Securities Lawyer's Deskbook                          published by The University of Cincinnati College of Law

Rule 13e-3 -- Going Private Transactions by Certain Issuers or Their Affiliates

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1. Definitions. Unless indicated otherwise or the context otherwise requires, all terms used in this section and in Schedule 13E-3 shall have the same meaning as in the Act or elsewhere in the General Rules and Regulations thereunder. In addition, the following definitions apply:
   
   
   1. An affiliate of an issuer is a person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with such issuer. For the purposes of this section only, a person who is not an affiliate of an issuer at the commencement of such person's tender offer for a class of equity securities of such issuer will not be deemed an affiliate of such issuer prior to the stated termination of such tender offer and any extensions thereof;
      
      
   2. The term purchase means any acquisition for value including, but not limited to,
      
      
      1. any acquisition pursuant to the dissolution of an issuer subsequent to the sale or other disposition of substantially all the assets of such issuer to its affiliate,
         
         
      2. any acquisition pursuant to a merger,
         
         
      3. any acquisition of fractional interests in connection with a reverse stock split, and
         
         
      4. any acquisition subject to the control of an issuer or an affiliate of such issuer;
         
         
   3. A Rule 13e-3 transaction is any transaction or series of transactions involving one or more of the transactions described in paragraph (a)3(i) of this section which has either a reasonable likelihood or a purpose of producing, either directly or indirectly, any of the effects described in paragraph (a)(3)(ii) of this section;
      
      
      1. The transactions referred to in paragraph (a)3 of this section are:
         
         
         1. A purchase of any equity security by the issuer of such security or by an affiliate of such issuer;
            
            
         2. A tender offer for or request or invitation for tenders of any equity security made by the issuer of such class of securities or by an affiliate of such issuer; or
            
            
         3. A solicitation subject to Regulation 14A [Rule 14a-1 to Rule 14b-1] of any proxy, consent or authorization of, or a distribution subject to Regulation 14C [Rule 14c-1 to Rule 14c-101] of information statements to, any equity security holder by the issuer of the class of securities or by an affiliate of such issuer, in connection with: a merger, consolidation, reclassification, recapitalization, reorganization or similar corporate transaction of an issuer or between an issuer (or its subsidiaries) and its affiliate; a sale of substantially all the assets of an issuer to its affiliate or group of affiliates; or a reverse stock split of any class of equity securities of the issuer involving the purchase of fractional interests.
            
            
      2. The effects referred to in paragraph (a)(3) of this section are:
         
         
         1. Causing any class of equity securities of the issuer which is subject to section 12(g) or section 15(d) of the Act to become eligible for termination of registration under Rule 12g-4 or Rule 12h-6 or causing the reporting obligations with respect to such class to become eligible for termination under Rule 12h-6; or suspension under Rule 12h-3 or section 15(d); or
            
            
         2. Causing any class of equity securities of the issuer which is either listed on a national securities exchange or authorized to be quoted in an inter-dealer quotation system of a registered national securities association to be neither listed on any national securities exchange nor authorized to be quoted on an inter-dealer quotation system of any registered national securities association.
            
            
   4. An unaffiliated security holder is any security holder of an equity security subject to a Rule 13e-3 transaction who is not an affiliate of the issuer of such security.
      
      
2. Application of section to an issuer (or an affiliate of such issuer) subject to section 12 of the Act.
   
   
   1. It shall be a fraudulent, deceptive or manipulative act or practice, in connection with a Rule 13e-3 transaction, for an issuer which has a class of equity securities registered pursuant to section 12 of the Act or which is a closed-end investment company registered under the Investment Company Act of 1940, or an affiliate of such issuer, directly or indirectly
      
      
      1. To employ any device, scheme or artifice to defraud any person;
         
         
      2. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or
         
         
      3. To engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person.
         
         
   2. As a means reasonably designed to prevent fraudulent, deceptive or manipulative acts or practices in connection with any Rule 13e-3 transaction, it shall be unlawful for an issuer which has a class of equity securities registered pursuant to section 12 of the Act, or an affiliate of such issuer, to engage, directly or indirectly, in a Rule 13e-3 transaction unless:
      
      
      1. Such issuer or affiliate complies with the requirements of paragraphs (d), (e) and (f) of this section; and
         
         
      2. The Rule 13e-3 transaction is not in violation of paragraph (b)(1) of this section.
         
         
3. Application of section to an issuer (or an affiliate of such issuer) subject to section 15(d) of the Act.
   
   
   1. It shall be unlawful as a fraudulent, deceptive or manipulative act or practice for an issuer which is required to file periodic reports pursuant to Section 15(d) of the Act, or an affiliate of such issuer, to engage, directly or indirectly, in a Rule 13e-3 transaction unless such issuer or affiliate complies with the requirements of paragraphs (d), (e) and (f) of this section.
      
      
   2. An issuer or affiliate which is subject to paragraph (c)1 of this section and which is soliciting proxies or distributing information statements in connection with a transaction described in paragraph (a)(3)(i)(A) of this section may elect to use the timing procedures for conducting a solicitation subject to Regulation 14A [Rule 14a-1 to Rule 14b-1] or a distribution subject to Regulation 14C [Rule 14c-1 to Rule 14c-101] in complying with paragraphs (d), (e) and (f) of this section, provided that if an election is made, such solicitation or distribution is conducted in accordance with the requirements of the respective regulations, including the filing of preliminary copies of soliciting materials or an information statement at the time specified in Regulation 14A or 14C, respectively.
      
      
4. 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 (Rule 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.
      
      
5. 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:
      
      
      1. The information required by Item 1 of Schedule 13E-3 (Rule 13e- 100) (Summary Term Sheet);
         
         
      2. 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;
         
         
      3. 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;
         
         
      4. The information concerning appraisal rights required by Item 1016(f) of Regulation M-A; and
         
         
      5. The information required by the remaining items of Schedule 13E-3, except for Item 1016 of Regulation M-A (exhibits), or a fair and adequate summary of the information.
         
      
      

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      Instructions to paragraph (e)(1):
      
      
      1. If the Rule 13e-3 transaction also is subject to Regulation 14A (Rule 14a-1 through Rule 14b-2) or 14C (Rule 14c-1 through Rule 14c-101), the registration provisions and rules of the Securities Act of 1933, Regulation 14D or Rule 13e-4, the information required by paragraph (e)(1) of this section must be combined with the proxy statement, information statement, prospectus or tender offer material sent or given to security holders.
         
         
      2. If the Rule 13e-3 transaction involves a registered securities offering, the legend required by Item 501(b)(7) of Regulation S-K 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.

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   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.
      
      
6. Dissemination of information to security holders.
   
   
   1. If the Rule 13e-3 transaction involves a purchase as described in paragraph (a)(3)(i)(A) of this section or a vote, consent, authorization, or distribution of information statements as described in paragraph (a)(3)(i)(C) of this section, the issuer or affiliate engaging in the Rule 13e-3 transaction shall:
      
      
      1. Provide the information required by paragraph (e) of this section:
         
         
         1. In accordance with the provisions of any applicable Federal or State law, but in no event later than 20 days prior to: any such purchase; any such vote, consent or authorization; or with respect to the distribution of information statements, the meeting date, or if corporate action is to be taken by means of the written authorization or consent of security holders, the earliest date on which corporate action may be taken: Provided, however, That if the purchase subject to this section is pursuant to a tender offer excepted from Rule 13e-4 by paragraph (g)(5) of Rule 13e-4 [Editor's note: It seems this should refer to paragraph (h)(5) of Rule 13e-4.], the information required by paragraph (e) of this section shall be disseminated in accordance with paragraph (e) of Rule 13e-4 no later than 10 business days prior to any purchase pursuant to such tender offer,
            
            
         2. to each person who is a record holder of a class of equity securities subject to the Rule 13e-3 transaction as of a date not more than 20 days prior to the date of dissemination of such information.
            
            
      2. If the issuer or affiliate knows that securities of the class of securities subject to the Rule 13e-3 transaction are held of record by a broker, dealer, bank or voting trustee or their nominees, such issuer or affiliate shall (unless Rule 14a-13(a) or Rule 14c-7 is applicable) furnish the number of copies of the information required by paragraph (e) of this section that are requested by such persons (pursuant to inquiries by or on behalf of the issuer or affiliate), instruct such persons to forward such information to the beneficial owners of such securities in a timely manner and undertake to pay the reasonable expenses incurred by such persons in forwarding such information; and
         
         
      3. Promptly disseminate disclosure of material changes to the information required by paragraph (d) of this section in a manner reasonably calculated to inform security holders.
         
         
   2. If the Rule 13e-3 transaction is a tender offer or a request or invitation for tenders of equity securities which is subject to Regulation 14D or Rule 13e-4, the tender offer containing the information required by paragraph (e) of this section, and any material change with respect thereto, shall be published, sent or given in accordance with Regulation 14D or Rule 13e-4, respectively, to security holders of the class of securities being sought by the issuer or affiliate.
      
      
7. Exceptions. This section shall not apply to:
   
   
   1. Any Rule 13e-3 transaction by or on behalf of a person which occurs within one year of the date of termination of a tender offer in which such person was the bidder and became an affiliate of the issuer as a result of such tender offer: Provided, That the consideration offered to unaffiliated security holders in such Rule 13e-3 transaction is at least equal to the highest consideration offered during such tender offer and Provided further, That:
      
      
      1. If such tender offer was made for any or all securities of a class of the issuer;
         
         
         1. Such tender offer fully disclosed such person's intention to engage in a Rule 13e-3 transaction, the form and effect of such transaction and, to the extent known, the proposed terms thereof; and
            
            
         2. Such Rule 13e-3 transaction is substantially similar to that described in such tender offer; or
            
            
      2. If such tender offer was made for less than all the securities of a class of the issuer:
         
         
         1. Such tender offer fully disclosed a plan of merger, a plan of liquidation or a similar binding agreement between such person and the issuer with respect to a Rule 13e-3 transaction; and
            
            
         2. Such Rule 13e-3 transaction occurs pursuant to the plan of merger, plan of liquidation or similar binding agreement disclosed in the bidder's tender offer.
            
            
   2. Any Rule 13e-3 transaction in which the security holders are offered or receive only an equity security Provided, That:
      
      
      1. Such equity security has substantially the same rights as the equity security which is the subject of the Rule 13e-3 transaction including, but not limited to, voting, dividends, redemption and liquidation rights except that this requirement shall be deemed to be satisfied if unaffiliated security holders are offered common stock;
         
         
      2. Such equity security is registered pursuant to section 12 of the Act or reports are required to be filed by the issuer thereof pursuant to section 15(d) of the Act; and
         
         
      3. If the security which is the subject of the Rule 13e-3 transaction was either listed on a national securities exchange or authorized to be quoted in an interdealer quotation system of a registered national securities association, such equity security is either listed on a national securities exchange or authorized to be quoted in an inter-dealer quotation system of a registered national securities association.
         
         
   3. [Removed and Reserved]
      
      
   4. Redemptions, calls or similar purchases of an equity security by an issuer pursuant to specific provisions set forth in the instrument(s) creating or governing that class of equity securities; or
      
      
   5. Any solicitation by an issuer with respect to a plan of reorganization under Chapter XI of the Bankruptcy Act, as amended, if made after the entry of an order approving such plan pursuant to section 1125(b) of that Act and after, or concurrently with, the transmittal of information concerning such plan as required by section 1125(b) of that Act.
      
      
   6. Any tender offer or business combination made in compliance with Rule 802 of this chapter, Rule 240.13e-4(h)(8) or Rule 240.14d-1(c) or any other kind of transaction that otherwise meets the conditions for reliance on the cross-border exemptions set forth in Rule 240.13e-4(h)(8), 240.14d-1(c) or 230.802 of this chapter except for the fact that it is not technically subject to those rules.
      
      

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      Instruction to Rule 240.13e-3(g)(6):
      To the extent applicable, the acquiror must comply with the conditions set forth in Rule 230.802 of this chapter, and Rules 240.13e-4(h)(8) and 14d-1(c). If the acquiror publishes or otherwise disseminates an informational document to the holders of the subject securities in connection with the transaction, the acquiror must furnish an English translation of that informational document, including any amendments thereto, to the Commission under cover of Form CB ( 239.800 of this chapter) by the first business day after publication or dissemination. If the acquiror is a foreign entity, it must also file a Form F-X ( 239.42 of this chapter) with the Commission at the same time as the submission of the Form CB to appoint an agent for service in the United States.

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