0602026 Informal Interpretation

James Ferkingstad

B. Michael Verne

Premerger Notification Office, Room 303 Bureau ofCompetition

Federal Trade Commission

600 Pennsylvania Ave NW

Washington DC 20003

RE: Exempt Transaction Issue DearJames and Michael:

As James knows, I spoke with him acouple of times in the last few days to discuss an acquisition I am working on,on a client-anonymous basis. At his request, I am sending this letter toMichael, as well.

Briefly, the facts I relayed toJames are these: I represent a target company, an issuer whose votingsecurities are being acquired from its shareholders in a transaction where thevalue exceeds the notification threshold. The issuer is controlled by a stateuniversity, which holds substantially more than 50% of the voting securities.The shares of the issuer would be transferred to the acquirer directly from theshareholders, including the state university.

I called to discuss theapplicability of Clayton Act 7A(c)(4), which reads:

"(c)Exempt transactions. The following classes of transactions are exempt from therequirements of this section:..

(4) transfers toor from a Federal agency or a State or political subdivision thereof"

Under my interpretation of thestatutory language, the subject transaction is exempt from the notificationrequirements of the Hart-Scott-Rodino Act. James agreed, but raised the issuethat some state universities or subdivisions of a state university might notqualify as agencies of the state itself (I believe we discussed an examplewhere a state university or affiliated medical center would be separatelyincorporated or otherwise controlled). I expressed my understanding that thestate university in this transaction does so qualify. I called back to confirmthat fact, based on my review of the relevant state statutes and judicialauthority.

James confirmed the conclusion thatthe transaction was exempt from reporting under 7A(c)(4), again subject only tothe qualification that the university must be a public agency of the state.

We carried on this discussion on aclient-anonymous basis, but I have since received permission to disclose theidentity of the parties. My client, the target, is (redacted), which owns 100%of (redacted)., a health insurance company in Kentucky. The Commonwealth ofKentucky, through the (redacted), owns approximately 85% of the votingsecurities of (redacted). The proposed acquiring party is (redacted). Thepurchase of the shares held by the minority shareholders would not satisfypertinent reporting thresholds if analyzed separately.

I initiated my calls to PNO when Ifirst learned of this transaction, but prior to my introduction to counsel for(redacted). Now I have learned that (redacted) has had independent discussionswith other PNO staff, including Marian R. Bruno, regarding this sametransaction, prior to his learning of my conversations with James. Apparently,his discussions with PNO staff have focused on the interplay of the statute,and the SBP and regulations, and he has received informal guidance that theissuer would be required to file under the Act, notwithstanding the fact thatshares constituting a controlling interest in the issuer are being transferreddirectly from a state government entity.

After discussing the matter withArt, we agreed that I would write to confirm or clarify our discussion beforegoing forward with the transaction. I am not clear whether the differentinformal guidance we received resulted from a different presentation orunderstanding of the facts, a different view of the law, or my ownmisunderstanding of our conversations. In any event, I continue to believe thatthe proposed transaction is exempt under the plain language of Section 7A(c)(4),and that the SBP and regulations must be construed in a manner consistent withthat language.

I look forward to discussing this matter with you further.Very truly yours,