Going Private Transactions, Exchange Act Rule 13e-3 and Schedule 13E-3

Last Update: January 26, 2009

These Compliance and Disclosure Interpretations (“C&DIs”) comprise the Division’s interpretations of Exchange Act Rule 13e-3 as it applies to “going private” transactions and related Schedule 13E-3. These C&DIs replace the Rule 13e-3 and Schedule 13E-3 interpretations in the July 1997 Manual of Publicly Available Telephone Interpretations, the July 2001 Interim Supplement to the Manual of Publicly Available Telephone Interpretations and the November 2000 Current Issues and Rulemaking Projects Outline. Some of these C&DIs were originally published in the sources noted above and have been revised in some cases. The bracketed date following each C&DI is the latest date of publication or revision.

Questions and Answers of General Applicability

> Section 101. Going Private Transactions by Certain Issuers or Their Affiliates: Rule 13e-3

Question 101.01

Question: In a “going private” merger transaction involving the leveraged buy-out of a class of equity securities subject to Section 12(g) or Section 15(d) of the Exchange Act by an affiliate of the issuer of those securities, must both the issuer and the affiliate, as filing persons on Schedule 13E-3, speak to the issuer’s unaffiliated shareholders as to the fairness of the transaction?

Answer: Yes. The issuer’s obligation to comply with Rule 13e-3 arises from its engagement in a solicitation subject to Regulation 14A, or a distribution subject to Regulation 14C, in connection with the going private merger with its affiliate. See Rule 13e-3(a)(3)(i)(C). The affiliate, as a Rule 13e-3(a)(3)(i)(A) purchaser of the equity securities of the issuer, is also subject to Rule 13e-3. The affiliate is deemed to be a “purchaser” of the equity securities of the issuer due to the definition of “purchase” in Rule 13e-3(a)(2). This definition states that “purchase” includes “any acquisition pursuant to a merger.” Both the affiliate and the issuer, therefore, are required under Rule 13e-3(b)(2)(i) to complete, file and disseminate a Schedule 13E-3 in accordance with Rules 13e-3(d), (e) and (f). Item 8 of Schedule 13E-3 and corresponding Item 1014(a) of Regulation M-A direct that each person filing the Schedule state whether it “… reasonably believes that the Rule 13e-3 transaction is fair or unfair to unaffiliated security holders.” Because both the issuer and the affiliate are persons required to file the Schedule 13E-3, each must evaluate the going private transaction from the standpoint of fairness to the issuer’s unaffiliated shareholders and appropriately disclose the results of such evaluation. See Question and Answer No. 5 in Exchange Act Release No. 17719 (April 13, 1981). [January 26, 2009]

Question 101.02

Question: Is an acquisition vehicle created by an affiliated purchaser in a going private transaction required to be included as a filing person on Schedule 13E-3? Is the intermediate or ultimate parent of that acquisition vehicle also required to be included as a filing person?

Answer: Yes. Where the purchaser has created a merger subsidiary or other acquisition vehicle to effect the transaction, the staff will “look through” the acquisition vehicle and treat as a separate, affiliated purchaser the intermediate or ultimate parent of that acquisition vehicle. Accordingly, both the acquisition vehicle and the entity or person who formed it to acquire the issuer are considered affiliates engaged in the Rule 13e-3 transaction that have separate filing obligations. The filing persons may satisfy their separate filing obligations by making a joint filing on a Schedule 13E-3 that contains both of their signatures and required disclosures. [January 26, 2009]

Question 101.03

Question: In a going private transaction subject to Rule 13e-3, is the target company to a tender offer considered to be “engaged” in the transaction pursuant to Rule 13e-3 if the target merely recommends the tender offer to its security holders, even where the target company has not signed a business combination agreement with the offeror?

Answer: Yes. If the affiliation between the offeror and target company is sufficient to trigger Rule 13e-3, the favorable recommendation alone would be sufficient to cause the target company to be “engaged” in the going private transaction. As a result, the target company would have to comply with Rules 13e-3(d), (e) and (f). Given the importance to security holders of their management’s recommendation and the conflicted nature of the transaction, the protections of Rule 13e-3 are warranted in these circumstances. While the staff understands that the target company has an obligation under Rule 14e-2 to make a statement with respect to the tender offer, the target company is not required to recommend in favor of the offer. The target company’s choices are to recommend acceptance or rejection of the offer, express no opinion and remain neutral, or state that it is unable to take a position. Illustration two to Question and Answer No. 5 in Exchange Act Release No. 17719 (April 13, 1981) is not inconsistent with this view, since that illustration does not contemplate that the target company recommended the tender offer to its security holders. [January 26, 2009]

> Sections 102 to 105. Definitions: Rules 13e-3(a)(1) to 13e-3(a)(4)

>> Section 102. Rule 13e-3(a)(1)

Question 102.01

Question: Security holder A owns a significant stake in a class of securities, but another unrelated holder, security holder B, owns a larger interest in the same class, or owns a percentage greater than 50% of that class. Is security holder A precluded from being considered an affiliate for purposes of Rule 13e-3(a)(1) due to the existence of security holder B?

Answer: The presence of another controlling or majority security holder does not necessarily preclude a holder of a lesser amount of securities from being considered an “affiliate” for purposes of Rule 13e-3. [January 26, 2009]

>> Section 103. Rule 13e-3(a)(2)

None

>> Section 104. Rule 13e-3(a)(3)

Question 104.01

Question: An issuer is eligible to terminate the registration of a class of equity securities under Section 12(g) or to suspend the obligation to report under Section 15(d) of the Exchange Act. The issuer is eligible to terminate the class’ registration or suspend its reporting obligation because the relevant class of securities is held of record by less than the threshold amounts specified in Exchange Act Rules 12g-4, 12h-3, 12h-6 or Section 15(d) and all other conditions under those provisions have been met. The issuer, however, continues to file Exchange Act reports on a voluntary basis. Is the issuer required to file a Schedule 13E-3 when it engages in a transaction specified in Rule 13e-3(a)(3)(i) that further reduces the number of record holders?

Answer: No. Because the issuer was already eligible to terminate the registration under Section 12(g) or to suspend the obligation to report under Section 15(d), the transaction would not be deemed to have “caused” the class of securities to become eligible for termination of registration or suspension of the obligation to report. The reduction in the number of security holders pursuant to this transaction would therefore not produce the going private effect specified in Rule 13e-3(a)(3)(ii)(A). The issuer would need to separately evaluate whether this transaction, considered independently or as the first step in a series of such transactions, was reasonably likely to produce or undertaken with the purpose of producing the going private effect specified in Rule 13e-3(a)(3)(ii)(B). [January 26, 2009]

Question 104.02

Question: An issuer will conduct a transaction specified in Rule 13e-3(a)(3)(i) that has either a reasonable likelihood or a purpose of producing one of the effects described in Rule 13e-3(a)(3)(ii)(A). May the issuer avoid the requirement to file a Schedule 13E-3 if it represents that it will continue to file Exchange Act reports on a voluntary basis?

Answer: No. No exception from Rule 13e-3 arises by virtue of an issuer’s intent to voluntarily continue its Section 12(g) registration or file Exchange Act reports after consummation of a transaction that causes the class of securities to become eligible for termination of registration under Section 12(g) or suspension of the obligation to report under Section 15(d) of the Exchange Act. [January 26, 2009]

Question 104.03

Question: For purposes of Rule 13e-3(a)(3)(ii)(B), is the over the counter bulletin board, or OTCBB, considered an “inter-dealer quotation system of a registered national securities association?”

Answer: For purposes of the rule, “an inter-dealer quotation system of a registered national securities association” does not include quotations on the OTCBB. [January 26, 2009]

>> Section 105. Rule 13e-3(a)(4)

None

> Sections 106 to 110. [Reserved]

> Sections 111 to 116. Exemptions: Rules 13e-3(g)(1) to 13e-3(g)(6)

>> Section 111. Rule 13e-3(g)(1)

Question 111.01

Question: If a third-party bidder that is unaffiliated with an issuer “reserves the right” to acquire any issuer securities that remain outstanding after the completion of the bidder’s tender offer for all such securities, is the bidder eligible to rely on the exception in Rule 13e-3(g)(1) for the second-step purchase of the remaining issuer securities?

Answer: No. If an unaffiliated bidder makes a tender offer for all securities of the class of an issuer, the offer to purchase must fully disclose the bidder’s intention to engage in a Rule 13e-3 transaction, the form and effect of the subsequent transaction, and, to the extent known, the proposed transaction terms. The bidder’s use of non-committal language such as “not obligated” or “conditional upon the costs of such an offer or the potential benefits of continuing access to the equity capital markets through the listed shares” does not satisfy the exception’s disclosure requirements with respect to a second-step transaction to acquire remaining target securities. Similarly, if the bidder expresses its “current intention” to undertake a minority buy-out offer after a first-step tender offer, but the final decision whether or not to proceed with such offer will be made based on certain subjective considerations, the bidder’s use of such highly qualified language compromises its ability to rely on Rule 13e-3(g)(1). [January 26, 2009]

>> Section 112. Rule 13e-3(g)(2)

Question 112.01

Question: Is the Rule 13e-3(g)(2) exception available for transactions in which non-voting common stock is offered as consideration in exchange for voting common stock? What if tracking stock is offered?

Answer: No, in both cases. As the Commission stated in the Rule 13e-3 adopting release, Exchange Act Release No. 16075 (August 2, 1979), a transaction in which either common stock or equity securities with essentially the same attributes are offered is outside the purpose of Rule 13e-3 “since all holders of that class of security are on an equal footing and are permitted to maintain an equivalent or enhanced equity interest.” When the securities given up by unaffiliated security holders are voting common stock, the offer of new securities without voting rights would not fit within the Rule 13e-3(g)(2) exception, even though the new securities are denominated as common stock, because security holders will not receive an equivalent or enhanced equity interest. Similarly, the issuance of tracking stock in exchange for an issuer’s common stock would not satisfy the Rule 13e-3(g)(2) exception. Even though the tracking stock may be denominated as common stock, the tracking stock restricts the income stream to only certain assets of the issuer. As a result, security holders will not maintain an equivalent or enhanced equity interest in the issuer. [January 26, 2009]

Question 112.02

Question: The exception in Rule 13e-3(g)(2) provides that security holders must be offered only an equity security. Are there any circumstances in which the Rule 13e-3(g)(2) exception is available when cash is offered as consideration?

Answer: If security holders are offered the opportunity to elect either cash or stock consideration, the exception in Rule 13e-3(g)(2) remains available provided that the cash, at the time it is first offered, is substantially equivalent to the value of the security offered and both options are offered to all security holders. See Question and Answer No. 11 in Exchange Act Release No. 17719 (April 13, 1981). The Rule 13e-3(g)(2) exception is not available when security holders are offered consideration consisting of a combination of cash and stock. Similarly, where unaffiliated security holders receive an equivalent equity security but other participants in the transaction receive cash and/or something other than an equivalent equity security, the exception is not available. [January 26, 2009]

>> Section 113. Rule 13e-3(g)(3)

None

>> Section 114. Rule 13e-3(g)(4)

Question 114.01

Question: Is the exemption provided in Rule 13e-3(g)(4) for 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 available when the equity security will be repurchased at a price to be set through an established formula, based in part on the average daily trading price of the subject securities?

Answer: The exemption provided in Rule 13e-3(g)(4) applies only where all of the terms of the redemption, call or similar purchase are set pursuant to the provisions of the governing instrument, including the price and timing of the redemption. A provision in the governing instruments that provides that securities will be repurchased at a price to be set through an established formula, based in part on the average daily trading price of the subject securities, does not fit within the exemption in Rule 13e-3(g)(4) unless the governing instruments established a set date or dates upon which the price will be calculated. [January 26, 2009]

>> Sections 115 to 116. [Reserved]

> Section 117. Schedule 13E-3

Question 117.01

Question: The term “associate” as used in Item 11 of Schedule 13E-3 and corresponding Item 1008 of Regulation M-A is not defined in the Schedule or Rule 13e-3, and it is not discussed in the Rule 13e-3 adopting or interpretive releases. What is the definition of “associate” in the Rule 13e-3 context?

Answer: The definition of “associate” in Rule 12b-2 should be used for purposes of providing disclosure pursuant to Item 11 of Schedule 13E-3 and corresponding Item 1008 of Regulation M-A. [January 26, 2009]

Question 117.02

Question: An issuer and its affiliate are engaged in a Rule 13e-3 going private transaction. Are the issuer and its affiliate permitted to make a joint filing on Schedule 13E-3?

Answer: Yes, a joint filing is permissible so long as each filing person individually makes the required disclosures (e.g., the statement of “reasonable belief” as to the fairness or unfairness of the proposed transaction) and signs the Schedule 13E-3. [January 26, 2009]

Question 117.03

Question: When should the Schedule 13E-3 in a “going private” issuer tender offer be filed?

Answer: General Instruction D.3 to Schedule 13E-3 provides that the Schedule 13E-3 shall be filed as soon as practicable on the date the tender offer is first published, sent, or given to security holders. For an issuer tender offer that is a “going private” transaction subject to Rule 13e-3, Rule 13e-3(f)(2) provides that the requirements of Rule 13e-4 govern when the initial and amended offer materials published, sent, or given, and these materials will include the disclosure required by Rule 13e-3(e). The requirements of General Instruction D.4 to Schedule 13E-3 that the schedule must be filed with the Commission 30 days before any purchase of the subject securities, and the requirements of Rule 13e-3(f)(1)(i) that the statement containing the disclosures required by Rule 13e-3 be provided to shareholders twenty days before any purchase of the subject securities, do not apply. Rule 13e-3(f)(1) only applies to the kinds of transactions described in Rules 13e- 3(a)(3)(i)(A) and (C), and not to subparagraph (B) which deals with tender offers. [January 26, 2009]

Question 117.04

Question: In a registered exchange offer that is also a going private transaction, where the bidder files a joint Schedule 13E-3/Schedule TO, when must the Schedule 13E-3 be filed?

Answer: The general instructions to Schedule TO state that a bidder may file a combined Schedule 13E-3/TO where the transaction is both a tender offer and a going private transaction. In a standard unaffiliated transaction, a Schedule TO is typically filed when the Form S-4 is declared effective (unless the tender offer has been commenced early under Securities Act Rule 162, in which case the Schedule TO is filed at the time of offer commencement). However, where a joint Schedule 13E-3/TO is filed, it must be filed when the Form S-4 is initially filed. This will alert the public and the staff that a going private transaction is involved. This is consistent with General Instruction D.2. to Schedule 13E-3, which states that the schedule must be filed “[a]t the same time as filing a registration statement under the Securities Act of 1933.” The bidder should make it clear in the joint schedule that the offer has not yet commenced and not include a transmittal letter (the letter furnished to security holders for transmission of securities sought in the tender offer) with the filing. The bidder should file an amended schedule with a transmittal letter filed as an exhibit when the offer does commence. [January 26, 2009]

Question 117.05

Question: May a party that is required to file a Schedule TO and/or Schedule 13E-3 rely on the Private Securities Litigation Reform Act of 1995, or PSLRA, for disclosures made in tender offers or Rule 13e-3 going private transactions?

Answer: No. Disclosure made in connection with a tender offer or a going private transaction is not entitled to the safe harbor provisions of the PSLRA. The Act does not apply to statements made in connection with a tender offer. See Section 21E(b)(2)(C) of the Securities Exchange Act of 1934. Similarly, the Act does not apply to statements made in connection with a going private transaction. See Section 21E(b)(1)(E) of the Exchange Act. Parties should not refer to the PSLRA in disclosure made in connection with a tender offer or a going private transaction, including press releases, offers to purchase, and proxy materials. [January 26, 2009]

Question 117.06

Question: An acquiror in a going private transaction subject to Rule 13e-3 engages an investment bank to advise on structuring the transaction. The financial advisor does not analyze or advise on the consideration to be paid to target security holders in the acquisition. The financial advisor meets with management of the acquiror several times regarding its findings and makes an oral presentation regarding the transaction. However, it does not provide written materials to the acquiror. Do the oral analyses provided by the financial advisor regarding the structure of the transaction constitute a report within the meaning of Item 9 of Schedule 13E-3 and corresponding Item 1015 of Regulation M-A?

Answer: Yes. Item 9 and Item 1015 encompass both written and oral “reports, opinions, appraisals and negotiations” that are materially related to a going private transaction. This may include reports or opinions that address matters other than the fairness of the consideration to be provided in the transaction. Where the acquiror receives information in non-written form, it must summarize that information in detail in the disclosure document provided to target security holders. See Item 1015(b)(6) of Regulation M-A. In addition, any limitations on the scope of the analyses imposed on the outside party providing the report must be detailed. [January 26, 2009]

Interpretive Responses Regarding Particular Situations

> Section 201. Going Private Transactions by Certain Issuers or Their Affiliates: Rule 13e-3

201.01. An acquiror enters into arms-length negotiations concerning its acquisition of a target company. The acquiror is not affiliated with the target. Pursuant to the resultant agreement for the acquisition, target will become a wholly-owned subsidiary of the acquiror; however, target’s management will remain intact. Exchange Act Release No. 16075 (August 2, 1979) suggests that where such continuity of management exists, the parties engaged in the transaction may be required to file a Schedule 13E-3. Factors considered to determine whether such a requirement exists include: increases in consideration to be received by management, alterations in management’s executive agreements favorable to such management, the equity participation of management in the acquiror, and the representation of management on the board of the acquiror. [January 26, 2009]

201.02. The “unitary transaction” no-action position, which permits certain persons to conduct multi-step acquisitions without filing Schedule 13E-3, is dependent upon, among other things, the acquisition of the entire class of securities at the same unit price. See, e.g., Federal-Mogul Corporation (August 27, 1980) and HM Acquisition Corp. (January 29, 1981). Sellers in an initial block transaction, however, may receive installment notes while the remaining security holders receive only cash, provided that the value represented by the notes (giving effect to the yield) is no more than the cash amounts offered to the other shareholders. [January 26, 2009]

201.03. A parent corporation holds a majority of a subsidiary’s outstanding common stock. The subsidiary’s common stock is registered pursuant to Section 12(g) of the Exchange Act. The parent proposes to make the subsidiary wholly-owned through the following sequence of transactions: (1) a tender offer for any and all of the subsidiary’s common stock; (2) the filing of a Form 15; and (3) after effectiveness of the Form 15, a short-form merger with a newly formed, wholly-owned subsidiary. On the date the tender offer commences, a Schedule TO and Schedule 13E-3 must be filed with the Commission and dissemination must occur in accordance with the tender offer rules. Provided that the Schedule 13E-3 appropriately discloses the plans for the “squeeze-out” merger and the anticipated Rule 12g-4/15d-6 filing, the filer(s) need not amend the Schedule 13E-3 when the squeeze-out merger ultimately takes place. Because the Form 15 will be effective at the time the squeeze-out merger occurs, the issuer will no longer be subject to either Section 12(g) or Section 15(d) of the Exchange Act, and an amendment to Schedule 13E-3 is therefore not required when the squeeze-out is consummated. [January 26, 2009]

201.04. An affiliate of a subject company will conduct a Regulation 14D tender offer that has either a reasonable likelihood or a purpose of producing one of the effects described in Rule 13e-3(a)(3)(ii) and will result in the subject company “going private.” The bidder will disseminate the tender offer materials and the disclosures required by Rule 13e-3 by mailing the disclosure document to security holders. The subject company provided the shareholder list to the bidder on a voluntary basis without the latter’s invocation of Rule 14d-5. Although Rule 14d-4(a)(2)(i) states that a summary advertisement may not be used to commence a tender offer subject to Rule 13e-3, the staff will not object where several days after the tender offer already validly commenced via other permissible means (see, e.g., Instruction to paragraph (a) of Rule 14d-4(a)), the bidder publishes a summary advertisement complying with Rule 14d-6(b) and notes that the offer will result in the issuer “going private.” [January 26, 2009]

201.05. Rule 13e-3 requires that each issuer and affiliate engaged, directly or indirectly, in a going private transaction file a Schedule 13E-3 and furnish the required disclosures (e.g., the statement of “reasonable belief” as to the fairness or unfairness of the proposed transaction) directly to the holders of the class of equity securities that is the subject of the transaction. Two separate but related issues may be raised with respect to the determination of “filing-person” status in situations where a third party proposes a transaction with an issuer that has at least one of the going private effects described in Rule 13e-3(a)(3)(ii): (1) whether the entities or persons are “affiliates” of the issuer within the scope of Rule 13e-3(a)(1); and, (2) whether those affiliates are deemed to be engaged, either directly or indirectly, in the going private transaction.

The staff consistently has taken the position that members of senior management of the issuer that is going private are affiliates of that issuer. Depending on the facts and circumstances of the transaction, such management affiliates also might be deemed to be engaged in the transaction and may incur a Schedule 13E-3 filing obligation separate from that of the issuer. For example, the staff has taken the position that members of senior management of an issuer that will be going private are required to file a Schedule 13E-3 where the transaction will be effected through the merger of the issuer into the purchaser or that purchaser’s acquisition subsidiary, even though:

management’s involvement in the issuer’s negotiations with the purchaser is limited to the terms of each manager’s future employment with and/or equity participation in the surviving company; and
the issuer’s board of directors appointed a special committee of outside directors to negotiate all other terms of the transaction except management’s role in the surviving entity.

An important aspect of the staff’s analysis was the fact that the issuer’s management ultimately would hold a material amount of the surviving company’s outstanding equity securities, occupy seats on the board of the company in addition to senior management positions, and otherwise be in a position to “control” the surviving company within the meaning of Exchange Act Rule 12b-2 (i.e., “possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.”).

In the situation described above, where management of the issuer-seller that will be going private is essentially “on both sides” of the transaction, the acquiring person or “purchaser” also may be deemed to be an affiliate of the issuer engaged in the transaction and, as a consequence, required to file on Schedule 13E-3. See Exchange Act Release No. 16075 (August 2, 1979) (noting that “affiliates of the seller often become affiliates of the purchaser through means other than equity ownership, and thereby are in control of the seller's business both before and after the transaction. In such cases the sale, in substance and effect, is being made to an affiliate of the issuer...”). Accordingly, the issuer-seller, its senior management and the purchaser may be deemed Schedule 13E-3 filing persons in connection with the going private transaction. [January 26, 2009]

201.06. A financial buyer, previously unaffiliated with an issuer that it had agreed to acquire, planned to enter into a separate agreement with certain members of the issuer’s senior management whereby they would collectively receive 20% of the surviving entity’s equity after the acquisition transaction closed. Members of the issuer’s senior management who were to receive the equity stake were not involved in the negotiation of the merger agreement and had not executed any documents regarding their future equity participation. Where there exists a general understanding that a target’s senior management will receive equity in a surviving entity, whether derived from unexecuted documents or otherwise, Rule 13e-3 may apply. This transaction would be subject to Rule 13e-3 despite the fact that the terms of the target management’s future equity participation were not finalized. Because target management generally understood they would be equity holders in a surviving entity, the financial buyer was deemed to be on both sides of the transaction. Rule 13e-3 would apply because the financial buyer was deemed to be an affiliate engaged in the Rule 13e-3 transaction. In view of the amount of equity participation being considered by senior management, each of whom would remain responsible for influencing the policy and direction of the issuer, the financial buyer could be, directly or indirectly, in control of the issuer in advance of the acquisition closing. [January 26, 2009]

> Sections 202 to 205. Definitions: Rules 13e-3(a)(1) to 13e-3(a)(4)

>> Section 202. Rule 13e-3(a)(1)

None

>> Section 203. Rule 13e-3(a)(2)

None

>> Section 204. Rule 13e-3(a)(3)

None

>> Section 205. Rule 13e-3(a)(4)

None

> Sections 206 to 210. [Reserved]

> Sections 211 to 216. Exemptions: Rules 13e-3(g)(1) to 13e-3(g)(6)

>> Section 211. Rule 13e-3(g)(1)

211.01. Rule 13e-3(g)(l) provides an exception from the requirement to file a Schedule 13E-3 for second-step clean-up transactions within one year of a tender offer provided, among other things, that the consideration offered in the second step is “at least equal to the highest consideration offered during such tender offer.” When the consideration in the second step is a security, the value of the security at the time the second step occurs (not at the time preceding the tender offer when the original agreement concerning the series of transactions is signed) is used to determine whether the consideration in the second step is sufficient to satisfy this requirement. [January 26, 2009]

211.02. Rule 13e-3(g)(1) provides an exemption from the requirement to file a Schedule 13E-3 for second-step clean-up transactions within one year of the tender offer in which the bidder becomes an affiliate of the subject company. If the affiliation between bidder and issuer existed before the tender offer, then the exemption provided by Rule 13e-3(g)(l) is not available. Rule 14e-5 prohibits a bidder from purchasing or arranging to purchase securities that are the subject of a tender offer from the public announcement of the offer until the offer is terminated. Rule 14e-5(b)(7) provides an exception from this prohibition for purchases or arrangements to purchase pursuant to contractual obligations, under certain conditions, including that the obligation to purchase is unconditional. Where the bidder enters into unconditional purchase agreements with shareholders of the subject company before announcement of the tender offer, as required by the exception in Rule 14e-5(b)(7), pursuant to which the holders’ shares (which represent a sizable block of the subject company’s outstanding securities that, by its proportion, will make the bidder an affiliate) will be sold to the bidder after the expiration of the tender offer, the bidder becomes an affiliate of the subject company on the date the agreement is signed. The exception in Rule 13e-3(g)(l) is, therefore, not available for any acquisitions after the completion of the tender offer. The unitary transaction no-action position, however, may be available, so long as all the conditions of that position are satisfied. See, e.g., Federal-Mogul Corporation (August 27, 1980), HM Acquisition Corp. (January 29, 1981) and Question and Answer No. 8 in Exchange Act Release No. 17719 (April 13, 1981). [January 26, 2009]

>> Section 212. Rule 13e-3(g)(2)

212.01. An issuer offers to exchange new non-interest bearing convertible debentures for outstanding interest-bearing convertible debentures. The exchange will be exempt from registration under Section 3(a)(9) of the Securities Act. The new debentures may or may not be accepted for listing on an exchange, depending on the number of debenture holders participating in the exchange. The existing debentures are registered under Section 12(b) of the Exchange Act and listed on a national exchange. The exemption provided in Rule 13e-3(g)(2) is not available because: (1) the new debentures may not be accepted for listing on a national exchange; and, (2) the new non-interest bearing debentures being offered do not contain substantially the same rights as the interest-bearing debentures being exchanged. [January 26, 2009]

212.02. In a two-step acquisition where the first step is a cash tender offer and the second step is a merger under which shareholders of the subject company are to receive shares of common stock of the bidder, the parties may claim a Rule 13e-3(g)(2) exemption from Rule 13e-3 for the second-step merger transaction so long as all of the conditions for that exemption are satisfied. The availability of the exemption would not be affected if the value of the security offered in the second step is lower than the cash amount offered in the tender offer or the board of directors of the subject company is changed by the bidder immediately following the tender offer. [January 26, 2009]

212.03. A limited partnership roll-up offers an option to the limited partners to take notes instead of an equity interest in the new master limited partnership that is otherwise offered as consideration. The general partner is an affiliate of all the limited partnerships. The option to receive notes instead of an equity security does not defeat the availability of the Rule 13e-3(g)(2) exemption for transactions in which security holders are offered or receive “only” an equity security, where the notes will be substantially equivalent in value to the limited partnership interests. The exemption remains available so long as all security holders continue to have an option to maintain an equity interest. See Question and Answer No. 11 in Exchange Act Release No. 17719 (April 13, 1981). [January 26, 2009]

>> Section 213. Rule 13e-3(g)(3)

None

>> Section 214. Rule 13e-3(g)(4)

214.01. Rule 13e-3(g)(4) provides that Rule 13e-3 shall not apply to 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.” This exemption is not lost when provisions relating to the repurchase of limited partnership interests by the general partner are contained in an attachment to the limited partnership agreement as opposed to being in the agreement itself, provided that each limited partner has consented to the buy-back provisions and the provisions are uniformly applied to each limited partner. [January 26, 2009]

>> Sections 215 to 216. [Reserved]

> Section 217. Schedule 13E-3

217.01. Neither Rule 13e-3 nor the disclosure requirements in Schedule 13E-3 require the preparer of a report, opinion or appraisal materially related to the going private transaction, such as an investment banker, to be “independent” of the issuer. Any material relationship between the issuer and/or its affiliates and the preparer of the report, opinion or appraisal, however, must be disclosed pursuant to Item 9 of Schedule 13E-3 and corresponding Item 1015(b)(4) of Regulation M-A. This disclosure should describe whether or not any of the compensation is contingent upon the successful completion of the transaction, and must quantify, including cases in which the fee is zero, any compensation received or to be received as a result of the relationship. [January 26, 2009]