0911002 Informal Interpretation

FACTS

CorporationA proposes to acquire 80% of the voting securities of Corporation B for $64million from the four current shareholders of Corporation B, who are managementemployees of Corporation B and will continue to be so following theacquisition. Business reasons for having the current shareholders ofCorporation B continue to own the remaining 20% of the voting securities ofCorporation B (the "Remaining Shares") are to keep them activelyinvolved in the business and to provide an incentive for them to make thebusiness profitable.

Aspart of the transaction and for no additional consideration, Corporation A willalso acquire an option to acquire the Remaining Shares. In addition, as part ofthe transaction and for no additional consideration, each of the fourshareholders of Corporation B will acquire an option to require Corporation Ato purchase the Remaining Shares owned by them. There is no requirement for theholder of an option to exercise the option. Except in the event a shareholder'semployment is terminated without cause or a shareholder terminates hisemployment for cause, none of the options is exercisable for three years, andthe purchase price will depend on the earnings of Corporation B over the threeyear period. If the earnings increase, the option price will increase.Conversely, if the earnings decrease, the option price will decrease.

Duringthe option period, the four current shareholders will retain all rights andindices of ownership of the Remaining Shares, including the right to vote andreceive dividends, and will bear the risk of loss or gain until the option isexercised. Except for the call and put options, Corporation A will have nointerest in the Remaining Shares.

Itis possible that, prior to the closing, Corporation B could transfer itsbusiness to a wholly owned subsidiary, which would be a limited liabilitycompany (the "LLC"). In that event Corporation A would acquire 80% ofthe membership interests in the LLC, the remaining 20% of the membershipinterests of the LLC (the "Remaining Interests") would continue to beheld by Corporation B or the four current shareholders, and the same call andput options and the rights and risks of ownership would apply as describedabove. Again, except for the call and put options, Corporation A would have nointerest in the Remaining Interests.

Aspart of the transaction and for no additional consideration, Corporation A willhave the option of requiring the four shareholders to cooperate in making anelection under the Internal Revenue Code whereby the transaction would betreated for federal income tax purposes as if Corporation B had sold all of itsassets and distributed 80% of the proceeds to the shareholders. However, anysuch election would affect only the federal income tax treatment of thetransaction and would not affect any part of the transaction as describedabove.

Isany filing required under the Hart-Scott-Rodino Antitrust Improvements Act of1976, as amended (the "Act"), in connection with the transactionsdescribed above?

Theacquisition of voting securities for $64 million is not a reportabletransaction because the purchase price does not exceed the current size-of-the-transactionthreshold of $65.2 million.

Theacquisition of an option to acquire voting securities is exempt under 16 C.F.R.801.1(f)(3) and 801.32. See also ABA Section of Antitrust Law, PremergerNotification Practice Manual, Interpretation 29 (4th Ed. 2007). Theacquisition of tile put option by Corporation A does not provide Corporation Awith any beneficial interest in tile Remaining Shares as referenced in ABASection of Antitrust Law, Premerger Notification Manual, Interpretation 46 (4thEd. 2007).

Theforegoing is consistent with Informal Staff Opinions 0404017, 0710009, 0905009by B. Michael Verne and 0907015 by James H. Ferkingstad.

Thesame analysis would also apply to the Remaining Interests.