Proposed Rules on Regulation of Takeovers and Security Holder Communications

SECURITIES AND EXCHANGE COMMISSION

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

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

Regulation of Takeovers and Security Holder Communications

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rules.

SUMMARY: The Securities and Exchange Commission proposes to update and simplify the rules and regulations applicable to takeover transactions (including tender offers, mergers, acquisitions and similar extraordinary transactions). We propose to permit significantly more communications with security holders and the markets before the filing of a registration statement involving a takeover transaction, a proxy statement or tender offer statement. We also propose to put cash and stock tender offers on a more equal regulatory footing; integrate the forms and disclosure requirements in issuer tender offers, third-party tender offers and going private transactions and consolidate the disclosure requirements in one location; permit security holders to tender their securities during a limited period after the successful completion of a tender offer; more closely align merger and tender offer requirements; and update the tender offer rules to clarify certain requirements and reduce compliance burdens where consistent with investor protection. The proposals presented in this release should be considered together with the companion release issued today, the Securities Act Reform Release.

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

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

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

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

SUPPLEMENTARY INFORMATION: We propose amendments to Rules 13e-1, 13e-3, 13e-4, 14a-4, 14a-6, 14a-11, 14a-12, 14c-2, 14c-5, 14d-1, 14d-2, 14d-3, 14d-4, 14d-5, 14d-6, 14d-7, 14d-9, 14e-1 [1] and Schedules 14A, 14C, 13E-3, and 14D-9 [2] under the Securities Exchange Act of 1934 (“Exchange Act”).[3] We also propose an amendment to Item 10 of Regulation S-K [4] and a new subpart of Regulation S-K, the 1000 series (“Regulation M-A”); a new tender offer schedule, Schedule TO, that would replace Schedules 13E-4 and 14D-1; [5] a new tender offer Rule 14e-5 that would replace Rule 10b-13; [6] and new tender offer Rules 14d-11 and 14e-8. Further, we propose to amend Rule 13(d) of Regulation S-T and Rules of Practice 30-1 and 30-3.[7] We also propose amendments to Rules 145 and 432, and new Rule 162, under the Securities Act of 1933 (“Securities Act”).[8] In addition, in the Securities Act Reform Release,[9] we propose new rules, forms and amendments under the Securities Act affecting the regulatory scheme for takeovers. Some of these proposals are republished in this release for the convenience of readers, as follows: portions of proposed new Forms C and SB-3 and proposed new Rules 166, 167 and 425.

[1] 17 CFR 240.13e-1; 17 CFR 240.13e-3; 17 CFR 240.13e-4; 17 CFR 240.14a-4; 17 CFR 240.14a-6; 17 CFR 240.14a-11; 17 CFR 240.14a-12; 17 CFR 240.14c-2; 17 CFR 240.14c-5; 17 CFR 240.14d-1; 17 CFR 240.14d-2; 17 CFR 240.14d-3; 17 CFR 240.14d-4; 17 CFR 240.14d-5; 17 CFR 240.14d-6; 17 CFR 240.14d-7; 17 CFR 240.14d-9; and 17 CFR 240.14e-1.

[2] 17 CFR 240.14a-101; 17 CFR 240.14c-101; 17 CFR 240.13e-100; and 17 CFR 240.14d-101.

[3] 15 U.S.C. 78a et seq.

[4] 17 CFR 229.10.

[5] 17 CFR 240.13e-101; 17 CFR 240.14d-100.

[6] 17 CFR 240.10b-13.

[7] 17 CFR 232.13(d); 17 CFR 200.30-1; 17 CFR 200.30-3.

[8] 17 CFR 230.145; 17 CFR 230.432; 15 U.S.C. 77a et seq.

[9] See Release No. 33-7606A (November 13, 1998).

Table of Contents

I. Executive Summary and Background II. Discussion of Proposals

A. Overview of the Regulatory Schemes

B. Expand Communications Permitted in Tender Offers and Mergers

1. Overview and General Considerations

2. Eliminate Restrictions on Pre-filing Communications

3. Waiting Period and Post-Effective Period Communications

4. Alternative Communications Proposals

5. Free Communications Under the Securities Act

6. Free Communications Under the Proxy Rules

a. Expand Rule 14a-12 Safe Harbor

b. “Test the Waters” Proxy Solicitations

c. Eliminate Confidential Treatment of Merger Proxies

d. Timing of Filings

7. Free Communications Under the Tender Offer Rules

a. Disclosure Triggering Commencement

b. Methods to Disseminate an Offer

C. Permit Exchange Offers to Commence On Filing

1. Early Commencement

2. Dissemination of a Supplement and Extension of the Offer

3. Tenders into an Offer Exempt from Sale Requirements of the Securities Act

D. Integrate and Streamline the Disclosure Requirements for Tender Offers and Mergers

1. Subpart 1000 of Regulation S-K (“Regulation M-A”) and Combination of Schedules

2. Streamline Disclosure Requirements and Improve Disclosure

a. “Plain English” Summary Term Sheet

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

c. Reduce Financial Statements Required for Non-Reporting Target Companies

d. Registration Statement Form for Business Combinations

E. Update the Tender Offer Rules

1. Permit Securities to be Tendered During a “Subsequent Offering Period” without Withdrawal Rights

2. Clarify the Financial Information Required for Bidders in Cash Tender Offers

a. When the Bidder's Financial Statements are Required in Cash Tender Offers

b. Content of Bidder's Financial Statements in Cash Tender Offers; Financial Statements in Going-Private Transactions

c. Bidder's Source of Funds

d. Pro Forma Financial Information in Two-Tier Transactions

3. Clarify the Requirement that a Target Report Purchases of its Own Securities After a Third-Party Tender Offer is Commenced

4. Harmonize the Tender Offer and Proxy Rules Relating to the Delivery of a Stockholder List and Security Position Listing

5. Revise and Redesignate the Rule Prohibiting Purchases Outside an Offer

a. Proposed Amendments Redesignating and Clarifying the Rule

b. Persons and Securities Subject to the Rule

c. Excepted Transactions

d. Solicitation of Comments on Proposed Rule 14e-5

6. Safe Harbor for Forward-Looking Statements III. General Request For Comments IV. Cost-Benefit Analysis

A. Communications

B. Filings

C. Tender Offers V. Initial Regulatory Flexibility Analysis

A. Reasons for Proposed Action

B. Objectives and Legal Basis

C. Small Entities Subject to the Rules

D. Reporting, Recordkeeping, and Other Compliance Requirements

E. Significant Alternatives

F. Overlapping or Conflicting Federal Rules VI. Paperwork Reduction Act VII. Statutory Basis and Text of Proposed Amendments

I. Executive Summary and Background

Over the last several years, takeover activity has surpassed the extraordinary levels seen during the 1980s.[10] In 1996, there were over 7,000 merger and acquisition transactions completed in the U.S. valued at more than $650 billion. In 1997, U.S. merger and acquisition activity increased to approximately 7,800 transactions valued at over $790 billion.[11] Global merger and acquisition activity totaled approximately (U.S.) $900 billion in 1996.[12] In 1997, global merger and acquisition activity increased to (U.S.) $1.6 trillion.[13] This wave of takeovers has continued into 1998 with approximately $626 billion in domestic mergers and acquisitions announced as of June, 1998.[14]

[10] In 1988, approximately 3,000 domestic merger and acquisition transactions were completed with a total value of over $300 billion. In 1989, there were slightly more than 3,800 transactions valued at approximately $330 billion. See Mergers & Acquisitions, The Dealmaker's Journal, 1998 Almanac (March/April 1998), at 42.

[11] Id.

[12] See 1996 Mergers and Acquisitions, Corporate Financing Week (February 10, 1997).

[13] See Steven Lipin, Murphy's Law Doesn't Apply: The Conditions Are Perfect For Continued Growth In Mergers, Wall St. J., Jan. 2, 1998, at R6.

[14] See John R. Wilke & Bryan Gruley, In Merger Blitz, Regulators Vie to Bust Biggest Prizes, Wall St. J., June 11, 1998, at B1, citing Securities Data Corp. Although the boom in U.S. merger and acquisition activity has tempered slightly in recent months, it is expected to remain strong. See Third Q M&A Soars, but the Bear Lurks, Mergers & Acquisitions Report, October 5, 1998.

Three characteristics are common to many of today's takeover transactions. First, many acquirors are offering securities or a combination of securities

and cash to the security holders of subject companies (“targets”). In 1996, almost half of the completed takeover transactions involved some form of stock as consideration, as opposed to cash only.[15] In 1997, the number of stock-based takeovers remained relatively constant at approximately half of all completed transactions.[16] During the first half of 1998, approximately 43% of the completed transactions involved securities as consideration.[17]

[15] Stock or a combination of stock and cash was offered to security holders in approximately 1,395 out of the 2,892 transactions announced in 1996. See Mergers & Acquisitions, The Dealmaker's Journal, 1998 Almanac (March/April 1998), at 47. The information reported in Mergers & Acquisitions 1998 Almanac was based on all completed mergers, acquisitions, and divestitures priced at $5 million and over, including purchases of partial interests of at least a 40% stake in the target company or an investment of a least $100 million. Id. at 42.

[16] Stock or a combination of stock and cash was offered to security holders in approximately 1,703 out of the 3,449 transactions announced in 1997. Id. at 47.

[17] See Mergers & Acquisitions, The Dealmaker's Journal, (September/October 1998) at p. 50.

Second, there has been an increase in the number of hostile transactions involving proxy or consent solicitations. This trend appears to be the result of the adoption of anti-takeover devices by many public companies and the development of more stringent state anti-takeover laws in reaction to the wave of takeovers in the 1980s. Today's proxy and consent solicitations are primarily aimed at unseating incumbent directors, dismantling anti-takeover devices, and generally facilitating transactions opposed by management.

Third, significant technological advances in communications permit more frequent, timely and direct communications with security holders. These developments in technology affect how acquirors, targets, and other market participants communicate with security holders and the securities markets regarding proposed mergers and other extraordinary corporate transactions. For example, many companies post detailed information regarding corporate developments on their Internet web sites. In addition, companies use the Internet as a means of communicating with security holders during proxy contests and in connection with tender offers and mergers.[18] These changes in how companies, security holders, and market participants communicate with one another prompted the Commission to issue several releases addressing the use of the Internet and other electronic media under the federal securities laws.[19]

[18] Companies also have broadcast annual security holder meetings over the Internet, and are increasingly soliciting proxies via the Internet.

[19] See Release Nos. 33-7233 (October 6, 1995) [60 FR 53458] and 33-7288 (May 9, 1996) [61 FR 24644], expressing the Commission's views on the use of electronic media to satisfy information delivery requirements under the federal securities laws. See also Release No. 33-7516 (March 27, 1998) [63 FR 14806] interpreting jurisdictional issues involving the use of the Internet by issuers, investment companies, broker-dalers, exchanges and investment advisers to solicit offshore securities transactions.

While the takeover market has evolved dramatically over the past 20 years, the applicable regulatory framework has remained substantially the same.[20] As a result, the application of our existing rules to today's extraordinary transactions can often raise complex regulatory issues. These issues may, in some instances, cause unnecessary burdens for companies without corresponding benefits to security holders. Today's proposals are intended to reduce these costs while maintaining the same high level of investor protection.

[20] One exception is the Commission's revisions to the proxy rules in 1992. The Commission eliminated the regulation of certain communications with or among security holders relating to corporate performance and other matters of interest to all security holders when made in the context of an actual or potential proxy solicitation. See Release No. 34-31326 (October 16, 1992) [57 FR 48276].

In formulating the proposals, we have drawn on the staff's experience in reviewing takeover disclosure, the suggestions of practitioners, and the recommendations of the Task Force on Disclosure Simplification.[21] We have examined all of the regulations relating to tender offers as well as other forms of takeovers with a view toward improving the regulatory scheme.

[21] The Commission staff's Report of the Task Force on Disclosure Simplification (March, 1996) recommended several of the proposals in this release. See “Significant Corporate Transactions” at pp. 51-57.

We encourage readers to keep in mind that these proposals were drafted, and should be considered, with the proposals presented in the Securities Act Reform Release also issued today. The goal underlying the proposals described below is the same as that underpinning the Securities Act Reform Release—making the regulatory scheme more workable for issuers and more effective for investors in today's capital markets. While we intend that both sets of proposals move towards adoption on the same track, we may adopt the proposals in either release without adopting those in the companion release.

The proposals vary in some respects from those in the Securities Act Reform Release because it is necessary to recognize the special nature of business combination transactions in contrast to capital-raising transactions. Specifically, we have considered that a security holder's decision regarding a proposed business combination is not always volitional, and that a change in security ownership can arise as a result of the security holder's inaction.[22] In addition, where the acquiror offers securities, the investment decision can be complex, requiring security holders to assess both the security of another company offered in exchange and the security they are asked to give up. They also must consider how the acquiror may change as a result of the acquisition, because they will receive securities in the combined entity. Therefore, it may be important for the companies involved to have the flexibility to announce and discuss the proposed acquisition, regardless of the size and seasoned status of the acquiror.[23] In addition, it is necessary for information about the transaction to be delivered timely to security holders who must evaluate the deal in order to protect their existing investment.[24]

[22] See Form S-4 adopting release No. 33-6578 (April 23, 1995) [50 FR 18990, at 18991].

[23] By contrast, the Securities Act Reform Release conditions the extent to which communications will be liberalized on the size and seasoned status of the issuer.

[24] The Securities Act Reform Release proposes to reduce the prospectus delivery requirements under certain circumstances with respect to offerings by large, seasoned issuers.

In some cases, we have proposed significant modifications to the entire regulatory approach to takeovers. In doing so, we have attempted to treat different acquisition methods in a similar manner to the extent the different methods merit similar treatment. In other cases, we have focused on areas where current practice could be improved. Our goals are to update the regulations in order to reduce unnecessary regulatory burdens on participants, while maintaining investor protection and improving the quality of information that investors receive about business combination transactions.[25] We describe below three areas where the costs of compliance with the current rules applicable to takeovers may outweigh the benefits conferred upon security holders, and summarize the proposals in this release.

[25] See Part II.A for a description of the basic methods of business combination and how they are treated under the current regulatory scheme.

Restrictions on Communications to Security Holders and the Marketplace

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

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

[26] See the Securities Act Reform Release.

[27] 17 CFR 240.10-5. Rule 10b-5 prohibits misleading statements or omissions and other fraudulent or deceptive practices in connection with the purchase or sale of a security.

Regulatory Disadvantage of Exchange Offers

Tender offers where the bidder is offering securities generally cannot commence until the Securities Act registration statement for the securities being offered becomes effective. In some cases, where the staff undertakes to review and comment during the waiting period,[28] the delay of effectiveness can be quite lengthy. This delay is particularly troublesome for bidders [29] in exchange offers.[30] In contrast, cash offers, which may compete with exchange offers, can commence as soon as the required information is filed with the Commission and disseminated to security holders. The delay in commencing an exchange offer can place the bidder at risk that a competing all-cash bid will commence and close before the exchange offer can even commence. As a result, bidders that offer securities in takeover transactions may not be as successful in acquiring targets as cash bidders, even when the value of the stock offered is equal to or greater than the value of the cash offered in a competing offer. In response to the disparities in regulatory treatment, we propose to permit exchange offers to commence on a similar time frame to cash tender offers.

[28] The “waiting period” is the period of time between when a registration statement is first filed and when it becomes effective.

[29] The term “bidder” is used throughout this release to refer to the offeror or purchaser in a tender offer.

[30] Exchange offers, sometimes called stock tender offers, are tender offers where the consideration offered to security holders includes securities; these transactions generally are registered under the Securities Act.

Costs of Compliance WIth Multiple Regulatory Schemes

Many of today's takeover transactions involve a combination of tender offer, proxy solicitation and Securities Act registration issues. As a result, participants in a merger or acquisition may be required to comply with several distinct regulatory schemes. Companies can incur additional costs analyzing and complying with the multiple filing and disclosure regimes that may apply to a transaction. For example, when a company conducts an exchange offer for all outstanding securities of an affiliated company, three regulatory schemes may be involved, including the tender offer rules, the “going-private” rule, and the provisions of the Securities Act relating to the registration of securities. The proxy rules also can apply if the transaction involves a solicitation of votes or consents. We recognize that the application of multiple regulatory regimes to a single transaction can significantly increase the burdens and costs of compliance without necessarily benefiting investors. We propose to simplify the regulatory structure for takeovers by using combined forms and a uniform disclosure regulation.

In summary, we propose numerous revisions to the regulations to conform them to the realities of today's environment surrounding takeover transactions, while maintaining high quality investor protection and enhancing the timing and quality of information available to investors. The proposed revisions address changes in deal structure and advances in technology. Our principal proposals are to:

Relax the current restrictions on communications with security holders to provide the market with more information on a timely basis; in particular,

Permit free communications before the filing of a registration statement in connection with either a stock tender offer or a stock merger transaction;

Permit free communications before the filing of a proxy statement (whether or not a takeover transaction is involved);

Permit free communications about a planned tender offer without triggering the “commencement” of the offer, requiring the filing and dissemination of information;

Harmonize the various communications principles applicable to business combinations under the Securities Act, tender offer rules and proxy rules;

Eliminate the confidential treatment now available for merger proxy statements;

Reduce the disparate treatment of stock and cash tender offers by permitting stock tender offers to commence upon the filing of a Securities Act registration statement;

Simplify the regulatory scheme by integrating the disclosure requirements for tender offers, going-private transactions, and other extraordinary transactions into a new 1000 series of Regulation S-K, referred to as “Regulation M-A”;

Combine the current schedules for issuer and third-party tender offers into a single schedule available for all tender offers, entitled “Schedule TO”;

Require a “plain English” summary term sheet in all cash tender offer, cash merger and going-private transactions;

Update the financial statement requirements for takeover transactions; in particular,

Eliminate the need to file financial statements for target companies in most cash mergers, to harmonize with the treatment of cash tender offers;

Clarify when financial statements of the acquiring company are not required in cash mergers, and when financial statements are required, reduce the financial statements required for the acquiror from three years to two;

Clarify when the bidder's financial statements are not required in cash tender offers, and when financial statements are required in third-party offers, reduce the requirement from three years to two;

Require pro forma and related financial information in cash tender offers where the bidder intends to engage in a back-end stock merger;

Reduce the financial statements required for non-reporting target companies in stock mergers;

Permit a subsequent offering period, similar to that available in many United Kingdom tender offers, during which security holders can tender their shares for a limited period after completion of a tender offer;

Clarify the rule that requires issuers to report any intended repurchases of their securities after a third-party tender offer has commenced (Rule 13e-1), and require information to be disseminated on a timely basis; and

Clarify the rule that prohibits purchases outside a tender offer (Rule 10b-13), codify prior interpretations of and exemptions from the rule, and redesignate it as Rule 14e-5.

At this time we are not proposing, but are considering, whether we should:

Impose a federally mandated proxy solicitation period in merger transactions comparable to the current minimum tender offer period, to allow security holders at least a minimum time to consider the proxy statement disclosure;

Modify the proxy rules to permit direct delivery of proxy materials to non-objecting beneficial owners;

Create a broad safe harbor under the proxy rules that would permit “test the waters” communications with security holders without requiring the filing or delivery of a proxy statement, so long as no proxy card is delivered to security holders;

Require delivery of a disclosure document to security holders in cash tender offers, instead of permitting dissemination by summary advertisement alone, to conform the dissemination required in tender offers with that in proxy solicitations and securities offerings;

Permit proxy cards to be sent to security holders before a registration statement for a stock merger is effective; and

Expand by rule the coverage of the Private Securities Litigation Reform Act safe harbor from liability to include forward-looking statements made in connection with tender offers.

II. Discussion of Proposals

A. Overview of the Regulatory Schemes

It may be useful to discuss the regulatory schemes for different methods of business combination before addressing how our proposals would affect the current procedures. This release discusses two primary business combination methods: tender offers and mergers.[31] Tender offers may be made either by the issuer of the securities sought or by a third party.[32] The essence of a tender offer is that the offeror, or bidder, can go directly to security holders of the target company with an offer to buy their shares. Each security holder makes an individual decision whether or not to tender. A tender offer may or may not have the cooperation of the target company's board of directors. Even if the tender offer is successful, the bidder is unlikely to receive 100% of the shares. In contrast, a merger is a collective, voting decision.[33] The acquiror acquires the entire company if security holders of the target company approve the merger.[34] The acquiror generally needs the approval of the target's board of directors in order to present the transaction for a security holder vote.

[31] The discussion of “business combinations” in this release includes all mergers and tender offers addressed by our rules, including those that do not necessarily result in a “combination,” such as issuer tender offers and tender offers where the bidder is not seeking control of the target.

[32] An offer by the company to purchase its own outstanding securities is an “issuer tender offer,” while an offer by someone other than the issuer is a “third party tender offer.” Third-party tender offers for a class of equity securities registered under Section 12 of the Exchange Act [15 U.S.C. 78l] must comply with the requirements of Regulation 14D. In addition, whether or not an offer is subject to Regulation 14D [17 CFR 240.14d-1 through 240.14d-101], the offer must comply with Regulation 14E [17 CFR 240.14e-1 through 240.14e7] and the antifraud requirements of Section 14(e) of the Exchange Act [15 U.S.C. 78n(e)]. Issuer tender offers for the equity securities of a public reporting must comply with Rule 13e-4. Whether or not the issuer is a public reporting company, the issuer tender offer must comply with Regulation 14E and Section 14(e).

[33] Throughout the release, where we discuss mergers we also include reclassifications, consolidations and transfers of assets where security holders are asked to vote or consent. See Rule 145(a) [17 CFR 230.145(a)].

[34] The security holders of the target company almost always must vote on the merger; sometimes the acquiring company's security holders also must vote. This is determined by state law, the company's governing instruments, and requirements of all applicable self-regulatory organizations. If either voting party's securities are equity registered under Section 12 of the Exchange Act, the voting party must comply with the proxy or information statement rules (Regulation 14A or 14C) [17 CFR 240.14a-1 through 240.14a-104 and 17 CFR 240.14c-1 through 240.14c-101].

In either a tender offer or a merger, the offeror may offer cash, securities, or a combination. If the consideration consists all or partly of securities, the offeror generally will have to register them under the Securities Act.[35] The offeror will have to give more information to security holders of the target company than if it were offering cash, since the investment decision is more complex. Security holders of the target need information about the issuer whose securities they will receive if the transaction is consummated, which really means information about the surviving, combined entity (the issuer plus the acquired company).

[35] The offeror also must comply with the tender offer and proxy rules, if applicable. All business combination methods described in this release also are subject to the antifraud provisions of the federal securities laws. See Securities Act Section 17 [15 U.S.C. 77q]; Exchange Act Section 10(b) [15 U.S.C. 77j(b)]; Rule 10b-5, Rule 14a-9 [17 CFR 240.14a-9], and Exchange Act Section 14(e) and the rules under that section.

The following summarizes the regulatory process for the four basic business combination methods. These examples assume that the tender offers and proxy solicitations discussed are subject to our filing and dissemination requirements:

1. Cash tender offer—either issuer or third party. The bidder commences the offer by disseminating tender offer material to security holders, including a request that they tender their shares. On the same day, the bidder files this material publicly with the Commission, along with a tender offer schedule that contains additional information.[36] Unlike the other three transactions discussed below, the Commission staff does not have the opportunity to review the tender offer material until after the tender offer has begun. If the staff decides to review the filed material, and has comments, the staff gives comments to the bidder during the tender offer and the bidder addresses the comments appropriately. (For example, the bidder may need to send additional information to the security holders of the target and the offer may have to be extended.) The offer must remain open for at least 20 business days, and then the bidder can purchase the shares if all conditions to the offer have been satisfied or waived.[37]

[36] Third-party tender offer statements are filed with the Commission on Schedule 14D-1, while issuer tender offers are filed on Schedule 13E-4.

[37] In a third-party tender offer, the target company must respond to the offer with a recommendation to its security holders. This recommendation is disseminated to the security holders and filed with the Commission along with a Schedule 14D-9 containing additional information. The staff may review the material and comment on it after it is filed, the same as with the bidders material.

2. Exchange offer (stock tender offer)—either issuer or third party.[38] The bidder files a Securities Act registration statement containing a preliminary prospectus covering the securities it is offering to security holders of the target in exchange for their shares. The prospectus also contains the information about the exchange offer required by the tender offer rules. This is a public document. The bidder may disseminate the preliminary prospectus to security holders of the target company, but it usually does not do so because it cannot request tenders or buy any shares until the registration statement is declared effective. If the staff decides to review the registration statement, it may give comments to the bidder. After these comments are resolved, the bidder requests that the staff declare the registration statement effective. Once the registration statement is effective, the tender offer may “commence”—the bidder disseminates the combined final prospectus/ tender offer document to security holders, and requests that they tender their shares. On the same day, the bidder files with the Commission the

same tender offer schedule as for a cash tender offer.[39] The offer must remain open for at least 20 business days from this point before the bidder can purchase any shares.

[38] In this release we sometimes refer to “stock tender offers” and “stock mergers,” but in both cases it is possible for the consideration offered to be either equity or debt.

[39] The target company has the same obligations as in a cash tender offer.

3. Cash merger. The offeror files a preliminary proxy statement with the Commission that describes the transaction. This is usually a public document, but the offeror can request that the preliminary merger proxy statement be treated confidentially, with some exceptions. The offeror may mail the preliminary proxy statement to security holders, but often waits until the proxy statement is final, or “definitive.” This is because the offeror can send the proxy card only with the definitive proxy statement. The offeror may mail the definitive proxy statement ten days after the preliminary proxy statement is filed. However, if the staff decides to review the proxy material, in most cases offerors wait to receive staff comments before mailing. Once all comments have been resolved, the offeror mails the definitive proxy statement along with a proxy card for security holders to mark and return. There is no federally mandated time period between the date the offeror mails the proxy material and the date of the security holder meeting,[40] but state law generally requires security holder notice of the meeting a specified time before the meeting. If the vote at the meeting is to approve the merger and all conditions have been met, the merger can close.

[40] But see note 94.

4. Stock merger. The offeror files a Securities Act registration statement with the Commission that contains a preliminary prospectus as well as the information required in a proxy statement. Registration statements are filed publicly, but the material may be filed as a confidential proxy statement if the offeror so chooses. The registration statement is then filed as a “wrap around” the proxy statement when the offeror is ready to make the information public. The offeror may disseminate the preliminary prospectus/proxy statement, but ordinarily will not do so because the offeror may not include the proxy card. If the staff decides to review the filing, it gives comments to the offeror. After comments are resolved, the offeror requests that the staff declare the registration statement effective. Once the registration statement is effective, the offeror can mail the combined final prospectus/definitive proxy statement along with a proxy card. The process then continues as it would for a cash merger.

Any of the above transactions also could be a “going-private” transaction if it meets the criteria set forth in the “going-private” rule.[41] In this case, the offeror and any other party engaging in the transaction must file another schedule and provide additional information to the Commission and security holders, in addition to complying with the other regulatory requirements discussed. Usually this information is combined into a single disclosure document with the proxy statement, tender offer material or prospectus.

[41] See Rule 13e-3 and Schedule 13E-3. This rule covers specified transactions where a company may cease to be a public reporting company or a class of equity securities may cease to be registered or publicly traded.

B. Expand Communications Permitted in Tender Offers and Mergers

1. Overview and General Considerations

As discussed above, the fast pace of today's securities markets and the ready accessibility of information through electronic media have caused changes in the mergers and acquisitions environment. We understand that participants in many merger and acquisition transactions are providing extensive, deal-related information to the marketplace immediately following the execution of a definitive merger or purchase agreement.

Frequently, parties to a merger or other similar transaction release information to the press containing pro firma financial information on the combined entity, as well as estimated cost savings or “synergies.” The parties generally issue this type of information through press releases, analyst conferences, and meetings with institutional investors and the press.[42] The information provided to analysts often goes beyond the information disseminated to all security holders through press releases.

[42] “The boundaries of the `gun jumping' prohibition are being pushed in the current environment. A careful balance must be made between deal announcement activities and broader disclosures, which may serve legitimate disclosure issues, covering expected timetables managements financing plans, integration [of] operations and synergy expectations. Deal participants frequently are pressured for such information by analysts, reporters and institutional investors, and it is not uncommon for corporations to have full analyst presentations that announce, among other things, aggregate synergies/cost savings and CEO succession plans at the time of the announcement of an exchange offer, merger or spin-off transaction.” See Brownstein & Cohen, “Navigating the M&A Waters: Greater Options, Greater Challenges,” N.Y.L.J. (February 18, 1997), at p. 6 (“Brownstein & Cohen”).

Parties to merger agreements have asserted several reasons for the need to disclose deal-related information at an early stage, including the duty to make “full disclosure” of material information under Rule 10b-5.[43] Under Rule 10b-5, it is unlawful to make any misstatement or omission of material fact in connection with the purchase or sale of a security. The rule applies to mergers, exchange offers and other extraordinary transactions. The duty to disclose can be triggered by, among other things: (1) line-item disclosure requirements in filings with the Commission; (2) the issuer or insider's duty to “disclose or abstain” from trading while in possession of material, non-public information; [44] (3) the duty to provide full and complete information when disclosing information to the markets; [45] and (4) the duty to correct false or misleading statements made by the company.[46] Companies also may be required by the particular rules of the stock exchange or inter-dealer quotation system upon which their securities trade to inform the marketplace in a timely manner of material corporate developments, including proposed mergers.[47]

[43] The Commission has long recognized the need for issuers to communicate with their security holders with respect to important business and finance developments. See Releases No. 33-4697 (May 28, 1964) [29 FR 7317] and 33-5180 (August 16, 1971) [36 FR 16506]. See also Release No. 33-5927 (April 24, 1978) [42 FR 18163], in which the Division of Corporation Finance noted that compelling policy reasons exist, as reflected in the Williams Act disclosure requirements, to permit disclosure of information regarding contemplated “back-end” mergers in order to aid investors confronted with a tender offer investment decision that would otherwise “jump the gun” on a merger.

[44] See SEC v. Texas Gulf Sulphur Co., 401 F.2d 833,848 (2d Cir. 1968).

[45] Id. at 862; Basic v. Livinson, 485 U.S.C. 224 (1988).

[46] See Ross v. A.H. Robins Co., Inc., 465 F. Supp. 904 (S.D.N.Y.), rev'd in part and remanded on other grounds, 607 F. 2nd 545 (2d Cir. 1979), cert. denied, 446 U.S. 946 (1980); Naye v. Boyd, CCH para.92,980 (W.D. Wash. Oct. 20, 1986); Sharp v. Coopers & Lybrand, CCH para.96,952 (E.D. Pa. 1979); SEC v. Shattuck Denn Minning Corp. 297 F. Supp. 470 (S.D.N.Y. 1968); Fischer v. Kletz, 266 F. Supp. 180 (S.D.N.Y. 1967). Generally, however, there is no duty to correct statements issued by a third party unless the statements are attributable to the company. See Electronic Specialty Co. v. Int'l Controls Corp., 409 F.2d 937 (2d Cir. 1969); Zucker v. Sable, 426 F. Supp. 658 (S.D.N.Y. 1976). Under certain circumstances courts have found a duty to update information previously disclosed when it is rendered misleading by subsequent developments. See In re Time Warner, Inc., 9 F.3d 259 (2d Cir. 1993).

[47] See NYSE Listed Company Manual Sec. 202.05 stating that “[a] listed company is expected to release quickly to the public any news or information that might reasonably be expected to materially affect the market for its securities”; and American Stock Exchange, Listing Standards, Policies and Requirements Sec. 402 requiring disclosure of material information “likely to have a significant effect on the price of any of the company's securities or * * * likely to be considered important by a reasonable investor in determining a choice of action,” providing as an example information regarding mergers and acquisitions. See also the National Association of Securities Dealers, Inc. (“NASD”) Manual, Rules 4310(c)(16) and 4320(e)(14).

We understand that parties involved in extraordinary transactions may have certain economic reasons as well for disclosing more information to the markets before a registration, proxy or tender offer statement is filed with the Commission. These reasons include: the need to maintain an orderly market for the securities to be offered as

consideration; [48] the need to satisfy the market's increased demand for information regarding a proposed transaction; [49] and the need to inform customers, employees or other constituencies.

[48] In the takeover heyday of the 1980s, the price of participants' stock frequently dropped following the announcement of the transaction. This also can happen today, but market reaction can be positive when a deal appears to make business sense. Steven Lipin, “Corporations' Dreams Converge in One Idea: It's Time to Do a Deal,” Wall St. J. (February 26, 1997).

[49] Wall Street may require education due to the complexity of the transaction, the non-apparent nature of its value or the obscure nature of the business. In any case, assuring that the value created by a transaction is properly appreciated by Wall Street, and relected in stock price, may be both a matter of responsibility to shareholders as well as protecting the deal itself.” Brownstein & Cohen at p. 6. Indeed, commentators have argued that “winning the immediate favor of the market through disclosure of projections and other forward-looking information can be an essential element in ensuring the transaction's success.” See, e.g., Victor I. Lewkow and Paul J. Shim, Law Puts Parties in a Bind When Ammouncing Merger, Nat'l L. J. (Feb. 10, 1997), at p. B9.

While there may be certain regulatory and economic reasons for early disclosure of deal-related information, provisions of the Securities Act and Exchange Act, including the Williams Act, [50] restrict the type of information that may be disseminated before the filing of a registration, proxy or tender offer statement. The flow of information to investors is constrained primarily by the concepts of “offer” [51] and “prospectus” [52] under the Securities Act, “solicitation” under the Exchange Act, and “commencement” under the Williams Act. [53] Each of these concepts reflect a judgment that the information needed to make an informed voting or investment decision should be provided within the four corners of a prescribed disclosure document.

[50] The Williams Act was enacted in 1968 as an amendment to the Exchange Act (Sections 13(d)-(e) and 14(d)-(f). The Williams Act regulates tender offers and imposes beneficial ownership reporting requirements. 15 U.S.C. 78m(d)-(e) and 15 U.S.C. 78n(d)-(f).

[51] Section 2(a)(3) of the Securities Act broadly defines “offer” as including every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security, for value. 15 U.S.C. 77b. Offers are prohibited during the pre-filing period and restricted during the waiting period.

[52] The term “prospectus” is defined in Section 2(a)(10) to include any prospectus, notice, circular, advertisement, letter of communication, written or by radio or television, that offers any security for sale or confirms the sale of the security, except for communications that are preceded or accompanied by a statutory prospectus. 15 U.S.C. 77b.

[53] “Solicitation” is broadly defined by the Commission to include “the furnishing of a form of proxy or other communication to security holders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy.” See Rule 14a-1(l) [17 CFR 240.14a-1(l)]. The Williams Act provides that only limited information can be announced without either commencing a crash tender offer or requiring the filing of a registration statement in a stock offer.

We believe that alleviation of these regulatory constraints may be appropriate in today's marketplace, particularly given technological advances in communications. Information regarding a planned extraordinary transaction can be provided to all security holders on a more equal and timely basis. Restricting communications to one document may in fact serve to impede, rather than promote, informed investing and voting decisions. Of course, any proposed safe harbors permitting increased communications must be balanced to assure investor protection. Modifications to the existing regulatory scheme include conditions designed to provide full and fair disclosure to all investors and the broader marketplace and not simply to a limited audience of analysts and financially sophisticated market participants. Today's proposals are designed to reduce selective disclosure by permitting the widespread dissemination of information through a variety of media calculated to inform all security holders about the terms, benefits and risks of a proposed extraordinary transaction.

It is important to note that the proposals do not change the current requirement that before security holders are asked to vote or tender their shares, they must receive a mandated disclosure document-- a prospectus, proxy statement, or tender offer statement—that sets forth complete and balanced information. [54] Our long-standing concern about communications conditioning the market before the dissemination of mandated disclosure documents (i.e., “gun-jumping”) is alleviated by continuing to require this disclosure document before the investment decision, as well as by the liability that could attach to knowingly false offering materials.

[54] See the discussion of proposed Form C in Part II.D.2.d below.

2. Eliminate Restrictions on Pre-filing Communications

We propose to eliminate the current restrictions on communications about an upcoming merger, tender offer, or other business combination. Each of the regulatory schemes would provide for a safe harbor, as described below, for oral and written communications about the transaction before the registration, proxy or tender offer statement is filed. Recognizing that deal-related disclosure, including forward-looking information, is important to a complete understanding of a transaction, we do not propose any content limitation on the communications. However, we request comment on whether any content restrictions should be included in the proposed safe harbors. Of course, even without content restrictions, the antifraud rules will continue to apply.

We do not propose to limit eligibility for the proposed safe harbors to transactions involving large or seasoned issuers. We considered making distinctions by size and seasoned status along the same lines as in the Securities Act Reform Release (i.e., Form A and Form B), but believe that those distinctions are not as important as other considerations in the case of business combination transactions. In these transactions, the market does not need information about the offeror alone, but rather the combined entity, with which the market is unfamiliar in any case. Thus, the need for freer disclosure stems in large part from the fact that the offeror is, in essence, becoming a new company. Therefore, the market-driven disclosure is not company information but “synergies” and similar information about the combined entity. Further, we believe that regardless of seasoned status, the reasons for full and timely disclosure in a business combination still exist.

Nevertheless, we request comment as to whether the size and seasoned status of the parties to the transaction should determine the availability of the free communication safe harbors. Should the safe harbor be limited to Form B companies? [55] If the safe harbor were based upon the size and seasoned status of the parties, should it be the status of the acquiror or the target that would govern, or both? If the status of the acquiror controlled, different acquirors for the same target could be subject to different rules. Would the lack of a level playing field for competing acquirors have adverse effects on competition or the target's security holders?

[55] If the proposals in the Securities Act Reform Release are not adopted, then the proposals presented in this release could be limited to companies that are Form S-3 eligible, including the requirement that the aggregate market value of voting and non-voting common equity held by non-affiliates equal or exceed $75 million.

While we believe that the parties involved in a business combination transaction should be permitted to rely on the free communications safe harbors regardless of size, certain safeguards to protect investors are necessary. All written communications by those parties from the date of the first announcement of the transaction would be required to be filed with the

Commission upon first use.[56] Although there would be no requirement to deliver this information to security holders, written communications would have to be filed upon first use in order to assure that the information is available to all security holders—not just analysts and institutional investors—at the same time. Furthermore, written information about a proposed combined entity or the “synergies” that are expected to result from a proposed transaction could be verified or confirmed, and corrective disclosure could be required if needed.

[56] See Part II.B.5 below. Written communications include communications that are published in electronic media, such as videos and CD-ROMs.

Each communication would be required to include a prominent legend advising investors to read the registration, proxy or tender offer statement.[57] We solicit comment on whether certain basic information, including the name and description of the acquiror, also should be required in each communication.[58]

[57] The legend also would advise investors that they can obtain copies of the filed documents for free at the Commission's web site and explain which documents are available for free from the issuer. See proposed Securities Act Rule 421(e) in the Securities Act Reform Release, as well as proposed Rules 14a-12(a)(2), 13e-4(c) and 14d-2(b)(2) in this release.

[58] As discussed below, free pre-filing communications are permitted under the current scheme only in contested proxy solicitations under Rules 14s-11 and 14a-12. Those rules require that certain basic information (the identity of the participants in the solicitation and description of their interest in the transaction) be disclosed in each communication, whether written or oral.

We believe that bidders would welcome the opportunity to disclose deal information earlier in the process and that the filing on first use requirement would not “chill” disclosure of forward-looking information because of continuing market demands. We request comment, however, as to whether parties involved in tender offers would be reluctant, in light of the filing requirement, to disclose forward-looking information absent a safe harbor from liability for that information. The safe harbor established by the Private Securities Litigation Reform Act currently applies to merger transactions but does not apply to tender offers. We discuss below the possibility of expanding by rule the scope of that safe harbor to tender offers.[59]

[59] See Part II.E.6 below.

Would parties to a transaction communicate more freely if the written communications could be filed at a later date, whether along with the mandated disclosure document [60] or some other date, instead of filing upon first use? If so, should the communications required to be filed be limited to those made during a specified period of time, such as 30 calendar days or 30 business days before the disclosure document is filed? In addition to the filing requirement for written communications, would any market conditioning effect of the pre-filing communications be cured by the built-in time period between delivery of the disclosure document and the final voting or tendering decision? Would offerors tend to shorten this time period, to the extent permitted by law, if they could engage in more extensive communications at an earlier point? We also ask whether security holders would tend to sell into the market on the basis of pre-filing communications, rather than waiting for the disclosure document.

[60] This is the way Form B issuers would be treated in capital-raising transactions, as proposed in the Securities Act Reform Release.

As noted, the proposed free communications safe harbors would apply to oral as well as written communications. We do not propose to require that oral communications be reduced to writing and filed. As one objective of the proposal is to reduce selective disclosure, we solicit comment on whether liberalizing oral communications would remove incentives for offerors to file information and disseminate it in a widespread manner.[61]Should the safe harbors be available to oral communications? [62] If so, would the need to provide information to the markets generally provide a sufficient incentive for offerors to disseminate full, fair and balanced information in a widespread manner? Should a “notice” filing be required when oral communications are made?

[61] Of course, nothing in the proposal would affect a person's liability for trading on inside information. See Rules 10b-5 and 14e-3 [17 CFR 240.14e-3].

[62] The current safe harbor in Securities Act Rule 145(b)(2), discussed below, is limited to written communications.

As proposed in the Securities Act Reform Release, business information that is factual in nature and relates solely to ordinary business matters, not to the pending transaction, would be exempt from the prohibition on offers and would not be required to be filed. This type of information generally does not have the potential for conditioning the market before an extraordinary transaction and, as the dissemination of such information is usually routine, we do not view it as specifically related to the transaction.[63] The proxy and tender offer rules would provide the same exclusion.[64]

[63] Proposed Rule 169. Also as proposed in the Securities Act Reform Release, there would be a safe harbor for regularly released forward-looking information (which would be filed under Rule 425), and the safe harbors for the publication of research reports by broker-dealers would be revised. All of these would apply to business combinations as well as to capital-raising transactions. See proposed Rule 168(b) and proposed revisions to Rules 137, 138, and 139 [17 CFR 230.137; 17 CFR 230.138 and 17 CFR 230.139].

[64] Proposed Rules 13e-4(c), 14a-12 and 14d-2.

3. Waiting Period and Post-Effective Period Communications

In the Securities Act Reform Release, we propose to permit free oral and written communications during the period between filing and effectiveness of the registration statement, in order to provide an opportunity for open dialogue between the company and its potential investors.[65] This Securities Act safe harbor also would apply to the period after effectiveness of the registration statement.[66] The rule would be available for business combinations as well as for capital-raising transactions. We also would extend this safe harbor to the proxy and tender offer rules.[67] Like pre-filing communications, written communications during these periods would be required to be filed upon first use. Free communications during the waiting period would be particularly important if our proposal to permit exchange offers to commence before effectiveness is adopted.[68]

[65] Proposed Rule 165.

[66] Currently, “free writing” is permitted after a registration statement becomes effective, but the “free writing” material, such as sales literature, must be accompanied or preceded by a final prospectus.

[67] Proposed Rules 14a-12 and 14d-2.

[68] See Part II.C.1 below.

4. Alternative Communications Proposals

We are considering alternatives to the free communications safe harbors that would provide more limited flexibility for pre-filing communications. In particular, we are considering whether to allow the companies conducting the transaction to make deal-related disclosure only during a 48-hour period following the public announcement of a definitive merger agreement or takeover plan. Similar to the “free communications” proposal, there would be no content restrictions on the companies' communications during the proposed 48-hour period, other than the antifraud provisions. After the 48-hour period, the companies would be required to remain quiet regarding the transaction until a registration, proxy or

tender offer statement is filed. If this alternative proposal is adopted, should the 48-hour time period be shorter or longer (e.g., 24 or 72 hours), or should it be based on a number of business days, such as one, three or five business days?

Under this alternative proposal, the safe harbor would not be available to a company if it disclosed deal-related information after the 48-hour period without the relevant disclosure document on file. The company, however, could take steps to regain protection under the safe harbor by discontinuing communications related to the transaction for at least 30 calendar days (the “30-day quiet period”) before a registration statement is filed. The 30-day quiet period would serve to cure any conditioning effect that the communications may have had on the market for the companies' securities.

As a third alternative to the free communications proposal and the 48-hour model, we also solicit comment on whether to permit free communications for an unlimited period of time after the deal is announced, so long as the parties observe a 30-day quiet period before filing the registration statement, proxy statement or tender offer material. This would be similar to the treatment of Form A companies in capital-raising transactions, as proposed in the Securities Act Reform Release. We ask commenters whether it would be practicable in the business combination context to require a minimum of 30 days between announcing the deal and filing the registration statement, proxy statement or tender offer material.

We request comment on whether, under the alternative proposals, the 30-day quiet period would be sufficient to cure any conditioning effect that earlier communications may have on the market. Is a longer quiet period necessary (e.g., 45 days), or would a shorter period suffice (e.g., 15 or 20 days)? We also solicit comment on whether the time period for staff review should be included in the 30-day quiet period. Should companies be permitted to file the relevant disclosure document as soon as it is prepared despite disclosure of deal-related information outside the 48-hour period? How should the announcement of a hostile transaction affect the type of communications permitted during the 30-day quiet period? Should the type of communications permitted outside the 48-hour period be different for friendly and hostile transactions? Should the communications be filed on first use, or not filed until the mandated disclosure document is filed?

Finally, we request comment as to whether either of the alternative proposals is preferable to the free communications safe harbors.[69] Commenters should keep in mind that we would conform the proxy rules and tender offer rules to whatever scheme we adopt under the Securities Act for business combinations.

[69] Like the free communications proposal, the alternative safe harbors would not restrict factual business communications at any time. These communications could occur throughout the pre-filing and waiting period without precluding reliance on the safe harbor or triggering a 30-day quiet period.

5. Free Communications Under the Securities Act

To implement the overall scheme discussed above, we propose new Securities Act Rule 166(b) to permit free communications in connection with any registration statement for a business combination. As discussed above, this rule would not contain any content restrictions so that deal-related information could be disclosed to analysts and security holders alike. Given the potential breadth of the communications, these communications still would be considered offers under the Securities Act.

As discussed above, Section 5(c) of the Securities Act prohibits offers unless a registration statement is on file. In 1996, the Commission was granted exemptive authority under Section 28 of the Securities Act.[70] For the reasons stated above—including the need to reduce selective disclosure and provide deal-related information to all security holders on an equal basis—we believe that an exemption from Section 5(c) of the Securities Act for persons making offers in business combination transactions is in the public interest and is consistent with the protection of investors.

[70] The Commission, by rule or regulation, may conditionally or unconditionally exempt any person, security or transaction, or any class or classes of persons, securities or transactions from any provision of this title or any rule or regulation issued under this title to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with protection of investors. 15 U.S.C. 77bb.

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

[71] See the discussion of research reports in the Securities Act Reform Release.

In cases where deal-related information is disclosed before filing a registration statement, the current practice has been to file the communications on Form 8-K [72] and then incorporate these filings by reference into the registration statement. As a result, these communications are subject to Section 11 liability.[73] As a condition to the proposed free communications safe harbor, written communications relating to the transaction would be filed upon first use as pre-filing prospectus supplements [74] that are subject to Section 12(a)(2) liability.[75] This is because we believe Section 12(a)(2) liability would adequately protect investors while not chilling parties' willingness to make these communications. However, we request comment on whether all written communications related to the transaction should be incorporated into the registration statement and subject to Section 11 liability under the Securities Act.[76] Would this encourage offerors to rely more on oral communications? We also ask whether it is necessary to condition the availability of the safe harbor on the timely filing of these communications, as proposed.

[72] 17 CFR 249.308.

[73] 15 U.S.C. 77k.

[74] Written communications would be filed as offering material under proposed Rule 425(b)(3). Like Rule 424 [17 CFR 230.424], proposed Rule 425 would provide the procedural requirements for filing the written communications as pre-filing prospectus supplements. Comparable filing requirements are proposed under the proxy and tender offer rules (proposed Rules 13e-4(c), 14a-12 and 14d-2). These communications would be filed on EDGAR to the same extent that the related prospectus, tender offer or proxy statement would be required to be filed electronically. For a discussion of materials in various electronic media and how they would be filed, see Part VII.B of the Securities Act Reform Release. If a Rule 425 filing was required, filers would not also have to file the same document under the proxy and tender offer rules.

[75] 15 U.S.C. 77l(a)(2). Oral communications also would be offers subject to Section 12(a)(2) liability.

[76] In any event, if a pre-filing communication contains material information that is required to be in the registration statement, the filer will put the information in the registration statement, so Section 11 will apply.

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

written, currently are not deemed offers under the Securities Act.[77] Written communications must be filed in accordance with proxy Rule 14a-12(b), as discussed below.

[77] See Rule 145(b)(2) [17 CFR 230.145(b)(2)]. Rule 145 is the rule that applies the registration requirements to business combinations involving security holder voting decisions.

To harmonize treatment of all merger transactions, whether contested or friendly, we propose to eliminate the provision that such communications are not offers under the Securities Act.[78] Thus, pre-filing communications in contested transactions also would be considered offers and pre-filing supplements to the prospectus subject to liability under Section 12(a)(2) of the Securities Act. We do not believe that communications would be chilled by this modification because of the heightened need for communications in hostile or competing transactions. In addition, we note that such communications already are subject to antifraud liability. We request comment, however, as to whether treating this information as offers—imposing Section 12(a)(2) liability under the Securities Act—would chill communications in hostile transactions.

[78] Rule 145(b)(2) would be rescinded. Rule 145(b)(1), which provides that certain written communications containing only specified information about mergers and similar transactions are not deemed offers, would be moved from Rule 145 to Rule 135 [17 CFR 230.135]. Rule 135 already contains similar provisions for communications about exchange offers. See the Securities Act Reform Release for the text of proposed Rule 135 revisions.

Rule 135 notices are not currently, and are not proposed to be, filed with the Commission. We solicit comment, however, on whether Rule 135 notices involving prospective business combinations should be filed, since they could contain the initial public announcement of the transaction. The filing would be made under Rule 425, but since these notices are not considered “offers” they would not have liability as such; Rule 425 would be modified to make this clear.[79]

[79] In any event, under the proposed scheme these communications would need to be filed under the proxy or tender offer rules.

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

[80] See proposed Rule 167(c).

[81] See proposed Rule 167(b).

[82] In that case, we also would apply the 30-day rule to proxy and tender offer solicitations.

We also solicit comment on whether, if we do retain the first public announcement standard, we need to define “public announcement.” We could define this as the first public communication about the transaction that gives more information than permitted by Rule 135. Alternatively, we could have a broader definition that includes any public communication identifying the offeror, the target company or class of securities, the number or percentage of securities sought, and the price or range of prices. Should the definition clarify what is meant by “public” (i.e., communications that go beyond the participants to the transaction)? 6. Free Communications Under the Proxy Rules a. Expand Rule 14a-12 Safe Harbor

In 1992, we significantly enhanced security holders' ability to communicate with one another regarding corporate matters without furnishing a proxy statement, so long as no proxy card or other authorization is furnished to or requested from security holders.[83] The enhancements have worked well to improve the quality and amount of information flowing to and among security holders. Under the current regulatory scheme, however, there are still some restrictions on communications. For instance, management or security holders seeking proxy authority may not communicate without first furnishing a proxy statement, unless the solicitation is either in connection with an election contest under Rule 14a-11 [84] or in opposition to an earlier solicitation, invitation for tenders, or certain other publicized activity under Rule 14a-12.[85] Both rules permit solicitations before furnishing security holders with a written proxy statement, so long as: (i) no form of proxy (i.e., proxy card) is furnished until a written proxy statement is furnished; (ii) the identity of the participants in the solicitation and a description of their interests are included in any communication published, sent, or given to security holders; and (iii) a written proxy statement is provided to security holders at the earliest practicable date. The rules apply to both oral and written solicitations.[86] Written soliciting material must be filed with, or mailed for filing to, the Commission no later than the date the material is first published, sent, or given to security holders.[87]

[83] See Rule 14a-2(b)(1). [17 CFR 240.14a-2(b)(1)]. The rule may not be used by the company itself. Also, there are various exceptions for persons with specified interests in the solicitation. For example, the rule may not be used by any person soliciting in opposition to a merger or other extraordinary transaction, when the soliciting person is a party to an alternative transaction.

[84] 17 CFR 240.14a-11.

[85] 17 CFR 240.14a-12. In addition, parties other than the company's management may solicit proxies from up to ten persons without being required to file a proxy statement. See Rule 14a-2(b)(2) [17 CFR 240.14a-2(b)(2)].

[86] The proxy antifraud rule, Rule 14a-9, applies to these communications.

[87] See Rules 14a-11(c) and 14a-12(b) [17 CFR 240.14a-11(c) and 240.14a-12(b)].

Despite the 1992 amendments, some have contended that the current rules may continue to unnecessarily restrict communications among security holders and/or between a company and its own security holders. Recent developments in information technology have enabled companies to engage in more frequent, direct and timely communications with their security holders about matters of particular interest. As the pace of the securities markets increases, there appears to be a greater need for some flexibility in the proxy rules to permit communications before filing and delivery of a written proxy statement. Accordingly, we propose to broaden the safe harbor in Rule 14a-12 to apply to all solicitations, not just to those involving opposed matters.

The other provisions in Rule 14a-12, including the condition that no form of proxy is furnished, the obligation to disclose participant information, and the delivery of a written proxy statement to all solicited security holders as soon as practicable, would be retained. We also would continue to require that written solicitations be filed upon first use. In addition, consistent with proposed changes to the Securities Act and tender offer rules, each communication would be required to prominently advise security holders to

read the proxy statement.[88] These requirements, together with the antifraud provisions in Rule 14a-9, appear sufficient to assure the integrity and adequacy of the information and protect against misleading solicitations.[89]

[88] Proposed Rule 14a-12(a)(2).

[89] The proposed expansion of communications would not expand a company's ability to secure promises to vote a certain way before a proxy statement is provided. See the Securities Act Reform Release, however, for proposed Rule 159, which would provide exemptions from the proxy rules for certain “lock-up” arrangements.

Filing of written communications upon first use also would assure consistency with the requirements we propose for extraordinary transactions under the Securities Act. We request comment, however, on whether the filing upon first use requirement should be modified if under the Securities Act we permit filing later than upon first use (i.e., when the disclosure document is filed). We also request comment on whether to retain the requirement to disclose the identity of participants and their interests if we do not adopt a corresponding requirement under the tender offer rules and the Securities Act requirements for tender offers. If we change either the filing requirement or the participant information requirement, should the change apply only to proxy statements relating to business combinations?

We proposed expanding Rule 14a-12 in 1992 to permit solicitations before filing and delivering a written proxy statement regardless of the existence of an opposing solicitation.[90] We ultimately determined not to adopt the proposal because “the broad scope of current Rules 14a-11(d) (now Rule 14a-11) and 14a-12 reach virtually all contested and responsive solicitations.” [91] We further noted that the need to extend Rule 14a-12 to all solicitations was mitigated by the proposal to allow registrants and other persons planning a solicitation to begin their solicitation on the basis of a publicly filed preliminary proxy statement.[92] However, given the pressures—both regulatory and market-induced—to disclose deal-related information immediately upon announcement, we now believe that the current rules may overly restrict communications among security holders and/or between a company and its own security holders. Based upon our experience with the 1992 liberalization of communications, we do not believe that further easing of restrictions would lead to abuse.

[90] Release No. 34-30849 (June 24, 1992) [57 FR 29564].

[91] Release No. 34-31326 (October 16, 1992) [57 FR 48276]. Comments on the proposal were mixed. Those who objected “questioned whether there was a demonstrated need for the revisions and raised concern with the potential abuse that could arise.” Id.

[92] Id. When a soliciting party uses a preliminary proxy statement to begin a solicitation, the form of proxy may not be included with the material distributed.

Under the proposed expansion of Rule 14a-12, management could engage more freely in communications regarding a prospective or pending acquisition. However, this proposal is not limited to takeover-related matters. For example, management could rely on the proposed safe harbor to obtain security holders' views in connection with certain corporate governance items that may require a security holder vote, such as the adoption or amendment of executive and director compensation plans, an increase in the number of authorized shares that may be issued, and the adoption or redemption of a security holder rights plan. We believe that management's ability to disseminate information on a more timely basis may result in more informed voting decisions by security holders and may increase the amount and quality of information generally available to all security holders.

We request comment as to whether there are certain instances when the requirement to deliver a proxy statement as soon as practicable would be too burdensome. In addition, are there any circumstances under which management or other parties may want to communicate that should not trigger the obligation to deliver a proxy statement at the earliest practicable date? For example, if a merger transaction was only under consideration by management, and no formal agreements were entered into, should it be necessary to send a proxy statement to security holders if the transaction does not materialize? As another example, management might find the proposed safe harbor useful to “road-test” an executive compensation proposal with large security holders, but not present the matter for a security holder vote if the reaction was negative. What impact would this have on smaller security holders?

We invite comments on whether the expansion of Rule 14a-12 to non-contested situations would have the intended effect of permitting management to communicate more freely with security holders and whether this would enhance the timing or quality of information given to security holders. One effect of the proposed expansion of Rule 14a-12 may be to eliminate any need for Rule 14a-11.[93] Would it be appropriate to eliminate Rule 14a-11 if we expanded Rule 14a-12 to cover all matters, whether or not they are contested?

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

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

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

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

solicitation period is adopted, how long should it be? Would 20 business days make sense so that it is harmonized with the mandated tender offer time period? Should it be 20 calendar days to conform with the information statement requirement, or should the information statement requirement be changed to 20 business days? Should the solicitation period be required only as a condition of the free communications safe harbor? Should it apply only to votes on business combinations?

We are particularly concerned about giving security holders time to consider proxy material in the case of street name holders—beneficial owners of securities who obtain their proxy material through banks, broker-dealers, or other nominees holding record title to the securities. Do street name holders receive correcting or updating material in a timely fashion? Would modifying the security holder communications provisions of the proxy rules to permit direct delivery of proxy statements and other soliciting materials to non-objecting beneficial owners facilitate more timely and fully informed voting decisions? [95]

[95] See Rules 14a-13 [17 CFR 240.14a-13], 14b-1 [17 CFR 240.14b-1], 14b-2 [17 CFR 240.14b-2] and 14c-7 [17 CFR 240.14c-7].

b. “Test the Waters” Proxy Solicitations

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

[96] Rule 14a-9 would, of course, impose antifraud liability on these communications.

[97] 17 CFR 240.14a-2.

[98] In particular, the exemption for solicitations that do not seek the power to act as a proxy for another security holder and do not furnish or otherwise request a form of revocation, abstention, consent or authorization in Rule 14a-2(b)(1) and the “ten person” exemption in Rule 14a-2(b)(2). [17 CFR 240.14a-2(b)].

[99] A person relying on Rule 14a-2(b)(1) currently is not permitted to change the exempt proxy solicitation to a non-exempt one and send a proxy card to security holders. This position would have to be modified to accomplish the objectives of the “test the waters” proxy solicitation proposal.

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

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

We request comment on whether a “test the waters” proxy rule would benefit security holders. This change would be consistent with the general theme of easing restrictions on communications under the Securities Act as expressed in this release and the Securities Act Reform Release. On the other hand, does the current requirement to follow up communications with delivery of a proxy statement impose a beneficial discipline on the solicitation process by discouraging premature insupportable communications? Should we require a “cooling-off period” (e.g., 20 or 30 days) between the “test the waters” solicitation and a request for a proxy card? Commenters should advise whether they think the “test the waters” rule would work, not just in the context of takeover-related matters, but also in the context of any corporate governance matters or other topics that are likely to be the subject of a proxy solicitation. c. Eliminate Confidential Treatment of Merger Proxies

Currently, preliminary proxy material relating to certain reclassifications and business combinations, other than going-private or roll-up transactions,[101] may be filed confidentially with the Commission.[102] In that case the proxy material is not filed on EDGAR and is not available for public inspection.[103] Due to the changing realities of today's markets, and the expressed need by many companies for an expanded safe harbor permitting early disclosure of information before a registration statement is on file, we propose to eliminate confidential treatment for merger proxy statements.[104] Often companies that invoke confidential treatment for their merger proxy statements already have made extensive pre-filing disclosure of information beyond what is permitted by current Securities Act Rule 145(b) and the proxy rules. It is unclear to us why a company that broadcasts extensive deal-related information to the securities markets soon after a definitive merger agreement is executed needs confidential treatment for the same information contained in its proxy materials. In some instances, the information disclosed to the market is more extensive than the information disclosed in the preliminary proxy statement filed confidentially.

[101] A roll-up transaction is any transaction or series of transactions that directly or indirectly, through acquisition or otherwise, involves the combination or reorganization of one or more “finite-life” entities (usually limited partnerships) where the securities to be issued are publicly registered. See Release No. 33-6900 (June 17, 1991) [56 FR 28979]; Release No. 33-6922 (October 30, 1991) [56 FR 57237]; Release No. 33-7113 (December 1, 1994 [59 FR 63676]; and the 900 series of Regulation S-K.

[102] Rule 14a-6(e)(2) [17 CFR 240.14a-6(e)(2)].

[103] The proxy material is filed publicly in definitive or final form when the staff has no further comments or when a related registration statement is filed that wraps-around (or incorporates) the information contained in the proxy statement.

[104] When the transaction is a stock merger, this would eliminate the need for the current practice of filing a (confidential) proxy statement before filing the related (public) registration statement.

We previously proposed to eliminate confidential treatment for all preliminary proxy statements, including those relating to mergers, in 1992.[105] The Commission ultimately decided to preserve confidential treatment for merger transactions in light of commenters' concerns that the inability to file documents relating to business combinations or acquisitions on a non-public basis would cause premature disclosure of information. The concern articulated was that merger negotiations might not be ripe at the time of filing and public disclosure “would adversely affect the timing of such transactions and thereby their costs, since they could not obtain Commission review of the offering documents while the

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

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

[106] Id.

The elimination of confidential treatment of merger proxy statements would harmonize the treatment of preliminary proxy statements with preliminary prospectuses and tender offer materials, which are publicly available when filed. In addition, security holders would obtain faster access to information concerning extraordinary transactions. Without confidential treatment, security holders also would have more time to consider and respond to proposed mergers and acquisitions.

We request comment on whether confidential treatment should be retained under any limited circumstances. Should confidential treatment be available if the parties to the merger transaction do not rely on the new safe harbors permitting increased communications?

Some have expressed the view that confidential treatment makes registrants more comfortable with amending their materials to comply with staff comments, as the marketplace is not aware of the nature of the changes. If a proxy statement is filed publicly, the trading markets may act on the information disclosed and there may be liability concerns if the information disclosed is revised. Do commenters believe that these concerns outweigh the benefits of public filing? If so, how are merger proxies different from exchange offers and other types of filings that are not accorded confidential treatment?

We note that when the wrap-around procedure is used, registration statement exhibits are filed on a delayed basis. Would registrants be put at a significant disadvantage if they were required to file all exhibits when they filed their registration statements publicly, or would they continue the practice of filing exhibits when available? Should we continue to permit the filing of a proxy statement before the wrap-around registration statement, even though the proxy statement would be public? d. Timing of Filings

In addition to the substantive changes to the proxy rules proposed above, we propose procedural amendments to the proxy filing requirements. Rule 14a-6(b) requires definitive material to be “filed with, or mailed for filing to, the Commission not later than the date such material is first sent or given to any security holders.” Several other proxy and information statement filing rules contain similar language.[107] The option to mail proxy materials to the Commission is no longer relevant because companies that are subject to the proxy rules are now required to file electronically.[108] We propose to update these filing rules to eliminate the “mailed for filing” language in the rules. Filers would be required to file definitive material with the Commission no later than the date they send or give proxy materials to security holders.

[107] See Rules 14a-4(f) [17 CFR 240.14a-4(f)], 14a-6(c) [17 CFR 240.14a-6(c)], 14a-11(c) [17 CFR 240.14a-11(c)], 14a-12(b) [17 CFR 240.14a-12(b)] and 14c-5(b) [17 CFR 240.14c-5(b)].

[108] See Rule 101(a)(iii) of Regulation S-T [17 CFR 232.101(a)(iii)]. Registrants may use paper only if a hardship exemption is available. Foreign private issuers that are not required to file electronically are exempt from the proxy and information statement requirements. 17 CFR 240.3a-12-3.

We believe that making definitive material available to security holders, the market and the staff as promptly as possible is important. EDGAR, and other sources of electronic filings, including the Internet, have become essential in supplying the investment community with public information. Any discrepancy between the time information is first disseminated and the time it is filed with the Commission could place those who rely on our filings for public information at a disadvantage.

Filers (particularly those in time zones later than the Commission's) have argued that filing proxy materials on the same day is a hardship. It is not clear why this is the case, in view of the treatment of tender offer materials. Such materials must be filed “as soon as practicable” on the date the tender offer commences, and filers comply with that requirement without any apparent difficulty.[109] While the proposed electronic filing rule acknowledges that some information may be released when it is not possible to file it with the Commission, we believe that material distributed during Commission business hours should be available at that time to the public through our filing system.[110]

[109] See Rule 14d-3(a) [17 CFR 240.4d-3(a)]. See also Rule 14d-3(b) [17 CFR 240.14d-3(b)] (filing of additional tender offer material).

[110] In an interpretive letter, the Division of Corporation Finance stated that, where it is impracticable to file proxy materials on the same business day, it is consistent with the intent of Rule 13(d) to allow issuers and others to file electronically “promptly on the next business day following distribution to security holders.” See Henry Lesser, Esq. (November 28, 1995). This proposal would supersede that interpretation. material disseminated during the Commission's business hours would be required to be filed on that day.

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

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

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

A bidder's ability to communicate with security holders and the markets in

general regarding a proposed offer is limited by the concept of “commencement” in the tender offer rules. A bidder is required to file and disseminate information regarding its offer upon “commencement.” Commencement is the date an offer starts for purposes of the tender offer rules. A bidder's public announcement of certain minimal information about an offer may trigger commencement and can result in certain filing and disclosure obligations for the bidder, depending upon whether cash or stock is offered.[112] Similarly, the target cannot make a recommendation regarding the offer without triggering filing and disclosure obligations.

[112] Issuer tender offers are not subject to pre-filing communication restrictions; thus no substantive change to the issuer tender offer rule is necessary, although we do propose some conforming changes.

a. Disclosure Triggering Commencement

Currently, a third-party cash tender offer is deemed to commence on the date the bidder discloses certain information (“announcement”),[113] unless the bidder does one of two things within five business days of the announcement date. If the bidder files a tender offer statement with the Commission, and disseminates specified information to security holders, the offer is deemed to commence on the date of filing and dissemination, not on the date of announcement.[114] If the bidder makes a subsequent public announcement that it has determined not to proceed with the offer, the initial announcement will not be deemed to commence an offer.[115] If the bidder neither complies with the tender offer rules nor withdraws the offer, the offer is deemed to commence upon public announcement, resulting in filing and disclosure violations. We refer to this requirement as the “five business day rule.”

[113] If solely cash and/or securities exempt from registration under Section 3 of the Securities Act are offered, then a public announcement of: the identity of the bidder, the identity of the subject company, the amount and class of securities sought and the price or range of prices offered will commence the tender offer. See Rule 14d-2 (b) and (c). [17 CFR 240.14d-2 (b) and (c)].

[114] See Rule 14d-2(b)(2). [17 CFR 240.14d-2(b)(2)].

[115] See Rule 14d-2(b)(1). [17 CFR 240.14d-2(b)(1)].

Stock tender offers are not subject to the same five business day rule. Instead, stock offers are deemed to commence when a final prospectus is first disseminated to security holders.[116] A bidder can publicly announce its intention to make a stock offer, so long as the announcement contains only the limited information permitted by the Securities Act.[117] This announcement will not stitute commencement of the offer if the bidder promptly files a registration statement relating to the securities offered.[118]

[116] See Rule 14d-2(a)(4) [17 CFR 240.14d-2(a)(4)].

[117] See Rule 135-2(a)(4) [17 CFR 230.135(a)(4)].

[118] See Rule 14d-2(e) [17 CFR 240.14d-2(e)].

In 1979, we recognized the “unsettling and disruptive effects” that cash tender offers can have on the trading markets when we proposed the five business day rule.[119] In adopting the rule, we noted it was common practice for bidders to publicly announce the material terms of their cash offers in advance of formal commencement.[120] We observed that pre-commencement public announcements regarding cash tender offers can trigger market mechanisms, such as arbitrageur activity, and cause security holders to make investment decisions with respect to a tender offer on the basis of incomplete information. The five business day rule was designed to prevent bidders from publicly announcing the material terms of an offer before formally commencing the offer.

[119] See Release No. 34-15548 (February 5, 1979) [44 FR 9956].

[120] See Release No. 34-16384 (November 29, 1979) [44 FR 70326].

Based on our experience with tender offers and the factors influencing the treatment of communications discussed earlier, we now believe that the communications restrictions imposed on bidders in both cash and stock tender offers may unnecessarily restrict communications with security holders. We believe that the reasoning behind easing restrictions on communications for other types of business combinations applies equally to tender offers. Unrestricted communications should result in the availability of more information to security holders on a timely basis. As a result, security holders should have a greater opportunity to inform themselves and assess the specific terms of a proposed offer. In light of the fact that tender offers generally remain open for a short period of time, usually 20 business days, advance notice of an offer should benefit security holders.

In an effort to increase bidders' ability to communicate with security holders, we propose to amend the provisions relating to commencement. Specifically, we propose to eliminate the obligation to commence or withdraw a cash offer within five business days of making a public announcement. We also propose to eliminate the requirement to promptly file a registration statement after public announcement of a stock offer. The revised rule would permit bidders to engage in free communications before commencement.[121] The communications permitted under the safe harbor, however, would not include a transmittal form or instructions on how to tender into the offer.

[121] Proposed revision to Rule 14d-2. Shortly after adopting the five business day rule, the Commission authorized the issuance of an interpretive release discussing the staff's views with respect to when certain tender offers commence under Regulation 14D and 14E. See Release No. 16623 (March 5, 1980) [45 FR 15521]. If we rescind the five business day rule as proposed, many of the interpretations in the release regarding commencement would no longer be applicable.

In place of the five business day rule and the requirement to promptly file a registration statement, we propose to require bidders to file and disseminate the required information when tenders are first requested. The Williams Act and the tender offer rules were designed to assure that there is adequate information available to security holders so that they can make an informed investment decision before tendering into an offer. The public announcement of an offer should not trigger the need to file or disseminate information. Instead, the focus should be on when security holders are provided the means to tender their shares into the offer. That is the time when information required by the tender offer rules must be available to security holders.[122]

[122] Although we propose to change the manner in which commencement of an offer is triggered, we are not defining the term “tender offer” or changing our position on what activities may be deemed to constitute a tender offer. Nothing in these proposals affects the fact that the tender offer rules may be triggered by activities that function as unconventional tender offers. We reiterate our position that the term “tender offer” should be interpreted flexibly in accordance with the intended purposes of Sections 14(d) and 14(e). A determination of whether a particular transaction or series of transactions constitutes a tender offer will, of course, depend on the particular facts and circumstances and is not limited to “conventional” tender offers. See Release No. 34-15548 (Feb. 5, 1979) [44 FR 9956].

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

requirements at that time. The 20 business day period would begin to run at this time.

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

[123] Proposed Rule 14e-8.

We solicit comment on whether the five business day rule or the requirement to file a registration statement promptly provide investors, bidders, targets or security holders with any benefits that the proposed rule would not provide. Do these requirements cause bidders to provide security holders with needed information sooner?

We also ask whether the proposed rules increase the risk that investors will make investment decisions based solely on a bidder's pre-commencement communications without adequate information. Security holders might sell into the market based on a bidder's pre-filing communications. This risk, however, exists today under the current rules, although for a more limited time. Should the tender offer rules focus on this risk? Is the risk of market activity, based on incomplete information, greater for cash offers than it is for stock offers? If so, is it more important to maintain the five business day rule than to harmonize cash tender offers with other types of business combinations? Would the proposed obligation to file and disseminate information when security holders are first solicited to tender using a transmittal form adequately protect security holders? Is there less of a need to permit bidders to provide information to the marketplace before filing than there is for other types of business communications because cash tender offer material may be prepared and disseminated so quickly?

Currently, bidders are required to hand deliver a copy of the tender offer statement and additional tender offer materials to the target company and any other bidder for the same class of securities.[124] In addition, we propose to require delivery to the same parties of the first written communication a bidder makes that sets forth its identity, that of the target company, the amount and class of securities sought, and the price or range of prices offered.[125] Is this needed, or would the fact that the communication must be filed with the Commission provide adequate notice to the target company and any other bidders?

[124] See Rule 14d-3(a)(2).

[125] The current rule also requires telephonic notice and mailing of tender offer material to any securities exchange or the NASD on which the securities are listed or traded. We do not propose to extend this to cover pre-commencement communications, as the exchanges and the NASD are moving away from relying on paper filings and increasingly using electronic databases to obtain EDGAR filings.

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

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

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

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

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

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

b. Methods to Disseminate an Offer

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

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

[129] A bidder can use more than one method provided it complies fully with each method used.

[130] See Rule 14d-2(a)(1) [17 CFR 240.14d-2(a)(1)]. See also Rule 14d-4 for these methods of dissemination, which also are means of publicizing changes to the initial tender offer information.

[131] See Rule 14d-2(a)(2) [17 CFR 240.14d-2(a)(2)].

[132] See Rule 14d-2(a)(3) [17 CFR 240.14d-2(a)(3)].

[133] See Rule 14d-2(a)(4) [17 CFR 240.14d-2(a)(4)].

[134] See Rule 14d-2(a)(5) [17 CFR 240.14d-2(a)(5)] providing that an offer may commence when “the tender offer is first published, sent or given to security holders by the bidder by any means not otherwise referred to in paragraphs (a)(1) through (4) of this section.”

[135] See Rule 14e-1(a) [17 CFR 240.14e-1(a)].

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

[136] A bidder must publish the information specified in Rule 14d-6(e)(1) [17 CFR 240.14d-6(e)(1)].

[137] See Release No. 34-16384 (November 29, 1979) [44 FR 70326].

[138] We propose this change both for issuer and third-party tender offers. See Rule 13e-4(e)(i) (issuer) and 14d-4(a)(1) (third party).

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

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

[140] See Rule 14d-6(e)(3) [17 CFR 240.13d-6(e)(3)].

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

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

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

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

In addition, we solicit comment on whether to retain the current requirement that bidders using stockholder lists also publish summary advertisements. The summary advertisement serves as an additional means of publicizing tender offer information while it is in the process of being mailed to security holders. This may be particularly useful in the short time frame of a cash tender offer.

Finally, we request commenters' views on whether we should permit means of disseminating tender offer material other than those described. The increasing use of electronic media, particularly the Internet, provides an avenue for widespread access to information. On the other hand, many security holders rely on more traditional sources of information, such as newspapers and the mail. We do not want to put these security holders at a disadvantage in obtaining tender offer information. Therefore, we are not proposing that electronic media be permitted as a sole means of dissemination. We are, however, interested in comment as to how electronic media are currently used in the tender offer area and whether there are electronic sources of information that are as commonly available and widely followed as the newspapers of general circulation used for summary advertisements.[143]

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

C. Permit Exchange Offers To Commence on Filing

1. Early Commencement

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

[144] Release No. 34-16384 (November 29, 1979) [44 FR 70326, 70338].

[145] Release No. 34-15548 (February 5, 1979) [44 FR 9956].

[146] See Advisory Committee on Tender Offer Report on Recommendations (July 8, 1983). We established the Committee to examine the tender offer process and other techniques of acquiring control of public issuers and to recommend legislative and/or regulatory changes deemed appropriate or necessary. Release No. 34-19528 (February 24, 1983) [48 FR 9111].

[147] The Committee stated that “there are significant regulatory impediments to undertaking an exchange offer rather than a cash tender offer, which impediments are not necessary for the protection of shareholders” and that “regulation should not be a principal factor in determining the method of acquisition.” Advisory Committee Report at 16. On that basis, the Committee issued Recommendation 5: Cash and securities tender offers should be placed on an equal regulatory footing so that bidder, the market and shareholders, and not regulation, decide between the two.

[148] Recommendation 12 of the Committee's Report stated:

Bidders should be permitted to commence their bids upon filing of a registration statement and receive tenders prior to the effective date of the registration statement. Prior to effectiveness, all tendered shares would be withdrawable. Effectiveness of the registration statement would be a condition to the exchange offer. If the final prospectus were materially different from the preliminary prospectus, the bidder would be required to maintain, by extension, a 10-day period between mailing of the amended prospectus and expiration, withdrawal and proration dates.

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

[149] Proposed Rule 14d-4(b).

Under the proposal, a bidder that wished to “commence” an exchange offer by requesting tenders would have to satisfy several requirements. First, the bidder would have to file a registration statement relating to the securities offered. The preliminary prospectus would need to include all information, including pricing information, necessary to allow security holders to make an informed investment decision. Information could not be omitted under Rule 430 or Rule 430A of the Securities Act.[150] Second, the prospectus would have to be disseminated to all security holders. Third, a tender offer statement would have to be filed with the Commission. The filing of a registration statement alone would not suffice. The bidder would have to file both a registration statement and a tender offer statement [151] and furnish a preliminary or final prospectus to security holders.[152] Security holders would have the right to withdraw shares tendered at any time until they were purchased, and bidders could not purchase shares until after the registration statement was effective.[153]

[150] Generally, a prospectus that is used before effectiveness may omit certain pricing information including the offering price, underwriting discounts or commissions, discounts or commissions to dealers, amount of proceeds, conversion rates, call prices or other matters dependent upon the offering price. See Rule 430 [17 CFR 230.430]. A prospectus in a registration statement that is declared effective may also omit certain syndicate, underwriting discounts or commissions, discounts or commissions to dealers, amount of proceeds, conversion rates, call prices and other information that is dependent upon the offering price, delivery dates, and terms of the securities dependent upon the offering date. See Rule 430A. [17 CFR 230.430A].

[151] Generally, tender offer statements in exchange offers incorporate by reference substantial portions of the information contained in the prospectus in response to the various disclosure requirements. Incorporation by reference would continue to be available under the proposal.

[152] Under the proposal, a bidder could disseminate a preliminary prospectus without requesting tenders, as permitted under the current rules, and not trigger commencement.

[153] Proposed Securities Act Rule 162.

The “early commencement” proposal is limited to third-party exchange offers because the need to put cash and stock offers on a more level playing field appears to arise most often in that context. We ask for comment, however, on whether issuer exchange offers present the same timing and competitive concerns. Should the proposal be expanded to issuer exchange offers?

Going-private and roll-up transactions involving exchange offers would not be permitted to commence before the effectiveness of a related registration statement. These types of transactions often involve material disclosure issues. We continue to believe that the staff should have a full opportunity to review and comment upon the documents filed in connection with these transactions before commencement of an exchange offer in order to ensure that the rules are complied with and the appropriate level of disclosure is made to security holders.

Under the proposal, early commencement would be at the option of the bidder. The filing of a tender offer statement would serve as notice to the Commission and the public that the offer commenced and a prospectus was disseminated to security holders. A bidder could commence upon filing the registration statement, or wait for staff comments or effectiveness before actually commencing its offer.

We request comment on whether a bidder should be required to commence its offer as soon as it files a registration statement.

Alternatively, should bidders be free, as the rule proposes, to determine when a stock offer commences? If we do not require bidders to commence on filing the registration statement, should there be an outside date on which the exchange offer must commence (e.g., no later than effectiveness of the related registration statement or no later than five or ten business days after effectiveness)?

The early commencement proposal is intended, in part, to provide bidders with an incentive to disseminate their offering materials broadly to all security holders at the earliest practicable date. The proposal would not prohibit bidders from making selective communications in addition to or instead of using the early commencement procedure to disseminate material to all security holders. When combined with the proposals above regarding communications, however, the availability of early commencement should encourage full and fair disclosure to all security holders. We request comment as to whether bidders would continue to communicate with large institutional investors to the exclusion of small retail investors. Is it necessary to require bidders to disseminate a prospectus to all security holders as soon as it is filed with the Commission? If we require delivery, however, the preliminary prospectus might include certain information that is not complete or accurate. In light of the inherent limitations on the information available to bidders that could be included in a preliminary prospectus, would mandatory dissemination to all security holders benefit or harm small retail investors?

The ability to commence upon filing may not be sufficient to level the playing field if bidders are not assured of having an effective registration statement within a reasonable period of time. While cash offers can expire after a minimum of 20 business days, stock offers could not expire under the proposal until the related registration statement became effective. Therefore, we solicit comment on whether expedited staff review is necessary to effectively harmonize the regulatory treatment of cash and stock tender offers. If so, how short would the Commission staff's review and comment period need to be in order to assure timely completion of a stock tender offer? Would it be helpful if the staff committed to an expedited review of stock tender offers whenever a competing cash tender offer emerges? Would it be necessary to provide for some form of accelerated effectiveness for stock offers to fully balance the treatment of cash and stock offers?

One way to achieve this balance would be to allow or require some or all exchange offers registered on Form C and Form SB-3 [154] to become effective

on filing,[155] or allow the bidder to specify the date after filing on which the registration statement would become effective.[156] This approach would provide bidders with greater certainty as to when their offer could close and shares could be accepted in the offer. “Early commencement” would then be unnecessary. This approach would allow bidders to freely decide between offering cash or stock without concern for regulatory delay. Of course, the staff would not have an opportunity to review the information before it is disseminated to security holders, but could review it after effectiveness just as it now reviews cash tender offer materials after they are mailed to security holders. We would not extend this approach to going-private or roll-up transactions. If this approach were permitted, should it be limited to third-party tender offers or also extend to issuer tender offers? Do the same timing concerns apply to mergers? If so, and this approach is adopted, should it apply to mergers as well? Should automatic effectiveness be limited to bidders entitled to use Form B?

[154] As noted in the Securities Act Reform Release, Form C (and Form SB-3 for small business issuers) would be the successor to Forms S-4 and F-4. If Forms C and SB-3 are not adopted, then the proposals in this release would apply to exchange offers registered on Form S-1, S-4, F-4 and S-11.

[155] The Task Force Disclosure Simplification recommended that registration statements on Forms S-4/F-4 relating to exchange offers by S-3/F-3 eligible companies become effective automatically upon filing, so long as the securities offered are common stock traded on a national securities exchange or quoted in the Nasdaq NMS, or are investment grade debt or preferred stock. See Report of the Task Force on Disclosure Simplification (March 1996) at p. 56. If the Securities Act Reform Release proposals are adopted, we could provide automatic effectiveness on filing for Form B issuers, or we could provide it for all registration statements on Form C only and not Form SB-3.

[156] This is how Form B would be treated in the Securities Act Reform Release.

We also are considering whether to harmonize the proxy rules with the tender offer rules by providing a proxy analogue to the “early commencement” proposal. If we did this, we would permit proxy cards in connection with mergers and similar business combinations to be sent with a preliminary proxy statement/prospectus, rather than requiring that they accompany only a definitive proxy statement/final prospectus. Proxies may be revoked at any time before the vote, just as tenders may be withdrawn before the offer expires. The vote could not take place until after the proxy statement was definitive or the registration statement was effective, and security holders would have to be given information about material changes in sufficient time to act on it, as discussed below in connection with exchange offers. Would this procedure be useful in mergers? Is the merger situation different from the tender offer situation; would there be greater risk that security holders would vote on the basis of premature or incomplete information and not receive updating or corrective information in a timely fashion? In particular, would street name holders receive this information in sufficient time to make an informed voting decision?

We have considered how the “early commencement” proposal interacts with our rules regarding stock purchases outside a tender offer. Regulation M [157] prohibits purchases of the bidder's securities during an exchange offer's restricted period, while Rule 10b-13 [158] prohibits purchases of the target's securities once the offer is publicly announced. The Regulation M restricted period begins as of the date that the exchange offer is commenced, i.e., when the bidder has first published, sent or given security holders the means to tender. In contrast, the restrictions of Rule 10b-13 start as of the time the offer is first publicly announced to security holders, which can be before the offer commences. We believe these rules would operate appropriately in the “early commencement” context, but solicit commenters” views.

[157] 17 CFR 242.100 through 242.105.

[158] 17 CFR 240.10b-13. Rule 10b-13 is proposed to be revised and redesignated as Rule 14e-5. See Part II.E.5 below.

2. Dissemination of a Supplement and Extension of the Offer

The Division of Corporation Finance staff decides whether to review a registration statement after it is filed, along with a related tender offer statement, based upon its selective review criteria. Under the “early commencement” proposal, the bidder already may have disseminated the combined prospectus/tender offer before staff comments are received. If the staff had material comments, the bidder would be required to file and disseminate a prospectus supplement, or possibly a post-effective amendment to the registration statement.

We propose to require bidders using “early commencement” to disseminate supplements to disclose any material changes, whether as a result of staff review, or due to any other material changes in the information previously disclosed. If a supplement contained material information, the exchange offer would need to remain open for a minimum period of time after a supplement was sent, as discussed below. The proposed rule would require a bidder to provide sufficient time for security holders to reconsider their investment decision (i.e., by withdrawing previously tendered shares or tendering shares not yet tendered) based upon the additional information.

The tender offer rules do not currently establish a specific minimum time period with respect to the disclosure and dissemination of material changes, except for those relating to price or the amount of securities sought.159 In an interpretive release relating to the tender offer rules, however, the Commission provided the following guidelines:

[159] See Rule 14e-1(b) [17 CFR 240.14e-1(b)]. A tender offer must remain open for ten business days after a notice of an increase or decrease in the percentage of the class of securities being sought, the consideration offered, or the dealer's soliciting fee.

As a general rule, the Commission is of the view that to allow dissemination to shareholders in a manner reasonably designed to inform (them) of such change (17 CFR 240.14d-4(c)), the offer should remain open for a minimum of five business days from the date that the material change is first published, sent or given to security holders. If material changes are made with respect to information that approaches the significance of price and share levels, a minimum period of ten business days may be required to allow for adequate dissemination and investor response. Moreover, the five business day period may not be sufficient where revised or additional materials are required because disclosure disseminated to security holders is found to be materially deficient. Similarly, a particular form of dissemination may be required. For example, amended disclosure material designed to correct materially deficient material previously delivered to security holders would have to be delivered rather than disseminated by publication.160

[160] Release No. 34-24296 (April 3, 1987) [52 FR 11458].

Under the “early commencement” proposal, if the bidder had to send a supplement containing material changes either before or after effectiveness of the registration statement, the offer would need to remain open for at least a specified minimum period.161 The original expiration date would have to be extended if necessary. The offer would need to remain open at least:

[161] Proposed Rule 14d-4(d)(2).

Five business days for a supplement containing a material change other than price or share levels;

Ten business days for a supplement containing a change in price, the number of shares sought, the dealer's soliciting fee, or other similarly significant change;

Ten business days for a supplement included as part of a post-effective amendment; and

20 business days for a revised prospectus when the initial prospectus was materially deficient; for example, failing to comply with the going-private rules or filing a “shell” document solely to trigger commencement and staff review.162

[162] This would, in effect, re-start the 20 business day period required by the tender offer rules. If the initial prospectus did not comply with the roll-up rules and was revised during the offering period, the minimum solicitation period under the roll-up rules would be tolled until a revised prospectus satisfying the roll-up rules was disseminated.

We invite comment on whether these time periods are appropriate, and if not, what periods should be substituted. Would the ready availability of this information in electronic format (e.g., on the Commission's or the bidder's Internet web site) mean that these time periods could be shorter? On the other hand, would shortening these periods deprive security holders of essential information if they are not willing or able to take advantage of electronic media? As proposed, this rule would apply only to exchange offers where “early commencement” is used. Should it instead replace Rule 14e-1(b) and thus apply to all tender offers?

We also solicit comment on whether bidders would be likely to take advantage of “early commencement” before receiving staff comments or a notification that the filing would not be reviewed. Would the risk of having to disseminate additional information and possibly extend the offer deter bidders from using this procedure? Or would they take those uncertainties into account as they now do for cash tender offers?

The Securities Act Reform Release proposes to eliminate the requirement that a final prospectus be delivered to investors who have received a preliminary prospectus.163 This exemption would not apply to business combinations, which have a distinct scheme for delivery of information. However, we solicit comment on whether bidders who use the “early commencement” rule should be required to deliver a final prospectus after effectiveness. The informational purpose of the prospectus may be best served by requiring security holders to be given supplements setting forth significant changes, rather than by requiring the prospectus to be re-delivered.

[163] Proposed Rule 173.

3. Tenders into an Offer Exempt from Sale Requirements of the Securities Act

Under the “early commencement” proposal, once a bidder commenced an offer, security holders could tender into the offer before the related registration statement became effective, but the bidder could not purchase securities tendered until the offer expired. Security holders would have the right to withdraw tenders until the offer expired, as they do now. As discussed above, expiration always would be after effectiveness of the related registration statement. In order to prevent the tendering of securities into an offer from being viewed as a “sale” without an effective registration statement, we propose a new rule to address this issue.164 We would use our new exemptive authority 165 to provide that transactions involving tenders during the “waiting period” when the early commencement rule is complied with would be exempt from the Securities Act requirements for sales.

[164] Proposed Securities Act Rule 162.

[165] Section 28 of the Securities act [15 U.S.C. 77z-3].

The purpose of this rule is to place cash and exchange offers on a more equal footing by allowing them to operate on a more comparable time schedule and minimizing any regulatory factors that may influence a bidder's decision to offer cash instead of securities in a tender offer. The proposed exemption is necessary to assure bidders that they would not be viewed as violating Section 5 of the Securities Act 166 when security holders tender into an exchange offer during the waiting period. Investors would continue to receive disclosure before making an investment decision. We believe that it is consistent with the public interest and the protection of investors to reduce the regulatory bias towards cash so that the bidder's choice of consideration is not unduly affected by concerns about timing. However, we solicit comment on whether this is an appropriate use of the Commission's exemptive authority.

[166] 15 U.S.C. 77e.

D. Integrate and Streamline the Disclosure Requirements for Tender Offers and Mergers

1. Subpart 1000 of Regulation S-K (“Regulation M-A”) and Combination of Schedules

Currently, there is a different disclosure schedule for issuer tender offers, third-party tender offers and going-private transactions. Compliance with the line-item requirements in each of these schedules results in certain differences in the information disclosed to security holders.167 These differences in the disclosure requirements can be particularly troublesome to companies that are seeking to comply with the disclosure requirements in today's fast-paced takeover environment. We believe that the cost of compliance could be reduced, and the quality of disclosure improved, if the disclosure requirements were integrated into one set of uniform regulations and unnecessary differences were harmonized.168

[167] For example, while Schedules 14D-1, 13E-4 and 13E-3 all require disclosure of high and low bid quotations of the subject security for each quarterly period during the preceding two years, only Schedules 13E-4 and 13E-3 require disclosure of the source of such quotations. See Item 1(c) of Schedule 13E-4 and Schedule 13E-3. As another example, Schedules 14D-1 and 13E-3 both require disclosure of past contacts, negotiations or transactions between the parties subject to a proposed tender offer or going-private transaction. Schedule 13E-3 (which generally requires more disclosure because of the affiliated nature of the transaction) requires disclosure for only the two preceding years, while Schedule 14D-1 requires disclosure for the preceding three years. See Item 3 of Schedule 13E-3 and Item 3 of Schedule 14D-1.

[168] Integration has worked well in the past. In 1985, the Commission integrated the disclosure requirements of the registration statement most commonly used in stock-based extraordinary transactions, Form S-4, with the disclosure requirements for proxy statements on Schedule 14A. See Release No. 33-6578 (April 23, 1985) [50 FR 18990].

Accordingly, we propose to integrate the disclosure items contained in the schedules relating to issuer and third-party tender offers, tender offer recommendations, and going-private transactions. The disclosure items applicable to these transactions would be relocated into a new subpart of Regulation S-K called “Regulation M-A.” The new series of items would contain the current disclosure requirements applicable to tender offers and going-private transactions, with minor modifications to harmonize and clarify the items as well as more substantive changes discussed below.169 The new regulation includes some disclosure items for cash merger proxy statements and business combination registration statements as well. We have made an effort to use clear language and reduce legalese. We anticipate expanding the new regulation in the future to cover additional disclosure items.

[169] In some cases, disclosure requirements appear in the rules rather than the schedules. These requirements also would be moved to Regulation M-A. For instance, schedule 14D-1 does not specifically require disclosure of the expiration date of the tender offer; that requirement appears in Rule 14d-6(e).

We also propose to combine current Schedules 13E-4 and 14D-1 (the schedules now used for issuer and third-party tender offers, respectively), into a new schedule called “Schedule

TO.” 170 The information required in Schedule 13E-4 is substantially similar to that required in Schedule 14D-1. Combining the schedules would harmonize the disclosure requirements applicable to issuer and third-party tender offers. Any differences in the information required due to the nature of the bidder (either issuer or third-party) would be addressed in items of the schedule and the applicable disclosure items in Regulation M-A.

[170] Schedules 13E-3 and 14D-9 would be revised so that the format and instructions harmonize with schedule TO. These schedules would use clearer language and would refer to Regulation M-A for the substantive disclosure requirements. We do not propose to revise the schedules used in connection with the multijurisdictional disclosure system with Canada (i.e., Schedules 14D-1F, 14D-9F and 13E-4F).

In addition, we propose to permit a single filing to satisfy both the tender offer and going-private disclosure requirements. The disclosure items required by Schedules 14D-1, 13E-4 and 13E-3 could all be satisfied in one combined filing. For example, an affiliate engaging in a tender offer having a going-private effect could file a combined Schedule TO and Schedule 13E-3. Of course, all filing person(s) and applicable schedules would have to be identified on the cover page, but separate cover pages would not be required. Schedule 13E-3 would be filed separately when the underlying transaction was not a tender offer.

In permitting a combined tender offer and going-private filing, we would reduce the redundancy of having to file two schedules for what is essentially the same transaction. The disclosure requirements are generally satisfied in the same document—the offer to purchase. This will continue to be the case.

Schedule TO would contain an instruction specifying the items that need to be complied with for particular types of transactions.[171] In addition, we would revise the current instruction requiring information that is incorporated by reference to be filed as an exhibit to the Schedule. The revised instruction would permit document(s) previously filed electronically with the Commission to be incorporated by reference without filing the information as an exhibit. Documents filed electronically on EDGAR are readily available to security holders and the public (e.g., through the Internet, our public reference room, brokers and investment advisors). This change also would apply to going-private statements.

[171] An instruction will specify that certain items may be omitted when Schedule TO is combined with a Schedule 13E-3, to avoid redundant requirements. See General Instruction J to proposed Schedule TO.

We request comment on whether the ability to combine the disclosure currently required by Schedules 14D-1, 13E-4 and 13E-3 into one filing would be useful to filing persons. Would it be easier for the marketplace to follow this information if the filings were kept separate?[172]

[172] There would be check boxes on the cover page to indicate whether the filing was an issuer tender offer, third-party tender offer, and/or going-private transaction. EDGAR tags also would indicate this information. If this proposal is adopted, EDGAR would be programmed so that public users of information could quickly determine the nature of each filing.

Alternatively, should the Schedule 13E-3 be eliminated entirely for most transactions? Instead, the tender offer schedule, registration statement and proxy statement cover page would have a check box indicating a going-private transaction is involved. The document would be required to contain all of the disclosure and signatures currently called for by Schedule 13E-3.[173] If we took this approach, the Schedule 13E-3 would not be available as a place to provide negative answers to items. Currently, negative answers may be provided in the schedule rather than in the disclosure document disseminated to security holders.[174] Accordingly, if we eliminated Schedule 13E-3 we would either eliminate the requirement for negative answers or require negative answers to be provided in the disclosure document.

[173] When a going-private transaction did not involve another Commission filing, the Schedule 13E-3 would be required as a stand-alone filing.

[174] See General Instruction A to Schedules 14D-9 and 13E-4; General Instruction B to Schedule 13E-3. As proposed, Schedule TO would include an instruction permitting filers to provide negative and “not applicable” answers in the schedule but not the disclosure document disseminated to security holders. A similar instruction is proposed for Schedules 13E-3 and 14D-9. See General Instruction E to proposed Schedules TO and 13E-3 and General Instruction C to proposed Schedule 14D-9. The ability to omit negative answers already exists to some extent for going-private and tender offer statements. See Instruction 1 to Rule 13e-3(e)(3); Instruction A to Rule 13e-4(d); and Rule 14d-6(e)(1)(vii). Negative answers are common in responding to items that call for information about civil and/or criminal proceedings involving the filing person and certain control persons for the five-year period before the filing. See Item 2 (e) and (f) to Schedules 13E-3 and 14D-1.

We also request comment on whether the concept of one filing satisfying all disclosure requirements should be applied to the Securities Act and proxy rules as well as the tender offer and going-private rules. Should one filing be permitted to satisfy all of these transactions? Currently, different signature pages may be required depending upon the schedules or forms combined.[175] If registration statements and proxy statements were permitted to be combined with tender offer and going-private schedules, then a uniform signature requirement would be necessary, or we could require that the more extensive signature requirements control.

[175] For example, no signature is currently required for Schedule 14A proxy statements while Securities Act registration statements require signatures by the registrant, the principal executive officer, the principal financial officer, the controller or principal accounting officer, and at least a majority of the board of directors of persons performing similar functions. The current signature requirements in Schedules 14D-1, 13E-4 and 13E-3 are substantially the same; the schedule must be signed by each person on whose behalf the statement is filed.

Currently, security holders do not receive all of the information filed with the Commission in a tender offer or going-private schedule. Instead, the rules permit filers to send security holders a disclosure document that summarizes most of the information in the schedule. The schedule, as filed, consists of a cover page, list of items with their responses, exhibits and signatures. The disclosure document is filed as one of the exhibits. Many of the responses to the items in the schedule are incorporated by reference from the disclosure document. While we are not changing this basic approach, we propose two changes to streamline the requirements:

Instead of specifying the items of each schedule required to be summarized, the rules would simply require that the document given to security holders summarize the entire schedule (except for exhibits). This is not intended to increase the information given to security holders, but rather to permit filers to exercise their judgment in determining what constitutes a fair and adequate summary. As discussed below, each disclosure document would include a Summary Term Sheet highlighting the basic information. Certain information required by the going-private rule would still be required to be set forth in full in the disclosure document.[176]

[176] See Rules 14d-6(d), 14d-9(d), 13e-3(e) and 13e-4(d), as proposed to be revised.

Filers would no longer have to answer each item of the schedule with a statement that the information is incorporated by reference from specified pages or sections of the disclosure document.[177] It would be sufficient to have a general statement incorporating the required information from the disclosure document into the schedule. The schedule, as filed, would consist primarily of a cover page, exhibits and

signatures. The item numbers from the schedule would be included only to provide information not required to be in the disclosure document, such as negative or “not applicable” responses or information that goes beyond what is summarized in the disclosure document. This change is designed to make the schedules easier to prepare. It would still be necessary, of course, for filers to provide all the required information.[178]

[177] As an example of the current requirement, see General Instruction B to Schedule 14D-1.

[178] See General Instructions E and F to Schedules TO and 13E-3 and General Instructions C and D to Schedule 14D-9. Similarly, we propose to eliminate the requirement in General Instruction F of current Schedule 13E-3 to provide a cross reference sheet showing where the responses are located.

The rest of this release discusses the most significant changes to the rules and schedules, many of which are incorporated into proposed Regulation M-A. In addition, we propose a number of less substantive changes to harmonize and update the requirements. For the complete text of all the technical, clarifying and conforming changes, including amendments to the tender offer and going-private rules, please see the text of the proposed rules at Part VII below. We request comment on these proposals as well. 2. Streamline Disclosure Requirements and Improve Disclosure

We believe that, in many cases, the current disclosure requirements can be simplified and clarified for filing persons. We also believe that disclosure to security holders can be improved. We discuss below several proposed amendments to the current rules and regulations that should help filing persons comply with their disclosure obligations and enhance security holders' understanding of tender offers and mergers. a. “Plain English” Summary Term Sheet

The disclosure in tender offer and merger proxy statements often is lengthy, difficult to understand and uninviting to the reader. In many instances important information is buried in boilerplate. Security holders often must make a voting or investment decision within a relatively short period of time. With the increasing complexity of the transactions, filing persons should provide security holders with clear, concise and understandable disclosure as required by the Commission's rules.[179] Disclosure is not effective from an investor's perspective unless it is understandable, complete and timely.[180]

[179] See Rule 421 of Regulation C [17 CFR 230.421]. Bidders in exchange tender offers also are reminded that effectiveness of a registration statement may be denied or a stop order issued when there has not been a bona fide effort to present information in a reasonably clear, concise and readable manner. See Rule 461(b)(1) of Regulation C [17 CFR 230.461(b)(1)]; see also, In the Matter of Franchard Corporation, 42 S.E.C. 163 (1964).

[180] Report of the Task Force on Disclosure Simplification, “Presentation of Information” at p. 17.

We propose to require that issuer and third-party cash tender offer statements, cash merger proxy statements, and going-private disclosure documents begin with a short “plain English” summary term sheet highlighting the most important features of the transaction.[181] The summary term sheet would be required to begin on the first or second page of the disclosure document. Each item covered in the summary term sheet would be presented in bullet point format with a cross-reference to a more detailed discussion found elsewhere in the tender offer, going-private or proxy materials.

[181] Proposed Item 1001 of Regulation M-A. “Plain English” would have the same meaning as in Rule 421, as amended, effective October 1, 1998.

In preparing a summary term sheet, filing persons would need to determine how best to highlight the most significant aspects of the transaction in a clear, concise and understandable manner. As noted by the Task Force, the summary term sheet should be used to answer the most common or frequently asked questions. In a tender offer, for example, the bidder should answer questions such as the following:

Who is offering to buy my securities?

What are the classes and amounts of securities sought in the offer?

How much is the bidder offering to pay and what is the form of payment?

Does the bidder have the financial resources to make payment?

Is the bidder's financial condition relevant to my decision on whether to tender in the offer?

How long do I have to decide whether to tender in the offer?

Can the offer be extended, and under what circumstances?

How will I be notified if the offer is extended?

What are the most significant conditions to the offer?

How do I tender my shares?

Until what time can I withdraw previously tendered shares?

How do I withdraw previously tendered shares?

If the transaction is consensual, what does my board of directors think of the offer?

Is this the first step in a going-private transaction?

Will the tender offer be followed by a merger if all the company's shares are not tendered in the offer?

If I decide not to tender, how will the offer affect my shares?

What is the market value (if traded) or the net asset or liquidation value (if not traded) of my shares as of a recent date?

Who can I talk to if I have questions about the tender offer?

In the case of a merger proxy statement, the summary term sheet should contain, among other things, a brief outline of the matters proposed, the material terms of the proposals including the parties to the proposed transaction, the consideration to be received by security holders, the board's recommendation on how to vote (if any), the effect of a vote for and against each proposal including the effects of not voting, the procedures for voting and changing or revoking a vote, and the existence of appraisal rights.

In going-private transactions, the summary term sheet would require a brief summary of the most material terms and consequences of the transaction. The summary term sheet should address, among other things, conflicts of interest, whether a fairness opinion was received, the identity, role and relationship of any affiliates involved in the transaction, the filing person's belief as to the fairness of the transaction to security holders, and any recommendations made to security holders regarding the transaction.

The proposed summary term sheet requirement would not specify the items to be addressed. Instead, the filing person would determine the most significant facts to highlight. We solicit comment, however, on whether the item should specify information that must be addressed in most situations. The information required could be specified in a manner similar to current Instruction 1 to Item 8 of Schedule 13E-3, which specifies factors that must normally be considered in determining the fairness of a going-private transaction to unaffiliated security holders. Other than the matters set forth above, what other information would rise to the level of requiring prominent disclosure in a summary term sheet?

Mergers or tender offers that involve the registration of securities are subject to the recently adopted “plain English” disclosure rules requiring issuers to write the cover page, summary, and risk factors section of their prospectuses in plain English.[182] In addition, Forms S-4 and F-4 currently require specified

information about the transaction to appear in the front of the prospectus. This would be continued in proposed Forms C and SB-3. Therefore, we do not propose to require a summary term sheet for such transactions. Would a summary term sheet specifically adapted to these forms be useful?

[182] See Release No. 33-7497 (January 28, 1998) [63 FR 6370].

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

To help issuers prepare disclosure documents, we propose to clarify the disclosure required in proxy statements. Item 14 of Schedule 14A is triggered when a vote or consent is solicited on any of the following matters: (i) a merger; (ii) a consolidation; (iii) the acquisition of assets, a business or securities; (v) the sale or transfer of all or substantially all the assets of the registrant; (vi) a liquidation; or (vii) a dissolution. The Item calls for information about the transaction, as well as business and financial information about the companies involved. Item 14 information is similar to the information that would be required in a Form S-4 registration statement if registered securities were being offered.

We propose to revise this Item to make it easier to understand and to adapt the disclosure scheme to Form A and B companies instead of Forms S-1, S-2 and S-3 companies. Instead of setting forth the detailed requirements for information about the acquired and acquiring companies, Item 14 would simply refer to the applicable requirements in Forms C and SB-3.[183]

[183] As revised, Item 14 eliminates the ability to incorporate specified information by reference to the “glossy” annual report to security holders. This is consistent with proposed Form C, as discussed in the Security Act Reform Release.

The revised Item would modify financial statement requirements in three principal respects. First, we propose to clarify that financial statements and other information about the acquiror in a cash merger are necessary only if material to the voting security holders' evaluation of the transaction.[184] Just as for financial statements of the bidder in a cash tender offer, discussed below, information about the acquiror in a merger generally is not needed if the target security holders are receiving cash and the acquiror has demonstrated the financial ability to satisfy the terms of the offer.[185]

[184] See Instruction 2 to Item 14 of Schedule 14A currently and as proposed to be revised. Pro forma information about the transaction also generally would not be required in a cash merger where only the target's security holders are voting on the transaction.

[185] Even if the acquiror's security holders are voting, we propose to permit the omission of acquiror information, as those security holders presumably have access to information about their own company.

Second, we propose to reduce the financial statements required for the acquiror under Item 14 from three years to two,[186] consistent with the proposed treatment of cash tender offers, as discussed below.[187]

[186] See proposed Item 14(c)(1) to Schedule 14A.

[187] See Part II.E.2.b below. Financial statements of the target, when required, generally would continue to be required for three years in order to be consistent with other requirements for financial statements of acquired companies.

Third, we propose to revise Item 14 with respect to when financial statements and other information about the target are required. Specifically, we propose to eliminate the requirement to provide information about the target in a cash merger when the acquiror's security holders are not voting on the transaction.[188] Security holders would receive a shorter document focusing on the terms and effect of the transaction. This revision would harmonize the disclosure required in cash merger transactions with that required in all-cash, all-share tender offers. Security holders are required to make substantially the same investment decision in both transactions.

[188] See Instruction 2 to Item 14 of Schedule 14A, as proposed to be revised.

Generally, financial statements of the target and other company information are not required in all-cash, all-share tender offers, although bidders sometimes provide this information in their tender offer materials on a voluntary basis. We do not believe the proxy rules should require disclosure of target information when the same transaction, structured as a cash tender offer, would not require disclosure of this information. In both types of transaction, security holders are asked to accept cash for their entire investment in the target, and most likely have received financial information previously with respect to the company whose security they already hold.

As proposed, we also would eliminate the requirement to provide information about the target when target security holders are voting on whether to approve a merger with the consideration consisting of acquiror securities exempt from Securities Act registration. This would be consistent with the requirements of the tender offer rules when exempt securities are being offered. Of course, information about the acquiring company would be material under these circumstances.

We do not propose to eliminate the requirement to provide financial statements of the target and other company information where the acquiror's security holders are voting on the transaction, since those security holders may not know anything about the target. In addition, we would continue to require target information in cash merger proxies that are going-private or roll-up transactions. We believe that target security holders have a need for current financial statements of their company if it is subject to one of these transactions.

We request comment on whether target security holders in mergers need financial statements and other information about their own company to determine whether or not to exercise their dissenters' or appraisal rights under state law. Are there circumstances under which the target security holders may have difficulty obtaining financial statements of the company whose securities they hold? Of course, if the proxy rules apply to the target, the target would be a reporting company. Does the liability imposed on financial statements filed under the proxy rules provide an added degree of protection to investors? If so, should the financial statements be incorporated by reference into the proxy material? Should we require the proxy statement to contain either summary financial statements,[189] or an undertaking to provide financial statements to any requesting security holder?

[189] For example, we could require summary financial statements as specified in Rule 1-02(bb) of Regulation S-X [17 CFR 210.1-02(bb)] for the latest fiscal year and interim period.

c. Reduce Financial Statements Required for Non-Reporting Target Companies

If our proposal to eliminate financial statements of the target in a cash merger when the acquiror's security holders are not voting is adopted, there still will be circumstances under which target financial statements are required. In particular, financial statements are required when the transaction is a stock merger or stock tender offer.

The rules currently provide special treatment when the target is not subject to the Commission's reporting requirements. We believe the existing requirements can be further relaxed under certain circumstances. In many transactions involving the acquisition of a non-reporting company, the target's financial statements are not readily available or can be obtained only at great expense. In some cases, companies have chosen to structure acquisitions so

an exception from registration was available rather than obtain the financial statements needed to register the transaction. We propose to reduce the costs of preparing proxy statements and registration statements for business combinations by reducing the financial statement requirements when the target is a non-reporting company and the acquiror's security holders are not voting on the transaction.

Currently, the rules require the filing person (the acquiror) to provide financial statements “that would have been required to be included in an annual report to security holders” had the non-reporting company been required to furnish an annual report that complies with Rule 14a-3(b).[190] Rule 14a-3(b) requires audited balance sheets for each of the two most recent fiscal years and audited statements of income and cash flows for each of the three most recent fiscal years prepared in accordance with Regulation S-X.[191] We no longer believe non-reporting target companies (or their acquirors) should have to generate financial statements for three years when security holders of the non-reporting target most likely made their initial investment decision based on less extensive or different financial statements. The requirement to provide financial statements prepared in accordance with Regulation S-X going back three years can be costly and burdensome.

[190] See Item 17(b)(7) of Form S-4, Item 17(b)(5) of Form F-4 and Item 14(b)(3)(ii)(A) of Schedule 14A. The item states that the balance sheet for the year preceding the latest full fiscal year and the income statements for the two years preceding the latest full fiscal year need not be audited if they have not previously been audited. The item further states that financial statements need be audited only to the extent practicable.

[191] 17 CFR 240.14a-3(b).

Under the proposal, when the acquiror's security holders are not voting on the acquisition, we would require financial statements of the target prepared in conformity with Generally Accepted Accounting Principles (“GAAP”) for the latest fiscal year.[192] If the non-reporting target company previously provided its security holders with GAAP financial statements for either of the two fiscal years before the latest fiscal year (or both), GAAP financial statements also would be required for those years.

[192] We proposed to implement this change in proposal forms C and SB-3. See Items 18(c) and 21(b) in Form C and Items 16(b) and 19(c) in Form SB-3. If these forms are not adopted, we would implement this amendment in Forms S-4 and F-4.

As is currently the case, the item would not require audited financial statements for years before the most recent fiscal year if the non-reporting target's financial statements were not audited previously. In addition, the financial statements for the latest fiscal year would have to be audited only to the extent practicable.

We would not change the existing requirement to provide pro forma financial information required by Article 11 of Regulation S-X. In addition, we are not changing the requirement to provide audited financial statements in accordance with Rule 3-05 of Regulation S-X if a registration statement is used for registering resales to the public by any person who, with regard to the securities being re-offered, is deemed an underwriter within the meaning of Rule 145(c). Further, the proposal would not change the financial statements currently required if the acquiror's security holders are voting on the transaction.[193] It should be noted that the Securities Act Reform Release includes a proposal to require certain additional non-financial information regarding non-reporting target companies.

[193] The proposal also would not affect the current requirement that the acquiror ultimately provide audited financial statements under Item 7 of Form 8-K when the transaction is significant to the acquiror.

If the non-reporting target is a foreign company, the proposed reduction in the required financial statements would operate in the same manner as for domestic companies. If the acquiror's security holders are not voting on the transaction, and the target's financial statements are prepared on the basis of a comprehensive body of accounting principles other than U.S. GAAP (“foreign GAAP”), a reconciliation to U.S. GAAP would be required unless a reconciliation is unavailable or not otherwise obtainable without unreasonable cost or expense.[194]

[194] At a minimum, however, filers should provide a narrative description of the material variations in accounting principles, practices and methods used in preparing the foreign GAAP financial statements from those accepted in the U.S.

The proposed change would not affect financial statements for a non-reporting target in roll-up transactions.[195] We believe that the acquiror's security holders have an independent need for financial statements of any non-reporting company that would be rolled-up into their company. We request comment on whether there are any other circumstances when this reduction in the target financial statements required should not apply. For example, should this reduction apply when the acquiror is a public shell company seeking to merge with or be acquired by a private company with substantial assets?

[195] An exception from the going-private rules would not be necessary because the proposal is limited to the financial statement requirements of non-reporting companies, which are not subject to Rule 13e-3.

We invite comment on whether this proposal would provide sufficient regulatory relief to filers and still assure that target security holders have sufficient information. We also solicit comment on whether, if the acquiror's security holders are voting on the transaction and it is significant to the acquiror at the 50% level, audited financial statements of the target should be required.[196] Currently, if the target is a non-reporting company the rules provide for special treatment by permitting Rule 14a-3(b) financial statements, as described above.[197] We invite comment on whether this special treatment provides any benefit to acquirors who eventually will have to provide audited financial statements of the target in a Form 8-K or in connection with other securities offerings.

[196] See Rule 3-05(b)(4)(i) of Regulation S-X [17 CFR 210.3-05(b)(4)(i)]. Audited financial statements of the target are currently required in Form S-4 if the target is a reporting company, whether or not the acquiror's security holders are voting on the transaction. In addition, audited financial statements are required for other probable acquisitions (i.e., acquisitions other than the one being voted on by security holders) at the 50% significance level.

[197] See note 190 above.

d. Registration Statement Form for Business Combinations

In the Securities Act Reform Release, we propose to replace Forms S-4 and F-4 with Form C (and Form SB-3 for small business issuers). These forms would be the only ones available for registered exchange offers, mergers and other business combinations.[198] Currently, Form S-1 is available for exchange offers and Form S-2 is available for issuer exchange offers. If these forms are rescinded, issuer exchange offers would be limited to Forms C and SB-3.

[198] These forms would be available for all transactions that can be registered on Forms S-4 and F-4 today. Forms S-4 and F-4 permit incorporation by reference of information about the acquiring and acquired companies to the extent those companies are eligible to use Forms S-2 and S-3 instead of S-1 (Forms F-1; F-2; and F-3 for foreign private issuers). Forms C and SB-3 would adapt the incorporation by reference provisions to the proposed new regulatory scheme, permitting incorporation by reference for Form B, seasoned Form A, and seasoned Form SB-2 companies.

As discussed in more detail in the Securities Act Reform Release, Forms C and SB-3 would require basically the same information as the current forms about the transaction, the acquiror, the company to be acquired and the

combined entity.[199] In that release, we propose to treat Form B issuers differently from other issuers in a number of respects. No information would be required to be delivered to investors until shortly before the investment decision; no final prospectus would be required to be delivered; and the registration statement would become effective upon filing, or upon a date designated by the filer. For the reasons discussed in Part II.B and C of this release, we do not propose the same scheme for Form C registration statements, even when the issuer and/or the target would be eligible to use Form B. Instead, our proposed approach for business combinations permits free communications, so long as security holders ultimately receive a mandated disclosure document with specified information before they make their tender or voting decision. We do, however, solicit comment on the extent to which aspects of the Form B scheme could be adopted for business combinations.

[199] If the transaction is an exchange offer, the prospectus also must include certain information specified by the tender offer rules. See Rule 432. We propose a technical change to Rule 432.

Forms S-4 and F-4 currently require that the prospectus be delivered at least 20 business days before the date of the vote or the expiration of the exchange offer when incorporation by reference is used. The purpose is to assure that security holders have time to obtain the documents incorporated by reference and review their contents. The proxy rules impose a comparable provision for cash mergers.[200] We propose to eliminate these requirements because Commission filings incorporated by reference are now readily available from many sources, including our Internet web site, our public reference room, and presumably from brokers and investment advisers. We ask for comment as to whether security holders would still benefit from a mandated solicitation period when incorporation by reference is used.

[200] General Instruction A.2 to Form S-4; General Instruction A.2 to Form F-4; Note D.3 to Schedule 14A.

E. Update the Tender Offer Rules

The tender offer rules have not been revised since 1986.[201] We are attempting to update them to correspond to the need of today's markets. We have already discussed several proposals affecting tender offers. These proposals involve expanding permissible communications, changing the timing and methods of commencement, combining tender offer schedules, integrating disclosure requirements and including a summary term sheet. In addition, as discussed below, we have several proposals to provide new tender offer procedures, revise and clarify the financial statements requirements and clarify the rules. We also solicit comment on whether the tender offer rules should include a safe harbor from liability for forward-looking information.

[201] In 1986, the Commission adopted amendments to the tender offer rules to provide that a third-party or issuer tender offer must be open to all holders of the class of securities subject to the tender offer (both record and beneficial owners) and that any security holder must be paid the highest consideration paid to any other security holder during the tender offer. See Release No. 34-23421 (July 11, 1986) [51 FR 25373] and Rule 14d-10 [17 CFR 240.14d-10]. More comprehensive revision of the tender offer rules has not been undertaken since 1979.

1. PERMIT SECURITIES TO BE TENDERED DURING A “SUBSEQUENT OFFERING

PERIOD” WITHOUT WITHDRAWAL RIGHTS

We believe that there may be times when bidders should be able to accept shares in a tender offer after the tender offer is completed.[202] We propose to permit security holders to tender securities during a limited time after the initial offer, including all extensions, is completed, referred to as the “subsequent offering period.” [203] The proposed subsequent offering period would be similar to the extended offering period that sometimes applies to tender offers made in the United Kingdom subject to the City Code on Take-overs and Mergers.[204] No withdrawal rights would be available during this period.[205] Security holders would be able to tender securities in the subsequent offering period only after all conditions to the offer were satisfied or waived and the shares tendered to that point were accepted for purchase and promptly paid for.[206] The subsequent offering period would be optional at the bidder's election.

[202] For example, when a bidder is successful in acquiring a sufficient number of target shares to approve a back-end merger (typically a majority or two-thirds is required), most remaining security holders want to get cashed out, knowing that a back-end merger to acquire the remaining shares is a relative certainty. Under most state laws, the bidder must own at least 85 or 90% of the target to merge without security holder approval in a short-form merger.

[203] Proposed Rule 14d-11.

[204] The City Code on Takeovers and Mergers and the Rules Governing Substantial Acquisition of Shares (the “City Code”) Rule 31.4. See also Part IV.A of Release No. 34-29275 (June 5, 1991) [56 FR 27582].

[205] Rule 14d-7 would be amended. The withdrawal rights that exist after 60 days following the start of the tender offer, pursuant to Section 14(d)(5) of the Exchange Act [15 U.S.C. 78n(d)(5)], similarly would not be available.

[206] The proposed subsequent offering period could not be used where payment would be delayed. We have stated that payment may be delayed for certain governmental regulatory approvals. See Release No. 34-16623 (March 5, 1980) [45 FR 15521]. However, the proposed subsequent offering period could not be used unless all conditions to payment have been satisfied or waived.

We propose limiting the use of the subsequent offering period to third-party tender offers for all outstanding shares of the target. In addition, the bidder must intend to engage in a back-end merger with the target after the tender offer, either offering cash or securities. The bidder's intent to merge with the target would have to be publicly disclosed in its offering materials.

Under our proposal, a bidder would have to disclose its intention to provide a subsequent offering period in the initial tender offer materials filed and disseminated to security holders. The tender offer materials would have to adequately disclose the use of a subsequent offering period and explain how it would operate. If the “plain English” summary term sheet proposal is adopted, the subsequent offering period would be disclosed in the summary term sheet. If a bidder decided to include a subsequent offering period after the initial offering materials were filed and disseminated, that would be treated as a material change in information, requiring dissemination of a supplement and possibly an extension of the offer by up to five business days.[207]

[207] Similarly, if the bidder stated that a subsequent offering period would be provided and then decided not to make one available, this would be a material change requiring dissemination and adequate time for security holders to receive and act on the information.

The subsequent offering period would be strictly limited to offers for all outstanding shares.[208] The subsequent offering period would be a fixed ten business day period that would follow the date a bidder satisfied or waived all conditions to its offer and accepted for purchase any shares tendered to that point in time. The bidder's prompt payment obligation would apply to all shares accepted in the initial offering period before the subsequent offering period began. During the subsequent offering period, the bidder could solicit remaining security holders to tender. The bidder would be obligated to “promptly” pay for the shares tendered, with prompt payment running from the date of each separate tender.[209]

[208] Application of the subsequent offering period in a partial offer could raise complex proration issues if the offer is oversubscribed.

[209] Proposed revision to Rule 14e-1(c).

The subsequent offering period could not start until the offer was open at least 20 business days with withdrawal rights available to all tendering security holders. This would prevent bidders from offering withdrawal rights during the first ten business days of an offer but not the last ten business days.

The final amendment to reflect the results of the tender offer [210] would not be required until the end of the subsequent offering period. We solicit comment, however, on whether bidders should be required to issue a public announcement at the beginning of the subsequent offering period setting forth the number of shares tendered and accepted in the initial offering period.

[210] See current General Instruction D to Schedule 14D-1; proposed to be moved to Rule 14d-3(b)(2).

The subsequent offering period would help security holders who do not tender into an offer, but then wish to participate in the offer after the bidder accepts shares and discloses the results. There may not be a very liquid trading market in the securities after the tender offer. As a result, security holders often are forced to either hold onto their shares until a back-end merger is completed or sell into the market below the offer price. Bidders may need to prepare and furnish a proxy statement or other disclosure documents before remaining security holders can obtain their final payment. We believe the subsequent offering period would minimize the delay in liquidating the investment of the relatively small number of security holders that do not tender in an offer, but later decide they want to tender and receive the offer price.

Comment is solicited on whether this procedure would be useful to bidders and security holders. Would there be any disadvantages for security holders? Should the subsequent offering period be mandatory? Should the subsequent offering period be longer or shorter (e.g., five, seven, 15 or 20 business days)? Should the bidder be allowed to extend the subsequent offering period for either a limited number of days (e.g., five or ten business days) or for whatever time period the bidder specifies? Would the subsequent offering period encourage security holders to delay tendering until the completion of the offer, and if so, how much of a disadvantage would this be to the bidder? Should the availability of the subsequent offering period be limited to circumstances where a substantial percentage of shares (such as 50%) has already been tendered? As proposed, the subsequent offering period would be available for both cash and stock tender offers, and the consideration offered in the back-end merger could be either cash or securities. Is there any reason to limit the proposal to cash tender offers or to situations where only cash is offered in the back-end merger? Should the subsequent offering period be limited to third-party offers, as proposed, or would it also be useful for issuer tender offers? 2. Clarify the Financial Information Required for Bidders in Cash Tender Offers a. When the Bidder's Financial Statements Are Required in Cash Tender Offers

Under the current rules, the financial statements of a bidder in a cash tender offer must be disclosed if the information is “material.” [211] There are several instructions in Schedule 14D-1 that help bidders determine the need for, and adequacy of financial statements. The first instruction states that materiality will depend on the facts and circumstances of the tender offer.

[211] See Item 9 of Schedule 14D-1 and Item 7 of Schedule 13E-4.

Once a bidder determines that financial statements are material, there is a provision in the instruction that details the type of financial statements deemed adequate for disclosure purposes. If a bidder provides financial statements that are prepared in compliance with Form 10, the financial statements requirement is deemed satisfied.[212] A second instruction permits incorporation by reference if the bidder is subject to the Exchange Act reporting requirements. A third instruction provides that non-reporting companies need not include audited financial statements if they are not available or obtainable without unreasonable cost or expense. Both third-party bidders and issuer offerors are required only to disseminate a fair and adequate summary of the financial information to security holders.[213]

[212] [17 CFR 249.210]. Financial statements prepared in accordance with Item 17 of Form 20-F will be deemed adequate for foreign bidders. [17 CFR 249.220f].

[213] See Rules 14d-6(e) [17 CFR 240.14d-6] and 13e-4(d) [17 CFR 240.13e-4(d)].

In adopting the third-party tender offer rules, we identified four factors that should be considered when determining whether financial statements of the bidder are material in a cash tender offer:

The terms of the tender offer, particularly those terms concerning the amount of securities sought, such as any-or-all, a fixed minimum with the right to accept additional shares tendered, all-or-none, and a fixed percentage of the outstanding;

Whether the purpose of the tender offer is for control of the subject company;

The plans or proposals of the bidder; and

The ability of the bidder to pay for the securities sought in the tender offer and/or to repay any loans made by the bidder or its affiliates in connection with the tender offer or otherwise.[214]

[214] See Release No. 34-13787 (July 21, 1977) [42 FR 38341].

Under the staff's current interpretation, the above factors are not exclusive, and it is not necessary that all factors be present to meet the materiality test. Based on our experience with tender offers since 1977, we believe it would be more helpful to provide specific guidance to bidders as to when financial statements are not required. We propose to include an instruction in Schedule TO [215] stating that a bidder's financial statements are not material when:

[215] The proposed instruction would appear in both Schedules 14D-1 and 13E-4 if our proposal to combine the schedules is not adopted. See proposed Instruction 2 to Item 10 of Schedule TO. See also Part II.D.2. above. Thus, we propose to clarify the financial statements required in both issuer and third-party tendor offers.

Only cash is offered;

There is no financing condition; and either:

The bidder is a public reporting company under the Exchange Act; or

The offer is for all outstanding securities of the target.

Under the above circumstances, we believe that the burden of providing the bidder's financial statements may outweigh the usefulness of the information to security holders.[216] Based on the information currently available on EDGAR (via the Internet and other sources), we believe there is less need to require financial statements for bidders that are public reporting companies than for non-reporting entities.[217]

[216] If the bidder is a reporting company, the financial statements could be incorporated by reference, as currently permitted.

[217] If the bidder is offering securities, as well as cash, then financial statements are material. The registration statement form for the securities offered will specify the financial statements required. If the bidder offers securities that are exempt from registration, the financial statements specified in Schedule TO would be filed.

When the bidder is not a public reporting company, we believe financial statements should be provided when the offer is not for all outstanding shares of the target. Financial statements can be material in a partial tender offer because security holders may need to evaluate the bidder's financial condition in determining whether to tender into the offer or remain a security holder in a

company in which the bidder will hold a substantial equity interest.[218]

[218] At least one court has observed that the bidder's financial condition can be material in an offer for all outstanding securities. In Prudent Real Estate v. Johncamp Realty, 599 F. 2d 1140 (2d Cir. 1979), Judge Friendly commented that: “If the bidder is in a flourishing financial condition, the stockholder might decide to hold his shares in hope that, if the offer was only partially successful, the bidder might raise its bide after termination of the offer or infuse new capital into the enterprise.” An offer, however, by a company in poor financial condition “might cause the shareholder to accept for fear that control of the company would pass into irresponsible hands.” Id. at 1147.

We request comment on whether there are any other circumstances under which financial statements may not be material. Conversely, are there any circumstances under which we propose to exclude financial statements that the information would be material? For example, should we require financial statements of any non-reporting bidder unless the offer is for all shares and conditioned on acquiring a controlling interest in the target and the bidder intends a back-end merger? If an offer is not subject to a financing condition, could the bidder's financial statements be material even under our proposed instruction? Should the proposed instruction hinge upon whether financing for the offer is in place, as opposed to whether the offer is subject to a financing condition? If the offer is self-financed, are the bidder's financial statements needed even if there is no financing condition?

Should the criteria for determining when financial statements are required be applied differently when the bidder is a foreign company whose financial information may not be readily available? [219] To the extent that the financial statements of a foreign bidder are required and are prepared under foreign GAAP, a reconciliation to U.S. GAAP would be required unless a reconciliation is unavailable or not otherwise obtainable without unreasonable cost or expense.[220] Finally, we note that, although Item 9 does not require financial statements of bidders who are natural persons, financial information concerning such bidders may be material under the circumstances of the offer.[221] The practice has developed of including disclosure regarding the net worth of a bidder who is a natural person. We think such information is useful and therefore propose to codify this practice with an instruction to Schedule TO.

[219] Foreign private issuers are not required to file their Form 20-F electronically.

[220] As noted above in Part II.D.2.c, at a minimum, bidders should provide a narrative description of the material variations in accounting principles, practices and methods used in preparing the foreign GAAP financial statements from those accepted in the U.S.

[221] See Release No. 34-13787 (July 21, 1977) [42 FR 38348], at n. 22.

b. Content of Bidder's Financial Statements in Cash Tender Offers; Financial Statements in Going-Private Transactions

When financial statements of the bidder are material, the rules currently require three years of historical financial statements for a third-party tender offer. In contrast, only two years of financial statements of the issuer are required in an issuer tender offer or going-private transaction. We propose to harmonize these requirements by reducing the financial statements requirement for third-party tender offers to two years.[222] Currently, Instruction 1 to Item 9 of Schedule 14D-1 provides that financial statements prepared in compliance with Form 10 for a domestic bidder or Item 17 of Form 20-F for a foreign bidder will be deemed adequate for purposes of the disclosure requirement. We would eliminate this instruction and require the financial information specified in proposed Item 1010(a) and (b) of Regulation M-A, if material.

[222] See proposed Item 1010 of Regulation M-A. Of course, if the bidder is offering registered securities, the registration statement requirements will control. As noted in Part II.D.2.b above, we also propose to reduce the financial statements of acquiring companies in merger proxy statements from three to two years.

We solicit comment, however, on whether two years of financial statements are necessary to informed investor decisions. Should it matter if the bidder is offering securities that are exempt from registration rather than cash? Would one year of financial statements be adequate for third-party and issuer tender offers? Would one year of financial statements be adequate for a going-private transaction that is not subject to the more stringent registration or proxy statement requirements?

The current financial disclosure requirements in issuer tender offers and going-private transactions call for information regarding book value per share, as well as the pro forma effect of the transaction on the company's balance sheet and book value per share, as of the most recent fiscal year end and the latest interim balance sheet date.[223] In reviewing the disclosure items, we believe that it may be unnecessary to provide this data for both the latest fiscal year end and latest interim period, and propose to reduce the requirement to only the most recent balance sheet date.[224] This proposed change also would apply to third-party tender offers.

[223] See Item 14 to Schedule 13E-3 and Item 7 to Schedule 13E 4.

[224] See Item 1010 (a)(4), (b) (1) and (3) of proposed Regulation M-A. The book value per share change also would apply to merger proxy statements.

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

[225] See Rule 14d-6(e)(1)(viii) [17 CFR 240.14d-6(e)(1)(viii)]; Instruction B to Rule 13e-4(d)(1)(iv) [17 CFR 240.13e-4(d)(1)(iv)]; and Instruction 2 to Rule 13e-3(e)(3) [17 CFR 240.13e-3(e)(3)].

[226] At least one line item currently specified in the rules, “total assets less deferred research and developemnt charges and excess cost of assets acquired over book value” is not an appropriate measure under GAAP because it is inconsistent with FASB Statement 2, which prohibits capitalization of research and development costs.

[227] See proposed Item 10 to Schedule TO; proposed Item 13 to Schedule 13E-3; and proposed Item 1010 of Regulation M-A.

The rules regarding summary financial information in issuer tender offers and going-private transactions currently require ratio of earnings to fixed charges, book value per share and, if material, pro forma data. These items are not specifically covered by Rule 1-02(bb). As proposed, Schedules TO and 13E-3 would call for these additional items as well as the information specified in Rule 1-02(bb). The current rule regarding summary financial information in third-party tender offers does not require book value per share information. As proposed, Schedule TO would call for this information, if material.

We also propose to clarify the reconciliation required for a foreign bidder's summary financial information

if the financial statements are prepared on the basis of foreign GAAP.[228] A reconciliation to U.S. GAAP would be required to the same extent that a reconciliation or narrative is required for the full financial statements, as discussed above.

[228] See Rule 14d-6(e)(ix) [17 CFR 240.14d-6(e)(ix)].

Finally, we are considering whether, in light of the proposals to reduce the number of years for which financial statements are required, security holders should receive the full financial statements whenever they are required, rather than summary financial information. Should we eliminate the provisions in Rules 13e-3, 13e-4 and 14d-1 that permit the substitution of summary financial information for the full financial statements in the disclosure document sent to security holders? c. Bidder's Source of Funds

Regardless of the level of financial information security holders receive, we believe that a bidder's ability to pay for securities in an offer is a material disclosure item. The disclosure appearing in many tender offers relating to a bidder's ability to finance the offer has been meager at best, even when financial statements are provided. Therefore, we intend to clarify the information that is required in order to fully inform security holders of the bidder's ability to finance the offer. We propose to expand the “Source of Funds” item requirement in the tender offer and going-private rules [229] to require the specific source(s) of financing, any condition(s) to the financing, and the bidder's ability to finance the offer if the primary source of financing falls through.[230]

[229] See Item 4 to Schedule 14D-1; Item 6 to Schedule 13E-3; and Item 2 to Schedule 13E-4.

[230] See proposed Item 1007 of Regulation M-A.

d. Pro Forma Financial Information in Two-Tier Transactions

A “two-tier” transaction is one in which the bidder first offers to acquire shares of the target in a cash tender offer with any securities remaining outstanding acquired in a back-end merger where securities are offered as consideration. In two-tier transactions, security holders are essentially asked to make an investment decision of whether to tender for cash in the front-end tender offer (to the extent pro ration allows their shares to be accepted), or hold on to their securities to receive securities of the bidder in the back-end. We believe security holders need pro forma financial information regarding the combined entity at the first tier so they can evaluate the second tier of the transaction when deciding whether to tender.[231]

[231] See Rule 11-01(a) of Regulation S-X.

In addition to the general need for the information, disclosure of pro forma financial information would be in keeping with the general theme of free communications expressed in this release and the Securities Act Reform Release. Also, as discussed in Part II.B.1 above, many bidders currently disclose pro forma information in order to satisfy the market's demand for information on a proposed transaction and to effectively sell the transaction to the market. Thus, we propose to require pro forma and related financial information in the first tier when a second tier is contemplated.

The requirement to provide financial information would be based on the bidder's intent to engage in a back-end merger with target security holders receiving securities of the bidder. Under the proposal, bidders would be required to provide the financial information specified by Item 3(f), (g) and (h) and Item 5 of proposed Forms C or SB-3,[232] as appropriate. This information would be required to be included in the tender offer materials for the cash tender offer.[233] We believe that this information, which would be required in any Form C or Form SB-3 filed when the securities are offered to security holders in the back-end, is necessary for security holders to make an informed investment decision. Consistent with the summary information provisions discussed above,[234] the proposed instruction for two-tier transactions would permit third-party bidders to provide only the financial information specified in Item 3(f), (g) and (h) of proposed Forms C or SB-3 in the disclosure document sent to security holders so long as the Schedule TO filed with the Commission included the information specified by Item 5.

[232] Specifically, these items call for disclosure of: selected financial data; pro forma selected financial data; pro forma information; and pro forma information required by Article 11 of Regulation S-X (Secs. 210.11-01 through 210.11-03).

[233] See Instruction 5 to proposed Item 10 of Schedule TO.

[234] See Part II.E.2.b above.

The proposal is consistent with an interpretive position published in 1978 that the inclusion of certain information would not be considered an “offer to sell” under the Securities Act. In the interpretive release, the Division of Corporation Finance stated that the “gun jumping” doctrine, which is designed to prevent an issuer from conditioning the market by arousing investor interest before a registration statement has been filed, does not prevent bidders from providing material information regarding a planned back-end merger. The Division explained:

The bidder's concern is purchasing the subject company's securities for cash, not priming the market for a subsequent registered offering of securities. Regardless of the bidder's intent, Schedule 14D-1 for compelling policy reasons reflected by the Williams Act requires (information regarding any negotiations, agreement in principle, or definitive merger agreement with the subject company) in order to provide full disclosure to investors confronted with an investment decision in the context of a tender offer.[235]

[235] See Release No. 33-5927, also discussed in note 43 above. Teh position expressed in the release was limited, in the tender offer context, to disclosure required by Schedule 14D-1.

Of course, under the proposals to permit free communications in this release and the Securities Act Reform Release, disclosure of pro forma financial information at any stage would not result in “gun jumping” under the Securities Act.

We request comment on whether this could create practical difficulties for bidders by causing delays in disseminating the cash tender offer material, and if so, whether this would be offset by benefits to security holders receiving the information. Also, if commenters believe the proposed requirement is too extensive, should we require some other level of information? For example, would the pro forma information specified in proposed Item 1010(b) of Regulation M-A be adequate? [236] Alternatively, would the pro forma information required by Article 11 of Regulation S-X be a sufficient basis for an investment decision regarding the cash tender offer?

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

We also request comment on whether, even if a transaction is intended, there could be reasons why the disclosure of pro forma information could be premature or unwarranted. Conversely, are there circumstances where pro forma financial information should be permitted or required if a back-end merger is not “intended”? In addition, we invite comment on whether the requirement to provide pro forma financial information needs to be modified to minimize difficulties for bidders in hostile transactions. 3. Clarify the Requirement That a Target Report Purchases of its Own Securities After a Third-Party Tender Offer Is Commenced

Rule 13e-1 prohibits an issuer whose securities are the subject of a third-party tender offer from repurchasing any of its equity securities until information about

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

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

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

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

We also propose to rewrite the rule in plain English so that the rule is more understandable. It would call for the same information as the current rule, including the amount of securities to be purchased, identification of the sellers or market, purpose of the purchases, how the securities will be used, and the source of funds for the purchases. The revised rule would clarify that disclosure is required only when an issuer wants to repurchase its securities after a tender offer is made. The restriction on repurchases only applies during the term of the tender offer.

We invite comment on the timeliness of the information currently received under Rule 13e-1. Do security holders receive information either too early or too late to be of any use? We also solicit comment on whether the requirement to file and disseminate information during the limited time after a tender offer is made and before purchasing securities would impose an unreasonable burden on companies. How would this change affect companies with periodic stock repurchase plans? Should the rule not apply to routine purchases for employee benefit plans as to which the issuer has little or no discretion? If the issuer commences an issuer tender offer in response to the third-party tender offer, should the filing of the issuer's tender offer schedule satisfy the requirements of Rule 13e-1? Further, we request comment on the specific information that is required under the rule. Is there any information that either should or should not be required disclosure? Generally, the statement required by the rule consists of one or two pages of information.

We note that a limited number of statements are filed under the rule.[239] Given the relatively low number of filings, we question whether the rule provides any benefits to security holders and the market. Issuers may not be disclosing the required information, or they may not be triggering the reporting obligation. We invite comment on the usefulness of and the need for the information disclosed under the rule. Should we eliminate the rule entirely? If the information is beneficial, should issuers be required merely to make the filing with the Commission, and not disseminate the information to security holders?

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

4. Harmonize the Tender Offer and Proxy Rules Relating to the Delivery of a Stockholder List and Security Position Listing

We propose to revise Rule 14d-5, the rule relating to dissemination of certain tender offers by use of stockholder lists and security position listings, to more closely align it with the 1992 amendments to Rule 14a-7 (the parallel rule relating to proxy materials).[240]

[240] 17 CFR 240.14a-7.

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

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

If the free communications proposals in this release are adopted, security holders may ultimately receive final disclosure documents closer to the time they are asked to make an investment decision. As a result, it may become more important for bidders to have access to stockholder lists that include non-objecting beneficial owners as well as record holders, particularly because of the time it takes for disclosure documents to be forwarded through street name holders to beneficial owners.

We propose to revise Rule 14d-5 to incorporate a stockholder list requirement in tender offers similar to that provided by Rule 14a-7 in proxy solicitations. Under the revised rule, a company that elects to provide a bidder with a stockholder list instead of mailing the bidder's materials would need to disclose the most recent list of names, addresses and security positions of non-objecting beneficial owners (as well as record holders) it has in its possession, or subsequently obtains. The list must be in the format requested by the bidder if this can be provided without undue burden or expense. The proposed amendment would give bidders the same ability as target companies to communicate directly with the non-objecting beneficial owners of securities.

This proposal would conform the stockholder list requirements so that the list required is the same whether security holders are solicited for proxies or for tenders. This should enhance a bidder's ability to timely communicate with non-objecting security holders of the target regarding the terms of its tender offer. Bidders would continue to be required to disseminate tender offer material to record holders (providing sufficient copies for the record holders to send to beneficial owners), but they would have the option also to send the material to non-objecting beneficial owners on the list. Would bidders find this useful? Should the rule permit bidders to send tender offer material to non-objecting beneficial owners instead of to record holders of those securities, and if so, should the issuer tender offer rule be revised the same way?[242] Would sending material, including transmittal forms, to beneficial owners unduly complicate the ability to keep track of tenders and count them accurately? Would beneficial owners receive tender offer material in a more timely manner than under the current system of dissemination through record holders?

[242] See Rule 13e-4(e)(1)(ii).

5. Revise and Redesignate the Rule Prohibiting Purchases Outside an Offer

We propose to amend Exchange Act Rule 10b-13 and redesignate it as Rule 14e-5. The proposals would clarify the

rule's text and codify several interpretations and exemptions.

Rule 10b-13 prohibits a person who is making a cash tender offer or exchange offer from purchasing or arranging to purchase, directly or indirectly, the security that is the subject of the offer (or any security that is immediately convertible into or exchangeable for the subject security) otherwise than as part of the offer.[243] The rule's prohibitions apply from the time the offer is publicly announced or otherwise made known to security holders until the time the bidder is required, by the offer's terms, either to accept or reject the tendered securities. Rule 10b-13 protects investors by preventing a bidder from extending greater or different consideration to some security holders by offering to purchase their securities outside the offer, while other security holders are limited to the offer's terms.[244] The rule applies to the bidder, whether the issuer or a third party, the bidder's affiliates, and the offer's dealer-manager.[245]

[243] 17 CFR 240.10b-13.

[244] Release No. 34-8712 (October 8, 1969) (“Rule 10b-13 Adopting Release”).

[245] See e.g., Letter regarding Offers for Smith New Court PLC (July 26, 1995) (“Smith New Court Letter”).

a. Proposed Amendments Redesignating and Clarifying the Rule

The Commission originally promulgated Rule 10b-13 under the provisions of Sections 10, 13 and 14 of the Exchange Act [246] to safeguard the interests of persons who sell their securities in response to a tender offer.[247] The dangers posed by a bidder's purchases outside an offer may involve fraud, deception and manipulation. Because the rule addresses conduct during tender offers, we believe it belongs with the other rules under Regulation 14E under the Exchange Act that directly address improper activities in the context of tender offers.[248]

[246] 15 U.S.C. 78j; 15 U.S.C. 78m; 15 U.S.C. 78n.

[247] Rule 10b-13 Adopting Release.

[248] Section 14(e) of the Exchange Act confers on the Commission the authority to define and prescribe means to prevent fraudulent, deceptive, or manipulative acts or practices in connection with any tender offer. See United States v. O'Hagan, 117 S. Ct. 2199, 2217 (1997) (holding that “under Sec. 14(e), the Commission may prohibit acts, not themselves fraudulent under the common law or Sec. 10(b), if the prohibition is `reasonably designed to prevent * * * acts and practices [that] are fraudulent' ” (citing 15 U.S.C. 78n(e)).

We prepose to amend the rule delegating exemptive authority to the Director of the Division of Market Regulation, Rule 30-3, and to replace references to Rule 10b-13 with Rule 14e-5. We also propose to add a parallel provision to Rule 30-1 to delegate exemptive authority to the Director of the Division of Corporation Finance.

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

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

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

[250] The phrase “otherwise made known” means any form of communication, other than public announcement, that notifies holders of subject securities of an offer.

[251] See Part II.E.1 above.

The rule applies from the time the offer is first publicly announced or otherwise made known to holders of subject securities. Should the rule apply if the bidder advises some but not all security holders that it intends to conduct a tender offer for the subject securities? b. Persons and Securities Subject to the Rule

Scope of Persons Subject to the Rule. Rule 10b-13 applies to the person who makes the offer, which has been interpreted to cover the bidder, the bidder's affiliates, and the offer's dealer-manager.[252] Under proposed Rule 14e-5, the term “person” is replaced by “covered person” to codify this interpretation. Covered person is defined as: the offeror and its affiliates; the offeror's dealer-manager(s) and other advisors; and any person acting, directly or indirectly, in concert with them. The term “affiliate” is defined in proposed Rule 14e-5 as any person that “directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the offeror.” [253]

[252] See, e.g., Smith New Court Letter. See also In the Matter of Trinity Acquisition's Offer to Purchase the Ordinary Shares and American Depositary Shares of Willis Corroon Group plc, Release No. 34-40246 (July 22, 1998) (67 S.E.C. Docket 1320).

[253] This definition is taken substantially from Rule 12b-2 under the Exchange Act [17 CFR 240.12b-2].

Scope of Securities Subject to the Rule. Proposed Rule 14e-5 would apply only to offers for equity securities, just as Rule 10b-13 currently does. Moreover, Rule 10b-13 and proposed Rule 14e-5 prohibit purchases outside the offer of not only the target security, but also related securities. We propose several changes from Rule 10b-13 regarding the scope and treatment of related securities.

Proposed Rule 14e-5 would define “related securities” as “securities that are immediately convertible into, exchangeable for, or exercisable for subject securities.” By covering securities that are immediately “exercisable for” subject securities, we are clarifying that securities, such as options, that can be exercised to receive target securities are included in the class of securities that a covered person cannot purchase outside the offer. c. Excepted Transactions

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

announced or otherwise made known to security holders.[254]

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

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

[255] 17 CFR 240.10b-13(c).

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

[256] 17 CFR 242.100.

Does the proposal regarding plans adequately address circumstances when a bidder may need to purchase shares during an offer on behalf of a plan? Are there situations when it would be appropriate for the bidder to buy shares directly on behalf of the plan? Should the rule expressly prevent a bidder from establishing a plan around the time of an offer and then purchasing shares on behalf of that plan through an independent agent or otherwise?

Purchases during Odd-Lot Offers. We propose to add a new exception that permits purchases during an issuer odd-lot tender offer conducted in compliance with the provisions of Rule 13e-4(h)(5) under the Exchange Act.[257] Under Rule 13e-4(h)(5), an issuer tender offer is excepted from application of Rule 13e-4 if the offer is directed solely to odd-lot security holders and provides “all holders” and “best price” protections to tendering security holders. This proposal codifies a class exemption from Rule 10b-13 issued by the Commission in connection with a recent revision to Rule 13e-4(h)(5).[258]

[257] 17 CFR 240.13e-4(h)(5).

[258] Release No. 34-38068 (December 20, 1996) [61 FR 68587].

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

[259] Letter regarding Reuters Holdings PLC (August 17, 1993).

Should the exception permit riskless principal transactions by dealer-managers as well? Is it necessary to define the term “dealer-manager?” d. Solicitation of Comments on Proposed Rule 14e-5

We solicit comment on all aspects of proposed Rule 14e-5. Are the current exceptions appropriate? Aside from plan transactions and purchases during an odd-lot offer, are there other circumstances when it would be appropriate to permit the bidder to purchase subject or related securities outside the offer? For example, should the bidder be permitted to purchase shares outside the offer if a purchase contract was entered into before public announcement of the offer and the per share purchase price is no higher than the offer consideration? Should any such exception be limited to cash tender offers for all outstanding shares?

In addition, we invite commenters to address whether a rule prohibiting purchases outside of a tender offer continues to be appropriate. Should we consider implementing a rule like that in the City Code, which permits purchases outside the offer if, among other things, the bidder increases the tender offer consideration to the highest price paid for any shares so acquired? [260]

[260] City Code, Rule 6.2.

Under what circumstances would it be appropriate not to apply Rule 14e-5 to the offer's dealer-managers and advisors? Should we consider provisions like those contained in the City Code that permit market makers affiliated with the offeror's advisors to continue their market making functions when the market maker is sufficiently independent from the advisor and other protections are present? [261]

[261] City Code, Rule 38; Statement 11.

6. Safe Harbor for Forward-Looking Statements

In permitting substantially greater communications before the filing of a tender offer statement and the commencement of an offer, we recognize that bidders may be unwilling to communicate freely about an offer absent a safe harbor from liability for forward-looking communications. Currently, the safe harbor provisions in the Private Securities Litigation Reform Act of 1995 (“PSLRA”) for forward-looking statements do not apply to statements made in connection with a tender offer,[262] although they do apply to statements made in connection with mergers.[263] We solicit comment on whether we should extend the provisions of the PSLRA to forward-looking statements issued in connection with a tender offer. Just as with mergers, there are other policing mechanisms to protect against false and misleading forward-looking statements in the tender offer context.

[262] See Section 27A(b)(2)(C) of the Securities Act and Section 21E(b)(2)(C) of the Exchange Act. The safe harbor in the PSLRA also is unavailable to penny-stock companies, companies involved in “blank check” offerings, roll-up transactions or going-private transactions. See Section 27A(b)(1)(B)-(E) of the Securities Act and Section 21E(b)(1)(B)-(E) of the Exchange Act.

[263] The Commission's safe harbor rules, Securities Act Rule 175 [17 CFR 230.175] and Exchange Act Rule 3b-6 [17 CFR 240.3b-6], are available for certain forward-looking statements made in Commission filings, including those made in tender offers.

Of course, under any extension of the PSLRA safe harbor, bidders would have to identify their forward-looking statements as “forward-looking” and the statements would need to be accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ significantly from those disclosed. In addition, bidders still may be subject to liability in any proceeding brought by the Commission. In order to promote balanced disclosure, we also would extend the safe harbor to statements made by targets as well as bidders.

We invite comment on whether the statutory safe harbor for forward-looking statements is necessary or appropriate to encourage bidders and targets to communicate fully and freely with security holders regarding proposed tender offers. What types of forward-looking information do bidders typically provide, or need to provide, before

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

III. General Request for Comments

If you would like to submit written comments on the proposals, to suggest additional changes, or to submit comments on other matters that might have an impact on the proposals, we encourage you to do so. Besides the specific questions we asked in this release, we also solicit comment on the usefulness of the proposals to security holders, issuers, and the marketplace at large. We would like comments from the point of view of both bidders and targets, as well as security holders and market professionals involved in the mergers and acquisitions area. We also encourage the submission of written comments on any aspect of the initial regulatory flexibility analysis. We will consider any written comments we receive in preparing the final regulatory flexibility analysis if the proposed rules are adopted.

We believe that the proposals, if adopted, would promote efficiency, competition, and capital formation. However, we solicit comment on whether the proposals would promote efficiency, competition, and capital formation. We also request comment on whether the proposals, if adopted, would have an adverse effect on competition or would impose a burden on competition that is neither necessary nor appropriate in furthering the purposes of the Securities Act and the Exchange Act. We will consider these comments in complying with our responsibilities under Section 23(a)(2) of the Exchange Act.[264]

[264] 15 U.S.C. 78w(a)(2).

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

IV. Cost-Benefit Analysis

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

A. Communications

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

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

We believe this increased flow of information would help security holders make more informed tender or voting decisions, despite the possibility that some deal participants might attempt to “condition the market” with false, misleading or confusing information. We believe security holders would benefit overall because they would receive issuers' registration, tender offer or proxy statements before having to tender or vote their shares. Therefore, security holders would have the opportunity to consider the statements in the disclosure document together with any other information disseminated by parties to business combination transactions. In addition, such information would be subject to high liability standards. Issuer communications made before filing with the Commission and during the waiting period would be subject to the anti-fraud provisions of Rule 10b-5 under the Exchange Act, as well as to the anti-fraud provisions of Rule 14a-9 and Section 14(e) if a transaction involves the proxy or tender offer rules, respectively. If the Securities Act is applicable, these communications also would be subject to the provisions of Section 12(a)(2) under the Securities Act. We have requested comment on whether these communications also should be deemed part of the registration statement and therefore subject to Section 11 of the Securities Act. We believe these standards of liability are sufficiently high to encourage parties to provide investors with fair and accurate information about transactions.

Does the benefit of greater freedom in communications outweigh the cost to security holders of obtaining and analyzing the additional information to determine its currency and accuracy and the cost to companies of filing such information? We do not believe that permitting offerors to communicate with security holders before filing their registration statements and during the waiting period would present a significant burden to investors or offerors. We request comment on the type and magnitude of burden this filing requirement would represent to deal participants.

In addition, we believe the proposed communication rules would reduce the current regulatory uncertainty for companies. As discussed above, the provisions of the Securities Act and Exchange Act, including the Williams Act, restrict communications before companies file their registration, proxy or tender offer statements. Companies have told us that they are uncertain whether and in what circumstances these restrictions conflict with their duties to make full and fair disclosure under Rule 10b-5 of the Exchange Act. Consequently, many companies are

unsure how to balance their duty to disclose with their duty to be silent before the filing of a disclosure document. By relaxing restrictions on communications, the proposed revisions would minimize this regulatory tension. This clarification would benefit offerors and security holders alike.

One potential cost of the proposals is that some security holders may make investment decisions based on information received before the filing of a disclosure statement.[266] To the extent that such activity could occur under the proposals, it also could occur today. The current rules limit companies from communicating with investors before they file their statements. By allowing companies to publicly announce transactions before the filing of a mandated disclosure document and requiring companies to file their written communications on first use, we believe investors would be more likely to make informed investment decisions than under the current rules. We request comment on the accuracy of this view.

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

To further protect investors, we propose new Rule 14e-8 that would make it clear that it is unlawful to announce a tender offer without the intention of beginning and completing it with the intention of manipulating the market price of the bidder or target. It also would clarify that it is unlawful to announce a tender offer without the reasonable belief that the bidder has the means to purchase the securities in the offer. We believe such actions should be unlawful because it could cause investors to base their investment decisions on false or misleading information. We believe the proposed rule would help stem these activities, but request your comments on this viewpoint.

In addition to permitting increased communications between companies and investors, the proposed revisions would reduce the differential in information available to investors by requiring companies to file their written communications upon first use. This proposal would help assure that communications are immediately available to many more investors than currently is the case. The proposals also would increase the uniformity and timeliness of information received by investors.

We also propose to permit bidders to begin their exchange offers as soon as they file their registration statements; that is, they would no longer have to wait for the registration statements' effectiveness. We believe the ability to begin an exchange offer on filing would encourage issuers to file quickly with the Commission, thereby creating incentives for companies to publicly disseminate information rather than selectively communicate with only a few security holders.

We recognize that our proposals to liberalize oral communications, which would not need to be filed, may encourage companies to use oral communications rather than written communications, which would have to be filed. On balance, however, we believe the proposals will reduce the selective disclosure of information to the market. We request comment on whether the benefits to security holders of greater access to written information would outweigh any potential costs from deregulating oral communications.

In proxy solicitations, whether or not they involve a business combination, we propose to permit companies to more freely communicate with security holders. Under the proposed rules, companies would be able to communicate freely with security holders without first furnishing a written proxy statement.[267] The proposal would allow security holders to receive more information on upcoming votes than they do today.

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

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

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

B. Filings

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

The proposals would reduce the burden of complying with the merger proxy requirements by,[269] among other things:

[269] See Item 14 of Schedule 14A.

Clarifying the disclosure requirements;

Clarifying that financial statements are required for an acquiror in a cash transaction only if an acquiror has not demonstrated the financial ability to satisfy the terms of the offer or the information is otherwise material;

Eliminating the requirement for financial statements of the target in a cash merger when the acquiror's security holders are not voting on the transaction;

Reducing the financial statement requirements for non-reporting target companies (when security holders of the acquiring company are not voting on the transaction) to be only those financial statements the target previously furnished to its security holders (with a minimum of U.S. GAAP financial statements provided for the latest fiscal year) instead of financial statements for three years; [270] and

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

Reducing the financial statements needed for acquiring companies in cash mergers and third-party cash tender offers from three years to two years.

In addition, we propose one offsetting cost. We would require that a bidder in a two-tier transaction, where security holders are offered cash in a tender offer and securities in a back-end merger, provide security holders with pro forma financial statements and other related information for the combined entity at the time of the cash tender offer. Rather than being an additional requirement, this proposal would accelerate the time at which bidders are required to disclose the information.

For the purposes of the Paperwork Reduction Act, Table 2 in Section VI summarizes our preliminary estimates of the internal burden hours that parties would spend to comply with the proposals. These estimates include the

burden hours incurred by companies from filing pre-filing communications. We base these estimates on current burden hour estimates and the staff's experience with these filings. The estimates in the table indicate that parties would expend approximately 234,759 internal burden hours/year complying with the proposals. If we assume that 70% of these burden hours would be expended by persons that cost the affected parties $85/hour and 30% of these burden hours would be expended by persons that cost $10/hour, then the proposals would cost approximately $14,691,250/year in internal staff time. For the purposes of the Paperwork Reduction Act, we also estimate that parties would spend approximately $122,929,990/year on outside professional help to comply with the proposals. Thus we estimate that affected parties would spend approximately $137,621,240/year to comply with the proposals. Applying the same cost estimates to the burden imposed by the current rules, we estimate that companies and affected parties spend approximately $163,268,490/year.[271] Note that these estimates do not attempt to quantify the proposals' intangible benefits, such as the benefits to issuers and investors of enhanced communications and possible improvements in price discovery, nor its intangible costs, such as the cost to security holders of identifying misleading or incomplete pre-filing information. We request comment on the reasonableness of our estimates and our analysis of other costs and benefits.

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

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

C. Tender Offers

We propose to reduce a regulatory bias against using securities as consideration in tender offers by allowing third-party bidders to begin an exchange offer upon filing and dissemination of their Form C or SB-3 registration statement (like bidders offering cash). This proposal would give bidders more flexibility in determining whether to offer cash or securities as consideration in transactions. Under the proposals, a bidder could not purchase tendered securities until its registration statement was declared effective and the mandatory 20-business day tender offer period had elapsed. Security holders could withdraw their securities at any time until purchased by the bidder. This proposal would likely shorten the period of time to complete stock tender offers relative to today, putting them on a more equal footing with cash tender offers. Of course, it may also increase the risk that bidders offering securities would have to disseminate supplements to the tender offer materials after their offers begin due to changes in material information. If so, they would have to provide sufficient time for security holders to receive the supplements and reconsider their investment decisions. This risk, however, would not be unique to exchange offers; issuers run the same risk today with cash offers. We solicit comment on this analysis and on any other costs and benefits that may arise from bidders commencing their exchange offers earlier than today.

We also propose to permit bidders to purchase (at the stated offer price) securities from holders who did not tender their shares during the offer in a “subsequent offering period.” We believe the proposal would minimize the delay that security holders encounter in liquidating their investments in a target's securities when a bidder is successful in purchasing a significant or controlling interest in the target. Under the proposal, however, security holders might wait to tender their shares in the subsequent offering period. We solicit comment on whether this would be likely to occur and whether it would outweigh the benefits of the proposal. We note that bidders would not be under any obligation to offer to purchase securities in a subsequent offering period.

We propose to eliminate the requirement for financial statements of the target in cash mergers when acquirors' security holders are not voting on the transaction, and require two, rather than three years of financial statements when they are material in third-party cash tender offers. If the security holders of the acquiror are not making a voting decision on the transaction, they do not need three years of historical financial statements. The reduction from three to two years of historical financial statements would thus lower acquirors' costs of complying with our rules, while continuing to protect security holders.

Finally, we propose to allow bidders greater access to security holders in tender offers by enabling them to contact non-objecting beneficial owners if the target company maintains a list of these persons. The proposed amendment would give bidders the same ability as target companies to communicate directly with the beneficial owners of securities similar to that provided under the proxy rules. We believe this proposal would benefit bidders and security holders because communications would be more efficient than today. We request your comments on the benefits and costs of this proposal.

For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996 (“SBREFA”),[272] a rule is “major” if it has resulted, or is likely to result in:

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

An annual effect on the economy of $100 million or more;

A major increase in costs or prices for consumers or individual industries; or

Significant adverse effects on competition, investment or innovation.

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

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

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

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

V. Initial Regulatory Flexibility Analysis

A. Reasons for Proposed Action

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

B. Objectives and Legal Basis

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

C. Small Entities Subject to the Rules

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

[275] See 17 CFR 230.157 and 17 CFR 240.0-10.

[276] See 17 CFR 240.0-10

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

D. Reporting, Recordkeeping, and Other Compliance Requirements

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

E. Significant Alternatives

The Regulatory Flexibility Act directs the Commission to consider significant alternatives that would accomplish the stated objectives, while minimizing any significant adverse impact on small issuers. In connection with the proposed rules, schedules, and amendments, we considered several alternatives, including:

Establishing different compliance and reporting requirements or timetables that take into account the resources of small businesses;

Clarifying, consolidating or simplifying compliance and reporting requirements under the rule for small businesses;

Using performance rather than design standards; and

Exempting small businesses from all or part of the requirements.

For the most part, the proposals are deregulatory in nature. They significantly expand the ability of businesses to structure and time their business combination transactions and communicate with security holders, while maintaining investor protections. Although we considered whether it would be appropriate to exclude smaller entities, we determined that the proposals should apply to all businesses regardless of their size; that is, we should not limit the rules and the corresponding benefits to large, seasoned issuers.

As a preliminary matter, we believe that there are no less restrictive alternatives to the proposed rules, schedules, and amendments that would serve the purposes of the proxy, tender offer, going-private, and registration requirements of the federal securities laws. We were unable to identify less burdensome alternatives to our proposals that would be consistent with our statutory mandate to require issuers to disclose material information fully and fairly to investors. We believe the proposed rules, schedules, and amendments should apply equally to all entities required to disclose information to enhance the protection of all investors. For these reasons, we also believe there would be no benefit in providing separate requirements for small issuers based on the use of performance rather than design standards.

F. Overlapping or Conflicting Federal Rules

We do not believe any current federal rules duplicate, overlap or conflict with the rules, schedules, and amendments that we propose to amend.

We request your written comments on any aspect of this Initial Regulatory Flexibility Analysis. We particularly seek comment on:

The number of small entities that would be affected by the proposed rules, schedules, and amendments;

The expected impact of the proposals as discussed above; and

How to quantify the number of small entities that would be affected by, and how to quantify the impact of, the proposed rules, schedules, and amendments.

We ask commenters to describe the nature of any impact and provide empirical data supporting the extent of the impact.

VI. Paperwork Reduction Act

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

meaning of the Paperwork Reduction Act of 1995.[277] We have submitted proposed revisions to those rules, schedules, and amendments to the Office of Management and Budget (“OMB”) for review in accordance with 44 U.S.C. Sec. 3507(d) and 5 CFR 1320.11. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. Table 1 below includes the titles for the affected collections of information under the Exchange Act, current OMB control numbers, if applicable, a summary of the collection of information, and a description of the likely respondents to each collection of information.[278]

[277] 44 U.S.C. Sec. 3501 et seq.

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

Table 1: Collections of Information Under the Securities Act and Exchange Act

Summary of the collection of information

                 Title                          OMB control No.           and description of likely respondents
----------------------------------------------------------------------------------------------------------------
Schedule 14A..........................  3235-0059.....................  When a shareholder vote is required,
                                                                         persons soliciting proxies with respect
                                                                         to securities registered under Section
                                                                         12 of the Exchange Act must furnish a
                                                                         proxy statement containing the
                                                                         information specified by Schedule 14A.
                                                                         The proxy statement is intended to
                                                                         provide security holders with the
                                                                         information necessary to enable them to
                                                                         vote in an informed manner on matters
                                                                         intended to be acted upon at security
                                                                         holders' meetings, whether the
                                                                         traditional annual meeting or a special
                                                                         meeting.
Schedule 14C..........................  3235-0057.....................  Companies with securities registered
                                                                         under Section 12 of the Exchange Act
                                                                         must send an information statement to
                                                                         every holder of the registered security
                                                                         that is entitled to vote on any matter
                                                                         for which a security holder vote is
                                                                         held, but proxies are not solicited.
                                                                         Schedule 14C sets forth the disclosure
                                                                         requirements for these information
                                                                         statements.
Schedule 13E-3........................  3235-0007.....................  Companies or their affiliates that
                                                                         engage in specified transactions that
                                                                         cause a class of the company's equity
                                                                         securities registered under the
                                                                         Exchange Act to be: 1) held by fewer
                                                                         than 300 record holders, or 2) de-
                                                                         listed from a securities exchange or
                                                                         inter-dealer quotation system must file
                                                                         a Schedule 13E-3. Filers must disclose
                                                                         detailed information about
                                                                         transactions, including whether they
                                                                         believe the transactions are fair.
Schedule 14D-9........................  3235-0102.....................  Interested parties (including issuers
                                                                         and beneficial owners of securities)
                                                                         that make a solicitation or
                                                                         recommendation to security holders
                                                                         regarding a tender offer subject to
                                                                         Regulation 14D must file a Schedule 14D-
                                                                         9.
Schedule 13E-4........................  3235-0203.....................  Reporting companies that make tender
                                                                         offers for their own securities must
                                                                         file a Schedule 13E-4.
Schedule 14D-1........................  3235-0102.....................  Any person, other than the issuer,
                                                                         making a tender offer for equity
                                                                         securities registered under Section 12
                                                                         of the Exchange Act, which offer, if
                                                                         consummated, would cause that person to
                                                                         own over 5 percent of that class of the
                                                                         securities, must at the time of the
                                                                         offer file a Schedule 14D-1 and send it
                                                                         to certain other parties, such as the
                                                                         issuer and any competing bidders.
Schedule TO...........................  t.b.d.........................  Any party that the SEC would require
                                                                         today to file a Schedule 13E-4 or
                                                                         Schedule 14D-1.
----------------------------------------------------------------------------------------------------------------

The proposed new rules, schedules, and amendments would update and simplify the rules and regulations for business combinations. The information is needed so that security holders may make informed tender and voting decisions in tender offers, mergers, acquisitions, and other extraordinary transactions. We propose to enhance communications between public companies and investors before companies file registration statements involving takeover transactions, proxy statements, and tender offer statements. We also propose to put cash and stock tender offers on a more equal regulatory footing; integrate the forms and disclosure requirements in issuer tender offers, third-party tender offers and going-private transactions; and consolidate the disclosure requirements in one location. We propose to allow security holders to tender their shares during a limited period after the completion of a tender offer; more closely align merger and tender offer requirements; and update the tender offer rules to clarify certain requirements and reduce compliance burdens where consistent with investor protection.

The affected schedules and regulations set forth the disclosures that the Commission would require offerors to make about business combination transactions and about themselves to the public. The requirements of the above schedules would largely be the same as today, except for a few changes. Specifically, under the proposals, Schedules 14A, 14C, 13E-3, 14D-9, and TO would require a short “plain English” summary term sheet, not currently required, in all cash mergers, cash tender offers, and going-private transactions.[279] The proposed rules would reduce the number of years of financial statements required by Schedules 14A and 14C for acquiring companies in cash mergers and cash tender offers from three years to two years. Under the proposals, Schedules 14A and 14C would no longer require the financial statements of the target in a cash merger when the acquiror's security holders are not voting on the transaction.[280] Proposed Schedule TO would replace current Schedules 13E-4 and 14D-1, harmonizing and clarifying their requirements. Under the proposals, Schedule TO would require a bidder in a two-tier transaction, where security holders are offered cash in a tender offer and securities in a back-end merger, provide security holders with pro forma financial statements and other related information for the combined entity at the time of the cash tender offer. The proposals would allow issuers to file

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

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

[280] For transactions offering stock as consideration (i.e., Form C and SB-3 transactions), the proposals would reduce the financial statement requirements for non-reporting target companies (when security holders of the acquiring company are not voting on the transaction) to be only those financial statements the target previously furnished to its security holders (with a minimum of U.S. GAAP financial statements provided for the latest fiscal year) instead of financial statements for three years.

The information collection requirements imposed by the schedules and regulations are mandatory to the extent that companies are publicly owned and undertake business combination transactions. There are no mandatory retention periods for the information disclosed. The information gathered is made publicly available,[281] unless granted confidential treatment. However, the release proposes to eliminate the confidential treatment of preliminary proxy statements.

As discussed in detail in Section IV, the proposals, if adopted, would reduce the burden of complying with the business combination disclosure and transaction requirements for many issuers. Public companies would expend approximately 988,986 burden hours/year to comply with the proposed rules, schedules, and amendments, cumulatively saving at least 191,592 burden hours/year. Table 1 of Section IV shows the estimated burden hours for the proposed forms and the approximate number of filings of each schedule under the proposed rules, schedules, and amendments.

The proposals would integrate and streamline the disclosure requirements for business combinations, thereby reducing issuers' compliance costs. For the purposes of the Paperwork Reduction Act, Table 2 below summarizes our preliminary estimates of the burden hours that parties would spend to comply with the proposals. These estimates include the burden hours incurred by companies from filing pre-filing communications. We base these estimates on current burden hour estimates and the staff's experience with these filings. The estimates in the table indicate that parties would expend approximately 234,759 burden hours/year to comply with the proposals. In addition, as discussed in more detail below, we estimate that parties would spend approximately $122,929,990/year on outside professional help to comply with the proposals. Note that these estimates do not attempt to quantify the proposals' intangible benefits, such as the benefits to issuers and investors of enhanced communications and possible improvements in price discovery. We discuss our preliminary estimates in greater detail below. We request comment on the reasonableness of our estimates.

Table 2: Burden Hour Estimates

                                                           Estimated burden hours/filing   Estimated filings/year \282\       Estimated burden hours
                                                         -----------------------------------------------------------------------------------------------
                        Schedule                                                                                              Before           After
                                                              Before           After          Before           After      Revisions  (E)  Revisions  (F)
                                                          Revisions  (A)  Revisions  (B)  Revisions  (C)  Revisions  (D)       = A*C           = B*D
--------------------------------------------------------------------------------------------------------------------------------------------------------
14A.....................................................           87.00           13.12           9,892          13,255         860,604         173,906
14C.....................................................           87.00           13.12             253             339          22,011           4,448
13E-3...................................................          139.25           34.31              96              96          13,368           3,294
14D-9...................................................          354.25           64.43             258             353          91,397          22,744
13E-4...................................................          232.00            0.00             139               0          32,248               0
14D-1...................................................          354.25            0.00             257               0          91,042               0
TO......................................................            0.00           43.50               0             705               0          30,668
                                                                                                                         -------------------------------
      Total.............................................  ..............  ..............  ..............  ..............       1,110,670         235,060
--------------------------------------------------------------------------------------------------------------------------------------------------------

[282] The estimated filings/year are based on the number of filings in fiscal year 1998.

We anticipate the proposals would reduce the number of hours required to file a full Schedule 14A from 87 hours today to 70 hours under the proposals.[283] Of the 70 hours, we estimate that 25% (17.5 internal burden hours) would be provided by corporate staff, and 75% (52.5 hours) by external professional help. Based on filings in fiscal year 1998, we anticipate that companies and other parties would file approximately 9,892 full Schedule 14As/year. Under the proposed rules, companies and other parties also would be required to file under cover of Schedule 14A any pre-filing written communications (in addition to the required proxy statement) concerning business combinations for cash.[284] The rule would require filers to attach their written communications and would have few specific information requirements. For fiscal year 1998, we estimate 34% of the 9,892 full Schedule 14As filed involved cash rather than securities.[285] We estimate that parties, on average, would file one written communication (in addition to the required proxy statement) for each cash transaction. We estimate that a firm's corporate staff would expend approximately 15 burden minutes (0.25 internal burden hours) to file a written communication under the proposed rules.[286] Thus, we estimate parties would file 9,892 full Schedule 14As/year (expending 17.5 internal burden hours/ filing) and 3,363 written communications/year (expending 0.25 internal burden hours/filing). On average, filers would require approximately 13.12 internal burden hours to file 13,255 full Schedule 14As and written communications. In addition, we anticipate filers would spend, at an estimated $175/hour, approximately $9,188/filing in professional labor costs to file a full Schedule 14A.[287] We request your

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

[281] If, however, a bank finances all or part of a tender offer, we permit the offeror to conceal the bank's name if the offeror files a request and the bank's name with the Secretary of the Commission. See Item 4 of Schedule 14D-1.

[283] The numbers in Column B of Table 2 differ significantly from those in Column A of Table 2 for two reasons. First, the estimated burden hours in Column A include the estimated corporate burden hours and outside labor hours that parties would require to file each disclosure document. In Column B, we estimate only the corporate burden hours needed to file each disclosure document (we estimate separately the expense, in dollar terms, of outside labor). Second, the estimates in Column B include the estimated burden hours that bidders would require to file pre-filing communications. Because parties would require less time to file communications than full Schedule 14As, the average estimated burden hours in Column B are lower than in Column A.

[284] Under the proposed rules, bidders would file under Rule 425 any pre-filing communications in transactions where securities are offered as consideration. Because we are proposing Rule 425 in the Securities Act Reform Release, we estimate the burden hours for filings of pre-filing communications for those transactions in that release.

[285] According to Securities Data Corporation, in 1996 security holders received only cash in 34% of merger transactions.

[286] We base this estimate on the burden imposed by a similar filing requirement under Item 901(c) of Regulation S-K for roll-up transactions.

[287] We estimate filers would spend $9,188/filing in professional labor costs. We base this estimate on 52.50 hours of professional labor/full Schedule 14A filing * $175/hour. In aggregate, we estimate that filers would spend $90,887,696/year to file 9,892 full Schedule 14As/year.

We anticipate the proposals would reduce the number of hours required to file a full Schedule 14C from 87 hours today to 70 hours under the proposals. Of the 70 hours, we estimate that 25% (17.5 internal burden hours) would be provided by corporate staff, and 75% (52.5 hours) by external professional help. Based on filings in fiscal year 1998, we anticipate that companies and other parties would file approximately 253 full Schedule 14Cs/year. Under the proposed rules, companies and other parties also would be required to file under cover of Schedule 14C any pre-filing written communications (in addition to the required proxy statement) concerning business combinations for cash.288 The rule would require filers to attach their written communications and would have few specific information requirements. For fiscal year 1998, we estimate 34% of the 253 full Schedule 14Cs filed involved cash rather than securities.289 We estimate that parties, on average, would file one written communication (in addition to the required information statement) for each cash transaction. We estimate that a firm's corporate staff would expend approximately 15 burden minutes (0.25 internal burden hours) to file a written communication under the proposed rules. Thus, we estimate parties would file 253 full Schedule 14Cs/year (expending 52.50 burden hours/filing) and 86 written communications/year (expending 0.25 internal burden hours/filing). On average, filers would require approximately 13.12 internal burden hours to file 339 full Schedule 14Cs and written communications. In addition, we anticipate filers would spend, at an estimated $175/hour, approximately $9,188/ filing in professional labor costs to file a full Schedule 14C.290 We request your comments and supporting empirical information on the reasonableness of these estimates.

[288] Under the proposed rules, bidders would file under Rule 425 any pre-filing communications in transactions where securities are offered as consideration. Because we are proposing Rule 425 in the Securities Act Reform Release, we estimate the burden hours of filings of pre-filing communications for those transactions in that release.

[289] According to Securities Data corporation, in 1996 security holders received only cashe in 34% of merger transactions.

[290] We estimate filers would spend $9,188/filing in professional labor costs. We base this estimate on 52.50 hours of professional labor/full Schedule 14C filing * $175/hour. In aggregate, we estimate that filers would spend $2,324,564/year to file 253 full Schedule 14Cs/year.

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

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

The proposals would clarify and make several technical changes to Schedule 14D-9. We anticipate a savings of two hours, from 354.25 hours/filing to 352.25 hours/filing, to file a full Schedule 14D-9 under the proposals. Of the 352.25 hours, we estimate that 25% (88.06 internal burden hours) would be provided by corporate staff, and 75% (264.19 hours) by external professional help. Based on filings in fiscal year 1998, we anticipate that companies and other parties would file approximately 258 full Schedule 14D-9s/year. Under the proposed rules, companies and other parties also would be required to file under cover of Schedule 14D-9 any pre-filing written communications (in addition to the required proxy statement) concerning business combinations for cash.292 The rule would require filers to attach their written communications and would have few specific information requirements. For fiscal year 1998, we estimate 37% of the 258 full Schedule 14D-9s filed involved cash rather than securities.293 We estimate that parties, on average, would file one written communication (in addition to the required information statement) for each cash transaction. We estimate that a firm's corporate staff would expend approximately 15 burden minutes (0.25 internal burden hours) to file a written communication under the proposed rules. Thus, we estimate parties would file 258 full Schedule 14D-9s/year (expending 88.06 internal burden hours/filing) and 95 written communications/year (expending 0.25 internal burden hours/ filing). On average, filers would require approximately 64.43 internal burden hours to file 353 full Schedule 14D-9s and written communications. In addition, we anticipate filers would spend, at an estimated $175/hour, approximately $46,233/filing in professional labor costs to file a full Schedule 14D-9.294 We request your comments and supporting empirical information on the reasonableness of these estimates.

[292] Under the proposed rules, bidders would file under Rule 425 any pre-filing communications in transactions where securities are offered as consideration. Because we are proposing Rule 425 in the Securities Act Reform Release, we estimate the burden hours of filings of pre-filing communications for those transactions in that release.

[293] According to Securities Data corporation and Mergerstat, in 1996 security holders received only cash in 37% of merger and tender offer transactions.

[294] We estimate filers would spend $46,233/filing in professional labor costs. We base this esimate on 264.19 hours of professional labor/full Schedule 14D-9 filing * $175/hour. In aggregate, we estimate that filers would spend $11,928,114/year to file 258 full Schjedule 14D-9s/year.

The proposals also would replace Schedules 13E-4 and 14D-1 with a new tender offer schedule, Schedule TO. Schedule TO would harmonize and clarify the requirements in current Schedules 13E-4 and 14D-1. Based on the number of Schedule 13E-4 and Schedule 14D-1s filed in fiscal year 1998, and the number of hours required to complete them, we estimate that bidders would require approximately 309 hours to file a full Schedule TO under the proposed rules.295 Of the 309 hours, we estimate that 25% (77.25 internal burden hours) would be provided by corporate staff, and 75% (231.75 hours) by external professional help. Based on filings in fiscal year 1998, we anticipate that companies and other parties would file approximately 396 full Schedule TOs/year. Under the proposed rules, companies and other parties also would be required to file under Schedule TO written communications (in addition to the required tender offer statement) concerning business combinations for

cash.296 The rule would require filers to attach their written communications and would have few specific information requirements. We estimate that parties, on average, would file one written communication (in addition to the required information statement) for each cash transaction. We estimate that a firm's corporate staff would expend approximately 15 burden minutes (0.25 internal burden hours) to file a written communication under the proposed rules. Based on data from fiscal year 1998, we estimate parties would file 396 full Schedule TOs/year (expending 77.25 internal burden hours/filing) and 309 written communications/year (expending 0.25 internal burden hours/filing).297 On average, filers would require approximately 43.50 internal burden hours to file 705 full Schedule TOs and written communications. In addition, we anticipate filers would spend, at an estimated $175/hour, approximately $40,556/filing in professional labor costs to file a full Schedule TO.298 We request your comments and supporting empirical information on the reasonableness of these estimates.

[295] Offerors currently require 232 hours to complete Schedule 13E-4, and 354.25 hours to complete Schedule 14D-1. In fiscal year 1998, offerors registered 139 business combinations on Schedule 13E-4 and 257 business combinations on Schedule 14D-1. We estimate the number of burden hours that offerors would require to file a full Schedule TO would be [(139 Schedule TO filings that previously would have been filed on Schedule 13E-4 * 232 hours/Schedule TO filing that previously would have been filed on Schedule 13E-4) + (257 Schedule TO filings that previously would have been filed on Schedule 14D-1 * 354.25 hours/Scheduel TO filing that previously would have been filed on Schedule 14D-1)—2 burden hours from simplification]/396 filings on Schedule TO=309 hours/filing on Schedule TO.

[296] Under the proposed rules, bidders would file under Rule 425 any pre-filing communications in transactions where securities are offered as consideration. Because we are proposing Rule 425 in the Securities Act Reform Release, we estimate the burden hours of filings of pre-filing communications for those transactions in that release.

[297] According to Mergerstat, in 1996 security holders received only cash in 78% of tender offer transactions.

[298] We estimate filers would spend $40,556/filing in professional labor costs. We base this estimate on 231.75 hours of professional labor/full Schedule TO filing * $175/hour. In aggregate, we estimate that filers would spend $16,060,176/year to file 396 full Schedule TOs/year.

In accordance with 44 U.S.C. Sec. 3506c(2)(B), we solicit comment on the following:

Whether the proposed changes in each collection of information are necessary for the proper performance of the function of the agency;

The accuracy of our estimate of the burden of the proposed changes to each collection of information;

The quality, utility, and clarity of the information to be collected; and

Whether there are ways to minimize the burden of any of the collections of information on those who are required to respond, including through the use of automated collection techniques or other forms of information technology.

Anyone desiring to submit comments on any or all of the collection of information requirements should direct them to the Office of Management and Budget, Attention: Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, D.C. 20503, and should also send a copy of their comments to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, with reference to File No. S7-28-98. The Office of Management and Budget is required to make a decision concerning the collection of information between 30 and 60 days after publication, so a comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication.

VII. Statutory Basis and Text of Proposed Amendments

The proposed rules, rule amendments, schedules, and schedule amendments in this release are being proposed under Sections 2(3), 5, 7, 8, 10, 12, 19 and 28, of the Securities Act of 1933, as amended, and Sections 3(b), 4(e), 10(b), 13, 14, 18, 23(a), 24 and 36 of the Securities Act of 1934, as amended.

List of Subjects

17 CFR Part 200

Administrative practice and procedure, Authority delegation.

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

Reporting and recordkeeping requirements, Securities.

Text of Proposed Amendments

For the reasons set out in the preamble, we propose to amend Title 17, Chapter II of the Code of Federal Regulations as follows:

PART 200—ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND

REQUESTS

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

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

2. By adding paragraph (e)(16) to Sec. 200.30-1, to read as follows:

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

---

(e) * * *

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

Sec. 200.30-3 [Amended]

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

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

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

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

5. By revising paragraph (a)(2) of Sec. 229.10 to read as follows:

Sec. 229.10 General.

(a) Application of Regulation S-K. * * *

(2) Registration statements under section 12 (subpart C of part 249 of this chapter), annual or other reports under sections 13 and 15(d) (subparts D and E of part 249 of this chapter), going-private transactions under section 13 (part 240 of this chapter), tender offer statements under sections 13 and 14 (part 240 of this chapter), annual reports to security holders and proxy and information statements under section 14 (part 240 of this chapter), and any other documents required to be filed under the Exchange Act, to the extent provided in the forms and rules under that Act. * * * * *

6. By adding an undesignated center heading and Secs. 229.1000 through 229.1016 to read as follows:

Mergers and Acquisitions (M-A)

Sec.

229.1000 (Item 1000) Definitions. 229.1001 (Item 1001) Summary term sheet. 229.1002 (Item 1002) Subject company information. 229.1003 (Item 1003) Identity and background of filing person.

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

Mergers and Acquisitions (M-A)

Sec. 229.1000 (Item 1000) Definitions.

The following definitions apply to the terms used in Regulation M-A (Secs. 229.1000-229.1016), unless specified otherwise:

(a) Associate has the same meaning as in Sec. 240.12b-2 of this chapter;

(b) Instruction C means General Instruction C to Schedule 13E-3 (Sec. 240.13e-100 of this chapter) and General Instruction C to Schedule TO (Sec. 240.14d-100 of this chapter);

(c) Issuer tender offer has the same meaning as in Sec. 240.13e-4(a)(2) of this chapter;

(d) Offeror means any person on whose behalf a tender offer is made;

(e) Rule 13e-3 transaction has the same meaning as in Sec. 240.13e-3(a)(3) of this chapter;

(f) Subject company means the company or entity whose securities are sought to be acquired in the transaction (e.g., the target), or that is otherwise the subject of the transaction;

(g) Subject securities means the securities or class of securities that are sought to be acquired in the transaction or that are otherwise the subject of the transaction; and

(h) Third-party tender offer means a tender offer that is not an issuer tender offer.

Sec. 229.1001 (Item 1001) Summary term sheet.

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

Instructions to Item 1001

1. The summary term sheet must not recite all information contained in the disclosure document that will be provided to security holders. The summary term sheet is intended to serve as an overview of all material matters that are presented in the accompanying documents provided to security holders.

2. The summary term sheet must begin on the first or second page of the disclosure document provided to security holders.

3. Refer to Rule 421(d) of Regulation C of the Securities Act (Sec. 230.421 of this chapter) for a description of plain English disclosure.

Sec. 229.1002 (Item 1002) Subject company information.

(a) Name and address. State the name of the subject company (or the issuer in the case of an issuer tender offer), and the address and telephone number of its principal executive offices.

(b) Securities. State the exact title and number of shares outstanding of the subject class of equity securities as of the most recent practicable date (which may be based upon information in the most recently available filing with the Commission by the subject company unless the filing person has more current information).

(c) Trading market and price. Identify the principal market in which the subject securities are traded and state the high and low sales prices for the subject securities in the principal market (or, if there is no principal market, the range of high and low bid quotations and the source of the quotations) for each quarter during the past two years. If there is no established trading market for the securities (except for limited or sporadic quotations), so state.

(d) Dividends. State the frequency and amount of any dividends paid during the past two years with respect to the subject securities and briefly describe any restriction on the issuer's current or future ability to pay dividends. If the filing person is an affiliate of the subject company, furnish this information to the extent known after making reasonable inquiry.

(e) Prior public offerings. If the filing person has made an underwritten public offering of the subject securities for cash during the past three years that was registered under the Securities Act of 1933 or exempt from registration under Regulation A (Sec. 230.251 through Sec. 230.263 of this chapter), state the date of the offering, the amount of securities offered, the offering price per share (adjusted for stock splits, stock dividends, etc. as appropriate) and the aggregate proceeds received by the filing person.

(f) Prior stock purchases. If the filing person purchased any subject securities during the past two years, state the amount of the securities purchased, the range of prices paid and the average purchase price for each quarter during that period. Affiliates need not give information for purchases made before becoming an affiliate.

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

(a) Name and address. State the name, business address and business telephone number of each filing person. Also state the name and address of each person specified in Instruction C to the schedule (except for Schedule 14D-9 (Sec. 240.14d-101 of this chapter)). If the filing person is an affiliate of the subject company, state the nature of the affiliation. If the filing person is the subject company, so state.

(b) Business and background of entities. If any filing person (other than the subject company) or any person specified in Instruction C to the applicable schedule is not a natural person, state the person's principal business, state or other place of organization, and the information required by paragraphs (c)(3) and (c)(4) of this section for each person.

(c) Business and background of natural persons. If any filing person or any person specified in Instruction C to the schedule is a natural person, provide the following information for each person:

(1) Current principal occupation or employment and the name, principal business and address of any corporation or other organization in which the employment or occupation is conducted;

(2) Material occupations, positions, offices or employment during the past five years, giving the starting and ending dates of each and the name, principal business and address of any corporation or other organization in which the occupation, position, office or employment was carried on;

(3) A statement whether or not the person was convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors). If the person was convicted, describe the criminal proceeding, including the dates, nature of conviction, name and location of

court, and penalty imposed or other disposition of the case;

(4) A statement whether or not the person was a party to any judicial or administrative proceeding during the past five years (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Describe the proceeding, including a summary of the terms of the judgment, decree or final order; and

(5) Country of citizenship.

(d) Tender offer. Identify the tender offer and the class of securities to which the offer relates, the name of the offeror and its address (which may be based on the offeror's Schedule TO (Sec. 240.14d-100 of this chapter) filed with the Commission).

Instruction to Item 1003

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

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

(a) Material terms. State the material terms of the transaction.

(1) Tender offers. In the case of a tender offer, the information must include:

(i) The total number and class of securities sought in the offer;

(ii) The type and amount of consideration offered to security holders;

(iii) The scheduled expiration date;

(iv) Whether a subsequent offering period will be available, if the transaction is a third-party tender offer;

(v) Whether the offer may be extended, and if so, how it could be extended;

(vi) The dates before and after which security holders may withdraw securities tendered in the offer;

(vii) The procedures for tendering and withdrawing securities;

(viii) The manner in which securities will be accepted for payment; and

(ix) The periods for accepting securities on a pro rata basis and the offeror's present intentions in the event that the offer is oversubscribed (if the offer is for less than all securities of a class).

(2) Mergers or Similar Transactions. In the case of a merger or similar transaction, the information must include:

(i) A brief description of the transaction;

(ii) The consideration offered to security holders;

(iii) The reasons for engaging in the transaction;

(iv) An explanation of any material differences in the rights of security holders as a result of the transaction;

(v) The vote required for approval of the transaction;

(vi) A brief statement as to the accounting treatment of the transaction; and

(vii) The federal income tax consequences of the transaction.

Instruction to Item 1004(a)

If the consideration offered consists solely of stock exempt from registration under the Securities Act of 1933, provide a description of the securities that complies with Item 202 of Regulation S-K (Sec. 229.202). This description is not required if the issuer of the securities meets the requirements of General Instructions I.B. and I.C.1. of Form B (Sec. 239.5 of this chapter) and elects to furnish information pursuant to Item 10; only capital stock is to be issued; and securities of the same class are registered under section 12 of the Exchange Act and either are listed for trading or admitted to unlisted trading privileges on a national securities exchange; or are securities for which bid and offer quotations are reported in an automated quotations system operated by a national securities association.

(b) Purchases. State whether any securities are to be purchased from any officer, director or affiliate of the subject company and provide the details of each transaction.

(c) Different terms. Describe any term or arrangement in the Rule 13e-3 transaction that treats any subject security holders differently from other subject security holders.

(d) Appraisal rights. State whether or not dissenting security holders are entitled to any appraisal rights. If so, summarize the appraisal rights. If there are no appraisal rights available under state law for security holders who object to the transaction, briefly outline any other rights that may be available to security holders under the law.

(e) Provisions for unaffiliated security holders. Describe any provision made by the filing person in connection with the transaction to grant unaffiliated security holders access to the corporate files of the filing person or to obtain counsel or appraisal services at the expense of the filing person. If none, so state.

(f) Eligibility for listing or trading. If the transaction involves the offer of securities of the filing person in exchange for equity securities held by non-affiliated security holders of the subject company, describe whether or not the filing person will take steps to assure that the securities offered are or will be eligible for trading on any national securities exchange or an automated inter-dealer quotation system.

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

(a) Transactions. Briefly state the nature and approximate dollar amount of any transaction, other than those described in paragraphs (b) or (c) of this section, that occurred during the past two years, between the filing person (including any person specified in Instruction C of the schedule) and;

(1) The subject company or any of its affiliates that are not natural persons if the aggregate value of the transactions is more than one percent of the subject company's consolidated revenues for:

(i) The fiscal year when the transaction occurred; or

(ii) The past portion of the current fiscal year, if the transaction occurred in the current year; and

Instruction to Item 1005(a)(1)

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

(2) Any executive officer, director or affiliate of the subject company that is a natural person if the aggregate value of a transaction or series of similar transactions with that person exceeds $60,000.

(b) Significant corporate events. Describe any negotiations, transactions or material contacts during the past two years between the filing person (including subsidiaries of the filing person and any person specified in Instruction C of the schedule) and the subject company or its affiliates concerning any:

(1) Merger;

(2) Consolidation;

(3) Acquisition;

(4) Tender offer for or other acquisition of any class of the subject company's securities;

(5) Election of the subject company's directors; or

(6) Sale or other transfer of a material amount of assets of the subject company.

(c) Negotiations or contacts. Describe any negotiations or material contacts concerning the matters referred to in paragraph (b) of this section during the past two years between:

(1) Any affiliates of the subject company; or

(2) The subject company or any of its affiliates and any person not affiliated with the subject company who would have a direct interest in such matters.

Instruction to Item 1005(c)

Identify the person who initiated the contacts or negotiations.

(d) Conflicts of interest. If material, describe any agreement, arrangement or understanding and any actual or potential conflict of interest between the filing person or its affiliates and:

(1) The subject company, its executive officers, directors or affiliates; or

(2) The offeror, its executive officers, directors or affiliates.

Instruction to Item 1005(d)

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

(e) Agreements involving the subject company's securities. Describe any agreement, arrangement, or understanding between the filing person (including any person specified in Instruction C of the schedule) and any other person with respect to any securities of the subject company. Name all persons that are a party to the agreements, arrangements, or understandings and describe all material provisions.

Instructions to Item 1005(e)

1. The information required by this Item includes: the transfer or voting of securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss, or the giving or withholding of proxies, consents or authorizations.

2. Include information for any securities that are pledged or otherwise subject to a contingency, the occurrence of which would give another person the power to direct the voting or disposition of the subject securities. No disclosure, however, is required about standard default and similar provisions contained in loan agreements.

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

(a) Purposes. State the purposes of the transaction.

(b) Use of securities acquired. Indicate whether the securities acquired in the transaction will be retained, retired, held in treasury, or otherwise disposed of.

(c) Plans. Describe any plans, proposals or negotiations that relate to or would result in:

(1) Any extraordinary transaction, such as a merger, reorganization or liquidation, involving the subject company or any of its subsidiaries;

(2) Any purchase, sale or transfer of a material amount of assets of the subject company or any of its subsidiaries;

(3) Any material change in the present dividend rate or policy, or indebtedness or capitalization of the subject company;

(4) Any change in the present board of directors or management of the subject company, including, but not limited to, any plans or proposals to change the number or the term of directors or to fill any existing vacancies on the board or to change any material term of the employment contract of any executive officer;

(5) Any other material change in the subject company's corporate structure or business, including, if the subject company is a registered closed-end investment company, any plans or proposals to make any changes in its investment policy for which a vote would be required by Section 13 of the Investment Company Act of 1940 (15 U.S.C. 80a-13);

(6) Any class of equity securities of the subject company to be delisted from a national securities exchange or cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association;

(7) Any class of equity securities of the subject company becoming eligible for termination of registration under Section 12(g)(4) of the Act (15 U.S.C. 78l);

(8) The suspension of the subject company's obligation to file reports under Section 15(d) of the Act (15 U.S.C. 78o);

(9) The acquisition by any person of additional securities of the subject company, or the disposition of securities of the subject company; or

(10) Any changes in the subject company's charter, bylaws or other governing instruments or other actions that could impede the acquisition of control of the subject company.

(d) Subject company negotiations. If the filing person is the subject company:

(1) State whether or not that person is engaged in any negotiations in response to the tender offer that relate to:

(i) A tender offer or other acquisition of the subject company's securities by the filing person or any of its subsidiaries; or

(ii) Any of the matters referred to in paragraphs (c)(1) through (c)(3) of this section; and

(2) Describe any transaction, board resolution, or signed contract that is entered into in response to the tender offer that relates to one or more of the matters referred to in paragraph (d)(1) of this section.

Instruction to Item 1006(d)(1)

If an agreement in principle has not been reached at the time of filing, no disclosure under paragraph (d)(1) of this section is required of the possible terms of or the parties to the transaction if in the opinion of the board of directors of the subject company disclosure would jeopardize continuation of the negotiations. In that case, disclosure indicating that negotiations are being undertaken or are underway and are in the preliminary stages is sufficient.

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

(a) Source of funds. State the specific sources and total amount of funds or other consideration to be used in the transaction. If the transaction involves a tender offer, disclose the amount of funds or other consideration required to purchase the maximum amount of securities sought in the offer.

(b) Conditions. State any material conditions to the financing discussed in response to paragraph (a) of this section. Disclose any alternative financing arrangements or alternative financing plans in the event the primary financing plans fall through. If none, so state.

(c) Expenses. Furnish a reasonably itemized statement of all expenses incurred or estimated to be incurred in connection with the transaction including, but not limited to, filing, legal, accounting and appraisal fees, solicitation expenses and printing costs and state whether or not the subject company has paid or will be responsible for paying any or all expenses.

(d) Borrowed funds. If all or any part of the funds or other consideration required is, or is expected to be borrowed, directly or indirectly, for the purpose of the transaction:

(1) Provide a summary of each loan agreement or arrangement containing the identity of the parties, the term, the collateral, the stated and effective interest rates, and any other material terms or conditions of the loan; and

(2) Briefly describe any plans or arrangements to finance or repay the loan, or, if no plans or arrangements have been made, so state.

Instruction to Item 1007(d)

If the transaction is a third-party tender offer and the source of all or any part of the funds used in the transaction is to come from a loan made in the ordinary course of business by a bank as defined by Section 3(a)(6) of the Act (15 U.S.C. Sec. 78c), the name of the bank will not be made available to the

public if the filing person so requests in writing and files the request, naming the bank, with the Secretary of the Commission.

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

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

Instructions to Item 1008(a)

1. For purposes of this section, beneficial ownership is determined in accordance with Rule 13d-3 (Sec. 240.13d-3 of this chapter) under the Exchange Act. Identify the shares that there is a right to acquire.

2. The information required by this section may be based on the number of outstanding securities disclosed in the subject company's most recently available filing with the Commission, unless the filing person has more current information.

3. The information required by this section with respect to officers, directors and associates of the subject company must be given to the extent known after making reasonable inquiry.

(b) Securities transactions. Describe any transaction in the subject securities during the past 60 days. The description of transactions required must include, but not necessarily be limited to:

(1) The identity of the persons specified in the Instruction to this section who effected the transaction;

(2) The date of the transaction;

(3) The amount of securities involved;

(4) The price per share; and

(5) Where and how the transaction was effected.

Instructions to Item 1008(b)

1. Provide the required transaction information for the following persons:

(a) The filing person (for all schedules);

(b) Any person named in Instruction C of the schedule and any associate or majority-owned subsidiary of the issuer or affiliate filing the schedule (for all schedules except Schedule 14D-9 (Sec. 240.14d-101 of this chapter));

(c) Any executive officer, director, affiliate or subsidiary of the filing person (for Schedule 14D-9 (Sec. 240.14d-101 of this chapter);

(d) The issuer and any executive officer or director of any subsidiary of the issuer or filing person (for an issuer tender offer on Schedule TO (Sec. 240.14d-100 of this chapter)); and

(e) The issuer and any pension, profit-sharing or similar plan of the issuer or affiliate filing the schedule (for a going-private transaction on Schedule 13E-3 (Sec. 240.13e-100 of this chapter)).

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

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

(a) Solicitations or recommendations. Identify all persons and classes of persons that are directly or indirectly employed, retained, or to be compensated to make solicitations or recommendations in connection with the transaction. Provide a summary of all material terms of employment, retainer or other arrangement for compensation.

(b) Employees and corporate assets. Identify any officer, class of employees or corporate assets of the subject company that has been or will be employed or used by the filing person in connection with the transaction. Describe the purpose for their employment or use.

Instruction to Item 1009(b)

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

Sec. 229.1010 (Item 1010) Financial statements.

(a) Financial information. Furnish the following financial information:

(1) Audited financial statements for the two fiscal years required to be filed with the company's most recent annual report under Sections 13 and 15(d) of the Exchange Act (15 U.S.C. 78m; 15 U.S.C. 78o);

(2) Unaudited balance sheets, comparative year-to-date income statements and related earnings per share data, statements of cash flows, and comprehensive income required to be included in the company's most recent quarterly report filed under the Exchange Act;

(3) Ratio of earnings to fixed charges, computed in a manner consistent with Sec. 229.503(d), for the two most recent fiscal years and the interim periods provided under paragraph (a)(2) of this section; and

(4) Book value per share as of the date of the most recent balance sheet presented.

(b) Pro forma information. If material, furnish pro forma information disclosing the effect of the transaction on:

(1) The company's balance sheet as of the date of the most recent balance sheet presented under paragraph (a) of this section;

(2) The company's statement of income, earnings per share, and ratio of earnings to fixed charges for the most recent fiscal year and the latest interim period provided under paragraph (a)(2) of this section; and

(3) The company's book value per share as of the date of the most recent balance sheet presented under paragraph (a) of this section.

(c) Summary information. Furnish a fair and adequate summary of the information specified in paragraphs (a) and (b) of this section for the same periods specified. A fair and adequate summary includes:

(1) The summarized financial information specified in Sec. 210.1-02(bb) of this chapter;

(2) Income per common share from continuing operations (basic and diluted, if applicable);

(3) Net income per common share (basic and diluted, if applicable);

(4) Ratio of earnings to fixed charges, computed in a manner consistent with Sec. 229.503(d);

(5) Book value per share as of the date of the most recent balance sheet; and

(6) If material, pro forma data for the summarized financial information specified in paragraph (c)(1) through (c)(6) of this section disclosing the effect of the transaction.

Sec. 229.1011 (Item 1011) Additional information.

(a) Agreements, regulatory requirements and legal proceedings. If material to a security holder's decision whether to sell, tender or hold the securities sought in the tender offer, furnish the following information:

(1) Any present or proposed material agreement, arrangement, understanding or relationship between the offeror or any of its executive officers, directors, controlling persons or subsidiaries and the subject company or any of its executive officers, directors, controlling persons or subsidiaries (other than any agreement, arrangement or understanding disclosed under any other sections of Regulation M-A (Secs. 229.1000-229.1016));

Instruction to Paragraph (a)(1)

In an issuer tender offer disclose any material agreement, arrangement, understanding or relationship between the offeror and any of its executive officers, directors, controlling persons or subsidiaries.

(2) To the extent known by the offeror after reasonable investigation, the applicable regulatory requirements which must be complied with or approvals which must be obtained in connection with the tender offer;

(3) The applicability of any anti-trust laws;

(4) The applicability of margin requirements under Section 7 of the Act (15 U.S.C. 78g) and the applicable regulations; and

(5) Any material pending legal proceedings relating to the tender offer, including the name and location of the court or agency in which the proceedings are pending, the date instituted, the principal parties, and a brief summary of the proceedings and the relief sought.

Instruction to Item 1011(a)(5)

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

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

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

(a) Solicitation or recommendation. State the nature of the solicitation or the recommendation. If this statement relates to a recommendation, state whether the filing person is advising holders of the subject securities to accept or reject the tender offer or to take other action with respect to the tender offer and, if so, describe the other action recommended. If the filing person is the subject company and is not making a recommendation, state whether the subject company is expressing no opinion and is remaining neutral toward the tender offer or is unable to take a position with respect to the tender offer.

(b) Reasons. State the reasons for the position (including the inability to take a position) stated in paragraph (a) of this section. Conclusory statements such as “The tender offer is in the best interests of shareholders” are not considered sufficient disclosure.

(c) Intent to tender. To the extent known by the filing person after making reasonable inquiry, state whether the filing person or any executive officer, director, affiliate or subsidiary of the filing person currently intends to tender, sell or hold the subject securities that are held of record or beneficially owned by that person.

(d) Intent to tender or vote in a going-private transaction. To the extent known by the filing person after making reasonable inquiry, state whether or not any executive officer, director or affiliate of the issuer (or any person specified in Instruction C to the schedule) currently intends to tender or sell subject securities owned or held by that person and/or how each person currently intends to vote subject securities, including any securities the person has proxy authority for. State the reasons for the intended action.

Instruction to Item 1012(d)

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

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

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

(a) Purposes. State the purposes for the Rule 13e-3 transaction.

(b) Alternatives. If the subject company or affiliate considered alternative means to accomplish the stated purposes, briefly describe the alternatives and state the reasons for their rejection.

(c) Reasons. State the reasons for the structure of the Rule 13e-3 transaction and for undertaking the transaction at this time.

(d) Effects. Describe the effects of the Rule 13e-3 transaction on the subject company, its affiliates and unaffiliated security holders, including the federal tax consequences of the transaction.

Instructions to Item 1013

1. Conclusory statements will not be considered sufficient disclosure in response to this section.

2. The description required by paragraph (d) of this section must include a reasonably detailed discussion of both the benefits and detriments of the Rule 13e-3 transaction to the subject company, its affiliates and unaffiliated security holders. The benefits and detriments of the Rule 13e-3 transaction must be quantified to the extent practicable.

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

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

(a) Fairness. State whether the subject company or affiliate filing the statement reasonably believes that the Rule 13e-3 transaction is fair or unfair to unaffiliated security holders. If any director dissented to or abstained from voting on the Rule 13e-3 transaction, identify the director, and indicate, if known, after making reasonable inquiry, the reasons for the dissent or abstention.

(b) Factors considered in determining fairness. Discuss in reasonable detail the material factors upon which the belief stated in paragraph (a) of this section is based and, to the extent practicable, the weight assigned to each factor. The discussion must include an analysis of the extent, if any, to which the filing person's beliefs are based on the factors described in Instruction 2 of this section, paragraphs (c), (d) and (e) of this section and Sec. 229.1015.

(c) Approval of security holders. State whether or not the transaction is structured so that approval of at least a majority of unaffiliated security holders is required.

(d) Unaffiliated representative. State whether or not a majority of directors who are not employees of the subject company has retained an unaffiliated representative to act solely on behalf of unaffiliated security holders for purposes of negotiating the terms of the Rule 13e-3 transaction and/or preparing a report concerning the fairness of the transaction.

(e) Approval of directors. State whether or not the Rule 13e-3 transaction was approved by a majority of the directors of the subject company who are not employees of the subject company.

(f) Other offers. If any offer of the type described in paragraph (viii) of Instruction 2 to this section has been received, describe the offer and state the reasons for its rejection.

Instructions to Item 1014

1. A statement that the issuer or affiliate has no reasonable belief as to the fairness of the Rule 13e-3 transaction to unaffiliated security holders will not be considered sufficient disclosure in response to paragraph (a) of this section.

2. The factors that are important in determining the fairness of a transaction to unaffiliated security holders and the weight, if any, that should be given to them in a particular context will vary. Normally such factors will include, among others, those referred to in paragraphs (c), (d) and (e) of this section and whether the consideration offered to unaffiliated security holders constitutes fair value in relation to:

(i) Current market prices;

(ii) Historical market prices;

(iii) Net book value;

(iv) Going concern value;

(v) Liquidation value;

(vi) Purchase prices paid in previous purchases disclosed in response to Sec. 229.1002(f);

(vii) Any report, opinion, or appraisal described in Sec. 229.1015; and

(viii) Firm offers of which the subject company or affiliate is aware made by any unaffiliated person, other than the filing persons, during the past two years for:

(A) The merger or consolidation of the subject company with or into another company, or vice versa;

(B) The sale or other transfer of all or any substantial part of the assets of the subject company; or

(C) A purchase of the subject company's securities that would enable the holder to exercise control of the subject company.

3. Conclusory statements, such as “The Rule 13e-3 transaction is fair to unaffiliated security holders in relation to net book value, going concern value and future prospects of the issuer” will not be considered sufficient disclosure in response to paragraph (b) of this section.

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

(a) Report, opinion or appraisal. State whether or not the subject company or affiliate has received any report, opinion (other than an opinion of counsel) or appraisal from an outside party that is materially related to the Rule 13e-3 transaction, including, but not limited to: any report, opinion or appraisal relating to the consideration or the fairness of the consideration to be offered to security holders or the fairness of the transaction to the issuer or affiliate or to security holders who are not affiliates.

(b) Preparer and summary of the report, opinion or appraisal. For each report, opinion or appraisal described in response to paragraph (a) of this section or any negotiation or report described in response to Item 1014(d) of Regulation M-A (Sec. 229.1014) or Item 14(b)(6) of Schedule 14A (Sec. 240.14a-101 of this chapter) concerning the terms of the transaction:

(1) Identify the outside party and/or unaffiliated representative;

(2) Briefly describe the qualifications of the outside party and/or unaffiliated representative;

(3) Describe the method of selection of the outside party and/or unaffiliated representative;

(4) Describe any material relationship that existed during the past two years or is mutually understood to be contemplated and any compensation received or to be received as a result of the relationship between:

(i) The outside party, its affiliates, and/or unaffiliated representative; and

(ii) The subject company or its affiliates;

(5) If the report, opinion or appraisal relates to the fairness of the consideration, state whether the subject company or affiliate determined the amount of consideration to be paid or whether the outside party recommended the amount of consideration to be paid; and

(6) Furnish a summary concerning the negotiation, report, opinion or appraisal. The summary must include, but need not be limited to, the procedures followed; the findings and recommendations; the bases for and methods of arriving at such findings and recommendations; instructions received from the subject company or affiliate; and any limitation imposed by the subject company or affiliate on the scope of the investigation.

Instruction to Item 1015(b)

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

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

Sec. 229.1016 (Item 1016) Exhibits.

File as an exhibit to the schedule:

(a) Any disclosure materials furnished to security holders by or on behalf of the filing person, including:

(1) Tender offer materials (including transmittal letter);

(2) Solicitation or recommendation (including those referred to in Sec. 229.1012;

(3) Going-private disclosure document;

(4) Prospectus used in connection with an exchange offer where securities are registered under the Securities Act of 1933; and

(5) Any other disclosure materials;

(b) Any loan agreement referred to in response to Sec. 229.1007;

Instruction to Item 1016(b)

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

(c) Any report, opinion or appraisal referred to in response to Sec. 229.1014(d) or Sec. 229.1015;

(d) Any document setting forth the terms of any agreement, arrangement, understanding or relationship referred to in response to Sec. 229.1005(e) or Sec. 229.1011(a)(1);

(e) Any agreement, arrangement or understanding referred to in response to Sec. 229.1005(d), or the pertinent portions of any proxy statement, report or other communication containing the disclosure required by Sec. 229.1005(d);

(f) A detailed statement describing security holders' appraisal rights and the procedures for exercising those appraisal rights referred to in response to Sec. 229.1004(d);

(g) Any written instruction, form or other material that is furnished to persons making an oral solicitation or recommendation by or on behalf of the filing person directly or indirectly in connection with the transaction; and

(h) Any written opinion prepared by legal counsel at the filing person's request and communicated to the filing person pertaining to the tax consequences of the transaction.

Exhibit Table to Item 1016 of Regulation M-A

                                    13E-3          TO           14D-9
------------------------------------------------------------------------
Disclosure Material...........            X             X             X
Loan Agreement................            X             X
Report, Opinion or Appraisal..            X

Contracts, Arrangements or

 Understandings...............            X             X             X
Statement re: Appraisal Rights            X
Oral Solicitation Materials...            X             X             X




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

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

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

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

8. In Sec. 230.145 as proposed to be amended in a document published elsewhere in this Federal Register, republish the last sentence of the first paragraph of Preliminary Note and paragraph (b) to read as follows:

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

Preliminary Note: * * * Issuers must register transactions described in paragraph (a) of this section on Form C (Sec. 239.6 of this chapter), Form SB-3 (Sec. 239.11 of this chapter) or Form N-14 (Sec. 239.23 of this chapter). * * * * *

(b) Communications. Communications in connection with a registered transaction described in paragraph (a) of this section may be made in accordance with Sec. 230.135, Sec. 230.165, Sec. 230.166, Sec. 230.167, Sec. 230.168 or Sec. 230.169. * * * * *

9. By adding Sec. 230.162 to read as follows:

Sec. 230.162 Submission of tenders in registered exchange offers.

Notwithstanding Section 5(a) of the Act (15 U.S.C. 77e), security holders may tender their securities in an exchange offer subject to Regulation 14D (Sec. Sec. 240.14d-1 through 240.14d-101) before a registration statement is effective as to the security offered, so long as no securities are purchased until the registration statement is effective and the tender offer has expired in accordance with the tender offer rules.

10. In Sec. 230.166 as proposed to be added in a document published elsewhere in this issue of the Federal Register, republish paragraph (b) to read as follows:

Sec. 230.166 Offers made before filing a registration statement.

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(b) Form C/SB-3 transactions. Notwithstanding Section 5(c) of the Act (15 U.S.C. 77e), the offeror of securities in a transaction to be registered on Form C (Sec. 239.6 of this chapter), SB-3 (Sec. 239.11 of this chapter), F-8 (Sec. 239.38 of this chapter), F-80 (Sec. 239.41 of this chapter) or F-10 (Sec. 239.40 of this chapter) (when that form is used in a business combination) may make an offer to sell or solicit an offer to buy securities before the filing of a registration statement with respect to those securities if:

(1) Any prospectus relating to the transaction used in the period beginning with the first public announcement and ending with the filing of the registration statement is filed in accordance with Sec. 230.425; and

(2) In an exchange offer, the offers are made in accordance with the tender offer rules; and, in a transaction involving the vote of security holders, the offers are made in accordance with the proxy rules.

11. In Sec. 230.167 as proposed to be added in a document published elsewhere in this issue of the Federal Register, republish paragraph (b) to read as follows:

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

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

12. In Sec. 230.425 as proposed to be added in a document published elsewhere in this issue of the Federal Register, republish paragraph (b)(3) to read as follows:

Sec. 230.425 Filing of “free writing” and other non-section 10 prospectuses.

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(b) * * *

(3) Five copies of any prospectus used before the filing of a registration statement in reliance on Sec. 230.166(b) must be filed with the Commission on or before the date of first use. Each copy of a prospectus filed under this section must identify the filer and the company that is the subject of the offering in the upper right hand corner of the cover page, in addition to the information required by paragraph (c) of this section. * * * * *

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

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

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

PART 232—REGULATION S-T—GENERAL RULES AND REGULATIONS FOR

ELECTRONIC FILINGS

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

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

Sec. 232.13 [Amended]

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

PART 239—FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

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

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

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

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

Form C

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

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(c) If the company being acquired is not subject to the reporting requirements of Exchange Act Section 13(a) or 15(d), or has not furnished an annual report to its security holders under Rule 14a-3 or Rule 14c-3 for the latest fiscal year because of Exchange Act Section 12(i), furnish the financial statements that would be required in an annual report sent to security holders under Rules 14a-3 (b)(1) and (b)(2) if one was required.

Instructions to paragraph (c):

1. If the registrant's security holders will not be voting on the transaction, financial statements for the two fiscal years before the latest fiscal year need be provided only to the extent that security holders of the company being acquired were previously furnished with financial statements (prepared in conformity with GAAP) for those periods.

2. The financial statements required by this paragraph for the latest fiscal year need be audited only to the extent practicable. The financial statements for the fiscal years before the latest fiscal year need not be audited if they were not previously audited.

3. If the financial statements required by this paragraph are prepared on the basis of a comprehensive body of accounting principles other than U.S. GAAP, provide a reconciliation to U.S. GAAP in accordance with Item 17 of Form 20-F (Sec. 249.220f of this chapter) unless a reconciliation is unavailable or not obtainable without unreasonable cost or expense. At a minimum, however, when financial statements are prepared on a basis other than U.S. GAAP, a narrative description of all material variations in accounting principles, practices and methods used in preparing the non-U.S. GAAP financial statements from those accepted in the U.S. must be presented. * * * * *

Item 21. Information Required for All Other Small Business Issuers

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(b) If the company being acquired is not subject to the reporting requirements of Exchange Act Section 13(a) or 15(d), or has not furnished an annual report to its security holders under Rule 14a-3 or Rule 14c-3 for the latest fiscal year because of Exchange Act Section 12(i), furnish the financial statements that would be required in an annual report sent to security holders under Rules 14a-3 (b)(1) and (b)(2) if one was required.

Instructions to paragraph (b):

1. If the registrant's security holders will not be voting on the transaction, financial statements for the two fiscal years before the latest fiscal year need be provided only to the extent that security holders of the company being acquired were previously furnished with financial statements (prepared in conformity with GAAP) for those periods.

2. The financial statements required by this paragraph for the latest fiscal year need be audited only to the extent practicable. The financial statements for the fiscal years before the latest fiscal year need not be audited if they were not previously audited.

3. If the financial statements required by this paragraph are prepared on the basis of a comprehensive body of accounting principles other than U.S. GAAP, provide a reconciliation to U.S. GAAP in accordance with Item 17 of Form 20-F (Sec. 249.220f of this chapter) unless a reconciliation is unavailable or not obtainable without unreasonable cost or expense. At a minimum, however, when financial statements are prepared on a basis other than U.S. GAAP, a narrative description of all material variations in accounting principles, practices and methods used in preparing the non-U.S. GAAP financial statements from those accepted in the U.S. must be presented. * * * * *

4. In Form SB-3 (referenced in Sec. 239.11) as proposed to be added in a document published elsewhere in this issue of the Federal Register, republish paragraph (b) of Item 16 and paragraph (c) of Item 19 to read as follows:

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

Form SB-3

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Item 16. Information Required for All Other Small Business Issuers

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(b) If the company being acquired is not subject to the reporting requirements of Exchange Act Section 13(a) or 15(d), or has not furnished an annual report to its security holders under Rule 14a-3 or Rule 14c-3 for the latest fiscal year because of Exchange Act Section 12(i), furnish the financial statements that would be required in an annual report sent to security holders under Rules 14a-3 (b)(1) and (b)(2) if one was required.

Instructions to paragraph (b):

1. If the registrant's security holders will not be voting on the transaction, financial statements for the two fiscal years before the latest fiscal year need be provided only to the extent that security holders of the company being acquired were previously furnished with financial statements (prepared in conformity with GAAP) for those periods.

2. The financial statements required by this paragraph for the latest fiscal year need be audited only to the extent practicable. The financial statements for the fiscal years before the latest fiscal year need not be audited if they were not previously audited.

3. If the financial statements required by this paragraph are prepared on the basis of a comprehensive body of accounting principles other than U.S. GAAP, provide a reconciliation to U.S. GAAP in accordance with Item 17 of Form 20-F (Sec. 249.220f of this chapter) unless a reconciliation is unavailable or not obtainable without unreasonable cost or expense. At a minimum, however, when financial statements are prepared on a basis other than U.S. GAAP, a narrative description of all material variations in accounting principles, practices and methods used in preparing the non-U.S. GAAP financial statements from those accepted in the U.S. must be presented. * * * * *

Item 19. Information Required for All Other Companies

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(c) If the company being acquired is not subject to the reporting requirements of Exchange Act Section 13(a) or 15(d), or has not furnished an annual report to its security holders under Rule 14a-3 or Rule 14c-3 for the latest fiscal year because of Exchange Act Section 12(i), furnish the financial statements that would be required in an annual report sent to security holders under Rules 14a-3 (b)(1) and (b)(2) if one was required.

Instructions to paragraph (c):

1. If the registrant's security holders will not be voting on the transaction, financial statements for the two fiscal years before the latest fiscal year need be provided only to the extent that security holders of the company being acquired were previously furnished with financial statements (prepared in conformity with GAAP) for those periods.

2. The financial statements required by this paragraph for the latest fiscal year need be audited only to the extent practicable. The financial statements for the fiscal years before the latest fiscal year need not be audited if they were not previously audited.

3. If the financial statements required by this paragraph are prepared on the basis of a comprehensive body of accounting principles other than U.S. GAAP, provide a reconciliation to U.S. GAAP in accordance with Item 17 of Form 20-F (Sec. 249.220f of this chapter) unless a reconciliation is unavailable or not obtainable without unreasonable cost or expense. At a minimum, however, when financial statements are prepared on a basis other than U.S. GAAP, a narrative description of all material variations in accounting principles, practices and methods used in preparing the non-U.S. GAAP financial statements from those accepted in the U.S. must be presented. * * * * *

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

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

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 77ggg, 77nnn, 77sss, 77ttt,

78c, 78d, 78f, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless otherwise noted. * * * * *

Sec. 240.10b-13 [Removed and Reserved]

20. By removing and reserving Sec. 240.10b-13.

21. By revising the section heading and Sec. 240.13e-1 to read as follows:

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

An issuer that has received notice that it is the subject of a tender offer made under Section 14(d)(1) of the Act (15 U.S.C. 78n), that has commenced under Sec. 240.14d-2 must not purchase any of its equity securities during the tender offer unless the issuer first:

(a) Files a statement with the Commission containing the following information:

(1) The title and number of securities to be purchased;

(2) The names of the persons or classes of persons from whom the issuer will purchase the securities;

(3) The name of any exchange, inter-dealer quotation system or any other market on or through which the securities will be purchased;

(4) The purpose of the purchase;

(5) Whether the issuer will retire the securities, hold the securities in its treasury, or dispose of the securities. If the issuer intends to dispose of the securities, describe how it intends to do so; and

(6) The source and amount of funds or other consideration to be used to make the purchase. If the issuer borrows any funds or other consideration to make the purchase or enters any agreement for the purpose of acquiring, holding, or trading the securities, describe the transaction and agreement and identify the parties;

(b) Sends the statement containing the information in paragraph (a) of this section to all of its equity security holders before purchasing any securities; and

(c) Pays the fee required by Sec. 240.0-11 when it files the initial statement.

Instruction to Sec. 240.13e-1

File eight copies if paper filing is permitted.

22. By amending Sec. 240.13e-3 by revising paragraphs (d) and (e); revising the title of paragraph (f); removing the reference “Chapter X” in paragraph (g)(5) and in its place add “Chapter XI”; removing the reference “section 174” in paragraph (g)(5) and in its place add “section 1125(b)”; and removing the reference “section 175 of the Act” in paragraph (g)(5) and in its place add “section 1125(b) of that Act”, to read as follows:

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

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(d) Material required to be filed. The issuer or affiliate engaging in a Rule 13e-3 transaction must file with the Commission:

(1) A Schedule 13E-3 (Sec. 240.13e-100), including all exhibits;

(2) An amendment to Schedule 13E-3 reporting promptly any material changes in the information set forth in the schedule previously filed; and

(3) A final amendment to Schedule 13E-3 reporting promptly the results of the Rule 13e-3 transaction.

(e) Disclosure of information to security holders. (1) In addition to disclosing the information required by any other applicable rule or regulation under the federal securities laws, the issuer or affiliate engaging in a Rule 13e-3 transaction must disclose to security holders of the class that is the subject of the transaction, as specified in paragraph (f) of this section, the following:

(i) The information required by Item 1 of Schedule 13E-3 (Sec. 240.13e-100) (Summary Term Sheet);

(ii) The information required by Items 7, 8 and 9 of Schedule 13E-3, which must be prominently disclosed in a “Special Factors” section in the front of the disclosure document;

(iii) A prominent legend on the outside front cover page that indicates that neither the Securities and Exchange Commission nor any state securities commission has: approved or disapproved of the transaction; passed upon the merits or fairness of the transaction; or passed upon the adequacy or accuracy of the disclosure in the document. The legend also must make it clear that any representation to the contrary is a criminal offense;

(iv) The information concerning appraisal rights required by Sec. 229.1016(f) of this chapter; and

(v) The information required by the remaining items of Schedule 13E-3, except for Sec. 229.1016 of this chapter (exhibits), or a fair and adequate summary of the information.

Instructions to Paragraph (e)(1)

1. If the Rule 13e-3 transaction also is subject to Regulation 14A (Secs. 240.14a-1 through 240.14b-2) or 14C (Secs. 240.14c-1 through 240.14c-101), the registration provisions and rules of the Securities Act of 1933, Regulation 14D or Sec. 240.13e-4, the information required by paragraph (e)(1) of this section must be combined with the proxy statement, information statement, prospectus or tender offer material sent to security holders.

2. If the Rule 13e-3 transaction involves a registered securities offering, the legend required by Sec. 229.501(b)(7) of this chapter must be combined with the legend required by paragraph (e)(1)(iii) of this section.

3. The required legend must be written in clear, plain language.

(2) If there is any material change in the information previously disclosed to security holders, the issuer or affiliate must disclose the change promptly to security holders as specified in paragraph (f)(1)(iii) of this section.

(f) Dissemination of information to security holders. * * * * * * * *

23. By amending Sec. 240.13e-4 by removing the reference:

a. “Schedule 13E-4 [Sec. 240.13E-101]” that appears in the introductory text of paragraph (a) and paragraph (a)(3) and in its place add “Schedule TO (Sec. 240.14d-100)”;

b. “Schedule 13E-4 Issuer Tender Offer Statement (Sec. 240.13e-101),” that appears in paragraph (f)(12) and in its place add “Schedule TO (Sec. 240.14d-100),”; “paragraph (a) of Item 9 of that Schedule” that appears in paragraph (f)(12) and in its place add “Item 1016(a)(1) of Regulation M-A (Sec. 229.1016(a)(1) of this chapter)”; and

c. “Schedule 13E-4” that appears in the introductory text of paragraph (g) and in its place add “Schedule TO (Sec. 240.14d-100)”.

24. By amending Sec. 240.13e-4 by redesignating paragraph (b) as paragraph (i); removing the reference “paragraph (b)(1)” in newly redesignated paragraph (i)(2)(ii) and in its place add “paragraph (i)(1)”; adding new paragraph (b); revising paragraph (a)(4); and revising the title and text of paragraphs (c), (d) and (e) to read as follows:

Sec. 240.13e-4 Tender offers by issuers.

(a) Definitions. * * *

(4) The term commencement means 12:01 a.m. on the date that the issuer or affiliate has first published, sent or given the means to tender to security holders. For purposes of this section, the means to tender includes the transmittal form or a statement regarding how the transmittal form may be obtained. * * * * *

(b) As soon as practicable on the date of commencement of the issuer tender offer, the issuer or affiliate making the issuer tender offer must comply with:

(1) The filing requirements of paragraph (c)(2) of this section;

(2) The disclosure requirements of paragraph (d)(1) of this section; and

(3) The dissemination requirements of paragraph (e)(1) of this section.

(c) Material required to be filed. The issuer or affiliate making the issuer tender offer must file with the Commission:

(1) All written communications made by the issuer or affiliate relating to the issuer tender offer, from and including the first public announcement, as soon as practicable on the date of the communication;

(2) A Schedule TO (Sec. 240.14d-100), including all exhibits;

(3) An amendment to Schedule TO (Sec. 240.14d-100) reporting promptly any material changes in the information set forth in the schedule previously filed; and

(4) A final amendment to Schedule TO (Sec. 240.14d-100) reporting promptly the results of the issuer tender offer.

Instructions to Sec. 240.13e-4(c)

1. Pre-commencement communications must be filed under cover of Schedule TO (Sec. 240.14d-100) and the box on the cover page of the schedule must be marked.

2. Any communications made in connection with an exchange offer registered under the Securities Act of 1933 need only be filed under Sec. 230.425 of this chapter and will be deemed to have been filed under this section as well.

3. Each pre-commencement communication must include a prominent legend in clear, plain language advising security holders to read the tender offer statement when it is available because it contains important information. The legend also must advise investors that they can get the tender offer statement and other filed documents for free at the SEC's web site and explain which documents are free from the issuer.

4. See Secs. 230.135, 230.166, 230.167, 230.168 and 230.169 of this chapter for pre-commencement communications made in connection with registered exchange offers.

5. Communications of the type described under Sec. 230.169 of this chapter need not be filed under this section.

(d) Disclosure of tender offer information to security holders. (1) The issuer or affiliate making the issuer tender offer must disclose, in a manner prescribed by paragraph (e)(1) of this section, the following:

(i) The information required by Item 1 of Schedule TO (Sec. 240.14d-100) (summary term sheet); and

(ii) The information required by the remaining items of Schedule TO for issuer tender offers, except for Item 12 (exhibits), or a fair and adequate summary of the information.

(2) If the issuer or affiliate is registering securities under the Securities Act of 1933 in connection with the issuer tender offer, the prospectus must contain the information specified in paragraph (d)(1) of this section in addition to the information required to be disclosed under the Securities Act and the rules and regulations.

(3) If there are any material changes in the information previously disclosed to security holders, the issuer or affiliate must disclose the changes promptly to security holders in a manner specified in paragraph (e)(2) of this section.

(4) If the issuer or affiliate disseminates the issuer tender offer by means of summary publication as described in paragraph (e)(1)(ii) of this section, the summary advertisement must not include a transmittal letter that would permit security holders to tender securities sought in the offer and must disclose at least the following information:

(i) The identity of the issuer or affiliate making the issuer tender offer;

(ii) The information required by Sec. 229.1004(a)(1) and Sec. 229.1006(a) of this chapter;

(iii) Instructions on how security holders can obtain promptly a copy of the statement required by paragraph (d)(1) of this section, at the issuer or affiliate's expense; and

(iv) A statement that the information contained in the statement required by paragraph (d)(1) of this section is incorporated by reference.

(e) Dissemination of tender offers to security holders. (1) An issuer tender offer will be deemed to be published, sent or given to security holders if the issuer or affiliate making the issuer tender offer complies fully with one or more of the methods described in paragraph (e)(1)(i) or (e)(2)(ii) of this section. For purposes of paragraph (e)(1)(ii) of this section, adequate publication of the issuer tender offer may require publication in a newspaper with a national circulation, a newspaper with metropolitan or regional circulation, or a combination of the two, depending upon the facts and circumstances involved.

(i) Dissemination of any issuer tender offer by use of stockholder and other lists:

(A) By mailing or otherwise furnishing promptly a statement containing the information required by paragraph (d)(1) of this section to each security holder whose name appears on the most recent stockholder list of the issuer;

(B) By contacting each participant on the most recent security position listing of any clearing agency within the possession or access of the issuer or affiliate making the issuer tender offer, and making inquiry of each participant as to the approximate number of beneficial owners of the securities sought in the offer that are held by the participant;

(C) By furnishing to each participant a sufficient number of copies of the statement required by paragraph (d)(1)(ii) of this section for transmittal to the beneficial owners; and

(D) By agreeing to reimburse each participant promptly for its reasonable expenses incurred in forwarding the statement to beneficial owners.

(ii) Dissemination of certain cash issuer tender offers by summary publication:

(A) If the issuer tender offer is not subject to Sec. 240.13e-3 (Sec. 240.13e-3), by making adequate publication of a summary advertisement containing the information required by paragraph (d)(4) of this section in a newspaper or newspapers, on the date of commencement of the issuer tender offer; and

(B) By mailing or otherwise furnishing promptly the statement required by paragraph (d)(1) of this section and a transmittal letter to any security holder who requests a copy of the statement or transmittal letter.

(2) If a material change occurs in the information published, sent or given to security holders, the issuer or affiliate must disseminate promptly disclosure of the change in a manner reasonably calculated to inform security holders of the change. * * * * *

25. By revising Sec. 240.13e-100 to read as follows:

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

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

Rule 13e-3 Transaction Statement under Section 13(e) of the Securities Exchange Act of 1934

(Amendment No. )———————————————————————————- (Name of the Issuer)—————————————————————————- (Names of Persons Filing Statement)—————————————————-- (Title of Class of Securities)————————————————————- (CUSIP Number of Class of Securities)————————————————--

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

This statement is filed in connection with (check the appropriate box):

a. [ ] The filing of solicitation materials or an information statement subject to Regulation 14A (Sec. Sec. 240.14a-1 through 240.14b-2), Regulation 14C (Sec. Sec. 240.14c-1 through 240.14c-101) or Rule 13e-3(c) (Sec. 240.13e-3(c)) under the Securities Exchange Act of 1934 (“the Act”).

b. [ ] The filing of a registration statement under the Securities Act of 1933.

c. [ ] A tender offer.

d. [ ] None of the above.

Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: [ ]

Check the following box if the filing is a final amendment reporting the results of the transaction: [ ]

Calculation of Filing Fee

Transaction valuation* Amount of filing fee

*Set forth the amount on which the filing fee is calculated and state

how it was determined.

[ ] Check the box if any part of the fee is offset as provided by Sec. 240.0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid:———————————————————————-- Form or Registration No.:——————————————————————-- Filing Party:————————————————————————————-- Date Filed:—————————————————————————————--

General Instructions

A. File eight copies of the statement, including all exhibits, with the Commission if paper filing is permitted.

B. This filing must be accompanied by a fee payable to the Commission as required by Sec. 240.0-11(b).

C. If the statement is filed by a general or limited partnership, syndicate or other group, the information called for by Items 3, 5, 6, 10 and 11 must be given with respect to: (i) each partner of the partnership; (ii) each partner who is, or functions as, a general partner of the limited partnership; (iii) each member of the syndicate or group; and (iv) each person controlling the partner or member. If the statement is filed by a corporation or if a person referred to in (i), (ii), (iii) or (iv) of this Instruction is a corporation, the information called for by the items specified above must be given with respect to: (a) each executive officer and director of the corporation; (b) each person controlling the corporation; and (c) each executive officer and director of any corporation or other person ultimately in control of the corporation.

D. Depending on the type of Rule 13e-3 transaction (Sec. 240.13e-3(a)(3)), this statement must be filed with the Commission:

1. At the same time as filing preliminary or definitive soliciting materials or an information statement under Regulations 14A or 14C of the Act;

2. At the same time as filing a registration statement under the Securities Act of 1933;

3. As soon as practicable on the date a tender offer is first published, sent or given to security holders; or

4. At least 30 days before any purchase of securities of the class of securities subject to the Rule 13e-3 transaction, if the transaction does not involve a solicitation, an information statement, the registration of securities or a tender offer, as described in paragraphs 1, 2 or 3 of this Instruction; and

5. If the Rule 13e-3 transaction involves a series of transactions, the issuer or affiliate must file this statement at the time indicated in paragraphs 1 through 4 of this Instruction for the first transaction and must amend the schedule promptly with respect to each subsequent transaction.

E. If an item is inapplicable or the answer is in the negative, so state. The statement published, sent or given to security holders may omit negative and not applicable responses, except that responses to Items 7, 8 and 9 of this schedule must be provided in full. If the schedule includes any information that is not published, sent or given to security holders, provide that information or specifically incorporate it by reference under the appropriate item number and heading in the schedule. Do not recite the text of disclosure requirements in the schedule or any document published, sent or given to security holders. Indicate clearly the coverage of the requirements without referring to the text of the items.

F. Information contained in exhibits to the statement may be incorporated by reference in answer or partial answer to any item unless it would render the answer misleading, incomplete, unclear or confusing. A copy of any information that is incorporated by reference or a copy of the pertinent pages of a document containing the information must be submitted with this statement as an exhibit, unless it was previously filed with the Commission electronically on EDGAR. If an exhibit contains information responding to more than one item in the schedule, all information in that exhibit may be incorporated by reference once in response to the several items in the schedule for which it provides an answer. Information incorporated by reference is deemed filed with the Commission for all purposes of the Act.

G. If the Rule 13e-3 transaction also involves a transaction subject to Regulation 14A (Sec. Sec. 240.14a-1 through 240.14b-2) or 14C (Sec. Sec. 240.14c-1 through 240.14c-101) of the Act, the registration of securities under the Securities Act of 1933 and the General Rules and Regulations of that Act, or a tender offer subject to Regulation 14D (Sec. Sec. 240.14d-1 through 240.14d-101) or Sec. 240.13e-4, this statement must incorporate by reference the information contained in the proxy, information, registration or tender offer statement in answer to the items of this statement.

H. The information required by the items of this statement is intended to be in addition to any disclosure requirements of any other form or schedule that may be filed with the Commission in connection with the Rule 13e-3 transaction. If those forms or schedules require less information on any topic than this statement, the requirements of this statement control.

I. If the Rule 13e-3 transaction involves a tender offer, then a combined statement on Schedules 13E-3 and TO may be filed with the Commission under cover of Schedule TO (Sec. 240.14d-100). See Instruction J of Schedule TO (Sec. 240.14d-100).

J. Amendments disclosing a material change in the information set forth in this statement may omit any information previously disclosed in this statement. Item 1. Summary Term Sheet

Furnish the information required by Item 1001 of Regulation M-A (Sec. 229.1001 of this chapter). Item 2. Subject Company Information

Furnish the information required by Item 1002 of Regulation M-A (Sec. 229.1002 of this chapter). Item 3. Identity and Background of Filing Person

Furnish the information required by Item 1003(a) through (c) of Regulation M-A (Sec. 229.1003 of this chapter). Item 4. Terms of the Transaction

Furnish the information required by Item 1004(a) and (c) through (f) of Regulation M-A (Sec. 229.1004 of this chapter). Item 5. Past Contacts, Transactions, Negotiations and Agreements

Furnish the information required by Item 1005(a) through (c) and (e) of Regulation M-A (Sec. 229.1005 of this chapter). Item 6. Purpose of the Transaction and Plans or Proposals

Furnish the information required by Item 1006(b) and (c)(1) through (8) of

Regulation M-A (Sec. 229.1006 of this chapter).

Instruction to Item 6

In providing the information specified in Item 1006(c) for this item, discuss any activities or transactions that would occur after the Rule 13e-3 transaction. Item 7. Purposes, Alternatives, Reasons and Effects

Furnish the information required by Item 1013 of Regulation M-A (Sec. 229.1013 of this chapter). Item 8. Fairness of the Transaction

Furnish the information required by Item 1014 of Regulation M-A (Sec. 229.1014 of this chapter). Item 9. Reports, Opinions, Appraisals and Negotiations

Furnish the information required by Item 1015 of Regulation M-A (Sec. 229.1015 of this chapter). Item 10. Source and Amounts of Funds or Other Consideration

Furnish the information required by Item 1007 of Regulation M-A (Sec. 229.1007 of this chapter). Item 11. Interest in Securities of the Subject Company

Furnish the information required by Item 1008 of Regulation M-A (Sec. 229.1008 of this chapter). Item 12. The Solicitation or Recommendation

Furnish the information required by Item 1012(d) and (e) of Regulation M-A (Sec. 229.1012 of this chapter). Item 13. Financial Statements

Furnish the information required by Item 1010(a) through (b) of Regulation M-A (Sec. 229.1010 of this chapter) for the issuer of the subject class of securities.

Instructions to Item 13

1. The disclosure materials disseminated to security holders may contain the summarized financial information required by Item 1010(c) of Regulation M-A (Sec. 229.1010 of this chapter) instead of the financial information required by Item 1010(a) and (b). In that case, the financial information required by Item 1010(a) and (b) of Regulation M-A must be disclosed directly or incorporated by reference in the statement. If summarized financial information is disseminated to security holders, include appropriate instructions on how more complete financial information can be obtained. If the summarized financial information is prepared on the basis of a comprehensive body of accounting principles other than U.S. GAAP, the summarized financial information must be accompanied by a reconciliation as described in Instruction 2.

2. If the financial statements required by this Item are prepared on the basis of a comprehensive body of accounting principles other than U.S. GAAP, provide a reconciliation to U.S. GAAP in accordance with Item 17 of Form 20-F (Sec. 249.220f of this chapter).

3. The filing person may incorporate by reference financial statements contained in any document filed with the Commission, solely for the purposes of this schedule, if: (a) the financial statements substantially meet the requirements of this Item; (b) an express statement is made that the financial statements are incorporated by reference; (c) the matter incorporated by reference is clearly identified by page, paragraph, caption or otherwise; and (d) if the matter incorporated by reference is not filed with this Schedule, an indication is made where the information may be inspected and copies obtained. Financial statements that are required to be presented in comparative form for two or more fiscal years or periods may not be incorporated by reference unless the material incorporated by reference includes the entire period for which the comparative data is required to be given. See General Instruction F to this Schedule. Item 14. Persons/Assets, Retained, Employed, Compensated or Used

Furnish the information required by Item 1009 of Regulation M-A (Sec. 229.1009 of this chapter). Item 15. Additional Information

Furnish the information required by Item 1011(b) of Regulation M-A (Sec. 229.1011 of this chapter). Item 16. Exhibits

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

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

(Signature)—————————————————————————————-- (Name and title)———————————————————————————- (Date)————————————————————————————————-

Instruction to Signature:

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

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

Sec. 240.14a-4 [Amended]

27. By amending Sec. 240.14a-4, paragraph (f), remove the words “, or mailed for filing to,”.

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

Sec. 240.14a-6 Filing requirements.

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(e) Public availability of information. All copies of preliminary proxy statements and forms of proxy filed under paragraph (a) of this section must be clearly marked “Preliminary Copies,” and will be deemed immediately available for public inspection. * * * * *

(j) Merger proxies. Any proxy statement, form of proxy or other soliciting material required to be filed by this section that also is included in a registration statement filed under the Securities Act of 1933 on Forms C (Sec. 239.6 of this chapter), SB-3 (Sec. 239.11 of this chapter) or N-14 (Sec. 239.23 of this chapter) or filed under Sec. Sec. 230.424 or 230.425 of this chapter may be filed only under the Securities Act, and will be deemed to be filed under this section. In that case, the fee required under paragraph (i) of this section need not be paid. * * * * *

(o) Solicitations before furnishing a definitive proxy statement. Solicitations that are published, sent or given to security holders before they have been furnished a definitive proxy statement must be made in accordance with Sec. Sec. 240.14a-11 or 240.14a-12.

Sec. 240.14a-11 [Amended]

29. By amending Sec. 240.14a-11 in paragraph (c) remove the words “, or mailed for filing to,” from the first sentence.

30. By revising the section heading and Sec. 240.14a-12 to read as follows:

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

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

made before furnishing security holders with a written proxy statement meeting the requirements of Sec. 240.14a-3(a) if:

(1) No form of proxy is furnished to security holders before a definitive written proxy statement required by Sec. 240.14a-3(a) is furnished to security holders;

(2) Each communication made in connection with the solicitation includes:

(i) The identity of the participants in the solicitation (as defined in Instruction 3 to Item 4 of Schedule 14A (Sec. 240.14a-101)) and a description of their interests direct or indirect, by security holdings or otherwise; and

(ii) A prominent legend in clear, plain language advising security holders to read the proxy statement when it is available because it contains important information. The legend also must advise investors that they can get the proxy statement and other filed documents for free at the SEC's web site and explain which documents are free from the issuer; and

(3) A written proxy statement meeting the requirements of this regulation is sent or given to security holders solicited pursuant to this section at the earliest practicable date.

(b) Any soliciting material published, sent or given to security holders in accordance with paragraph (a) of this section must be filed with the Commission no later than the date the material is published, sent or given to security holders. Three copies of the material must at the same time be filed with, or mailed for filing to, each national securities exchange upon which any class of securities of the registrant is listed and registered. The soliciting material must include a cover page in the form set forth in Schedule 14A (Sec. 240.14a-101) and the appropriate box on the cover page must be marked. Soliciting material in connection with a registered offering must be filed only under Sec. 230.425 of this chapter, and will be deemed to be filed under this section.

Instructions to Sec. 240.14a-12

1. Communications of the type described by Sec. 230.169 of this chapter need not be filed under this section.

2. If paper filing is permitted, file eight copies of the soliciting material with the Commission.

3. Any communications made under this rule after the definitive proxy statement is on file but before it is disseminated also must specify that the proxy statement is publicly available and the anticipated date of dissemination.

4. By amending Sec. 240.14a-101 on the cover page by removing the box and accompanying text “Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))”; removing Notes D.3 and D.4; in Note G, redesignate the second paragraph (2)(e) and paragraphs (2)(f), (2)(g) and (2)(h) as paragraphs (2)(f), (2)(g), (2)(h) and (2)(i), in newly redesignated paragraph (2)(f) and paragraph (3)(f), revising the reference “Items 13 or 14” to read “Item 13”, removing newly redesignated paragraphs (2)(h) and (2)(i) and paragraphs (3)(h) and (3)(i), adding the word “and” after newly redesignated paragraph (2)(f) and paragraph (3)(f), and removing the semicolons after newly redesignated paragraph (2)(g) and paragraph (3)(g) and in their place add a period; and revising Item 14 to read as follows:

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

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Item 14. Mergers, consolidations, acquisitions and similar matters. (See Notes A and D at the beginning of this Schedule.)

Instructions to Item 14

1. In transactions in which the consideration consists wholly or in part of securities registered under the Securities Act of 1933, furnish the information required by Form C (Sec. 239.6 of this chapter) or Form SB-3 (Sec. 239.11 of this chapter), as applicable, instead of this Item. Only a Form C (or Form SB-3) must be filed in accordance with Sec. 240.14a-6(j).

2. In transactions in which the consideration consists wholly of cash, information about the acquiring company required by paragraph (c)(1) of this Item need not be provided unless the information is material to an informed voting decision (e.g., the security holders of the target company are voting and financing is not assured). Additionally, if only the security holders of the target company are voting:

i. Financial information in paragraphs (b)(8)-(11) of this Item need not be provided; and

ii. Information about the target company in paragraph (c)(2) of this Item need not be provided. However, the information required by paragraph (c)(2) of this Item must be provided if the transaction is a going-private (as defined by Sec. 240.13e-3) or roll-up (as described by Item 901 of Regulation S-K (Sec. 229.901 of this chapter)) transaction.

3. In transactions in which the consideration consists wholly of securities exempt under the Securities Act of 1933 or partially of exempt securities and partially of cash, information about the acquiring company required by paragraph (c)(1) of this Item need not be provided if only the security holders of the acquiring company are voting, unless the information is material to an informed voting decision. Additionally, if only the security holders of the target company are voting, information about the target company in paragraph (c)(2) of this Item need not be provided. However, the information required by paragraph (c)(2) of this Item must be provided if the transaction is a going-private (as defined by Sec. 240.13e-3) or roll-up (as described by Item 901 of Regulation S-K (Sec. 229.901 of this chapter)) transaction.

4. The information required by paragraphs (b)(8)-(11) and (c) need not be provided if the plan being voted on involves only the acquiring company and one or more of its totally held subsidiaries and does not involve a liquidation or a spin-off.

5. To facilitate compliance with Rule 2-02(a) of Regulation S-X (Sec. 210.2-02(a) of this chapter) (technical requirements relating to accountants' reports), one copy of the definitive proxy statement filed with the Commission must include a signed copy of the accountant's report. If the financial statements are incorporated by reference, a signed copy of the accountant's report must be filed with the definitive proxy statement.

6. Notwithstanding the provisions of Regulation S-X, no schedules other than those prepared in accordance with Secs. 210.12-15, 210.12-28 and 210.12-29 of this chapter (or, for management investment companies, Secs. 210.12-12 through 210.12-14 of this chapter) of that regulation need be furnished in the proxy statement.

7. If the preliminary proxy material incorporates by reference financial statements required by this Item, a draft of the financial statements must be furnished to the Commission staff upon request if the document from which they are incorporated has not been filed with or furnished to the Commission.

8. Unless registered on a national securities exchange or otherwise required to furnish such information, registered investment companies need not furnish the information required by paragraphs (b)(8) and (b)(9) of this Item or paragraphs (h), (i) and (j) of Item 14 of Form C (Sec. 239.6).

9. A registered management investment company need not comply with paragraphs (a), (d), (h), (i), (j) and (l) of Item 14 of Form C (Sec. 239.6).

(a) Applicability. If action is to be taken with respect to any of the following transactions, provide the information required by this Item:

(1) A merger or consolidation;

(2) An acquisition of securities of another person;

(3) An acquisition of any other going business or the assets of a going business;

(4) A sale or other transfer of all or any substantial part of assets; or

(5) A liquidation or dissolution.

(b) Transaction information. Provide the following information for each of the parties to the transaction unless otherwise specified:

(1) Summary term sheet. The information required by Item 1001 of Regulation M-A (Sec. 229.1001 of this chapter).

(2) Contact information. The name, complete mailing address and telephone number of the principal executive offices.

(3) Business conducted. A brief description of the general nature of the business conducted.

(4) Terms of the transaction. The information required by Item 1004(a)(2) of Regulation M-A (Sec. 229.1004 of this chapter).

(5) Regulatory approvals. A statement as to whether any federal or state regulatory

requirements must be complied with or approval must be obtained in connection with the transaction and, if so, the status of the compliance or approval.

(6) Reports, opinions, appraisals. If a report, opinion or appraisal materially relating to the transaction has been received from an outside party, and such report, opinion or appraisal is referred to in the proxy statement, furnish the information required by Item 1015(b) of Regulation M-A (Sec. 229.1015 of this chapter).

(7) Past contacts, transactions or negotiations. The information required by Items 1005(b) and 1011(a)(1) of Regulation M-A (Sec. 229.1005 of this chapter and Sec. 229.1011 of this chapter), for the parties to the transaction and their affiliates during the periods for which financial statements are presented or incorporated by reference under this Item.

(8) Selected financial data. The selected financial data required by Item 301 of Regulation S-K (Sec. 229.301 of this chapter).

(9) Pro forma selected financial data. If material, the information required by Item 301 of Regulation S-K (Sec. 229.301 of this chapter), showing the pro forma effect of the transaction.

(10) Pro forma information. In a table designed to facilitate comparison, historical and pro forma per share data of the acquiring company and historical and equivalent pro forma per share data of the target company for the following Items:

(i) Book value per share as of the date financial data is presented pursuant to Item 301 of Regulation S-K (Sec. 229.301 of this chapter);

(ii) Cash dividends declared per share for the periods for which financial data is presented pursuant to Item 301 of Regulation S-K (Sec. 229.301 of this chapter); and

(iii) Income (loss) per share from continuing operations for the periods for which financial data is presented pursuant to Item 301 of Regulation S-K (Sec. 229.301 of this chapter).

Instructions to Paragraphs (b)(9) and (b)(10)

1. For a business combination accounted for as a purchase, present the financial information required by paragraphs (b)(9) and (b)(10) only for the most recent fiscal year and interim period. For a business combination accounted for as a pooling, present the financial information required by paragraphs (b)(9) and (b)(10) (except for information with regard to book value) for the most recent three fiscal years and interim period. For purposes of these paragraphs, book value information need only be provided for the most recent balance sheet date.

2. Calculate the equivalent pro forma per share amounts for one share of the company being acquired by multiplying the exchange ratio times each of:

(i) The pro forma income (loss) per share before non-recurring charges or credits directly attributable to the transaction;

(ii) The pro forma book value per share; and

(iii) The pro forma dividends per share of the acquiring company.

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

Instructions to Paragraph (b)(11)

1. Present any Article 11 information required by the other Items of this schedule (where not incorporated by reference) together with the information provided under this Item. In presenting this information, you must clearly distinguish between this transaction and any other.

2. You need only show the pro forma effect that this transaction has on any pro forma financial information that:

(i) Is incorporated by reference; and

(ii) Reflects all prior transactions.

(c) Information about the parties to the transaction.

(1) Acquiring company. Furnish the information required by Part II (Registrant Information) of Form C (Sec. 239.6 of this chapter) or Form SB-3 (Secs. 239.11 of this chapter) for the acquiring company. However, financial statements need only be presented for the latest two fiscal years and interim period.

(2) Acquired company. Furnish the information required by Part III (Information with Respect to the Company Being Acquired) of Form C (Sec. 239.6 of this chapter).

Instruction to Paragraph (c)

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

Sec. 240.14c-2 [Amended]

32. By amending the introductory text in paragraph (a) of Sec. 240.14c-2 by removing the reference “Form S-4 or F-4 (Sec. 239.25 or Sec. 239.34 of this chapter)” and in its place add “Form C or SB-3 (Sec. 239.6 or Sec. 239.11 of this chapter)”; removing the reference “Form S-4 (17 CFR 229.25) or Form F-4 (17 CFR 229.34)” in paragraph (c) and in its place add “Form C or SB-3 (Sec. 239.6 or Sec. 239.11 of this chapter)”.

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

Sec. 240.14c-5 Filing requirements.

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

Sec. 240.14c-101 [Amended]

34. By amending the cover page of Sec. 240.14c-101 by removing the box and accompanying text “Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))”.

35. By amending Sec. 240.14d-1 by removing the reference “Schedules 14D-1” in the introductory text of paragraph (b) and adding in its place “Schedules TO”; redesignating paragraphs (e)(1), (e)(2), (e)(3), (e)(4), (e)(5), (e)(6) and (e)(7) as paragraphs (e)(2), (e)(7), (e)(5), (e)(1), (e)(9), (e)(3) and (e)(6), respectively; in newly redesignated paragraph (e)(1) remove the reference “Rule 14d-3, Rule 14d-9(d) and Item 6 of Schedule 14D-1” and in its place add “Rule 14d-3 and Rule 14d-9(d)”; and adding new paragraphs (e)(4) and (e)(8) to read as follows:

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

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(e) Definitions. * * *

(4) The term initial offering period means the period from the time the offer commences until all minimum time periods, including extensions, required by Regulations 14D (Secs. 240.14d-1 through 240.14d-103) and 14E (Secs. 240.14e-1 through 240.14e-8) have been satisfied and all conditions to the offer have been satisfied or waived within these time periods. * * * * *

(8) The term “subsequent offering period” means the ten business day period immediately following the initial offering period meeting the conditions specified in Sec. 240.14d-11. * * * * *

36. By revising the section heading and Sec. 240.14d-2 to read as follows:

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

(a) Date of commencement. A bidder will have commenced its tender offer for purposes of section 14(d) of the Act (15 U.S.C. 78n) and the rules promulgated thereunder at 12:01 a.m. on the date when the bidder has first published, sent or given the means to tender to security holders. For purposes of this section, the means to tender includes the transmittal form or a statement regarding how the transmittal form may be obtained.

(b) Pre-commencement communications. A communication by the bidder will not be deemed to constitute commencement of a tender offer if:

(1) It does not include the means for security holders to tender their shares into the offer; and

(2) All written communications relating to the tender offer, from and including the first public announcement, are filed under cover of Schedule TO (Sec. 240.14d-100) with the Commission as soon as practicable on the date of the communication. The bidder also must deliver to the subject company and any other bidder for the same class of securities the first communication that discloses the identities of the bidder and the subject company, the amount and class of securities sought, and the price or range of prices offered, as soon as practicable on the date of the communication.

Instructions to Paragraph (b)(2)

1. The box on the front of Schedule TO indicating that the filing contains pre-commencement communications must be checked.

2. Any communications made in connection with an exchange offer registered under the Securities Act of 1933 need only be filed under Sec. 230.425 of this chapter and will be deemed to have been filed under this section as well.

3. Each pre-commencement communication must include a prominent legend in clear, plain language advising security holders to read the tender offer statement when it is available because it contains important information. The legend also must advise investors that they can get the tender offer statement and other filed documents for free at the SEC's web site and explain which documents are free from the issuer.

4. For pre-commencement communications in connection with registered exchange offers, also see Secs. 230.135, 230.166, 230.167, 230.168 and 230.169 of this chapter.

5. Communications of the type described under Sec. 230.169 need not be filed under this section.

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

37. By amending Sec. 240.14d-3 by removing the reference “Schedule 14D-1” in paragraphs (a)(1), (a)(2), (a)(2)(ii), the introductory text of (a)(3), and paragraph (c) each time it appears and adding in its place “Schedule TO”; removing the word “ten copies of” in paragraphs (a)(1); and revising paragraph (b) to read as follows:

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

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(b) Post-commencement amendments and additional materials. The bidder making the tender offer must file with the Commission:

(1) An amendment to Schedule TO (Sec. 240.14d-100) reporting promptly any material changes in the information set forth in the schedule previously filed and including copies of any additional tender offer materials as exhibits; and

(2) A final amendment to Schedule TO (Sec. 240.14d-100) reporting promptly the results of the tender offer.

Instruction to Paragraph (b)

A copy of any additional tender offer materials or amendment filed under this section must be sent promptly to the subject company and to any exchange and/or NASD, as required by paragraph (a) of this section, but in no event later than the date the materials are first published, sent or given to security holders. * * * * *

38. Amend Sec. 240.14d-4 by revising the section heading and adding introductory text to Sec. 240.14d-4; revising the introductory text of paragraph (a); removing paragraph (a)(1); redesignating paragraphs (a)(2) and (a)(3) as paragraphs (a)(1) and (a)(2); revising newly redesignated paragraph (a)(2); adding an Instruction to paragraph (a); redesignating paragraphs (b) and (c) as paragraphs (c) and (d)(1) and adding a new paragraph (b); revising the heading of newly redesignated paragraph (d); in the first sentence of newly redesignated paragraph (d)(1) remove the phrase “paragraph (a) of”; and adding paragraph (d)(2) to read as follows:

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

As soon as practicable on the date of commencement of a tender offer, the bidder must publish, send or give the disclosure required by Sec. 240.14d-6 to security holders of the class of securities that is the subject of the offer, by complying with all of the requirements of any of the following:

(a) Cash tender offers and exempt securities offers. For tender offers in which the consideration consists solely of cash and/or securities exempt from registration under section 3 of the Securities Act of 1933 (15 U.S.C. 77c):

(1) Summary publication. * * *

(2) Use of stockholder lists and security position listings. Any bidder using stockholder lists and security position listings under Sec. 240.14d-5 must comply with paragraph (a)(1) of this section on or before the date of the bidder's request for such lists or listing under Sec. 240.14d-5(a).

Instruction to Paragraph (a)

Tender offers may be published or sent or given to security holders by other methods, but with respect to summary publication and the use of stockholder lists and security position listings under Sec. 240.14d-5, paragraphs (a)(1) and (a)(2) of this section are exclusive.

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

Instructions to Paragraph (b)

1. If the prospectus is being delivered by mail, mailing on the date of commencement is sufficient.

2. A preliminary prospectus used under this section may not omit information under Sec. 230.430 and 230.430A of this chapter.

3. If a preliminary prospectus is used under this section and the bidder must disseminate material changes, the tender offer must remain open for the period specified in paragraph (d)(2) of this section.

4. If a preliminary prospectus is used under this section, tenders may be requested in accordance with Sec. 230.162 of this chapter.

(c) Adequate publication. * * *

(d) Publication of changes and extension of the offer.

(1) * * *

(2) In a registered securities offer where the bidder disseminates the preliminary prospectus as permitted by paragraph (b) of this section, the offer must remain open from the date that material changes to the tender offer materials are disseminated to security holders, as follows:

(i) Five business days for a supplement containing a material change other than price or share levels;

(ii) Ten business days for a supplement containing a change in price, the amount of securities sought, the dealer's soliciting fee, or other similarly significant change;

(iii) Ten business days for a supplement included as part of a post-effective amendment; and

(iv) Twenty business days for a revised prospectus when the initial prospectus was materially deficient.

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.

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(c) * * *

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

40. By revising the section heading and Sec. 240.14d-6 to read as follows:

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

(a) Information required on date of commencement. (1) Summary publication. If a tender offer is published, sent or given to security holders on the date of commencement by means of summary publication under Sec. 240.14d-4(a)(1):

(i) The summary advertisement must contain at least the information required by paragraph (d)(2) of this section; and

(ii) The tender offer materials furnished by the bidder upon request of any security holder must include the information required by paragraph (d)(1) of this section.

(2) Use of stockholder lists and security position listings. If a tender offer is published, sent or given to security holders on the date of commencement by the use of stockholder lists and security position listings under Sec. 240.14d-4(a)(2):

(i) The summary advertisement must contain at least the information required by paragraph (d)(2) of this section; and

(ii) The tender offer materials transmitted to security holders pursuant to such lists and security position listings and furnished by the bidder upon the request of any security holder must include the information required by paragraph (d)(1) of this section.

(3) Other tender offers. If a tender offer is published or sent or given to security holders other than pursuant to Sec. 240.14d-4(a), the tender offer materials that are published or sent or given to security holders on the date of commencement of such offer must include the information required by paragraph (d)(1) of this section.

(b) Information required in other tender offer materials published after commencement. Except for tender offer materials described in paragraphs (a)(1)(ii) and (a)(2)(ii) of this section, additional tender offer materials published, sent or given to security holders after commencement must include:

(1) The identities of the bidder and subject company;

(2) The amount and class of securities being sought;

(3) The type and amount of consideration being offered; and

(4) The scheduled expiration date of the tender offer, whether the tender offer may be extended and, if so, the procedures for extension of the tender offer.

Instruction to Paragraph (b)

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

(c) Material changes. A material change in the information published or sent or given to security holders must be promptly disclosed to security holders in additional tender offer materials.

(d) Information to be included. (1) Tender offer materials other than summary publication. The following information is required by paragraphs (a)(1)(ii), (a)(2)(ii) and (a)(3) of this section:

(i) The information required by Item 1 of Schedule TO (Sec. 240.14d-100) (Summary Term Sheet); and

(ii) The information required by the remaining items of Schedule TO (Sec. 240.14d-100) for third-party tender offers, except for Item 12 (exhibits) of Schedule TO (Sec. 240.14d-100), or a fair and adequate summary of the information.

(2) Summary publication. The following information is required in a summary advertisement under paragraphs (a)(1)(i) and (a)(2)(i) of this section:

(i) The identity of the bidder and the subject company;

(ii) The information required by Item 1004(a)(1) of Regulation M-A (Sec. 229.1004(a)(1) of this chapter);

(iii) If the tender offer is for less than all of the outstanding securities of a class of equity securities, a statement as to whether the purpose or one of the purposes of the tender offer is to acquire or influence control of the business of the subject company;

(iv) A statement that the information required by paragraph (d)(1) of this section is incorporated by reference into the summary advertisement;

(v) Appropriate instructions as to how security holders may obtain promptly, at the bidder's expense, the bidder's tender offer materials; and

(vi) In a tender offer published or sent or given to security holders by use of stockholder lists and security position listings under Sec. 240.14d-4(a)(3), a statement that a request is being made for such lists and listings. The summary publication also must state that tender offer materials will be mailed to record holders and will be furnished to brokers, banks and similar persons whose name appears or whose nominee appears on the list of security holders or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of such securities. If the list furnished to the bidder also included beneficial owners pursuant to Sec. 240.14d-5(c)(1) and tender offer materials will be mailed directly to beneficial holders, a statement to that effect also should be included.

(3) No transmittal letter. Neither the initial summary advertisement nor any subsequent summary advertisement may include a transmittal letter (the letter furnished to security holders for transmission of securities sought in the tender offer) or any amendment to the transmittal letter.

41. By amending Sec. 240.14d-7 to redesignate paragraph (a) as (a)(1) and to add paragraph (a)(2) to read as follows:

Sec. 240.14d-7 Additional withdrawal rights.

(a) * * *

(2) Exemption during subsequent offering period. Notwithstanding the provisions of Section 14(d)(5) of the Act (15 U.S.C. 78n(d)(5)) and paragraph (a) of this section, the bidder need not offer withdrawal rights during a subsequent offering period. * * * * *

42. By amending Sec. 240.14d-9 by revising the section heading; redesignating paragraphs (a) through (f) as paragraphs (b) through (g); adding new paragraph (a); and revising the introductory text of newly redesignated paragraph (b) to read as follows:

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

(a) Pre-commencement communications. A communication by persons described in paragraph (e) of this section with respect to a tender offer will not be deemed to constitute a recommendation or solicitation under this section if:

(1) The tender offer has not commenced under Sec. 240.14d-2; and

(2) The communications are filed under cover of Schedule 14D-9 (Sec. 240.14d-101) with the Commission as soon as practicable on the date of the communication.

Instructions to Paragraph (a)(2)

1. The box on the front of Schedule 14D-9 (Sec. 240.14d-101) indicating that the filing contains pre-commencement communications must be checked.

2. Any communications made in connection with an exchange offer registered under the Securities Act of 1933 need only be filed under Sec. 230.425 of this chapter and will be deemed to have been filed under this section as well.

3. For pre-commencement communications in connection with registered exchange offers, also see Secs. 230.135, 230.166, 230.167, 230.168 and 230.169 of this chapter.

4. Communications of the type described under Sec. 230.169 need not be filed under this section.

(b) Post-commencement communications. After commencement by a bidder under Sec. 240.14d-2, no solicitation or recommendation to security holders may be made by any person described in paragraph (e) of this section with respect to a tender offer for such securities unless as soon as practicable on the date such solicitation or recommendation is first published or sent or given to security holders such person complies with the following: * * * * *

Sec. 240.14d-9 [Amended]

43. By amending Sec. 240.14d-9 by removing the words “eight copies of” in newly redesignated paragraph (b)(1); removing the reference “14D-1” in newly redesignated paragraphs (b)(2)(i) and (b)(3)(i) and in its place add “TO”, removing the reference “Items 2 and 4(a) of Schedule 14D-9” in newly redesignated paragraph (b)(2)(ii) and in its place add “Items 1003(d) and 1012(a) of Regulation M-A (Sec. 229.1003(d) and Sec. 229.1012(a))”; removing the reference “paragraph (a)(2) or (3)” in newly redesignated paragraph (c)(2) and in its place add “paragraph (b)(2) or (3)”; removing the reference “Items 1, 2, 3(b), 4, 6, 7 and 8” in newly redesignated paragraph (d) and in its place add “Items 1 through 8”; removing the reference “paragraphs (d)(2) and (e)” in the introductory text of newly redesignated paragraph (e)(1) and in its place add “paragraphs (e)(2) and (f)”; removing the reference “14D-1 (Sec. 240.14d-101)” in newly redesignated paragraph (e)(2)(i) and in its place add “TO (Sec. 240.14d-100)”; and removing the reference to “paragraph (e)(3)” in newly redesignated paragraph (f)(4) and in its place add “paragraph (f)(3)”.

44. By adding Sec. 240.14d-11 to read as follows:

Sec. 240.14d-11. Subsequent offering period.

A bidder may elect to provide a ten business day subsequent offering period during which tenders will be accepted if:

(a) The initial offering period has expired;

(b) The offer is for all outstanding securities of the class that is the subject of the tender offer;

(c) When the initial offering period expires, the bidder immediately accepts and promptly pays for all securities tendered during the initial offering period;

(d) The bidder immediately accepts and promptly pays for all securities as they are tendered during the subsequent offering period;

(e) The bidder discloses its intention to offer a subsequent offering period and describes the subsequent offering period in the initial tender offer materials filed and disseminated to security holders. If the bidder elects to offer a subsequent offering period after the initial tender offer materials have been disseminated to security holders, it must amend the tender offer materials to reflect this decision, disseminate the information to security holders in a manner reasonably calculated to inform security holders of this change, and give shareholders a sufficient period of time to consider the information; and

(f) The bidder intends to acquire all securities remaining after the tender offer through a merger or similar transaction, and discloses this intention in the initial or supplemental tender offer materials filed and disseminated to security holders.

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

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

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

Schedule TO

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

(Amendment No. )*—————————————————————————-- (Name of Subject Company (issuer))——————————————————- (Names of Filing Persons (identifying status as offeror, issuer or other person))————————————————————————————- (Title of Class of Securities)————————————————————- (CUSIP Number of Class of Securities)————————————————--

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

Calculation of Filing Fee

Transaction valuation* Amount of filing fee

*Set forth the amount on which the filing fee is calculated and state

how it was determined.

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

Amount Previously Paid:———————————————————————-- Form or Registration No.:——————————————————————-- Filing Party:————————————————————————————-- Date Filed:—————————————————————————————--

[ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

[ ] third-party tender offer subject to Rule 14d-1. [ ] issuer tender offer subject to Rule 13e-4. [ ] going-private transaction subject to Rule 13e-3. [ ] amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ]

General Instructions

A. File eight copies of the statement, including all exhibits, with the Commission if paper filing is permitted.

B. This filing must be accompanied by a fee payable to the Commission as required by Sec. 240.0-11.

C. If the statement is filed by a partnership, limited partnership, syndicate or other group, the information called for by Items 3 and 5-9 for a third-party tender offer and Items 5-8 for an issuer tender offer must be given with respect to: (i) each partner of the partnership; (ii) each partner who is, or functions as, a general partner of the limited partnership; (iii) each member of the syndicate or group; and (iv) each person controlling the partner or member. If the statement is filed by a corporation or if a person referred to in

(i), (ii), (iii) or (iv) of this Instruction is a corporation, the information called for by the items specified above must be given with respect to: (a) each executive officer and director of the corporation; (b) each person controlling the corporation; and (c) each executive officer and director of any corporation or other person ultimately in control of the corporation.

D. If the filing contains only preliminary communications made before the commencement of a tender offer, no signature or filing fee is required. The filer need not respond to the items in the schedule. Any pre-commencement communications that are filed under cover of this schedule need not be incorporated by reference into the schedule.

E. If an item is inapplicable or the answer is in the negative, so state. The statement published, sent or given to security holders may omit negative and not applicable responses. If the schedule includes any information that is not published, sent or given to security holders, provide that information or specifically incorporate it by reference under the appropriate item number and heading in the schedule. Do not recite the text of disclosure requirements in the schedule or any document published, sent or given to security holders. Indicate clearly the coverage of the requirements without referring to the text of the items.

F. Information contained in exhibits to the statement may be incorporated by reference in answer or partial answer to any item unless it would render the answer misleading, incomplete, unclear or confusing. A copy of any information that is incorporated by reference or a copy of the pertinent pages of a document containing the information must be submitted with this statement as an exhibit, unless it was previously filed with the Commission electronically on EDGAR. If an exhibit contains information responding to more than one item in the schedule, all information in that exhibit may be incorporated by reference once in response to the several items in the schedule for which it provides an answer. Information incorporated by reference is deemed filed with the Commission for all purposes of the Securities Exchange Act of 1934 (“the Act”).

G. A filing person may amend its previously filed Schedule 13D (Sec. 240.13d-101) on Schedule TO (Sec. 240.14d-100) if the appropriate box on the cover page is checked to indicate a combined filing and the information called for by the fourteen disclosure items on the cover page of Schedule 13D (Sec. 240.13d-101) is provided on the cover page of the combined filing with respect to each filing person.

H. The final amendment required by Secs. 240.14d-3(b)(2) and 240.13e-4(c)(4) will satisfy the reporting requirements of section 13(d) of the Act with respect to all securities acquired by the offeror in the tender offer.

I. Amendments disclosing a material change in the information set forth in this statement may omit any information previously disclosed in this statement.

J. If the tender offer disclosed on this statement involves a going-private transaction, a combined Schedule TO (Sec. 240.14d-100) and Schedule 13E-3 (Sec. 240.13e-100) may be filed with the Commission under cover of Schedule TO. The Rule 13e-3 box on the cover page of the Schedule TO must be checked to indicate a combined filing. All information called for by both schedules must be provided except that Items 1-3, 5, 8 and 9 of Schedule TO may be omitted to the extent those items call for information that duplicates the item requirements in Schedule 13E-3.

K. For purposes of this statement, the following definitions apply:

(1) The term offeror means any person on whose behalf a tender offer is made;

(2) The term issuer tender offer has the same meaning as in Rule 13e-4(a)(2); and

(3) The term third-party tender offer means a tender offer that is not an issuer tender offer.

Special Instructions for Complying With Schedule to:

Under Sections 13(e), 14(d) and 23 of the Act and the rules and regulations of the Act, the Commission is authorized to solicit the information required to be supplied by this schedule.

Disclosure of the information specified in this schedule is mandatory, except for I.R.S. identification numbers, disclosure of which is voluntary. The information will be used for the primary purpose of disclosing tender offer and going-private transactions. This statement will be made a matter of public record. Therefore, any information given will be available for inspection by any member of the public.

Because of the public nature of the information, the Commission can use it for a variety of purposes, including referral to other governmental authorities or securities self-regulatory organizations for investigatory purposes or in connection with litigation involving the Federal securities laws or other civil, criminal or regulatory statutes or provisions. I.R.S. identification numbers, if furnished, will assist the Commission in identifying security holders and, therefore, in promptly processing tender offer and going-private statements.

Failure to disclose the information required by this schedule, except for I.R.S. identification numbers, may result in civil or criminal action against the persons involved for violation of the Federal securities laws and rules. Item 1. Summary Term Sheet

Furnish the information required by Item 1001 of Regulation M-A (Sec. 229.1001 of this chapter). Item 2. Subject Company Information

Furnish the information required by Item 1002(a) through (c) of Regulation M-A (Sec. 229.1002 of this chapter). Item 3. Identity and Background of Filing Person

Furnish the information required by Item 1003(a) through (c) of Regulation M-A (Sec. 229.1003 of this chapter) for a third-party tender offer and the information required by Item 1003(a) of Regulation M-A (Sec. 229.1003 of this chapter) for an issuer tender offer. Item 4. Terms of the Transaction

Furnish the information required by Item 1004(a) of Regulation M-A (Sec. 229.1004 of this chapter) for a third-party tender offer and the information required by Item 1004(a) through (b) of Regulation M-A (Sec. 229.1004 of this chapter) for an issuer tender offer. Item 5. Past Contacts, Transactions, Negotiations and Agreements

Furnish the information required by Item 1005(a) and (b) of Regulation M-A (Sec. 229.1005 of this chapter) for a third-party tender offer and the information required by Item 1005(e) of Regulation M-A (Sec. 229.1005) for an issuer tender offer. Item 6. Purpose of the Transaction and Plans or Proposals

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

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

Item 8. Interest in Securities of the Subject Company

Furnish the information required by Item 1008 of Regulation M-A (Sec. 229.1008 of this chapter). Item 9. Persons/Assets, Retained, Employed, Compensated or Used

Furnish the information required by Item 1009(a) of Regulation M-A (Sec. 229.1009 of this chapter). Item 10. Financial Statements

If material, furnish the information required by Item 1010(a) and (b) of Regulation M-A (Sec. 229.1010 of this chapter) for the issuer in an issuer tender offer and for the offeror in a third-party tender offer.

Instructions to Item 10

1. Financial statements must be provided when the offeror's financial condition is material to security holder's decision whether to sell, tender or hold the securities sought. The facts and circumstances of a tender offer, particularly the terms of the tender offer, may influence a determination as to whether financial statements are material, and thus required to be disclosed.

2. Financial statements are not considered material when: (a) the consideration offered consists solely of cash; (b) the offer is not subject to any financing condition; and either: (c) the offeror is a public reporting company under Section 13(a) or 15(d) of the Act, or (d) the offer is for all outstanding securities of the subject class.

3. The filing person may incorporate by reference financial statements contained in any document filed with the Commission, solely for the purposes of this schedule, if: (a) the financial statements substantially meet the requirements of this item; (b) an express statement is made that the financial statements are incorporated by reference; (c) the matter incorporated by reference is clearly identified by page, paragraph, caption or otherwise; and (d) if the matter incorporated by reference is not filed with this schedule, an indication is made where the information may be inspected and copies obtained. Financial statements that are required to be presented in comparative form for two or more fiscal years or periods may not be incorporated by reference unless the material incorporated by reference includes the entire period for which the comparative data is required to be given. See General Instruction F to this schedule.

4. If the offeror in a third-party tender offer is a natural person, and such person's financial information is material, disclose the net worth of the offeror. If the offeror's net worth is derived from material amounts of assets that are not readily marketable or there are material guarantees and contingencies, provide appropriate disclosure.

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

6. The disclosure materials disseminated to security holders may contain the summarized financial information specified by Item 1010(c) of Regulation M-A (Sec. 229.1010 of this chapter) instead of the financial information required by Item 1010(a) and (b). In that case, the financial information required by Item 1010(a) and (b) of Regulation M-A must be disclosed directly or incorporated by reference in the statement. If summarized financial information is disseminated to security holders, include appropriate instructions on how more complete financial information can be obtained. If the summarized financial information is prepared on the basis of a comprehensive body of accounting principles other than U.S. GAAP, the summarized financial information must be accompanied by a reconciliation as described in Instruction 8 of this Item.

7. If the offeror is not subject to the periodic reporting requirements of the Act, the financial statements required by this Item need not be audited if audited financial statements are not available or obtainable without unreasonable cost or expense. Make a statement to that effect and the reasons for their unavailability.

8. If the financial statements required by this Item are prepared on the basis of a comprehensive body of accounting principles other than U.S. GAAP, provide a reconciliation to U.S. GAAP in accordance with Item 17 of Form 20-F (Sec. 249.220f of this chapter), unless a reconciliation is unavailable or not obtainable without unreasonable cost or expense. At a minimum, however, when financial statements are prepared on a basis other than U.S. GAAP, a narrative description of all material variations in accounting principles, practices and methods used in preparing the non-U.S. GAAP financial statements from those accepted in the U.S. must be presented. Item 11. Additional Information

Furnish the information required by Item 1011 of Regulation M-A (Sec. 229.1011 of this chapter). Item 12. Exhibits

File as an exhibit to the Schedule all documents specified by Item 1016(a), (b), (d), (g) and (h) of Regulation M-A (Sec. 229.1016 of this chapter). Item 13. Information Required by Schedule 13E-3

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

Signature

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

(Signature)—————————————————————————————-- (Name and title)———————————————————————————- (Date)————————————————————————————————-

Instruction to Signature:

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

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

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

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

Schedule 14D-9

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

(Amendment No.——-- )————————————————————————- (Name of Subject Company)——————————————————————-- (Names of Persons Filing Statement)—————————————————-- (Title of Class of Securities)————————————————————- (CUSIP Number of Class of Securities)————————————————--

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

( ) Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

General Instructions

A. File eight copies of the statement, including all exhibits, with the Commission if paper filing is permitted.

B. If the filing contains only preliminary communications made before the commencement of a tender offer, no signature is required. The filer need not respond to the items in the schedule. Any pre-commencement communications that are filed under cover of this schedule need not be incorporated by reference into the schedule.

C. If an item is inapplicable or the answer is in the negative, so state. The statement published, sent or given to security holders may omit negative and not applicable responses. If the schedule includes any information that is not

published, sent or given to security holders, provide that information or specifically incorporate it by reference under the appropriate item number and heading in the schedule. Do not recite the text of disclosure requirements in the schedule or any document published, sent or given to security holders. Indicate clearly the coverage of the requirements without referring to the text of the items.

D. Information contained in exhibits to the statement may be incorporated by reference in answer or partial answer to any item unless it would render the answer misleading, incomplete, unclear or confusing. A copy of any information that is incorporated by reference or a copy of the pertinent pages of a document containing the information must be submitted with this statement as an exhibit, unless it was previously filed with the Commission electronically on EDGAR. If an exhibit contains information responding to more than one item in the schedule, all information in that exhibit may be incorporated by reference once in response to the several items in the schedule for which it provides an answer. Information incorporated by reference is deemed filed with the Commission for all purposes of the Securities Exchange Act of 1934 (“the Act”).

E. Amendments disclosing a material change in the information set forth in this statement may omit any information previously disclosed in this statement. Item 1. Subject Company Information

Furnish the information required by Item 1002(a) and (b) of Regulation M-A (Sec. 229.1002 of this chapter). Item 2. Identity and Background of Filing Person

Furnish the information required by Item 1003(a) and (d) of Regulation M-A (Sec. 229.1003 of this chapter). Item 3. Past Contacts, Transactions, Negotiations and Agreements

Furnish the information required by Item 1005(d) of Regulation M-A (Sec. 229.1005 of this chapter). Item 4. The Solicitation or Recommendation

Furnish the information required by Item 1012(a) through (c) of Regulation M-A (Sec. 229.1012 of this chapter). Item 5. Person/Assets, Retained, Employed, Compensated or Used

Furnish the information required by Item 1009(a) of Regulation M-A (Sec. 229.1009 of this chapter). Item 6. Interest in Securities of the Subject Company

Furnish the information required by Item 1008(b) of Regulation M-A (Sec. 229.1008 of this chapter). Item 7. Purpose of the Transaction and Plans or Proposals

Furnish the information required by Item 1006(d) of Regulation M-A (Sec. 229.1006 of this chapter). Item 8. Additional Information

Furnish the information required by Item 1011(b) of Regulation M-A (Sec. 229.1011 of this chapter). Item 9. Exhibits

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

Signature

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

(Signature)—————————————————————————————--

(Name and title)———————————————————————————-

(Date)————————————————————————————————-

Instruction to Signature:

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

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

Sec. 240.14e-1 Unlawful tender offer practices.

---

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

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

Sec. 240.14e-5 Prohibiting purchases outside the tender offer.

(a) Unlawful activity. As a means reasonably designed to prevent fraudulent, deceptive or manipulative acts or practices in connection with a tender offer for equity securities, no covered person may directly or indirectly purchase or arrange to purchase any subject securities or any related securities, except as part of the offer. This prohibition applies from the time the offer is first publicly announced or otherwise made known to holders of the subject securities until the offer expires.

(b) Excepted activity. The following transactions in subject securities or related securities are not prohibited by paragraph (a) of this section:

(1) Exercises of securities. Transactions by covered persons to convert, exchange, or exercise related securities into subject securities, if the covered person owned the related securities before the offer was first publicly announced or otherwise made known to security holders;

(2) Purchases for plans. Purchases or arrangements to purchase by or for a plan that are made by an agent independent of the issuer;

(3) Purchases during odd-lot offers. Purchases or arrangements to purchase if the offer is exempt under Sec. 240.13e-4(h)(5); and

(4) Unsolicited purchases. Unsolicited purchases by a dealer-manager that are made on an agency basis.

(c) Definitions. For purposes of this section, the term:

(1) Affiliate means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the offeror;

(2) Agent independent of the issuer has the same meaning as in Sec. 242.100(b);

(3) Covered person means:

(i) The offeror and its affiliates;

(ii) The offeror's dealer-manager(s) and other advisors; and

(iii) Any person acting, directly or indirectly, in concert with any of the persons specified in this paragraph (c)(3) in connection with any purchase or arrangement to purchase any subject securities or any related securities;

(4) Plan has the same meaning as in Sec. 242.100(b) of this chapter;

(5) Related securities means securities that are immediately convertible into, exchangeable for, or exercisable for subject securities; and

(6) Subject securities has the same meaning as in Sec. 229.1000 of this chapter.

(d) Exemptive authority. Upon written application or upon its own motion, the

Commission may grant an exemption from the provisions of this section, either unconditionally or on specified terms or conditions, to any transaction or class of transactions.

49. By adding Sec. 240.14e-8 to read as follows:

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

It is a fraudulent, deceptive or manipulative act or practice within the meaning of section 14(e) of the Act (15 U.S.C. 78n) for any person to publicly announce that the person (or a party on whose behalf the person is acting) plans to make a tender offer that has not yet been commenced, if the person:

(a) Is making the announcement of a potential tender offer without the intention to commence and complete the offer;

(b) Intends, directly or indirectly, for the announcement to manipulate the market price of the stock of the bidder or subject company; or

(c) Does not have the reasonable belief that the person will have the means to purchase securities to complete the offer.

Dated: November 3, 1998.

By the Commission. Jonathan G. Katz, Secretary.

[FR Doc. 98-30227 Filed 12-3-98; 8:45 am]

BILLING CODE 8010-01-P