Question
From: (redacted)
Sent: Thursday, October 18, 2007 4:24 PM
To: Verne, B. Michael
Cc: (redacted)
Subject: Proposed Acquisition 801.1(c)
DearMike,
Thankyou for taking the time to speak with me yesterday regarding the proposedtransaction. To follow-up on that discussion, following is a brief descriptionof the proposed acquisitions. Also, an illustration of the transaction isattached to this email.
HoldingsLLC will acquire 100% of the voting securities of Target via a series ofacquisitions governed by a Stock Purchase Agreement and a Merger Agreement.Signing of the Stock Purchase Agreement and the Merger Agreement will occursimultaneously. The Merger Agreement will close within approximately 12 monthsafter the closing of the Stock Purchase Agreement. The relevant steps of thetransaction for HSR purposes are as follows:
(i)One day prior to signing of the StockPurchase Agreement, A LP, B LP, and C LP will each contribute cash to a newlyformed partnership ("Holdings GP") (Note, GP may be an LP) sufficientto represent each LP's pro rata share of escrow and deposit amounts. As aresult, Holdings GP's total assets upon formation will be approximately $58million in cash. None of A LP, B LP, or C LP will have a contractual right to50% of the profits or assets upon dissolution of Holdings GP. The formation ofHoldings GP will not be a reportable transaction pursuant to the HSR Act.
(ii)At the closing of the private placementof Target stock pursuant to the Stock Purchase Agreement (45 days afterexecution of the Stock Purchase Agreement), A LP, B LP, and C LP will acquirevoting securities of Target worth approximately $43 million, $45 million, and$10 million, respectively. Each acquisition will be below the size oftransaction threshold and not reportable.
(ii)At signing of the Merger Agreement, Holdings GP will contribute $58 million incash to Holdings LLC in exchange for an approximate 32% membership interest inHoldings LLC. Holdings GP is a party to the ancillary merger transactiondocuments, including an Equity Contribution Agreement, an LLC Agreement, anEscrow Agreement, and a Deposit Agreement. Holdings LLC, and not Holdings GP,is a party to the Merger Agreement.
(iv)Contemporaneous with the closing of theMerger Agreement, each of A LP, B LP, and C LP will contribute 100% of thevoting securities of Target respectively held by each LP to Holdings GP.Holdings GP will contemporaneously contribute those same voting securities ofTarget to Holdings LLC in exchange for membership interests in Holdings LLC.Holdings GP will not have a contractual right to 50% or more of the profits orassets upon dissolution of Holdings LLC.
(v)Merger Sub will merge with and intoTarget, the separate identity of Merger Sub shall cease according to the lawsof the applicable jurisdiction, and Target will survive as a wholly-ownedsubsidiary of Holdings LLC. The value of the voting securities acquired willexceed $239.2 million and the transaction will be reportable.
Aswe discussed, the contribution of Target voting securities to Holdings GP willoccur contemporaneous with, and is an integral part of, the acquisition by Holdings LLC of 100% of the voting securities of Target. As the parties will submit an HSR Notification in connection with theacquisition by Holdings LLC of the voting securities of Target (Step v),no filing will be required for the contribution by A LP, B LP, or C LP of the votingsecurities of Target held by each LP to Holdings GP (step iv).
Thankyou in advance for your consideration of this matter and I look forward to yourresponse. Please do not hesitate to contact me at (redacted) or via email ifyou have any questions.
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