[Federal Register Volume 64, Number 217 (Wednesday, November 10, 1999)]
[Rules and Regulations]
[Pages 61408-61466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28355]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 200, 229, 230, 232, 239, and 240
[Release No. 33-7760; 34-42055; IC-24107; File No. S7-28-98]
RIN 3235-AG84
Regulation of Takeovers and Security Holder Communications
AGENCY: Securities and Exchange Commission.
ACTION: Final Rules.
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SUMMARY: We are adopting comprehensive revisions to the rules and
regulations applicable to takeover transactions (including tender
offers, mergers, acquisitions and similar extraordinary transactions).
The revised rules will permit increased communications with security
holders and the markets. The amendments also will: Balance the
treatment of cash and stock tender offers; simplify and centralize the
disclosure requirements; and eliminate regulatory inconsistencies in
mergers and tender offers. In addition, we are updating the tender
offer rules by providing for a subsequent offering period, clarifying
certain filing and disclosure requirements and reducing compliance
burdens where consistent with investor protection. We believe these
revisions will lead to a more well informed and efficient market.
EFFECTIVE DATE: The rules and amendments will become effective January
24, 2000.
FOR MORE INFORMATION CONTACT: Dennis O. Garris, Chief, or James J.
Moloney, Special Counsel, in the Office of Mergers & Acquisitions,
Division of Corporation Finance, at (202) 942-2920. For questions on
new Rule 14e-5, contact James A. Brigagliano, Assistant Director, Irene
Halpin, Florence Harmon or Michael Trocchio, Special Counsels, in the
Office of Risk Management and Control, Division of Market Regulation,
at (202) 942-0772. For questions on investment companies, contact
Martha B. Peterson, Special Counsel, in the Office of Disclosure
Regulation, Division of Investment Management, at (202) 942-0721.
SUPPLEMENTARY INFORMATION: We are adopting amendments to Rules 13e-1,
13e-3, 13e-4, 14a-4, 14a-6, 14a-12, 14c-5, 14d-1, 14d-2, 14d-3, 14d-4,
14d-5, 14d-6, 14d-7, 14d-9, 14e-1\1\ and Schedules 14A, 13E-3, and 14D-
9\2\ under the Securities Exchange Act of 1934 (``Exchange Act'').\3\
We are rescinding Exchange Act Rule 14a-11.\4\ We are adopting:
amendments to Item 10 of Regulation S-K; \5\ a new subpart of
Regulation S-K, the 1000 series (``Regulation M-A''); a new tender
offer schedule, Schedule TO, to replace Schedules 13E-4 and 14D-1; \6\
new tender offer Rule 14e-5 to replace Rule 10b-13; \7\ and new tender
offer Rules 14d-11 and 14e-8. We also are adopting amendments to Rule
13(d) of Regulation S-T and Rule of Practice 30-3.\8\ Lastly, we are
adopting amendments to Rules 135, 145 and 432, Forms S-4 and F-4, and
new Rules 162, 165, 166 and 425 under the Securities Act of 1933
(``Securities Act'').\9\
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\1\ 17 CFR 240.13e-1, 13e-3, 13e-4, 14a-4, 14a-6, 14a-12, 14c-
5,14d-1, 14d-2, 14d-3, 14d-4, 14d-5, 14d-6, 14d-7, 14d-9, and 14e-1.
\2\ 17 CFR 240.14a-101, 13e-100, and 14d-101.
\3\ 15 U.S.C. 78a et seq.
\4\ 17 CFR 240.14a-11.
\5\ 17 CFR 229.10.
\6\ 17 CFR 240.13e-101, 14d-100.
\7\ 17 CFR 240.10b-13.
\8\ 17 CFR 232.13(d); 17 CFR 200.30-3.
\9\ 17 CFR 230.135, 145, and 432; 17 CFR 239.25 and 34; 15
U.S.C. 77a et seq.
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Table of Contents
I. Executive Summary and Background
II. Discussion of New Regulatory Scheme
A. Overview
1. Increased Communications Permitted Before Filing Disclosure
Document
2. Eligibility
3. Written Communications with Legend Filed on Date of First Use
B. Communications Under the Securities Act
1. Securities Act Exemption and Filing Rules
2. Liability for Communications
3. Rules 135 and 145
4. Public Announcement
C. Communications Under the Proxy Rules
1. Rule 14a-12 Expanded
a. The ``As Soon as Practicable'' Requirement
b. Participant Information
c. ``Test the Waters''
2. Limited Confidential Treatment of Merger Proxy Materials
3. Timing of Filings
D. Communications Under the Tender Offer Rules
1. ``Commencement,'' Communications, and Filing Requirements
2. Dissemination Requirements
E. Exchange Offers May Commence On Filing
1. Early Commencement
2. Dissemination of a Supplement and Extension of the Offer
F. Disclosure Requirements for Tender Offers and Mergers
1. Schedules Combined and Disclosure Requirements Moved to
Subpart 1000 of Regulation S-K (``Regulation M-A'')
2. Streamline and Improve Required Disclosure
a. ``Plain English'' Summary Term Sheet
b. Item 14 of Schedule 14A Revised to Clarify Requirements and
Harmonize Cash Merger and Cash Tender Offer Disclosure
c. Reduced Financial Statement Requirements for Non-Reporting
Target Companies in Stock Mergers and Stock Tender Offers
G. Tender Offer Rules Updated
1. Bidders May Include a ``Subsequent Offering Period'' Without
Withdrawal Rights
2. Bidder Financial Information Clarified for Cash Tender Offers
a. When a Bidder's Financial Statements Are Not Required; Source
of Funds
b. Content of Bidder's Financial Statements in Cash Tender
Offers; Financial Statements in Going-Private Transactions
c. Pro Forma Financial Information Required in Two-Tier
Transactions
3. Target Is Required to Report Purchases of Its Own Securities
After a Third-Party Tender Offer Is Commenced
4. Tender Offer and Proxy Rules Relating to the Delivery of a
Security Holder List and Security Position Listing Harmonized
5. New Rule 14e-5: Revision and Redesignation of Former Rule
10b-13, the Rule Prohibiting Purchases Outside an Offer
a. Redesignating Rule 10b-13 as Rule 14e-5
b. Clarification of Rule 14e-5; Prohibited Period
c. Persons and Securities Subject to the Rule
d. Excepted Transactions
e. Additional Exceptions Being Adopted
III. Effective Date and Transition
A. Communications
B. Confidential Treatment of Proxy Materials
C. Early Commencement
D. Disclosure Requirements and New Schedules
E. Subsequent Offering Period
F. Revised Security Holder List Rule for Tender Offers
G. New Rules 14e-5
IV. Cost-Benefit Analysis
A. Communications
B. Filings
C. Tender Offers
V. Commission Findings and Considerations
A. Exemptive Authority Findings
B. Effect on Competition
C. Promotion of Efficiency, Competition and Capital Formation
VI. Final Regulatory Flexibility Analysis
A. Need for Action
B. Objectives of the Rule Amendments
[[Page 61409]]
C. Summary of Significant Issues Raised by the Public Comments
D. Description and Estimate of the Number of Small Entities
Subject to the New Rules
E. Projected Reporting, Recordkeeping, and Other Compliance
Requirements
F. Description of Steps Taken to Minimize the Effect on Small
Entities
VII. Paperwork Reduction Act
VIII. Statutory Basis and Text of Amendments
I. Executive Summary and Background
Last fall, we proposed comprehensive changes to the various
regulatory schemes applicable to issuer and third-party tender offers,
mergers, going-private transactions and security holder
communications.\10\ The proposed changes were prompted by an increase
in the number of transactions where securities are offered as
consideration; an increase in the number of hostile transactions
involving proxy or consent solicitations; and significant technological
advances that have resulted in more and faster communications with
security holders and the markets. Because these trends have continued
since we issued the Proposing Release and commenters, for the most
part, viewed the proposals as favorable,\11\ we are adopting the
proposals, with some modification.
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\10\ Regulation of Takeovers and Security Holder Communications,
Release No. 33-7607 (November 3, 1998) (63 FR 67331) (the
``Proposing Release'').
\11\ The comment letters are available for inspection and
copying in our Public Reference Room in File No. S7-28-98. Comments
that were submitted electronically also are available on our web
site (www.sec.gov).
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As we noted in the Proposing Release, the existing regulatory
framework imposes a number of restrictions on communications with
security holders and the marketplace. In addition, the disparate
regulatory treatment of cash and stock tender offers \12\ may unduly
influence a bidder's \13\ choice of offering cash or securities in a
takeover transaction. We also noted unnecessary differences in
regulatory requirements between tender offers and other types of
extraordinary transactions, such as mergers.\14\ Finally, we noted
that the multiple regulatory schemes that can apply to a transaction
may impose additional compliance costs without necessarily providing a
sufficient marginal benefit to security holders. Our goals in proposing
and adopting these changes are to promote communications with security
holders and the markets, minimize selective disclosure, harmonize
inconsistent disclosure requirements and alleviate unnecessary burdens
associated with the compliance process, without a reduction in investor
protection.\15\
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\12\ Stock tender offers, also referred to as exchange offers,
are tender offers where the consideration offered to security
holders includes securities (either equity or debt); these
transactions generally are registered under the Securities Act.
\13\ The term ``bidder'' is used throughout this release to
refer to the offeror or purchaser in a tender offer.
\14\ For a discussion of the regulatory schemes applicable to
cash tender offers, exchange offers, cash and stock mergers, see
Part II.A of the Proposing Release.
\15\ In this release we focus on the amendments that we are
adopting and how they differ from the original proposals. For a more
complete discussion of the background and rationale for the changes,
see the Proposing Release.
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We also proposed broad changes to the regulation of securities
offerings in a companion release.\16\ Our proposed treatment of
communications in the Securities Act Reform Release differs from our
approach in the Proposing Release. The differences were due to the
special nature of business combination transactions \17\ in contrast to
capital-raising transactions. At this time we are not adopting the
Securities Act Reform proposals that are unrelated to business
combination transactions. We are continuing to evaluate commenters'
responses to the Securities Act Reform proposals and in the future we
may take action on these proposals. We are adopting, however, several
proposals in the Securities Act Reform Release that relate to business
combination transactions. As a result, some proposals or concepts
previously presented in the Securities Act Reform Release are
incorporated into this release. Where we proposed changes that would
appear in new forms included in the Securities Act Reform Release
(Forms C and SB-3), those changes have been implemented in existing
forms (Forms S-4 and F-4). In a separate release, we also are adopting
significant changes to the regulatory scheme for cross-border tender
offers, exchange offers and rights offerings.\18\
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\16\ Securities Act Reform Release, Release No. 33-7606A
(November 13,1998) (63 FR 67174).
\17\ For purposes of this release, the Proposing Release and the
rules adopted in this release, a ``business combination
transaction'' means any Rule 145(a) transaction (17 CFR 230.145(a))
(including mergers, recapitalizations, acquisitions, and similar
matters) or tender offer (including issuer tender offers).
\18\ Release No. 33-7759 (October 22, 1999) (the ``Cross-Border
Adopting Release'').
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We believe these new rules and revisions should provide
participants in the securities markets sufficient flexibility to
accommodate changes in deal structure and advances in technology that
continue to occur in today's markets. Briefly, the new rules and
amendments adopted today will:
Relax existing restrictions on oral and written
communications with security holders by permitting the dissemination
of more information on a timely basis, so long as the written
communications are filed on the date of first use; in particular,
Permit more communications before the filing of a
registration statement in connection with either a stock tender
offer or a stock merger transaction;
Permit more communications before the filing of a proxy
statement (whether or not a business combination transaction is
involved);
Permit more communications regarding a proposed tender
offer without ``commencing'' the offer and requiring the filing and
dissemination of specified information;
Harmonize the various communications principles
applicable to business combinations under the Securities Act, tender
offer rules and proxy rules; and
Eliminate the confidential treatment currently
available for merger proxy statements, except when communications
made outside the proxy statement are limited to those specified in
Rule 135;
Balance the treatment of stock and cash tender offers
by permitting both issuer and third-party stock tender offers to
commence as early as the filing of a registration statement;
Simplify and integrate the various disclosure
requirements for tender offers, going-private transactions, and
other extraordinary transactions in a new series of rules within
Regulation S-K, called ``Regulation M-A'';
Combine the existing schedules for issuer and third-
party tender offers into one schedule available for all tender
offers, entitled ``Schedule TO'';
Require a ``plain English'' summary term sheet in all
tender offers, mergers and going-private transactions, except when
the transaction is already subject to the Securities Act plain
English rules;
Update the financial statement requirements for
takeover transactions; in particular,
Eliminate the requirement to file financial statements
for target companies \19\ in most cash mergers, consistent with the
treatment of cash tender offers;
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\19\ The term ``target'' is used throughout this release to
refer to the company to be acquired in a business combination
transaction or the company whose securities are the subject of the
transaction, whether the transaction is agreed upon or unsolicited.
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Clarify when financial statements of the acquiring
company are not required in cash mergers, and when financial
statements are required, reduce the financial statements for the
acquiror from three years to two;
Clarify when the bidder's financial statements are not
required in cash tender offers, and when financial statements are
required in third-party offers, reduce the requirement from three
years to two;
Require pro forma and related financial information in
negotiated cash tender offers where the bidder intends to engage in
a back-end securities transaction;
[[Page 61410]]
Reduce the financial statements required for non-
reporting target companies in stock mergers and stock tender offers;
Permit an optional subsequent offering period after
completion of a tender offer, during which security holders can
tender shares without withdrawal rights;
Clarify Rule 13e-1, which requires issuers to report
intended repurchases of their own securities once a third-party
tender offer has commenced;
Conform the security holder list requirement in the
tender offer rules with the comparable provision in the proxy rules
so that the list will include non-objecting beneficial owners; and *
clarify the rule that prohibits purchases outside a tender offer
(Rule 10b-13), codify prior interpretations of and exemptions from
the rule, and redesignate it as Rule 14e-5.
In several respects the rules adopted today differ from the
proposed rule changes. The primary differences are as follows:
The Securities Act exemption for communications is
extended to all parties to the transaction and any persons acting on
their behalf;
The Securities Act exemption also is revised to clarify
that an unintentional or immaterial breach of the filing requirement
will not result in a loss of the exemption so long as a good faith
and reasonable attempt was made to file and the material is filed as
soon as practicable after discovery of the failure to file;
A definition of ``public announcement'' is provided so
that parties know when they need to begin filing written
communications relating to the transaction and when the prohibition
against making purchases outside the tender offer begins;
A written communication relating to a proposed
transaction that is a Rule 135 notice must be filed unless the
notice only contains information that has already been filed;
The confidential treatment currently available for
preliminary merger proxy statements is retained under limited
circumstances;
The requirement in expanded Rule 14a-12 to furnish a
proxy statement as soon as practicable is revised so that a proxy
statement must be furnished at the time a form of proxy is given to
or requested from security holders;
Written communications permitted under expanded Rule
14a-12 must include either full participant information, as
currently required, or a legend directing security holders where
they can obtain participant information;
Long form publication is retained as a means to
commence a tender offer, rather than being eliminated as proposed;
The provision permitting commencement of exchange
offers as early as the filing of a registration statement is
extended to issuer exchange offers, not limited to third-party
offers as proposed;
A bidder that commences an exchange offer early may not
be required to deliver a final prospectus to security holders;
An acquiror in a stock merger or stock tender offer
need not provide any financial statements for a non-reporting target
if the acquiror's security holders are not voting on the transaction
and the acquisition is not significant to the acquiror at the 20%
level;
Subsequent offering period changes: this period can be
between three and 20 business days, and is not fixed at ten business
days as initially proposed; a bidder is not required to disclose an
intent to engage in a back-end merger; and a bidder must announce
the results of the initial offering period before beginning the
subsequent offering period;
A bidder must disclose pro forma financial information
in the first tier of a two-tier transaction for negotiated
transactions only, not for transactions where access to the target's
financial information is limited;
The information required by Rule 13e-1 regarding issuer
repurchases of securities need not be disseminated to security
holders; in addition, an exclusion from this rule is provided for
certain periodic, routine repurchases; and
Several additional exceptions are added to new Rule
14e-5.
At this time we are not adopting several concepts that we solicited
comment on, including:
A modification to the proxy rules that would permit the
direct delivery of proxy materials to non-objecting beneficial
owners;
A federally-mandated proxy solicitation period;
A ``test the waters'' provision for proxy
solicitations;
A requirement that bidders commencing a tender offer by
summary advertisement mail their tender offer materials to security
holders;
A proxy analogue to the early commencement provision in
exchange offers that would permit the sending of proxy cards with
``preliminary'' proxy materials; and
An expansion of the Private Securities Litigation
Reform Act of 1995 \20\ safe harbor from liability to cover forward-
looking statements made in connection with tender offers.
\20\ Pub. L. 104-67, 109 Stat. 737 (1995).
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In the future, depending on the effects of today's rule changes, we
may consider proposing additional changes to further harmonize the
regulatory requirements.
II. Discussion of New Regulatory Scheme
A. Overview
1. Increased Communications Permitted Before Filing Disclosure Document
Today, merger and acquisition transactions are occurring at a
faster pace, due in part to the rapid development of new technologies
and advancements in communications. As a result of economic and
regulatory pressures, many companies are releasing more information to
the market before a registration, proxy or tender offer statement is
filed publicly with us.\21\ In many cases, parties are releasing
information on proposed transactions including pro forma financial
information for the combined entity, estimated cost savings and
synergies. As we noted in the Proposing Release, parties to business
combination transactions provide several reasons for the need to
disclose information early,\22\ including the duty under Rule 10b-5 to
disclose material information in a manner that is not misleading.\23\
We also recognize that parties may be subject to other regulatory
requirements to disclose information to the markets early.\24\
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\21\ Companies may disclose information in response to the
market's demand for information regarding proposed transactions and
the need to keep customers, employees and other constituencies
adequately informed.
\22\ See Part II.B.1 of the Proposing Release.
\23\ 17 CFR 240.10b-5. We have long recognized the needs of
issuers to communicate with security holders regarding important
business and financial developments. See Releases No. 33-4697 (May
28, 1964) (29 FR 7317) and 33-5180 (August 16, 1971) (36 FR 16506).
In addition, the Division of Corporation Finance has previously
recognized the needs of bidders to disclose information regarding a
contemplated ``back-end'' transaction (i.e., a subsequent
transaction in which the bidder acquires any remaining securities
outstanding). Disclosure of information required by Schedule 14D-1
regarding a ``back-end'' transaction generally will not result in
``gun jumping'' because the information is not designed to prime the
market for a subsequent registered offering of securities. Instead,
the information aids investors in evaluating the terms of a tender
offer and deciding whether to tender for cash or wait for securities
in a back-end transaction. See Release No. 33-5927 (April 24, 1978)
(42 FR 18163).
\24\ Companies may be required to disclose information under the
particular rules of the stock exchange or inter-dealer quotation
system upon which their securities are traded.
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Existing restrictions on communications result primarily from the
broad concepts of ``offer'' \25\ and ``prospectus'' \26\ under the
Securities Act, ``solicitation'' \27\ under the Exchange Act proxy
rules, and ``commencement'' \28\ under the Williams
[[Page 61411]]
Act tender offer rules.\29\ We recognize that restricting
communications to one document may actually impede, rather than
promote, informed investing and voting decisions.
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\25\ Section 2(a)(3) of the Securities Act (15 U.S.C. 77b)
broadly defines ``offer'' as including every attempt or offer to
dispose of, or solicitation of an offer to buy, a security or
interest in a security, for value. Offers are currently prohibited
during the pre-filing period and restricted during the waiting
period.
\26\ The term ``prospectus'' is defined in section 2(a)(10) (15
U.S.C. 77b) to include any prospectus, notice, circular,
advertisement, letter of communication, written or by radio or
television, that offers any security for sale or confirms the sale
of the security, except for communications that are preceded or
accompanied by a statutory prospectus.
\27\ ``Solicitation'' is broadly defined to include ``the
furnishing of a form of proxy or other communication to security
holders under circumstances reasonably calculated to result in the
procurement, withholding or revocation of a proxy.'' See Rule 14a-
1(l) (17 CFR 240.14a-1(l)).
\28\ The Williams Act provides that only very limited
information can be announced without either commencing a cash tender
offer or requiring the filing of a registration statement in a stock
offer. See Rule 14d-2(c) and (d) (17 CFR 240.14d-2(c) and (d)).
\29\ The Williams Act was enacted in 1968 as an amendment to the
Exchange Act (sections 13(d)-(e) and 14(d)-(f)). The Williams Act
regulates tender offers and imposes beneficial ownership reporting
requirements. 15 U.S.C. 78m(d)-(e) and 15 U.S.C. 78n(d)-(f).
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We are adopting, as proposed, non-exclusive exemptions under the
Securities Act, proxy rules and tender offer rules that permit
communications for an unrestricted length of time without a cooling-off
period between the end of communications and filing. Written
communications made in reliance on the exemptions must be filed. In
response to comments, we have modified the exemptions slightly from
those proposed, as discussed below.
One major benefit of permitting earlier communications is that more
information will be available generally to all security holders, not
simply to a limited audience of analysts and financially sophisticated
market participants. Because the new rules do not require oral
communications to be reduced to writing and filed, some selective
disclosure may continue to occur.\30\ Nevertheless, the rules adopted
today are designed to reduce selective disclosure by permitting
widespread dissemination of information through a variety of media
calculated to inform all security holders about the terms, benefits and
risks of a planned extraordinary transaction. We believe that parties
to business combination transactions generally wish to inform the
marketplace at large about their deals, and will use the new rules to
accomplish this end. The new regulatory scheme is not intended to be
used as a means to substitute selective oral disclosure for written and
oral disclosure that becomes public on a widespread basis.\31\ Although
this release does not impose new requirements on oral communications,
we remain extremely troubled by the selective disclosure of material
information.\32\ The staff is considering broader regulatory approaches
to limit or inhibit written and oral selective disclosure by issuers in
all contexts, including those addressed in this release. If we decide
to pursue these approaches, we will issue a separate release seeking
public comment.\33\
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\30\ Our exemptions permitting earlier communications do not in
any way alter the liability traditionally imposed on insider
trading. See Rules 10b-5 and 14e-3 (17 CFR 240.14e-3). Rule 14e-3
applies when a person ``has taken a substantial step or steps to
commence, or has commenced, a tender offer,'' so the timing of this
rule is not affected by the new regulatory scheme.
\31\ The new rules only provide an exemption from section 5 (and
comparable restrictions on communications under the proxy and tender
offer rules). Oral communications under the new rules, like written
communications, will have liability under the applicable regulatory
scheme. See Part II.B.2 below.
\32\ Chairman Levitt has expressed concerns about the selective
disclosure of material information to analysts and institutional
investors. See ``A Question of Integrity: Promoting Investor
Confidence by Fighting Insider Trading,'' speech given Feb. 27,
1998, available on our web site (www.sec.gov).
\33\ See ``Quality Information: The Lifeblood of Our Markets''
speech given by Chairman Levitt on Oct. 18, 1999, available on our
web site (www.sec.gov). ``The behind-the-scenes feeding of material
non-public information from companies to analysts is a stain on our
markets. This selectiveness is a disservice to investors and it
undermines the fundamental principle of fairness. In a time when
instantaneous and free flowing information is the norm, these sort
of whispers are an insult to fair and public disclosure * * *. (T)he
Commission is planning to take action where it can. Within the next
few months, we will consider proposing rules to close the gap
between those in the so-called `know' and the rest of us in the
public.''
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The scheme we adopt today provides the maximum amount of
flexibility to disclose information to security holders and the
markets.\34\ This new communications scheme, however, does not change
the current requirement that security holders receive a mandated
disclosure document before they are asked to make a voting or
investment decision (e.g., a prospectus, proxy statement, or tender
offer statement setting forth complete and balanced information).\35\
Of course, security holders may buy or sell in the market before they
receive the mandated disclosure document. That is true under the
current regulatory scheme as well as under the new one. Under the new
rules, security holders are likely to have information about the
transaction at an earlier point in time, and they can choose to act on
this information or wait for the complete disclosure document.
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\34\ We solicited comment on two alternatives to our primary
communications proposal that were not favored by commenters and are
not being adopted.
\35\ The exemptions also apply to communications made after the
mandated disclosure document is filed, so long as written
communications are filed. They do not, however, alter the
disclosure, filing and delivery requirements for the mandated
disclosure documents.
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While it is possible under the new scheme to announce a proposed
transaction long before a mandated disclosure document is filed, we do
not believe acquirors will delay the filing of a mandated disclosure
document unnecessarily because the longer they wait the greater the
risk that market forces will affect the terms of the deal or another
potential acquiror will announce a competing transaction. We believe
that companies announcing a transaction should, and we encourage them
to, file the mandated disclosure document as soon as possible after
announcing a proposed transaction.
Our long-held concern regarding communications that could condition
the market before dissemination of a mandated disclosure document is
mitigated by the continuing requirement to deliver a disclosure
document before any voting or investment decision can be made, and the
attendant liability for false or misleading statements. Communications
made in reliance on the new exemptions would, of course, be subject to
section 10(b) liability.\36\ We remind persons relying on the
exemptions that fraudulent statements in these communications could not
be cured by subsequent filings. In light of these considerations, we
believe that the benefits conferred on the marketplace by the
disclosure of more information on a timely basis outweigh the risks
that the information will be incomplete or potentially misleading.
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\36\ 15 U.S.C. 78j(b). The communications permitted under the
exemptions adopted would be subject to liability under the
particular regulatory scheme (the Securities Act, proxy or tender
offer rules) as well as Rule 10b-5 and the other antifraud rules.
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2. Eligibility
Our proposals did not make distinctions based on size and seasoned
status. Due to the extraordinary nature of business combination
transactions, security holders and the markets need full and timely
information regarding those transactions regardless of the size or
seasoned status of the companies involved. We recognized the inherent
difficulties in selecting the appropriate focus for purposes of
applying an eligibility test (i.e., should you look at the status of
the acquiror, the target or the combined entity?). All commenters who
addressed the issue agreed with our view. Therefore, the exemptions are
adopted as proposed, without any eligibility requirements.
We also asked whether the exemptions should be limited to the
parties to the transaction or available to others who may be acting on
behalf of the parties to the transaction. In particular, we noted that
in a third-party stock offer the company to be acquired would not
ordinarily be subject to the Securities Act restrictions on
communications, but under certain circumstances, it could be viewed as
joining with the acquiror in making the offer. In that case, the
exemptions would need to extend to additional parties. In addition, we
asked whether the parties' affiliates, dealer-managers,
[[Page 61412]]
and others acting on behalf of the parties to the transaction should be
permitted to rely on the exemption. Again, most commenters were
consistent in recommending that we expand the exemptions to these
persons. While we realize that in many circumstances the exemptions
would not be necessary for persons other than the parties to the
transaction or the party making the offer, we want to encourage full,
complete and continuous communications with security holders.
Therefore, we are adopting the exemptions to cover all persons acting
on the parties' behalf.
3. Written Communications With Legend Filed on Date of First Use
We are adopting, as proposed, a condition to the communications
exemptions that all written communications in connection with or
relating to a business combination transaction be filed on or before
the date of first use.\37\ In addition, all written communications must
include a prominent legend advising investors to read the registration,
proxy or tender offer statement, as applicable.\38\ We believe that a
prompt filing requirement is necessary to protect security holders and
assure that these communications are available to all investors on a
timely basis.\39\ In most cases, this information will need to be filed
electronically via the EDGAR System, and thus will be rapidly
disseminated to the marketplace.\40\
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\37\ Written communications include all information disseminated
otherwise than orally, including electronic communications and other
future applications of changing technology. Videos and CD-ROMs, for
example, should be filed on EDGAR by means of a transcript. See Rule
304 of Regulation S-T (17 CFR 232.304).
\38\ The legend also would advise investors that they can obtain
copies of the filed documents for free at the Commission's web site
and explain which documents are available for free from the issuer
or filing person, as applicable. See new Rule 165(c)(1) and revised
Rules 14a-12(a)(1)(ii), 13e-4(c), 14d-2(b)(2), and 14d-9(a).
\39\ We did not propose, and are not adopting, a requirement to
deliver written communications to security holders.
\40\ These communications must be filed on EDGAR to the same
extent that the related prospectus, proxy statement or tender offer
statement must be filed on EDGAR.
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In the Proposing Release, we asked whether parties relying on the
exemptions should be permitted to file written communications on a
later date (e.g., when the mandated disclosure document is filed or
some other date). While several commenters viewed the requirement as
reasonable, a few believed it would be burdensome. The latter group of
commenters stated that a same-day filing requirement could cause
parties to delay the release of information. These commenters believed
that communications that would otherwise be made late in the day will
be postponed until the materials can be filed on the same day. We
believe, however, that in most cases parties to business combination
transactions will be able to time their communications so that it is
possible to file them on the same day they are made. Also, Rule 13(d)
of Regulation S-T permits communications that are made outside of the
Commission's business hours to be filed electronically as soon as
practicable on the next business day.\41\ Further, we have clarified
that an immaterial or unintentional delay in filing will not preclude
reliance on the Securities Act exemption.\42\
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\41\ 17 CFR 232.13(d). See Part II.C.3 below.
\42\ See Part II.B.2 below.
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The filing requirement applies to written communications that are
made public or are otherwise provided to persons that are not a party
to the transaction.\43\ As a general matter, this would include, for
example, scripts used by parties to the transaction to communicate
information to the public and other written material (e.g., slides)
relating to the transaction that is shown to investors.\44\ In
contrast, internal written communications provided solely to parties to
the transaction, legal counsel, financial advisors, and similar persons
authorized to act on behalf of the parties to the transaction would not
need to be filed. Also, as explained in the Proposing Release, business
information that is factual in nature and relates solely to ordinary
business matters, and not the pending transaction, would not need to be
filed. We expect that filing persons will apply traditional legal
principles in determining whether a particular written communication is
made in connection with or relates to a proposed business combination
transaction.\45\
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\43\ Oral communications are covered by the exemptions, but they
do not need to be reduced to writing or filed. Oral communications,
as proposed, will be subject to liability under the applicable
regulatory scheme. For example, pre-filing oral communications
regarding a proposed offering of securities in connection with a
business combination transaction will be subject to section 12(a)(2)
liability. See Part II.B.2 below.
\44\ Cf. Rule 14a-6(c) (17 CFR 240.14a-6(c)) and Item 1016(g) of
Regulation M-A.
\45\ At this time we are not adopting proposed Rules 168 and
169, the exemptions for regularly released forward-looking
information and factual business communications from the filing
requirements. See Part VII.A.1.c.ii.(A) and (B) of the Securities
Act Reform Release and Release No. 33-5009 (Oct. 7, 1969) (34 FR
16870). Although we are not adopting these rules, we do not expect
parties to file ordinary or routine business communications that
refer to the transaction in a non-substantive way.
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Several commenters criticized the proposed filing requirement
because it could result in the filing of duplicative or substantially
similar information when similar communications are made over time. In
response to this concern, we are clarifying that any republication or
redissemination of the same information would not need to be filed
again to comply with the exemptions. If, however, information is either
added to or changed from the content of an earlier communication, then
the revised written communication must be filed.\46\
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\46\ If the same written communication is redisseminated or
contains only minimal changes (e.g., correction of minor
typographical errors, an update regarding a contact person, or
stylistic changes including a change in the format, type-size,
letterhead, addressee, etc.) without any change to the content of
the information, the written communication would not need to be
refiled. In addition, we do not expect persons to file responses to
specific unsolicited inquiries if the responses are not disseminated
to others. Of course, if a response to an unsolicited inquiry
contained material information not otherwise available to the
investing public (e.g., projections), the communication would need
to be filed.
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B. Communications Under the Securities Act
1. Securities Act Exemption and Filing Rules
We are exercising our exemptive authority to create an exemption
that will permit more communications with security holders and the
markets regarding a planned business combination transaction.\47\ We
find that free communications relating to business combination
transactions are in the public interest and consistent with the
protection of investors. Accordingly, we adopt new Rules 165, 166 \48\
and 425 \49\ and amend Rules 135 and 145.\50\ These new and amended
[[Page 61413]]
rules permit parties to communicate freely about a planned business
combination transaction before a registration statement is filed, as
well as during the waiting period and post-effective periods, so long
as their written communications used in connection with or relating to
the transaction are filed beginning with the first public announcement
\51\ and ending with the close of the proposed transaction.\52\ As
noted in the Proposing Release, these communications are not excluded
from the definition of ``offer'' in the Securities Act,\53\ as no
content restriction is imposed on the communications.\54\ Instead, new
Rule 165 exempts persons making these communications from sections
5(b)(1) and (c) of the Securities Act.\55\
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\47\ Section 28 of the Securities Act (15 U.S.C. 77z-3) gives us
authority to, by rule or regulation, conditionally or
unconditionally exempt any person, security or transaction, or any
class or classes of persons, securities or transactions from any
provision of this title or any rule or regulation issued under this
title to the extent that such exemption is necessary or appropriate
in the public interest, and is consistent with protection of
investors.
\48\ We adopt proposed Securities Act Rules 165, 166 and 167 as
new Rules 165(b), 165(a) and 166, respectively. These rules are
limited to business combination transactions since the Securities
Act Reform Release proposals governing capital-raising transactions
are not being adopted at this time.
\49\In the Securities Act Reform Release, we proposed a
requirement that all ``free writing'' materials be filed as
prospectus supplements in accordance with Rule 425. In this release,
we adopt proposed Rule 425(b) and (c) as new Rule 425(a) and (b) and
limit the rule to business combination transactions. Proposed
paragraph (a) contained several exceptions from the filing
requirement. We retain the exceptions that are still applicable in
Rule 425(d).
\50\ See Part II.B.3 below discussing revised Rules 135 and 145
in greater detail.
\51\ See Part II.B.4 below for the definition of public
announcement.
\52\ See Part II.A.3 above discussing the types of written
communications that must be filed. Written communications relating
to the transaction before the filing of a registration statement are
prospectuses that must be filed under Rule 425. See new Rule 165(a).
After a registration statement is filed (during what is called the
``waiting period''), and after effectiveness of the registration
statement, written communications relating to the transaction are
prospectuses that must be filed under Rule 425. See new Rule 165(b).
Communications filed under Rule 425 do not need to be delivered to
security holders. This does not, however, change the prospectus
delivery requirements for the mandated prospectus that is part of
the registration statement, and any supplements either before or
after the registration statement is declared effective. These
prospectuses and supplements would continue to be delivered to
security holders and filed under Rule 424 (17 CFR 230.424) instead
of Rule 425.
\53\ A communication that contains no more information than that
specified in Rule 135 will not be an offer, as is currently the
case.
\54\ We note, however, that a communication relating to an
investment company that is permitted by the new and amended rules
generally would have omitted to state a fact necessary in order to
make the statements in the communication not materially misleading
unless the communication includes the information specified in Rule
34b-1 (17 CFR 270.34b-1) under the Investment Company Act of 1940
(17 U.S.C. 80a-1 et seq.)
\55\ New Rule 166 provides that communications before the first
public announcement of a transaction will not be offers, so long as
parties to the transaction take reasonable steps to prevent further
distribution or publication until the first public announcement or
the registration statement is filed.
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New Rules 165 and 166 are available only for business combination
transactions. New Rule 165 defines a business combination transaction
as a transaction specified in Rule 145(a) or an exchange offer. Thus,
either the proxy rules or the tender offer rules must be applicable to
the transaction. We have added a preliminary note to Rules 165 and 166
to state that the exemption is not available to communications that may
technically comply with the rule, but have the primary purpose or
effect of conditioning the market for a capital-raising or resale
transaction.\56\
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\56\ For example, the exemption would not be available where a
non-reporting issuer conducts an exchange offer primarily for the
purposes of giving its investors freely tradable securities and
creating a public market in, or manipulating the market for, those
securities. Likewise, it would be inappropriate to rely on the
exemptions in effecting a merger of a public ``shell'' company to
take a private company public. These mergers commonly are used to
develop a market for the merged entity's securities, often as part
of a scheme to manipulate the market for those securities.
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2. Liability for Communications
As proposed, both oral and written communications made in reliance
on the Securities Act exemption would be offers subject to section
12(a)(2) liability, based on the belief that this level of liability
would adequately protect investors without chilling communications.\57\
Approximately half the commenters who addressed the issue agreed with
the proposed liability standard, while the others believed that this
potential level of liability could have a chilling effect on
communications.
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\57\ Of course, if a communication contains material
information, that information must be disclosed in the registration
statement that is declared effective. Therefore, the information
ultimately will be subject to section 11 liability (15 U.S.C. 77k)
as well.
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We are adopting the proposed regulatory scheme. To the extent that
these communications constitute offers, they currently would be subject
to section 12(a)(2) liability. As a result, we do not believe that the
adopted rules alter the current liability levels for these
communications.\58\ In light of the extensive pre-filing communications
that are ongoing in the marketplace now with respect to business
combination transactions, we believe that a section 12(a)(2) standard
of liability would not significantly chill communications.
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\58\ In some cases, these communications are filed and
incorporated by reference into registration statements, and as a
result also are subject to section 11 liability.
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Several commenters also indicated that the proposed section 5(c)
exemption should not be conditioned on timely filing of all written
communications. Commenters were concerned that a failure to timely file
a written communication could result in a loss of protection under the
exemption, resulting in a section 5 violation that would give security
holders a right of rescission. In proposing the filing requirement, we
did not intend to provide security holders with an automatic right of
rescission if a communication is either filed late or there is an
unintentional failure to file. To clarify this issue, we are revising
the filing requirement in new Rule 165 to state that an immaterial or
unintentional failure to file or delay in filing will not result in a
loss of the exemption from section 5(b)(1) or (c), so long as a good
faith and reasonable attempt to file the written communication is made
and the communication is filed as soon as practicable after discovery
of the failure to file.\59\
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\59\ New Rule 165(e). This provision is similar to the good
faith standard in Rule 508(a) of Regulation D (17 CFR 230.508(a)).
Although an immaterial or unintentional failure to file or delay in
filing is a violation of the filing requirement, it would not render
the exemption unavailable. Factors to be considered in determining
whether a delay in filing is immaterial or unintentional include:
The nature of the information, the length of the delay, and the
surrounding circumstances, including whether a bona fide effort was
made to file timely. If a written communication is made late in the
day and the offeror attempts to file it, but experiences difficulty
in filing electronically on EDGAR, and files as soon as practicable
after business hours or the following business day, the exemption
will continue to be available.
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3. Rules 135 and 145
Currently, Rule 135 provides that disclosure of certain limited
information in notice form will not be deemed an ``offer'' for purposes
of section 5 of the Securities Act.\60\ A Rule 135 notice is typically
made upon announcement of a proposed securities offering before a
registration statement is filed.\61\ Rule 145(b)(1) contains a similar
provision regarding the information in a stock merger that will not be
deemed a ``prospectus'' or ``offer.'' \62\
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\60\ 15 U.S.C. 77e. Rule 135 generally permits prospective
offerors to issue notices that include the following information:
(1) The name of the issuer; (2) the title, amount and basic terms of
the securities to be offered, the amount of the offering, if any, by
selling security holders, the anticipated time of the offering, and
a brief statement of the manner and purpose of the offering, without
naming the underwriters; and (3) any statement or legend required by
state law. Other limited information also is permitted under the
rule for rights offerings, exchange offers and offers to employees
of the issuer or an affiliate.
\61\ Cash tender offers and cash mergers do not involve the
Securities Act, and thus no reliance on Rule 135 is necessary.
\62\ Rule 145 is the rule that applies the registration
requirements to business combinations involving security holder
voting decisions. Rule 145(b)(1) provides that written
communications containing only specified information about mergers
and similar transactions are not deemed offers or a prospectus. Rule
135(a)(4) contains a similar provision for communications about
exchange offers. Rule 145(b)(2), which provides that certain
communications subject to the proxy rules are not offers, is being
rescinded as proposed.
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We proposed several revisions to Rules 135 and 145 in the Proposing
Release and the Securities Act Reform Release. In particular, we
proposed moving the substance of Rule 145(b)(1) to Rule 135, as both
rules contain similar provisions regarding the
[[Page 61414]]
information that will not be deemed an offer. We are adopting those
revisions.\63\
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\63\ Changes to Rules 135 and 145 in the Securities Act Reform
Release that were specifically tailored to capital-raising
transactions are not being adopted at this time.
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In addition to the changes proposed, we asked whether Rule 135
notices should be filed. Although Rule 135 does not currently require
these notices to be filed, in many cases the 135 notice would be the
first written communication relating to a proposed business combination
transaction. We believe it is important for this information to reach
the marketplace promptly and on a widespread basis. Generally, these
notices are short documents (e.g., press release or other form of
written notice of an intended offer). Currently, the first press
release or other written communication announcing a proposed business
combination transaction often is filed under cover of Form 8-K.\64\ In
addition, under the new regulatory scheme these communications would
have to be filed under the proxy or tender offer rules, if applicable.
As a result, we do not believe that a filing requirement for the first
public communication regarding a business combination will impose a
significant burden.
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\64\ 17 CFR 249.308.
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We are adopting a filing requirement that encompasses Rule 135
notices. These notices must be filed under new Rule 425 because they
are written communications relating to a proposed transaction. Even
though we are requiring these notices to be filed, our rules provide
that they will not constitute offers and therefore will not have
section 12(a)(2) prospectus liability.\65\ In addition, subsequent
notices or announcements made under Rule 135 that do not contain new or
different information are not required to be filed. This approach is
consistent with the filing requirement under each of the three
regulatory schemes.
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\65\ New Rule 425(b).
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4. Public Announcement
Under the terms of the exemptions, written communications must be
filed beginning with the first public announcement of the business
combination transaction. Today we are adopting a specific definition of
``public announcement'' that encompasses all communications that put
the market on notice of a proposed transaction. For purposes of
determining when a filing obligation is incurred under the exemptions,
``public announcement'' means any communication by a party to the
transaction, or any person authorized to act on a party's behalf, that
is reasonably designed to, or has the effect of, informing the public
or security holders in general about the transaction.\66\ We asked in
the Proposing Release whether the term ``public announcement'' should
be defined, and if so, how it should be defined. Although the
commenters that responded favored a bright line definition, they
opposed a broad definition that could potentially create difficulties
in determining when a filing obligation is triggered.
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\66\ New Rule 165(f)(3). A similar definition of ``public
announcement'' is included in revised Rules 13e-4(c) and 14d-2(b).
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We agree that a definition is necessary, but we believe that the
definition should be sufficiently broad to cover communications that
are reasonably designed to, or have the effect of, putting the markets
or the security holders on notice of a proposed transaction. We do not
believe the definition should be so narrow that the parties must
actually intend to effect a broad dissemination of the information.\67\
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\67\ Of course, if the regulations of the self-regulatory
organization on which the securities are listed require a public
announcement of the transaction, that would constitute a public
announcement for purposes of the communications exemptions.
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1C. Communications Under the Proxy Rules
1. Rule 14a-12 Expanded
We are revising Rule 14a-12,\68\ substantially as proposed, to
permit both written and oral communications before the filing of a
proxy statement so long as all written communications related to the
solicitation are filed on the date of first use.\69\ This is the same
filing requirement adopted for the communications exemption under the
Securities Act.\70\ This exemption is not limited to business
combination transactions, but is available regardless of the subject
matter of the solicitation. Oral communications do not need to be
reduced to writing and filed. In revising Rule 14a-12, we retain
substantially all the proposed conditions to reliance on the exemption.
These conditions are that no form of proxy is furnished until a proxy
statement is delivered, the obligation to disclose participant
information, and the requirement to file all written communications
with a prominent legend advising security holders to read the proxy
statement.
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\68\ The expansion of Rule 14a-12 to cover all solicitations
eliminates the need for many of the provisions in Rule 14a-11. As a
result, we are rescinding Rule 14a-11 and moving paragraphs (d) and
(f) of Rule 14a-11 to new Rule 14a-12. These two provisions apply if
soliciting persons refer to information in annual reports or use
reprints or reproductions of previously published materials in their
soliciting materials. Revised Rule 14a-12 makes it clear that these
provisions are limited to election contests.
\69\ Written communications by soliciting parties before a proxy
statement is furnished to security holders must be filed on the date
of first use and must provide information regarding the participants
and their interests or include a legend advising security holders
where they can obtain this information. See revised Rule 14a-
12(a)(1). Once a proxy statement is furnished to security holders,
any additional soliciting materials used must be filed on the date
of first use but need not include participant information or a
legend advising where to obtain that information. See revised Rule
14a-6(b).
\70\ Communications under revised Rule 14a-12 generally will be
filed under cover of the proxy statement cover sheet, with the Rule
14a-12 box checked. If a transaction is subject to the Securities
Act in addition to one or more of the other regulatory schemes
(i.e., the proxy or tender offer rules), the written communications
only need to be filed under Securities Act Rule 425. Although the
materials are only filed under the Securities Act, they also would
be deemed filed and take liability under the proxy or tender offer
rules, as applicable.
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As a result of these changes to Rule 14a-12, management can
communicate more freely with security holders about significant
corporate events, including a proposed merger or acquisition, or other
significant corporate governance matters that may require a security
holder vote. Likewise, security holders are able to communicate more
freely with one another. The revised rule does not, however, expand a
company's or security holder's ability to secure promises to vote a
certain way before a proxy statement is provided.\71\ The expansion of
Rule 14a-12 to non-contested matters is premised on the same rationale
for increasing communications related to business combination
transactions under the Securities Act. We recognize the many recent
developments in technology that have enabled companies to communicate
more frequently with security holders at a significantly reduced cost.
In addition, security holders and the markets are demanding more
information from public companies about new developments and proposed
transactions. In light of the rapid pace of change in the securities
markets and developments in technology, we believe the time has come to
update the proxy rules to permit security holder communications to flow
more freely and to facilitate a more informed security holder base.
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\71\ Similarly, the revised rule does not change a security
holder's obligation under section 13(d) of the Exchange Act (15
U.S.C. 78m(d)) to file or amend a Schedule 13D (17 CFR 240.13d-101)
when a voting arrangement, agreement or understanding is reached
with respect to a company's securities.
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We believe that the requirement to file all written communications,
the condition that no proxy or form of proxy be furnished to security
holders before
[[Page 61415]]
a written proxy statement is delivered, and the requirement to include
a legend on all written communications advising security holders to
read the proxy statement and where to find participant information
should be sufficient to protect against misleading solicitations.
Together with the antifraud provisions of Rule 14a-9,\72\ these
requirements should maintain the integrity of the solicitation process
and adequacy of information disseminated to security holders.\73\ In
addition to these safeguards, security holders will receive a complete
proxy statement before they can vote.
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\72\ 17 CFR 240.14a-9.
\73\ We note that a communication relating to an investment
company that is permitted by Rule 14a-12 generally would have
omitted to state a fact necessary in order to make the statements in
the communication not materially misleading unless the communication
includes the information specified in Rule 34b-1 under the
Investment Company Act of 1940.
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In the Proposing Release we solicited comment on whether a
federally mandated proxy solicitation period would be appropriate for
mergers and similar transactions in light of the free communications
permitted under the exemption. We noted that security holders may need
a minimum amount of time (e.g., 20 business days), similar to that in
tender offers, to digest the free communications together with the
information in the proxy statement. Most commenters that responded to
this question were opposed to a minimum solicitation period. Because
this is an area that traditionally has been governed by state corporate
law, and in light of the improved ability of security holders to access
information through electronic means, we believe that the existing
solicitation periods are adequate. We are not adopting a minimum
solicitation period at this time.
We also asked whether the proxy rules should be amended to permit
direct delivery of proxy statements and other soliciting materials to
non-objecting beneficial owners to facilitate more timely and informed
voting decisions. We were concerned that security holders holding
securities in street name may not receive materials from banks, broker-
dealers, or other nominees in a timely fashion. While we believe that
direct delivery of proxy materials to non-objecting beneficial owners
may have benefits for security holders, at this time we reserve this
concept for a future rulemaking project.
a. The ``As Soon as Practicable'' Requirement
Many of the commenters urged us to revise the current and proposed
condition in Rule 14a-12 that a written proxy statement meeting the
requirements of Regulation 14A be sent or given to solicited security
holders at the earliest practicable date. These commenters pointed out
that, in practice, when the purpose of a solicitation becomes moot or
the solicitation is otherwise discontinued, persons making pre-filing
communications in reliance on the rule generally do not, and should not
be required to, send security holders a written proxy statement. We
recognize that literal adherence to the delivery requirement in Rule
14a-12 in circumstances where a solicitation is canceled prematurely
may not provide a significant benefit to security holders, but could
result in unnecessary costs to the soliciting parties and potentially
mislead security holders into believing that the solicitation is
ongoing.
In view of these concerns, current practice, and the overall
approach to communications adopted today, we are eliminating the
current ``as soon as practicable'' requirement. As revised, Rule 14a-12
requires that a definitive proxy statement be furnished to security
holders when a form of proxy is either given to or requested from
security holders.\74\ When proxies are first requested from security
holders the mandated disclosure document must be delivered to them so
they can make informed voting decisions. This approach is consistent
with the delivery requirements adopted under the other regulatory
schemes.\75\ As a result, parties relying on the rule are not obligated
to furnish a written proxy statement if the solicitation is
discontinued for any reason. If a solicitation is discontinued, we
believe it would be appropriate for the soliciting persons to inform
previously solicited security holders that the solicitation is over and
provide a brief explanation of why it is being canceled.
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\74\ Revised Rule 14a-12(a)(2).
\75\ For example, in Part II.D.1 below, we are revising the
definition of commencement in the tender offer rules so that a
complete tender offer statement need not be filed and disseminated
until the means to tender are provided to security holders.
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b. Participant Information
We are modifying the current requirement to disclose participant
information in proxy materials. Instead, the revised rule requires a
prominent legend on written communications advising security holders
where they can obtain a detailed list of the names, affiliations and
interests of participants in the solicitation.\76\ Of course, the
soliciting materials could include the participant information in full,
as currently required, instead of a legend.
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\76\ In response to our question asking whether to retain the
requirement to disclose the names of all participants and their
interests, several commenters expressed the view that the
requirement has resulted in lengthy and boilerplate disclosure that
can be costly for participants without providing any significant
benefit for security holders.
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The legend may refer to either a previously filed communication
that contains the participant information, or a separate statement that
contains the participant information and is filed as Rule 14a-12
material.\77\ We are not eliminating the requirement to make
participant information available to security holders. Rather, we are
requiring disclosure of this information once instead of in every
communication.
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\77\ The information must be filed under cover of Schedule 14A
with the appropriate box on the cover page checked to designate that
the material is filed under Rule 14a-12.
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c. ``Test the Waters''
In addition to our proposal to expand Rule 14a-12, we solicited
comment on adopting a broader ``test the waters'' approach to proxy
solicitations. Under this approach, parties could engage in soliciting
activities without filing proxy material so long as no form of proxy is
requested or sent. Test the waters would permit both written and oral
proxy solicitations before the filing of a proxy statement. Unlike the
proposed expansion of Rule 14a-12, however, test the waters would not
require written communications to be filed on first use.
Many commenters favored our concept of test the waters, but a few
commenters expressed concern that it could result in unregulated and
secret solicitations. At this time, we believe that our expansion of
Rule 14a-12, as adopted, should provide sufficient flexibility to
companies to communicate more frequently with security holders on a
timely basis. After we gain some experience with communications under
the expanded Rule 14a-12, depending on its effects, we may consider
moving toward a test the waters approach in future rulemaking.
2. Limited Confidential Treatment of Merger Proxy Materials
Today, a proxy statement relating to a merger, consolidation,
acquisition or similar matter may be filed confidentially with the
Commission.\78\ If the staff decides to review the proxy statement it
may issue comments to the
[[Page 61416]]
filing parties. When all comments are resolved, a public filing is made
either a definitive proxy statement or, if securities are being
offered, a registration statement that wraps around the proxy
statement. We proposed to eliminate the provision for confidential
treatment. We note the practice of disclosing extensive deal-related
information to the market before a registration statement or proxy
statement is filed publicly. We do not believe that material public
information regarding a merger should receive confidential treatment.
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\78\ Rule 14a-6(e)(2) (17 CFR 240.14a-6(e)(2)).
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Many commenters opposed eliminating confidential treatment due to a
concern for increased liability. These commenters pointed out that they
may be required to make revisions to their proxy statement disclosure
in response to staff comment that would be subject to unnecessary
public scrutiny. It is not clear, however, why the proxy statement
situation warrants different treatment from exchange offers and other
public filings that are routinely amended in response to staff comment.
One commenter suggested that we retain confidential treatment when the
parties to a transaction do not publicly disclose information about the
transaction outside the proxy statement.
We have decided to retain confidential treatment under limited
circumstances. Where the parties to a merger or other business
combination transaction limit their public communications to those
specified in Rule 135,\79\ confidential treatment will continue to be
available for the proxy materials. If, however, the parties elect to
publicly disclose, either orally or in writing, information relating to
the transaction that goes beyond Rule 135, confidential treatment will
not be available.\80\
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\79\ Rule 135 generally exempts from the definition of ``offer''
any notice that states no more than specific limited information;
see n.60 above. The Rule 135 limit on communications would apply to
all parties to the transaction and anyone acting on their behalf in
communicating to the public.
\80\ Revised Rules 14a-6(e)(2) and 14c-5(c)(2). Confidential
treatment will continue to be unavailable for going-private or roll-
up transactions.
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As a result, the parties to the transaction may choose either to
forgo confidential treatment and communicate publicly about the deal in
reliance on one of the new exemptions, or invoke confidential treatment
and refrain from any publicity outside the proxy statement, except for
the basic information permitted by Rule 135. We will use Rule 135 as a
bright line in determining whether parties to a transaction have
publicly disclosed sufficient information to the point that
confidential treatment of the proxy materials is no longer warranted.
This bright line will be applied whether or not the transaction is
subject to the Securities Act and Rule 135. If a preliminary proxy
statement is filed confidentially, but information beyond Rule 135 is
subsequently disclosed, confidential treatment will no longer be
available and all proxy materials related to the transaction must be
filed publicly.
Two commenters recommended that we institute a procedure that would
allow parties to seek an expedited, confidential pre-filing review of
pro forma financial statements and other accounting matters if
confidential treatment is eliminated. Currently, parties are permitted
to, and frequently do, initiate pre-filing conferences with our
accounting staff to resolve sensitive accounting issues before the
filing a merger proxy statement. Our accounting staff will continue to
be available for pre-filing conferences with filing parties.
Several commenters also indicated that if we decided to eliminate
confidential treatment, we should not require that all exhibits be
filed with the first public filing of the proxy statement. These
commenters noted that in many cases some exhibits may not exist or are
not in final form when the proxy statement is first filed. The
limitation on confidential treatment adopted today would not require
that all exhibits be filed with the initial filing of a proxy
statement. As is the case today, a proxy statement may be filed first,
without any exhibits. Schedule 14A does not have any exhibit
requirements. Exhibits could be filed at a later date when the
registration statement is wrapped around the proxy statement. If all
exhibits are not final or complete at the time the registration
statement is first filed, then those exhibits could be filed in an
amendment to the combined proxy statement/registration statement.
3. Timing of Filings
Rule 14a-6(b) requires that definitive proxy materials be ``filed
with, or mailed for filing to, the Commission not later than the date
such material is first sent or given to security holders.'' \81\
Similar language appears in several other proxy and information
statement filing rules.\82\ The mailing alternative, however, is no
longer an option because companies must file electronically.\83\
Therefore, we are amending the proxy and information statement filing
rules as proposed to require filing no later than the date the
materials are first sent or given to security holders.\84\ This change
is consistent with the filing requirements imposed under the exemptions
adopted today.
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\81\ 17 CFR 240.14a-6(b).
\82\ See Rules 14a-4(f) (17 CFR 240.14a-4(f)), 14a-6(c) (17 CFR
240.14a-6(c)), 14a-11(c) (17 CFR 240.14a-11(c)), 14a-12(b) (17 CFR
240.14a-12(b)) and 14c-5(b) (17 CFR 240.14c-5(b)).
\83\ See Rule 101(a)(1)(iii) of Regulation S-T (17 CFR
232.101(a)(1)(iii)). Paper filings are permitted only if a hardship
exemption is available. Foreign private issuers that are not
required to file electronically are exempt from the proxy and
information statement requirements. Exchange Act Rule 3a-12-3 (17
CFR 240.3a-12-3).
\84\ We also are adopting the proposed clarification to Rule
13(d) of Regulation S-T. The revised rule makes it clear that if a
communication takes place after our official business hours (i.e.,
5:30 p.m. Eastern time) or on a non-business day, the communication
must be filed electronically on EDGAR the following business day.
This revision supersedes the interpretive position expressed by the
Division of Corporation Finance in Henry Lesser, Esq. (November 28,
1995). This provision applies to all our rules that require filing
on the same date that information is furnished, including the
Securities Act, proxy and tender offer rules.
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We continue to believe that definitive materials should be
available to security holders, the market and the staff as promptly as
possible. EDGAR and other electronic sources of information, including
the Internet, increasingly are relied upon by the investment community
for information regarding public companies. When there is a lag between
the time information is first disseminated and the time it is filed,
persons relying on our filings for information on public companies are
placed at a disadvantage.
D. Communications Under the Tender Offer Rules
1. ``Commencement,'' Communications, and Filing Requirements
Currently, the tender offer rules restrict a third-party bidder's
communications regarding a proposed tender offer. The restrictions on
communications stem from the concept of ``commencement,'' the five
business day rule for cash tender offers,\85\ and the requirement that
a registration statement be filed promptly for registered exchange
offers.\86\ A target's
[[Page 61417]]
communications regarding a tender offer are similarly restricted.\87\
To harmonize the treatment of communications regarding business
combination transactions under the three regulatory schemes, and to
promote the dissemination of information to all security holders on a
more timely basis, we are modifying the definition of ``commencement''
and eliminating the five business day rule and the requirement to
promptly file a registration statement after announcing a registered
exchange offer.\88\
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\85\ Currently, an offer is deemed to ``commence'' on public
announcement of the following limited information: the identity of
the bidder, the identity of the subject company, the amount and
class of securities sought and the price or range of prices offered,
unless a tender offer statement is filed within five business days
of the announcement and disseminated to security holders or the
bidder makes a subsequent public announcement withdrawing the offer.
See Rule 14d-2(b) and (c) (17 CFR 240.14d-2(b) and (c)). We refer to
this as the ``five business day rule.''
\86\ Although third-party bidders offering cash or exempt
securities must file a tender offer statement within five business
days, bidders offering registered securities are not bound by the
same rule. They must file a registration statement relating to the
securities offered ``promptly'' after announcing the limited
information specified in Rule 135. See Rule 14d-2(e) 17 CFR 240.14d-
2(e)).
\87\ If the target company comments on the merits of an offer or
otherwise makes a recommendation with respect to an offer, it may be
required to file a disclosure document. See Rule 14d-9(a) (17 CFR
240.14d-9(a)).
\88\ Revised Rule 14d-2(c). Rule 13e-4 has no comparable
communications restrictions, but we are adopting changes to this
rule to conform it to the new communications scheme.
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In place of these rules, we are adopting a filing requirement for
all written communications that relate to a tender offer beginning with
and including the first public announcement of the transaction.\89\ As
with communications subject to the Securities Act and the proxy rules,
written communications must be filed on the date that the communication
is made.\90\ In addition, written communications must contain a legend
advising security holders to read the full tender offer or
recommendation statement when it becomes available.
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\89\ The public announcement also triggers the Rule 14e-5
restrictions on purchasing outside the tender offer, as discussed in
Part II.G.5 below.
\90\ Revised Rule 14d-2(b)(2). These communications will be
filed under cover of Schedule TO or 14D-9, as appropriate. Both
schedules have a box to check indicating that these are pre-
commencement communications. No signature is required. See General
Instruction D to Schedule TO and General Instruction B to Schedule
14D-9. If the transaction also is subject to the Securities Act,
then communications must be filed under Rule 425 only, and those
communications will be deemed filed under the tender offer rules.
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Under the revised rules, ``commencement'' is when the bidder first
publishes, sends or gives security holders the means to tender
securities in the offer.\91\ We believe that security holders need the
information required by the tender offer rules when they are either
asked or able to tender their securities in an offer.\92\
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\91\ Generally, this will occur if the bidder provides security
holders with a transmittal form to use to tender securities or if
the bidder publishes an advertisement advising security holders how
to tender in the offer or to contact the bidder for more information
on how to tender securities in the offer. This also would occur if
by some other means persons are able to tender securities to the
bidder. At that time, the bidder must file and disseminate the
tender offer schedule, and the required 20 business day period that
all tender offers must remain open will begin to run. Revised Rule
14d-2(a).
\92\ Although we are changing how a tender offer is commenced
for purposes of the tender offer rules, we are not defining the term
``tender offer'' or changing our position on what activities may be
deemed to constitute a tender offer. The tender offer rules still
may apply to activities that function as unconventional tender
offers. We maintain our position that the term ``tender offer''
should be interpreted flexibly in accordance with the intended
purposes of sections 14(d) and 14(e). A determination of whether a
particular transaction or series of transactions constitutes a
tender offer will, of course, depend on the particular facts and
circumstances and is not limited to ``conventional'' tender offers.
See Release No. 34-15548 (Feb. 5, 1979) (44 FR 9956).
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To minimize the potential for dissemination of false offers into
the marketplace in the absence of the five business day rule, we are
adopting new Rule 14e-8. As proposed, this rule prohibits bidders from
announcing an offer: without an intent to commence the offer within a
reasonable time and complete the offer; with the intent to manipulate
the price of the bidder or the target's securities; or without a
reasonable belief that the person will have the means to purchase the
securities sought. We believe that a specific rule prohibiting such
conduct is appropriate. This antifraud rule is intended as a means to
prevent fraudulent and misleading communications regarding proposed
offers under the new communications scheme, in addition to the existing
antifraud provisions.
Two commenters expressed concern that the rule could create new
grounds for frivolous litigation, while others supported the proposal.
Of course, if a target or other party decided to litigate under this
new rule, the plaintiff would have the burden of showing that the
bidder either did not have an intent to commence and complete the offer
or did not reasonably believe it had the ability to purchase the
securities. Although not required, a commitment letter or other
evidence of financing ability (e.g., funds on hand or an existing
credit facility) would in most cases be adequate to satisfy the rule's
requirement that the bidder have a reasonable belief that it can
purchase the securities sought.\93\
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\93\ This is not intended to change how bidders legitimately
finance their offers today. Bidders may have sufficient funds on
hand to complete the offer or they may arrange to borrow funds from
an outside source. In most cases when the bidder expects to obtain
funds from another source, financing is arranged in advance or
immediately after announcing an offer. Bidders typically get a
commitment letter from their lenders.
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Although we noted in the Proposing Release that eliminating the
current restrictions could have potentially destabilizing effects on
the securities markets,\94\ it is not clear that the market effects
differ greatly from those caused by merger announcements, which are not
subject to the same constraints. Based on our experience with tender
offers \95\ and the factors discussed above influencing our decision to
permit more communications regarding business combination transactions,
we believe that the availability of more information on a timely basis
will better assist security holders in making well informed individual
investment decisions when confronted with news of a pending or proposed
business combination. Accordingly, we are adopting the changes to the
tender offer communications provisions substantially as proposed.
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\94\ See Part II.B.7.a of the Proposing Release and Release No.
34-15548 (February 5, 1979) (44 FR 9956).
\95\ We have not observed any disruptive or destabilizing
effects in cases where precommencement publicity is currently
permitted, such as where Rule 135 information is disclosed regarding
a proposed exchange offer more than five business days before a
registration statement is filed.
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In reaching this conclusion, we note that communications regarding
issuer tender offers are not similarly restrained.\96\ Also, it appears
that some bidders do not use the term ``tender offer'' in their public
announcement of a proposed business combination transaction in an
attempt to avoid triggering application of Rule 14d-2. Furthermore,
security holders today, upon hearing news of a proposed tender offer
for their securities (either directly by the formal notice published by
the bidder or indirectly through rumors in the marketplace), must
decide whether to: (i) Retain their securities until a tender offer
statement is filed and disseminated so they can tender into the offer;
or (ii) sell into the market at prevailing prices based on the limited
information available.\97\ Under the new approach, more time may elapse
between announcement and the filing of the tender offer statement, but
more information also may be available during that period. We do not
believe there is a sufficiently compelling basis
[[Page 61418]]
to continue treating third-party cash offers, exchange offers, issuer
tender offers and mergers differently.\98\
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\96\ Issuer tender offers are subject to Rule 13e-4, which does
not contain a comparable provision to the five business day rule or
a requirement to file a registration statement promptly after
announcing limited information about a registered exchange offer.
\97\ Bidders often wait until the fifth business day following
public announcement before filing a full tender offer statement in
accordance with Rule 14d-3(a) (17 CFR 14d-3(a)). In addition, it can
take several days before mailed copies of the tender offer statement
are received by beneficial owners. Bidders offering registered
securities must promptly file the registration statement after
announcement, which in most cases is more than five business days
after the announcement.
\98\ All tender offers must remain open for at least 20 business
days. See Rule 14e-1(a) (17 CFR 240.14e-1(a)). If security holders
are willing to wait to receive the tender offer statement containing
the required information, they can consider the disclosure document
in light of all earlier communications relating to the transactions
before making an investment decision with respect to the offer. We
have no reason to believe that the current minimum time period for
tender offers is inadequate.
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Most of the commenters that addressed the proposals favored
eliminating the five business days rule and the requirement to promptly
file a registration statement after announcement of an exchange offer,
as well as the revised definition of ``commencement.'' A few
commenters, however, expressed concern that elimination of the five
business day rule could revive certain inconsistent state law
requirements. We do not believe that elimination of the five business
day rule will result in a resurgence of inconsistent state anti-
takeover statutes that impose disclosure or other requirements
incompatible with our new regulatory scheme.
We have long defined when a tender offer commences. This definition
served several purposes, including implementing a uniform nationwide
timetable for the tender offer process, regulating the flow of
information by identifying the date by which required disclosure
filings must be made with the Commission, and helping to create a level
playing field between bidders and targets. Under well-established
principles, any state law that conflicted with this provision was
preempted.
The new definition continues to serve these sorts of purposes--it
establishes a uniform time at which a tender offer is deemed to
commence, it continues to balance the rights and obligations of bidders
and targets, and it facilitates the free flow of information from both
bidders and targets before that date (subject to the antifraud
provisions), based on our judgment that this flow of information is in
the best interests of the holders of securities. The elimination of the
five business day rule and the other changes in the rule are intended
to provide security holders with the broadest possible disclosure of
information at the earliest date possible.
We believe that courts would hold that any state law that
conflicted with the new rule by attempting to establish a different
commencement date or otherwise frustrating operation of the rule would
be preempted.\99\ For instance, we believe that any state provision
that made it impossible to comply with both state and federal
requirements or that created obstacles to the accomplishment and
execution of the full purposes and objectives of the new rule would
continue to be preempted.\100\
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\99\ See Dynamics Corp. of America v. CTS Corp., 481 U.S. 69, 79
(1987).
\100\ See, e.g., Barnett Bank of Marion County versus Nelson,
517 U.S. 25 (1996) (summarizing preemption principles); see also
Fidelity Fed. Sav. & Loan Assoc. versus de la Cuesta, 458 U.S. 141,
154 (1982).
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Security holders ultimately have the choice to sell into the market
based on information disclosed early or wait until a complete, mandated
disclosure document is sent to them before making an investment
decision. The ability of security holders to sell into the market
before a complete disclosure document is filed and disseminated is no
different from their current position between the time a transaction is
announced and the time a mandated disclosure document is filed and
disseminated. However, we believe that liberalizing early
communications will better serve investors and the markets by providing
them with more information at an earlier date. The bidder continues to
have the flexibility to commence promptly after the first public
announcement. We encourage bidders to commence their offers as soon as
they are able to do so, since security holders and other market
participants will benefit from the complete information in the mandated
tender offer materials. To the extent, however, that there are delays
between announcement and commencement, we believe that investors will
benefit from the free flow of information provided by the new
regulatory scheme. Therefore, we are changing the current regulatory
scheme, and is doing so we are clearly expressing our intent that these
new rules serve, as an integrated whole, to regulate the various
communications that persons may make regarding a potential or proposed
business combination transaction.
Two commenters favored retaining the five business day rule for
hostile offers, but eliminating it for negotiated transactions. We
believe, however, that applying the rule only to hostile offers could
present problems when the same target is the subject of both a
negotiated transaction and a hostile offer, or when a negotiated
transaction becomes hostile as a result of changed circumstances or
another offer. Further, in light of the communications scheme we adopt
today, it does not appear that security holders' best interests would
be served by permitting expanded communications only with respect to
negotiated transactions.
One commenter believed that the five business day rule provides
investors and the markets with a degree of certainty regarding proposed
offers and results in the dissemination of better information in a
relatively short time. We believe that our requirements to file all
written communications relating to a proposed transaction on first use
will result in more information on a timely basis. As noted above, we
do not believe bidders will have an incentive to unnecessarily delay
commencing their offers because of the risk that market forces may
affect the terms of the offer or a competing bidder will emerge.
Under these new and revised rules, bidders and targets alike have
an increased ability to communicate with security holders along with
the requirement to file all written communications related to an offer.
Under the new scheme, the target must file all written communications
relating to the transaction on the date the communication is made.\101\
Targets need not file a formal recommendation statement until after the
offer is formally commenced and a recommendation is made. The target
remains obligated, however, to take a position with respect to the
offer no later than 10 business days after the offer commences under
Rule 14d-2.\102\ If the target makes a recommendation after
commencement, but before the tenth business day, then it must file a
recommendation/solicitation statement on Schedule 14D-9 on or before
the time the recommendation is first made.
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\101\ Revised Rule 14d-9. These communications must include a
legend similar to the one required on the bidder's pre-commencement
communications, advising security holders to read the complete
recommendation when it is available. Although we did not propose
such a legend, we solicited comment on it, and the commenters who
addressed the issue supported a legend requirement.
\102\ See Rule 14e-2(a) (17 CFR 240.14e-2(a)).
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These rules apply to issuer and third-party tender offers alike. In
addition, the new rules make no distinction based on the form of
consideration offered to security holders (e.g., cash or stock). We do
not believe that there is sufficient justification to treat tender
offer communications differently based on either the nature of the
bidder or the consideration offered. Security holders ultimately face
the same investment decision--whether or not to tender in the offer.
2. Dissemination Requirements
We also reviewed the various methods to commence a tender offer in
[[Page 61419]]
the Proposing Release.\103\ In reviewing these methods, we noted that
long form publication \104\ is rarely used by bidders due to the cost
associated with publishing extensive information about the offer in a
newspaper.\105\ We proposed to eliminate long form publication.
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\103\ See Part II.B.7.b of the Proposing Release.
\104\ Rule 14d-2(a)(1) (17 CFR 240.14d-2(a)(2)).
\105\ A bidder must publish the information specified in Rule
14d-6(e)(1) (17 CFR 240.14d-6(e)(1)).
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Several commenters agreed that long form publication is rarely
used, but urged us to retain the method, citing the lack of any abuse
under the rule. In addition, these commenters noted that, in the
future, long form publication may become a viable means of
disseminating an offer using the Internet or another electronic
delivery system. At this time, we do not believe that technology has
developed to the point where bidders can rely solely on electronic
media to disseminate information about a tender offer to security
holders. In particular, posting the information on a web site alone
would not be adequate dissemination.\106\ Nevertheless, in response to
commenters' requests that we retain long form publication as a means of
commencement, we have decided not to eliminate it.
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\106\ Not all security holders have access to the Internet. Even
those that do have access would not have notice that a tender offer
for their company's securities was posted on a web site. All
commenters who addressed the question opposed electronic
dissemination as the sole means to disseminate an offer, noting that
there are no electronic sources of information as commonly available
and widely followed as newspapers. Of course, it is permissible to
post tender offer materials on a web site in addition to using other
methods of dissemination. Electronic media also may be used to
satisfy requirements to deliver tender offer material in accordance
with our guidelines for electronic delivery. See Release No. 33-7233
(October 6, 1995) (60 FR 53458). For example, a summary
advertisement for a tender offer could contain a consent form for
security holders to indicate their willingness to receive the
complete tender offer materials by means of a specified electronic
medium.
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We solicited comment on whether the rules should continue to permit
an offer to be commenced and disseminated by summary advertisement
alone.\107\ Currently, bidders that rely on the summary advertisement
method to disseminate an offer tend also to mail their offering
documents to security holders using a security holder list under Rule
14d-5. We asked whether bidders should always be required to use
security holder lists when disseminating an offer. Two commenters
favored retaining summary publication without the use of security
holder lists. Both cited the lack of any abuse with the rule and the
possibility that its elimination could force bidders to tip their hand
when requesting a security holder list from the target in hostile
transactions. Accordingly, we are not changing this aspect of the
summary advertisement rule.\108\ However, in keeping with the expansion
of permissible communications, we are eliminating, as proposed, the
current restriction on the information that may be included in a
summary advertisement.\109\
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\107\ Rule 14d-6(a)(2) (17 CFR 240.14d-6(a)(2)).
\108\ Similarly, we are retaining the current requirement that
bidders using stockholder lists also publish summary advertisements.
\109\ We are amending Rule 14d-6(a)(2) to delete the language
limiting the information that can appear in a summary advertisement.
We are retaining the prohibition against including a transmittal
form with the summary advertisement. A summary advertisement may
(and must, if it is designed to commence the offer) include the
means to tender, e.g., a telephone number to call to obtain the
complete tender offer materials, including the transmittal form.
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Currently, bidders must hand deliver a copy of their tender offer
statement and any additional tender offer materials to the target
company as well as any other bidder that has made an offer for the same
class of securities.\110\ We proposed a similar delivery requirement
for the first written communication disclosing a proposed offer. Under
the new communications scheme for tender offers, bidders are able to
disclose information about a proposed offer without commencing the
offer.\111\ In light of the many different communications media
available to bidders, we believe targets need a reliable way to learn
about proposed offers for their securities so they can respond in a
timely manner. Therefore, we are adopting a requirement that the bidder
deliver to the target and any other bidder the first written
communication relating to the transaction that is filed, or required to
be filed, with the Commission.\112\ This material must be delivered on
the date of the communication.\113\
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\110\ Rule 14d-3(a)(2). The current rule also requires
telephonic notice and mailing of tender offer material to any
securities exchange or the NASD on which the securities are listed
or traded. We are not extending this delivery requirement to pre-
commencement communications because the exchanges and the NASD are
relying less on paper filings and more on electronic databases to
obtain EDGAR filings.
\111\ Communications regarding offers can be made without a
summary advertisement of the offer appearing in newspapers.
\112\ As proposed, this requirement would have been triggered by
the first communication setting forth specified information. We
believe, however, that it will be simpler for bidders to know that
this obligation will attach at the same time the first pre-
commencement communication is filed. Once target companies and other
bidders receive notice of the transaction, they can monitor the
Commission's filings for subsequent pre-commencement materials.
\113\ Revised Rule 14d-2(b)(2). Instead of hand delivery, the
rule only requires ``delivery,'' so the bidder may use any other
means of delivery that is equally prompt and equally likely to
receive the attention of the target company (e.g., an e-mail to the
corporate secretary, chief executive officer and other persons of
similar authority at the target company, where the target company
uses these e-mail addresses for public communications). We have
similarly modified the bidder's current obligation to hand deliver a
copy of the mandated disclosure document. See revised Rule 14d-
3(a)(2).
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E. Exchange Offers May Commence On Filing
1. Early Commencement
We are adopting the early commencement provision substantially as
proposed, but extended to cover issuer exchange offers. Currently,
registered exchange offers may not commence until the related
registration statement becomes effective.\114\ As we noted in the
Proposing Release, this results in cash and stock tender offers being
treated differently. Cash tender offers have a distinct timing
advantage over stock tender offers because cash offers can commence as
soon as a tender offer statement is filed and disseminated.\115\ This
change should minimize this regulatory disparity by permitting stock
tender offers to commence as early as the date the related registration
statement is first filed.
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\114\ See Rule 14d-2(a)(4). Commencement occurs when definitive
copies of the prospectus/tender offer material are first published,
sent or given to security holders.
\115\ As a result, the 20 business day period that a tender
offer must remain open typically begins to run earlier for cash
offers than stock offers. See Rule 14e-1(a).
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Almost all of the commenters that addressed early commencement
indicated that it was a step in the right direction, but they believed
more was needed to fully balance the regulation of cash and stock
offers. We recognized in the Proposing Release that early commencement
alone may not be sufficient to level the playing field between cash and
stock tender offers because bidders would not be able to purchase
shares tendered in the offer until after the related registration
statement is effective. Accordingly, cash offers could close earlier
than stock tender offers due to possible staff review and comment on
the registration statement.
We solicited comment on whether there are other changes (e.g.,
expedited staff review, automatic effectiveness on filing or
effectiveness within a specified time after filing), that might further
reduce the disparity in regulatory treatment. We also asked whether
[[Page 61420]]
expedited staff review would minimize the regulatory differences.
Commenters had mixed views. Some commenters favored automatic
effectiveness or effectiveness shortly after filing, while others
believed the potential for post-effective staff review and comment
would discourage bidders from offering securities as consideration in a
tender offer.\116\ Most commenters, however, were in agreement that
expedited staff review is essential to balancing the regulatory
treatment of the two types of offers. Due to the risks associated with
automatic effectiveness and effectiveness shortly after filing (before
the staff has had an adequate opportunity to review the disclosure), we
believe these measures would not be in security holders' best
interests, especially in the business combination context where the
disclosure and accounting issues can be particularly complex. We are,
however, committed to expediting staff review of exchange offers so
that they may compete more effectively with cash tender offers.
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\116\ The latter group was primarily concerned that staff
comment could necessitate the dissemination of a post-effective
amendment.
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As proposed, early commencement was limited to third-party offers.
We solicited comment, however, on whether early commencement would
provide any benefits to issuers making exchange offers for their own
securities. Several of the commenters believed that issuers should have
the same ability to commence an exchange offer upon filing.\117\ We
agree that there is no reason to exclude issuer exchange offers from
early commencement, and therefore, we have decided to treat third-party
and issuer exchange offers alike under the new rule.
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\117\ These commenters also urged us to extend early
commencement to going-private transactions as well. We do not
believe going-private transactions warrant early commencement,
especially in light of the numerous comments issued by the staff of
the Division of Corporation Finance that result in significant
changes to the disclosure. Therefore, we are not extending early
commencement to Rule 13e-3 transactions. In addition, as proposed,
early commencement is not available to roll-up transactions. A roll-
up transaction is any transaction or series of transactions that
directly or indirectly, through acquisition or otherwise, involves
the combination or reorganization of one or more ``finite-life''
entities (usually limited partnerships) where the securities to be
issued are registered under the Securities Act. See Release No. 33-
6900 (June 17, 1991) (56 FR 28979); Release No. 33-6922 (October 30,
1991) (56 FR 57237); Release No. 33-7113 (December 1, 1994) (59 FR
63676); and the 900 series of Regulation S-K.
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We also asked whether there should be a proxy analogue to early
commencement so that parties to a business combination transaction
involving a voting decision would be able to furnish proxy cards with
preliminary proxy materials. Currently, proxy cards may only accompany
the definitive proxy statement/prospectus.\118\ A proxy analogue would
further balance the regulatory treatment of mergers and tender offers.
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\118\ Rule 14a-4(f).
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We are not adopting a proxy analogue to early commencement at this
time. We note that all tender offers must remain open for at least 20
business days.\119\ Currently, the minimum proxy solicitation period is
dictated by applicable state corporate law requirements.\120\ A proxy
solicitation period, accordingly, could be less than 20 business days.
Further, under the new rules adopted today, we are specifying the
appropriate time periods necessary for dissemination of a prospectus
supplement when there are material changes to the information
previously disseminated. The proxy rules do not have similar
provisions. Since the proxy solicitation area has traditionally been
governed by state law, and because we are not adopting a federally
mandated proxy solicitation period,\121\ we are not adopting an
analogue to early commencement that would permit the sending of proxy
cards along with preliminary proxy materials. We may consider extending
the concept to the solicitation of proxies once we have sufficient
experience with early commencement of exchange offers. Any proxy
analogue to early commencement would, of course, require the
establishment of a uniform proxy solicitation period and well-defined
time periods for the dissemination and receipt of a supplement
containing all material changes from the preliminary proxy statement
previously sent or given to security holders.\122\
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\119\ Rule 14e-1(a).
\120\ Most state corporate laws require that notice of a meeting
be sent to security holders no less than 10 days and no more than 60
days before the meeting.
\121\ See Part II.C.1 above.
\122\ See Part II.E.2 below discussing appropriate time periods
for the dissemination of a prospectus supplement containing
materials changes.
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Under the new rules,\123\ to commence an exchange offer early
(before effectiveness of a registration statement), a bidder must file
a registration statement relating to the securities offered and include
in the preliminary prospectus all information, including pricing
information,\124\ necessary for investors to make an informed
investment decision.\125\ Information may not be omitted under Rule 430
or Rule 430A under the Securities Act.\126\ Bidders also must
disseminate the prospectus and related letter of transmittal to all
security holders and file a tender offer statement with us before the
exchange offer can commence.\127\
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\123\ New Rule 162 and revised Rules 13e-4(e)(2) and 14d-4(b).
\124\ If the registration statement as first filed does not
contain a prospectus with this information, the bidder may file a
pre-effective amendment to supply the requisite information and then
commence the offer.
\125\ We are not changing our current position regarding the
level of information necessary to adequately inform security holders
of the consideration offered; the pricing information required is
the same information that would be required in an effective
registration statement today. Often, in a business combination
transaction the consideration offered to security holders is based
on a formula pricing mechanism that is based on the market price of
either the target or the bidder's securities during a specified
period. The requirement to provide pricing information in a
prospectus that is delivered to security holders to commence an
exchange offer would be satisfied if all material elements of the
formula are described in sufficient detail so that security holders
can evaluate the offer. A fixed price is not required under early
commencement.
\126\ Rule 430 and 430A (17 CFR 230.430 and 430A).
\127\ Because tender offer statements generally incorporate by
reference a substantial amount of the required information from the
related registration statement, the actual filing of a tender offer
statement would serve primarily as notice to us and the markets that
the exchange offer commenced. Of course, any prospectus furnished to
security holders before the registration statement is effective must
include the red herring legend required by Item 501(b)(10) of
Regulation S-K (17 CFR 229.501(b)(10)).
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Early commencement is at the option of the bidder. Exchange offers
can commence as early as the filing of a registration statement, or on
a later date selected by the bidder up to the date of
effectiveness.\128\ If a bidder does not commence its exchange offer
before effectiveness of the related registration statement, then the
exchange offer would need to commence on or shortly after
effectiveness, as is the case today.
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\128\ Regulation M (17 CFR 242.100 through 242.105) prohibits
purchases of the bidder's securities during an exchange offer's
restricted period, beginning when the bidder commences its offer.
The restrictions under Rule 10b-13 (new Rule 14e-5) start when the
bidder makes its first public announcement.
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As proposed, we are adopting new Rule 162 to permit the tender of
securities into an exchange offer before a registration statement is
effective.\129\ New Rule 162(a) exempts the tender of securities from
section 5(a) of the Securities Act.\130\ Security holders may
[[Page 61421]]
withdraw tendered securities until they are purchased, and bidders may
not purchase the tendered securities until the registration statement
is declared effective, as is currently the case. Because security
holders must receive a mandated disclosure document before having to
make an investment decision, we believe that early commencement,
together with the communications scheme adopted today, is consistent
with the public interest and the protection of investors. Early
commencement gives bidders an incentive to disseminate their offering
materials broadly to all security holders as soon as practicable.
Further, the new rule provides bidders with greater flexibility in
choosing the form of consideration to offer in a business combination
transaction and should serve to facilitate the growth of our capital
markets.
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\129\ Rule 162, as adopted, is extended to issuer exchange
offers subject to Rule 13e-4 as well as third-party exchange offers
subject to Regulation 14D (17 CFR 240.14d-1 through 17 CFR 240.14d-
101).
\130\ This exemption is necessary to prevent the tendering of
securities into an offer from being viewed as a ``sale'' without an
effective registration statement. We are using our exemptive
authority under section 28 of the Securities Act to adopt this new
rule.
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2. Dissemination of a Supplement and Extension of the Offer
Under the early commencement provision adopted, bidders are
required to disseminate a prospectus to all security holders. If a
bidder wants to commence its exchange offer early, it must disseminate
a preliminary prospectus to all security holders as discussed above.
The new rules also provide that bidders sending a preliminary
prospectus must disseminate a supplement to security holders if there
are any material changes, whether as a result of staff review, or due
to any other material changes in the information previously disclosed.
Exchange offers must remain open for a specified minimum period of time
after a supplement is sent to security holders containing the new
information, depending on the significance of the change. This is to
permit security holders to react to the information by tendering
securities or by withdrawing securities already tendered.
Since the tender offer rules do not currently establish specific
minimum time periods necessary for the disclosure and dissemination of
material changes, other than those relating to changes in price or the
amount of securities sought,\131\ we are establishing well-defined
periods necessary for the dissemination of a prospectus supplement that
contains material changes under early commencement. The mandated
periods we adopt today are consistent with our current rules and
interpretive positions in this area.\132\ Therefore, we are revising
Rule 14d-4 to specify the minimum time periods necessary for the
dissemination of changes to preliminary prospectuses that are used to
commence an exchange offer early.\133\ As a result, exchange offers
that commence early must remain open for at least:
\131\ Rule 14e-1(b) [17 CFR 240.14e-1(b)]. A tender offer must
remain open for ten business days after a notice of an increase or
decrease in the percentage of the class of securities being sought,
the consideration offered, or the dealer's soliciting fee.
\132\ See Release No. 34-24296 (April 3, 1987) [52 FR 11458].
\133\ Revised Rules 14d-4(b) and (d) and 13e-4(e). This approach
was favored by all commenters who addressed the issue.
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Five business days for a prospectus supplement
containing a material change other than price or share levels;
Ten business days for a prospectus supplement
containing a change in price, the number of shares sought, the
dealer's soliciting fee, or other similarly significant change;
Ten business days for a prospectus supplement included
as part of a post-effective amendment; and
20 business days for a revised prospectus when the
initial prospectus was materially deficient; for example, failing to
comply with the going-private rules or filing a ``shell'' document
solely to trigger commencement and staff review.\134\
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\134\ The 20 business day period required by the tender offer
rules will not begin to run if the prospectus disseminated to
security holders is materially deficient. For example, if the
initial prospectus does not comply with the roll-up rules, the
minimum solicitation period under the roll-up rules will not begin
until a revised prospectus satisfying the roll-up rules is
disseminated.
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Of course, if a material change in the information previously
disseminated to security holders occurred shortly before the expiration
of the offer, a prospectus supplement would need to be disseminated to
security holders and the offer extended for the appropriate length of
time. We also believe that these time periods represent general
guidelines that should be applied uniformly to all tender offers,
including those subject only to Regulation 14E.\135\
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\135\ 17 CFR 240.14e-1 through 17 CFR 240.14e-8.
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We asked whether bidders should be required to deliver a final
prospectus to security holders. Commenters who addressed the issue
believed that the requirement to deliver prospectus supplements
containing all material changes should effectively eliminate the need
for the dissemination of a final prospectus. We agree that the
informational purpose of the prospectus may best be served by requiring
bidders to deliver to security holders prospectus supplements
containing material changes rather than redeliver a final prospectus
repeating substantial amounts of information that was previously
delivered.\136\ The use of prospectus supplements should adequately
inform security holders of the information they need to make an
informed investment decision.
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\136\ Any supplements sent to security holders should present
the informational changes in a clear, concise and understandable
manner. See Rule 421 of Regulation C (17 CFR 230.421). If there are
a number of changes necessitating the delivery of several
supplements, offerors should consider the need to give security
holders a complete unified document containing all changes and
updates in a revised preliminary or final prospectus.
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Accordingly, we are using our exemptive authority \137\ to exempt
exchange offers that commence early from the final prospectus delivery
requirement.\138\ In doing so, we are not changing the final prospectus
delivery requirement in Exchange Act Rule 15c2-8(d).\139\ Under these
circumstances, where a preliminary prospectus is delivered to security
holders along with prospectus supplements containing material changes
to the information previously disseminated, we believe that the cost of
delivering a final prospectus is not justified by any marginal benefit
to security holders. Although we are eliminating the requirement to
deliver a final prospectus, bidders would still need to file a final
prospectus.
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\137\ Section 28 of the Securities Act.
\138\ See new Rule 162(b), which provides an exemption from
section 5(b)(2) of the Securities Act (15 U.S.C. 77e(b)(2)). This
rule does not provide an exemption for exchange offers that commence
on the date of effectiveness or later, for which a final prospectus
must be delivered to security holders. In the Securities Act Reform
Release we proposed to eliminate the requirement to deliver a final
prospectus for certain capital-raising transactions, but not
business combination transactions. See proposed Rule 173 and Part
VIII.C.3.b of the Securities Act Reform Release.
\139\ 17 CFR 240.15c2-8(d). This rule requires all brokers or
dealers that participate in a distribution of securities registered
under the Securities Act to take reasonable steps to comply promptly
with the written request of any person for a copy of the final
prospectus. The broker or dealer must comply with this request until
the expiration of the applicable 40-day or 90-day period under
section 4(3) of the Act. 15 U.S.C. 77(d)(3). See Rule 174 (17 CFR
230.174).
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F. Disclosure Requirements for Tender Offers and Mergers
1. Schedules Combined and Disclosure Requirements Moved to Subpart 1000
of Regulation S-K (``Regulation M-A'')
Currently, there are different disclosure schedules for issuer
tender offers, third-party tender offers and going-private
transactions.\140\ Since a given transaction may involve more than one
of these regulatory schemes, a company may be required to file a
separate disclosure document to satisfy each applicable disclosure
regime. In
[[Page 61422]]
addition, the disclosure requirements appearing in the rules and
schedules can often lead to duplicative, and sometimes inconsistent,
requirements. In light of the increased pressure to announce a business
combination transaction soon after it is entered into and the attendant
requirement to file mandated disclosure documents quickly, we proposed
to integrate, simplify and update the disclosure requirements currently
in the rules and schedules. Our basic approach was to combine all the
disclosure requirements in one central location in a subpart of
Regulation S-K, called Regulation M-A. The specific disclosure
requirements in schedules were keyed to items under Regulation M-A in a
manner consistent with the integrated disclosure system previously
adopted for proxy and registration statements.
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\140\ Schedules 13E-4, 14D-1 and 13E-3, respectively.
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All commenters addressing the proposed changes in this area
believed that it was time to update and simplify the disclosure
requirements for business combination transactions.\141\ We are
adopting Regulation M-A substantially as proposed. This series of
disclosure items incorporates all the current disclosure requirements
for issuer and third-party tender offers, tender offer recommendation
statements and going-private transactions. The new regulation includes
some disclosure items for cash merger proxy statements as well. We have
made slight modifications, where necessary, to harmonize and clarify
the requirements, as well as a few substantive changes that are
discussed below in more detail. In some cases the disclosure
requirements may appear different, but that is because we have made an
effort to draft the items in Regulation M-A using clear, plain
language. In the future, we expect to expand this new regulation to
cover additional disclosure items as necessary.
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\141\ One commenter urged us to codify the availability of a
procedure for making acquisitions using securities registered on an
acquisition shelf registration statement. While we are not codifying
this procedure as part of this release, we remind offerors that the
procedure continues to be available. See Form S-4, General
Instruction H, and Service Corporation International (December 2,
1985).
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We are combining current Schedules 13E-4 and 14D-1 (the schedules
now used for issuer and third-party tender offers, respectively), into
new Schedule TO, as proposed.\142\ In addition, we are changing the
rules to allow one filing to satisfy both the tender offer and going-
private disclosure requirements.\143\ As a result, the information
required by Schedules 14D-1, 13E-4 and 13E-3 can be disclosed in one
combined filing.\144\ We believe that these revisions will reduce the
need to file two or more schedules for what is essentially the same
transaction.\145\
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\142\ The format and instructions for Schedules 13E-3 and 14D-9
are revised so that they are consistent with new Schedule TO. These
schedules refer to Regulation M-A for all substantive disclosure
requirements. We did not propose, and are not adopting, any changes
to the schedules used in connection with the multijurisdictional
disclosure system for Canadian issuers (Schedules 13E-4F, 14D-1F and
14D-9F) (17 CFR 240.13e-102; 17 CFR 240.14d-102; 17 CFR 240.14d-
103).
\143\ New Schedule TO has boxes on the cover page to check to
indicate whether the filing is an issuer tender offer, third-party
tender offer, and/or going-private transaction. We are implementing
conforming changes to the EDGAR filing tag system so that the type
of transaction and filing persons are identified when viewing a
document on EDGAR.
\144\ For example, an affiliate engaged in a tender offer having
a going-private effect can now file a Schedule TO that also serves
as a Schedule 13E-3. All filing persons and applicable schedules
must be identified on the cover page. Separate cover pages are not
required. Of course, a Schedule 13E-3 must be filed independently
when the underlying transaction is not a tender offer.
\145\ Schedule TO also may be combined with an amendment to a
previously filed Schedule 13D. See General Instruction G to Schedule
TO. The ability to file a joint 13D amendment and tender offer
statement is the same as currently permitted. See General
Instruction E to Schedule 14D-1.
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We have included an instruction in new Schedule TO, as proposed,
listing the specific line items that must be complied with for
different types of transactions.\146\ In addition, we have revised the
current instruction requiring information that is incorporated by
reference to be filed as an exhibit. As revised, filers can incorporate
information included in documents previously filed electronically on
EDGAR without refiling that information as an exhibit to the
schedule.\147\ To the extent that the existing schedules permit filers
to include negative answers in the schedule, but not in the disclosure
document sent to security holders, filers will continue to have the
ability to omit that information from documents sent to security
holders.\148\
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\146\ General Instruction J to new Schedule TO.
\147\ Documents filed electronically on EDGAR are readily
available to security holders and the public (e.g., through the
Internet, our public reference room, brokers and investment
advisors). This change also applies to going-private statements.
\148\ General Instruction E to new Schedules TO and revised
Schedule 13E-3 and General Instruction C to revised Schedule 14D-9.
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At this time we are not extending the one filing satisfies all
approach to encompass transactions involving the Securities Act and
proxy rules as well as the tender offer and going-private rules. In the
future, we may consider integrating the requirements further, to permit
the satisfaction of the disclosure required under all four regulatory
schemes with one filing.
We also are revising the rules that require filing persons to
include a fair and adequate summary of the information required by the
schedules in the disclosure document sent to security holders. Instead
of specifying some items and excluding others, as the current rules
do,\149\ the revised rules simply require that the document given to
security holders summarize all items in the schedule (except for
exhibits).\150\ As noted in the Proposing Release, this change is not
intended to increase the amount of information that is given to
security holders. Instead, it is intended to simplify the requirements.
We expect filers to exercise their judgment in determining the specific
information that must be included in the disclosure document sent to
security holders to provide a fair and adequate summary. We are not,
however, changing the current requirement that certain disclosure
required in a going-private transaction be set forth in full in the
disclosure document delivered to security holders.\151\
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\149\ See current Rules 14d-6(e), 14d-9(c), 13e-3(e) and 13e-
4(d) specifying the information that must be summarized or included
in the disclosure document sent to security holders.
\150\ Revised Rules 14d-6(d), 14d-9(d), 13e-3(e) and 13e-4(d).
\151\ Items 7, 8 and 9 of current and revised Schedule 13E-3.
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As a result of today's changes, filers no longer need to answer
each item of the schedule with a statement that the required
information is incorporated by reference from certain pages or sections
of the primary disclosure document. Under the revised rules, it is
sufficient to include a general statement in the schedule that all
information in the disclosure document filed as an exhibit is
incorporated by reference in answer to all or some of the items in the
schedule. The revised schedules, as proposed, would include a cover
page, any exhibits and the required signatures. Specific item numbers
from the schedule must be included only to the extent necessary to
provide information that is not in the disclosure document sent to
security holders, but is required to be disclosed under an item in the
schedule.\152\ This change is designed to make the schedules easier to
prepare. Of course, filers still must provide all the required
information.\153\
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\152\ For example, negative or ``not applicable'' responses or
information that goes beyond what is summarized in the disclosure
document must be disclosed under the appropriate item number in the
schedule if not included in the disclosure document sent to security
holders.
\153\ See General Instructions E and F to new Schedule TO and
revised Schedule 13E-3 and General Instructions C and D to revised
Schedule 14D-9. We are eliminating the requirement in General
Instruction F of current Schedule 13E-3 to provide a cross-reference
sheet showing where the responses are located.
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[[Page 61423]]
2. Streamline and Improve Required Disclosure
a. ``Plain English'' Summary Term Sheet
We proposed to require a plain English summary term sheet in all
cash tender offers and all cash mergers, as well as going-private
transactions. The disclosure documents in these transactions often can
be difficult to understand, especially in the context of a business
combination transaction where a vast amount of information may be
available. We believe security holders should be provided with a
concise, easy to read term sheet that highlights the most important and
relevant information regarding an extraordinary transaction.
Accordingly, we are adopting the plain English summary term sheet
requirement as proposed.\154\ We are not adopting a plain English
summary term sheet for transactions involving the registration of
securities \155\ because these transactions already are required to
have a plain English summary, although the format may be somewhat
different from the summary term sheet approach.\156\ The summary term
sheet must begin on the first or second page of the disclosure
document, and must highlight the most important or material features of
a proposed transaction.\157\ This requirement applies to all issuer and
third-party cash tender offers, cash mergers and going-private
transactions. We believe the disclosure in these transactions can be
improved through the use of a plain English summary term sheet.
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\154\ Item 1001 of Regulation M-A. For purposes of this
requirement, plain English has the same meaning as in Rule 421(b)
and (d).
\155\ If a transaction is subject both to the registration
requirements of the Securities Act and either Rule 13e-3 or the
tender offer rules, a plain English summary term sheet is not
required. See Item 1 of revised Schedule 13E-3 (17 CFR 240.13e-100)
and new Schedule TO (17 CFR 240.14d-100).
\156\ See Item 3 of Forms S-4 and F-4 and Rule 421(d) of
Regulation C (17 CFR 230.421(d)). Effectiveness of a registration
statement may be denied or a stop order issued when there has not
been a bona fide effort to present information in a reasonably
clear, concise and readable manner. See Rule 461(b)(1) of Regulation
C (17 CFR 230.461(b)(1)); see also, In the Matter of Franchard
Corporation, 42 S.E.C. 163 (1964).
\157\ The required summary term sheet should present information
in bullet-point format and may include cross-references to more
detailed information found elsewhere in the disclosure documents
provided to security holders, consistent with plain English
principles.
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In proposing this requirement, we did not mandate the specific
items or questions that must be addressed in every case. Instead, we
gave examples of information that most security holders would need when
confronted with a tender offer or merger. Most commenters favored the
proposed approach of keeping the requirement general and giving filers
the flexibility to determine the issues that rise to the level of
addressing in a plain English summary term sheet. We are adopting this
approach.
As noted in the Proposing Release, in most cases, we believe
bidders should address the following questions in the summary term
sheet accompanying their cash tender offers:
Who is offering to buy my securities?
What are the classes and amounts of securities sought
in the offer?
How much is the bidder offering to pay and what is the
form of payment?
Does the bidder have the financial resources to make
payment?
Is the bidder's financial condition relevant to my
decision on whether to tender in the offer?
How long do I have to decide whether to tender in the
offer?
Can the offer be extended, and under what
circumstances?
How will I be notified if the offer is extended?
What are the most significant conditions to the offer?
How do I tender my shares?
Until what time can I withdraw previously tendered
shares?
How do I withdraw previously tendered shares?
If the transaction is negotiated, what does my board of
directors think of the offer?
Is this the first step in a going-private transaction?
Will the tender offer be followed by a merger if all
the company's shares are not tendered in the offer?
If I decide not to tender, how will the offer affect my
shares?
What is the market value (if traded) or the net asset
or liquidation value (if not traded) of my shares as of a recent
date?
Who can I talk to if I have questions about the tender
offer?
As for merger proxy statements, we believe a summary term sheet
should provide a brief outline of the particular matters proposed, the
material terms of the proposals, including the parties to the proposed
transaction, the consideration to be received by security holders, the
board's recommendation on how to vote or their position regarding the
transaction, the effect of a vote for and against each matter
presented, including the effects of not voting, the procedures for
voting and changing or revoking a vote, and the existence of appraisal
rights.
Several commenters provided useful suggestions on other information
that may assist security holders. We agree with these commenters that a
plain English summary term sheet should address, to the extent
applicable, the vote required to approve each matter presented, the
number of votes, if any, already committed to vote in a particular way,
any material interests of insiders or affiliates, as well as the
accounting and federal income tax treatment of the transaction. In the
context of a going-private transaction, we believe that the receipt of
opinions, appraisals, or other similar reports \158\ regarding the
fairness of a transaction would be of material interest to security
holders. In addition, the identity of the filing persons, including the
affiliates engaged in the transaction, a description of their
affiliation or relationship with the issuer, and their role in the
transaction may be important disclosure. Of course, we do not attempt
to provide an exhaustive list in this release of all the matters or
issues that may be material to security holders warranting inclusion in
a plain English summary term sheet. We leave that determination for
filers based on the particular facts and circumstances of their
transaction.
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\158\ See current and revised Item 9 to Schedule 13E-3.
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b. Item 14 of Schedule 14A Revised to Clarify Requirements and
Harmonize Cash Merger and Cash Tender Offer Disclosure
Item 14 of Schedule 14A specifies the information required in proxy
and information statements relating to extraordinary transactions.\159\
We are revising Item 14 substantially as proposed, except that the
revised item refers filers to the applicable disclosure requirements in
Forms S-4 and F-4, instead of Forms C and SB-3, which are not being
adopted at this time. This approach should make the item easier to
understand, and harmonize the proxy and registration statement
disclosure requirements. Since the disclosure and incorporation by
reference requirements in Forms S-4 and F-4 are essentially the same as
in current Item 14, this streamlined approach will not greatly modify
the disclosure required in a merger proxy statement. We are retaining
in Item 14 the existing
[[Page 61424]]
disclosure requirements applicable to investment companies.\160\
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\159\ 17 CFR 240.14a-101. Item 14 disclosure is required when a
vote or consent is solicited on: (i) A merger; (ii) a consolidation;
(iii) the acquisition of assets, a business or securities; (v) the
sale or transfer of all or substantially all the assets of the
registrant; (vi) a liquidation; or (vii) a dissolution. This item
requires information about the transaction and each party to the
transaction (i.e., the acquiror and the target). The information
specified in Item 14 may be incorporated by reference or physically
included in the disclosure document depending on the extent to which
the acquiror or target is eligible to use Form S-2 or S-3.
\160\ New Item 14(d) of Schedule 14A. We believe that this will
be simpler for investment companies than referring to Forms S-4 and
F-4, which generally are inapplicable to investment companies. We
also have consolidated and conformed current Instructions 6 and 8 to
Item 14 for investment companies. Instruction to paragraph (d) of
Item 14 of Schedule 14A. The requirements that we are retaining for
investment companies were not specifically tailored for investment
companies, and we believe that it would be appropriate to reconsider
these requirements in a future rulemaking project focused on the
registration and disclosure requirements applicable to investment
company business combination transactions.
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In addition, we are adopting several substantive changes regarding
the information required for acquirors and targets under Item 14. All
commenters that addressed the proposed changes to Item 14 believed they
were appropriate. We continue to believe that in certain circumstances
the disclosure requirements in Item 14 may be unnecessarily burdensome
and inconsistent with the level of information that would be required
if the same transaction was structured as an all-cash, all-share tender
offer. Therefore, we are adopting the following proposed revisions:
Item 14 is revised to clarify that financial statement
and other information about the acquiror is required in a cash
merger only if that information is material to voting security
holders' evaluation of the transaction.\161\ Similar to the need for
a bidder's financial statements in a cash tender offer, information
about the acquiror in a merger is generally not needed when target
security holders are receiving cash and the acquiror has
demonstrated its financial ability to satisfy the terms of the
offer.\162\
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\161\ Revised Instruction 2(a) to Item 14 of Schedule 14A. Pro
forma information about the transaction is not generally required in
a cash merger where only the target's security holders are voting on
the transaction.
\162\ Even if the acquiror's security holders are voting,
acquiror information may be omitted because the acquiror's security
holders are presumed to have access to information about their own
company. In this case, pro forma information about the transaction
will still be required in accordance with Article 11 of Regulation
S-X (17 CFR 210.11-01 through 17 CFR 210.11-03).
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In cases where financial statement information for the
acquiror would be material to a security holder's voting decision,
acquiror information is required for only two years and not three,
consistent with the treatment of tender offers.\163\
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\163\ Revised Item 14(c)(1) to Schedule 14A. If financial
statements of the target are required, then three years of financial
statements must be provided, consistent with the other requirements
for financial statements of acquired companies.
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The requirement to provide information about the target
in a cash merger is eliminated when the acquiror's security holders
are not voting on the transaction.\164\ Most likely, target security
holders will have information about the securities they already
hold. As a result, security holders can receive a shorter disclosure
document that is focused on the terms and effects of the
transaction. This revision harmonizes the disclosure required in
cash merger transactions with that required in all-cash, all-share
tender offers.\165\
\164\ Revised Instruction 2(b) to Item 14 of Schedule 14A.
\165\ No target information is required if target security
holders are voting on a merger in which the consideration offered
consists of acquiror securities that are exempt from Securities Act
registration. Revised Instruction 3 to Item 14 of Schedule 14A.
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The changes adopted today do not change the current requirement to
provide financial statements of the target and other company
information when the acquiror's security holders are voting on the
transaction, since those security holders may not know anything about
the target. In addition, target information is required in merger
proxies that are going-private or roll-up transactions. We believe that
target security holders have a need for current financial statements of
their company if it is subject to one of these types of transactions.
We are not adopting two proposed changes. Under the proposal, Item
14 would no longer permit information to be incorporated by reference
from the ``glossy'' annual report sent to security holders. Further, we
proposed to eliminate the instructions in Schedule 14A and Form S-4
that require filers to send the mandated disclosure document to
security holders at least 20 business days before the meeting date or
the expiration date of an exchange offer if information is incorporated
by reference.\166\ At this time we believe there still may be a number
of security holders that do not have the ability to access information
electronically, so we are not eliminating the 20 business day
incorporation by reference provision.\167\ We are retaining
incorporation by reference from the glossy annual report because this
information is delivered to security holders.\168\
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\166\ See Note D.3 to Schedule 14A; General Instruction A.2 to
Form S-4; and General Instruction A.2 to Form F-4.
\167\ We have stated that the 20 business day period must be
complied with even if the documents incorporated by reference are
delivered along with the disclosure document. See Release No. 33-
6578 (April 23, 1985) (50 FR 18990) (Form S-4 adopting release). We
are changing this interpretation. If filers furnish the information
that is incorporated by reference with the disclosure document that
is sent to security holders, they do not have to comply with the 20
business day requirement.
\168\ Revised Item 14(e) to Schedule 14A (17 CFR 240.14a-101).
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c. Reduced Financial Statement Requirements for Non-Reporting Target
Companies in Stock Mergers and Stock Tender Offers
The previous section addressed information requirements in cash
mergers. We also have examined financial statement requirements in the
context of stock mergers and stock tender offers. As we noted in the
Proposing Release, financial statements of the target generally are
required when registered securities are being offered. The rules
currently provide special treatment when the target is not subject to
the Commission's reporting requirements, but we believe these
requirements can be further relaxed. Currently, the rules require the
filing person (the acquiror) to provide financial statements of the
non-reporting target going back three years.\169\ We noted that
providing three years of financial statements prepared in accordance
with Regulation S-X \170\ for a non-reporting company can be costly and
burdensome to prepare. In some cases they may not be available.
Therefore, we proposed to reduce the financial statements required for
non-reporting targets when the acquiror's security holders are not
being asked to vote on the transaction.
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\169\ See Item 17(b)(7) of Form S-4, Item 17(b)(5) of Form F-4
and Item 14(b)(3)(ii)(A) of Schedule 14A. These items specify the
information required for non-reporting target companies in a
business combination transaction. An acquiror must provide financial
statements ``that would have been required to be included in an
annual report to security holders'' had the non-reporting company
been required to furnish an annual report that complies with Rule
14a-3(b) (17 CFR 240.14a-3(b)). This rule requires audited balance
sheets for each of the two most recent fiscal years and audited
statements of income and cash flows for each of the three most
recent fiscal years prepared in accordance with Regulation S-X.
\170\ The required balance sheet for the year preceding the
latest full fiscal year and the income statements for the two years
preceding the latest full fiscal year need not be audited if they
have not previously been audited. The required financial statements
must be audited to the extent practicable.
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Most commenters believed that the proposed reduction was
appropriate and would facilitate acquisitions of non-reporting targets.
We continue to believe that the requirement to provide target financial
statements can be curtailed, particularly because in many cases target
security holders likely made their initial investment decision in the
non-reporting company based on less extensive information than what is
currently required. In addition, security holders are being offered
securities in a public company for which there should be significantly
more information available and a more liquid market to
[[Page 61425]]
sell into. Therefore, we are reducing the financial statement
requirement substantially as proposed.\171\ In addition, where the non-
reporting target is not significant to the acquiror and the acquiror's
security holders are not voting on the transaction, we believe the
financial statement requirements can be reduced even further.
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\171\ Since we are not adopting Forms C and SB-3, these changes
are implemented in amendments to Forms S-4 and F-4.
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Accordingly, we are eliminating the requirement to provide
financial statements for the non-reporting target altogether when the
acquiror's security holders are not voting on the transaction and the
non-reporting target is not significant to the acquiror above the 20%
level.\172\ The security holders that purchased securities in the non-
reporting company generally would be aware that they invested in a
company that is not subject to our reporting requirements and they
would not expect to receive the same level of financial information
that is required for a public reporting company. Moreover, if the non-
reporting company is not significant to the acquiror, we believe
security holders would likely rely on the financial statements of the
acquiror in making their voting or investment decision. Because a
combination of an insignificant non-reporting target company and a
public acquiror should not materially alter the financial condition of
the acquiror, we believe that non-reporting target security holders are
likely to rely on the required acquiror financial information
alone.\173\ In addition, the 20% threshold is the standard adopted in
1996 for the requirement of audited financial statements in filings
made under the Securities Act and the Exchange Act for business
acquisitions.\174\
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\172\ Determination of the significance of an acquisition to the
acquiror is made in accordance with Rule 3-05 of Regulation S-X (17
CFR 210.3-05). See Release No. 33-7355 (October 10, 1996) (61 FR
54509) and Rule 1-02(w) of Regulation S-X (17 CFR 210.1-02(w)).
\173\ This change is consonant with our revisions to Item 14 to
eliminate the requirement to provide target financial statements in
cash mergers when the acquiror's security holders are not voting on
the transaction and the information is not material to the target
security holders' voting decision.
\174\ In Release No. 33-7355, we streamlined the requirements
with respect to financial statements for business acquisitions.
Among other things, the amended rules raised the thresholds of
significance that determine whether financial statements of an
acquired business must be provided in filings. These rule changes
were intended to reduce impediments to registered offerings that may
have caused companies to undertake private or offshore offerings
instead. We believe the significance threshold for non-reporting
targets should be the same in Forms S-4 and F-4 as under our other
financial statement requirements. We may, however, consider
revisiting this issue in a broader context in a future rulemaking
proposal that addresses what the significance thresholds should be
in light of the current accounting environment.
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Accordingly, we are revising the financial statement requirements
for non-reporting targets when the acquiror's security holders are not
voting on the transaction,\175\ as follows:
\175\ These changes do not affect the financial statements
required in roll-up transactions.
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If a non-reporting company is being acquired in a
business combination transaction, then financial statements for the
latest fiscal year prepared in conformity with generally accepted
accounting principles (``GAAP'') must be provided.\176\
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\176\ Revised Items 17(b)(7) of Form S-4 and 17(b)(5) of Form F-
4.
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Also, if the non-reporting target security holders were
previously provided with GAAP financial statements for either or
both of the two fiscal years before the latest fiscal year, then
GAAP financial statements must be provided for those years as well.
If the non-reporting target is not significant to the
acquiror in excess of the 20% level, then no financial information
is required for the target.\177\
\177\ Under these facts pro forma and comparative per share
information is not required. See Rule 11-01(c) of Regulation S-X (17
CFR 210.11-01(c)).
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These revisions apply equally to foreign and domestic non-reporting
target companies. If the target's financial statements are prepared on
the basis of a comprehensive body of accounting principles other than
U.S. GAAP (foreign GAAP), a reconciliation to U.S. GAAP is required
unless a reconciliation is unavailable or not otherwise obtainable
without unreasonable cost or expense.\178\
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\178\At a minimum, however, a narrative description of the
material variations in accounting principles, practices and methods
used in preparing the foreign GAAP financial statements from those
accepted in the U.S. is required.
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The current requirement to provide ``audited'' financial statements
for the non-reporting target remains the same. Financial statements for
the latest fiscal year must be audited only to the extent practicable.
Audited financial statements are not required for years before the most
recent fiscal year if the target's financial statements were not
previously audited.
We are not changing the current requirement that a resale
registration statement include audited financial statements in
accordance with Rule 3-05 of Regulation S-X.\179\ Also, to the extent
that a transaction is significant to the acquiror, audited financial
statements would ultimately need to be provided under Item 7 of Form 8-
K. Of course, if the acquiror's security holders are voting on the
transaction, then the current financial statement requirements apply.
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\179\ A resale registration statement is used to register the
resale of securities to the public by anyone who is deemed an
underwriter within the meaning of Rule 145(c) with respect to the
securities being re-offered.
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G. Tender Offer Rules Updated
In addition to the changes discussed above, some of which affect
tender offers, we proposed to update the tender offer rules, which have
not been revised since 1986. For the most part, commenters favored our
approach to updating the regulations. As a result, these changes are
being adopted, substantially as proposed.\180\ The significant changes
are discussed below.
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\180\ As proposed, we are adopting a technical change to Rule
432, which requires the prospectus disseminated to security holders
in connection with an exchange offer to include certain information
specified by the tender offer rules. The revised rule also clarifies
that the requirement includes issuer tender offers. See current Rule
13e-4(d)(iv). The requirement is moved to revised Rule 432.
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We also solicited comment on whether the Private Securities
Litigation Reform Act of 1995 (``PSLRA'') safe harbor for forward-
looking statements should be extended to tender offers. We are not
extending the PSLRA safe harbor to tender offers at this time. Given
the relative infancy of the body of law interpreting the PSLRA
generally and the safe harbor in particular, we do not believe that
extending the reach of the safe harbor would be prudent. We note, for
example, that we recently filed an amicus curiae brief out of concern
about certain language in an appellate court decision regarding the
application of the safe harbor.\181\
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\181\ See Memorandum of the Securities and Exchange Commission,
Amicus Curiae, at 2, Harris v. Ivax Corp., No. 98-4818 (11th Cir.
Aug. 1999) (partially supporting a petition for rehearing and
rehearing en banc in Harris v. Ivax Corp., 182 F.3d 799 (11th Cir.
1999)).
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1. Bidders May Include a ``Subsequent Offering Period'' Without
Withdrawal Rights
We are adopting the subsequent offering period rule with several
modifications described below. Under the new rules third-party bidders
may provide, at their election, a subsequent offering period during
which security holders can tender securities into the offer without
withdrawal rights. The purpose of the subsequent offering period is
two-fold. First, the period will assist bidders in reaching the
statutory state law minimum necessary to engage in a short-form, back-
end merger with the target. Second, the period will provide security
holders who remain after the offer one last opportunity to tender into
an offer that is otherwise complete in order to avoid the delay and
illiquid market that can result after a tender offer and before a back-
end merger.
[[Page 61426]]
The subsequent offering period may be disclosed in the bidder's
initial offering materials, or in a subsequent amendment to the tender
offer materials that is disseminated to security holders. In either
case, the bidder's determination to include a subsequent offering
period must be disclosed sufficiently in advance of the expiration of
the initial offering period.
Commenters generally were favorable to the proposal, but many
commenters criticized the advance notice requirement. They expressed
the view that advance notice would create a ``hold-out'' problem with
security holders waiting until the subsequent offering period to tender
shares. In response to these comments, we are not adopting a specific
requirement in the rule that the determination to add a subsequent
offering period must be disclosed before the end of the initial
offering period. Nevertheless, we continue to believe at this time that
the addition of a subsequent offering period once an offer has
commenced would constitute a material change to the terms of that
offer. Thus, bidders must disseminate the new information to security
holders in a manner reasonably calculated to inform them of the change
sufficiently in advance of the expiration of the initial offering
period (generally five business days).\182\ After the Division of
Corporation Finance gains practical experience with the operation of
the subsequent offering period, the Division may decide, through staff
interpretation, to shorten or possibly eliminate the requirement for
advance notice.\183\
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\182\ See Release No. 34-24296 (April 3, 1987) (52 FR 11458).
\183\ If a bidder announces a subsequent offering period and
later decides not to provide the period, clearly this would be a
material change in the offer's terms that must be disclosed in
advance as provided in Release No. 34-24296. Commenters did not
disagree with this view.
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In short, we are adopting new Rule 14d-11, which permits bidders to
include a subsequent offering period in a third-party tender offer
during which no withdrawal rights are available,\184\ so long as:
\184\ We also are amending Rule 14d-7 to provide an exemption so
the withdrawal rights required by section 14(d)(5) of the Exchange
Act (15 U.S.C. 78n(d)(5)), which apply 60 days after the start of a
tender offer, are not available during a subsequent offering period.
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The offer is for all outstanding securities of the
class sought;
The initial offering period (with withdrawal rights)
remains open for at least 20 business days;
All conditions to the offer are deemed satisfied or
waived by the bidder on or before the close of the initial offering
period; \185\
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\185\ The subsequent offering period may not be used if payment
will be delayed for any reason. In the past we have stated that
payment may be delayed for certain governmental regulatory
approvals. See Release No. 34-16623 (March 5, 1980) (45 FR 15521). A
subsequent offering period, however, cannot be used unless all
conditions to payment have been satisfied or waived and the bidder
pays for all securities tendered in the initial offering period
promptly after the close of the initial offering period. Likewise,
there cannot be any conditions to the offer during the subsequent
offering period.
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The bidder accepts and promptly pays for all securities
tendered during the initial offering period on the closing of the
initial offering period;
The bidder announces the approximate number and
percentage of outstanding securities that were deposited by the
close of the initial offering period no later than 9:00 a.m. Eastern
time on the next business day after the scheduled expiration date of
the initial offering period; and
The bidder immediately accepts and promptly pays for
all shares as they are tendered in the subsequent offering
period.\186\
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\186\ New Rule 14d-11(e) and revised Rule 14e-1(c).
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The rule, as proposed and adopted, permits bidders to use a
subsequent offering period in both cash and stock tender offers.\187\
Similarly, the rule permits bidders to offer either cash or stock in
any planned back-end merger. There is no specific requirement that a
minimum number of shares be tendered in the initial offering period. Of
course, the same consideration must be paid in both the initial and
subsequent offering periods.\188\
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\187\ If a bidder offers cash and securities with a limit on the
amount of cash or securities that may be paid to security holders,
then a subsequent offering period may not be used. The imposition of
a cap on one or the other form of consideration could result in
proration which, as discussed in the Proposing Release, is why we
limited the subsequent offering period to offers for all outstanding
securities.
\188\ The initial and subsequent offering periods are all part
of one tender offer. If a different price were paid to security
holders it would violate the all-holders best-price rules as well as
the subsequent offering period rule. See new Rule 14d-11(f), current
Rule 14d-10(a)(2) and Release No. 34-23421 (July 11, 1986) (51 FR
25873).
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The new rule includes a requirement that bidders announce the
results of the initial offering period (including the number and
percentage of securities tendered) before 9 a.m. on the next business
day following the close of the initial offering period.\189\ We believe
an announcement is necessary to inform remaining security holders
whether the offer was successful and whether or not a back-end merger
is imminent. Because of this requirement to announce the results before
9 a.m. on the next business day, the subsequent offering period must
begin on that day. This will avoid any delay in the offer between the
initial offering period and the subsequent offering period. We believe
that this will prevent any confusion in the market as to whether the
offering period is still open.
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\189\ In response to a question in the Proposing Release, two
commenters favored such a requirement.
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We proposed conditioning the subsequent offering period on the
bidder stating its intention to engage in a back-end merger with the
target. Commenters addressing this issue did not believe that this
requirement was necessary. We are not adopting this requirement because
we believe security holders may benefit from a subsequent offering
period whether or not the bidder intends a back-end merger transaction.
As proposed, Rule 14d-1(e)(8) would have defined the subsequent
offering period as a ten business day period following the initial
offering period. Several commenters, however, recommended that bidders
be permitted to determine the duration of the subsequent offering
period. In response to these comments, we have decided to adopt a more
flexible approach to the subsequent offering period. New Rule 14d-11
will allow the subsequent offering period to be a minimum of three
business days and a maximum of 20 business days. Bidders could opt for
a relatively short subsequent offering period and later extend the
period if necessary. Any extension of the subsequent offering period
must be made in accordance with Rule 14e-1(d).\190\
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\190\ 17 CFR 240.14e-1(d). For example, if a bidder elects to
provide a three business day subsequent offering period, and later
determines that a longer period is necessary, the bidder could
extend the subsequent offering period by up to 17 business days. The
bidder would, of course, need to announce the extension no later
than 9:00 a.m. on the fourth business day after the initial offering
period closed, and the total duration of the subsequent offering
period could not exceed twenty business days.
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2. Bidder Financial Information Clarified for Cash Tender Offers
a. When a Bidder's Financial Statements Are Not Required; Source of
Funds
We are clarifying when financial statement information of the
bidder must be disclosed in a cash tender offer.\191\ Currently, this
information is
[[Page 61427]]
required in a cash tender offer when the information is material to a
security holder's decision whether to tender, sell or hold.\192\ The
instructions in Schedule 14D-1 provide some guidance on when financial
statement information is material.\193\ These instructions also specify
the type of information that will satisfy the financial statement
disclosure requirement.\194\
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\191\ If a bidder offers securities instead of or in addition to
cash, then financial statements are material. The registration
statement form for the securities offered will specify the financial
statements required. If the bidder offers securities that are exempt
from registration, the financial statements specified in Schedule TO
would be filed.
\192\ Item 9 of Schedule 14D-1 and Item 7 of Schedule 13E-4.
\193\ Instruction 1 to Item 9 of Schedule 14D-1.
\194\ Rules 14d-6(e) (17 CFR 240.14d-6) and 13e-4(d) (17 CFR
240.13e-4(d)).
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We noted in the Proposing Release that generally there are several
factors that should be considered in determining whether financial
statements of the bidder are material. Those factors are as follows:
The terms of the tender offer, particularly terms
concerning the amount of securities sought, such as any-or-all, a fixed
minimum with the right to accept additional shares tendered, all-or-
none, and a fixed percentage of the outstanding;
Whether the purpose of the tender offer is for control of
the subject company; \195\
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\195\ Financial information can be material when a bidder seeks
to acquire the entire equity interest of the target and the bidder's
ability to finance the transaction is uncertain. Financial
information also can be material when a bidder seeks to acquire a
significant equity stake in order to influence the management and
affairs of the target. In the latter case, security holders need
financial information for the prospective controlling security
holder to decide whether to tender in the offer or remain a
continuing security holder in a company with a dominant or
controlling security holder.
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The plans or proposals of the bidder; and
The ability of the bidder to pay for the securities
sought in the tender offer and/or to repay any loans made by the
bidder or its affiliates in connection with the tender offer or
otherwise.\196\
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\196\ Release No. 34-13787 (July 21, 1977) (42 FR 38341).
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We also noted that these factors are not exclusive, and not all
factors are necessary to meet the materiality test. In order to provide
more guidance to bidders, we are adopting a new instruction to Schedule
TO specifying when the financial statements of a bidder are not
material and do not have to be provided. Commenters generally supported
the proposal, offering some suggestions on how to modify the
instruction so that it achieves its intended purpose. We are,
therefore, adopting the instruction with some minor changes. We believe
that under the circumstances specified in the new instruction, the
burden of providing the bidder's financial information in tender offer
materials may outweigh the usefulness of the information to security
holders.\197\
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\197\ We are not changing bidders' ability to incorporate by
reference financial information into their tender offer materials.
See Instruction 3 to Item 10 of new Schedule TO.
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As adopted, Item 10 to new Schedule TO \198\ includes an
instruction stating that a bidder's financial statement information is
not material when:
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\198\ Although proposed Item 10 to Schedule TO did not
specifically address the need to provide financial information for a
controlling entity that forms an entity for the purpose of making a
tender offer, we have revised Item 10 consistent with the
requirements currently in Item 9 to Schedule 14D-1. If a bidder is
formed by a controlling person for the purpose of making an offer,
then financial information for the parent must be provided.
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Only cash consideration is offered;
The offer is not subject to any financing condition; and
either:
The bidder is a public reporting company that files
reports electronically on EDGAR; or
The offer is for all outstanding securities of the
target.\199\
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\199\ Instruction 2 to Item 10 of new Schedule TO.
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Several commenters addressed the financing condition element to the
instruction. Most of these commenters indicated that the status of a
bidder's financing arrangements (e.g., commitment letter, definitive
financing in place, or sufficient funds on hand) is not determinative
so long as the offer is not subject to a financing condition. We agree.
We believe security holders may need financial information for the
bidder when an offer is subject to a financing condition so they can
evaluate the terms of the offer, gauge the likelihood of the offer's
success and make an informed investment decision. Whether an offer is
conditioned on obtaining satisfactory financing arrangements (e.g.,
receipt of a commitment letter or execution of other definitive
financing documents) or the actual receipt of funds from a lender,\200\
the offer is considered subject to a financing condition and the bidder
may not omit financial information in reliance on the instruction.
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\200\ The same analysis applies for non-reporting bidders, such
as private investors, partnerships or private equity funds. These
private bidders often finance their tender offers with funds raised
from limited partners through a process known as a ``capital call.''
If the private bidder's offer is conditioned on obtaining funds from
limited partners, security holders or other members of the entity,
the offer is deemed subject to a financing condition.
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We also asked whether foreign companies whose financial statement
information may not be readily available should be treated any
differently. Foreign companies are permitted to file reports in paper
and are not required to file electronically.\201\ As a result, security
holders may have more difficulty obtaining information for foreign
bidders. Two commenters indicated that foreign bidders that file
reports (e.g., Form 20-F) \202\ in paper should not be able to satisfy
the third prong of the instruction. We agree that the instruction
should take into account the availability of financial statement
information for foreign bidders. If information is available on EDGAR
(via the Internet and other sources), we believe there is less need to
require disclosure of the bidder's financial statements in its tender
offer materials. Therefore, we have revised this condition to state
that the bidder must be a reporting company that files reports
electronically on EDGAR.\203\ Of course, foreign bidders that choose to
file reports electronically on EDGAR can rely fully on this new
instruction. Alternatively, a bidder that is non-reporting or files
reports in paper may rely on the instruction if the offer is for all
outstanding securities of the target.\204\
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\201\ Rule 100(a) of Regulation S-T (17 CFR 232.100).
\202\ 17 CFR 249.220f.
\203\ This prong of the instruction will not be deemed satisfied
if the bidder's financial statement information is not available on
the EDGAR system (e.g., because the bidder is delinquent in its
reporting obligations or the bidder has filed this information in
paper under a hardship exemption).
\204\ To the extent financial statements of a foreign bidder are
required and are prepared under foreign GAAP, a reconciliation to
U.S. GAAP is required unless a reconciliation is unavailable or not
otherwise obtainable without unreasonable cost or expense. As noted
above in Part II.F.2.c, bidders must provide, at a minimum, a
narrative description of the material variations in accounting
principles, practices and methods used in preparing the foreign GAAP
financial statements from those accepted in the U.S. See n.178
above.
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We also proposed to codify the current practice of providing net
worth information when the bidder is a natural person. The one
commenter that addressed this proposal supported it, but believed the
requirement to provide ``appropriate disclosure'' when a bidder's net
worth is derived from material amounts of assets that are not readily
marketable or there are material guarantees and contingencies was too
vague. Therefore, we are adopting this instruction, substantially as
proposed, but with a clarification that the bidder must disclose the
nature and approximate amount of the individual's net worth consisting
of illiquid assets and the magnitude of any guarantees or contingencies
that may negatively affect the natural person's net worth.\205\ We
believe this information is useful to security holders in evaluating a
tender offer made by a natural person.
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\205\ Instruction 4 to Item 10 of new Schedule TO.
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Regardless of the level of financial information that security
holders
[[Page 61428]]
receive, a bidder's ability to pay for the securities is a material
disclosure item. We believe the disclosure that security holders
currently receive in this area can be improved by clarifying the
``Source of Funds'' item requirement for tender offers and going-
private transactions. As proposed, we are revising this item to require
disclosure of information regarding the specific sources of financing,
any conditions to the financing, and the filing person's ability to
finance the transaction through alternative means if the primary source
of financing should fall through.\206\
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\206\ Item 1007 of Regulation M-A.
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b. Content of Bidder's Financial Statements in Cash Tender Offers;
Financial Statements in Going-Private Transactions
In the Proposing Release we noted the disparity in the financial
statements required in third-party tender offers, issuer tender offers,
and going-private transactions. We are reducing the financial statement
information required in third-party tender offers as proposed. This
change harmonizes the requirements with those for issuer tender offers
and going-private transactions.\207\ The commenters that addressed this
proposal supported it. We believe that the burden of providing three
years of historical financial statements in a third-party cash tender
offer outweighs the benefit to security holders.\208\
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\207\ When securities are offered the registration statement
requirements prevail. See n.191 above. We also are reducing the
financial statements required for acquiring companies in merger
proxy statements from three to two years. See Part II.F.2.b above.
\208\ Item 10 to Schedule TO and Item 1010(a) and (b) of
Regulation M-A, as adopted, require financial statements for two
fiscal years when the information is material.
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We also proposed to update the disclosure requirements for tender
offers and going-private transactions. Currently, information regarding
book value per share and the pro forma effect of the transaction on the
company's balance sheet and book value per share (as of the most recent
fiscal year end and the latest interim balance sheet period) may be
required. We are reducing the required information, as proposed, to
only the most recent balance sheet date.\209\
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\209\ Item 1010(a)(4), (b)(1) and (3) of Regulation M-A. As
proposed, this change also applies to merger proxy statements.
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In addition, when financial statement information is required in
tender offer and going-private transactions, the current rules permit
filers to include summary financial information,\210\ instead of full
financial statements, in the disclosure documents sent to security
holders. We proposed to update the summary information requirements to
consist of the summarized financial information specified in Rule 1-
02(bb) of Regulation S-X \211\ as well as ratio of earnings to fixed
charges, book value per share and pro forma data. The two commenters
that addressed this proposal indicated that the additional information
(redeemable preferred stock, minority interests, unconsolidated
subsidiaries and 50 percent or less owned persons) called for by Rule
1-02(bb) is not relevant or useful to security holders, especially in
cash tender offers.
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\210\ See Rule 14d-6(e)(1)(viii) (17 CFR 240.14d-6(e)(1)(viii));
Instruction B to Rule 13e-4(d)(1)(iv) (17 CFR 240.13e-4(d)(1)(iv));
and Instruction 2 to Rule 13e-3(e)(3) (17 CFR 240.13e-3(e)(3)).
\211\ 17 CFR 210.1-02(bb).
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In response to their concern, we have revised the summary
requirement so that information regarding unconsolidated subsidiaries
and 50 percent or less owned persons is not required. We continue to
believe, however, that the information specified in Rule 1-02(bb)(1)
(redeemable preferred stock and minority interests) may be relevant
when the bidder's financial information is material \212\ and the
bidder elects to provide summary instead of full financial statements
in the disclosure document sent to security holders. Under the current
rules a fair and adequate summary includes ``shareholders'' equity.''
The additional specificity provided by Rule 1-02(bb)(1) is not
inconsistent with the current requirements. Also, information regarding
the existence of minority interests may be material to security holders
if the filing person (bidder) holds substantial assets or derives
substantial revenues from a consolidated subsidiary that is not wholly-
owned. Accordingly, we do not believe that updating the disclosure
requirements to reference the information specified in Rule 1-02(bb)(1)
will result in the disclosure of irrelevant information. As this
information may be material to security holders, we adopt an updated
definition of summary financial information that is substantially as
proposed.\213\ These revisions also extend to third-party tender offers
the requirement to disclose book value information when that
information is material.\214\
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\212\ See Part II.G.2.a above discussing when financial
statement information is material.
\213\ Item 1010(c) of Regulation M-A, Instruction 1 to Item 13
of revised Schedule 13E-3, Instruction 6 to Item 10 of new Schedule
TO.
\214\ Item 1010(a)(4), (b)(3) and (c)(5) of Regulation M-A.
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We also proposed to clarify the reconciliation required when non-
U.S. GAAP financial statement information is summarized in a foreign
bidder's disclosure document. We believe that summary financial
information must include a reconciliation to the same extent full
financial statements must include a reconciliation to U.S. GAAP.\215\
This reconciliation requirement is consistent with that required for
the acquisition of a foreign non-reporting target company with foreign
GAAP financial statements.\216\
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\215\ See Part II.G.2.a above.
\216\ See Part II.F.2.c above.
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c. Pro Forma Financial Information Required in Two-Tier Transactions
We believe security holders need pro forma financial information
for a bidder and target on a combined basis when deciding whether or
not to tender in the first tier of a two-tier transaction.\217\
Security holders need pro forma financial information to make an
informed investment decision because if security holders do not tender
in an offer they may receive securities of the bidder in exchange for
the securities they hold in the target at a later date in a back-end
securities transaction. Bidders frequently disclose information
regarding expected synergies and other financial information to
effectively sell their transaction to the market. We believe that pro
forma information may be necessary to balance the disclosure
disseminated to security holders and the markets. In addition,
disclosure of pro forma financial information is generally consistent
with our free communications scheme.\218\ We are, however, adopting a
slightly less burdensome pro forma requirement than proposed in
response to some of the concerns expressed by commenters.\219\
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\217\ A ``two-tier transaction'' is a business combination
structured as a cash tender offer followed by a back-end securities
transaction, typically a merger, where remaining security holders of
the target receive the bidder's securities as consideration.
\218\ A requirement to disclose pro forma financial information
in the first tier of a two-tier transaction extends the Division of
Corporation's interpretive position that disclosure of certain
material information known to the bidder regarding a planned back-
end securities transaction would not result in ``gun-jumping'' under
the Securities Act. See n.23 above.
\219\ Instruction 5 to Item 10 of new Schedule TO. This
instruction requires bidders to provide the financial data specified
in Item 3(f) (comparative historical and pro forma per share data)
and Item 5 (pro forma financial information required by Article 11
of Regulation S-X) of Form S-4 in the Schedule filed with the
Commission. Bidders may provide only the summary financial
information specified in Item 3(d), (e) and (f) of Form S-4 in the
disclosure document sent to security holders.
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[[Page 61429]]
Three commenters generally supported the proposed pro forma
requirement, expressing different views on the appropriate level of pro
forma financial information and the circumstances under which the
information should be required. Two commenters believed that the pro
forma requirement would be burdensome and provide only a marginal
benefit to security holders. Several commenters noted that external
factors may affect a bidder's ability to prepare pro forma financial
information in compliance with the proposed requirement. Some of these
factors include: the lack of any agreement with the target regarding
the type and amount of consideration to be offered to security holders
in any back-end securities transaction; the hostile or negotiated
nature of the transaction; and the results of the tender offer.
We recognize that it may be more difficult for bidders to prepare
accurate and complete pro forma financial information when the target
is not cooperating with the bidder. We also realize that bidders may
decide later not to offer securities in a back-end transaction for a
number of reasons. Nevertheless, to the extent that a bidder, at the
time of the cash tender offer, intends to offer securities in a back-
end securities transaction with the target, we believe such information
would be material to target security holders.\220\ In addition, bidders
that intend to offer securities in a back-end transaction would most
likely have prepared some level of pro forma financial information on
the combined entity for their own negotiating and planning purposes. As
a result, we do not believe the requirement to provide pro forma
financial information should be unduly burdensome for the bidder.
Therefore, we are adopting a requirement that bidders disclose pro
forma financial information prepared in accordance with Article 11 of
Regulation S-X, in addition to historical financial statements,\221\
when they intend to engage in a back-end securities transaction
following a cash tender offer.\222\ We limit this requirement, however,
in two important respects.
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\220\ A bidder that intends to engage in a back-end securities
transaction may not avoid the disclosure requirement by not
disclosing its intentions because non-disclosure could be a material
omission that renders other statements by the bidder false and
misleading.
\221\ The bidder must disclose the historical financial
statements specified in Item 1010 of Regulation M-A. See Instruction
5 to Item 10 of new Schedule TO. Historical financial information
for the bidder is necessary to present the pro forma financial
information in context.
\222\ The pro forma financial information requirement applies
whether the first step is a partial offer or an offer for all
outstanding securities. In both cases, a bidder could intend to
engage in a back-end securities transaction with the target.
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First, the requirement is limited to ``negotiated'' transactions
(i.e., management of the target is cooperating with the bidder).
Generally, in negotiated transactions, bidders have access to internal
financial information of the target necessary to prepare pro forma
financial information.\223\ In transactions where the bidder does not
have access to the internal information necessary to prepare reliable
pro forma financial information in compliance with Article 11 of
Regulation S-X (i.e., non-negotiated transactions), we are not
requiring pro forma financial information. However, we encourage
bidders to provide pro forma or other similar financial information
that they consider useful and meaningful to security holders,
regardless of whether the transaction is negotiated or not.
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\223\ As required by Article 11, the pro forma financial
information disclosed in the first tier must be accompanied by clear
and explanatory footnotes that address the nature of all material
pro forma adjustments.
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Second, if an acquisition of a target is not significant to the
bidder, we do not believe that pro forma financial information for the
transaction would be helpful to security holders. Therefore, we are
only requiring bidders to disclose pro forma financial information in a
first-step tender offer when the acquisition is significant above the
20% level.\224\
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\224\ Determination of the significance of an acquisition to the
acquiror is made in accordance with Rule 3-05 of Regulation S-X. See
Release No. 33-7355 (October 10, 1996).
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3. Target Is Required To Report Purchases of Its Own Securities After a
Third-Party Tender Offer Is Commenced
Rule 13e-1 prohibits an issuer whose securities are the subject of
a third-party tender offer from repurchasing any of its equity
securities until information about the intended acquisition is filed
and disseminated to security holders. We proposed to clarify the timing
of the disclosure called for by the rule so that the required
information is disclosed only after a third-party tender offer is made,
when it is most relevant. We also proposed to rewrite the rule in plain
English. We are now adopting the revised rule as proposed, but without
a requirement to send information to security holders. We also provide
an exclusion from the rule for periodic repurchases in connection with
employee benefit plans and other similar plans that are made in the
ordinary course and not in response to the third-party offer.
Several commenters suggested that we rescind Rule 13e-1 based on
the relatively low number of filings received during the past several
years. Although few filings are made under the rule,\225\ we continue
to believe that the requirement serves the useful purpose of informing
the marketplace in advance that an issuer plans to repurchase its own
equity securities in response to a third party tender offer. While some
of the information required by the rule may be provided in Schedule
14D-9, that schedule could be filed as late as ten business days after
commencement of a third-party offer. Therefore, we are adopting the
rule substantially as proposed, but as a filing requirement only. The
information would not be required to be sent to security holders.\226\
This will eliminate the cost to issuers of mailing the information, but
the information will be publicly available to the marketplace.
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\225\ There is no schedule or form accompanying the rule. The
required information is disclosed in a ``Rule 13e-1 Transaction
Statement'' filed electronically on EDGAR under the submission-type
SC 13E1.
\226\ If a target is making an issuer tender offer and complies
with the filing, disclosure and dissemination requirements of Rule
13e-4 before repurchasing any securities, the requirements of Rule
13e-1 would be satisfied without a separate Rule 13e-1 filing.
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4. Tender Offer and Proxy Rules Relating to the Delivery of a Security
Holder List and Security Position Listing Harmonized
We are adopting as proposed revisions to Rule 14d-5 to conform the
tender offer dissemination requirements with the proxy dissemination
requirements in Rule 14a-7.\227\ The revised rule expands the scope of
information included in a security holder list under the tender offer
rules so that it is consistent with the security holder list
requirements in the proxy rules. Under the revised rule, a target
company that elects to provide a bidder with a security holder list
instead of mailing the bidder's materials to security holders must
disclose the most recent list of names, addresses and security
positions of non-objecting beneficial owners (as well as record
holders) it has in its possession, or subsequently obtains. The
security holder list must be in the format requested by the bidder if
it can be provided without undue burden or expense. The purpose of the
amendment to the rule is to give bidders the same
[[Page 61430]]
ability as target companies to communicate directly with non-objecting
beneficial owners of securities.
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\227\ 17 CFR 240.14a-7.
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Most commenters supported the proposal, with one commenter
expressing concern on the mechanics of tracking transmittal letters. We
do not believe that the revised rule would unduly complicate the tender
process or the tracking of transmittal forms. Bidders would mail their
tender offer materials to record holders, consistent with current
practice, and record holders would then forward the materials to
beneficial owners. Bidders also would have the option of supplementing
their distribution by mailing directly to non-objecting beneficial
owners set forth on the security holder list provided by the target.
Transmittal forms would include instructions, as they do today, stating
where to send transmittal forms (e.g., forms should be returned to the
record holder with directions to tender shares in the offer).
5. New Rule 14e-5: Revision and Redesignation of Former Rule 10b-13,
the Rule Prohibiting Purchases Outside an Offer
Rule 10b-13 prohibits a person who is making a cash tender offer or
exchange offer from purchasing or arranging to purchase, directly or
indirectly, the security that is the subject of the offer (or any
security that is immediately convertible into or exchangeable for the
subject security), otherwise than as part of the offer. We proposed to
clarify the rule's text, codify several interpretations and exemptions,
and redesignate it as new Rule 14e-5. We are adopting the amendments
substantially as proposed. In response to commenters' suggestions, we
are adopting four additional exceptions. We also are implementing the
changes proposed in the cross-border tender offers proposing release
since those proposals are being adopted today.\228\ With these two
further exceptions regarding cross-border offers adopted today,\229\
Rule 14e-5 has ten exceptions.
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\228\ See Release No. 34-40678 (December 15, 1998 (63 FR 69136))
(the ``Cross-Border Proposing Release'') and the Cross-Border
Adopting Release.
\229\ These additional exceptions, one for purchases during
cross-border tender offers and one for purchases by ``connected
exempt market makers'' and ``connected exempt principal traders,''
are discussed in the Cross-Border Proposing and Adopting Releases.
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a. Redesignating Rule 10b-13 as Rule 14e-5
Former Rule 10b-13 is redesignated as Rule 14e-5. We originally
promulgated Rule 10b-13 under Sections 10, 13 and 14 of the Exchange
Act \230\ to safeguard the interests of persons who sell their
securities in response to a tender offer.\231\ As stated in the
Proposing Release, because the rule addresses conduct during tender
offers, we believe it belongs with the other rules under Regulation 14E
under the Exchange Act that address activities in the context of tender
offers.\232\ No commenters disagreed with this change, and we are
adopting it as proposed.\233\
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\230\ 15 U.S.C. 78j; 15 U.S.C. 78m; 15 U.S.C. 78n.
\231\ Release No. 34-8712 (October 8, 1969) (34 FR 15836) (the
``Rule 10b-13 Adopting Release'').
\232\ Section 14(e) of the Exchange Act confers on the
Commission the authority to define and prescribe means to prevent
fraudulent, deceptive, or manipulative acts or practices in
connection with any tender offer. See United States v. O'Hagan, 117
S. Ct. 2199, 2217 (1997) (holding that ``under section 14(e), the
Commission may prohibit acts, not themselves fraudulent under the
common law or section 10(b), if the prohibition is `reasonably
designed to prevent . . . acts and practices (that) are fraudulent''
' (citing 15 U.S.C. 78n(e)).
\233\ As proposed, we are amending Rule 30-3 delegating
exemptive authority to the Director of the Division of Market
Regulation, and replacing references to Rule 10b-13 with Rule 14e-5.
We also are adding a parallel provision to Rule 30-1 (17 CFR 200.30-
1) to delegate exemptive authority to the Director of the Division
of Corporation Finance, and by operation of Rule 30-5(b) (17 CFR
200.30-05(b)), to the Director of the Division of Investment
Management. The amended text of Rule 30-1 appears in the Cross-
Border Adopting Release.
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b. Clarification of Rule 14e-5; Prohibited Period
The amendments to Rule 14e-5 being adopted today do not alter the
rule's basic terms. Instead, they modify the rule's text to more
clearly set forth the covered activities. Rule 14e-5 will continue to
protect investors by preventing an offeror from extending greater or
different consideration to some security holders outside the offer,
while other security holders are limited to the offer's terms.\234\
Rule 10b-13 prohibited a person who is making a cash tender offer or
exchange offer from purchasing or arranging to purchase, directly or
indirectly, the security that is the subject of the offer (or any
security that is immediately convertible into or exchangeable for the
subject security), otherwise than as part of the offer. Similarly, Rule
14e-5 prohibits a covered person from purchasing or arranging to
purchase any subject securities or any related securities except as
part of the tender offer. Rule 14e-5 does not explicitly include the
term ``exchange offer'' as former Rule 10b-13 did because in Regulation
14E the term ``tender offer'' includes offers to exchange securities
for cash and/or securities.\235\
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\234\ See Rule 10b-13 Adopting Release.
\235\ See n.12 above.
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We are changing the language describing the time period of the
rule's restrictions. As adopted, the restrictions of Rule 14e-5 start
upon ``public announcement,'' which is defined in the rule as any oral
or written communication by the offeror, or any person authorized to
act on the offeror's behalf, that is reasonably designed to, or has the
effect of, informing the public or security holders in general about
the tender offer.\236\ Although the language regarding the commencement
of the rule's restrictions is different from the language in Rule 10b-
13,\237\ the scope is the same; the restrictions apply from the time
holders of the subject securities, or the public more generally, are
notified of the tender offer.\238\
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\236\ See new Rule 165(f)(3) and revised Rules 13e-4(c) and 14d-
2(b).
\237\ Rule 10b-13 applies from the time the offer is publicly
announced or otherwise made known to security holders until the
offer expires. The phrase ``otherwise made known'' means any form of
communication, other than public announcement, that notifies holders
of subject securities of an offer.
\238\ We asked whether the rule should apply if the offeror
advises some but not all security holders that it intends to conduct
a tender offer for the subject securities. Two of the three
commenters that addressed this point believed that a communication
to some security holders should not commence the restricted period.
These two commenters opposed any such change because it would make
negotiations impossible without triggering the rule. We agree with
these commenters in that it is not appropriate for private
negotiations that do not notify security holders more generally to
trigger the rule.
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We are adopting the proposed simplification of the language
regarding the end of the rule's restrictions. Under Rule 14e-5, the
restrictions end when the offer expires.\239\ Under Rule 14d-11, a
tender offer may be extended up to 20 days under specific circumstances
without offering withdrawal rights,\240\ thus giving security holders
an additional opportunity to tender into the offer.
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\239\ Expiration includes termination by the offeror as well as
reaching the time the offeror is required, by the offer's terms,
either to accept or reject the tendered securities.
\240\ See Part II.G.1 above.
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As adopted, Rule 14e-5 does not apply to purchases or arrangements
to purchase outside of a tender offer during a subsequent offering
period if the consideration is the same in form and amount. In the
Proposing Release, we said we believed offeror purchases outside the
offer during this subsequent offering period present the same concerns
as during the initial offering period; therefore, we proposed that Rule
14e-5 restrictions would cover any subsequent offering period provided
under proposed Rule 14d-11. Two commenters agreed with the proposal,
and two others thought the rule should
[[Page 61431]]
not extend to a subsequent offering period so long as the purchase
price does not exceed the offer price. We now believe that the
requirements of Rules 14d-11 and 14e-5 are sufficient to avoid any of
the problems that Rule 14e-5 is designed to prevent. More specifically,
under the terms of Rule 14e-5, any purchases made outside the offer
during the subsequent offering period must be made using the same form
and amount of consideration offered in the tender offer. Also, under
the terms of Rule 14d-11, the offeror must immediately accept and
promptly pay for all securities as they are tendered in the subsequent
offering period, which eliminates any difference in the time value of
money between those who tender and those who sell to the offeror
outside the offer. Under these conditions, we believe those people who
tender during a subsequent offering period will not be disadvantaged in
relation to those whose securities are purchased outside of, but
during, a subsequent offering period.
c. Persons and Securities Subject to the Rule
Scope of Persons Subject to the Rule
Rule 10b-13 applied to the person who made the offer, which had
been interpreted to cover the offeror, the offeror's affiliates, and
the offer's dealer-manager.\241\ Under Rule 14e-5, the Rule 10b-13 term
``person'' is replaced by ``covered person'' to codify this
interpretation. The definition of ``covered person'' we are adopting
has several changes from the proposed definition. The proposal defined
a covered person as: The offeror and its affiliates; the offeror's
dealer-manager(s) and other advisors; and any person acting, directly
or indirectly, in concert with them. Two commenters objected to
including all advisors within the meaning of covered person as too
broad. We agree, and have narrowed the scope of the advisor category.
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\241\ See, e.g., Letter regarding Offers for Smith New Court PLC
(July 26, 1995) (``Smith New Court Letter''). See also In the Matter
of Trinity Acquisition's Offer to Purchase the Ordinary Shares and
American Depositary Shares of Willis Corroon Group plc, Release No.
34-40246 (July 22, 1998) [67 S.E.C. Docket 1320].
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Covered person, as adopted, means: The offeror and its affiliates;
the offeror's dealer-manager and its affiliates; any advisor to the
offeror, dealer-manager or their affiliates, if such advisor's
compensation is dependent on the completion of the offer; and any
person acting, directly or indirectly, in concert with any of the other
covered persons in connection with any purchase or arrangement to
purchase any subject securities or any related securities.\242\ These
changes replace the broader proposed term ``other advisors'' with two
narrower categories: affiliates of the dealer-manager; and advisors to
the offeror, dealer-manager or their affiliates, if such advisor's
compensation is dependent on the completion of the offer. These changes
mean that advisors such as attorneys and accountants will not be
affected by the rule where they have no stake in the outcome of the
offer.
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\242\ In a negotiated transaction, we would consider the target
company to be acting in concert with the offeror.
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The proposed definition of an affiliate borrowed heavily from the
definition in Rule 12b-2.\243\ As proposed in Rule 14e-5, the term
meant any person that ``directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, the offeror.'' The only distinction between the two
definitions is that the proposed Rule 14e-5 definition was limited to
affiliates of the offeror whereas, Rule 12b-2 extends to the affiliate
of other relevant persons.\244\ In order to accommodate other changes
from proposed Rule 14e-5,\245\ we needed to broaden this definition to
include affiliates of the dealer-manager as well as the offeror, so we
are adopting the entire definition of affiliate in Rule 12b-2.
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\243\ 17 CFR 240.12b-2.
\244\ Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2)
defines an ``affiliate'' of, or a person ``affiliated'' with, a
specified person, as a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is
under common control with, the person specified.
\245\ See, e.g., Part II.G.5.d. below, where we extend the
exception for intermediary transactions to include affiliates of the
dealer-manager.
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Scope of Securities Subject to the Rule
We are adopting the proposed changes from Rule 10b-13 regarding the
scope and treatment of related securities in the definitions of subject
securities and related securities. Rule 14e-5 applies only to offers
for equity securities, just as Rule 10b-13 did. Moreover, Rule 14e-5,
as with Rule 10b-13, prohibits purchases outside the offer of not only
the subject securities,\246\ but also related securities. ``Related
securities'' are defined as securities that are immediately convertible
into, exchangeable for, or exercisable for subject securities. Among
other things, this clarifies that securities that are immediately
``exercisable for'' subject securities, such as options, are included
in the types of securities that a covered person cannot generally
purchase outside the offer.
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\246\ ``Subject securities'' are defined in Item 1000 of
Regulation M-A as ``the securities or class of securities that are
sought to be acquired in the transaction or that are otherwise the
subject of the transaction.''
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d. Excepted Transactions
Exercise of Related Securities
Rule 10b-13 specified that if the person making the offer ``is the
owner of another security which is immediately convertible into or
exchangeable for the security which is the subject of the offer, his
subsequent exercise of his right of conversion or exchange with respect
to such other security shall not be prohibited by this rule.'' We are
amending this provision as proposed.
When Rule 10b-13 was adopted, options were not nearly as common as
they are today, and the text of this exception did not explicitly
include the exercise of options. We believe the exercise of options
acquired before announcement of the offer is no more likely to lead to
undesirable effects than the exchange or conversion of other related
securities, so we want to make it clear that the exercise of options is
included in this exception. Thus, Rule 14e-5 will permit, as proposed,
a covered person to convert, exchange, or exercise related securities,
if the covered person owned the related securities before public
announcement.
Purchases by or for Plans
The exception for purchases for plans is adopted as proposed. Since
the adoption of Rule 10b-13, there has been an exception for purchases
by the issuer of the target security (or a related security) under
certain types of plans, by participating employees of the issuer or the
employees of its subsidiaries, or by the trustee or other person
acquiring the security for the account of the employees.\247\ We are
eliminating the references to outdated Internal Revenue Code provisions
that were contained in Rule 10b-13 to define permissible plan
purchases; instead, we are using the more expansive plan scope
contained in the Commission's Regulation M. The exception now permits
purchases of subject securities or related securities for any ``plan''
if the purchases are made by an ``agent independent of the issuer'' as
these terms are defined in Regulation M.
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\247\ 17 CFR 240.10b-13(c).
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Purchases during Odd-Lot Offers
We are adopting the proposed exception to permit purchases during
an issuer odd-lot tender offer conducted in compliance with the
provisions of Rule
[[Page 61432]]
13e-4(h)(5) under the Exchange Act.\248\ This exception codifies a
class exemption from Rule 10b-13 issued by the Commission in connection
with a 1996 revision to Rule 13e-4(h)(5).\249\ Under Rule 13e-4(h)(5),
an issuer tender offer is excepted from application of Rule 13e-4 if
the offer is directed solely to odd-lot security holders and provides
``all holders'' and ``best price'' protections to tendering security
holders.
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\248\ 17 CFR 240.13e-4(h)(5).
\249\ Release No. 34-38068 (December 20, 1996) (61 FR 68587).
This class exemption permitted ``any issuer or agent acting on
behalf of an issuer in connection with an odd-lot offer to purchase
or arrange to purchase the security that is the subject of the
offer.'' The release also states that the exemption, among other
things, ``will allow the issuer or its agent to purchase the
issuer's securities to satisfy requests of odd-lot holders to
``round-up'' their holdings to 100 shares.'' 61 FR at 68587-8.
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Purchases as Intermediary
We proposed to add an exception for unsolicited purchases by a
dealer-manager that are made on an agency basis. We based this
exception on a prior exemption \250\ that allowed a dealer-manager to
continue to conduct its customary brokerage (i.e., agent) activities
during a tender offer. These activities generally do not raise the
concerns that proposed Rule 14e-5 is intended to address. In the
Proposing Release, we asked if the exception should permit ``riskless
principal'' transactions by dealer-managers as well. Two commenters
answered this question and both agreed that the exception should be
broadened to permit unsolicited purchases as a riskless principal by
dealer-managers. One of the two thought it should extend to other
financial advisors.
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\250\ Letter regarding Reuters Holdings PLC (August 17, 1993).
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As adopted, we are broadening this exception in two ways from the
proposal. First, we are including affiliates of the dealer-manager
within the exception. Second, in addition to agency transactions, we
are permitting purchases to offset a contemporaneous sale after having
received an unsolicited order in the ordinary course of business to buy
from a customer who is not a covered person, if the dealer-manager or
affiliate is not a market maker.\251\ We believe these changes
appropriately accommodate a dealer-manager's and its affiliates'
activities as intermediary without allowing the offeror to use the
dealer-manager and its affiliates to facilitate the tender offer.
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\251\ Cf. Rule 10b-10(a)(2)(ii)(A) (17 CFR 240.10b-
10(a)(2)(ii)(A)).
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e. Additional Exceptions Being Adopted
We are adopting four exceptions that were not proposed
specifically, although we either sought comment in the Proposing
Release or received suggestions from commenters on them.
Purchases Pursuant to Contractual Obligations
In the Proposing Release, we asked whether an offeror should be
permitted to purchase subject or related securities outside an offer if
a purchase contract was entered into before public announcement of the
offer and the per share purchase price is no higher than the offer
consideration. Four commenters addressed this issue, and all agreed
such purchases should be permitted. One commenter stated that it could
not discern any public policy rationale for permitting purchases
pursuant to conversions, exchanges or exercises but not pre-
announcement contracts. We agree with the commenters.
As adopted, this exception is available only if: the contract was
entered into before public announcement; the contract is unconditional
and binding on both parties; and the existence of the contract and all
material terms, including quantity, price and parties, are disclosed in
the offering materials.\252\ We are not requiring that the contract
price be the same as the offer price because we view these contracts as
the functional equivalents of options that have no such price
restriction for their exercise under Rule 14e-5.
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\252\ This exception is not available unless the obligation
under the contract is the purchase by the covered person. For
example, a purchase necessitated by an obligation to deliver
pursuant to a contract is not covered.
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Basket Transactions
In response to a commenter's suggestion, we are adopting an
exception for transactions in baskets of securities containing a
subject security or a related security.\253\ We are requiring that: the
purchase or arrangement to purchase the basket be made in the ordinary
course of business and not to facilitate the offer; the basket contains
20 or more securities; and covered securities and related securities do
not comprise more than 5% of the value of the basket.\254\
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\253\ The staff of the Division of Market Regulation has taken
no-action positions under Rule 10b-13 under similar facts and
circumstances. See, e.g., Letter regarding Select Sector SPDRs
(December 22, 1998).
\254\ We base this language on a similar provision in Rule
101(b)(6)(i) of Regulation M [17 CFR 242.101(b)(6)(i)].
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We believe that transactions in baskets, following the terms of
this exception, provide little opportunity for a covered person to
facilitate an offer or for a security holder to exact a premium from
the offeror. Facilitation of an offer includes purchases intended to
bid up the market price of the covered or related security, and
includes buying a basket to strip out the covered security in an effort
to get the offeror the number of shares it is seeking.
Covering Transactions
In response to a commenter's suggestion, we are adopting an
exception from Rule 14e-5 for purchases of subject and related
securities that are made to satisfy an obligation to deliver arising
from a short sale or from the exercise of an option by a non-covered
person. This exception is available to any covered person, so long as
the short sale or option transaction was made in the ordinary course of
business, not to facilitate the tender offer, and before public
announcement. We adopt this exception because we believe such purchases
effected for the purpose of making delivery to another party warrant
the same treatment as purchases made pursuant to contractual
obligations.
Purchases by an Affiliate of the Dealer-Manager
In response to a commenter's suggestion, we are adopting an
exception from Rule 14e-5 for purchases of subject and related
securities by an affiliate of the dealer-manager.\255\ This exception
permits purchases or arrangements to purchase by an affiliate of a
dealer-manager if:
\255\ Cf. Rule 100(b) of Regulation M (17 CFR 242.100(b)). In
the Proposing Release, we asked whether we should consider
provisions like those contained in the U.K. City Code on Takeovers
and Mergers (``City Code'') that permit market makers affiliated
with the offeror's advisors to continue their market making
functions when the market maker is sufficiently independent from the
advisor and other protections are present. Three commenters agreed
that some exception should be provided for market making activities,
and one opposed an exception based on the City Code. This exception
for purchases by an affiliate of the dealer-manager permits market
making activities by affiliates of the dealer-manager.
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The dealer-manager maintains and enforces written
policies and procedures reasonably designed to prevent the flow of
information to or from the affiliate that might result in a
violation of the federal securities laws and regulations;
The dealer-manager is registered as a broker or dealer
under Section 15(a) of the Exchange Act; \256\
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\256\ 15 U.S.C. 78o.
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The affiliate has no officers (or persons performing
similar functions) or employees (other than clerical, ministerial,
or support
[[Page 61433]]
personnel) in common with the dealer-manager that direct, effect, or
recommend transactions in securities; and
The purchases or arrangements to purchase are not made
to facilitate the tender offer.
This exception, based largely upon the definition of ``affiliated
purchaser'' in Rule 100 of Regulation M, allows investment affiliates
to continue their investment advisory activities without interruption,
on the same basis as they do during distributions subject to Rule 101
of Regulation M.\257\ We believe effective information barriers between
the dealer-manager and affiliate prevent improper motives from
influencing purchases by affiliates while permitting such affiliates to
continue their normal advisory activities. We are limiting this
exception to the affiliates of dealer-managers that are registered
under Section 15(a) of the Exchange Act because the dealer-managers are
subject to a high level of regulatory and reporting oversight.
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\257\ Cf. Rule 100(b) of Regulation M.
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III. Effective Date and Transition
The new rules become effective on January 24, 2000. This date has
been selected to accommodate the need for EDGAR programming before some
of these changes become effective. The new rules are applicable to
transactions beginning on or after the effective date, as well as to
transactions already in progress on that date. The following addresses
the application of the rules to some specific situations.
A. Communications
As of the effective date, the new regulatory scheme for
communications is in effect. Even if a registration statement, proxy
statement or tender offer statement is filed before the effective date,
persons may rely on the new exemptions for communications made on or
after the effective date. Of course, they must comply with the
conditions of the exemptions, including the filing of written
communications.
B. Confidential Treatment of Proxy Material
If preliminary proxy material is filed confidentially as permitted
by the current rules before the effective date, the filer may choose to
continue relying on the current rules after the effective date until
the material is published, sent or given to security holders in
definitive form. In that event, so long as parties to the transaction
do not make public communications exceeding what would be permitted by
the pre-effective date rules, the preliminary proxy material may remain
confidential. On the other hand, if the parties to the transaction
choose to avail themselves of the new communications exemptions before
providing the definitive proxy statement, they must re-file the
preliminary material publicly.
C. Early Commencement
If a registration statement for an exchange offer is filed before
the effective date of the new rules, and is not effective, the filer
has the option of complying with the early commencement provisions as
soon as the new rules become effective.
D. Disclosure Requirements and New Schedules
The disclosure requirements have changed in a number of respects.
If a registration statement, tender offer statement or proxy/
information statement is filed before the effective date, the
disclosure requirements in existence at that time continue to be
applicable until the transaction is completed. Amendments should
continue to comply with those requirements, not Regulation M-A or the
revised rules. If a tender offer schedule relating to a two-tier
transaction is filed before the effective date, pro forma financial
information will not be required in the cash tender offer materials,
even if it would be required for an offer filed on or after the
effective date. However, we encourage offerors to provide this
information. Amendments to tender offers filed before the effective
date for the new rules should continue to be filed as amendments to
Schedules 14D-1 or 13E-4, not Schedule TO. Tender offers commenced on
or after the effective date must be filed on Schedule TO.
E. Subsequent Offering Period
If a tender offer statement is filed before the effective date, the
bidder may choose to provide a subsequent offering period beginning on
or after the effective date. Of course, it must advise security holders
of the decision to include a subsequent offering period in accordance
with the timing discussed above, as this would be viewed as a material
change. The announcement of a subsequent offering period may be made
before the effective date.
F. Revised Security Holder List Rule for Tender Offers
A request for the security holder list on or after the effective
date is governed by the revised rule, whether or not the tender offer
statement was filed before the effective date.
G. New Rule 14e-5
All tender offers that are publicly announced before the effective
date of the amendment and redesignation of Rule 10b-13 as Rule 14e-5
are governed by Rule 10b-13, even if the tender offer extends beyond
the effective date. Rule 14e-5 only applies to tender offers publicly
announced on or after the effective date of the changes.
IV. Cost-Benefit Analysis
We expect that the amendments adopted today will facilitate and
enhance security holder communications, especially before a
registration statement relating to a business combination transaction,
proxy statement or tender offer statement is filed. The amendments also
will update and simplify the rules and regulations applicable to
business combination transactions, including tender offers, mergers,
and similar extraordinary transactions. Accordingly, we expect the cost
of compliance with the applicable rules and regulations will decrease
as a result of these amendments.
In addition to permitting more communications with security
holders, the amendments attempt to place cash and stock tender offers
on a more equal regulatory footing. We also have integrated the forms
and disclosure requirements applicable to issuer tender offers, third-
party tender offers and going-private transactions while consolidating
the disclosure requirements in one central location within the
regulations. We expect that these changes will simplify compliance with
the regulations. Further, the amendments will permit bidders to provide
a subsequent offering period after the successful completion of a
tender offer when security holders can tender their securities without
having to wait for a back-end merger. The regulations are revised to
more closely align the merger and tender offer requirements as well as
update the tender offer rules to clarify certain requirements and
reduce compliance burdens consistent with investor protection. We
expect that these changes will reduce the compliance burden on
registrants and generally facilitate the consummation of transactions.
In the Proposing Release we provided our preliminary cost-benefit
analysis and requested that commenters provide their views on the
specific costs and benefits associated with our proposals. We also
requested that commenters provide any data supporting their views.
While commenters addressed the potential costs and benefits of the
[[Page 61434]]
proposals in general terms, none provided empirical data to support
their views. We discuss below the expected benefits and costs of the
revisions and focus on the groups of persons and entities that are
likely to be affected by the changes adopted today.
A. Communications
Overall, the amendments should enhance price discovery and market
efficiency by permitting companies to communicate earlier and more
freely about proposed business combination transactions and other
significant corporate events. Currently, provisions of the Securities
Act and Exchange Act, including the Williams Act, restrict the
dissemination of information before a registration, proxy or tender
offer statement is filed. The amendments allow companies to communicate
more freely with security holders both before and after the filing of a
registration, proxy, or tender offer statement.\258\ The revisions
allowing more communications treat bidders and targets alike--both are
free to communicate with security holders regarding the merits and
potential risks of a proposed transaction.
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\258\ See new Rule 165 and revised Rules 14a-12, 14d-2 and 14d-
9.
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We expect that the increased flow of information will assist
investors in making better-informed tender or voting decisions. We
recognize that under the regulatory scheme adopted today there is a
risk some persons may attempt to ``condition the market'' with false,
misleading or confusing information.\259\ Nevertheless, we believe that
investors will benefit from an increased flow of information and they
will eventually receive a registration, tender offer or proxy statement
before an investment, tender or voting decision must be made with
respect to a particular transaction. As a result, we expect investors
will have adequate opportunity to consider the full information in the
mandated disclosure document together with any information disseminated
earlier before needing to act on that information.
---------------------------------------------------------------------------
\259\ As discussed below, we are adopting new Rule 14e-8 to
specifically prohibit certain conduct that would mislead investors.
---------------------------------------------------------------------------
In addition, the increased flow of information will be subject to
liability. Communications that are made at any time will be subject to
the antifraud provisions of Rule 10b-5 under the Exchange Act, as well
as to the antifraud provisions of Rule 14a-9 and Section 14(e) if a
transaction involves the proxy or tender offer rules, respectively.
Also, if the transaction involves the Securities Act, the
communications will be subject to Section 12(a)(2) liability as well.
In addition, all material information must be included in the
registration statement that is ultimately declared effective; therefore
the information will be subject to Section 11 liability. In the
aggregate, the liability imposed on these communications is appropriate
to discourage the dissemination of false or misleading information into
the market while at the same time providing investors with more
information about a proposed transaction on a timely basis. We do not
expect that these amendments will present a significant burden to
investors or offerors.\260\ Although communications are subject to
liability, the amendments essentially permit communications that would
not otherwise be permitted today and parties have the option of whether
or not to communicate more with security holders and the markets.
---------------------------------------------------------------------------
\260\ Under the exemptions adopted, all written communications
relating to a proposed transaction following first public
announcement must be publicly filed.
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The amendments also should reduce the current regulatory
uncertainty relating to security holder communications. Companies have
indicated difficulty in complying with the current restrictions on
communications while at the same time fulfilling their duties to make
full and fair disclosure under Rule 10b-5 of the Exchange Act. By
relaxing the current restrictions on communications, this regulatory
tension should be minimized. This clarification is expected to benefit
issuers and security holders alike.
One potential cost or risk of the amendments is that some security
holders may make investment decisions based on information received
before a complete disclosure statement containing the required
information is filed. While some investors may make premature
investment decisions, the same risk exists today under the current
rules. For example, the tender offer rules currently limit
communications with investors until an offer is formally commenced. The
required disclosure statement, however, is not required to be filed
until five business days after the announcement of an offer. In
addition, the information required in the mandated disclosure document
may not be received by security holders until several days after the
material is filed. By allowing companies to publicly announce
transactions without having to file mandated disclosure documents,
together with the requirement that all written communications relating
to a proposed transaction be publicly filed and contain a legend
advising security holders to read the complete disclosure document when
it is available,\261\ we believe investors will have more information
and more time to make an informed investment decision. Further,
investors will receive a mandated disclosure document before the time
they must decide whether or not to tender in an offer.
---------------------------------------------------------------------------
\261\ See new Rule 165(c) and revised Rules 13e-4(c), 14a-12(a),
14d-2(b), and 14d-9(a).
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To protect investors from possible misleading information, we are
adopting new Rule 14e-8 which specifically prohibits the announcement
of a tender offer if the bidder does not intend to commence and
complete the offer; intends to manipulate the market price of the
bidder or target; or does not have a reasonable belief it will have the
means to purchase the securities sought in the offer. This new rule
should encourage only bona fide offers to be publicly announced and
minimize the potential for dissemination of false or misleading
information in the marketplace.
In addition to permitting more communications, we believe that the
amendments will reduce selective disclosure of information because
companies must publicly file all written communications relating to the
transaction. This filing requirement will make written communications
available to a broader base of investors than is currently the case.
The amendments also should increase the uniformity and timeliness of
information received by investors. We recognize, of course, that the
amendments will not eliminate selective disclosure entirely. In fact,
the amendments may encourage companies to communicate orally instead of
in writing to avoid the filing requirement. Because the market will
likely demand that information be reduced to writing and companies
generally will want to disseminate information broadly in order to sell
their transaction to the market, we expect that the communications
scheme adopted will reduce selective disclosure overall.
The revisions also will permit significantly more communications
under the proxy rules, regardless of whether the communications relate
to a business combination transaction. Under the amended rules,
companies and security holders may communicate more freely before
having to furnish a written proxy statement.\262\ The increased ability
to communicate under the amendments adopted today applies equally to
security holders and companies. As a result, we expect
[[Page 61435]]
security holders will receive more information regarding matters on
which a vote may be solicited in the future. In addition, the revisions
should result in the dissemination of information earlier than is
currently the case, giving security holders more time to consider that
information.
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\262\ No proxy card or form of proxy may be given or requested
unless preceded or accompanied by a proxy statement.
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We are requiring companies to provide security holders with a short
``plain English'' summary term sheet in all cash mergers, cash tender
offers, and going-private transactions.\263\ We expect that the
required summary term sheet will facilitate investors' understanding of
the basic terms of a proposed transaction, allowing them to make
better-informed voting and investment decisions. We do not expect the
requirement to impose a significant burden on filers because the
information required in a summary term sheet must be gathered to
respond to existing disclosure requirements in any event. Further, most
filers should be sufficiently experienced with the plain English
requirements applicable to Securities Act filings.
---------------------------------------------------------------------------
\263\ Forms S-4 and F-4 are already subject to the plain English
requirements; thus we are not requiring a summary term sheet for
securities offerings.
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B. Filings
The amendments should effectively reduce the cost of complying with
many of the current disclosure and other regulatory requirements. We
have integrated and streamlined the current disclosure requirements
applicable to business combination and going-private transactions. To a
large extent the amendments harmonize and integrate the disclosure
requirements for tender offer, merger proxy, and going-private
transaction statements. The various disclosure requirements now appear
in one location and are written in a more reader-friendly manner. Also,
the amendments permit the filing of one schedule, rather than two, to
satisfy the tender offer and going-private disclosure requirements when
both sets of regulations apply to a particular transaction.
Consistent with the free communications scheme adopted today, we
are limiting the availability of confidential treatment of merger proxy
statements. Under the amendments, filers will be permitted to file a
merger proxy statement confidentially so long as the parties limit
their public oral and written communications to the information
specified in Rule 135 of the Securities Act. If the parties to the
transaction elect to publicly disclose more information than that
specified in Rule 135, the proxy statement must be filed publicly. We
do not expect that this limitation on confidential treatment will
impose significant costs on filers. The revised treatment of merger
proxy statements is consistent with the current requirement to publicly
file all other registration, proxy, tender offer and going-private
statements. The same information must be filed regardless of whether
confidential treatment is invoked by the filer.
We expect the amendments also will reduce the burden of complying
with the merger proxy and tender offer requirements by, among other
things:
Clarifying the disclosure requirements;
Clarifying that an acquiror's financial statements are
required in all-cash transactions only when the acquiror cannot
demonstrate a financial ability to satisfy the terms of the
transaction or the information is otherwise material;
Eliminating the requirement to provide target financial
statement information in an all-cash merger when the acquiror's
security holders are not voting on the transaction;
Reducing from three years to as little as one year, and
in some cases eliminating, the required financial statements for a
non-reporting target company when the acquiring company's security
holders are not voting on the transaction; and
Reducing from three years to two the required financial
statements for an acquiring company in cash mergers and third-party
cash tender offers.
We are adopting, however, a new disclosure requirement that may
impose an additional cost on acquirors in negotiated two-tier business
combination transactions. If security holders will be offered cash
first in a tender offer followed by securities in a back-end merger, an
acquiror must disclose certain pro forma and related financial
information for the combined entity in the cash tender offer materials.
We do not expect that this requirement will impose a significant burden
on acquirors because the same information would eventually be required
for the back-end merger. The amendments require disclosure at an
earlier point in time, when security holders are confronted with a cash
tender offer and must decide whether to tender in the offer or wait to
receive securities in the back-end. The pro forma information required
will benefit investors and should not impose a significant burden on
acquirors. Therefore, the costs associated with providing pro forma
information is reasonable. We recognize, however, that some acquirors
may have difficulty in generating reliable pro forma financial
information in situations when the target is not cooperating with the
bidder. In response to this concern, we have limited the pro forma
requirement to negotiated transactions.
For the purposes of the Paperwork Reduction Act, Table 2 in Part
VII below summarizes our estimate of the paperwork burden hours that
parties would expend to comply with the amended rules. In arriving at
these estimates we note that U.S. merger and acquisition activity in
1998 was valued in excess of $1.3 trillion.\264\ These estimates
include the burden hours incurred by companies from filing pre-filing
communications. We have based these estimates on current burden hour
estimates and the staff's experience with these filings. The estimates
in the table indicate that parties would expend approximately 234,759
burden hours/year complying with the revised rules. If we assume that
70% of the burden hours would be expended by persons that cost the
affected parties $85/hour (e.g., professionals) and 30% of these burden
hours would be expended by persons that cost $10/hour (e.g., clerical
support), then the proposals would cost approximately $14,691,250/year
in internal staff time. We expect that a majority of the compliance
burden will fall on professionals while approximately one-third of the
burden will rest on clerical staff that will monitor and implement the
compliance process.
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\264\ See Mergers & Acquisitions, The Dealmaker's Journal, 1998
Almanac (March/April 1999), at 42.
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For purposes of the Paperwork Reduction Act, we also estimate that
parties would spend approximately $122,929,990/year on outside
professional assistance to comply with the proposals. Thus, we estimate
that affected parties would spend approximately $137,621,240/year to
comply with the paperwork requirements of the amended rules. Applying
the same cost estimates to the burden imposed by the current rules, we
estimate that companies and affected parties spend approximately
$163,268,490/year.\265\ Note that these estimates do not attempt to
quantify intangible benefits of the amended rules, such as the benefits
to issuers and investors of enhanced communications
[[Page 61436]]
and possible improvements in price discovery, nor intangible costs.
---------------------------------------------------------------------------
\265\ For the purposes of the Paperwork Reduction Act, we
estimate in Table 2 of Part VII the burden hours imposed on parties
to comply with the current rules. Assuming (as we did for the
proposed rules) that 25% of the hours required to comply with the
rules are provided by corporate staff at a cost of $63/hour (70% of
the expended corporate staff time cost $85/hour, whereas 30% of the
expended corporate staff time cost $10/hour), and 75% of the hours
required to comply with the rules are provided by external
professional help at a cost of $175/hour, we estimate that affected
parties spend approximately 1,110,670 burden hours/year * $147/
hour=$163,268,490/year.
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C. Tender Offers
We are providing bidders with more flexibility regarding the timing
of exchange offers. Currently, bidders may not commence an exchange
offer until the related registration statement is effective. Under the
amendments, bidders will be able to commence an exchange offer as soon
as they file a registration statement, or on a later date if desired.
Offerors will no longer need to wait for effectiveness to commence an
exchange offer. We expect that this increased flexibility will
encourage issuers to file their registration statements earlier,
thereby creating an incentive to publicly disseminate more information
sooner rather than selectively communicate with a limited number of
security holders. In addition, we expect the attempt at balancing the
regulatory treatment of cash and stock offers will enhance the
attractiveness of offering securities, more so than is currently the
case. The increased feasibility of offering securities as an
alternative to cash should result in a more competitive market for
target companies overall.
We realize that the ability to commence an offer early will likely
shorten the period of time necessary to complete an exchange offer
relative to the time currently required. We retain, however, certain
investor protection mechanisms, including a requirement that a bidder
may not purchase securities tendered in an exchange offer until the
related registration statement is effective. In addition, the exchange
offer may not expire until after the mandatory 20-business day tender
offer period has elapsed. The bidder must disseminate a supplement to
security holders containing all material changes to the information
previously disseminated and security holders may withdraw tendered
securities at any time until purchased by the bidder.
We also recognize that early commencement may increase the risk
that bidders offering securities will need to disseminate supplements
to disclose changes in material information. This may cause bidders to
incur additional costs in redisseminating information and security
holders will need to reconsider their investment decisions upon receipt
of the new information. The risk is not unique to exchange offers,
however, because bidders run the same risk today in cash tender offers
when there is a material change in information. We do not expect that
the costs associated with redissemination will be overly burdensome
because early commencement is at the bidder's election. Bidders are not
required to commence immediately upon filing. Instead, bidders can file
a registration statement and wait for staff comments before
disseminating offering materials and commencing the offer, thereby
minimizing both the need for supplements and the costs associated with
redissemination.
The amendments also permit bidders to purchase (at the stated offer
price) securities from holders who did not tender their shares during
the offer in a follow-on period called a ``subsequent offering
period.'' We expect this change will minimize the delay security
holders currently encounter in liquidating their investment in a target
company when the bidder is successful in purchasing a significant or
controlling interest in the target. We recognize that some security
holders might wait to tender their shares until the subsequent offering
period, thus creating a hold-out problem for some bidders. We do not
believe, however, that the need to announce a subsequent offering
period in advance will pose a significant hold-out risk because most
bidders will not be willing to close the initial offering period until
a sufficient number of securities have been tendered in the offer.
Therefore, security holders will need to tender a sufficient number of
securities into an offer before the bidder will close the initial
offering period and purchase the securities tendered in the offer. As a
result, the economics of the transaction will drive a sufficient number
of security holders to tender. In addition, we note that bidders are
not required to provide a subsequent offering period, but may do so at
their election.
We are reducing the financial statement requirement in third-party
cash tender offers from three years to two when the information is
material. This change harmonizes the financial statement requirement in
third-party tender offers with the requirements for issuer tender
offers and going-private transactions. We expect that this reduction
from three to two years of historical financial statements will lower a
bidder's costs to comply with our rules, while continuing to give
security holders adequate information to make investment decisions.
The amendments also allow bidders greater access to security
holders in tender offers by enabling them to contact non-objecting
beneficial owners if the target company maintains a list of these
persons. The amendment is expected to give bidders the same ability as
target companies to communicate directly with non-objecting beneficial
owners of securities similar to that provided under the proxy rules.
This revision should benefit both bidders and security holders because
communications regarding tender offers will be more efficient than they
are today. The amendments do not require targets to gather this
information. Instead, the information must be provided only when the
target has the information and elects to provide the bidder with
security holder list information instead of mailing the tender offer
materials for the bidder. Accordingly, we do not expect the revised
rule will impose significant costs on target companies.
V. Commission Findings and Considerations
A. Exemptive Authority Findings
We find that it is appropriate, in the public interest and
consistent with the protection of investors to exempt: (i) Persons
making communications regarding planned business combination or similar
takeover transactions from Sections 5(b)(1) and (c) of the Securities
Act; and (ii) exchange offers commencing early from section 5(a) and
(b)(2) of the Securities Act. We make these findings based on the
reasons described in this release. In particular, we believe that
investors will be better served if they are able to receive more
information concerning business combination transactions before the
time they must make an investment decision.
Our use of exemptive authority will allow companies to communicate
more freely with security holders and the markets and will permit
investors to receive more information in a timely manner. If security
holders receive more information sooner, they will be able to better
inform themselves before having to make an investment decision. In
addition, our use of exemptive authority will help minimize the
regulatory disparity between exchange offers and cash tender offers. If
bidders can choose more freely between offering cash or securities as
consideration in a business combination, the markets will operate more
efficiently and security holders will benefit as a result.
In light of improved technologies that permit more and faster
communications with security holders and the markets, and the
increasing speed at which business combination transactions are
consummated, we believe that removing restraints on communications will
benefit investors. Therefore, we have found that persons making
communications regarding these types of transactions should be free to
communicate earlier, before a formal
[[Page 61437]]
registration statement is filed or a prospectus meeting the
requirements of Section 10(a) of the Securities Act is delivered.
We realize that these exemptions will lead to significantly more
communications, some of which could be incomplete in the absence of a
mandated disclosure document. We believe, however, that investors will
be adequately protected by our continuing requirement to furnish
security holders with a complete disclosure document before an
investment decision must be made. In addition, we believe that the
level of liability imposed on these pre- and post-filing communications
will be adequate to protect investors.
B. Effect on Competition
Section 23(a) of the Exchange Act \266\ requires us, in adopting
rules under the Exchange Act, to consider the impact those rules would
have on competition. We cannot adopt any rule that would impose a
burden on competition not necessary or appropriate in the public
interest. We did not receive any information from commenters on the
impact of increased competition for capital in connection with business
combination transactions. We also received no comments on whether the
new rules, schedules and amendments will have an adverse effect on
competition or will impose a burden on competition that is neither
necessary nor appropriate in furthering the purposes of the Exchange
Act. Harmonizing the requirements between cash and exchange offers
removes burdens on competition. Our view, therefore, is that any anti-
competitive effects of the new rules, schedules and amendments adopted
today are necessary or appropriate in the public interest.
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\266\ 15 U.S.C. 78w(a)(2).
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C. Promotion of Efficiency, Competition and Capital Formation
Section 2(b) of the Securities Act \267\ and section 3(f) of the
Exchange Act,\268\ as amended by the National Securities Markets
Improvement Act of 1996,\269\ provide that whenever the Commission is
engaged in rulemaking and is required to consider or determine whether
an action is necessary or appropriate in the public interest, the
Commission also must consider, in addition to the protection of
investors, whether the action will promote efficiency, competition and
capital formation. We believe that harmonizing the regulatory
requirements between cash tender and exchange offers will promote
efficiency and competition. In addition, facilitating communications
with security holders will promote efficiency and capital formation.
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\267\ 15 U.S.C. 77b.
\268\ 15 U.S.C. 78c.
\269\ Pub. L. 104-290, Sec. 106, 110 Stat. 3416 (1996).
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VI. Final Regulatory Flexibility Analysis
This Final Regulatory Flexibility Analysis (``FRFA'') has been
prepared in accordance with the provisions of the Regulatory
Flexibility Act (``RFA''), as amended by Public Law 104-121, 110 Stat.
847, 864 (1996), 5 U.S.C. 604. The FRFA relates to the new rules,
amendments, and schedules adopted today, which are primarily intended
to enhance communications with security holders; harmonize the
regulations affecting cash and stock tender offers; facilitate
compliance with the rules and regulations associated with business
combination transactions and similar extraordinary transactions; and
promote investor protection.
A. Need for Action
Communications
Currently, the rules and regulations applicable to business
combination transactions impose restrictions on communications during
the period before a mandated disclosure document is publicly filed with
us. These restrictions appear in the registration, proxy and tender
offer rules.\270\ Companies, security holders and other market
participants have expressed an increasing desire to communicate and
receive information about proposed business combination transactions
before the time that a mandated disclosure document (e.g., a
registration, proxy or tender offer statement) is filed. This desire is
partly attributable to the emergence of new and developing technologies
that allow for faster and less expensive means to communicate. In
addition, disclosure requirements under both the federal securities
laws and applicable exchange rules and regulations may require
disclosure. Further, participants to business combination transactions
often feel compelled to promptly inform the marketplace, their
employees, suppliers, and customers about a proposed business
combination transaction that potentially could impact their
relationships with these constituencies. We also have recognized that
business combination transactions differ from capital-raising
transactions to the extent that security holders may be forced to take
cash or securities in exchange for their securities even though no
action is taken with respect to the transaction.
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\270\ For example, see section 5 of the Securities Act, Rules
14a-3, 14a-6, 14a-11 and 14a-12 (proxy rules) and Rules 14d-1, 14d-2
and 14d-3 (tender offer rules).
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Accordingly, we have decided to eliminate many of the restrictions
imposed on communications before a mandated disclosure document is
filed by adopting specific exemptions under each regulatory scheme that
could apply to a business combination transaction. Revised Securities
Act Rules 135 and 145 and new Rules 165, 166 and 425 permit more
communications regarding a business combination transaction before a
registration statement is filed. Revised proxy Rule 14a-12 permits more
communications regardless of whether a business combination transaction
is involved before a proxy statement must be filed. Revised tender
offer Rule 14d-2 permits a bidder to communicate more information
without having to formally commence its tender offer or file a tender
offer statement. Revised tender offer Rule 14d-9 permits a target to
respond to a bidder's announcement of a proposed tender offer before
commencement of the offer without having to file a solicitation/
recommendation statement.
In each case, the person making communications must file all
written communications made in connection with or relating to the
transaction on the date of first use. The written communications must
contain a brief legend advising security holders to read the applicable
mandated disclosure document when it is filed together with any other
documents that may be available. Under the new regulatory scheme
security holders must be furnished with the traditional mandated
disclosure document before they must make an investment or voting
decision. This new regulatory scheme facilitates the dissemination of
more information to security holders at an earlier point in time,
providing security holders with a greater opportunity to consider the
information in light of all other information available, including the
mandated disclosure document that must be furnished before action can
be taken.
Balancing the Regulation of Stock and Cash Tender Offers
Currently, a bidder offering securities as consideration in an
exchange offer may not commence the offer until a related registration
statement is effective.\271\ This differs in a significant
[[Page 61438]]
respect from cash tender offers that may commence as soon as a tender
statement is filed and the required information disseminated to
security holders. This disparity in regulatory treatment of cash and
stock tender offers may influence a bidder's choice of consideration
offered in a tender offer. In order to provide bidders with more
flexibility on the form of consideration to offer in a business
combination transaction, we are revising the rules to permit the
commencement of exchange offers before a related registration statement
is effective.\272\ A bidder, however, may not close its exchange offer
and purchase the tendered securities until after the related
registration statement is effective. Bidders also must deliver a
preliminary prospectus containing all required information in addition
to supplements or amendments that disclose material changes from the
prospectus previously furnished. This balancing of the regulatory
treatment of cash and stock tender offers will provide bidders with
increased flexibility to choose between cash and securities as
consideration in a business combination transaction without impairing
the current level of investor protection afforded to security holders.
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\271\ See Rule 14d-2(a)(4) stating that commencement occurs when
definitive copies of the prospectus/tender offer material are first
published, sent or given to security holders.
\272\ See new Rule 162 and revised Rule 14d-2(a).
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Harmonizing, Clarifying and Updating the Disclosure Requirements
In some cases the current rules relating to business combination
transactions require differing levels and types of information based on
how the transaction is structured. If a transaction is structured as a
merger instead of a tender offer, the required disclosure may differ
unnecessarily. For example, a fully-financed, all-cash merger generally
requires three years of financial statements for the company to be
acquired,\273\ while a fully-financed, all-cash all-share tender offer
generally will not require any financial statement information for
either the bidder or the target unless that information is
material.\274\ In addition, there are other areas where the required
level of information may differ unnecessarily. For example, issuer
tender offers and going-private transactions generally require two
years of financial statements while third-party tender offers require
three years of financial statements, when material.
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\273\ See Item 14 of Schedule 14A.
\274\ See Item 9 to Schedule 14D-1.
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This disparity in required disclosure may be attributed in part to
the fact that the disclosure requirements were not adopted at the same
time, resulting in some minor inconsistencies or differences. The new
and revised schedules \275\ and disclosure items \276\ serve to
integrate the disclosure requirements, harmonizing the requirements to
the extent practicable and appropriate. The revisions adopted will
facilitate compliance with the disclosure requirements applicable to
business combination transactions and going-private transactions while
maintaining all substantive disclosure requirements appropriate to the
transaction.
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\275\ New Schedule TO (replacing Schedules 13E-4 and 14D-1) and
revised Schedules 13E-3 and 14D-9.
\276\ Regulation M-A, Items 1000 through 1016 and revised Item
14 of Schedule 14A.
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B. Objectives of the Rule Amendments
The new rules, schedules and amendments are expected to reduce
compliance costs overall for all persons that are subject to our rules
and regulations, benefiting both small and large business entities. As
a result of the amendments adopted, security holders, including small
entities, should receive more information on a timely basis. In
addition, persons subject to our rules should have greater flexibility
in structuring and completing tender offers, mergers, and other
extraordinary transactions. Also as a result of the amendments, bidders
should realize greater flexibility in selecting the form of
consideration to offer in a tender offer (e.g., cash or securities). We
expect that our revisions harmonizing, clarifying and updating the
disclosure requirements will facilitate compliance with the rules and
regulations as well as improve the disclosure that security holders
ultimately receive in business combination transactions.
C. Summary of Significant Issues Raised by the Public Comments
We requested comment with respect to the Initial Regulatory
Flexibility Analysis (``IRFA'') that was prepared when the new rules,
amendments and schedules were proposed. We did not receive any comments
with respect to the IRFA.
D. Description and Estimate of the Number of Small Entities Subject to
the New Rules
We adopted definitions of the term ``small business'' for the
various entities subject to our rulemaking. Rule 157 under the
Securities Act \277\ and Rule 0-10 under the Exchange Act \278\ provide
that ``small business issuer'' includes an issuer, other than an
investment company, that has total assets of $5 million or less as of
the end of its most recent fiscal year. For purposes of the RFA, an
investment company is a small business if the investment company,
together with other investment companies in the same group of related
investment companies, has net assets of $50 million or less as of the
end of its most recent fiscal year.\279\
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\277\ 17 CFR 230.157.
\278\ 17 CFR 240.0-10.
\279\ 17 CFR 270.0-10.
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Currently, we are aware of approximately 836 reporting companies
that are not investment companies with assets of $5 million or less. In
addition, there are approximately 320 investment companies that satisfy
the ``small business'' definition. All of these companies could
potentially be subject to at least some of the new rules, schedules,
and amendments. We expect small businesses will be affected by these
amendments to the extent that they are involved in a business
combination transaction. In addition, small businesses may be affected
by the amendments made to the proxy rules, which permit significantly
greater communications with and among security holders. Small entities
that are required to file registration statements, proxy statements,
tender offer statements and other reports under the Securities Act,
Exchange Act, and Investment Company Act will be affected by these
amendments. Finally, small entities may be affected as shareholders in
companies that are part of a business combination.
We have no reliable way of determining or estimating the number of
reporting or non-reporting small businesses that may seek to rely on or
would otherwise be affected by the new rules, schedules and amendments.
We believe, however, that these amendments will substantially benefit
both small and large entities to the extent they will substantially
reduce current restrictions on communications and generally facilitate
compliance with existing rules and regulations. In addition, because
many of the amendments represent exemptions from existing rules and
regulations, small businesses can decide whether the burdens imposed by
the requirements (e.g., the filing of written communications) outweigh
the related benefits (e.g., the ability to communicate more freely).
E. Projected Reporting, Recordkeeping, and Other Compliance
Requirements
We believe that the new rules, schedules and amendments are
primarily deregulatory in nature because they significantly expand the
ability of businesses to structure and
[[Page 61439]]
time their business combination transactions and communicate with
security holders. In addition, security holders in general will be
afforded a greater opportunity to receive information and communicate
with other security holders. The resulting increase in flexibility to
communicate will benefit companies as well as security holders.
Under the amendments, small businesses will report and file
essentially the same information as they do today. One exception to
this generalization, however, is that both large and small bidders are
required to publicly file all pre-and post-filing written
communications relating to proposed business combination transactions.
This filing requirement is necessary due to the deregulation of pre-
filing communications. Companies are not obligated to communicate with
security holders, but to the extent that they do communicate in
writing, those communications must be filed on the date of first use.
The new rules, schedules, and amendments adopted today treat all
persons and entities alike, and do not make any distinctions based on
size.
F. Description of Steps Taken To Minimize the Effect on Small Entities
We are directed by the RFA to consider significant alternatives to
proposals that would accomplish our stated objectives while minimizing
any significant adverse economic impact on small entities. In
connection with the proposals presented in the Proposing Release, the
views expressed by commenters, and our extensive review of existing
rules and regulations, we considered several possible alternatives,
including:
Establishing different compliance and reporting
requirements or timetables that take into account the resources of
small businesses;
Clarifying, consolidating or simplifying compliance and
reporting requirements under the rule for small businesses;
Using performance rather than design standards; and
Exempting small businesses from all or part of the
requirements.
Because the new rules, schedules, and amendments are primarily
deregulatory in nature, any different treatment of small business
entities would likely be more burdensome to small business entities.
The amendments significantly expand the ability of businesses to
structure and time their business combination transactions and
communicate with security holders, while maintaining investor
protections. While we considered excluding smaller entities from the
new rules, schedules, and amendments, we concluded that the benefits of
the amendments should apply to all businesses regardless of their size.
If small business were exempted, in most cases they would be subject to
more rather than less regulation. Accordingly, we decided not to limit
the new rules and amendments and their corresponding benefits to larger
issuers.
Accordingly, we do not believe any benefit can be achieved by
providing separate disclosure requirements for small issuers based on
the use of performance rather than design standards.
VII. Paperwork Reduction Act
In November, 1998, the staff submitted the proposed new rules,
schedules and amendments to the Office of Management and Budget (OMB)
for review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11.
Also, in accordance with the Paperwork Reduction Act, we solicited
comment on the compliance burdens associated with the proposals. We did
not receive any public comments that quantified the estimated paperwork
burdens associated with the new rules, schedules and amendments. The
comments we received primarily addressed the costs and benefits of the
proposals in general terms. We discuss these general comments above in
more detail.
The new rules, schedules and amendments will affect several
regulations and forms that contain ``collection of information
requirements'' within the meaning of the Paperwork Reduction Act of
1995.\280\ An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless it displays
a currently valid OMB control number. Table 1 below provides the titles
for the affected collections of information under the Exchange Act,
current OMB control numbers, where applicable, a summary of the
collection of information, and a description of the likely respondents
to each collection of information.\281\
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\280\ 44 U.S.C. 3501 et seq.
\281\ Although Regulations S-K and S-B do not actually impose
reporting burdens directly on public companies, for administrative
convenience, we have assigned each of these regulations one burden
hour. The burden hours imposed by the disclosure regulations are
included in the estimates for the forms that refer to the
regulations.
Table 1: Collections of Information Under the Securities Act and Exchange Act
--------------------------------------------------------------------------------------------------------------------------------------------------------
OMB Control
Title Number Summary of the collection of information and description of likely respondents
--------------------------------------------------------------------------------------------------------------------------------------------------------
Schedule 14A............................... 3235-0059 If a vote of security holders is required, persons soliciting proxies with respect to
securities registered under Section 12 of the Exchange Act must furnish security holders
with a proxy statement containing the information specified in Schedule 14A. The proxy
statement is intended to provide security holders with the information necessary to enable
them to make an informed voting decision on any matters that will be acted upon at an
annual or special meeting of security holders.
Schedule 14C............................... 3235-0057 If a vote of security holders is required, but proxies are not being solicited, companies
with securities registered under Section 12 of Exchange Act must send an information
statement containing the information specified in Schedule 14C to every security holder
that would be entitled to vote on the matters presented at a meeting at which a vote will
be taken.
Schedule 13E-3............................. 3235-0007 Companies or their affiliates engaging in specified transactions that cause a class of the
company's equity securities registered under the Exchange Act to be: (1) Held by fewer
than 300 record holders; or (2) de-listed from a securities exchange or inter-dealer
quotation system must file and disseminate to security holders the information specified
in Schedule 13E-3. This schedule requires detailed information addressing whether the
filing persons believe the transaction is fair to unaffiliated security holders and why.
Schedule 14D-9............................. 3235-0102 Issuers of securities registered under Section 12 of the Exchange Act that make a
solicitation or recommendation to security holders regarding a third-party tender offer
subject to Regulation 14D must file and send to security holders the information specified
in Schedule 14D-9.
[[Page 61440]]
Schedule 13E-4............................. 3235-0203 Issuers of securities registered under Section 12 or reporting under Section 15(d) of the
Exchange Act, and certain of their affiliates, must file and disseminate to security
holders the information specified in Schedule 13E-4 when making a tender offer for any
class of the issuer's equity securities.
Schedule 14D-1............................. 3235-0102 Any person, other than the issuer, making a tender offer for equity securities registered
under Section 12 of the Exchange Act, that would result in that person owning greater than
five percent of the class of the securities subject to the offer, must at the time of the
offer file and disseminate the information specified in Schedule 14D-1 to the issuer,
security holders and competing bidders.
Schedule TO................................ 3235-0515 Any person making a tender offer for securities that would have to file a Schedule 13E-4 or
14D-1 must now file and disseminate to security holders the information specified in
Schedule TO, instead of Schedule 13E-4 or 14D-1.
--------------------------------------------------------------------------------------------------------------------------------------------------------
The new rules, schedules, and amendments update and simplify the
rules and regulations applicable to business combination transactions.
The information required by these schedules is needed so that security
holders can make an informed tender or voting decision with respect to
tender offers, mergers, acquisitions, and other extraordinary
transactions. We enhance communications between public companies and
investors by providing companies with greater flexibility to determine
when to file their registration statements involving takeover
transactions, proxy statements, and tender offer statements. We also
attempt to put cash and stock tender offers on a more equal regulatory
footing; integrate the forms and disclosure requirements in issuer
tender offers, third-party tender offers and going-private
transactions; and consolidate the disclosure requirements in one
location in the regulations. In addition, we allow bidders to accept
tenders from security holders during a limited period after the
successful completion of the tender offer; more closely align the
merger and tender offer requirements; and update the tender offer rules
to clarify certain requirements and reduce compliance burdens where
consistent with investor protection.
The schedules and regulations affected by these changes set forth
the public disclosures that offerors are required to make concerning
business combination transactions. For the most part the disclosure
requirements in the above schedules remain the same, with a few limited
exceptions. Specifically, revised Schedules 14A, 14C, 13E-3, 14D-9, and
new Schedule TO requires a brief ``plain English'' summary term sheet
highlighting the most significant aspects of a particular transaction
in all cash mergers, cash tender offers, and going-private
transactions.\282\ The amendments also reduce in certain instances the
number of years of financial statements that are required in Schedules
14A and 14C for acquirors and companies being acquired in cash mergers.
For example, Schedules 14A and 14C no longer require the financial
statements of the target in a cash merger when the acquiror's security
holders are not voting on the transaction.
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\282\ Forms S-4 and F-4 are currently subject to summary and
plan English requirements. Therefore, we are not requiring a plain
English summary term sheet for business combination transactions
that are registered on one of these forms.
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New Schedule TO, which replaces current Schedules 13E-4 and 14D-1,
harmonizes and clarifies the disclosure requirements in issuer and
third-party tender offers. For example, currently when a third-party
bidder's financial statement information is material to security
holders, three years of financial statements are required while only
two years is required for issuers making an issuer tender offer. New
Schedule TO requires only two years of financial statements for the
bidder if that information is material, regardless of whether an issuer
or third-party is making the tender offer. In a negotiated two-tier
transaction, Schedule TO will require the bidder to provide security
holders with certain pro forma financial and other related information
for the combined entity at the time of the cash tender offer. In
addition, the amendments permit the filing of one schedule, rather than
two, to satisfy the tender offer and going-private disclosure
requirements when both sets of regulations apply to the transaction. As
a result, the amendments are expected to reduce the number of filings
required.
The information collection requirements imposed by the schedules
and regulations are mandatory to the extent that companies are
publicly-owned and engage in business combination transactions. There
is no mandatory retention period for the information disclosed. The
information gathered by these schedules and regulation is made publicly
available, unless confidential treatment is available. Confidential
treatment of information in preliminary merger proxy statements is
retained to a limited extent.
As discussed in more detail in Part IV above, the amendments reduce
the burden of complying with the disclosure and transaction
requirements applicable to business combination transactions. We
estimate that public companies will expend approximately 988,986 burden
hours/year to comply with the new rules, schedules, and amendments.
Table 2 below summarizes our estimates of the burden hours that
filers will expend to comply with the new rules, amendments and
schedules. We expect compliance costs will be less than current costs
because the amendments primarily integrate and streamline the
disclosure requirements for business combination transactions. Our
estimates include the burden hours that will be incurred by companies
to file pre-filing written communications. We base these estimates on
current burden hour estimates and the staff's experience with these
filings. The estimates in the table indicate that filers will expend
approximately 234,759 burden hours/year to comply with the amendments.
In addition, as discussed in more detail below, we estimate that filers
will spend approximately $122,929,990/year on outside professional help
to comply with the amendments. The estimates are discussed in greater
detail below.
[[Page 61441]]
Table 2: Burden Hour Estimates
----------------------------------------------------------------------------------------------------------------
Estimated burden Hours/ Estimated filings/year Estimated burden hours
filing \283\ -------------------------
Schedule ----------------------------------------------------
Before After Before After Before After
revisions revisions revisions revisions revisions revisions
(A) (B) (C) (D) (E =A*C (F)=B*D
----------------------------------------------------------------------------------------------------------------
14A............................... 87.00 13.12 9,892 13,255 860,604 173,906
14C............................... 87.00 13.12 253 339 22,011 4,448
13E-3............................. 139.25 34.31 96 96 13,368 3,294
14D-9............................. 354.25 64.43 258 353 91,397 22,744
13E-4............................. 232.00 0.00 139 0 32,248 0
14D-1............................. 354.25 0.00 257 0 91,042 0
TO................................ 0 43.50 0 705 0 30,668
Rule 425 filings.................. 0 0.25 0 10,628 0 2,657
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Total......................... ........... ........... ........... ........... 1,110,670 237,717
----------------------------------------------------------------------------------------------------------------
\283\ The estimated filings/year are based on the number of filings in fiscal year 1998.
We expect that the amendments will reduce the number of burden
hours required to file a full Schedule 14A from 87 hours today to 70
hours under the amendments.\284\ Of the 70 hours, we estimate that 25%
(17.5 internal burden hours) will be provided by corporate staff, and
75% (52.5 hours) by external professional help. Based on filings
received in fiscal year 1998, we anticipate that companies and other
filers will file approximately 9,892 full Schedule 14As/year. Under the
amendments, companies and other filers also are required to file under
cover of Schedule 14A any pre-filing written communications (in
addition to the required proxy statement) concerning business
combinations for cash.\285\ Revised Rule 14a-12 requires filers to file
their pre- and post-filing written communications and include certain
information including a legend advising security holders to read the
proxy statement. In fiscal year 1998, approximately 9,892 full Schedule
14As were filed. We estimate that approximately 34% of the full
Schedule 14As filed will involve cash rather than securities.\286\ We
also estimate that filers, on average, will file one written
communication (in addition to the required proxy statement) for each
cash transaction. We estimate that a firm's corporate staff will expend
approximately 15 burden minutes (0.25 internal burden hours) to file a
written communication under the amended rules.\287\ Thus, we estimate
filers will file 9,892 full Schedule 14As/year (expending 17.5 internal
burden hours/filing) and 3,363 written communications/year (expending
0.25 internal burden hours/filing). On average, filers will require
approximately 13.12 internal burden hours to file 13,255 full Schedule
14As and written communications. In addition, we anticipate filers will
spend, at an estimated $175/hour, approximately $9,188/filing in
professional labor costs to file a Schedule 14A.\288\
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\284\ The numbers in Column B of Table 2 differ significantly
from those in Column A of Table 2 for two reasons. First, the
estimated burden hours in Column A include the estimated corporate
burden hours and outside labor hours that filers would require to
file each disclosure document. In Column B, we estimate only the
corporate burden hours needed to file each disclosure document (we
estimate separately the expense, in dollar terms, of outside labor).
Second, the estimates in Column B include the estimated burden hours
that bidders would require to file pre-filing communications.
Because parties would require less time to file communications than
full Schedule 14As, the average estimated burden hours in Column B
are lower than in Column A.
\285\ Under the amendments, bidders will file their pre- and
post-filing written communications relating to a business
combination transaction under Rule 425 in transactions where
securities are offered as consideration.
\286\ This estimate is based on data from the Securities Data
Corporation indicating that security holders had received only cash
in 34% of the merger transactions reported in 1996.
\287\ We base this estimate on the burden imposed by a similar
filing requirement under Item 901(c) of Regulation S-K for roll-up
transactions.
\288\ We base this estimate on 52.50 hours of professional
labor/full Schedule 14A filing * $175/hour. In aggregate, we
estimate that filers will spend $90,887,696/year to file 9,892 full
Schedule 14As/year.
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We anticipate the amendments will reduce the number of hours
required to file a full Schedule 14C from 87 hours today to 70 hours
under the amendments. Of the 70 hours, we estimate that 25% (17.5
internal burden hours) will be provided by corporate staff, and 75%
(52.5 hours) by external professional help. Based on filings in fiscal
year 1998, we anticipate that companies and other filers will file
approximately 253 full Schedule 14Cs/year. Under the amended rules,
companies and other filers also are required to file under cover of
Schedule 14C any pre-filing written communications (in addition to the
required proxy statement) concerning business combinations for
cash.\289\ The amendments require filers to file their written
communications and include certain information including a legend
advising security holders to read the information statement. In fiscal
year 1998, approximately 253 full Schedule 14Cs were filed. We estimate
that 34% of the full Schedule 14Cs will involve cash rather than
securities.\290\ We estimate that filers, on average, will file one
written communication (in addition to the required information
statement) for each cash transaction. We estimate that a firm's
corporate staff will expend approximately 15 burden minutes (0.25
internal burden hours) to file a written communication under the
amended rules. Thus, we estimate filers will file 253 full Schedule
14Cs/year (expending 52.50 burden hours/filing) and 86 written
communications/year (expending 0.25 internal burden hours/filing). On
average, filers will require approximately 13.12 internal burden hours
to file 339 full Schedule 14Cs and written communications. In addition,
we anticipate filers will spend, at an estimated $175/hour,
approximately $9,188/filing in professional labor costs to file a full
Schedule 14C.\291\
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\289\ Under the amendments, bidders will file under rule 425
pre- and post-filing written communications relating to a business
combination transaction where securities are offered as
consideration.
\290\ This estimate is based on data from the Securities Data
Corporation indicating that in security holders had received only
cash in 34% of merger transactions in 1996.
\291\ We base this estimate on 52.50 hours of professional
laborfull Schedule 14C filing * $175/hour. In aggregate, we estimate
that filers will spend $2,324,564/year to file 253 full Schedule
14Cs/year.
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[[Page 61442]]
The amendments clarify and make several technical changes to
Schedule 13E-3. As a result, we anticipate a savings of two hours, from
139.25 hours/filing to 137.25 hours/filing, to file Schedule 13E-3
under the amendments. Of the 137.25 hours, we estimate that 25% (34.31
internal burden hours) will be provided by corporate staff, and 75%
(102.94 hours) by external professional help. Based on filings in
fiscal year 1998, we estimate filers will file 96 Schedule 13E-3s/year.
In addition, we anticipate filers will spend, at an estimated $175/
hour, approximately $18,015/filing in professional labor costs to file
a full Schedule 13E-3.\292\
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\292\ We base this estimate on 102.94 hours of professional
labor/full Schedule 13E-3 filing * $175/hour. In aggregate, we
estimate that filers will spend $1,729,440/year to file 96 full
Schedule 13E-3s/year.
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The amendments clarify and make several technical changes to
Schedule 14D-9. As a result, we anticipate a savings of two hours, from
354.25 hours/filing to 352.25 hours/filing, to file a full Schedule
14D-9 under the amendments. Of the 352.25 hours, we estimate that 25%
(88.06 internal burden hours) will be provided by corporate staff, and
75% (264.19 hours) by external professional help. Based on filings in
fiscal year 1998, we anticipate that companies and other filers will
file approximately 258 full Schedule 14D-9s/year. Under the amendments,
companies and other filers also are required to file under cover of
Schedule 14D-9 any pre- or post-filing written communications (in
addition to the required proxy statement) concerning business
combinations for cash.\293\ The rule requires filers to attach their
written communications and include certain information including a
legend advising security holders to read the full recommendation
statement. In fiscal year 1998, approximately 258 full Schedule 14D-9s
were filed. We estimate that 37% of the full Schedule 14D-9s filed will
involve cash rather than securities.\294\ We estimate that filers, on
average, will file one written communication (in addition to the
required information statement) for each cash transaction. We estimate
that a firm's corporate staff will expend approximately 15 burden
minutes (0.25 internal burden hours) to file a written communication
under Rule 425. Thus, we estimate filers will file 258 full Schedule
14D-9s /year (expending 88.06 internal burden hours/filing) and 95
written communications/year (expending 0.25 internal burden hours/
filing). On average, filers will require approximately 64.43 internal
burden hours to file 353 full Schedule 14D-9s and written
communications. In addition, we anticipate filers will spend, at an
estimated $175/hour, approximately $46,233/filing in professional labor
costs to file a full Schedule 14D-9.\295\
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\293\ Under the amendments, bidders must file under Rule 425 any
pre- or post-filing written communications in business combination
transactions where securities are offered as consideration.
\294\ This estimate is based on data from the Securities Data
Corporation and Mergerstat, indicating that security holders
received only cash in 37% of merger and tender offer transactions in
1996.
\295\ We base this estimate on 264.19 hours of professional
laborfull Schedule 14D-9 filing * $175/hour. In aggregate, we
estimate that filers will spend $11,928,114/year to file 258 full
Schedule 14D-9s/year.
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Under the amendments new Schedule TO replaces current Schedules
13E-4 and 14D-1. Schedule TO harmonizes and clarifies the requirements
in current Schedules 13E-4 and 14D-1. Based on the number of Schedule
13E-4 and Schedule 14D-1s filed in fiscal year 1998, and the number of
hours required to complete them, we estimate that bidders will require
approximately 309 hours to file a full Schedule TO under the amended
rules.\296\ Of the 309 hours, we estimate that 25% (77.25 internal
burden hours) will be provided by corporate staff, and 75% (231.75
hours) by external professional help. Based on filings in fiscal year
1998, we anticipate that companies and other filers will file
approximately 396 full Schedule TOs/year. Under the amendments,
companies and other filers also will be required to file under Schedule
TO all pre- and post filing written communications (in addition to the
required tender offer statement) concerning all cash tender
offers.\297\ The amendments require filers to file their written
communications with certain information including a legend advising
security holders to read the tender offer disclosure statement. We
estimate that filers, on average, will file one written communication
(in addition to the required information statement) for each cash
tender offer transaction. We estimate that a firm's corporate staff
will expend approximately 15 burden minutes (0.25 internal burden
hours) to file a written communication under the amendments. Based on
data from fiscal year 1998, we estimate filers will file 396 full
Schedule TOs/year (expending 77.25 internal burden hours/filing) and
309 written communications/year (expending 0.25 internal burden hours/
filing).\298\ On average, filers will require approximately 43.50
internal burden hours to file 705 full Schedule TOs and written
communications. In addition, we anticipate filers will spend, at an
estimated $175/hour, approximately $40,556/filing in professional labor
costs to file a full Schedule TO.\299\
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\296\ Offerors currently require 232 hours to complete Schedule
13E-4, and 354.25 hours to complete Schedule 14D-1. In fiscal year
1998, offerors registered 139 business combinations on Schedule 13E-
4 and 257 business combinations on Schedule 14D-1. We estimate the
number of burden hours to file a full Schedule TO will be [(139
Schedule TO filings that previously would have been filed on
Schedule 13E-4 * 232 hours/Schedule TO filing that previously would
have been filed on Schedule 13E-4) + (257 Schedule TO filings that
previously would have been filed on Schedule 14D-1 * 354.25 hours/
Schedule TO filing that previously would have been filed on Schedule
14D-1)--2 burden hours from simplication]/396 filings on Schedule TO
= 309 hours/filing on Schedule TO.
\297\ Under the new rules, bidders must file under Rule 425 any
pre-filing communications in transactions where securities are
offered as consideration.
\298\ According to Mergerstat, in 1996 security holders received
only cash in 78% of tender offer transactions.
\299\ We base this estimate on 231.75 hours of professional
labor/full Schedule TO filing * $175/hour. In aggregate, we estimate
that filers will spend $16,060,176/year to file 396 full Schedule
TOs/year.
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VIII. Statutory Basis and Text of Amendments
We are adopting amendments to the rules under sections 2(3), 5, 7,
8, 10, 12, 19 and 28, of the Securities Act of 1933, as amended, and
sections 3(b), 4(e), 10(b), 13, 14, 18, 23(a), 24 and 36 of the
Securities Act of 1934, as amended.
List of Subjects
17 CFR Part 200
Administrative practice and procedure, Authority delegation.
17 CFR Parts 229, 230, 232, 239 and 240
Reporting and recordkeeping requirements, Securities.
Text of Amendments
For the reasons set out in the preamble, Title 17, Chapter II of
the Code of Federal Regulations is amended as follows:
PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND
REQUESTS
1. The authority citation for part 200 continues to read in part as
follows:
Authority: 15 U.S.C. 77s, 78d-1, 78d-2, 78w, 78ll(d), 78mm, 79t,
77sss, 80a-37, 80b-11, unless otherwise noted.
* * * * *
Sec. 200.30-3 [Amended]
2. By amending paragraph (a)(6) of Sec. 200.30-3 by removing the
phrase
[[Page 61443]]
``Rules 10b-13(d), 14e-4(c), and 15c2-11(h) (Secs. 240.10b-13(d),
240.14e-4(c), and 240.15c2-11(h) of this chapter)'' and in its place
adding ``Rules 14e-4(c), 14e-5(d), and 15c2-11(h) (Secs. 240.14e-4(c),
240.14e-5(d), and 240.15c2-11(h) of this chapter)'', and removing the
phrase ``to grant requests for exemptions from Rules 10b-13, 14e-4, and
15c2-11) (Secs. 240.10b-13, 240.14e-4, and 240.15c2-11 of this
chapter)'' and in its place adding ``to grant requests for exemptions
from Rules 14e-4, 14e-5, and 15c2-11 (Secs. 240.14e-4, 240.14e-5, and
240.15c2-11 of this chapter)''.
* * * * *
PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K
3. The authority citation for part 229 continues to read in part as
follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2,
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn,
77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll(d), 79e,
79n, 79t, 80a-8, 80a-29, 80a-30, 80a-37, 80b-11, unless otherwise
noted.
* * * * *
4. By revising paragraph (a)(2) of Sec. 229.10 to read as follows:
Sec. 229.10 General.
(a) Application of Regulation S-K. * * *
(2) Registration statements under section 12 (subpart C of part 249
of this chapter), annual or other reports under sections 13 and 15(d)
(subparts D and E of part 249 of this chapter), going-private
transaction statements under section 13 (part 240 of this chapter),
tender offer statements under sections 13 and 14 (part 240 of this
chapter), annual reports to security holders and proxy and information
statements under section 14 (part 240 of this chapter), and any other
documents required to be filed under the Exchange Act, to the extent
provided in the forms and rules under that Act.
* * * * *
5. By adding subpart 229.1000 consisting of Secs. 229.1000 through
229.1016 to read as follows:
Subpart 229.1000--Mergers and Acquisitions (Regulation M-A)
Sec.
229.1000 (Item 1000) Definitions.
229.1001 (Item 1001) Summary term sheet.
229.1002 (Item 1002) Subject company information.
229.1003 (Item 1003) Identity and background of filing person.
229.1004 (Item 1004) Terms of the transaction.
229.1005 (Item 1005) Past contacts, transactions, negotiations and
agreements.
229.1006 (Item 1006) Purposes of the transaction and plans or
proposals.
229.1007 (Item 1007) Source and amount of funds or other
consideration.
229.1008 (Item 1008) Interest in securities of the subject company.
229.1009 (Item 1009) Persons/assets, retained, employed,
compensated or used.
229.1010 (Item 1010) Financial statements.
229.1011 (Item 1011) Additional information.
229.1012 (Item 1012) The solicitation or recommendation.
229.1013 (Item 1013) Purposes, alternatives, reasons and effects in
a going-private transaction.
229.1014 (Item 1014) Fairness of the going-private transaction.
229.1015 (Item 1015) Reports, opinions, appraisals and
negotiations.
229.1016 (Item 1016) Exhibits.
Subpart 229.1000--Mergers and Acquisitions (Regulation M-A)
Sec. 229.1000 (Item 1000) Definitions.
The following definitions apply to the terms used in Regulation M-A
(Secs. 229.1000 through 229.1016), unless specified otherwise:
(a) Associate has the same meaning as in Sec. 240.12b-2 of this
chapter;
(b) Instruction C means General Instruction C to Schedule 13E-3
(Sec. 240.13e-100 of this chapter) and General Instruction C to
Schedule TO (Sec. 240.14d-100 of this chapter);
(c) Issuer tender offer has the same meaning as in Sec. 240.13e-
4(a)(2) of this chapter;
(d) Offeror means any person who makes a tender offer or on whose
behalf a tender offer is made;
(e) Rule 13e-3 transaction has the same meaning as in Sec. 240.13e-
3(a)(3) of this chapter;
(f) Subject company means the company or entity whose securities
are sought to be acquired in the transaction (e.g., the target), or
that is otherwise the subject of the transaction;
(g) Subject securities means the securities or class of securities
that are sought to be acquired in the transaction or that are otherwise
the subject of the transaction; and
(h) Third-party tender offer means a tender offer that is not an
issuer tender offer.
Sec. 229.1001 (Item 1001) Summary term sheet.
Summary term sheet. Provide security holders with a summary term
sheet that is written in plain English. The summary term sheet must
briefly describe in bullet point format the most material terms of the
proposed transaction. The summary term sheet must provide security
holders with sufficient information to understand the essential
features and significance of the proposed transaction. The bullet
points must cross-reference a more detailed discussion contained in the
disclosure document that is disseminated to security holders.
Instructions to Item 1001:
1. The summary term sheet must not recite all information
contained in the disclosure document that will be provided to
security holders. The summary term sheet is intended to serve as an
overview of all material matters that are presented in the
accompanying documents provided to security holders.
2. The summary term sheet must begin on the first or second page
of the disclosure document provided to security holders.
3. Refer to Rule 421(b) and (d) of Regulation C of the
Securities Act (Sec. 230.421 of this chapter) for a description of
plain English disclosure.
Sec. 229.1002 (Item 1002) Subject company information.
(a) Name and address. State the name of the subject company (or the
issuer in the case of an issuer tender offer), and the address and
telephone number of its principal executive offices.
(b) Securities. State the exact title and number of shares
outstanding of the subject class of equity securities as of the most
recent practicable date. This may be based upon information in the most
recently available filing with the Commission by the subject company
unless the filing person has more current information.
(c) Trading market and price. Identify the principal market in
which the subject securities are traded and state the high and low
sales prices for the subject securities in the principal market (or, if
there is no principal market, the range of high and low bid quotations
and the source of the quotations) for each quarter during the past two
years. If there is no established trading market for the securities
(except for limited or sporadic quotations), so state.
(d) Dividends. State the frequency and amount of any dividends paid
during the past two years with respect to the subject securities.
Briefly describe any restriction on the subject company's current or
future ability to pay dividends. If the filing person is not the
subject company, furnish this information to the extent known after
making reasonable inquiry.
(e) Prior public offerings. If the filing person has made an
underwritten public
[[Page 61444]]
offering of the subject securities for cash during the past three years
that was registered under the Securities Act of 1933 or exempt from
registration under Regulation A (Sec. 230.251 through Sec. 230.263 of
this chapter), state the date of the offering, the amount of securities
offered, the offering price per share (adjusted for stock splits, stock
dividends, etc. as appropriate) and the aggregate proceeds received by
the filing person.
(f) Prior stock purchases. If the filing person purchased any
subject securities during the past two years, state the amount of the
securities purchased, the range of prices paid and the average purchase
price for each quarter during that period. Affiliates need not give
information for purchases made before becoming an affiliate.
Sec. 229.1003 (Item 1003) Identity and background of filing person.
(a) Name and address. State the name, business address and business
telephone number of each filing person. Also state the name and address
of each person specified in Instruction C to the schedule (except for
Schedule 14D-9 (Sec. 240.14d-101 of this chapter)). If the filing
person is an affiliate of the subject company, state the nature of the
affiliation. If the filing person is the subject company, so state.
(b) Business and background of entities. If any filing person
(other than the subject company) or any person specified in Instruction
C to the schedule is not a natural person, state the person's principal
business, state or other place of organization, and the information
required by paragraphs (c)(3) and (c)(4) of this section for each
person.
(c) Business and background of natural persons. If any filing
person or any person specified in Instruction C to the schedule is a
natural person, provide the following information for each person:
(1) Current principal occupation or employment and the name,
principal business and address of any corporation or other organization
in which the employment or occupation is conducted;
(2) Material occupations, positions, offices or employment during
the past five years, giving the starting and ending dates of each and
the name, principal business and address of any corporation or other
organization in which the occupation, position, office or employment
was carried on;
(3) A statement whether or not the person was convicted in a
criminal proceeding during the past five years (excluding traffic
violations or similar misdemeanors). If the person was convicted,
describe the criminal proceeding, including the dates, nature of
conviction, name and location of court, and penalty imposed or other
disposition of the case;
(4) A statement whether or not the person was a party to any
judicial or administrative proceeding during the past five years
(except for matters that were dismissed without sanction or settlement)
that resulted in a judgment, decree or final order enjoining the person
from future violations of, or prohibiting activities subject to,
federal or state securities laws, or a finding of any violation of
federal or state securities laws. Describe the proceeding, including a
summary of the terms of the judgment, decree or final order; and
(5) Country of citizenship.
(d) Tender offer. Identify the tender offer and the class of
securities to which the offer relates, the name of the offeror and its
address (which may be based on the offeror's Schedule TO (Sec. 240.14d-
100 of this chapter) filed with the Commission).
Instruction to Item 1003
If the filing person is making information relating to the
transaction available on the Internet, state the address where the
information can be found.
Sec. 229.1004 (Item 1004) Terms of the transaction.
(a) Material terms. State the material terms of the transaction.
(1) Tender offers. In the case of a tender offer, the information
must include:
(i) The total number and class of securities sought in the offer;
(ii) The type and amount of consideration offered to security
holders;
(iii) The scheduled expiration date;
(iv) Whether a subsequent offering period will be available, if the
transaction is a third-party tender offer;
(v) Whether the offer may be extended, and if so, how it could be
extended;
(vi) The dates before and after which security holders may withdraw
securities tendered in the offer;
(vii) The procedures for tendering and withdrawing securities;
(viii) The manner in which securities will be accepted for payment;
(ix) If the offer is for less than all securities of a class, the
periods for accepting securities on a pro rata basis and the offeror's
present intentions in the event that the offer is oversubscribed;
(x) An explanation of any material differences in the rights of
security holders as a result of the transaction, if material;
(xi) A brief statement as to the accounting treatment of the
transaction, if material; and
(xii) The federal income tax consequences of the transaction, if
material.
(2) Mergers or similar transactions. In the case of a merger or
similar transaction, the information must include:
(i) A brief description of the transaction;
(ii) The consideration offered to security holders;
(iii) The reasons for engaging in the transaction;
(iv) The vote required for approval of the transaction;
(v) An explanation of any material differences in the rights of
security holders as a result of the transaction, if material;
(vi) A brief statement as to the accounting treatment of the
transaction, if material; and
(vii) The federal income tax consequences of the transaction, if
material.
Instruction to Item 1004(a):
If the consideration offered includes securities exempt from
registration under the Securities Act of 1933, provide a description
of the securities that complies with Item 202 of Regulation S-K
(Sec. 229.202). This description is not required if the issuer of
the securities meets the requirements of General Instructions I.A,
I.B.1 or I.B.2, as applicable, or I.C. of Form S-3 (Sec. 239.13 of
this chapter) and elects to furnish information by incorporation by
reference; only capital stock is to be issued; and securities of the
same class are registered under section 12 of the Exchange Act and
either are listed for trading or admitted to unlisted trading
privileges on a national securities exchange; or are securities for
which bid and offer quotations are reported in an automated
quotations system operated by a national securities association.
(b) Purchases. State whether any securities are to be purchased
from any officer, director or affiliate of the subject company and
provide the details of each transaction.
(c) Different terms. Describe any term or arrangement in the Rule
13e-3 transaction that treats any subject security holders differently
from other subject security holders.
(d) Appraisal rights. State whether or not dissenting security
holders are entitled to any appraisal rights. If so, summarize the
appraisal rights. If there are no appraisal rights available under
state law for security holders who object to the transaction, briefly
outline any other rights that may be available to security holders
under the law.
(e) Provisions for unaffiliated security holders. Describe any
provision made
[[Page 61445]]
by the filing person in connection with the transaction to grant
unaffiliated security holders access to the corporate files of the
filing person or to obtain counsel or appraisal services at the expense
of the filing person. If none, so state.
(f) Eligibility for listing or trading. If the transaction involves
the offer of securities of the filing person in exchange for equity
securities held by unaffiliated security holders of the subject
company, describe whether or not the filing person will take steps to
assure that the securities offered are or will be eligible for trading
on an automated quotations system operated by a national securities
association.
Sec. 229.1005 (Item 1005) Past contacts, transactions, negotiations
and agreements.
(a) Transactions. Briefly state the nature and approximate dollar
amount of any transaction, other than those described in paragraphs (b)
or (c) of this section, that occurred during the past two years,
between the filing person (including any person specified in
Instruction C of the schedule) and;
(1) The subject company or any of its affiliates that are not
natural persons if the aggregate value of the transactions is more than
one percent of the subject company's consolidated revenues for:
(i) The fiscal year when the transaction occurred; or
(ii) The past portion of the current fiscal year, if the
transaction occurred in the current year; and
Instruction to Item 1005(a)(1):
The information required by this Item may be based on
information in the subject company's most recent filing with the
Commission, unless the filing person has reason to believe the
information is not accurate.
(2) Any executive officer, director or affiliate of the subject
company that is a natural person if the aggregate value of the
transaction or series of similar transactions with that person exceeds
$60,000.
(b) Significant corporate events. Describe any negotiations,
transactions or material contacts during the past two years between the
filing person (including subsidiaries of the filing person and any
person specified in Instruction C of the schedule) and the subject
company or its affiliates concerning any:
(1) Merger;
(2) Consolidation;
(3) Acquisition;
(4) Tender offer for or other acquisition of any class of the
subject company's securities;
(5) Election of the subject company's directors; or
(6) Sale or other transfer of a material amount of assets of the
subject company.
(c) Negotiations or contacts. Describe any negotiations or material
contacts concerning the matters referred to in paragraph (b) of this
section during the past two years between:
(1) Any affiliates of the subject company; or
(2) The subject company or any of its affiliates and any person not
affiliated with the subject company who would have a direct interest in
such matters.
Instruction to paragraphs (b) and (c) of Item 1005
Identify the person who initiated the contacts or negotiations.
(d) Conflicts of interest. If material, describe any agreement,
arrangement or understanding and any actual or potential conflict of
interest between the filing person or its affiliates and:
(1) The subject company, its executive officers, directors or
affiliates; or
(2) The offeror, its executive officers, directors or affiliates.
Instruction to Item 1005(d)
If the filing person is the subject company, no disclosure
called for by this paragraph is required in the document
disseminated to security holders, so long as substantially the same
information was filed with the Commission previously and disclosed
in a proxy statement, report or other communication sent to security
holders by the subject company in the past year. The document
disseminated to security holders, however, must refer specifically
to the discussion in the proxy statement, report or other
communication that was sent to security holders previously. The
information also must be filed as an exhibit to the schedule.
(e) Agreements involving the subject company's securities. Describe
any agreement, arrangement, or understanding, whether or not legally
enforceable, between the filing person (including any person specified
in Instruction C of the schedule) and any other person with respect to
any securities of the subject company. Name all persons that are a
party to the agreements, arrangements, or understandings and describe
all material provisions.
Instructions to Item 1005(e)
1. The information required by this Item includes: the transfer
or voting of securities, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against
loss, or the giving or withholding of proxies, consents or
authorizations.
2. Include information for any securities that are pledged or
otherwise subject to a contingency, the occurrence of which would
give another person the power to direct the voting or disposition of
the subject securities. No disclosure, however, is required about
standard default and similar provisions contained in loan
agreements.
Sec. 229.1006 (Item 1006) Purposes of the transaction and plans or
proposals.
(a) Purposes. State the purposes of the transaction.
(b) Use of securities acquired. Indicate whether the securities
acquired in the transaction will be retained, retired, held in
treasury, or otherwise disposed of.
(c) Plans. Describe any plans, proposals or negotiations that
relate to or would result in:
(1) Any extraordinary transaction, such as a merger, reorganization
or liquidation, involving the subject company or any of its
subsidiaries;
(2) Any purchase, sale or transfer of a material amount of assets
of the subject company or any of its subsidiaries;
(3) Any material change in the present dividend rate or policy, or
indebtedness or capitalization of the subject company;
(4) Any change in the present board of directors or management of
the subject company, including, but not limited to, any plans or
proposals to change the number or the term of directors or to fill any
existing vacancies on the board or to change any material term of the
employment contract of any executive officer;
(5) Any other material change in the subject company's corporate
structure or business, including, if the subject company is a
registered closed-end investment company, any plans or proposals to
make any changes in its investment policy for which a vote would be
required by Section 13 of the Investment Company Act of 1940 (15 U.S.C.
80a-13);
(6) Any class of equity securities of the subject company to be
delisted from a national securities exchange or cease to be authorized
to be quoted in an automated quotations system operated by a national
securities association;
(7) Any class of equity securities of the subject company becoming
eligible for termination of registration under section 12(g)(4) of the
Act (15 U.S.C. 78l);
(8) The suspension of the subject company's obligation to file
reports under Section 15(d) of the Act (15 U.S.C. 78o);
(9) The acquisition by any person of additional securities of the
subject company, or the disposition of securities of the subject
company; or (10) Any changes in the subject company's charter, bylaws
or other governing instruments or other actions that could impede the
acquisition of control of the subject company.
(d) Subject company negotiations. If the filing person is the
subject company:
[[Page 61446]]
(1) State whether or not that person is undertaking or engaged in
any negotiations in response to the tender offer that relate to:
(i) A tender offer or other acquisition of the subject company's
securities by the filing person, any of its subsidiaries, or any other
person; or
(ii) Any of the matters referred to in paragraphs (c)(1) through
(c)(3) of this section; and
(2) Describe any transaction, board resolution, agreement in
principle, or signed contract that is entered into in response to the
tender offer that relates to one or more of the matters referred to in
paragraph (d)(1) of this section.
Instruction to Item 1006(d)(1)
If an agreement in principle has not been reached at the time of
filing, no disclosure under paragraph (d)(1) of this section is
required of the possible terms of or the parties to the transaction
if in the opinion of the board of directors of the subject company
disclosure would jeopardize continuation of the negotiations. In
that case, disclosure indicating that negotiations are being
undertaken or are underway and are in the preliminary stages is
sufficient.
Sec. 229.1007 (Item 1007) Source and amount of funds or other
consideration.
(a) Source of funds. State the specific sources and total amount of
funds or other consideration to be used in the transaction. If the
transaction involves a tender offer, disclose the amount of funds or
other consideration required to purchase the maximum amount of
securities sought in the offer.
(b) Conditions. State any material conditions to the financing
discussed in response to paragraph (a) of this section. Disclose any
alternative financing arrangements or alternative financing plans in
the event the primary financing plans fall through. If none, so state.
(c) Expenses. Furnish a reasonably itemized statement of all
expenses incurred or estimated to be incurred in connection with the
transaction including, but not limited to, filing, legal, accounting
and appraisal fees, solicitation expenses and printing costs and state
whether or not the subject company has paid or will be responsible for
paying any or all expenses.
(d) Borrowed funds. If all or any part of the funds or other
consideration required is, or is expected, to be borrowed, directly or
indirectly, for the purpose of the transaction:
(1) Provide a summary of each loan agreement or arrangement
containing the identity of the parties, the term, the collateral, the
stated and effective interest rates, and any other material terms or
conditions of the loan; and
(2) Briefly describe any plans or arrangements to finance or repay
the loan, or, if no plans or arrangements have been made, so state.
Instruction to Item 1007(d):
If the transaction is a third-party tender offer and the source
of all or any part of the funds used in the transaction is to come
from a loan made in the ordinary course of business by a bank as
defined by section 3(a)(6) of the Act (15 U.S.C. 78c), the name of
the bank will not be made available to the public if the filing
person so requests in writing and files the request, naming the
bank, with the Secretary of the Commission.
Sec. 229.1008 (Item 1008) Interest in securities of the subject
company.
(a) Securities ownership. State the aggregate number and percentage
of subject securities that are beneficially owned by each person named
in response to Item 1003 of Regulation M-A (Sec. 229.1003) and by each
associate and majority-owned subsidiary of those persons. Give the name
and address of any associate or subsidiary.
Instructions to Item 1008(a)
1. For purposes of this section, beneficial ownership is
determined in accordance with Rule 13d-3 (Sec. 240.13d-3 of this
chapter) under the Exchange Act. Identify the shares that the person
has a right to acquire.
2. The information required by this section may be based on the
number of outstanding securities disclosed in the subject company's
most recently available filing with the Commission, unless the
filing person has more current information.
3. The information required by this section with respect to
officers, directors and associates of the subject company must be
given to the extent known after making reasonable inquiry.
(b) Securities transactions. Describe any transaction in the
subject securities during the past 60 days. The description of
transactions required must include, but not necessarily be limited to:
(1) The identity of the persons specified in the Instruction to
this section who effected the transaction;
(2) The date of the transaction;
(3) The amount of securities involved;
(4) The price per share; and
(5) Where and how the transaction was effected.
Instructions to Item 1008(b)
1. Provide the required transaction information for the
following persons:
(a) The filing person (for all schedules);
(b) Any person named in Instruction C of the schedule and any
associate or majority-owned subsidiary of the issuer or filing
person (for all schedules except Schedule 14D-9 (Sec. 240.14d-101 of
this chapter));
(c) Any executive officer, director, affiliate or subsidiary of
the filing person (for Schedule 14D-9 (Sec. 240.14d-101 of this
chapter);
(d) The issuer and any executive officer or director of any
subsidiary of the issuer or filing person (for an issuer tender
offer on Schedule TO (Sec. 240.14d-100 of this chapter)); and
(e) The issuer and any pension, profit-sharing or similar plan
of the issuer or affiliate filing the schedule (for a going-private
transaction on Schedule 13E-3 (Sec. 240.13e-100 of this chapter)).
2. Provide the information required by this Item if it is
available to the filing person at the time the statement is
initially filed with the Commission. If the information is not
initially available, it must be obtained and filed with the
Commission promptly, but in no event later than three business days
after the date of the initial filing, and if material, disclosed in
a manner reasonably designed to inform security holders. The
procedure specified by this instruction is provided to maintain the
confidentiality of information in order to avoid possible misuse of
inside information.
Sec. 229.1009 (Item 1009) Persons/assets, retained, employed,
compensated or used.
(a) Solicitations or recommendations. Identify all persons and
classes of persons that are directly or indirectly employed, retained,
or to be compensated to make solicitations or recommendations in
connection with the transaction. Provide a summary of all material
terms of employment, retainer or other arrangement for compensation.
(b) Employees and corporate assets. Identify any officer, class of
employees or corporate assets of the subject company that has been or
will be employed or used by the filing person in connection with the
transaction. Describe the purpose for their employment or use.
Instruction to Item 1009(b):
Provide all information required by this Item except for the
information required by paragraph (a) of this section and Item 1007
of Regulation M-A (Sec. 229.1007).
Sec. 229.1010 (Item 1010) Financial statements.
(a) Financial information. Furnish the following financial
information:
(1) Audited financial statements for the two fiscal years required
to be filed with the company's most recent annual report under sections
13 and 15(d) of the Exchange Act (15 U.S.C. 78m; 15 U.S.C. 78o);
(2) Unaudited balance sheets, comparative year-to-date income
statements and related earnings per share data, statements of cash
flows, and comprehensive income required to be included in the
company's most recent quarterly report filed under the Exchange Act;
(3) Ratio of earnings to fixed charges, computed in a manner
consistent with Item 503(d) of Regulation S-K (Sec. 229.503(d)), for
the two most recent fiscal years and the interim periods provided under
paragraph (a)(2) of this section; and
[[Page 61447]]
(4) Book value per share as of the date of the most recent balance
sheet presented.
(b) Pro forma information. If material, furnish pro forma
information disclosing the effect of the transaction on:
(1) The company's balance sheet as of the date of the most recent
balance sheet presented under paragraph (a) of this section;
(2) The company's statement of income, earnings per share, and
ratio of earnings to fixed charges for the most recent fiscal year and
the latest interim period provided under paragraph (a)(2) of this
section; and
(3) The company's book value per share as of the date of the most
recent balance sheet presented under paragraph (a) of this section.
(c) Summary information. Furnish a fair and adequate summary of the
information specified in paragraphs (a) and (b) of this section for the
same periods specified. A fair and adequate summary includes:
(1) The summarized financial information specified in Sec. 210.1-
02(bb)(1) of this chapter;
(2) Income per common share from continuing operations (basic and
diluted, if applicable);
(3) Net income per common share (basic and diluted, if applicable);
(4) Ratio of earnings to fixed charges, computed in a manner
consistent with Item 503(d) of Regulation S-K (Sec. 229.503(d));
(5) Book value per share as of the date of the most recent balance
sheet; and
(6) If material, pro forma data for the summarized financial
information specified in paragraphs (c)(1) through (c)(5) of this
section disclosing the effect of the transaction.
Sec. 229.1011 (Item 1011) Additional information.
(a) Agreements, regulatory requirements and legal proceedings. If
material to a security holder's decision whether to sell, tender or
hold the securities sought in the tender offer, furnish the following
information:
(1) Any present or proposed material agreement, arrangement,
understanding or relationship between the offeror or any of its
executive officers, directors, controlling persons or subsidiaries and
the subject company or any of its executive officers, directors,
controlling persons or subsidiaries (other than any agreement,
arrangement or understanding disclosed under any other sections of
Regulation M-A (Secs. 229.1000 through 229.1016));
Instruction to paragraph (a)(1):
In an issuer tender offer disclose any material agreement,
arrangement, understanding or relationship between the offeror and
any of its executive officers, directors, controlling persons or
subsidiaries.
(2) To the extent known by the offeror after reasonable
investigation, the applicable regulatory requirements which must be
complied with or approvals which must be obtained in connection with
the tender offer;
(3) The applicability of any anti-trust laws;
(4) The applicability of margin requirements under section 7 of the
Act (15 U.S.C. 78g) and the applicable regulations; and
(5) Any material pending legal proceedings relating to the tender
offer, including the name and location of the court or agency in which
the proceedings are pending, the date instituted, the principal
parties, and a brief summary of the proceedings and the relief sought.
Instruction to Item 1011(a)(5):
A copy of any document relating to a major development (such as
pleadings, an answer, complaint, temporary restraining order,
injunction, opinion, judgment or order) in a material pending legal
proceeding must be furnished promptly to the Commission staff on a
supplemental basis.
(b) Other material information. Furnish such additional material
information, if any, as may be necessary to make the required
statements, in light of the circumstances under which they are made,
not materially misleading.
Sec. 229.1012 (Item 1012) The solicitation or recommendation.
(a) Solicitation or recommendation. State the nature of the
solicitation or the recommendation. If this statement relates to a
recommendation, state whether the filing person is advising holders of
the subject securities to accept or reject the tender offer or to take
other action with respect to the tender offer and, if so, describe the
other action recommended. If the filing person is the subject company
and is not making a recommendation, state whether the subject company
is expressing no opinion and is remaining neutral toward the tender
offer or is unable to take a position with respect to the tender offer.
(b) Reasons. State the reasons for the position (including the
inability to take a position) stated in paragraph (a) of this section.
Conclusory statements such as ``The tender offer is in the best
interests of shareholders'' are not considered sufficient disclosure.
(c) Intent to tender. To the extent known by the filing person
after making reasonable inquiry, state whether the filing person or any
executive officer, director, affiliate or subsidiary of the filing
person currently intends to tender, sell or hold the subject securities
that are held of record or beneficially owned by that person.
(d) Intent to tender or vote in a going-private transaction. To the
extent known by the filing person after making reasonable inquiry,
state whether or not any executive officer, director or affiliate of
the issuer (or any person specified in Instruction C to the schedule)
currently intends to tender or sell subject securities owned or held by
that person and/or how each person currently intends to vote subject
securities, including any securities the person has proxy authority
for. State the reasons for the intended action.
Instruction to Item 1012(d):
Provide the information required by this section if it is
available to the filing person at the time the statement is
initially filed with the Commission. If the information is not
available, it must be filed with the Commission promptly, but in no
event later than three business days after the date of the initial
filing, and if material, disclosed in a manner reasonably designed
to inform security holders.
(e) Recommendations of others. To the extent known by the filing
person after making reasonable inquiry, state whether or not any person
specified in paragraph (d) of this section has made a recommendation
either in support of or opposed to the transaction and the reasons for
the recommendation.
Sec. 229.1013 (Item 1013) Purposes, alternatives, reasons and effects
in a going-private transaction.
(a) Purposes. State the purposes for the Rule 13e-3 transaction.
(b) Alternatives. If the subject company or affiliate considered
alternative means to accomplish the stated purposes, briefly describe
the alternatives and state the reasons for their rejection.
(c) Reasons. State the reasons for the structure of the Rule 13e-3
transaction and for undertaking the transaction at this time.
(d) Effects. Describe the effects of the Rule 13e-3 transaction on
the subject company, its affiliates and unaffiliated security holders,
including the federal tax consequences of the transaction.
Instructions to Item 1013:
1. Conclusory statements will not be considered sufficient
disclosure in response to this section.
2. The description required by paragraph (d) of this section
must include a reasonably detailed discussion of both the benefits
and detriments of the Rule 13e-3 transaction to the subject company,
its affiliates and unaffiliated security holders. The benefits and
detriments of the Rule 13e-3 transaction must be quantified to the
extent practicable.
[[Page 61448]]
3. If this statement is filed by an affiliate of the subject
company, the description required by paragraph (d) of this section
must include, but not be limited to, the effect of the Rule 13e-3
transaction on the affiliate's interest in the net book value and
net earnings of the subject company in terms of both dollar amounts
and percentages.
Sec. 229.1014 (Item 1014) Fairness of the going-private transaction.
(a) Fairness. State whether the subject company or affiliate filing
the statement reasonably believes that the Rule 13e-3 transaction is
fair or unfair to unaffiliated security holders. If any director
dissented to or abstained from voting on the Rule 13e-3 transaction,
identify the director, and indicate, if known, after making reasonable
inquiry, the reasons for the dissent or abstention.
(b) Factors considered in determining fairness. Discuss in
reasonable detail the material factors upon which the belief stated in
paragraph (a) of this section is based and, to the extent practicable,
the weight assigned to each factor. The discussion must include an
analysis of the extent, if any, to which the filing person's beliefs
are based on the factors described in Instruction 2 of this section,
paragraphs (c), (d) and (e) of this section and Item 1015 of Regulation
M-A (Sec. 229.1015).
(c) Approval of security holders. State whether or not the
transaction is structured so that approval of at least a majority of
unaffiliated security holders is required.
(d) Unaffiliated representative. State whether or not a majority of
directors who are not employees of the subject company has retained an
unaffiliated representative to act solely on behalf of unaffiliated
security holders for purposes of negotiating the terms of the Rule 13e-
3 transaction and/or preparing a report concerning the fairness of the
transaction.
(e) Approval of directors. State whether or not the Rule 13e-3
transaction was approved by a majority of the directors of the subject
company who are not employees of the subject company.
(f) Other offers. If any offer of the type described in paragraph
(viii) of Instruction 2 to this section has been received, describe the
offer and state the reasons for its rejection.
Instructions to Item 1014:
1. A statement that the issuer or affiliate has no reasonable
belief as to the fairness of the Rule 13e-3 transaction to
unaffiliated security holders will not be considered sufficient
disclosure in response to paragraph (a) of this section.
2. The factors that are important in determining the fairness of
a transaction to unaffiliated security holders and the weight, if
any, that should be given to them in a particular context will vary.
Normally such factors will include, among others, those referred to
in paragraphs (c), (d) and (e) of this section and whether the
consideration offered to unaffiliated security holders constitutes
fair value in relation to:
(i) Current market prices;
(ii) Historical market prices;
(iii) Net book value;
(iv) Going concern value;
(v) Liquidation value;
(vi) Purchase prices paid in previous purchases disclosed in
response to Item 1002(f) of Regulation M-A (Sec. 229.1002(f));
(vii) Any report, opinion, or appraisal described in Item 1015
of Regulation M-A (Sec. 229.1015); and
(viii) Firm offers of which the subject company or affiliate is
aware made by any unaffiliated person, other than the filing
persons, during the past two years for:
(A) The merger or consolidation of the subject company with or
into another company, or vice versa;
(B) The sale or other transfer of all or any substantial part of
the assets of the subject company; or
(C) A purchase of the subject company's securities that would
enable the holder to exercise control of the subject company.
3. Conclusory statements, such as ``The Rule 13e-3 transaction
is fair to unaffiliated security holders in relation to net book
value, going concern value and future prospects of the issuer'' will
not be considered sufficient disclosure in response to paragraph (b)
of this section.
Sec. 229.1015 (Item 1015) Reports, opinions, appraisals and
negotiations.
(a) Report, opinion or appraisal. State whether or not the subject
company or affiliate has received any report, opinion (other than an
opinion of counsel) or appraisal from an outside party that is
materially related to the Rule 13e-3 transaction, including, but not
limited to: Any report, opinion or appraisal relating to the
consideration or the fairness of the consideration to be offered to
security holders or the fairness of the transaction to the issuer or
affiliate or to security holders who are not affiliates.
(b) Preparer and summary of the report, opinion or appraisal. For
each report, opinion or appraisal described in response to paragraph
(a) of this section or any negotiation or report described in response
to Item 1014(d) of Regulation M-A (Sec. 229.1014) or Item 14(b)(6) of
Schedule 14A (Sec. 240.14a-101 of this chapter) concerning the terms of
the transaction:
(1) Identify the outside party and/or unaffiliated representative;
(2) Briefly describe the qualifications of the outside party and/or
unaffiliated representative;
(3) Describe the method of selection of the outside party and/or
unaffiliated representative;
(4) Describe any material relationship that existed during the past
two years or is mutually understood to be contemplated and any
compensation received or to be received as a result of the relationship
between:
(i) The outside party, its affiliates, and/or unaffiliated
representative; and
(ii) The subject company or its affiliates;
(5) If the report, opinion or appraisal relates to the fairness of
the consideration, state whether the subject company or affiliate
determined the amount of consideration to be paid or whether the
outside party recommended the amount of consideration to be paid; and
(6) Furnish a summary concerning the negotiation, report, opinion
or appraisal. The summary must include, but need not be limited to, the
procedures followed; the findings and recommendations; the bases for
and methods of arriving at such findings and recommendations;
instructions received from the subject company or affiliate; and any
limitation imposed by the subject company or affiliate on the scope of
the investigation.
Instruction to Item 1015(b):
The information called for by paragraphs (b)(1), (2) and (3) of
this section must be given with respect to the firm that provides
the report, opinion or appraisal rather than the employees of the
firm that prepared the report.
(c) Availability of documents. Furnish a statement to the effect
that the report, opinion or appraisal will be made available for
inspection and copying at the principal executive offices of the
subject company or affiliate during its regular business hours by any
interested equity security holder of the subject company or
representative who has been so designated in writing. This statement
also may provide that a copy of the report, opinion or appraisal will
be transmitted by the subject company or affiliate to any interested
equity security holder of the subject company or representative who has
been so designated in writing upon written request and at the expense
of the requesting security holder.
Sec. 229.1016 (Item 1016) Exhibits.
File as an exhibit to the schedule:
(a) Any disclosure materials furnished to security holders by or on
behalf of the filing person, including:
(1) Tender offer materials (including transmittal letter);
(2) Solicitation or recommendation (including those referred to in
Item 1012 of Regulation M-A (Sec. 229.1012));
(3) Going-private disclosure document;
[[Page 61449]]
(4) Prospectus used in connection with an exchange offer where
securities are registered under the Securities Act of 1933; and
(5) Any other disclosure materials;
(b) Any loan agreement referred to in response to Item 1007(d) of
Regulation M-A (Sec. 229.1007(d));
Instruction to Item 1016(b):
If the filing relates to a third-party tender offer and a
request is made under Item 1007(d) of Regulation M-A
(Sec. 229.1007(d)), the identity of the bank providing financing may
be omitted from the loan agreement filed as an exhibit.
(c) Any report, opinion or appraisal referred to in response to
Item 1014(d) or Item 1015 of Regulation M-A (Sec. 229.1014(d) or
Sec. 229.1015);
(d) Any document setting forth the terms of any agreement,
arrangement, understanding or relationship referred to in response to
Item 1005(e) or Item 1011(a)(1) of Regulation M-A (Sec. 229.1005(e) or
Sec. 229.1011(a)(1));
(e) Any agreement, arrangement or understanding referred to in
response to Sec. 229.1005(d), or the pertinent portions of any proxy
statement, report or other communication containing the disclosure
required by Item 1005(d) of Regulation M-A (Sec. 229.1005(d));
(f) A detailed statement describing security holders' appraisal
rights and the procedures for exercising those appraisal rights
referred to in response to Item 1004(d) of Regulation M-A
(Sec. 229.1004(d));
(g) Any written instruction, form or other material that is
furnished to persons making an oral solicitation or recommendation by
or on behalf of the filing person for their use directly or indirectly
in connection with the transaction; and
(h) Any written opinion prepared by legal counsel at the filing
person's request and communicated to the filing person pertaining to
the tax consequences of the transaction.
Exhibit Table to Item 1016 of Regulation M-A [13E-3 to 14D-9]
------------------------------------------------------------------------
Disclosure Material........... X X X
Loan Agreement................ X X ............
Report, Opinion or Appraisal.. X ............ ............
Contracts, Arrangements or X X X
Understandings...............
Statement re: Appraisal Rights X ............ ............
Oral Solicitation Materials... X X X
Tax Opinion ............ X ............
------------------------------------------------------------------------
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
6. The authority citation for part 230 is revised to read in part
as follows:
Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77r, 77s, 77sss,
77z-3, 78c, 78d, 781, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-
24, 80a-28, 80a-29, 80a-30, and 80a-37, unless otherwise noted.
* * * * *
7. By revising Sec. 230.135 to read as follows:
Sec. 230.135 Notice of proposed registered offerings.
(a) When notice is not an offer. For purposes of section 5 of the
Act (15 U.S.C. 77e) only, an issuer or a selling security holder (and
any person acting on behalf of either of them) that publishes through
any medium a notice of a proposed offering to be registered under the
Act will not be deemed to offer its securities for sale through that
notice if:
(1) Legend. The notice includes a statement to the effect that it
does not constitute an offer of any securities for sale; and
(2) Limited notice content. The notice otherwise includes no more
than the following information:
(i) The name of the issuer;
(ii) The title, amount and basic terms of the securities offered;
(iii) The amount of the offering, if any, to be made by selling
security holders;
(iv) The anticipated timing of the offering;
(v) A brief statement of the manner and the purpose of the
offering, without naming the underwriters;
(vi) Whether the issuer is directing its offering to only a
particular class of purchasers;
(vii) Any statements or legends required by the laws of any state
or foreign country or administrative authority; and
(viii) In the following offerings, the notice may contain
additional information, as follows:
(A) Rights offering. In a rights offering to existing security
holders:
(1) The class of security holders eligible to subscribe;
(2) The subscription ratio and expected subscription price;
(3) The proposed record date;
(4) The anticipated issuance date of the rights; and
(5) The subscription period or expiration date of the rights
offering.
(B) Offering to employees. In an offering to employees of the
issuer or an affiliated company:
(1) The name of the employer;
(2) The class of employees being offered the securities;
(3) The offering price; and
(4) The duration of the offering period.
(C) Exchange offer. In an exchange offer:
(1) The basic terms of the exchange offer;
(2) The name of the subject company;
(3) The subject class of securities sought in the exchange offer.
(D) Rule 145(a) offering. In a Sec. 230.145(a) offering:
(1) The name of the person whose assets are to be sold in exchange
for the securities to be offered;
(2) The names of any other parties to the transaction;
(3) A brief description of the business of the parties to the
transaction;
(4) The date, time and place of the meeting of security holders to
vote on or consent to the transaction; and
(5) A brief description of the transaction and the basic terms of
the transaction.
(b) Corrections of misstatements about the offering. A person that
publishes a notice in reliance on this section may issue a notice that
contains no more information than is necessary to correct inaccuracies
published about the proposed offering.
Note to Sec. 230.135: Communications under this section relating
to business combination transactions must be filed as required by
Sec. 230.425(b).
8. By amending Sec. 230.145 by revising paragraph (b) to read as
follows:
[[Page 61450]]
Sec. 230.145 Reclassification of securities, mergers, consolidations
and acquisitions of assets.
* * * * *
(b) Communications before a Registration Statement is filed.
Communications made in connection with or relating to a transaction
described in paragraph (a) of this section that will be registered
under the Act may be made under Sec. 230.135, Sec. 230.165 or
Sec. 230.166.
* * * * *
9. By adding Sec. 230.162 to read as follows:
Sec. 230.162 Submission of tenders in registered exchange offers.
(a) Notwithstanding section 5(a) of the Act (15 U.S.C. 77e(a)),
offerors may solicit tenders of securities in an exchange offer subject
to Sec. 240.13e-4(e) or Sec. 240.14d-4(b) of this chapter before a
registration statement is effective as to the security offered, so long
as no securities are purchased until the registration statement is
effective and the tender offer has expired in accordance with the
tender offer rules.
(b) Notwithstanding section 5(b)(2) of the Act (15 U.S.C.
77e(b)(2)), a prospectus that meets the requirements of section 10(a)
of the Act (15 U.S.C. 77j(a)) need not be delivered to security holders
in an exchange offer subject to Sec. 240.13e-4(e) or Sec. 240.14d-4(b)
of this chapter, so long as a preliminary prospectus, prospectus
supplements and revised prospectuses are delivered to security holders
in accordance with Sec. 240.13e-4(e)(2) or Sec. 240.14d-4(b) of this
chapter, as applicable.
10. By adding Sec. 230.165 to read as follows:
Sec. 230.165 Offers made in connection with a business combination
transaction.
Preliminary Note: This section is available only to
communications relating to business combinations. The exemption does
not apply to communications that may be in technical compliance with
this section, but have the primary purpose or effect of conditioning
the market for another transaction, such as a capital-raising or
resale transaction.
(a) Communications before a registration statement is filed.
Notwithstanding section 5(c) of the Act (15 U.S.C. 77e(c)), the offeror
of securities in a business combination transaction to be registered
under the Act may make an offer to sell or solicit an offer to buy
those securities from and including the first public announcement until
the filing of a registration statement related to the transaction, so
long as any written communication (other than non-public communications
among participants) made in connection with or relating to the
transaction (i.e., prospectus) is filed in accordance with Sec. 230.425
and the conditions in paragraph (c) of this section are satisfied.
(b) Communications after a registration statement is filed.
Notwithstanding section 5(b)(1) of the Act (15 U.S.C. 77e(b)(1)), any
written communication (other than non-public communications among
participants) made in connection with or relating to a business
combination transaction (i.e., prospectus) after the filing of a
registration statement related to the transaction need not satisfy the
requirements of section 10 (15 U.S.C. 77j) of the Act, so long as the
prospectus is filed in accordance with Sec. 230.424 or Sec. 230.425 and
the conditions in paragraph (c) of this section are satisfied.
(c) Conditions. To rely on paragraphs (a) and (b) of this section:
(1) Each prospectus must contain a prominent legend that urges
investors to read the relevant documents filed or to be filed with the
Commission because they contain important information. The legend also
must explain to investors that they can get the documents for free at
the Commission's web site and describe which documents are available
free from the offeror; and
(2) In an exchange offer, the offer must be made in accordance with
the applicable tender offer rules (Secs. 240.14d-1 through 240.14e-8 of
this chapter); and, in a transaction involving the vote of security
holders, the offer must be made in accordance with the applicable proxy
or information statement rules (Secs. 240.14a-1 through 240.14a-101 and
Secs. 240.14c-1 through 240.14c-101 of this chapter).
(d) Applicability. This section is applicable not only to the
offeror of securities in a business combination transaction, but also
to any other participant that may need to rely on and complies with
this section in communicating about the transaction.
(e) Failure to file or delay in filing. An immaterial or
unintentional failure to file or delay in filing a prospectus described
in this section will not result in a violation of section 5(b)(1) or
(c) of the Act (15 U.S.C. 77e(b)(1) and (c)), so long as:
(1) A good faith and reasonable effort was made to comply with the
filing requirement; and
(2) The prospectus is filed as soon as practicable after discovery
of the failure to file.
(f) Definitions.
(1) A business combination transaction means any transaction
specified in Sec. 230.145(a) or exchange offer;
(2) A participant is any person or entity that is a party to the
business combination transaction and any persons authorized to act on
their behalf; and
(3) Public announcement is any oral or written communication by a
participant that is reasonably designed to, or has the effect of,
informing the public or security holders in general about the business
combination transaction.
11. By adding Sec. 230.166 to read as follows:
Sec. 230.166 Exemption from section 5(c) for certain communications in
connection with business combination transactions.
Preliminary Note: This section is available only to
communications relating to business combinations. The exemption does
not apply to communications that may be in technical compliance with
this section, but have the primary purpose or effect of conditioning
the market for another transaction, such as a capital-raising or
resale transaction.
(a) Communications. In a registered offering involving a business
combination transaction, any communication made in connection with or
relating to the transaction before the first public announcement of the
offering will not constitute an offer to sell or a solicitation of an
offer to buy the securities offered for purposes of section 5(c) of the
Act (15 U.S.C. 77e(c)), so long as the participants take all reasonable
steps within their control to prevent further distribution or
publication of the communication until either the first public
announcement is made or the registration statement related to the
transaction is filed.
(b) Definitions. The terms business combination transaction,
participant and public announcement have the same meaning as set forth
in Sec. 230.165(f).
12. By adding Sec. 230.425 to read as follows:
Sec. 230.425 Filing of certain prospectuses and communications under
Sec. 230.135 in connection with business combination transactions.
(a) All written communications made in reliance on Sec. 230.165 are
prospectuses that must be filed with the Commission under this section
on the date of first use.
(b) All written communications that contain no more information
than that specified in Sec. 230.135 must be filed with the Commission
on or before the date of first use except as provided in paragraph
(d)(1) of this section. A communication limited to the information
specified in Sec. 230.135 will
[[Page 61451]]
not be deemed an offer in accordance with Sec. 230.135 even though it
is filed under this section.
(c) Each prospectus or Sec. 230.135 communication filed under this
section must identify the filer, the company that is the subject of the
offering and the Commission file number for the related registration
statement or, if that file number is unknown, the subject company's
Exchange Act or Investment Company Act file number, in the upper right
corner of the cover page.
(d) Notwithstanding paragraph (a) of this section, the following
need not be filed under this section:
(1) Any written communication that is limited to the information
specified in Sec. 230.135 and does not contain new or different
information from that which was previously publicly disclosed and filed
under this section.
(2) Any research report used in reliance on Sec. 230.137,
Sec. 230.138 and Sec. 230.139;
(3) Any confirmation described in Sec. 240.10b-10 of this chapter;
and
(4) Any prospectus filed under Sec. 230.424.
Notes to Sec. 230.425: 1. File five copies of the prospectus or
Sec. 230.135 communication if paper filing is permitted.
2. No filing is required under Sec. 240.13e-4(c), Sec. 240.14a-
12(b), Sec. 240.14d-2(b), or Sec. 240.14d-9(a), if the communication
is filed under this section. Communications filed under this section
also are deemed filed under the other applicable sections.
13. By revising Sec. 230.432 to read as follows:
Sec. 230.432 Additional information required to be included in
prospectuses relating to tender offers.
Notwithstanding the provisions of any form for the registration of
securities under the Act, any prospectus relating to securities to be
offered in connection with a tender offer for, or a request or
invitation for tenders of, securities subject to either Sec. 240.13e-4
or section 14(d) of the Securities Exchange Act of 1934 (15 U.S.C.
78n(d)) must include the information required by Sec. 240.13e-4(d)(1)
or Sec. 240.14d-6(d)(1) of this chapter, as applicable, in all tender
offers, requests or invitations that are published, sent or given to
security holders.
PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR
ELECTRONIC FILINGS
14. The authority citation for Part 232 continues to read as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77sss(a),
78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79t(a), 80a-8, 80a-
29, 80a-30 and 80a-37.
Sec. 232.13 [Amended]
15. By amending Sec. 232.13 in the first sentence of paragraph (d)
by removing the phrase ``may be `mailed for filing with the Commission'
at the same time'' and adding in its place ``must be filed on the same
day'' and by removing the phrase ``on a business day'' and adding in
its place ``during the official business hours''.
PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933
16. The authority citation for part 239 continues to read in part
as follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77sss, 78c,
78l, 78m, 78n, 78o(d), 78u-5, 78w(a), 78ll(d), 79e, 79f, 79g, 79j,
79l, 79m, 79n, 79q, 79t, 80a-8, 80a-24, 80a-29, 80a-30 and 80a-37,
unless otherwise noted.
Sec. 239.25 (Form S-4 [Amended]
* * * * *
17. By amending Form S-4 (referenced in Sec. 239.25) by revising
paragraph (b)(7) of Item 17 to read as follows:
[Note: Form S-4 does not and this amendment will not appear in
the Code of Federal Regulations.]
Form S-4
* * * * *
Item 17. Information With Respect to Companies Other Than S-3 or S-2
Companies.
* * * * *
(b) * * **
(7) Financial statements that would be required in an annual
report sent to security holders under Rules 14a-3(b)(1) and (b)(2)
(Sec. 240.14b-3 of this chapter), if an annual report was required.
If the registrant's security holders are not voting, the transaction
is not a roll-up transaction (as described by Item 901 of Regulation
S-K (Sec. 229.901 of this chapter)), and:
(i) The company being acquired is significant to the registrant
in excess of the 20% level as determined under Sec. 210.3-05(b)(2),
provide financial statements of the company being acquired for the
latest fiscal year in conformity with GAAP. In addition, if the
company being acquired has provided its security holders with
financial statements prepared in conformity with GAAP for either or
both of the two fiscal years before the latest fiscal year, provide
the financial statements for those years; or
(ii) The company being acquired is significant to the registrant
at or below the 20% level, no financial information (including pro
forma and comparative per share information) for the company being
acquired need be provided.
Instructions:
1. The financial statements required by this paragraph for the
latest fiscal year need be audited only to the extent practicable.
The financial statements for the fiscal years before the latest
fiscal year need not be audited if they were not previously audited.
2. If the financial statements required by this paragraph are
prepared on the basis of a comprehensive body of accounting
principles other than U.S. GAAP, provide a reconciliation to U.S.
GAAP in accordance with Item 17 of Form 20-F (Sec. 249.220f of this
chapter) unless a reconciliation is unavailable or not obtainable
without unreasonable cost or expense. At a minimum, provide a
narrative description of all material variations in accounting
principles, practices and methods used in preparing the non-U.S.
GAAP financial statements from those accepted in the U.S. when the
financial statements are prepared on a basis other than U.S. GAAP.
3. If this Form is used to register resales to the public by any
person who is deemed an underwriter within the meaning of Rule
145(c) (Sec. 230.145(c) of this chapter) with respect to the
securities being reoffered, the financial statements must be audited
for the fiscal years required to be presented under paragraph (b)(2)
of Rule 3-05 of Regulation S-X (17 CFR 210.3-05(b)(2)).
4. In determining the significance of an acquisition for
purposes of this paragraph, apply the tests prescribed in Rule 1-
02(w) (Sec. 210.1-02(w) of this chapter).
* * * * *
Sec. 239.34 (Form F-4) [Amended]
18. By amending Form F-4 (referenced in Sec. 239.34) by revising
paragraph (b)(5) of Item 17, removing the instruction at the end of
Item 17 and in its place adding a new instruction to paragraphs (b)(5)
and (b)(6) to read as follows:
[Note: Form F-4 does not and this amendment will not appear in
the Code of Federal Regulations.]
Form F-4
* * * * *
Item 17. Information With Respect to Foreign Companies Other Than F-2
or F-3 Companies.
* * * * *
(b) * * *
(5) Financial statements that would have been required to be
included in an annual report on Form 20-F (Sec. 249.220f of this
chapter) had the company being acquired been required to prepare
such a report. If the registrant's security holders are not voting,
the transaction is not a roll-up transaction (as described by Item
901 of Regulation S-K (Sec. 229.901 of this chapter)), and:
(i) The company being acquired is significant to the registrant
in excess of the 20% level as determined under Sec. 210.3-05(b)(2),
provide financial statements of the company being acquired for the
latest fiscal year in conformity with GAAP. In addition, if the
company being acquired has provided its security holders with
financial statements prepared in conformity with GAAP for either or
both of the two fiscal years before the latest fiscal year, provide
the financial statements for those years; or
(ii) the company being acquired is significant to the registrant
at or below the 20% level, no financial information
[[Page 61452]]
(including pro forma and comparative per share information) for the
company being acquired need be provided.
Instructions:
1. The financial statements required by this paragraph for the
latest fiscal year need be audited only to the extent practicable.
The financial statements for the fiscal years before the latest
fiscal year need not be audited if they were not previously audited.
2. If this Form is used to register resales to the public by any
person who is deemed an underwriter within the meaning of Rule
145(c) (Sec. 230.145(c) of this chapter) with respect to the
securities being reoffered, the financial statements must be audited
for the fiscal years required to be presented under paragraph (b)(2)
of Rule 3-05 of Regulation S-X (17 CFR 210.3-05(b)(2)).
3. In determining the significance of an acquisition for
purposes of this paragraph, apply the tests prescribed in Rule 1-
02(w) (Sec. 210.1-02(w) of this chapter).
* * * * *
Instruction to paragraphs (b)(5) and (b)(6): If the financial
statements required by paragraphs (b)(5) and (b)(6) are prepared on the
basis of a comprehensive body of accounting principles other than U.S.
GAAP, provide a reconciliation to U.S. GAAP in accordance with Item 17
of Form 20-F (Sec. 249.220f of this chapter) unless a reconciliation is
unavailable or not obtainable without unreasonable cost or expense. At
a minimum, provide a narrative description of all material variations
in accounting principles, practices and methods used in preparing the
non-U.S. GAAP financial statements from those accepted in the U.S. when
the financial statements are prepared on a basis other than U.S. GAAP.
* * * * *
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
19. The authority citation for part 240 continues to read in part
as follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee,
77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k,
78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d),
78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and
80b-11, unless otherwise noted.
Sec. 240.10b-13 [Removed and reserved]
20. By removing and reserving Sec. 240.10b-13.
21. By revising Sec. 240.13e-1 to read as follows:
Sec. 240.13e-1 Purchase of securities by the issuer during a third-
party tender offer.
An issuer that has received notice that it is the subject of a
tender offer made under Section 14(d)(1) of the Act (15 U.S.C. 78n),
that has commenced under Sec. 240.14d-2 must not purchase any of its
equity securities during the tender offer unless the issuer first:
(a) Files a statement with the Commission containing the following
information:
(1) The title and number of securities to be purchased;
(2) The names of the persons or classes of persons from whom the
issuer will purchase the securities;
(3) The name of any exchange, inter-dealer quotation system or any
other market on or through which the securities will be purchased;
(4) The purpose of the purchase;
(5) Whether the issuer will retire the securities, hold the
securities in its treasury, or dispose of the securities. If the issuer
intends to dispose of the securities, describe how it intends to do so;
and
(6) The source and amount of funds or other consideration to be
used to make the purchase. If the issuer borrows any funds or other
consideration to make the purchase or enters any agreement for the
purpose of acquiring, holding, or trading the securities, describe the
transaction and agreement and identify the parties; and
(b) Pays the fee required by Sec. 240.0-11 when it files the
initial statement.
(c) This section does not apply to periodic repurchases in
connection with an employee benefit plan or other similar plan of the
issuer so long as the purchases are made in the ordinary course and not
in response to the tender offer.
Instruction to Sec. 240.13e-1:
File eight copies if paper filing is permitted.
22. By amending Sec. 240.13e-3 as follows:
a. By revising paragraphs (d) and (e);
b. Revising the heading of paragraph (f);
c. Removing the reference ``Chapter X'' in paragraph (g)(5) and in
its place add ``Chapter XI'';
d. Removing the reference ``section 174'' in paragraph (g)(5) and
in its place adding ``section 1125(b)''; and
e. Removing the reference ``section 175 of the Act'' in paragraph
(g)(5) and in its place adding ``section 1125(b) of that Act''.
The revisions to Sec. 240.13e-3 read as follows:
Sec. 240.13e-3 Going private transactions by certain issuers or their
affiliates.
* * * * *
(d) Material required to be filed. The issuer or affiliate engaging
in a Rule 13e-3 transaction must file with the Commission:
(1) A Schedule 13E-3 (Sec. 240.13e-100), including all exhibits;
(2) An amendment to Schedule 13E-3 reporting promptly any material
changes in the information set forth in the schedule previously filed;
and
(3) A final amendment to Schedule 13E-3 reporting promptly the
results of the Rule 13e-3 transaction.
(e) Disclosure of information to security holders.
(1) In addition to disclosing the information required by any other
applicable rule or regulation under the federal securities laws, the
issuer or affiliate engaging in a Sec. 240.13e-3 transaction must
disclose to security holders of the class that is the subject of the
transaction, as specified in paragraph (f) of this section, the
following:
(i) The information required by Item 1 of Schedule 13E-3
(Sec. 240.13e-100) (Summary Term Sheet);
(ii) The information required by Items 7, 8 and 9 of Schedule 13E-
3, which must be prominently disclosed in a ``Special Factors'' section
in the front of the disclosure document;
(iii) A prominent legend on the outside front cover page that
indicates that neither the Securities and Exchange Commission nor any
state securities commission has: approved or disapproved of the
transaction; passed upon the merits or fairness of the transaction; or
passed upon the adequacy or accuracy of the disclosure in the document.
The legend also must make it clear that any representation to the
contrary is a criminal offense;
(iv) The information concerning appraisal rights required by
Sec. 229.1016(f) of this chapter; and
(v) The information required by the remaining items of Schedule
13E-3, except for Sec. 229.1016 of this chapter (exhibits), or a fair
and adequate summary of the information.
Instructions to paragraph (e)(1):
1. If the Rule 13e-3 transaction also is subject to Regulation
14A (Secs. 240.14a-1 through 240.14b-2) or 14C (Secs. 240.14c-1
through 240.14c-101), the registration provisions and rules of the
Securities Act of 1933, Regulation 14D or Sec. 240.13e-4, the
information required by paragraph (e)(1) of this section must be
combined with the proxy statement, information statement, prospectus
or tender offer material sent or given to security holders.
2. If the Rule 13e-3 transaction involves a registered
securities offering, the legend required by Sec. 229.501(b)(7) of
this chapter must be combined with the legend required by paragraph
(e)(1)(iii) of this section.
3. The required legend must be written in clear, plain language.
(2) If there is any material change in the information previously
disclosed to
[[Page 61453]]
security holders, the issuer or affiliate must disclose the change
promptly to security holders as specified in paragraph (f)(1)(iii) of
this section.
(f) Dissemination of information to security holders. * * *
* * * * *
Sec. 240.13e-4 [Amended]
23. By amending Sec. 240.13e-4 by removing the reference:
a. ``Schedule 13E-4 [Sec. 240.13E-101]'' that appears in the
introductory text of paragraph (a) and in its place adding ``Schedule
TO (Sec. 240.14d-100)'';
b. ``Schedule 13E-4 [Sec. 240.13e-101]'' that appears in paragraph
(a)(3) and in its place adding ``Schedule TO (Sec. 240.14d-100)'';
c. ``Schedule 13E-4 Issuer Tender Offer Statement (Sec. 240.13e-
101),'' that appears in paragraph (f)(12) and in its place adding
``Schedule TO (Sec. 240.14d-100),'';
d. ``paragraph (a) of Item 9 of that Schedule'' that appears in
paragraph (f)(12) and in its place adding ``Item 1016(a)(1) of
Regulation M-A (Sec. 229.1016(a)(1) of this chapter)''; and
e. ``Schedule 13E-4'' that appears in the introductory text of
paragraph (g) and in its place adding ``Schedule TO (Sec. 240.14d-
100)''.
24. By amending Sec. 240.13e-4 as follows:
a. By revising paragraph (a)(4);
b. Redesignating paragraph (b) as paragraph (j);
c. Adding new paragraph (b);
d. Removing the reference ``paragraphs (c), (d), (e) and (f)'' in
newly redesignated paragraph (j)(2)(i) and in its place adding
``paragraphs (b), (c), (d), (e) and (f)'';
e. Removing the reference ``paragraph (b)(1)'' in newly
redesignated paragraph (j)(2)(ii) and in its place adding ``paragraph
(j)(1)''; and
f. revising the section heading and paragraphs (c), (d) and (e).
The additions and revisions to 240.13e-4 read as follows:
Sec. 240.13e-4 Tender offers by issuers.
(a) Definitions. * * *
(4) The term commencement means 12:01 a.m. on the date that the
issuer or affiliate has first published, sent or given the means to
tender to security holders. For purposes of this section, the means to
tender includes the transmittal form or a statement regarding how the
transmittal form may be obtained.
* * * * *
(b) Filing, disclosure and dissemination. As soon as practicable on
the date of commencement of the issuer tender offer, the issuer or
affiliate making the issuer tender offer must comply with:
(1) The filing requirements of paragraph (c)(2) of this section;
(2) The disclosure requirements of paragraph (d)(1) of this
section; and
(3) The dissemination requirements of paragraph (e) of this
section.
(c) Material required to be filed. The issuer or affiliate making
the issuer tender offer must file with the Commission:
(1) All written communications made by the issuer or affiliate
relating to the issuer tender offer, from and including the first
public announcement, as soon as practicable on the date of the
communication;
(2) A Schedule TO (Sec. 240.14d-100), including all exhibits;
(3) An amendment to Schedule TO (Sec. 240.14d-100) reporting
promptly any material changes in the information set forth in the
schedule previously filed; and
(4) A final amendment to Schedule TO (Sec. 240.14d-100) reporting
promptly the results of the issuer tender offer.
Instructions to Sec. 240.13e-4(c):
1. Pre-commencement communications must be filed under cover of
Schedule TO (Sec. 240.14d-100) and the box on the cover page of the
schedule must be marked.
2. Any communications made in connection with an exchange offer
registered under the Securities Act of 1933 need only be filed under
Sec. 230.425 of this chapter and will be deemed filed under this
section.
3. Each pre-commencement written communication must include a
prominent legend in clear, plain language advising security holders
to read the tender offer statement when it is available because it
contains important information. The legend also must advise
investors that they can get the tender offer statement and other
filed documents for free at the Commission's web site and explain
which documents are free from the issuer.
4. See Secs. 230.135, 230.165 and 230.166 of this chapter for
pre-commencement communications made in connection with registered
exchange offers.
5. ``Public announcement'' is any oral or written communication
by the issuer, affiliate or any person authorized to act on their
behalf that is reasonably designed to, or has the effect of,
informing the public or security holders in general about the issuer
tender offer.
(d) Disclosure of tender offer information to security holders.
(1) The issuer or affiliate making the issuer tender offer must
disclose, in a manner prescribed by paragraph (e)(1) of this section,
the following:
(i) The information required by Item 1 of Schedule TO
(Sec. 240.14d-100) (summary term sheet); and
(ii) The information required by the remaining items of Schedule TO
for issuer tender offers, except for Item 12 (exhibits), or a fair and
adequate summary of the information.
(2) If there are any material changes in the information previously
disclosed to security holders, the issuer or affiliate must disclose
the changes promptly to security holders in a manner specified in
paragraph (e)(3) of this section.
(3) If the issuer or affiliate disseminates the issuer tender offer
by means of summary publication as described in paragraph (e)(1)(iii)
of this section, the summary advertisement must not include a
transmittal letter that would permit security holders to tender
securities sought in the offer and must disclose at least the following
information:
(i) The identity of the issuer or affiliate making the issuer
tender offer;
(ii) The information required by Sec. 229.1004(a)(1) and
Sec. 229.1006(a) of this chapter;
(iii) Instructions on how security holders can obtain promptly a
copy of the statement required by paragraph (d)(1) of this section, at
the issuer or affiliate's expense; and
(iv) A statement that the information contained in the statement
required by paragraph (d)(1) of this section is incorporated by
reference.
(e) Dissemination of tender offers to security holders. An issuer
tender offer will be deemed to be published, sent or given to security
holders if the issuer or affiliate making the issuer tender offer
complies fully with one or more of the methods described in this
section.
(1) For issuer tender offers in which the consideration offered
consists solely of cash and/or securities exempt from registration
under section 3 of the Securities Act of 1933 (15 U.S.C. 77c):
(i) Dissemination of cash issuer tender offers by long-form
publication: By making adequate publication of the information required
by paragraph (d)(1) of this section in a newspaper or newspapers, on
the date of commencement of the issuer tender offer.
(ii) Dissemination of any issuer tender offer by use of stockholder
and other lists:
(A) By mailing or otherwise furnishing promptly a statement
containing the information required by paragraph (d)(1) of this section
to each security holder whose name appears on the most recent
stockholder list of the issuer;
(B) By contacting each participant on the most recent security
position listing of any clearing agency within the possession or access
of the issuer or affiliate making the issuer tender offer, and making
inquiry of each participant
[[Page 61454]]
as to the approximate number of beneficial owners of the securities
sought in the offer that are held by the participant;
(C) By furnishing to each participant a sufficient number of copies
of the statement required by paragraph (d)(1) of this section for
transmittal to the beneficial owners; and
(D) By agreeing to reimburse each participant promptly for its
reasonable expenses incurred in forwarding the statement to beneficial
owners.
(iii) Dissemination of certain cash issuer tender offers by summary
publication:
(A) If the issuer tender offer is not subject to Sec. 240.13e-3, by
making adequate publication of a summary advertisement containing the
information required by paragraph (d)(3) of this section in a newspaper
or newspapers, on the date of commencement of the issuer tender offer;
and
(B) By mailing or otherwise furnishing promptly the statement
required by paragraph (d)(1) of this section and a transmittal letter
to any security holder who requests a copy of the statement or
transmittal letter.
Instruction to paragraph (e)(1): For purposes of paragraphs
(e)(1)(i) and (e)(1)(iii) of this section, adequate publication of
the issuer tender offer may require publication in a newspaper with
a national circulation, a newspaper with metropolitan or regional
circulation, or a combination of the two, depending upon the facts
and circumstances involved.
(2) For tender offers in which the consideration consists solely
or partially of securities registered under the Securities Act of
1933, a registration statement containing all of the required
information, including pricing information, has been filed and a
preliminary prospectus or a prospectus that meets the requirements
of Section 10(a) of the Securities Act (15 U.S.C. (15 U.S.C.
77j(a)), including a letter of transmittal, is delivered to security
holders. However, for going-private transactions (as defined by
Sec. 240.13e-3) and roll-up transactions (as described by Item 901
of Regulation S-K (Sec. 229.901 of this chapter)), a registration
statement registering the securities to be offered must have become
effective and only a prospectus that meets the requirements of
Section 10(a) of the Securities Act may be delivered to security
holders on the date of commencement.
Instructions to paragraph (e)(2)
1. If the prospectus is being delivered by mail, mailing on the
date of commencement is sufficient.
2. A preliminary prospectus used under this section may not omit
information under Sec. 230.430 or Sec. 230.430A of this chapter.
3. If a preliminary prospectus is used under this section and
the issuer must disseminate material changes, the tender offer must
remain open for the period specified in paragraph (e)(3) of this
section.
4. If a preliminary prospectus is used under this section,
tenders may be requested in accordance with Sec. 230.162(a) of this
chapter.
(3) If a material change occurs in the information published, sent
or given to security holders, the issuer or affiliate must disseminate
promptly disclosure of the change in a manner reasonably calculated to
inform security holders of the change. In a registered securities offer
where the issuer or affiliate disseminates the preliminary prospectus
as permitted by paragraph (e)(2) of this section, the offer must remain
open from the date that material changes to the tender offer materials
are disseminated to security holders, as follows:
(i) Five business days for a prospectus supplement containing a
material change other than price or share levels;
(ii) Ten business days for a prospectus supplement containing a
change in price, the amount of securities sought, the dealer's
soliciting fee, or other similarly significant change;
(iii) Ten business days for a prospectus supplement included as
part of a post-effective amendment; and
(iv) Twenty business days for a revised prospectus when the initial
prospectus was materially deficient.
* * * * *
25. By revising Sec. 240.13e-100 to read as follows:
Sec. 240.13e-100 Schedule 13E-3, Transaction statement under section
13(e) of the Securities Exchange Act of 1934 and Rule 13e-3
(Sec. 240.13e-3) thereunder.
Securities and Exchange Commission,
Washington, D.C. 20549
Rule 13e-3 Transaction Statement under Section 13(e) of the
Securities Exchange Act of 1934 (Amendment No. __)
----------------------------------------------------------------------
(Name of the Issuer)
----------------------------------------------------------------------
(Names of Persons Filing Statement)
----------------------------------------------------------------------
(Title of Class of Securities)
----------------------------------------------------------------------
(CUSIP Number of Class of Securities)
----------------------------------------------------------------------
(Name, Address, and Telephone Numbers of Person Authorized to
Receive Notices and Communications on Behalf of the Persons Filing
Statement)
This statement is filed in connection with (check the
appropriate box):
a. [ ] The filing of solicitation materials or an information
statement subject to Regulation 14A (Secs. 240.14a-1 through
240.14b-2), Regulation 14C (Secs. 240.14c-1 through 240.14c-101) or
Rule 13e-3(c) (Sec. 240.13e-3(c)) under the Securities Exchange Act
of 1934 (``the Act'').
b. [ ] The filing of a registration statement under the
Securities Act of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or
information statement referred to in checking box (a) are
preliminary copies: [ ]
Check the following box if the filing is a final amendment
reporting the results of the transaction [ ]
Calculation of Filing Fee
------------------------------------------------------------------------
Transaction valuation * Amount of filing fee
------------------------------------------------------------------------
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Check the box if any part of the fee is offset as provided
by Sec. 240.0-11(a)(2) and identify the filing with which the
offsetting fee was previously paid. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
Amount Previously Paid:------------------------------------------------
Form or Registration No.:----------------------------------------------
Filing Party:----------------------------------------------------------
Date Filed:------------------------------------------------------------
General Instructions:
A. File eight copies of the statement, including all exhibits,
with the Commission if paper filing is permitted.
B. This filing must be accompanied by a fee payable to the
Commission as required by Sec. 240.0-11(b).
C. If the statement is filed by a general or limited
partnership, syndicate or other group, the information called for by
Items 3, 5, 6, 10 and 11 must be given with respect to: (i) Each
partner of the general partnership; (ii) each partner who is, or
functions as, a general partner of the limited partnership; (iii)
each member of the syndicate or group; and (iv) each person
controlling the partner or member. If the statement is filed by a
corporation or if a person referred to in (i), (ii), (iii) or (iv)
of this Instruction is a corporation, the information called for by
the items specified above must be given with respect to: (a) Each
executive officer and director of the corporation; (b) each person
controlling the corporation; and (c) each executive officer and
director of any corporation or other person ultimately in control of
the corporation.
D. Depending on the type of Rule 13e-3 transaction
(Sec. 240.13e-3(a)(3)), this statement must be filed with the
Commission:
1. At the same time as filing preliminary or definitive
soliciting materials or an information statement under Regulations
14A or 14C of the Act;
2. At the same time as filing a registration statement under the
Securities Act of 1933;
3. As soon as practicable on the date a tender offer is first
published, sent or given to security holders; or
4. At least 30 days before any purchase of securities of the
class of securities subject to the Rule 13e-3 transaction, if the
transaction does not involve a solicitation, an information
statement, the registration of securities or a tender offer, as
described in paragraphs 1, 2 or 3 of this Instruction; and
[[Page 61455]]
5. If the Rule 13e-3 transaction involves a series of
transactions, the issuer or affiliate must file this statement at
the time indicated in paragraphs 1 through 4 of this Instruction for
the first transaction and must amend the schedule promptly with
respect to each subsequent transaction.
E. If an item is inapplicable or the answer is in the negative,
so state. The statement published, sent or given to security holders
may omit negative and not applicable responses, except that
responses to Items 7, 8 and 9 of this schedule must be provided in
full. If the schedule includes any information that is not
published, sent or given to security holders, provide that
information or specifically incorporate it by reference under the
appropriate item number and heading in the schedule. Do not recite
the text of disclosure requirements in the schedule or any document
published, sent or given to security holders. Indicate clearly the
coverage of the requirements without referring to the text of the
items.
F. Information contained in exhibits to the statement may be
incorporated by reference in answer or partial answer to any item
unless it would render the answer misleading, incomplete, unclear or
confusing. A copy of any information that is incorporated by
reference or a copy of the pertinent pages of a document containing
the information must be submitted with this statement as an exhibit,
unless it was previously filed with the Commission electronically on
EDGAR. If an exhibit contains information responding to more than
one item in the schedule, all information in that exhibit may be
incorporated by reference once in response to the several items in
the schedule for which it provides an answer. Information
incorporated by reference is deemed filed with the Commission for
all purposes of the Act.
G. If the Rule 13e-3 transaction also involves a transaction
subject to Regulation 14A (Secs. 240.14a-1 through 240.14b-2) or 14C
(Secs. 240.14c-1 through 240.14c-101) of the Act, the registration
of securities under the Securities Act of 1933 and the General Rules
and Regulations of that Act, or a tender offer subject to Regulation
14D (Secs. 240.14d-1 through 240.14d-101) or Sec. 240.13e-4, this
statement must incorporate by reference the information contained in
the proxy, information, registration or tender offer statement in
answer to the items of this statement.
H. The information required by the items of this statement is
intended to be in addition to any disclosure requirements of any
other form or schedule that may be filed with the Commission in
connection with the Rule 13e-3 transaction. If those forms or
schedules require less information on any topic than this statement,
the requirements of this statement control.
I. If the Rule 13e-3 transaction involves a tender offer, then a
combined statement on Schedules 13E-3 and TO may be filed with the
Commission under cover of Schedule TO (Sec. 240.14d-100). See
Instruction J of Schedule TO (Sec. 240.14d-100).
J. Amendments disclosing a material change in the information
set forth in this statement may omit any information previously
disclosed in this statement.
Item 1. Summary Term Sheet
Furnish the information required by Item 1001 of Regulation M-A
(Sec. 229.1001 of this chapter) unless information is disclosed to
security holders in a prospectus that meets the requirements of
Sec. 230.421(d) of this chapter.
Item 2. Subject Company Information
Furnish the information required by Item 1002 of Regulation M-A
(Sec. 229.1002 of this chapter).
Item 3. Identity and Background of Filing Person
Furnish the information required by Item 1003(a) through (c) of
Regulation M-A (Sec. 229.1003 of this chapter).
Item 4. Terms of the Transaction
Furnish the information required by Item 1004(a) and (c) through
(f) of Regulation M-A (Sec. 229.1004 of this chapter).
Item 5. Past Contacts, Transactions, Negotiations and Agreements
Furnish the information required by Item 1005(a) through (c) and
(e) of Regulation M-A (Sec. 229.1005 of this chapter).
Item 6. Purposes of the Transaction and Plans or Proposals
Furnish the information required by Item 1006(b) and (c)(1)
through (8) of Regulation M-A (Sec. 229.1006 of this chapter).
Instruction to Item 6: In providing the information specified in
Item 1006(c) for this item, discuss any activities or transactions
that would occur after the Rule 13e-3 transaction.
Item 7. Purposes, Alternatives, Reasons and Effects
Furnish the information required by Item 1013 of Regulation M-A
(Sec. 229.1013 of this chapter).
Item 8. Fairness of the Transaction
Furnish the information required by Item 1014 of Regulation M-A
(Sec. 229.1014 of this chapter).
Item 9. Reports, Opinions, Appraisals and Negotiations
Furnish the information required by Item 1015 of Regulation M-A
(Sec. 229.1015 of this chapter).
Item 10. Source and Amounts of Funds or Other Consideration
Furnish the information required by Item 1007 of Regulation M-A
(Sec. 229.1007 of this chapter).
Item 11. Interest in Securities of the Subject Company
Furnish the information required by Item 1008 of Regulation M-A
(Sec. 229.1008 of this chapter).
Item 12. The Solicitation or Recommendation
Furnish the information required by Item 1012(d) and (e) of
Regulation M-A (Sec. 229.1012 of this chapter).
Item 13. Financial Statements
Furnish the information required by Item 1010(a) through (b) of
Regulation M-A (Sec. 229.1010 of this chapter) for the issuer of the
subject class of securities.
Instructions to Item 13:
1. The disclosure materials disseminated to security holders may
contain the summarized financial information required by Item
1010(c) of Regulation M-A (Sec. 229.1010 of this chapter) instead of
the financial information required by Item 1010(a) and (b). In that
case, the financial information required by Item 1010(a) and (b) of
Regulation M-A must be disclosed directly or incorporated by
reference in the statement. If summarized financial information is
disseminated to security holders, include appropriate instructions
on how more complete financial information can be obtained. If the
summarized financial information is prepared on the basis of a
comprehensive body of accounting principles other than U.S. GAAP,
the summarized financial information must be accompanied by a
reconciliation as described in Instruction 2.
2. If the financial statements required by this Item are
prepared on the basis of a comprehensive body of accounting
principles other than U.S. GAAP, provide a reconciliation to U.S.
GAAP in accordance with Item 17 of Form 20-F (Sec. 249.220f of this
chapter).
3. The filing person may incorporate by reference financial
statements contained in any document filed with the Commission,
solely for the purposes of this schedule, if: (a) The financial
statements substantially meet the requirements of this Item; (b) an
express statement is made that the financial statements are
incorporated by reference; (c) the matter incorporated by reference
is clearly identified by page, paragraph, caption or otherwise; and
(d) if the matter incorporated by reference is not filed with this
Schedule, an indication is made where the information may be
inspected and copies obtained. Financial statements that are
required to be presented in comparative form for two or more fiscal
years or periods may not be incorporated by reference unless the
material incorporated by reference includes the entire period for
which the comparative data is required to be given. See General
Instruction F to this Schedule.
Item 14. Persons/Assets, Retained, Employed, Compensated or Used
Furnish the information required by Item 1009 of Regulation M-A
(Sec. 229.1009 of this chapter).
Item 15. Additional Information
Furnish the information required by Item 1011(b) of Regulation
M-A (Sec. 229.1011 of this chapter).
Item 16. Exhibits
File as an exhibit to the Schedule all documents specified in
Item 1016(a) through (d), (f) and (g) of Regulation M-A
(Sec. 229.1016 of this chapter).
Signature. After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement
is true, complete and correct.
[[Page 61456]]
----------------------------------------------------------------------
(Signature)
----------------------------------------------------------------------
(Name and title)
----------------------------------------------------------------------
(Date)
Instruction to Signature: The statement must be signed by the
filing person or that person's authorized representative. If the
statement is signed on behalf of a person by an authorized
representative (other than an executive officer of a corporation or
general partner of a partnership), evidence of the representative's
authority to sign on behalf of the person must be filed with the
statement. The name and any title of each person who signs the
statement must be typed or printed beneath the signature. See
Sec. 240.12b-11 with respect to signature requirements.
Sec. 240.13e-101 [Removed and reserved]
26. By removing and reserving Sec. 240.13e-101.
Sec. 240.14a-4 [Amended]
27. By amending Sec. 240.14a-4, paragraph (f), by removing the
words ``, or mailed for filing to,''.
28. By amending Sec. 240.14a-6 as follows:
a. By revising paragraphs (b), (c), (e)(2) and (j),
b. Removing the note following paragraph (b), and
c. Adding paragraph (o) to read as follows:
Sec. 240.14a-6 Filing requirements.
* * * * *
(b) Definitive proxy statement and other soliciting material. Eight
definitive copies of the proxy statement, form of proxy and all other
soliciting materials, in the same form as the materials sent to
security holders, must be filed with the Commission no later than the
date they are first sent or given to security holders. Three copies of
these materials also must be filed with, or mailed for filing to, each
national securities exchange on which the registrant has a class of
securities listed and registered.
(c) Personal solicitation materials. If part or all of the
solicitation involves personal solicitation, then eight copies of all
written instructions or other materials that discuss, review or comment
on the merits of any matter to be acted on, that are furnished to
persons making the actual solicitation for their use directly or
indirectly in connection with the solicitation, must be filed with the
Commission no later than the date the materials are first sent or given
to these persons.
* * * * *
(e)(1) * * *
(2) Confidential treatment. If action will be taken on any matter
specified in Item 14 of Schedule 14A (Sec. 240.14a-101), all copies of
the preliminary proxy statement and form of proxy filed under paragraph
(a) of this section will be for the information of the Commission only
and will not be deemed available for public inspection until filed with
the Commission in definitive form so long as:
(i) The proxy statement does not relate to a matter or proposal
subject to Sec. 240.13e-3 or a roll-up transaction as defined in Item
901(c) of Regulation S-K (Sec. 229.901(c) of this chapter);
(ii) Neither the parties to the transaction nor any persons
authorized to act on their behalf have made any public communications
relating to the transaction except for statements where the content is
limited to the information specified in Sec. 230.135 of this chapter;
and
(iii) The materials are filed in paper and marked ``Confidential,
For Use of the Commission Only.'' In all cases, the materials may be
disclosed to any department or agency of the United States Government
and to the Congress, and the Commission may make any inquiries or
investigation into the materials as may be necessary to conduct an
adequate review by the Commission.
Instruction to paragraph (e)(2): If communications are made
publicly that go beyond the information specified in Sec. 230.135 of
this chapter, the preliminary proxy materials must be re-filed
promptly with the Commission as public materials.
* * * * *
(j) Merger proxy materials. (1) Any proxy statement, form of proxy
or other soliciting material required to be filed by this section that
also is either
(i) Included in a registration statement filed under the Securities
Act of 1933 on Forms S-4 (Sec. 239.25 of this chapter), F-4
(Sec. 239.34 of this chapter) or N-14 (Sec. 239.23 of this chapter); or
(ii) Filed under Sec. 230.424, Sec. 230.425 or Sec. 230.497 of this
chapter is required to be filed only under the Securities Act, and is
deemed filed under this section.
(2) Under paragraph (j)(1) of this section, the fee required by
paragraph (i) of this section need not be paid.
* * * * *
(o) Solicitations before furnishing a definitive proxy statement.
Solicitations that are published, sent or given to security holders
before they have been furnished a definitive proxy statement must be
made in accordance with Sec. 240.14a-12 unless there is an exemption
available under Sec. 240.14a-2.
Sec. 240.14a-11 [Removed and reserved]
29. By removing and reserving Sec. 240.14a-11.
30. By revising Sec. 240.14a-12 to read as follows:
Sec. 240.14a-12 Solicitation before furnishing a proxy statement.
(a) Notwithstanding the provisions of Sec. 240.14a-3(a), a
solicitation may be made before furnishing security holders with a
proxy statement meeting the requirements of Sec. 240.14a-3(a) if:
(1) Each written communication includes:
(i) The identity of the participants in the solicitation (as
defined in Instruction 3 to Item 4 of Schedule 14A (Sec. 240.14a-101))
and a description of their direct or indirect interests, by security
holdings or otherwise, or a prominent legend in clear, plain language
advising security holders where they can obtain that information; and
(ii) A prominent legend in clear, plain language advising security
holders to read the proxy statement when it is available because it
contains important information. The legend also must explain to
investors that they can get the proxy statement, and any other relevant
documents, for free at the Commission's web site and describe which
documents are available free from the participants; and
(2) A definitive proxy statement meeting the requirements of
Sec. 240.14a-3(a) is sent or given to security holders solicited in
reliance on this section before or at the same time as the forms of
proxy, consent or authorization are furnished to or requested from
security holders.
(b) Any soliciting material published, sent or given to security
holders in accordance with paragraph (a) of this section must be filed
with the Commission no later than the date the material is first
published, sent or given to security holders. Three copies of the
material must at the same time be filed with, or mailed for filing to,
each national securities exchange upon which any class of securities of
the registrant is listed and registered. The soliciting material must
include a cover page in the form set forth in Schedule 14A
(Sec. 240.14a-101) and the appropriate box on the cover page must be
marked. Soliciting material in connection with a registered offering is
required to be filed only under Sec. 230.424 or Sec. 230.425 of this
chapter, and will be deemed filed under this section.
(c) Solicitations by any person or group of persons for the purpose
of opposing a solicitation subject to this regulation by any other
person or group of persons with respect to the election or removal of
directors at any annual or
[[Page 61457]]
special meeting of security holders also are subject to the following
provisions:
(1) Application of this rule to annual report. Notwithstanding the
provisions of Sec. 240.14a-3 (b) and (c), any portion of the annual
report referred to in Sec. 240.14a-3(b) that comments upon or refers to
any solicitation subject to this rule, or to any participant in the
solicitation, other than the solicitation by the management, must be
filed with the Commission as proxy material subject to this regulation.
This must be filed in electronic format unless an exemption is
available under Rules 201 or 202 of Regulation S-T (Sec. 232.201 or
Sec. 232.202 of this chapter).
(2) Use of reprints or reproductions. In any solicitation subject
to this Sec. 240.14a-12(c), soliciting material that includes, in whole
or part, any reprints or reproductions of any previously published
material must:
(i) State the name of the author and publication, the date of prior
publication, and identify any person who is quoted without being named
in the previously published material.
(ii) Except in the case of a public or official document or
statement, state whether or not the consent of the author and
publication has been obtained to the use of the previously published
material as proxy soliciting material.
(iii) If any participant using the previously published material,
or anyone on his or her behalf, paid, directly or indirectly, for the
preparation or prior publication of the previously published material,
or has made or proposes to make any payments or give any other
consideration in connection with the publication or republication of
the material, state the circumstances.
Instructions to Sec. 240.14a-12
1. If paper filing is permitted, file eight copies of the
soliciting material with the Commission, except that only three
copies of the material specified by Sec. 240.14a-12(c)(1) need be
filed.
2. Any communications made under this section after the
definitive proxy statement is on file but before it is disseminated
also must specify that the proxy statement is publicly available and
the anticipated date of dissemination.
31. By amending Sec. 240.14a-101 by removing the reference:
a. ``Soliciting Material Pursuant to Sec. 240.14a-11(c) or
Sec. 240.14a-12'' on the cover page and in its place adding
``Soliciting Material under Sec. 240.14a-12'';
b. ``Item 14(b)'' in paragraph (3) of Note D and in its place
adding ``Item 14(e)(1)'';
c. ``In Items 13 and 14'' in the introductory text of Note E and in
its place adding ``In Item 13'';
d. ``or to an `other person' specified in Item 14(a) of this
Schedule'' each time it appears in the introductory text of Note E; and
e. ``or other person'' each time it appears in Note E.
32. By amending Sec. 240.14a-101 by removing the reference:
a. ``Rule 14a-11 (Sec. 240.14a-11 of this chapter.)'' in the
introductory text of paragraph (a) of Item 4 and in its place adding
``Rule 14a-12(c) (Sec. 240.14a-12(c)).'';
b. ``Rule 14a-11 (Sec. 240.14a-11 of this chapter).'' in the
introductory text of paragraph (b) of Item 4 and in its place adding
``Rule 14a-12(c) (Sec. 240.14a-12(c)).'';
c. ``Rule 14a-11 (Sec. 240.14a-11 of this chapter),'' in
Instruction 1 to Item 4 and in its place adding ``Rule 14a-12(c)
(Sec. 240.14a-12(c)),''; and
d. ``Rule 14a-11 (Sec. 240.14a-11 of this chapter).'' in the
introductory text of paragraphs (a) and (b) of Item 5 and in its place
adding ``Rule 14a-12(c) (Sec. 240.14a-12(c)).'' each time it appears.
33. By amending Sec. 240.14a-101 by revising paragraphs (2) and (3)
in Note G and Item 14 to read as follows:
* * * * *
Sec. 240.14a-101 Schedule 14A. Information required in proxy
statement.
* * * * *
G. Special Note for Small Business Issuers
(1) * * *
(2) Registrants and acquirees that relied upon Alternative 1 in
their most recent Form 10-KSB may provide the following information
(Question numbers are in reference to Model A of Form 1-A): (a)
Questions 37 and 38 instead of Item 6(d); (b) Question 43 instead of
Item 7(a); (c) Questions 29-36 and 39 instead of Item 7(b); (d)
Questions 40-42 instead of Item 8; (e) Questions 40-42 instead of
Item 10; (f) the information required in Part F/S of Form 10-SB
instead of the financial statement requirements of Items 13 or 14;
(g) Questions 4, 11, and 47-50 instead of Item 13(a)(1)(3); (h)
Question 3 instead of the information specified in Items 101 and 102
of Regulation S-B (Sec. 228.101 and Sec. 228.102 of this chapter);
and (i) Questions 4, 11, and 47-50 instead of the information
specified in Item 303 of Regulation S-B(Sec. 228.303 of this
chapter).
(3) Registrants and acquirees that relied upon Alternative 2 in
their most recent Form 10-KSB may provide the following information
(``Model B'' refers to Model B of Form 1-A): (a) Item 10 of Model B
instead of Item 6(d) of Schedule 14A; (b) Item 8(d) of Model B
instead of Item 7(a) of Schedule 14A; (c) Items 8(a)(8(c) and Item
11 of Model B instead of Item 7(b) of Schedule 14A; (d) Item 9 of
Model B instead of Item 8 of Schedule 14A; (e) Item 9 of Model B
instead of Item 10 of Schedule 14A; (f) the information required in
Part F/S of Form 10-SB instead of the financial statements
requirements of Items 13 or 14 of Schedule 14A; (g) Item 6(a)(3)(i)
of Model B instead of Item 13(a)(1)(3) of Schedule 14A; (h) Items 6
and 7 of Model B instead of the information specified in Items 101
and 102 of Regulation S-B (Sec. 228.101 and Sec. 228.102 of this
chapter); and (i) Item 6(a)(3)(i) of Model B instead of the
information specified in Item 303 of Regulation S-B (Sec. 228.303 of
this chapter).
* * * * *
Item 14. Mergers, consolidations, acquisitions and similar
matters. (See Notes A and D at the beginning of this Schedule.)
Instructions to Item 14.
1. In transactions in which the consideration offered to
security holders consists wholly or in part of securities registered
under the Securities Act of 1933, furnish the information required
by Form S-4 (Sec. 239.25 of this chapter), Form F-4 (Sec. 239.34 of
this chapter), or Form N-14 (Sec. 239.23 of this chapter), as
applicable, instead of this Item. Only a Form S-4, Form F-4, or Form
N-14 must be filed in accordance with Sec. 240.14a-6(j).
2. (a) In transactions in which the consideration offered to
security holders consists wholly of cash, the information required
by paragraph (c)(1) of this Item for the acquiring company need not
be provided unless the information is material to an informed voting
decision (e.g., the security holders of the target company are
voting and financing is not assured).
(b) Additionally, if only the security holders of the target
company are voting:
i. The financial information in paragraphs (b)(8)--(11) of this
Item for the acquiring company and the target need not be provided;
and
ii. The information in paragraph (c)(2) of this Item for the
target company need not be provided.
If, however, the transaction is a going-private transaction (as
defined by Sec. 240.13e-3), then the information required by
paragraph (c)(2) of this Item must be provided and to the extent
that the going-private rules require the information specified in
paragraph (b)(8)--(b)(11) of this Item, that information must be
provided as well.
3. In transactions in which the consideration offered to
security holders consists wholly of securities exempt from
registration under the Securities Act of 1933 or a combination of
exempt securities and cash, information about the acquiring company
required by paragraph (c)(1) of this Item need not be provided if
only the security holders of the acquiring company are voting,
unless the information is material to an informed voting decision.
If only the security holders of the target company are voting,
information about the target company in paragraph (c)(2) of this
Item need not be provided. However, the information required by
paragraph (c)(2) of this Item must be provided if the transaction is
a going-private (as defined by Sec. 240.13e-3) or roll-up (as
described by Item 901 of Regulation S-K (Sec. 229.901 of this
chapter)) transaction.
4. The information required by paragraphs (b)(8)--(11) and (c)
need not be provided if
[[Page 61458]]
the plan being voted on involves only the acquiring company and one
or more of its totally held subsidiaries and does not involve a
liquidation or a spin-off.
5. To facilitate compliance with Rule 2-02(a) of Regulation S-X
(Sec. 210.2-02(a) of this chapter) (technical requirements relating
to accountants' reports), one copy of the definitive proxy statement
filed with the Commission must include a signed copy of the
accountant's report. If the financial statements are incorporated by
reference, a signed copy of the accountant's report must be filed
with the definitive proxy statement. Signatures may be typed if the
document is filed electronically on EDGAR. See Rule 302 of
Regulation S-T (Sec. 232.302 of this chapter).
6. Notwithstanding the provisions of Regulation S-X, no
schedules other than those prepared in accordance with Sec. 210.12-
15, Sec. 210.12-28 and Sec. 210.12-29 of this chapter (or, for
management investment companies, Secs. 210.12-12 through 210.12-14
of this chapter) of that regulation need be furnished in the proxy
statement.
7. If the preliminary proxy material incorporates by reference
financial statements required by this Item, a draft of the financial
statements must be furnished to the Commission staff upon request if
the document from which they are incorporated has not been filed
with or furnished to the Commission.
(a) Applicability. If action is to be taken with respect to any
of the following transactions, provide the information required by
this Item:
(1) A merger or consolidation;
(2) An acquisition of securities of another person;
(3) An acquisition of any other going business or the assets of
a going business;
(4) A sale or other transfer of all or any substantial part of
assets; or
(5) A liquidation or dissolution.
(b) Transaction information. Provide the following information
for each of the parties to the transaction unless otherwise
specified:
(1) Summary term sheet. The information required by Item 1001 of
Regulation M-A (Sec. 229.1001 of this chapter).
(2) Contact information. The name, complete mailing address and
telephone number of the principal executive offices.
(3) Business conducted. A brief description of the general
nature of the business conducted.
(4) Terms of the transaction. The information required by Item
1004(a)(2) of Regulation M-A (Sec. 229.1004 of this chapter).
(5) Regulatory approvals. A statement as to whether any federal
or state regulatory requirements must be complied with or approval
must be obtained in connection with the transaction and, if so, the
status of the compliance or approval.
(6) Reports, opinions, appraisals. If a report, opinion or
appraisal materially relating to the transaction has been received
from an outside party, and is referred to in the proxy statement,
furnish the information required by Item 1015(b) of Regulation M-A
(Sec. 229.1015 of this chapter).
(7) Past contacts, transactions or negotiations. The information
required by Items 1005(b) and 1011(a)(1) of Regulation M-A
(Sec. 229.1005 of this chapter and Sec. 229.1011 of this chapter),
for the parties to the transaction and their affiliates during the
periods for which financial statements are presented or incorporated
by reference under this Item.
(8) Selected financial data. The selected financial data
required by Item 301 of Regulation S-K (Sec. 229.301 of this
chapter).
(9) Pro forma selected financial data. If material, the
information required by Item 301 of Regulation S-K (Sec. 229.301 of
this chapter) for the acquiring company, showing the pro forma
effect of the transaction.
(10) Pro forma information. In a table designed to facilitate
comparison, historical and pro forma per share data of the acquiring
company and historical and equivalent pro forma per share data of
the target company for the following Items:
(i) Book value per share as of the date financial data is
presented pursuant to Item 301 of Regulation S-K (Sec. 229.301 of
this chapter);
(ii) Cash dividends declared per share for the periods for which
financial data is presented pursuant to Item 301 of Regulation S-K
(Sec. 229.301 of this chapter); and
(iii) Income (loss) per share from continuing operations for the
periods for which financial data is presented pursuant to Item 301
of Regulation S-K (Sec. 229.301 of this chapter).
Instructions to paragraphs (b)(8), (b)(9) and (b)(10):
1. For a business combination accounted for as a purchase,
present the financial information required by paragraphs (b)(9) and
(b)(10) only for the most recent fiscal year and interim period. For
a business combination accounted for as a pooling, present the
financial information required by paragraphs (b)(9) and (b)(10)
(except for information with regard to book value) for the most
recent three fiscal years and interim period. For purposes of these
paragraphs, book value information need only be provided for the
most recent balance sheet date.
2. Calculate the equivalent pro forma per share amounts for one
share of the company being acquired by multiplying the exchange
ratio times each of:
(i) The pro forma income (loss) per share before non-recurring
charges or credits directly attributable to the transaction;
(ii) The pro forma book value per share; and
(iii) The pro forma dividends per share of the acquiring
company.
3. Unless registered on a national securities exchange or
otherwise required to furnish such information, registered
investment companies need not furnish the information required by
paragraphs (b)(8) and (b)(9) of this Item.
(11) Financial information. If material, financial information
required by Article 11 of Regulation S-X (Secs. 210.10-01 through
229.11-03 of this chapter) with respect to this transaction.
Instructions to paragraph (b)(11):
1. Present any Article 11 information required with respect to
transactions other than those being voted upon (where not
incorporated by reference) together with the pro forma information
relating to the transaction being voted upon. In presenting this
information, you must clearly distinguish between the transaction
being voted upon and any other transaction.
2. If current pro forma financial information with respect to
all other transactions is incorporated by reference, you need only
present the pro forma effect of this transaction.
(c) Information about the parties to the transaction.
(1) Acquiring company. Furnish the information required by Part
B (Registrant Information) of Form S-4 (Sec. 239.25 of this chapter)
or Form F-4 (Sec. 239.34 of this chapter), as applicable, for the
acquiring company. However, financial statements need only be
presented for the latest two fiscal years and interim periods.
(2) Acquired company. Furnish the information required by Part C
(Information with Respect to the Company Being Acquired) of Form S-4
(Sec. 239.25 of this chapter) or Form F-4 (Sec. 239.34 of this
chapter), as applicable.
(d) Information about parties to the transaction: registered
investment companies and business development companies. If the
acquiring company or the acquired company is an investment company
registered under the Investment Company Act of 1940 or a business
development company as defined by Section 2(a)(48) of the Investment
Company Act of 1940, provide the following information for that
company instead of the information specified by paragraph (c) of
this Item:
(1) Information required by Item 101 of Regulation S-K
(Sec. 229.101 of this chapter), description of business;
(2) Information required by Item 102 of Regulation S-K
(Sec. 229.102 of this chapter), description of property;
(3) Information required by Item 103 of Regulation S-K
(Sec. 229.103 of this chapter), legal proceedings;
(4) Information required by Item 201 of Regulation S-K
(Sec. 229.201 of this chapter), market price of and dividends on the
registrant's common equity and related stockholder matters;
(5) Financial statements meeting the requirements of Regulation
S-X, including financial information required by Rule 3-05 and
Article 11 of Regulation S-X (Sec. 210.3-05 and Sec. 210.11-01
through Sec. 210.11-03 of this chapter) with respect to transactions
other than that as to which action is to be taken as described in
this proxy statement;
(6) Information required by Item 301 of Regulation S-K
(Sec. 229.301 of this chapter), selected financial data;
(7) Information required by Item 302 of Regulation S-K
(Sec. 229.302 of this chapter), supplementary financial information;
(8) Information required by Item 303 of Regulation S-K
(Sec. 229.303 of this chapter), management's discussion and analysis
of financial condition and results of operations; and
(9) Information required by Item 304 of Regulation S-K
(Sec. 229.304 of this chapter), changes in and disagreements with
accountants on accounting and financial disclosure.
[[Page 61459]]
Instruction to paragraph (d) of Item 14: Unless registered on a
national securities exchange or otherwise required to furnish such
information, registered investment companies need not furnish the
information required by paragraphs (d)(6), (d)(7) and (d)(8) of this
Item.
(e) Incorporation by reference.
(1) The information required by paragraph (c) of this section
may be incorporated by reference into the proxy statement to the
same extent as would be permitted by Form S-4 (Sec. 239.25 of this
chapter) or Form F-4 (Sec. 239.34 of this chapter), as applicable.
(2) Alternatively, the registrant may incorporate by reference
into the proxy statement the information required by paragraph (c)
of this Item if it is contained in an annual report sent to security
holders in accordance with Sec. 240.14a-3 of this chapter with
respect to the same meeting or solicitation of consents or
authorizations that the proxy statement relates to and the
information substantially meets the disclosure requirements of Item
14 or Item 17 of Form S-4 (Sec. 239.25 of this chapter) or Form F-4
(Sec. 239.34 of this chapter), as applicable.
* * * * *
34. By amending Sec. 240.14c-5 by revising paragraphs (b) and
(d)(2), and removing the note following paragraph (b) to read as
follows:
Sec. 240.14c-5 Filing requirements.
* * * * *
(b) Definitive information statement. Eight definitive copies of
the information statement, in the form in which it is furnished to
security holders, must be filed with the Commission no later than the
date the information statement is first sent or given to security
holders. Three copies of these materials also must be filed with, or
mailed for filing to, each national securities exchange on which the
registrant has a class of securities listed and registered.
* * * * *
(d)(1) * * *
(2) Confidential treatment. If action will be taken on any matter
specified in Item 14 of Schedule 14A (Sec. 240.14a-101), all copies of
the preliminary information statement filed under paragraph (a) of this
section will be for the information of the Commission only and will not
be deemed available for public inspection until filed with the
Commission in definitive form so long as:
(i) The information statement does not relate to a matter or
proposal subject to Sec. 240.13e-3 or a roll-up transaction as defined
in Item 901(c) of Regulation S-K (Sec. 229.901(c) of this chapter);
(ii) Neither the parties to the transaction nor any persons
authorized to act on their behalf have made any public communications
relating to the transaction except for statements where the content is
limited to the information specified in Sec. 230.135 of this chapter;
and
(iii) The materials are filed in paper and marked ``Confidential,
For Use of the Commission Only.'' In all cases, the materials may be
disclosed to any department or agency of the United States Government
and to the Congress, and the Commission may make any inquiries or
investigation into the materials as may be necessary to conduct an
adequate review by the Commission.
Instruction to paragraph (d)(2): If communications are made
publicly that go beyond the information specified in Sec. 230.135,
the materials must be re-filed publicly with the Commission.
* * * * *
35. By amending Sec. 240.14d-1 as follows:
a. By removing the reference ``Schedules 14D-1'' in the
introductory text of paragraph (b) and adding in its place ``Schedules
TO'';
b. Redesignating paragraphs (g)(1), (g)(2), (g)(3), (g)(4), (g)(5),
(g)(6) and (g)(7) as paragraphs (g)(2), (g)(7), (g)(5), (g)(1), (g)(9),
(g)(3) and (g)(6), respectively;
c. In newly redesignated paragraph (g)(1) removing the reference
``Rule 14d-3, Rule 14d-9(d) and Item 6 of Schedule 14D-1'' and in its
place adding ``Rule 14d-3 and Rule 14d-9(d)''; and
d. Adding new paragraphs (g)(4) and (g)(8) to read as follows:
Sec. 240.14d-1 Scope of and definitions applicable to Regulations 14D
and 14E.
* * * * *
(g) Definitions. * * *
(4) The term initial offering period means the period from the time
the offer commences until all minimum time periods, including
extensions, required by Regulations 14D (Secs. 240.14d-1 through
240.14d-103) and 14E (Secs. 240.14e-1 through 240.14e-8) have been
satisfied and all conditions to the offer have been satisfied or waived
within these time periods.
* * * * *
(8) The term subsequent offering period means the period
immediately following the initial offering period meeting the
conditions specified in Sec. 240.14d-11.
* * * * *
36. By revising Sec. 240.14d-2 to read as follows:
Sec. 240.14d-2 Commencement of a tender offer.
(a) Date of commencement. A bidder will have commenced its tender
offer for purposes of section 14(d) of the Act (15 U.S.C. 78n) and the
rules under that section at 12:01 a.m. on the date when the bidder has
first published, sent or given the means to tender to security holders.
For purposes of this section, the means to tender includes the
transmittal form or a statement regarding how the transmittal form may
be obtained.
(b) Pre-commencement communications. A communication by the bidder
will not be deemed to constitute commencement of a tender offer if:
(1) It does not include the means for security holders to tender
their shares into the offer; and
(2) All written communications relating to the tender offer, from
and including the first public announcement, are filed under cover of
Schedule TO (Sec. 240.14d-100) with the Commission no later than the
date of the communication. The bidder also must deliver to the subject
company and any other bidder for the same class of securities the first
communication relating to the transaction that is filed, or required to
be filed, with the Commission.
Instructions to paragraph (b)(2)
1. The box on the front of Schedule TO indicating that the
filing contains pre-commencement communications must be checked.
2. Any communications made in connection with an exchange offer
registered under the Securities Act of 1933 need only be filed under
Sec. 230.425 of this chapter and will be deemed filed under this
section.
3. Each pre-commencement written communication must include a
prominent legend in clear, plain language advising security holders
to read the tender offer statement when it is available because it
contains important information. The legend also must advise
investors that they can get the tender offer statement and other
filed documents for free at the Commission's web site and explain
which documents are free from the offeror.
4. See Secs. 230.135, 230.165 and 230.166 of this chapter for
pre-commencement communications made in connection with registered
exchange offers.
5. ``Public announcement'' is any oral or written communication
by the bidder, or any person authorized to act on the bidder's
behalf, that is reasonably designed to, or has the effect of,
informing the public or security holders in general about the tender
offer.
(c) Filing and other obligations triggered by commencement. As soon
as practicable on the date of commencement, a bidder must comply with
the filing requirements of Sec. 240.14d-3(a), the dissemination
requirements of Sec. 240.14d-4(a) or (b), and the disclosure
requirements of Sec. 240.14d-6(a).
[[Page 61460]]
37. By amending Sec. 240.14d-3 as follows:
a. By removing the reference ``Schedule 14D-1'' in paragraphs
(a)(1), (a)(2), (a)(2)(ii), the introductory text of (a)(3), and
paragraph (c) each time it appears and adding in its place ``Schedule
TO'';
b. Removing the phrase ``ten copies of'' in paragraphs (a)(1);
c. Removing the phrase ``Hand delivers'' in paragraph (a)(2), and
adding in its place ``Delivers'', and
d. Revising paragraph (b) to read as follows:
Sec. 240.14d-3 Filing and transmission of tender offer statement.
* * * * *
(b) Post-commencement amendments and additional materials. The
bidder making the tender offer must file with the Commission:
(1) An amendment to Schedule TO (Sec. 240.14d-100) reporting
promptly any material changes in the information set forth in the
schedule previously filed and including copies of any additional tender
offer materials as exhibits; and
(2) A final amendment to Schedule TO (Sec. 240.14d-100) reporting
promptly the results of the tender offer.
Instruction to paragraph (b): A copy of any additional tender
offer materials or amendment filed under this section must be sent
promptly to the subject company and to any exchange and/or NASD, as
required by paragraph (a) of this section, but in no event later
than the date the materials are first published, sent or given to
security holders.
* * * * *
38. Amend Sec. 240.14d-4 as follows:
a. By revising the section heading;
b. Adding an introductory text to Sec. 240.14d-4;
c. Revising the introductory text of paragraph (a) and paragraph
(a)(3);
d. Adding an Instruction to paragraph (a);
e. Redesignating paragraphs (b) and (c) as paragraphs (c) and
(d)(1) and adding a new paragraph (b);
f. Revising the heading of newly redesignated paragraph (d);
g. In the first sentence of newly redesignated paragraph (d)(1)
removing the phrase ``paragraph (a) of''; and
h. Adding paragraph (d)(2) to read as follows:
Sec. 240.14d-4 Dissemination of tender offers to security holders.
As soon as practicable on the date of commencement of a tender
offer, the bidder must publish, send or give the disclosure required by
Sec. 240.14d-6 to security holders of the class of securities that is
the subject of the offer, by complying with all of the requirements of
any of the following:
(a) Cash tender offers and exempt securities offers. For tender
offers in which the consideration consists solely of cash and/or
securities exempt from registration under section 3 of the Securities
Act of 1933 (15 U.S.C. 77c):
* * * * *
(3) Use of stockholder lists and security position listings. Any
bidder using stockholder lists and security position listings under
Sec. 240.14d-5 must comply with paragraph (a)(1) or (2) of this section
on or before the date of the bidder's request under Sec. 240.14d-5(a).
Instruction to paragraph (a): Tender offers may be published or
sent or given to security holders by other methods, but with respect
to summary publication and the use of stockholder lists and security
position listings under Sec. 240.14d-5, paragraphs (a)(2) and (a)(3)
of this section are exclusive.
(b) Registered securities offers. For tender offers in which the
consideration consists solely or partially of securities registered
under the Securities Act of 1933, a registration statement containing
all of the required information, including pricing information, has
been filed and a preliminary prospectus or a prospectus that meets the
requirements of section 10(a) of the Securities Act (15 U.S.C. 77j(a)),
including a letter of transmittal, is delivered to security holders.
However, for going-private transactions (as defined by Sec. 240.13e-3)
and roll-up transactions (as described by Item 901 of Regulation S-K
(Sec. 229.901 of this chapter)), a registration statement registering
the securities to be offered must have become effective and only a
prospectus that meets the requirements of section 10(a) of the
Securities Act may be delivered to security holders on the date of
commencement.
Instructions to paragraph (b)
1. If the prospectus is being delivered by mail, mailing on the
date of commencement is sufficient.
2. A preliminary prospectus used under this section may not omit
information under Sec. 230.430 or Sec. 230.430A of this chapter.
3. If a preliminary prospectus is used under this section and
the bidder must disseminate material changes, the tender offer must
remain open for the period specified in paragraph (d)(2) of this
section.
4. If a preliminary prospectus is used under this section,
tenders may be requested in accordance with Sec. 230.162(a) of this
chapter.
* * * * *
(d) Publication of changes and extension of the offer. (1) * * *
(2) In a registered securities offer where the bidder disseminates
the preliminary prospectus as permitted by paragraph (b) of this
section, the offer must remain open from the date that material changes
to the tender offer materials are disseminated to security holders, as
follows:
(i) Five business days for a prospectus supplement containing a
material change other than price or share levels;
(ii) Ten business days for a prospectus supplement containing a
change in price, the amount of securities sought, the dealer's
soliciting fee, or other similarly significant change;
(iii) Ten business days for a prospectus supplement included as
part of a post-effective amendment; and
(iv) Twenty business days for a revised prospectus when the initial
prospectus was materially deficient.
39. By amending Sec. 240.14d-5 by revising paragraph (c)(1) to read
as follows:
Sec. 240.14d-5 Dissemination of certain tender offers by the use of
stockholder lists and security position listings.
* * * * *
(c) * * *
(1) No later than the third business day after the date of the
bidder's request, the subject company must furnish to the bidder at the
subject company's principal executive office a copy of the names and
addresses of the record holders on the most recent stockholder list
referred to in paragraph (a)(2) of this section; the names and
addresses of participants identified on the most recent security
position listing of any clearing agency that is within the access of
the subject company; and the most recent list of names, addresses and
security positions of beneficial owners as specified in Sec. 240.14a-
13(b), in the possession of the subject company, or that subsequently
comes into its possession. All security holder list information must be
in the format requested by the bidder to the extent the format is
available to the subject company without undue burden or expense.
* * * * *
40. By revising Sec. 240.14d-6 to read as follows:
Sec. 240.14d-6 Disclosure of tender offer information to security
holders.
(a) Information required on date of commencement.--(1) Long-form
publication. If a tender offer is published, sent or given to security
holders on the date of commencement by means of long-form publication
under Sec. 240.14d-4(a)(1), the long-form publication must include the
information required by paragraph (d)(1) of this section.
(2) Summary publication. If a tender offer is published, sent or
given to security holders on the date of
[[Page 61461]]
commencement by means of summary publication under Sec. 240.14d-
4(a)(2):
(i) The summary advertisement must contain at least the information
required by paragraph (d)(2) of this section; and
(ii) The tender offer materials furnished by the bidder upon
request of any security holder must include the information required by
paragraph (d)(1) of this section.
(3) Use of stockholder lists and security position listings. If a
tender offer is published, sent or given to security holders on the
date of commencement by the use of stockholder lists and security
position listings under Sec. 240.14d-4(a)(3):
(i) The summary advertisement must contain at least the information
required by paragraph (d)(2) of this section; and
(ii) The tender offer materials transmitted to security holders
pursuant to such lists and security position listings and furnished by
the bidder upon the request of any security holder must include the
information required by paragraph (d)(1) of this section.
(4) Other tender offers. If a tender offer is published or sent or
given to security holders other than pursuant to Sec. 240.14d-4(a), the
tender offer materials that are published or sent or given to security
holders on the date of commencement of such offer must include the
information required by paragraph (d)(1) of this section.
(b) Information required in other tender offer materials published
after commencement. Except for tender offer materials described in
paragraphs (a)(2)(ii) and (a)(3)(ii) of this section, additional tender
offer materials published, sent or given to security holders after
commencement must include:
(1) The identities of the bidder and subject company;
(2) The amount and class of securities being sought;
(3) The type and amount of consideration being offered; and
(4) The scheduled expiration date of the tender offer, whether the
tender offer may be extended and, if so, the procedures for extension
of the tender offer.
Instruction to paragraph (b): If the additional tender offer
materials are summary advertisements, they also must include the
information required by paragraphs (d)(2)(v) of this section.
(c) Material changes. A material change in the information
published or sent or given to security holders must be promptly
disclosed to security holders in additional tender offer materials.
(d) Information to be included.--(1) Tender offer materials other
than summary publication. The following information is required by
paragraphs (a)(1), (a)(2)(ii), (a)(3)(ii) and (a)(4) of this section:
(i) The information required by Item 1 of Schedule TO
(Sec. 240.14d-100) (Summary Term Sheet); and
(ii) The information required by the remaining items of Schedule TO
(Sec. 240.14d-100) for third-party tender offers, except for Item 12
(exhibits) of Schedule TO (Sec. 240.14d-100), or a fair and adequate
summary of the information.
(2) Summary Publication. The following information is required in a
summary advertisement under paragraphs (a)(2)(i) and (a)(3)(i) of this
section:
(i) The identity of the bidder and the subject company;
(ii) The information required by Item 1004(a)(1) of Regulation M-A
(Sec. 229.1004(a)(1) of this chapter);
(iii) If the tender offer is for less than all of the outstanding
securities of a class of equity securities, a statement as to whether
the purpose or one of the purposes of the tender offer is to acquire or
influence control of the business of the subject company;
(iv) A statement that the information required by paragraph (d)(1)
of this section is incorporated by reference into the summary
advertisement;
(v) Appropriate instructions as to how security holders may obtain
promptly, at the bidder's expense, the bidder's tender offer materials;
and
(vi) In a tender offer published or sent or given to security
holders by use of stockholder lists and security position listings
under Sec. 240.14d-4(a)(3), a statement that a request is being made
for such lists and listings. The summary publication also must state
that tender offer materials will be mailed to record holders and will
be furnished to brokers, banks and similar persons whose name appears
or whose nominee appears on the list of security holders or, if
applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial
owners of such securities. If the list furnished to the bidder also
included beneficial owners pursuant to Sec. 240.14d-5(c)(1) and tender
offer materials will be mailed directly to beneficial holders, include
a statement to that effect.
(3) No transmittal letter. Neither the initial summary
advertisement nor any subsequent summary advertisement may include a
transmittal letter (the letter furnished to security holders for
transmission of securities sought in the tender offer) or any amendment
to the transmittal letter.
41. By amending Sec. 240.14d-7 by redesignating paragraph (a) as
(a)(1) and adding paragraph (a)(2) to read as follows:
Sec. 240.14d-7 Additional withdrawal rights.
(a) * * *
(2) Exemption during subsequent offering period. Notwithstanding
the provisions of section 14(d)(5) of the Act (15 U.S.C. 78n(d)(5)) and
paragraph (a) of this section, the bidder need not offer withdrawal
rights during a subsequent offering period.
* * * * *
42. By amending Sec. 240.14d-9 as follows:
a. By revising the section heading;
b. Redesignating paragraphs (a) through (f) as paragraphs (b)
through (g);
c. Adding new paragraph (a); and
d. Revising the introductory text of newly redesignated paragraph
(b) to read as follows:
Sec. 240.14d-9 Recommendation or solicitation by the subject company
and others.
(a) Pre-commencement communications. A communication by a person
described in paragraph (e) of this section with respect to a tender
offer will not be deemed to constitute a recommendation or solicitation
under this section if:
(1) The tender offer has not commenced under Sec. 240.14d-2; and
(2) The communication is filed under cover of Schedule 14D-9
(Sec. 240.14d-101) with the Commission no later than the date of the
communication.
Instructions to paragraph (a)(2):
1. The box on the front of Schedule 14D-9 (Sec. 240.14d-101)
indicating that the filing contains pre-commencement communications
must be checked.
2. Any communications made in connection with an exchange offer
registered under the Securities Act of 1933 need only be filed under
Sec. 230.425 of this chapter and will be deemed filed under this
section.
3. Each pre-commencement written communication must include a
prominent legend in clear, plain language advising security holders
to read the company's solicitation/recommendation statement when it
is available because it contains important information. The legend
also must advise investors that they can get the recommendation and
other filed documents for free at the Commission's web site and
explain which documents are free from the filer.
4. See Secs. 230.135, 230.165 and 230.166 of this chapter for
pre-commencement communications made in connection with registered
exchange offers.
(b) Post-commencement communications. After commencement by a
bidder under Sec. 240.14d-2, no solicitation or recommendation to
[[Page 61462]]
security holders may be made by any person described in paragraph (e)
of this section with respect to a tender offer for such securities
unless as soon as practicable on the date such solicitation or
recommendation is first published or sent or given to security holders
such person complies with the following:
(1) * * *
* * * * *
43. By amending Sec. 240.14d-9 by removing the reference:
a. ``eight copies of'' in newly redesignated paragraph (b)(1);
b. ``14D-1'' in newly redesignated paragraphs (b)(2)(i) and
(b)(3)(i) and in its place adding ``TO'';
c. ``Items 2 and 4(a) of Schedule 14D-9'' in newly redesignated
paragraph (b)(2)(ii) and in its place adding ``Items 1003(d) and
1012(a) of Regulation M-A (Sec. 229.1003(d) and Sec. 229.1012(a))'';
d. ``paragraph (a)(2) or (3)'' in newly redesignated paragraph
(c)(2) and in its place adding ``paragraph (b)(2) or (3)'';
e. ``Items 1, 2, 3(b), 4, 6, 7 and 8'' in newly redesignated
paragraph (d) and in its place adding ``Items 1 through 8'';
f. ``paragraphs (d)(2) and (e)'' in the introductory text of newly
redesignated paragraph (e)(1) and in its place adding ``paragraphs
(e)(2) and (f)'';
g. ``paragraph (d)(1)'' each time it appears in newly redesignated
paragraph (e)(2) and in its place adding ``paragraph (e)(1)'';
h. ``14D-1 (Sec. 240.14d-101)'' in newly redesignated paragraph
(e)(2)(i) and in its place adding ``TO (Sec. 240.14d-100)''; and
i. ``paragraph (e)(3)'' in newly redesignated paragraph (f)(4) and
in its place adding ``paragraph (f)(3)''.
44. By adding Sec. 240.14d-11 to read as follows:
Sec. 240.14d-11 Subsequent offering period.
A bidder may elect to provide a subsequent offering period of three
business days to 20 business days during which tenders will be accepted
if:
(a) The initial offering period of at least 20 business days has
expired;
(b) The offer is for all outstanding securities of the class that
is the subject of the tender offer, and if the bidder is offering
security holders a choice of different forms of consideration, there is
no ceiling on any form of consideration offered;
(c) The bidder immediately accepts and promptly pays for all
securities tendered during the initial offering period;
(d) The bidder announces the results of the tender offer, including
the approximate number and percentage of securities deposited to date,
no later than 9:00 a.m. Eastern time on the next business day after the
expiration date of the initial offering period and immediately begins
the subsequent offering period;
(e) The bidder immediately accepts and promptly pays for all
securities as they are tendered during the subsequent offering period;
and
(f) The bidder offers the same form and amount of consideration to
security holders in both the initial and the subsequent offering
period.
Note Sec. 240.14d-11: No withdrawal rights apply during the
subsequent offering period in accordance with Sec. 240.14d-7(a)(2).
45. By revising Sec. 240.14d-100 to read as follows:
Sec. 240.14d-100 Schedule TO. Tender offer statement under section
14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934.
Securities and Exchange Commission,
Washington, D.C. 20549
Schedule TO
Tender Offer Statement under Section 14(d)(1) or 13(e)(1) of the
Securities Exchange Act of 1934
(Amendment No. ______)*
----------------------------------------------------------------------
(Name of Subject Company (issuer))
----------------------------------------------------------------------
(Names of Filing Persons (identifying status as offeror, issuer or
other person))
----------------------------------------------------------------------
(Title of Class of Securities)
----------------------------------------------------------------------
(CUSIP Number of Class of Securities)
(Name, address, and telephone numbers of person authorized to
receive notices and communications on behalf of filing persons)
Calculation of Filing Fee
------------------------------------------------------------------------
Transaction valuation* Amount of filing fee
------------------------------------------------------------------------
------------------------------------------------------------------------
*Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Check the box if any part of the fee is offset as provided
by Rule 0-11(a)(2) and identify the filing with which the offsetting
fee was previously paid. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
Amount Previously Paid:------------------------------------------------
Form or Registration No.:----------------------------------------------
Filing Party:----------------------------------------------------------
Date Filed:------------------------------------------------------------
[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions
to which the statement relates:
[ ] third-party tender offer subject to Rule 14d-1.
[ ] issuer tender offer subject to Rule 13e-4.
[ ] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment
reporting the results of the tender offer: [ ]
General Instructions:
A. File eight copies of the statement, including all exhibits,
with the Commission if paper filing is permitted.
B. This filing must be accompanied by a fee payable to the
Commission as required by Sec. 240.0-11.
C. If the statement is filed by a general or limited
partnership, syndicate or other group, the information called for by
Items 3 and 5-8 for a third-party tender offer and Items 5-8 for an
issuer tender offer must be given with respect to: (i) Each partner
of the general partnership; (ii) each partner who is, or functions
as, a general partner of the limited partnership; (iii) each member
of the syndicate or group; and (iv) each person controlling the
partner or member. If the statement is filed by a corporation or if
a person referred to in (i), (ii), (iii) or (iv) of this Instruction
is a corporation, the information called for by the items specified
above must be given with respect to: (a) Each executive officer and
director of the corporation; (b) each person controlling the
corporation; and (c) each executive officer and director of any
corporation or other person ultimately in control of the
corporation.
D. If the filing contains only preliminary communications made
before the commencement of a tender offer, no signature or filing
fee is required. The filer need not respond to the items in the
schedule. Any pre-commencement communications that are filed under
cover of this schedule need not be incorporated by reference into
the schedule.
E. If an item is inapplicable or the answer is in the negative,
so state. The statement published, sent or given to security holders
may omit negative and not applicable responses. If the schedule
includes any information that is not published, sent or given to
security holders, provide that information or specifically
incorporate it by reference under the appropriate item number and
heading in the schedule. Do not recite the text of disclosure
requirements in the schedule or any document published, sent or
given to security holders. Indicate clearly the coverage of the
requirements without referring to the text of the items.
F. Information contained in exhibits to the statement may be
incorporated by reference in answer or partial answer to any item
unless it would render the answer misleading, incomplete, unclear or
confusing. A copy of any information that is incorporated by
reference or a copy of the pertinent pages of a document containing
the information must be submitted with this statement as an exhibit,
unless it was previously filed with the Commission electronically on
EDGAR. If an exhibit contains information responding to more than
one item in the schedule, all information in that exhibit may be
incorporated by reference once in response to the several items in
the schedule for which
[[Page 61463]]
it provides an answer. Information incorporated by reference is
deemed filed with the Commission for all purposes of the Act.
G. A filing person may amend its previously filed Schedule 13D
(Sec. 240.13d-101) on Schedule TO (Sec. 240.14d-100) if the
appropriate box on the cover page is checked to indicate a combined
filing and the information called for by the fourteen disclosure
items on the cover page of Schedule 13D (Sec. 240.13d-101) is
provided on the cover page of the combined filing with respect to
each filing person.
H. The final amendment required by Sec. 240.14d-3(b)(2) and
Sec. 240.13e-4(c)(4) will satisfy the reporting requirements of
section 13(d) of the Act with respect to all securities acquired by
the offeror in the tender offer.
I. Amendments disclosing a material change in the information
set forth in this statement may omit any information previously
disclosed in this statement.
J. If the tender offer disclosed on this statement involves a
going-private transaction, a combined Schedule TO (Sec. 240.14d-100)
and Schedule 13E-3 (Sec. 240.13e-100) may be filed with the
Commission under cover of Schedule TO. The Rule 13e-3 box on the
cover page of the Schedule TO must be checked to indicate a combined
filing. All information called for by both schedules must be
provided except that Items 1--3, 5, 8 and 9 of Schedule TO may be
omitted to the extent those items call for information that
duplicates the item requirements in Schedule 13E-3.
K. For purposes of this statement, the following definitions
apply:
(1) The term offeror means any person who makes a tender offer
or on whose behalf a tender offer is made;
(2) The term issuer tender offer has the same meaning as in Rule
13e-4(a)(2); and
(3) The term third-party tender offer means a tender offer that
is not an issuer tender offer.
Special Instructions for Complying With Schedule to
Under Sections 13(e), 14(d) and 23 of the Act and the rules and
regulations of the Act, the Commission is authorized to solicit the
information required to be supplied by this schedule.
Disclosure of the information specified in this schedule is
mandatory, except for I.R.S. identification numbers, disclosure of
which is voluntary. The information will be used for the primary
purpose of disclosing tender offer and going-private transactions.
This statement will be made a matter of public record. Therefore,
any information given will be available for inspection by any member
of the public.
Because of the public nature of the information, the Commission
can use it for a variety of purposes, including referral to other
governmental authorities or securities self-regulatory organizations
for investigatory purposes or in connection with litigation
involving the Federal securities laws or other civil, criminal or
regulatory statutes or provisions. I.R.S. identification numbers, if
furnished, will assist the Commission in identifying security
holders and, therefore, in promptly processing tender offer and
going-private statements.
Failure to disclose the information required by this schedule,
except for I.R.S. identification numbers, may result in civil or
criminal action against the persons involved for violation of the
Federal securities laws and rules.
Item 1. Summary Term Sheet
Furnish the information required by Item 1001 of Regulation M-A
(Sec. 229.1001 of this chapter) unless information is disclosed to
security holders in a prospectus that meets the requirements of
Sec. 230.421(d) of this chapter.
Item 2. Subject Company Information
Furnish the information required by Item 1002(a) through (c) of
Regulation M-A (Sec. 229.1002 of this chapter).
Item 3. Identity and Background of Filing Person
Furnish the information required by Item 1003(a) through (c) of
Regulation M-A (Sec. 229.1003 of this chapter) for a third-party
tender offer and the information required by Item 1003(a) of
Regulation M-A (Sec. 229.1003 of this chapter) for an issuer tender
offer.
Item 4. Terms of the Transaction
Furnish the information required by Item 1004(a) of Regulation
M-A (Sec. 229.1004 of this chapter) for a third-party tender offer
and the information required by Item 1004(a) through (b) of
Regulation M-A (Sec. 229.1004 of this chapter) for an issuer tender
offer.
Item 5. Past Contacts, Transactions, Negotiations and Agreements
Furnish the information required by Item 1005(a) and (b) of
Regulation M-A (Sec. 229.1005 of this chapter) for a third-party
tender offer and the information required by Item 1005(e) of
Regulation M-A (Sec. 229.1005) for an issuer tender offer.
Item 6. Purposes of the Transaction and Plans or Proposals
Furnish the information required by Item 1006(a) and (c)(1)
through (7) of Regulation M-A (Sec. 229.1006 of this chapter) for a
third-party tender offer and the information required by Item
1006(a) through (c) of Regulation M-A (Sec. 229.1006 of this
chapter) for an issuer tender offer.
Item 7. Source and Amount of Funds or Other Consideration
Furnish the information required by Item 1007(a), (b) and (d) of
Regulation M-A (Sec. 229.1007 of this chapter).
Item 8. Interest in Securities of the Subject Company
Furnish the information required by Item 1008 of Regulation M-A
(Sec. 229.1008 of this chapter).
Item 9. Persons/Assets, Retained, Employed, Compensated or Used
Furnish the information required by Item 1009(a) of Regulation
M-A (Sec. 229.1009 of this chapter).
Item 10. Financial Statements
If material, furnish the information required by Item 1010(a)
and (b) of Regulation M-A (Sec. 229.1010 of this chapter) for the
issuer in an issuer tender offer and for the offeror in a third-
party tender offer.
Instructions to Item 10:
1. Financial statements must be provided when the offeror's
financial condition is material to security holder's decision
whether to sell, tender or hold the securities sought. The facts and
circumstances of a tender offer, particularly the terms of the
tender offer, may influence a determination as to whether financial
statements are material, and thus required to be disclosed.
2. Financial statements are not considered material when: (a)
The consideration offered consists solely of cash; (b) the offer is
not subject to any financing condition; and either: (c) the offeror
is a public reporting company under Section 13(a) or 15(d) of the
Act that files reports electronically on EDGAR, or (d) the offer is
for all outstanding securities of the subject class. Financial
information may be required, however, in a two-tier transaction. See
Instruction 5 below.
3. The filing person may incorporate by reference financial
statements contained in any document filed with the Commission,
solely for the purposes of this schedule, if: (a) The financial
statements substantially meet the requirements of this item; (b) an
express statement is made that the financial statements are
incorporated by reference; (c) the information incorporated by
reference is clearly identified by page, paragraph, caption or
otherwise; and (d) if the information incorporated by reference is
not filed with this schedule, an indication is made where the
information may be inspected and copies obtained. Financial
statements that are required to be presented in comparative form for
two or more fiscal years or periods may not be incorporated by
reference unless the material incorporated by reference includes the
entire period for which the comparative data is required to be
given. See General Instruction F to this schedule.
4. If the offeror in a third-party tender offer is a natural
person, and such person's financial information is material,
disclose the net worth of the offeror. If the offeror's net worth is
derived from material amounts of assets that are not readily
marketable or there are material guarantees and contingencies,
disclose the nature and approximate amount of the individual's net
worth that consists of illiquid assets and the magnitude of any
guarantees or contingencies that may negatively affect the natural
person's net worth.
5. Pro forma financial information is required in a negotiated
third-party cash tender offer when securities are intended to be
offered in a subsequent merger or other transaction in which
remaining target securities are acquired and the acquisition of the
subject company is significant to the offeror under Sec. 210.11-
01(b)(1) of this chapter. The offeror must disclose the financial
information specified in Item 3(f) and Item 5 of Form S-4
(Sec. 239.25 of this chapter) in the schedule filed with the
Commission, but may furnish only the summary financial information
specified in
[[Page 61464]]
Item 3(d), (e) and (f) of Form S-4 in the disclosure document sent
to security holders. If pro forma financial information is required
by this instruction, the historical financial statements specified
in Item 1010 of Regulation M-A (Sec. 229.1010 of this chapter) are
required for the bidder.
6. The disclosure materials disseminated to security holders may
contain the summarized financial information specified by Item
1010(c) of Regulation M-A (Sec. 229.1010 of this chapter) instead of
the financial information required by Item 1010(a) and (b). In that
case, the financial information required by Item 1010(a) and (b) of
Regulation M-A must be disclosed in the statement. If summarized
financial information is disseminated to security holders, include
appropriate instructions on how more complete financial information
can be obtained. If the summarized financial information is prepared
on the basis of a comprehensive body of accounting principles other
than U.S. GAAP, the summarized financial information must be
accompanied by a reconciliation as described in Instruction 8 of
this Item.
7. If the offeror is not subject to the periodic reporting
requirements of the Act, the financial statements required by this
Item need not be audited if audited financial statements are not
available or obtainable without unreasonable cost or expense. Make a
statement to that effect and the reasons for their unavailability.
8. If the financial statements required by this Item are
prepared on the basis of a comprehensive body of accounting
principles other than U.S. GAAP, provide a reconciliation to U.S.
GAAP in accordance with Item 17 of Form 20-F (Sec. 249.220f of this
chapter), unless a reconciliation is unavailable or not obtainable
without unreasonable cost or expense. At a minimum, however, when
financial statements are prepared on a basis other than U.S. GAAP, a
narrative description of all material variations in accounting
principles, practices and methods used in preparing the non-U.S.
GAAP financial statements from those accepted in the U.S. must be
presented.
Item 11. Additional Information
Furnish the information required by Item 1011 of Regulation M-A
(Sec. 229.1011 of this chapter).
Item 12. Exhibits
File as an exhibit to the Schedule all documents specified by
Item 1016 (a), (b), (d), (g) and (h) of Regulation M-A
(Sec. 229.1016 of this chapter).
Item 13. Information Required by Schedule 13E-3
If the Schedule TO is combined with Schedule 13E-3
(Sec. 240.13e-100), set forth the information required by Schedule
13E-3 that is not included or covered by the items in Schedule TO.
Signature. After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement
is true, complete and correct.
----------------------------------------------------------------------
(Signature)
----------------------------------------------------------------------
(Name and title)
----------------------------------------------------------------------
(Date)
Instruction to Signature: The statement must be signed by the
filing person or that person's authorized representative. If the
statement is signed on behalf of a person by an authorized
representative (other than an executive officer of a corporation or
general partner of a partnership), evidence of the representative's
authority to sign on behalf of the person must be filed with the
statement. The name and any title of each person who signs the
statement must be typed or printed beneath the signature. See
Secs. 240.12b-11 and 240.14d-1(f) with respect to signature
requirements.
46. By revising Sec. 240.14d-101 to read as follows:
Sec. 240.14d-101 Schedule 14D-9.
Securities and Exchange Commission,
Washington, D.C. 20549
Schedule 14D-9
Solicitation/Recommendation Statement under Section 14(d)(4) of the
Securities Exchange Act of 1934
(Amendment No. ______)
----------------------------------------------------------------------
(Name of Subject Company)
----------------------------------------------------------------------
(Names of Persons Filing Statement)
----------------------------------------------------------------------
(Title of Class of Securities)
----------------------------------------------------------------------
(CUSIP Number of Class of Securities)
----------------------------------------------------------------------
(Name, address, and telephone numbers of person authorized to
receive notices and communications on behalf of the persons filing
statement)
[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
General Instructions:
A. File eight copies of the statement, including all exhibits,
with the Commission if paper filing is permitted.
B. If the filing contains only preliminary communications made
before the commencement of a tender offer, no signature is required.
The filer need not respond to the items in the schedule. Any pre-
commencement communications that are filed under cover of this
schedule need not be incorporated by reference into the schedule.
C. If an item is inapplicable or the answer is in the negative,
so state. The statement published, sent or given to security holders
may omit negative and not applicable responses. If the schedule
includes any information that is not published, sent or given to
security holders, provide that information or specifically
incorporate it by reference under the appropriate item number and
heading in the schedule. Do not recite the text of disclosure
requirements in the schedule or any document published, sent or
given to security holders. Indicate clearly the coverage of the
requirements without referring to the text of the items.
D. Information contained in exhibits to the statement may be
incorporated by reference in answer or partial answer to any item
unless it would render the answer misleading, incomplete, unclear or
confusing. A copy of any information that is incorporated by
reference or a copy of the pertinent pages of a document containing
the information must be submitted with this statement as an exhibit,
unless it was previously filed with the Commission electronically on
EDGAR. If an exhibit contains information responding to more than
one item in the schedule, all information in that exhibit may be
incorporated by reference once in response to the several items in
the schedule for which it provides an answer. Information
incorporated by reference is deemed filed with the Commission for
all purposes of the Act.
E. Amendments disclosing a material change in the information
set forth in this statement may omit any information previously
disclosed in this statement.
Item 1. Subject Company Information
Furnish the information required by Item 1002(a) and (b) of
Regulation M-A (Sec. 229.1002 of this chapter).
Item 2. Identity and Background of Filing Person
Furnish the information required by Item 1003(a) and (d) of
Regulation M-A (Sec. 229.1003 of this chapter).
Item 3. Past Contacts, Transactions, Negotiations and Agreements
Furnish the information required by Item 1005(d) of Regulation
M-A (Sec. 229.1005 of this chapter).
Item 4. The Solicitation or Recommendation
Furnish the information required by Item 1012(a) through (c) of
Regulation M-A (Sec. 229.1012 of this chapter).
Item 5. Person/Assets, Retained, Employed, Compensated or Used
Furnish the information required by Item 1009(a) of Regulation
M-A (Sec. 229.1009 of this chapter).
Item 6. Interest in Securities of the Subject Company
Furnish the information required by Item 1008(b) of Regulation
M-A (Sec. 229.1008 of this chapter).
Item 7. Purposes of the Transaction and Plans or Proposals
Furnish the information required by Item 1006(d) of Regulation
M-A (Sec. 229.1006 of this chapter).
Item 8. Additional Information
Furnish the information required by Item 1011(b) of Regulation
M-A (Sec. 229.1011 of this chapter).
Item 9. Exhibits
File as an exhibit to the Schedule all documents specified by
Item 1016(a), (e) and (g) of Regulation M-A (Sec. 229.1016 of this
chapter).
Signature. After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement
is true, complete and correct.
[[Page 61465]]
----------------------------------------------------------------------
(Signature)
----------------------------------------------------------------------
(Name and title)
----------------------------------------------------------------------
(Date)
Instruction to Signature: The statement must be signed by the
filing person or that person's authorized representative. If the
statement is signed on behalf of a person by an authorized
representative (other than an executive officer of a corporation or
general partner of a partnership), evidence of the representative's
authority to sign on behalf of the person must be filed with the
statement. The name and any title of each person who signs the
statement must be typed or printed beneath the signature. See
Sec. 240.14d-1(f) with respect to signature requirements.
47. By adding a note at the beginning of Regulation 14E
(Sec. 240.14e-1 through Sec. 240.14e-8) that reads as follows:
Note: For the scope of and definitions applicable to Regulation
14E, refer to Sec. 240.14d-1.
48. By amending Sec. 240.14e-1 by revising paragraph (c) to read as
follows:
Sec. 240.14e-1 Unlawful tender offer practices.
* * * * *
(c) Fail to pay the consideration offered or return the securities
deposited by or on behalf of security holders promptly after the
termination or withdrawal of a tender offer. This paragraph does not
prohibit a bidder electing to offer a subsequent offering period under
Sec. 240.14d-11 from paying for securities during the subsequent
offering period in accordance with that section.
* * * * *
49. By adding Sec. 240.14e-5 to read as follows:
Sec. 240.14e-5 Prohibiting purchases outside of a tender offer.
(a) Unlawful activity. As a means reasonably designed to prevent
fraudulent, deceptive or manipulative acts or practices in connection
with a tender offer for equity securities, no covered person may
directly or indirectly purchase or arrange to purchase any subject
securities or any related securities except as part of the tender
offer. This prohibition applies from the time of public announcement of
the tender offer until the tender offer expires. This prohibition does
not apply to any purchases or arrangements to purchase made during the
time of any subsequent offering period as provided for in Sec. 240.14d-
11 if the consideration paid or to be paid for the purchases or
arrangements to purchase is the same in form and amount as the
consideration offered in the tender offer.
(b) Excepted activity. The following transactions in subject
securities or related securities are not prohibited by paragraph (a) of
this section:
(1) Exercises of securities. Transactions by covered persons to
convert, exchange, or exercise related securities into subject
securities, if the covered person owned the related securities before
public announcement;
(2) Purchases for plans. Purchases or arrangements to purchase by
or for a plan that are made by an agent independent of the issuer;
(3) Purchases during odd-lot offers. Purchases or arrangements to
purchase if the tender offer is excepted under Sec. 240.13e-4(h)(5);
(4) Purchases as intermediary. Purchases by or through a dealer-
manager or its affiliates that are made in the ordinary course of
business and made either:
(i) On an agency basis not for a covered person; or
(ii) As principal for its own account if the dealer-manager or its
affiliate is not a market maker, and the purchase is made to offset a
contemporaneous sale after having received an unsolicited order to buy
from a customer who is not a covered person;
(5) Basket transactions. Purchases or arrangements to purchase a
basket of securities containing a subject security or a related
security if the following conditions are satisfied:
(i) The purchase or arrangement to purchase is made in the ordinary
course of business and not to facilitate the tender offer;
(ii) The basket contains 20 or more securities; and
(iii) Covered securities and related securities do not comprise
more than 5% of the value of the basket;
(6) Covering transactions. Purchases or arrangements to purchase
that are made to satisfy an obligation to deliver a subject security or
a related security arising from a short sale or from the exercise of an
option by a non-covered person if:
(i) The short sale or option transaction was made in the ordinary
course of business and not to facilitate the offer;
(ii) In the case of a short sale, the short sale was entered into
before public announcement of the tender offer; and
(iii) In the case of an exercise of an option, the covered person
wrote the option before public announcement of the tender offer;
(7) Purchases pursuant to contractual obligations. Purchases or
arrangements to purchase pursuant to a contract if the following
conditions are satisfied:
(i) The contract was entered into before public announcement of the
tender offer;
(ii) The contract is unconditional and binding on both parties; and
(iii) The existence of the contract and all material terms
including quantity, price and parties are disclosed in the offering
materials;
(8) Purchases or arrangements to purchase by an affiliate of the
dealer-manager. Purchases or arrangements to purchase by an affiliate
of a dealer-manager if the following conditions are satisfied:
(i) The dealer-manager maintains and enforces written policies and
procedures reasonably designed to prevent the flow of information to or
from the affiliate that might result in a violation of the federal
securities laws and regulations;
(ii) The dealer-manager is registered as a broker or dealer under
Section 15(a) of the Act;
(iii) The affiliate has no officers (or persons performing similar
functions) or employees (other than clerical, ministerial, or support
personnel) in common with the dealer-manager that direct, effect, or
recommend transactions in securities; and
(iv) The purchases or arrangements to purchase are not made to
facilitate the tender offer;
(9) Purchases by connected exempt market makers or connected exempt
principal traders. Purchases or arrangements to purchase if the
following conditions are satisfied:
(i) The issuer of the subject security is a foreign private issuer,
as defined in Sec. 240.3b-4(c);
(ii) The tender offer is subject to the United Kingdom's City Code
on Takeovers and Mergers;
(iii) The purchase or arrangement to purchase is effected by a
connected exempt market maker or a connected exempt principal trader,
as those terms are used in the United Kingdom's City Code on Takeovers
and Mergers;
(iv) The connected exempt market maker or the connected exempt
principal trader complies with the applicable provisions of the United
Kingdom's City Code on Takeovers and Mergers; and
(v) The tender offer documents disclose the identity of the
connected exempt market maker or the connected exempt principal trader
and disclose, or describe how U.S. security holders can obtain,
information regarding market making or principal purchases by such
market maker or principal trader to the extent that this information is
required to be made public in the United Kingdom; and
(10) Purchases during cross-border tender offers. Purchases or
arrangements
[[Page 61466]]
to purchase if the following conditions are satisfied:
(i) The tender offer is excepted under Sec. 240.13e-4(h)(8) or
Sec. 240.14d-1(c);
(ii) The offering documents furnished to U.S. holders prominently
disclose the possibility of any purchases, or arrangements to purchase,
or the intent to make such purchases;
(iii) The offering documents disclose the manner in which any
information about any such purchases or arrangements to purchase will
be disclosed;
(iv) The offeror discloses information in the United States about
any such purchases or arrangements to purchase in a manner comparable
to the disclosure made in the home jurisdiction, as defined in
Sec. 240.13e-4(i)(3); and
(v) The purchases comply with the applicable tender offer laws and
regulations of the home jurisdiction.
(c) Definitions. For purposes of this section, the term:
(1) Affiliate has the same meaning as in Sec. 240.12b-2;
(2) Agent independent of the issuer has the same meaning as in
Sec. 242.100(b) of this chapter;
(3) Covered person means:
(i) The offeror and its affiliates;
(ii) The offeror's dealer-manager and its affiliates;
(iii) Any advisor to any of the persons specified in paragraph
(c)(3)(i) and (ii) of this section, whose compensation is dependent on
the completion of the offer; and
(iv) Any person acting, directly or indirectly, in concert with any
of the persons specified in this paragraph (c)(3) in connection with
any purchase or arrangement to purchase any subject securities or any
related securities;
(4) Plan has the same meaning as in Sec. 242.100(b) of this
chapter;
(5) Public announcement is any oral or written communication by the
offeror or any person authorized to act on the offeror's behalf that is
reasonably designed to, or has the effect of, informing the public or
security holders in general about the tender offer;
(6) Related securities means securities that are immediately
convertible into, exchangeable for, or exercisable for subject
securities; and
(7) Subject securities has the same meaning as in Sec. 229.1000 of
this chapter.
(d) Exemptive authority. Upon written application or upon its own
motion, the Commission may grant an exemption from the provisions of
this section, either unconditionally or on specified terms or
conditions, to any transaction or class of transactions or any security
or class of security, or any person or class of persons.
50. By adding Sec. 240.14e-8 to read as follows:
Sec. 240.14e-8 Prohibited conduct in connection with pre-commencement
communications.
It is a fraudulent, deceptive or manipulative act or practice
within the meaning of section 14(e) of the Act (15 U.S.C. 78n) for any
person to publicly announce that the person (or a party on whose behalf
the person is acting) plans to make a tender offer that has not yet
been commenced, if the person:
(a) Is making the announcement of a potential tender offer without
the intention to commence the offer within a reasonable time and
complete the offer;
(b) Intends, directly or indirectly, for the announcement to
manipulate the market price of the stock of the bidder or subject
company; or
(c) Does not have the reasonable belief that the person will have
the means to purchase securities to complete the offer.
By the Commission.
Dated: October 22, 1999.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-28355 Filed 11-9-99; 8:45 am]
BILLING CODE 8010-01-P