Question
January 9, 2006
Via Electronic Mail
James Ferkingstad
Premerger NotificationOffice
Bureau of Competition
Room 303
Federal Trade Commission
600 Pennsylvania Avenue
Washington, D.C. 20580
Re: Premerger NotificationExemptions
Dear Mr. Ferkingstad:
Thankyou for taking the time to speak with me last Friday regarding a proposedtransaction and whether it is a reportable under the Hart-Scott-Rodino Act. Aswe discussed, the structure of this proposed transaction is as follows:
Companyis a privately held corporation with a majority of its voting securities heldby two trusts controlled by Company's Chairman. The remaining voting securitiesare held by an Employee Stock Ownership Plan ("ESOP"), an employeetrust that meets the qualifications of section 401 of the Internal Revenue Codeand is controlled by a person that employs the beneficiaries. Pursuant to aredemption agreement, Company will redeem and cancel all of Chairman's votingsecurities. As a result, the ESOP will hold 100% of the voting securities ofCompany although it will not1 acquire any voting securities from anysecurity holder of the Company as a result of the transaction. Chairman willsubstantially separate from Company, although he will remain an employee ofCompany in some capacity and will retain a seat on the board of directors as a non-officerchairman. The transaction would otherwise meet the size thresholds forreporting.
Underan interpretation of section 802.30 of the Exemption Rules, "Intra-PersonTransactions," 16 CFR 802.30,in the Statement of Basis and Purpose (at p. 100), redemptions and retirementsof shares are exempt from the filing requirements of the Act, except undercertain circumstances not presented here, because the acquiring and acquiredpersons are the same under section 801.2(b). Additionally, under section 802.35of the Exemption Rules, 16 CFR 802.35, an acquisition by a qualified ESOP that iscontrolled by a person that employs its beneficiaries is also exempt.
Thetransaction described above should be exempt under section 802.30 and, althoughthe ESOP is not thereby making an acquisition of voting securities from anyholder of voting securities, the transaction has the same effect as atransaction exempt under section 802.35. The purchase of Company securities bythe ESOP directly from the Company is also not reportable. You advised that thetransaction, as described above, is exempt from the filing requirements of theHart-Scott-Rodino Act. Please call me at your earliest convenience at(redacted) if this is not correct. Thank you very much.
Footnote
1.In connection with the redemption, the Company intends to issue and the ESOPintends to purchase approximately $5 million in newly issued voting securitiesfrom the Company.