8512007 Informal Interpretation

(redacted)

December 13, 1985

Wayne Kaplan, Esq.
Premerger Notification Office
Bureau of Competition
Seventh Street & Pennsylvania Avenue, N.W.
Washington, D.C. 20580

Dear Mr. Kaplan:

Thank you for your explanation by telephone today of certain matters relating to the requirement for Premerger Notification reporting. This letter is to confirm my understanding of your explanation.

Your explanation was based on the following hypothetical: An acquisition of assets is contemplated. The acquisition agreement provides that the purchase price for the acquisition is to be $8 million plus an earn out that is to total between zero and $5.0 million and is to be paid over a two year period. The size of the earn out is contingent upon the acquiring entity achieving certain levels of gross revenue during that two year period. The acquisition agreement also provides that certain liabilities are to be assumed by the acquiring entity, including accounts payable of $20 million.

My understanding of your explanation is that, on these hypothetical facts, for the purposes of determining the size of the transaction and accordingly whether premerger notification reporting is necessary, the value of the acquisition of assets is contingent and therefore should be determined by the board of directors of the acquiring entity pursuant to 16 C.F.R. 801.10(c)(3). In making its determination, the board should consider the purchase price, the earn out, the liabilities to be assumed, and all other relevant factors.

Sincerely,

(redacted)

(redacted)

STAFF COMMENTS: OK WEK, upon later review, 3/9/87.