[Federal Register Volume 64, Number 217 (Wednesday, November 10, 1999)]
[Rules and Regulations]
[Pages 61408-61466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28355]


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SECURITIES AND EXCHANGE COMMISSION

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

[Release No. 33-7760; 34-42055; IC-24107; File No. S7-28-98]
RIN 3235-AG84


Regulation of Takeovers and Security Holder Communications

AGENCY: Securities and Exchange Commission.

ACTION: Final Rules.

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SUMMARY: We are adopting comprehensive revisions to the rules and 
regulations applicable to takeover transactions (including tender 
offers, mergers, acquisitions and similar extraordinary transactions). 
The revised rules will permit increased communications with security 
holders and the markets. The amendments also will: Balance the 
treatment of cash and stock tender offers; simplify and centralize the 
disclosure requirements; and eliminate regulatory inconsistencies in 
mergers and tender offers. In addition, we are updating the tender 
offer rules by providing for a subsequent offering period, clarifying 
certain filing and disclosure requirements and reducing compliance 
burdens where consistent with investor protection. We believe these 
revisions will lead to a more well informed and efficient market.

EFFECTIVE DATE: The rules and amendments will become effective January 
24, 2000.

FOR MORE INFORMATION CONTACT: Dennis O. Garris, Chief, or James J. 
Moloney, Special Counsel, in the Office of Mergers & Acquisitions, 
Division of Corporation Finance, at (202) 942-2920. For questions on 
new Rule 14e-5, contact James A. Brigagliano, Assistant Director, Irene 
Halpin, Florence Harmon or Michael Trocchio, Special Counsels, in the 
Office of Risk Management and Control, Division of Market Regulation, 
at (202) 942-0772. For questions on investment companies, contact 
Martha B. Peterson, Special Counsel, in the Office of Disclosure 
Regulation, Division of Investment Management, at (202) 942-0721.

SUPPLEMENTARY INFORMATION: We are adopting amendments to Rules 13e-1, 
13e-3, 13e-4, 14a-4, 14a-6, 14a-12, 14c-5, 14d-1, 14d-2, 14d-3, 14d-4, 
14d-5, 14d-6, 14d-7, 14d-9, 14e-1\1\ and Schedules 14A, 13E-3, and 14D-
9\2\ under the Securities Exchange Act of 1934 (``Exchange Act'').\3\ 
We are rescinding Exchange Act Rule 14a-11.\4\ We are adopting: 
amendments to Item 10 of Regulation S-K; \5\ a new subpart of 
Regulation S-K, the 1000 series (``Regulation M-A''); a new tender 
offer schedule, Schedule TO, to replace Schedules 13E-4 and 14D-1; \6\ 
new tender offer Rule 14e-5 to replace Rule 10b-13; \7\ and new tender 
offer Rules 14d-11 and 14e-8. We also are adopting amendments to Rule 
13(d) of Regulation S-T and Rule of Practice 30-3.\8\ Lastly, we are 
adopting amendments to Rules 135, 145 and 432, Forms S-4 and F-4, and 
new Rules 162, 165, 166 and 425 under the Securities Act of 1933 
(``Securities Act'').\9\
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    \1\ 17 CFR 240.13e-1, 13e-3, 13e-4, 14a-4, 14a-6, 14a-12, 14c-
5,14d-1, 14d-2, 14d-3, 14d-4, 14d-5, 14d-6, 14d-7, 14d-9, and 14e-1.
    \2\ 17 CFR 240.14a-101, 13e-100, and 14d-101.
    \3\ 15 U.S.C. 78a et seq.
    \4\ 17 CFR 240.14a-11.
    \5\ 17 CFR 229.10.
    \6\ 17 CFR 240.13e-101, 14d-100.
    \7\ 17 CFR 240.10b-13.
    \8\ 17 CFR 232.13(d); 17 CFR 200.30-3.
    \9\ 17 CFR 230.135, 145, and 432; 17 CFR 239.25 and 34; 15 
U.S.C. 77a et seq.
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Table of Contents

I. Executive Summary and Background
II. Discussion of New Regulatory Scheme
    A. Overview
    1. Increased Communications Permitted Before Filing Disclosure 
Document
    2. Eligibility
    3. Written Communications with Legend Filed on Date of First Use
    B. Communications Under the Securities Act
    1. Securities Act Exemption and Filing Rules
    2. Liability for Communications
    3. Rules 135 and 145
    4. Public Announcement
    C. Communications Under the Proxy Rules
    1. Rule 14a-12 Expanded
    a. The ``As Soon as Practicable'' Requirement
    b. Participant Information
    c. ``Test the Waters''
    2. Limited Confidential Treatment of Merger Proxy Materials
    3. Timing of Filings
    D. Communications Under the Tender Offer Rules
    1. ``Commencement,'' Communications, and Filing Requirements
    2. Dissemination Requirements
    E. Exchange Offers May Commence On Filing
    1. Early Commencement
    2. Dissemination of a Supplement and Extension of the Offer
    F. Disclosure Requirements for Tender Offers and Mergers
    1. Schedules Combined and Disclosure Requirements Moved to 
Subpart 1000 of Regulation S-K (``Regulation M-A'')
    2. Streamline and Improve Required Disclosure
    a. ``Plain English'' Summary Term Sheet
    b. Item 14 of Schedule 14A Revised to Clarify Requirements and 
Harmonize Cash Merger and Cash Tender Offer Disclosure
    c. Reduced Financial Statement Requirements for Non-Reporting 
Target Companies in Stock Mergers and Stock Tender Offers
    G. Tender Offer Rules Updated
    1. Bidders May Include a ``Subsequent Offering Period'' Without 
Withdrawal Rights
    2. Bidder Financial Information Clarified for Cash Tender Offers
    a. When a Bidder's Financial Statements Are Not Required; Source 
of Funds
    b. Content of Bidder's Financial Statements in Cash Tender 
Offers; Financial Statements in Going-Private Transactions
    c. Pro Forma Financial Information Required in Two-Tier 
Transactions
    3. Target Is Required to Report Purchases of Its Own Securities 
After a Third-Party Tender Offer Is Commenced
    4. Tender Offer and Proxy Rules Relating to the Delivery of a 
Security Holder List and Security Position Listing Harmonized
    5. New Rule 14e-5: Revision and Redesignation of Former Rule 
10b-13, the Rule Prohibiting Purchases Outside an Offer
    a. Redesignating Rule 10b-13 as Rule 14e-5
    b. Clarification of Rule 14e-5; Prohibited Period
    c. Persons and Securities Subject to the Rule
    d. Excepted Transactions
    e. Additional Exceptions Being Adopted
III. Effective Date and Transition
    A. Communications
    B. Confidential Treatment of Proxy Materials
    C. Early Commencement
    D. Disclosure Requirements and New Schedules
    E. Subsequent Offering Period
    F. Revised Security Holder List Rule for Tender Offers
    G. New Rules 14e-5
IV. Cost-Benefit Analysis
    A. Communications
    B. Filings
    C. Tender Offers
V. Commission Findings and Considerations
    A. Exemptive Authority Findings
    B. Effect on Competition
    C. Promotion of Efficiency, Competition and Capital Formation
VI. Final Regulatory Flexibility Analysis
    A. Need for Action
    B. Objectives of the Rule Amendments

[[Page 61409]]

    C. Summary of Significant Issues Raised by the Public Comments
    D. Description and Estimate of the Number of Small Entities 
Subject to the New Rules
    E. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements
    F. Description of Steps Taken to Minimize the Effect on Small 
Entities
VII. Paperwork Reduction Act
VIII. Statutory Basis and Text of Amendments

I. Executive Summary and Background

    Last fall, we proposed comprehensive changes to the various 
regulatory schemes applicable to issuer and third-party tender offers, 
mergers, going-private transactions and security holder 
communications.\10\ The proposed changes were prompted by an increase 
in the number of transactions where securities are offered as 
consideration; an increase in the number of hostile transactions 
involving proxy or consent solicitations; and significant technological 
advances that have resulted in more and faster communications with 
security holders and the markets. Because these trends have continued 
since we issued the Proposing Release and commenters, for the most 
part, viewed the proposals as favorable,\11\ we are adopting the 
proposals, with some modification.
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    \10\ Regulation of Takeovers and Security Holder Communications, 
Release No. 33-7607 (November 3, 1998) (63 FR 67331) (the 
``Proposing Release'').
    \11\ The comment letters are available for inspection and 
copying in our Public Reference Room in File No. S7-28-98. Comments 
that were submitted electronically also are available on our web 
site (www.sec.gov).
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    As we noted in the Proposing Release, the existing regulatory 
framework imposes a number of restrictions on communications with 
security holders and the marketplace. In addition, the disparate 
regulatory treatment of cash and stock tender offers \12\ may unduly 
influence a bidder's \13\ choice of offering cash or securities in a 
takeover transaction. We also noted unnecessary differences in 
regulatory requirements between tender offers and other types of 
extraordinary transactions, such as mergers.\14\  Finally, we noted 
that the multiple regulatory schemes that can apply to a transaction 
may impose additional compliance costs without necessarily providing a 
sufficient marginal benefit to security holders. Our goals in proposing 
and adopting these changes are to promote communications with security 
holders and the markets, minimize selective disclosure, harmonize 
inconsistent disclosure requirements and alleviate unnecessary burdens 
associated with the compliance process, without a reduction in investor 
protection.\15\
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    \12\ Stock tender offers, also referred to as exchange offers, 
are tender offers where the consideration offered to security 
holders includes securities (either equity or debt); these 
transactions generally are registered under the Securities Act.
    \13\ The term ``bidder'' is used throughout this release to 
refer to the offeror or purchaser in a tender offer.
    \14\ For a discussion of the regulatory schemes applicable to 
cash tender offers, exchange offers, cash and stock mergers, see 
Part II.A of the Proposing Release.
    \15\ In this release we focus on the amendments that we are 
adopting and how they differ from the original proposals. For a more 
complete discussion of the background and rationale for the changes, 
see the Proposing Release.
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    We also proposed broad changes to the regulation of securities 
offerings in a companion release.\16\ Our proposed treatment of 
communications in the Securities Act Reform Release differs from our 
approach in the Proposing Release. The differences were due to the 
special nature of business combination transactions \17\ in contrast to 
capital-raising transactions. At this time we are not adopting the 
Securities Act Reform proposals that are unrelated to business 
combination transactions. We are continuing to evaluate commenters' 
responses to the Securities Act Reform proposals and in the future we 
may take action on these proposals. We are adopting, however, several 
proposals in the Securities Act Reform Release that relate to business 
combination transactions. As a result, some proposals or concepts 
previously presented in the Securities Act Reform Release are 
incorporated into this release. Where we proposed changes that would 
appear in new forms included in the Securities Act Reform Release 
(Forms C and SB-3), those changes have been implemented in existing 
forms (Forms S-4 and F-4). In a separate release, we also are adopting 
significant changes to the regulatory scheme for cross-border tender 
offers, exchange offers and rights offerings.\18\
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    \16\ Securities Act Reform Release, Release No. 33-7606A 
(November 13,1998) (63 FR 67174).
    \17\ For purposes of this release, the Proposing Release and the 
rules adopted in this release, a ``business combination 
transaction'' means any Rule 145(a) transaction (17 CFR 230.145(a)) 
(including mergers, recapitalizations, acquisitions, and similar 
matters) or tender offer (including issuer tender offers).
    \18\ Release No. 33-7759 (October 22, 1999) (the ``Cross-Border 
Adopting Release'').
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    We believe these new rules and revisions should provide 
participants in the securities markets sufficient flexibility to 
accommodate changes in deal structure and advances in technology that 
continue to occur in today's markets. Briefly, the new rules and 
amendments adopted today will:

     Relax existing restrictions on oral and written 
communications with security holders by permitting the dissemination 
of more information on a timely basis, so long as the written 
communications are filed on the date of first use; in particular,
     Permit more communications before the filing of a 
registration statement in connection with either a stock tender 
offer or a stock merger transaction;
     Permit more communications before the filing of a proxy 
statement (whether or not a business combination transaction is 
involved);
     Permit more communications regarding a proposed tender 
offer without ``commencing'' the offer and requiring the filing and 
dissemination of specified information;
     Harmonize the various communications principles 
applicable to business combinations under the Securities Act, tender 
offer rules and proxy rules; and
     Eliminate the confidential treatment currently 
available for merger proxy statements, except when communications 
made outside the proxy statement are limited to those specified in 
Rule 135;
     Balance the treatment of stock and cash tender offers 
by permitting both issuer and third-party stock tender offers to 
commence as early as the filing of a registration statement;
     Simplify and integrate the various disclosure 
requirements for tender offers, going-private transactions, and 
other extraordinary transactions in a new series of rules within 
Regulation S-K, called ``Regulation M-A'';
     Combine the existing schedules for issuer and third-
party tender offers into one schedule available for all tender 
offers, entitled ``Schedule TO'';
     Require a ``plain English'' summary term sheet in all 
tender offers, mergers and going-private transactions, except when 
the transaction is already subject to the Securities Act plain 
English rules;
     Update the financial statement requirements for 
takeover transactions; in particular,
     Eliminate the requirement to file financial statements 
for target companies \19\ in most cash mergers, consistent with the 
treatment of cash tender offers;
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    \19\ The term ``target'' is used throughout this release to 
refer to the company to be acquired in a business combination 
transaction or the company whose securities are the subject of the 
transaction, whether the transaction is agreed upon or unsolicited.
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     Clarify when financial statements of the acquiring 
company are not required in cash mergers, and when financial 
statements are required, reduce the financial statements for the 
acquiror from three years to two;
     Clarify when the bidder's financial statements are not 
required in cash tender offers, and when financial statements are 
required in third-party offers, reduce the requirement from three 
years to two;
     Require pro forma and related financial information in 
negotiated cash tender offers where the bidder intends to engage in 
a back-end securities transaction;

[[Page 61410]]

     Reduce the financial statements required for non-
reporting target companies in stock mergers and stock tender offers;
     Permit an optional subsequent offering period after 
completion of a tender offer, during which security holders can 
tender shares without withdrawal rights;
     Clarify Rule 13e-1, which requires issuers to report 
intended repurchases of their own securities once a third-party 
tender offer has commenced;
     Conform the security holder list requirement in the 
tender offer rules with the comparable provision in the proxy rules 
so that the list will include non-objecting beneficial owners; and * 
clarify the rule that prohibits purchases outside a tender offer 
(Rule 10b-13), codify prior interpretations of and exemptions from 
the rule, and redesignate it as Rule 14e-5.

    In several respects the rules adopted today differ from the 
proposed rule changes. The primary differences are as follows:

     The Securities Act exemption for communications is 
extended to all parties to the transaction and any persons acting on 
their behalf;
     The Securities Act exemption also is revised to clarify 
that an unintentional or immaterial breach of the filing requirement 
will not result in a loss of the exemption so long as a good faith 
and reasonable attempt was made to file and the material is filed as 
soon as practicable after discovery of the failure to file;
     A definition of ``public announcement'' is provided so 
that parties know when they need to begin filing written 
communications relating to the transaction and when the prohibition 
against making purchases outside the tender offer begins;
     A written communication relating to a proposed 
transaction that is a Rule 135 notice must be filed unless the 
notice only contains information that has already been filed;
     The confidential treatment currently available for 
preliminary merger proxy statements is retained under limited 
circumstances;
     The requirement in expanded Rule 14a-12 to furnish a 
proxy statement as soon as practicable is revised so that a proxy 
statement must be furnished at the time a form of proxy is given to 
or requested from security holders;
     Written communications permitted under expanded Rule 
14a-12 must include either full participant information, as 
currently required, or a legend directing security holders where 
they can obtain participant information;
     Long form publication is retained as a means to 
commence a tender offer, rather than being eliminated as proposed;
     The provision permitting commencement of exchange 
offers as early as the filing of a registration statement is 
extended to issuer exchange offers, not limited to third-party 
offers as proposed;
     A bidder that commences an exchange offer early may not 
be required to deliver a final prospectus to security holders;
     An acquiror in a stock merger or stock tender offer 
need not provide any financial statements for a non-reporting target 
if the acquiror's security holders are not voting on the transaction 
and the acquisition is not significant to the acquiror at the 20% 
level;
     Subsequent offering period changes: this period can be 
between three and 20 business days, and is not fixed at ten business 
days as initially proposed; a bidder is not required to disclose an 
intent to engage in a back-end merger; and a bidder must announce 
the results of the initial offering period before beginning the 
subsequent offering period;
     A bidder must disclose pro forma financial information 
in the first tier of a two-tier transaction for negotiated 
transactions only, not for transactions where access to the target's 
financial information is limited;
     The information required by Rule 13e-1 regarding issuer 
repurchases of securities need not be disseminated to security 
holders; in addition, an exclusion from this rule is provided for 
certain periodic, routine repurchases; and
     Several additional exceptions are added to new Rule 
14e-5.

    At this time we are not adopting several concepts that we solicited 
comment on, including:

     A modification to the proxy rules that would permit the 
direct delivery of proxy materials to non-objecting beneficial 
owners;
     A federally-mandated proxy solicitation period;
     A ``test the waters'' provision for proxy 
solicitations;
     A requirement that bidders commencing a tender offer by 
summary advertisement mail their tender offer materials to security 
holders;
     A proxy analogue to the early commencement provision in 
exchange offers that would permit the sending of proxy cards with 
``preliminary'' proxy materials; and
     An expansion of the Private Securities Litigation 
Reform Act of 1995 \20\ safe harbor from liability to cover forward-
looking statements made in connection with tender offers.

    \20\ Pub. L. 104-67, 109 Stat. 737 (1995).
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    In the future, depending on the effects of today's rule changes, we 
may consider proposing additional changes to further harmonize the 
regulatory requirements.

II. Discussion of New Regulatory Scheme

A. Overview

1. Increased Communications Permitted Before Filing Disclosure Document
    Today, merger and acquisition transactions are occurring at a 
faster pace, due in part to the rapid development of new technologies 
and advancements in communications. As a result of economic and 
regulatory pressures, many companies are releasing more information to 
the market before a registration, proxy or tender offer statement is 
filed publicly with us.\21\ In many cases, parties are releasing 
information on proposed transactions including pro forma financial 
information for the combined entity, estimated cost savings and 
synergies. As we noted in the Proposing Release, parties to business 
combination transactions provide several reasons for the need to 
disclose information early,\22\ including the duty under Rule 10b-5 to 
disclose material information in a manner that is not misleading.\23\ 
We also recognize that parties may be subject to other regulatory 
requirements to disclose information to the markets early.\24\
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    \21\ Companies may disclose information in response to the 
market's demand for information regarding proposed transactions and 
the need to keep customers, employees and other constituencies 
adequately informed.
    \22\ See Part II.B.1 of the Proposing Release.
    \23\ 17 CFR 240.10b-5. We have long recognized the needs of 
issuers to communicate with security holders regarding important 
business and financial developments. See Releases No. 33-4697 (May 
28, 1964) (29 FR 7317) and 33-5180 (August 16, 1971) (36 FR 16506). 
In addition, the Division of Corporation Finance has previously 
recognized the needs of bidders to disclose information regarding a 
contemplated ``back-end'' transaction (i.e., a subsequent 
transaction in which the bidder acquires any remaining securities 
outstanding). Disclosure of information required by Schedule 14D-1 
regarding a ``back-end'' transaction generally will not result in 
``gun jumping'' because the information is not designed to prime the 
market for a subsequent registered offering of securities. Instead, 
the information aids investors in evaluating the terms of a tender 
offer and deciding whether to tender for cash or wait for securities 
in a back-end transaction. See Release No. 33-5927 (April 24, 1978) 
(42 FR 18163).
    \24\ Companies may be required to disclose information under the 
particular rules of the stock exchange or inter-dealer quotation 
system upon which their securities are traded.
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    Existing restrictions on communications result primarily from the 
broad concepts of ``offer'' \25\ and ``prospectus'' \26\ under the 
Securities Act, ``solicitation'' \27\ under the Exchange Act proxy 
rules, and ``commencement'' \28\ under the Williams

[[Page 61411]]

Act tender offer rules.\29\ We recognize that restricting 
communications to one document may actually impede, rather than 
promote, informed investing and voting decisions.
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    \25\ Section 2(a)(3) of the Securities Act (15 U.S.C. 77b) 
broadly defines ``offer'' as including every attempt or offer to 
dispose of, or solicitation of an offer to buy, a security or 
interest in a security, for value. Offers are currently prohibited 
during the pre-filing period and restricted during the waiting 
period.
    \26\ The term ``prospectus'' is defined in section 2(a)(10) (15 
U.S.C. 77b) to include any prospectus, notice, circular, 
advertisement, letter of communication, written or by radio or 
television, that offers any security for sale or confirms the sale 
of the security, except for communications that are preceded or 
accompanied by a statutory prospectus.
    \27\ ``Solicitation'' is broadly defined to include ``the 
furnishing of a form of proxy or other communication to security 
holders under circumstances reasonably calculated to result in the 
procurement, withholding or revocation of a proxy.'' See Rule 14a-
1(l) (17 CFR 240.14a-1(l)).
    \28\ The Williams Act provides that only very limited 
information can be announced without either commencing a cash tender 
offer or requiring the filing of a registration statement in a stock 
offer. See Rule 14d-2(c) and (d) (17 CFR 240.14d-2(c) and (d)).
    \29\ The Williams Act was enacted in 1968 as an amendment to the 
Exchange Act (sections 13(d)-(e) and 14(d)-(f)). The Williams Act 
regulates tender offers and imposes beneficial ownership reporting 
requirements. 15 U.S.C. 78m(d)-(e) and 15 U.S.C. 78n(d)-(f).
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    We are adopting, as proposed, non-exclusive exemptions under the 
Securities Act, proxy rules and tender offer rules that permit 
communications for an unrestricted length of time without a cooling-off 
period between the end of communications and filing. Written 
communications made in reliance on the exemptions must be filed. In 
response to comments, we have modified the exemptions slightly from 
those proposed, as discussed below.
    One major benefit of permitting earlier communications is that more 
information will be available generally to all security holders, not 
simply to a limited audience of analysts and financially sophisticated 
market participants. Because the new rules do not require oral 
communications to be reduced to writing and filed, some selective 
disclosure may continue to occur.\30\ Nevertheless, the rules adopted 
today are designed to reduce selective disclosure by permitting 
widespread dissemination of information through a variety of media 
calculated to inform all security holders about the terms, benefits and 
risks of a planned extraordinary transaction. We believe that parties 
to business combination transactions generally wish to inform the 
marketplace at large about their deals, and will use the new rules to 
accomplish this end. The new regulatory scheme is not intended to be 
used as a means to substitute selective oral disclosure for written and 
oral disclosure that becomes public on a widespread basis.\31\ Although 
this release does not impose new requirements on oral communications, 
we remain extremely troubled by the selective disclosure of material 
information.\32\ The staff is considering broader regulatory approaches 
to limit or inhibit written and oral selective disclosure by issuers in 
all contexts, including those addressed in this release. If we decide 
to pursue these approaches, we will issue a separate release seeking 
public comment.\33\
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    \30\ Our exemptions permitting earlier communications do not in 
any way alter the liability traditionally imposed on insider 
trading. See Rules 10b-5 and 14e-3 (17 CFR 240.14e-3). Rule 14e-3 
applies when a person ``has taken a substantial step or steps to 
commence, or has commenced, a tender offer,'' so the timing of this 
rule is not affected by the new regulatory scheme.
    \31\ The new rules only provide an exemption from section 5 (and 
comparable restrictions on communications under the proxy and tender 
offer rules). Oral communications under the new rules, like written 
communications, will have liability under the applicable regulatory 
scheme. See Part II.B.2 below.
    \32\ Chairman Levitt has expressed concerns about the selective 
disclosure of material information to analysts and institutional 
investors. See ``A Question of Integrity: Promoting Investor 
Confidence by Fighting Insider Trading,'' speech given Feb. 27, 
1998, available on our web site (www.sec.gov).
    \33\ See ``Quality Information: The Lifeblood of Our Markets'' 
speech given by Chairman Levitt on Oct. 18, 1999, available on our 
web site (www.sec.gov). ``The behind-the-scenes feeding of material 
non-public information from companies to analysts is a stain on our 
markets. This selectiveness is a disservice to investors and it 
undermines the fundamental principle of fairness. In a time when 
instantaneous and free flowing information is the norm, these sort 
of whispers are an insult to fair and public disclosure * * *. (T)he 
Commission is planning to take action where it can. Within the next 
few months, we will consider proposing rules to close the gap 
between those in the so-called `know' and the rest of us in the 
public.''
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    The scheme we adopt today provides the maximum amount of 
flexibility to disclose information to security holders and the 
markets.\34\ This new communications scheme, however, does not change 
the current requirement that security holders receive a mandated 
disclosure document before they are asked to make a voting or 
investment decision (e.g., a prospectus, proxy statement, or tender 
offer statement setting forth complete and balanced information).\35\ 
Of course, security holders may buy or sell in the market before they 
receive the mandated disclosure document. That is true under the 
current regulatory scheme as well as under the new one. Under the new 
rules, security holders are likely to have information about the 
transaction at an earlier point in time, and they can choose to act on 
this information or wait for the complete disclosure document.
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    \34\ We solicited comment on two alternatives to our primary 
communications proposal that were not favored by commenters and are 
not being adopted.
    \35\ The exemptions also apply to communications made after the 
mandated disclosure document is filed, so long as written 
communications are filed. They do not, however, alter the 
disclosure, filing and delivery requirements for the mandated 
disclosure documents.
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    While it is possible under the new scheme to announce a proposed 
transaction long before a mandated disclosure document is filed, we do 
not believe acquirors will delay the filing of a mandated disclosure 
document unnecessarily because the longer they wait the greater the 
risk that market forces will affect the terms of the deal or another 
potential acquiror will announce a competing transaction. We believe 
that companies announcing a transaction should, and we encourage them 
to, file the mandated disclosure document as soon as possible after 
announcing a proposed transaction.
    Our long-held concern regarding communications that could condition 
the market before dissemination of a mandated disclosure document is 
mitigated by the continuing requirement to deliver a disclosure 
document before any voting or investment decision can be made, and the 
attendant liability for false or misleading statements. Communications 
made in reliance on the new exemptions would, of course, be subject to 
section 10(b) liability.\36\ We remind persons relying on the 
exemptions that fraudulent statements in these communications could not 
be cured by subsequent filings. In light of these considerations, we 
believe that the benefits conferred on the marketplace by the 
disclosure of more information on a timely basis outweigh the risks 
that the information will be incomplete or potentially misleading.
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    \36\ 15 U.S.C. 78j(b). The communications permitted under the 
exemptions adopted would be subject to liability under the 
particular regulatory scheme (the Securities Act, proxy or tender 
offer rules) as well as Rule 10b-5 and the other antifraud rules.
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2. Eligibility
    Our proposals did not make distinctions based on size and seasoned 
status. Due to the extraordinary nature of business combination 
transactions, security holders and the markets need full and timely 
information regarding those transactions regardless of the size or 
seasoned status of the companies involved. We recognized the inherent 
difficulties in selecting the appropriate focus for purposes of 
applying an eligibility test (i.e., should you look at the status of 
the acquiror, the target or the combined entity?). All commenters who 
addressed the issue agreed with our view. Therefore, the exemptions are 
adopted as proposed, without any eligibility requirements.
    We also asked whether the exemptions should be limited to the 
parties to the transaction or available to others who may be acting on 
behalf of the parties to the transaction. In particular, we noted that 
in a third-party stock offer the company to be acquired would not 
ordinarily be subject to the Securities Act restrictions on 
communications, but under certain circumstances, it could be viewed as 
joining with the acquiror in making the offer. In that case, the 
exemptions would need to extend to additional parties. In addition, we 
asked whether the parties' affiliates, dealer-managers,

[[Page 61412]]

and others acting on behalf of the parties to the transaction should be 
permitted to rely on the exemption. Again, most commenters were 
consistent in recommending that we expand the exemptions to these 
persons. While we realize that in many circumstances the exemptions 
would not be necessary for persons other than the parties to the 
transaction or the party making the offer, we want to encourage full, 
complete and continuous communications with security holders. 
Therefore, we are adopting the exemptions to cover all persons acting 
on the parties' behalf.
3. Written Communications With Legend Filed on Date of First Use
    We are adopting, as proposed, a condition to the communications 
exemptions that all written communications in connection with or 
relating to a business combination transaction be filed on or before 
the date of first use.\37\ In addition, all written communications must 
include a prominent legend advising investors to read the registration, 
proxy or tender offer statement, as applicable.\38\ We believe that a 
prompt filing requirement is necessary to protect security holders and 
assure that these communications are available to all investors on a 
timely basis.\39\ In most cases, this information will need to be filed 
electronically via the EDGAR System, and thus will be rapidly 
disseminated to the marketplace.\40\
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    \37\ Written communications include all information disseminated 
otherwise than orally, including electronic communications and other 
future applications of changing technology. Videos and CD-ROMs, for 
example, should be filed on EDGAR by means of a transcript. See Rule 
304 of Regulation S-T (17 CFR 232.304).
    \38\ The legend also would advise investors that they can obtain 
copies of the filed documents for free at the Commission's web site 
and explain which documents are available for free from the issuer 
or filing person, as applicable. See new Rule 165(c)(1) and revised 
Rules 14a-12(a)(1)(ii), 13e-4(c), 14d-2(b)(2), and 14d-9(a).
    \39\ We did not propose, and are not adopting, a requirement to 
deliver written communications to security holders.
    \40\ These communications must be filed on EDGAR to the same 
extent that the related prospectus, proxy statement or tender offer 
statement must be filed on EDGAR.
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    In the Proposing Release, we asked whether parties relying on the 
exemptions should be permitted to file written communications on a 
later date (e.g., when the mandated disclosure document is filed or 
some other date). While several commenters viewed the requirement as 
reasonable, a few believed it would be burdensome. The latter group of 
commenters stated that a same-day filing requirement could cause 
parties to delay the release of information. These commenters believed 
that communications that would otherwise be made late in the day will 
be postponed until the materials can be filed on the same day. We 
believe, however, that in most cases parties to business combination 
transactions will be able to time their communications so that it is 
possible to file them on the same day they are made. Also, Rule 13(d) 
of Regulation S-T permits communications that are made outside of the 
Commission's business hours to be filed electronically as soon as 
practicable on the next business day.\41\ Further, we have clarified 
that an immaterial or unintentional delay in filing will not preclude 
reliance on the Securities Act exemption.\42\
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    \41\ 17 CFR 232.13(d). See Part II.C.3 below.
    \42\ See Part II.B.2 below.
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    The filing requirement applies to written communications that are 
made public or are otherwise provided to persons that are not a party 
to the transaction.\43\ As a general matter, this would include, for 
example, scripts used by parties to the transaction to communicate 
information to the public and other written material (e.g., slides) 
relating to the transaction that is shown to investors.\44\ In 
contrast, internal written communications provided solely to parties to 
the transaction, legal counsel, financial advisors, and similar persons 
authorized to act on behalf of the parties to the transaction would not 
need to be filed. Also, as explained in the Proposing Release, business 
information that is factual in nature and relates solely to ordinary 
business matters, and not the pending transaction, would not need to be 
filed. We expect that filing persons will apply traditional legal 
principles in determining whether a particular written communication is 
made in connection with or relates to a proposed business combination 
transaction.\45\
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    \43\ Oral communications are covered by the exemptions, but they 
do not need to be reduced to writing or filed. Oral communications, 
as proposed, will be subject to liability under the applicable 
regulatory scheme. For example, pre-filing oral communications 
regarding a proposed offering of securities in connection with a 
business combination transaction will be subject to section 12(a)(2) 
liability. See Part II.B.2 below.
    \44\ Cf. Rule 14a-6(c) (17 CFR 240.14a-6(c)) and Item 1016(g) of 
Regulation M-A.
    \45\ At this time we are not adopting proposed Rules 168 and 
169, the exemptions for regularly released forward-looking 
information and factual business communications from the filing 
requirements. See Part VII.A.1.c.ii.(A) and (B) of the Securities 
Act Reform Release and Release No. 33-5009 (Oct. 7, 1969) (34 FR 
16870). Although we are not adopting these rules, we do not expect 
parties to file ordinary or routine business communications that 
refer to the transaction in a non-substantive way.
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    Several commenters criticized the proposed filing requirement 
because it could result in the filing of duplicative or substantially 
similar information when similar communications are made over time. In 
response to this concern, we are clarifying that any republication or 
redissemination of the same information would not need to be filed 
again to comply with the exemptions. If, however, information is either 
added to or changed from the content of an earlier communication, then 
the revised written communication must be filed.\46\
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    \46\ If the same written communication is redisseminated or 
contains only minimal changes (e.g., correction of minor 
typographical errors, an update regarding a contact person, or 
stylistic changes including a change in the format, type-size, 
letterhead, addressee, etc.) without any change to the content of 
the information, the written communication would not need to be 
refiled. In addition, we do not expect persons to file responses to 
specific unsolicited inquiries if the responses are not disseminated 
to others. Of course, if a response to an unsolicited inquiry 
contained material information not otherwise available to the 
investing public (e.g., projections), the communication would need 
to be filed.
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B. Communications Under the Securities Act

1. Securities Act Exemption and Filing Rules
    We are exercising our exemptive authority to create an exemption 
that will permit more communications with security holders and the 
markets regarding a planned business combination transaction.\47\ We 
find that free communications relating to business combination 
transactions are in the public interest and consistent with the 
protection of investors. Accordingly, we adopt new Rules 165, 166 \48\ 
and 425 \49\ and amend Rules 135 and 145.\50\ These new and amended

[[Page 61413]]

rules permit parties to communicate freely about a planned business 
combination transaction before a registration statement is filed, as 
well as during the waiting period and post-effective periods, so long 
as their written communications used in connection with or relating to 
the transaction are filed beginning with the first public announcement 
\51\ and ending with the close of the proposed transaction.\52\ As 
noted in the Proposing Release, these communications are not excluded 
from the definition of ``offer'' in the Securities Act,\53\ as no 
content restriction is imposed on the communications.\54\ Instead, new 
Rule 165 exempts persons making these communications from sections 
5(b)(1) and (c) of the Securities Act.\55\
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    \47\ Section 28 of the Securities Act (15 U.S.C. 77z-3) gives us 
authority to, by rule or regulation, conditionally or 
unconditionally exempt any person, security or transaction, or any 
class or classes of persons, securities or transactions from any 
provision of this title or any rule or regulation issued under this 
title to the extent that such exemption is necessary or appropriate 
in the public interest, and is consistent with protection of 
investors.
    \48\ We adopt proposed Securities Act Rules 165, 166 and 167 as 
new Rules 165(b), 165(a) and 166, respectively. These rules are 
limited to business combination transactions since the Securities 
Act Reform Release proposals governing capital-raising transactions 
are not being adopted at this time.
    \49\In the Securities Act Reform Release, we proposed a 
requirement that all ``free writing'' materials be filed as 
prospectus supplements in accordance with Rule 425. In this release, 
we adopt proposed Rule 425(b) and (c) as new Rule 425(a) and (b) and 
limit the rule to business combination transactions. Proposed 
paragraph (a) contained several exceptions from the filing 
requirement. We retain the exceptions that are still applicable in 
Rule 425(d).
    \50\ See Part II.B.3 below discussing revised Rules 135 and 145 
in greater detail.
    \51\ See Part II.B.4 below for the definition of public 
announcement.
    \52\ See Part II.A.3 above discussing the types of written 
communications that must be filed. Written communications relating 
to the transaction before the filing of a registration statement are 
prospectuses that must be filed under Rule 425. See new Rule 165(a). 
After a registration statement is filed (during what is called the 
``waiting period''), and after effectiveness of the registration 
statement, written communications relating to the transaction are 
prospectuses that must be filed under Rule 425. See new Rule 165(b). 
Communications filed under Rule 425 do not need to be delivered to 
security holders. This does not, however, change the prospectus 
delivery requirements for the mandated prospectus that is part of 
the registration statement, and any supplements either before or 
after the registration statement is declared effective. These 
prospectuses and supplements would continue to be delivered to 
security holders and filed under Rule 424 (17 CFR 230.424) instead 
of Rule 425.
    \53\ A communication that contains no more information than that 
specified in Rule 135 will not be an offer, as is currently the 
case.
    \54\ We note, however, that a communication relating to an 
investment company that is permitted by the new and amended rules 
generally would have omitted to state a fact necessary in order to 
make the statements in the communication not materially misleading 
unless the communication includes the information specified in Rule 
34b-1 (17 CFR 270.34b-1) under the Investment Company Act of 1940 
(17 U.S.C. 80a-1 et seq.)
    \55\ New Rule 166 provides that communications before the first 
public announcement of a transaction will not be offers, so long as 
parties to the transaction take reasonable steps to prevent further 
distribution or publication until the first public announcement or 
the registration statement is filed.
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    New Rules 165 and 166 are available only for business combination 
transactions. New Rule 165 defines a business combination transaction 
as a transaction specified in Rule 145(a) or an exchange offer. Thus, 
either the proxy rules or the tender offer rules must be applicable to 
the transaction. We have added a preliminary note to Rules 165 and 166 
to state that the exemption is not available to communications that may 
technically comply with the rule, but have the primary purpose or 
effect of conditioning the market for a capital-raising or resale 
transaction.\56\
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    \56\ For example, the exemption would not be available where a 
non-reporting issuer conducts an exchange offer primarily for the 
purposes of giving its investors freely tradable securities and 
creating a public market in, or manipulating the market for, those 
securities. Likewise, it would be inappropriate to rely on the 
exemptions in effecting a merger of a public ``shell'' company to 
take a private company public. These mergers commonly are used to 
develop a market for the merged entity's securities, often as part 
of a scheme to manipulate the market for those securities.
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2. Liability for Communications
    As proposed, both oral and written communications made in reliance 
on the Securities Act exemption would be offers subject to section 
12(a)(2) liability, based on the belief that this level of liability 
would adequately protect investors without chilling communications.\57\ 
Approximately half the commenters who addressed the issue agreed with 
the proposed liability standard, while the others believed that this 
potential level of liability could have a chilling effect on 
communications.
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    \57\ Of course, if a communication contains material 
information, that information must be disclosed in the registration 
statement that is declared effective. Therefore, the information 
ultimately will be subject to section 11 liability (15 U.S.C. 77k) 
as well.
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    We are adopting the proposed regulatory scheme. To the extent that 
these communications constitute offers, they currently would be subject 
to section 12(a)(2) liability. As a result, we do not believe that the 
adopted rules alter the current liability levels for these 
communications.\58\ In light of the extensive pre-filing communications 
that are ongoing in the marketplace now with respect to business 
combination transactions, we believe that a section 12(a)(2) standard 
of liability would not significantly chill communications.
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    \58\ In some cases, these communications are filed and 
incorporated by reference into registration statements, and as a 
result also are subject to section 11 liability.
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    Several commenters also indicated that the proposed section 5(c) 
exemption should not be conditioned on timely filing of all written 
communications. Commenters were concerned that a failure to timely file 
a written communication could result in a loss of protection under the 
exemption, resulting in a section 5 violation that would give security 
holders a right of rescission. In proposing the filing requirement, we 
did not intend to provide security holders with an automatic right of 
rescission if a communication is either filed late or there is an 
unintentional failure to file. To clarify this issue, we are revising 
the filing requirement in new Rule 165 to state that an immaterial or 
unintentional failure to file or delay in filing will not result in a 
loss of the exemption from section 5(b)(1) or (c), so long as a good 
faith and reasonable attempt to file the written communication is made 
and the communication is filed as soon as practicable after discovery 
of the failure to file.\59\
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    \59\ New Rule 165(e). This provision is similar to the good 
faith standard in Rule 508(a) of Regulation D (17 CFR 230.508(a)). 
Although an immaterial or unintentional failure to file or delay in 
filing is a violation of the filing requirement, it would not render 
the exemption unavailable. Factors to be considered in determining 
whether a delay in filing is immaterial or unintentional include: 
The nature of the information, the length of the delay, and the 
surrounding circumstances, including whether a bona fide effort was 
made to file timely. If a written communication is made late in the 
day and the offeror attempts to file it, but experiences difficulty 
in filing electronically on EDGAR, and files as soon as practicable 
after business hours or the following business day, the exemption 
will continue to be available.
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3. Rules 135 and 145
    Currently, Rule 135 provides that disclosure of certain limited 
information in notice form will not be deemed an ``offer'' for purposes 
of section 5 of the Securities Act.\60\ A Rule 135 notice is typically 
made upon announcement of a proposed securities offering before a 
registration statement is filed.\61\ Rule 145(b)(1) contains a similar 
provision regarding the information in a stock merger that will not be 
deemed a ``prospectus'' or ``offer.'' \62\
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    \60\ 15 U.S.C. 77e. Rule 135 generally permits prospective 
offerors to issue notices that include the following information: 
(1) The name of the issuer; (2) the title, amount and basic terms of 
the securities to be offered, the amount of the offering, if any, by 
selling security holders, the anticipated time of the offering, and 
a brief statement of the manner and purpose of the offering, without 
naming the underwriters; and (3) any statement or legend required by 
state law. Other limited information also is permitted under the 
rule for rights offerings, exchange offers and offers to employees 
of the issuer or an affiliate.
    \61\ Cash tender offers and cash mergers do not involve the 
Securities Act, and thus no reliance on Rule 135 is necessary.
    \62\ Rule 145 is the rule that applies the registration 
requirements to business combinations involving security holder 
voting decisions. Rule 145(b)(1) provides that written 
communications containing only specified information about mergers 
and similar transactions are not deemed offers or a prospectus. Rule 
135(a)(4) contains a similar provision for communications about 
exchange offers. Rule 145(b)(2), which provides that certain 
communications subject to the proxy rules are not offers, is being 
rescinded as proposed.
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    We proposed several revisions to Rules 135 and 145 in the Proposing 
Release and the Securities Act Reform Release. In particular, we 
proposed moving the substance of Rule 145(b)(1) to Rule 135, as both 
rules contain similar provisions regarding the

[[Page 61414]]

information that will not be deemed an offer. We are adopting those 
revisions.\63\
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    \63\ Changes to Rules 135 and 145 in the Securities Act Reform 
Release that were specifically tailored to capital-raising 
transactions are not being adopted at this time.
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    In addition to the changes proposed, we asked whether Rule 135 
notices should be filed. Although Rule 135 does not currently require 
these notices to be filed, in many cases the 135 notice would be the 
first written communication relating to a proposed business combination 
transaction. We believe it is important for this information to reach 
the marketplace promptly and on a widespread basis. Generally, these 
notices are short documents (e.g., press release or other form of 
written notice of an intended offer). Currently, the first press 
release or other written communication announcing a proposed business 
combination transaction often is filed under cover of Form 8-K.\64\ In 
addition, under the new regulatory scheme these communications would 
have to be filed under the proxy or tender offer rules, if applicable. 
As a result, we do not believe that a filing requirement for the first 
public communication regarding a business combination will impose a 
significant burden.
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    \64\ 17 CFR 249.308.
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    We are adopting a filing requirement that encompasses Rule 135 
notices. These notices must be filed under new Rule 425 because they 
are written communications relating to a proposed transaction. Even 
though we are requiring these notices to be filed, our rules provide 
that they will not constitute offers and therefore will not have 
section 12(a)(2) prospectus liability.\65\ In addition, subsequent 
notices or announcements made under Rule 135 that do not contain new or 
different information are not required to be filed. This approach is 
consistent with the filing requirement under each of the three 
regulatory schemes.
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    \65\ New Rule 425(b).
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4. Public Announcement
    Under the terms of the exemptions, written communications must be 
filed beginning with the first public announcement of the business 
combination transaction. Today we are adopting a specific definition of 
``public announcement'' that encompasses all communications that put 
the market on notice of a proposed transaction. For purposes of 
determining when a filing obligation is incurred under the exemptions, 
``public announcement'' means any communication by a party to the 
transaction, or any person authorized to act on a party's behalf, that 
is reasonably designed to, or has the effect of, informing the public 
or security holders in general about the transaction.\66\ We asked in 
the Proposing Release whether the term ``public announcement'' should 
be defined, and if so, how it should be defined. Although the 
commenters that responded favored a bright line definition, they 
opposed a broad definition that could potentially create difficulties 
in determining when a filing obligation is triggered.
---------------------------------------------------------------------------

    \66\ New Rule 165(f)(3). A similar definition of ``public 
announcement'' is included in revised Rules 13e-4(c) and 14d-2(b).
---------------------------------------------------------------------------

    We agree that a definition is necessary, but we believe that the 
definition should be sufficiently broad to cover communications that 
are reasonably designed to, or have the effect of, putting the markets 
or the security holders on notice of a proposed transaction. We do not 
believe the definition should be so narrow that the parties must 
actually intend to effect a broad dissemination of the information.\67\
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    \67\ Of course, if the regulations of the self-regulatory 
organization on which the securities are listed require a public 
announcement of the transaction, that would constitute a public 
announcement for purposes of the communications exemptions.
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1C. Communications Under the Proxy Rules

1. Rule 14a-12 Expanded
    We are revising Rule 14a-12,\68\ substantially as proposed, to 
permit both written and oral communications before the filing of a 
proxy statement so long as all written communications related to the 
solicitation are filed on the date of first use.\69\ This is the same 
filing requirement adopted for the communications exemption under the 
Securities Act.\70\ This exemption is not limited to business 
combination transactions, but is available regardless of the subject 
matter of the solicitation. Oral communications do not need to be 
reduced to writing and filed. In revising Rule 14a-12, we retain 
substantially all the proposed conditions to reliance on the exemption. 
These conditions are that no form of proxy is furnished until a proxy 
statement is delivered, the obligation to disclose participant 
information, and the requirement to file all written communications 
with a prominent legend advising security holders to read the proxy 
statement.
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    \68\ The expansion of Rule 14a-12 to cover all solicitations 
eliminates the need for many of the provisions in Rule 14a-11. As a 
result, we are rescinding Rule 14a-11 and moving paragraphs (d) and 
(f) of Rule 14a-11 to new Rule 14a-12. These two provisions apply if 
soliciting persons refer to information in annual reports or use 
reprints or reproductions of previously published materials in their 
soliciting materials. Revised Rule 14a-12 makes it clear that these 
provisions are limited to election contests.
    \69\ Written communications by soliciting parties before a proxy 
statement is furnished to security holders must be filed on the date 
of first use and must provide information regarding the participants 
and their interests or include a legend advising security holders 
where they can obtain this information. See revised Rule 14a-
12(a)(1). Once a proxy statement is furnished to security holders, 
any additional soliciting materials used must be filed on the date 
of first use but need not include participant information or a 
legend advising where to obtain that information. See revised Rule 
14a-6(b).
    \70\ Communications under revised Rule 14a-12 generally will be 
filed under cover of the proxy statement cover sheet, with the Rule 
14a-12 box checked. If a transaction is subject to the Securities 
Act in addition to one or more of the other regulatory schemes 
(i.e., the proxy or tender offer rules), the written communications 
only need to be filed under Securities Act Rule 425. Although the 
materials are only filed under the Securities Act, they also would 
be deemed filed and take liability under the proxy or tender offer 
rules, as applicable.
---------------------------------------------------------------------------

    As a result of these changes to Rule 14a-12, management can 
communicate more freely with security holders about significant 
corporate events, including a proposed merger or acquisition, or other 
significant corporate governance matters that may require a security 
holder vote. Likewise, security holders are able to communicate more 
freely with one another. The revised rule does not, however, expand a 
company's or security holder's ability to secure promises to vote a 
certain way before a proxy statement is provided.\71\ The expansion of 
Rule 14a-12 to non-contested matters is premised on the same rationale 
for increasing communications related to business combination 
transactions under the Securities Act. We recognize the many recent 
developments in technology that have enabled companies to communicate 
more frequently with security holders at a significantly reduced cost. 
In addition, security holders and the markets are demanding more 
information from public companies about new developments and proposed 
transactions. In light of the rapid pace of change in the securities 
markets and developments in technology, we believe the time has come to 
update the proxy rules to permit security holder communications to flow 
more freely and to facilitate a more informed security holder base.
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    \71\ Similarly, the revised rule does not change a security 
holder's obligation under section 13(d) of the Exchange Act (15 
U.S.C. 78m(d)) to file or amend a Schedule 13D (17 CFR 240.13d-101) 
when a voting arrangement, agreement or understanding is reached 
with respect to a company's securities.
---------------------------------------------------------------------------

    We believe that the requirement to file all written communications, 
the condition that no proxy or form of proxy be furnished to security 
holders before

[[Page 61415]]

a written proxy statement is delivered, and the requirement to include 
a legend on all written communications advising security holders to 
read the proxy statement and where to find participant information 
should be sufficient to protect against misleading solicitations. 
Together with the antifraud provisions of Rule 14a-9,\72\ these 
requirements should maintain the integrity of the solicitation process 
and adequacy of information disseminated to security holders.\73\ In 
addition to these safeguards, security holders will receive a complete 
proxy statement before they can vote.
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    \72\ 17 CFR 240.14a-9.
    \73\ We note that a communication relating to an investment 
company that is permitted by Rule 14a-12 generally would have 
omitted to state a fact necessary in order to make the statements in 
the communication not materially misleading unless the communication 
includes the information specified in Rule 34b-1 under the 
Investment Company Act of 1940.
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    In the Proposing Release we solicited comment on whether a 
federally mandated proxy solicitation period would be appropriate for 
mergers and similar transactions in light of the free communications 
permitted under the exemption. We noted that security holders may need 
a minimum amount of time (e.g., 20 business days), similar to that in 
tender offers, to digest the free communications together with the 
information in the proxy statement. Most commenters that responded to 
this question were opposed to a minimum solicitation period. Because 
this is an area that traditionally has been governed by state corporate 
law, and in light of the improved ability of security holders to access 
information through electronic means, we believe that the existing 
solicitation periods are adequate. We are not adopting a minimum 
solicitation period at this time.
    We also asked whether the proxy rules should be amended to permit 
direct delivery of proxy statements and other soliciting materials to 
non-objecting beneficial owners to facilitate more timely and informed 
voting decisions. We were concerned that security holders holding 
securities in street name may not receive materials from banks, broker-
dealers, or other nominees in a timely fashion. While we believe that 
direct delivery of proxy materials to non-objecting beneficial owners 
may have benefits for security holders, at this time we reserve this 
concept for a future rulemaking project.

a. The ``As Soon as Practicable'' Requirement

    Many of the commenters urged us to revise the current and proposed 
condition in Rule 14a-12 that a written proxy statement meeting the 
requirements of Regulation 14A be sent or given to solicited security 
holders at the earliest practicable date. These commenters pointed out 
that, in practice, when the purpose of a solicitation becomes moot or 
the solicitation is otherwise discontinued, persons making pre-filing 
communications in reliance on the rule generally do not, and should not 
be required to, send security holders a written proxy statement. We 
recognize that literal adherence to the delivery requirement in Rule 
14a-12 in circumstances where a solicitation is canceled prematurely 
may not provide a significant benefit to security holders, but could 
result in unnecessary costs to the soliciting parties and potentially 
mislead security holders into believing that the solicitation is 
ongoing.
    In view of these concerns, current practice, and the overall 
approach to communications adopted today, we are eliminating the 
current ``as soon as practicable'' requirement. As revised, Rule 14a-12 
requires that a definitive proxy statement be furnished to security 
holders when a form of proxy is either given to or requested from 
security holders.\74\ When proxies are first requested from security 
holders the mandated disclosure document must be delivered to them so 
they can make informed voting decisions. This approach is consistent 
with the delivery requirements adopted under the other regulatory 
schemes.\75\ As a result, parties relying on the rule are not obligated 
to furnish a written proxy statement if the solicitation is 
discontinued for any reason. If a solicitation is discontinued, we 
believe it would be appropriate for the soliciting persons to inform 
previously solicited security holders that the solicitation is over and 
provide a brief explanation of why it is being canceled.
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    \74\ Revised Rule 14a-12(a)(2).
    \75\ For example, in Part II.D.1 below, we are revising the 
definition of commencement in the tender offer rules so that a 
complete tender offer statement need not be filed and disseminated 
until the means to tender are provided to security holders.
---------------------------------------------------------------------------

b. Participant Information

    We are modifying the current requirement to disclose participant 
information in proxy materials. Instead, the revised rule requires a 
prominent legend on written communications advising security holders 
where they can obtain a detailed list of the names, affiliations and 
interests of participants in the solicitation.\76\ Of course, the 
soliciting materials could include the participant information in full, 
as currently required, instead of a legend.
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    \76\ In response to our question asking whether to retain the 
requirement to disclose the names of all participants and their 
interests, several commenters expressed the view that the 
requirement has resulted in lengthy and boilerplate disclosure that 
can be costly for participants without providing any significant 
benefit for security holders.
---------------------------------------------------------------------------

    The legend may refer to either a previously filed communication 
that contains the participant information, or a separate statement that 
contains the participant information and is filed as Rule 14a-12 
material.\77\ We are not eliminating the requirement to make 
participant information available to security holders. Rather, we are 
requiring disclosure of this information once instead of in every 
communication.
---------------------------------------------------------------------------

    \77\ The information must be filed under cover of Schedule 14A 
with the appropriate box on the cover page checked to designate that 
the material is filed under Rule 14a-12.
---------------------------------------------------------------------------

c. ``Test the Waters''

    In addition to our proposal to expand Rule 14a-12, we solicited 
comment on adopting a broader ``test the waters'' approach to proxy 
solicitations. Under this approach, parties could engage in soliciting 
activities without filing proxy material so long as no form of proxy is 
requested or sent. Test the waters would permit both written and oral 
proxy solicitations before the filing of a proxy statement. Unlike the 
proposed expansion of Rule 14a-12, however, test the waters would not 
require written communications to be filed on first use.
    Many commenters favored our concept of test the waters, but a few 
commenters expressed concern that it could result in unregulated and 
secret solicitations. At this time, we believe that our expansion of 
Rule 14a-12, as adopted, should provide sufficient flexibility to 
companies to communicate more frequently with security holders on a 
timely basis. After we gain some experience with communications under 
the expanded Rule 14a-12, depending on its effects, we may consider 
moving toward a test the waters approach in future rulemaking.
2. Limited Confidential Treatment of Merger Proxy Materials
    Today, a proxy statement relating to a merger, consolidation, 
acquisition or similar matter may be filed confidentially with the 
Commission.\78\ If the staff decides to review the proxy statement it 
may issue comments to the

[[Page 61416]]

filing parties. When all comments are resolved, a public filing is made 
either a definitive proxy statement or, if securities are being 
offered, a registration statement that wraps around the proxy 
statement. We proposed to eliminate the provision for confidential 
treatment. We note the practice of disclosing extensive deal-related 
information to the market before a registration statement or proxy 
statement is filed publicly. We do not believe that material public 
information regarding a merger should receive confidential treatment.
---------------------------------------------------------------------------

    \78\ Rule 14a-6(e)(2) (17 CFR 240.14a-6(e)(2)).
---------------------------------------------------------------------------

    Many commenters opposed eliminating confidential treatment due to a 
concern for increased liability. These commenters pointed out that they 
may be required to make revisions to their proxy statement disclosure 
in response to staff comment that would be subject to unnecessary 
public scrutiny. It is not clear, however, why the proxy statement 
situation warrants different treatment from exchange offers and other 
public filings that are routinely amended in response to staff comment. 
One commenter suggested that we retain confidential treatment when the 
parties to a transaction do not publicly disclose information about the 
transaction outside the proxy statement.
    We have decided to retain confidential treatment under limited 
circumstances. Where the parties to a merger or other business 
combination transaction limit their public communications to those 
specified in Rule 135,\79\ confidential treatment will continue to be 
available for the proxy materials. If, however, the parties elect to 
publicly disclose, either orally or in writing, information relating to 
the transaction that goes beyond Rule 135, confidential treatment will 
not be available.\80\
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    \79\ Rule 135 generally exempts from the definition of ``offer'' 
any notice that states no more than specific limited information; 
see n.60 above. The Rule 135 limit on communications would apply to 
all parties to the transaction and anyone acting on their behalf in 
communicating to the public.
    \80\ Revised Rules 14a-6(e)(2) and 14c-5(c)(2). Confidential 
treatment will continue to be unavailable for going-private or roll-
up transactions.
---------------------------------------------------------------------------

    As a result, the parties to the transaction may choose either to 
forgo confidential treatment and communicate publicly about the deal in 
reliance on one of the new exemptions, or invoke confidential treatment 
and refrain from any publicity outside the proxy statement, except for 
the basic information permitted by Rule 135. We will use Rule 135 as a 
bright line in determining whether parties to a transaction have 
publicly disclosed sufficient information to the point that 
confidential treatment of the proxy materials is no longer warranted. 
This bright line will be applied whether or not the transaction is 
subject to the Securities Act and Rule 135. If a preliminary proxy 
statement is filed confidentially, but information beyond Rule 135 is 
subsequently disclosed, confidential treatment will no longer be 
available and all proxy materials related to the transaction must be 
filed publicly.
    Two commenters recommended that we institute a procedure that would 
allow parties to seek an expedited, confidential pre-filing review of 
pro forma financial statements and other accounting matters if 
confidential treatment is eliminated. Currently, parties are permitted 
to, and frequently do, initiate pre-filing conferences with our 
accounting staff to resolve sensitive accounting issues before the 
filing a merger proxy statement. Our accounting staff will continue to 
be available for pre-filing conferences with filing parties.
    Several commenters also indicated that if we decided to eliminate 
confidential treatment, we should not require that all exhibits be 
filed with the first public filing of the proxy statement. These 
commenters noted that in many cases some exhibits may not exist or are 
not in final form when the proxy statement is first filed. The 
limitation on confidential treatment adopted today would not require 
that all exhibits be filed with the initial filing of a proxy 
statement. As is the case today, a proxy statement may be filed first, 
without any exhibits. Schedule 14A does not have any exhibit 
requirements. Exhibits could be filed at a later date when the 
registration statement is wrapped around the proxy statement. If all 
exhibits are not final or complete at the time the registration 
statement is first filed, then those exhibits could be filed in an 
amendment to the combined proxy statement/registration statement.
3. Timing of Filings
    Rule 14a-6(b) requires that definitive proxy materials be ``filed 
with, or mailed for filing to, the Commission not later than the date 
such material is first sent or given to security holders.'' \81\ 
Similar language appears in several other proxy and information 
statement filing rules.\82\ The mailing alternative, however, is no 
longer an option because companies must file electronically.\83\ 
Therefore, we are amending the proxy and information statement filing 
rules as proposed to require filing no later than the date the 
materials are first sent or given to security holders.\84\ This change 
is consistent with the filing requirements imposed under the exemptions 
adopted today.
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    \81\ 17 CFR 240.14a-6(b).
    \82\ See Rules 14a-4(f) (17 CFR 240.14a-4(f)), 14a-6(c) (17 CFR 
240.14a-6(c)), 14a-11(c) (17 CFR 240.14a-11(c)), 14a-12(b) (17 CFR 
240.14a-12(b)) and 14c-5(b) (17 CFR 240.14c-5(b)).
    \83\ See Rule 101(a)(1)(iii) of Regulation S-T (17 CFR 
232.101(a)(1)(iii)). Paper filings are permitted only if a hardship 
exemption is available. Foreign private issuers that are not 
required to file electronically are exempt from the proxy and 
information statement requirements. Exchange Act Rule 3a-12-3 (17 
CFR 240.3a-12-3).
    \84\ We also are adopting the proposed clarification to Rule 
13(d) of Regulation S-T. The revised rule makes it clear that if a 
communication takes place after our official business hours (i.e., 
5:30 p.m. Eastern time) or on a non-business day, the communication 
must be filed electronically on EDGAR the following business day. 
This revision supersedes the interpretive position expressed by the 
Division of Corporation Finance in Henry Lesser, Esq. (November 28, 
1995). This provision applies to all our rules that require filing 
on the same date that information is furnished, including the 
Securities Act, proxy and tender offer rules.
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    We continue to believe that definitive materials should be 
available to security holders, the market and the staff as promptly as 
possible. EDGAR and other electronic sources of information, including 
the Internet, increasingly are relied upon by the investment community 
for information regarding public companies. When there is a lag between 
the time information is first disseminated and the time it is filed, 
persons relying on our filings for information on public companies are 
placed at a disadvantage.

D. Communications Under the Tender Offer Rules

1. ``Commencement,'' Communications, and Filing Requirements
    Currently, the tender offer rules restrict a third-party bidder's 
communications regarding a proposed tender offer. The restrictions on 
communications stem from the concept of ``commencement,'' the five 
business day rule for cash tender offers,\85\ and the requirement that 
a registration statement be filed promptly for registered exchange 
offers.\86\ A target's

[[Page 61417]]

communications regarding a tender offer are similarly restricted.\87\ 
To harmonize the treatment of communications regarding business 
combination transactions under the three regulatory schemes, and to 
promote the dissemination of information to all security holders on a 
more timely basis, we are modifying the definition of ``commencement'' 
and eliminating the five business day rule and the requirement to 
promptly file a registration statement after announcing a registered 
exchange offer.\88\
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    \85\ Currently, an offer is deemed to ``commence'' on public 
announcement of the following limited information: the identity of 
the bidder, the identity of the subject company, the amount and 
class of securities sought and the price or range of prices offered, 
unless a tender offer statement is filed within five business days 
of the announcement and disseminated to security holders or the 
bidder makes a subsequent public announcement withdrawing the offer. 
See Rule 14d-2(b) and (c) (17 CFR 240.14d-2(b) and (c)). We refer to 
this as the ``five business day rule.''
    \86\ Although third-party bidders offering cash or exempt 
securities must file a tender offer statement within five business 
days, bidders offering registered securities are not bound by the 
same rule. They must file a registration statement relating to the 
securities offered ``promptly'' after announcing the limited 
information specified in Rule 135. See Rule 14d-2(e) 17 CFR 240.14d-
2(e)).
    \87\ If the target company comments on the merits of an offer or 
otherwise makes a recommendation with respect to an offer, it may be 
required to file a disclosure document. See Rule 14d-9(a) (17 CFR 
240.14d-9(a)).
    \88\ Revised Rule 14d-2(c). Rule 13e-4 has no comparable 
communications restrictions, but we are adopting changes to this 
rule to conform it to the new communications scheme.
---------------------------------------------------------------------------

    In place of these rules, we are adopting a filing requirement for 
all written communications that relate to a tender offer beginning with 
and including the first public announcement of the transaction.\89\ As 
with communications subject to the Securities Act and the proxy rules, 
written communications must be filed on the date that the communication 
is made.\90\ In addition, written communications must contain a legend 
advising security holders to read the full tender offer or 
recommendation statement when it becomes available.
---------------------------------------------------------------------------

    \89\ The public announcement also triggers the Rule 14e-5 
restrictions on purchasing outside the tender offer, as discussed in 
Part II.G.5 below.
    \90\ Revised Rule 14d-2(b)(2). These communications will be 
filed under cover of Schedule TO or 14D-9, as appropriate. Both 
schedules have a box to check indicating that these are pre-
commencement communications. No signature is required. See General 
Instruction D to Schedule TO and General Instruction B to Schedule 
14D-9. If the transaction also is subject to the Securities Act, 
then communications must be filed under Rule 425 only, and those 
communications will be deemed filed under the tender offer rules.
---------------------------------------------------------------------------

    Under the revised rules, ``commencement'' is when the bidder first 
publishes, sends or gives security holders the means to tender 
securities in the offer.\91\ We believe that security holders need the 
information required by the tender offer rules when they are either 
asked or able to tender their securities in an offer.\92\
---------------------------------------------------------------------------

    \91\ Generally, this will occur if the bidder provides security 
holders with a transmittal form to use to tender securities or if 
the bidder publishes an advertisement advising security holders how 
to tender in the offer or to contact the bidder for more information 
on how to tender securities in the offer. This also would occur if 
by some other means persons are able to tender securities to the 
bidder. At that time, the bidder must file and disseminate the 
tender offer schedule, and the required 20 business day period that 
all tender offers must remain open will begin to run. Revised Rule 
14d-2(a).
    \92\ Although we are changing how a tender offer is commenced 
for purposes of the tender offer rules, we are not defining the term 
``tender offer'' or changing our position on what activities may be 
deemed to constitute a tender offer. The tender offer rules still 
may apply to activities that function as unconventional tender 
offers. We maintain our position that the term ``tender offer'' 
should be interpreted flexibly in accordance with the intended 
purposes of sections 14(d) and 14(e). A determination of whether a 
particular transaction or series of transactions constitutes a 
tender offer will, of course, depend on the particular facts and 
circumstances and is not limited to ``conventional'' tender offers. 
See Release No. 34-15548 (Feb. 5, 1979) (44 FR 9956).
---------------------------------------------------------------------------

    To minimize the potential for dissemination of false offers into 
the marketplace in the absence of the five business day rule, we are 
adopting new Rule 14e-8. As proposed, this rule prohibits bidders from 
announcing an offer: without an intent to commence the offer within a 
reasonable time and complete the offer; with the intent to manipulate 
the price of the bidder or the target's securities; or without a 
reasonable belief that the person will have the means to purchase the 
securities sought. We believe that a specific rule prohibiting such 
conduct is appropriate. This antifraud rule is intended as a means to 
prevent fraudulent and misleading communications regarding proposed 
offers under the new communications scheme, in addition to the existing 
antifraud provisions.
    Two commenters expressed concern that the rule could create new 
grounds for frivolous litigation, while others supported the proposal. 
Of course, if a target or other party decided to litigate under this 
new rule, the plaintiff would have the burden of showing that the 
bidder either did not have an intent to commence and complete the offer 
or did not reasonably believe it had the ability to purchase the 
securities. Although not required, a commitment letter or other 
evidence of financing ability (e.g., funds on hand or an existing 
credit facility) would in most cases be adequate to satisfy the rule's 
requirement that the bidder have a reasonable belief that it can 
purchase the securities sought.\93\
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    \93\ This is not intended to change how bidders legitimately 
finance their offers today. Bidders may have sufficient funds on 
hand to complete the offer or they may arrange to borrow funds from 
an outside source. In most cases when the bidder expects to obtain 
funds from another source, financing is arranged in advance or 
immediately after announcing an offer. Bidders typically get a 
commitment letter from their lenders.
---------------------------------------------------------------------------

    Although we noted in the Proposing Release that eliminating the 
current restrictions could have potentially destabilizing effects on 
the securities markets,\94\ it is not clear that the market effects 
differ greatly from those caused by merger announcements, which are not 
subject to the same constraints. Based on our experience with tender 
offers \95\ and the factors discussed above influencing our decision to 
permit more communications regarding business combination transactions, 
we believe that the availability of more information on a timely basis 
will better assist security holders in making well informed individual 
investment decisions when confronted with news of a pending or proposed 
business combination. Accordingly, we are adopting the changes to the 
tender offer communications provisions substantially as proposed.
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    \94\ See Part II.B.7.a of the Proposing Release and Release No. 
34-15548 (February 5, 1979) (44 FR 9956).
    \95\ We have not observed any disruptive or destabilizing 
effects in cases where precommencement publicity is currently 
permitted, such as where Rule 135 information is disclosed regarding 
a proposed exchange offer more than five business days before a 
registration statement is filed.
---------------------------------------------------------------------------

    In reaching this conclusion, we note that communications regarding 
issuer tender offers are not similarly restrained.\96\ Also, it appears 
that some bidders do not use the term ``tender offer'' in their public 
announcement of a proposed business combination transaction in an 
attempt to avoid triggering application of Rule 14d-2. Furthermore, 
security holders today, upon hearing news of a proposed tender offer 
for their securities (either directly by the formal notice published by 
the bidder or indirectly through rumors in the marketplace), must 
decide whether to: (i) Retain their securities until a tender offer 
statement is filed and disseminated so they can tender into the offer; 
or (ii) sell into the market at prevailing prices based on the limited 
information available.\97\ Under the new approach, more time may elapse 
between announcement and the filing of the tender offer statement, but 
more information also may be available during that period. We do not 
believe there is a sufficiently compelling basis

[[Page 61418]]

to continue treating third-party cash offers, exchange offers, issuer 
tender offers and mergers differently.\98\
---------------------------------------------------------------------------

    \96\ Issuer tender offers are subject to Rule 13e-4, which does 
not contain a comparable provision to the five business day rule or 
a requirement to file a registration statement promptly after 
announcing limited information about a registered exchange offer.
    \97\ Bidders often wait until the fifth business day following 
public announcement before filing a full tender offer statement in 
accordance with Rule 14d-3(a) (17 CFR 14d-3(a)). In addition, it can 
take several days before mailed copies of the tender offer statement 
are received by beneficial owners. Bidders offering registered 
securities must promptly file the registration statement after 
announcement, which in most cases is more than five business days 
after the announcement.
    \98\ All tender offers must remain open for at least 20 business 
days. See Rule 14e-1(a) (17 CFR 240.14e-1(a)). If security holders 
are willing to wait to receive the tender offer statement containing 
the required information, they can consider the disclosure document 
in light of all earlier communications relating to the transactions 
before making an investment decision with respect to the offer. We 
have no reason to believe that the current minimum time period for 
tender offers is inadequate.
---------------------------------------------------------------------------

    Most of the commenters that addressed the proposals favored 
eliminating the five business days rule and the requirement to promptly 
file a registration statement after announcement of an exchange offer, 
as well as the revised definition of ``commencement.'' A few 
commenters, however, expressed concern that elimination of the five 
business day rule could revive certain inconsistent state law 
requirements. We do not believe that elimination of the five business 
day rule will result in a resurgence of inconsistent state anti-
takeover statutes that impose disclosure or other requirements 
incompatible with our new regulatory scheme.
    We have long defined when a tender offer commences. This definition 
served several purposes, including implementing a uniform nationwide 
timetable for the tender offer process, regulating the flow of 
information by identifying the date by which required disclosure 
filings must be made with the Commission, and helping to create a level 
playing field between bidders and targets. Under well-established 
principles, any state law that conflicted with this provision was 
preempted.
    The new definition continues to serve these sorts of purposes--it 
establishes a uniform time at which a tender offer is deemed to 
commence, it continues to balance the rights and obligations of bidders 
and targets, and it facilitates the free flow of information from both 
bidders and targets before that date (subject to the antifraud 
provisions), based on our judgment that this flow of information is in 
the best interests of the holders of securities. The elimination of the 
five business day rule and the other changes in the rule are intended 
to provide security holders with the broadest possible disclosure of 
information at the earliest date possible.
    We believe that courts would hold that any state law that 
conflicted with the new rule by attempting to establish a different 
commencement date or otherwise frustrating operation of the rule would 
be preempted.\99\ For instance, we believe that any state provision 
that made it impossible to comply with both state and federal 
requirements or that created obstacles to the accomplishment and 
execution of the full purposes and objectives of the new rule would 
continue to be preempted.\100\
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    \99\ See Dynamics Corp. of America v. CTS Corp., 481 U.S. 69, 79 
(1987).
    \100\ See, e.g., Barnett Bank of Marion County versus Nelson, 
517 U.S. 25 (1996) (summarizing preemption principles); see also 
Fidelity Fed. Sav. & Loan Assoc. versus de la Cuesta, 458 U.S. 141, 
154 (1982).
---------------------------------------------------------------------------

    Security holders ultimately have the choice to sell into the market 
based on information disclosed early or wait until a complete, mandated 
disclosure document is sent to them before making an investment 
decision. The ability of security holders to sell into the market 
before a complete disclosure document is filed and disseminated is no 
different from their current position between the time a transaction is 
announced and the time a mandated disclosure document is filed and 
disseminated. However, we believe that liberalizing early 
communications will better serve investors and the markets by providing 
them with more information at an earlier date. The bidder continues to 
have the flexibility to commence promptly after the first public 
announcement. We encourage bidders to commence their offers as soon as 
they are able to do so, since security holders and other market 
participants will benefit from the complete information in the mandated 
tender offer materials. To the extent, however, that there are delays 
between announcement and commencement, we believe that investors will 
benefit from the free flow of information provided by the new 
regulatory scheme. Therefore, we are changing the current regulatory 
scheme, and is doing so we are clearly expressing our intent that these 
new rules serve, as an integrated whole, to regulate the various 
communications that persons may make regarding a potential or proposed 
business combination transaction.
    Two commenters favored retaining the five business day rule for 
hostile offers, but eliminating it for negotiated transactions. We 
believe, however, that applying the rule only to hostile offers could 
present problems when the same target is the subject of both a 
negotiated transaction and a hostile offer, or when a negotiated 
transaction becomes hostile as a result of changed circumstances or 
another offer. Further, in light of the communications scheme we adopt 
today, it does not appear that security holders' best interests would 
be served by permitting expanded communications only with respect to 
negotiated transactions.
    One commenter believed that the five business day rule provides 
investors and the markets with a degree of certainty regarding proposed 
offers and results in the dissemination of better information in a 
relatively short time. We believe that our requirements to file all 
written communications relating to a proposed transaction on first use 
will result in more information on a timely basis. As noted above, we 
do not believe bidders will have an incentive to unnecessarily delay 
commencing their offers because of the risk that market forces may 
affect the terms of the offer or a competing bidder will emerge.
    Under these new and revised rules, bidders and targets alike have 
an increased ability to communicate with security holders along with 
the requirement to file all written communications related to an offer. 
Under the new scheme, the target must file all written communications 
relating to the transaction on the date the communication is made.\101\ 
Targets need not file a formal recommendation statement until after the 
offer is formally commenced and a recommendation is made. The target 
remains obligated, however, to take a position with respect to the 
offer no later than 10 business days after the offer commences under 
Rule 14d-2.\102\ If the target makes a recommendation after 
commencement, but before the tenth business day, then it must file a 
recommendation/solicitation statement on Schedule 14D-9 on or before 
the time the recommendation is first made.
---------------------------------------------------------------------------

    \101\ Revised Rule 14d-9. These communications must include a 
legend similar to the one required on the bidder's pre-commencement 
communications, advising security holders to read the complete 
recommendation when it is available. Although we did not propose 
such a legend, we solicited comment on it, and the commenters who 
addressed the issue supported a legend requirement.
    \102\ See Rule 14e-2(a) (17 CFR 240.14e-2(a)).
---------------------------------------------------------------------------

    These rules apply to issuer and third-party tender offers alike. In 
addition, the new rules make no distinction based on the form of 
consideration offered to security holders (e.g., cash or stock). We do 
not believe that there is sufficient justification to treat tender 
offer communications differently based on either the nature of the 
bidder or the consideration offered. Security holders ultimately face 
the same investment decision--whether or not to tender in the offer.
2. Dissemination Requirements
    We also reviewed the various methods to commence a tender offer in

[[Page 61419]]

the Proposing Release.\103\ In reviewing these methods, we noted that 
long form publication \104\ is rarely used by bidders due to the cost 
associated with publishing extensive information about the offer in a 
newspaper.\105\ We proposed to eliminate long form publication.
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    \103\ See Part II.B.7.b of the Proposing Release.
    \104\ Rule 14d-2(a)(1) (17 CFR 240.14d-2(a)(2)).
    \105\ A bidder must publish the information specified in Rule 
14d-6(e)(1) (17 CFR 240.14d-6(e)(1)).
---------------------------------------------------------------------------

    Several commenters agreed that long form publication is rarely 
used, but urged us to retain the method, citing the lack of any abuse 
under the rule. In addition, these commenters noted that, in the 
future, long form publication may become a viable means of 
disseminating an offer using the Internet or another electronic 
delivery system. At this time, we do not believe that technology has 
developed to the point where bidders can rely solely on electronic 
media to disseminate information about a tender offer to security 
holders. In particular, posting the information on a web site alone 
would not be adequate dissemination.\106\ Nevertheless, in response to 
commenters' requests that we retain long form publication as a means of 
commencement, we have decided not to eliminate it.
---------------------------------------------------------------------------

    \106\ Not all security holders have access to the Internet. Even 
those that do have access would not have notice that a tender offer 
for their company's securities was posted on a web site. All 
commenters who addressed the question opposed electronic 
dissemination as the sole means to disseminate an offer, noting that 
there are no electronic sources of information as commonly available 
and widely followed as newspapers. Of course, it is permissible to 
post tender offer materials on a web site in addition to using other 
methods of dissemination. Electronic media also may be used to 
satisfy requirements to deliver tender offer material in accordance 
with our guidelines for electronic delivery. See Release No. 33-7233 
(October 6, 1995) (60 FR 53458). For example, a summary 
advertisement for a tender offer could contain a consent form for 
security holders to indicate their willingness to receive the 
complete tender offer materials by means of a specified electronic 
medium.
---------------------------------------------------------------------------

    We solicited comment on whether the rules should continue to permit 
an offer to be commenced and disseminated by summary advertisement 
alone.\107\ Currently, bidders that rely on the summary advertisement 
method to disseminate an offer tend also to mail their offering 
documents to security holders using a security holder list under Rule 
14d-5. We asked whether bidders should always be required to use 
security holder lists when disseminating an offer. Two commenters 
favored retaining summary publication without the use of security 
holder lists. Both cited the lack of any abuse with the rule and the 
possibility that its elimination could force bidders to tip their hand 
when requesting a security holder list from the target in hostile 
transactions. Accordingly, we are not changing this aspect of the 
summary advertisement rule.\108\ However, in keeping with the expansion 
of permissible communications, we are eliminating, as proposed, the 
current restriction on the information that may be included in a 
summary advertisement.\109\
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    \107\ Rule 14d-6(a)(2) (17 CFR 240.14d-6(a)(2)).
    \108\ Similarly, we are retaining the current requirement that 
bidders using stockholder lists also publish summary advertisements.
    \109\ We are amending Rule 14d-6(a)(2) to delete the language 
limiting the information that can appear in a summary advertisement. 
We are retaining the prohibition against including a transmittal 
form with the summary advertisement. A summary advertisement may 
(and must, if it is designed to commence the offer) include the 
means to tender, e.g., a telephone number to call to obtain the 
complete tender offer materials, including the transmittal form.
---------------------------------------------------------------------------

    Currently, bidders must hand deliver a copy of their tender offer 
statement and any additional tender offer materials to the target 
company as well as any other bidder that has made an offer for the same 
class of securities.\110\ We proposed a similar delivery requirement 
for the first written communication disclosing a proposed offer. Under 
the new communications scheme for tender offers, bidders are able to 
disclose information about a proposed offer without commencing the 
offer.\111\ In light of the many different communications media 
available to bidders, we believe targets need a reliable way to learn 
about proposed offers for their securities so they can respond in a 
timely manner. Therefore, we are adopting a requirement that the bidder 
deliver to the target and any other bidder the first written 
communication relating to the transaction that is filed, or required to 
be filed, with the Commission.\112\ This material must be delivered on 
the date of the communication.\113\
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    \110\ Rule 14d-3(a)(2). The current rule also requires 
telephonic notice and mailing of tender offer material to any 
securities exchange or the NASD on which the securities are listed 
or traded. We are not extending this delivery requirement to pre-
commencement communications because the exchanges and the NASD are 
relying less on paper filings and more on electronic databases to 
obtain EDGAR filings.
    \111\ Communications regarding offers can be made without a 
summary advertisement of the offer appearing in newspapers.
    \112\ As proposed, this requirement would have been triggered by 
the first communication setting forth specified information. We 
believe, however, that it will be simpler for bidders to know that 
this obligation will attach at the same time the first pre-
commencement communication is filed. Once target companies and other 
bidders receive notice of the transaction, they can monitor the 
Commission's filings for subsequent pre-commencement materials.
    \113\ Revised Rule 14d-2(b)(2). Instead of hand delivery, the 
rule only requires ``delivery,'' so the bidder may use any other 
means of delivery that is equally prompt and equally likely to 
receive the attention of the target company (e.g., an e-mail to the 
corporate secretary, chief executive officer and other persons of 
similar authority at the target company, where the target company 
uses these e-mail addresses for public communications). We have 
similarly modified the bidder's current obligation to hand deliver a 
copy of the mandated disclosure document. See revised Rule 14d-
3(a)(2).
---------------------------------------------------------------------------

E. Exchange Offers May Commence On Filing

1. Early Commencement
    We are adopting the early commencement provision substantially as 
proposed, but extended to cover issuer exchange offers. Currently, 
registered exchange offers may not commence until the related 
registration statement becomes effective.\114\ As we noted in the 
Proposing Release, this results in cash and stock tender offers being 
treated differently. Cash tender offers have a distinct timing 
advantage over stock tender offers because cash offers can commence as 
soon as a tender offer statement is filed and disseminated.\115\ This 
change should minimize this regulatory disparity by permitting stock 
tender offers to commence as early as the date the related registration 
statement is first filed.
---------------------------------------------------------------------------

    \114\ See Rule 14d-2(a)(4). Commencement occurs when definitive 
copies of the prospectus/tender offer material are first published, 
sent or given to security holders.
    \115\ As a result, the 20 business day period that a tender 
offer must remain open typically begins to run earlier for cash 
offers than stock offers. See Rule 14e-1(a).
---------------------------------------------------------------------------

    Almost all of the commenters that addressed early commencement 
indicated that it was a step in the right direction, but they believed 
more was needed to fully balance the regulation of cash and stock 
offers. We recognized in the Proposing Release that early commencement 
alone may not be sufficient to level the playing field between cash and 
stock tender offers because bidders would not be able to purchase 
shares tendered in the offer until after the related registration 
statement is effective. Accordingly, cash offers could close earlier 
than stock tender offers due to possible staff review and comment on 
the registration statement.
    We solicited comment on whether there are other changes (e.g., 
expedited staff review, automatic effectiveness on filing or 
effectiveness within a specified time after filing), that might further 
reduce the disparity in regulatory treatment. We also asked whether

[[Page 61420]]

expedited staff review would minimize the regulatory differences.
    Commenters had mixed views. Some commenters favored automatic 
effectiveness or effectiveness shortly after filing, while others 
believed the potential for post-effective staff review and comment 
would discourage bidders from offering securities as consideration in a 
tender offer.\116\ Most commenters, however, were in agreement that 
expedited staff review is essential to balancing the regulatory 
treatment of the two types of offers. Due to the risks associated with 
automatic effectiveness and effectiveness shortly after filing (before 
the staff has had an adequate opportunity to review the disclosure), we 
believe these measures would not be in security holders' best 
interests, especially in the business combination context where the 
disclosure and accounting issues can be particularly complex. We are, 
however, committed to expediting staff review of exchange offers so 
that they may compete more effectively with cash tender offers.
---------------------------------------------------------------------------

    \116\ The latter group was primarily concerned that staff 
comment could necessitate the dissemination of a post-effective 
amendment.
---------------------------------------------------------------------------

    As proposed, early commencement was limited to third-party offers. 
We solicited comment, however, on whether early commencement would 
provide any benefits to issuers making exchange offers for their own 
securities. Several of the commenters believed that issuers should have 
the same ability to commence an exchange offer upon filing.\117\ We 
agree that there is no reason to exclude issuer exchange offers from 
early commencement, and therefore, we have decided to treat third-party 
and issuer exchange offers alike under the new rule.
---------------------------------------------------------------------------

    \117\ These commenters also urged us to extend early 
commencement to going-private transactions as well. We do not 
believe going-private transactions warrant early commencement, 
especially in light of the numerous comments issued by the staff of 
the Division of Corporation Finance that result in significant 
changes to the disclosure. Therefore, we are not extending early 
commencement to Rule 13e-3 transactions. In addition, as proposed, 
early commencement is not available to roll-up transactions. A roll-
up transaction is any transaction or series of transactions that 
directly or indirectly, through acquisition or otherwise, involves 
the combination or reorganization of one or more ``finite-life'' 
entities (usually limited partnerships) where the securities to be 
issued are registered under the Securities Act. See Release No. 33-
6900 (June 17, 1991) (56 FR 28979); Release No. 33-6922 (October 30, 
1991) (56 FR 57237); Release No. 33-7113 (December 1, 1994) (59 FR 
63676); and the 900 series of Regulation S-K.
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    We also asked whether there should be a proxy analogue to early 
commencement so that parties to a business combination transaction 
involving a voting decision would be able to furnish proxy cards with 
preliminary proxy materials. Currently, proxy cards may only accompany 
the definitive proxy statement/prospectus.\118\ A proxy analogue would 
further balance the regulatory treatment of mergers and tender offers.
---------------------------------------------------------------------------

    \118\ Rule 14a-4(f).
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    We are not adopting a proxy analogue to early commencement at this 
time. We note that all tender offers must remain open for at least 20 
business days.\119\ Currently, the minimum proxy solicitation period is 
dictated by applicable state corporate law requirements.\120\ A proxy 
solicitation period, accordingly, could be less than 20 business days. 
Further, under the new rules adopted today, we are specifying the 
appropriate time periods necessary for dissemination of a prospectus 
supplement when there are material changes to the information 
previously disseminated. The proxy rules do not have similar 
provisions. Since the proxy solicitation area has traditionally been 
governed by state law, and because we are not adopting a federally 
mandated proxy solicitation period,\121\ we are not adopting an 
analogue to early commencement that would permit the sending of proxy 
cards along with preliminary proxy materials. We may consider extending 
the concept to the solicitation of proxies once we have sufficient 
experience with early commencement of exchange offers. Any proxy 
analogue to early commencement would, of course, require the 
establishment of a uniform proxy solicitation period and well-defined 
time periods for the dissemination and receipt of a supplement 
containing all material changes from the preliminary proxy statement 
previously sent or given to security holders.\122\
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    \119\ Rule 14e-1(a).
    \120\ Most state corporate laws require that notice of a meeting 
be sent to security holders no less than 10 days and no more than 60 
days before the meeting.
    \121\ See Part II.C.1 above.
    \122\ See Part II.E.2 below discussing appropriate time periods 
for the dissemination of a prospectus supplement containing 
materials changes.
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    Under the new rules,\123\ to commence an exchange offer early 
(before effectiveness of a registration statement), a bidder must file 
a registration statement relating to the securities offered and include 
in the preliminary prospectus all information, including pricing 
information,\124\ necessary for investors to make an informed 
investment decision.\125\ Information may not be omitted under Rule 430 
or Rule 430A under the Securities Act.\126\ Bidders also must 
disseminate the prospectus and related letter of transmittal to all 
security holders and file a tender offer statement with us before the 
exchange offer can commence.\127\
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    \123\ New Rule 162 and revised Rules 13e-4(e)(2) and 14d-4(b).
    \124\ If the registration statement as first filed does not 
contain a prospectus with this information, the bidder may file a 
pre-effective amendment to supply the requisite information and then 
commence the offer.
    \125\ We are not changing our current position regarding the 
level of information necessary to adequately inform security holders 
of the consideration offered; the pricing information required is 
the same information that would be required in an effective 
registration statement today. Often, in a business combination 
transaction the consideration offered to security holders is based 
on a formula pricing mechanism that is based on the market price of 
either the target or the bidder's securities during a specified 
period. The requirement to provide pricing information in a 
prospectus that is delivered to security holders to commence an 
exchange offer would be satisfied if all material elements of the 
formula are described in sufficient detail so that security holders 
can evaluate the offer. A fixed price is not required under early 
commencement.
    \126\ Rule 430 and 430A (17 CFR 230.430 and 430A).
    \127\ Because tender offer statements generally incorporate by 
reference a substantial amount of the required information from the 
related registration statement, the actual filing of a tender offer 
statement would serve primarily as notice to us and the markets that 
the exchange offer commenced. Of course, any prospectus furnished to 
security holders before the registration statement is effective must 
include the red herring legend required by Item 501(b)(10) of 
Regulation S-K (17 CFR 229.501(b)(10)).
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    Early commencement is at the option of the bidder. Exchange offers 
can commence as early as the filing of a registration statement, or on 
a later date selected by the bidder up to the date of 
effectiveness.\128\ If a bidder does not commence its exchange offer 
before effectiveness of the related registration statement, then the 
exchange offer would need to commence on or shortly after 
effectiveness, as is the case today.
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    \128\ Regulation M (17 CFR 242.100 through 242.105) prohibits 
purchases of the bidder's securities during an exchange offer's 
restricted period, beginning when the bidder commences its offer. 
The restrictions under Rule 10b-13 (new Rule 14e-5) start when the 
bidder makes its first public announcement.
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    As proposed, we are adopting new Rule 162 to permit the tender of 
securities into an exchange offer before a registration statement is 
effective.\129\ New Rule 162(a) exempts the tender of securities from 
section 5(a) of the Securities Act.\130\ Security holders may

[[Page 61421]]

withdraw tendered securities until they are purchased, and bidders may 
not purchase the tendered securities until the registration statement 
is declared effective, as is currently the case. Because security 
holders must receive a mandated disclosure document before having to 
make an investment decision, we believe that early commencement, 
together with the communications scheme adopted today, is consistent 
with the public interest and the protection of investors. Early 
commencement gives bidders an incentive to disseminate their offering 
materials broadly to all security holders as soon as practicable. 
Further, the new rule provides bidders with greater flexibility in 
choosing the form of consideration to offer in a business combination 
transaction and should serve to facilitate the growth of our capital 
markets.
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    \129\ Rule 162, as adopted, is extended to issuer exchange 
offers subject to Rule 13e-4 as well as third-party exchange offers 
subject to Regulation 14D (17 CFR 240.14d-1 through 17 CFR 240.14d-
101).
    \130\ This exemption is necessary to prevent the tendering of 
securities into an offer from being viewed as a ``sale'' without an 
effective registration statement. We are using our exemptive 
authority under section 28 of the Securities Act to adopt this new 
rule.
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2. Dissemination of a Supplement and Extension of the Offer
    Under the early commencement provision adopted, bidders are 
required to disseminate a prospectus to all security holders. If a 
bidder wants to commence its exchange offer early, it must disseminate 
a preliminary prospectus to all security holders as discussed above. 
The new rules also provide that bidders sending a preliminary 
prospectus must disseminate a supplement to security holders if there 
are any material changes, whether as a result of staff review, or due 
to any other material changes in the information previously disclosed. 
Exchange offers must remain open for a specified minimum period of time 
after a supplement is sent to security holders containing the new 
information, depending on the significance of the change. This is to 
permit security holders to react to the information by tendering 
securities or by withdrawing securities already tendered.
    Since the tender offer rules do not currently establish specific 
minimum time periods necessary for the disclosure and dissemination of 
material changes, other than those relating to changes in price or the 
amount of securities sought,\131\ we are establishing well-defined 
periods necessary for the dissemination of a prospectus supplement that 
contains material changes under early commencement. The mandated 
periods we adopt today are consistent with our current rules and 
interpretive positions in this area.\132\ Therefore, we are revising 
Rule 14d-4 to specify the minimum time periods necessary for the 
dissemination of changes to preliminary prospectuses that are used to 
commence an exchange offer early.\133\ As a result, exchange offers 
that commence early must remain open for at least:

    \131\ Rule 14e-1(b) [17 CFR 240.14e-1(b)]. A tender offer must 
remain open for ten business days after a notice of an increase or 
decrease in the percentage of the class of securities being sought, 
the consideration offered, or the dealer's soliciting fee.
    \132\ See Release No. 34-24296 (April 3, 1987) [52 FR 11458].
    \133\ Revised Rules 14d-4(b) and (d) and 13e-4(e). This approach 
was favored by all commenters who addressed the issue.
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     Five business days for a prospectus supplement 
containing a material change other than price or share levels;
     Ten business days for a prospectus supplement 
containing a change in price, the number of shares sought, the 
dealer's soliciting fee, or other similarly significant change;
     Ten business days for a prospectus supplement included 
as part of a post-effective amendment; and
     20 business days for a revised prospectus when the 
initial prospectus was materially deficient; for example, failing to 
comply with the going-private rules or filing a ``shell'' document 
solely to trigger commencement and staff review.\134\
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    \134\ The 20 business day period required by the tender offer 
rules will not begin to run if the prospectus disseminated to 
security holders is materially deficient. For example, if the 
initial prospectus does not comply with the roll-up rules, the 
minimum solicitation period under the roll-up rules will not begin 
until a revised prospectus satisfying the roll-up rules is 
disseminated.
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    Of course, if a material change in the information previously 
disseminated to security holders occurred shortly before the expiration 
of the offer, a prospectus supplement would need to be disseminated to 
security holders and the offer extended for the appropriate length of 
time. We also believe that these time periods represent general 
guidelines that should be applied uniformly to all tender offers, 
including those subject only to Regulation 14E.\135\
---------------------------------------------------------------------------

    \135\ 17 CFR 240.14e-1 through 17 CFR 240.14e-8.
---------------------------------------------------------------------------

    We asked whether bidders should be required to deliver a final 
prospectus to security holders. Commenters who addressed the issue 
believed that the requirement to deliver prospectus supplements 
containing all material changes should effectively eliminate the need 
for the dissemination of a final prospectus. We agree that the 
informational purpose of the prospectus may best be served by requiring 
bidders to deliver to security holders prospectus supplements 
containing material changes rather than redeliver a final prospectus 
repeating substantial amounts of information that was previously 
delivered.\136\ The use of prospectus supplements should adequately 
inform security holders of the information they need to make an 
informed investment decision.
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    \136\ Any supplements sent to security holders should present 
the informational changes in a clear, concise and understandable 
manner. See Rule 421 of Regulation C (17 CFR 230.421). If there are 
a number of changes necessitating the delivery of several 
supplements, offerors should consider the need to give security 
holders a complete unified document containing all changes and 
updates in a revised preliminary or final prospectus.
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    Accordingly, we are using our exemptive authority \137\ to exempt 
exchange offers that commence early from the final prospectus delivery 
requirement.\138\ In doing so, we are not changing the final prospectus 
delivery requirement in Exchange Act Rule 15c2-8(d).\139\ Under these 
circumstances, where a preliminary prospectus is delivered to security 
holders along with prospectus supplements containing material changes 
to the information previously disseminated, we believe that the cost of 
delivering a final prospectus is not justified by any marginal benefit 
to security holders. Although we are eliminating the requirement to 
deliver a final prospectus, bidders would still need to file a final 
prospectus.
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    \137\ Section 28 of the Securities Act.
    \138\ See new Rule 162(b), which provides an exemption from 
section 5(b)(2) of the Securities Act (15 U.S.C. 77e(b)(2)). This 
rule does not provide an exemption for exchange offers that commence 
on the date of effectiveness or later, for which a final prospectus 
must be delivered to security holders. In the Securities Act Reform 
Release we proposed to eliminate the requirement to deliver a final 
prospectus for certain capital-raising transactions, but not 
business combination transactions. See proposed Rule 173 and Part 
VIII.C.3.b of the Securities Act Reform Release.
    \139\ 17 CFR 240.15c2-8(d). This rule requires all brokers or 
dealers that participate in a distribution of securities registered 
under the Securities Act to take reasonable steps to comply promptly 
with the written request of any person for a copy of the final 
prospectus. The broker or dealer must comply with this request until 
the expiration of the applicable 40-day or 90-day period under 
section 4(3) of the Act. 15 U.S.C. 77(d)(3). See Rule 174 (17 CFR 
230.174).
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F. Disclosure Requirements for Tender Offers and Mergers

1. Schedules Combined and Disclosure Requirements Moved to Subpart 1000 
of Regulation S-K (``Regulation M-A'')
    Currently, there are different disclosure schedules for issuer 
tender offers, third-party tender offers and going-private 
transactions.\140\ Since a given transaction may involve more than one 
of these regulatory schemes, a company may be required to file a 
separate disclosure document to satisfy each applicable disclosure 
regime. In

[[Page 61422]]

addition, the disclosure requirements appearing in the rules and 
schedules can often lead to duplicative, and sometimes inconsistent, 
requirements. In light of the increased pressure to announce a business 
combination transaction soon after it is entered into and the attendant 
requirement to file mandated disclosure documents quickly, we proposed 
to integrate, simplify and update the disclosure requirements currently 
in the rules and schedules. Our basic approach was to combine all the 
disclosure requirements in one central location in a subpart of 
Regulation S-K, called Regulation M-A. The specific disclosure 
requirements in schedules were keyed to items under Regulation M-A in a 
manner consistent with the integrated disclosure system previously 
adopted for proxy and registration statements.
---------------------------------------------------------------------------

    \140\ Schedules 13E-4, 14D-1 and 13E-3, respectively.
---------------------------------------------------------------------------

    All commenters addressing the proposed changes in this area 
believed that it was time to update and simplify the disclosure 
requirements for business combination transactions.\141\ We are 
adopting Regulation M-A substantially as proposed. This series of 
disclosure items incorporates all the current disclosure requirements 
for issuer and third-party tender offers, tender offer recommendation 
statements and going-private transactions. The new regulation includes 
some disclosure items for cash merger proxy statements as well. We have 
made slight modifications, where necessary, to harmonize and clarify 
the requirements, as well as a few substantive changes that are 
discussed below in more detail. In some cases the disclosure 
requirements may appear different, but that is because we have made an 
effort to draft the items in Regulation M-A using clear, plain 
language. In the future, we expect to expand this new regulation to 
cover additional disclosure items as necessary.
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    \141\ One commenter urged us to codify the availability of a 
procedure for making acquisitions using securities registered on an 
acquisition shelf registration statement. While we are not codifying 
this procedure as part of this release, we remind offerors that the 
procedure continues to be available. See Form S-4, General 
Instruction H, and Service Corporation International (December 2, 
1985).
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    We are combining current Schedules 13E-4 and 14D-1 (the schedules 
now used for issuer and third-party tender offers, respectively), into 
new Schedule TO, as proposed.\142\ In addition, we are changing the 
rules to allow one filing to satisfy both the tender offer and going-
private disclosure requirements.\143\ As a result, the information 
required by Schedules 14D-1, 13E-4 and 13E-3 can be disclosed in one 
combined filing.\144\ We believe that these revisions will reduce the 
need to file two or more schedules for what is essentially the same 
transaction.\145\
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    \142\ The format and instructions for Schedules 13E-3 and 14D-9 
are revised so that they are consistent with new Schedule TO. These 
schedules refer to Regulation M-A for all substantive disclosure 
requirements. We did not propose, and are not adopting, any changes 
to the schedules used in connection with the multijurisdictional 
disclosure system for Canadian issuers (Schedules 13E-4F, 14D-1F and 
14D-9F) (17 CFR 240.13e-102; 17 CFR 240.14d-102; 17 CFR 240.14d-
103).
    \143\ New Schedule TO has boxes on the cover page to check to 
indicate whether the filing is an issuer tender offer, third-party 
tender offer, and/or going-private transaction. We are implementing 
conforming changes to the EDGAR filing tag system so that the type 
of transaction and filing persons are identified when viewing a 
document on EDGAR.
    \144\ For example, an affiliate engaged in a tender offer having 
a going-private effect can now file a Schedule TO that also serves 
as a Schedule 13E-3. All filing persons and applicable schedules 
must be identified on the cover page. Separate cover pages are not 
required. Of course, a Schedule 13E-3 must be filed independently 
when the underlying transaction is not a tender offer.
    \145\ Schedule TO also may be combined with an amendment to a 
previously filed Schedule 13D. See General Instruction G to Schedule 
TO. The ability to file a joint 13D amendment and tender offer 
statement is the same as currently permitted. See General 
Instruction E to Schedule 14D-1.
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    We have included an instruction in new Schedule TO, as proposed, 
listing the specific line items that must be complied with for 
different types of transactions.\146\ In addition, we have revised the 
current instruction requiring information that is incorporated by 
reference to be filed as an exhibit. As revised, filers can incorporate 
information included in documents previously filed electronically on 
EDGAR without refiling that information as an exhibit to the 
schedule.\147\ To the extent that the existing schedules permit filers 
to include negative answers in the schedule, but not in the disclosure 
document sent to security holders, filers will continue to have the 
ability to omit that information from documents sent to security 
holders.\148\
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    \146\ General Instruction J to new Schedule TO.
    \147\ Documents filed electronically on EDGAR are readily 
available to security holders and the public (e.g., through the 
Internet, our public reference room, brokers and investment 
advisors). This change also applies to going-private statements.
    \148\ General Instruction E to new Schedules TO and revised 
Schedule 13E-3 and General Instruction C to revised Schedule 14D-9.
---------------------------------------------------------------------------

    At this time we are not extending the one filing satisfies all 
approach to encompass transactions involving the Securities Act and 
proxy rules as well as the tender offer and going-private rules. In the 
future, we may consider integrating the requirements further, to permit 
the satisfaction of the disclosure required under all four regulatory 
schemes with one filing.
    We also are revising the rules that require filing persons to 
include a fair and adequate summary of the information required by the 
schedules in the disclosure document sent to security holders. Instead 
of specifying some items and excluding others, as the current rules 
do,\149\ the revised rules simply require that the document given to 
security holders summarize all items in the schedule (except for 
exhibits).\150\ As noted in the Proposing Release, this change is not 
intended to increase the amount of information that is given to 
security holders. Instead, it is intended to simplify the requirements. 
We expect filers to exercise their judgment in determining the specific 
information that must be included in the disclosure document sent to 
security holders to provide a fair and adequate summary. We are not, 
however, changing the current requirement that certain disclosure 
required in a going-private transaction be set forth in full in the 
disclosure document delivered to security holders.\151\
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    \149\ See current Rules 14d-6(e), 14d-9(c), 13e-3(e) and 13e-
4(d) specifying the information that must be summarized or included 
in the disclosure document sent to security holders.
    \150\ Revised Rules 14d-6(d), 14d-9(d), 13e-3(e) and 13e-4(d).
    \151\ Items 7, 8 and 9 of current and revised Schedule 13E-3.
---------------------------------------------------------------------------

    As a result of today's changes, filers no longer need to answer 
each item of the schedule with a statement that the required 
information is incorporated by reference from certain pages or sections 
of the primary disclosure document. Under the revised rules, it is 
sufficient to include a general statement in the schedule that all 
information in the disclosure document filed as an exhibit is 
incorporated by reference in answer to all or some of the items in the 
schedule. The revised schedules, as proposed, would include a cover 
page, any exhibits and the required signatures. Specific item numbers 
from the schedule must be included only to the extent necessary to 
provide information that is not in the disclosure document sent to 
security holders, but is required to be disclosed under an item in the 
schedule.\152\ This change is designed to make the schedules easier to 
prepare. Of course, filers still must provide all the required 
information.\153\
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    \152\ For example, negative or ``not applicable'' responses or 
information that goes beyond what is summarized in the disclosure 
document must be disclosed under the appropriate item number in the 
schedule if not included in the disclosure document sent to security 
holders.
    \153\ See General Instructions E and F to new Schedule TO and 
revised Schedule 13E-3 and General Instructions C and D to revised 
Schedule 14D-9. We are eliminating the requirement in General 
Instruction F of current Schedule 13E-3 to provide a cross-reference 
sheet showing where the responses are located.

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[[Page 61423]]

2. Streamline and Improve Required Disclosure

a. ``Plain English'' Summary Term Sheet

    We proposed to require a plain English summary term sheet in all 
cash tender offers and all cash mergers, as well as going-private 
transactions. The disclosure documents in these transactions often can 
be difficult to understand, especially in the context of a business 
combination transaction where a vast amount of information may be 
available. We believe security holders should be provided with a 
concise, easy to read term sheet that highlights the most important and 
relevant information regarding an extraordinary transaction.
    Accordingly, we are adopting the plain English summary term sheet 
requirement as proposed.\154\ We are not adopting a plain English 
summary term sheet for transactions involving the registration of 
securities \155\ because these transactions already are required to 
have a plain English summary, although the format may be somewhat 
different from the summary term sheet approach.\156\ The summary term 
sheet must begin on the first or second page of the disclosure 
document, and must highlight the most important or material features of 
a proposed transaction.\157\ This requirement applies to all issuer and 
third-party cash tender offers, cash mergers and going-private 
transactions. We believe the disclosure in these transactions can be 
improved through the use of a plain English summary term sheet.
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    \154\ Item 1001 of Regulation M-A. For purposes of this 
requirement, plain English has the same meaning as in Rule 421(b) 
and (d).
    \155\ If a transaction is subject both to the registration 
requirements of the Securities Act and either Rule 13e-3 or the 
tender offer rules, a plain English summary term sheet is not 
required. See Item 1 of revised Schedule 13E-3 (17 CFR 240.13e-100) 
and new Schedule TO (17 CFR 240.14d-100).
    \156\ See Item 3 of Forms S-4 and F-4 and Rule 421(d) of 
Regulation C (17 CFR 230.421(d)). Effectiveness of a registration 
statement may be denied or a stop order issued when there has not 
been a bona fide effort to present information in a reasonably 
clear, concise and readable manner. See Rule 461(b)(1) of Regulation 
C (17 CFR 230.461(b)(1)); see also, In the Matter of Franchard 
Corporation, 42 S.E.C. 163 (1964).
    \157\ The required summary term sheet should present information 
in bullet-point format and may include cross-references to more 
detailed information found elsewhere in the disclosure documents 
provided to security holders, consistent with plain English 
principles.
---------------------------------------------------------------------------

    In proposing this requirement, we did not mandate the specific 
items or questions that must be addressed in every case. Instead, we 
gave examples of information that most security holders would need when 
confronted with a tender offer or merger. Most commenters favored the 
proposed approach of keeping the requirement general and giving filers 
the flexibility to determine the issues that rise to the level of 
addressing in a plain English summary term sheet. We are adopting this 
approach.
    As noted in the Proposing Release, in most cases, we believe 
bidders should address the following questions in the summary term 
sheet accompanying their cash tender offers:

     Who is offering to buy my securities?
     What are the classes and amounts of securities sought 
in the offer?
     How much is the bidder offering to pay and what is the 
form of payment?
     Does the bidder have the financial resources to make 
payment?
     Is the bidder's financial condition relevant to my 
decision on whether to tender in the offer?
     How long do I have to decide whether to tender in the 
offer?
     Can the offer be extended, and under what 
circumstances?
     How will I be notified if the offer is extended?
     What are the most significant conditions to the offer?
     How do I tender my shares?
     Until what time can I withdraw previously tendered 
shares?
     How do I withdraw previously tendered shares?
     If the transaction is negotiated, what does my board of 
directors think of the offer?
     Is this the first step in a going-private transaction?
     Will the tender offer be followed by a merger if all 
the company's shares are not tendered in the offer?
     If I decide not to tender, how will the offer affect my 
shares?
     What is the market value (if traded) or the net asset 
or liquidation value (if not traded) of my shares as of a recent 
date?
     Who can I talk to if I have questions about the tender 
offer?

    As for merger proxy statements, we believe a summary term sheet 
should provide a brief outline of the particular matters proposed, the 
material terms of the proposals, including the parties to the proposed 
transaction, the consideration to be received by security holders, the 
board's recommendation on how to vote or their position regarding the 
transaction, the effect of a vote for and against each matter 
presented, including the effects of not voting, the procedures for 
voting and changing or revoking a vote, and the existence of appraisal 
rights.
    Several commenters provided useful suggestions on other information 
that may assist security holders. We agree with these commenters that a 
plain English summary term sheet should address, to the extent 
applicable, the vote required to approve each matter presented, the 
number of votes, if any, already committed to vote in a particular way, 
any material interests of insiders or affiliates, as well as the 
accounting and federal income tax treatment of the transaction. In the 
context of a going-private transaction, we believe that the receipt of 
opinions, appraisals, or other similar reports \158\ regarding the 
fairness of a transaction would be of material interest to security 
holders. In addition, the identity of the filing persons, including the 
affiliates engaged in the transaction, a description of their 
affiliation or relationship with the issuer, and their role in the 
transaction may be important disclosure. Of course, we do not attempt 
to provide an exhaustive list in this release of all the matters or 
issues that may be material to security holders warranting inclusion in 
a plain English summary term sheet. We leave that determination for 
filers based on the particular facts and circumstances of their 
transaction.
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    \158\ See current and revised Item 9 to Schedule 13E-3.
---------------------------------------------------------------------------

b. Item 14 of Schedule 14A Revised to Clarify Requirements and 
Harmonize Cash Merger and Cash Tender Offer Disclosure

    Item 14 of Schedule 14A specifies the information required in proxy 
and information statements relating to extraordinary transactions.\159\ 
We are revising Item 14 substantially as proposed, except that the 
revised item refers filers to the applicable disclosure requirements in 
Forms S-4 and F-4, instead of Forms C and SB-3, which are not being 
adopted at this time. This approach should make the item easier to 
understand, and harmonize the proxy and registration statement 
disclosure requirements. Since the disclosure and incorporation by 
reference requirements in Forms S-4 and F-4 are essentially the same as 
in current Item 14, this streamlined approach will not greatly modify 
the disclosure required in a merger proxy statement. We are retaining 
in Item 14 the existing

[[Page 61424]]

disclosure requirements applicable to investment companies.\160\
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    \159\  17 CFR 240.14a-101. Item 14 disclosure is required when a 
vote or consent is solicited on: (i) A merger; (ii) a consolidation; 
(iii) the acquisition of assets, a business or securities; (v) the 
sale or transfer of all or substantially all the assets of the 
registrant; (vi) a liquidation; or (vii) a dissolution. This item 
requires information about the transaction and each party to the 
transaction (i.e., the acquiror and the target). The information 
specified in Item 14 may be incorporated by reference or physically 
included in the disclosure document depending on the extent to which 
the acquiror or target is eligible to use Form S-2 or S-3.
    \160\ New Item 14(d) of Schedule 14A. We believe that this will 
be simpler for investment companies than referring to Forms S-4 and 
F-4, which generally are inapplicable to investment companies. We 
also have consolidated and conformed current Instructions 6 and 8 to 
Item 14 for investment companies. Instruction to paragraph (d) of 
Item 14 of Schedule 14A. The requirements that we are retaining for 
investment companies were not specifically tailored for investment 
companies, and we believe that it would be appropriate to reconsider 
these requirements in a future rulemaking project focused on the 
registration and disclosure requirements applicable to investment 
company business combination transactions.
---------------------------------------------------------------------------

    In addition, we are adopting several substantive changes regarding 
the information required for acquirors and targets under Item 14. All 
commenters that addressed the proposed changes to Item 14 believed they 
were appropriate. We continue to believe that in certain circumstances 
the disclosure requirements in Item 14 may be unnecessarily burdensome 
and inconsistent with the level of information that would be required 
if the same transaction was structured as an all-cash, all-share tender 
offer. Therefore, we are adopting the following proposed revisions:

     Item 14 is revised to clarify that financial statement 
and other information about the acquiror is required in a cash 
merger only if that information is material to voting security 
holders' evaluation of the transaction.\161\ Similar to the need for 
a bidder's financial statements in a cash tender offer, information 
about the acquiror in a merger is generally not needed when target 
security holders are receiving cash and the acquiror has 
demonstrated its financial ability to satisfy the terms of the 
offer.\162\
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    \161\ Revised Instruction 2(a) to Item 14 of Schedule 14A. Pro 
forma information about the transaction is not generally required in 
a cash merger where only the target's security holders are voting on 
the transaction.
    \162\ Even if the acquiror's security holders are voting, 
acquiror information may be omitted because the acquiror's security 
holders are presumed to have access to information about their own 
company. In this case, pro forma information about the transaction 
will still be required in accordance with Article 11 of Regulation 
S-X (17 CFR 210.11-01 through 17 CFR 210.11-03).
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     In cases where financial statement information for the 
acquiror would be material to a security holder's voting decision, 
acquiror information is required for only two years and not three, 
consistent with the treatment of tender offers.\163\
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    \163\ Revised Item 14(c)(1) to Schedule 14A. If financial 
statements of the target are required, then three years of financial 
statements must be provided, consistent with the other requirements 
for financial statements of acquired companies.
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     The requirement to provide information about the target 
in a cash merger is eliminated when the acquiror's security holders 
are not voting on the transaction.\164\ Most likely, target security 
holders will have information about the securities they already 
hold. As a result, security holders can receive a shorter disclosure 
document that is focused on the terms and effects of the 
transaction. This revision harmonizes the disclosure required in 
cash merger transactions with that required in all-cash, all-share 
tender offers.\165\

    \164\ Revised Instruction 2(b) to Item 14 of Schedule 14A.
    \165\ No target information is required if target security 
holders are voting on a merger in which the consideration offered 
consists of acquiror securities that are exempt from Securities Act 
registration. Revised Instruction 3 to Item 14 of Schedule 14A.
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    The changes adopted today do not change the current requirement to 
provide financial statements of the target and other company 
information when the acquiror's security holders are voting on the 
transaction, since those security holders may not know anything about 
the target. In addition, target information is required in merger 
proxies that are going-private or roll-up transactions. We believe that 
target security holders have a need for current financial statements of 
their company if it is subject to one of these types of transactions.
    We are not adopting two proposed changes. Under the proposal, Item 
14 would no longer permit information to be incorporated by reference 
from the ``glossy'' annual report sent to security holders. Further, we 
proposed to eliminate the instructions in Schedule 14A and Form S-4 
that require filers to send the mandated disclosure document to 
security holders at least 20 business days before the meeting date or 
the expiration date of an exchange offer if information is incorporated 
by reference.\166\ At this time we believe there still may be a number 
of security holders that do not have the ability to access information 
electronically, so we are not eliminating the 20 business day 
incorporation by reference provision.\167\ We are retaining 
incorporation by reference from the glossy annual report because this 
information is delivered to security holders.\168\
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    \166\ See Note D.3 to Schedule 14A; General Instruction A.2 to 
Form S-4; and General Instruction A.2 to Form F-4.
    \167\ We have stated that the 20 business day period must be 
complied with even if the documents incorporated by reference are 
delivered along with the disclosure document. See Release No. 33-
6578 (April 23, 1985) (50 FR 18990) (Form S-4 adopting release). We 
are changing this interpretation. If filers furnish the information 
that is incorporated by reference with the disclosure document that 
is sent to security holders, they do not have to comply with the 20 
business day requirement.
    \168\ Revised Item 14(e) to Schedule 14A (17 CFR 240.14a-101).
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c. Reduced Financial Statement Requirements for Non-Reporting Target 
Companies in Stock Mergers and Stock Tender Offers

    The previous section addressed information requirements in cash 
mergers. We also have examined financial statement requirements in the 
context of stock mergers and stock tender offers. As we noted in the 
Proposing Release, financial statements of the target generally are 
required when registered securities are being offered. The rules 
currently provide special treatment when the target is not subject to 
the Commission's reporting requirements, but we believe these 
requirements can be further relaxed. Currently, the rules require the 
filing person (the acquiror) to provide financial statements of the 
non-reporting target going back three years.\169\ We noted that 
providing three years of financial statements prepared in accordance 
with Regulation S-X \170\ for a non-reporting company can be costly and 
burdensome to prepare. In some cases they may not be available. 
Therefore, we proposed to reduce the financial statements required for 
non-reporting targets when the acquiror's security holders are not 
being asked to vote on the transaction.
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    \169\ See Item 17(b)(7) of Form S-4, Item 17(b)(5) of Form F-4 
and Item 14(b)(3)(ii)(A) of Schedule 14A. These items specify the 
information required for non-reporting target companies in a 
business combination transaction. An acquiror must provide financial 
statements ``that would have been required to be included in an 
annual report to security holders'' had the non-reporting company 
been required to furnish an annual report that complies with Rule 
14a-3(b) (17 CFR 240.14a-3(b)). This rule requires audited balance 
sheets for each of the two most recent fiscal years and audited 
statements of income and cash flows for each of the three most 
recent fiscal years prepared in accordance with Regulation S-X.
    \170\ The required balance sheet for the year preceding the 
latest full fiscal year and the income statements for the two years 
preceding the latest full fiscal year need not be audited if they 
have not previously been audited. The required financial statements 
must be audited to the extent practicable.
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    Most commenters believed that the proposed reduction was 
appropriate and would facilitate acquisitions of non-reporting targets. 
We continue to believe that the requirement to provide target financial 
statements can be curtailed, particularly because in many cases target 
security holders likely made their initial investment decision in the 
non-reporting company based on less extensive information than what is 
currently required. In addition, security holders are being offered 
securities in a public company for which there should be significantly 
more information available and a more liquid market to

[[Page 61425]]

sell into. Therefore, we are reducing the financial statement 
requirement substantially as proposed.\171\ In addition, where the non-
reporting target is not significant to the acquiror and the acquiror's 
security holders are not voting on the transaction, we believe the 
financial statement requirements can be reduced even further.
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    \171\ Since we are not adopting Forms C and SB-3, these changes 
are implemented in amendments to Forms S-4 and F-4.
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    Accordingly, we are eliminating the requirement to provide 
financial statements for the non-reporting target altogether when the 
acquiror's security holders are not voting on the transaction and the 
non-reporting target is not significant to the acquiror above the 20% 
level.\172\ The security holders that purchased securities in the non-
reporting company generally would be aware that they invested in a 
company that is not subject to our reporting requirements and they 
would not expect to receive the same level of financial information 
that is required for a public reporting company. Moreover, if the non-
reporting company is not significant to the acquiror, we believe 
security holders would likely rely on the financial statements of the 
acquiror in making their voting or investment decision. Because a 
combination of an insignificant non-reporting target company and a 
public acquiror should not materially alter the financial condition of 
the acquiror, we believe that non-reporting target security holders are 
likely to rely on the required acquiror financial information 
alone.\173\ In addition, the 20% threshold is the standard adopted in 
1996 for the requirement of audited financial statements in filings 
made under the Securities Act and the Exchange Act for business 
acquisitions.\174\
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    \172\ Determination of the significance of an acquisition to the 
acquiror is made in accordance with Rule 3-05 of Regulation S-X (17 
CFR 210.3-05). See Release No. 33-7355 (October 10, 1996) (61 FR 
54509) and Rule 1-02(w) of Regulation S-X (17 CFR 210.1-02(w)).
    \173\ This change is consonant with our revisions to Item 14 to 
eliminate the requirement to provide target financial statements in 
cash mergers when the acquiror's security holders are not voting on 
the transaction and the information is not material to the target 
security holders' voting decision.
    \174\ In Release No. 33-7355, we streamlined the requirements 
with respect to financial statements for business acquisitions. 
Among other things, the amended rules raised the thresholds of 
significance that determine whether financial statements of an 
acquired business must be provided in filings. These rule changes 
were intended to reduce impediments to registered offerings that may 
have caused companies to undertake private or offshore offerings 
instead. We believe the significance threshold for non-reporting 
targets should be the same in Forms S-4 and F-4 as under our other 
financial statement requirements. We may, however, consider 
revisiting this issue in a broader context in a future rulemaking 
proposal that addresses what the significance thresholds should be 
in light of the current accounting environment.
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    Accordingly, we are revising the financial statement requirements 
for non-reporting targets when the acquiror's security holders are not 
voting on the transaction,\175\ as follows:

    \175\ These changes do not affect the financial statements 
required in roll-up transactions.
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     If a non-reporting company is being acquired in a 
business combination transaction, then financial statements for the 
latest fiscal year prepared in conformity with generally accepted 
accounting principles (``GAAP'') must be provided.\176\
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    \176\ Revised Items 17(b)(7) of Form S-4 and 17(b)(5) of Form F-
4.
---------------------------------------------------------------------------

     Also, if the non-reporting target security holders were 
previously provided with GAAP financial statements for either or 
both of the two fiscal years before the latest fiscal year, then 
GAAP financial statements must be provided for those years as well.
     If the non-reporting target is not significant to the 
acquiror in excess of the 20% level, then no financial information 
is required for the target.\177\

    \177\ Under these facts pro forma and comparative per share 
information is not required. See Rule 11-01(c) of Regulation S-X (17 
CFR 210.11-01(c)).
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    These revisions apply equally to foreign and domestic non-reporting 
target companies. If the target's financial statements are prepared on 
the basis of a comprehensive body of accounting principles other than 
U.S. GAAP (foreign GAAP), a reconciliation to U.S. GAAP is required 
unless a reconciliation is unavailable or not otherwise obtainable 
without unreasonable cost or expense.\178\
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    \178\At a minimum, however, a narrative description of the 
material variations in accounting principles, practices and methods 
used in preparing the foreign GAAP financial statements from those 
accepted in the U.S. is required.
---------------------------------------------------------------------------

    The current requirement to provide ``audited'' financial statements 
for the non-reporting target remains the same. Financial statements for 
the latest fiscal year must be audited only to the extent practicable. 
Audited financial statements are not required for years before the most 
recent fiscal year if the target's financial statements were not 
previously audited.
    We are not changing the current requirement that a resale 
registration statement include audited financial statements in 
accordance with Rule 3-05 of Regulation S-X.\179\ Also, to the extent 
that a transaction is significant to the acquiror, audited financial 
statements would ultimately need to be provided under Item 7 of Form 8-
K. Of course, if the acquiror's security holders are voting on the 
transaction, then the current financial statement requirements apply.
---------------------------------------------------------------------------

    \179\ A resale registration statement is used to register the 
resale of securities to the public by anyone who is deemed an 
underwriter within the meaning of Rule 145(c) with respect to the 
securities being re-offered.
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G. Tender Offer Rules Updated

    In addition to the changes discussed above, some of which affect 
tender offers, we proposed to update the tender offer rules, which have 
not been revised since 1986. For the most part, commenters favored our 
approach to updating the regulations. As a result, these changes are 
being adopted, substantially as proposed.\180\ The significant changes 
are discussed below.
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    \180\ As proposed, we are adopting a technical change to Rule 
432, which requires the prospectus disseminated to security holders 
in connection with an exchange offer to include certain information 
specified by the tender offer rules. The revised rule also clarifies 
that the requirement includes issuer tender offers. See current Rule 
13e-4(d)(iv). The requirement is moved to revised Rule 432.
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    We also solicited comment on whether the Private Securities 
Litigation Reform Act of 1995 (``PSLRA'') safe harbor for forward-
looking statements should be extended to tender offers. We are not 
extending the PSLRA safe harbor to tender offers at this time. Given 
the relative infancy of the body of law interpreting the PSLRA 
generally and the safe harbor in particular, we do not believe that 
extending the reach of the safe harbor would be prudent. We note, for 
example, that we recently filed an amicus curiae brief out of concern 
about certain language in an appellate court decision regarding the 
application of the safe harbor.\181\
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    \181\ See Memorandum of the Securities and Exchange Commission, 
Amicus Curiae, at 2, Harris v. Ivax Corp., No. 98-4818 (11th Cir. 
Aug. 1999) (partially supporting a petition for rehearing and 
rehearing en banc in Harris v. Ivax Corp., 182 F.3d 799 (11th Cir. 
1999)).
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1. Bidders May Include a ``Subsequent Offering Period'' Without 
Withdrawal Rights
    We are adopting the subsequent offering period rule with several 
modifications described below. Under the new rules third-party bidders 
may provide, at their election, a subsequent offering period during 
which security holders can tender securities into the offer without 
withdrawal rights. The purpose of the subsequent offering period is 
two-fold. First, the period will assist bidders in reaching the 
statutory state law minimum necessary to engage in a short-form, back-
end merger with the target. Second, the period will provide security 
holders who remain after the offer one last opportunity to tender into 
an offer that is otherwise complete in order to avoid the delay and 
illiquid market that can result after a tender offer and before a back-
end merger.

[[Page 61426]]

    The subsequent offering period may be disclosed in the bidder's 
initial offering materials, or in a subsequent amendment to the tender 
offer materials that is disseminated to security holders. In either 
case, the bidder's determination to include a subsequent offering 
period must be disclosed sufficiently in advance of the expiration of 
the initial offering period.
    Commenters generally were favorable to the proposal, but many 
commenters criticized the advance notice requirement. They expressed 
the view that advance notice would create a ``hold-out'' problem with 
security holders waiting until the subsequent offering period to tender 
shares. In response to these comments, we are not adopting a specific 
requirement in the rule that the determination to add a subsequent 
offering period must be disclosed before the end of the initial 
offering period. Nevertheless, we continue to believe at this time that 
the addition of a subsequent offering period once an offer has 
commenced would constitute a material change to the terms of that 
offer. Thus, bidders must disseminate the new information to security 
holders in a manner reasonably calculated to inform them of the change 
sufficiently in advance of the expiration of the initial offering 
period (generally five business days).\182\ After the Division of 
Corporation Finance gains practical experience with the operation of 
the subsequent offering period, the Division may decide, through staff 
interpretation, to shorten or possibly eliminate the requirement for 
advance notice.\183\
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    \182\ See Release No. 34-24296 (April 3, 1987) (52 FR 11458).
    \183\ If a bidder announces a subsequent offering period and 
later decides not to provide the period, clearly this would be a 
material change in the offer's terms that must be disclosed in 
advance as provided in Release No. 34-24296. Commenters did not 
disagree with this view.
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    In short, we are adopting new Rule 14d-11, which permits bidders to 
include a subsequent offering period in a third-party tender offer 
during which no withdrawal rights are available,\184\ so long as:

    \184\ We also are amending Rule 14d-7 to provide an exemption so 
the withdrawal rights required by section 14(d)(5) of the Exchange 
Act (15 U.S.C. 78n(d)(5)), which apply 60 days after the start of a 
tender offer, are not available during a subsequent offering period.
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     The offer is for all outstanding securities of the 
class sought;
     The initial offering period (with withdrawal rights) 
remains open for at least 20 business days;
     All conditions to the offer are deemed satisfied or 
waived by the bidder on or before the close of the initial offering 
period; \185\
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    \185\ The subsequent offering period may not be used if payment 
will be delayed for any reason. In the past we have stated that 
payment may be delayed for certain governmental regulatory 
approvals. See Release No. 34-16623 (March 5, 1980) (45 FR 15521). A 
subsequent offering period, however, cannot be used unless all 
conditions to payment have been satisfied or waived and the bidder 
pays for all securities tendered in the initial offering period 
promptly after the close of the initial offering period. Likewise, 
there cannot be any conditions to the offer during the subsequent 
offering period.
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     The bidder accepts and promptly pays for all securities 
tendered during the initial offering period on the closing of the 
initial offering period;
     The bidder announces the approximate number and 
percentage of outstanding securities that were deposited by the 
close of the initial offering period no later than 9:00 a.m. Eastern 
time on the next business day after the scheduled expiration date of 
the initial offering period; and
     The bidder immediately accepts and promptly pays for 
all shares as they are tendered in the subsequent offering 
period.\186\
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    \186\ New Rule 14d-11(e) and revised Rule 14e-1(c).
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    The rule, as proposed and adopted, permits bidders to use a 
subsequent offering period in both cash and stock tender offers.\187\ 
Similarly, the rule permits bidders to offer either cash or stock in 
any planned back-end merger. There is no specific requirement that a 
minimum number of shares be tendered in the initial offering period. Of 
course, the same consideration must be paid in both the initial and 
subsequent offering periods.\188\
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    \187\ If a bidder offers cash and securities with a limit on the 
amount of cash or securities that may be paid to security holders, 
then a subsequent offering period may not be used. The imposition of 
a cap on one or the other form of consideration could result in 
proration which, as discussed in the Proposing Release, is why we 
limited the subsequent offering period to offers for all outstanding 
securities.
    \188\ The initial and subsequent offering periods are all part 
of one tender offer. If a different price were paid to security 
holders it would violate the all-holders best-price rules as well as 
the subsequent offering period rule. See new Rule 14d-11(f), current 
Rule 14d-10(a)(2) and Release No. 34-23421 (July 11, 1986) (51 FR 
25873).
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    The new rule includes a requirement that bidders announce the 
results of the initial offering period (including the number and 
percentage of securities tendered) before 9 a.m. on the next business 
day following the close of the initial offering period.\189\ We believe 
an announcement is necessary to inform remaining security holders 
whether the offer was successful and whether or not a back-end merger 
is imminent. Because of this requirement to announce the results before 
9 a.m. on the next business day, the subsequent offering period must 
begin on that day. This will avoid any delay in the offer between the 
initial offering period and the subsequent offering period. We believe 
that this will prevent any confusion in the market as to whether the 
offering period is still open.
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    \189\ In response to a question in the Proposing Release, two 
commenters favored such a requirement.
---------------------------------------------------------------------------

    We proposed conditioning the subsequent offering period on the 
bidder stating its intention to engage in a back-end merger with the 
target. Commenters addressing this issue did not believe that this 
requirement was necessary. We are not adopting this requirement because 
we believe security holders may benefit from a subsequent offering 
period whether or not the bidder intends a back-end merger transaction.
    As proposed, Rule 14d-1(e)(8) would have defined the subsequent 
offering period as a ten business day period following the initial 
offering period. Several commenters, however, recommended that bidders 
be permitted to determine the duration of the subsequent offering 
period. In response to these comments, we have decided to adopt a more 
flexible approach to the subsequent offering period. New Rule 14d-11 
will allow the subsequent offering period to be a minimum of three 
business days and a maximum of 20 business days. Bidders could opt for 
a relatively short subsequent offering period and later extend the 
period if necessary. Any extension of the subsequent offering period 
must be made in accordance with Rule 14e-1(d).\190\
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    \190\ 17 CFR 240.14e-1(d). For example, if a bidder elects to 
provide a three business day subsequent offering period, and later 
determines that a longer period is necessary, the bidder could 
extend the subsequent offering period by up to 17 business days. The 
bidder would, of course, need to announce the extension no later 
than 9:00 a.m. on the fourth business day after the initial offering 
period closed, and the total duration of the subsequent offering 
period could not exceed twenty business days.
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2. Bidder Financial Information Clarified for Cash Tender Offers

a. When a Bidder's Financial Statements Are Not Required; Source of 
Funds

    We are clarifying when financial statement information of the 
bidder must be disclosed in a cash tender offer.\191\ Currently, this 
information is

[[Page 61427]]

required in a cash tender offer when the information is material to a 
security holder's decision whether to tender, sell or hold.\192\ The 
instructions in Schedule 14D-1 provide some guidance on when financial 
statement information is material.\193\ These instructions also specify 
the type of information that will satisfy the financial statement 
disclosure requirement.\194\
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    \191\ If a bidder offers securities instead of or in addition to 
cash, then financial statements are material. The registration 
statement form for the securities offered will specify the financial 
statements required. If the bidder offers securities that are exempt 
from registration, the financial statements specified in Schedule TO 
would be filed.
    \192\ Item 9 of Schedule 14D-1 and Item 7 of Schedule 13E-4.
    \193\ Instruction 1 to Item 9 of Schedule 14D-1.
    \194\ Rules 14d-6(e) (17 CFR 240.14d-6) and 13e-4(d) (17 CFR 
240.13e-4(d)).
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    We noted in the Proposing Release that generally there are several 
factors that should be considered in determining whether financial 
statements of the bidder are material. Those factors are as follows:

     The terms of the tender offer, particularly terms 
concerning the amount of securities sought, such as any-or-all, a fixed 
minimum with the right to accept additional shares tendered, all-or-
none, and a fixed percentage of the outstanding;
     Whether the purpose of the tender offer is for control of 
the subject company; \195\
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    \195\ Financial information can be material when a bidder seeks 
to acquire the entire equity interest of the target and the bidder's 
ability to finance the transaction is uncertain. Financial 
information also can be material when a bidder seeks to acquire a 
significant equity stake in order to influence the management and 
affairs of the target. In the latter case, security holders need 
financial information for the prospective controlling security 
holder to decide whether to tender in the offer or remain a 
continuing security holder in a company with a dominant or 
controlling security holder.
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     The plans or proposals of the bidder; and
     The ability of the bidder to pay for the securities 
sought in the tender offer and/or to repay any loans made by the 
bidder or its affiliates in connection with the tender offer or 
otherwise.\196\
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    \196\ Release No. 34-13787 (July 21, 1977) (42 FR 38341).
---------------------------------------------------------------------------

    We also noted that these factors are not exclusive, and not all 
factors are necessary to meet the materiality test. In order to provide 
more guidance to bidders, we are adopting a new instruction to Schedule 
TO specifying when the financial statements of a bidder are not 
material and do not have to be provided. Commenters generally supported 
the proposal, offering some suggestions on how to modify the 
instruction so that it achieves its intended purpose. We are, 
therefore, adopting the instruction with some minor changes. We believe 
that under the circumstances specified in the new instruction, the 
burden of providing the bidder's financial information in tender offer 
materials may outweigh the usefulness of the information to security 
holders.\197\
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    \197\ We are not changing bidders' ability to incorporate by 
reference financial information into their tender offer materials. 
See Instruction 3 to Item 10 of new Schedule TO.
---------------------------------------------------------------------------

    As adopted, Item 10 to new Schedule TO \198\ includes an 
instruction stating that a bidder's financial statement information is 
not material when:
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    \198\ Although proposed Item 10 to Schedule TO did not 
specifically address the need to provide financial information for a 
controlling entity that forms an entity for the purpose of making a 
tender offer, we have revised Item 10 consistent with the 
requirements currently in Item 9 to Schedule 14D-1. If a bidder is 
formed by a controlling person for the purpose of making an offer, 
then financial information for the parent must be provided.
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     Only cash consideration is offered;
     The offer is not subject to any financing condition; and 
either:
     The bidder is a public reporting company that files 
reports electronically on EDGAR; or
     The offer is for all outstanding securities of the 
target.\199\
---------------------------------------------------------------------------

    \199\ Instruction 2 to Item 10 of new Schedule TO.
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    Several commenters addressed the financing condition element to the 
instruction. Most of these commenters indicated that the status of a 
bidder's financing arrangements (e.g., commitment letter, definitive 
financing in place, or sufficient funds on hand) is not determinative 
so long as the offer is not subject to a financing condition. We agree. 
We believe security holders may need financial information for the 
bidder when an offer is subject to a financing condition so they can 
evaluate the terms of the offer, gauge the likelihood of the offer's 
success and make an informed investment decision. Whether an offer is 
conditioned on obtaining satisfactory financing arrangements (e.g., 
receipt of a commitment letter or execution of other definitive 
financing documents) or the actual receipt of funds from a lender,\200\ 
the offer is considered subject to a financing condition and the bidder 
may not omit financial information in reliance on the instruction.
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    \200\ The same analysis applies for non-reporting bidders, such 
as private investors, partnerships or private equity funds. These 
private bidders often finance their tender offers with funds raised 
from limited partners through a process known as a ``capital call.'' 
If the private bidder's offer is conditioned on obtaining funds from 
limited partners, security holders or other members of the entity, 
the offer is deemed subject to a financing condition.
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    We also asked whether foreign companies whose financial statement 
information may not be readily available should be treated any 
differently. Foreign companies are permitted to file reports in paper 
and are not required to file electronically.\201\ As a result, security 
holders may have more difficulty obtaining information for foreign 
bidders. Two commenters indicated that foreign bidders that file 
reports (e.g., Form 20-F) \202\ in paper should not be able to satisfy 
the third prong of the instruction. We agree that the instruction 
should take into account the availability of financial statement 
information for foreign bidders. If information is available on EDGAR 
(via the Internet and other sources), we believe there is less need to 
require disclosure of the bidder's financial statements in its tender 
offer materials. Therefore, we have revised this condition to state 
that the bidder must be a reporting company that files reports 
electronically on EDGAR.\203\ Of course, foreign bidders that choose to 
file reports electronically on EDGAR can rely fully on this new 
instruction. Alternatively, a bidder that is non-reporting or files 
reports in paper may rely on the instruction if the offer is for all 
outstanding securities of the target.\204\
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    \201\ Rule 100(a) of Regulation S-T (17 CFR 232.100).
    \202\ 17 CFR 249.220f.
    \203\ This prong of the instruction will not be deemed satisfied 
if the bidder's financial statement information is not available on 
the EDGAR system (e.g., because the bidder is delinquent in its 
reporting obligations or the bidder has filed this information in 
paper under a hardship exemption).
    \204\ To the extent financial statements of a foreign bidder are 
required and are prepared under foreign GAAP, a reconciliation to 
U.S. GAAP is required unless a reconciliation is unavailable or not 
otherwise obtainable without unreasonable cost or expense. As noted 
above in Part II.F.2.c, bidders must provide, at a minimum, a 
narrative description of the material variations in accounting 
principles, practices and methods used in preparing the foreign GAAP 
financial statements from those accepted in the U.S. See n.178 
above.
---------------------------------------------------------------------------

    We also proposed to codify the current practice of providing net 
worth information when the bidder is a natural person. The one 
commenter that addressed this proposal supported it, but believed the 
requirement to provide ``appropriate disclosure'' when a bidder's net 
worth is derived from material amounts of assets that are not readily 
marketable or there are material guarantees and contingencies was too 
vague. Therefore, we are adopting this instruction, substantially as 
proposed, but with a clarification that the bidder must disclose the 
nature and approximate amount of the individual's net worth consisting 
of illiquid assets and the magnitude of any guarantees or contingencies 
that may negatively affect the natural person's net worth.\205\ We 
believe this information is useful to security holders in evaluating a 
tender offer made by a natural person.
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    \205\ Instruction 4 to Item 10 of new Schedule TO.
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    Regardless of the level of financial information that security 
holders

[[Page 61428]]

receive, a bidder's ability to pay for the securities is a material 
disclosure item. We believe the disclosure that security holders 
currently receive in this area can be improved by clarifying the 
``Source of Funds'' item requirement for tender offers and going-
private transactions. As proposed, we are revising this item to require 
disclosure of information regarding the specific sources of financing, 
any conditions to the financing, and the filing person's ability to 
finance the transaction through alternative means if the primary source 
of financing should fall through.\206\
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    \206\ Item 1007 of Regulation M-A.
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b. Content of Bidder's Financial Statements in Cash Tender Offers; 
Financial Statements in Going-Private Transactions

    In the Proposing Release we noted the disparity in the financial 
statements required in third-party tender offers, issuer tender offers, 
and going-private transactions. We are reducing the financial statement 
information required in third-party tender offers as proposed. This 
change harmonizes the requirements with those for issuer tender offers 
and going-private transactions.\207\ The commenters that addressed this 
proposal supported it. We believe that the burden of providing three 
years of historical financial statements in a third-party cash tender 
offer outweighs the benefit to security holders.\208\
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    \207\ When securities are offered the registration statement 
requirements prevail. See n.191 above. We also are reducing the 
financial statements required for acquiring companies in merger 
proxy statements from three to two years. See Part II.F.2.b above.
    \208\ Item 10 to Schedule TO and Item 1010(a) and (b) of 
Regulation M-A, as adopted, require financial statements for two 
fiscal years when the information is material.
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    We also proposed to update the disclosure requirements for tender 
offers and going-private transactions. Currently, information regarding 
book value per share and the pro forma effect of the transaction on the 
company's balance sheet and book value per share (as of the most recent 
fiscal year end and the latest interim balance sheet period) may be 
required. We are reducing the required information, as proposed, to 
only the most recent balance sheet date.\209\
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    \209\ Item 1010(a)(4), (b)(1) and (3) of Regulation M-A. As 
proposed, this change also applies to merger proxy statements.
---------------------------------------------------------------------------

    In addition, when financial statement information is required in 
tender offer and going-private transactions, the current rules permit 
filers to include summary financial information,\210\ instead of full 
financial statements, in the disclosure documents sent to security 
holders. We proposed to update the summary information requirements to 
consist of the summarized financial information specified in Rule 1-
02(bb) of Regulation S-X \211\ as well as ratio of earnings to fixed 
charges, book value per share and pro forma data. The two commenters 
that addressed this proposal indicated that the additional information 
(redeemable preferred stock, minority interests, unconsolidated 
subsidiaries and 50 percent or less owned persons) called for by Rule 
1-02(bb) is not relevant or useful to security holders, especially in 
cash tender offers.
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    \210\ See Rule 14d-6(e)(1)(viii) (17 CFR 240.14d-6(e)(1)(viii)); 
Instruction B to Rule 13e-4(d)(1)(iv) (17 CFR 240.13e-4(d)(1)(iv)); 
and Instruction 2 to Rule 13e-3(e)(3) (17 CFR 240.13e-3(e)(3)).
    \211\ 17 CFR 210.1-02(bb).
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    In response to their concern, we have revised the summary 
requirement so that information regarding unconsolidated subsidiaries 
and 50 percent or less owned persons is not required. We continue to 
believe, however, that the information specified in Rule 1-02(bb)(1) 
(redeemable preferred stock and minority interests) may be relevant 
when the bidder's financial information is material \212\ and the 
bidder elects to provide summary instead of full financial statements 
in the disclosure document sent to security holders. Under the current 
rules a fair and adequate summary includes ``shareholders'' equity.'' 
The additional specificity provided by Rule 1-02(bb)(1) is not 
inconsistent with the current requirements. Also, information regarding 
the existence of minority interests may be material to security holders 
if the filing person (bidder) holds substantial assets or derives 
substantial revenues from a consolidated subsidiary that is not wholly-
owned. Accordingly, we do not believe that updating the disclosure 
requirements to reference the information specified in Rule 1-02(bb)(1) 
will result in the disclosure of irrelevant information. As this 
information may be material to security holders, we adopt an updated 
definition of summary financial information that is substantially as 
proposed.\213\ These revisions also extend to third-party tender offers 
the requirement to disclose book value information when that 
information is material.\214\
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    \212\ See Part II.G.2.a above discussing when financial 
statement information is material.
    \213\ Item 1010(c) of Regulation M-A, Instruction 1 to Item 13 
of revised Schedule 13E-3, Instruction 6 to Item 10 of new Schedule 
TO.
    \214\ Item 1010(a)(4), (b)(3) and (c)(5) of Regulation M-A.
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    We also proposed to clarify the reconciliation required when non-
U.S. GAAP financial statement information is summarized in a foreign 
bidder's disclosure document. We believe that summary financial 
information must include a reconciliation to the same extent full 
financial statements must include a reconciliation to U.S. GAAP.\215\ 
This reconciliation requirement is consistent with that required for 
the acquisition of a foreign non-reporting target company with foreign 
GAAP financial statements.\216\
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    \215\ See Part II.G.2.a above.
    \216\ See Part II.F.2.c above.
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c. Pro Forma Financial Information Required in Two-Tier Transactions

    We believe security holders need pro forma financial information 
for a bidder and target on a combined basis when deciding whether or 
not to tender in the first tier of a two-tier transaction.\217\ 
Security holders need pro forma financial information to make an 
informed investment decision because if security holders do not tender 
in an offer they may receive securities of the bidder in exchange for 
the securities they hold in the target at a later date in a back-end 
securities transaction. Bidders frequently disclose information 
regarding expected synergies and other financial information to 
effectively sell their transaction to the market. We believe that pro 
forma information may be necessary to balance the disclosure 
disseminated to security holders and the markets. In addition, 
disclosure of pro forma financial information is generally consistent 
with our free communications scheme.\218\ We are, however, adopting a 
slightly less burdensome pro forma requirement than proposed in 
response to some of the concerns expressed by commenters.\219\
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    \217\ A ``two-tier transaction'' is a business combination 
structured as a cash tender offer followed by a back-end securities 
transaction, typically a merger, where remaining security holders of 
the target receive the bidder's securities as consideration.
    \218\ A requirement to disclose pro forma financial information 
in the first tier of a two-tier transaction extends the Division of 
Corporation's interpretive position that disclosure of certain 
material information known to the bidder regarding a planned back-
end securities transaction would not result in ``gun-jumping'' under 
the Securities Act. See n.23 above.
    \219\ Instruction 5 to Item 10 of new Schedule TO. This 
instruction requires bidders to provide the financial data specified 
in Item 3(f) (comparative historical and pro forma per share data) 
and Item 5 (pro forma financial information required by Article 11 
of Regulation S-X) of Form S-4 in the Schedule filed with the 
Commission. Bidders may provide only the summary financial 
information specified in Item 3(d), (e) and (f) of Form S-4 in the 
disclosure document sent to security holders.

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[[Page 61429]]

    Three commenters generally supported the proposed pro forma 
requirement, expressing different views on the appropriate level of pro 
forma financial information and the circumstances under which the 
information should be required. Two commenters believed that the pro 
forma requirement would be burdensome and provide only a marginal 
benefit to security holders. Several commenters noted that external 
factors may affect a bidder's ability to prepare pro forma financial 
information in compliance with the proposed requirement. Some of these 
factors include: the lack of any agreement with the target regarding 
the type and amount of consideration to be offered to security holders 
in any back-end securities transaction; the hostile or negotiated 
nature of the transaction; and the results of the tender offer.
    We recognize that it may be more difficult for bidders to prepare 
accurate and complete pro forma financial information when the target 
is not cooperating with the bidder. We also realize that bidders may 
decide later not to offer securities in a back-end transaction for a 
number of reasons. Nevertheless, to the extent that a bidder, at the 
time of the cash tender offer, intends to offer securities in a back-
end securities transaction with the target, we believe such information 
would be material to target security holders.\220\ In addition, bidders 
that intend to offer securities in a back-end transaction would most 
likely have prepared some level of pro forma financial information on 
the combined entity for their own negotiating and planning purposes. As 
a result, we do not believe the requirement to provide pro forma 
financial information should be unduly burdensome for the bidder. 
Therefore, we are adopting a requirement that bidders disclose pro 
forma financial information prepared in accordance with Article 11 of 
Regulation S-X, in addition to historical financial statements,\221\ 
when they intend to engage in a back-end securities transaction 
following a cash tender offer.\222\ We limit this requirement, however, 
in two important respects.
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    \220\ A bidder that intends to engage in a back-end securities 
transaction may not avoid the disclosure requirement by not 
disclosing its intentions because non-disclosure could be a material 
omission that renders other statements by the bidder false and 
misleading.
    \221\ The bidder must disclose the historical financial 
statements specified in Item 1010 of Regulation M-A. See Instruction 
5 to Item 10 of new Schedule TO. Historical financial information 
for the bidder is necessary to present the pro forma financial 
information in context.
    \222\ The pro forma financial information requirement applies 
whether the first step is a partial offer or an offer for all 
outstanding securities. In both cases, a bidder could intend to 
engage in a back-end securities transaction with the target.
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    First, the requirement is limited to ``negotiated'' transactions 
(i.e., management of the target is cooperating with the bidder). 
Generally, in negotiated transactions, bidders have access to internal 
financial information of the target necessary to prepare pro forma 
financial information.\223\ In transactions where the bidder does not 
have access to the internal information necessary to prepare reliable 
pro forma financial information in compliance with Article 11 of 
Regulation S-X (i.e., non-negotiated transactions), we are not 
requiring pro forma financial information. However, we encourage 
bidders to provide pro forma or other similar financial information 
that they consider useful and meaningful to security holders, 
regardless of whether the transaction is negotiated or not.
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    \223\ As required by Article 11, the pro forma financial 
information disclosed in the first tier must be accompanied by clear 
and explanatory footnotes that address the nature of all material 
pro forma adjustments.
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    Second, if an acquisition of a target is not significant to the 
bidder, we do not believe that pro forma financial information for the 
transaction would be helpful to security holders. Therefore, we are 
only requiring bidders to disclose pro forma financial information in a 
first-step tender offer when the acquisition is significant above the 
20% level.\224\
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    \224\ Determination of the significance of an acquisition to the 
acquiror is made in accordance with Rule 3-05 of Regulation S-X. See 
Release No. 33-7355 (October 10, 1996).
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3. Target Is Required To Report Purchases of Its Own Securities After a 
Third-Party Tender Offer Is Commenced
    Rule 13e-1 prohibits an issuer whose securities are the subject of 
a third-party tender offer from repurchasing any of its equity 
securities until information about the intended acquisition is filed 
and disseminated to security holders. We proposed to clarify the timing 
of the disclosure called for by the rule so that the required 
information is disclosed only after a third-party tender offer is made, 
when it is most relevant. We also proposed to rewrite the rule in plain 
English. We are now adopting the revised rule as proposed, but without 
a requirement to send information to security holders. We also provide 
an exclusion from the rule for periodic repurchases in connection with 
employee benefit plans and other similar plans that are made in the 
ordinary course and not in response to the third-party offer.
    Several commenters suggested that we rescind Rule 13e-1 based on 
the relatively low number of filings received during the past several 
years. Although few filings are made under the rule,\225\ we continue 
to believe that the requirement serves the useful purpose of informing 
the marketplace in advance that an issuer plans to repurchase its own 
equity securities in response to a third party tender offer. While some 
of the information required by the rule may be provided in Schedule 
14D-9, that schedule could be filed as late as ten business days after 
commencement of a third-party offer. Therefore, we are adopting the 
rule substantially as proposed, but as a filing requirement only. The 
information would not be required to be sent to security holders.\226\ 
This will eliminate the cost to issuers of mailing the information, but 
the information will be publicly available to the marketplace.
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    \225\ There is no schedule or form accompanying the rule. The 
required information is disclosed in a ``Rule 13e-1 Transaction 
Statement'' filed electronically on EDGAR under the submission-type 
SC 13E1.
    \226\ If a target is making an issuer tender offer and complies 
with the filing, disclosure and dissemination requirements of Rule 
13e-4 before repurchasing any securities, the requirements of Rule 
13e-1 would be satisfied without a separate Rule 13e-1 filing.
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4. Tender Offer and Proxy Rules Relating to the Delivery of a Security 
Holder List and Security Position Listing Harmonized
    We are adopting as proposed revisions to Rule 14d-5 to conform the 
tender offer dissemination requirements with the proxy dissemination 
requirements in Rule 14a-7.\227\ The revised rule expands the scope of 
information included in a security holder list under the tender offer 
rules so that it is consistent with the security holder list 
requirements in the proxy rules. Under the revised rule, a target 
company that elects to provide a bidder with a security holder list 
instead of mailing the bidder's materials to security holders must 
disclose the most recent list of names, addresses and security 
positions of non-objecting beneficial owners (as well as record 
holders) it has in its possession, or subsequently obtains. The 
security holder list must be in the format requested by the bidder if 
it can be provided without undue burden or expense. The purpose of the 
amendment to the rule is to give bidders the same

[[Page 61430]]

ability as target companies to communicate directly with non-objecting 
beneficial owners of securities.
---------------------------------------------------------------------------

    \227\ 17 CFR 240.14a-7.
---------------------------------------------------------------------------

    Most commenters supported the proposal, with one commenter 
expressing concern on the mechanics of tracking transmittal letters. We 
do not believe that the revised rule would unduly complicate the tender 
process or the tracking of transmittal forms. Bidders would mail their 
tender offer materials to record holders, consistent with current 
practice, and record holders would then forward the materials to 
beneficial owners. Bidders also would have the option of supplementing 
their distribution by mailing directly to non-objecting beneficial 
owners set forth on the security holder list provided by the target. 
Transmittal forms would include instructions, as they do today, stating 
where to send transmittal forms (e.g., forms should be returned to the 
record holder with directions to tender shares in the offer).
5. New Rule 14e-5: Revision and Redesignation of Former Rule 10b-13, 
the Rule Prohibiting Purchases Outside an Offer
    Rule 10b-13 prohibits a person who is making a cash tender offer or 
exchange offer from purchasing or arranging to purchase, directly or 
indirectly, the security that is the subject of the offer (or any 
security that is immediately convertible into or exchangeable for the 
subject security), otherwise than as part of the offer. We proposed to 
clarify the rule's text, codify several interpretations and exemptions, 
and redesignate it as new Rule 14e-5. We are adopting the amendments 
substantially as proposed. In response to commenters' suggestions, we 
are adopting four additional exceptions. We also are implementing the 
changes proposed in the cross-border tender offers proposing release 
since those proposals are being adopted today.\228\ With these two 
further exceptions regarding cross-border offers adopted today,\229\ 
Rule 14e-5 has ten exceptions.
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    \228\ See Release No. 34-40678 (December 15, 1998 (63 FR 69136)) 
(the ``Cross-Border Proposing Release'') and the Cross-Border 
Adopting Release.
    \229\ These additional exceptions, one for purchases during 
cross-border tender offers and one for purchases by ``connected 
exempt market makers'' and ``connected exempt principal traders,'' 
are discussed in the Cross-Border Proposing and Adopting Releases.
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a. Redesignating Rule 10b-13 as Rule 14e-5

    Former Rule 10b-13 is redesignated as Rule 14e-5. We originally 
promulgated Rule 10b-13 under Sections 10, 13 and 14 of the Exchange 
Act \230\ to safeguard the interests of persons who sell their 
securities in response to a tender offer.\231\ As stated in the 
Proposing Release, because the rule addresses conduct during tender 
offers, we believe it belongs with the other rules under Regulation 14E 
under the Exchange Act that address activities in the context of tender 
offers.\232\ No commenters disagreed with this change, and we are 
adopting it as proposed.\233\
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    \230\ 15 U.S.C. 78j; 15 U.S.C. 78m; 15 U.S.C. 78n.
    \231\ Release No. 34-8712 (October 8, 1969) (34 FR 15836) (the 
``Rule 10b-13 Adopting Release'').
    \232\ Section 14(e) of the Exchange Act confers on the 
Commission the authority to define and prescribe means to prevent 
fraudulent, deceptive, or manipulative acts or practices in 
connection with any tender offer. See United States v. O'Hagan, 117 
S. Ct. 2199, 2217 (1997) (holding that ``under section 14(e), the 
Commission may prohibit acts, not themselves fraudulent under the 
common law or section 10(b), if the prohibition is `reasonably 
designed to prevent . . . acts and practices (that) are fraudulent'' 
' (citing 15 U.S.C. 78n(e)).
    \233\ As proposed, we are amending Rule 30-3 delegating 
exemptive authority to the Director of the Division of Market 
Regulation, and replacing references to Rule 10b-13 with Rule 14e-5. 
We also are adding a parallel provision to Rule 30-1 (17 CFR 200.30-
1) to delegate exemptive authority to the Director of the Division 
of Corporation Finance, and by operation of Rule 30-5(b) (17 CFR 
200.30-05(b)), to the Director of the Division of Investment 
Management. The amended text of Rule 30-1 appears in the Cross-
Border Adopting Release.
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b. Clarification of Rule 14e-5; Prohibited Period

    The amendments to Rule 14e-5 being adopted today do not alter the 
rule's basic terms. Instead, they modify the rule's text to more 
clearly set forth the covered activities. Rule 14e-5 will continue to 
protect investors by preventing an offeror from extending greater or 
different consideration to some security holders outside the offer, 
while other security holders are limited to the offer's terms.\234\ 
Rule 10b-13 prohibited a person who is making a cash tender offer or 
exchange offer from purchasing or arranging to purchase, directly or 
indirectly, the security that is the subject of the offer (or any 
security that is immediately convertible into or exchangeable for the 
subject security), otherwise than as part of the offer. Similarly, Rule 
14e-5 prohibits a covered person from purchasing or arranging to 
purchase any subject securities or any related securities except as 
part of the tender offer. Rule 14e-5 does not explicitly include the 
term ``exchange offer'' as former Rule 10b-13 did because in Regulation 
14E the term ``tender offer'' includes offers to exchange securities 
for cash and/or securities.\235\
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    \234\ See Rule 10b-13 Adopting Release.
    \235\ See n.12 above.
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    We are changing the language describing the time period of the 
rule's restrictions. As adopted, the restrictions of Rule 14e-5 start 
upon ``public announcement,'' which is defined in the rule as any oral 
or written communication by the offeror, or any person authorized to 
act on the offeror's behalf, that is reasonably designed to, or has the 
effect of, informing the public or security holders in general about 
the tender offer.\236\ Although the language regarding the commencement 
of the rule's restrictions is different from the language in Rule 10b-
13,\237\ the scope is the same; the restrictions apply from the time 
holders of the subject securities, or the public more generally, are 
notified of the tender offer.\238\
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    \236\ See new Rule 165(f)(3) and revised Rules 13e-4(c) and 14d-
2(b).
    \237\ Rule 10b-13 applies from the time the offer is publicly 
announced or otherwise made known to security holders until the 
offer expires. The phrase ``otherwise made known'' means any form of 
communication, other than public announcement, that notifies holders 
of subject securities of an offer.
    \238\ We asked whether the rule should apply if the offeror 
advises some but not all security holders that it intends to conduct 
a tender offer for the subject securities. Two of the three 
commenters that addressed this point believed that a communication 
to some security holders should not commence the restricted period. 
These two commenters opposed any such change because it would make 
negotiations impossible without triggering the rule. We agree with 
these commenters in that it is not appropriate for private 
negotiations that do not notify security holders more generally to 
trigger the rule.
---------------------------------------------------------------------------

    We are adopting the proposed simplification of the language 
regarding the end of the rule's restrictions. Under Rule 14e-5, the 
restrictions end when the offer expires.\239\ Under Rule 14d-11, a 
tender offer may be extended up to 20 days under specific circumstances 
without offering withdrawal rights,\240\ thus giving security holders 
an additional opportunity to tender into the offer.
---------------------------------------------------------------------------

    \239\ Expiration includes termination by the offeror as well as 
reaching the time the offeror is required, by the offer's terms, 
either to accept or reject the tendered securities.
    \240\ See Part II.G.1 above.
---------------------------------------------------------------------------

    As adopted, Rule 14e-5 does not apply to purchases or arrangements 
to purchase outside of a tender offer during a subsequent offering 
period if the consideration is the same in form and amount. In the 
Proposing Release, we said we believed offeror purchases outside the 
offer during this subsequent offering period present the same concerns 
as during the initial offering period; therefore, we proposed that Rule 
14e-5 restrictions would cover any subsequent offering period provided 
under proposed Rule 14d-11. Two commenters agreed with the proposal, 
and two others thought the rule should

[[Page 61431]]

not extend to a subsequent offering period so long as the purchase 
price does not exceed the offer price. We now believe that the 
requirements of Rules 14d-11 and 14e-5 are sufficient to avoid any of 
the problems that Rule 14e-5 is designed to prevent. More specifically, 
under the terms of Rule 14e-5, any purchases made outside the offer 
during the subsequent offering period must be made using the same form 
and amount of consideration offered in the tender offer. Also, under 
the terms of Rule 14d-11, the offeror must immediately accept and 
promptly pay for all securities as they are tendered in the subsequent 
offering period, which eliminates any difference in the time value of 
money between those who tender and those who sell to the offeror 
outside the offer. Under these conditions, we believe those people who 
tender during a subsequent offering period will not be disadvantaged in 
relation to those whose securities are purchased outside of, but 
during, a subsequent offering period.

c. Persons and Securities Subject to the Rule

Scope of Persons Subject to the Rule

    Rule 10b-13 applied to the person who made the offer, which had 
been interpreted to cover the offeror, the offeror's affiliates, and 
the offer's dealer-manager.\241\ Under Rule 14e-5, the Rule 10b-13 term 
``person'' is replaced by ``covered person'' to codify this 
interpretation. The definition of ``covered person'' we are adopting 
has several changes from the proposed definition. The proposal defined 
a covered person as: The offeror and its affiliates; the offeror's 
dealer-manager(s) and other advisors; and any person acting, directly 
or indirectly, in concert with them. Two commenters objected to 
including all advisors within the meaning of covered person as too 
broad. We agree, and have narrowed the scope of the advisor category.
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    \241\ See, e.g., Letter regarding Offers for Smith New Court PLC 
(July 26, 1995) (``Smith New Court Letter''). See also In the Matter 
of Trinity Acquisition's Offer to Purchase the Ordinary Shares and 
American Depositary Shares of Willis Corroon Group plc, Release No. 
34-40246 (July 22, 1998) [67 S.E.C. Docket 1320].
---------------------------------------------------------------------------

    Covered person, as adopted, means: The offeror and its affiliates; 
the offeror's dealer-manager and its affiliates; any advisor to the 
offeror, dealer-manager or their affiliates, if such advisor's 
compensation is dependent on the completion of the offer; and any 
person acting, directly or indirectly, in concert with any of the other 
covered persons in connection with any purchase or arrangement to 
purchase any subject securities or any related securities.\242\ These 
changes replace the broader proposed term ``other advisors'' with two 
narrower categories: affiliates of the dealer-manager; and advisors to 
the offeror, dealer-manager or their affiliates, if such advisor's 
compensation is dependent on the completion of the offer. These changes 
mean that advisors such as attorneys and accountants will not be 
affected by the rule where they have no stake in the outcome of the 
offer.
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    \242\ In a negotiated transaction, we would consider the target 
company to be acting in concert with the offeror.
---------------------------------------------------------------------------

    The proposed definition of an affiliate borrowed heavily from the 
definition in Rule 12b-2.\243\ As proposed in Rule 14e-5, the term 
meant any person that ``directly, or indirectly through one or more 
intermediaries, controls, or is controlled by, or is under common 
control with, the offeror.'' The only distinction between the two 
definitions is that the proposed Rule 14e-5 definition was limited to 
affiliates of the offeror whereas, Rule 12b-2 extends to the affiliate 
of other relevant persons.\244\ In order to accommodate other changes 
from proposed Rule 14e-5,\245\ we needed to broaden this definition to 
include affiliates of the dealer-manager as well as the offeror, so we 
are adopting the entire definition of affiliate in Rule 12b-2.
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    \243\ 17 CFR 240.12b-2.
    \244\ Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2) 
defines an ``affiliate'' of, or a person ``affiliated'' with, a 
specified person, as a person that directly, or indirectly through 
one or more intermediaries, controls, or is controlled by, or is 
under common control with, the person specified.
    \245\ See, e.g., Part II.G.5.d. below, where we extend the 
exception for intermediary transactions to include affiliates of the 
dealer-manager.
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Scope of Securities Subject to the Rule

    We are adopting the proposed changes from Rule 10b-13 regarding the 
scope and treatment of related securities in the definitions of subject 
securities and related securities. Rule 14e-5 applies only to offers 
for equity securities, just as Rule 10b-13 did. Moreover, Rule 14e-5, 
as with Rule 10b-13, prohibits purchases outside the offer of not only 
the subject securities,\246\ but also related securities. ``Related 
securities'' are defined as securities that are immediately convertible 
into, exchangeable for, or exercisable for subject securities. Among 
other things, this clarifies that securities that are immediately 
``exercisable for'' subject securities, such as options, are included 
in the types of securities that a covered person cannot generally 
purchase outside the offer.
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    \246\ ``Subject securities'' are defined in Item 1000 of 
Regulation M-A as ``the securities or class of securities that are 
sought to be acquired in the transaction or that are otherwise the 
subject of the transaction.''
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d. Excepted Transactions

Exercise of Related Securities

    Rule 10b-13 specified that if the person making the offer ``is the 
owner of another security which is immediately convertible into or 
exchangeable for the security which is the subject of the offer, his 
subsequent exercise of his right of conversion or exchange with respect 
to such other security shall not be prohibited by this rule.'' We are 
amending this provision as proposed.
    When Rule 10b-13 was adopted, options were not nearly as common as 
they are today, and the text of this exception did not explicitly 
include the exercise of options. We believe the exercise of options 
acquired before announcement of the offer is no more likely to lead to 
undesirable effects than the exchange or conversion of other related 
securities, so we want to make it clear that the exercise of options is 
included in this exception. Thus, Rule 14e-5 will permit, as proposed, 
a covered person to convert, exchange, or exercise related securities, 
if the covered person owned the related securities before public 
announcement.

Purchases by or for Plans

    The exception for purchases for plans is adopted as proposed. Since 
the adoption of Rule 10b-13, there has been an exception for purchases 
by the issuer of the target security (or a related security) under 
certain types of plans, by participating employees of the issuer or the 
employees of its subsidiaries, or by the trustee or other person 
acquiring the security for the account of the employees.\247\ We are 
eliminating the references to outdated Internal Revenue Code provisions 
that were contained in Rule 10b-13 to define permissible plan 
purchases; instead, we are using the more expansive plan scope 
contained in the Commission's Regulation M. The exception now permits 
purchases of subject securities or related securities for any ``plan'' 
if the purchases are made by an ``agent independent of the issuer'' as 
these terms are defined in Regulation M.
---------------------------------------------------------------------------

    \247\ 17 CFR 240.10b-13(c).
---------------------------------------------------------------------------

Purchases during Odd-Lot Offers

    We are adopting the proposed exception to permit purchases during 
an issuer odd-lot tender offer conducted in compliance with the 
provisions of Rule

[[Page 61432]]

13e-4(h)(5) under the Exchange Act.\248\ This exception codifies a 
class exemption from Rule 10b-13 issued by the Commission in connection 
with a 1996 revision to Rule 13e-4(h)(5).\249\ Under Rule 13e-4(h)(5), 
an issuer tender offer is excepted from application of Rule 13e-4 if 
the offer is directed solely to odd-lot security holders and provides 
``all holders'' and ``best price'' protections to tendering security 
holders.
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    \248\ 17 CFR 240.13e-4(h)(5).
    \249\ Release No. 34-38068 (December 20, 1996) (61 FR 68587). 
This class exemption permitted ``any issuer or agent acting on 
behalf of an issuer in connection with an odd-lot offer to purchase 
or arrange to purchase the security that is the subject of the 
offer.'' The release also states that the exemption, among other 
things, ``will allow the issuer or its agent to purchase the 
issuer's securities to satisfy requests of odd-lot holders to 
``round-up'' their holdings to 100 shares.'' 61 FR at 68587-8.
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Purchases as Intermediary

    We proposed to add an exception for unsolicited purchases by a 
dealer-manager that are made on an agency basis. We based this 
exception on a prior exemption \250\ that allowed a dealer-manager to 
continue to conduct its customary brokerage (i.e., agent) activities 
during a tender offer. These activities generally do not raise the 
concerns that proposed Rule 14e-5 is intended to address. In the 
Proposing Release, we asked if the exception should permit ``riskless 
principal'' transactions by dealer-managers as well. Two commenters 
answered this question and both agreed that the exception should be 
broadened to permit unsolicited purchases as a riskless principal by 
dealer-managers. One of the two thought it should extend to other 
financial advisors.
---------------------------------------------------------------------------

    \250\ Letter regarding Reuters Holdings PLC (August 17, 1993).
---------------------------------------------------------------------------

    As adopted, we are broadening this exception in two ways from the 
proposal. First, we are including affiliates of the dealer-manager 
within the exception. Second, in addition to agency transactions, we 
are permitting purchases to offset a contemporaneous sale after having 
received an unsolicited order in the ordinary course of business to buy 
from a customer who is not a covered person, if the dealer-manager or 
affiliate is not a market maker.\251\ We believe these changes 
appropriately accommodate a dealer-manager's and its affiliates' 
activities as intermediary without allowing the offeror to use the 
dealer-manager and its affiliates to facilitate the tender offer.
---------------------------------------------------------------------------

    \251\ Cf. Rule 10b-10(a)(2)(ii)(A) (17 CFR 240.10b-
10(a)(2)(ii)(A)).
---------------------------------------------------------------------------

e. Additional Exceptions Being Adopted

    We are adopting four exceptions that were not proposed 
specifically, although we either sought comment in the Proposing 
Release or received suggestions from commenters on them.

Purchases Pursuant to Contractual Obligations

    In the Proposing Release, we asked whether an offeror should be 
permitted to purchase subject or related securities outside an offer if 
a purchase contract was entered into before public announcement of the 
offer and the per share purchase price is no higher than the offer 
consideration. Four commenters addressed this issue, and all agreed 
such purchases should be permitted. One commenter stated that it could 
not discern any public policy rationale for permitting purchases 
pursuant to conversions, exchanges or exercises but not pre-
announcement contracts. We agree with the commenters.
    As adopted, this exception is available only if: the contract was 
entered into before public announcement; the contract is unconditional 
and binding on both parties; and the existence of the contract and all 
material terms, including quantity, price and parties, are disclosed in 
the offering materials.\252\ We are not requiring that the contract 
price be the same as the offer price because we view these contracts as 
the functional equivalents of options that have no such price 
restriction for their exercise under Rule 14e-5.
---------------------------------------------------------------------------

    \252\ This exception is not available unless the obligation 
under the contract is the purchase by the covered person. For 
example, a purchase necessitated by an obligation to deliver 
pursuant to a contract is not covered.
---------------------------------------------------------------------------

Basket Transactions

    In response to a commenter's suggestion, we are adopting an 
exception for transactions in baskets of securities containing a 
subject security or a related security.\253\ We are requiring that: the 
purchase or arrangement to purchase the basket be made in the ordinary 
course of business and not to facilitate the offer; the basket contains 
20 or more securities; and covered securities and related securities do 
not comprise more than 5% of the value of the basket.\254\
---------------------------------------------------------------------------

    \253\ The staff of the Division of Market Regulation has taken 
no-action positions under Rule 10b-13 under similar facts and 
circumstances. See, e.g., Letter regarding Select Sector SPDRs 
(December 22, 1998).
    \254\ We base this language on a similar provision in Rule 
101(b)(6)(i) of Regulation M [17 CFR 242.101(b)(6)(i)].
---------------------------------------------------------------------------

    We believe that transactions in baskets, following the terms of 
this exception, provide little opportunity for a covered person to 
facilitate an offer or for a security holder to exact a premium from 
the offeror. Facilitation of an offer includes purchases intended to 
bid up the market price of the covered or related security, and 
includes buying a basket to strip out the covered security in an effort 
to get the offeror the number of shares it is seeking.

Covering Transactions

    In response to a commenter's suggestion, we are adopting an 
exception from Rule 14e-5 for purchases of subject and related 
securities that are made to satisfy an obligation to deliver arising 
from a short sale or from the exercise of an option by a non-covered 
person. This exception is available to any covered person, so long as 
the short sale or option transaction was made in the ordinary course of 
business, not to facilitate the tender offer, and before public 
announcement. We adopt this exception because we believe such purchases 
effected for the purpose of making delivery to another party warrant 
the same treatment as purchases made pursuant to contractual 
obligations.

Purchases by an Affiliate of the Dealer-Manager

    In response to a commenter's suggestion, we are adopting an 
exception from Rule 14e-5 for purchases of subject and related 
securities by an affiliate of the dealer-manager.\255\ This exception 
permits purchases or arrangements to purchase by an affiliate of a 
dealer-manager if:

    \255\ Cf. Rule 100(b) of Regulation M (17 CFR 242.100(b)). In 
the Proposing Release, we asked whether we should consider 
provisions like those contained in the U.K. City Code on Takeovers 
and Mergers (``City Code'') that permit market makers affiliated 
with the offeror's advisors to continue their market making 
functions when the market maker is sufficiently independent from the 
advisor and other protections are present. Three commenters agreed 
that some exception should be provided for market making activities, 
and one opposed an exception based on the City Code. This exception 
for purchases by an affiliate of the dealer-manager permits market 
making activities by affiliates of the dealer-manager.
---------------------------------------------------------------------------

     The dealer-manager maintains and enforces written 
policies and procedures reasonably designed to prevent the flow of 
information to or from the affiliate that might result in a 
violation of the federal securities laws and regulations;
     The dealer-manager is registered as a broker or dealer 
under Section 15(a) of the Exchange Act; \256\
---------------------------------------------------------------------------

    \256\ 15 U.S.C. 78o.
---------------------------------------------------------------------------

     The affiliate has no officers (or persons performing 
similar functions) or employees (other than clerical, ministerial, 
or support

[[Page 61433]]

personnel) in common with the dealer-manager that direct, effect, or 
recommend transactions in securities; and
     The purchases or arrangements to purchase are not made 
to facilitate the tender offer.

    This exception, based largely upon the definition of ``affiliated 
purchaser'' in Rule 100 of Regulation M, allows investment affiliates 
to continue their investment advisory activities without interruption, 
on the same basis as they do during distributions subject to Rule 101 
of Regulation M.\257\ We believe effective information barriers between 
the dealer-manager and affiliate prevent improper motives from 
influencing purchases by affiliates while permitting such affiliates to 
continue their normal advisory activities. We are limiting this 
exception to the affiliates of dealer-managers that are registered 
under Section 15(a) of the Exchange Act because the dealer-managers are 
subject to a high level of regulatory and reporting oversight.
---------------------------------------------------------------------------

    \257\ Cf. Rule 100(b) of Regulation M.
---------------------------------------------------------------------------

III. Effective Date and Transition

    The new rules become effective on January 24, 2000. This date has 
been selected to accommodate the need for EDGAR programming before some 
of these changes become effective. The new rules are applicable to 
transactions beginning on or after the effective date, as well as to 
transactions already in progress on that date. The following addresses 
the application of the rules to some specific situations.

A. Communications

    As of the effective date, the new regulatory scheme for 
communications is in effect. Even if a registration statement, proxy 
statement or tender offer statement is filed before the effective date, 
persons may rely on the new exemptions for communications made on or 
after the effective date. Of course, they must comply with the 
conditions of the exemptions, including the filing of written 
communications.

B. Confidential Treatment of Proxy Material

    If preliminary proxy material is filed confidentially as permitted 
by the current rules before the effective date, the filer may choose to 
continue relying on the current rules after the effective date until 
the material is published, sent or given to security holders in 
definitive form. In that event, so long as parties to the transaction 
do not make public communications exceeding what would be permitted by 
the pre-effective date rules, the preliminary proxy material may remain 
confidential. On the other hand, if the parties to the transaction 
choose to avail themselves of the new communications exemptions before 
providing the definitive proxy statement, they must re-file the 
preliminary material publicly.

C. Early Commencement

    If a registration statement for an exchange offer is filed before 
the effective date of the new rules, and is not effective, the filer 
has the option of complying with the early commencement provisions as 
soon as the new rules become effective.

D. Disclosure Requirements and New Schedules

    The disclosure requirements have changed in a number of respects. 
If a registration statement, tender offer statement or proxy/
information statement is filed before the effective date, the 
disclosure requirements in existence at that time continue to be 
applicable until the transaction is completed. Amendments should 
continue to comply with those requirements, not Regulation M-A or the 
revised rules. If a tender offer schedule relating to a two-tier 
transaction is filed before the effective date, pro forma financial 
information will not be required in the cash tender offer materials, 
even if it would be required for an offer filed on or after the 
effective date. However, we encourage offerors to provide this 
information. Amendments to tender offers filed before the effective 
date for the new rules should continue to be filed as amendments to 
Schedules 14D-1 or 13E-4, not Schedule TO. Tender offers commenced on 
or after the effective date must be filed on Schedule TO.

E. Subsequent Offering Period

    If a tender offer statement is filed before the effective date, the 
bidder may choose to provide a subsequent offering period beginning on 
or after the effective date. Of course, it must advise security holders 
of the decision to include a subsequent offering period in accordance 
with the timing discussed above, as this would be viewed as a material 
change. The announcement of a subsequent offering period may be made 
before the effective date.

F. Revised Security Holder List Rule for Tender Offers

    A request for the security holder list on or after the effective 
date is governed by the revised rule, whether or not the tender offer 
statement was filed before the effective date.

G. New Rule 14e-5

    All tender offers that are publicly announced before the effective 
date of the amendment and redesignation of Rule 10b-13 as Rule 14e-5 
are governed by Rule 10b-13, even if the tender offer extends beyond 
the effective date. Rule 14e-5 only applies to tender offers publicly 
announced on or after the effective date of the changes.

IV. Cost-Benefit Analysis

    We expect that the amendments adopted today will facilitate and 
enhance security holder communications, especially before a 
registration statement relating to a business combination transaction, 
proxy statement or tender offer statement is filed. The amendments also 
will update and simplify the rules and regulations applicable to 
business combination transactions, including tender offers, mergers, 
and similar extraordinary transactions. Accordingly, we expect the cost 
of compliance with the applicable rules and regulations will decrease 
as a result of these amendments.
    In addition to permitting more communications with security 
holders, the amendments attempt to place cash and stock tender offers 
on a more equal regulatory footing. We also have integrated the forms 
and disclosure requirements applicable to issuer tender offers, third-
party tender offers and going-private transactions while consolidating 
the disclosure requirements in one central location within the 
regulations. We expect that these changes will simplify compliance with 
the regulations. Further, the amendments will permit bidders to provide 
a subsequent offering period after the successful completion of a 
tender offer when security holders can tender their securities without 
having to wait for a back-end merger. The regulations are revised to 
more closely align the merger and tender offer requirements as well as 
update the tender offer rules to clarify certain requirements and 
reduce compliance burdens consistent with investor protection. We 
expect that these changes will reduce the compliance burden on 
registrants and generally facilitate the consummation of transactions.
    In the Proposing Release we provided our preliminary cost-benefit 
analysis and requested that commenters provide their views on the 
specific costs and benefits associated with our proposals. We also 
requested that commenters provide any data supporting their views. 
While commenters addressed the potential costs and benefits of the

[[Page 61434]]

proposals in general terms, none provided empirical data to support 
their views. We discuss below the expected benefits and costs of the 
revisions and focus on the groups of persons and entities that are 
likely to be affected by the changes adopted today.

A. Communications

    Overall, the amendments should enhance price discovery and market 
efficiency by permitting companies to communicate earlier and more 
freely about proposed business combination transactions and other 
significant corporate events. Currently, provisions of the Securities 
Act and Exchange Act, including the Williams Act, restrict the 
dissemination of information before a registration, proxy or tender 
offer statement is filed. The amendments allow companies to communicate 
more freely with security holders both before and after the filing of a 
registration, proxy, or tender offer statement.\258\ The revisions 
allowing more communications treat bidders and targets alike--both are 
free to communicate with security holders regarding the merits and 
potential risks of a proposed transaction.
---------------------------------------------------------------------------

    \258\ See new Rule 165 and revised Rules 14a-12, 14d-2 and 14d-
9.
---------------------------------------------------------------------------

    We expect that the increased flow of information will assist 
investors in making better-informed tender or voting decisions. We 
recognize that under the regulatory scheme adopted today there is a 
risk some persons may attempt to ``condition the market'' with false, 
misleading or confusing information.\259\ Nevertheless, we believe that 
investors will benefit from an increased flow of information and they 
will eventually receive a registration, tender offer or proxy statement 
before an investment, tender or voting decision must be made with 
respect to a particular transaction. As a result, we expect investors 
will have adequate opportunity to consider the full information in the 
mandated disclosure document together with any information disseminated 
earlier before needing to act on that information.
---------------------------------------------------------------------------

    \259\ As discussed below, we are adopting new Rule 14e-8 to 
specifically prohibit certain conduct that would mislead investors.
---------------------------------------------------------------------------

    In addition, the increased flow of information will be subject to 
liability. Communications that are made at any time will be subject to 
the antifraud provisions of Rule 10b-5 under the Exchange Act, as well 
as to the antifraud provisions of Rule 14a-9 and Section 14(e) if a 
transaction involves the proxy or tender offer rules, respectively. 
Also, if the transaction involves the Securities Act, the 
communications will be subject to Section 12(a)(2) liability as well. 
In addition, all material information must be included in the 
registration statement that is ultimately declared effective; therefore 
the information will be subject to Section 11 liability. In the 
aggregate, the liability imposed on these communications is appropriate 
to discourage the dissemination of false or misleading information into 
the market while at the same time providing investors with more 
information about a proposed transaction on a timely basis. We do not 
expect that these amendments will present a significant burden to 
investors or offerors.\260\ Although communications are subject to 
liability, the amendments essentially permit communications that would 
not otherwise be permitted today and parties have the option of whether 
or not to communicate more with security holders and the markets.
---------------------------------------------------------------------------

    \260\ Under the exemptions adopted, all written communications 
relating to a proposed transaction following first public 
announcement must be publicly filed.
---------------------------------------------------------------------------

    The amendments also should reduce the current regulatory 
uncertainty relating to security holder communications. Companies have 
indicated difficulty in complying with the current restrictions on 
communications while at the same time fulfilling their duties to make 
full and fair disclosure under Rule 10b-5 of the Exchange Act. By 
relaxing the current restrictions on communications, this regulatory 
tension should be minimized. This clarification is expected to benefit 
issuers and security holders alike.
    One potential cost or risk of the amendments is that some security 
holders may make investment decisions based on information received 
before a complete disclosure statement containing the required 
information is filed. While some investors may make premature 
investment decisions, the same risk exists today under the current 
rules. For example, the tender offer rules currently limit 
communications with investors until an offer is formally commenced. The 
required disclosure statement, however, is not required to be filed 
until five business days after the announcement of an offer. In 
addition, the information required in the mandated disclosure document 
may not be received by security holders until several days after the 
material is filed. By allowing companies to publicly announce 
transactions without having to file mandated disclosure documents, 
together with the requirement that all written communications relating 
to a proposed transaction be publicly filed and contain a legend 
advising security holders to read the complete disclosure document when 
it is available,\261\ we believe investors will have more information 
and more time to make an informed investment decision. Further, 
investors will receive a mandated disclosure document before the time 
they must decide whether or not to tender in an offer.
---------------------------------------------------------------------------

    \261\ See new Rule 165(c) and revised Rules 13e-4(c), 14a-12(a), 
14d-2(b), and 14d-9(a).
---------------------------------------------------------------------------

    To protect investors from possible misleading information, we are 
adopting new Rule 14e-8 which specifically prohibits the announcement 
of a tender offer if the bidder does not intend to commence and 
complete the offer; intends to manipulate the market price of the 
bidder or target; or does not have a reasonable belief it will have the 
means to purchase the securities sought in the offer. This new rule 
should encourage only bona fide offers to be publicly announced and 
minimize the potential for dissemination of false or misleading 
information in the marketplace.
    In addition to permitting more communications, we believe that the 
amendments will reduce selective disclosure of information because 
companies must publicly file all written communications relating to the 
transaction. This filing requirement will make written communications 
available to a broader base of investors than is currently the case. 
The amendments also should increase the uniformity and timeliness of 
information received by investors. We recognize, of course, that the 
amendments will not eliminate selective disclosure entirely. In fact, 
the amendments may encourage companies to communicate orally instead of 
in writing to avoid the filing requirement. Because the market will 
likely demand that information be reduced to writing and companies 
generally will want to disseminate information broadly in order to sell 
their transaction to the market, we expect that the communications 
scheme adopted will reduce selective disclosure overall.
    The revisions also will permit significantly more communications 
under the proxy rules, regardless of whether the communications relate 
to a business combination transaction. Under the amended rules, 
companies and security holders may communicate more freely before 
having to furnish a written proxy statement.\262\ The increased ability 
to communicate under the amendments adopted today applies equally to 
security holders and companies. As a result, we expect

[[Page 61435]]

security holders will receive more information regarding matters on 
which a vote may be solicited in the future. In addition, the revisions 
should result in the dissemination of information earlier than is 
currently the case, giving security holders more time to consider that 
information.
---------------------------------------------------------------------------

    \262\ No proxy card or form of proxy may be given or requested 
unless preceded or accompanied by a proxy statement.
---------------------------------------------------------------------------

    We are requiring companies to provide security holders with a short 
``plain English'' summary term sheet in all cash mergers, cash tender 
offers, and going-private transactions.\263\ We expect that the 
required summary term sheet will facilitate investors' understanding of 
the basic terms of a proposed transaction, allowing them to make 
better-informed voting and investment decisions. We do not expect the 
requirement to impose a significant burden on filers because the 
information required in a summary term sheet must be gathered to 
respond to existing disclosure requirements in any event. Further, most 
filers should be sufficiently experienced with the plain English 
requirements applicable to Securities Act filings.
---------------------------------------------------------------------------

    \263\ Forms S-4 and F-4 are already subject to the plain English 
requirements; thus we are not requiring a summary term sheet for 
securities offerings.
---------------------------------------------------------------------------

B. Filings

    The amendments should effectively reduce the cost of complying with 
many of the current disclosure and other regulatory requirements. We 
have integrated and streamlined the current disclosure requirements 
applicable to business combination and going-private transactions. To a 
large extent the amendments harmonize and integrate the disclosure 
requirements for tender offer, merger proxy, and going-private 
transaction statements. The various disclosure requirements now appear 
in one location and are written in a more reader-friendly manner. Also, 
the amendments permit the filing of one schedule, rather than two, to 
satisfy the tender offer and going-private disclosure requirements when 
both sets of regulations apply to a particular transaction.
    Consistent with the free communications scheme adopted today, we 
are limiting the availability of confidential treatment of merger proxy 
statements. Under the amendments, filers will be permitted to file a 
merger proxy statement confidentially so long as the parties limit 
their public oral and written communications to the information 
specified in Rule 135 of the Securities Act. If the parties to the 
transaction elect to publicly disclose more information than that 
specified in Rule 135, the proxy statement must be filed publicly. We 
do not expect that this limitation on confidential treatment will 
impose significant costs on filers. The revised treatment of merger 
proxy statements is consistent with the current requirement to publicly 
file all other registration, proxy, tender offer and going-private 
statements. The same information must be filed regardless of whether 
confidential treatment is invoked by the filer.
    We expect the amendments also will reduce the burden of complying 
with the merger proxy and tender offer requirements by, among other 
things:
     Clarifying the disclosure requirements;
     Clarifying that an acquiror's financial statements are 
required in all-cash transactions only when the acquiror cannot 
demonstrate a financial ability to satisfy the terms of the 
transaction or the information is otherwise material;
     Eliminating the requirement to provide target financial 
statement information in an all-cash merger when the acquiror's 
security holders are not voting on the transaction;
     Reducing from three years to as little as one year, and 
in some cases eliminating, the required financial statements for a 
non-reporting target company when the acquiring company's security 
holders are not voting on the transaction; and
     Reducing from three years to two the required financial 
statements for an acquiring company in cash mergers and third-party 
cash tender offers.

    We are adopting, however, a new disclosure requirement that may 
impose an additional cost on acquirors in negotiated two-tier business 
combination transactions. If security holders will be offered cash 
first in a tender offer followed by securities in a back-end merger, an 
acquiror must disclose certain pro forma and related financial 
information for the combined entity in the cash tender offer materials. 
We do not expect that this requirement will impose a significant burden 
on acquirors because the same information would eventually be required 
for the back-end merger. The amendments require disclosure at an 
earlier point in time, when security holders are confronted with a cash 
tender offer and must decide whether to tender in the offer or wait to 
receive securities in the back-end. The pro forma information required 
will benefit investors and should not impose a significant burden on 
acquirors. Therefore, the costs associated with providing pro forma 
information is reasonable. We recognize, however, that some acquirors 
may have difficulty in generating reliable pro forma financial 
information in situations when the target is not cooperating with the 
bidder. In response to this concern, we have limited the pro forma 
requirement to negotiated transactions.
    For the purposes of the Paperwork Reduction Act, Table 2 in Part 
VII below summarizes our estimate of the paperwork burden hours that 
parties would expend to comply with the amended rules. In arriving at 
these estimates we note that U.S. merger and acquisition activity in 
1998 was valued in excess of $1.3 trillion.\264\ These estimates 
include the burden hours incurred by companies from filing pre-filing 
communications. We have based these estimates on current burden hour 
estimates and the staff's experience with these filings. The estimates 
in the table indicate that parties would expend approximately 234,759 
burden hours/year complying with the revised rules. If we assume that 
70% of the burden hours would be expended by persons that cost the 
affected parties $85/hour (e.g., professionals) and 30% of these burden 
hours would be expended by persons that cost $10/hour (e.g., clerical 
support), then the proposals would cost approximately $14,691,250/year 
in internal staff time. We expect that a majority of the compliance 
burden will fall on professionals while approximately one-third of the 
burden will rest on clerical staff that will monitor and implement the 
compliance process.
---------------------------------------------------------------------------

    \264\ See Mergers & Acquisitions, The Dealmaker's Journal, 1998 
Almanac (March/April 1999), at 42.
---------------------------------------------------------------------------

    For purposes of the Paperwork Reduction Act, we also estimate that 
parties would spend approximately $122,929,990/year on outside 
professional assistance to comply with the proposals. Thus, we estimate 
that affected parties would spend approximately $137,621,240/year to 
comply with the paperwork requirements of the amended rules. Applying 
the same cost estimates to the burden imposed by the current rules, we 
estimate that companies and affected parties spend approximately 
$163,268,490/year.\265\ Note that these estimates do not attempt to 
quantify intangible benefits of the amended rules, such as the benefits 
to issuers and investors of enhanced communications

[[Page 61436]]

and possible improvements in price discovery, nor intangible costs.
---------------------------------------------------------------------------

    \265\ For the purposes of the Paperwork Reduction Act, we 
estimate in Table 2 of Part VII the burden hours imposed on parties 
to comply with the current rules. Assuming (as we did for the 
proposed rules) that 25% of the hours required to comply with the 
rules are provided by corporate staff at a cost of $63/hour (70% of 
the expended corporate staff time cost $85/hour, whereas 30% of the 
expended corporate staff time cost $10/hour), and 75% of the hours 
required to comply with the rules are provided by external 
professional help at a cost of $175/hour, we estimate that affected 
parties spend approximately 1,110,670 burden hours/year * $147/
hour=$163,268,490/year.
---------------------------------------------------------------------------

C. Tender Offers

    We are providing bidders with more flexibility regarding the timing 
of exchange offers. Currently, bidders may not commence an exchange 
offer until the related registration statement is effective. Under the 
amendments, bidders will be able to commence an exchange offer as soon 
as they file a registration statement, or on a later date if desired. 
Offerors will no longer need to wait for effectiveness to commence an 
exchange offer. We expect that this increased flexibility will 
encourage issuers to file their registration statements earlier, 
thereby creating an incentive to publicly disseminate more information 
sooner rather than selectively communicate with a limited number of 
security holders. In addition, we expect the attempt at balancing the 
regulatory treatment of cash and stock offers will enhance the 
attractiveness of offering securities, more so than is currently the 
case. The increased feasibility of offering securities as an 
alternative to cash should result in a more competitive market for 
target companies overall.
    We realize that the ability to commence an offer early will likely 
shorten the period of time necessary to complete an exchange offer 
relative to the time currently required. We retain, however, certain 
investor protection mechanisms, including a requirement that a bidder 
may not purchase securities tendered in an exchange offer until the 
related registration statement is effective. In addition, the exchange 
offer may not expire until after the mandatory 20-business day tender 
offer period has elapsed. The bidder must disseminate a supplement to 
security holders containing all material changes to the information 
previously disseminated and security holders may withdraw tendered 
securities at any time until purchased by the bidder.
    We also recognize that early commencement may increase the risk 
that bidders offering securities will need to disseminate supplements 
to disclose changes in material information. This may cause bidders to 
incur additional costs in redisseminating information and security 
holders will need to reconsider their investment decisions upon receipt 
of the new information. The risk is not unique to exchange offers, 
however, because bidders run the same risk today in cash tender offers 
when there is a material change in information. We do not expect that 
the costs associated with redissemination will be overly burdensome 
because early commencement is at the bidder's election. Bidders are not 
required to commence immediately upon filing. Instead, bidders can file 
a registration statement and wait for staff comments before 
disseminating offering materials and commencing the offer, thereby 
minimizing both the need for supplements and the costs associated with 
redissemination.
    The amendments also permit bidders to purchase (at the stated offer 
price) securities from holders who did not tender their shares during 
the offer in a follow-on period called a ``subsequent offering 
period.'' We expect this change will minimize the delay security 
holders currently encounter in liquidating their investment in a target 
company when the bidder is successful in purchasing a significant or 
controlling interest in the target. We recognize that some security 
holders might wait to tender their shares until the subsequent offering 
period, thus creating a hold-out problem for some bidders. We do not 
believe, however, that the need to announce a subsequent offering 
period in advance will pose a significant hold-out risk because most 
bidders will not be willing to close the initial offering period until 
a sufficient number of securities have been tendered in the offer. 
Therefore, security holders will need to tender a sufficient number of 
securities into an offer before the bidder will close the initial 
offering period and purchase the securities tendered in the offer. As a 
result, the economics of the transaction will drive a sufficient number 
of security holders to tender. In addition, we note that bidders are 
not required to provide a subsequent offering period, but may do so at 
their election.
    We are reducing the financial statement requirement in third-party 
cash tender offers from three years to two when the information is 
material. This change harmonizes the financial statement requirement in 
third-party tender offers with the requirements for issuer tender 
offers and going-private transactions. We expect that this reduction 
from three to two years of historical financial statements will lower a 
bidder's costs to comply with our rules, while continuing to give 
security holders adequate information to make investment decisions.
    The amendments also allow bidders greater access to security 
holders in tender offers by enabling them to contact non-objecting 
beneficial owners if the target company maintains a list of these 
persons. The amendment is expected to give bidders the same ability as 
target companies to communicate directly with non-objecting beneficial 
owners of securities similar to that provided under the proxy rules. 
This revision should benefit both bidders and security holders because 
communications regarding tender offers will be more efficient than they 
are today. The amendments do not require targets to gather this 
information. Instead, the information must be provided only when the 
target has the information and elects to provide the bidder with 
security holder list information instead of mailing the tender offer 
materials for the bidder. Accordingly, we do not expect the revised 
rule will impose significant costs on target companies.

V. Commission Findings and Considerations

A. Exemptive Authority Findings

    We find that it is appropriate, in the public interest and 
consistent with the protection of investors to exempt: (i) Persons 
making communications regarding planned business combination or similar 
takeover transactions from Sections 5(b)(1) and (c) of the Securities 
Act; and (ii) exchange offers commencing early from section 5(a) and 
(b)(2) of the Securities Act. We make these findings based on the 
reasons described in this release. In particular, we believe that 
investors will be better served if they are able to receive more 
information concerning business combination transactions before the 
time they must make an investment decision.
    Our use of exemptive authority will allow companies to communicate 
more freely with security holders and the markets and will permit 
investors to receive more information in a timely manner. If security 
holders receive more information sooner, they will be able to better 
inform themselves before having to make an investment decision. In 
addition, our use of exemptive authority will help minimize the 
regulatory disparity between exchange offers and cash tender offers. If 
bidders can choose more freely between offering cash or securities as 
consideration in a business combination, the markets will operate more 
efficiently and security holders will benefit as a result.
    In light of improved technologies that permit more and faster 
communications with security holders and the markets, and the 
increasing speed at which business combination transactions are 
consummated, we believe that removing restraints on communications will 
benefit investors. Therefore, we have found that persons making 
communications regarding these types of transactions should be free to 
communicate earlier, before a formal

[[Page 61437]]

registration statement is filed or a prospectus meeting the 
requirements of Section 10(a) of the Securities Act is delivered.
    We realize that these exemptions will lead to significantly more 
communications, some of which could be incomplete in the absence of a 
mandated disclosure document. We believe, however, that investors will 
be adequately protected by our continuing requirement to furnish 
security holders with a complete disclosure document before an 
investment decision must be made. In addition, we believe that the 
level of liability imposed on these pre- and post-filing communications 
will be adequate to protect investors.

B. Effect on Competition

    Section 23(a) of the Exchange Act \266\ requires us, in adopting 
rules under the Exchange Act, to consider the impact those rules would 
have on competition. We cannot adopt any rule that would impose a 
burden on competition not necessary or appropriate in the public 
interest. We did not receive any information from commenters on the 
impact of increased competition for capital in connection with business 
combination transactions. We also received no comments on whether the 
new rules, schedules and amendments will have an adverse effect on 
competition or will impose a burden on competition that is neither 
necessary nor appropriate in furthering the purposes of the Exchange 
Act. Harmonizing the requirements between cash and exchange offers 
removes burdens on competition. Our view, therefore, is that any anti-
competitive effects of the new rules, schedules and amendments adopted 
today are necessary or appropriate in the public interest.
---------------------------------------------------------------------------

    \266\ 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

C. Promotion of Efficiency, Competition and Capital Formation

    Section 2(b) of the Securities Act \267\ and section 3(f) of the 
Exchange Act,\268\ as amended by the National Securities Markets 
Improvement Act of 1996,\269\ provide that whenever the Commission is 
engaged in rulemaking and is required to consider or determine whether 
an action is necessary or appropriate in the public interest, the 
Commission also must consider, in addition to the protection of 
investors, whether the action will promote efficiency, competition and 
capital formation. We believe that harmonizing the regulatory 
requirements between cash tender and exchange offers will promote 
efficiency and competition. In addition, facilitating communications 
with security holders will promote efficiency and capital formation.
---------------------------------------------------------------------------

    \267\ 15 U.S.C. 77b.
    \268\ 15 U.S.C. 78c.
    \269\ Pub. L. 104-290, Sec. 106, 110 Stat. 3416 (1996).
---------------------------------------------------------------------------

VI. Final Regulatory Flexibility Analysis

    This Final Regulatory Flexibility Analysis (``FRFA'') has been 
prepared in accordance with the provisions of the Regulatory 
Flexibility Act (``RFA''), as amended by Public Law 104-121, 110 Stat. 
847, 864 (1996), 5 U.S.C. 604. The FRFA relates to the new rules, 
amendments, and schedules adopted today, which are primarily intended 
to enhance communications with security holders; harmonize the 
regulations affecting cash and stock tender offers; facilitate 
compliance with the rules and regulations associated with business 
combination transactions and similar extraordinary transactions; and 
promote investor protection.

A. Need for Action

Communications
    Currently, the rules and regulations applicable to business 
combination transactions impose restrictions on communications during 
the period before a mandated disclosure document is publicly filed with 
us. These restrictions appear in the registration, proxy and tender 
offer rules.\270\ Companies, security holders and other market 
participants have expressed an increasing desire to communicate and 
receive information about proposed business combination transactions 
before the time that a mandated disclosure document (e.g., a 
registration, proxy or tender offer statement) is filed. This desire is 
partly attributable to the emergence of new and developing technologies 
that allow for faster and less expensive means to communicate. In 
addition, disclosure requirements under both the federal securities 
laws and applicable exchange rules and regulations may require 
disclosure. Further, participants to business combination transactions 
often feel compelled to promptly inform the marketplace, their 
employees, suppliers, and customers about a proposed business 
combination transaction that potentially could impact their 
relationships with these constituencies. We also have recognized that 
business combination transactions differ from capital-raising 
transactions to the extent that security holders may be forced to take 
cash or securities in exchange for their securities even though no 
action is taken with respect to the transaction.
---------------------------------------------------------------------------

    \270\ For example, see section 5 of the Securities Act, Rules 
14a-3, 14a-6, 14a-11 and 14a-12 (proxy rules) and Rules 14d-1, 14d-2 
and 14d-3 (tender offer rules).
---------------------------------------------------------------------------

    Accordingly, we have decided to eliminate many of the restrictions 
imposed on communications before a mandated disclosure document is 
filed by adopting specific exemptions under each regulatory scheme that 
could apply to a business combination transaction. Revised Securities 
Act Rules 135 and 145 and new Rules 165, 166 and 425 permit more 
communications regarding a business combination transaction before a 
registration statement is filed. Revised proxy Rule 14a-12 permits more 
communications regardless of whether a business combination transaction 
is involved before a proxy statement must be filed. Revised tender 
offer Rule 14d-2 permits a bidder to communicate more information 
without having to formally commence its tender offer or file a tender 
offer statement. Revised tender offer Rule 14d-9 permits a target to 
respond to a bidder's announcement of a proposed tender offer before 
commencement of the offer without having to file a solicitation/
recommendation statement.
    In each case, the person making communications must file all 
written communications made in connection with or relating to the 
transaction on the date of first use. The written communications must 
contain a brief legend advising security holders to read the applicable 
mandated disclosure document when it is filed together with any other 
documents that may be available. Under the new regulatory scheme 
security holders must be furnished with the traditional mandated 
disclosure document before they must make an investment or voting 
decision. This new regulatory scheme facilitates the dissemination of 
more information to security holders at an earlier point in time, 
providing security holders with a greater opportunity to consider the 
information in light of all other information available, including the 
mandated disclosure document that must be furnished before action can 
be taken.
Balancing the Regulation of Stock and Cash Tender Offers
    Currently, a bidder offering securities as consideration in an 
exchange offer may not commence the offer until a related registration 
statement is effective.\271\ This differs in a significant

[[Page 61438]]

respect from cash tender offers that may commence as soon as a tender 
statement is filed and the required information disseminated to 
security holders. This disparity in regulatory treatment of cash and 
stock tender offers may influence a bidder's choice of consideration 
offered in a tender offer. In order to provide bidders with more 
flexibility on the form of consideration to offer in a business 
combination transaction, we are revising the rules to permit the 
commencement of exchange offers before a related registration statement 
is effective.\272\ A bidder, however, may not close its exchange offer 
and purchase the tendered securities until after the related 
registration statement is effective. Bidders also must deliver a 
preliminary prospectus containing all required information in addition 
to supplements or amendments that disclose material changes from the 
prospectus previously furnished. This balancing of the regulatory 
treatment of cash and stock tender offers will provide bidders with 
increased flexibility to choose between cash and securities as 
consideration in a business combination transaction without impairing 
the current level of investor protection afforded to security holders.
---------------------------------------------------------------------------

    \271\ See Rule 14d-2(a)(4) stating that commencement occurs when 
definitive copies of the prospectus/tender offer material are first 
published, sent or given to security holders.
    \272\ See new Rule 162 and revised Rule 14d-2(a).
---------------------------------------------------------------------------

Harmonizing, Clarifying and Updating the Disclosure Requirements
    In some cases the current rules relating to business combination 
transactions require differing levels and types of information based on 
how the transaction is structured. If a transaction is structured as a 
merger instead of a tender offer, the required disclosure may differ 
unnecessarily. For example, a fully-financed, all-cash merger generally 
requires three years of financial statements for the company to be 
acquired,\273\ while a fully-financed, all-cash all-share tender offer 
generally will not require any financial statement information for 
either the bidder or the target unless that information is 
material.\274\ In addition, there are other areas where the required 
level of information may differ unnecessarily. For example, issuer 
tender offers and going-private transactions generally require two 
years of financial statements while third-party tender offers require 
three years of financial statements, when material.
---------------------------------------------------------------------------

    \273\ See Item 14 of Schedule 14A.
    \274\ See Item 9 to Schedule 14D-1.
---------------------------------------------------------------------------

    This disparity in required disclosure may be attributed in part to 
the fact that the disclosure requirements were not adopted at the same 
time, resulting in some minor inconsistencies or differences. The new 
and revised schedules \275\ and disclosure items \276\ serve to 
integrate the disclosure requirements, harmonizing the requirements to 
the extent practicable and appropriate. The revisions adopted will 
facilitate compliance with the disclosure requirements applicable to 
business combination transactions and going-private transactions while 
maintaining all substantive disclosure requirements appropriate to the 
transaction.
---------------------------------------------------------------------------

    \275\ New Schedule TO (replacing Schedules 13E-4 and 14D-1) and 
revised Schedules 13E-3 and 14D-9.
    \276\ Regulation M-A, Items 1000 through 1016 and revised Item 
14 of Schedule 14A.
---------------------------------------------------------------------------

B. Objectives of the Rule Amendments

    The new rules, schedules and amendments are expected to reduce 
compliance costs overall for all persons that are subject to our rules 
and regulations, benefiting both small and large business entities. As 
a result of the amendments adopted, security holders, including small 
entities, should receive more information on a timely basis. In 
addition, persons subject to our rules should have greater flexibility 
in structuring and completing tender offers, mergers, and other 
extraordinary transactions. Also as a result of the amendments, bidders 
should realize greater flexibility in selecting the form of 
consideration to offer in a tender offer (e.g., cash or securities). We 
expect that our revisions harmonizing, clarifying and updating the 
disclosure requirements will facilitate compliance with the rules and 
regulations as well as improve the disclosure that security holders 
ultimately receive in business combination transactions.

C. Summary of Significant Issues Raised by the Public Comments

    We requested comment with respect to the Initial Regulatory 
Flexibility Analysis (``IRFA'') that was prepared when the new rules, 
amendments and schedules were proposed. We did not receive any comments 
with respect to the IRFA.

D. Description and Estimate of the Number of Small Entities Subject to 
the New Rules

    We adopted definitions of the term ``small business'' for the 
various entities subject to our rulemaking. Rule 157 under the 
Securities Act \277\ and Rule 0-10 under the Exchange Act \278\ provide 
that ``small business issuer'' includes an issuer, other than an 
investment company, that has total assets of $5 million or less as of 
the end of its most recent fiscal year. For purposes of the RFA, an 
investment company is a small business if the investment company, 
together with other investment companies in the same group of related 
investment companies, has net assets of $50 million or less as of the 
end of its most recent fiscal year.\279\
---------------------------------------------------------------------------

    \277\ 17 CFR 230.157.
    \278\ 17 CFR 240.0-10.
    \279\ 17 CFR 270.0-10.
---------------------------------------------------------------------------

    Currently, we are aware of approximately 836 reporting companies 
that are not investment companies with assets of $5 million or less. In 
addition, there are approximately 320 investment companies that satisfy 
the ``small business'' definition. All of these companies could 
potentially be subject to at least some of the new rules, schedules, 
and amendments. We expect small businesses will be affected by these 
amendments to the extent that they are involved in a business 
combination transaction. In addition, small businesses may be affected 
by the amendments made to the proxy rules, which permit significantly 
greater communications with and among security holders. Small entities 
that are required to file registration statements, proxy statements, 
tender offer statements and other reports under the Securities Act, 
Exchange Act, and Investment Company Act will be affected by these 
amendments. Finally, small entities may be affected as shareholders in 
companies that are part of a business combination.
    We have no reliable way of determining or estimating the number of 
reporting or non-reporting small businesses that may seek to rely on or 
would otherwise be affected by the new rules, schedules and amendments. 
We believe, however, that these amendments will substantially benefit 
both small and large entities to the extent they will substantially 
reduce current restrictions on communications and generally facilitate 
compliance with existing rules and regulations. In addition, because 
many of the amendments represent exemptions from existing rules and 
regulations, small businesses can decide whether the burdens imposed by 
the requirements (e.g., the filing of written communications) outweigh 
the related benefits (e.g., the ability to communicate more freely).

E. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    We believe that the new rules, schedules and amendments are 
primarily deregulatory in nature because they significantly expand the 
ability of businesses to structure and

[[Page 61439]]

time their business combination transactions and communicate with 
security holders. In addition, security holders in general will be 
afforded a greater opportunity to receive information and communicate 
with other security holders. The resulting increase in flexibility to 
communicate will benefit companies as well as security holders.
    Under the amendments, small businesses will report and file 
essentially the same information as they do today. One exception to 
this generalization, however, is that both large and small bidders are 
required to publicly file all pre-and post-filing written 
communications relating to proposed business combination transactions. 
This filing requirement is necessary due to the deregulation of pre-
filing communications. Companies are not obligated to communicate with 
security holders, but to the extent that they do communicate in 
writing, those communications must be filed on the date of first use. 
The new rules, schedules, and amendments adopted today treat all 
persons and entities alike, and do not make any distinctions based on 
size.

F. Description of Steps Taken To Minimize the Effect on Small Entities

    We are directed by the RFA to consider significant alternatives to 
proposals that would accomplish our stated objectives while minimizing 
any significant adverse economic impact on small entities. In 
connection with the proposals presented in the Proposing Release, the 
views expressed by commenters, and our extensive review of existing 
rules and regulations, we considered several possible alternatives, 
including:

     Establishing different compliance and reporting 
requirements or timetables that take into account the resources of 
small businesses;
     Clarifying, consolidating or simplifying compliance and 
reporting requirements under the rule for small businesses;
     Using performance rather than design standards; and
     Exempting small businesses from all or part of the 
requirements.

    Because the new rules, schedules, and amendments are primarily 
deregulatory in nature, any different treatment of small business 
entities would likely be more burdensome to small business entities. 
The amendments significantly expand the ability of businesses to 
structure and time their business combination transactions and 
communicate with security holders, while maintaining investor 
protections. While we considered excluding smaller entities from the 
new rules, schedules, and amendments, we concluded that the benefits of 
the amendments should apply to all businesses regardless of their size. 
If small business were exempted, in most cases they would be subject to 
more rather than less regulation. Accordingly, we decided not to limit 
the new rules and amendments and their corresponding benefits to larger 
issuers.
    Accordingly, we do not believe any benefit can be achieved by 
providing separate disclosure requirements for small issuers based on 
the use of performance rather than design standards.

VII. Paperwork Reduction Act

    In November, 1998, the staff submitted the proposed new rules, 
schedules and amendments to the Office of Management and Budget (OMB) 
for review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. 
Also, in accordance with the Paperwork Reduction Act, we solicited 
comment on the compliance burdens associated with the proposals. We did 
not receive any public comments that quantified the estimated paperwork 
burdens associated with the new rules, schedules and amendments. The 
comments we received primarily addressed the costs and benefits of the 
proposals in general terms. We discuss these general comments above in 
more detail.
    The new rules, schedules and amendments will affect several 
regulations and forms that contain ``collection of information 
requirements'' within the meaning of the Paperwork Reduction Act of 
1995.\280\ An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a currently valid OMB control number. Table 1 below provides the titles 
for the affected collections of information under the Exchange Act, 
current OMB control numbers, where applicable, a summary of the 
collection of information, and a description of the likely respondents 
to each collection of information.\281\
---------------------------------------------------------------------------

    \280\ 44 U.S.C. 3501 et seq.
    \281\ Although Regulations S-K and S-B do not actually impose 
reporting burdens directly on public companies, for administrative 
convenience, we have assigned each of these regulations one burden 
hour. The burden hours imposed by the disclosure regulations are 
included in the estimates for the forms that refer to the 
regulations.

                                      Table 1: Collections of Information Under the Securities Act and Exchange Act
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               OMB Control
                   Title                         Number             Summary of the collection of information and description of likely respondents
--------------------------------------------------------------------------------------------------------------------------------------------------------
Schedule 14A...............................       3235-0059  If a vote of security holders is required, persons soliciting proxies with respect to
                                                              securities registered under Section 12 of the Exchange Act must furnish security holders
                                                              with a proxy statement containing the information specified in Schedule 14A. The proxy
                                                              statement is intended to provide security holders with the information necessary to enable
                                                              them to make an informed voting decision on any matters that will be acted upon at an
                                                              annual or special meeting of security holders.
Schedule 14C...............................       3235-0057  If a vote of security holders is required, but proxies are not being solicited, companies
                                                              with securities registered under Section 12 of Exchange Act must send an information
                                                              statement containing the information specified in Schedule 14C to every security holder
                                                              that would be entitled to vote on the matters presented at a meeting at which a vote will
                                                              be taken.
Schedule 13E-3.............................       3235-0007  Companies or their affiliates engaging in specified transactions that cause a class of the
                                                              company's equity securities registered under the Exchange Act to be: (1) Held by fewer
                                                              than 300 record holders; or (2) de-listed from a securities exchange or inter-dealer
                                                              quotation system must file and disseminate to security holders the information specified
                                                              in Schedule 13E-3. This schedule requires detailed information addressing whether the
                                                              filing persons believe the transaction is fair to unaffiliated security holders and why.
Schedule 14D-9.............................       3235-0102  Issuers of securities registered under Section 12 of the Exchange Act that make a
                                                              solicitation or recommendation to security holders regarding a third-party tender offer
                                                              subject to Regulation 14D must file and send to security holders the information specified
                                                              in Schedule 14D-9.

[[Page 61440]]

 
Schedule 13E-4.............................       3235-0203  Issuers of securities registered under Section 12 or reporting under Section 15(d) of the
                                                              Exchange Act, and certain of their affiliates, must file and disseminate to security
                                                              holders the information specified in Schedule 13E-4 when making a tender offer for any
                                                              class of the issuer's equity securities.
Schedule 14D-1.............................       3235-0102  Any person, other than the issuer, making a tender offer for equity securities registered
                                                              under Section 12 of the Exchange Act, that would result in that person owning greater than
                                                              five percent of the class of the securities subject to the offer, must at the time of the
                                                              offer file and disseminate the information specified in Schedule 14D-1 to the issuer,
                                                              security holders and competing bidders.
Schedule TO................................       3235-0515  Any person making a tender offer for securities that would have to file a Schedule 13E-4 or
                                                              14D-1 must now file and disseminate to security holders the information specified in
                                                              Schedule TO, instead of Schedule 13E-4 or 14D-1.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The new rules, schedules, and amendments update and simplify the 
rules and regulations applicable to business combination transactions. 
The information required by these schedules is needed so that security 
holders can make an informed tender or voting decision with respect to 
tender offers, mergers, acquisitions, and other extraordinary 
transactions. We enhance communications between public companies and 
investors by providing companies with greater flexibility to determine 
when to file their registration statements involving takeover 
transactions, proxy statements, and tender offer statements. We also 
attempt to put cash and stock tender offers on a more equal regulatory 
footing; integrate the forms and disclosure requirements in issuer 
tender offers, third-party tender offers and going-private 
transactions; and consolidate the disclosure requirements in one 
location in the regulations. In addition, we allow bidders to accept 
tenders from security holders during a limited period after the 
successful completion of the tender offer; more closely align the 
merger and tender offer requirements; and update the tender offer rules 
to clarify certain requirements and reduce compliance burdens where 
consistent with investor protection.
    The schedules and regulations affected by these changes set forth 
the public disclosures that offerors are required to make concerning 
business combination transactions. For the most part the disclosure 
requirements in the above schedules remain the same, with a few limited 
exceptions. Specifically, revised Schedules 14A, 14C, 13E-3, 14D-9, and 
new Schedule TO requires a brief ``plain English'' summary term sheet 
highlighting the most significant aspects of a particular transaction 
in all cash mergers, cash tender offers, and going-private 
transactions.\282\ The amendments also reduce in certain instances the 
number of years of financial statements that are required in Schedules 
14A and 14C for acquirors and companies being acquired in cash mergers. 
For example, Schedules 14A and 14C no longer require the financial 
statements of the target in a cash merger when the acquiror's security 
holders are not voting on the transaction.
---------------------------------------------------------------------------

    \282\ Forms S-4 and F-4 are currently subject to summary and 
plan English requirements. Therefore, we are not requiring a plain 
English summary term sheet for business combination transactions 
that are registered on one of these forms.
---------------------------------------------------------------------------

    New Schedule TO, which replaces current Schedules 13E-4 and 14D-1, 
harmonizes and clarifies the disclosure requirements in issuer and 
third-party tender offers. For example, currently when a third-party 
bidder's financial statement information is material to security 
holders, three years of financial statements are required while only 
two years is required for issuers making an issuer tender offer. New 
Schedule TO requires only two years of financial statements for the 
bidder if that information is material, regardless of whether an issuer 
or third-party is making the tender offer. In a negotiated two-tier 
transaction, Schedule TO will require the bidder to provide security 
holders with certain pro forma financial and other related information 
for the combined entity at the time of the cash tender offer. In 
addition, the amendments permit the filing of one schedule, rather than 
two, to satisfy the tender offer and going-private disclosure 
requirements when both sets of regulations apply to the transaction. As 
a result, the amendments are expected to reduce the number of filings 
required.
    The information collection requirements imposed by the schedules 
and regulations are mandatory to the extent that companies are 
publicly-owned and engage in business combination transactions. There 
is no mandatory retention period for the information disclosed. The 
information gathered by these schedules and regulation is made publicly 
available, unless confidential treatment is available. Confidential 
treatment of information in preliminary merger proxy statements is 
retained to a limited extent.
    As discussed in more detail in Part IV above, the amendments reduce 
the burden of complying with the disclosure and transaction 
requirements applicable to business combination transactions. We 
estimate that public companies will expend approximately 988,986 burden 
hours/year to comply with the new rules, schedules, and amendments.
    Table 2 below summarizes our estimates of the burden hours that 
filers will expend to comply with the new rules, amendments and 
schedules. We expect compliance costs will be less than current costs 
because the amendments primarily integrate and streamline the 
disclosure requirements for business combination transactions. Our 
estimates include the burden hours that will be incurred by companies 
to file pre-filing written communications. We base these estimates on 
current burden hour estimates and the staff's experience with these 
filings. The estimates in the table indicate that filers will expend 
approximately 234,759 burden hours/year to comply with the amendments. 
In addition, as discussed in more detail below, we estimate that filers 
will spend approximately $122,929,990/year on outside professional help 
to comply with the amendments. The estimates are discussed in greater 
detail below.

[[Page 61441]]



                                         Table 2: Burden Hour Estimates
----------------------------------------------------------------------------------------------------------------
                                     Estimated burden Hours/   Estimated filings/year    Estimated burden hours
                                             filing                     \283\          -------------------------
             Schedule              ----------------------------------------------------
                                       Before       After        Before       After        Before       After
                                     revisions    revisions    revisions    revisions    revisions    revisions
                                            (A)          (B)          (C)          (D)      (E =A*C      (F)=B*D
----------------------------------------------------------------------------------------------------------------
14A...............................        87.00        13.12        9,892       13,255      860,604      173,906
14C...............................        87.00        13.12          253          339       22,011        4,448
13E-3.............................       139.25        34.31           96           96       13,368        3,294
14D-9.............................       354.25        64.43          258          353       91,397       22,744
13E-4.............................       232.00         0.00          139            0       32,248            0
14D-1.............................       354.25         0.00          257            0       91,042            0
TO................................            0        43.50            0          705            0       30,668
Rule 425 filings..................            0         0.25            0       10,628            0        2,657
                                   -----------------------------------------------------------------------------
    Total.........................  ...........  ...........  ...........  ...........    1,110,670     237,717
----------------------------------------------------------------------------------------------------------------
\283\ The estimated filings/year are based on the number of filings in fiscal year 1998.

    We expect that the amendments will reduce the number of burden 
hours required to file a full Schedule 14A from 87 hours today to 70 
hours under the amendments.\284\ Of the 70 hours, we estimate that 25% 
(17.5 internal burden hours) will be provided by corporate staff, and 
75% (52.5 hours) by external professional help. Based on filings 
received in fiscal year 1998, we anticipate that companies and other 
filers will file approximately 9,892 full Schedule 14As/year. Under the 
amendments, companies and other filers also are required to file under 
cover of Schedule 14A any pre-filing written communications (in 
addition to the required proxy statement) concerning business 
combinations for cash.\285\ Revised Rule 14a-12 requires filers to file 
their pre- and post-filing written communications and include certain 
information including a legend advising security holders to read the 
proxy statement. In fiscal year 1998, approximately 9,892 full Schedule 
14As were filed. We estimate that approximately 34% of the full 
Schedule 14As filed will involve cash rather than securities.\286\ We 
also estimate that filers, on average, will file one written 
communication (in addition to the required proxy statement) for each 
cash transaction. We estimate that a firm's corporate staff will expend 
approximately 15 burden minutes (0.25 internal burden hours) to file a 
written communication under the amended rules.\287\ Thus, we estimate 
filers will file 9,892 full Schedule 14As/year (expending 17.5 internal 
burden hours/filing) and 3,363 written communications/year (expending 
0.25 internal burden hours/filing). On average, filers will require 
approximately 13.12 internal burden hours to file 13,255 full Schedule 
14As and written communications. In addition, we anticipate filers will 
spend, at an estimated $175/hour, approximately $9,188/filing in 
professional labor costs to file a Schedule 14A.\288\
---------------------------------------------------------------------------

    \284\ The numbers in Column B of Table 2 differ significantly 
from those in Column A of Table 2 for two reasons. First, the 
estimated burden hours in Column A include the estimated corporate 
burden hours and outside labor hours that filers would require to 
file each disclosure document. In Column B, we estimate only the 
corporate burden hours needed to file each disclosure document (we 
estimate separately the expense, in dollar terms, of outside labor). 
Second, the estimates in Column B include the estimated burden hours 
that bidders would require to file pre-filing communications. 
Because parties would require less time to file communications than 
full Schedule 14As, the average estimated burden hours in Column B 
are lower than in Column A.
    \285\ Under the amendments, bidders will file their pre- and 
post-filing written communications relating to a business 
combination transaction under Rule 425 in transactions where 
securities are offered as consideration.
    \286\ This estimate is based on data from the Securities Data 
Corporation indicating that security holders had received only cash 
in 34% of the merger transactions reported in 1996.
    \287\ We base this estimate on the burden imposed by a similar 
filing requirement under Item 901(c) of Regulation S-K for roll-up 
transactions.
    \288\ We base this estimate on 52.50 hours of professional 
labor/full Schedule 14A filing * $175/hour. In aggregate, we 
estimate that filers will spend $90,887,696/year to file 9,892 full 
Schedule 14As/year.
---------------------------------------------------------------------------

    We anticipate the amendments will reduce the number of hours 
required to file a full Schedule 14C from 87 hours today to 70 hours 
under the amendments. Of the 70 hours, we estimate that 25% (17.5 
internal burden hours) will be provided by corporate staff, and 75% 
(52.5 hours) by external professional help. Based on filings in fiscal 
year 1998, we anticipate that companies and other filers will file 
approximately 253 full Schedule 14Cs/year. Under the amended rules, 
companies and other filers also are required to file under cover of 
Schedule 14C any pre-filing written communications (in addition to the 
required proxy statement) concerning business combinations for 
cash.\289\ The amendments require filers to file their written 
communications and include certain information including a legend 
advising security holders to read the information statement. In fiscal 
year 1998, approximately 253 full Schedule 14Cs were filed. We estimate 
that 34% of the full Schedule 14Cs will involve cash rather than 
securities.\290\ We estimate that filers, on average, will file one 
written communication (in addition to the required information 
statement) for each cash transaction. We estimate that a firm's 
corporate staff will expend approximately 15 burden minutes (0.25 
internal burden hours) to file a written communication under the 
amended rules. Thus, we estimate filers will file 253 full Schedule 
14Cs/year (expending 52.50 burden hours/filing) and 86 written 
communications/year (expending 0.25 internal burden hours/filing). On 
average, filers will require approximately 13.12 internal burden hours 
to file 339 full Schedule 14Cs and written communications. In addition, 
we anticipate filers will spend, at an estimated $175/hour, 
approximately $9,188/filing in professional labor costs to file a full 
Schedule 14C.\291\
---------------------------------------------------------------------------

    \289\ Under the amendments, bidders will file under rule 425 
pre- and post-filing written communications relating to a business 
combination transaction where securities are offered as 
consideration.
    \290\ This estimate is based on data from the Securities Data 
Corporation indicating that in security holders had received only 
cash in 34% of merger transactions in 1996.
    \291\ We base this estimate on 52.50 hours of professional 
laborfull Schedule 14C filing * $175/hour. In aggregate, we estimate 
that filers will spend $2,324,564/year to file 253 full Schedule 
14Cs/year.

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

[[Page 61442]]

    The amendments clarify and make several technical changes to 
Schedule 13E-3. As a result, we anticipate a savings of two hours, from 
139.25 hours/filing to 137.25 hours/filing, to file Schedule 13E-3 
under the amendments. Of the 137.25 hours, we estimate that 25% (34.31 
internal burden hours) will be provided by corporate staff, and 75% 
(102.94 hours) by external professional help. Based on filings in 
fiscal year 1998, we estimate filers will file 96 Schedule 13E-3s/year. 
In addition, we anticipate filers will spend, at an estimated $175/
hour, approximately $18,015/filing in professional labor costs to file 
a full Schedule 13E-3.\292\
---------------------------------------------------------------------------

    \292\  We base this estimate on 102.94 hours of professional 
labor/full Schedule 13E-3 filing * $175/hour. In aggregate, we 
estimate that filers will spend $1,729,440/year to file 96 full 
Schedule 13E-3s/year.
---------------------------------------------------------------------------

    The amendments clarify and make several technical changes to 
Schedule 14D-9. As a result, we anticipate a savings of two hours, from 
354.25 hours/filing to 352.25 hours/filing, to file a full Schedule 
14D-9 under the amendments. Of the 352.25 hours, we estimate that 25% 
(88.06 internal burden hours) will be provided by corporate staff, and 
75% (264.19 hours) by external professional help. Based on filings in 
fiscal year 1998, we anticipate that companies and other filers will 
file approximately 258 full Schedule 14D-9s/year. Under the amendments, 
companies and other filers also are required to file under cover of 
Schedule 14D-9 any pre- or post-filing written communications (in 
addition to the required proxy statement) concerning business 
combinations for cash.\293\ The rule requires filers to attach their 
written communications and include certain information including a 
legend advising security holders to read the full recommendation 
statement. In fiscal year 1998, approximately 258 full Schedule 14D-9s 
were filed. We estimate that 37% of the full Schedule 14D-9s filed will 
involve cash rather than securities.\294\ We estimate that filers, on 
average, will file one written communication (in addition to the 
required information statement) for each cash transaction. We estimate 
that a firm's corporate staff will expend approximately 15 burden 
minutes (0.25 internal burden hours) to file a written communication 
under Rule 425. Thus, we estimate filers will file 258 full Schedule 
14D-9s /year (expending 88.06 internal burden hours/filing) and 95 
written communications/year (expending 0.25 internal burden hours/
filing). On average, filers will require approximately 64.43 internal 
burden hours to file 353 full Schedule 14D-9s and written 
communications. In addition, we anticipate filers will spend, at an 
estimated $175/hour, approximately $46,233/filing in professional labor 
costs to file a full Schedule 14D-9.\295\
---------------------------------------------------------------------------

    \293\ Under the amendments, bidders must file under Rule 425 any 
pre- or post-filing written communications in business combination 
transactions where securities are offered as consideration.
    \294\ This estimate is based on data from the Securities Data 
Corporation and Mergerstat, indicating that security holders 
received only cash in 37% of merger and tender offer transactions in 
1996.
    \295\ We base this estimate on 264.19 hours of professional 
laborfull Schedule 14D-9 filing * $175/hour. In aggregate, we 
estimate that filers will spend $11,928,114/year to file 258 full 
Schedule 14D-9s/year.
---------------------------------------------------------------------------

    Under the amendments new Schedule TO replaces current Schedules 
13E-4 and 14D-1. Schedule TO harmonizes and clarifies the requirements 
in current Schedules 13E-4 and 14D-1. Based on the number of Schedule 
13E-4 and Schedule 14D-1s filed in fiscal year 1998, and the number of 
hours required to complete them, we estimate that bidders will require 
approximately 309 hours to file a full Schedule TO under the amended 
rules.\296\ Of the 309 hours, we estimate that 25% (77.25 internal 
burden hours) will be provided by corporate staff, and 75% (231.75 
hours) by external professional help. Based on filings in fiscal year 
1998, we anticipate that companies and other filers will file 
approximately 396 full Schedule TOs/year. Under the amendments, 
companies and other filers also will be required to file under Schedule 
TO all pre- and post filing written communications (in addition to the 
required tender offer statement) concerning all cash tender 
offers.\297\ The amendments require filers to file their written 
communications with certain information including a legend advising 
security holders to read the tender offer disclosure statement. We 
estimate that filers, on average, will file one written communication 
(in addition to the required information statement) for each cash 
tender offer transaction. We estimate that a firm's corporate staff 
will expend approximately 15 burden minutes (0.25 internal burden 
hours) to file a written communication under the amendments. Based on 
data from fiscal year 1998, we estimate filers will file 396 full 
Schedule TOs/year (expending 77.25 internal burden hours/filing) and 
309 written communications/year (expending 0.25 internal burden hours/
filing).\298\ On average, filers will require approximately 43.50 
internal burden hours to file 705 full Schedule TOs and written 
communications. In addition, we anticipate filers will spend, at an 
estimated $175/hour, approximately $40,556/filing in professional labor 
costs to file a full Schedule TO.\299\
---------------------------------------------------------------------------

    \296\  Offerors currently require 232 hours to complete Schedule 
13E-4, and 354.25 hours to complete Schedule 14D-1. In fiscal year 
1998, offerors registered 139 business combinations on Schedule 13E-
4 and 257 business combinations on Schedule 14D-1. We estimate the 
number of burden hours to file a full Schedule TO will be [(139 
Schedule TO filings that previously would have been filed on 
Schedule 13E-4 * 232 hours/Schedule TO filing that previously would 
have been filed on Schedule 13E-4) + (257 Schedule TO filings that 
previously would have been filed on Schedule 14D-1 * 354.25 hours/
Schedule TO filing that previously would have been filed on Schedule 
14D-1)--2 burden hours from simplication]/396 filings on Schedule TO 
= 309 hours/filing on Schedule TO.
    \297\ Under the new rules, bidders must file under Rule 425 any 
pre-filing communications in transactions where securities are 
offered as consideration.
    \298\ According to Mergerstat, in 1996 security holders received 
only cash in 78% of tender offer transactions.
    \299\ We base this estimate on 231.75 hours of professional 
labor/full Schedule TO filing * $175/hour. In aggregate, we estimate 
that filers will spend $16,060,176/year to file 396 full Schedule 
TOs/year.
---------------------------------------------------------------------------

VIII. Statutory Basis and Text of Amendments

    We are adopting amendments to the rules under sections 2(3), 5, 7, 
8, 10, 12, 19 and 28, of the Securities Act of 1933, as amended, and 
sections 3(b), 4(e), 10(b), 13, 14, 18, 23(a), 24 and 36 of the 
Securities Act of 1934, as amended.

List of Subjects

17 CFR Part 200

    Administrative practice and procedure, Authority delegation.

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

    Reporting and recordkeeping requirements, Securities.

Text of Amendments

    For the reasons set out in the preamble, Title 17, Chapter II of 
the Code of Federal Regulations is amended as follows:

PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 
REQUESTS

    1. The authority citation for part 200 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77s, 78d-1, 78d-2, 78w, 78ll(d), 78mm, 79t, 
77sss, 80a-37, 80b-11, unless otherwise noted.
* * * * *


Sec. 200.30-3  [Amended]

    2. By amending paragraph (a)(6) of Sec. 200.30-3 by removing the 
phrase

[[Page 61443]]

``Rules 10b-13(d), 14e-4(c), and 15c2-11(h) (Secs. 240.10b-13(d), 
240.14e-4(c), and 240.15c2-11(h) of this chapter)'' and in its place 
adding ``Rules 14e-4(c), 14e-5(d), and 15c2-11(h) (Secs. 240.14e-4(c), 
240.14e-5(d), and 240.15c2-11(h) of this chapter)'', and removing the 
phrase ``to grant requests for exemptions from Rules 10b-13, 14e-4, and 
15c2-11) (Secs. 240.10b-13, 240.14e-4, and 240.15c2-11 of this 
chapter)'' and in its place adding ``to grant requests for exemptions 
from Rules 14e-4, 14e-5, and 15c2-11 (Secs. 240.14e-4, 240.14e-5, and 
240.15c2-11 of this chapter)''.
* * * * *

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES 
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND 
CONSERVATION ACT OF 1975--REGULATION S-K

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

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn, 
77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll(d), 79e, 
79n, 79t, 80a-8, 80a-29, 80a-30, 80a-37, 80b-11, unless otherwise 
noted.
* * * * *
    4. By revising paragraph (a)(2) of Sec. 229.10 to read as follows:


Sec. 229.10  General.

    (a) Application of Regulation S-K. * * *
    (2) Registration statements under section 12 (subpart C of part 249 
of this chapter), annual or other reports under sections 13 and 15(d) 
(subparts D and E of part 249 of this chapter), going-private 
transaction statements under section 13 (part 240 of this chapter), 
tender offer statements under sections 13 and 14 (part 240 of this 
chapter), annual reports to security holders and proxy and information 
statements under section 14 (part 240 of this chapter), and any other 
documents required to be filed under the Exchange Act, to the extent 
provided in the forms and rules under that Act.
* * * * *
    5. By adding subpart 229.1000 consisting of Secs. 229.1000 through 
229.1016 to read as follows:

Subpart 229.1000--Mergers and Acquisitions (Regulation M-A)

Sec.
229.1000  (Item 1000) Definitions.
229.1001  (Item 1001) Summary term sheet.
229.1002  (Item 1002) Subject company information.
229.1003  (Item 1003) Identity and background of filing person.
229.1004  (Item 1004) Terms of the transaction.
229.1005  (Item 1005) Past contacts, transactions, negotiations and 
agreements.
229.1006  (Item 1006) Purposes of the transaction and plans or 
proposals.
229.1007  (Item 1007) Source and amount of funds or other 
consideration.
229.1008  (Item 1008) Interest in securities of the subject company.
229.1009  (Item 1009) Persons/assets, retained, employed, 
compensated or used.
229.1010  (Item 1010) Financial statements.
229.1011  (Item 1011) Additional information.
229.1012  (Item 1012) The solicitation or recommendation.
229.1013  (Item 1013) Purposes, alternatives, reasons and effects in 
a going-private transaction.
229.1014  (Item 1014) Fairness of the going-private transaction.
229.1015  (Item 1015) Reports, opinions, appraisals and 
negotiations.
229.1016  (Item 1016) Exhibits.

Subpart 229.1000--Mergers and Acquisitions (Regulation M-A)


Sec. 229.1000  (Item 1000) Definitions.

    The following definitions apply to the terms used in Regulation M-A 
(Secs. 229.1000 through 229.1016), unless specified otherwise:
    (a) Associate has the same meaning as in Sec. 240.12b-2 of this 
chapter;
    (b) Instruction C means General Instruction C to Schedule 13E-3 
(Sec. 240.13e-100 of this chapter) and General Instruction C to 
Schedule TO (Sec. 240.14d-100 of this chapter);
    (c) Issuer tender offer has the same meaning as in Sec. 240.13e-
4(a)(2) of this chapter;
    (d) Offeror means any person who makes a tender offer or on whose 
behalf a tender offer is made;
    (e) Rule 13e-3 transaction has the same meaning as in Sec. 240.13e-
3(a)(3) of this chapter;
    (f) Subject company means the company or entity whose securities 
are sought to be acquired in the transaction (e.g., the target), or 
that is otherwise the subject of the transaction;
    (g) Subject securities means the securities or class of securities 
that are sought to be acquired in the transaction or that are otherwise 
the subject of the transaction; and
    (h) Third-party tender offer means a tender offer that is not an 
issuer tender offer.


Sec. 229.1001  (Item 1001) Summary term sheet.

    Summary term sheet. Provide security holders with a summary term 
sheet that is written in plain English. The summary term sheet must 
briefly describe in bullet point format the most material terms of the 
proposed transaction. The summary term sheet must provide security 
holders with sufficient information to understand the essential 
features and significance of the proposed transaction. The bullet 
points must cross-reference a more detailed discussion contained in the 
disclosure document that is disseminated to security holders.

    Instructions to Item 1001:
    1. The summary term sheet must not recite all information 
contained in the disclosure document that will be provided to 
security holders. The summary term sheet is intended to serve as an 
overview of all material matters that are presented in the 
accompanying documents provided to security holders.
    2. The summary term sheet must begin on the first or second page 
of the disclosure document provided to security holders.
    3. Refer to Rule 421(b) and (d) of Regulation C of the 
Securities Act (Sec. 230.421 of this chapter) for a description of 
plain English disclosure.


Sec. 229.1002  (Item 1002) Subject company information.

    (a) Name and address. State the name of the subject company (or the 
issuer in the case of an issuer tender offer), and the address and 
telephone number of its principal executive offices.
    (b) Securities. State the exact title and number of shares 
outstanding of the subject class of equity securities as of the most 
recent practicable date. This may be based upon information in the most 
recently available filing with the Commission by the subject company 
unless the filing person has more current information.
    (c) Trading market and price. Identify the principal market in 
which the subject securities are traded and state the high and low 
sales prices for the subject securities in the principal market (or, if 
there is no principal market, the range of high and low bid quotations 
and the source of the quotations) for each quarter during the past two 
years. If there is no established trading market for the securities 
(except for limited or sporadic quotations), so state.
    (d) Dividends. State the frequency and amount of any dividends paid 
during the past two years with respect to the subject securities. 
Briefly describe any restriction on the subject company's current or 
future ability to pay dividends. If the filing person is not the 
subject company, furnish this information to the extent known after 
making reasonable inquiry.
    (e) Prior public offerings. If the filing person has made an 
underwritten public

[[Page 61444]]

offering of the subject securities for cash during the past three years 
that was registered under the Securities Act of 1933 or exempt from 
registration under Regulation A (Sec. 230.251 through Sec. 230.263 of 
this chapter), state the date of the offering, the amount of securities 
offered, the offering price per share (adjusted for stock splits, stock 
dividends, etc. as appropriate) and the aggregate proceeds received by 
the filing person.
    (f) Prior stock purchases. If the filing person purchased any 
subject securities during the past two years, state the amount of the 
securities purchased, the range of prices paid and the average purchase 
price for each quarter during that period. Affiliates need not give 
information for purchases made before becoming an affiliate.


Sec. 229.1003  (Item 1003) Identity and background of filing person.

    (a) Name and address. State the name, business address and business 
telephone number of each filing person. Also state the name and address 
of each person specified in Instruction C to the schedule (except for 
Schedule 14D-9 (Sec. 240.14d-101 of this chapter)). If the filing 
person is an affiliate of the subject company, state the nature of the 
affiliation. If the filing person is the subject company, so state.
    (b) Business and background of entities. If any filing person 
(other than the subject company) or any person specified in Instruction 
C to the schedule is not a natural person, state the person's principal 
business, state or other place of organization, and the information 
required by paragraphs (c)(3) and (c)(4) of this section for each 
person.
    (c) Business and background of natural persons. If any filing 
person or any person specified in Instruction C to the schedule is a 
natural person, provide the following information for each person:
    (1) Current principal occupation or employment and the name, 
principal business and address of any corporation or other organization 
in which the employment or occupation is conducted;
    (2) Material occupations, positions, offices or employment during 
the past five years, giving the starting and ending dates of each and 
the name, principal business and address of any corporation or other 
organization in which the occupation, position, office or employment 
was carried on;
    (3) A statement whether or not the person was convicted in a 
criminal proceeding during the past five years (excluding traffic 
violations or similar misdemeanors). If the person was convicted, 
describe the criminal proceeding, including the dates, nature of 
conviction, name and location of court, and penalty imposed or other 
disposition of the case;
    (4) A statement whether or not the person was a party to any 
judicial or administrative proceeding during the past five years 
(except for matters that were dismissed without sanction or settlement) 
that resulted in a judgment, decree or final order enjoining the person 
from future violations of, or prohibiting activities subject to, 
federal or state securities laws, or a finding of any violation of 
federal or state securities laws. Describe the proceeding, including a 
summary of the terms of the judgment, decree or final order; and
    (5) Country of citizenship.
    (d) Tender offer. Identify the tender offer and the class of 
securities to which the offer relates, the name of the offeror and its 
address (which may be based on the offeror's Schedule TO (Sec. 240.14d-
100 of this chapter) filed with the Commission).

    Instruction to Item 1003
    If the filing person is making information relating to the 
transaction available on the Internet, state the address where the 
information can be found.


Sec. 229.1004  (Item 1004) Terms of the transaction.

    (a) Material terms. State the material terms of the transaction.
    (1) Tender offers. In the case of a tender offer, the information 
must include:
    (i) The total number and class of securities sought in the offer;
    (ii) The type and amount of consideration offered to security 
holders;
    (iii) The scheduled expiration date;
    (iv) Whether a subsequent offering period will be available, if the 
transaction is a third-party tender offer;
    (v) Whether the offer may be extended, and if so, how it could be 
extended;
    (vi) The dates before and after which security holders may withdraw 
securities tendered in the offer;
    (vii) The procedures for tendering and withdrawing securities;
    (viii) The manner in which securities will be accepted for payment;
    (ix) If the offer is for less than all securities of a class, the 
periods for accepting securities on a pro rata basis and the offeror's 
present intentions in the event that the offer is oversubscribed;
    (x) An explanation of any material differences in the rights of 
security holders as a result of the transaction, if material;
    (xi) A brief statement as to the accounting treatment of the 
transaction, if material; and
    (xii) The federal income tax consequences of the transaction, if 
material.
    (2) Mergers or similar transactions. In the case of a merger or 
similar transaction, the information must include:
    (i) A brief description of the transaction;
    (ii) The consideration offered to security holders;
    (iii) The reasons for engaging in the transaction;
    (iv) The vote required for approval of the transaction;
    (v) An explanation of any material differences in the rights of 
security holders as a result of the transaction, if material;
    (vi) A brief statement as to the accounting treatment of the 
transaction, if material; and
    (vii) The federal income tax consequences of the transaction, if 
material.

    Instruction to Item 1004(a):
    If the consideration offered includes securities exempt from 
registration under the Securities Act of 1933, provide a description 
of the securities that complies with Item 202 of Regulation S-K 
(Sec. 229.202). This description is not required if the issuer of 
the securities meets the requirements of General Instructions I.A, 
I.B.1 or I.B.2, as applicable, or I.C. of Form S-3 (Sec. 239.13 of 
this chapter) and elects to furnish information by incorporation by 
reference; only capital stock is to be issued; and securities of the 
same class are registered under section 12 of the Exchange Act and 
either are listed for trading or admitted to unlisted trading 
privileges on a national securities exchange; or are securities for 
which bid and offer quotations are reported in an automated 
quotations system operated by a national securities association.

    (b) Purchases. State whether any securities are to be purchased 
from any officer, director or affiliate of the subject company and 
provide the details of each transaction.
    (c) Different terms. Describe any term or arrangement in the Rule 
13e-3 transaction that treats any subject security holders differently 
from other subject security holders.
    (d) Appraisal rights. State whether or not dissenting security 
holders are entitled to any appraisal rights. If so, summarize the 
appraisal rights. If there are no appraisal rights available under 
state law for security holders who object to the transaction, briefly 
outline any other rights that may be available to security holders 
under the law.
    (e) Provisions for unaffiliated security holders. Describe any 
provision made

[[Page 61445]]

by the filing person in connection with the transaction to grant 
unaffiliated security holders access to the corporate files of the 
filing person or to obtain counsel or appraisal services at the expense 
of the filing person. If none, so state.
    (f) Eligibility for listing or trading. If the transaction involves 
the offer of securities of the filing person in exchange for equity 
securities held by unaffiliated security holders of the subject 
company, describe whether or not the filing person will take steps to 
assure that the securities offered are or will be eligible for trading 
on an automated quotations system operated by a national securities 
association.


Sec. 229.1005  (Item 1005) Past contacts, transactions, negotiations 
and agreements.

    (a) Transactions. Briefly state the nature and approximate dollar 
amount of any transaction, other than those described in paragraphs (b) 
or (c) of this section, that occurred during the past two years, 
between the filing person (including any person specified in 
Instruction C of the schedule) and;
    (1) The subject company or any of its affiliates that are not 
natural persons if the aggregate value of the transactions is more than 
one percent of the subject company's consolidated revenues for:
    (i) The fiscal year when the transaction occurred; or
    (ii) The past portion of the current fiscal year, if the 
transaction occurred in the current year; and

    Instruction to Item 1005(a)(1):
    The information required by this Item may be based on 
information in the subject company's most recent filing with the 
Commission, unless the filing person has reason to believe the 
information is not accurate.

    (2) Any executive officer, director or affiliate of the subject 
company that is a natural person if the aggregate value of the 
transaction or series of similar transactions with that person exceeds 
$60,000.
    (b) Significant corporate events. Describe any negotiations, 
transactions or material contacts during the past two years between the 
filing person (including subsidiaries of the filing person and any 
person specified in Instruction C of the schedule) and the subject 
company or its affiliates concerning any:
    (1) Merger;
    (2) Consolidation;
    (3) Acquisition;
    (4) Tender offer for or other acquisition of any class of the 
subject company's securities;
    (5) Election of the subject company's directors; or
    (6) Sale or other transfer of a material amount of assets of the 
subject company.
    (c) Negotiations or contacts. Describe any negotiations or material 
contacts concerning the matters referred to in paragraph (b) of this 
section during the past two years between:
    (1) Any affiliates of the subject company; or
    (2) The subject company or any of its affiliates and any person not 
affiliated with the subject company who would have a direct interest in 
such matters.
    Instruction to paragraphs (b) and (c) of Item 1005
    Identify the person who initiated the contacts or negotiations.

    (d) Conflicts of interest. If material, describe any agreement, 
arrangement or understanding and any actual or potential conflict of 
interest between the filing person or its affiliates and:
    (1) The subject company, its executive officers, directors or 
affiliates; or
    (2) The offeror, its executive officers, directors or affiliates.

    Instruction to Item 1005(d)
    If the filing person is the subject company, no disclosure 
called for by this paragraph is required in the document 
disseminated to security holders, so long as substantially the same 
information was filed with the Commission previously and disclosed 
in a proxy statement, report or other communication sent to security 
holders by the subject company in the past year. The document 
disseminated to security holders, however, must refer specifically 
to the discussion in the proxy statement, report or other 
communication that was sent to security holders previously. The 
information also must be filed as an exhibit to the schedule.

    (e) Agreements involving the subject company's securities. Describe 
any agreement, arrangement, or understanding, whether or not legally 
enforceable, between the filing person (including any person specified 
in Instruction C of the schedule) and any other person with respect to 
any securities of the subject company. Name all persons that are a 
party to the agreements, arrangements, or understandings and describe 
all material provisions.
    Instructions to Item 1005(e)
    1. The information required by this Item includes: the transfer 
or voting of securities, joint ventures, loan or option 
arrangements, puts or calls, guarantees of loans, guarantees against 
loss, or the giving or withholding of proxies, consents or 
authorizations.
    2. Include information for any securities that are pledged or 
otherwise subject to a contingency, the occurrence of which would 
give another person the power to direct the voting or disposition of 
the subject securities. No disclosure, however, is required about 
standard default and similar provisions contained in loan 
agreements.


Sec. 229.1006  (Item 1006) Purposes of the transaction and plans or 
proposals.

    (a) Purposes. State the purposes of the transaction.
    (b) Use of securities acquired. Indicate whether the securities 
acquired in the transaction will be retained, retired, held in 
treasury, or otherwise disposed of.
    (c) Plans. Describe any plans, proposals or negotiations that 
relate to or would result in:
    (1) Any extraordinary transaction, such as a merger, reorganization 
or liquidation, involving the subject company or any of its 
subsidiaries;
    (2) Any purchase, sale or transfer of a material amount of assets 
of the subject company or any of its subsidiaries;
    (3) Any material change in the present dividend rate or policy, or 
indebtedness or capitalization of the subject company;
    (4) Any change in the present board of directors or management of 
the subject company, including, but not limited to, any plans or 
proposals to change the number or the term of directors or to fill any 
existing vacancies on the board or to change any material term of the 
employment contract of any executive officer;
    (5) Any other material change in the subject company's corporate 
structure or business, including, if the subject company is a 
registered closed-end investment company, any plans or proposals to 
make any changes in its investment policy for which a vote would be 
required by Section 13 of the Investment Company Act of 1940 (15 U.S.C. 
80a-13);
    (6) Any class of equity securities of the subject company to be 
delisted from a national securities exchange or cease to be authorized 
to be quoted in an automated quotations system operated by a national 
securities association;
    (7) Any class of equity securities of the subject company becoming 
eligible for termination of registration under section 12(g)(4) of the 
Act (15 U.S.C. 78l);
    (8) The suspension of the subject company's obligation to file 
reports under Section 15(d) of the Act (15 U.S.C. 78o);
    (9) The acquisition by any person of additional securities of the 
subject company, or the disposition of securities of the subject 
company; or (10) Any changes in the subject company's charter, bylaws 
or other governing instruments or other actions that could impede the 
acquisition of control of the subject company.
    (d) Subject company negotiations. If the filing person is the 
subject company:

[[Page 61446]]

    (1) State whether or not that person is undertaking or engaged in 
any negotiations in response to the tender offer that relate to:
    (i) A tender offer or other acquisition of the subject company's 
securities by the filing person, any of its subsidiaries, or any other 
person; or
    (ii) Any of the matters referred to in paragraphs (c)(1) through 
(c)(3) of this section; and
    (2) Describe any transaction, board resolution, agreement in 
principle, or signed contract that is entered into in response to the 
tender offer that relates to one or more of the matters referred to in 
paragraph (d)(1) of this section.
    Instruction to Item 1006(d)(1)
    If an agreement in principle has not been reached at the time of 
filing, no disclosure under paragraph (d)(1) of this section is 
required of the possible terms of or the parties to the transaction 
if in the opinion of the board of directors of the subject company 
disclosure would jeopardize continuation of the negotiations. In 
that case, disclosure indicating that negotiations are being 
undertaken or are underway and are in the preliminary stages is 
sufficient.


Sec. 229.1007  (Item 1007) Source and amount of funds or other 
consideration.

    (a) Source of funds. State the specific sources and total amount of 
funds or other consideration to be used in the transaction. If the 
transaction involves a tender offer, disclose the amount of funds or 
other consideration required to purchase the maximum amount of 
securities sought in the offer.
    (b) Conditions. State any material conditions to the financing 
discussed in response to paragraph (a) of this section. Disclose any 
alternative financing arrangements or alternative financing plans in 
the event the primary financing plans fall through. If none, so state.
    (c) Expenses. Furnish a reasonably itemized statement of all 
expenses incurred or estimated to be incurred in connection with the 
transaction including, but not limited to, filing, legal, accounting 
and appraisal fees, solicitation expenses and printing costs and state 
whether or not the subject company has paid or will be responsible for 
paying any or all expenses.
    (d) Borrowed funds. If all or any part of the funds or other 
consideration required is, or is expected, to be borrowed, directly or 
indirectly, for the purpose of the transaction:
    (1) Provide a summary of each loan agreement or arrangement 
containing the identity of the parties, the term, the collateral, the 
stated and effective interest rates, and any other material terms or 
conditions of the loan; and
    (2) Briefly describe any plans or arrangements to finance or repay 
the loan, or, if no plans or arrangements have been made, so state.

    Instruction to Item 1007(d):
    If the transaction is a third-party tender offer and the source 
of all or any part of the funds used in the transaction is to come 
from a loan made in the ordinary course of business by a bank as 
defined by section 3(a)(6) of the Act (15 U.S.C. 78c), the name of 
the bank will not be made available to the public if the filing 
person so requests in writing and files the request, naming the 
bank, with the Secretary of the Commission.


Sec. 229.1008  (Item 1008) Interest in securities of the subject 
company.

    (a) Securities ownership. State the aggregate number and percentage 
of subject securities that are beneficially owned by each person named 
in response to Item 1003 of Regulation M-A (Sec. 229.1003) and by each 
associate and majority-owned subsidiary of those persons. Give the name 
and address of any associate or subsidiary.
    Instructions to Item 1008(a)

    1. For purposes of this section, beneficial ownership is 
determined in accordance with Rule 13d-3 (Sec. 240.13d-3 of this 
chapter) under the Exchange Act. Identify the shares that the person 
has a right to acquire.
    2. The information required by this section may be based on the 
number of outstanding securities disclosed in the subject company's 
most recently available filing with the Commission, unless the 
filing person has more current information.
    3. The information required by this section with respect to 
officers, directors and associates of the subject company must be 
given to the extent known after making reasonable inquiry.

    (b) Securities transactions. Describe any transaction in the 
subject securities during the past 60 days. The description of 
transactions required must include, but not necessarily be limited to:
    (1) The identity of the persons specified in the Instruction to 
this section who effected the transaction;
    (2) The date of the transaction;
    (3) The amount of securities involved;
    (4) The price per share; and
    (5) Where and how the transaction was effected.

    Instructions to Item 1008(b)
    1. Provide the required transaction information for the 
following persons:
    (a) The filing person (for all schedules);
    (b) Any person named in Instruction C of the schedule and any 
associate or majority-owned subsidiary of the issuer or filing 
person (for all schedules except Schedule 14D-9 (Sec. 240.14d-101 of 
this chapter));
    (c) Any executive officer, director, affiliate or subsidiary of 
the filing person (for Schedule 14D-9 (Sec. 240.14d-101 of this 
chapter);
    (d) The issuer and any executive officer or director of any 
subsidiary of the issuer or filing person (for an issuer tender 
offer on Schedule TO (Sec. 240.14d-100 of this chapter)); and
    (e) The issuer and any pension, profit-sharing or similar plan 
of the issuer or affiliate filing the schedule (for a going-private 
transaction on Schedule 13E-3 (Sec. 240.13e-100 of this chapter)).
    2. Provide the information required by this Item if it is 
available to the filing person at the time the statement is 
initially filed with the Commission. If the information is not 
initially available, it must be obtained and filed with the 
Commission promptly, but in no event later than three business days 
after the date of the initial filing, and if material, disclosed in 
a manner reasonably designed to inform security holders. The 
procedure specified by this instruction is provided to maintain the 
confidentiality of information in order to avoid possible misuse of 
inside information.


Sec. 229.1009  (Item 1009) Persons/assets, retained, employed, 
compensated or used.

    (a) Solicitations or recommendations. Identify all persons and 
classes of persons that are directly or indirectly employed, retained, 
or to be compensated to make solicitations or recommendations in 
connection with the transaction. Provide a summary of all material 
terms of employment, retainer or other arrangement for compensation.
    (b) Employees and corporate assets. Identify any officer, class of 
employees or corporate assets of the subject company that has been or 
will be employed or used by the filing person in connection with the 
transaction. Describe the purpose for their employment or use.

    Instruction to Item 1009(b):
    Provide all information required by this Item except for the 
information required by paragraph (a) of this section and Item 1007 
of Regulation M-A (Sec. 229.1007).


Sec. 229.1010  (Item 1010) Financial statements.

    (a) Financial information. Furnish the following financial 
information:
    (1) Audited financial statements for the two fiscal years required 
to be filed with the company's most recent annual report under sections 
13 and 15(d) of the Exchange Act (15 U.S.C. 78m; 15 U.S.C. 78o);
    (2) Unaudited balance sheets, comparative year-to-date income 
statements and related earnings per share data, statements of cash 
flows, and comprehensive income required to be included in the 
company's most recent quarterly report filed under the Exchange Act;
    (3) Ratio of earnings to fixed charges, computed in a manner 
consistent with Item 503(d) of Regulation S-K (Sec. 229.503(d)), for 
the two most recent fiscal years and the interim periods provided under 
paragraph (a)(2) of this section; and

[[Page 61447]]

    (4) Book value per share as of the date of the most recent balance 
sheet presented.
    (b) Pro forma information. If material, furnish pro forma 
information disclosing the effect of the transaction on:
    (1) The company's balance sheet as of the date of the most recent 
balance sheet presented under paragraph (a) of this section;
    (2) The company's statement of income, earnings per share, and 
ratio of earnings to fixed charges for the most recent fiscal year and 
the latest interim period provided under paragraph (a)(2) of this 
section; and
    (3) The company's book value per share as of the date of the most 
recent balance sheet presented under paragraph (a) of this section.
    (c) Summary information. Furnish a fair and adequate summary of the 
information specified in paragraphs (a) and (b) of this section for the 
same periods specified. A fair and adequate summary includes:
    (1) The summarized financial information specified in Sec. 210.1-
02(bb)(1) of this chapter;
    (2) Income per common share from continuing operations (basic and 
diluted, if applicable);
    (3) Net income per common share (basic and diluted, if applicable);
    (4) Ratio of earnings to fixed charges, computed in a manner 
consistent with Item 503(d) of Regulation S-K (Sec. 229.503(d));
    (5) Book value per share as of the date of the most recent balance 
sheet; and
    (6) If material, pro forma data for the summarized financial 
information specified in paragraphs (c)(1) through (c)(5) of this 
section disclosing the effect of the transaction.


Sec. 229.1011  (Item 1011) Additional information.

    (a) Agreements, regulatory requirements and legal proceedings. If 
material to a security holder's decision whether to sell, tender or 
hold the securities sought in the tender offer, furnish the following 
information:
    (1) Any present or proposed material agreement, arrangement, 
understanding or relationship between the offeror or any of its 
executive officers, directors, controlling persons or subsidiaries and 
the subject company or any of its executive officers, directors, 
controlling persons or subsidiaries (other than any agreement, 
arrangement or understanding disclosed under any other sections of 
Regulation M-A (Secs. 229.1000 through 229.1016));

    Instruction to paragraph (a)(1):
    In an issuer tender offer disclose any material agreement, 
arrangement, understanding or relationship between the offeror and 
any of its executive officers, directors, controlling persons or 
subsidiaries.

    (2) To the extent known by the offeror after reasonable 
investigation, the applicable regulatory requirements which must be 
complied with or approvals which must be obtained in connection with 
the tender offer;
    (3) The applicability of any anti-trust laws;
    (4) The applicability of margin requirements under section 7 of the 
Act (15 U.S.C. 78g) and the applicable regulations; and
    (5) Any material pending legal proceedings relating to the tender 
offer, including the name and location of the court or agency in which 
the proceedings are pending, the date instituted, the principal 
parties, and a brief summary of the proceedings and the relief sought.

    Instruction to Item 1011(a)(5):
    A copy of any document relating to a major development (such as 
pleadings, an answer, complaint, temporary restraining order, 
injunction, opinion, judgment or order) in a material pending legal 
proceeding must be furnished promptly to the Commission staff on a 
supplemental basis.

    (b) Other material information. Furnish such additional material 
information, if any, as may be necessary to make the required 
statements, in light of the circumstances under which they are made, 
not materially misleading.


Sec. 229.1012  (Item 1012) The solicitation or recommendation.

    (a) Solicitation or recommendation. State the nature of the 
solicitation or the recommendation. If this statement relates to a 
recommendation, state whether the filing person is advising holders of 
the subject securities to accept or reject the tender offer or to take 
other action with respect to the tender offer and, if so, describe the 
other action recommended. If the filing person is the subject company 
and is not making a recommendation, state whether the subject company 
is expressing no opinion and is remaining neutral toward the tender 
offer or is unable to take a position with respect to the tender offer.
    (b) Reasons. State the reasons for the position (including the 
inability to take a position) stated in paragraph (a) of this section. 
Conclusory statements such as ``The tender offer is in the best 
interests of shareholders'' are not considered sufficient disclosure.
    (c) Intent to tender. To the extent known by the filing person 
after making reasonable inquiry, state whether the filing person or any 
executive officer, director, affiliate or subsidiary of the filing 
person currently intends to tender, sell or hold the subject securities 
that are held of record or beneficially owned by that person.
    (d) Intent to tender or vote in a going-private transaction. To the 
extent known by the filing person after making reasonable inquiry, 
state whether or not any executive officer, director or affiliate of 
the issuer (or any person specified in Instruction C to the schedule) 
currently intends to tender or sell subject securities owned or held by 
that person and/or how each person currently intends to vote subject 
securities, including any securities the person has proxy authority 
for. State the reasons for the intended action.

    Instruction to Item 1012(d):
    Provide the information required by this section if it is 
available to the filing person at the time the statement is 
initially filed with the Commission. If the information is not 
available, it must be filed with the Commission promptly, but in no 
event later than three business days after the date of the initial 
filing, and if material, disclosed in a manner reasonably designed 
to inform security holders.

    (e) Recommendations of others. To the extent known by the filing 
person after making reasonable inquiry, state whether or not any person 
specified in paragraph (d) of this section has made a recommendation 
either in support of or opposed to the transaction and the reasons for 
the recommendation.


Sec. 229.1013  (Item 1013) Purposes, alternatives, reasons and effects 
in a going-private transaction.

    (a) Purposes. State the purposes for the Rule 13e-3 transaction.
    (b) Alternatives. If the subject company or affiliate considered 
alternative means to accomplish the stated purposes, briefly describe 
the alternatives and state the reasons for their rejection.
    (c) Reasons. State the reasons for the structure of the Rule 13e-3 
transaction and for undertaking the transaction at this time.
    (d) Effects. Describe the effects of the Rule 13e-3 transaction on 
the subject company, its affiliates and unaffiliated security holders, 
including the federal tax consequences of the transaction.

    Instructions to Item 1013:
    1. Conclusory statements will not be considered sufficient 
disclosure in response to this section.
    2. The description required by paragraph (d) of this section 
must include a reasonably detailed discussion of both the benefits 
and detriments of the Rule 13e-3 transaction to the subject company, 
its affiliates and unaffiliated security holders. The benefits and 
detriments of the Rule 13e-3 transaction must be quantified to the 
extent practicable.

[[Page 61448]]

    3. If this statement is filed by an affiliate of the subject 
company, the description required by paragraph (d) of this section 
must include, but not be limited to, the effect of the Rule 13e-3 
transaction on the affiliate's interest in the net book value and 
net earnings of the subject company in terms of both dollar amounts 
and percentages.


Sec. 229.1014  (Item 1014) Fairness of the going-private transaction.

    (a) Fairness. State whether the subject company or affiliate filing 
the statement reasonably believes that the Rule 13e-3 transaction is 
fair or unfair to unaffiliated security holders. If any director 
dissented to or abstained from voting on the Rule 13e-3 transaction, 
identify the director, and indicate, if known, after making reasonable 
inquiry, the reasons for the dissent or abstention.
    (b) Factors considered in determining fairness. Discuss in 
reasonable detail the material factors upon which the belief stated in 
paragraph (a) of this section is based and, to the extent practicable, 
the weight assigned to each factor. The discussion must include an 
analysis of the extent, if any, to which the filing person's beliefs 
are based on the factors described in Instruction 2 of this section, 
paragraphs (c), (d) and (e) of this section and Item 1015 of Regulation 
M-A (Sec. 229.1015).
    (c) Approval of security holders. State whether or not the 
transaction is structured so that approval of at least a majority of 
unaffiliated security holders is required.
    (d) Unaffiliated representative. State whether or not a majority of 
directors who are not employees of the subject company has retained an 
unaffiliated representative to act solely on behalf of unaffiliated 
security holders for purposes of negotiating the terms of the Rule 13e-
3 transaction and/or preparing a report concerning the fairness of the 
transaction.
    (e) Approval of directors. State whether or not the Rule 13e-3 
transaction was approved by a majority of the directors of the subject 
company who are not employees of the subject company.
    (f) Other offers. If any offer of the type described in paragraph 
(viii) of Instruction 2 to this section has been received, describe the 
offer and state the reasons for its rejection.

    Instructions to Item 1014:
    1. A statement that the issuer or affiliate has no reasonable 
belief as to the fairness of the Rule 13e-3 transaction to 
unaffiliated security holders will not be considered sufficient 
disclosure in response to paragraph (a) of this section.
    2. The factors that are important in determining the fairness of 
a transaction to unaffiliated security holders and the weight, if 
any, that should be given to them in a particular context will vary. 
Normally such factors will include, among others, those referred to 
in paragraphs (c), (d) and (e) of this section and whether the 
consideration offered to unaffiliated security holders constitutes 
fair value in relation to:
    (i) Current market prices;
    (ii) Historical market prices;
    (iii) Net book value;
    (iv) Going concern value;
    (v) Liquidation value;
    (vi) Purchase prices paid in previous purchases disclosed in 
response to Item 1002(f) of Regulation M-A (Sec. 229.1002(f));
    (vii) Any report, opinion, or appraisal described in Item 1015 
of Regulation M-A (Sec. 229.1015); and
    (viii) Firm offers of which the subject company or affiliate is 
aware made by any unaffiliated person, other than the filing 
persons, during the past two years for:
    (A) The merger or consolidation of the subject company with or 
into another company, or vice versa;
    (B) The sale or other transfer of all or any substantial part of 
the assets of the subject company; or
    (C) A purchase of the subject company's securities that would 
enable the holder to exercise control of the subject company.
    3. Conclusory statements, such as ``The Rule 13e-3 transaction 
is fair to unaffiliated security holders in relation to net book 
value, going concern value and future prospects of the issuer'' will 
not be considered sufficient disclosure in response to paragraph (b) 
of this section.


Sec. 229.1015  (Item 1015) Reports, opinions, appraisals and 
negotiations.

    (a) Report, opinion or appraisal. State whether or not the subject 
company or affiliate has received any report, opinion (other than an 
opinion of counsel) or appraisal from an outside party that is 
materially related to the Rule 13e-3 transaction, including, but not 
limited to: Any report, opinion or appraisal relating to the 
consideration or the fairness of the consideration to be offered to 
security holders or the fairness of the transaction to the issuer or 
affiliate or to security holders who are not affiliates.
    (b) Preparer and summary of the report, opinion or appraisal. For 
each report, opinion or appraisal described in response to paragraph 
(a) of this section or any negotiation or report described in response 
to Item 1014(d) of Regulation M-A (Sec. 229.1014) or Item 14(b)(6) of 
Schedule 14A (Sec. 240.14a-101 of this chapter) concerning the terms of 
the transaction:
    (1) Identify the outside party and/or unaffiliated representative;
    (2) Briefly describe the qualifications of the outside party and/or 
unaffiliated representative;
    (3) Describe the method of selection of the outside party and/or 
unaffiliated representative;
    (4) Describe any material relationship that existed during the past 
two years or is mutually understood to be contemplated and any 
compensation received or to be received as a result of the relationship 
between:
    (i) The outside party, its affiliates, and/or unaffiliated 
representative; and
    (ii) The subject company or its affiliates;
    (5) If the report, opinion or appraisal relates to the fairness of 
the consideration, state whether the subject company or affiliate 
determined the amount of consideration to be paid or whether the 
outside party recommended the amount of consideration to be paid; and
    (6) Furnish a summary concerning the negotiation, report, opinion 
or appraisal. The summary must include, but need not be limited to, the 
procedures followed; the findings and recommendations; the bases for 
and methods of arriving at such findings and recommendations; 
instructions received from the subject company or affiliate; and any 
limitation imposed by the subject company or affiliate on the scope of 
the investigation.

    Instruction to Item 1015(b):
    The information called for by paragraphs (b)(1), (2) and (3) of 
this section must be given with respect to the firm that provides 
the report, opinion or appraisal rather than the employees of the 
firm that prepared the report.

    (c) Availability of documents. Furnish a statement to the effect 
that the report, opinion or appraisal will be made available for 
inspection and copying at the principal executive offices of the 
subject company or affiliate during its regular business hours by any 
interested equity security holder of the subject company or 
representative who has been so designated in writing. This statement 
also may provide that a copy of the report, opinion or appraisal will 
be transmitted by the subject company or affiliate to any interested 
equity security holder of the subject company or representative who has 
been so designated in writing upon written request and at the expense 
of the requesting security holder.


Sec. 229.1016  (Item 1016) Exhibits.

    File as an exhibit to the schedule:
    (a) Any disclosure materials furnished to security holders by or on 
behalf of the filing person, including:
    (1) Tender offer materials (including transmittal letter);
    (2) Solicitation or recommendation (including those referred to in 
Item 1012 of Regulation M-A (Sec. 229.1012));
    (3) Going-private disclosure document;

[[Page 61449]]

    (4) Prospectus used in connection with an exchange offer where 
securities are registered under the Securities Act of 1933; and
    (5) Any other disclosure materials;
    (b) Any loan agreement referred to in response to Item 1007(d) of 
Regulation M-A (Sec. 229.1007(d));

    Instruction to Item 1016(b):
    If the filing relates to a third-party tender offer and a 
request is made under Item 1007(d) of Regulation M-A 
(Sec. 229.1007(d)), the identity of the bank providing financing may 
be omitted from the loan agreement filed as an exhibit.

    (c) Any report, opinion or appraisal referred to in response to 
Item 1014(d) or Item 1015 of Regulation M-A (Sec. 229.1014(d) or 
Sec. 229.1015);
    (d) Any document setting forth the terms of any agreement, 
arrangement, understanding or relationship referred to in response to 
Item 1005(e) or Item 1011(a)(1) of Regulation M-A (Sec. 229.1005(e) or 
Sec. 229.1011(a)(1));
    (e) Any agreement, arrangement or understanding referred to in 
response to Sec. 229.1005(d), or the pertinent portions of any proxy 
statement, report or other communication containing the disclosure 
required by Item 1005(d) of Regulation M-A (Sec. 229.1005(d));
    (f) A detailed statement describing security holders' appraisal 
rights and the procedures for exercising those appraisal rights 
referred to in response to Item 1004(d) of Regulation M-A 
(Sec. 229.1004(d));
    (g) Any written instruction, form or other material that is 
furnished to persons making an oral solicitation or recommendation by 
or on behalf of the filing person for their use directly or indirectly 
in connection with the transaction; and
    (h) Any written opinion prepared by legal counsel at the filing 
person's request and communicated to the filing person pertaining to 
the tax consequences of the transaction.

Exhibit Table to Item 1016 of Regulation M-A [13E-3 to 14D-9]

 
------------------------------------------------------------------------
 
Disclosure Material...........            X             X             X
Loan Agreement................            X             X   ............
Report, Opinion or Appraisal..            X   ............  ............
Contracts, Arrangements or                X             X             X
 Understandings...............
Statement re: Appraisal Rights            X   ............  ............
Oral Solicitation Materials...            X             X             X
Tax Opinion                     ............            X   ............
------------------------------------------------------------------------

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

    6. The authority citation for part 230 is revised to read in part 
as follows:

    Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77r, 77s, 77sss, 
77z-3, 78c, 78d, 781, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-
24, 80a-28, 80a-29, 80a-30, and 80a-37, unless otherwise noted.
* * * * *
    7. By revising Sec. 230.135 to read as follows:


Sec. 230.135  Notice of proposed registered offerings.

    (a) When notice is not an offer. For purposes of section 5 of the 
Act (15 U.S.C. 77e) only, an issuer or a selling security holder (and 
any person acting on behalf of either of them) that publishes through 
any medium a notice of a proposed offering to be registered under the 
Act will not be deemed to offer its securities for sale through that 
notice if:
    (1) Legend. The notice includes a statement to the effect that it 
does not constitute an offer of any securities for sale; and
    (2) Limited notice content. The notice otherwise includes no more 
than the following information:
    (i) The name of the issuer;
    (ii) The title, amount and basic terms of the securities offered;
    (iii) The amount of the offering, if any, to be made by selling 
security holders;
    (iv) The anticipated timing of the offering;
    (v) A brief statement of the manner and the purpose of the 
offering, without naming the underwriters;
    (vi) Whether the issuer is directing its offering to only a 
particular class of purchasers;
    (vii) Any statements or legends required by the laws of any state 
or foreign country or administrative authority; and
    (viii) In the following offerings, the notice may contain 
additional information, as follows:
    (A) Rights offering. In a rights offering to existing security 
holders:
    (1) The class of security holders eligible to subscribe;
    (2) The subscription ratio and expected subscription price;
    (3) The proposed record date;
    (4) The anticipated issuance date of the rights; and
    (5) The subscription period or expiration date of the rights 
offering.
    (B) Offering to employees. In an offering to employees of the 
issuer or an affiliated company:
    (1) The name of the employer;
    (2) The class of employees being offered the securities;
    (3) The offering price; and
    (4) The duration of the offering period.
    (C) Exchange offer. In an exchange offer:
    (1) The basic terms of the exchange offer;
    (2) The name of the subject company;
    (3) The subject class of securities sought in the exchange offer.
    (D) Rule 145(a) offering. In a Sec. 230.145(a) offering:
    (1) The name of the person whose assets are to be sold in exchange 
for the securities to be offered;
    (2) The names of any other parties to the transaction;
    (3) A brief description of the business of the parties to the 
transaction;
    (4) The date, time and place of the meeting of security holders to 
vote on or consent to the transaction; and
    (5) A brief description of the transaction and the basic terms of 
the transaction.
    (b) Corrections of misstatements about the offering. A person that 
publishes a notice in reliance on this section may issue a notice that 
contains no more information than is necessary to correct inaccuracies 
published about the proposed offering.

    Note to Sec. 230.135: Communications under this section relating 
to business combination transactions must be filed as required by 
Sec. 230.425(b).

    8. By amending Sec. 230.145 by revising paragraph (b) to read as 
follows:

[[Page 61450]]

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

* * * * *
    (b) Communications before a Registration Statement is filed. 
Communications made in connection with or relating to a transaction 
described in paragraph (a) of this section that will be registered 
under the Act may be made under Sec. 230.135, Sec. 230.165 or 
Sec. 230.166.
* * * * *
    9. By adding Sec. 230.162 to read as follows:


Sec. 230.162  Submission of tenders in registered exchange offers.

    (a) Notwithstanding section 5(a) of the Act (15 U.S.C. 77e(a)), 
offerors may solicit tenders of securities in an exchange offer subject 
to Sec. 240.13e-4(e) or Sec. 240.14d-4(b) of this chapter before a 
registration statement is effective as to the security offered, so long 
as no securities are purchased until the registration statement is 
effective and the tender offer has expired in accordance with the 
tender offer rules.
    (b) Notwithstanding section 5(b)(2) of the Act (15 U.S.C. 
77e(b)(2)), a prospectus that meets the requirements of section 10(a) 
of the Act (15 U.S.C. 77j(a)) need not be delivered to security holders 
in an exchange offer subject to Sec. 240.13e-4(e) or Sec. 240.14d-4(b) 
of this chapter, so long as a preliminary prospectus, prospectus 
supplements and revised prospectuses are delivered to security holders 
in accordance with Sec. 240.13e-4(e)(2) or Sec. 240.14d-4(b) of this 
chapter, as applicable.
    10. By adding Sec. 230.165 to read as follows:


Sec. 230.165  Offers made in connection with a business combination 
transaction.

    Preliminary Note: This section is available only to 
communications relating to business combinations. The exemption does 
not apply to communications that may be in technical compliance with 
this section, but have the primary purpose or effect of conditioning 
the market for another transaction, such as a capital-raising or 
resale transaction.

    (a) Communications before a registration statement is filed. 
Notwithstanding section 5(c) of the Act (15 U.S.C. 77e(c)), the offeror 
of securities in a business combination transaction to be registered 
under the Act may make an offer to sell or solicit an offer to buy 
those securities from and including the first public announcement until 
the filing of a registration statement related to the transaction, so 
long as any written communication (other than non-public communications 
among participants) made in connection with or relating to the 
transaction (i.e., prospectus) is filed in accordance with Sec. 230.425 
and the conditions in paragraph (c) of this section are satisfied.
    (b) Communications after a registration statement is filed. 
Notwithstanding section 5(b)(1) of the Act (15 U.S.C. 77e(b)(1)), any 
written communication (other than non-public communications among 
participants) made in connection with or relating to a business 
combination transaction (i.e., prospectus) after the filing of a 
registration statement related to the transaction need not satisfy the 
requirements of section 10 (15 U.S.C. 77j) of the Act, so long as the 
prospectus is filed in accordance with Sec. 230.424 or Sec. 230.425 and 
the conditions in paragraph (c) of this section are satisfied.
    (c) Conditions. To rely on paragraphs (a) and (b) of this section:
    (1) Each prospectus must contain a prominent legend that urges 
investors to read the relevant documents filed or to be filed with the 
Commission because they contain important information. The legend also 
must explain to investors that they can get the documents for free at 
the Commission's web site and describe which documents are available 
free from the offeror; and
    (2) In an exchange offer, the offer must be made in accordance with 
the applicable tender offer rules (Secs. 240.14d-1 through 240.14e-8 of 
this chapter); and, in a transaction involving the vote of security 
holders, the offer must be made in accordance with the applicable proxy 
or information statement rules (Secs. 240.14a-1 through 240.14a-101 and 
Secs. 240.14c-1 through 240.14c-101 of this chapter).
    (d) Applicability. This section is applicable not only to the 
offeror of securities in a business combination transaction, but also 
to any other participant that may need to rely on and complies with 
this section in communicating about the transaction.
    (e) Failure to file or delay in filing. An immaterial or 
unintentional failure to file or delay in filing a prospectus described 
in this section will not result in a violation of section 5(b)(1) or 
(c) of the Act (15 U.S.C. 77e(b)(1) and (c)), so long as:
    (1) A good faith and reasonable effort was made to comply with the 
filing requirement; and
    (2) The prospectus is filed as soon as practicable after discovery 
of the failure to file.
    (f) Definitions.
    (1) A business combination transaction means any transaction 
specified in Sec. 230.145(a) or exchange offer;
    (2) A participant is any person or entity that is a party to the 
business combination transaction and any persons authorized to act on 
their behalf; and
    (3) Public announcement is any oral or written communication by a 
participant that is reasonably designed to, or has the effect of, 
informing the public or security holders in general about the business 
combination transaction.
    11. By adding Sec. 230.166 to read as follows:


Sec. 230.166  Exemption from section 5(c) for certain communications in 
connection with business combination transactions.

    Preliminary Note: This section is available only to 
communications relating to business combinations. The exemption does 
not apply to communications that may be in technical compliance with 
this section, but have the primary purpose or effect of conditioning 
the market for another transaction, such as a capital-raising or 
resale transaction.

    (a) Communications. In a registered offering involving a business 
combination transaction, any communication made in connection with or 
relating to the transaction before the first public announcement of the 
offering will not constitute an offer to sell or a solicitation of an 
offer to buy the securities offered for purposes of section 5(c) of the 
Act (15 U.S.C. 77e(c)), so long as the participants take all reasonable 
steps within their control to prevent further distribution or 
publication of the communication until either the first public 
announcement is made or the registration statement related to the 
transaction is filed.
    (b) Definitions. The terms business combination transaction, 
participant and public announcement have the same meaning as set forth 
in Sec. 230.165(f).
    12. By adding Sec. 230.425 to read as follows:


Sec. 230.425  Filing of certain prospectuses and communications under 
Sec. 230.135 in connection with business combination transactions.

    (a) All written communications made in reliance on Sec. 230.165 are 
prospectuses that must be filed with the Commission under this section 
on the date of first use.
    (b) All written communications that contain no more information 
than that specified in Sec. 230.135 must be filed with the Commission 
on or before the date of first use except as provided in paragraph 
(d)(1) of this section. A communication limited to the information 
specified in Sec. 230.135 will

[[Page 61451]]

not be deemed an offer in accordance with Sec. 230.135 even though it 
is filed under this section.
    (c) Each prospectus or Sec. 230.135 communication filed under this 
section must identify the filer, the company that is the subject of the 
offering and the Commission file number for the related registration 
statement or, if that file number is unknown, the subject company's 
Exchange Act or Investment Company Act file number, in the upper right 
corner of the cover page.
    (d) Notwithstanding paragraph (a) of this section, the following 
need not be filed under this section:
    (1) Any written communication that is limited to the information 
specified in Sec. 230.135 and does not contain new or different 
information from that which was previously publicly disclosed and filed 
under this section.
    (2) Any research report used in reliance on Sec. 230.137, 
Sec. 230.138 and Sec. 230.139;
    (3) Any confirmation described in Sec. 240.10b-10 of this chapter; 
and
    (4) Any prospectus filed under Sec. 230.424.

    Notes to Sec. 230.425: 1. File five copies of the prospectus or 
Sec. 230.135 communication if paper filing is permitted.
    2. No filing is required under Sec. 240.13e-4(c), Sec. 240.14a-
12(b), Sec. 240.14d-2(b), or Sec. 240.14d-9(a), if the communication 
is filed under this section. Communications filed under this section 
also are deemed filed under the other applicable sections.

    13. By revising Sec. 230.432 to read as follows:


Sec. 230.432  Additional information required to be included in 
prospectuses relating to tender offers.

    Notwithstanding the provisions of any form for the registration of 
securities under the Act, any prospectus relating to securities to be 
offered in connection with a tender offer for, or a request or 
invitation for tenders of, securities subject to either Sec. 240.13e-4 
or section 14(d) of the Securities Exchange Act of 1934 (15 U.S.C. 
78n(d)) must include the information required by Sec. 240.13e-4(d)(1) 
or Sec. 240.14d-6(d)(1) of this chapter, as applicable, in all tender 
offers, requests or invitations that are published, sent or given to 
security holders.

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILINGS

    14. The authority citation for Part 232 continues to read as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77sss(a), 
78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79t(a), 80a-8, 80a-
29, 80a-30 and 80a-37.


Sec. 232.13  [Amended]

    15. By amending Sec. 232.13 in the first sentence of paragraph (d) 
by removing the phrase ``may be `mailed for filing with the Commission' 
at the same time'' and adding in its place ``must be filed on the same 
day'' and by removing the phrase ``on a business day'' and adding in 
its place ``during the official business hours''.

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

    16. The authority citation for part 239 continues to read in part 
as follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77sss, 78c, 
78l, 78m, 78n, 78o(d), 78u-5, 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 
79l, 79m, 79n, 79q, 79t, 80a-8, 80a-24, 80a-29, 80a-30 and 80a-37, 
unless otherwise noted.


Sec. 239.25  (Form S-4 [Amended]

* * * * *
    17. By amending Form S-4 (referenced in Sec. 239.25) by revising 
paragraph (b)(7) of Item 17 to read as follows:

    [Note: Form S-4 does not and this amendment will not appear in 
the Code of Federal Regulations.]

Form S-4

* * * * *

Item 17. Information With Respect to Companies Other Than S-3 or S-2 
Companies.

* * * * *
    (b) * * **
    (7) Financial statements that would be required in an annual 
report sent to security holders under Rules 14a-3(b)(1) and (b)(2) 
(Sec. 240.14b-3 of this chapter), if an annual report was required. 
If the registrant's security holders are not voting, the transaction 
is not a roll-up transaction (as described by Item 901 of Regulation 
S-K (Sec. 229.901 of this chapter)), and:
    (i) The company being acquired is significant to the registrant 
in excess of the 20% level as determined under Sec. 210.3-05(b)(2), 
provide financial statements of the company being acquired for the 
latest fiscal year in conformity with GAAP. In addition, if the 
company being acquired has provided its security holders with 
financial statements prepared in conformity with GAAP for either or 
both of the two fiscal years before the latest fiscal year, provide 
the financial statements for those years; or
    (ii) The company being acquired is significant to the registrant 
at or below the 20% level, no financial information (including pro 
forma and comparative per share information) for the company being 
acquired need be provided.
    Instructions:
    1. The financial statements required by this paragraph for the 
latest fiscal year need be audited only to the extent practicable. 
The financial statements for the fiscal years before the latest 
fiscal year need not be audited if they were not previously audited.
    2. If the financial statements required by this paragraph are 
prepared on the basis of a comprehensive body of accounting 
principles other than U.S. GAAP, provide a reconciliation to U.S. 
GAAP in accordance with Item 17 of Form 20-F (Sec. 249.220f of this 
chapter) unless a reconciliation is unavailable or not obtainable 
without unreasonable cost or expense. At a minimum, provide a 
narrative description of all material variations in accounting 
principles, practices and methods used in preparing the non-U.S. 
GAAP financial statements from those accepted in the U.S. when the 
financial statements are prepared on a basis other than U.S. GAAP.
    3. If this Form is used to register resales to the public by any 
person who is deemed an underwriter within the meaning of Rule 
145(c) (Sec. 230.145(c) of this chapter) with respect to the 
securities being reoffered, the financial statements must be audited 
for the fiscal years required to be presented under paragraph (b)(2) 
of Rule 3-05 of Regulation S-X (17 CFR 210.3-05(b)(2)).
    4. In determining the significance of an acquisition for 
purposes of this paragraph, apply the tests prescribed in Rule 1-
02(w) (Sec. 210.1-02(w) of this chapter).
* * * * *


Sec. 239.34  (Form F-4) [Amended]

    18. By amending Form F-4 (referenced in Sec. 239.34) by revising 
paragraph (b)(5) of Item 17, removing the instruction at the end of 
Item 17 and in its place adding a new instruction to paragraphs (b)(5) 
and (b)(6) to read as follows:

    [Note: Form F-4 does not and this amendment will not appear in 
the Code of Federal Regulations.]

Form F-4

* * * * *

Item 17. Information With Respect to Foreign Companies Other Than F-2 
or F-3 Companies.

* * * * *
    (b) * * *
    (5) Financial statements that would have been required to be 
included in an annual report on Form 20-F (Sec. 249.220f of this 
chapter) had the company being acquired been required to prepare 
such a report. If the registrant's security holders are not voting, 
the transaction is not a roll-up transaction (as described by Item 
901 of Regulation S-K (Sec. 229.901 of this chapter)), and:
    (i) The company being acquired is significant to the registrant 
in excess of the 20% level as determined under Sec. 210.3-05(b)(2), 
provide financial statements of the company being acquired for the 
latest fiscal year in conformity with GAAP. In addition, if the 
company being acquired has provided its security holders with 
financial statements prepared in conformity with GAAP for either or 
both of the two fiscal years before the latest fiscal year, provide 
the financial statements for those years; or
    (ii) the company being acquired is significant to the registrant 
at or below the 20% level, no financial information

[[Page 61452]]

(including pro forma and comparative per share information) for the 
company being acquired need be provided.
    Instructions:
    1. The financial statements required by this paragraph for the 
latest fiscal year need be audited only to the extent practicable. 
The financial statements for the fiscal years before the latest 
fiscal year need not be audited if they were not previously audited.
    2. If this Form is used to register resales to the public by any 
person who is deemed an underwriter within the meaning of Rule 
145(c) (Sec. 230.145(c) of this chapter) with respect to the 
securities being reoffered, the financial statements must be audited 
for the fiscal years required to be presented under paragraph (b)(2) 
of Rule 3-05 of Regulation S-X (17 CFR 210.3-05(b)(2)).
    3. In determining the significance of an acquisition for 
purposes of this paragraph, apply the tests prescribed in Rule 1-
02(w) (Sec. 210.1-02(w) of this chapter).
* * * * *
    Instruction to paragraphs (b)(5) and (b)(6): If the financial 
statements required by paragraphs (b)(5) and (b)(6) are prepared on the 
basis of a comprehensive body of accounting principles other than U.S. 
GAAP, provide a reconciliation to U.S. GAAP in accordance with Item 17 
of Form 20-F (Sec. 249.220f of this chapter) unless a reconciliation is 
unavailable or not obtainable without unreasonable cost or expense. At 
a minimum, provide a narrative description of all material variations 
in accounting principles, practices and methods used in preparing the 
non-U.S. GAAP financial statements from those accepted in the U.S. when 
the financial statements are prepared on a basis other than U.S. GAAP.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    19. The authority citation for part 240 continues to read in part 
as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 
77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k, 
78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 
78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 
80b-11, unless otherwise noted.


Sec. 240.10b-13  [Removed and reserved]

    20. By removing and reserving Sec. 240.10b-13.
    21. By revising Sec. 240.13e-1 to read as follows:


Sec. 240.13e-1  Purchase of securities by the issuer during a third-
party tender offer.

    An issuer that has received notice that it is the subject of a 
tender offer made under Section 14(d)(1) of the Act (15 U.S.C. 78n), 
that has commenced under Sec. 240.14d-2 must not purchase any of its 
equity securities during the tender offer unless the issuer first:
    (a) Files a statement with the Commission containing the following 
information:
    (1) The title and number of securities to be purchased;
    (2) The names of the persons or classes of persons from whom the 
issuer will purchase the securities;
    (3) The name of any exchange, inter-dealer quotation system or any 
other market on or through which the securities will be purchased;
    (4) The purpose of the purchase;
    (5) Whether the issuer will retire the securities, hold the 
securities in its treasury, or dispose of the securities. If the issuer 
intends to dispose of the securities, describe how it intends to do so; 
and
    (6) The source and amount of funds or other consideration to be 
used to make the purchase. If the issuer borrows any funds or other 
consideration to make the purchase or enters any agreement for the 
purpose of acquiring, holding, or trading the securities, describe the 
transaction and agreement and identify the parties; and
    (b) Pays the fee required by Sec. 240.0-11 when it files the 
initial statement.
    (c) This section does not apply to periodic repurchases in 
connection with an employee benefit plan or other similar plan of the 
issuer so long as the purchases are made in the ordinary course and not 
in response to the tender offer.

Instruction to Sec. 240.13e-1:

    File eight copies if paper filing is permitted.

    22. By amending Sec. 240.13e-3 as follows:
    a. By revising paragraphs (d) and (e);
    b. Revising the heading of paragraph (f);
    c. Removing the reference ``Chapter X'' in paragraph (g)(5) and in 
its place add ``Chapter XI'';
    d. Removing the reference ``section 174'' in paragraph (g)(5) and 
in its place adding ``section 1125(b)''; and
    e. Removing the reference ``section 175 of the Act'' in paragraph 
(g)(5) and in its place adding ``section 1125(b) of that Act''.
    The revisions to Sec. 240.13e-3 read as follows:


Sec. 240.13e-3  Going private transactions by certain issuers or their 
affiliates.

* * * * *
    (d) Material required to be filed. The issuer or affiliate engaging 
in a Rule 13e-3 transaction must file with the Commission:
    (1) A Schedule 13E-3 (Sec. 240.13e-100), including all exhibits;
    (2) An amendment to Schedule 13E-3 reporting promptly any material 
changes in the information set forth in the schedule previously filed; 
and
    (3) A final amendment to Schedule 13E-3 reporting promptly the 
results of the Rule 13e-3 transaction.
    (e) Disclosure of information to security holders.
    (1) In addition to disclosing the information required by any other 
applicable rule or regulation under the federal securities laws, the 
issuer or affiliate engaging in a Sec. 240.13e-3 transaction must 
disclose to security holders of the class that is the subject of the 
transaction, as specified in paragraph (f) of this section, the 
following:
    (i) The information required by Item 1 of Schedule 13E-3 
(Sec. 240.13e-100) (Summary Term Sheet);
    (ii) The information required by Items 7, 8 and 9 of Schedule 13E-
3, which must be prominently disclosed in a ``Special Factors'' section 
in the front of the disclosure document;
    (iii) A prominent legend on the outside front cover page that 
indicates that neither the Securities and Exchange Commission nor any 
state securities commission has: approved or disapproved of the 
transaction; passed upon the merits or fairness of the transaction; or 
passed upon the adequacy or accuracy of the disclosure in the document. 
The legend also must make it clear that any representation to the 
contrary is a criminal offense;
    (iv) The information concerning appraisal rights required by 
Sec. 229.1016(f) of this chapter; and
    (v) The information required by the remaining items of Schedule 
13E-3, except for Sec. 229.1016 of this chapter (exhibits), or a fair 
and adequate summary of the information.

    Instructions to paragraph (e)(1):
    1. If the Rule 13e-3 transaction also is subject to Regulation 
14A (Secs. 240.14a-1 through 240.14b-2) or 14C (Secs. 240.14c-1 
through 240.14c-101), the registration provisions and rules of the 
Securities Act of 1933, Regulation 14D or Sec. 240.13e-4, the 
information required by paragraph (e)(1) of this section must be 
combined with the proxy statement, information statement, prospectus 
or tender offer material sent or given to security holders.
    2. If the Rule 13e-3 transaction involves a registered 
securities offering, the legend required by Sec. 229.501(b)(7) of 
this chapter must be combined with the legend required by paragraph 
(e)(1)(iii) of this section.
    3. The required legend must be written in clear, plain language.

    (2) If there is any material change in the information previously 
disclosed to

[[Page 61453]]

security holders, the issuer or affiliate must disclose the change 
promptly to security holders as specified in paragraph (f)(1)(iii) of 
this section.
    (f) Dissemination of information to security holders. * * *
* * * * *


Sec. 240.13e-4  [Amended]

    23. By amending Sec. 240.13e-4 by removing the reference:
    a. ``Schedule 13E-4 [Sec. 240.13E-101]'' that appears in the 
introductory text of paragraph (a) and in its place adding ``Schedule 
TO (Sec. 240.14d-100)'';
    b. ``Schedule 13E-4 [Sec. 240.13e-101]'' that appears in paragraph 
(a)(3) and in its place adding ``Schedule TO (Sec. 240.14d-100)'';
    c. ``Schedule 13E-4 Issuer Tender Offer Statement (Sec. 240.13e-
101),'' that appears in paragraph (f)(12) and in its place adding 
``Schedule TO (Sec. 240.14d-100),'';
    d. ``paragraph (a) of Item 9 of that Schedule'' that appears in 
paragraph (f)(12) and in its place adding ``Item 1016(a)(1) of 
Regulation M-A (Sec. 229.1016(a)(1) of this chapter)''; and
    e. ``Schedule 13E-4'' that appears in the introductory text of 
paragraph (g) and in its place adding ``Schedule TO (Sec. 240.14d-
100)''.
    24. By amending Sec. 240.13e-4 as follows:
    a. By revising paragraph (a)(4);
    b. Redesignating paragraph (b) as paragraph (j);
    c. Adding new paragraph (b);
    d. Removing the reference ``paragraphs (c), (d), (e) and (f)'' in 
newly redesignated paragraph (j)(2)(i) and in its place adding 
``paragraphs (b), (c), (d), (e) and (f)'';
    e. Removing the reference ``paragraph (b)(1)'' in newly 
redesignated paragraph (j)(2)(ii) and in its place adding ``paragraph 
(j)(1)''; and
    f. revising the section heading and paragraphs (c), (d) and (e).
    The additions and revisions to 240.13e-4 read as follows:


Sec. 240.13e-4  Tender offers by issuers.

    (a) Definitions. * * *
    (4) The term commencement means 12:01 a.m. on the date that the 
issuer or affiliate has first published, sent or given the means to 
tender to security holders. For purposes of this section, the means to 
tender includes the transmittal form or a statement regarding how the 
transmittal form may be obtained.
* * * * *
    (b) Filing, disclosure and dissemination. As soon as practicable on 
the date of commencement of the issuer tender offer, the issuer or 
affiliate making the issuer tender offer must comply with:
    (1) The filing requirements of paragraph (c)(2) of this section;
    (2) The disclosure requirements of paragraph (d)(1) of this 
section; and
    (3) The dissemination requirements of paragraph (e) of this 
section.
    (c) Material required to be filed. The issuer or affiliate making 
the issuer tender offer must file with the Commission:
    (1) All written communications made by the issuer or affiliate 
relating to the issuer tender offer, from and including the first 
public announcement, as soon as practicable on the date of the 
communication;
    (2) A Schedule TO (Sec. 240.14d-100), including all exhibits;
    (3) An amendment to Schedule TO (Sec. 240.14d-100) reporting 
promptly any material changes in the information set forth in the 
schedule previously filed; and
    (4) A final amendment to Schedule TO (Sec. 240.14d-100) reporting 
promptly the results of the issuer tender offer.

    Instructions to Sec. 240.13e-4(c):
    1. Pre-commencement communications must be filed under cover of 
Schedule TO (Sec. 240.14d-100) and the box on the cover page of the 
schedule must be marked.
    2. Any communications made in connection with an exchange offer 
registered under the Securities Act of 1933 need only be filed under 
Sec. 230.425 of this chapter and will be deemed filed under this 
section.
    3. Each pre-commencement written communication must include a 
prominent legend in clear, plain language advising security holders 
to read the tender offer statement when it is available because it 
contains important information. The legend also must advise 
investors that they can get the tender offer statement and other 
filed documents for free at the Commission's web site and explain 
which documents are free from the issuer.
    4. See Secs. 230.135, 230.165 and 230.166 of this chapter for 
pre-commencement communications made in connection with registered 
exchange offers.
    5. ``Public announcement'' is any oral or written communication 
by the issuer, affiliate or any person authorized to act on their 
behalf that is reasonably designed to, or has the effect of, 
informing the public or security holders in general about the issuer 
tender offer.

    (d) Disclosure of tender offer information to security holders.
    (1) The issuer or affiliate making the issuer tender offer must 
disclose, in a manner prescribed by paragraph (e)(1) of this section, 
the following:
    (i) The information required by Item 1 of Schedule TO 
(Sec. 240.14d-100) (summary term sheet); and
    (ii) The information required by the remaining items of Schedule TO 
for issuer tender offers, except for Item 12 (exhibits), or a fair and 
adequate summary of the information.
    (2) If there are any material changes in the information previously 
disclosed to security holders, the issuer or affiliate must disclose 
the changes promptly to security holders in a manner specified in 
paragraph (e)(3) of this section.
    (3) If the issuer or affiliate disseminates the issuer tender offer 
by means of summary publication as described in paragraph (e)(1)(iii) 
of this section, the summary advertisement must not include a 
transmittal letter that would permit security holders to tender 
securities sought in the offer and must disclose at least the following 
information:
    (i) The identity of the issuer or affiliate making the issuer 
tender offer;
    (ii) The information required by Sec. 229.1004(a)(1) and 
Sec. 229.1006(a) of this chapter;
    (iii) Instructions on how security holders can obtain promptly a 
copy of the statement required by paragraph (d)(1) of this section, at 
the issuer or affiliate's expense; and
    (iv) A statement that the information contained in the statement 
required by paragraph (d)(1) of this section is incorporated by 
reference.
    (e) Dissemination of tender offers to security holders. An issuer 
tender offer will be deemed to be published, sent or given to security 
holders if the issuer or affiliate making the issuer tender offer 
complies fully with one or more of the methods described in this 
section.
    (1) For issuer tender offers in which the consideration offered 
consists solely of cash and/or securities exempt from registration 
under section 3 of the Securities Act of 1933 (15 U.S.C. 77c):
    (i) Dissemination of cash issuer tender offers by long-form 
publication: By making adequate publication of the information required 
by paragraph (d)(1) of this section in a newspaper or newspapers, on 
the date of commencement of the issuer tender offer.
    (ii) Dissemination of any issuer tender offer by use of stockholder 
and other lists:
    (A) By mailing or otherwise furnishing promptly a statement 
containing the information required by paragraph (d)(1) of this section 
to each security holder whose name appears on the most recent 
stockholder list of the issuer;
    (B) By contacting each participant on the most recent security 
position listing of any clearing agency within the possession or access 
of the issuer or affiliate making the issuer tender offer, and making 
inquiry of each participant

[[Page 61454]]

as to the approximate number of beneficial owners of the securities 
sought in the offer that are held by the participant;
    (C) By furnishing to each participant a sufficient number of copies 
of the statement required by paragraph (d)(1) of this section for 
transmittal to the beneficial owners; and
    (D) By agreeing to reimburse each participant promptly for its 
reasonable expenses incurred in forwarding the statement to beneficial 
owners.
    (iii) Dissemination of certain cash issuer tender offers by summary 
publication:
    (A) If the issuer tender offer is not subject to Sec. 240.13e-3, by 
making adequate publication of a summary advertisement containing the 
information required by paragraph (d)(3) of this section in a newspaper 
or newspapers, on the date of commencement of the issuer tender offer; 
and
    (B) By mailing or otherwise furnishing promptly the statement 
required by paragraph (d)(1) of this section and a transmittal letter 
to any security holder who requests a copy of the statement or 
transmittal letter.

    Instruction to paragraph (e)(1): For purposes of paragraphs 
(e)(1)(i) and (e)(1)(iii) of this section, adequate publication of 
the issuer tender offer may require publication in a newspaper with 
a national circulation, a newspaper with metropolitan or regional 
circulation, or a combination of the two, depending upon the facts 
and circumstances involved.
    (2) For tender offers in which the consideration consists solely 
or partially of securities registered under the Securities Act of 
1933, a registration statement containing all of the required 
information, including pricing information, has been filed and a 
preliminary prospectus or a prospectus that meets the requirements 
of Section 10(a) of the Securities Act (15 U.S.C. (15 U.S.C. 
77j(a)), including a letter of transmittal, is delivered to security 
holders. However, for going-private transactions (as defined by 
Sec. 240.13e-3) and roll-up transactions (as described by Item 901 
of Regulation S-K (Sec. 229.901 of this chapter)), a registration 
statement registering the securities to be offered must have become 
effective and only a prospectus that meets the requirements of 
Section 10(a) of the Securities Act may be delivered to security 
holders on the date of commencement.
    Instructions to paragraph (e)(2)
    1. If the prospectus is being delivered by mail, mailing on the 
date of commencement is sufficient.
    2. A preliminary prospectus used under this section may not omit 
information under Sec. 230.430 or Sec. 230.430A of this chapter.
    3. If a preliminary prospectus is used under this section and 
the issuer must disseminate material changes, the tender offer must 
remain open for the period specified in paragraph (e)(3) of this 
section.
    4. If a preliminary prospectus is used under this section, 
tenders may be requested in accordance with Sec. 230.162(a) of this 
chapter.

    (3) If a material change occurs in the information published, sent 
or given to security holders, the issuer or affiliate must disseminate 
promptly disclosure of the change in a manner reasonably calculated to 
inform security holders of the change. In a registered securities offer 
where the issuer or affiliate disseminates the preliminary prospectus 
as permitted by paragraph (e)(2) of this section, the offer must remain 
open from the date that material changes to the tender offer materials 
are disseminated to security holders, as follows:
    (i) Five business days for a prospectus supplement containing a 
material change other than price or share levels;
    (ii) Ten business days for a prospectus supplement containing a 
change in price, the amount of securities sought, the dealer's 
soliciting fee, or other similarly significant change;
    (iii) Ten business days for a prospectus supplement included as 
part of a post-effective amendment; and
    (iv) Twenty business days for a revised prospectus when the initial 
prospectus was materially deficient.
* * * * *
    25. By revising Sec. 240.13e-100 to read as follows:


Sec. 240.13e-100  Schedule 13E-3, Transaction statement under section 
13(e) of the Securities Exchange Act of 1934 and Rule 13e-3 
(Sec. 240.13e-3) thereunder.

Securities and Exchange Commission,
Washington, D.C. 20549

Rule 13e-3 Transaction Statement under Section 13(e) of the 
Securities Exchange Act of 1934 (Amendment No. __)
----------------------------------------------------------------------

(Name of the Issuer)

----------------------------------------------------------------------

(Names of Persons Filing Statement)

----------------------------------------------------------------------

(Title of Class of Securities)

----------------------------------------------------------------------

(CUSIP Number of Class of Securities)

----------------------------------------------------------------------

(Name, Address, and Telephone Numbers of Person Authorized to 
Receive Notices and Communications on Behalf of the Persons Filing 
Statement)

    This statement is filed in connection with (check the 
appropriate box):
    a. [  ] The filing of solicitation materials or an information 
statement subject to Regulation 14A (Secs. 240.14a-1 through 
240.14b-2), Regulation 14C (Secs. 240.14c-1 through 240.14c-101) or 
Rule 13e-3(c) (Sec. 240.13e-3(c)) under the Securities Exchange Act 
of 1934 (``the Act'').
    b. [  ] The filing of a registration statement under the 
Securities Act of 1933.
    c. [  ] A tender offer.
    d. [  ] None of the above.
    Check the following box if the soliciting materials or 
information statement referred to in checking box (a) are 
preliminary copies: [  ]
    Check the following box if the filing is a final amendment 
reporting the results of the transaction [  ]

                        Calculation of Filing Fee
------------------------------------------------------------------------
         Transaction  valuation *               Amount of filing fee
------------------------------------------------------------------------
 
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state
  how it was determined.

    [  ] Check the box if any part of the fee is offset as provided 
by Sec. 240.0-11(a)(2) and identify the filing with which the 
offsetting fee was previously paid. Identify the previous filing by 
registration statement number, or the Form or Schedule and the date 
of its filing.
Amount Previously Paid:------------------------------------------------
Form or Registration No.:----------------------------------------------
Filing Party:----------------------------------------------------------
Date Filed:------------------------------------------------------------
    General Instructions:
    A. File eight copies of the statement, including all exhibits, 
with the Commission if paper filing is permitted.
    B. This filing must be accompanied by a fee payable to the 
Commission as required by Sec. 240.0-11(b).
    C. If the statement is filed by a general or limited 
partnership, syndicate or other group, the information called for by 
Items 3, 5, 6, 10 and 11 must be given with respect to: (i) Each 
partner of the general partnership; (ii) each partner who is, or 
functions as, a general partner of the limited partnership; (iii) 
each member of the syndicate or group; and (iv) each person 
controlling the partner or member. If the statement is filed by a 
corporation or if a person referred to in (i), (ii), (iii) or (iv) 
of this Instruction is a corporation, the information called for by 
the items specified above must be given with respect to: (a) Each 
executive officer and director of the corporation; (b) each person 
controlling the corporation; and (c) each executive officer and 
director of any corporation or other person ultimately in control of 
the corporation.
    D. Depending on the type of Rule 13e-3 transaction 
(Sec. 240.13e-3(a)(3)), this statement must be filed with the 
Commission:
    1. At the same time as filing preliminary or definitive 
soliciting materials or an information statement under Regulations 
14A or 14C of the Act;
    2. At the same time as filing a registration statement under the 
Securities Act of 1933;
    3. As soon as practicable on the date a tender offer is first 
published, sent or given to security holders; or
    4. At least 30 days before any purchase of securities of the 
class of securities subject to the Rule 13e-3 transaction, if the 
transaction does not involve a solicitation, an information 
statement, the registration of securities or a tender offer, as 
described in paragraphs 1, 2 or 3 of this Instruction; and

[[Page 61455]]

    5. If the Rule 13e-3 transaction involves a series of 
transactions, the issuer or affiliate must file this statement at 
the time indicated in paragraphs 1 through 4 of this Instruction for 
the first transaction and must amend the schedule promptly with 
respect to each subsequent transaction.
    E. If an item is inapplicable or the answer is in the negative, 
so state. The statement published, sent or given to security holders 
may omit negative and not applicable responses, except that 
responses to Items 7, 8 and 9 of this schedule must be provided in 
full. If the schedule includes any information that is not 
published, sent or given to security holders, provide that 
information or specifically incorporate it by reference under the 
appropriate item number and heading in the schedule. Do not recite 
the text of disclosure requirements in the schedule or any document 
published, sent or given to security holders. Indicate clearly the 
coverage of the requirements without referring to the text of the 
items.
    F. Information contained in exhibits to the statement may be 
incorporated by reference in answer or partial answer to any item 
unless it would render the answer misleading, incomplete, unclear or 
confusing. A copy of any information that is incorporated by 
reference or a copy of the pertinent pages of a document containing 
the information must be submitted with this statement as an exhibit, 
unless it was previously filed with the Commission electronically on 
EDGAR. If an exhibit contains information responding to more than 
one item in the schedule, all information in that exhibit may be 
incorporated by reference once in response to the several items in 
the schedule for which it provides an answer. Information 
incorporated by reference is deemed filed with the Commission for 
all purposes of the Act.
    G. If the Rule 13e-3 transaction also involves a transaction 
subject to Regulation 14A (Secs. 240.14a-1 through 240.14b-2) or 14C 
(Secs. 240.14c-1 through 240.14c-101) of the Act, the registration 
of securities under the Securities Act of 1933 and the General Rules 
and Regulations of that Act, or a tender offer subject to Regulation 
14D (Secs. 240.14d-1 through 240.14d-101) or Sec. 240.13e-4, this 
statement must incorporate by reference the information contained in 
the proxy, information, registration or tender offer statement in 
answer to the items of this statement.
    H. The information required by the items of this statement is 
intended to be in addition to any disclosure requirements of any 
other form or schedule that may be filed with the Commission in 
connection with the Rule 13e-3 transaction. If those forms or 
schedules require less information on any topic than this statement, 
the requirements of this statement control.
    I. If the Rule 13e-3 transaction involves a tender offer, then a 
combined statement on Schedules 13E-3 and TO may be filed with the 
Commission under cover of Schedule TO (Sec. 240.14d-100). See 
Instruction J of Schedule TO (Sec. 240.14d-100).
    J. Amendments disclosing a material change in the information 
set forth in this statement may omit any information previously 
disclosed in this statement.

Item 1. Summary Term Sheet

    Furnish the information required by Item 1001 of Regulation M-A 
(Sec. 229.1001 of this chapter) unless information is disclosed to 
security holders in a prospectus that meets the requirements of 
Sec. 230.421(d) of this chapter.

Item 2. Subject Company Information

    Furnish the information required by Item 1002 of Regulation M-A 
(Sec. 229.1002 of this chapter).

Item 3. Identity and Background of Filing Person

    Furnish the information required by Item 1003(a) through (c) of 
Regulation M-A (Sec. 229.1003 of this chapter).

Item 4. Terms of the Transaction

    Furnish the information required by Item 1004(a) and (c) through 
(f) of Regulation M-A (Sec. 229.1004 of this chapter).

Item 5. Past Contacts, Transactions, Negotiations and Agreements

    Furnish the information required by Item 1005(a) through (c) and 
(e) of Regulation M-A (Sec. 229.1005 of this chapter).

Item 6. Purposes of the Transaction and Plans or Proposals

    Furnish the information required by Item 1006(b) and (c)(1) 
through (8) of Regulation M-A (Sec. 229.1006 of this chapter).
    Instruction to Item 6: In providing the information specified in 
Item 1006(c) for this item, discuss any activities or transactions 
that would occur after the Rule 13e-3 transaction.

Item 7. Purposes, Alternatives, Reasons and Effects

    Furnish the information required by Item 1013 of Regulation M-A 
(Sec. 229.1013 of this chapter).

Item 8. Fairness of the Transaction

    Furnish the information required by Item 1014 of Regulation M-A 
(Sec. 229.1014 of this chapter).

Item 9. Reports, Opinions, Appraisals and Negotiations

    Furnish the information required by Item 1015 of Regulation M-A 
(Sec. 229.1015 of this chapter).

Item 10. Source and Amounts of Funds or Other Consideration

    Furnish the information required by Item 1007 of Regulation M-A 
(Sec. 229.1007 of this chapter).

Item 11. Interest in Securities of the Subject Company

    Furnish the information required by Item 1008 of Regulation M-A 
(Sec. 229.1008 of this chapter).

Item 12. The Solicitation or Recommendation

    Furnish the information required by Item 1012(d) and (e) of 
Regulation M-A (Sec. 229.1012 of this chapter).

Item 13. Financial Statements

    Furnish the information required by Item 1010(a) through (b) of 
Regulation M-A (Sec. 229.1010 of this chapter) for the issuer of the 
subject class of securities.
    Instructions to Item 13:
    1. The disclosure materials disseminated to security holders may 
contain the summarized financial information required by Item 
1010(c) of Regulation M-A (Sec. 229.1010 of this chapter) instead of 
the financial information required by Item 1010(a) and (b). In that 
case, the financial information required by Item 1010(a) and (b) of 
Regulation M-A must be disclosed directly or incorporated by 
reference in the statement. If summarized financial information is 
disseminated to security holders, include appropriate instructions 
on how more complete financial information can be obtained. If the 
summarized financial information is prepared on the basis of a 
comprehensive body of accounting principles other than U.S. GAAP, 
the summarized financial information must be accompanied by a 
reconciliation as described in Instruction 2.
    2. If the financial statements required by this Item are 
prepared on the basis of a comprehensive body of accounting 
principles other than U.S. GAAP, provide a reconciliation to U.S. 
GAAP in accordance with Item 17 of Form 20-F (Sec. 249.220f of this 
chapter).
    3. The filing person may incorporate by reference financial 
statements contained in any document filed with the Commission, 
solely for the purposes of this schedule, if: (a) The financial 
statements substantially meet the requirements of this Item; (b) an 
express statement is made that the financial statements are 
incorporated by reference; (c) the matter incorporated by reference 
is clearly identified by page, paragraph, caption or otherwise; and 
(d) if the matter incorporated by reference is not filed with this 
Schedule, an indication is made where the information may be 
inspected and copies obtained. Financial statements that are 
required to be presented in comparative form for two or more fiscal 
years or periods may not be incorporated by reference unless the 
material incorporated by reference includes the entire period for 
which the comparative data is required to be given. See General 
Instruction F to this Schedule.

Item 14. Persons/Assets, Retained, Employed, Compensated or Used

    Furnish the information required by Item 1009 of Regulation M-A 
(Sec. 229.1009 of this chapter).

Item 15. Additional Information

    Furnish the information required by Item 1011(b) of Regulation 
M-A (Sec. 229.1011 of this chapter).

Item 16. Exhibits

    File as an exhibit to the Schedule all documents specified in 
Item 1016(a) through (d), (f) and (g) of Regulation M-A 
(Sec. 229.1016 of this chapter).

Signature. After due inquiry and to the best of my knowledge and 
belief, I certify that the information set forth in this statement 
is true, complete and correct.


[[Page 61456]]


----------------------------------------------------------------------
(Signature)

----------------------------------------------------------------------
(Name and title)

----------------------------------------------------------------------
(Date)

    Instruction to Signature: The statement must be signed by the 
filing person or that person's authorized representative. If the 
statement is signed on behalf of a person by an authorized 
representative (other than an executive officer of a corporation or 
general partner of a partnership), evidence of the representative's 
authority to sign on behalf of the person must be filed with the 
statement. The name and any title of each person who signs the 
statement must be typed or printed beneath the signature. See 
Sec. 240.12b-11 with respect to signature requirements.


Sec. 240.13e-101  [Removed and reserved]

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


Sec. 240.14a-4  [Amended]

    27. By amending Sec. 240.14a-4, paragraph (f), by removing the 
words ``, or mailed for filing to,''.
    28. By amending Sec. 240.14a-6 as follows:
    a. By revising paragraphs (b), (c), (e)(2) and (j),
    b. Removing the note following paragraph (b), and
    c. Adding paragraph (o) to read as follows:


Sec. 240.14a-6  Filing requirements.

* * * * *
    (b) Definitive proxy statement and other soliciting material. Eight 
definitive copies of the proxy statement, form of proxy and all other 
soliciting materials, in the same form as the materials sent to 
security holders, must be filed with the Commission no later than the 
date they are first sent or given to security holders. Three copies of 
these materials also must be filed with, or mailed for filing to, each 
national securities exchange on which the registrant has a class of 
securities listed and registered.
    (c) Personal solicitation materials. If part or all of the 
solicitation involves personal solicitation, then eight copies of all 
written instructions or other materials that discuss, review or comment 
on the merits of any matter to be acted on, that are furnished to 
persons making the actual solicitation for their use directly or 
indirectly in connection with the solicitation, must be filed with the 
Commission no later than the date the materials are first sent or given 
to these persons.
* * * * *
    (e)(1) * * *
    (2) Confidential treatment. If action will be taken on any matter 
specified in Item 14 of Schedule 14A (Sec. 240.14a-101), all copies of 
the preliminary proxy statement and form of proxy filed under paragraph 
(a) of this section will be for the information of the Commission only 
and will not be deemed available for public inspection until filed with 
the Commission in definitive form so long as:
    (i) The proxy statement does not relate to a matter or proposal 
subject to Sec. 240.13e-3 or a roll-up transaction as defined in Item 
901(c) of Regulation S-K (Sec. 229.901(c) of this chapter);
    (ii) Neither the parties to the transaction nor any persons 
authorized to act on their behalf have made any public communications 
relating to the transaction except for statements where the content is 
limited to the information specified in Sec. 230.135 of this chapter; 
and
    (iii) The materials are filed in paper and marked ``Confidential, 
For Use of the Commission Only.'' In all cases, the materials may be 
disclosed to any department or agency of the United States Government 
and to the Congress, and the Commission may make any inquiries or 
investigation into the materials as may be necessary to conduct an 
adequate review by the Commission.

    Instruction to paragraph (e)(2): If communications are made 
publicly that go beyond the information specified in Sec. 230.135 of 
this chapter, the preliminary proxy materials must be re-filed 
promptly with the Commission as public materials.
* * * * *
    (j) Merger proxy materials. (1) Any proxy statement, form of proxy 
or other soliciting material required to be filed by this section that 
also is either
    (i) Included in a registration statement filed under the Securities 
Act of 1933 on Forms S-4 (Sec. 239.25 of this chapter), F-4 
(Sec. 239.34 of this chapter) or N-14 (Sec. 239.23 of this chapter); or
    (ii) Filed under Sec. 230.424, Sec. 230.425 or Sec. 230.497 of this 
chapter is required to be filed only under the Securities Act, and is 
deemed filed under this section.
    (2) Under paragraph (j)(1) of this section, the fee required by 
paragraph (i) of this section need not be paid.
* * * * *
    (o) Solicitations before furnishing a definitive proxy statement. 
Solicitations that are published, sent or given to security holders 
before they have been furnished a definitive proxy statement must be 
made in accordance with Sec. 240.14a-12 unless there is an exemption 
available under Sec. 240.14a-2.


Sec. 240.14a-11  [Removed and reserved]

    29. By removing and reserving Sec. 240.14a-11.
    30. By revising Sec. 240.14a-12 to read as follows:


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

    (a) Notwithstanding the provisions of Sec. 240.14a-3(a), a 
solicitation may be made before furnishing security holders with a 
proxy statement meeting the requirements of Sec. 240.14a-3(a) if:
    (1) Each written communication includes:
    (i) The identity of the participants in the solicitation (as 
defined in Instruction 3 to Item 4 of Schedule 14A (Sec. 240.14a-101)) 
and a description of their direct or indirect interests, by security 
holdings or otherwise, or a prominent legend in clear, plain language 
advising security holders where they can obtain that information; and
    (ii) A prominent legend in clear, plain language advising security 
holders to read the proxy statement when it is available because it 
contains important information. The legend also must explain to 
investors that they can get the proxy statement, and any other relevant 
documents, for free at the Commission's web site and describe which 
documents are available free from the participants; and
    (2) A definitive proxy statement meeting the requirements of 
Sec. 240.14a-3(a) is sent or given to security holders solicited in 
reliance on this section before or at the same time as the forms of 
proxy, consent or authorization are furnished to or requested from 
security holders.
    (b) Any soliciting material published, sent or given to security 
holders in accordance with paragraph (a) of this section must be filed 
with the Commission no later than the date the material is first 
published, sent or given to security holders. Three copies of the 
material must at the same time be filed with, or mailed for filing to, 
each national securities exchange upon which any class of securities of 
the registrant is listed and registered. The soliciting material must 
include a cover page in the form set forth in Schedule 14A 
(Sec. 240.14a-101) and the appropriate box on the cover page must be 
marked. Soliciting material in connection with a registered offering is 
required to be filed only under Sec. 230.424 or Sec. 230.425 of this 
chapter, and will be deemed filed under this section.
    (c) Solicitations by any person or group of persons for the purpose 
of opposing a solicitation subject to this regulation by any other 
person or group of persons with respect to the election or removal of 
directors at any annual or

[[Page 61457]]

special meeting of security holders also are subject to the following 
provisions:
    (1) Application of this rule to annual report. Notwithstanding the 
provisions of Sec. 240.14a-3 (b) and (c), any portion of the annual 
report referred to in Sec. 240.14a-3(b) that comments upon or refers to 
any solicitation subject to this rule, or to any participant in the 
solicitation, other than the solicitation by the management, must be 
filed with the Commission as proxy material subject to this regulation. 
This must be filed in electronic format unless an exemption is 
available under Rules 201 or 202 of Regulation S-T (Sec. 232.201 or 
Sec. 232.202 of this chapter).
    (2) Use of reprints or reproductions. In any solicitation subject 
to this Sec. 240.14a-12(c), soliciting material that includes, in whole 
or part, any reprints or reproductions of any previously published 
material must:
    (i) State the name of the author and publication, the date of prior 
publication, and identify any person who is quoted without being named 
in the previously published material.
    (ii) Except in the case of a public or official document or 
statement, state whether or not the consent of the author and 
publication has been obtained to the use of the previously published 
material as proxy soliciting material.
    (iii) If any participant using the previously published material, 
or anyone on his or her behalf, paid, directly or indirectly, for the 
preparation or prior publication of the previously published material, 
or has made or proposes to make any payments or give any other 
consideration in connection with the publication or republication of 
the material, state the circumstances.

    Instructions to Sec. 240.14a-12
    1. If paper filing is permitted, file eight copies of the 
soliciting material with the Commission, except that only three 
copies of the material specified by Sec. 240.14a-12(c)(1) need be 
filed.
    2. Any communications made under this section after the 
definitive proxy statement is on file but before it is disseminated 
also must specify that the proxy statement is publicly available and 
the anticipated date of dissemination.

    31. By amending Sec. 240.14a-101 by removing the reference:
    a. ``Soliciting Material Pursuant to Sec. 240.14a-11(c) or 
Sec. 240.14a-12'' on the cover page and in its place adding 
``Soliciting Material under Sec. 240.14a-12'';
    b. ``Item 14(b)'' in paragraph (3) of Note D and in its place 
adding ``Item 14(e)(1)'';
    c. ``In Items 13 and 14'' in the introductory text of Note E and in 
its place adding ``In Item 13'';
    d. ``or to an `other person' specified in Item 14(a) of this 
Schedule'' each time it appears in the introductory text of Note E; and
    e. ``or other person'' each time it appears in Note E.
    32. By amending Sec. 240.14a-101 by removing the reference:
    a. ``Rule 14a-11 (Sec. 240.14a-11 of this chapter.)'' in the 
introductory text of paragraph (a) of Item 4 and in its place adding 
``Rule 14a-12(c) (Sec. 240.14a-12(c)).'';
    b. ``Rule 14a-11 (Sec. 240.14a-11 of this chapter).'' in the 
introductory text of paragraph (b) of Item 4 and in its place adding 
``Rule 14a-12(c) (Sec. 240.14a-12(c)).'';
    c. ``Rule 14a-11 (Sec. 240.14a-11 of this chapter),'' in 
Instruction 1 to Item 4 and in its place adding ``Rule 14a-12(c) 
(Sec. 240.14a-12(c)),''; and
    d. ``Rule 14a-11 (Sec. 240.14a-11 of this chapter).'' in the 
introductory text of paragraphs (a) and (b) of Item 5 and in its place 
adding ``Rule 14a-12(c) (Sec. 240.14a-12(c)).'' each time it appears.
    33. By amending Sec. 240.14a-101 by revising paragraphs (2) and (3) 
in Note G and Item 14 to read as follows:
* * * * *


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

* * * * *
    G. Special Note for Small Business Issuers
    (1) * * *
    (2) Registrants and acquirees that relied upon Alternative 1 in 
their most recent Form 10-KSB may provide the following information 
(Question numbers are in reference to Model A of Form 1-A): (a) 
Questions 37 and 38 instead of Item 6(d); (b) Question 43 instead of 
Item 7(a); (c) Questions 29-36 and 39 instead of Item 7(b); (d) 
Questions 40-42 instead of Item 8; (e) Questions 40-42 instead of 
Item 10; (f) the information required in Part F/S of Form 10-SB 
instead of the financial statement requirements of Items 13 or 14; 
(g) Questions 4, 11, and 47-50 instead of Item 13(a)(1)(3); (h) 
Question 3 instead of the information specified in Items 101 and 102 
of Regulation S-B (Sec. 228.101 and Sec. 228.102 of this chapter); 
and (i) Questions 4, 11, and 47-50 instead of the information 
specified in Item 303 of Regulation S-B(Sec. 228.303 of this 
chapter).
    (3) Registrants and acquirees that relied upon Alternative 2 in 
their most recent Form 10-KSB may provide the following information 
(``Model B'' refers to Model B of Form 1-A): (a) Item 10 of Model B 
instead of Item 6(d) of Schedule 14A; (b) Item 8(d) of Model B 
instead of Item 7(a) of Schedule 14A; (c) Items 8(a)(8(c) and Item 
11 of Model B instead of Item 7(b) of Schedule 14A; (d) Item 9 of 
Model B instead of Item 8 of Schedule 14A; (e) Item 9 of Model B 
instead of Item 10 of Schedule 14A; (f) the information required in 
Part F/S of Form 10-SB instead of the financial statements 
requirements of Items 13 or 14 of Schedule 14A; (g) Item 6(a)(3)(i) 
of Model B instead of Item 13(a)(1)(3) of Schedule 14A; (h) Items 6 
and 7 of Model B instead of the information specified in Items 101 
and 102 of Regulation S-B (Sec. 228.101 and Sec. 228.102 of this 
chapter); and (i) Item 6(a)(3)(i) of Model B instead of the 
information specified in Item 303 of Regulation S-B (Sec. 228.303 of 
this chapter).
* * * * *
    Item 14. Mergers, consolidations, acquisitions and similar 
matters. (See Notes A and D at the beginning of this Schedule.)
    Instructions to Item 14.
    1. In transactions in which the consideration offered to 
security holders consists wholly or in part of securities registered 
under the Securities Act of 1933, furnish the information required 
by Form S-4 (Sec. 239.25 of this chapter), Form F-4 (Sec. 239.34 of 
this chapter), or Form N-14 (Sec. 239.23 of this chapter), as 
applicable, instead of this Item. Only a Form S-4, Form F-4, or Form 
N-14 must be filed in accordance with Sec. 240.14a-6(j).
    2. (a) In transactions in which the consideration offered to 
security holders consists wholly of cash, the information required 
by paragraph (c)(1) of this Item for the acquiring company need not 
be provided unless the information is material to an informed voting 
decision (e.g., the security holders of the target company are 
voting and financing is not assured).
    (b) Additionally, if only the security holders of the target 
company are voting:
    i. The financial information in paragraphs (b)(8)--(11) of this 
Item for the acquiring company and the target need not be provided; 
and
    ii. The information in paragraph (c)(2) of this Item for the 
target company need not be provided.
    If, however, the transaction is a going-private transaction (as 
defined by Sec. 240.13e-3), then the information required by 
paragraph (c)(2) of this Item must be provided and to the extent 
that the going-private rules require the information specified in 
paragraph (b)(8)--(b)(11) of this Item, that information must be 
provided as well.
    3. In transactions in which the consideration offered to 
security holders consists wholly of securities exempt from 
registration under the Securities Act of 1933 or a combination of 
exempt securities and cash, information about the acquiring company 
required by paragraph (c)(1) of this Item need not be provided if 
only the security holders of the acquiring company are voting, 
unless the information is material to an informed voting decision. 
If only the security holders of the target company are voting, 
information about the target company in paragraph (c)(2) of this 
Item need not be provided. However, the information required by 
paragraph (c)(2) of this Item must be provided if the transaction is 
a going-private (as defined by Sec. 240.13e-3) or roll-up (as 
described by Item 901 of Regulation S-K (Sec. 229.901 of this 
chapter)) transaction.
    4. The information required by paragraphs (b)(8)--(11) and (c) 
need not be provided if

[[Page 61458]]

the plan being voted on involves only the acquiring company and one 
or more of its totally held subsidiaries and does not involve a 
liquidation or a spin-off.
    5. To facilitate compliance with Rule 2-02(a) of Regulation S-X 
(Sec. 210.2-02(a) of this chapter) (technical requirements relating 
to accountants' reports), one copy of the definitive proxy statement 
filed with the Commission must include a signed copy of the 
accountant's report. If the financial statements are incorporated by 
reference, a signed copy of the accountant's report must be filed 
with the definitive proxy statement. Signatures may be typed if the 
document is filed electronically on EDGAR. See Rule 302 of 
Regulation S-T (Sec. 232.302 of this chapter).
    6. Notwithstanding the provisions of Regulation S-X, no 
schedules other than those prepared in accordance with Sec. 210.12-
15, Sec. 210.12-28 and Sec. 210.12-29 of this chapter (or, for 
management investment companies, Secs. 210.12-12 through 210.12-14 
of this chapter) of that regulation need be furnished in the proxy 
statement.
    7. If the preliminary proxy material incorporates by reference 
financial statements required by this Item, a draft of the financial 
statements must be furnished to the Commission staff upon request if 
the document from which they are incorporated has not been filed 
with or furnished to the Commission.
    (a) Applicability. If action is to be taken with respect to any 
of the following transactions, provide the information required by 
this Item:
    (1) A merger or consolidation;
    (2) An acquisition of securities of another person;
    (3) An acquisition of any other going business or the assets of 
a going business;
    (4) A sale or other transfer of all or any substantial part of 
assets; or
    (5) A liquidation or dissolution.
    (b) Transaction information. Provide the following information 
for each of the parties to the transaction unless otherwise 
specified:
    (1) Summary term sheet. The information required by Item 1001 of 
Regulation M-A (Sec. 229.1001 of this chapter).
    (2) Contact information. The name, complete mailing address and 
telephone number of the principal executive offices.
    (3) Business conducted. A brief description of the general 
nature of the business conducted.
    (4) Terms of the transaction. The information required by Item 
1004(a)(2) of Regulation M-A (Sec. 229.1004 of this chapter).
    (5) Regulatory approvals. A statement as to whether any federal 
or state regulatory requirements must be complied with or approval 
must be obtained in connection with the transaction and, if so, the 
status of the compliance or approval.
    (6) Reports, opinions, appraisals. If a report, opinion or 
appraisal materially relating to the transaction has been received 
from an outside party, and is referred to in the proxy statement, 
furnish the information required by Item 1015(b) of Regulation M-A 
(Sec. 229.1015 of this chapter).
    (7) Past contacts, transactions or negotiations. The information 
required by Items 1005(b) and 1011(a)(1) of Regulation M-A 
(Sec. 229.1005 of this chapter and Sec. 229.1011 of this chapter), 
for the parties to the transaction and their affiliates during the 
periods for which financial statements are presented or incorporated 
by reference under this Item.
    (8) Selected financial data. The selected financial data 
required by Item 301 of Regulation S-K (Sec. 229.301 of this 
chapter).
    (9) Pro forma selected financial data. If material, the 
information required by Item 301 of Regulation S-K (Sec. 229.301 of 
this chapter) for the acquiring company, showing the pro forma 
effect of the transaction.
    (10) Pro forma information. In a table designed to facilitate 
comparison, historical and pro forma per share data of the acquiring 
company and historical and equivalent pro forma per share data of 
the target company for the following Items:
    (i) Book value per share as of the date financial data is 
presented pursuant to Item 301 of Regulation S-K (Sec. 229.301 of 
this chapter);
    (ii) Cash dividends declared per share for the periods for which 
financial data is presented pursuant to Item 301 of Regulation S-K 
(Sec. 229.301 of this chapter); and
    (iii) Income (loss) per share from continuing operations for the 
periods for which financial data is presented pursuant to Item 301 
of Regulation S-K (Sec. 229.301 of this chapter).
    Instructions to paragraphs (b)(8), (b)(9) and (b)(10): 
    1. For a business combination accounted for as a purchase, 
present the financial information required by paragraphs (b)(9) and 
(b)(10) only for the most recent fiscal year and interim period. For 
a business combination accounted for as a pooling, present the 
financial information required by paragraphs (b)(9) and (b)(10) 
(except for information with regard to book value) for the most 
recent three fiscal years and interim period. For purposes of these 
paragraphs, book value information need only be provided for the 
most recent balance sheet date.
    2. Calculate the equivalent pro forma per share amounts for one 
share of the company being acquired by multiplying the exchange 
ratio times each of:
    (i) The pro forma income (loss) per share before non-recurring 
charges or credits directly attributable to the transaction;
    (ii) The pro forma book value per share; and
    (iii) The pro forma dividends per share of the acquiring 
company.
    3. Unless registered on a national securities exchange or 
otherwise required to furnish such information, registered 
investment companies need not furnish the information required by 
paragraphs (b)(8) and (b)(9) of this Item.
    (11) Financial information. If material, financial information 
required by Article 11 of Regulation S-X (Secs. 210.10-01 through 
229.11-03 of this chapter) with respect to this transaction.
    Instructions to paragraph (b)(11): 
    1. Present any Article 11 information required with respect to 
transactions other than those being voted upon (where not 
incorporated by reference) together with the pro forma information 
relating to the transaction being voted upon. In presenting this 
information, you must clearly distinguish between the transaction 
being voted upon and any other transaction.
    2. If current pro forma financial information with respect to 
all other transactions is incorporated by reference, you need only 
present the pro forma effect of this transaction.
    (c) Information about the parties to the transaction. 
    (1) Acquiring company. Furnish the information required by Part 
B (Registrant Information) of Form S-4 (Sec. 239.25 of this chapter) 
or Form F-4 (Sec. 239.34 of this chapter), as applicable, for the 
acquiring company. However, financial statements need only be 
presented for the latest two fiscal years and interim periods.
    (2) Acquired company. Furnish the information required by Part C 
(Information with Respect to the Company Being Acquired) of Form S-4 
(Sec. 239.25 of this chapter) or Form F-4 (Sec. 239.34 of this 
chapter), as applicable.
    (d) Information about parties to the transaction: registered 
investment companies and business development companies. If the 
acquiring company or the acquired company is an investment company 
registered under the Investment Company Act of 1940 or a business 
development company as defined by Section 2(a)(48) of the Investment 
Company Act of 1940, provide the following information for that 
company instead of the information specified by paragraph (c) of 
this Item:
    (1) Information required by Item 101 of Regulation S-K 
(Sec. 229.101 of this chapter), description of business;
    (2) Information required by Item 102 of Regulation S-K 
(Sec. 229.102 of this chapter), description of property;
    (3) Information required by Item 103 of Regulation S-K 
(Sec. 229.103 of this chapter), legal proceedings;
    (4) Information required by Item 201 of Regulation S-K 
(Sec. 229.201 of this chapter), market price of and dividends on the 
registrant's common equity and related stockholder matters;
    (5) Financial statements meeting the requirements of Regulation 
S-X, including financial information required by Rule 3-05 and 
Article 11 of Regulation S-X (Sec. 210.3-05 and Sec. 210.11-01 
through Sec. 210.11-03 of this chapter) with respect to transactions 
other than that as to which action is to be taken as described in 
this proxy statement;
    (6) Information required by Item 301 of Regulation S-K 
(Sec. 229.301 of this chapter), selected financial data;
    (7) Information required by Item 302 of Regulation S-K 
(Sec. 229.302 of this chapter), supplementary financial information;
    (8) Information required by Item 303 of Regulation S-K 
(Sec. 229.303 of this chapter), management's discussion and analysis 
of financial condition and results of operations; and
    (9) Information required by Item 304 of Regulation S-K 
(Sec. 229.304 of this chapter), changes in and disagreements with 
accountants on accounting and financial disclosure.

[[Page 61459]]

    Instruction to paragraph (d) of Item 14: Unless registered on a 
national securities exchange or otherwise required to furnish such 
information, registered investment companies need not furnish the 
information required by paragraphs (d)(6), (d)(7) and (d)(8) of this 
Item.
    (e) Incorporation by reference. 
    (1) The information required by paragraph (c) of this section 
may be incorporated by reference into the proxy statement to the 
same extent as would be permitted by Form S-4 (Sec. 239.25 of this 
chapter) or Form F-4 (Sec. 239.34 of this chapter), as applicable.
    (2) Alternatively, the registrant may incorporate by reference 
into the proxy statement the information required by paragraph (c) 
of this Item if it is contained in an annual report sent to security 
holders in accordance with Sec. 240.14a-3 of this chapter with 
respect to the same meeting or solicitation of consents or 
authorizations that the proxy statement relates to and the 
information substantially meets the disclosure requirements of Item 
14 or Item 17 of Form S-4 (Sec. 239.25 of this chapter) or Form F-4 
(Sec. 239.34 of this chapter), as applicable.
* * * * *
    34. By amending Sec. 240.14c-5 by revising paragraphs (b) and 
(d)(2), and removing the note following paragraph (b) to read as 
follows:


Sec. 240.14c-5  Filing requirements.

* * * * *
    (b) Definitive information statement. Eight definitive copies of 
the information statement, in the form in which it is furnished to 
security holders, must be filed with the Commission no later than the 
date the information statement is first sent or given to security 
holders. Three copies of these materials also must be filed with, or 
mailed for filing to, each national securities exchange on which the 
registrant has a class of securities listed and registered.
* * * * *
    (d)(1) * * *
    (2) Confidential treatment. If action will be taken on any matter 
specified in Item 14 of Schedule 14A (Sec. 240.14a-101), all copies of 
the preliminary information statement filed under paragraph (a) of this 
section will be for the information of the Commission only and will not 
be deemed available for public inspection until filed with the 
Commission in definitive form so long as:
    (i) The information statement does not relate to a matter or 
proposal subject to Sec. 240.13e-3 or a roll-up transaction as defined 
in Item 901(c) of Regulation S-K (Sec. 229.901(c) of this chapter);
    (ii) Neither the parties to the transaction nor any persons 
authorized to act on their behalf have made any public communications 
relating to the transaction except for statements where the content is 
limited to the information specified in Sec. 230.135 of this chapter; 
and
    (iii) The materials are filed in paper and marked ``Confidential, 
For Use of the Commission Only.'' In all cases, the materials may be 
disclosed to any department or agency of the United States Government 
and to the Congress, and the Commission may make any inquiries or 
investigation into the materials as may be necessary to conduct an 
adequate review by the Commission.

    Instruction to paragraph (d)(2): If communications are made 
publicly that go beyond the information specified in Sec. 230.135, 
the materials must be re-filed publicly with the Commission.
* * * * *
    35. By amending Sec. 240.14d-1 as follows:
    a. By removing the reference ``Schedules 14D-1'' in the 
introductory text of paragraph (b) and adding in its place ``Schedules 
TO'';
    b. Redesignating paragraphs (g)(1), (g)(2), (g)(3), (g)(4), (g)(5), 
(g)(6) and (g)(7) as paragraphs (g)(2), (g)(7), (g)(5), (g)(1), (g)(9), 
(g)(3) and (g)(6), respectively;
    c. In newly redesignated paragraph (g)(1) removing the reference 
``Rule 14d-3, Rule 14d-9(d) and Item 6 of Schedule 14D-1'' and in its 
place adding ``Rule 14d-3 and Rule 14d-9(d)''; and
    d. Adding new paragraphs (g)(4) and (g)(8) to read as follows:


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

* * * * *
    (g) Definitions. * * *
    (4) The term initial offering period means the period from the time 
the offer commences until all minimum time periods, including 
extensions, required by Regulations 14D (Secs. 240.14d-1 through 
240.14d-103) and 14E (Secs. 240.14e-1 through 240.14e-8) have been 
satisfied and all conditions to the offer have been satisfied or waived 
within these time periods.
* * * * *
    (8) The term subsequent offering period means the period 
immediately following the initial offering period meeting the 
conditions specified in Sec. 240.14d-11.
* * * * *
    36. By revising Sec. 240.14d-2 to read as follows:


Sec. 240.14d-2  Commencement of a tender offer.

    (a) Date of commencement. A bidder will have commenced its tender 
offer for purposes of section 14(d) of the Act (15 U.S.C. 78n) and the 
rules under that section at 12:01 a.m. on the date when the bidder has 
first published, sent or given the means to tender to security holders. 
For purposes of this section, the means to tender includes the 
transmittal form or a statement regarding how the transmittal form may 
be obtained.
    (b) Pre-commencement communications. A communication by the bidder 
will not be deemed to constitute commencement of a tender offer if:
    (1) It does not include the means for security holders to tender 
their shares into the offer; and
    (2) All written communications relating to the tender offer, from 
and including the first public announcement, are filed under cover of 
Schedule TO (Sec. 240.14d-100) with the Commission no later than the 
date of the communication. The bidder also must deliver to the subject 
company and any other bidder for the same class of securities the first 
communication relating to the transaction that is filed, or required to 
be filed, with the Commission.

Instructions to paragraph (b)(2) 

    1. The box on the front of Schedule TO indicating that the 
filing contains pre-commencement communications must be checked.
    2. Any communications made in connection with an exchange offer 
registered under the Securities Act of 1933 need only be filed under 
Sec. 230.425 of this chapter and will be deemed filed under this 
section.
    3. Each pre-commencement written communication must include a 
prominent legend in clear, plain language advising security holders 
to read the tender offer statement when it is available because it 
contains important information. The legend also must advise 
investors that they can get the tender offer statement and other 
filed documents for free at the Commission's web site and explain 
which documents are free from the offeror.
    4. See Secs. 230.135, 230.165 and 230.166 of this chapter for 
pre-commencement communications made in connection with registered 
exchange offers.
    5. ``Public announcement'' is any oral or written communication 
by the bidder, or any person authorized to act on the bidder's 
behalf, that is reasonably designed to, or has the effect of, 
informing the public or security holders in general about the tender 
offer.

    (c) Filing and other obligations triggered by commencement. As soon 
as practicable on the date of commencement, a bidder must comply with 
the filing requirements of Sec. 240.14d-3(a), the dissemination 
requirements of Sec. 240.14d-4(a) or (b), and the disclosure 
requirements of Sec. 240.14d-6(a).

[[Page 61460]]

    37. By amending Sec. 240.14d-3 as follows:
    a. By removing the reference ``Schedule 14D-1'' in paragraphs 
(a)(1), (a)(2), (a)(2)(ii), the introductory text of (a)(3), and 
paragraph (c) each time it appears and adding in its place ``Schedule 
TO'';
    b. Removing the phrase ``ten copies of'' in paragraphs (a)(1);
    c. Removing the phrase ``Hand delivers'' in paragraph (a)(2), and 
adding in its place ``Delivers'', and
    d. Revising paragraph (b) to read as follows:


Sec. 240.14d-3  Filing and transmission of tender offer statement.

* * * * *
    (b) Post-commencement amendments and additional materials. The 
bidder making the tender offer must file with the Commission:
    (1) An amendment to Schedule TO (Sec. 240.14d-100) reporting 
promptly any material changes in the information set forth in the 
schedule previously filed and including copies of any additional tender 
offer materials as exhibits; and
    (2) A final amendment to Schedule TO (Sec. 240.14d-100) reporting 
promptly the results of the tender offer.

    Instruction to paragraph (b): A copy of any additional tender 
offer materials or amendment filed under this section must be sent 
promptly to the subject company and to any exchange and/or NASD, as 
required by paragraph (a) of this section, but in no event later 
than the date the materials are first published, sent or given to 
security holders.
* * * * *
    38. Amend Sec. 240.14d-4 as follows:
    a. By revising the section heading;
    b. Adding an introductory text to Sec. 240.14d-4;
    c. Revising the introductory text of paragraph (a) and paragraph 
(a)(3);
    d. Adding an Instruction to paragraph (a);
    e. Redesignating paragraphs (b) and (c) as paragraphs (c) and 
(d)(1) and adding a new paragraph (b);
    f. Revising the heading of newly redesignated paragraph (d);
    g. In the first sentence of newly redesignated paragraph (d)(1) 
removing the phrase ``paragraph (a) of''; and
    h. Adding paragraph (d)(2) to read as follows:


Sec. 240.14d-4  Dissemination of tender offers to security holders.

    As soon as practicable on the date of commencement of a tender 
offer, the bidder must publish, send or give the disclosure required by 
Sec. 240.14d-6 to security holders of the class of securities that is 
the subject of the offer, by complying with all of the requirements of 
any of the following:
    (a) Cash tender offers and exempt securities offers. For tender 
offers in which the consideration consists solely of cash and/or 
securities exempt from registration under section 3 of the Securities 
Act of 1933 (15 U.S.C. 77c):
* * * * *
    (3) Use of stockholder lists and security position listings. Any 
bidder using stockholder lists and security position listings under 
Sec. 240.14d-5 must comply with paragraph (a)(1) or (2) of this section 
on or before the date of the bidder's request under Sec. 240.14d-5(a).

    Instruction to paragraph (a): Tender offers may be published or 
sent or given to security holders by other methods, but with respect 
to summary publication and the use of stockholder lists and security 
position listings under Sec. 240.14d-5, paragraphs (a)(2) and (a)(3) 
of this section are exclusive.

    (b) Registered securities offers. For tender offers in which the 
consideration consists solely or partially of securities registered 
under the Securities Act of 1933, a registration statement containing 
all of the required information, including pricing information, has 
been filed and a preliminary prospectus or a prospectus that meets the 
requirements of section 10(a) of the Securities Act (15 U.S.C. 77j(a)), 
including a letter of transmittal, is delivered to security holders. 
However, for going-private transactions (as defined by Sec. 240.13e-3) 
and roll-up transactions (as described by Item 901 of Regulation S-K 
(Sec. 229.901 of this chapter)), a registration statement registering 
the securities to be offered must have become effective and only a 
prospectus that meets the requirements of section 10(a) of the 
Securities Act may be delivered to security holders on the date of 
commencement.

Instructions to paragraph (b) 

    1. If the prospectus is being delivered by mail, mailing on the 
date of commencement is sufficient.
    2. A preliminary prospectus used under this section may not omit 
information under Sec. 230.430 or Sec. 230.430A of this chapter.
    3. If a preliminary prospectus is used under this section and 
the bidder must disseminate material changes, the tender offer must 
remain open for the period specified in paragraph (d)(2) of this 
section.
    4. If a preliminary prospectus is used under this section, 
tenders may be requested in accordance with Sec. 230.162(a) of this 
chapter.
* * * * *
    (d) Publication of changes and extension of the offer. (1) * * *
    (2) In a registered securities offer where the bidder disseminates 
the preliminary prospectus as permitted by paragraph (b) of this 
section, the offer must remain open from the date that material changes 
to the tender offer materials are disseminated to security holders, as 
follows:
    (i) Five business days for a prospectus supplement containing a 
material change other than price or share levels;
    (ii) Ten business days for a prospectus supplement containing a 
change in price, the amount of securities sought, the dealer's 
soliciting fee, or other similarly significant change;
    (iii) Ten business days for a prospectus supplement included as 
part of a post-effective amendment; and
    (iv) Twenty business days for a revised prospectus when the initial 
prospectus was materially deficient.
    39. By amending Sec. 240.14d-5 by revising paragraph (c)(1) to read 
as follows:


Sec. 240.14d-5  Dissemination of certain tender offers by the use of 
stockholder lists and security position listings.

* * * * *
    (c) * * *
    (1) No later than the third business day after the date of the 
bidder's request, the subject company must furnish to the bidder at the 
subject company's principal executive office a copy of the names and 
addresses of the record holders on the most recent stockholder list 
referred to in paragraph (a)(2) of this section; the names and 
addresses of participants identified on the most recent security 
position listing of any clearing agency that is within the access of 
the subject company; and the most recent list of names, addresses and 
security positions of beneficial owners as specified in Sec. 240.14a-
13(b), in the possession of the subject company, or that subsequently 
comes into its possession. All security holder list information must be 
in the format requested by the bidder to the extent the format is 
available to the subject company without undue burden or expense.
* * * * *
    40. By revising Sec. 240.14d-6 to read as follows:


Sec. 240.14d-6  Disclosure of tender offer information to security 
holders.

    (a) Information required on date of commencement.--(1) Long-form 
publication. If a tender offer is published, sent or given to security 
holders on the date of commencement by means of long-form publication 
under Sec. 240.14d-4(a)(1), the long-form publication must include the 
information required by paragraph (d)(1) of this section.
    (2) Summary publication. If a tender offer is published, sent or 
given to security holders on the date of

[[Page 61461]]

commencement by means of summary publication under Sec. 240.14d-
4(a)(2):
    (i) The summary advertisement must contain at least the information 
required by paragraph (d)(2) of this section; and
    (ii) The tender offer materials furnished by the bidder upon 
request of any security holder must include the information required by 
paragraph (d)(1) of this section.
    (3) Use of stockholder lists and security position listings. If a 
tender offer is published, sent or given to security holders on the 
date of commencement by the use of stockholder lists and security 
position listings under Sec. 240.14d-4(a)(3):
    (i) The summary advertisement must contain at least the information 
required by paragraph (d)(2) of this section; and
    (ii) The tender offer materials transmitted to security holders 
pursuant to such lists and security position listings and furnished by 
the bidder upon the request of any security holder must include the 
information required by paragraph (d)(1) of this section.
    (4) Other tender offers. If a tender offer is published or sent or 
given to security holders other than pursuant to Sec. 240.14d-4(a), the 
tender offer materials that are published or sent or given to security 
holders on the date of commencement of such offer must include the 
information required by paragraph (d)(1) of this section.
    (b) Information required in other tender offer materials published 
after commencement. Except for tender offer materials described in 
paragraphs (a)(2)(ii) and (a)(3)(ii) of this section, additional tender 
offer materials published, sent or given to security holders after 
commencement must include:
    (1) The identities of the bidder and subject company;
    (2) The amount and class of securities being sought;
    (3) The type and amount of consideration being offered; and
    (4) The scheduled expiration date of the tender offer, whether the 
tender offer may be extended and, if so, the procedures for extension 
of the tender offer.

    Instruction to paragraph (b): If the additional tender offer 
materials are summary advertisements, they also must include the 
information required by paragraphs (d)(2)(v) of this section.

    (c) Material changes. A material change in the information 
published or sent or given to security holders must be promptly 
disclosed to security holders in additional tender offer materials.
    (d) Information to be included.--(1) Tender offer materials other 
than summary publication. The following information is required by 
paragraphs (a)(1), (a)(2)(ii), (a)(3)(ii) and (a)(4) of this section:
    (i) The information required by Item 1 of Schedule TO 
(Sec. 240.14d-100) (Summary Term Sheet); and
    (ii) The information required by the remaining items of Schedule TO 
(Sec. 240.14d-100) for third-party tender offers, except for Item 12 
(exhibits) of Schedule TO (Sec. 240.14d-100), or a fair and adequate 
summary of the information.
    (2) Summary Publication. The following information is required in a 
summary advertisement under paragraphs (a)(2)(i) and (a)(3)(i) of this 
section:
    (i) The identity of the bidder and the subject company;
    (ii) The information required by Item 1004(a)(1) of Regulation M-A 
(Sec. 229.1004(a)(1) of this chapter);
    (iii) If the tender offer is for less than all of the outstanding 
securities of a class of equity securities, a statement as to whether 
the purpose or one of the purposes of the tender offer is to acquire or 
influence control of the business of the subject company;
    (iv) A statement that the information required by paragraph (d)(1) 
of this section is incorporated by reference into the summary 
advertisement;
    (v) Appropriate instructions as to how security holders may obtain 
promptly, at the bidder's expense, the bidder's tender offer materials; 
and
    (vi) In a tender offer published or sent or given to security 
holders by use of stockholder lists and security position listings 
under Sec. 240.14d-4(a)(3), a statement that a request is being made 
for such lists and listings. The summary publication also must state 
that tender offer materials will be mailed to record holders and will 
be furnished to brokers, banks and similar persons whose name appears 
or whose nominee appears on the list of security holders or, if 
applicable, who are listed as participants in a clearing agency's 
security position listing for subsequent transmittal to beneficial 
owners of such securities. If the list furnished to the bidder also 
included beneficial owners pursuant to Sec. 240.14d-5(c)(1) and tender 
offer materials will be mailed directly to beneficial holders, include 
a statement to that effect.
    (3) No transmittal letter. Neither the initial summary 
advertisement nor any subsequent summary advertisement may include a 
transmittal letter (the letter furnished to security holders for 
transmission of securities sought in the tender offer) or any amendment 
to the transmittal letter.
    41. By amending Sec. 240.14d-7 by redesignating paragraph (a) as 
(a)(1) and adding paragraph (a)(2) to read as follows:


Sec. 240.14d-7  Additional withdrawal rights.

    (a) * * *
    (2) Exemption during subsequent offering period. Notwithstanding 
the provisions of section 14(d)(5) of the Act (15 U.S.C. 78n(d)(5)) and 
paragraph (a) of this section, the bidder need not offer withdrawal 
rights during a subsequent offering period.
* * * * *
    42. By amending Sec. 240.14d-9 as follows:
    a. By revising the section heading;
    b. Redesignating paragraphs (a) through (f) as paragraphs (b) 
through (g);
    c. Adding new paragraph (a); and
    d. Revising the introductory text of newly redesignated paragraph 
(b) to read as follows:


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

    (a) Pre-commencement communications. A communication by a person 
described in paragraph (e) of this section with respect to a tender 
offer will not be deemed to constitute a recommendation or solicitation 
under this section if:
    (1) The tender offer has not commenced under Sec. 240.14d-2; and
    (2) The communication is filed under cover of Schedule 14D-9 
(Sec. 240.14d-101) with the Commission no later than the date of the 
communication.

    Instructions to paragraph (a)(2):
    1. The box on the front of Schedule 14D-9 (Sec. 240.14d-101) 
indicating that the filing contains pre-commencement communications 
must be checked.
    2. Any communications made in connection with an exchange offer 
registered under the Securities Act of 1933 need only be filed under 
Sec. 230.425 of this chapter and will be deemed filed under this 
section.
    3. Each pre-commencement written communication must include a 
prominent legend in clear, plain language advising security holders 
to read the company's solicitation/recommendation statement when it 
is available because it contains important information. The legend 
also must advise investors that they can get the recommendation and 
other filed documents for free at the Commission's web site and 
explain which documents are free from the filer.
    4. See Secs. 230.135, 230.165 and 230.166 of this chapter for 
pre-commencement communications made in connection with registered 
exchange offers.

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

[[Page 61462]]

security holders may be made by any person described in paragraph (e) 
of this section with respect to a tender offer for such securities 
unless as soon as practicable on the date such solicitation or 
recommendation is first published or sent or given to security holders 
such person complies with the following:
    (1) * * *
* * * * *
    43. By amending Sec. 240.14d-9 by removing the reference:
    a. ``eight copies of'' in newly redesignated paragraph (b)(1);
    b. ``14D-1'' in newly redesignated paragraphs (b)(2)(i) and 
(b)(3)(i) and in its place adding ``TO'';
    c. ``Items 2 and 4(a) of Schedule 14D-9'' in newly redesignated 
paragraph (b)(2)(ii) and in its place adding ``Items 1003(d) and 
1012(a) of Regulation M-A (Sec. 229.1003(d) and Sec. 229.1012(a))'';
    d. ``paragraph (a)(2) or (3)'' in newly redesignated paragraph 
(c)(2) and in its place adding ``paragraph (b)(2) or (3)'';
    e. ``Items 1, 2, 3(b), 4, 6, 7 and 8'' in newly redesignated 
paragraph (d) and in its place adding ``Items 1 through 8'';
    f. ``paragraphs (d)(2) and (e)'' in the introductory text of newly 
redesignated paragraph (e)(1) and in its place adding ``paragraphs 
(e)(2) and (f)'';
    g. ``paragraph (d)(1)'' each time it appears in newly redesignated 
paragraph (e)(2) and in its place adding ``paragraph (e)(1)'';
    h. ``14D-1 (Sec. 240.14d-101)'' in newly redesignated paragraph 
(e)(2)(i) and in its place adding ``TO (Sec. 240.14d-100)''; and
    i. ``paragraph (e)(3)'' in newly redesignated paragraph (f)(4) and 
in its place adding ``paragraph (f)(3)''.
    44. By adding Sec. 240.14d-11 to read as follows:


Sec. 240.14d-11  Subsequent offering period.

    A bidder may elect to provide a subsequent offering period of three 
business days to 20 business days during which tenders will be accepted 
if:
    (a) The initial offering period of at least 20 business days has 
expired;
    (b) The offer is for all outstanding securities of the class that 
is the subject of the tender offer, and if the bidder is offering 
security holders a choice of different forms of consideration, there is 
no ceiling on any form of consideration offered;
    (c) The bidder immediately accepts and promptly pays for all 
securities tendered during the initial offering period;
    (d) The bidder announces the results of the tender offer, including 
the approximate number and percentage of securities deposited to date, 
no later than 9:00 a.m. Eastern time on the next business day after the 
expiration date of the initial offering period and immediately begins 
the subsequent offering period;
    (e) The bidder immediately accepts and promptly pays for all 
securities as they are tendered during the subsequent offering period; 
and
    (f) The bidder offers the same form and amount of consideration to 
security holders in both the initial and the subsequent offering 
period.

    Note Sec. 240.14d-11: No withdrawal rights apply during the 
subsequent offering period in accordance with Sec. 240.14d-7(a)(2).

    45. By revising Sec. 240.14d-100 to read as follows:


Sec. 240.14d-100  Schedule TO. Tender offer statement under section 
14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934.

Securities and Exchange Commission,
Washington, D.C. 20549

Schedule TO

Tender Offer Statement under Section 14(d)(1) or 13(e)(1) of the 
Securities Exchange Act of 1934

(Amendment No. ______)*

----------------------------------------------------------------------
(Name of Subject Company (issuer))

----------------------------------------------------------------------
(Names of Filing Persons (identifying status as offeror, issuer or 
other person))

----------------------------------------------------------------------
(Title of Class of Securities)

----------------------------------------------------------------------
(CUSIP Number of Class of Securities)

(Name, address, and telephone numbers of person authorized to 
receive notices and communications on behalf of filing persons)

                        Calculation of Filing Fee
------------------------------------------------------------------------
          Transaction valuation*                Amount of filing fee
------------------------------------------------------------------------
 
------------------------------------------------------------------------
*Set forth the amount on which the filing fee is calculated and state
  how it was determined.

    [  ] Check the box if any part of the fee is offset as provided 
by Rule 0-11(a)(2) and identify the filing with which the offsetting 
fee was previously paid. Identify the previous filing by 
registration statement number, or the Form or Schedule and the date 
of its filing.

Amount Previously Paid:------------------------------------------------
Form or Registration No.:----------------------------------------------
Filing Party:----------------------------------------------------------
Date Filed:------------------------------------------------------------
    [  ] Check the box if the filing relates solely to preliminary 
communications made before the commencement of a tender offer.
    Check the appropriate boxes below to designate any transactions 
to which the statement relates:
    [  ] third-party tender offer subject to Rule 14d-1.
    [  ] issuer tender offer subject to Rule 13e-4.
    [  ] going-private transaction subject to Rule 13e-3.
    [  ] amendment to Schedule 13D under Rule 13d-2.
    Check the following box if the filing is a final amendment 
reporting the results of the tender offer: [  ]
    General Instructions:
    A. File eight copies of the statement, including all exhibits, 
with the Commission if paper filing is permitted.
    B. This filing must be accompanied by a fee payable to the 
Commission as required by Sec. 240.0-11.
    C. If the statement is filed by a general or limited 
partnership, syndicate or other group, the information called for by 
Items 3 and 5-8 for a third-party tender offer and Items 5-8 for an 
issuer tender offer must be given with respect to: (i) Each partner 
of the general partnership; (ii) each partner who is, or functions 
as, a general partner of the limited partnership; (iii) each member 
of the syndicate or group; and (iv) each person controlling the 
partner or member. If the statement is filed by a corporation or if 
a person referred to in (i), (ii), (iii) or (iv) of this Instruction 
is a corporation, the information called for by the items specified 
above must be given with respect to: (a) Each executive officer and 
director of the corporation; (b) each person controlling the 
corporation; and (c) each executive officer and director of any 
corporation or other person ultimately in control of the 
corporation.
    D. If the filing contains only preliminary communications made 
before the commencement of a tender offer, no signature or filing 
fee is required. The filer need not respond to the items in the 
schedule. Any pre-commencement communications that are filed under 
cover of this schedule need not be incorporated by reference into 
the schedule.
    E. If an item is inapplicable or the answer is in the negative, 
so state. The statement published, sent or given to security holders 
may omit negative and not applicable responses. If the schedule 
includes any information that is not published, sent or given to 
security holders, provide that information or specifically 
incorporate it by reference under the appropriate item number and 
heading in the schedule. Do not recite the text of disclosure 
requirements in the schedule or any document published, sent or 
given to security holders. Indicate clearly the coverage of the 
requirements without referring to the text of the items.
    F. Information contained in exhibits to the statement may be 
incorporated by reference in answer or partial answer to any item 
unless it would render the answer misleading, incomplete, unclear or 
confusing. A copy of any information that is incorporated by 
reference or a copy of the pertinent pages of a document containing 
the information must be submitted with this statement as an exhibit, 
unless it was previously filed with the Commission electronically on 
EDGAR. If an exhibit contains information responding to more than 
one item in the schedule, all information in that exhibit may be 
incorporated by reference once in response to the several items in 
the schedule for which

[[Page 61463]]

it provides an answer. Information incorporated by reference is 
deemed filed with the Commission for all purposes of the Act.
    G. A filing person may amend its previously filed Schedule 13D 
(Sec. 240.13d-101) on Schedule TO (Sec. 240.14d-100) if the 
appropriate box on the cover page is checked to indicate a combined 
filing and the information called for by the fourteen disclosure 
items on the cover page of Schedule 13D (Sec. 240.13d-101) is 
provided on the cover page of the combined filing with respect to 
each filing person.
    H. The final amendment required by Sec. 240.14d-3(b)(2) and 
Sec. 240.13e-4(c)(4) will satisfy the reporting requirements of 
section 13(d) of the Act with respect to all securities acquired by 
the offeror in the tender offer.
    I. Amendments disclosing a material change in the information 
set forth in this statement may omit any information previously 
disclosed in this statement.
    J. If the tender offer disclosed on this statement involves a 
going-private transaction, a combined Schedule TO (Sec. 240.14d-100) 
and Schedule 13E-3 (Sec. 240.13e-100) may be filed with the 
Commission under cover of Schedule TO. The Rule 13e-3 box on the 
cover page of the Schedule TO must be checked to indicate a combined 
filing. All information called for by both schedules must be 
provided except that Items 1--3, 5, 8 and 9 of Schedule TO may be 
omitted to the extent those items call for information that 
duplicates the item requirements in Schedule 13E-3.
    K. For purposes of this statement, the following definitions 
apply:
    (1) The term offeror means any person who makes a tender offer 
or on whose behalf a tender offer is made;
    (2) The term issuer tender offer has the same meaning as in Rule 
13e-4(a)(2); and
    (3) The term third-party tender offer means a tender offer that 
is not an issuer tender offer.

Special Instructions for Complying With Schedule to

    Under Sections 13(e), 14(d) and 23 of the Act and the rules and 
regulations of the Act, the Commission is authorized to solicit the 
information required to be supplied by this schedule.
    Disclosure of the information specified in this schedule is 
mandatory, except for I.R.S. identification numbers, disclosure of 
which is voluntary. The information will be used for the primary 
purpose of disclosing tender offer and going-private transactions. 
This statement will be made a matter of public record. Therefore, 
any information given will be available for inspection by any member 
of the public.
    Because of the public nature of the information, the Commission 
can use it for a variety of purposes, including referral to other 
governmental authorities or securities self-regulatory organizations 
for investigatory purposes or in connection with litigation 
involving the Federal securities laws or other civil, criminal or 
regulatory statutes or provisions. I.R.S. identification numbers, if 
furnished, will assist the Commission in identifying security 
holders and, therefore, in promptly processing tender offer and 
going-private statements.
    Failure to disclose the information required by this schedule, 
except for I.R.S. identification numbers, may result in civil or 
criminal action against the persons involved for violation of the 
Federal securities laws and rules.

Item 1. Summary Term Sheet

    Furnish the information required by Item 1001 of Regulation M-A 
(Sec. 229.1001 of this chapter) unless information is disclosed to 
security holders in a prospectus that meets the requirements of 
Sec. 230.421(d) of this chapter.

Item 2. Subject Company Information

    Furnish the information required by Item 1002(a) through (c) of 
Regulation M-A (Sec. 229.1002 of this chapter).

Item 3. Identity and Background of Filing Person

    Furnish the information required by Item 1003(a) through (c) of 
Regulation M-A (Sec. 229.1003 of this chapter) for a third-party 
tender offer and the information required by Item 1003(a) of 
Regulation M-A (Sec. 229.1003 of this chapter) for an issuer tender 
offer.

Item 4. Terms of the Transaction

    Furnish the information required by Item 1004(a) of Regulation 
M-A (Sec. 229.1004 of this chapter) for a third-party tender offer 
and the information required by Item 1004(a) through (b) of 
Regulation M-A (Sec. 229.1004 of this chapter) for an issuer tender 
offer.

Item 5. Past Contacts, Transactions, Negotiations and Agreements

    Furnish the information required by Item 1005(a) and (b) of 
Regulation M-A (Sec. 229.1005 of this chapter) for a third-party 
tender offer and the information required by Item 1005(e) of 
Regulation M-A (Sec. 229.1005) for an issuer tender offer.

Item 6. Purposes of the Transaction and Plans or Proposals

    Furnish the information required by Item 1006(a) and (c)(1) 
through (7) of Regulation M-A (Sec. 229.1006 of this chapter) for a 
third-party tender offer and the information required by Item 
1006(a) through (c) of Regulation M-A (Sec. 229.1006 of this 
chapter) for an issuer tender offer.

Item 7. Source and Amount of Funds or Other Consideration

    Furnish the information required by Item 1007(a), (b) and (d) of 
Regulation M-A (Sec. 229.1007 of this chapter).

Item 8. Interest in Securities of the Subject Company

    Furnish the information required by Item 1008 of Regulation M-A 
(Sec. 229.1008 of this chapter).

Item 9. Persons/Assets, Retained, Employed, Compensated or Used

    Furnish the information required by Item 1009(a) of Regulation 
M-A (Sec. 229.1009 of this chapter).

Item 10. Financial Statements

    If material, furnish the information required by Item 1010(a) 
and (b) of Regulation M-A (Sec. 229.1010 of this chapter) for the 
issuer in an issuer tender offer and for the offeror in a third-
party tender offer.
    Instructions to Item 10:
    1. Financial statements must be provided when the offeror's 
financial condition is material to security holder's decision 
whether to sell, tender or hold the securities sought. The facts and 
circumstances of a tender offer, particularly the terms of the 
tender offer, may influence a determination as to whether financial 
statements are material, and thus required to be disclosed.
    2. Financial statements are not considered material when: (a) 
The consideration offered consists solely of cash; (b) the offer is 
not subject to any financing condition; and either: (c) the offeror 
is a public reporting company under Section 13(a) or 15(d) of the 
Act that files reports electronically on EDGAR, or (d) the offer is 
for all outstanding securities of the subject class. Financial 
information may be required, however, in a two-tier transaction. See 
Instruction 5 below.
    3. The filing person may incorporate by reference financial 
statements contained in any document filed with the Commission, 
solely for the purposes of this schedule, if: (a) The financial 
statements substantially meet the requirements of this item; (b) an 
express statement is made that the financial statements are 
incorporated by reference; (c) the information incorporated by 
reference is clearly identified by page, paragraph, caption or 
otherwise; and (d) if the information incorporated by reference is 
not filed with this schedule, an indication is made where the 
information may be inspected and copies obtained. Financial 
statements that are required to be presented in comparative form for 
two or more fiscal years or periods may not be incorporated by 
reference unless the material incorporated by reference includes the 
entire period for which the comparative data is required to be 
given. See General Instruction F to this schedule.
    4. If the offeror in a third-party tender offer is a natural 
person, and such person's financial information is material, 
disclose the net worth of the offeror. If the offeror's net worth is 
derived from material amounts of assets that are not readily 
marketable or there are material guarantees and contingencies, 
disclose the nature and approximate amount of the individual's net 
worth that consists of illiquid assets and the magnitude of any 
guarantees or contingencies that may negatively affect the natural 
person's net worth.
    5. Pro forma financial information is required in a negotiated 
third-party cash tender offer when securities are intended to be 
offered in a subsequent merger or other transaction in which 
remaining target securities are acquired and the acquisition of the 
subject company is significant to the offeror under Sec. 210.11-
01(b)(1) of this chapter. The offeror must disclose the financial 
information specified in Item 3(f) and Item 5 of Form S-4 
(Sec. 239.25 of this chapter) in the schedule filed with the 
Commission, but may furnish only the summary financial information 
specified in

[[Page 61464]]

Item 3(d), (e) and (f) of Form S-4 in the disclosure document sent 
to security holders. If pro forma financial information is required 
by this instruction, the historical financial statements specified 
in Item 1010 of Regulation M-A (Sec. 229.1010 of this chapter) are 
required for the bidder.
    6. The disclosure materials disseminated to security holders may 
contain the summarized financial information specified by Item 
1010(c) of Regulation M-A (Sec. 229.1010 of this chapter) instead of 
the financial information required by Item 1010(a) and (b). In that 
case, the financial information required by Item 1010(a) and (b) of 
Regulation M-A must be disclosed in the statement. If summarized 
financial information is disseminated to security holders, include 
appropriate instructions on how more complete financial information 
can be obtained. If the summarized financial information is prepared 
on the basis of a comprehensive body of accounting principles other 
than U.S. GAAP, the summarized financial information must be 
accompanied by a reconciliation as described in Instruction 8 of 
this Item.
    7. If the offeror is not subject to the periodic reporting 
requirements of the Act, the financial statements required by this 
Item need not be audited if audited financial statements are not 
available or obtainable without unreasonable cost or expense. Make a 
statement to that effect and the reasons for their unavailability.
    8. If the financial statements required by this Item are 
prepared on the basis of a comprehensive body of accounting 
principles other than U.S. GAAP, provide a reconciliation to U.S. 
GAAP in accordance with Item 17 of Form 20-F (Sec. 249.220f of this 
chapter), unless a reconciliation is unavailable or not obtainable 
without unreasonable cost or expense. At a minimum, however, when 
financial statements are prepared on a basis other than U.S. GAAP, a 
narrative description of all material variations in accounting 
principles, practices and methods used in preparing the non-U.S. 
GAAP financial statements from those accepted in the U.S. must be 
presented.

Item 11. Additional Information

    Furnish the information required by Item 1011 of Regulation M-A 
(Sec. 229.1011 of this chapter).

Item 12. Exhibits

    File as an exhibit to the Schedule all documents specified by 
Item 1016 (a), (b), (d), (g) and (h) of Regulation M-A 
(Sec. 229.1016 of this chapter).

Item 13. Information Required by Schedule 13E-3

    If the Schedule TO is combined with Schedule 13E-3 
(Sec. 240.13e-100), set forth the information required by Schedule 
13E-3 that is not included or covered by the items in Schedule TO.

Signature. After due inquiry and to the best of my knowledge and 
belief, I certify that the information set forth in this statement 
is true, complete and correct.

----------------------------------------------------------------------
(Signature)

----------------------------------------------------------------------
(Name and title)

----------------------------------------------------------------------
(Date)

    Instruction to Signature: The statement must be signed by the 
filing person or that person's authorized representative. If the 
statement is signed on behalf of a person by an authorized 
representative (other than an executive officer of a corporation or 
general partner of a partnership), evidence of the representative's 
authority to sign on behalf of the person must be filed with the 
statement. The name and any title of each person who signs the 
statement must be typed or printed beneath the signature. See 
Secs. 240.12b-11 and 240.14d-1(f) with respect to signature 
requirements.

    46. By revising Sec. 240.14d-101 to read as follows:


Sec. 240.14d-101  Schedule 14D-9.

Securities and Exchange Commission,
Washington, D.C. 20549

Schedule 14D-9

Solicitation/Recommendation Statement under Section 14(d)(4) of the 
Securities Exchange Act of 1934

(Amendment No. ______)

----------------------------------------------------------------------
(Name of Subject Company)

----------------------------------------------------------------------
(Names of Persons Filing Statement)

----------------------------------------------------------------------
(Title of Class of Securities)

----------------------------------------------------------------------
(CUSIP Number of Class of Securities)

----------------------------------------------------------------------
(Name, address, and telephone numbers of person authorized to 
receive notices and communications on behalf of the persons filing 
statement)

    [  ] Check the box if the filing relates solely to preliminary 
communications made before the commencement of a tender offer.
    General Instructions:
    A. File eight copies of the statement, including all exhibits, 
with the Commission if paper filing is permitted.
    B. If the filing contains only preliminary communications made 
before the commencement of a tender offer, no signature is required. 
The filer need not respond to the items in the schedule. Any pre-
commencement communications that are filed under cover of this 
schedule need not be incorporated by reference into the schedule.
    C. If an item is inapplicable or the answer is in the negative, 
so state. The statement published, sent or given to security holders 
may omit negative and not applicable responses. If the schedule 
includes any information that is not published, sent or given to 
security holders, provide that information or specifically 
incorporate it by reference under the appropriate item number and 
heading in the schedule. Do not recite the text of disclosure 
requirements in the schedule or any document published, sent or 
given to security holders. Indicate clearly the coverage of the 
requirements without referring to the text of the items.
    D. Information contained in exhibits to the statement may be 
incorporated by reference in answer or partial answer to any item 
unless it would render the answer misleading, incomplete, unclear or 
confusing. A copy of any information that is incorporated by 
reference or a copy of the pertinent pages of a document containing 
the information must be submitted with this statement as an exhibit, 
unless it was previously filed with the Commission electronically on 
EDGAR. If an exhibit contains information responding to more than 
one item in the schedule, all information in that exhibit may be 
incorporated by reference once in response to the several items in 
the schedule for which it provides an answer. Information 
incorporated by reference is deemed filed with the Commission for 
all purposes of the Act.
    E. Amendments disclosing a material change in the information 
set forth in this statement may omit any information previously 
disclosed in this statement.

Item 1. Subject Company Information

    Furnish the information required by Item 1002(a) and (b) of 
Regulation M-A (Sec. 229.1002 of this chapter).

Item 2. Identity and Background of Filing Person

    Furnish the information required by Item 1003(a) and (d) of 
Regulation M-A (Sec. 229.1003 of this chapter).

Item 3. Past Contacts, Transactions, Negotiations and Agreements

    Furnish the information required by Item 1005(d) of Regulation 
M-A (Sec. 229.1005 of this chapter).

Item 4. The Solicitation or Recommendation

    Furnish the information required by Item 1012(a) through (c) of 
Regulation M-A (Sec. 229.1012 of this chapter).

Item 5. Person/Assets, Retained, Employed, Compensated or Used

    Furnish the information required by Item 1009(a) of Regulation 
M-A (Sec. 229.1009 of this chapter).

Item 6. Interest in Securities of the Subject Company

    Furnish the information required by Item 1008(b) of Regulation 
M-A (Sec. 229.1008 of this chapter).

Item 7. Purposes of the Transaction and Plans or Proposals

    Furnish the information required by Item 1006(d) of Regulation 
M-A (Sec. 229.1006 of this chapter).

Item 8. Additional Information

    Furnish the information required by Item 1011(b) of Regulation 
M-A (Sec. 229.1011 of this chapter).

Item 9. Exhibits

    File as an exhibit to the Schedule all documents specified by 
Item 1016(a), (e) and (g) of Regulation M-A (Sec. 229.1016 of this 
chapter).
    Signature. After due inquiry and to the best of my knowledge and 
belief, I certify that the information set forth in this statement 
is true, complete and correct.


[[Page 61465]]


----------------------------------------------------------------------
(Signature)

----------------------------------------------------------------------
(Name and title)

----------------------------------------------------------------------
(Date)

    Instruction to Signature: The statement must be signed by the 
filing person or that person's authorized representative. If the 
statement is signed on behalf of a person by an authorized 
representative (other than an executive officer of a corporation or 
general partner of a partnership), evidence of the representative's 
authority to sign on behalf of the person must be filed with the 
statement. The name and any title of each person who signs the 
statement must be typed or printed beneath the signature. See 
Sec. 240.14d-1(f) with respect to signature requirements.

    47. By adding a note at the beginning of Regulation 14E 
(Sec. 240.14e-1 through Sec. 240.14e-8) that reads as follows:

    Note: For the scope of and definitions applicable to Regulation 
14E, refer to Sec. 240.14d-1.

    48. By amending Sec. 240.14e-1 by revising paragraph (c) to read as 
follows:


Sec. 240.14e-1  Unlawful tender offer practices.

* * * * *
    (c) Fail to pay the consideration offered or return the securities 
deposited by or on behalf of security holders promptly after the 
termination or withdrawal of a tender offer. This paragraph does not 
prohibit a bidder electing to offer a subsequent offering period under 
Sec. 240.14d-11 from paying for securities during the subsequent 
offering period in accordance with that section.
* * * * *
    49. By adding Sec. 240.14e-5 to read as follows:


Sec. 240.14e-5  Prohibiting purchases outside of a tender offer.

    (a) Unlawful activity. As a means reasonably designed to prevent 
fraudulent, deceptive or manipulative acts or practices in connection 
with a tender offer for equity securities, no covered person may 
directly or indirectly purchase or arrange to purchase any subject 
securities or any related securities except as part of the tender 
offer. This prohibition applies from the time of public announcement of 
the tender offer until the tender offer expires. This prohibition does 
not apply to any purchases or arrangements to purchase made during the 
time of any subsequent offering period as provided for in Sec. 240.14d-
11 if the consideration paid or to be paid for the purchases or 
arrangements to purchase is the same in form and amount as the 
consideration offered in the tender offer.
    (b) Excepted activity. The following transactions in subject 
securities or related securities are not prohibited by paragraph (a) of 
this section:
    (1) Exercises of securities. Transactions by covered persons to 
convert, exchange, or exercise related securities into subject 
securities, if the covered person owned the related securities before 
public announcement;
    (2) Purchases for plans. Purchases or arrangements to purchase by 
or for a plan that are made by an agent independent of the issuer;
    (3) Purchases during odd-lot offers. Purchases or arrangements to 
purchase if the tender offer is excepted under Sec. 240.13e-4(h)(5);
    (4) Purchases as intermediary. Purchases by or through a dealer-
manager or its affiliates that are made in the ordinary course of 
business and made either:
    (i) On an agency basis not for a covered person; or
    (ii) As principal for its own account if the dealer-manager or its 
affiliate is not a market maker, and the purchase is made to offset a 
contemporaneous sale after having received an unsolicited order to buy 
from a customer who is not a covered person;
    (5) Basket transactions. Purchases or arrangements to purchase a 
basket of securities containing a subject security or a related 
security if the following conditions are satisfied:
    (i) The purchase or arrangement to purchase is made in the ordinary 
course of business and not to facilitate the tender offer;
    (ii) The basket contains 20 or more securities; and
    (iii) Covered securities and related securities do not comprise 
more than 5% of the value of the basket;
    (6) Covering transactions. Purchases or arrangements to purchase 
that are made to satisfy an obligation to deliver a subject security or 
a related security arising from a short sale or from the exercise of an 
option by a non-covered person if:
    (i) The short sale or option transaction was made in the ordinary 
course of business and not to facilitate the offer;
    (ii) In the case of a short sale, the short sale was entered into 
before public announcement of the tender offer; and
    (iii) In the case of an exercise of an option, the covered person 
wrote the option before public announcement of the tender offer;
    (7) Purchases pursuant to contractual obligations. Purchases or 
arrangements to purchase pursuant to a contract if the following 
conditions are satisfied:
    (i) The contract was entered into before public announcement of the 
tender offer;
    (ii) The contract is unconditional and binding on both parties; and
    (iii) The existence of the contract and all material terms 
including quantity, price and parties are disclosed in the offering 
materials;
    (8) Purchases or arrangements to purchase by an affiliate of the 
dealer-manager. Purchases or arrangements to purchase by an affiliate 
of a dealer-manager if the following conditions are satisfied:
    (i) The dealer-manager maintains and enforces written policies and 
procedures reasonably designed to prevent the flow of information to or 
from the affiliate that might result in a violation of the federal 
securities laws and regulations;
    (ii) The dealer-manager is registered as a broker or dealer under 
Section 15(a) of the Act;
    (iii) The affiliate has no officers (or persons performing similar 
functions) or employees (other than clerical, ministerial, or support 
personnel) in common with the dealer-manager that direct, effect, or 
recommend transactions in securities; and
    (iv) The purchases or arrangements to purchase are not made to 
facilitate the tender offer;
    (9) Purchases by connected exempt market makers or connected exempt 
principal traders. Purchases or arrangements to purchase if the 
following conditions are satisfied:
    (i) The issuer of the subject security is a foreign private issuer, 
as defined in Sec. 240.3b-4(c);
    (ii) The tender offer is subject to the United Kingdom's City Code 
on Takeovers and Mergers;
    (iii) The purchase or arrangement to purchase is effected by a 
connected exempt market maker or a connected exempt principal trader, 
as those terms are used in the United Kingdom's City Code on Takeovers 
and Mergers;
    (iv) The connected exempt market maker or the connected exempt 
principal trader complies with the applicable provisions of the United 
Kingdom's City Code on Takeovers and Mergers; and
    (v) The tender offer documents disclose the identity of the 
connected exempt market maker or the connected exempt principal trader 
and disclose, or describe how U.S. security holders can obtain, 
information regarding market making or principal purchases by such 
market maker or principal trader to the extent that this information is 
required to be made public in the United Kingdom; and
    (10) Purchases during cross-border tender offers. Purchases or 
arrangements

[[Page 61466]]

to purchase if the following conditions are satisfied:
    (i) The tender offer is excepted under Sec. 240.13e-4(h)(8) or 
Sec. 240.14d-1(c);
    (ii) The offering documents furnished to U.S. holders prominently 
disclose the possibility of any purchases, or arrangements to purchase, 
or the intent to make such purchases;
    (iii) The offering documents disclose the manner in which any 
information about any such purchases or arrangements to purchase will 
be disclosed;
    (iv) The offeror discloses information in the United States about 
any such purchases or arrangements to purchase in a manner comparable 
to the disclosure made in the home jurisdiction, as defined in 
Sec. 240.13e-4(i)(3); and
    (v) The purchases comply with the applicable tender offer laws and 
regulations of the home jurisdiction.
    (c) Definitions. For purposes of this section, the term:
    (1) Affiliate has the same meaning as in Sec. 240.12b-2;
    (2) Agent independent of the issuer has the same meaning as in 
Sec. 242.100(b) of this chapter;
    (3) Covered person means:
    (i) The offeror and its affiliates;
    (ii) The offeror's dealer-manager and its affiliates;
    (iii) Any advisor to any of the persons specified in paragraph 
(c)(3)(i) and (ii) of this section, whose compensation is dependent on 
the completion of the offer; and
    (iv) Any person acting, directly or indirectly, in concert with any 
of the persons specified in this paragraph (c)(3) in connection with 
any purchase or arrangement to purchase any subject securities or any 
related securities;
    (4) Plan has the same meaning as in Sec. 242.100(b) of this 
chapter;
    (5) Public announcement is any oral or written communication by the 
offeror or any person authorized to act on the offeror's behalf that is 
reasonably designed to, or has the effect of, informing the public or 
security holders in general about the tender offer;
    (6) Related securities means securities that are immediately 
convertible into, exchangeable for, or exercisable for subject 
securities; and
    (7) Subject securities has the same meaning as in Sec. 229.1000 of 
this chapter.
    (d) Exemptive authority. Upon written application or upon its own 
motion, the Commission may grant an exemption from the provisions of 
this section, either unconditionally or on specified terms or 
conditions, to any transaction or class of transactions or any security 
or class of security, or any person or class of persons.
    50. By adding Sec. 240.14e-8 to read as follows:


Sec. 240.14e-8  Prohibited conduct in connection with pre-commencement 
communications.

    It is a fraudulent, deceptive or manipulative act or practice 
within the meaning of section 14(e) of the Act (15 U.S.C. 78n) for any 
person to publicly announce that the person (or a party on whose behalf 
the person is acting) plans to make a tender offer that has not yet 
been commenced, if the person:
    (a) Is making the announcement of a potential tender offer without 
the intention to commence the offer within a reasonable time and 
complete the offer;
    (b) Intends, directly or indirectly, for the announcement to 
manipulate the market price of the stock of the bidder or subject 
company; or
    (c) Does not have the reasonable belief that the person will have 
the means to purchase securities to complete the offer.

    By the Commission.

    Dated: October 22, 1999.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-28355 Filed 11-9-99; 8:45 am]
BILLING CODE 8010-01-P