USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Vinita Sithapathy, Kristina Trauger, Pierre-Emmanuel Perais, Clara Pang and Gregory Gewirtz, Linklaters
the board no longer recommends that shareholders vote in favour of the transaction. • Right to match (or top) other offers: the bidder has the right to change the terms of its proposal to “match” or “top” a third-party proposal. See also 6.12 Irrevocable Commitments . State law restricts target companies’ boards of direc- tors from using certain deal protection terms and makes it virtually impossible to “lock in” a transaction. Generally, unless the deal is signed and closed simul- taneously, the transaction will also involve interim operating covenants to maintain the target business between signing and closing and to deliver it at clos- ing without material impairment. 6.11 Additional Governance Rights This topic is not applicable. 6.12 Irrevocable Commitments Prior to announcing a transaction, the acquirer may execute agreements with the target company’s board of directors and senior management to ensure they will tender any shares they own into a tender offer or vote in favour of a proposed merger. If the target company has one or more significant shareholders, requiring such shareholders to sell their stock to the acquirer, to vote their stock in favour of the merger and/or to tender their stock into the offer is an effec- tive way to “lock up” the deal. However, Delaware courts have struck down such lock-up agreements that absolutely preclude the tar- get company’s shareholders from availing themselves of a more attractive subsequent offer. Further, any commitments by directors will be subject to review in light of the directors’ duties. 6.13 Securities Regulator’s or Stock To solicit the stockholder vote required to approve a merger, the target must prepare and file a detailed “proxy statement” with the SEC that complies with the SEC’s proxy rules. The proxy statement may not be disseminated to stockholders until the SEC staff Exchange Process Merger Transactions
has commented on it and all such comments have been resolved. Upon finalisation, the target mails the proxy statement to its shareholders and files the final version with the SEC. State law, the target’s consti- tutional documents and rules of the stock exchange on which the target is listed will dictate the minimum length of time between the mailing of the proxy materi- als and the date of the target stockholders’ meeting to approve the merger, though a period of 20 business days is typical. Tender Offers and Exchange Offers The SEC rules relating to tender offers require that the acquirer file a Schedule TO (including an offer to purchase and related documents, such as a letter of transmittal). Because a tender offer is made directly to stockholders, no board of directors’ approval from the target is technically required, although most friendly tender offers are made pursuant to a board-approved merger agreement. In any event, the board of directors of the target will be required under other SEC rules to state its position on the tender offer. SEC staff will review and comment on any materials relating to the tender offer. The acquirer must address the staff’s comments to the SEC’s sat- isfaction (which typically involves filing amendments to the tender offer materials while the tender offer is open). If the SEC comment process leads to material amendments to the tender offer materials, the acquirer may be required to extend the offer period and/or dis- seminate new documents to the target’s stockholders. 6.14 Timing of the Takeover Offer See 6.13 Securities Regulator’s or Stock Exchange Process . 7. Overview of Regulatory Requirements 7.1 Regulations Applicable to a Technology Company Generally, no specific regulations apply to starting up a new technology company in the USA solely because it is a technology company.
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