Question
March 7, 2005
VIA: FACSIMILE
MichaelB. Verne
PremergerNotification Office
Bureau ofCompetition
Federal TradeCommission - Room 303
6th Street and Pennsylvania Avenue, N.W.
Washington, D.C.20580
Dear Mike:
Thisletter is confirming our telephone conversation on Thursday, March 3, 2005, regarding the filing requirements of the Hart-Scott-RodinoAntitrust improvements Act of 1976, as amended, 15 U.S.C. 18a (the"HSR Act" or the "Act"), andthe rules promulgated thereunder, 16 C.F.R 801.10 et seq. (the"Rules"), relating to the restructuring of the membership interestsof a non-profit corporation.
As;discussed, company A has a membership interest in company B, which i s the solemember of company sub-B, A's interest constitutes one class of members. Thereis currently another class of individual members of company B. Election of theboard of sub-B requires approval of both classes of members. All ofthese entities are non-profits.
Pursuantto the proposed restructuring, B will merge into sub-B, the individual membersof B will be eliminated, and A will become the sole member of sub-B. The boardof sub-B will elect its own directors, subject to ratification by the board ofA. The question 1 posed to you was whether this transaction would bepotentially reportable because A will have gained the sole right to ratify theboard once the individual members are eliminated. You confirmed that merelyhaving the right to ratify the board does not constitute control under 16C.F.R. 801.1(b)(2), which defines control as the contractual power todesignate 50% or more of the board of directors, A also will have no right toany distribution of revenues of sub-B and no right to any assets upondissolution of sub-B. Therefore, because A is not gaining control of sub-Bthrough this restructuring, no fling would be required.
Please let meknow if I have misunderstood any part of our conversation. Thank you for yourattention to this matter.