Question
(redacted)
January 17, 1986
BY HAND
Mr. Andrew Scanlon
Premerger Notification Office
Room 303
7th & Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Dear Mr. Scanlon:
This is to confirm our telephone conversation of January 17, 1986, that it is the Premerger Notification Offices position that the hypothetical transaction described below need not be reported under the Commissions Premerger Notification Rules.
Company A is acquiring certain technology developed by Company B. Company A will pay Company B $5.5 million upon signing of the agreement with an additional $5.5 million payment to be made two years thereafter or when a to be constructed plant is ready for commercial production, whichever is earlier. The agreement further provides for an additional payment of up to $12.5 million, contingent upon the revenues earned from the to be constructed plant. The additional contingent payments would be made over a period of five years from the date that the plant first commences operation, which is expected to be approximately two years from the date the agreement is signed.
In our telephone conversation, you advised me that the transaction described above ned not be reported since it did not meet the size of transaction test. You confirmed that the value of the assets acquired under Rule 801.10(b) would be $11 million and that the additional payment contingent on the stream of revenues from a yet to be constructed plant would not be included in the value of the technology assets purchased.
We appreciate your prompt attention to this matter and will, of course, be pleased to provide you with any clarification of the above hypothetical transaction that you may require.
I will be contacting you to reconfirm the substance of our January 17, 1986 telephone conversation as set forth above.
Sincerely yours,
(redacted)
STAFF COMMENTS: 1/21/86 T/C Scanlon / (redacted)
I advised (redacted) that this letter infers that I made the decision that the contingent payment had no value. I explained that while we discussed the situation the determination of the value (if any ) of the contingent payment must be made by the filer. He understood.
AMS