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Date
Rule
801.50
Staff
Michael Verne
Response/Comments
Future commitments to contribute cash are only taken into account in determining the size of person for the Newco. They would not be considered in determining the size of transaction. K Walsh concurs.

Question

From:

(Redacted)

Sent:

Monday, October 01, 2012 3:16 PM

To:

Verne, B. Michael

Subject:

801.50 Question

Mike

Ihave a question about a 801.50 joint venture transaction. My client,Contributor A, plans to enter into Contribution Agreement with Contributor Band create Newco LLC. B will contribute non-exempt assets worth $134 million toNewco LLC and receive 50% of Newco LLC. A will contribute $67 million to NewcoLLC in exchange for 50% of Newco LLC. Under the Agreement, A & B will bothbe required to make cash calls in the future, which will be used to make capitalimprovements to the LLC assets. With respect to Contributor A, I understand the802.4 and 802.30(c) exemptions do not apply. In calculating the acquisitionprice in accordance with 801.10(d), does Contributor A need to take intoaccount the future cash calls it will make to Newco LLC? It would seem strangethat capital improvement funding would be taken into account.

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