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Date
Rule
801.1(f)
Staff
Michael Verne
Response/Comments
Agree.

Question

From:

(redacted)

Sent:

Friday, May 01, 2009 9:55 AM

To:

Verne, B. Michael

Subject: HSR Question

Mike,

Thank you for your help on this transaction. I amwriting this note to confirm my understanding of our discussion.

Our client, Company X proposes to acquire fromEntity A a Note issued by Company Y. The collateral for the Note is votingshares of Company Z. The parties and the price of the note all exceed thethresholds. Under the terms of the Note, Company X at any time may convert allor part of the note into a percentage of the shares that are serving ascollateral. The Note also provides that for the next five years Company Y shallnot vote its shares "without [Company X's] consent (to be granted at[Company X's] sole discretion." We understand that this is being done inorder to prevent the wasting of the underlying assets by the Note issuer. Theclient understands that the act of converting the shares is likely a reportableevent subject to the waiting periods.

Applicable rules: 802.31 ("Acquisition ofconvertible voting securities shall be exempt from the requirements of the Act.") and 802.1 (f)(2)("The term 'convertible voting security' means avoting security which presently does not entitle its owner to vote for thedirectors of any entity.") Under these rules it appears that the noteshould be treated as a convertible voting security and therefore exempt fromthe Act.

This conclusion does not appear inconsistent withthe informal interpretations I have reviewed. There is a note from you onInterpretation 080002 (0810002 MV) that "[g]enerally, the onlytime that a convertible security is deemed a voting security prior toconversion is if the security carriers an irrevocable proxy to vote the underlyingshares as if the conversion had already occurred." We agreed that therights that Company X would acquire here is not equivalent to the voting rightsmentioned in your note.

If you disagree with the above in any way, pleaselet me know as soon as possible.

Thank you again,

About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

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