[Federal Register Volume 63, Number 233 (Friday, December 4, 1998)]
[Proposed Rules]
[Pages 67331-67389]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-30227]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200, 229, 230, 232, 239, and 240

[Release No. 33-7607; 34-40633; IC-23520; File No. S7-28-98]
RIN 3235-AG84


Regulation of Takeovers and Security Holder Communications

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rules.

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SUMMARY: The Securities and Exchange Commission proposes to update and 
simplify the rules and regulations applicable to takeover transactions 
(including tender offers, mergers, acquisitions and similar 
extraordinary transactions). We propose to permit significantly more 
communications with security holders and the markets before the filing 
of a registration statement involving a takeover transaction, a proxy 
statement or tender offer statement. We also propose 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; permit security holders to 
tender their securities during a limited period after the successful 
completion of a tender offer; more closely align 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 proposals presented in this release 
should be considered together with the companion release issued today, 
the Securities Act Reform Release.

DATES: Comments should be submitted on or before April 5, 1999.

ADDRESSES: Comments concerning the proposed amendments should be 
submitted in triplicate to Jonathan G. Katz, Secretary, U.S. Securities 
and Exchange Commission, Mail Stop 6-9, 450 Fifth Street, N.W., 
Washington, D.C. 20549-6009. Comments also may be submitted 
electronically to the following e-mail address: [email protected]. 
All comment letters

[[Page 67332]]

should refer to File Number S7-28-98. This file number should be 
included on the subject line if e-mail is used to submit comments. 
Comment letters will be available for inspection and copying in the 
public reference room at the same address. Electronically submitted 
comment letters will be posted on our Internet web site (http://
www.sec.gov).

FOR FURTHER INFORMATION CONTACT: James J. Moloney, in the Office of 
Mergers and Acquisitions, or P.J. Himelfarb, in the Office of Chief 
Counsel, Division of Corporation Finance, at (202) 942-2920. For 
questions regarding proposed Rule 14e-5, please contact Irene A. Halpin 
or Michael R. Trocchio, in the Office of Risk Management and Control, 
Division of Market Regulation, at (202) 942-0772.

SUPPLEMENTARY INFORMATION: We propose amendments to Rules 13e-1, 13e-3, 
13e-4, 14a-4, 14a-6, 14a-11, 14a-12, 14c-2, 14c-5, 14d-1, 14d-2, 14d-3, 
14d-4, 14d-5, 14d-6, 14d-7, 14d-9, 14e-1 \1\ and Schedules 14A, 14C, 
13E-3, and 14D-9 \2\ under the Securities Exchange Act of 1934 
(``Exchange Act'').\3\ We also propose an amendment to Item 10 of 
Regulation S-K \4\ and a new subpart of Regulation S-K, the 1000 series 
(``Regulation M-A''); a new tender offer schedule, Schedule TO, that 
would replace Schedules 13E-4 and 14D-1; \5\ a new tender offer Rule 
14e-5 that would replace Rule 10b-13; \6\ and new tender offer Rules 
14d-11 and 14e-8. Further, we propose to amend Rule 13(d) of Regulation 
S-T and Rules of Practice 30-1 and 30-3.\7\ We also propose amendments 
to Rules 145 and 432, and new Rule 162, under the Securities Act of 
1933 (``Securities Act'').\8\ In addition, in the Securities Act Reform 
Release,\9\ we propose new rules, forms and amendments under the 
Securities Act affecting the regulatory scheme for takeovers. Some of 
these proposals are republished in this release for the convenience of 
readers, as follows: portions of proposed new Forms C and SB-3 and 
proposed new Rules 166, 167 and 425.
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    \1\ 17 CFR 240.13e-1; 17 CFR 240.13e-3; 17 CFR 240.13e-4; 17 CFR 
240.14a-4; 17 CFR 240.14a-6; 17 CFR 240.14a-11; 17 CFR 240.14a-12; 
17 CFR 240.14c-2; 17 CFR 240.14c-5; 17 CFR 240.14d-1; 17 CFR 
240.14d-2; 17 CFR 240.14d-3; 17 CFR 240.14d-4; 17 CFR 240.14d-5; 17 
CFR 240.14d-6; 17 CFR 240.14d-7; 17 CFR 240.14d-9; and 17 CFR 
240.14e-1.
    \2\ 17 CFR 240.14a-101; 17 CFR 240.14c-101; 17 CFR 240.13e-100; 
and 17 CFR 240.14d-101.
    \3\ 15 U.S.C. 78a et seq.
    \4\ 17 CFR 229.10.
    \5\ 17 CFR 240.13e-101; 17 CFR 240.14d-100.
    \6\ 17 CFR 240.10b-13.
    \7\ 17 CFR 232.13(d); 17 CFR 200.30-1; 17 CFR 200.30-3.
    \8\ 17 CFR 230.145; 17 CFR 230.432; 15 U.S.C. 77a et seq.
    \9\ See Release No. 33-7606A (November 13, 1998).
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Table of Contents

I. Executive Summary and Background
II. Discussion of Proposals
    A. Overview of the Regulatory Schemes
    B. Expand Communications Permitted in Tender Offers and Mergers
    1. Overview and General Considerations
    2. Eliminate Restrictions on Pre-filing Communications
    3. Waiting Period and Post-Effective Period Communications
    4. Alternative Communications Proposals
    5. Free Communications Under the Securities Act
    6. Free Communications Under the Proxy Rules
    a. Expand Rule 14a-12 Safe Harbor
    b. ``Test the Waters'' Proxy Solicitations
    c. Eliminate Confidential Treatment of Merger Proxies
    d. Timing of Filings
    7. Free Communications Under the Tender Offer Rules
    a. Disclosure Triggering Commencement
    b. Methods to Disseminate an Offer
    C. Permit Exchange Offers to Commence On Filing
    1. Early Commencement
    2. Dissemination of a Supplement and Extension of the Offer
    3. Tenders into an Offer Exempt from Sale Requirements of the 
Securities Act
    D. Integrate and Streamline the Disclosure Requirements for 
Tender Offers and Mergers
    1. Subpart 1000 of Regulation S-K (``Regulation M-A'') and 
Combination of Schedules
    2. Streamline Disclosure Requirements and Improve Disclosure
    a. ``Plain English'' Summary Term Sheet
    b. Revise Item 14 of Schedule 14A to Clarify Requirements and 
Harmonize Cash Merger with Cash Tender Offer Disclosure
    c. Reduce Financial Statements Required for Non-Reporting Target 
Companies
    d. Registration Statement Form for Business Combinations
    E. Update the Tender Offer Rules
    1. Permit Securities to be Tendered During a ``Subsequent 
Offering Period'' without Withdrawal Rights
    2. Clarify the Financial Information Required for Bidders in 
Cash Tender Offers
    a. When the Bidder's Financial Statements are Required in Cash 
Tender Offers
    b. Content of Bidder's Financial Statements in Cash Tender 
Offers; Financial Statements in Going-Private Transactions
    c. Bidder's Source of Funds
    d. Pro Forma Financial Information in Two-Tier Transactions
    3. Clarify the Requirement that a Target Report Purchases of its 
Own Securities After a Third-Party Tender Offer is Commenced
    4. Harmonize the Tender Offer and Proxy Rules Relating to the 
Delivery of a Stockholder List and Security Position Listing
    5. Revise and Redesignate the Rule Prohibiting Purchases Outside 
an Offer
    a. Proposed Amendments Redesignating and Clarifying the Rule
    b. Persons and Securities Subject to the Rule
    c. Excepted Transactions
    d. Solicitation of Comments on Proposed Rule 14e-5
    6. Safe Harbor for Forward-Looking Statements
III. General Request For Comments
IV. Cost-Benefit Analysis
    A. Communications
    B. Filings
    C. Tender Offers
V. Initial Regulatory Flexibility Analysis
    A. Reasons for Proposed Action
    B. Objectives and Legal Basis
    C. Small Entities Subject to the Rules
    D. Reporting, Recordkeeping, and Other Compliance Requirements
    E. Significant Alternatives
    F. Overlapping or Conflicting Federal Rules
VI. Paperwork Reduction Act
VII. Statutory Basis and Text of Proposed Amendments

I. Executive Summary and Background

    Over the last several years, takeover activity has surpassed the 
extraordinary levels seen during the 1980s.\10\ In 1996, there were 
over 7,000 merger and acquisition transactions completed in the U.S. 
valued at more than $650 billion. In 1997, U.S. merger and acquisition 
activity increased to approximately 7,800 transactions valued at over 
$790 billion.\11\ Global merger and acquisition activity totaled 
approximately (U.S.) $900 billion in 1996.\12\ In 1997, global merger 
and acquisition activity increased to (U.S.) $1.6 trillion.\13\ This 
wave of takeovers has continued into 1998 with approximately $626 
billion in domestic mergers and acquisitions announced as of June, 
1998.\14\
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    \10\ In 1988, approximately 3,000 domestic merger and 
acquisition transactions were completed with a total value of over 
$300 billion. In 1989, there were slightly more than 3,800 
transactions valued at approximately $330 billion. See Mergers & 
Acquisitions, The Dealmaker's Journal, 1998 Almanac (March/April 
1998), at 42.
    \11\ Id.
    \12\ See 1996 Mergers and Acquisitions, Corporate Financing Week 
(February 10, 1997).
    \13\ See Steven Lipin, Murphy's Law Doesn't Apply: The 
Conditions Are Perfect For Continued Growth In Mergers, Wall St. J., 
Jan. 2, 1998, at R6.
    \14\ See John R. Wilke & Bryan Gruley, In Merger Blitz, 
Regulators Vie to Bust Biggest Prizes, Wall St. J., June 11, 1998, 
at B1, citing Securities Data Corp. Although the boom in U.S. merger 
and acquisition activity has tempered slightly in recent months, it 
is expected to remain strong. See Third Q M&A Soars, but the Bear 
Lurks, Mergers & Acquisitions Report, October 5, 1998.
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    Three characteristics are common to many of today's takeover 
transactions. First, many acquirors are offering securities or a 
combination of securities

[[Page 67333]]

and cash to the security holders of subject companies (``targets''). In 
1996, almost half of the completed takeover transactions involved some 
form of stock as consideration, as opposed to cash only.\15\ In 1997, 
the number of stock-based takeovers remained relatively constant at 
approximately half of all completed transactions.\16\ During the first 
half of 1998, approximately 43% of the completed transactions involved 
securities as consideration.\17\
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    \15\ Stock or a combination of stock and cash was offered to 
security holders in approximately 1,395 out of the 2,892 
transactions announced in 1996. See Mergers & Acquisitions, The 
Dealmaker's Journal, 1998 Almanac (March/April 1998), at 47. The 
information reported in Mergers & Acquisitions 1998 Almanac was 
based on all completed mergers, acquisitions, and divestitures 
priced at $5 million and over, including purchases of partial 
interests of at least a 40% stake in the target company or an 
investment of a least $100 million. Id. at 42.
    \16\ Stock or a combination of stock and cash was offered to 
security holders in approximately 1,703 out of the 3,449 
transactions announced in 1997. Id. at 47.
    \17\ See Mergers & Acquisitions, The Dealmaker's Journal, 
(September/October 1998) at p. 50.
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    Second, there has been an increase in the number of hostile 
transactions involving proxy or consent solicitations. This trend 
appears to be the result of the adoption of anti-takeover devices by 
many public companies and the development of more stringent state anti-
takeover laws in reaction to the wave of takeovers in the 1980s. 
Today's proxy and consent solicitations are primarily aimed at 
unseating incumbent directors, dismantling anti-takeover devices, and 
generally facilitating transactions opposed by management.
    Third, significant technological advances in communications permit 
more frequent, timely and direct communications with security holders. 
These developments in technology affect how acquirors, targets, and 
other market participants communicate with security holders and the 
securities markets regarding proposed mergers and other extraordinary 
corporate transactions. For example, many companies post detailed 
information regarding corporate developments on their Internet web 
sites. In addition, companies use the Internet as a means of 
communicating with security holders during proxy contests and in 
connection with tender offers and mergers.\18\ These changes in how 
companies, security holders, and market participants communicate with 
one another prompted the Commission to issue several releases 
addressing the use of the Internet and other electronic media under the 
federal securities laws.\19\
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    \18\ Companies also have broadcast annual security holder 
meetings over the Internet, and are increasingly soliciting proxies 
via the Internet.
    \19\ See Release Nos. 33-7233 (October 6, 1995) [60 FR 53458] 
and 33-7288 (May 9, 1996) [61 FR 24644], expressing the Commission's 
views on the use of electronic media to satisfy information delivery 
requirements under the federal securities laws. See also Release No. 
33-7516 (March 27, 1998) [63 FR 14806] interpreting jurisdictional 
issues involving the use of the Internet by issuers, investment 
companies, broker-dalers, exchanges and investment advisers to 
solicit offshore securities transactions.
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    While the takeover market has evolved dramatically over the past 20 
years, the applicable regulatory framework has remained substantially 
the same.\20\ As a result, the application of our existing rules to 
today's extraordinary transactions can often raise complex regulatory 
issues. These issues may, in some instances, cause unnecessary burdens 
for companies without corresponding benefits to security holders. 
Today's proposals are intended to reduce these costs while maintaining 
the same high level of investor protection.
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    \20\ One exception is the Commission's revisions to the proxy 
rules in 1992. The Commission eliminated the regulation of certain 
communications with or among security holders relating to corporate 
performance and other matters of interest to all security holders 
when made in the context of an actual or potential proxy 
solicitation. See Release No. 34-31326 (October 16, 1992) [57 FR 
48276].
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    In formulating the proposals, we have drawn on the staff's 
experience in reviewing takeover disclosure, the suggestions of 
practitioners, and the recommendations of the Task Force on Disclosure 
Simplification.\21\ We have examined all of the regulations relating to 
tender offers as well as other forms of takeovers with a view toward 
improving the regulatory scheme.
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    \21\ The Commission staff's Report of the Task Force on 
Disclosure Simplification (March, 1996) recommended several of the 
proposals in this release. See ``Significant Corporate 
Transactions'' at pp. 51-57.
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    We encourage readers to keep in mind that these proposals were 
drafted, and should be considered, with the proposals presented in the 
Securities Act Reform Release also issued today. The goal underlying 
the proposals described below is the same as that underpinning the 
Securities Act Reform Release--making the regulatory scheme more 
workable for issuers and more effective for investors in today's 
capital markets. While we intend that both sets of proposals move 
towards adoption on the same track, we may adopt the proposals in 
either release without adopting those in the companion release.
    The proposals vary in some respects from those in the Securities 
Act Reform Release because it is necessary to recognize the special 
nature of business combination transactions in contrast to capital-
raising transactions. Specifically, we have considered that a security 
holder's decision regarding a proposed business combination is not 
always volitional, and that a change in security ownership can arise as 
a result of the security holder's inaction.\22\ In addition, where the 
acquiror offers securities, the investment decision can be complex, 
requiring security holders to assess both the security of another 
company offered in exchange and the security they are asked to give up. 
They also must consider how the acquiror may change as a result of the 
acquisition, because they will receive securities in the combined 
entity. Therefore, it may be important for the companies involved to 
have the flexibility to announce and discuss the proposed acquisition, 
regardless of the size and seasoned status of the acquiror.\23\ In 
addition, it is necessary for information about the transaction to be 
delivered timely to security holders who must evaluate the deal in 
order to protect their existing investment.\24\
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    \22\ See Form S-4 adopting release No. 33-6578 (April 23, 1995) 
[50 FR 18990, at 18991].
    \23\ By contrast, the Securities Act Reform Release conditions 
the extent to which communications will be liberalized on the size 
and seasoned status of the issuer.
    \24\ The Securities Act Reform Release proposes to reduce the 
prospectus delivery requirements under certain circumstances with 
respect to offerings by large, seasoned issuers.
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    In some cases, we have proposed significant modifications to the 
entire regulatory approach to takeovers. In doing so, we have attempted 
to treat different acquisition methods in a similar manner to the 
extent the different methods merit similar treatment. In other cases, 
we have focused on areas where current practice could be improved. Our 
goals are to update the regulations in order to reduce unnecessary 
regulatory burdens on participants, while maintaining investor 
protection and improving the quality of information that investors 
receive about business combination transactions.\25\ We describe below 
three areas where the costs of compliance with the current rules 
applicable to takeovers may outweigh the benefits conferred upon 
security holders, and summarize the proposals in this release.
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    \25\ See Part II.A for a description of the basic methods of 
business combination and how they are treated under the current 
regulatory scheme.
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Restrictions on Communications to Security Holders and the Marketplace

    A company's ability to communicate in a timely and effective manner 
with its security holders about a proposed

[[Page 67334]]

takeover is limited by the Securities Act if the transaction involves 
an offering of securities. Although the impact of the Securities Act on 
capital formation has been the subject of great debate,\26\ 
commentators have given somewhat less attention to the permissibility 
of communications relating to business combinations involving the 
issuance of securities. Offerors often have a compelling reason, and 
may under certain circumstances have an obligation under Rule 10b-
5,\27\ to disseminate promptly full, fair and accurate information 
regarding a planned extraordinary transaction to existing security 
holders as well as the securities markets. As a part of this release, 
we propose to increase significantly the ability of companies to 
communicate with security holders with respect to business combinations 
involving the registered offering of securities. In addition, many 
takeovers trigger the need for compliance with the tender offer and 
proxy rules, which also contain restrictions on the timing and content 
of communications. We propose to permit freer communications under the 
tender offer rules in connection with public announcements of tender 
offers. Similarly, we propose to permit freer communications under the 
proxy rules, whether or not the matter being voted on relates to a 
takeover.
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    \26\ See the Securities Act Reform Release.
    \27\ 17 CFR 240.10-5. Rule 10b-5 prohibits misleading statements 
or omissions and other fraudulent or deceptive practices in 
connection with the purchase or sale of a security.
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Regulatory Disadvantage of Exchange Offers

    Tender offers where the bidder is offering securities generally 
cannot commence until the Securities Act registration statement for the 
securities being offered becomes effective. In some cases, where the 
staff undertakes to review and comment during the waiting period,\28\ 
the delay of effectiveness can be quite lengthy. This delay is 
particularly troublesome for bidders \29\ in exchange offers.\30\ In 
contrast, cash offers, which may compete with exchange offers, can 
commence as soon as the required information is filed with the 
Commission and disseminated to security holders. The delay in 
commencing an exchange offer can place the bidder at risk that a 
competing all-cash bid will commence and close before the exchange 
offer can even commence. As a result, bidders that offer securities in 
takeover transactions may not be as successful in acquiring targets as 
cash bidders, even when the value of the stock offered is equal to or 
greater than the value of the cash offered in a competing offer. In 
response to the disparities in regulatory treatment, we propose to 
permit exchange offers to commence on a similar time frame to cash 
tender offers.
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    \28\ The ``waiting period'' is the period of time between when a 
registration statement is first filed and when it becomes effective.
    \29\ The term ``bidder'' is used throughout this release to 
refer to the offeror or purchaser in a tender offer.
    \30\ Exchange offers, sometimes called stock tender offers, are 
tender offers where the consideration offered to security holders 
includes securities; these transactions generally are registered 
under the Securities Act.
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Costs of Compliance WIth Multiple Regulatory Schemes

    Many of today's takeover transactions involve a combination of 
tender offer, proxy solicitation and Securities Act registration 
issues. As a result, participants in a merger or acquisition may be 
required to comply with several distinct regulatory schemes. Companies 
can incur additional costs analyzing and complying with the multiple 
filing and disclosure regimes that may apply to a transaction. For 
example, when a company conducts an exchange offer for all outstanding 
securities of an affiliated company, three regulatory schemes may be 
involved, including the tender offer rules, the ``going-private'' rule, 
and the provisions of the Securities Act relating to the registration 
of securities. The proxy rules also can apply if the transaction 
involves a solicitation of votes or consents. We recognize that the 
application of multiple regulatory regimes to a single transaction can 
significantly increase the burdens and costs of compliance without 
necessarily benefiting investors. We propose to simplify the regulatory 
structure for takeovers by using combined forms and a uniform 
disclosure regulation.
    In summary, we propose numerous revisions to the regulations to 
conform them to the realities of today's environment surrounding 
takeover transactions, while maintaining high quality investor 
protection and enhancing the timing and quality of information 
available to investors. The proposed revisions address changes in deal 
structure and advances in technology. Our principal proposals are to:
     Relax the current restrictions on communications with 
security holders to provide the market with more information on a 
timely basis; in particular,
     Permit free communications before the filing of a 
registration statement in connection with either a stock tender offer 
or a stock merger transaction;
     Permit free communications before the filing of a proxy 
statement (whether or not a takeover transaction is involved);
     Permit free communications about a planned tender offer 
without triggering the ``commencement'' of the offer, requiring the 
filing and dissemination of information;
     Harmonize the various communications principles applicable 
to business combinations under the Securities Act, tender offer rules 
and proxy rules;
     Eliminate the confidential treatment now available for 
merger proxy statements;
     Reduce the disparate treatment of stock and cash tender 
offers by permitting stock tender offers to commence upon the filing of 
a Securities Act registration statement;
     Simplify the regulatory scheme by integrating the 
disclosure requirements for tender offers, going-private transactions, 
and other extraordinary transactions into a new 1000 series of 
Regulation S-K, referred to as ``Regulation M-A'';
     Combine the current schedules for issuer and third-party 
tender offers into a single schedule available for all tender offers, 
entitled ``Schedule TO'';
     Require a ``plain English'' summary term sheet in all cash 
tender offer, cash merger and going-private transactions;
     Update the financial statement requirements for takeover 
transactions; in particular,
     Eliminate the need to file financial statements for target 
companies in most cash mergers, to harmonize with the treatment of cash 
tender offers;
     Clarify when financial statements of the acquiring company 
are not required in cash mergers, and when financial statements are 
required, reduce the financial statements required 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 
cash tender offers where the bidder intends to engage in a back-end 
stock merger;
     Reduce the financial statements required for non-reporting 
target companies in stock mergers;
     Permit a subsequent offering period, similar to that 
available in many United Kingdom tender offers, during which security 
holders can tender their shares for a limited period after completion 
of a tender offer;

[[Page 67335]]

     Clarify the rule that requires issuers to report any 
intended repurchases of their securities after a third-party tender 
offer has commenced (Rule 13e-1), and require information to be 
disseminated on a timely basis; 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.
      At this time we are not proposing, but are considering, whether 
we should:
     Impose a federally mandated proxy solicitation period in 
merger transactions comparable to the current minimum tender offer 
period, to allow security holders at least a minimum time to consider 
the proxy statement disclosure;
     Modify the proxy rules to permit direct delivery of proxy 
materials to non-objecting beneficial owners;
     Create a broad safe harbor under the proxy rules that 
would permit ``test the waters'' communications with security holders 
without requiring the filing or delivery of a proxy statement, so long 
as no proxy card is delivered to security holders;
     Require delivery of a disclosure document to security 
holders in cash tender offers, instead of permitting dissemination by 
summary advertisement alone, to conform the dissemination required in 
tender offers with that in proxy solicitations and securities 
offerings;
     Permit proxy cards to be sent to security holders before a 
registration statement for a stock merger is effective; and
     Expand by rule the coverage of the Private Securities 
Litigation Reform Act safe harbor from liability to include forward-
looking statements made in connection with tender offers.

II. Discussion of Proposals

A. Overview of the Regulatory Schemes

    It may be useful to discuss the regulatory schemes for different 
methods of business combination before addressing how our proposals 
would affect the current procedures. This release discusses two primary 
business combination methods: tender offers and mergers.\31\ Tender 
offers may be made either by the issuer of the securities sought or by 
a third party.\32\ The essence of a tender offer is that the offeror, 
or bidder, can go directly to security holders of the target company 
with an offer to buy their shares. Each security holder makes an 
individual decision whether or not to tender. A tender offer may or may 
not have the cooperation of the target company's board of directors. 
Even if the tender offer is successful, the bidder is unlikely to 
receive 100% of the shares. In contrast, a merger is a collective, 
voting decision.\33\ The acquiror acquires the entire company if 
security holders of the target company approve the merger.\34\ The 
acquiror generally needs the approval of the target's board of 
directors in order to present the transaction for a security holder 
vote.
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    \31\ The discussion of ``business combinations'' in this release 
includes all mergers and tender offers addressed by our rules, 
including those that do not necessarily result in a ``combination,'' 
such as issuer tender offers and tender offers where the bidder is 
not seeking control of the target.
    \32\ An offer by the company to purchase its own outstanding 
securities is an ``issuer tender offer,'' while an offer by someone 
other than the issuer is a ``third party tender offer.'' Third-party 
tender offers for a class of equity securities registered under 
Section 12 of the Exchange Act [15 U.S.C. 78l] must comply with the 
requirements of Regulation 14D. In addition, whether or not an offer 
is subject to Regulation 14D [17 CFR 240.14d-1 through 240.14d-101], 
the offer must comply with Regulation 14E [17 CFR 240.14e-1 through 
240.14e7] and the antifraud requirements of Section 14(e) of the 
Exchange Act [15 U.S.C. 78n(e)]. Issuer tender offers for the equity 
securities of a public reporting must comply with Rule 13e-4. 
Whether or not the issuer is a public reporting company, the issuer 
tender offer must comply with Regulation 14E and Section 14(e).
    \33\ Throughout the release, where we discuss mergers we also 
include reclassifications, consolidations and transfers of assets 
where security holders are asked to vote or consent. See Rule 145(a) 
[17 CFR 230.145(a)].
    \34\ The security holders of the target company almost always 
must vote on the merger; sometimes the acquiring company's security 
holders also must vote. This is determined by state law, the 
company's governing instruments, and requirements of all applicable 
self-regulatory organizations. If either voting party's securities 
are equity registered under Section 12 of the Exchange Act, the 
voting party must comply with the proxy or information statement 
rules (Regulation 14A or 14C) [17 CFR 240.14a-1 through 240.14a-104 
and 17 CFR 240.14c-1 through 240.14c-101].
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    In either a tender offer or a merger, the offeror may offer cash, 
securities, or a combination. If the consideration consists all or 
partly of securities, the offeror generally will have to register them 
under the Securities Act.\35\ The offeror will have to give more 
information to security holders of the target company than if it were 
offering cash, since the investment decision is more complex. Security 
holders of the target need information about the issuer whose 
securities they will receive if the transaction is consummated, which 
really means information about the surviving, combined entity (the 
issuer plus the acquired company).
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    \35\ The offeror also must comply with the tender offer and 
proxy rules, if applicable. All business combination methods 
described in this release also are subject to the antifraud 
provisions of the federal securities laws. See Securities Act 
Section 17 [15 U.S.C. 77q]; Exchange Act Section 10(b) [15 U.S.C. 
77j(b)]; Rule 10b-5, Rule 14a-9 [17 CFR 240.14a-9], and Exchange Act 
Section 14(e) and the rules under that section.
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    The following summarizes the regulatory process for the four basic 
business combination methods. These examples assume that the tender 
offers and proxy solicitations discussed are subject to our filing and 
dissemination requirements:

    1. Cash tender offer--either issuer or third party. The bidder 
commences the offer by disseminating tender offer material to 
security holders, including a request that they tender their shares. 
On the same day, the bidder files this material publicly with the 
Commission, along with a tender offer schedule that contains 
additional information.\36\ Unlike the other three transactions 
discussed below, the Commission staff does not have the opportunity 
to review the tender offer material until after the tender offer has 
begun. If the staff decides to review the filed material, and has 
comments, the staff gives comments to the bidder during the tender 
offer and the bidder addresses the comments appropriately. (For 
example, the bidder may need to send additional information to the 
security holders of the target and the offer may have to be 
extended.) The offer must remain open for at least 20 business days, 
and then the bidder can purchase the shares if all conditions to the 
offer have been satisfied or waived.\37\
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    \36\ Third-party tender offer statements are filed with the 
Commission on Schedule 14D-1, while issuer tender offers are filed 
on Schedule 13E-4.
    \37\ In a third-party tender offer, the target company must 
respond to the offer with a recommendation to its security holders. 
This recommendation is disseminated to the security holders and 
filed with the Commission along with a Schedule 14D-9 containing 
additional information. The staff may review the material and 
comment on it after it is filed, the same as with the bidders 
material.
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    2. Exchange offer (stock tender offer)--either issuer or third 
party.\38\ The bidder files a Securities Act registration statement 
containing a preliminary prospectus covering the securities it is 
offering to security holders of the target in exchange for their 
shares. The prospectus also contains the information about the 
exchange offer required by the tender offer rules. This is a public 
document. The bidder may disseminate the preliminary prospectus to 
security holders of the target company, but it usually does not do 
so because it cannot request tenders or buy any shares until the 
registration statement is declared effective. If the staff decides 
to review the registration statement, it may give comments to the 
bidder. After these comments are resolved, the bidder requests that 
the staff declare the registration statement effective. Once the 
registration statement is effective, the tender offer may 
``commence''--the bidder disseminates the combined final prospectus/
tender offer document to security holders, and requests that they 
tender their shares. On the same day, the bidder files with the 
Commission the

[[Page 67336]]

same tender offer schedule as for a cash tender offer.\39\ The offer 
must remain open for at least 20 business days from this point 
before the bidder can purchase any shares.
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    \38\ In this release we sometimes refer to ``stock tender 
offers'' and ``stock mergers,'' but in both cases it is possible for 
the consideration offered to be either equity or debt.
    \39\ The target company has the same obligations as in a cash 
tender offer.
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    3. Cash merger. The offeror files a preliminary proxy statement 
with the Commission that describes the transaction. This is usually 
a public document, but the offeror can request that the preliminary 
merger proxy statement be treated confidentially, with some 
exceptions. The offeror may mail the preliminary proxy statement to 
security holders, but often waits until the proxy statement is 
final, or ``definitive.'' This is because the offeror can send the 
proxy card only with the definitive proxy statement. The offeror may 
mail the definitive proxy statement ten days after the preliminary 
proxy statement is filed. However, if the staff decides to review 
the proxy material, in most cases offerors wait to receive staff 
comments before mailing. Once all comments have been resolved, the 
offeror mails the definitive proxy statement along with a proxy card 
for security holders to mark and return. There is no federally 
mandated time period between the date the offeror mails the proxy 
material and the date of the security holder meeting,\40\ but state 
law generally requires security holder notice of the meeting a 
specified time before the meeting. If the vote at the meeting is to 
approve the merger and all conditions have been met, the merger can 
close.
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    \40\ But see note 94.
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    4. Stock merger. The offeror files a Securities Act registration 
statement with the Commission that contains a preliminary prospectus 
as well as the information required in a proxy statement. 
Registration statements are filed publicly, but the material may be 
filed as a confidential proxy statement if the offeror so chooses. 
The registration statement is then filed as a ``wrap around'' the 
proxy statement when the offeror is ready to make the information 
public. The offeror may disseminate the preliminary prospectus/proxy 
statement, but ordinarily will not do so because the offeror may not 
include the proxy card. If the staff decides to review the filing, 
it gives comments to the offeror. After comments are resolved, the 
offeror requests that the staff declare the registration statement 
effective. Once the registration statement is effective, the offeror 
can mail the combined final prospectus/definitive proxy statement 
along with a proxy card. The process then continues as it would for 
a cash merger.
    Any of the above transactions also could be a ``going-private'' 
transaction if it meets the criteria set forth in the ``going-private'' 
rule.\41\ In this case, the offeror and any other party engaging in the 
transaction must file another schedule and provide additional 
information to the Commission and security holders, in addition to 
complying with the other regulatory requirements discussed. Usually 
this information is combined into a single disclosure document with the 
proxy statement, tender offer material or prospectus.
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    \41\ See Rule 13e-3 and Schedule 13E-3. This rule covers 
specified transactions where a company may cease to be a public 
reporting company or a class of equity securities may cease to be 
registered or publicly traded.
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B. Expand Communications Permitted in Tender Offers and Mergers

1. Overview and General Considerations
    As discussed above, the fast pace of today's securities markets and 
the ready accessibility of information through electronic media have 
caused changes in the mergers and acquisitions environment. We 
understand that participants in many merger and acquisition 
transactions are providing extensive, deal-related information to the 
marketplace immediately following the execution of a definitive merger 
or purchase agreement.
    Frequently, parties to a merger or other similar transaction 
release information to the press containing pro firma financial 
information on the combined entity, as well as estimated cost savings 
or ``synergies.'' The parties generally issue this type of information 
through press releases, analyst conferences, and meetings with 
institutional investors and the press.\42\ The information provided to 
analysts often goes beyond the information disseminated to all security 
holders through press releases.
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    \42\ ``The boundaries of the `gun jumping' prohibition are being 
pushed in the current environment. A careful balance must be made 
between deal announcement activities and broader disclosures, which 
may serve legitimate disclosure issues, covering expected timetables 
managements financing plans, integration [of] operations and synergy 
expectations. Deal participants frequently are pressured for such 
information by analysts, reporters and institutional investors, and 
it is not uncommon for corporations to have full analyst 
presentations that announce, among other things, aggregate 
synergies/cost savings and CEO succession plans at the time of the 
announcement of an exchange offer, merger or spin-off transaction.'' 
See Brownstein & Cohen, ``Navigating the M&A Waters: Greater 
Options, Greater Challenges,'' N.Y.L.J. (February 18, 1997), at p. 6 
(``Brownstein & Cohen'').
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    Parties to merger agreements have asserted several reasons for the 
need to disclose deal-related information at an early stage, including 
the duty to make ``full disclosure'' of material information under Rule 
10b-5.\43\ Under Rule 10b-5, it is unlawful to make any misstatement or 
omission of material fact in connection with the purchase or sale of a 
security. The rule applies to mergers, exchange offers and other 
extraordinary transactions. The duty to disclose can be triggered by, 
among other things: (1) line-item disclosure requirements in filings 
with the Commission; (2) the issuer or insider's duty to ``disclose or 
abstain'' from trading while in possession of material, non-public 
information; \44\ (3) the duty to provide full and complete information 
when disclosing information to the markets; \45\ and (4) the duty to 
correct false or misleading statements made by the company.\46\ 
Companies also may be required by the particular rules of the stock 
exchange or inter-dealer quotation system upon which their securities 
trade to inform the marketplace in a timely manner of material 
corporate developments, including proposed mergers.\47\
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    \43\ The Commission has long recognized the need for issuers to 
communicate with their security holders with respect to important 
business and finance developments. See Releases No. 33-4697 (May 28, 
1964) [29 FR 7317] and 33-5180 (August 16, 1971) [36 FR 16506]. See 
also Release No. 33-5927 (April 24, 1978) [42 FR 18163], in which 
the Division of Corporation Finance noted that compelling policy 
reasons exist, as reflected in the Williams Act disclosure 
requirements, to permit disclosure of information regarding 
contemplated ``back-end'' mergers in order to aid investors 
confronted with a tender offer investment decision that would 
otherwise ``jump the gun'' on a merger.
    \44\ See SEC v. Texas Gulf Sulphur Co., 401 F.2d 833,848 (2d 
Cir. 1968).
    \45\ Id. at 862; Basic v. Livinson, 485 U.S.C. 224 (1988).
    \46\ See Ross v. A.H. Robins Co., Inc., 465 F. Supp. 904 
(S.D.N.Y.), rev'd in part and remanded on other grounds, 607 F. 2nd 
545 (2d Cir. 1979), cert. denied, 446 U.S. 946 (1980); Naye v. Boyd, 
CCH para.92,980 (W.D. Wash. Oct. 20, 1986); Sharp v. Coopers & 
Lybrand, CCH para.96,952 (E.D. Pa. 1979); SEC v. Shattuck Denn 
Minning Corp. 297 F. Supp. 470 (S.D.N.Y. 1968); Fischer v. Kletz, 
266 F. Supp. 180 (S.D.N.Y. 1967). Generally, however, there is no 
duty to correct statements issued by a third party unless the 
statements are attributable to the company. See Electronic Specialty 
Co. v. Int'l Controls Corp., 409 F.2d 937 (2d Cir. 1969); Zucker v. 
Sable, 426 F. Supp. 658 (S.D.N.Y. 1976). Under certain circumstances 
courts have found a duty to update information previously disclosed 
when it is rendered misleading by subsequent developments. See In re 
Time Warner, Inc., 9 F.3d 259 (2d Cir. 1993).
    \47\ See NYSE Listed Company Manual Sec. 202.05 stating that 
``[a] listed company is expected to release quickly to the public 
any news or information that might reasonably be expected to 
materially affect the market for its securities''; and American 
Stock Exchange, Listing Standards, Policies and Requirements 
Sec. 402 requiring disclosure of material information ``likely to 
have a significant effect on the price of any of the company's 
securities or * * * likely to be considered important by a 
reasonable investor in determining a choice of action,'' providing 
as an example information regarding mergers and acquisitions. See 
also the National Association of Securities Dealers, Inc. (``NASD'') 
Manual, Rules 4310(c)(16) and 4320(e)(14).
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    We understand that parties involved in extraordinary transactions 
may have certain economic reasons as well for disclosing more 
information to the markets before a registration, proxy or tender offer 
statement is filed with the Commission. These reasons include: the need 
to maintain an orderly market for the securities to be offered as

[[Page 67337]]

consideration; \48\ the need to satisfy the market's increased demand 
for information regarding a proposed transaction; \49\ and the need to 
inform customers, employees or other constituencies.
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    \48\ In the takeover heyday of the 1980s, the price of 
participants' stock frequently dropped following the announcement of 
the transaction. This also can happen today, but market reaction can 
be positive when a deal appears to make business sense. Steven 
Lipin, ``Corporations' Dreams Converge in One Idea: It's Time to Do 
a Deal,'' Wall St. J. (February 26, 1997).
    \49\ Wall Street may require education due to the complexity of 
the transaction, the non-apparent nature of its value or the obscure 
nature of the business. In any case, assuring that the value created 
by a transaction is properly appreciated by Wall Street, and 
relected in stock price, may be both a matter of responsibility to 
shareholders as well as protecting the deal itself.'' Brownstein & 
Cohen at p. 6. Indeed, commentators have argued that ``winning the 
immediate favor of the market through disclosure of projections and 
other forward-looking information can be an essential element in 
ensuring the transaction's success.'' See, e.g., Victor I. Lewkow 
and Paul J. Shim, Law Puts Parties in a Bind When Ammouncing Merger, 
Nat'l L. J. (Feb. 10, 1997), at p. B9.
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    While there may be certain regulatory and economic reasons for 
early disclosure of deal-related information, provisions of the 
Securities Act and Exchange Act, including the Williams Act, \50\ 
restrict the type of information that may be disseminated before the 
filing of a registration, proxy or tender offer statement. The flow of 
information to investors is constrained primarily by the concepts of 
``offer'' \51\ and ``prospectus'' \52\ under the Securities Act, 
``solicitation'' under the Exchange Act, and ``commencement'' under the 
Williams Act. \53\ Each of these concepts reflect a judgment that the 
information needed to make an informed voting or investment decision 
should be provided within the four corners of a prescribed disclosure 
document.
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    \50\ 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).
    \51\ Section 2(a)(3) of the Securities Act 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. 15 U.S.C. 77b. Offers are prohibited during the 
pre-filing period and restricted during the waiting period.
    \52\ The term ``prospectus'' is defined in Section 2(a)(10) 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. 15 U.S.C. 77b.
    \53\ ``Solicitation'' is broadly defined by the Commission 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)]. The Williams Act provides 
that only limited information can be announced without either 
commencing a crash tender offer or requiring the filing of a 
registration statement in a stock offer.
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    We believe that alleviation of these regulatory constraints may be 
appropriate in today's marketplace, particularly given technological 
advances in communications. Information regarding a planned 
extraordinary transaction can be provided to all security holders on a 
more equal and timely basis. Restricting communications to one document 
may in fact serve to impede, rather than promote, informed investing 
and voting decisions. Of course, any proposed safe harbors permitting 
increased communications must be balanced to assure investor 
protection. Modifications to the existing regulatory scheme include 
conditions designed to provide full and fair disclosure to all 
investors and the broader marketplace and not simply to a limited 
audience of analysts and financially sophisticated market participants. 
Today's proposals are designed to reduce selective disclosure by 
permitting the widespread dissemination of information through a 
variety of media calculated to inform all security holders about the 
terms, benefits and risks of a proposed extraordinary transaction.
    It is important to note that the proposals do not change the 
current requirement that before security holders are asked to vote or 
tender their shares, they must receive a mandated disclosure document--
a prospectus, proxy statement, or tender offer statement--that sets 
forth complete and balanced information. \54\ Our long-standing concern 
about communications conditioning the market before the dissemination 
of mandated disclosure documents (i.e., ``gun-jumping'') is alleviated 
by continuing to require this disclosure document before the investment 
decision, as well as by the liability that could attach to knowingly 
false offering materials.
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    \54\ See the discussion of proposed Form C in Part II.D.2.d 
below.
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2. Eliminate Restrictions on Pre-filing Communications
    We propose to eliminate the current restrictions on communications 
about an upcoming merger, tender offer, or other business combination. 
Each of the regulatory schemes would provide for a safe harbor, as 
described below, for oral and written communications about the 
transaction before the registration, proxy or tender offer statement is 
filed. Recognizing that deal-related disclosure, including forward-
looking information, is important to a complete understanding of a 
transaction, we do not propose any content limitation on the 
communications. However, we request comment on whether any content 
restrictions should be included in the proposed safe harbors. Of 
course, even without content restrictions, the antifraud rules will 
continue to apply.
    We do not propose to limit eligibility for the proposed safe 
harbors to transactions involving large or seasoned issuers. We 
considered making distinctions by size and seasoned status along the 
same lines as in the Securities Act Reform Release (i.e., Form A and 
Form B), but believe that those distinctions are not as important as 
other considerations in the case of business combination transactions. 
In these transactions, the market does not need information about the 
offeror alone, but rather the combined entity, with which the market is 
unfamiliar in any case. Thus, the need for freer disclosure stems in 
large part from the fact that the offeror is, in essence, becoming a 
new company. Therefore, the market-driven disclosure is not company 
information but ``synergies'' and similar information about the 
combined entity. Further, we believe that regardless of seasoned 
status, the reasons for full and timely disclosure in a business 
combination still exist.
    Nevertheless, we request comment as to whether the size and 
seasoned status of the parties to the transaction should determine the 
availability of the free communication safe harbors. Should the safe 
harbor be limited to Form B companies? \55\ If the safe harbor were 
based upon the size and seasoned status of the parties, should it be 
the status of the acquiror or the target that would govern, or both? If 
the status of the acquiror controlled, different acquirors for the same 
target could be subject to different rules. Would the lack of a level 
playing field for competing acquirors have adverse effects on 
competition or the target's security holders?
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    \55\ If the proposals in the Securities Act Reform Release are 
not adopted, then the proposals presented in this release could be 
limited to companies that are Form S-3 eligible, including the 
requirement that the aggregate market value of voting and non-voting 
common equity held by non-affiliates equal or exceed $75 million.
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    While we believe that the parties involved in a business 
combination transaction should be permitted to rely on the free 
communications safe harbors regardless of size, certain safeguards to 
protect investors are necessary. All written communications by those 
parties from the date of the first announcement of the transaction 
would be required to be filed with the

[[Page 67338]]

Commission upon first use.\56\ Although there would be no requirement 
to deliver this information to security holders, written communications 
would have to be filed upon first use in order to assure that the 
information is available to all security holders--not just analysts and 
institutional investors--at the same time. Furthermore, written 
information about a proposed combined entity or the ``synergies'' that 
are expected to result from a proposed transaction could be verified or 
confirmed, and corrective disclosure could be required if needed.
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    \56\ See Part II.B.5 below. Written communications include 
communications that are published in electronic media, such as 
videos and CD-ROMs.
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    Each communication would be required to include a prominent legend 
advising investors to read the registration, proxy or tender offer 
statement.\57\ We solicit comment on whether certain basic information, 
including the name and description of the acquiror, also should be 
required in each communication.\58\
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    \57\ 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. 
See proposed Securities Act Rule 421(e) in the Securities Act Reform 
Release, as well as proposed Rules 14a-12(a)(2), 13e-4(c) and 14d-
2(b)(2) in this release.
    \58\ As discussed below, free pre-filing communications are 
permitted under the current scheme only in contested proxy 
solicitations under Rules 14s-11 and 14a-12. Those rules require 
that certain basic information (the identity of the participants in 
the solicitation and description of their interest in the 
transaction) be disclosed in each communication, whether written or 
oral.
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    We believe that bidders would welcome the opportunity to disclose 
deal information earlier in the process and that the filing on first 
use requirement would not ``chill'' disclosure of forward-looking 
information because of continuing market demands. We request comment, 
however, as to whether parties involved in tender offers would be 
reluctant, in light of the filing requirement, to disclose forward-
looking information absent a safe harbor from liability for that 
information. The safe harbor established by the Private Securities 
Litigation Reform Act currently applies to merger transactions but does 
not apply to tender offers. We discuss below the possibility of 
expanding by rule the scope of that safe harbor to tender offers.\59\
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    \59\ See Part II.E.6 below.
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    Would parties to a transaction communicate more freely if the 
written communications could be filed at a later date, whether along 
with the mandated disclosure document \60\ or some other date, instead 
of filing upon first use? If so, should the communications required to 
be filed be limited to those made during a specified period of time, 
such as 30 calendar days or 30 business days before the disclosure 
document is filed? In addition to the filing requirement for written 
communications, would any market conditioning effect of the pre-filing 
communications be cured by the built-in time period between delivery of 
the disclosure document and the final voting or tendering decision? 
Would offerors tend to shorten this time period, to the extent 
permitted by law, if they could engage in more extensive communications 
at an earlier point? We also ask whether security holders would tend to 
sell into the market on the basis of pre-filing communications, rather 
than waiting for the disclosure document.
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    \60\ This is the way Form B issuers would be treated in capital-
raising transactions, as proposed in the Securities Act Reform 
Release.
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    As noted, the proposed free communications safe harbors would apply 
to oral as well as written communications. We do not propose to require 
that oral communications be reduced to writing and filed. As one 
objective of the proposal is to reduce selective disclosure, we solicit 
comment on whether liberalizing oral communications would remove 
incentives for offerors to file information and disseminate it in a 
widespread manner.\61\Should the safe harbors be available to oral 
communications? \62\ If so, would the need to provide information to 
the markets generally provide a sufficient incentive for offerors to 
disseminate full, fair and balanced information in a widespread manner? 
Should a ``notice'' filing be required when oral communications are 
made?
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    \61\ Of course, nothing in the proposal would affect a person's 
liability for trading on inside information. See Rules 10b-5 and 
14e-3 [17 CFR 240.14e-3].
    \62\ The current safe harbor in Securities Act Rule 145(b)(2), 
discussed below, is limited to written communications.
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    As proposed in the Securities Act Reform Release, business 
information that is factual in nature and relates solely to ordinary 
business matters, not to the pending transaction, would be exempt from 
the prohibition on offers and would not be required to be filed. This 
type of information generally does not have the potential for 
conditioning the market before an extraordinary transaction and, as the 
dissemination of such information is usually routine, we do not view it 
as specifically related to the transaction.\63\ The proxy and tender 
offer rules would provide the same exclusion.\64\
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    \63\ Proposed Rule 169. Also as proposed in the Securities Act 
Reform Release, there would be a safe harbor for regularly released 
forward-looking information (which would be filed under Rule 425), 
and the safe harbors for the publication of research reports by 
broker-dealers would be revised. All of these would apply to 
business combinations as well as to capital-raising transactions. 
See proposed Rule 168(b) and proposed revisions to Rules 137, 138, 
and 139 [17 CFR 230.137; 17 CFR 230.138 and 17 CFR 230.139].
    \64\ Proposed Rules 13e-4(c), 14a-12 and 14d-2.
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3. Waiting Period and Post-Effective Period Communications
    In the Securities Act Reform Release, we propose to permit free 
oral and written communications during the period between filing and 
effectiveness of the registration statement, in order to provide an 
opportunity for open dialogue between the company and its potential 
investors.\65\ This Securities Act safe harbor also would apply to the 
period after effectiveness of the registration statement.\66\ The rule 
would be available for business combinations as well as for capital-
raising transactions. We also would extend this safe harbor to the 
proxy and tender offer rules.\67\ Like pre-filing communications, 
written communications during these periods would be required to be 
filed upon first use. Free communications during the waiting period 
would be particularly important if our proposal to permit exchange 
offers to commence before effectiveness is adopted.\68\
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    \65\ Proposed Rule 165.
    \66\ Currently, ``free writing'' is permitted after a 
registration statement becomes effective, but the ``free writing'' 
material, such as sales literature, must be accompanied or preceded 
by a final prospectus.
    \67\ Proposed Rules 14a-12 and 14d-2.
    \68\ See Part II.C.1 below.
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4. Alternative Communications Proposals
    We are considering alternatives to the free communications safe 
harbors that would provide more limited flexibility for pre-filing 
communications. In particular, we are considering whether to allow the 
companies conducting the transaction to make deal-related disclosure 
only during a 48-hour period following the public announcement of a 
definitive merger agreement or takeover plan. Similar to the ``free 
communications'' proposal, there would be no content restrictions on 
the companies' communications during the proposed 48-hour period, other 
than the antifraud provisions. After the 48-hour period, the companies 
would be required to remain quiet regarding the transaction until a 
registration, proxy or

[[Page 67339]]

tender offer statement is filed. If this alternative proposal is 
adopted, should the 48-hour time period be shorter or longer (e.g., 24 
or 72 hours), or should it be based on a number of business days, such 
as one, three or five business days?
    Under this alternative proposal, the safe harbor would not be 
available to a company if it disclosed deal-related information after 
the 48-hour period without the relevant disclosure document on file. 
The company, however, could take steps to regain protection under the 
safe harbor by discontinuing communications related to the transaction 
for at least 30 calendar days (the ``30-day quiet period'') before a 
registration statement is filed. The 30-day quiet period would serve to 
cure any conditioning effect that the communications may have had on 
the market for the companies' securities.
    As a third alternative to the free communications proposal and the 
48-hour model, we also solicit comment on whether to permit free 
communications for an unlimited period of time after the deal is 
announced, so long as the parties observe a 30-day quiet period before 
filing the registration statement, proxy statement or tender offer 
material. This would be similar to the treatment of Form A companies in 
capital-raising transactions, as proposed in the Securities Act Reform 
Release. We ask commenters whether it would be practicable in the 
business combination context to require a minimum of 30 days between 
announcing the deal and filing the registration statement, proxy 
statement or tender offer material.
    We request comment on whether, under the alternative proposals, the 
30-day quiet period would be sufficient to cure any conditioning effect 
that earlier communications may have on the market. Is a longer quiet 
period necessary (e.g., 45 days), or would a shorter period suffice 
(e.g., 15 or 20 days)? We also solicit comment on whether the time 
period for staff review should be included in the 30-day quiet period. 
Should companies be permitted to file the relevant disclosure document 
as soon as it is prepared despite disclosure of deal-related 
information outside the 48-hour period? How should the announcement of 
a hostile transaction affect the type of communications permitted 
during the 30-day quiet period? Should the type of communications 
permitted outside the 48-hour period be different for friendly and 
hostile transactions? Should the communications be filed on first use, 
or not filed until the mandated disclosure document is filed?
    Finally, we request comment as to whether either of the alternative 
proposals is preferable to the free communications safe harbors.\69\ 
Commenters should keep in mind that we would conform the proxy rules 
and tender offer rules to whatever scheme we adopt under the Securities 
Act for business combinations.
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    \69\ Like the free communications proposal, the alternative safe 
harbors would not restrict factual business communications at any 
time. These communications could occur throughout the pre-filing and 
waiting period without precluding reliance on the safe harbor or 
triggering a 30-day quiet period.
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5. Free Communications Under the Securities Act
    To implement the overall scheme discussed above, we propose new 
Securities Act Rule 166(b) to permit free communications in connection 
with any registration statement for a business combination. As 
discussed above, this rule would not contain any content restrictions 
so that deal-related information could be disclosed to analysts and 
security holders alike. Given the potential breadth of the 
communications, these communications still would be considered offers 
under the Securities Act.
    As discussed above, Section 5(c) of the Securities Act prohibits 
offers unless a registration statement is on file. In 1996, the 
Commission was granted exemptive authority under Section 28 of the 
Securities Act.\70\ For the reasons stated above--including the need to 
reduce selective disclosure and provide deal-related information to all 
security holders on an equal basis--we believe that an exemption from 
Section 5(c) of the Securities Act for persons making offers in 
business combination transactions is in the public interest and is 
consistent with the protection of investors.
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    \70\ The Commission, by rule or regulation, may 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. 15 U.S.C. 77bb.
---------------------------------------------------------------------------

    The proposed safe harbor under this exemption would be available to 
the acquiring company--the offeror of the securities. The company to be 
acquired would not ordinarily be subject to restrictions on 
communications under the Securities Act, but under some circumstances 
it could be viewed as joining the acquiring company in making the 
offer. In this event, it also could avail itself of the safe harbor. In 
addition, we request comment as to whether any other parties should be 
exempted from Section 5(c) and eligible to rely on the proposed safe 
harbor for pre-filing communications. For example, should the parties' 
affiliates, dealer-managers and others acting on behalf of the parties 
to the transaction be permitted to take advantage of the safe harbor? 
\71\
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    \71\ See the discussion of research reports in the Securities 
Act Reform Release.
---------------------------------------------------------------------------

    In cases where deal-related information is disclosed before filing 
a registration statement, the current practice has been to file the 
communications on Form 8-K \72\ and then incorporate these filings by 
reference into the registration statement. As a result, these 
communications are subject to Section 11 liability.\73\ As a condition 
to the proposed free communications safe harbor, written communications 
relating to the transaction would be filed upon first use as pre-filing 
prospectus supplements \74\ that are subject to Section 12(a)(2) 
liability.\75\ This is because we believe Section 12(a)(2) liability 
would adequately protect investors while not chilling parties' 
willingness to make these communications. However, we request comment 
on whether all written communications related to the transaction should 
be incorporated into the registration statement and subject to Section 
11 liability under the Securities Act.\76\ Would this encourage 
offerors to rely more on oral communications? We also ask whether it is 
necessary to condition the availability of the safe harbor on the 
timely filing of these communications, as proposed.
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    \72\ 17 CFR 249.308.
    \73\ 15 U.S.C. 77k.
    \74\ Written communications would be filed as offering material 
under proposed Rule 425(b)(3). Like Rule 424 [17 CFR 230.424], 
proposed Rule 425 would provide the procedural requirements for 
filing the written communications as pre-filing prospectus 
supplements. Comparable filing requirements are proposed under the 
proxy and tender offer rules (proposed Rules 13e-4(c), 14a-12 and 
14d-2). These communications would be filed on EDGAR to the same 
extent that the related prospectus, tender offer or proxy statement 
would be required to be filed electronically. For a discussion of 
materials in various electronic media and how they would be filed, 
see Part VII.B of the Securities Act Reform Release. If a Rule 425 
filing was required, filers would not also have to file the same 
document under the proxy and tender offer rules.
    \75\ 15 U.S.C. 77l(a)(2). Oral communications also would be 
offers subject to Section 12(a)(2) liability.
    \76\ In any event, if a pre-filing communication contains 
material information that is required to be in the registration 
statement, the filer will put the information in the registration 
statement, so Section 11 will apply.
---------------------------------------------------------------------------

    We note that relatively free written and oral pre-filing 
communications already are permitted under the current scheme for 
contested proxy solicitations. Such solicitations, if

[[Page 67340]]

written, currently are not deemed offers under the Securities Act.\77\ 
Written communications must be filed in accordance with proxy Rule 14a-
12(b), as discussed below.
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    \77\ See Rule 145(b)(2) [17 CFR 230.145(b)(2)]. Rule 145 is the 
rule that applies the registration requirements to business 
combinations involving security holder voting decisions.
---------------------------------------------------------------------------

    To harmonize treatment of all merger transactions, whether 
contested or friendly, we propose to eliminate the provision that such 
communications are not offers under the Securities Act.\78\ Thus, pre-
filing communications in contested transactions also would be 
considered offers and pre-filing supplements to the prospectus subject 
to liability under Section 12(a)(2) of the Securities Act. We do not 
believe that communications would be chilled by this modification 
because of the heightened need for communications in hostile or 
competing transactions. In addition, we note that such communications 
already are subject to antifraud liability. We request comment, 
however, as to whether treating this information as offers--imposing 
Section 12(a)(2) liability under the Securities Act--would chill 
communications in hostile transactions.
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    \78\ Rule 145(b)(2) would be rescinded. Rule 145(b)(1), which 
provides that certain written communications containing only 
specified information about mergers and similar transactions are not 
deemed offers, would be moved from Rule 145 to Rule 135 [17 CFR 
230.135]. Rule 135 already contains similar provisions for 
communications about exchange offers. See the Securities Act Reform 
Release for the text of proposed Rule 135 revisions.
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    Rule 135 notices are not currently, and are not proposed to be, 
filed with the Commission. We solicit comment, however, on whether Rule 
135 notices involving prospective business combinations should be 
filed, since they could contain the initial public announcement of the 
transaction. The filing would be made under Rule 425, but since these 
notices are not considered ``offers'' they would not have liability as 
such; Rule 425 would be modified to make this clear.\79\
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    \79\ In any event, under the proposed scheme these 
communications would need to be filed under the proxy or tender 
offer rules.
---------------------------------------------------------------------------

    In the Securities Act Reform Release, the proposed scheme for 
capital-raising transactions for Form A issuers contemplates that 
communications more than 30 days before the filing of a registration 
statement do not constitute offers.\80\ In contrast, the proposed 
scheme for business combinations treats all communications related to 
the transaction as offers, starting with the first communication 
relating to the transaction (except for communications among the 
participants in the transaction).\81\ Thus, these communications would 
be subject to Section 12(a)(2) liability even if made more than 30 days 
before filing the registration statement. Should we treat business 
combinations the same as capital-raising transactions and apply the 30-
day rule to both? \82\ If we did this, we could still require 
communications before the 30-day window to be filed, but they would not 
have Securities Act liability as offers. We ask commenters to address 
whether the status of deal-related communications as offers should 
depend on how soon they are followed by the filing of a registration 
statement.
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    \80\ See proposed Rule 167(c).
    \81\ See proposed Rule 167(b).
    \82\ In that case, we also would apply the 30-day rule to proxy 
and tender offer solicitations.
---------------------------------------------------------------------------

    We also solicit comment on whether, if we do retain the first 
public announcement standard, we need to define ``public 
announcement.'' We could define this as the first public communication 
about the transaction that gives more information than permitted by 
Rule 135. Alternatively, we could have a broader definition that 
includes any public communication identifying the offeror, the target 
company or class of securities, the number or percentage of securities 
sought, and the price or range of prices. Should the definition clarify 
what is meant by ``public'' (i.e., communications that go beyond the 
participants to the transaction)?
6. Free Communications Under the Proxy Rules
a. Expand Rule 14a-12 Safe Harbor
    In 1992, we significantly enhanced security holders' ability to 
communicate with one another regarding corporate matters without 
furnishing a proxy statement, so long as no proxy card or other 
authorization is furnished to or requested from security holders.\83\ 
The enhancements have worked well to improve the quality and amount of 
information flowing to and among security holders. Under the current 
regulatory scheme, however, there are still some restrictions on 
communications. For instance, management or security holders seeking 
proxy authority may not communicate without first furnishing a proxy 
statement, unless the solicitation is either in connection with an 
election contest under Rule 14a-11 \84\ or in opposition to an earlier 
solicitation, invitation for tenders, or certain other publicized 
activity under Rule 14a-12.\85\ Both rules permit solicitations before 
furnishing security holders with a written proxy statement, so long as: 
(i) no form of proxy (i.e., proxy card) is furnished until a written 
proxy statement is furnished; (ii) the identity of the participants in 
the solicitation and a description of their interests are included in 
any communication published, sent, or given to security holders; and 
(iii) a written proxy statement is provided to security holders at the 
earliest practicable date. The rules apply to both oral and written 
solicitations.\86\ Written soliciting material must be filed with, or 
mailed for filing to, the Commission no later than the date the 
material is first published, sent, or given to security holders.\87\
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    \83\ See Rule 14a-2(b)(1). [17 CFR 240.14a-2(b)(1)]. The rule 
may not be used by the company itself. Also, there are various 
exceptions for persons with specified interests in the solicitation. 
For example, the rule may not be used by any person soliciting in 
opposition to a merger or other extraordinary transaction, when the 
soliciting person is a party to an alternative transaction.
    \84\ 17 CFR 240.14a-11.
    \85\ 17 CFR 240.14a-12. In addition, parties other than the 
company's management may solicit proxies from up to ten persons 
without being required to file a proxy statement. See Rule 14a-
2(b)(2) [17 CFR 240.14a-2(b)(2)].
    \86\ The proxy antifraud rule, Rule 14a-9, applies to these 
communications.
    \87\ See Rules 14a-11(c) and 14a-12(b) [17 CFR 240.14a-11(c) and 
240.14a-12(b)].
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    Despite the 1992 amendments, some have contended that the current 
rules may continue to unnecessarily restrict communications among 
security holders and/or between a company and its own security holders. 
Recent developments in information technology have enabled companies to 
engage in more frequent, direct and timely communications with their 
security holders about matters of particular interest. As the pace of 
the securities markets increases, there appears to be a greater need 
for some flexibility in the proxy rules to permit communications before 
filing and delivery of a written proxy statement. Accordingly, we 
propose to broaden the safe harbor in Rule 14a-12 to apply to all 
solicitations, not just to those involving opposed matters.
    The other provisions in Rule 14a-12, including the condition that 
no form of proxy is furnished, the obligation to disclose participant 
information, and the delivery of a written proxy statement to all 
solicited security holders as soon as practicable, would be retained. 
We also would continue to require that written solicitations be filed 
upon first use. In addition, consistent with proposed changes to the 
Securities Act and tender offer rules, each communication would be 
required to prominently advise security holders to

[[Page 67341]]

read the proxy statement.\88\ These requirements, together with the 
antifraud provisions in Rule 14a-9, appear sufficient to assure the 
integrity and adequacy of the information and protect against 
misleading solicitations.\89\
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    \88\ Proposed Rule 14a-12(a)(2).
    \89\ The proposed expansion of communications would not expand a 
company's ability to secure promises to vote a certain way before a 
proxy statement is provided. See the Securities Act Reform Release, 
however, for proposed Rule 159, which would provide exemptions from 
the proxy rules for certain ``lock-up'' arrangements.
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    Filing of written communications upon first use also would assure 
consistency with the requirements we propose for extraordinary 
transactions under the Securities Act. We request comment, however, on 
whether the filing upon first use requirement should be modified if 
under the Securities Act we permit filing later than upon first use 
(i.e., when the disclosure document is filed). We also request comment 
on whether to retain the requirement to disclose the identity of 
participants and their interests if we do not adopt a corresponding 
requirement under the tender offer rules and the Securities Act 
requirements for tender offers. If we change either the filing 
requirement or the participant information requirement, should the 
change apply only to proxy statements relating to business 
combinations?
    We proposed expanding Rule 14a-12 in 1992 to permit solicitations 
before filing and delivering a written proxy statement regardless of 
the existence of an opposing solicitation.\90\ We ultimately determined 
not to adopt the proposal because ``the broad scope of current Rules 
14a-11(d) (now Rule 14a-11) and 14a-12 reach virtually all contested 
and responsive solicitations.'' \91\ We further noted that the need to 
extend Rule 14a-12 to all solicitations was mitigated by the proposal 
to allow registrants and other persons planning a solicitation to begin 
their solicitation on the basis of a publicly filed preliminary proxy 
statement.\92\ However, given the pressures--both regulatory and 
market-induced--to disclose deal-related information immediately upon 
announcement, we now believe that the current rules may overly restrict 
communications among security holders and/or between a company and its 
own security holders. Based upon our experience with the 1992 
liberalization of communications, we do not believe that further easing 
of restrictions would lead to abuse.
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    \90\ Release No. 34-30849 (June 24, 1992) [57 FR 29564].
    \91\ Release No. 34-31326 (October 16, 1992) [57 FR 48276]. 
Comments on the proposal were mixed. Those who objected ``questioned 
whether there was a demonstrated need for the revisions and raised 
concern with the potential abuse that could arise.'' Id.
    \92\ Id. When a soliciting party uses a preliminary proxy 
statement to begin a solicitation, the form of proxy may not be 
included with the material distributed.
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    Under the proposed expansion of Rule 14a-12, management could 
engage more freely in communications regarding a prospective or pending 
acquisition. However, this proposal is not limited to takeover-related 
matters. For example, management could rely on the proposed safe harbor 
to obtain security holders' views in connection with certain corporate 
governance items that may require a security holder vote, such as the 
adoption or amendment of executive and director compensation plans, an 
increase in the number of authorized shares that may be issued, and the 
adoption or redemption of a security holder rights plan. We believe 
that management's ability to disseminate information on a more timely 
basis may result in more informed voting decisions by security holders 
and may increase the amount and quality of information generally 
available to all security holders.
    We request comment as to whether there are certain instances when 
the requirement to deliver a proxy statement as soon as practicable 
would be too burdensome. In addition, are there any circumstances under 
which management or other parties may want to communicate that should 
not trigger the obligation to deliver a proxy statement at the earliest 
practicable date? For example, if a merger transaction was only under 
consideration by management, and no formal agreements were entered 
into, should it be necessary to send a proxy statement to security 
holders if the transaction does not materialize? As another example, 
management might find the proposed safe harbor useful to ``road-test'' 
an executive compensation proposal with large security holders, but not 
present the matter for a security holder vote if the reaction was 
negative. What impact would this have on smaller security holders?
    We invite comments on whether the expansion of Rule 14a-12 to non-
contested situations would have the intended effect of permitting 
management to communicate more freely with security holders and whether 
this would enhance the timing or quality of information given to 
security holders. One effect of the proposed expansion of Rule 14a-12 
may be to eliminate any need for Rule 14a-11.\93\ Would it be 
appropriate to eliminate Rule 14a-11 if we expanded Rule 14a-12 to 
cover all matters, whether or not they are contested?
---------------------------------------------------------------------------

    \93\ Currently, Rule 14a-12 excludes matters covered by Rule 
14a-11.
---------------------------------------------------------------------------

    As discussed above, one ``check'' on any conditioning effect that 
free communications might have on security holders is the fact that 
security holders will receive a mandated disclosure document in 
extraordinary transactions before making their tender or voting 
decision. In a tender offer, there is a mandated minimum 20-business 
day period between the time the disclosure document is disseminated and 
the expiration of the offer. As a general rule, however, there is no 
federally mandated time period for disseminating a proxy statement.\94\ 
Many state laws, however, dictate that there be at least 10 and no more 
than 60 days between notice of the meeting and the meeting date. 
Generally, the state law notice and the federally mandated proxy 
statement are mailed together to security holders. During this period, 
security holders are able to assess the relevance and credibility of 
all written communications in light of the mandated disclosure. In some 
cases, state law permits a period so short that security holders may 
not have enough time to consider the information.
---------------------------------------------------------------------------

    \94\ Note, however, that there is a mandated 60-day solicitation 
period if the transaction is a roll-up. See Section 14(h)(1)(J) of 
the Exchange Act [15 U.S.C. 78n(h)(1)(J)]; Rule 14a-6(l) [17 CFR 
240.14a-6(l); General Instruction I.2 to Form S-4 [17 CFR 239.25] 
and General Instruction G.2 to Form F-4 [17 CFR 239.34]. Also note 
that there is a requirement to send or give security holders a 
written information statement on Schedule 14C at least 20 calendar 
days before the meeting date or the earliest date on which corporate 
action may be taken if no meeting will be held. See Rule 14c-2(b) 
[17 CFR 240.14c-2(b)]. See also Release No. 34-33768 (March 16, 
1994) [59 FR 13517]. ``Although the rules do not specify the number 
of days before the meeting by which registrants must make their 
proxy materials available for distribution to their beneficial 
owners, in order to comply with the timeliness requirement, the 
materials must be mailed sufficiently in advance of the meeting to 
allow five business days for processing by the banks and brokers and 
an additional period to provide ample time for delivery of the 
material, consideration of the material by beneficial owners, return 
of their voting instructions, and transmittal of the vote from the 
bank or broker to the tabulator.'' Id. (footnotes omitted).
---------------------------------------------------------------------------

    We request comment as to whether there should be a federally 
mandated solicitation period for mergers and similar transactions, 
given the free communications proposals and the need to digest the 
mandated disclosure in light of earlier communications. This period 
also would assure that record holders and beneficial owners alike would 
have enough time to consider the proxy materials. If a federally 
mandated

[[Page 67342]]

solicitation period is adopted, how long should it be? Would 20 
business days make sense so that it is harmonized with the mandated 
tender offer time period? Should it be 20 calendar days to conform with 
the information statement requirement, or should the information 
statement requirement be changed to 20 business days? Should the 
solicitation period be required only as a condition of the free 
communications safe harbor? Should it apply only to votes on business 
combinations?
    We are particularly concerned about giving security holders time to 
consider proxy material in the case of street name holders--beneficial 
owners of securities who obtain their proxy material through banks, 
broker-dealers, or other nominees holding record title to the 
securities. Do street name holders receive correcting or updating 
material in a timely fashion? Would modifying the security holder 
communications provisions of the proxy rules to permit direct delivery 
of proxy statements and other soliciting materials to non-objecting 
beneficial owners facilitate more timely and fully informed voting 
decisions? \95\
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    \95\ See Rules 14a-13 [17 CFR 240.14a-13], 14b-1 [17 CFR 
240.14b-1], 14b-2 [17 CFR 240.14b-2] and 14c-7 [17 CFR 240.14c-7].
---------------------------------------------------------------------------

b. ``Test the Waters'' Proxy Solicitations
    We also are considering a broader exemption from the proxy rules 
that would not require delivery of a proxy statement after 
communicating with security holders. The only condition would be that 
no proxy card or other authorization be requested or sent. In effect, 
such a rule would permit both written and oral ``test the waters'' 
proxy solicitations.\96\ Such an exemption would be crafted as part of 
Rule 14a-2,\97\ which sets forth a number of solicitations that are 
exempt from the proxy statement disclosure and dissemination 
requirements. Would a broad exemption remove the need for any of the 
current exemptions in Rule 14a-2? \98\ Would it remove the need for 
Rules 14a-11 and 14a-12? Would the same purpose be accomplished by 
amending Rule 14a-2(b)(1) to eliminate the exceptions, so the rule 
could be used by the company itself and interested parties? \99\ Should 
the ``test the waters'' communication be required to include any 
minimal information?
---------------------------------------------------------------------------

    \96\ Rule 14a-9 would, of course, impose antifraud liability on 
these communications.
    \97\ 17 CFR 240.14a-2.
    \98\ In particular, the exemption for solicitations that do not 
seek the power to act as a proxy for another security holder and do 
not furnish or otherwise request a form of revocation, abstention, 
consent or authorization in Rule 14a-2(b)(1) and the ``ten person'' 
exemption in Rule 14a-2(b)(2). [17 CFR 240.14a-2(b)].
    \99\ A person relying on Rule 14a-2(b)(1) currently is not 
permitted to change the exempt proxy solicitation to a non-exempt 
one and send a proxy card to security holders. This position would 
have to be modified to accomplish the objectives of the ``test the 
waters'' proxy solicitation proposal.
---------------------------------------------------------------------------

    Unlike Rule 14a-12, the ``test the waters'' proxy rule would not 
require that written communications be filed with the Commission.\100\ 
However, we are considering requiring communications to be filed in 
order to harmonize with the treatment of written communications under 
the Securities Act and the Williams Act. Commenters should address 
whether the need to file material would reduce the usefulness of the 
``test the waters'' proxy exemption. Would a filing requirement provide 
benefits to security holders by assuring that information is available 
on a widespread basis? If we do require filing of material under this 
exemption, should it be a ``notice'' filing only as opposed to 
requiring the communication itself to be filed? Should the filing 
requirement be limited to the business combination context? Or should 
the ``test the waters'' proxy solicitation be unavailable for business 
combination communications, leaving Rule 14a-12 as the sole safe harbor 
for these communications?
---------------------------------------------------------------------------

    \100\ Currently, communications exempt under Rule 14a-2 need not 
be filed, except that notice filings are required for certain 
communications under Rule 14a-2(b)(1) and the roll-up solicitation 
rule, Rule 14a-2(b)(4).
---------------------------------------------------------------------------

    We request comment on whether a ``test the waters'' proxy rule 
would benefit security holders. This change would be consistent with 
the general theme of easing restrictions on communications under the 
Securities Act as expressed in this release and the Securities Act 
Reform Release. On the other hand, does the current requirement to 
follow up communications with delivery of a proxy statement impose a 
beneficial discipline on the solicitation process by discouraging 
premature insupportable communications? Should we require a ``cooling-
off period'' (e.g., 20 or 30 days) between the ``test the waters'' 
solicitation and a request for a proxy card? Commenters should advise 
whether they think the ``test the waters'' rule would work, not just in 
the context of takeover-related matters, but also in the context of any 
corporate governance matters or other topics that are likely to be the 
subject of a proxy solicitation.
c. Eliminate Confidential Treatment of Merger Proxies
    Currently, preliminary proxy material relating to certain 
reclassifications and business combinations, other than going-private 
or roll-up transactions,\101\ may be filed confidentially with the 
Commission.\102\ In that case the proxy material is not filed on EDGAR 
and is not available for public inspection.\103\ Due to the changing 
realities of today's markets, and the expressed need by many companies 
for an expanded safe harbor permitting early disclosure of information 
before a registration statement is on file, we propose to eliminate 
confidential treatment for merger proxy statements.\104\ Often 
companies that invoke confidential treatment for their merger proxy 
statements already have made extensive pre-filing disclosure of 
information beyond what is permitted by current Securities Act Rule 
145(b) and the proxy rules. It is unclear to us why a company that 
broadcasts extensive deal-related information to the securities markets 
soon after a definitive merger agreement is executed needs confidential 
treatment for the same information contained in its proxy materials. In 
some instances, the information disclosed to the market is more 
extensive than the information disclosed in the preliminary proxy 
statement filed confidentially.
---------------------------------------------------------------------------

    \101\ 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 publicly registered. 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.
    \102\ Rule 14a-6(e)(2) [17 CFR 240.14a-6(e)(2)].
    \103\ The proxy material is filed publicly in definitive or 
final form when the staff has no further comments or when a related 
registration statement is filed that wraps-around (or incorporates) 
the information contained in the proxy statement.
    \104\ When the transaction is a stock merger, this would 
eliminate the need for the current practice of filing a 
(confidential) proxy statement before filing the related (public) 
registration statement.
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    We previously proposed to eliminate confidential treatment for all 
preliminary proxy statements, including those relating to mergers, in 
1992.\105\ The Commission ultimately decided to preserve confidential 
treatment for merger transactions in light of commenters' concerns that 
the inability to file documents relating to business combinations or 
acquisitions on a non-public basis would cause premature disclosure of 
information. The concern articulated was that merger negotiations might 
not be ripe at the time of filing and public disclosure ``would 
adversely affect the timing of such transactions and thereby their 
costs, since they could not obtain Commission review of the offering 
documents while the

[[Page 67343]]

participants were preparing for the public announcement of the 
transaction.'' \106\ In light of the current practice of disclosing 
extensive deal-related information before the filing of a proxy 
statement, we do not believe that preliminary merger proxy materials 
continue to merit confidential treatment.
---------------------------------------------------------------------------

    \105\ See Release No. 34-30849 (June 24, 1992) [57 FR 29564].
    \106\ Id.
---------------------------------------------------------------------------

    The elimination of confidential treatment of merger proxy 
statements would harmonize the treatment of preliminary proxy 
statements with preliminary prospectuses and tender offer materials, 
which are publicly available when filed. In addition, security holders 
would obtain faster access to information concerning extraordinary 
transactions. Without confidential treatment, security holders also 
would have more time to consider and respond to proposed mergers and 
acquisitions.
    We request comment on whether confidential treatment should be 
retained under any limited circumstances. Should confidential treatment 
be available if the parties to the merger transaction do not rely on 
the new safe harbors permitting increased communications?
    Some have expressed the view that confidential treatment makes 
registrants more comfortable with amending their materials to comply 
with staff comments, as the marketplace is not aware of the nature of 
the changes. If a proxy statement is filed publicly, the trading 
markets may act on the information disclosed and there may be liability 
concerns if the information disclosed is revised. Do commenters believe 
that these concerns outweigh the benefits of public filing? If so, how 
are merger proxies different from exchange offers and other types of 
filings that are not accorded confidential treatment?
    We note that when the wrap-around procedure is used, registration 
statement exhibits are filed on a delayed basis. Would registrants be 
put at a significant disadvantage if they were required to file all 
exhibits when they filed their registration statements publicly, or 
would they continue the practice of filing exhibits when available? 
Should we continue to permit the filing of a proxy statement before the 
wrap-around registration statement, even though the proxy statement 
would be public?
d. Timing of Filings
    In addition to the substantive changes to the proxy rules proposed 
above, we propose procedural amendments to the proxy filing 
requirements. Rule 14a-6(b) requires definitive material to be ``filed 
with, or mailed for filing to, the Commission not later than the date 
such material is first sent or given to any security holders.'' Several 
other proxy and information statement filing rules contain similar 
language.\107\ The option to mail proxy materials to the Commission is 
no longer relevant because companies that are subject to the proxy 
rules are now required to file electronically.\108\ We propose to 
update these filing rules to eliminate the ``mailed for filing'' 
language in the rules. Filers would be required to file definitive 
material with the Commission no later than the date they send or give 
proxy materials to security holders.
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    \107\ 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)].
    \108\ See Rule 101(a)(iii) of Regulation S-T [17 CFR 
232.101(a)(iii)]. Registrants may use paper 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. 17 CFR 240.3a-12-3.
---------------------------------------------------------------------------

    We believe that making definitive material available to security 
holders, the market and the staff as promptly as possible is important. 
EDGAR, and other sources of electronic filings, including the Internet, 
have become essential in supplying the investment community with public 
information. Any discrepancy between the time information is first 
disseminated and the time it is filed with the Commission could place 
those who rely on our filings for public information at a disadvantage.
    Filers (particularly those in time zones later than the 
Commission's) have argued that filing proxy materials on the same day 
is a hardship. It is not clear why this is the case, in view of the 
treatment of tender offer materials. Such materials must be filed ``as 
soon as practicable'' on the date the tender offer commences, and 
filers comply with that requirement without any apparent 
difficulty.\109\ While the proposed electronic filing rule acknowledges 
that some information may be released when it is not possible to file 
it with the Commission, we believe that material distributed during 
Commission business hours should be available at that time to the 
public through our filing system.\110\
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    \109\ See Rule 14d-3(a) [17 CFR 240.4d-3(a)]. See also Rule 14d-
3(b) [17 CFR 240.14d-3(b)] (filing of additional tender offer 
material).
    \110\ In an interpretive letter, the Division of Corporation 
Finance stated that, where it is impracticable to file proxy 
materials on the same business day, it is consistent with the intent 
of Rule 13(d) to allow issuers and others to file electronically 
``promptly on the next business day following distribution to 
security holders.'' See Henry Lesser, Esq. (November 28, 1995). This 
proposal would supersede that interpretation. material disseminated 
during the Commission's business hours would be required to be filed 
on that day.
---------------------------------------------------------------------------

    In connection with this change to the proxy filing rules, we 
propose to update our electronic filing rules to provide guidance to 
filers as to when to file material that is disseminated outside normal 
Commission business hours. The issue of when to file this type of 
material arises most often in the context of proxy soliciting material, 
although it may, on occasion, arise for tender offer filings. Our 
electronic filing rule already requires material that may be ``mailed 
for filing'' to be filed on or before publication or distribution; in 
the event of publication or distribution on a non-business day, the 
rule permits filing ``as soon as practicable on the next business 
day.'' \111\ We propose to modify this rule to eliminate ``mailed for 
filing'' and refer to material that is required to be filed on the same 
day it is disseminated. The revised rule would continue to permit 
filing as soon as practicable on the next business day if the material 
was disseminated on a non-business day, but would make it clear that 
dissemination after the Commission's business hours is treated the same 
as dissemination on a non-business day. The revised rule would apply to 
tender offer filings as well as proxy filings.
---------------------------------------------------------------------------

    \111\ See Rule 13(d) of Regulation S-T.
---------------------------------------------------------------------------

    We solicit comment on the nature and extent of problems encountered 
with the timing requirement for filing proxy and tender offer material. 
Commenters should consider whether the proposed rule provides adequate 
guidance to filers disseminating materials outside of our business 
hours. Alternatively, the rule could be amended to require filing 
within one business day of dissemination instead of ``as soon as 
practicable on the next business day,'' or by a certain time on the 
next business day (e.g., 9:00 a.m. or 12:00 noon). We believe security 
holders and the public in general should be able to access public 
filings at the earliest possible time. Currently, filings are accepted 
on EDGAR as late as 10:00 p.m., although filings submitted after 5:30 
p.m. receive a filing date of the next business day and are not 
available to the public until the next business day. We could amend 
Rule 13(d) of Regulation S-T to require submission of proxy material by 
10:00 p.m. on the same day it is disseminated to security holders, 
unless dissemination occurs on a day that the Commission is not open.
7. Free Communications Under the Tender Offer Rules
    A bidder's ability to communicate with security holders and the 
markets in

[[Page 67344]]

general regarding a proposed offer is limited by the concept of 
``commencement'' in the tender offer rules. A bidder is required to 
file and disseminate information regarding its offer upon 
``commencement.'' Commencement is the date an offer starts for purposes 
of the tender offer rules. A bidder's public announcement of certain 
minimal information about an offer may trigger commencement and can 
result in certain filing and disclosure obligations for the bidder, 
depending upon whether cash or stock is offered.\112\ Similarly, the 
target cannot make a recommendation regarding the offer without 
triggering filing and disclosure obligations.
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    \112\ Issuer tender offers are not subject to pre-filing 
communication restrictions; thus no substantive change to the issuer 
tender offer rule is necessary, although we do propose some 
conforming changes.
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a. Disclosure Triggering Commencement
    Currently, a third-party cash tender offer is deemed to commence on 
the date the bidder discloses certain information 
(``announcement''),\113\ unless the bidder does one of two things 
within five business days of the announcement date. If the bidder files 
a tender offer statement with the Commission, and disseminates 
specified information to security holders, the offer is deemed to 
commence on the date of filing and dissemination, not on the date of 
announcement.\114\ If the bidder makes a subsequent public announcement 
that it has determined not to proceed with the offer, the initial 
announcement will not be deemed to commence an offer.\115\ If the 
bidder neither complies with the tender offer rules nor withdraws the 
offer, the offer is deemed to commence upon public announcement, 
resulting in filing and disclosure violations. We refer to this 
requirement as the ``five business day rule.''
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    \113\ If solely cash and/or securities exempt from registration 
under Section 3 of the Securities Act are offered, then a public 
announcement of: 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 will commence the tender offer. See 
Rule 14d-2 (b) and (c). [17 CFR 240.14d-2 (b) and (c)].
    \114\ See Rule 14d-2(b)(2). [17 CFR 240.14d-2(b)(2)].
    \115\ See Rule 14d-2(b)(1). [17 CFR 240.14d-2(b)(1)].
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    Stock tender offers are not subject to the same five business day 
rule. Instead, stock offers are deemed to commence when a final 
prospectus is first disseminated to security holders.\116\ A bidder can 
publicly announce its intention to make a stock offer, so long as the 
announcement contains only the limited information permitted by the 
Securities Act.\117\ This announcement will not stitute commencement of 
the offer if the bidder promptly files a registration statement 
relating to the securities offered.\118\
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    \116\ See Rule 14d-2(a)(4) [17 CFR 240.14d-2(a)(4)].
    \117\ See Rule 135-2(a)(4) [17 CFR 230.135(a)(4)].
    \118\ See Rule 14d-2(e) [17 CFR 240.14d-2(e)].
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    In 1979, we recognized the ``unsettling and disruptive effects'' 
that cash tender offers can have on the trading markets when we 
proposed the five business day rule.\119\ In adopting the rule, we 
noted it was common practice for bidders to publicly announce the 
material terms of their cash offers in advance of formal 
commencement.\120\ We observed that pre-commencement public 
announcements regarding cash tender offers can trigger market 
mechanisms, such as arbitrageur activity, and cause security holders to 
make investment decisions with respect to a tender offer on the basis 
of incomplete information. The five business day rule was designed to 
prevent bidders from publicly announcing the material terms of an offer 
before formally commencing the offer.
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    \119\ See Release No. 34-15548 (February 5, 1979) [44 FR 9956].
    \120\ See Release No. 34-16384 (November 29, 1979) [44 FR 
70326].
---------------------------------------------------------------------------

    Based on our experience with tender offers and the factors 
influencing the treatment of communications discussed earlier, we now 
believe that the communications restrictions imposed on bidders in both 
cash and stock tender offers may unnecessarily restrict communications 
with security holders. We believe that the reasoning behind easing 
restrictions on communications for other types of business combinations 
applies equally to tender offers. Unrestricted communications should 
result in the availability of more information to security holders on a 
timely basis. As a result, security holders should have a greater 
opportunity to inform themselves and assess the specific terms of a 
proposed offer. In light of the fact that tender offers generally 
remain open for a short period of time, usually 20 business days, 
advance notice of an offer should benefit security holders.
    In an effort to increase bidders' ability to communicate with 
security holders, we propose to amend the provisions relating to 
commencement. Specifically, we propose to eliminate the obligation to 
commence or withdraw a cash offer within five business days of making a 
public announcement. We also propose to eliminate the requirement to 
promptly file a registration statement after public announcement of a 
stock offer. The revised rule would permit bidders to engage in free 
communications before commencement.\121\ The communications permitted 
under the safe harbor, however, would not include a transmittal form or 
instructions on how to tender into the offer.
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    \121\ Proposed revision to Rule 14d-2. Shortly after adopting 
the five business day rule, the Commission authorized the issuance 
of an interpretive release discussing the staff's views with respect 
to when certain tender offers commence under Regulation 14D and 14E. 
See Release No. 16623 (March 5, 1980) [45 FR 15521]. If we rescind 
the five business day rule as proposed, many of the interpretations 
in the release regarding commencement would no longer be applicable.
---------------------------------------------------------------------------

    In place of the five business day rule and the requirement to 
promptly file a registration statement, we propose to require bidders 
to file and disseminate the required information when tenders are first 
requested. The Williams Act and the tender offer rules were designed to 
assure that there is adequate information available to security holders 
so that they can make an informed investment decision before tendering 
into an offer. The public announcement of an offer should not trigger 
the need to file or disseminate information. Instead, the focus should 
be on when security holders are provided the means to tender their 
shares into the offer. That is the time when information required by 
the tender offer rules must be available to security holders.\122\
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    \122\ Although we propose to change the manner in which 
commencement of an offer is triggered, we are not defining the term 
``tender offer'' or changing our position on what activities may be 
deemed to constitute a tender offer. Nothing in these proposals 
affects the fact that the tender offer rules may be triggered by 
activities that function as unconventional tender offers. We 
reiterate 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].
---------------------------------------------------------------------------

    Under the proposal, we would require bidders in both stock and cash 
tender offers to satisfy the filing and dissemination requirements upon 
first disseminating transmittal forms (the tender offer equivalent of a 
proxy card) or disclosing to security holders instructions on how to 
tender into an offer. For example, if a bidder published an 
advertisement that instructed security holders how to contact the 
bidder and receive information on tendering securities in the offer 
(e.g., by publishing a telephone number for security holders to call to 
receive more information on how to tender), then the bidder would be 
required to comply with the filing and dissemination

[[Page 67345]]

requirements at that time. The 20 business day period would begin to 
run at this time.
    The five business day rule and the requirement to file a 
registration statement promptly may serve as a protection against 
bidders making tender offer announcements without the intent or ability 
to follow through. In order to prevent the development of such 
practices if these requirements are eliminated, we propose a new rule 
to make it clear that such conduct would be prohibited as fraudulent 
under the tender offer rules.\123\ The rule would prohibit a person 
from announcing a tender offer: without the intent to commence and 
complete the offer; with the intent to manipulate the price of either 
the bidder's or the target's securities; or without a reasonable belief 
that the person will have the means to purchase the securities sought. 
Are there other provisions that should be included to prevent 
inappropriate use of the free communications safe harbor, while not 
deterring legitimate communications?
---------------------------------------------------------------------------

    \123\ Proposed Rule 14e-8.
---------------------------------------------------------------------------

    We solicit comment on whether the five business day rule or the 
requirement to file a registration statement promptly provide 
investors, bidders, targets or security holders with any benefits that 
the proposed rule would not provide. Do these requirements cause 
bidders to provide security holders with needed information sooner?
    We also ask whether the proposed rules increase the risk that 
investors will make investment decisions based solely on a bidder's 
pre-commencement communications without adequate information. Security 
holders might sell into the market based on a bidder's pre-filing 
communications. This risk, however, exists today under the current 
rules, although for a more limited time. Should the tender offer rules 
focus on this risk? Is the risk of market activity, based on incomplete 
information, greater for cash offers than it is for stock offers? If 
so, is it more important to maintain the five business day rule than to 
harmonize cash tender offers with other types of business combinations? 
Would the proposed obligation to file and disseminate information when 
security holders are first solicited to tender using a transmittal form 
adequately protect security holders? Is there less of a need to permit 
bidders to provide information to the marketplace before filing than 
there is for other types of business communications because cash tender 
offer material may be prepared and disseminated so quickly?
    Currently, bidders are required to hand deliver a copy of the 
tender offer statement and additional tender offer materials to the 
target company and any other bidder for the same class of 
securities.\124\ In addition, we propose to require delivery to the 
same parties of the first written communication a bidder makes that 
sets forth its identity, that of the target company, the amount and 
class of securities sought, and the price or range of prices 
offered.\125\ Is this needed, or would the fact that the communication 
must be filed with the Commission provide adequate notice to the target 
company and any other bidders?
---------------------------------------------------------------------------

    \124\ See Rule 14d-3(a)(2).
    \125\ 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 do not propose 
to extend this to cover pre-commencement communications, as the 
exchanges and the NASD are moving away from relying on paper filings 
and increasingly using electronic databases to obtain EDGAR filings.
---------------------------------------------------------------------------

    Each communication made in reliance on the safe harbor would be 
required to prominently advise security holders to read the complete 
tender offer material, consistent with the Securities Act and proxy 
rule proposals.\126\ Should we require any additional information in 
these communications? For example, should a bidder be required to 
disclose information such as its identity, the target's identity, the 
form and amount of consideration offered, any conditions to the offer, 
and the bidder's interest(s) in the target, including security 
ownership? This would be similar to the current requirement in Rule 
14a-12 that specified information be contained in any communications 
made before the filing of a proxy statement.
---------------------------------------------------------------------------

    \126\ See proposed Rules 13e-4(c) and 14d-2(b)(2).
---------------------------------------------------------------------------

    Currently, the tender offer rules require specified information to 
be included in any communications made after the bidder has commenced 
the offer and disseminated the complete tender offer disclosure 
document. These ``additional tender offer materials'' must include 
basic information about the identity of the bidder and subject company, 
the terms and the expiration date. \127\ We propose to retain this 
requirement. Does the requirement serve a useful purpose in preventing 
confusion, particularly where there are competing offers? Would it be 
more important to require specific information in pre-commencement 
communications than in post-commencement additional material?
---------------------------------------------------------------------------

    \127\ See Rule 14d-6(c), proposed to be redesignated Rule 14d-
6(b).
---------------------------------------------------------------------------

    We also propose to revise the rules to permit targets the same 
freedom to make pre-commencement communications as bidders. A target 
(or other person who makes any solicitation or recommendation to 
security holders regarding the offer) must provide specified 
information to security holders and file a Schedule 14D-9 with the 
Commission on the same date that it makes a recommendation regarding 
the offer.\128\ This obligation is triggered by the target's 
communications even if the bidder has not yet commenced the tender 
offer. We propose to amend the rule so this obligation is not triggered 
by communications made by the target before the bidder has filed its 
tender offer statement and commenced the offer. Targets would be 
required to file pre-commencement communications on first use. This 
would put the bidder and target in an equal position to engage in free 
pre-commencement communications. We solicit comment on whether there is 
any reason to treat bidders and targets differently. We also ask 
whether the target's communications should be required to contain a 
statement advising security holders to read the complete recommendation 
when it is available.
---------------------------------------------------------------------------

    \128\ See Rule 14d-9. A target must respond to a tender offer by 
communicating a position on the offer no later than ten business 
days from the date the offer is disseminated. See Rule 14e-2.
---------------------------------------------------------------------------

b. Methods to Disseminate an Offer
    The tender offer rules currently provide for several non-exclusive 
methods to ``commence'' an offer. If one or more of the specified 
methods are followed,\129\ the tender offer will be deemed ``published, 
sent or given to security holders''' for purposes of Section 14(d)(1) 
of the Exchange Act. The methods of disseminating information that will 
commence an offer include: (i) long form publication; \130\ (ii) 
summary advertisement; \131\ (iii) summary advertisement or long form 
publication using stockholder lists and security position listings; 
\132\ and (iv) if securities are to be offered as consideration, 
publishing, sending, or giving copies of a final prospectus to security 
holders.\133\ While a tender offer can be commenced in other ways,\134\ 
the

[[Page 67346]]

methods listed above are generally regarded as safe harbors and will 
give the bidder comfort that the offer has commenced under the tender 
offer rules. Commencement is important because if an offer is not 
deemed to commence, the required 20 business day period will not begin 
to run.\135\
---------------------------------------------------------------------------

    \129\ A bidder can use more than one method provided it complies 
fully with each method used.
    \130\ See Rule 14d-2(a)(1) [17 CFR 240.14d-2(a)(1)]. See also 
Rule 14d-4 for these methods of dissemination, which also are means 
of publicizing changes to the initial tender offer information.
    \131\ See Rule 14d-2(a)(2) [17 CFR 240.14d-2(a)(2)].
    \132\ See Rule 14d-2(a)(3) [17 CFR 240.14d-2(a)(3)].
    \133\ See Rule 14d-2(a)(4) [17 CFR 240.14d-2(a)(4)].
    \134\ See Rule 14d-2(a)(5) [17 CFR 240.14d-2(a)(5)] providing 
that an offer may commence when ``the tender offer is first 
published, sent or given to security holders by the bidder by any 
means not otherwise referred to in paragraphs (a)(1) through (4) of 
this section.''
    \135\ See Rule 14e-1(a) [17 CFR 240.14e-1(a)].
---------------------------------------------------------------------------

    Long form publication requires the bidder to publish extensive 
information regarding the tender offer in a newspaper.\136\ Before we 
adopted the summary advertisement method in 1979,\137\ long form 
publication was the accepted means of dissemination. Due to escalating 
costs and scheduling problems associated with long form publication, 
summary publication has replaced long form publication as the common 
means of disseminating a tender offer. Given that long form publication 
is not viewed as cost-effective and is rarely used by bidders, we 
propose to eliminate it as a means of disseminating information about a 
tender offer.\138\ We solicit comment, however, on whether the method 
should be retained, perhaps in connection with publication on the 
Internet in combination with other methods of dissemination.
---------------------------------------------------------------------------

    \136\ A bidder must publish the information specified in Rule 
14d-6(e)(1) [17 CFR 240.14d-6(e)(1)].
    \137\ See Release No. 34-16384 (November 29, 1979) [44 FR 
70326].
    \138\ We propose this change both for issuer and third-party 
tender offers. See Rule 13e-4(e)(i) (issuer) and 14d-4(a)(1) (third 
party).
---------------------------------------------------------------------------

    Under the summary publication method, a bidder must publish an 
advertisement in a newspaper and furnish its tender offer materials 
with reasonable promptness to any security holder who requests a copy. 
The advertisement must contain, and is limited to, certain specified 
information.\139\ Bidders are not permitted to include a transmittal 
form with the summary advertisement.\140\ Security holders therefore 
must request and receive complete information from the bidder before 
they can tender into the offer.
---------------------------------------------------------------------------

    \139\ See Rule 14d-6(a)(2) [17 CFR 240.14d-6(a)(2)]. Bidders, 
however, generally disclose more information in their summary 
advertisements than is currently permitted under the rules. There is 
some judicial support for the disclosure of additional information. 
See Crouse-Hinds Co. v. Internorth, Inc., 518 F. Supp. 416 (N.D.N.Y. 
1980) (permitting disclosure of conditions to an offer in a summary 
advertisement). Based on our proposals to permit free 
communications, we would amend Rule 14d-6(a)(2) to delete the 
language limiting the information that can appear in a summary 
advertisement. We would retain the prohibition against including a 
transmittal form with the summary advertisement. However, the 
summary advertisement could (and should, 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.
    \140\ See Rule 14d-6(e)(3) [17 CFR 240.13d-6(e)(3)].
---------------------------------------------------------------------------

    Summary advertisements alone usually are not sufficient to prompt a 
large number of security holders to request a copy of the tender offer 
materials. Therefore, bidders generally will supplement their 
solicitation of tenders with a request for a stockholder list under 
Rule 14d-5, in addition to publishing a summary advertisement. Under 
this rule bidders can request a stockholder list from the target. The 
target has the option of either mailing the offering materials to 
security holders at the bidder's expense, or providing the bidder with 
a stockholder list of record holders prepared as of the most recent 
practicable date.\141\
---------------------------------------------------------------------------

    \141\ In Part II.E.4 below, we propose to expand the stockholder 
list rule to make it more useful by including beneficial owner 
information.
---------------------------------------------------------------------------

    We solicit comment on whether we should eliminate dissemination by 
summary advertisement alone (without the use of stockholder lists) to 
make the cash tender offer regulations more comparable to other 
business combination methods. Should the stockholder list requirement 
apply to amendments disclosing material changes as well as to initial 
tender offer material? We note that delivery is required if registered 
securities are offered, given that prospectuses must be delivered as 
required by the Securities Act. Similarly, delivery of a disclosure 
document would be necessary if security holder approval was solicited 
under the proxy rules.\142\ While we note that bidders typically use 
stockholder lists, we solicit comment on whether there are 
circumstances when the use of stockholder lists is impracticable.
---------------------------------------------------------------------------

    \142\ When delivery is required by the rules, this can be 
accomplished by using electronic media, provided the bidder 
satisfies the guidelines set forth in Release No. 33-7233 (October 
6, 1995) [60 FR 53458], regarding electronic delivery. For example, 
a summary advertisement for a tender offer could contain a consent 
form for a security holder to indicate his or her willingness to 
receive the complete tender offer materials by means of a specified 
electronic medium.
---------------------------------------------------------------------------

    In addition, we solicit comment on whether to retain the current 
requirement that bidders using stockholder lists also publish summary 
advertisements. The summary advertisement serves as an additional means 
of publicizing tender offer information while it is in the process of 
being mailed to security holders. This may be particularly useful in 
the short time frame of a cash tender offer.
    Finally, we request commenters' views on whether we should permit 
means of disseminating tender offer material other than those 
described. The increasing use of electronic media, particularly the 
Internet, provides an avenue for widespread access to information. On 
the other hand, many security holders rely on more traditional sources 
of information, such as newspapers and the mail. We do not want to put 
these security holders at a disadvantage in obtaining tender offer 
information. Therefore, we are not proposing that electronic media be 
permitted as a sole means of dissemination. We are, however, interested 
in comment as to how electronic media are currently used in the tender 
offer area and whether there are electronic sources of information that 
are as commonly available and widely followed as the newspapers of 
general circulation used for summary advertisements.\143\
---------------------------------------------------------------------------

    \143\ Rule 14d-4(b) [17 CFR 240.14d-4(b)] provides that 
publication in all editions of a daily newspaper with a national 
circulation is deemed to constitute adequate publication.
---------------------------------------------------------------------------

C. Permit Exchange Offers To Commence on Filing

1. Early Commencement
    The Commission first adopted the requirement for an effective 
registration statement before commencing an exchange offer in 
1979.\144\ In proposing the requirement, we noted that we intended to 
codify ``the current practice of commencing the bidder's offer when its 
registration statement under the Securities Act becomes effective.'' 
\145\ In 1983, a Commission Advisory Committee \146\ noted the 
regulatory disincentives to offering securities as consideration \147\ 
in a tender offer and recommended that exchange offers be permitted to 
commence as soon as the registration statement is filed.\148\
---------------------------------------------------------------------------

    \144\ Release No. 34-16384 (November 29, 1979) [44 FR 70326, 
70338].
    \145\ Release No. 34-15548 (February 5, 1979) [44 FR 9956].
    \146\ See Advisory Committee on Tender Offer Report on 
Recommendations (July 8, 1983). We established the Committee to 
examine the tender offer process and other techniques of acquiring 
control of public issuers and to recommend legislative and/or 
regulatory changes deemed appropriate or necessary. Release No. 34-
19528 (February 24, 1983) [48 FR 9111].
    \147\ The Committee stated that ``there are significant 
regulatory impediments to undertaking an exchange offer rather than 
a cash tender offer, which impediments are not necessary for the 
protection of shareholders'' and that ``regulation should not be a 
principal factor in determining the method of acquisition.'' 
Advisory Committee Report at 16. On that basis, the Committee issued 
Recommendation 5: Cash and securities tender offers should be placed 
on an equal regulatory footing so that bidder, the market and 
shareholders, and not regulation, decide between the two.
    \148\ Recommendation 12 of the Committee's Report stated:
    Bidders should be permitted to commence their bids upon filing 
of a registration statement and receive tenders prior to the 
effective date of the registration statement. Prior to 
effectiveness, all tendered shares would be withdrawable. 
Effectiveness of the registration statement would be a condition to 
the exchange offer. If the final prospectus were materially 
different from the preliminary prospectus, the bidder would be 
required to maintain, by extension, a 10-day period between mailing 
of the amended prospectus and expiration, withdrawal and proration 
dates.

---------------------------------------------------------------------------

[[Page 67347]]

    In order to put cash and stock tender offers on a more level 
playing field, we propose to permit ``early commencement'' of third-
party exchange offers. Currently, stock tender offers commence on the 
date the related registration statement becomes effective. Under 
today's proposal, exchange offers could commence upon the filing of a 
registration statement, or on a later date selected by the bidder.\149\ 
As a result, the regulatory bias against stock offers would be reduced. 
We request comment as to whether the current regulatory scheme is a 
significant factor in deciding how offers are structured. Is it 
important to harmonize the regulatory treatment of cash and stock 
offers? If so, does the proposal accomplish this goal while continuing 
to protect investors?
---------------------------------------------------------------------------

    \149\ Proposed Rule 14d-4(b).
---------------------------------------------------------------------------

    Under the proposal, a bidder that wished to ``commence'' an 
exchange offer by requesting tenders would have to satisfy several 
requirements. First, the bidder would have to file a registration 
statement relating to the securities offered. The preliminary 
prospectus would need to include all information, including pricing 
information, necessary to allow security holders to make an informed 
investment decision. Information could not be omitted under Rule 430 or 
Rule 430A of the Securities Act.\150\ Second, the prospectus would have 
to be disseminated to all security holders. Third, a tender offer 
statement would have to be filed with the Commission. The filing of a 
registration statement alone would not suffice. The bidder would have 
to file both a registration statement and a tender offer statement 
\151\ and furnish a preliminary or final prospectus to security 
holders.\152\ Security holders would have the right to withdraw shares 
tendered at any time until they were purchased, and bidders could not 
purchase shares until after the registration statement was 
effective.\153\
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    \150\ Generally, a prospectus that is used before effectiveness 
may omit certain pricing information including the offering price, 
underwriting discounts or commissions, discounts or commissions to 
dealers, amount of proceeds, conversion rates, call prices or other 
matters dependent upon the offering price. See Rule 430 [17 CFR 
230.430]. A prospectus in a registration statement that is declared 
effective may also omit certain syndicate, underwriting discounts or 
commissions, discounts or commissions to dealers, amount of 
proceeds, conversion rates, call prices and other information that 
is dependent upon the offering price, delivery dates, and terms of 
the securities dependent upon the offering date. See Rule 430A. [17 
CFR 230.430A].
    \151\ Generally, tender offer statements in exchange offers 
incorporate by reference substantial portions of the information 
contained in the prospectus in response to the various disclosure 
requirements. Incorporation by reference would continue to be 
available under the proposal.
    \152\ Under the proposal, a bidder could disseminate a 
preliminary prospectus without requesting tenders, as permitted 
under the current rules, and not trigger commencement.
    \153\ Proposed Securities Act Rule 162.
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    The ``early commencement'' proposal is limited to third-party 
exchange offers because the need to put cash and stock offers on a more 
level playing field appears to arise most often in that context. We ask 
for comment, however, on whether issuer exchange offers present the 
same timing and competitive concerns. Should the proposal be expanded 
to issuer exchange offers?
    Going-private and roll-up transactions involving exchange offers 
would not be permitted to commence before the effectiveness of a 
related registration statement. These types of transactions often 
involve material disclosure issues. We continue to believe that the 
staff should have a full opportunity to review and comment upon the 
documents filed in connection with these transactions before 
commencement of an exchange offer in order to ensure that the rules are 
complied with and the appropriate level of disclosure is made to 
security holders.
    Under the proposal, early commencement would be at the option of 
the bidder. The filing of a tender offer statement would serve as 
notice to the Commission and the public that the offer commenced and a 
prospectus was disseminated to security holders. A bidder could 
commence upon filing the registration statement, or wait for staff 
comments or effectiveness before actually commencing its offer.
    We request comment on whether a bidder should be required to 
commence its offer as soon as it files a registration statement.
    Alternatively, should bidders be free, as the rule proposes, to 
determine when a stock offer commences? If we do not require bidders to 
commence on filing the registration statement, should there be an 
outside date on which the exchange offer must commence (e.g., no later 
than effectiveness of the related registration statement or no later 
than five or ten business days after effectiveness)?
    The early commencement proposal is intended, in part, to provide 
bidders with an incentive to disseminate their offering materials 
broadly to all security holders at the earliest practicable date. The 
proposal would not prohibit bidders from making selective 
communications in addition to or instead of using the early 
commencement procedure to disseminate material to all security holders. 
When combined with the proposals above regarding communications, 
however, the availability of early commencement should encourage full 
and fair disclosure to all security holders. We request comment as to 
whether bidders would continue to communicate with large institutional 
investors to the exclusion of small retail investors. Is it necessary 
to require bidders to disseminate a prospectus to all security holders 
as soon as it is filed with the Commission? If we require delivery, 
however, the preliminary prospectus might include certain information 
that is not complete or accurate. In light of the inherent limitations 
on the information available to bidders that could be included in a 
preliminary prospectus, would mandatory dissemination to all security 
holders benefit or harm small retail investors?
    The ability to commence upon filing may not be sufficient to level 
the playing field if bidders are not assured of having an effective 
registration statement within a reasonable period of time. While cash 
offers can expire after a minimum of 20 business days, stock offers 
could not expire under the proposal until the related registration 
statement became effective. Therefore, we solicit comment on whether 
expedited staff review is necessary to effectively harmonize the 
regulatory treatment of cash and stock tender offers. If so, how short 
would the Commission staff's review and comment period need to be in 
order to assure timely completion of a stock tender offer? Would it be 
helpful if the staff committed to an expedited review of stock tender 
offers whenever a competing cash tender offer emerges? Would it be 
necessary to provide for some form of accelerated effectiveness for 
stock offers to fully balance the treatment of cash and stock offers?
    One way to achieve this balance would be to allow or require some 
or all exchange offers registered on Form C and Form SB-3 \154\ to 
become effective

[[Page 67348]]

on filing,\155\ or allow the bidder to specify the date after filing on 
which the registration statement would become effective.\156\ This 
approach would provide bidders with greater certainty as to when their 
offer could close and shares could be accepted in the offer. ``Early 
commencement'' would then be unnecessary. This approach would allow 
bidders to freely decide between offering cash or stock without concern 
for regulatory delay. Of course, the staff would not have an 
opportunity to review the information before it is disseminated to 
security holders, but could review it after effectiveness just as it 
now reviews cash tender offer materials after they are mailed to 
security holders. We would not extend this approach to going-private or 
roll-up transactions. If this approach were permitted, should it be 
limited to third-party tender offers or also extend to issuer tender 
offers? Do the same timing concerns apply to mergers? If so, and this 
approach is adopted, should it apply to mergers as well? Should 
automatic effectiveness be limited to bidders entitled to use Form B?
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    \154\ As noted in the Securities Act Reform Release, Form C (and 
Form SB-3 for small business issuers) would be the successor to 
Forms S-4 and F-4. If Forms C and SB-3 are not adopted, then the 
proposals in this release would apply to exchange offers registered 
on Form S-1, S-4, F-4 and S-11.
    \155\ The Task Force Disclosure Simplification recommended that 
registration statements on Forms S-4/F-4 relating to exchange offers 
by S-3/F-3 eligible companies become effective automatically upon 
filing, so long as the securities offered are common stock traded on 
a national securities exchange or quoted in the Nasdaq NMS, or are 
investment grade debt or preferred stock. See Report of the Task 
Force on Disclosure Simplification (March 1996) at p. 56. If the 
Securities Act Reform Release proposals are adopted, we could 
provide automatic effectiveness on filing for Form B issuers, or we 
could provide it for all registration statements on Form C only and 
not Form SB-3.
    \156\ This is how Form B would be treated in the Securities Act 
Reform Release.
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    We also are considering whether to harmonize the proxy rules with 
the tender offer rules by providing a proxy analogue to the ``early 
commencement'' proposal. If we did this, we would permit proxy cards in 
connection with mergers and similar business combinations to be sent 
with a preliminary proxy statement/prospectus, rather than requiring 
that they accompany only a definitive proxy statement/final prospectus. 
Proxies may be revoked at any time before the vote, just as tenders may 
be withdrawn before the offer expires. The vote could not take place 
until after the proxy statement was definitive or the registration 
statement was effective, and security holders would have to be given 
information about material changes in sufficient time to act on it, as 
discussed below in connection with exchange offers. Would this 
procedure be useful in mergers? Is the merger situation different from 
the tender offer situation; would there be greater risk that security 
holders would vote on the basis of premature or incomplete information 
and not receive updating or corrective information in a timely fashion? 
In particular, would street name holders receive this information in 
sufficient time to make an informed voting decision?
    We have considered how the ``early commencement'' proposal 
interacts with our rules regarding stock purchases outside a tender 
offer. Regulation M \157\ prohibits purchases of the bidder's 
securities during an exchange offer's restricted period, while Rule 
10b-13 \158\ prohibits purchases of the target's securities once the 
offer is publicly announced. The Regulation M restricted period begins 
as of the date that the exchange offer is commenced, i.e., when the 
bidder has first published, sent or given security holders the means to 
tender. In contrast, the restrictions of Rule 10b-13 start as of the 
time the offer is first publicly announced to security holders, which 
can be before the offer commences. We believe these rules would operate 
appropriately in the ``early commencement'' context, but solicit 
commenters'' views.
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    \157\ 17 CFR 242.100 through 242.105.
    \158\ 17 CFR 240.10b-13. Rule 10b-13 is proposed to be revised 
and redesignated as Rule 14e-5. See Part II.E.5 below.
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2. Dissemination of a Supplement and Extension of the Offer
    The Division of Corporation Finance staff decides whether to review 
a registration statement after it is filed, along with a related tender 
offer statement, based upon its selective review criteria. Under the 
``early commencement'' proposal, the bidder already may have 
disseminated the combined prospectus/tender offer before staff comments 
are received. If the staff had material comments, the bidder would be 
required to file and disseminate a prospectus supplement, or possibly a 
post-effective amendment to the registration statement.
    We propose to require bidders using ``early commencement'' to 
disseminate supplements to disclose any material changes, whether as a 
result of staff review, or due to any other material changes in the 
information previously disclosed. If a supplement contained material 
information, the exchange offer would need to remain open for a minimum 
period of time after a supplement was sent, as discussed below. The 
proposed rule would require a bidder to provide sufficient time for 
security holders to reconsider their investment decision (i.e., by 
withdrawing previously tendered shares or tendering shares not yet 
tendered) based upon the additional information.
    The tender offer rules do not currently establish a specific 
minimum time period with respect to the disclosure and dissemination of 
material changes, except for those relating to price or the amount of 
securities sought.159 In an interpretive release relating to 
the tender offer rules, however, the Commission provided the following 
guidelines:
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    \159\ See 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.

    As a general rule, the Commission is of the view that to allow 
dissemination to shareholders in a manner reasonably designed to 
inform (them) of such change (17 CFR 240.14d-4(c)), the offer should 
remain open for a minimum of five business days from the date that 
the material change is first published, sent or given to security 
holders. If material changes are made with respect to information 
that approaches the significance of price and share levels, a 
minimum period of ten business days may be required to allow for 
adequate dissemination and investor response. Moreover, the five 
business day period may not be sufficient where revised or 
additional materials are required because disclosure disseminated to 
security holders is found to be materially deficient. Similarly, a 
particular form of dissemination may be required. For example, 
amended disclosure material designed to correct materially deficient 
material previously delivered to security holders would have to be 
delivered rather than disseminated by publication.160
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    \160\ Release No. 34-24296 (April 3, 1987) [52 FR 11458].

    Under the ``early commencement'' proposal, if the bidder had to 
send a supplement containing material changes either before or after 
effectiveness of the registration statement, the offer would need to 
remain open for at least a specified minimum period.161 The 
original expiration date would have to be extended if necessary. The 
offer would need to remain open at least:
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    \161\ Proposed Rule 14d-4(d)(2).
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     Five business days for a supplement containing a material 
change other than price or share levels;
     Ten business days for a 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 supplement included as part of a 
post-effective amendment; and

[[Page 67349]]

     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.162
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    \162\ This would, in effect, re-start the 20 business day period 
required by the tender offer rules. If the initial prospectus did 
not comply with the roll-up rules and was revised during the 
offering period, the minimum solicitation period under the roll-up 
rules would be tolled until a revised prospectus satisfying the 
roll-up rules was disseminated.
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    We invite comment on whether these time periods are appropriate, 
and if not, what periods should be substituted. Would the ready 
availability of this information in electronic format (e.g., on the 
Commission's or the bidder's Internet web site) mean that these time 
periods could be shorter? On the other hand, would shortening these 
periods deprive security holders of essential information if they are 
not willing or able to take advantage of electronic media? As proposed, 
this rule would apply only to exchange offers where ``early 
commencement'' is used. Should it instead replace Rule 14e-1(b) and 
thus apply to all tender offers?
    We also solicit comment on whether bidders would be likely to take 
advantage of ``early commencement'' before receiving staff comments or 
a notification that the filing would not be reviewed. Would the risk of 
having to disseminate additional information and possibly extend the 
offer deter bidders from using this procedure? Or would they take those 
uncertainties into account as they now do for cash tender offers?
    The Securities Act Reform Release proposes to eliminate the 
requirement that a final prospectus be delivered to investors who have 
received a preliminary prospectus.163 This exemption would 
not apply to business combinations, which have a distinct scheme for 
delivery of information. However, we solicit comment on whether bidders 
who use the ``early commencement'' rule should be required to deliver a 
final prospectus after effectiveness. The informational purpose of the 
prospectus may be best served by requiring security holders to be given 
supplements setting forth significant changes, rather than by requiring 
the prospectus to be re-delivered.
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    \163\ Proposed Rule 173.
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3. Tenders into an Offer Exempt from Sale Requirements of the 
Securities Act
    Under the ``early commencement'' proposal, once a bidder commenced 
an offer, security holders could tender into the offer before the 
related registration statement became effective, but the bidder could 
not purchase securities tendered until the offer expired. Security 
holders would have the right to withdraw tenders until the offer 
expired, as they do now. As discussed above, expiration always would be 
after effectiveness of the related registration statement. In order to 
prevent the tendering of securities into an offer from being viewed as 
a ``sale'' without an effective registration statement, we propose a 
new rule to address this issue.164 We would use our new 
exemptive authority 165 to provide that transactions 
involving tenders during the ``waiting period'' when the early 
commencement rule is complied with would be exempt from the Securities 
Act requirements for sales.
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    \164\ Proposed Securities Act Rule 162.
    \165\ Section 28 of the Securities act [15 U.S.C. 77z-3].
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    The purpose of this rule is to place cash and exchange offers on a 
more equal footing by allowing them to operate on a more comparable 
time schedule and minimizing any regulatory factors that may influence 
a bidder's decision to offer cash instead of securities in a tender 
offer. The proposed exemption is necessary to assure bidders that they 
would not be viewed as violating Section 5 of the Securities Act 
166 when security holders tender into an exchange offer 
during the waiting period. Investors would continue to receive 
disclosure before making an investment decision. We believe that it is 
consistent with the public interest and the protection of investors to 
reduce the regulatory bias towards cash so that the bidder's choice of 
consideration is not unduly affected by concerns about timing. However, 
we solicit comment on whether this is an appropriate use of the 
Commission's exemptive authority.
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    \166\ 15 U.S.C. 77e.
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D. Integrate and Streamline the Disclosure Requirements for Tender 
Offers and Mergers

1. Subpart 1000 of Regulation S-K (``Regulation M-A'') and Combination 
of Schedules
    Currently, there is a different disclosure schedule for issuer 
tender offers, third-party tender offers and going-private 
transactions. Compliance with the line-item requirements in each of 
these schedules results in certain differences in the information 
disclosed to security holders.167 These differences in the 
disclosure requirements can be particularly troublesome to companies 
that are seeking to comply with the disclosure requirements in today's 
fast-paced takeover environment. We believe that the cost of compliance 
could be reduced, and the quality of disclosure improved, if the 
disclosure requirements were integrated into one set of uniform 
regulations and unnecessary differences were harmonized.168
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    \167\ For example, while Schedules 14D-1, 13E-4 and 13E-3 all 
require disclosure of high and low bid quotations of the subject 
security for each quarterly period during the preceding two years, 
only Schedules 13E-4 and 13E-3 require disclosure of the source of 
such quotations. See Item 1(c) of Schedule 13E-4 and Schedule 13E-3. 
As another example, Schedules 14D-1 and 13E-3 both require 
disclosure of past contacts, negotiations or transactions between 
the parties subject to a proposed tender offer or going-private 
transaction. Schedule 13E-3 (which generally requires more 
disclosure because of the affiliated nature of the transaction) 
requires disclosure for only the two preceding years, while Schedule 
14D-1 requires disclosure for the preceding three years. See Item 3 
of Schedule 13E-3 and Item 3 of Schedule 14D-1.
    \168\ Integration has worked well in the past. In 1985, the 
Commission integrated the disclosure requirements of the 
registration statement most commonly used in stock-based 
extraordinary transactions, Form S-4, with the disclosure 
requirements for proxy statements on Schedule 14A. See Release No. 
33-6578 (April 23, 1985) [50 FR 18990].
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    Accordingly, we propose to integrate the disclosure items contained 
in the schedules relating to issuer and third-party tender offers, 
tender offer recommendations, and going-private transactions. The 
disclosure items applicable to these transactions would be relocated 
into a new subpart of Regulation S-K called ``Regulation M-A.'' The new 
series of items would contain the current disclosure requirements 
applicable to tender offers and going-private transactions, with minor 
modifications to harmonize and clarify the items as well as more 
substantive changes discussed below.169 The new regulation 
includes some disclosure items for cash merger proxy statements and 
business combination registration statements as well. We have made an 
effort to use clear language and reduce legalese. We anticipate 
expanding the new regulation in the future to cover additional 
disclosure items.
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    \169\ In some cases, disclosure requirements appear in the rules 
rather than the schedules. These requirements also would be moved to 
Regulation M-A. For instance, schedule 14D-1 does not specifically 
require disclosure of the expiration date of the tender offer; that 
requirement appears in Rule 14d-6(e).
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    We also propose to combine current Schedules 13E-4 and 14D-1 (the 
schedules now used for issuer and third-party tender offers, 
respectively), into a new schedule called ``Schedule

[[Page 67350]]

TO.'' 170 The information required in Schedule 13E-4 is 
substantially similar to that required in Schedule 14D-1. Combining the 
schedules would harmonize the disclosure requirements applicable to 
issuer and third-party tender offers. Any differences in the 
information required due to the nature of the bidder (either issuer or 
third-party) would be addressed in items of the schedule and the 
applicable disclosure items in Regulation M-A.
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    \170\ Schedules 13E-3 and 14D-9 would be revised so that the 
format and instructions harmonize with schedule TO. These schedules 
would use clearer language and would refer to Regulation M-A for the 
substantive disclosure requirements. We do not propose to revise the 
schedules used in connection with the multijurisdictional disclosure 
system with Canada (i.e., Schedules 14D-1F, 14D-9F and 13E-4F).
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    In addition, we propose to permit a single filing to satisfy both 
the tender offer and going-private disclosure requirements. The 
disclosure items required by Schedules 14D-1, 13E-4 and 13E-3 could all 
be satisfied in one combined filing. For example, an affiliate engaging 
in a tender offer having a going-private effect could file a combined 
Schedule TO and Schedule 13E-3. Of course, all filing person(s) and 
applicable schedules would have to be identified on the cover page, but 
separate cover pages would not be required. Schedule 13E-3 would be 
filed separately when the underlying transaction was not a tender 
offer.
    In permitting a combined tender offer and going-private filing, we 
would reduce the redundancy of having to file two schedules for what is 
essentially the same transaction. The disclosure requirements are 
generally satisfied in the same document--the offer to purchase. This 
will continue to be the case.
    Schedule TO would contain an instruction specifying the items that 
need to be complied with for particular types of transactions.\171\ In 
addition, we would revise the current instruction requiring information 
that is incorporated by reference to be filed as an exhibit to the 
Schedule. The revised instruction would permit document(s) previously 
filed electronically with the Commission to be incorporated by 
reference without filing the information as an exhibit. 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 would apply to 
going-private statements.
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    \171\ An instruction will specify that certain items may be 
omitted when Schedule TO is combined with a Schedule 13E-3, to avoid 
redundant requirements. See General Instruction J to proposed 
Schedule TO.
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    We request comment on whether the ability to combine the disclosure 
currently required by Schedules 14D-1, 13E-4 and 13E-3 into one filing 
would be useful to filing persons. Would it be easier for the 
marketplace to follow this information if the filings were kept 
separate?\172\
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    \172\ There would be check boxes on the cover page to indicate 
whether the filing was an issuer tender offer, third-party tender 
offer, and/or going-private transaction. EDGAR tags also would 
indicate this information. If this proposal is adopted, EDGAR would 
be programmed so that public users of information could quickly 
determine the nature of each filing.
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    Alternatively, should the Schedule 13E-3 be eliminated entirely for 
most transactions? Instead, the tender offer schedule, registration 
statement and proxy statement cover page would have a check box 
indicating a going-private transaction is involved. The document would 
be required to contain all of the disclosure and signatures currently 
called for by Schedule 13E-3.\173\ If we took this approach, the 
Schedule 13E-3 would not be available as a place to provide negative 
answers to items. Currently, negative answers may be provided in the 
schedule rather than in the disclosure document disseminated to 
security holders.\174\ Accordingly, if we eliminated Schedule 13E-3 we 
would either eliminate the requirement for negative answers or require 
negative answers to be provided in the disclosure document.
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    \173\ When a going-private transaction did not involve another 
Commission filing, the Schedule 13E-3 would be required as a stand-
alone filing.
    \174\ See General Instruction A to Schedules 14D-9 and 13E-4; 
General Instruction B to Schedule 13E-3. As proposed, Schedule TO 
would include an instruction permitting filers to provide negative 
and ``not applicable'' answers in the schedule but not the 
disclosure document disseminated to security holders. A similar 
instruction is proposed for Schedules 13E-3 and 14D-9. See General 
Instruction E to proposed Schedules TO and 13E-3 and General 
Instruction C to proposed Schedule 14D-9. The ability to omit 
negative answers already exists to some extent for going-private and 
tender offer statements. See Instruction 1 to Rule 13e-3(e)(3); 
Instruction A to Rule 13e-4(d); and Rule 14d-6(e)(1)(vii). Negative 
answers are common in responding to items that call for information 
about civil and/or criminal proceedings involving the filing person 
and certain control persons for the five-year period before the 
filing. See Item 2 (e) and (f) to Schedules 13E-3 and 14D-1.
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    We also request comment on whether the concept of one filing 
satisfying all disclosure requirements should be applied to the 
Securities Act and proxy rules as well as the tender offer and going-
private rules. Should one filing be permitted to satisfy all of these 
transactions? Currently, different signature pages may be required 
depending upon the schedules or forms combined.\175\ If registration 
statements and proxy statements were permitted to be combined with 
tender offer and going-private schedules, then a uniform signature 
requirement would be necessary, or we could require that the more 
extensive signature requirements control.
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    \175\ For example, no signature is currently required for 
Schedule 14A proxy statements while Securities Act registration 
statements require signatures by the registrant, the principal 
executive officer, the principal financial officer, the controller 
or principal accounting officer, and at least a majority of the 
board of directors of persons performing similar functions. The 
current signature requirements in Schedules 14D-1, 13E-4 and 13E-3 
are substantially the same; the schedule must be signed by each 
person on whose behalf the statement is filed.
---------------------------------------------------------------------------

    Currently, security holders do not receive all of the information 
filed with the Commission in a tender offer or going-private schedule. 
Instead, the rules permit filers to send security holders a disclosure 
document that summarizes most of the information in the schedule. The 
schedule, as filed, consists of a cover page, list of items with their 
responses, exhibits and signatures. The disclosure document is filed as 
one of the exhibits. Many of the responses to the items in the schedule 
are incorporated by reference from the disclosure document. While we 
are not changing this basic approach, we propose two changes to 
streamline the requirements:
     Instead of specifying the items of each schedule required 
to be summarized, the rules would simply require that the document 
given to security holders summarize the entire schedule (except for 
exhibits). This is not intended to increase the information given to 
security holders, but rather to permit filers to exercise their 
judgment in determining what constitutes a fair and adequate summary. 
As discussed below, each disclosure document would include a Summary 
Term Sheet highlighting the basic information. Certain information 
required by the going-private rule would still be required to be set 
forth in full in the disclosure document.\176\
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    \176\ See Rules 14d-6(d), 14d-9(d), 13e-3(e) and 13e-4(d), as 
proposed to be revised.
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     Filers would no longer have to answer each item of the 
schedule with a statement that the information is incorporated by 
reference from specified pages or sections of the disclosure 
document.\177\ It would be sufficient to have a general statement 
incorporating the required information from the disclosure document 
into the schedule. The schedule, as filed, would consist primarily of a 
cover page, exhibits and

[[Page 67351]]

signatures. The item numbers from the schedule would be included only 
to provide information not required to be in the disclosure document, 
such as negative or ``not applicable'' responses or information that 
goes beyond what is summarized in the disclosure document. This change 
is designed to make the schedules easier to prepare. It would still be 
necessary, of course, for filers to provide all the required 
information.\178\
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    \177\ As an example of the current requirement, see General 
Instruction B to Schedule 14D-1.
    \178\ See General Instructions E and F to Schedules TO and 13E-3 
and General Instructions C and D to Schedule 14D-9. Similarly, we 
propose to eliminate 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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    The rest of this release discusses the most significant changes to 
the rules and schedules, many of which are incorporated into proposed 
Regulation M-A. In addition, we propose a number of less substantive 
changes to harmonize and update the requirements. For the complete text 
of all the technical, clarifying and conforming changes, including 
amendments to the tender offer and going-private rules, please see the 
text of the proposed rules at Part VII below. We request comment on 
these proposals as well.
2. Streamline Disclosure Requirements and Improve Disclosure
    We believe that, in many cases, the current disclosure requirements 
can be simplified and clarified for filing persons. We also believe 
that disclosure to security holders can be improved. We discuss below 
several proposed amendments to the current rules and regulations that 
should help filing persons comply with their disclosure obligations and 
enhance security holders' understanding of tender offers and mergers.
a. ``Plain English'' Summary Term Sheet
    The disclosure in tender offer and merger proxy statements often is 
lengthy, difficult to understand and uninviting to the reader. In many 
instances important information is buried in boilerplate. Security 
holders often must make a voting or investment decision within a 
relatively short period of time. With the increasing complexity of the 
transactions, filing persons should provide security holders with 
clear, concise and understandable disclosure as required by the 
Commission's rules.\179\ Disclosure is not effective from an investor's 
perspective unless it is understandable, complete and timely.\180\
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    \179\ See Rule 421 of Regulation C [17 CFR 230.421]. Bidders in 
exchange tender offers also are reminded that 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).
    \180\ Report of the Task Force on Disclosure Simplification, 
``Presentation of Information'' at p. 17.
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    We propose to require that issuer and third-party cash tender offer 
statements, cash merger proxy statements, and going-private disclosure 
documents begin with a short ``plain English'' summary term sheet 
highlighting the most important features of the transaction.\181\ The 
summary term sheet would be required to begin on the first or second 
page of the disclosure document. Each item covered in the summary term 
sheet would be presented in bullet point format with a cross-reference 
to a more detailed discussion found elsewhere in the tender offer, 
going-private or proxy materials.
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    \181\ Proposed Item 1001 of Regulation M-A. ``Plain English'' 
would have the same meaning as in Rule 421, as amended, effective 
October 1, 1998.
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    In preparing a summary term sheet, filing persons would need to 
determine how best to highlight the most significant aspects of the 
transaction in a clear, concise and understandable manner. As noted by 
the Task Force, the summary term sheet should be used to answer the 
most common or frequently asked questions. In a tender offer, for 
example, the bidder should answer questions such as the following:
     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 consensual, 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?
    In the case of a merger proxy statement, the summary term sheet 
should contain, among other things, a brief outline of the 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 (if any), the effect 
of a vote for and against each proposal including the effects of not 
voting, the procedures for voting and changing or revoking a vote, and 
the existence of appraisal rights.
    In going-private transactions, the summary term sheet would require 
a brief summary of the most material terms and consequences of the 
transaction. The summary term sheet should address, among other things, 
conflicts of interest, whether a fairness opinion was received, the 
identity, role and relationship of any affiliates involved in the 
transaction, the filing person's belief as to the fairness of the 
transaction to security holders, and any recommendations made to 
security holders regarding the transaction.
    The proposed summary term sheet requirement would not specify the 
items to be addressed. Instead, the filing person would determine the 
most significant facts to highlight. We solicit comment, however, on 
whether the item should specify information that must be addressed in 
most situations. The information required could be specified in a 
manner similar to current Instruction 1 to Item 8 of Schedule 13E-3, 
which specifies factors that must normally be considered in determining 
the fairness of a going-private transaction to unaffiliated security 
holders. Other than the matters set forth above, what other information 
would rise to the level of requiring prominent disclosure in a summary 
term sheet?
    Mergers or tender offers that involve the registration of 
securities are subject to the recently adopted ``plain English'' 
disclosure rules requiring issuers to write the cover page, summary, 
and risk factors section of their prospectuses in plain English.\182\ 
In addition, Forms S-4 and F-4 currently require specified

[[Page 67352]]

information about the transaction to appear in the front of the 
prospectus. This would be continued in proposed Forms C and SB-3. 
Therefore, we do not propose to require a summary term sheet for such 
transactions. Would a summary term sheet specifically adapted to these 
forms be useful?
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    \182\ See Release No. 33-7497 (January 28, 1998) [63 FR 6370].
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b. Revise Item 14 of Schedule 14A to Clarify Requirements and Harmonize 
Cash Merger With Cash Tender Offer Disclosure
    To help issuers prepare disclosure documents, we propose to clarify 
the disclosure required in proxy statements. Item 14 of Schedule 14A is 
triggered when a vote or consent is solicited on any of the following 
matters: (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. The Item calls for information about the 
transaction, as well as business and financial information about the 
companies involved. Item 14 information is similar to the information 
that would be required in a Form S-4 registration statement if 
registered securities were being offered.
    We propose to revise this Item to make it easier to understand and 
to adapt the disclosure scheme to Form A and B companies instead of 
Forms S-1, S-2 and S-3 companies. Instead of setting forth the detailed 
requirements for information about the acquired and acquiring 
companies, Item 14 would simply refer to the applicable requirements in 
Forms C and SB-3.\183\
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    \183\ As revised, Item 14 eliminates the ability to incorporate 
specified information by reference to the ``glossy'' annual report 
to security holders. This is consistent with proposed Form C, as 
discussed in the Security Act Reform Release.
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    The revised Item would modify financial statement requirements in 
three principal respects. First, we propose to clarify that financial 
statements and other information about the acquiror in a cash merger 
are necessary only if material to the voting security holders' 
evaluation of the transaction.\184\ Just as for financial statements of 
the bidder in a cash tender offer, discussed below, information about 
the acquiror in a merger generally is not needed if the target security 
holders are receiving cash and the acquiror has demonstrated the 
financial ability to satisfy the terms of the offer.\185\
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    \184\ See Instruction 2 to Item 14 of Schedule 14A currently and 
as proposed to be revised. Pro forma information about the 
transaction also generally would not be required in a cash merger 
where only the target's security holders are voting on the 
transaction.
    \185\ Even if the acquiror's security holders are voting, we 
propose to permit the omission of acquiror information, as those 
security holders presumably have access to information about their 
own company.
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    Second, we propose to reduce the financial statements required for 
the acquiror under Item 14 from three years to two,\186\ consistent 
with the proposed treatment of cash tender offers, as discussed 
below.\187\
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    \186\ See proposed Item 14(c)(1) to Schedule 14A.
    \187\ See Part II.E.2.b below. Financial statements of the 
target, when required, generally would continue to be required for 
three years in order to be consistent with other requirements for 
financial statements of acquired companies.
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    Third, we propose to revise Item 14 with respect to when financial 
statements and other information about the target are required. 
Specifically, we propose to eliminate the requirement to provide 
information about the target in a cash merger when the acquiror's 
security holders are not voting on the transaction.\188\ Security 
holders would receive a shorter document focusing on the terms and 
effect of the transaction. This revision would harmonize the disclosure 
required in cash merger transactions with that required in all-cash, 
all-share tender offers. Security holders are required to make 
substantially the same investment decision in both transactions.
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    \188\ See Instruction 2 to Item 14 of Schedule 14A, as proposed 
to be revised.
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    Generally, financial statements of the target and other company 
information are not required in all-cash, all-share tender offers, 
although bidders sometimes provide this information in their tender 
offer materials on a voluntary basis. We do not believe the proxy rules 
should require disclosure of target information when the same 
transaction, structured as a cash tender offer, would not require 
disclosure of this information. In both types of transaction, security 
holders are asked to accept cash for their entire investment in the 
target, and most likely have received financial information previously 
with respect to the company whose security they already hold.
    As proposed, we also would eliminate the requirement to provide 
information about the target when target security holders are voting on 
whether to approve a merger with the consideration consisting of 
acquiror securities exempt from Securities Act registration. This would 
be consistent with the requirements of the tender offer rules when 
exempt securities are being offered. Of course, information about the 
acquiring company would be material under these circumstances.
    We do not propose to eliminate the requirement to provide financial 
statements of the target and other company information where the 
acquiror's security holders are voting on the transaction, since those 
security holders may not know anything about the target. In addition, 
we would continue to require target information in cash 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 transactions.
    We request comment on whether target security holders in mergers 
need financial statements and other information about their own company 
to determine whether or not to exercise their dissenters' or appraisal 
rights under state law. Are there circumstances under which the target 
security holders may have difficulty obtaining financial statements of 
the company whose securities they hold? Of course, if the proxy rules 
apply to the target, the target would be a reporting company. Does the 
liability imposed on financial statements filed under the proxy rules 
provide an added degree of protection to investors? If so, should the 
financial statements be incorporated by reference into the proxy 
material? Should we require the proxy statement to contain either 
summary financial statements,\189\ or an undertaking to provide 
financial statements to any requesting security holder?
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    \189\ For example, we could require summary financial statements 
as specified in Rule 1-02(bb) of Regulation S-X [17 CFR 210.1-
02(bb)] for the latest fiscal year and interim period.
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c. Reduce Financial Statements Required for Non-Reporting Target 
Companies
    If our proposal to eliminate financial statements of the target in 
a cash merger when the acquiror's security holders are not voting is 
adopted, there still will be circumstances under which target financial 
statements are required. In particular, financial statements are 
required when the transaction is a stock merger or stock tender offer.
    The rules currently provide special treatment when the target is 
not subject to the Commission's reporting requirements. We believe the 
existing requirements can be further relaxed under certain 
circumstances. In many transactions involving the acquisition of a non-
reporting company, the target's financial statements are not readily 
available or can be obtained only at great expense. In some cases, 
companies have chosen to structure acquisitions so

[[Page 67353]]

an exception from registration was available rather than obtain the 
financial statements needed to register the transaction. We propose to 
reduce the costs of preparing proxy statements and registration 
statements for business combinations by reducing the financial 
statement requirements when the target is a non-reporting company and 
the acquiror's security holders are not voting on the transaction.
    Currently, the rules require the filing person (the acquiror) to 
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).\190\ Rule 14a-3(b) 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.\191\ We no 
longer believe non-reporting target companies (or their acquirors) 
should have to generate financial statements for three years when 
security holders of the non-reporting target most likely made their 
initial investment decision based on less extensive or different 
financial statements. The requirement to provide financial statements 
prepared in accordance with Regulation S-X going back three years can 
be costly and burdensome.
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    \190\ 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. The item states that the 
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 item further states that financial statements need be 
audited only to the extent practicable.
    \191\ 17 CFR 240.14a-3(b).
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    Under the proposal, when the acquiror's security holders are not 
voting on the acquisition, we would require financial statements of the 
target prepared in conformity with Generally Accepted Accounting 
Principles (``GAAP'') for the latest fiscal year.\192\ If the non-
reporting target company previously provided its security holders with 
GAAP financial statements for either of the two fiscal years before the 
latest fiscal year (or both), GAAP financial statements also would be 
required for those years.
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    \192\ We proposed to implement this change in proposal forms C 
and SB-3. See Items 18(c) and 21(b) in Form C and Items 16(b) and 
19(c) in Form SB-3. If these forms are not adopted, we would 
implement this amendment in Forms S-4 and F-4.
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    As is currently the case, the item would not require audited 
financial statements for years before the most recent fiscal year if 
the non-reporting target's financial statements were not audited 
previously. In addition, the financial statements for the latest fiscal 
year would have to be audited only to the extent practicable.
    We would not change the existing requirement to provide pro forma 
financial information required by Article 11 of Regulation S-X. In 
addition, we are not changing the requirement to provide audited 
financial statements in accordance with Rule 3-05 of Regulation S-X if 
a registration statement is used for registering resales to the public 
by any person who, with regard to the securities being re-offered, is 
deemed an underwriter within the meaning of Rule 145(c). Further, the 
proposal would not change the financial statements currently required 
if the acquiror's security holders are voting on the transaction.\193\ 
It should be noted that the Securities Act Reform Release includes a 
proposal to require certain additional non-financial information 
regarding non-reporting target companies.
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    \193\ The proposal also would not affect the current requirement 
that the acquiror ultimately provide audited financial statements 
under Item 7 of Form 8-K when the transaction is significant to the 
acquiror.
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    If the non-reporting target is a foreign company, the proposed 
reduction in the required financial statements would operate in the 
same manner as for domestic companies. If the acquiror's security 
holders are not voting on the transaction, and 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 would be required unless a reconciliation 
is unavailable or not otherwise obtainable without unreasonable cost or 
expense.\194\
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    \194\ At a minimum, however, filers should provide 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.
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    The proposed change would not affect financial statements for a 
non-reporting target in roll-up transactions.\195\ We believe that the 
acquiror's security holders have an independent need for financial 
statements of any non-reporting company that would be rolled-up into 
their company. We request comment on whether there are any other 
circumstances when this reduction in the target financial statements 
required should not apply. For example, should this reduction apply 
when the acquiror is a public shell company seeking to merge with or be 
acquired by a private company with substantial assets?
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    \195\ An exception from the going-private rules would not be 
necessary because the proposal is limited to the financial statement 
requirements of non-reporting companies, which are not subject to 
Rule 13e-3.
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    We invite comment on whether this proposal would provide sufficient 
regulatory relief to filers and still assure that target security 
holders have sufficient information. We also solicit comment on 
whether, if the acquiror's security holders are voting on the 
transaction and it is significant to the acquiror at the 50% level, 
audited financial statements of the target should be required.\196\ 
Currently, if the target is a non-reporting company the rules provide 
for special treatment by permitting Rule 14a-3(b) financial statements, 
as described above.\197\ We invite comment on whether this special 
treatment provides any benefit to acquirors who eventually will have to 
provide audited financial statements of the target in a Form 8-K or in 
connection with other securities offerings.
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    \196\ See Rule 3-05(b)(4)(i) of Regulation S-X [17 CFR 210.3-
05(b)(4)(i)]. Audited financial statements of the target are 
currently required in Form S-4 if the target is a reporting company, 
whether or not the acquiror's security holders are voting on the 
transaction. In addition, audited financial statements are required 
for other probable acquisitions (i.e., acquisitions other than the 
one being voted on by security holders) at the 50% significance 
level.
    \197\ See note 190 above.
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d. Registration Statement Form for Business Combinations
    In the Securities Act Reform Release, we propose to replace Forms 
S-4 and F-4 with Form C (and Form SB-3 for small business issuers). 
These forms would be the only ones available for registered exchange 
offers, mergers and other business combinations.\198\ Currently, Form 
S-1 is available for exchange offers and Form S-2 is available for 
issuer exchange offers. If these forms are rescinded, issuer exchange 
offers would be limited to Forms C and SB-3.
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    \198\ These forms would be available for all transactions that 
can be registered on Forms S-4 and F-4 today. Forms S-4 and F-4 
permit incorporation by reference of information about the acquiring 
and acquired companies to the extent those companies are eligible to 
use Forms S-2 and S-3 instead of S-1 (Forms F-1; F-2; and F-3 for 
foreign private issuers). Forms C and SB-3 would adapt the 
incorporation by reference provisions to the proposed new regulatory 
scheme, permitting incorporation by reference for Form B, seasoned 
Form A, and seasoned Form SB-2 companies.
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    As discussed in more detail in the Securities Act Reform Release, 
Forms C and SB-3 would require basically the same information as the 
current forms about the transaction, the acquiror, the company to be 
acquired and the

[[Page 67354]]

combined entity.\199\ In that release, we propose to treat Form B 
issuers differently from other issuers in a number of respects. No 
information would be required to be delivered to investors until 
shortly before the investment decision; no final prospectus would be 
required to be delivered; and the registration statement would become 
effective upon filing, or upon a date designated by the filer. For the 
reasons discussed in Part II.B and C of this release, we do not propose 
the same scheme for Form C registration statements, even when the 
issuer and/or the target would be eligible to use Form B. Instead, our 
proposed approach for business combinations permits free 
communications, so long as security holders ultimately receive a 
mandated disclosure document with specified information before they 
make their tender or voting decision. We do, however, solicit comment 
on the extent to which aspects of the Form B scheme could be adopted 
for business combinations.
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    \199\ If the transaction is an exchange offer, the prospectus 
also must include certain information specified by the tender offer 
rules. See Rule 432. We propose a technical change to Rule 432.
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    Forms S-4 and F-4 currently require that the prospectus be 
delivered at least 20 business days before the date of the vote or the 
expiration of the exchange offer when incorporation by reference is 
used. The purpose is to assure that security holders have time to 
obtain the documents incorporated by reference and review their 
contents. The proxy rules impose a comparable provision for cash 
mergers.\200\ We propose to eliminate these requirements because 
Commission filings incorporated by reference are now readily available 
from many sources, including our Internet web site, our public 
reference room, and presumably from brokers and investment advisers. We 
ask for comment as to whether security holders would still benefit from 
a mandated solicitation period when incorporation by reference is used.
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    \200\ General Instruction A.2 to Form S-4; General Instruction 
A.2 to Form F-4; Note D.3 to Schedule 14A.
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E. Update the Tender Offer Rules

    The tender offer rules have not been revised since 1986.\201\ We 
are attempting to update them to correspond to the need of today's 
markets. We have already discussed several proposals affecting tender 
offers. These proposals involve expanding permissible communications, 
changing the timing and methods of commencement, combining tender offer 
schedules, integrating disclosure requirements and including a summary 
term sheet. In addition, as discussed below, we have several proposals 
to provide new tender offer procedures, revise and clarify the 
financial statements requirements and clarify the rules. We also 
solicit comment on whether the tender offer rules should include a safe 
harbor from liability for forward-looking information.
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    \201\ In 1986, the Commission adopted amendments to the tender 
offer rules to provide that a third-party or issuer tender offer 
must be open to all holders of the class of securities subject to 
the tender offer (both record and beneficial owners) and that any 
security holder must be paid the highest consideration paid to any 
other security holder during the tender offer. See Release No. 34-
23421 (July 11, 1986) [51 FR 25373] and Rule 14d-10 [17 CFR 240.14d-
10]. More comprehensive revision of the tender offer rules has not 
been undertaken since 1979.
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1. PERMIT SECURITIES TO BE TENDERED DURING A ``SUBSEQUENT OFFERING 
PERIOD'' WITHOUT WITHDRAWAL RIGHTS
    We believe that there may be times when bidders should be able to 
accept shares in a tender offer after the tender offer is 
completed.\202\ We propose to permit security holders to tender 
securities during a limited time after the initial offer, including all 
extensions, is completed, referred to as the ``subsequent offering 
period.'' \203\ The proposed subsequent offering period would be 
similar to the extended offering period that sometimes applies to 
tender offers made in the United Kingdom subject to the City Code on 
Take-overs and Mergers.\204\ No withdrawal rights would be available 
during this period.\205\ Security holders would be able to tender 
securities in the subsequent offering period only after all conditions 
to the offer were satisfied or waived and the shares tendered to that 
point were accepted for purchase and promptly paid for.\206\ The 
subsequent offering period would be optional at the bidder's election.
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    \202\ For example, when a bidder is successful in acquiring a 
sufficient number of target shares to approve a back-end merger 
(typically a majority or two-thirds is required), most remaining 
security holders want to get cashed out, knowing that a back-end 
merger to acquire the remaining shares is a relative certainty. 
Under most state laws, the bidder must own at least 85 or 90% of the 
target to merge without security holder approval in a short-form 
merger.
    \203\ Proposed Rule 14d-11.
    \204\ The City Code on Takeovers and Mergers and the Rules 
Governing Substantial Acquisition of Shares (the ``City Code'') Rule 
31.4. See also Part IV.A of Release No. 34-29275 (June 5, 1991) [56 
FR 27582].
    \205\ Rule 14d-7 would be amended. The withdrawal rights that 
exist after 60 days following the start of the tender offer, 
pursuant to Section 14(d)(5) of the Exchange Act [15 U.S.C. 
78n(d)(5)], similarly would not be available.
    \206\ The proposed subsequent offering period could not be used 
where payment would be delayed. We have stated that payment may be 
delayed for certain governmental regulatory approvals. See Release 
No. 34-16623 (March 5, 1980) [45 FR 15521]. However, the proposed 
subsequent offering period could not be used unless all conditions 
to payment have been satisfied or waived.
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    We propose limiting the use of the subsequent offering period to 
third-party tender offers for all outstanding shares of the target. In 
addition, the bidder must intend to engage in a back-end merger with 
the target after the tender offer, either offering cash or securities. 
The bidder's intent to merge with the target would have to be publicly 
disclosed in its offering materials.
    Under our proposal, a bidder would have to disclose its intention 
to provide a subsequent offering period in the initial tender offer 
materials filed and disseminated to security holders. The tender offer 
materials would have to adequately disclose the use of a subsequent 
offering period and explain how it would operate. If the ``plain 
English'' summary term sheet proposal is adopted, the subsequent 
offering period would be disclosed in the summary term sheet. If a 
bidder decided to include a subsequent offering period after the 
initial offering materials were filed and disseminated, that would be 
treated as a material change in information, requiring dissemination of 
a supplement and possibly an extension of the offer by up to five 
business days.\207\
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    \207\ Similarly, if the bidder stated that a subsequent offering 
period would be provided and then decided not to make one available, 
this would be a material change requiring dissemination and adequate 
time for security holders to receive and act on the information.
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    The subsequent offering period would be strictly limited to offers 
for all outstanding shares.\208\ The subsequent offering period would 
be a fixed ten business day period that would follow the date a bidder 
satisfied or waived all conditions to its offer and accepted for 
purchase any shares tendered to that point in time. The bidder's prompt 
payment obligation would apply to all shares accepted in the initial 
offering period before the subsequent offering period began. During the 
subsequent offering period, the bidder could solicit remaining security 
holders to tender. The bidder would be obligated to ``promptly'' pay 
for the shares tendered, with prompt payment running from the date of 
each separate tender.\209\
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    \208\ Application of the subsequent offering period in a partial 
offer could raise complex proration issues if the offer is 
oversubscribed.
    \209\ Proposed revision to Rule 14e-1(c).

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[[Page 67355]]

    The subsequent offering period could not start until the offer was 
open at least 20 business days with withdrawal rights available to all 
tendering security holders. This would prevent bidders from offering 
withdrawal rights during the first ten business days of an offer but 
not the last ten business days.
    The final amendment to reflect the results of the tender offer 
\210\ would not be required until the end of the subsequent offering 
period. We solicit comment, however, on whether bidders should be 
required to issue a public announcement at the beginning of the 
subsequent offering period setting forth the number of shares tendered 
and accepted in the initial offering period.
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    \210\ See current General Instruction D to Schedule 14D-1; 
proposed to be moved to Rule 14d-3(b)(2).
---------------------------------------------------------------------------

    The subsequent offering period would help security holders who do 
not tender into an offer, but then wish to participate in the offer 
after the bidder accepts shares and discloses the results. There may 
not be a very liquid trading market in the securities after the tender 
offer. As a result, security holders often are forced to either hold 
onto their shares until a back-end merger is completed or sell into the 
market below the offer price. Bidders may need to prepare and furnish a 
proxy statement or other disclosure documents before remaining security 
holders can obtain their final payment. We believe the subsequent 
offering period would minimize the delay in liquidating the investment 
of the relatively small number of security holders that do not tender 
in an offer, but later decide they want to tender and receive the offer 
price.
    Comment is solicited on whether this procedure would be useful to 
bidders and security holders. Would there be any disadvantages for 
security holders? Should the subsequent offering period be mandatory? 
Should the subsequent offering period be longer or shorter (e.g., five, 
seven, 15 or 20 business days)? Should the bidder be allowed to extend 
the subsequent offering period for either a limited number of days 
(e.g., five or ten business days) or for whatever time period the 
bidder specifies? Would the subsequent offering period encourage 
security holders to delay tendering until the completion of the offer, 
and if so, how much of a disadvantage would this be to the bidder? 
Should the availability of the subsequent offering period be limited to 
circumstances where a substantial percentage of shares (such as 50%) 
has already been tendered? As proposed, the subsequent offering period 
would be available for both cash and stock tender offers, and the 
consideration offered in the back-end merger could be either cash or 
securities. Is there any reason to limit the proposal to cash tender 
offers or to situations where only cash is offered in the back-end 
merger? Should the subsequent offering period be limited to third-party 
offers, as proposed, or would it also be useful for issuer tender 
offers?
2. Clarify the Financial Information Required for Bidders in Cash 
Tender Offers
a. When the Bidder's Financial Statements Are Required in Cash Tender 
Offers
    Under the current rules, the financial statements of a bidder in a 
cash tender offer must be disclosed if the information is ``material.'' 
\211\ There are several instructions in Schedule 14D-1 that help 
bidders determine the need for, and adequacy of financial statements. 
The first instruction states that materiality will depend on the facts 
and circumstances of the tender offer.
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    \211\ See Item 9 of Schedule 14D-1 and Item 7 of Schedule 13E-4.
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    Once a bidder determines that financial statements are material, 
there is a provision in the instruction that details the type of 
financial statements deemed adequate for disclosure purposes. If a 
bidder provides financial statements that are prepared in compliance 
with Form 10, the financial statements requirement is deemed 
satisfied.\212\ A second instruction permits incorporation by reference 
if the bidder is subject to the Exchange Act reporting requirements. A 
third instruction provides that non-reporting companies need not 
include audited financial statements if they are not available or 
obtainable without unreasonable cost or expense. Both third-party 
bidders and issuer offerors are required only to disseminate a fair and 
adequate summary of the financial information to security holders.\213\
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    \212\ [17 CFR 249.210]. Financial statements prepared in 
accordance with Item 17 of Form 20-F will be deemed adequate for 
foreign bidders. [17 CFR 249.220f].
    \213\ See Rules 14d-6(e) [17 CFR 240.14d-6] and 13e-4(d) [17 CFR 
240.13e-4(d)].
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    In adopting the third-party tender offer rules, we identified four 
factors that should be considered when determining whether financial 
statements of the bidder are material in a cash tender offer:
     The terms of the tender offer, particularly those 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;
     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.\214\
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    \214\ See Release No. 34-13787 (July 21, 1977) [42 FR 38341].
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    Under the staff's current interpretation, the above factors are not 
exclusive, and it is not necessary that all factors be present to meet 
the materiality test. Based on our experience with tender offers since 
1977, we believe it would be more helpful to provide specific guidance 
to bidders as to when financial statements are not required. We propose 
to include an instruction in Schedule TO \215\ stating that a bidder's 
financial statements are not material when:
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    \215\ The proposed instruction would appear in both Schedules 
14D-1 and 13E-4 if our proposal to combine the schedules is not 
adopted. See proposed Instruction 2 to Item 10 of Schedule TO. See 
also Part II.D.2. above. Thus, we propose to clarify the financial 
statements required in both issuer and third-party tendor offers.
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      Only cash is offered;
      There is no financing condition; and either:
      The bidder is a public reporting company under the 
Exchange Act; or
      The offer is for all outstanding securities of the 
target.
    Under the above circumstances, we believe that the burden of 
providing the bidder's financial statements may outweigh the usefulness 
of the information to security holders.\216\ Based on the information 
currently available on EDGAR (via the Internet and other sources), we 
believe there is less need to require financial statements for bidders 
that are public reporting companies than for non-reporting 
entities.\217\
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    \216\ If the bidder is a reporting company, the financial 
statements could be incorporated by reference, as currently 
permitted.
    \217\ If the bidder is offering securities, as well as 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.
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    When the bidder is not a public reporting company, we believe 
financial statements should be provided when the offer is not for all 
outstanding shares of the target. Financial statements can be material 
in a partial tender offer because security holders may need to evaluate 
the bidder's financial condition in determining whether to tender into 
the offer or remain a security holder in a

[[Page 67356]]

company in which the bidder will hold a substantial equity 
interest.\218\
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    \218\ At least one court has observed that the bidder's 
financial condition can be material in an offer for all outstanding 
securities. In Prudent Real Estate v. Johncamp Realty, 599 F. 2d 
1140 (2d Cir. 1979), Judge Friendly commented that: ``If the bidder 
is in a flourishing financial condition, the stockholder might 
decide to hold his shares in hope that, if the offer was only 
partially successful, the bidder might raise its bide after 
termination of the offer or infuse new capital into the 
enterprise.'' An offer, however, by a company in poor financial 
condition ``might cause the shareholder to accept for fear that 
control of the company would pass into irresponsible hands.'' Id. at 
1147.
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    We request comment on whether there are any other circumstances 
under which financial statements may not be material. Conversely, are 
there any circumstances under which we propose to exclude financial 
statements that the information would be material? For example, should 
we require financial statements of any non-reporting bidder unless the 
offer is for all shares and conditioned on acquiring a controlling 
interest in the target and the bidder intends a back-end merger? If an 
offer is not subject to a financing condition, could the bidder's 
financial statements be material even under our proposed instruction? 
Should the proposed instruction hinge upon whether financing for the 
offer is in place, as opposed to whether the offer is subject to a 
financing condition? If the offer is self-financed, are the bidder's 
financial statements needed even if there is no financing condition?
    Should the criteria for determining when financial statements are 
required be applied differently when the bidder is a foreign company 
whose financial information may not be readily available? \219\ To the 
extent that the financial statements of a foreign bidder are required 
and are prepared under foreign GAAP, a reconciliation to U.S. GAAP 
would be required unless a reconciliation is unavailable or not 
otherwise obtainable without unreasonable cost or expense.\220\ 
Finally, we note that, although Item 9 does not require financial 
statements of bidders who are natural persons, financial information 
concerning such bidders may be material under the circumstances of the 
offer.\221\ The practice has developed of including disclosure 
regarding the net worth of a bidder who is a natural person. We think 
such information is useful and therefore propose to codify this 
practice with an instruction to Schedule TO.
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    \219\ Foreign private issuers are not required to file their 
Form 20-F electronically.
    \220\ As noted above in Part II.D.2.c, at a minimum, bidders 
should provide 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.
    \221\ See Release No. 34-13787 (July 21, 1977) [42 FR 38348], at 
n. 22.
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b. Content of Bidder's Financial Statements in Cash Tender Offers; 
Financial Statements in Going-Private Transactions
    When financial statements of the bidder are material, the rules 
currently require three years of historical financial statements for a 
third-party tender offer. In contrast, only two years of financial 
statements of the issuer are required in an issuer tender offer or 
going-private transaction. We propose to harmonize these requirements 
by reducing the financial statements requirement for third-party tender 
offers to two years.\222\ Currently, Instruction 1 to Item 9 of 
Schedule 14D-1 provides that financial statements prepared in 
compliance with Form 10 for a domestic bidder or Item 17 of Form 20-F 
for a foreign bidder will be deemed adequate for purposes of the 
disclosure requirement. We would eliminate this instruction and require 
the financial information specified in proposed Item 1010(a) and (b) of 
Regulation M-A, if material.
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    \222\ See proposed Item 1010 of Regulation M-A. Of course, if 
the bidder is offering registered securities, the registration 
statement requirements will control. As noted in Part II.D.2.b 
above, we also propose to reduce the financial statements of 
acquiring companies in merger proxy statements from three to two 
years.
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    We solicit comment, however, on whether two years of financial 
statements are necessary to informed investor decisions. Should it 
matter if the bidder is offering securities that are exempt from 
registration rather than cash? Would one year of financial statements 
be adequate for third-party and issuer tender offers? Would one year of 
financial statements be adequate for a going-private transaction that 
is not subject to the more stringent registration or proxy statement 
requirements?
    The current financial disclosure requirements in issuer tender 
offers and going-private transactions call for information regarding 
book value per share, as well as 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 
date.\223\ In reviewing the disclosure items, we believe that it may be 
unnecessary to provide this data for both the latest fiscal year end 
and latest interim period, and propose to reduce the requirement to 
only the most recent balance sheet date.\224\ This proposed change also 
would apply to third-party tender offers.
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    \223\ See Item 14 to Schedule 13E-3 and Item 7 to Schedule 13E 
4.
    \224\ See Item 1010 (a)(4), (b) (1) and (3) of proposed 
Regulation M-A. The book value per share change also would apply to 
merger proxy statements.
---------------------------------------------------------------------------

    The current rules require that full financial statements of the 
bidder in a third-party tender offer and of the issuer in an issuer 
tender offer or going-private transaction be included in Schedule 14D-
1, 13E-4 and 13E-3, respectively. Filers are permitted, however, to 
provide summary financial information instead of the full financial 
statements in the disclosure document sent to security holders. We 
believe the current requirements regarding summary financial 
information \225\ are outdated and potentially confusing.\226\ 
Therefore, we propose to revise the rules regarding summary information 
in all of these schedules to specifically require the information set 
forth in Rule 1-02(bb) of Regulation S-X.\227\ The summary information 
would continue to be required for the same periods as the full 
financial statements. Rule 1-02(bb), however, calls for some 
information that is not currently required, specifically redeemable 
preferred stock, minority interests, and summarized financial 
information for unconsolidated subsidiaries and 50 percent or less 
owned persons. We solicit comment on whether this information is useful 
to investors.
---------------------------------------------------------------------------

    \225\ 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)].
    \226\ At least one line item currently specified in the rules, 
``total assets less deferred research and developemnt charges and 
excess cost of assets acquired over book value'' is not an 
appropriate measure under GAAP because it is inconsistent with FASB 
Statement 2, which prohibits capitalization of research and 
development costs.
    \227\ See proposed Item 10 to Schedule TO; proposed Item 13 to 
Schedule 13E-3; and proposed Item 1010 of Regulation M-A.
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    The rules regarding summary financial information in issuer tender 
offers and going-private transactions currently require ratio of 
earnings to fixed charges, book value per share and, if material, pro 
forma data. These items are not specifically covered by Rule 1-02(bb). 
As proposed, Schedules TO and 13E-3 would call for these additional 
items as well as the information specified in Rule 1-02(bb). The 
current rule regarding summary financial information in third-party 
tender offers does not require book value per share information. As 
proposed, Schedule TO would call for this information, if material.
    We also propose to clarify the reconciliation required for a 
foreign bidder's summary financial information

[[Page 67357]]

if the financial statements are prepared on the basis of foreign 
GAAP.\228\ A reconciliation to U.S. GAAP would be required to the same 
extent that a reconciliation or narrative is required for the full 
financial statements, as discussed above.
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    \228\ See Rule 14d-6(e)(ix) [17 CFR 240.14d-6(e)(ix)].
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    Finally, we are considering whether, in light of the proposals to 
reduce the number of years for which financial statements are required, 
security holders should receive the full financial statements whenever 
they are required, rather than summary financial information. Should we 
eliminate the provisions in Rules 13e-3, 13e-4 and 14d-1 that permit 
the substitution of summary financial information for the full 
financial statements in the disclosure document sent to security 
holders?
c. Bidder's Source of Funds
    Regardless of the level of financial information security holders 
receive, we believe that a bidder's ability to pay for securities in an 
offer is a material disclosure item. The disclosure appearing in many 
tender offers relating to a bidder's ability to finance the offer has 
been meager at best, even when financial statements are provided. 
Therefore, we intend to clarify the information that is required in 
order to fully inform security holders of the bidder's ability to 
finance the offer. We propose to expand the ``Source of Funds'' item 
requirement in the tender offer and going-private rules \229\ to 
require the specific source(s) of financing, any condition(s) to the 
financing, and the bidder's ability to finance the offer if the primary 
source of financing falls through.\230\
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    \229\ See Item 4 to Schedule 14D-1; Item 6 to Schedule 13E-3; 
and Item 2 to Schedule 13E-4.
    \230\ See proposed Item 1007 of Regulation M-A.
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d. Pro Forma Financial Information in Two-Tier Transactions
    A ``two-tier'' transaction is one in which the bidder first offers 
to acquire shares of the target in a cash tender offer with any 
securities remaining outstanding acquired in a back-end merger where 
securities are offered as consideration. In two-tier transactions, 
security holders are essentially asked to make an investment decision 
of whether to tender for cash in the front-end tender offer (to the 
extent pro ration allows their shares to be accepted), or hold on to 
their securities to receive securities of the bidder in the back-end. 
We believe security holders need pro forma financial information 
regarding the combined entity at the first tier so they can evaluate 
the second tier of the transaction when deciding whether to 
tender.\231\
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    \231\ See Rule 11-01(a) of Regulation S-X.
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    In addition to the general need for the information, disclosure of 
pro forma financial information would be in keeping with the general 
theme of free communications expressed in this release and the 
Securities Act Reform Release. Also, as discussed in Part II.B.1 above, 
many bidders currently disclose pro forma information in order to 
satisfy the market's demand for information on a proposed transaction 
and to effectively sell the transaction to the market. Thus, we propose 
to require pro forma and related financial information in the first 
tier when a second tier is contemplated.
    The requirement to provide financial information would be based on 
the bidder's intent to engage in a back-end merger with target security 
holders receiving securities of the bidder. Under the proposal, bidders 
would be required to provide the financial information specified by 
Item 3(f), (g) and (h) and Item 5 of proposed Forms C or SB-3,\232\ as 
appropriate. This information would be required to be included in the 
tender offer materials for the cash tender offer.\233\ We believe that 
this information, which would be required in any Form C or Form SB-3 
filed when the securities are offered to security holders in the back-
end, is necessary for security holders to make an informed investment 
decision. Consistent with the summary information provisions discussed 
above,\234\ the proposed instruction for two-tier transactions would 
permit third-party bidders to provide only the financial information 
specified in Item 3(f), (g) and (h) of proposed Forms C or SB-3 in the 
disclosure document sent to security holders so long as the Schedule TO 
filed with the Commission included the information specified by Item 5.
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    \232\ Specifically, these items call for disclosure of: selected 
financial data; pro forma selected financial data; pro forma 
information; and pro forma information required by Article 11 of 
Regulation S-X (Secs. 210.11-01 through 210.11-03).
    \233\ See Instruction 5 to proposed Item 10 of Schedule TO.
    \234\ See Part II.E.2.b above.
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    The proposal is consistent with an interpretive position published 
in 1978 that the inclusion of certain information would not be 
considered an ``offer to sell'' under the Securities Act. In the 
interpretive release, the Division of Corporation Finance stated that 
the ``gun jumping'' doctrine, which is designed to prevent an issuer 
from conditioning the market by arousing investor interest before a 
registration statement has been filed, does not prevent bidders from 
providing material information regarding a planned back-end merger. The 
Division explained:

    The bidder's concern is purchasing the subject company's 
securities for cash, not priming the market for a subsequent 
registered offering of securities. Regardless of the bidder's 
intent, Schedule 14D-1 for compelling policy reasons reflected by 
the Williams Act requires (information regarding any negotiations, 
agreement in principle, or definitive merger agreement with the 
subject company) in order to provide full disclosure to investors 
confronted with an investment decision in the context of a tender 
offer.\235\
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    \235\ See Release No. 33-5927, also discussed in note 43 above. 
Teh position expressed in the release was limited, in the tender 
offer context, to disclosure required by Schedule 14D-1.

Of course, under the proposals to permit free communications in this 
release and the Securities Act Reform Release, disclosure of pro forma 
financial information at any stage would not result in ``gun jumping'' 
under the Securities Act.
    We request comment on whether this could create practical 
difficulties for bidders by causing delays in disseminating the cash 
tender offer material, and if so, whether this would be offset by 
benefits to security holders receiving the information. Also, if 
commenters believe the proposed requirement is too extensive, should we 
require some other level of information? For example, would the pro 
forma information specified in proposed Item 1010(b) of Regulation M-A 
be adequate? \236\ Alternatively, would the pro forma information 
required by Article 11 of Regulation S-X be a sufficient basis for an 
investment decision regarding the cash tender offer?
---------------------------------------------------------------------------

    \236\ See Part II.E.2.b above and Item 1010(b) of proposed 
Regulation M-A.
---------------------------------------------------------------------------

    We also request comment on whether, even if a transaction is 
intended, there could be reasons why the disclosure of pro forma 
information could be premature or unwarranted. Conversely, are there 
circumstances where pro forma financial information should be permitted 
or required if a back-end merger is not ``intended''? In addition, we 
invite comment on whether the requirement to provide pro forma 
financial information needs to be modified to minimize difficulties for 
bidders in hostile transactions.
3. Clarify the Requirement That a Target 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

[[Page 67358]]

the issuer's acquisition is filed with the Commission and is sent or 
given to security holders. We propose to update the rule, which was 
adopted in 1968,\237\ and clarify its operation.
---------------------------------------------------------------------------

    \237\ See Release No. 34-8370 (july 30, 1968 [33 FR 11015].
---------------------------------------------------------------------------

    Once the required information is filed and sent to security 
holders, the issuer is free to repurchase its securities.\238\ Under 
the current rule, an issuer can disseminate the required information to 
its security holders as early as six months before making any 
repurchases. As a result, issuers can send information regarding 
repurchases to security holders long before they become the target of a 
tender offer, diminishing the usefulness of this rule. We propose to 
revise the rule so that its purpose is to notify security holders that 
the issuer is purchasing its securities during a third-party tender 
offer for the securities. Therefore, the issuer's disclosure should be 
made only after a tender offer is made.
---------------------------------------------------------------------------

    \238\ There is no schedule or form accompanying the rule. The 
required information is disclosed in a ``Rule 13e-1 Transaction 
Statement'' filed electrically on EDGAR under the submission-type SC 
13E1.
---------------------------------------------------------------------------

    We also propose to rewrite the rule in plain English so that the 
rule is more understandable. It would call for the same information as 
the current rule, including the amount of securities to be purchased, 
identification of the sellers or market, purpose of the purchases, how 
the securities will be used, and the source of funds for the purchases. 
The revised rule would clarify that disclosure is required only when an 
issuer wants to repurchase its securities after a tender offer is made. 
The restriction on repurchases only applies during the term of the 
tender offer.
    We invite comment on the timeliness of the information currently 
received under Rule 13e-1. Do security holders receive information 
either too early or too late to be of any use? We also solicit comment 
on whether the requirement to file and disseminate information during 
the limited time after a tender offer is made and before purchasing 
securities would impose an unreasonable burden on companies. How would 
this change affect companies with periodic stock repurchase plans? 
Should the rule not apply to routine purchases for employee benefit 
plans as to which the issuer has little or no discretion? If the issuer 
commences an issuer tender offer in response to the third-party tender 
offer, should the filing of the issuer's tender offer schedule satisfy 
the requirements of Rule 13e-1? Further, we request comment on the 
specific information that is required under the rule. Is there any 
information that either should or should not be required disclosure? 
Generally, the statement required by the rule consists of one or two 
pages of information.
    We note that a limited number of statements are filed under the 
rule.\239\ Given the relatively low number of filings, we question 
whether the rule provides any benefits to security holders and the 
market. Issuers may not be disclosing the required information, or they 
may not be triggering the reporting obligation. We invite comment on 
the usefulness of and the need for the information disclosed under the 
rule. Should we eliminate the rule entirely? If the information is 
beneficial, should issuers be required merely to make the filing with 
the Commission, and not disseminate the information to security 
holders?
---------------------------------------------------------------------------

    \239\ Approximately six statements were filed under Rule 13e-1 
during the past five years.
---------------------------------------------------------------------------

4. Harmonize the Tender Offer and Proxy Rules Relating to the Delivery 
of a Stockholder List and Security Position Listing
    We propose to revise Rule 14d-5, the rule relating to dissemination 
of certain tender offers by use of stockholder lists and security 
position listings, to more closely align it with the 1992 amendments to 
Rule 14a-7 (the parallel rule relating to proxy materials).\240\
---------------------------------------------------------------------------

    \240\ 17 CFR 240.14a-7.
---------------------------------------------------------------------------

    Both Rule 14d-5 and Rule 14a-7 currently allow the ``requesting 
party'' (the bidder under Rule 14d-5 and the security holder soliciting 
in opposition under Rule 14a-7), to ask the company either to provide a 
stockholder list or to mail the requesting party's materials. Until 
1992, both rules required that the list provided by the company 
identify no more than record holders. In 1992, the Commission amended 
Rule 14a-7 to require a stockholder list that includes a reasonably 
current list of non-objecting beneficial owners, as well as record 
holders, if the company has obtained or obtains a list of beneficial 
owners for its own use before the meeting or security holder 
action.\241\ In contested situations, both the company and parties 
soliciting in opposition could use the list to engage in personal 
solicitation of non-objecting beneficial owners.
---------------------------------------------------------------------------

    \241\ See Release No. 34-31326 (October 16, 1992) [57 FR 48276]. 
The list of beneficial owners includes only those who have not 
objected to the bank or broker nominee disclosing their identity to 
the issuer.
---------------------------------------------------------------------------

    If the free communications proposals in this release are adopted, 
security holders may ultimately receive final disclosure documents 
closer to the time they are asked to make an investment decision. As a 
result, it may become more important for bidders to have access to 
stockholder lists that include non-objecting beneficial owners as well 
as record holders, particularly because of the time it takes for 
disclosure documents to be forwarded through street name holders to 
beneficial owners.
    We propose to revise Rule 14d-5 to incorporate a stockholder list 
requirement in tender offers similar to that provided by Rule 14a-7 in 
proxy solicitations. Under the revised rule, a company that elects to 
provide a bidder with a stockholder list instead of mailing the 
bidder's materials would need to 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 list must be in the format requested by the 
bidder if this can be provided without undue burden or expense. The 
proposed amendment would give bidders the same ability as target 
companies to communicate directly with the non-objecting beneficial 
owners of securities.
    This proposal would conform the stockholder list requirements so 
that the list required is the same whether security holders are 
solicited for proxies or for tenders. This should enhance a bidder's 
ability to timely communicate with non-objecting security holders of 
the target regarding the terms of its tender offer. Bidders would 
continue to be required to disseminate tender offer material to record 
holders (providing sufficient copies for the record holders to send to 
beneficial owners), but they would have the option also to send the 
material to non-objecting beneficial owners on the list. Would bidders 
find this useful? Should the rule permit bidders to send tender offer 
material to non-objecting beneficial owners instead of to record 
holders of those securities, and if so, should the issuer tender offer 
rule be revised the same way?\242\ Would sending material, including 
transmittal forms, to beneficial owners unduly complicate the ability 
to keep track of tenders and count them accurately? Would beneficial 
owners receive tender offer material in a more timely manner than under 
the current system of dissemination through record holders?
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    \242\ See Rule 13e-4(e)(1)(ii).
---------------------------------------------------------------------------

5. Revise and Redesignate the Rule Prohibiting Purchases Outside an 
Offer
    We propose to amend Exchange Act Rule 10b-13 and redesignate it as 
Rule 14e-5. The proposals would clarify the

[[Page 67359]]

rule's text and codify several interpretations and exemptions.
    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.\243\ The rule's 
prohibitions apply from the time the offer is publicly announced or 
otherwise made known to security holders until the time the bidder is 
required, by the offer's terms, either to accept or reject the tendered 
securities. Rule 10b-13 protects investors by preventing a bidder from 
extending greater or different consideration to some security holders 
by offering to purchase their securities outside the offer, while other 
security holders are limited to the offer's terms.\244\ The rule 
applies to the bidder, whether the issuer or a third party, the 
bidder's affiliates, and the offer's dealer-manager.\245\
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    \243\ 17 CFR 240.10b-13.
    \244\ Release No. 34-8712 (October 8, 1969) (``Rule 10b-13 
Adopting Release'').
    \245\ See e.g., Letter regarding Offers for Smith New Court PLC 
(July 26, 1995) (``Smith New Court Letter'').
---------------------------------------------------------------------------

a. Proposed Amendments Redesignating and Clarifying the Rule
    The Commission originally promulgated Rule 10b-13 under the 
provisions of Sections 10, 13 and 14 of the Exchange Act \246\ to 
safeguard the interests of persons who sell their securities in 
response to a tender offer.\247\ The dangers posed by a bidder's 
purchases outside an offer may involve fraud, deception and 
manipulation. Because the rule addresses conduct during tender offers, 
we believe it belongs with the other rules under Regulation 14E under 
the Exchange Act that directly address improper activities in the 
context of tender offers.\248\
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    \246\ 15 U.S.C. 78j; 15 U.S.C. 78m; 15 U.S.C. 78n.
    \247\ Rule 10b-13 Adopting Release.
    \248\ 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 Sec. 14(e), the 
Commission may prohibit acts, not themselves fraudulent under the 
common law or Sec. 10(b), if the prohibition is `reasonably designed 
to prevent * * * acts and practices [that] are fraudulent' '' 
(citing 15 U.S.C. 78n(e)).
    We prepose to amend the rule delegating exemptive authority to 
the Director of the Division of Market Regulation, Rule 30-3, and to 
replace references to Rule 10b-13 with Rule 14e-5. We also propose 
to add a parallel provision to Rule 30-1 to delegate exemptive 
authority to the Director of the Division of Corporation Finance.
---------------------------------------------------------------------------

    The proposed amendments do not alter the rule's basic terms. 
Instead, they modify the rule's text to more clearly set forth the 
covered activities. New Rule 14e-5 would prohibit, in connection with a 
tender offer for equity securities, a covered person from purchasing or 
arranging to purchase any subject securities or any related securities 
otherwise than as part of the offer. As used in Regulation 14E, the 
term ``tender offer'' includes offers to exchange securities for cash 
and/or securities. \249\
---------------------------------------------------------------------------

    \249\ Thus, it is unnecessary to include paragraph (b) of Rule 
10b-13 defining the term ``exchange offer'' in new Rule 14e-5.
---------------------------------------------------------------------------

    We also propose to simplify the language describing the period 
during which the prohibition on purchases applies. Under proposed Rule 
14e-5, this prohibition still would commence at the time the offer is 
first publicly announced or otherwise made known \250\ to holders of 
subject securities and end with the offer's expiration. Under proposed 
Rule 14d-11, a tender offer could be extended under specific 
circumstances without offering withdrawal rights. \251\ This gives 
security holders an additional opportunity to tender into the offer. We 
believe bidder purchases outside the offer during this subsequent 
offering period present the same concerns as during the initial 
offering period. Therefore, the proposed Rule 14e-5 restrictions would 
cover any subsequent offering period provided under proposed Rule 14d-
11.
---------------------------------------------------------------------------

    \250\ The phrase ``otherwise made known'' means any form of 
communication, other than public announcement, that notifies holders 
of subject securities of an offer.
    \251\ See Part II.E.1 above.
---------------------------------------------------------------------------

    The rule applies from the time the offer is first publicly 
announced or otherwise made known to holders of subject securities. 
Should the rule apply if the bidder advises some but not all security 
holders that it intends to conduct a tender offer for the subject 
securities?
b. Persons and Securities Subject to the Rule
    Scope of Persons Subject to the Rule. Rule 10b-13 applies to the 
person who makes the offer, which has been interpreted to cover the 
bidder, the bidder's affiliates, and the offer's dealer-manager.\252\ 
Under proposed Rule 14e-5, the term ``person'' is replaced by ``covered 
person'' to codify this interpretation. Covered person is defined 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. The term ``affiliate'' is defined in proposed Rule 
14e-5 as any person that ``directly, or indirectly through one or more 
intermediaries, controls, or is controlled by, or is under common 
control with, the offeror.'' \253\
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    \252\ See, e.g., 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).
    \253\ This definition is taken substantially from Rule 12b-2 
under the Exchange Act [17 CFR 240.12b-2].
---------------------------------------------------------------------------

    Scope of Securities Subject to the Rule. Proposed Rule 14e-5 would 
apply only to offers for equity securities, just as Rule 10b-13 
currently does. Moreover, Rule 10b-13 and proposed Rule 14e-5 prohibit 
purchases outside the offer of not only the target security, but also 
related securities. We propose several changes from Rule 10b-13 
regarding the scope and treatment of related securities.
    Proposed Rule 14e-5 would define ``related securities'' as 
``securities that are immediately convertible into, exchangeable for, 
or exercisable for subject securities.'' By covering securities that 
are immediately ``exercisable for'' subject securities, we are 
clarifying that securities, such as options, that can be exercised to 
receive target securities are included in the class of securities that 
a covered person cannot purchase outside the offer.
c. Excepted Transactions
    Exercise of Related Securities. Rule 10b-13 specifies 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 and 
relocating it in the part of proposed Rule 14e-5 covering excepted 
activities. 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 
stock options 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, we propose to permit a covered person to convert, exchange, or 
exercise related securities, as long as the covered person owned the 
related securities before the offer was publicly

[[Page 67360]]

announced or otherwise made known to security holders.\254\
---------------------------------------------------------------------------

    \254\ As discussed above, proposed Rule 14e-5 would prohibit a 
covered persons from purchasing related securities from the time 
that the offer is publicly announced or otherwise made known to 
security holders.
---------------------------------------------------------------------------

    Purchases by or for Plans. Since the adoption of Rule 10b-13, there 
has been an exception for purchases of the target security (or a 
related security) by the issuer, 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, under 
certain types of plans.\255\ For example, issuers conducting tender 
offers for their equity securities may purchase subject securities on 
behalf of an employee plan. Rule 10b-13 partly incorporates outdated 
Internal Revenue Code provisions to define these excepted plans.
---------------------------------------------------------------------------

    \255\ 17 CFR 240.10b-13(c).
---------------------------------------------------------------------------

    We propose to eliminate references to Internal Revenue Code 
provisions to define permissible plan purchases and rely instead on the 
more expansive plan provisions contained in the Commission's Regulation 
M. The exception would permit 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.\256\ This exception would recognize the phenomenal growth 
in variety of employee, security holder, and affinity group plans in 
recent years. Moreover, requiring that these purchases be made by an 
``agent independent of the issuer'' should help assure that such 
purchases do not lead to the abuses that proposed Rule 14e-5 is 
designed to prevent.
---------------------------------------------------------------------------

    \256\ 17 CFR 242.100.
---------------------------------------------------------------------------

    Does the proposal regarding plans adequately address circumstances 
when a bidder may need to purchase shares during an offer on behalf of 
a plan? Are there situations when it would be appropriate for the 
bidder to buy shares directly on behalf of the plan? Should the rule 
expressly prevent a bidder from establishing a plan around the time of 
an offer and then purchasing shares on behalf of that plan through an 
independent agent or otherwise?
    Purchases during Odd-Lot Offers. We propose to add a new exception 
that permits purchases during an issuer odd-lot tender offer conducted 
in compliance with the provisions of Rule 13e-4(h)(5) under the 
Exchange Act.\257\ 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. This proposal 
codifies a class exemption from Rule 10b-13 issued by the Commission in 
connection with a recent revision to Rule 13e-4(h)(5).\258\
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    \257\ 17 CFR 240.13e-4(h)(5).
    \258\ Release No. 34-38068 (December 20, 1996) [61 FR 68587].
---------------------------------------------------------------------------

    Unsolicited Purchases by a Dealer-Manager. We propose to except 
unsolicited purchases by a dealer-manager that are made on an agency 
basis. This exception, which codifies a prior exemption, \259\ would 
allow a dealer-manager to continue to conduct its customary brokerage 
activities during a tender offer. Those activities generally do not 
raise the concerns that proposed Rule 14e-5 is intended to address. Of 
course, the unsolicited orders must be from a person other than a 
covered person and must be made in the ordinary course of business.
---------------------------------------------------------------------------

    \259\ Letter regarding Reuters Holdings PLC (August 17, 1993).
---------------------------------------------------------------------------

    Should the exception permit riskless principal transactions by 
dealer-managers as well? Is it necessary to define the term ``dealer-
manager?''
d. Solicitation of Comments on Proposed Rule 14e-5
    We solicit comment on all aspects of proposed Rule 14e-5. Are the 
current exceptions appropriate? Aside from plan transactions and 
purchases during an odd-lot offer, are there other circumstances when 
it would be appropriate to permit the bidder to purchase subject or 
related securities outside the offer? For example, should the bidder be 
permitted to purchase shares outside the 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? Should 
any such exception be limited to cash tender offers for all outstanding 
shares?
    In addition, we invite commenters to address whether a rule 
prohibiting purchases outside of a tender offer continues to be 
appropriate. Should we consider implementing a rule like that in the 
City Code, which permits purchases outside the offer if, among other 
things, the bidder increases the tender offer consideration to the 
highest price paid for any shares so acquired? \260\
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    \260\ City Code, Rule 6.2.
---------------------------------------------------------------------------

    Under what circumstances would it be appropriate not to apply Rule 
14e-5 to the offer's dealer-managers and advisors? Should we consider 
provisions like those contained in the 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? \261\
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    \261\  City Code, Rule 38; Statement 11.
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6. Safe Harbor for Forward-Looking Statements
    In permitting substantially greater communications before the 
filing of a tender offer statement and the commencement of an offer, we 
recognize that bidders may be unwilling to communicate freely about an 
offer absent a safe harbor from liability for forward-looking 
communications. Currently, the safe harbor provisions in the Private 
Securities Litigation Reform Act of 1995 (``PSLRA'') for forward-
looking statements do not apply to statements made in connection with a 
tender offer,\262\ although they do apply to statements made in 
connection with mergers.\263\ We solicit comment on whether we should 
extend the provisions of the PSLRA to forward-looking statements issued 
in connection with a tender offer. Just as with mergers, there are 
other policing mechanisms to protect against false and misleading 
forward-looking statements in the tender offer context.
---------------------------------------------------------------------------

    \262\ See Section 27A(b)(2)(C) of the Securities Act and Section 
21E(b)(2)(C) of the Exchange Act. The safe harbor in the PSLRA also 
is unavailable to penny-stock companies, companies involved in 
``blank check'' offerings, roll-up transactions or going-private 
transactions. See Section 27A(b)(1)(B)-(E) of the Securities Act and 
Section 21E(b)(1)(B)-(E) of the Exchange Act.
    \263\ The Commission's safe harbor rules, Securities Act Rule 
175 [17 CFR 230.175] and Exchange Act Rule 3b-6 [17 CFR 240.3b-6], 
are available for certain forward-looking statements made in 
Commission filings, including those made in tender offers.
---------------------------------------------------------------------------

    Of course, under any extension of the PSLRA safe harbor, bidders 
would have to identify their forward-looking statements as ``forward-
looking'' and the statements would need to be accompanied by meaningful 
cautionary statements identifying important factors that could cause 
actual results to differ significantly from those disclosed. In 
addition, bidders still may be subject to liability in any proceeding 
brought by the Commission. In order to promote balanced disclosure, we 
also would extend the safe harbor to statements made by targets as well 
as bidders.
    We invite comment on whether the statutory safe harbor for forward-
looking statements is necessary or appropriate to encourage bidders and 
targets to communicate fully and freely with security holders regarding 
proposed tender offers. What types of forward-looking information do 
bidders typically provide, or need to provide, before

[[Page 67361]]

commencing a tender offer that merit safe harbor protection from 
private litigation? Could a safe harbor be abused in the fast-moving 
tender offer context? Are there any circumstances when a forward-
looking information safe harbor should not be available? For example, 
should we limit our extension of the PSLRA safe harbor to only those 
communications made in reliance on the proposed free communications 
safe harbor?

III. General Request for Comments

    If you would like to submit written comments on the proposals, to 
suggest additional changes, or to submit comments on other matters that 
might have an impact on the proposals, we encourage you to do so. 
Besides the specific questions we asked in this release, we also 
solicit comment on the usefulness of the proposals to security holders, 
issuers, and the marketplace at large. We would like comments from the 
point of view of both bidders and targets, as well as security holders 
and market professionals involved in the mergers and acquisitions area. 
We also encourage the submission of written comments on any aspect of 
the initial regulatory flexibility analysis. We will consider any 
written comments we receive in preparing the final regulatory 
flexibility analysis if the proposed rules are adopted.
    We believe that the proposals, if adopted, would promote 
efficiency, competition, and capital formation. However, we solicit 
comment on whether the proposals would promote efficiency, competition, 
and capital formation. We also request comment on whether the 
proposals, if adopted, would have an adverse effect on competition or 
would impose a burden on competition that is neither necessary nor 
appropriate in furthering the purposes of the Securities Act and the 
Exchange Act. We will consider these comments in complying with our 
responsibilities under Section 23(a)(2) of the Exchange Act.\264\
---------------------------------------------------------------------------

    \264\ 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

    Please send three copies of your comments to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., 
Washington, D.C. 20549. You may also submit your comments 
electronically at the following E-mail address: [email protected]. 
All comment letters should refer to File No. S7-28-98; this file number 
should be included in the subject line if E-mail is used. Comment 
letters can be inspected and copied in the public reference room at 450 
Fifth Street, N.W., Washington, D.C. We will post electronically 
submitted comments on our Internet Web site (http://www.sec.gov).

IV. Cost-Benefit Analysis

    The proposed new rules, schedules, and amendments would update and 
simplify the rules and regulations that apply to takeover transactions, 
including tender offers, mergers, and similar extraordinary 
transactions. We propose to enhance communications between public 
companies and investors before companies file registration statements 
involving takeover transactions, proxy statements or tender offer 
statements. We also propose to put cash and stock tender offers on a 
more equal regulatory footing; integrate the forms and disclosure 
requirements applicable to issuer tender offers, third-party tender 
offers and going private transactions; and consolidate the disclosure 
requirements in one location. We propose to allow security holders to 
tender their shares during a limited period after the successful 
completion of a 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. In this section, we examine the benefits and 
costs associated with the proposed revisions, focusing on the groups 
that might be affected. We request that commenters provide their views 
and supporting data as to the benefits and costs of the proposals.

A. Communications

    We anticipate the proposals would enhance price discovery and 
market efficiency by permitting companies to communicate more freely 
with investors in business combination transactions. Today, the 
provisions of the Securities Act and Exchange Act, including the 
Williams Act, restrict the type of information that can be disseminated 
before a bidder files a registration, proxy or tender offer statement. 
The proposals would allow companies to communicate with security 
holders both before and after they file their registration, proxy, and 
tender offer statements.\265\ The proposed rules also would allow 
companies that are the target of a tender offer to communicate more 
freely with security holders.
---------------------------------------------------------------------------

    \265\ See proposed Rules 166(b), 14d-2, and 14a-12.
---------------------------------------------------------------------------

    We believe this increased flow of information would help security 
holders make more informed tender or voting decisions, despite the 
possibility that some deal participants might attempt to ``condition 
the market'' with false, misleading or confusing information. We 
believe security holders would benefit overall because they would 
receive issuers' registration, tender offer or proxy statements before 
having to tender or vote their shares. Therefore, security holders 
would have the opportunity to consider the statements in the disclosure 
document together with any other information disseminated by parties to 
business combination transactions. In addition, such information would 
be subject to high liability standards. Issuer communications made 
before filing with the Commission and during the waiting period would 
be subject to the anti-fraud provisions of Rule 10b-5 under the 
Exchange Act, as well as to the anti-fraud provisions of Rule 14a-9 and 
Section 14(e) if a transaction involves the proxy or tender offer 
rules, respectively. If the Securities Act is applicable, these 
communications also would be subject to the provisions of Section 
12(a)(2) under the Securities Act. We have requested comment on whether 
these communications also should be deemed part of the registration 
statement and therefore subject to Section 11 of the Securities Act. We 
believe these standards of liability are sufficiently high to encourage 
parties to provide investors with fair and accurate information about 
transactions.
    Does the benefit of greater freedom in communications outweigh the 
cost to security holders of obtaining and analyzing the additional 
information to determine its currency and accuracy and the cost to 
companies of filing such information? We do not believe that permitting 
offerors to communicate with security holders before filing their 
registration statements and during the waiting period would present a 
significant burden to investors or offerors. We request comment on the 
type and magnitude of burden this filing requirement would represent to 
deal participants.
    In addition, we believe the proposed communication rules would 
reduce the current regulatory uncertainty for companies. As discussed 
above, the provisions of the Securities Act and Exchange Act, including 
the Williams Act, restrict communications before companies file their 
registration, proxy or tender offer statements. Companies have told us 
that they are uncertain whether and in what circumstances these 
restrictions conflict with their duties to make full and fair 
disclosure under Rule 10b-5 of the Exchange Act. Consequently, many 
companies are

[[Page 67362]]

unsure how to balance their duty to disclose with their duty to be 
silent before the filing of a disclosure document. By relaxing 
restrictions on communications, the proposed revisions would minimize 
this regulatory tension. This clarification would benefit offerors and 
security holders alike.
    One potential cost of the proposals is that some security holders 
may make investment decisions based on information received before the 
filing of a disclosure statement.\266\ To the extent that such activity 
could occur under the proposals, it also could occur today. The current 
rules limit companies from communicating with investors before they 
file their statements. By allowing companies to publicly announce 
transactions before the filing of a mandated disclosure document and 
requiring companies to file their written communications on first use, 
we believe investors would be more likely to make informed investment 
decisions than under the current rules. We request comment on the 
accuracy of this view.
---------------------------------------------------------------------------

    \266\ The above proposals could cause some security holders to 
make premature investment decisions based on incomplete information 
if they buy or sell securities after an issuer announces a 
transaction, but before the issuer files its registration, proxy or 
tender offer statement.
---------------------------------------------------------------------------

    To further protect investors, we propose new Rule 14e-8 that would 
make it clear that it is unlawful to announce a tender offer without 
the intention of beginning and completing it with the intention of 
manipulating the market price of the bidder or target. It also would 
clarify that it is unlawful to announce a tender offer without the 
reasonable belief that the bidder has the means to purchase the 
securities in the offer. We believe such actions should be unlawful 
because it could cause investors to base their investment decisions on 
false or misleading information. We believe the proposed rule would 
help stem these activities, but request your comments on this 
viewpoint.
    In addition to permitting increased communications between 
companies and investors, the proposed revisions would reduce the 
differential in information available to investors by requiring 
companies to file their written communications upon first use. This 
proposal would help assure that communications are immediately 
available to many more investors than currently is the case. The 
proposals also would increase the uniformity and timeliness of 
information received by investors.
    We also propose to permit bidders to begin their exchange offers as 
soon as they file their registration statements; that is, they would no 
longer have to wait for the registration statements' effectiveness. We 
believe the ability to begin an exchange offer on filing would 
encourage issuers to file quickly with the Commission, thereby creating 
incentives for companies to publicly disseminate information rather 
than selectively communicate with only a few security holders.
    We recognize that our proposals to liberalize oral communications, 
which would not need to be filed, may encourage companies to use oral 
communications rather than written communications, which would have to 
be filed. On balance, however, we believe the proposals will reduce the 
selective disclosure of information to the market. We request comment 
on whether the benefits to security holders of greater access to 
written information would outweigh any potential costs from 
deregulating oral communications.
    In proxy solicitations, whether or not they involve a business 
combination, we propose to permit companies to more freely communicate 
with security holders. Under the proposed rules, companies would be 
able to communicate freely with security holders without first 
furnishing a written proxy statement.\267\ The proposal would allow 
security holders to receive more information on upcoming votes than 
they do today.
---------------------------------------------------------------------------

    \267\ A company would, however, have to provide a proxy 
statement before or concurrently with soliciting a proxy card.
---------------------------------------------------------------------------

    We also propose to require companies to provide a short ``plain 
English'' summary term sheet in all cash mergers, cash tender offers, 
and going-private transactions.\268\ We believe that this would 
facilitate investors' understanding of the basic terms of transactions, 
and thus allow them to make better-informed choices. We do not 
anticipate that companies would incur significant costs in writing 
plain English term sheets because they need to generate the same 
information to comply with other disclosure requirements and many 
should have experience writing plain English disclosures in connection 
with the Securities Act requirements. We request comment on the 
accuracy of this view.
---------------------------------------------------------------------------

    \268\ Forms C and SB-3 would be subject to the current Form S-4 
summary and plain English requirements; thus we would not need to 
require a term sheet for securities offerings, although we are 
soliciting comment on whether it would be useful.
---------------------------------------------------------------------------

B. Filings

    We anticipate that the proposals would lower the costs of complying 
with the business combination disclosure and other regulatory 
requirements for many offerors. The proposals would integrate and 
streamline the disclosure requirements for business combinations, 
thereby reducing compliance costs. Specifically, the proposals would 
harmonize and integrate the disclosure requirements for tender offer, 
merger proxy, and going-private transaction statements. The proposals 
would allow issuers to file one schedule, rather than two, to satisfy 
the tender offer and going-private disclosure requirements when both 
apply to the transaction.
    The proposals would reduce the burden of complying with the merger 
proxy requirements by,\269\ among other things:
---------------------------------------------------------------------------

    \269\ See Item 14 of Schedule 14A.
---------------------------------------------------------------------------

     Clarifying the disclosure requirements;
     Clarifying that financial statements are required for an 
acquiror in a cash transaction only if an acquiror has not demonstrated 
the financial ability to satisfy the terms of the offer or the 
information is otherwise material;
     Eliminating the requirement for financial statements of 
the target in a cash merger when the acquiror's security holders are 
not voting on the transaction;
     Reducing the financial statement requirements for non-
reporting target companies (when security holders of the acquiring 
company are not voting on the transaction) to be only those financial 
statements the target previously furnished to its security holders 
(with a minimum of U.S. GAAP financial statements provided for the 
latest fiscal year) instead of financial statements for three years; 
\270\ and
---------------------------------------------------------------------------

    \270\ This revision would apply to Form C and SB-3 transactions.
---------------------------------------------------------------------------

     Reducing the financial statements needed for acquiring 
companies in cash mergers and third-party cash tender offers from three 
years to two years.
    In addition, we propose one offsetting cost. We would require that 
a bidder in a two-tier transaction, where security holders are offered 
cash in a tender offer and securities in a back-end merger, provide 
security holders with pro forma financial statements and other related 
information for the combined entity at the time of the cash tender 
offer. Rather than being an additional requirement, this proposal would 
accelerate the time at which bidders are required to disclose the 
information.
    For the purposes of the Paperwork Reduction Act, Table 2 in Section 
VI summarizes our preliminary estimates of the internal burden hours 
that parties would spend to comply with the proposals. These estimates 
include the

[[Page 67363]]

burden hours incurred by companies from filing pre-filing 
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 parties would expend approximately 234,759 
internal burden hours/year complying with the proposals. If we assume 
that 70% of these burden hours would be expended by persons that cost 
the affected parties $85/hour and 30% of these burden hours would be 
expended by persons that cost $10/hour, then the proposals would cost 
approximately $14,691,250/year in internal staff time. For the purposes 
of the Paperwork Reduction Act, we also estimate that parties would 
spend approximately $122,929,990/year on outside professional help to 
comply with the proposals. Thus we estimate that affected parties would 
spend approximately $137,621,240/year to comply with the proposals. 
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.\271\ Note that these estimates do not 
attempt to quantify the proposals' intangible benefits, such as the 
benefits to issuers and investors of enhanced communications and 
possible improvements in price discovery, nor its intangible costs, 
such as the cost to security holders of identifying misleading or 
incomplete pre-filing information. We request comment on the 
reasonableness of our estimates and our analysis of other costs and 
benefits.
---------------------------------------------------------------------------

    \271\ For the purposes of the Paperwork Reduction act, we 
estimate in Table 2 of Section VI 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.
---------------------------------------------------------------------------

    We propose to eliminate confidential treatment of merger proxy 
statements. Today, many of the filings we accord confidential treatment 
are preceded by public announcements of the transactions. Consequently, 
we question whether eliminating confidential treatment of merger proxy 
statements would impose a burden or cost on companies. We solicit 
comment on the possible impact on companies of this proposal.

C. Tender Offers

    We propose to reduce a regulatory bias against using securities as 
consideration in tender offers by allowing third-party bidders to begin 
an exchange offer upon filing and dissemination of their Form C or SB-3 
registration statement (like bidders offering cash). This proposal 
would give bidders more flexibility in determining whether to offer 
cash or securities as consideration in transactions. Under the 
proposals, a bidder could not purchase tendered securities until its 
registration statement was declared effective and the mandatory 20-
business day tender offer period had elapsed. Security holders could 
withdraw their securities at any time until purchased by the bidder. 
This proposal would likely shorten the period of time to complete stock 
tender offers relative to today, putting them on a more equal footing 
with cash tender offers. Of course, it may also increase the risk that 
bidders offering securities would have to disseminate supplements to 
the tender offer materials after their offers begin due to changes in 
material information. If so, they would have to provide sufficient time 
for security holders to receive the supplements and reconsider their 
investment decisions. This risk, however, would not be unique to 
exchange offers; issuers run the same risk today with cash offers. We 
solicit comment on this analysis and on any other costs and benefits 
that may arise from bidders commencing their exchange offers earlier 
than today.
    We also propose to permit bidders to purchase (at the stated offer 
price) securities from holders who did not tender their shares during 
the offer in a ``subsequent offering period.'' We believe the proposal 
would minimize the delay that security holders encounter in liquidating 
their investments in a target's securities when a bidder is successful 
in purchasing a significant or controlling interest in the target. 
Under the proposal, however, security holders might wait to tender 
their shares in the subsequent offering period. We solicit comment on 
whether this would be likely to occur and whether it would outweigh the 
benefits of the proposal. We note that bidders would not be under any 
obligation to offer to purchase securities in a subsequent offering 
period.
    We propose to eliminate the requirement for financial statements of 
the target in cash mergers when acquirors' security holders are not 
voting on the transaction, and require two, rather than three years of 
financial statements when they are material in third-party cash tender 
offers. If the security holders of the acquiror are not making a voting 
decision on the transaction, they do not need three years of historical 
financial statements. The reduction from three to two years of 
historical financial statements would thus lower acquirors' costs of 
complying with our rules, while continuing to protect security holders.
    Finally, we propose to 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 proposed amendment would give bidders the same ability as 
target companies to communicate directly with the beneficial owners of 
securities similar to that provided under the proxy rules. We believe 
this proposal would benefit bidders and security holders because 
communications would be more efficient than today. We request your 
comments on the benefits and costs of this proposal.
    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (``SBREFA''),\272\ a rule is ``major'' if it has resulted, 
or is likely to result in:
---------------------------------------------------------------------------

    \272\ Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).
---------------------------------------------------------------------------

     An annual effect on the economy of $100 million or more;
     A major increase in costs or prices for consumers or 
individual industries; or
     Significant adverse effects on competition, investment or 
innovation.
    We request information on the potential impact of the proposed 
rules, schedules, and amendments on the economy on an annual basis. 
Commenters should provide empirical data on: (i) the annual effect on 
the economy; (ii) any increase in costs or prices for consumers or 
individual industries; and (iii) any effect on competition, investment 
or innovation. We note that U.S. merger and acquisition activity in 
1997 was valued at over $790 billion.\273\
---------------------------------------------------------------------------

    \273\ See Mergers & Acquisitions, The Dealmaker's Journal, 1998 
Almanac (March/April), at 42.
---------------------------------------------------------------------------

    In adopting rules under the Exchange Act, Section 23(a) requires 
the Commission to consider the impact that rules would have on 
competition and to not adopt any rule that would impose a burden on 
competition not necessary or appropriate in the public interest. 
Section 3(f) of the Exchange Act requires the Commission, when engaged 
in rulemaking, to consider or determine whether the action is necessary 
or appropriate in the public interest, and also to consider in addition 
to the protection of investors, whether the action would promote 
efficiency, competition, and capital formation.\274\
---------------------------------------------------------------------------

    \274\ 15 U.S.C. Sec. 78c(f).

---------------------------------------------------------------------------

[[Page 67364]]

V. Initial Regulatory Flexibility Analysis

A. Reasons for Proposed Action

    We prepared this Initial Regulatory Flexibility Analysis under 5 
U.S.C. Sec. 603 concerning the new rules, schedules, and amendments 
proposed today. We will consider your written comments in the 
preparation of the final analysis. The primary purposes of the proposed 
new rules, schedules, and amendments are to enhance communications with 
security holders; harmonize the regulations affecting cash and stock 
tender offers; facilitate compliance with the rules and regulations 
associated with takeover and similar extraordinary transactions; and 
promote investor protection.

B. Objectives and Legal Basis

    The resulting reduction in compliance costs for all persons subject 
to our rules and regulations would benefit small and large business 
entities alike. The proposals should result in security holders 
receiving more information on a timely basis. In addition, the 
proposals would give persons subject to our rules greater flexibility 
in structuring and completing tender offers, mergers, and other 
extraordinary transactions. We propose the new rules, schedules, and 
amendments under Sections 2(3), 5, 7, 8, 10, 12, 19, and 28 of the 
Securities Act, as amended, and Sections 3(b), 4(e), 10(b), 13, 14, 18, 
23(a), 24, and 36 of the Exchange Act, as amended.

C. Small Entities Subject to the Rules

    The proposals would affect small entities that are required to file 
registration statements, proxy statements, tender offer statements and 
other reports under the Securities Act, Exchange Act, and the 
Investment Company Act. For the purposes of the Regulatory Flexibility 
Act, the Securities Act and Exchange Act define a ``small business'' 
issuer, other than an investment company, to be an issuer that, on the 
last day of its most recent fiscal year, had total assets of $5 million 
or less.\275\ When used with respect to an issuer that is an investment 
company, the term is defined as an investment company and any related 
investment company with aggregate net assets of $50 million or less as 
of the end of its most recent fiscal year.\276\
---------------------------------------------------------------------------

    \275\ See 17 CFR 230.157 and 17 CFR 240.0-10.
    \276\ See 17 CFR 240.0-10
---------------------------------------------------------------------------

    We currently are aware of approximately 1,100 reporting companies 
that are not investment companies with assets of $5 million or less. 
There are approximately 400 investment companies that satisfy the 
``small entity'' definition. All of these companies would be subject to 
at least some of the proposed rules, schedules, and amendments and 
could be affected either as acquiring or as acquired companies. We have 
no reliable way, however, to determine how many reporting or non-
reporting small businesses may actually rely on the proposed rules, or 
may otherwise be affected by the rule proposals. Nevertheless, we 
believe that the proposals would substantially benefit both small and 
large entities to the extent the proposals substantially reduce current 
restrictions on communications and facilitate compliance with existing 
rules and regulations.

D. Reporting, Recordkeeping, and Other Compliance Requirements

    For the most part, the proposals are deregulatory in nature, 
significantly expanding the ability of businesses to structure and time 
their business combination transactions and communicate with security 
holders. Under the proposed rules, small businesses would report and 
file essentially the same information as today. One exception to this 
generalization is that offerors, both large and small, would be 
required to file pre-filing communications in business combination 
transactions with the Commission. This requirement arises, however, 
from the proposed deregulation of voluntary pre-filing communications. 
The proposed rules, schedules, and amendments in this release would 
treat all persons and entities alike, and would not distinguish among 
them based on size.

E. Significant Alternatives

    The Regulatory Flexibility Act directs the Commission to consider 
significant alternatives that would accomplish the stated objectives, 
while minimizing any significant adverse impact on small issuers. In 
connection with the proposed rules, schedules, and amendments, we 
considered several 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.
    For the most part, the proposals are deregulatory in nature. They 
significantly expand the ability of businesses to structure and time 
their business combination transactions and communicate with security 
holders, while maintaining investor protections. Although we considered 
whether it would be appropriate to exclude smaller entities, we 
determined that the proposals should apply to all businesses regardless 
of their size; that is, we should not limit the rules and the 
corresponding benefits to large, seasoned issuers.
    As a preliminary matter, we believe that there are no less 
restrictive alternatives to the proposed rules, schedules, and 
amendments that would serve the purposes of the proxy, tender offer, 
going-private, and registration requirements of the federal securities 
laws. We were unable to identify less burdensome alternatives to our 
proposals that would be consistent with our statutory mandate to 
require issuers to disclose material information fully and fairly to 
investors. We believe the proposed rules, schedules, and amendments 
should apply equally to all entities required to disclose information 
to enhance the protection of all investors. For these reasons, we also 
believe there would be no benefit in providing separate requirements 
for small issuers based on the use of performance rather than design 
standards.

F. Overlapping or Conflicting Federal Rules

    We do not believe any current federal rules duplicate, overlap or 
conflict with the rules, schedules, and amendments that we propose to 
amend.
    We request your written comments on any aspect of this Initial 
Regulatory Flexibility Analysis. We particularly seek comment on:
     The number of small entities that would be affected by the 
proposed rules, schedules, and amendments;
     The expected impact of the proposals as discussed above; 
and
     How to quantify the number of small entities that would be 
affected by, and how to quantify the impact of, the proposed rules, 
schedules, and amendments.
    We ask commenters to describe the nature of any impact and provide 
empirical data supporting the extent of the impact.

VI. Paperwork Reduction Act

    The proposed rules, schedules, and amendments affect several 
regulations and forms that contain ``collection of information 
requirements'' within the

[[Page 67365]]

meaning of the Paperwork Reduction Act of 1995.\277\ We have submitted 
proposed revisions to those rules, schedules, and amendments to the 
Office of Management and Budget (``OMB'') for review in accordance with 
44 U.S.C. Sec. 3507(d) and 5 CFR 1320.11. 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 includes the titles for the affected collections of 
information under the Exchange Act, current OMB control numbers, if 
applicable, a summary of the collection of information, and a 
description of the likely respondents to each collection of 
information.\278\
---------------------------------------------------------------------------

    \277\ 44 U.S.C. Sec. 3501 et seq.
    \278\ Regulations S-K and S-B do not impose reporting burdens 
directly on public companies. For administrative convenience, each 
of these regulations is currently assigned one burden hour. The 
burden hours imposed by the disclosure regulations are currently 
included in the estimates for the forms that refer to the 
regulations.

                  Table 1: Collections of Information Under the Securities Act and Exchange Act
----------------------------------------------------------------------------------------------------------------
                                                                        Summary of the collection of information
                 Title                          OMB control No.           and description of likely respondents
----------------------------------------------------------------------------------------------------------------
Schedule 14A..........................  3235-0059.....................  When a shareholder vote is required,
                                                                         persons soliciting proxies with respect
                                                                         to securities registered under Section
                                                                         12 of the Exchange Act must furnish a
                                                                         proxy statement containing the
                                                                         information specified by Schedule 14A.
                                                                         The proxy statement is intended to
                                                                         provide security holders with the
                                                                         information necessary to enable them to
                                                                         vote in an informed manner on matters
                                                                         intended to be acted upon at security
                                                                         holders' meetings, whether the
                                                                         traditional annual meeting or a special
                                                                         meeting.
Schedule 14C..........................  3235-0057.....................  Companies with securities registered
                                                                         under Section 12 of the Exchange Act
                                                                         must send an information statement to
                                                                         every holder of the registered security
                                                                         that is entitled to vote on any matter
                                                                         for which a security holder vote is
                                                                         held, but proxies are not solicited.
                                                                         Schedule 14C sets forth the disclosure
                                                                         requirements for these information
                                                                         statements.
Schedule 13E-3........................  3235-0007.....................  Companies or their affiliates that
                                                                         engage 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
                                                                         a Schedule 13E-3. Filers must disclose
                                                                         detailed information about
                                                                         transactions, including whether they
                                                                         believe the transactions are fair.
Schedule 14D-9........................  3235-0102.....................  Interested parties (including issuers
                                                                         and beneficial owners of securities)
                                                                         that make a solicitation or
                                                                         recommendation to security holders
                                                                         regarding a tender offer subject to
                                                                         Regulation 14D must file a Schedule 14D-
                                                                         9.
Schedule 13E-4........................  3235-0203.....................  Reporting companies that make tender
                                                                         offers for their own securities must
                                                                         file a Schedule 13E-4.
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, which offer, if
                                                                         consummated, would cause that person to
                                                                         own over 5 percent of that class of the
                                                                         securities, must at the time of the
                                                                         offer file a Schedule 14D-1 and send it
                                                                         to certain other parties, such as the
                                                                         issuer and any competing bidders.
Schedule TO...........................  t.b.d.........................  Any party that the SEC would require
                                                                         today to file a Schedule 13E-4 or
                                                                         Schedule 14D-1.
----------------------------------------------------------------------------------------------------------------

    The proposed new rules, schedules, and amendments would update and 
simplify the rules and regulations for business combinations. The 
information is needed so that security holders may make informed tender 
and voting decisions in tender offers, mergers, acquisitions, and other 
extraordinary transactions. We propose to enhance communications 
between public companies and investors before companies file 
registration statements involving takeover transactions, proxy 
statements, and tender offer statements. We also propose 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. We propose to allow security 
holders to tender their shares during a limited period after the 
completion of a tender offer; more closely align 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 affected schedules and regulations set forth the disclosures 
that the Commission would require offerors to make about business 
combination transactions and about themselves to the public. The 
requirements of the above schedules would largely be the same as today, 
except for a few changes. Specifically, under the proposals, Schedules 
14A, 14C, 13E-3, 14D-9, and TO would require a short ``plain English'' 
summary term sheet, not currently required, in all cash mergers, cash 
tender offers, and going-private transactions.\279\ The proposed rules 
would reduce the number of years of financial statements required by 
Schedules 14A and 14C for acquiring companies in cash mergers and cash 
tender offers from three years to two years. Under the proposals, 
Schedules 14A and 14C would 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.\280\ Proposed Schedule TO would replace 
current Schedules 13E-4 and 14D-1, harmonizing and clarifying their 
requirements. Under the proposals, Schedule TO would require a bidder 
in a two-tier transaction, where security holders are offered cash in a 
tender offer and securities in a back-end merger, provide security 
holders with pro forma financial statements and other related 
information for the combined entity at the time of the cash tender 
offer. The proposals would allow issuers to file

[[Page 67366]]

one schedule, rather than two, to satisfy the tender offer and going-
private disclosure requirements when both apply to the transaction.
---------------------------------------------------------------------------

    \279\ Forms C and SB-3 would be subject to the current Form S-4 
summary and plain English requirements; thus we would not need to 
require a term sheet for securities offerings, although we are 
soliciting comment on whether it would be useful.
    \280\ For transactions offering stock as consideration (i.e., 
Form C and SB-3 transactions), the proposals would reduce the 
financial statement requirements for non-reporting target companies 
(when security holders of the acquiring company are not voting on 
the transaction) to be only those financial statements the target 
previously furnished to its security holders (with a minimum of U.S. 
GAAP financial statements provided for the latest fiscal year) 
instead of financial statements for three years.
---------------------------------------------------------------------------

    The information collection requirements imposed by the schedules 
and regulations are mandatory to the extent that companies are publicly 
owned and undertake business combination transactions. There are no 
mandatory retention periods for the information disclosed. The 
information gathered is made publicly available,\281\ unless granted 
confidential treatment. However, the release proposes to eliminate the 
confidential treatment of preliminary proxy statements.
    As discussed in detail in Section IV, the proposals, if adopted, 
would reduce the burden of complying with the business combination 
disclosure and transaction requirements for many issuers. Public 
companies would expend approximately 988,986 burden hours/year to 
comply with the proposed rules, schedules, and amendments, cumulatively 
saving at least 191,592 burden hours/year. Table 1 of Section IV shows 
the estimated burden hours for the proposed forms and the approximate 
number of filings of each schedule under the proposed rules, schedules, 
and amendments.
    The proposals would integrate and streamline the disclosure 
requirements for business combinations, thereby reducing issuers' 
compliance costs. For the purposes of the Paperwork Reduction Act, 
Table 2 below summarizes our preliminary estimates of the burden hours 
that parties would spend to comply with the proposals. These estimates 
include the burden hours incurred by companies from filing pre-filing 
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 parties would expend approximately 234,759 
burden hours/year to comply with the proposals. In addition, as 
discussed in more detail below, we estimate that parties would spend 
approximately $122,929,990/year on outside professional help to comply 
with the proposals. Note that these estimates do not attempt to 
quantify the proposals' intangible benefits, such as the benefits to 
issuers and investors of enhanced communications and possible 
improvements in price discovery. We discuss our preliminary estimates 
in greater detail below. We request comment on the reasonableness of 
our estimates.

                                                             Table 2: Burden Hour Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Estimated burden hours/filing   Estimated filings/year \282\       Estimated burden hours
                                                         -----------------------------------------------------------------------------------------------
                        Schedule                                                                                              Before           After
                                                              Before           After          Before           After      Revisions  (E)  Revisions  (F)
                                                          Revisions  (A)  Revisions  (B)  Revisions  (C)  Revisions  (D)       = A*C           = 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......................................................            0.00           43.50               0             705               0          30,668
                                                                                                                         -------------------------------
      Total.............................................  ..............  ..............  ..............  ..............       1,110,670         235,060
--------------------------------------------------------------------------------------------------------------------------------------------------------
\282\ The estimated filings/year are based on the number of filings in fiscal year 1998.

    We anticipate the proposals would reduce the number of hours 
required to file a full Schedule 14A from 87 hours today to 70 hours 
under the proposals.\283\ Of the 70 hours, we estimate that 25% (17.5 
internal burden hours) would 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 parties would file 
approximately 9,892 full Schedule 14As/year. Under the proposed rules, 
companies and other parties also would be 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.\284\ The rule would require filers to attach their written 
communications and would have few specific information requirements. 
For fiscal year 1998, we estimate 34% of the 9,892 full Schedule 14As 
filed involved cash rather than securities.\285\ We estimate that 
parties, on average, would file one written communication (in addition 
to the required proxy statement) for each cash transaction. We estimate 
that a firm's corporate staff would expend approximately 15 burden 
minutes (0.25 internal burden hours) to file a written communication 
under the proposed rules.\286\ Thus, we estimate parties would 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 would require approximately 
13.12 internal burden hours to file 13,255 full Schedule 14As and 
written communications. In addition, we anticipate filers would spend, 
at an estimated $175/hour, approximately $9,188/filing in professional 
labor costs to file a full Schedule 14A.\287\ We request your

[[Page 67367]]

comments and supporting empirical information on the reasonableness of 
these estimates.
---------------------------------------------------------------------------

    \281\ If, however, a bank finances all or part of a tender 
offer, we permit the offeror to conceal the bank's name if the 
offeror files a request and the bank's name with the Secretary of 
the Commission. See Item 4 of Schedule 14D-1.
    \283\ 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 parties 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.
    \284\ Under the proposed rules, bidders would file under Rule 
425 any pre-filing communications in transactions where securities 
are offered as consideration. Because we are proposing Rule 425 in 
the Securities Act Reform Release, we estimate the burden hours for 
filings of pre-filing communications for those transactions in that 
release.
    \285\ According to Securities Data Corporation, in 1996 security 
holders received only cash in 34% of merger transactions.
    \286\ 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.
    \287\ We estimate filers would spend $9,188/filing in 
professional labor costs. We base this estimate on 52.50 hours of 
professional labor/full Schedule 14A filing * $175/hour. In 
aggregate, we estimate that filers would spend $90,887,696/year to 
file 9,892 full Schedule 14As/year.
---------------------------------------------------------------------------

    We anticipate the proposals would reduce the number of hours 
required to file a full Schedule 14C from 87 hours today to 70 hours 
under the proposals. Of the 70 hours, we estimate that 25% (17.5 
internal burden hours) would 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 parties would file 
approximately 253 full Schedule 14Cs/year. Under the proposed rules, 
companies and other parties also would be 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.288 The rule would require filers to attach their 
written communications and would have few specific information 
requirements. For fiscal year 1998, we estimate 34% of the 253 full 
Schedule 14Cs filed involved cash rather than securities.289 
We estimate that parties, on average, would file one written 
communication (in addition to the required information statement) for 
each cash transaction. We estimate that a firm's corporate staff would 
expend approximately 15 burden minutes (0.25 internal burden hours) to 
file a written communication under the proposed rules. Thus, we 
estimate parties would 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 would 
require approximately 13.12 internal burden hours to file 339 full 
Schedule 14Cs and written communications. In addition, we anticipate 
filers would spend, at an estimated $175/hour, approximately $9,188/
filing in professional labor costs to file a full Schedule 
14C.290 We request your comments and supporting empirical 
information on the reasonableness of these estimates.
---------------------------------------------------------------------------

    \288\ Under the proposed rules, bidders would file under Rule 
425 any pre-filing communications in transactions where securities 
are offered as consideration. Because we are proposing Rule 425 in 
the Securities Act Reform Release, we estimate the burden hours of 
filings of pre-filing communications for those transactions in that 
release.
    \289\ According to Securities Data corporation, in 1996 security 
holders received only cashe in 34% of merger transactions.
    \290\ We estimate filers would spend $9,188/filing in 
professional labor costs. We base this estimate on 52.50 hours of 
professional labor/full Schedule 14C filing * $175/hour. In 
aggregate, we estimate that filers would spend $2,324,564/year to 
file 253 full Schedule 14Cs/year.
---------------------------------------------------------------------------

    The proposals would clarify and make several technical changes to 
Schedule 13E-3. We anticipate a savings of two hours, from 139.25 
hours/filing to 137.25 hours/filing, to file Schedule 13E-3 under the 
proposals. Of the 137.25 hours, we estimate that 25% (34.31 internal 
burden hours) would be provided by corporate staff, and 75% (102.94 
hours) by external professional help. Based on filings in fiscal year 
1998, we estimate parties would file 96 Schedule 13E-3s/year. In 
addition, we anticipate filers would spend, at an estimated $175/hour, 
approximately $18,015/filing in professional labor costs to file a full 
Schedule 13E-3.291 We request your comments and supporting 
empirical information on the reasonableness of these estimates.
---------------------------------------------------------------------------

    \291\ We estimate filers would spend $18,015/filing in 
professional labor costs. We base this esimate on 102.94 hours of 
professional labor/full Schedule 13e-3 filing * $175/hour. In 
aggregate, we estimate that filers would spend $1,729,440/year to 
file 96 full Schedule 13E-3s/year.
---------------------------------------------------------------------------

    The proposals would clarify and make several technical changes to 
Schedule 14D-9. 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 proposals. Of the 352.25 hours, we estimate that 25% (88.06 
internal burden hours) would 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 parties would 
file approximately 258 full Schedule 14D-9s/year. Under the proposed 
rules, companies and other parties also would be required to file under 
cover of Schedule 14D-9 any pre-filing written communications (in 
addition to the required proxy statement) concerning business 
combinations for cash.292 The rule would require filers to 
attach their written communications and would have few specific 
information requirements. For fiscal year 1998, we estimate 37% of the 
258 full Schedule 14D-9s filed involved cash rather than 
securities.293 We estimate that parties, on average, would 
file one written communication (in addition to the required information 
statement) for each cash transaction. We estimate that a firm's 
corporate staff would expend approximately 15 burden minutes (0.25 
internal burden hours) to file a written communication under the 
proposed rules. Thus, we estimate parties would 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 would require approximately 64.43 internal 
burden hours to file 353 full Schedule 14D-9s and written 
communications. In addition, we anticipate filers would spend, at an 
estimated $175/hour, approximately $46,233/filing in professional labor 
costs to file a full Schedule 14D-9.294 We request your 
comments and supporting empirical information on the reasonableness of 
these estimates.
---------------------------------------------------------------------------

    \292\ Under the proposed rules, bidders would file under Rule 
425 any pre-filing communications in transactions where securities 
are offered as consideration. Because we are proposing Rule 425 in 
the Securities Act Reform Release, we estimate the burden hours of 
filings of pre-filing communications for those transactions in that 
release.
    \293\ According to Securities Data corporation and Mergerstat, 
in 1996 security holders received only cash in 37% of merger and 
tender offer transactions.
    \294\ We estimate filers would spend $46,233/filing in 
professional labor costs. We base this esimate on 264.19 hours of 
professional labor/full Schedule 14D-9 filing * $175/hour. In 
aggregate, we estimate that filers would spend $11,928,114/year to 
file 258 full Schjedule 14D-9s/year.
---------------------------------------------------------------------------

    The proposals also would replace Schedules 13E-4 and 14D-1 with a 
new tender offer schedule, Schedule TO. Schedule TO would harmonize and 
clarify 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 would require approximately 309 hours to file a full 
Schedule TO under the proposed rules.295 Of the 309 hours, 
we estimate that 25% (77.25 internal burden hours) would 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 parties would file approximately 396 full Schedule TOs/year. 
Under the proposed rules, companies and other parties also would be 
required to file under Schedule TO written communications (in addition 
to the required tender offer statement) concerning business 
combinations for

[[Page 67368]]

cash.296 The rule would require filers to attach their 
written communications and would have few specific information 
requirements. We estimate that parties, on average, would file one 
written communication (in addition to the required information 
statement) for each cash transaction. We estimate that a firm's 
corporate staff would expend approximately 15 burden minutes (0.25 
internal burden hours) to file a written communication under the 
proposed rules. Based on data from fiscal year 1998, we estimate 
parties would 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).297 On average, filers 
would require approximately 43.50 internal burden hours to file 705 
full Schedule TOs and written communications. In addition, we 
anticipate filers would spend, at an estimated $175/hour, approximately 
$40,556/filing in professional labor costs to file a full Schedule 
TO.298 We request your comments and supporting empirical 
information on the reasonableness of these estimates.
---------------------------------------------------------------------------

    \295\ 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 that offerors would require to file a full 
Schedule TO would 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/Scheduel TO filing that previously 
would have been filed on Schedule 14D-1)--2 burden hours from 
simplification]/396 filings on Schedule TO=309 hours/filing on 
Schedule TO.
    \296\ Under the proposed rules, bidders would file under Rule 
425 any pre-filing communications in transactions where securities 
are offered as consideration. Because we are proposing Rule 425 in 
the Securities Act Reform Release, we estimate the burden hours of 
filings of pre-filing communications for those transactions in that 
release.
    \297\ According to Mergerstat, in 1996 security holders received 
only cash in 78% of tender offer transactions.
    \298\ We estimate filers would spend $40,556/filing in 
professional labor costs. We base this estimate on 231.75 hours of 
professional labor/full Schedule TO filing * $175/hour. In 
aggregate, we estimate that filers would spend $16,060,176/year to 
file 396 full Schedule TOs/year.
---------------------------------------------------------------------------

    In accordance with 44 U.S.C. Sec. 3506c(2)(B), we solicit comment 
on the following:
     Whether the proposed changes in each collection of 
information are necessary for the proper performance of the function of 
the agency;
     The accuracy of our estimate of the burden of the proposed 
changes to each collection of information;
     The quality, utility, and clarity of the information to be 
collected; and
     Whether there are ways to minimize the burden of any of 
the collections of information on those who are required to respond, 
including through the use of automated collection techniques or other 
forms of information technology.
    Anyone desiring to submit comments on any or all of the collection 
of information requirements should direct them to the Office of 
Management and Budget, Attention: Desk Officer for the Securities and 
Exchange Commission, Office of Information and Regulatory Affairs, 
Washington, D.C. 20503, and should also send a copy of their comments 
to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 
Fifth Street, N.W., Washington, D.C. 20549, with reference to File No. 
S7-28-98. The Office of Management and Budget is required to make a 
decision concerning the collection of information between 30 and 60 
days after publication, so a comment to OMB is best assured of having 
its full effect if OMB receives it within 30 days of publication.

VII. Statutory Basis and Text of Proposed Amendments

    The proposed rules, rule amendments, schedules, and schedule 
amendments in this release are being proposed 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 Proposed Amendments

    For the reasons set out in the preamble, we propose to amend Title 
17, Chapter II of the Code of Federal Regulations 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.
* * * * *
    2. By adding paragraph (e)(16) to Sec. 200.30-1, to read as 
follows:


Sec. 200.30-1  Delegation of authority to Director of Division of 
Corporation Finance.

* * * * *
    (e) * * *
    (16) Pursuant to Rule 14e-5(d) (Sec. 240.14e-5(d) of this chapter), 
to grant requests for exemptions from Rule 14e-5 (Sec. 240.14e-5 of 
this chapter).
* * * * *


Sec. 200.30-3  [Amended]

    3. By amending paragraph (a)(6) of Sec. 200.30-3 to remove the 
phrase ``Rules 10b-13(d), 14e-4(c), and 15c2-11(h) (Sec. Sec. 240.10b-
13(d), 240.14e-4(c), and 240.15c2-11(h) of this chapter)'' and in its 
place add ``Rules 14e-4(c), 14e-5(d), and 15c2-11(h) 
(Sec. Sec. 240.14e-4(c), 240.14e-5(d), and 240.15c2-11(h) of this 
chapter)'', and to remove the phrase ``to grant requests for exemptions 
from Rules 10b-13, 14e-4, and 15c2-11) (Sec. Sec. 240.10b-13, 240.14e-
4, and 240.15c2-11 of this chapter)'' and in its place add ``to grant 
requests for exemptions from Rules 14e-4, 14e-5, and 15c2-11 
(Sec. Sec. 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

    4. The authority citation for part 229 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77(e), 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.
* * * * *
    5. 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 
transactions 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.
* * * * *
    6. By adding an undesignated center heading and Secs. 229.1000 
through 229.1016 to read as follows:

Mergers and Acquisitions (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.

[[Page 67369]]

229.1004  (Item 1004) Terms of the transaction.
229.1005  (Item 1005) Past contacts, transactions, negotiations and 
agreements.
229.1006  (Item 1006) Purpose 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.

Mergers and Acquisitions (M-A)


Sec. 229.1000  (Item 1000) Definitions.

    The following definitions apply to the terms used in Regulation M-A 
(Secs. 229.1000-229.1016), 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 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(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 (which 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 and 
briefly describe any restriction on the issuer's current or future 
ability to pay dividends. If the filing person is an affiliate of 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 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 applicable 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

[[Page 67370]]

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; 
and
    (ix) The periods for accepting securities on a pro rata basis and 
the offeror's present intentions in the event that the offer is 
oversubscribed (if the offer is for less than all securities of a 
class).
    (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) An explanation of any material differences in the rights of 
security holders as a result of the transaction;
    (v) The vote required for approval of the transaction;
    (vi) A brief statement as to the accounting treatment of the 
transaction; and
    (vii) The federal income tax consequences of the transaction.

Instruction to Item 1004(a)

    If the consideration offered consists solely of stock 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.B. and I.C.1. of Form B (Sec. 239.5 of this chapter) 
and elects to furnish information pursuant to Item 10; 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 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 non-affiliated 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 any national securities exchange or an automated inter-dealer 
quotation system.


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 a 
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.

[[Page 67371]]

Instruction to Item 1005(c)

    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 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) Purpose 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 inter-dealer quotation system of a registered 
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:
    (1) State whether or not that person is 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 or any of its subsidiaries; 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, 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. Sec. 78c), the name 
of the bank will not be made available to the

[[Page 67372]]

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 there is 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 affiliate 
filing the schedule (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 filing, and if material, disclosed in a manner 
reasonably designed to inform security holders.


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 Sec. 229.503(d), for the two most recent fiscal years 
and the interim periods provided under paragraph (a)(2) of this 
section; and
    (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) 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 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 paragraph (c)(1) through (c)(6) 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. 229.1000-229.1016));

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;

[[Page 67373]]

    (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 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.
    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 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;

[[Page 67374]]

    (iv) Going concern value;
    (v) Liquidation value;
    (vi) Purchase prices paid in previous purchases disclosed in 
response to Sec. 229.1002(f);
    (vii) Any report, opinion, or appraisal described in 
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 
Sec. 229.1012;
    (3) Going-private disclosure document;
    (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 Sec. 229.1007;

Instruction to Item 1016(b)

    If the filing relates to a third-party tender offer and a 
request is made under 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 
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 
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 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 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 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
 Understandings...............            X             X             X
Statement re: Appraisal Rights            X
Oral Solicitation Materials...            X             X             X

[[Page 67375]]

 
Tax Opinion...................                          X
------------------------------------------------------------------------

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

    7. 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, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-
24, 80a-28, 80a-29, 80a-30, and 80a-37, unless otherwise noted.
* * * * *
    8. In Sec. 230.145 as proposed to be amended in a document 
published elsewhere in this Federal Register, republish the last 
sentence of the first paragraph of Preliminary Note and paragraph (b) 
to read as follows:


Sec. 230.145  Reclassifications of securities, mergers, consolidations 
and acquisitions of assets.

    Preliminary Note: * * * Issuers must register transactions 
described in paragraph (a) of this section on Form C (Sec. 239.6 of 
this chapter), Form SB-3 (Sec. 239.11 of this chapter) or Form N-14 
(Sec. 239.23 of this chapter).
* * * * *
    (b) Communications. Communications in connection with a registered 
transaction described in paragraph (a) of this section may be made in 
accordance with Sec. 230.135, Sec. 230.165, Sec. 230.166, Sec. 230.167, 
Sec. 230.168 or Sec. 230.169.
* * * * *
    9. By adding Sec. 230.162 to read as follows:


Sec. 230.162  Submission of tenders in registered exchange offers.

    Notwithstanding Section 5(a) of the Act (15 U.S.C. 77e), security 
holders may tender their securities in an exchange offer subject to 
Regulation 14D (Sec. Sec. 240.14d-1 through 240.14d-101) 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.
    10. In Sec. 230.166 as proposed to be added in a document published 
elsewhere in this issue of the Federal Register, republish paragraph 
(b) to read as follows:


Sec. 230.166  Offers made before filing a registration statement.

* * * * *
    (b) Form C/SB-3 transactions. Notwithstanding Section 5(c) of the 
Act (15 U.S.C. 77e), the offeror of securities in a transaction to be 
registered on Form C (Sec. 239.6 of this chapter), SB-3 (Sec. 239.11 of 
this chapter), F-8 (Sec. 239.38 of this chapter), F-80 (Sec. 239.41 of 
this chapter) or F-10 (Sec. 239.40 of this chapter) (when that form is 
used in a business combination) may make an offer to sell or solicit an 
offer to buy securities before the filing of a registration statement 
with respect to those securities if:
    (1) Any prospectus relating to the transaction used in the period 
beginning with the first public announcement and ending with the filing 
of the registration statement is filed in accordance with Sec. 230.425; 
and
    (2) In an exchange offer, the offers are made in accordance with 
the tender offer rules; and, in a transaction involving the vote of 
security holders, the offers are made in accordance with the proxy 
rules.
    11. In Sec. 230.167 as proposed to be added in a document published 
elsewhere in this issue of the Federal Register, republish paragraph 
(b) to read as follows:


Sec. 230.167  Exemption from Section 5(c) for certain communications.

* * * * *
    (b) In offerings registered on Form C (Sec. 239.6 of this chapter), 
SB-3 (Sec. 239.11 of this chapter), F-8 (Sec. 239.38 of this chapter), 
F-80 (Sec. 239.41 of this chapter) or F-10 (Sec. 239.40 of this 
chapter) (when Form F-10 is used in connection with a business 
combination transaction), any communication before the first 
communication related to the offering (except for communications among 
the participants in the offering) shall not constitute an offer to sell 
or an offer to buy the securities being offered under the registration 
statement for purposes of Section 5(c) of the Act, provided that the 
parties to the transaction take all reasonable steps within their 
control to prevent further distribution or publication of such 
communication during the period between that first communication and 
the date of filing the registration statement.
* * * * *
    12. In Sec. 230.425 as proposed to be added in a document published 
elsewhere in this issue of the Federal Register, republish paragraph 
(b)(3) to read as follows:


Sec. 230.425  Filing of ``free writing'' and other non-section 10 
prospectuses.

* * * * *
    (b) * * *
    (3) Five copies of any prospectus used before the filing of a 
registration statement in reliance on Sec. 230.166(b) must be filed 
with the Commission on or before the date of first use. Each copy of a 
prospectus filed under this section must identify the filer and the 
company that is the subject of the offering in the upper right hand 
corner of the cover page, in addition to the information required by 
paragraph (c) of this section.
* * * * *
    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 that is subject to section 14(d) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78n) must include all 
of the information required by Sec. 240.14d-6(d)(1) of this chapter to 
be included in all such tender offers, requests or invitations, 
published or sent or given to the holders of such securities.

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''.

[[Page 67376]]

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.
* * * * *
    17. In Form C (referenced in Sec. 239.6) as proposed to be added in 
a document published elsewhere in this issue of the Federal Register, 
republish paragraph (c) of Item 18 and paragraph (b) of Item 21 to read 
as follows:

    Note: Form C does not and this amendment will not appear in the 
Code of Federal Regulations.

Form C

* * * * *

Item 18. Information Required for All Other (Non-Small Business) 
Companies

* * * * *
    (c) If the company being acquired is not subject to the 
reporting requirements of Exchange Act Section 13(a) or 15(d), or 
has not furnished an annual report to its security holders under 
Rule 14a-3 or Rule 14c-3 for the latest fiscal year because of 
Exchange Act Section 12(i), furnish the financial statements that 
would be required in an annual report sent to security holders under 
Rules 14a-3 (b)(1) and (b)(2) if one was required.
    Instructions to paragraph (c):
    1. If the registrant's security holders will not be voting on 
the transaction, financial statements for the two fiscal years 
before the latest fiscal year need be provided only to the extent 
that security holders of the company being acquired were previously 
furnished with financial statements (prepared in conformity with 
GAAP) for those periods.
    2. 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.
    3. 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, 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 21. Information Required for All Other Small Business Issuers

* * * * *
    (b) If the company being acquired is not subject to the 
reporting requirements of Exchange Act Section 13(a) or 15(d), or 
has not furnished an annual report to its security holders under 
Rule 14a-3 or Rule 14c-3 for the latest fiscal year because of 
Exchange Act Section 12(i), furnish the financial statements that 
would be required in an annual report sent to security holders under 
Rules 14a-3 (b)(1) and (b)(2) if one was required.
    Instructions to paragraph (b):
    1. If the registrant's security holders will not be voting on 
the transaction, financial statements for the two fiscal years 
before the latest fiscal year need be provided only to the extent 
that security holders of the company being acquired were previously 
furnished with financial statements (prepared in conformity with 
GAAP) for those periods.
    2. 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.
    3. 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, 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.
* * * * *
    18. In Form SB-3 (referenced in Sec. 239.11) as proposed to be 
added in a document published elsewhere in this issue of the Federal 
Register, republish paragraph (b) of Item 16 and paragraph (c) of 
Item 19 to read as follows:

    Note: Form SB-3 does not and this amendment will not appear in 
the Code of Federal Regulations.

Form SB-3

* * * * *

Item 16. Information Required for All Other Small Business Issuers

* * * * *
    (b) If the company being acquired is not subject to the 
reporting requirements of Exchange Act Section 13(a) or 15(d), or 
has not furnished an annual report to its security holders under 
Rule 14a-3 or Rule 14c-3 for the latest fiscal year because of 
Exchange Act Section 12(i), furnish the financial statements that 
would be required in an annual report sent to security holders under 
Rules 14a-3 (b)(1) and (b)(2) if one was required.
    Instructions to paragraph (b):
    1. If the registrant's security holders will not be voting on 
the transaction, financial statements for the two fiscal years 
before the latest fiscal year need be provided only to the extent 
that security holders of the company being acquired were previously 
furnished with financial statements (prepared in conformity with 
GAAP) for those periods.
    2. 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.
    3. 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, 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 19. Information Required for All Other Companies

* * * * *
    (c) If the company being acquired is not subject to the 
reporting requirements of Exchange Act Section 13(a) or 15(d), or 
has not furnished an annual report to its security holders under 
Rule 14a-3 or Rule 14c-3 for the latest fiscal year because of 
Exchange Act Section 12(i), furnish the financial statements that 
would be required in an annual report sent to security holders under 
Rules 14a-3 (b)(1) and (b)(2) if one was required.
    Instructions to paragraph (c):
    1. If the registrant's security holders will not be voting on 
the transaction, financial statements for the two fiscal years 
before the latest fiscal year need be provided only to the extent 
that security holders of the company being acquired were previously 
furnished with financial statements (prepared in conformity with 
GAAP) for those periods.
    2. 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.
    3. 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, 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.
* * * * *

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,

[[Page 67377]]

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 the section heading and 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;
    (b) Sends the statement containing the information in paragraph (a) 
of this section to all of its equity security holders before purchasing 
any securities; and
    (c) Pays the fee required by Sec. 240.0-11 when it files the 
initial statement.

Instruction to Sec. 240.13e-1

    File eight copies if paper filing is permitted.

    22. By amending Sec. 240.13e-3 by revising paragraphs (d) and (e); 
revising the title of paragraph (f); removing the reference ``Chapter 
X'' in paragraph (g)(5) and in its place add ``Chapter XI''; removing 
the reference ``section 174'' in paragraph (g)(5) and in its place add 
``section 1125(b)''; and removing the reference ``section 175 of the 
Act'' in paragraph (g)(5) and in its place add ``section 1125(b) of 
that Act'', to 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 Rule 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 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 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. * * *
* * * * *
    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 paragraph (a)(3) and in its 
place add ``Schedule TO (Sec. 240.14d-100)'';
    b. ``Schedule 13E-4 Issuer Tender Offer Statement (Sec. 240.13e-
101),'' that appears in paragraph (f)(12) and in its place add 
``Schedule TO (Sec. 240.14d-100),''; ``paragraph (a) of Item 9 of that 
Schedule'' that appears in paragraph (f)(12) and in its place add 
``Item 1016(a)(1) of Regulation M-A (Sec. 229.1016(a)(1) of this 
chapter)''; and
    c. ``Schedule 13E-4'' that appears in the introductory text of 
paragraph (g) and in its place add ``Schedule TO (Sec. 240.14d-100)''.
    24. By amending Sec. 240.13e-4 by redesignating paragraph (b) as 
paragraph (i); removing the reference ``paragraph (b)(1)'' in newly 
redesignated paragraph (i)(2)(ii) and in its place add ``paragraph 
(i)(1)''; adding new paragraph (b); revising paragraph (a)(4); and 
revising the title and text of paragraphs (c), (d) and (e) to 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) 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)(1) of this 
section.

[[Page 67378]]

    (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 to have been filed 
under this section as well.
    3. Each pre-commencement 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 SEC's web site and explain which documents are free 
from the issuer.
    4. See Secs. 230.135, 230.166, 230.167, 230.168 and 230.169 of 
this chapter for pre-commencement communications made in connection 
with registered exchange offers.
    5. Communications of the type described under Sec. 230.169 of 
this chapter need not be filed under this section.

    (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 the issuer or affiliate is registering securities under the 
Securities Act of 1933 in connection with the issuer tender offer, the 
prospectus must contain the information specified in paragraph (d)(1) 
of this section in addition to the information required to be disclosed 
under the Securities Act and the rules and regulations.
    (3) 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)(2) of this section.
    (4) If the issuer or affiliate disseminates the issuer tender offer 
by means of summary publication as described in paragraph (e)(1)(ii) 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. (1) 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 
paragraph (e)(1)(i) or (e)(2)(ii) of this section. For purposes of 
paragraph (e)(1)(ii) 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.
    (i) 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 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)(ii) 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.
    (ii) Dissemination of certain cash issuer tender offers by summary 
publication:
    (A) If the issuer tender offer is not subject to Sec. 240.13e-3 
(Sec. 240.13e-3), by making adequate publication of a summary 
advertisement containing the information required by paragraph (d)(4) 
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.
    (2) 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.
* * * * *
    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 (Sec. Sec. 240.14a-1 through 
240.14b-2), Regulation 14C (Sec. Sec. 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'').

[[Page 67379]]

    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 
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
    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 (Sec. Sec. 240.14a-1 through 240.14b-2) or 
14C (Sec. Sec. 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 (Sec. Sec. 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).
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. Purpose of the Transaction and Plans or Proposals
    Furnish the information required by Item 1006(b) and (c)(1) through 
(8) of

[[Page 67380]]

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.

(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.
    26. By removing and reserving Sec. 240.13e-101.


Sec. 240.14a-4  [Amended]

    27. By amending Sec. 240.14a-4, paragraph (f), remove the words ``, 
or mailed for filing to,''.
    28. By amending Sec. 240.14a-6 to remove the phrase ``, or mailed 
for filing to,'' from the first sentence of paragraph (b) and paragraph 
(c); remove the note following paragraph (b); revise paragraphs (e) and 
(j); remove the phrase ``Form S-4 (17 CFR 229.25) or Form F-4 (17 CFR 
229.34),'' from paragraph (l) and in its place add ``Forms C 
(Sec. 239.6 of this chapter) or SB-3 (Sec. 239.11 of this chapter)''; 
and add paragraph (o) to read as follows:


Sec. 240.14a-6  Filing requirements.

* * * * *
    (e) Public availability of information. All copies of preliminary 
proxy statements and forms of proxy filed under paragraph (a) of this 
section must be clearly marked ``Preliminary Copies,'' and will be 
deemed immediately available for public inspection.
* * * * *
    (j) Merger proxies. Any proxy statement, form of proxy or other 
soliciting material required to be filed by this section that also is 
included in a registration statement filed under the Securities Act of 
1933 on Forms C (Sec. 239.6 of this chapter), SB-3 (Sec. 239.11 of this 
chapter) or N-14 (Sec. 239.23 of this chapter) or filed under 
Sec. Sec. 230.424 or 230.425 of this chapter may be filed only under 
the Securities Act, and will be deemed to be filed under this section. 
In that case, the fee required under 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. Sec. 240.14a-11 or 240.14a-12.


Sec. 240.14a-11  [Amended]

    29. By amending Sec. 240.14a-11 in paragraph (c) remove the words 
``, or mailed for filing to,'' from the first sentence.
    30. By revising the section heading and Sec. 240.14a-12 to read as 
follows:


Sec. 240.14a-12  Solicitation before furnishing written proxy 
statement.

    (a) Notwithstanding the provisions of Sec. 240.14a-3(a), a 
solicitation (other than one subject to Sec. 240.14a-11) may be

[[Page 67381]]

made before furnishing security holders with a written proxy statement 
meeting the requirements of Sec. 240.14a-3(a) if:
    (1) No form of proxy is furnished to security holders before a 
definitive written proxy statement required by Sec. 240.14a-3(a) is 
furnished to security holders;
    (2) Each communication made in connection with the solicitation 
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 interests direct or indirect, by security 
holdings or otherwise; 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 advise investors 
that they can get the proxy statement and other filed documents for 
free at the SEC's web site and explain which documents are free from 
the issuer; and
    (3) A written proxy statement meeting the requirements of this 
regulation is sent or given to security holders solicited pursuant to 
this section at the earliest practicable date.
    (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 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 
must be filed only under Sec. 230.425 of this chapter, and will be 
deemed to be filed under this section.

Instructions to Sec. 240.14a-12

    1. Communications of the type described by Sec. 230.169 of this 
chapter need not be filed under this section.
    2. If paper filing is permitted, file eight copies of the 
soliciting material with the Commission.
    3. Any communications made under this rule 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 on the cover page by removing the 
box and accompanying text ``Confidential, for Use of the Commission 
Only (as permitted by Rule 14a-6(e)(2))''; removing Notes D.3 and D.4; 
in Note G, redesignate the second paragraph (2)(e) and paragraphs 
(2)(f), (2)(g) and (2)(h) as paragraphs (2)(f), (2)(g), (2)(h) and 
(2)(i), in newly redesignated paragraph (2)(f) and paragraph (3)(f), 
revising the reference ``Items 13 or 14'' to read ``Item 13'', removing 
newly redesignated paragraphs (2)(h) and (2)(i) and paragraphs (3)(h) 
and (3)(i), adding the word ``and'' after newly redesignated paragraph 
(2)(f) and paragraph (3)(f), and removing the semicolons after newly 
redesignated paragraph (2)(g) and paragraph (3)(g) and in their place 
add a period; and revising Item 14 to read as follows:


Sec. 240.14a-101  Schedule 14A  Information required in proxy 
statement.

* * * * *
    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 consists wholly or 
in part of securities registered under the Securities Act of 1933, 
furnish the information required by Form C (Sec. 239.6 of this 
chapter) or Form SB-3 (Sec. 239.11 of this chapter), as applicable, 
instead of this Item. Only a Form C (or Form SB-3) must be filed in 
accordance with Sec. 240.14a-6(j).
    2. In transactions in which the consideration consists wholly of 
cash, information about the acquiring company required by paragraph 
(c)(1) of this Item 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). 
Additionally, if only the security holders of the target company are 
voting:
    i. Financial information in paragraphs (b)(8)-(11) of this Item 
need not be provided; and
    ii. 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.
    3. In transactions in which the consideration consists wholly of 
securities exempt under the Securities Act of 1933 or partially of 
exempt securities and partially of 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. Additionally, 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 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.
    6. Notwithstanding the provisions of Regulation S-X, no 
schedules other than those prepared in accordance with Secs. 210.12-
15, 210.12-28 and 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.
    8. 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 or paragraphs (h), (i) and 
(j) of Item 14 of Form C (Sec. 239.6).
    9. A registered management investment company need not comply 
with paragraphs (a), (d), (h), (i), (j) and (l) of Item 14 of Form C 
(Sec. 239.6).
    (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

[[Page 67382]]

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 such report, opinion or appraisal 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), 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)(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.
    (11) Financial information. If material, financial information 
required by Article 11 of Regulation S-X (Sec. 210.10-01 through 
Sec. 229.11-03 of this chapter) with respect to this transaction.

Instructions to Paragraph (b)(11)

    1. Present any Article 11 information required by the other 
Items of this schedule (where not incorporated by reference) 
together with the information provided under this Item. In 
presenting this information, you must clearly distinguish between 
this transaction and any other.
    2. You need only show the pro forma effect that this transaction 
has on any pro forma financial information that:
    (i) Is incorporated by reference; and
    (ii) Reflects all prior transactions.
    (c) Information about the parties to the transaction.
    (1) Acquiring company. Furnish the information required by Part 
II (Registrant Information) of Form C (Sec. 239.6 of this chapter) 
or Form SB-3 (Secs. 239.11 of this chapter) for the acquiring 
company. However, financial statements need only be presented for 
the latest two fiscal years and interim period.
    (2) Acquired company. Furnish the information required by Part 
III (Information with Respect to the Company Being Acquired) of Form 
C (Sec. 239.6 of this chapter).

Instruction to Paragraph (c)

    Information may be incorporated by reference to the same extent 
as permitted by Forms C (Sec. 239.6 of this chapter) and SB-3 
(Sec. 239.11 of this chapter).


Sec. 240.14c-2  [Amended]

    32. By amending the introductory text in paragraph (a) of 
Sec. 240.14c-2 by removing the reference ``Form S-4 or F-4 (Sec. 239.25 
or Sec. 239.34 of this chapter)'' and in its place add ``Form C or SB-3 
(Sec. 239.6 or Sec. 239.11 of this chapter)''; removing the reference 
``Form S-4 (17 CFR 229.25) or Form F-4 (17 CFR 229.34)'' in paragraph 
(c) and in its place add ``Form C or SB-3 (Sec. 239.6 or Sec. 239.11 of 
this chapter)''.
    33. By amending Sec. 240.14c-5 by removing the phrase ``, or mailed 
for filing to,'' from the first sentence of paragraph (b); removing the 
note following paragraph (b); revising paragraph (d); removing the 
reference in paragraph (f) ``Form N-14, S-4, or F-4 (Sec. 239.23, 
Sec. 239.25 or Sec. 239.34 of this chapter)'' and in its place add 
``Form C, SB-3, or N-14 (Sec. 239.6, Sec. 239.11 or Sec. 239.23 of this 
chapter)''; removing the reference in paragraph (f) ``Form N-14, S-4, 
or F-4'' and in its place add ``Form C, SB-3, or N-14 (Sec. 239.6, 
Sec. 239.11 or Sec. 239.23 of this chapter)'' to read as follows:


Sec. 240.14c-5  Filing requirements.

* * * * *
    (d) Public availability of information. All copies of material 
filed under paragraph (a) of this section must be clearly marked 
``Preliminary Copies,'' and will be deemed immediately available for 
public inspection.
* * * * *


Sec. 240.14c-101  [Amended]

    34. By amending the cover page of Sec. 240.14c-101 by removing the 
box and accompanying text ``Confidential, for Use of the Commission 
Only (as permitted by Rule 14c-5(d)(2))''.
    35. By amending Sec. 240.14d-1 by removing the reference 
``Schedules 14D-1'' in the introductory text of paragraph (b) and 
adding in its place ``Schedules TO''; redesignating paragraphs (e)(1), 
(e)(2), (e)(3), (e)(4), (e)(5), (e)(6) and (e)(7) as paragraphs (e)(2), 
(e)(7), (e)(5), (e)(1), (e)(9), (e)(3) and (e)(6), respectively; in 
newly redesignated paragraph (e)(1) remove the reference ``Rule 14d-3, 
Rule 14d-9(d) and Item 6 of Schedule 14D-1'' and in its place add 
``Rule 14d-3 and Rule 14d-9(d)''; and adding new paragraphs (e)(4) and 
(e)(8) to read as follows:


Sec. 240.14d-1  Scope of and definitions applicable to regulations 14D 
and 14E.

* * * * *
    (e) 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 ten business 
day period immediately following the initial offering period meeting 
the conditions specified in Sec. 240.14d-11.
* * * * *
    36. By revising the section heading and 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 promulgated thereunder 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:

[[Page 67383]]

    (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 as soon as 
practicable on 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 that discloses the identities of 
the bidder and the subject company, the amount and class of securities 
sought, and the price or range of prices offered, as soon as 
practicable on the date of the communication.

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 to have been filed 
under this section as well.
    3. Each pre-commencement 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 SEC's web site and explain which documents are free 
from the issuer.
    4. For pre-commencement communications in connection with 
registered exchange offers, also see Secs. 230.135, 230.166, 
230.167, 230.168 and 230.169 of this chapter.
    5. Communications of the type described under Sec. 230.169 need 
not be filed under this section.

    (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).
    37. By amending Sec. 240.14d-3 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''; removing the word ``ten copies of'' in 
paragraphs (a)(1); and 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 by revising the section heading and adding 
introductory text to Sec. 240.14d-4; revising the introductory text of 
paragraph (a); removing paragraph (a)(1); redesignating paragraphs 
(a)(2) and (a)(3) as paragraphs (a)(1) and (a)(2); revising newly 
redesignated paragraph (a)(2); adding an Instruction to paragraph (a); 
redesignating paragraphs (b) and (c) as paragraphs (c) and (d)(1) and 
adding a new paragraph (b); revising the heading of newly redesignated 
paragraph (d); in the first sentence of newly redesignated paragraph 
(d)(1) remove the phrase ``paragraph (a) of''; and 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):
    (1) Summary publication. * * *
    (2) 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) of this section on or 
before the date of the bidder's request for such lists or listing 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)(1) and (a)(2) 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 or final prospectus 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 final prospectus 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 and 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 of this 
chapter.

    (c) Adequate publication. * * *
    (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 supplement containing a material 
change other than price or share levels;
    (ii) Ten business days for a 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 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.

[[Page 67384]]

    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 the section heading and 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) Summary 
publication. If a tender offer is published, sent or given to security 
holders on the date of commencement by means of summary publication 
under Sec. 240.14d-4(a)(1):
    (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.
    (2) 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)(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 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.
    (3) 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)(1)(ii) and (a)(2)(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)(ii), (a)(2)(ii) and (a)(3) 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)(1)(i) and (a)(2)(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, a 
statement to that effect also should be included.
    (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 to redesignate paragraph (a) as 
(a)(1) and to add 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 by revising the section heading; 
redesignating paragraphs (a) through (f) as paragraphs (b) through (g); 
adding new paragraph (a); and revising the introductory text of newly 
redesignated paragraph (b) to read as follows:

[[Page 67385]]

Sec. 240.14d-9  Recommendation or solicitation by the subject company 
and others.

    (a) Pre-commencement communications. A communication by persons 
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 communications are filed under cover of Schedule 14D-9 
(Sec. 240.14d-101) with the Commission as soon as practicable on 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 to have been filed 
under this section as well.
    3. For pre-commencement communications in connection with 
registered exchange offers, also see Secs. 230.135, 230.166, 
230.167, 230.168 and 230.169 of this chapter.
    4. Communications of the type described under Sec. 230.169 need 
not be filed under this section.

    (b) Post-commencement communications. After commencement by a 
bidder under Sec. 240.14d-2, no solicitation or recommendation to 
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:
* * * * *


Sec. 240.14d-9   [Amended]

    43. By amending Sec. 240.14d-9 by removing the words ``eight copies 
of'' in newly redesignated paragraph (b)(1); removing the reference 
``14D-1'' in newly redesignated paragraphs (b)(2)(i) and (b)(3)(i) and 
in its place add ``TO'', removing the reference ``Items 2 and 4(a) of 
Schedule 14D-9'' in newly redesignated paragraph (b)(2)(ii) and in its 
place add ``Items 1003(d) and 1012(a) of Regulation M-A 
(Sec. 229.1003(d) and Sec. 229.1012(a))''; removing the reference 
``paragraph (a)(2) or (3)'' in newly redesignated paragraph (c)(2) and 
in its place add ``paragraph (b)(2) or (3)''; removing the reference 
``Items 1, 2, 3(b), 4, 6, 7 and 8'' in newly redesignated paragraph (d) 
and in its place add ``Items 1 through 8''; removing the reference 
``paragraphs (d)(2) and (e)'' in the introductory text of newly 
redesignated paragraph (e)(1) and in its place add ``paragraphs (e)(2) 
and (f)''; removing the reference ``14D-1 (Sec. 240.14d-101)'' in newly 
redesignated paragraph (e)(2)(i) and in its place add ``TO 
(Sec. 240.14d-100)''; and removing the reference to ``paragraph 
(e)(3)'' in newly redesignated paragraph (f)(4) and in its place add 
``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 ten business day subsequent 
offering period during which tenders will be accepted if:
    (a) The initial offering period has expired;
    (b) The offer is for all outstanding securities of the class that 
is the subject of the tender offer;
    (c) When the initial offering period expires, the bidder 
immediately accepts and promptly pays for all securities tendered 
during the initial offering period;
    (d) The bidder immediately accepts and promptly pays for all 
securities as they are tendered during the subsequent offering period;
    (e) The bidder discloses its intention to offer a subsequent 
offering period and describes the subsequent offering period in the 
initial tender offer materials filed and disseminated to security 
holders. If the bidder elects to offer a subsequent offering period 
after the initial tender offer materials have been disseminated to 
security holders, it must amend the tender offer materials to reflect 
this decision, disseminate the information to security holders in a 
manner reasonably calculated to inform security holders of this change, 
and give shareholders a sufficient period of time to consider the 
information; and
    (f) The bidder intends to acquire all securities remaining after 
the tender offer through a merger or similar transaction, and discloses 
this intention in the initial or supplemental tender offer materials 
filed and disseminated to security holders.
    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 partnership, limited partnership, 
syndicate or other group, the information called for by Items 3 and 5-9 
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 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

[[Page 67386]]

(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 it provides an answer. Information incorporated by reference is 
deemed filed with the Commission for all purposes of the Securities 
Exchange Act of 1934 (``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 Secs. 240.14d-3(b)(2) and 
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 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).
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. Purpose 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).

[[Page 67387]]

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, or (d) the offer is for all outstanding securities of the 
subject class.
    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.
    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, 
provide appropriate disclosure.
    5. If the offeror in a third-party cash tender offer intends to 
engage in a merger or similar transaction with the subject company 
after the tender offer and non-tendering security holders will 
receive securities in the subsequent transaction, the offeror must 
disclose the financial information specified in Item 3(f), (g) and 
(h) and Item 5 of Form C (Sec. 239.6 of this chapter) or Form SB-3 
(Sec. 229.11 of this chapter), as applicable. The disclosure 
document sent to security holders may include only the information 
specified in Items 3(f), (g) and (h) so long as the schedule filed 
with the Commission contains all information required by this 
instruction and the disclosure document advises security holders 
where the full financial information can be found.
    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 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 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

[[Page 67388]]

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 Securities 
Exchange Act of 1934 (``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. Purpose 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.

(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 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.
* * * * *
    47. By adding Sec. 240.14e-5 to read as follows:


Sec. 240.14e-5  Prohibiting purchases outside the 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 offer. This 
prohibition applies from the time the offer is first publicly announced 
or otherwise made known to holders of the subject securities until the 
offer expires.
    (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 
the offer was first publicly announced or otherwise made known to 
security holders;
    (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 offer is exempt under Sec. 240.13e-4(h)(5); and
    (4) Unsolicited purchases. Unsolicited purchases by a dealer-
manager that are made on an agency basis.
    (c) Definitions. For purposes of this section, the term:
    (1) Affiliate means a person that directly, or indirectly through 
one or more intermediaries, controls, or is controlled by, or is under 
common control with, the offeror;
    (2) Agent independent of the issuer has the same meaning as in 
Sec. 242.100(b);
    (3) Covered person means:
    (i) The offeror and its affiliates;
    (ii) The offeror's dealer-manager(s) and other advisors; and
    (iii) 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) Related securities means securities that are immediately 
convertible into, exchangeable for, or exercisable for subject 
securities; and
    (6) 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

[[Page 67389]]

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.
    49. 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 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.

    Dated: November 3, 1998.

    By the Commission.
Jonathan G. Katz,
Secretary.
[FR Doc. 98-30227 Filed 12-3-98; 8:45 am]
BILLING CODE 8010-01-P