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Date
Rule
801.1c
Staff
Mike Verne
Response/Comments
The conveyance of the membership interest which gives A the right designate a majority of the directions of B is viewed as the acquisition of all of the assets of B by A. If the assets are valued in excess of $50mm, this step is reportable. None of the remaining steps are reportable.

Question

Date: - Wed. March 28, 2001 12:29pm

Subject: HSR issue

Mike:

I would like your opinion of the HSR reportability of the transaction described below. Please note that all of the steps listed will occur in order at closing, essentially contemporaneously.

B is a not-for-profit corporation with over $100 million in assets.

A is a for-profit corporation with over $100 million in assets.

B will convey to A a membership interest in B, which will give A the present contractual right to name the majority of the Board of Directors of B. There will be no consideration paid for this conveyance.

B currently has a wholly-owned subsidiary, C. C will issue new stock to A in exchange for less than $100,000, resulting in A's ownership of a 1 % interest in C. C is a corporation.

B will then merge into C. As a result of the merger, all stock of C owned by B will be canceled. By virtue of its acquisition of the 1 % equity interest in the preceding step, A will own 100% of C. B will no longer exist. The merged entity~(C) will then pay in excess of $100 million to D, a foundation that will be a newly created charitable entity. It will not have stock, but will have a Board of Directors. The Board of Directors will not be appointed by, or overlap with, the Board of Directors of A, B or C.

Please advise as to your thoughts about the HSR issues. Thanks!

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