

[Federal Register: November 8, 2006 (Volume 71, Number 216)]
[Rules and Regulations]               
[Page 65393-65409]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08no06-8]                         

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200 and 240

[Release Nos. 34-54684; IC-27542; File No. S7-11-05]
RIN 3235-AJ50

 
Amendments to the Tender Offer Best-Price Rules

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: We are adopting amendments to the language of the third-party 
and issuer tender offer best-price rules to clarify that the provisions 
apply only with respect to the consideration offered and paid for 
securities tendered in a tender offer. We also are amending the third-
party and issuer tender offer best-price rules to provide that any 
consideration that is offered and paid according to employment 
compensation, severance or other employee benefit arrangements entered 
into with security holders of the subject company that meet certain 
requirements will not be prohibited by the rules. Finally, we are 
amending the third-party and issuer tender offer best-price rules to 
provide a safe harbor provision so that arrangements that are approved 
by certain independent directors of either the subject company's or the 
bidder's board of directors, as applicable, will not be prohibited by 
the rules. These amendments are intended to make it clear that the 
best-price rule was not intended to capture employment compensation, 
severance or other employee benefit arrangements. We are also making a 
technical amendment to correct a cross-reference in the rules that 
govern the ability to delegate authority for purposes of granting 
exemptions under the best-price rule.

DATES: Effective Date: December 8, 2006.

FOR FURTHER INFORMATION CONTACT: Brian V. Breheny, Chief, or Mara L. 
Ransom, Special Counsel, Office of Mergers and Acquisitions, Division 
of Corporation Finance, at (202) 551-3440.

SUPPLEMENTARY INFORMATION: We are adopting amendments to Rule 13e-4 \1\ 
and Rule 14d-10 \2\ under the Securities Exchange Act of 1934 \3\ and 
making certain technical changes to a delegated authority rule that is 
affected by the amendments to the best-price rule.\4\
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    \1\ 17 CFR 240.13e-4.
    \2\ 17 CFR 240.14d-10.
    \3\ 15 U.S.C. 78a et seq.
    \4\ 17 CFR 200.30-1.
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I. Background

A. Introduction and Summary

    On December 16, 2005, we proposed changes to the issuer and third-
party tender offer best-price rules \5\ to make it clear that the best-
price rule generally was not intended to apply to compensatory 
arrangements.\6\ We believed that these amendments were necessary to 
alleviate the uncertainty

[[Page 65394]]

that the various interpretations of the best-price rule by courts have 
produced. We also intended that the amendments would reduce a 
regulatory disincentive to structuring an acquisition of securities as 
a tender offer, as compared to a statutory merger, to which the best-
price rule does not apply.\7\ We received 11 comment letters on the 
proposed amendments.\8\ In general, commenters supported our proposed 
changes to the tender offer best-price rule and believed that the 
proposed changes, if adopted, would meet our objectives. We did, 
however, receive a number of comments with regard to specific aspects 
of the proposed changes. The changes we adopt today are, in most 
respects, consistent with those proposed on December 16, 2005, but 
include certain revisions made in response to concerns raised by 
commenters.
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    \5\ For purposes of this release, unless otherwise indicated, 
our references to the ``tender offer best-price rule'' or the 
``best-price rule'' are intended to refer to both Exchange Act Rule 
13e-4(f)(8)(ii) (17 CFR 240.13e-4(f)(8)(ii)) and Exchange Act Rule 
14d-10(a)(2) (17 CFR 240.14d-10(a)(2)).
    \6\ Amendments to the Tender Offer Best-Price Rule, Release No. 
34-52968 (Dec. 22, 2005) [70 FR 76116] (the ``Proposing Release'').
    \7\ Statutory mergers are also known as ``long-form'' or unitary 
mergers, the requirements of which are governed generally by 
applicable State law.
    \8\ The public comments we received are available for inspection 
in our Public Reference Room at 100 F Street, NE., Washington DC 
20549 in File No. S7-11-05, or may be viewed at http://www.sec.gov/rules/proposed/s71105.shtml
.

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    The amendments to the best-price rule will change the language of 
the rule to clarify that the provisions of the rule apply only with 
respect to the consideration offered and paid for securities tendered 
in a tender offer. The amendments are premised on our view that the 
best-price rule was never intended to apply to consideration paid 
pursuant to arrangements, including employment compensation, severance 
or other employee benefit arrangements, entered into with security 
holders of the subject company, so long as the consideration paid 
pursuant to such arrangements was not to acquire their securities.\9\ 
Accordingly, the amendments provide that consideration offered and paid 
according to employment compensation, severance or other employee 
benefit arrangements entered into with security holders of the subject 
company of a tender offer, where the arrangements meet certain 
requirements, are not prohibited by the best-price rule.
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    \9\ See the definition of ``subject company'' at Exchange Act 
Rule 14d-1(g)(7) (17 CFR 240.14d-1(g)(7)).
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    The amendments also provide for a non-exclusive safe harbor, which 
states that arrangements, and any consideration offered and paid 
according to such arrangements, that are approved by either a 
compensation committee of the subject company's board of directors or a 
committee performing similar functions, regardless of whether the 
subject company is a party to the arrangement, are not prohibited by 
the best-price rules. Alternatively, if the bidder is a party to the 
arrangement, the arrangement may be approved by either a compensation 
committee or a committee performing similar functions of the bidder's 
board of directors.\10\ In order to satisfy the safe harbor, we have 
provided certain alternatives for bidders or subject companies, as 
applicable, that do not have a compensation committee or that are 
foreign private issuers.\11\
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    \10\ See the definition of ``bidder'' at Exchange Act Rule 14d-
1(g)(2) (17 CFR 240.14d-1(g)(2)).
    \11\ See the definition of ``foreign private issuer'' at Rule 
405 of the Securities Act of 1933 (17 CFR 230.405).
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    The principal changes from the proposals, as discussed in detail 
below, are:
     For purposes of the exemption and the safe harbor, the 
persons who may enter into an employment compensation, severance or 
other employee benefit arrangement have been expanded to include all 
security holders of the subject company, as opposed to only employees 
and directors of the subject company;
     The requirements of the exemption have been modified;
     The approval of the directors of the subject company will 
satisfy the safe harbor requirements, regardless of whether the subject 
company is a party to the arrangement;
     A special committee of the board of directors of the 
subject company or the bidder, as applicable, comprised solely of 
independent members and formed to consider and approve the arrangement 
may approve the arrangement and satisfy the safe harbor requirements if 
the subject company's or bidder's board of directors, as applicable, 
does not have a compensation committee or a committee of the board of 
directors that performs functions similar to a compensation committee 
or if none of the members of those committees is independent;
     The approving directors do not need to determine that the 
arrangements meet the additional requirements of the compensation 
arrangement exemption to qualify for the safe harbor;
     The safe harbor provides certain accommodations for 
foreign private issuers;
     A new instruction provides that a determination by the 
board of directors that the board members approving an arrangement are 
independent in accordance with the provisions of the safe harbor will 
satisfy the independence requirements of the safe harbor; and
     The exemption and safe harbor are included as part of the 
issuer, as well as third-party, best-price rule.

B. History of the Best-Price Rule and the Reasons for Today's 
Amendments

    Section 14(d)(7) of the Exchange Act \12\ requires equal treatment 
of security holders.\13\ Based on the objectives of the Williams Act 
\14\ and the protections afforded by Section 14(d)(7), the Commission 
adopted Rules 13e-4(f)(8) and 14d-10 in 1986.\15\ These rules codified 
the positions that both an issuer tender offer and a third-party tender 
offer must be open to all holders of the class of securities subject to 
the tender offer (commonly referred to as the ``all-holders rule'') and 
that all security holders must be paid the highest consideration paid 
to any security holder (commonly referred to as the ``best-price 
rule'').\16\ The rules provided that no one may ``make a tender offer 
unless: (1) [T]he tender offer is open to all security holders of the 
class of securities subject to the tender offer; and (2) [t]he 
consideration paid to any security holder pursuant to the tender offer 
is the highest consideration paid to any other security holder during 
such tender offer.'' \17\
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    \12\ 15 U.S.C. 78n(d)(7).
    \13\ The statute and rules governing third-party tender offers 
apply to tender offers for more than 5 per cent of any class of any 
equity security registered pursuant to Section 12 of the Exchange 
Act, or any equity security of an insurance company that would have 
been required to be registered but for the exemption contained in 
Section 12(g)(2)(G) of the Exchange Act, or any equity security 
issued by a closed-end investment company registered under the 
Investment Company Act of 1940. See Section 14(d)(1) of the Exchange 
Act.
    \14\ Pub. L. No. 90-439, 82 Stat. 454 (1968).
    \15\ See Amendments to Tender Offer Rules: All-Holders and Best-
Price, Release No. 34-23421 (July 17, 1986) [51 FR 25873].
    \16\ Id.
    \17\ Exchange Act Rules 13e-4(f)(8) (17 CFR 240.13e-4(f)(8)) and 
14d-10(a) (17 CFR 240.14d-10(a)).
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    Since the adoption of these rules, the best-price rule has been the 
basis for litigation brought in connection with tender offers in which 
it is claimed that the rule was violated as a result of the bidder 
entering into new agreements or arrangements, or adopting the subject 
company's pre-existing agreements or arrangements, with security 
holders of the subject company.\18\ When ruling on these best-price 
rule claims, courts generally have employed either an ``integral-part 
test'' or a ``bright-line

[[Page 65395]]

test'' to determine whether the arrangement violates the best-price 
rule.
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    \18\ See, e.g., Epstein v. MCA, Inc., 50 F.3d 644 (9th Cir. 
1995), rev'd on other grounds sub nom.; Matsushita Elec. Indus. Co. 
v. Epstein, 516 U.S. 367 (1996); Lerro v. Quaker Oats Co., 84 F.3d 
239 (7th Cir. 1996); Walker v. Shield Acquisition Corp., 145 F. 
Supp.2d 1360 (N.D. Ga. 2001).
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    The integral-part test states that the best-price rule applies to 
all integral elements of a tender offer, including employment 
compensation, severance and other employee benefit arrangements or 
commercial arrangements that are deemed to be part of the tender offer, 
regardless of whether the arrangements are executed and performed 
outside of the time that the tender offer formally commences and 
expires.\19\ Courts following the integral-part test have ruled that 
agreements or arrangements made with security holders that constituted 
an ``integral part'' of the tender offer violate the best-price 
rule.\20\
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    \19\ See Epstein, 50 F.3d 644; Perera v. Chiron Corp., 1996 U.S. 
Dist. LEXIS 22503 (N.D. Cal. 1996); Padilla v. MedPartners, Inc., 
1998 U.S. Dist. LEXIS 22839 (C.D. Cal. 1998); Millionerrors Inv. 
Club v. General Elec. Co., 2000 U.S. Dist. LEXIS 4778 (W.D. Pa. 
2000); Maxick v. Cadence Design Sys., Inc., 2000 U.S. Dist. LEXIS 
14099 (N.D. Cal. 2000); McMichael v. United States Filter Corp., 
2001 U.S. Dist. LEXIS 3918 (C.D. Cal. 2001); Karlin v. Alcatel, 
S.A., 2001 U.S. Dist. LEXIS 12349 (C.D. Cal. 2001); Harris v. Intel 
Corp., 2002 U.S. Dist. LEXIS 13796 (N.D. Cal. 2002); Cummings v. 
Koninklijke Philips Elec., N.V., 2002 U.S. Dist. LEXIS 23383 (N.D. 
Cal. 2002); In re: Luxottica Group S.p.A., 293 F. Supp.2d 224 (E.D. 
N.Y. 2003).
    \20\ Id.
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    The bright-line test, on the other hand, States that the best-price 
rule applies only to arrangements executed and performed between the 
time a tender offer formally commences \21\ and expires.\22\ 
Jurisdictions following the bright-line test have held that agreements 
or arrangements with security holders of the subject company do not 
violate the best-price rule if they are not executed and performed 
``during the tender offer.'' \23\
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    \21\ See Exchange Act Rule 13e-4(a)(4) (17 CFR 240.13e-4(a)(4)) 
and Exchange Act Rule 14d-2 (17 CFR 240.14d-2) (relating to 
procedures for formal commencement of tender offers).
    \22\ See Lerro, 84 F.3d 239; Gerber v. Computer Assoc. Int'l, 
Inc., 303 F.3d 126 (2d Cir. 2002); In re: Digital Island Securities 
Litig., 357 F.3d 322 (3d Cir. 2004); Walker v. Shield Acquisition 
Corp., 145 F. Supp.2d 1360 (N.D. Ga. 2001); Susquehanna Capital 
Group v. Rite Aid Corp., 2002 U.S. Dist. LEXIS 18290 (E.D. Pa. 
2002); Katt v. Titan Acquisitions, Inc., 244 F. Supp.2d 841 (M.D. 
Tenn. 2003).
    \23\ Id.
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    These differing interpretations of the best-price rule have made 
using a tender offer acquisition structure unattractive because of the 
potential liability of bidders for claims alleging that compensation 
payments violate the best-price rule.\24\ This potential liability is 
heightened by the possibility that claimants can choose to bring a 
claim in a jurisdiction that recognizes an interpretation of the best-
price rule that suits the claimant's case. These differing 
interpretations do not best serve the interests of security holders and 
have resulted in a regulatory disincentive to structuring an 
acquisition of securities as a tender offer, as compared to a statutory 
merger, to which the best-price rule does not apply. We believe that 
the interests of security holders are better served when all 
acquisition structures are viable options.\25\ We intend for the 
amendments we are adopting today to alleviate this regulatory 
disincentive.
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    \24\ Commenters cited the judicial interpretations as one reason 
for the decline in the use of tender offers and some indicated that 
they do not recommend the use of tender offers if other acquisition 
structures are available. See, e.g., the letters from the American 
Bar Association, Business Law Section, Committee on Federal 
Regulation of Securities (``ABA''); Cravath, Swaine & Moore LLP, 
Davis Polk & Wardwell, Latham & Watkins LLP, Simpson Thacher & 
Bartlett LLP, Skadden, Arps, Slate, Meagher & Flom LLP, Sullivan & 
Cromwell LLP, and Wachtell, Lipton, Rosen & Katz (``Law Firm 
Group''); and Association of the Bar of the City of New York, 
Special Committee on Mergers, Acquisitions and Corporate Control 
Contests (``NYCBA'').
    \25\ As we indicated in the Proposing Release, at the time we 
adopted Regulation M-A (17 CFR 229.1000-229.1016) we stated that 
``[o]ur goals in proposing and adopting these changes are to * * * 
harmonize inconsistent disclosure requirements and alleviate 
unnecessary burdens associated with the compliance process * * * 
'').
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C. Overview of the Proposed Amendments

    As we discussed in the Proposing Release, we do not believe that 
the best-price rule should be subject to a strict temporal test because 
such a test lends itself to abuse. However, we also do not believe that 
all payments that are conditioned on or otherwise somehow related to a 
tender offer, including payments under compensatory or commercial 
arrangements that are made to persons who happen to be security 
holders, whether made before, during or after the tender offer period, 
should be subject to the best-price rule. Accordingly, we proposed 
amendments to the best-price rule that did not follow the approach of 
either the integral-part or the bright-line test. Instead, we proposed 
to change the language of the best-price rule so that only 
consideration paid to security holders for securities tendered into a 
tender offer will be evaluated when determining the highest 
consideration paid to any other security holder for securities tendered 
into the tender offer.
    Our proposed amendments to the third-party tender offer best-price 
rule also acknowledged that critical personnel decisions often are 
required to be made concurrently with decisions regarding whether to 
pursue a transaction with the subject company in a tender offer. We 
believed, and continue to believe, that these decisions generally are 
made independently from the consideration paid for securities tendered 
in the tender offer. We therefore proposed a specific exemption from 
the third-party tender offer best-price rule for consideration offered 
and paid according to employment compensation, severance or other 
employee benefit arrangements entered into with employees and directors 
of the subject company of a tender offer where the amounts payable 
under the arrangements meet certain requirements. We also proposed a 
safe harbor to the exemption from the third-party tender offer best-
price rule for consideration offered and paid according to certain 
employment compensation, severance or other employee benefit 
arrangements that were approved by either the compensation committee or 
a committee performing similar functions as the compensation committee 
of the board of directors of either the subject company or bidder, 
depending on which entity was a party to the arrangement.

II. Amendments to the Best-Price Rule

A. Amendments to the Basic Standard in Exchange Act Rules 13e-
4(f)(8)(ii) and 14d-10(a)(2)

1. Discussion
    We proposed amendments to the issuer and third-party best-price 
rule to address the uncertainty that the various court interpretations 
have produced while ensuring that the intent of the best-price rule--
equal treatment of security holders--is satisfied. The amendments 
revise the best-price rule to state that no one may make a tender offer 
unless ``[t]he consideration paid to any security holder for securities 
tendered in the tender offer is the highest consideration paid to any 
other security holder for securities tendered in the tender offer.'' 
The clause ``for securities tendered in the tender offer'' would 
replace the clauses ``pursuant to the tender offer'' and ``during such 
tender offer,'' as the rule previously read, to clarify the intent of 
the best-price rule. Today, we adopt these changes as proposed.
2. Comments Regarding the Proposed Amendments to the Basic Standard in 
Exchange Act Rules 13e-4(f)(8)(ii) and 14d-10(a)(2)
    Although commenters generally favored the proposals, certain 
commenters expressed some concerns

[[Page 65396]]

regarding the proposed amendments.\26\ These commenters were of the 
view that the proposed changes likely would alter the bright-line 
precedent that has been established by courts. Specifically, one 
commenter indicated that the removal of the phrase ``during the tender 
offer'' would be used to argue that payments made at any time are for 
``securities tendered in'' the tender offer, which would expand the 
application and, therefore, the potential claims that could be made 
under the best-price rule.\27\ We believe that the amendments we are 
adopting today, as discussed in more detail below, will provide 
sufficient certainty in assuring that payments made with respect to 
compensatory arrangements will not be captured by the best-price rule 
such that any temporal certainty that may previously have been present 
under the ``bright-line test'' will no longer be necessary. As stated 
above, we also do not believe that the best-price rule should be 
subject to a strict temporal test, which could provide opportunities 
for evasion of the rule.
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    \26\ See, e.g., letters from ABA; Dechert LLP (``Dechert''); and 
Law Firm Group.
    \27\ Letter from Law Firm Group.
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    As we articulated in the Proposing Release, the flexible concept of 
a tender offer is consistent with the purpose of the best-price rule, 
in that it prevents bidders from impermissibly circumventing the rule 
by limiting the application of the rule to stated dates.\28\ The best-
price rule was not intended to apply to all payments made to persons 
who happen to be security holders of a subject company, whether made 
before, during or after the formal tender offer period. Further, the 
amendments that we are adopting today will remove the potentially 
expansive concept of consideration paid ``pursuant to'' the tender 
offer in order to focus the analysis as to whether the consideration to 
which the best-price rule would apply was paid ``for securities 
tendered in'' the tender offer.
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    \28\ See note 21 above.
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    In response to questions that we posed about whether employees and 
directors who enter into arrangements with the bidder or subject 
company and do not tender their securities into a tender offer will 
avoid the strictures of the best-price rule as proposed, commenters 
generally agreed that no violation of the best-price rule should occur 
under these circumstances.\29\ Commenters believed that this outcome 
was appropriate. We agree, because the best-price rule would not be 
applicable in these instances.
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    \29\ See, e.g., letters from ABA; Jason A. Gonzalez 
(``Gonzalez''); and Law Firm Group.
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B. Exemption for Consideration Offered and Paid Pursuant to 
Compensatory Arrangements

1. Discussion
    We are adopting an amendment to the issuer and third-party best-
price rules so that consideration offered and paid pursuant to 
employment compensation, severance or other employee benefit 
arrangements that are entered into with security holders of the subject 
company and that meet certain substantive requirements are not 
prohibited by the best-price rules.\30\ We believe that amounts paid 
pursuant to arrangements meeting the requirements of this provision 
should not be considered when calculating the price paid for tendered 
securities.
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    \30\ The exemption and safe harbor were proposed as amendments 
to Rule 14d-10(c) of the third-party tender offer rules. The 
exemption and the safe harbor are adopted as new Rules 14d-10(d)(1) 
and 14d-10(d)(2), respectively, and Rules 13e-4(f)(12)(i) and 13e-
4(f)(12)(ii), respectively. Because we are inserting the exemption 
and safe harbor into an existing subparagraph (and redesignating old 
subparagraph (d) as (e), etc.), we are also making a technical 
change to reflect this redesignation in the rules that govern the 
ability to delegate authority for purposes of granting exemptions 
under the best-price rule.
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    We have revised the proposed exemption for compensatory 
arrangements that meet specified substantive requirements to address a 
number of the comments received. We have expanded the persons who may 
enter into an employment compensation, severance or other employee 
benefit arrangement to include all security holders of the subject 
company, as opposed to only employees and directors of the subject 
company. We are also extending this exemption to issuer tender 
offers.\31\ Finally, we have modified the requirements of the exemption 
so that the amounts to be paid pursuant to an arrangement will have to 
be ``paid or granted as compensation for past services performed, 
future services to be performed, or future services to be refrained 
from performing, by the security holder (and matters incidental 
thereto)'' and may ``not [be] calculated based on the number of 
securities tendered or to be tendered in the tender offer by the 
security holder.''
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    \31\ The term ``issuer tender offer,'' as defined in Rule 13e-
4(a)(2) (17 CFR 240.13e-4(a)(2)), refers to a tender offer for, or a 
request or invitation for tenders of, any class of equity security, 
made by the issuer or an affiliate of such issuer of the class of 
such equity security. For purposes of this release, all references 
to ``subject company,'' as defined for purposes of the third-party 
tender offer rules are intended to refer to ``issuer,'' for purposes 
of the issuer tender offer rules. Similarly, all references to 
``bidder,'' as defined for purposes of the third-party tender offer 
rules are intended to refer to an ``issuer'' and ``affiliate,'' for 
purposes of the issuer tender offer rules.
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2. Comments Regarding the Compensatory Arrangement Exemption
a. Parties to the Arrangement
    As proposed, the exemption would have applied to employment 
compensation, severance or other employee benefit arrangements entered 
into with employees or directors of the subject company. We solicited 
comment regarding whether the exemption should be restricted to such 
persons. Commenters believed that the exemption should be expanded and 
suggested expansion of the exemption to encompass consultants,\32\ 
independent contractors,\33\ employees or directors of the bidder,\34\ 
and/or any security holder of the subject company.\35\ Commenters were 
of the view that it would be appropriate to expand the class of persons 
because arrangements entered into with the expanded class of persons 
are, like those entered into with employees and directors, intended to 
cover compensation for past services or incentives for future services 
and not tied to the number of shares to be tendered.\36\ We agree and 
have expanded the exemption to apply to any security holder of the 
subject company. While, as a practical matter, the challenges to the 
best-price rule to date have focused primarily on employment 
compensation, severance and other employee benefit arrangements with 
employees or directors of the subject company, we believe that the role 
of the person who is a party to the arrangement is irrelevant.
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    \32\ See, e.g., letters from Law Firm Group and Shearman & 
Sterling LLP (``Shearman'').
    \33\ Letter from New York State Bar Association, Business Law 
Section, Committee on Securities Regulation (``NYSBA'').
    \34\ See, e.g., letters from Gonzalez and Society of Corporate 
Secretaries & Governance Professionals, Securities Law Committee 
(``SCSGP'').
    \35\ See, e.g., letters from ABA and Dechert.
    \36\ See, e.g., letter from SCSGP.
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b. Types of Arrangements Covered by the Exemption
    In the Proposing Release, we asked whether we should expand the 
exemption to include commercial arrangements, in addition to employment 
compensation, severance or other employee benefit arrangements. Several 
commenters favored extending the exemption to commercial 
arrangements.\37\ In doing so,

[[Page 65397]]

commenters generally argued that it is not uncommon for security 
holders of the subject company of a tender offer to enter into 
commercial arrangements with the bidder and, absent a specific 
exemption, such arrangements could be (and have been) challenged under 
the best-price rule.\38\ Other commenters suggested that providing an 
express exemption for employment compensation, severance or other 
employee benefit arrangements but not providing a similar exemption for 
commercial arrangements may undermine our objectives in adopting these 
amendments.\39\
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    \37\ See, e.g., letters from ABA; Dechert; Intel Corporation 
(``Intel''); NYCBA; NYSBA; SCSGP; and Securities Industry 
Association, Capital Markets Committee (``SIA'').
    \38\ See, e.g., letters from Dechert, Intel and NYCBA.
    \39\ See, e.g., letter from NYSBA.
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    We do not believe that it is appropriate to provide a separate 
exemption for commercial arrangements. As is reflected in an 
instruction to the exemption, which is adopted as proposed,\40\ the 
fact that the exemption extends to employment compensation, severance 
or other employee benefit arrangements does not mean that an 
arrangement of any other nature, including a commercial arrangement, 
with a security holder should be treated as consideration paid for 
securities tendered in a tender offer. This instruction should 
alleviate the concerns raised by commenters about whether the perceived 
exclusivity of the exemption will create an unintended inference.\41\ 
Also, because of the wide variety of potential commercial arrangements 
that could be negotiated at the time of a tender offer we are presently 
unable to craft a specific exemption for commercial arrangements--
unlike the language of the compensation arrangement exemption--that 
could be tailored to be functional while assuring security holders of 
the intended benefits of the best-price rule.
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    \40\ As noted in Section II.C.2.d., the instruction now applies 
to both the exemption and the safe harbor.
    \41\ Further, the best-price rule does not apply if a security 
holder refrains from tendering into a tender offer. See Section 
II.A.2. above.
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    In the Proposing Release, we also asked whether we should consider 
adopting a de minimis exception to the best-price rule whereby holders 
of a certain percentage of securities of the subject company would be 
exempt from the application of the best-price rule. Some commenters 
were in favor of a de minimis exception, although the commenters had 
differing views as to the percentage to be applied to the exception, to 
whom the exception would apply and what types of arrangements should be 
available under the exception.\42\ We determined that it would not be 
appropriate to implement a de minimis exception because it could 
undermine the protections of the best-price rule.
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    \42\ Letters from ABA; Law Firm Group; NYCBA; NYSBA; SCSGP; and 
SIA.
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    In the Proposing Release, we also asked whether the proposed 
exemption should provide a definition or provide examples of what we 
mean when we refer to ``employment compensation, severance or other 
employee benefit arrangements.'' Commenters were mixed in their 
preference as to whether or not defining the phrase or offering 
examples would be helpful, although most did not believe it would be 
necessary.\43\ Some commenters expressed the view that if the phrase 
was defined and an employment compensation, severance or other employee 
benefit arrangement did not fall squarely within the definition or list 
of examples, potential bidders might opt to use a transaction structure 
other than a tender offer.\44\ Others stated that the phrase 
``employment compensation, severance or other employee benefit 
arrangement'' uses terms that are generally understood and an attempt 
to define the phrase or provide examples would raise questions of 
interpretation.\45\ We agree and generally believe that providing a 
definition or a list of examples is not necessary and would invite 
confusion.
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    \43\ See, e.g., letters from ABA; Intel; Law Firm Group; and 
SCSGP.
    \44\ See, e.g., letter from Intel.
    \45\ See, e.g., letters from ABA and SCSGP.
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c. Additional Requirements of the Exemption
    We proposed that, for purposes of satisfying the exemption, the 
amounts to be paid pursuant to an arrangement would have to relate 
``solely to past services performed or future services to be performed 
or refrained from performing, by the employee or director (and matters 
incidental thereto)'' and could ``not [be] based on the number of 
securities the employee or director owns or tenders.'' As we explained 
in the Proposing Release, we included these requirements so that the 
amounts paid pursuant to employment compensation, severance or other 
employee benefit arrangements were based on legitimate compensatory 
reasons.\46\ We also believed that it was not appropriate to permit the 
exemption of any payments to be made that were proportional to or 
otherwise based on the number of securities held by the security holder 
because such a relationship between the payment and the securities 
tendered presented the type of situation the best-price rule was 
adopted to guard against.
---------------------------------------------------------------------------

    \46\ Proposing Release at Section II.B.1.
---------------------------------------------------------------------------

    Most of the commenters believed that excluding employment 
compensation, severance or other employee benefit arrangements from the 
application of the best-price rule would provide certainty and address 
the issues raised by the current legal precedent.\47\ A number of 
commenters suggested, however, that we remove the requirements of the 
exemption.\48\ These commenters generally were concerned that the 
courts would scrutinize whether the requirements were satisfied, 
resulting in the substitution of one set of disputed facts for 
another.\49\ Commenters also were concerned that it might be difficult 
to determine whether or not the requirements have been met, given that 
it would require the ability to discern the intent of the parties at 
the time the arrangement was made.\50\ At least one commenter also 
expressed the concern that the requirements might unnecessarily 
circumscribe the availability of the exemption.\51\
---------------------------------------------------------------------------

    \47\ See, e.g., letters from Dechert; Law Firm Group; and NYCBA.
    \48\ See, e.g., letters from ABA; Dechert; Law Firm Group; 
NYCBA; and SIA.
    \49\ See, e.g., letters from ABA; Dechert; Law Firm Group; and 
SIA.
    \50\ See, e.g., letter from Dechert.
    \51\ See, e.g., letter from Shearman.
---------------------------------------------------------------------------

    We have considered these comments and determined to retain the 
requirements with certain modifications. While we recognize that it may 
be difficult to determine in all instances whether or not the 
requirements have been satisfied, we believe making the exemption 
available without the requirements might subject the exemption to 
abuse. These requirements are designed to prevent the compensation 
being paid or granted under an arrangement from being for securities 
tendered in the tender offer.\52\
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    \52\ Some commenters asked us to confirm whether any 
compensatory arrangement that is conditioned upon the security 
holder, who is a party to the arrangement, tendering securities into 
the tender offer would render the arrangement less likely to be one 
that should fall within the exemption or whether it is objectionable 
for the compensatory arrangement to be conditioned upon consummation 
of the tender offer. We believe that conditioning an arrangement on 
a security holder tendering securities into the tender offer would 
most likely violate one or both of the requirements of the 
exemption. We do not believe that conditioning an arrangement on the 
completion or consummation of the tender offer, without any 
requirements as to the security holder who is a party to the 
arrangement tendering shares in the tender offer, is relevant to a 
determination as to whether the exemption is available.

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[[Page 65398]]

i. Requirement That the Amount Payable Under the Compensatory 
Arrangement Is Being Paid or Granted as Compensation
    With respect to the first requirement, some commenters asked that 
we remove the reference to ``solely'' in order to avoid language that 
might unnecessarily circumscribe the availability of the exemption.\53\ 
We agree and have substituted the first clause that read ``relate 
solely to'' with ``is being paid or granted as compensation for'' to 
clarify that it was our intent to provide an exemption only for 
employment compensation, severance or other employee benefit 
arrangements for which there is a legitimate compensatory purpose.
---------------------------------------------------------------------------

    \53\ See, e.g., letters from SCSGP and Shearman.
---------------------------------------------------------------------------

    One commenter also asked that we consider using a term other than 
``services'' to avoid the possibility that certain forms of 
consideration, which may be paid or granted pursuant to the 
arrangements, would not meet the requirements of the exemption.\54\ The 
commenter was concerned that the use of the term ``services'' might 
exclude those arrangements that called for compensation to be paid that 
was unconventional, such as the purchase of assets owned or used by an 
employee or director. We considered this concern and note that this 
requirement is intended only to require that the consideration paid is 
for services performed or to be performed or to be refrained from being 
performed--not to restrict the forms of consideration to be paid under 
an arrangement. We believe that the inclusion of the phrase ``and 
matters incidental thereto'' also should provide flexibility to cover 
other service-related compensation.
---------------------------------------------------------------------------

    \54\ Letter from NYCBA.
---------------------------------------------------------------------------

ii. Requirement That the Amount Payable Under the Compensatory 
Arrangement Is Not Calculated Based on the Number of Securities 
Tendered
    With respect to the second requirement, several commenters 
expressed concern as to whether we intended for employment 
compensation, severance or other employee benefit arrangements that are 
in the form of equity-based awards to be captured by this 
requirement.\55\ Because equity-based awards are almost always based on 
the number of securities ``owned or tendered,'' commenters argued that 
the grant of equity-based awards or the modification of previously 
granted equity-based awards generally would fall outside of the 
compensation arrangement exemption to the best-price rule by virtue of 
failing to meet this second requirement. They suggested that we clarify 
the intent of the requirement. For similar reasons, commenters also 
suggested that we remove the reference to securities ``owned'' and 
refocus the provisions of this requirement on securities ``tendered.'' 
\56\ We believe that we have addressed these concerns by adding the 
word ``calculated'' before ``based'' and replacing ``owns or tenders'' 
with ``tendered or to be tendered'' so that the exemption now requires 
that the arrangement ``not [be] calculated based on the number of 
securities tendered or to be tendered * * * '' We believe these changes 
address the concerns raised by commenters and clarify that we did not 
intend for equity-based employment compensation, severance or other 
employee benefit arrangements that are premised on legitimate 
compensatory reasons to fall outside this exemption from the best-price 
rule.
---------------------------------------------------------------------------

    \55\ See, e.g., letters from ABA; NYCBA; and SIA.
    \56\ See, e.g., letter from ABA.
---------------------------------------------------------------------------

C. Arrangements Approved by Independent Directors

1. Discussion
    We proposed a safe harbor from the third-party tender offer best-
price rule for consideration offered and paid according to employment 
compensation, severance or other employee benefit arrangements entered 
into with employees and directors of the subject company that are 
approved by certain committees of the subject company's or bidder's 
board of directors. As we stated in the Proposing Release, we believe 
that the fiduciary duty requirements of board members, coupled with 
significant advances in the independence requirements for compensation 
committee members and recent advances in corporate governance, provide 
safeguards to allow employment compensation, severance or other 
employee benefit arrangements that are approved by independent 
compensation committee members and groups of independent board members 
to be exempt from the best-price rule.\57\ As proposed, this provision 
would have operated as a safe harbor within the broader proposed 
exemption that included the two requirements discussed above. As we 
noted in the Proposing Release, we believed that providing such a safe 
harbor would provide increased certainty to bidders and subject 
companies in connection with the application of the best-price rule. We 
also believed that the proposed safe harbor struck the proper balance 
between the need for certainty in planning and structuring proposed 
acquisitions and the statutory purposes of the best-price rule. Most of 
the commenters agreed that providing the safe harbor was a good idea, 
although some commenters suggested certain changes to the provisions of 
the safe harbor to address issues on which we requested comment or that 
commenters identified.\58\
---------------------------------------------------------------------------

    \57\ See, e.g., New York Stock Exchange, Inc. and National 
Association of Securities Dealers, Inc. Order Approving Proposed 
Rule Changes, Release No. 34-48745 (Nov. 4, 2003) [68 FR 64154] and 
Section 303A.05 of the New York Stock Exchange's Listed Company 
Manual (requiring the compensation committee to be comprised solely 
of independent directors).
    \58\ See the discussion at Section II.C.2. below.
---------------------------------------------------------------------------

    We are adopting the safe harbor provision with certain 
modifications. First, we added the safe harbor to both the issuer and 
third-party tender offer best-price rules. Next, we amended the 
language of the safe harbor so that arrangements can be approved by 
either a compensation committee or a committee performing similar 
functions of the subject company's board of directors, regardless of 
whether the subject company is a party to the arrangement. 
Alternatively, if the bidder is a party to the arrangement, the 
arrangement may be approved by either a compensation committee or a 
committee performing similar functions of the board of directors of the 
bidder. In the case of issuer tender offers, arrangements must be 
approved by either a compensation committee of the issuer's board of 
directors or a committee performing similar functions, regardless of 
whether the issuer is a party to the arrangement. Alternatively, if an 
affiliate is a party to the arrangement, the arrangement may be 
approved by either a compensation committee or a committee performing 
similar functions of the board of directors of the affiliate. We are 
also amending the safe harbor to allow a special committee of the 
approving entity formed to consider and approve the arrangement to 
approve the arrangement and meet the requirements of the safe harbor if 
the approving entity does not have a compensation committee or a 
committee of the board of directors that performs functions similar to 
a compensation committee or if all the members of either of those 
committees are not independent. All of the members of the committee 
used to approve an arrangement must be independent, as defined.\59\ We 
have

[[Page 65399]]

made certain accommodations to these requirements for foreign private 
issuers, as discussed below.
---------------------------------------------------------------------------

    \59\ Therefore, it is not necessary for the entire compensation 
committee of the bidder or subject company to approve the 
arrangement and, in fact, a subcommittee of this committee may 
approve the arrangement, so long as the subcommittee is comprised 
entirely of members that are independent in accordance with the 
requirements of the listing standards. See the related discussion at 
Section II.C.2.b. and note 72 below.
---------------------------------------------------------------------------

    Most of the commenters believed that providing the safe harbor 
would create certainty in an otherwise uncertain environment caused by 
the legal precedent that has evolved in this area.\60\ In this regard, 
commenters were of the view that the safe harbor should provide as much 
certainty as possible, while still retaining a certain amount of 
flexibility so as to allow parties to be able to take advantage of 
it.\61\ Commenters provided significant specific guidance regarding the 
operation of the proposed safe harbor and offered suggestions regarding 
the most effective means of accomplishing its purpose. The safe harbor 
we are adopting today has been revised from the proposal to address the 
following concerns, as discussed in further detail below:
---------------------------------------------------------------------------

    \60\ See, e.g., letters from ABA, Dechert and NYCBA.
    \61\ See, e.g., letters from Law Firm Group and NYCBA.
---------------------------------------------------------------------------

     The approval of the directors of the subject company will 
satisfy the safe harbor requirements, regardless of whether the subject 
company is a party to the arrangement; \62\
---------------------------------------------------------------------------

    \62\ Alternatively, as adopted, the safe harbor is available 
where the arrangement is approved by the bidder's board of 
directors, but only if the bidder is a party to the arrangement.
---------------------------------------------------------------------------

     A special committee of the board of directors of the 
subject company or the bidder, as applicable, comprised solely of 
independent members and formed to consider and approve the arrangement 
may approve the arrangement and satisfy the safe harbor requirements if 
the subject company's or bidder's board of directors, as applicable, 
does not have a compensation committee or a committee of the board of 
directors that performs functions similar to a compensation committee 
or if none of the members of such committees is independent;
     Foreign private issuers may have the arrangement approved 
by any members of the board of directors or any committee of the board 
of directors authorized to approve the arrangement under the laws or 
regulations of their home country, and the members of the board or 
committee need not be independent in accordance with the U.S. listing 
standards but must be independent in accordance with the laws, 
regulations, codes or standards of their home country;
     The approving directors do not need to determine that the 
arrangements meet the additional requirements of the compensation 
arrangement exemption;
     A new instruction provides that a determination by the 
board of directors that the board members approving an arrangement are 
independent in accordance with the provisions of the safe harbor will 
satisfy the independence requirements of the safe harbor; and
     We have expanded the safe harbor to apply to issuer, in 
addition to third-party, tender offers.
2. Comments Regarding the Safe Harbor
a. The Committee Approval Required
i. Approving Party
    As proposed, for purposes of satisfying the safe harbor, an 
arrangement would have needed to be approved by the applicable 
committee of the board of directors of either the subject company or 
the bidder, depending on whether the subject company or bidder is a 
party to the arrangement. We requested comment on whether the safe 
harbor could be modified to work better with State law protections. 
Several commenters advocated that the safe harbor provide that the 
arrangement may be approved by the applicable committee of the subject 
company, regardless of whether the subject company is a party to the 
arrangement.\63\ We agree with these comments and have followed this 
approach in the amendments we are adopting. We believe the duties owed 
by the subject company's board members to the security holders subject 
to a tender offer provide certain protections of security holder 
interests regardless of whether the subject company is a party to the 
arrangement because the subject company's directors have a duty to act 
in the best interests of the security holders of the subject company. 
Also, this provides additional flexibility to parties wanting to take 
advantage of the safe harbor; bidders that, for whatever reason, do not 
have a compensation committee with independent directors will be able 
to rely upon the safe harbor by allowing the subject company to approve 
the compensation arrangement whether or not the bidder is a party to 
the arrangement. The safe harbor adopted today also allows approval by 
the applicable committee of the bidder's board of directors only if the 
bidder is a party to the arrangement. The amendments to the issuer 
tender offer rules follow a similar approach with respect to the 
approval required by the directors of the issuer or an affiliate of the 
issuer.
---------------------------------------------------------------------------

    \63\ See, e.g., letters from ABA; Dechert; Law Firm Group; 
NYCBA; and SIA.
---------------------------------------------------------------------------

ii. Approving Body
    The proposed safe harbor would have allowed a compensation 
committee or a committee performing similar functions comprised solely 
of independent members of the board of directors to approve the 
arrangement. The safe harbor adopted today includes this provision. In 
the Proposing Release, we sought comment as to whether certain entities 
(e.g., small business issuers, foreign private issuers) may not have 
established compensation committees or committees performing similar 
functions such that the safe harbor may not be available to them. 
Commenters suggested we expand the approving body to include, among 
others, the entire board of directors or another duly authorized 
committee of the board.\64\
---------------------------------------------------------------------------

    \64\ See, e.g., letters from ABA; Dechert; Law Firm Group; 
NYCBA; NYSBA; and SIA.
---------------------------------------------------------------------------

    In response to these comments, the safe harbor adopted today has 
been expanded in two respects. First, the safe harbor allows a special 
committee of the board of directors of the subject company or the 
bidder, as applicable, comprised solely of independent members and 
formed to consider and approve the arrangement, to approve the 
arrangement and satisfy the safe harbor if the subject company's or 
bidder's board of directors, as applicable, does not have a 
compensation committee or a committee that performs functions similar 
to a compensation committee or does have one of these committees but 
none of its members is independent. The safe harbor adopted today also 
has been expanded to allow foreign private issuers to obtain the 
approval by any or all members of the board of directors or any 
committee of the board of directors authorized to approve the 
arrangement under the laws or regulations of the home country of the 
approving party.
    We believe that expanding the safe harbor to include approvals by a 
special committee comprised of independent directors and the 
accommodation for foreign private issuers is appropriate for purposes 
of the best-price rule. Allowing a special committee, in lieu of a 
compensation or similar committee, to approve the compensatory 
arrangement provides additional flexibility to parties who want to rely 
on the safe harbor. Further, because the members of the special 
committee would have to be independent, we believe the approval by a 
special committee should not compromise investor protection.\65\
---------------------------------------------------------------------------

    \65\ State law also creates an incentive for board members to be 
disinterested from the transaction. See, e.g., 8 Del. C. section 144 
and Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983).

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

[[Page 65400]]

    The accommodation for foreign private issuers is appropriate 
because those issuers may not have compensation or similar committees. 
Deferring to the laws and regulations of the home country of foreign 
private issuers makes it more likely that they will avail themselves of 
the safe harbor and, consequently, conduct tender offers that will 
include U.S. security holders.
b. Determining Independence
    In the Proposing Release, we solicited comment regarding the 
appropriateness of relying on the independence standards for 
compensation committee members as defined in the listing standards. One 
commenter suggested that we rely upon State law duties of directors 
because the approving body is already relying upon State law standards 
of fiduciary duties in approving the arrangement.\66\ Other commenters 
suggested that codifying an independence definition similar to other 
definitions provided in some Exchange Act rules--as opposed to relying 
upon a definition that is determined by reference to the listing 
standards, as we have in other Exchange Act rules--would be a better 
approach because this would provide a consistent definition.\67\ We 
disagree and are adopting the provisions related to the independence 
standards as proposed, with an accommodation for foreign private 
issuers. We believe this approach is appropriate because the 
definitions under the listing standards have previously been approved 
by us and are consistent with the approach we have followed in the 
past.\68\ In addition, the amendments, as adopted, clarify that a 
director of a registered closed-end investment company is considered to 
be independent if the director is not an ``interested person'' of the 
investment company, as defined in Section 2(a)(19) of the Investment 
Company Act of 1940.\69\ This clarification is necessary because 
compensation committee listing standards typically do not apply to 
registered investment companies.\70\
---------------------------------------------------------------------------

    \66\ See letter from Dechert.
    \67\ See, e.g., letter from Shearman, which refers to Rule 16b-
3(d), but we presume that the commenter is referring to the 
definition of ``Non-Employee Director'' provided in Exchange Act 
Rule 16b-3(b)(3) (17 CFR 240.16b-3(b)(3)).
    \68\ See, e.g., Item 407 of Regulations S-B and S-K (17 CFR 
228.407 and 17 CFR 229.407) as adopted in Executive Compensation and 
Related Person Disclosure, Release No. 33-8732A (Aug. 29, 2006) [71 
FR 53158] and Self-Regulatory Organizations; New York Stock 
Exchange, Inc. and National Association of Securities Dealers, Inc. 
Order Approving Proposed Rule Changes, Release No. 34-48745 (Nov. 4, 
2003) [68 FR 64154].
    \69\ 15 U.S.C. 80a-2(a)(19).
    \70\ See, e.g., Section 801 of the American Stock Exchange 
Company Guide; NASDAQ Rule 4350(a)(2); and, Section 303A.00 of the 
New York Stock Exchange's Listed Company Manual.
---------------------------------------------------------------------------

    The amendments do not require that the approving body of a foreign 
private issuer be comprised of members that are independent as defined 
in the listing standards. While foreign private issuers may rely on the 
listing standards when determining independence for purposes of the new 
rule, those issuers will have the alternative of determining the 
independence of the members of the board or committee approving a 
compensatory arrangement for purposes of the safe harbor in accordance 
with home country laws, regulations, codes and standards. We believe 
this accommodation is appropriate because foreign private issuers may 
not be subject to the listing standard's independence provisions as 
they relate to compensation committees and should be provided with the 
flexibility to rely on home country laws, regulations, codes and 
standards in adhering to independence standards. We recognize that 
foreign private issuers may be subject to regulatory schemes and 
structures that differ from those that apply to U.S. issuers and that 
some of these schemes and structures may have a definition that is not 
consistent with the definition of independence contained in U.S. 
listing standards. Nevertheless, we are comfortable with this approach 
and believe that it balances the premise of the safe harbor--approval 
of arrangements by independent board members--against the potential 
that local independence standards differ drastically from the listing 
standard's definitions.
    We also received comments regarding the possibility that a member 
of an existing compensation committee or a committee that performs 
functions similar to a compensation committee may not be independent 
for purposes of a particular tender offer.\71\ Recusal by a member of 
the approving body from considering and approving the arrangement under 
those circumstances in accordance with State or local law or the 
listing standards would not eliminate the availability of the safe 
harbor.\72\
---------------------------------------------------------------------------

    \71\ See, e.g., letter from SCSGP.
    \72\ A bidder or subject company's standing compensation 
committee may include multiple board members, each of whom has 
qualified as independent in accordance with the requirements of the 
applicable listing standards. The safe harbor does not require that 
each of the members of a company's standing compensation committee 
participate in the consideration and approval of an arrangement.
---------------------------------------------------------------------------

    In the Proposing Release, we requested comment regarding whether 
the language of the proposed amendments provided sufficient certainty 
and clarity. Some commenters stated that the safe harbor should be 
clarified to state that a conclusion by the board of directors that 
each member of the approving committee is independent should be 
sufficient to determine conclusively that such committee members meet 
the applicable independence requirements.\73\ We have added an 
instruction to the safe harbor that a determination by the bidder's or 
the subject company's board of directors, as applicable, that the 
members of the committee approving an arrangement are independent in 
accordance with the provisions of the safe harbor will satisfy the 
requirements of the safe harbor. We believe that clarifying this point 
is consistent with the provisions of the safe harbor and the intent of 
the best-price rule.
---------------------------------------------------------------------------

    \73\ See, e.g., letters from Law Firm Group and NYCBA.
---------------------------------------------------------------------------

c. Procedural Aspects of the Approval of Arrangements
    We proposed that, for purposes of satisfying the safe harbor, an 
arrangement needed to be approved by the applicable committee as 
meeting the additional requirements of the proposed compensation 
arrangement exemption--specifically, that the amount to be paid 
pursuant to a compensatory arrangement must ``relate[] solely to past 
services performed or future services to be performed or refrained from 
performing, by the employee or director (and matters incidental 
thereto) and [may not be] based on the number of securities the 
employee or director owns or tenders.'' We solicited comment on the 
appropriateness of these requirements. Commenters believed that 
requiring the committee to consider these additional factors was 
unnecessary and could potentially lead to confusion regarding the 
application of the safe harbor.\74\ We agree with these comments, and 
the safe harbor adopted today does not require that the approving 
committee consider these requirements. The language of the safe harbor 
adopted today does require that the independent directors approve the 
arrangement as an employment compensation, severance or other employee 
benefit arrangement. We believe this procedural requirement is 
necessary so directors understand that by approving an arrangement and 
thereby satisfying the requirements of

[[Page 65401]]

the safe harbor, they are determining that the arrangement is 
compensatory.\75\
---------------------------------------------------------------------------

    \74\ See the discussion at Section II.B.2.c. above.
    \75\ This procedural requirement is not intended to affect the 
State law or listing standard approval or documentation requirements 
for matters considered by the board of directors or committees of 
the board of directors.
---------------------------------------------------------------------------

    In response to our request for comment, many commenters expressed 
the view that committee approval of specific arrangements, as compared 
to approval of plans or programs, with security holders of a subject 
company should not be required by the proposed safe harbor.\76\ We have 
not made changes in response to these comments, as we believe they are 
inconsistent with a basic premise of the safe harbor, which is that 
individuals vested with the fiduciary responsibility for approving 
compensation arrangements will consider and approve arrangements with 
security holders of the subject company of a tender offer and, 
therefore, the best-price rule need not apply. Based on this premise, 
directors would need to have knowledge of the specific arrangements 
with security holders and the related tender offer when the approval is 
given. Of course, the corporate procedures for obtaining and 
documenting such approval remain matters of State law and the 
requirements of the safe harbor do not limit the ability of the 
independent directors to approve multiple specific arrangements or 
stock grants generally.
---------------------------------------------------------------------------

    \76\ See, e.g., letters from ABA; Intel; Law Firm Group; NYCBA; 
SCSGP; and Shearman.
---------------------------------------------------------------------------

    Many commenters requested that the timing of the required approval 
of arrangements by the committee and the ability of committees to 
reapprove or ratify arrangements originally approved before the 
consideration of a specific transaction or the effectiveness of these 
rule changes be clarified. We have not proposed changes to the safe 
harbor to address these comments, as we do not believe it is necessary 
to address such procedural issues in the rule itself. We do note, 
however, that the revised best-price rule states that ``[t]he 
consideration paid to any security holder for securities tendered in 
the tender offer [shall be] the highest consideration paid to any other 
security holder for securities tendered in the tender offer'' and, as 
such, approval pursuant to the provisions of the safe harbor would need 
to be received before the consideration is paid in the tender offer. We 
also note that the requirements of the safe harbor do not prohibit 
ratification of arrangements provided that the tender offer 
consideration has not been paid yet.
d. Challenges to the Applicability of the Safe Harbor
    Commenters requested clarification of the proposed safe harbor to 
provide that any finding of a violation of fiduciary duties by the 
board would not nullify the application of the safe harbor.\77\ We have 
not adopted changes to the safe harbor to address these comments. A 
violation of State law fiduciary duties would not have any impact on 
the availability of the safe harbor, as remedies are generally 
available for such allegations under State law.
---------------------------------------------------------------------------

    \77\ See, e.g., letters from Intel and SIA.
---------------------------------------------------------------------------

    We have also expanded the application of the proposed instruction 
that no inference should be drawn that consideration paid pursuant to 
arrangements other than compensation arrangements, such as commercial 
arrangements, constitutes consideration paid for securities tendered in 
the tender offer. The adopted instruction now relates to both the 
exemption and the safe harbor. The fact that directors approve an 
arrangement as an employment compensation, severance or other employee 
benefit arrangement in order to meet the requirements of the safe 
harbor should not raise an inference that consideration paid or to be 
paid pursuant to other arrangements that may be entered into with 
security holders of the subject company constitutes consideration paid 
for securities tendered in a tender offer.
    We also received comments about whether the language of the safe 
harbor was potentially ambiguous and whether the safe harbor was self-
operating.\78\ In order to address these comments, we adopted the 
exemption and the safe harbor as new sections of the third-party and 
issuer best-price rules.\79\ We also amended the language of the safe 
harbor so that it is clear that the negotiation, execution and 
amendment of, and any payments made or to be made or benefits granted 
or to be granted according to, arrangements approved pursuant to the 
safe harbor are not prohibited by the best-price rule.
---------------------------------------------------------------------------

    \78\ See, e.g., letter from Dechert.
    \79\ See note 30 above.
---------------------------------------------------------------------------

e. Application of the Safe Harbor to the Issuer Best-Price Rule
    In the Proposing Release, we proposed to add the safe harbor to the 
third-party best-price rule but did not propose an analogous safe 
harbor to the issuer best-price rule. To date it does not appear that 
claims of a violation of the best-price rule have been made under the 
issuer tender offer rules. Commenters, however, were unanimous in their 
request that we extend the safe harbor to the issuer best-price 
rule.\80\ They reasoned that the need to enter into employment 
compensation, severance or other employee benefit arrangements also 
arises during issuer tender offers because similar issues of severance 
and retention often are present, especially in restructuring and 
recapitalization transactions.\81\ Commenters also believed that there 
appeared to be no compelling reason to distinguish between the issuer 
and third-party best-price rules, especially because doing so might 
have unintended consequences.\82\ We agree and the amendments we are 
adopting today add the safe harbor to the issuer best-price rule at 
Rule 13e-4(f)(12).
---------------------------------------------------------------------------

    \80\ See, e.g., letters from ABA; Dechert; Gonzalez; Intel; Law 
Firm Group; NYCBA; NYSBA; Perkins Coie LLP (``Perkins''); SCSGP; 
Shearman; and SIA.
    \81\ See, e.g., letters from ABA; Intel; and SCSGP.
    \82\ See, e.g., Law Firm Group; SCSGP; and SIA.
---------------------------------------------------------------------------

 III. Paperwork Reduction Act

    We have not prepared a submission to the Office of Management and 
Budget under the Paperwork Reduction Act of 1995 because the proposals 
do not impose any new recordkeeping or information collection 
requirements, or other collections of information requiring the 
approval of the Office of Management and Budget.

IV. Cost-Benefit Analysis

A. Background

    On December 16, 2005, we proposed amendments to the best-price rule 
to clarify that the best-price rule applies only with respect to the 
consideration offered and paid for securities tendered in a tender 
offer. We also proposed that the rule exclude employment compensation, 
severance and other employee benefit arrangements between subject 
company employees or directors and the subject company or bidder from 
the application of the best-price rule, as long as the compensatory 
arrangements meet certain requirements. Finally, we proposed an 
accompanying safe harbor to the exemption for those compensatory 
arrangements that were approved by a compensation committee (or a 
committee performing similar functions) of either the bidder or the 
subject company, depending upon who was a party to the arrangement.
    We are adopting the amendments substantially as proposed. First, we 
are adopting the amendment to the language of the best-price rule that 
clarifies that the provisions of the rule apply only with respect to 
the consideration offered and paid for securities tendered in a tender 
offer. We also are amending the third-party and

[[Page 65402]]

issuer tender offer best-price rules to provide that any consideration 
that is offered and paid according to employment compensation, 
severance or other employee benefit arrangements entered into with 
security holders of the subject company that meet certain requirements 
will not be prohibited by the rules. Finally, we are amending the 
third-party and issuer tender offer best-price rules to provide a safe 
harbor provision so that arrangements that are approved by the 
independent directors of either the subject company's or the bidder's 
board of directors, as applicable, will not be prohibited by the rules.
    We expect that these amendments will make it clear that the best-
price rule was not intended to capture compensatory arrangements. The 
amendments also are intended to alleviate the reluctance bidders and 
subject companies have expressed in planning and structuring 
transactions as tender offers due to differing judicial interpretations 
of the best-price rule that have been rendered by courts to date. We 
also want to diminish a regulatory disincentive against structuring 
transactions as tender offers, as compared to statutory mergers, to 
which the best-price rule does not apply. We recognize that the 
amendments may create costs and benefits to parties engaging in tender 
offers and to the economy as a whole. We have identified those costs 
and benefits below.

B. Benefits

    The amendments to the rule will benefit investors most directly 
through their intended effect of lowering the costs of tender offer 
transactions that arise from the risk of litigation under the current 
case law. Bidders and subject companies are expected to respond with 
increased tender offer activity as a result of choosing to structure an 
acquisition as a tender offer, rather than a statutory merger. Some 
benefits from lower litigation-related costs are expected to arise in 
each instance, depending on the cost of the litigation risk that would 
be borne otherwise. This cost would likely continue to persist as a 
regulatory obstacle in the absence of the amendment; such cost would 
deter the use of tender offers relative to statutory mergers and the 
conduct of acquisitions as tender offers that would not occur 
otherwise. The magnitude of the benefit from the amendment will thus 
partly depend on the magnitude of the substitution into tender offers 
and any tender offer-related increase in acquisition activity 
generally. In the Proposing Release, we requested comment on the 
magnitude of these and other potential benefits of the proposed 
amendments. We received no direct response to this request. Commenters 
also did not indicate that the judicial interpretations of the best-
price rule were preventing potential acquisitions from proceeding in 
any form. Commenters did indicate that the judicial interpretations of 
the best-price rule were causing transactions to proceed as statutory 
mergers, as opposed to tender offers. Accordingly, we do not expect the 
amended best-price rule to materially impact the number of transactions 
that occur overall, but rather the form in which the transaction takes 
place.\83\
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    \83\ Under the assumption that the amendments do not have a 
material impact on the number of overall acquisitions conducted 
annually, an estimate of the potential increase in tender offers can 
be obtained from an estimate of the potential decline in statutory 
mergers, expressed as a fraction of the total. For example, if 5% of 
the transactions that would otherwise be conducted as statutory 
mergers will now be conducted as tender offers, an estimated 35.7% 
increase in the number of tender offers might result annually (based 
upon the number of statutory mergers and tender offers that have 
taken place over the last 10 years).
---------------------------------------------------------------------------

    The comments that we received on the proposed amendments are 
consistent with the view that benefits would occur through a reduction 
in the litigation-related cost of conducting tender offers, leading to 
an increased incentive to undertake tender offers. As to the regulatory 
incentives to conduct statutory mergers as compared to tender offers, 
one commenter indicated that the economic efficiencies of using tender 
offers, as compared to mergers, have been lost because of the potential 
liability associated with conducting a tender offer that may be subject 
to a lawsuit where a compensatory arrangement is involved.\84\ This 
commenter endorsed the objectives of the amendments to the best-price 
rule. Several commenters also indicated generally that the amendments 
would meet the objectives of the best-price rule.\85\ Others expressed 
their support by indicating that the amendments would provide clarity 
and certainty to participants in tender offers, particularly regarding 
the perceived litigation risk that has been present in the best-price 
rule.\86\ Almost all of the commenters suggested additional changes to 
the amendments, particularly with respect to the exemption and safe 
harbor from the best-price rule.
---------------------------------------------------------------------------

    \84\ See, e.g., letter from Law Firm Group (citing the benefit 
of the relatively shorter amount of time that it takes to conduct a 
tender offer (30 days) as compared to mergers (90-120 days)). 
Similar support for the fact that tender offers, as compared to 
mergers, provide the benefit of time can be found in the letters 
from ABA, Dechert and SIA. Other benefits of tender offers include 
the fact that management support is not necessary for the bidder to 
acquire the target company (i.e., individuals make their own 
investment decision) and control by a bidder may be obtained without 
necessarily purchasing all of the outstanding securities of the 
target company. See Eleanor M. Fox and Byron E. Fox, Corporate 
Acquisitions and Mergers (2006 ed.) at 5E-6.
    \85\ See, e.g., letters from ABA and NYCBA.
    \86\ See, e.g., letters from Dechert; SCSGP; and Shearman.
---------------------------------------------------------------------------

    The litigation-related costs that the amendment would eliminate 
stem from diverging court interpretations of the best-price rule that 
have emerged in the past decade. The best-price rule has been 
interpreted as requiring, in some courts, that the amounts paid 
pursuant to compensation arrangements be included as part of the 
consideration paid to security holders in the tender offer either 
because the compensation was offered or paid during a tender offer and, 
in other courts, because the compensatory arrangement constituted an 
``integral part'' of the tender offer. These interpretations have made 
parties reluctant to structure acquisitions as tender offers for fear 
of exposure to potential liability. We believe it is appropriate to 
amend the best-price rule to clarify this point now, rather than to 
wait and see how the courts might interpret the rule in the future. 
These amendments are thus intended to eliminate a regulatory obstacle 
to the use of tender offers as a viable alternative to statutory 
mergers for parties who wish to conduct an acquisition. We believe that 
the interests of security holders are better served when all 
acquisition structures are viable options.\87\
    We recognize that the application of our exemption and safe harbor 
is limited to compensatory arrangements. Parties who wish to enter into 
arrangements that are not compensatory in nature may continue to be 
reluctant to engage in tender offers. In these situations, parties may 
choose to engage in a statutory merger, as opposed to a tender offer, 
to accomplish an acquisition because the litigation risk continues to 
be too great. While we do not intend for arrangements entered into with 
security holders that are not compensatory to be presumed to be in 
violation of the best-price rule,\88\ we also believe that it is 
appropriate to limit our exemption and safe harbor to arrangements that 
are compensatory in nature.
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    \87\ A disincentive against structuring transactions as tender 
offers has potential negative consequences to acquirors and security 
holders. See prior note 84 for a discussion of some of the benefits 
of tender offers.
    \88\ The rule, as adopted, includes the proposed instruction to 
this effect.

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[[Page 65403]]

    Depending upon the jurisdiction in which a best-price rule claim 
has been brought, the potential costs to bidders as a result of certain 
of the judicial interpretations of the best-price rule have been 
substantial. An intended benefit of our amendments will be to assist 
parties in reducing their exposure to potential costs arising from 
allegations of best-price rule violations. These potential costs 
include, among others, the cost of litigation to defend against alleged 
violations of the best-price rule.\89\ We believe bidders will be less 
likely to be subject to a claim because our amendments provide an 
exception to the best-price rule for compensatory arrangements without 
the loss of the basic protections that the rule is designed to provide 
to security holders.
---------------------------------------------------------------------------

    \89\ In sixteen published judicial opinions over the last ten 
years, approximately half were decided in favor of the plaintiff 
with the other half being decided in favor of the defendant. 
Extrapolating from these opinions, we assume an average of three 
claims per year are brought, that one claim is settled per year, 
that the costs of defending all three actions would total no more 
than $10 million per year (based on the staff's estimate of 
attorney's fees), and that the costs associated with settling one 
such action would be $15 million (based on historical data). See, 
e.g., Technology Briefing Software: Computer Associates Ordered to 
Pay $11 Million, The N.Y. Times, Sept. 6, 2002 at C6 and $18.25 
Million Settlement Approved in Litigation Resulting From Take-Over, 
Securities Class Action Reporter, March 15, 2006 at 17. Based on 
these assumptions, the annual cost savings would be approximately 
$25 million.
---------------------------------------------------------------------------

C. Costs

    The best-price rule prohibits certain conduct in connection with a 
tender offer. In this regard, the amendments to the best-price rule do 
not add any new requirements. Rather, the amendments clarify that 
certain conduct is not prohibited by the rule and add means by which 
parties can comply, via an exemption or a safe harbor provision, with 
the rule. Continued compliance with the best-price rule can be achieved 
in the same manner and by the same persons responsible for compliance 
under the rule in effect before our amendments today. Reliance upon the 
exemption or the safe harbor, however, may entail additional costs. We 
discuss these additional costs below. We do not believe these costs are 
substantial.
    The amendments seek to modify the language of the existing best-
price rule to remove the reference to ``during.'' Some commenters have 
indicated that the effect of this change would be to expand the 
potential timeframe in which litigants could argue that a best-price 
rule violation has occurred.\90\ If the commenter's concerns were 
realized, it is possible claims that the best-price rule has been 
violated might continue to be brought, only under a different, 
potentially more expansive, theory. We do not believe that a temporal 
limitation in the best-price rule is appropriate because such a strict 
timeframe might lend itself to abuse. Further, we believe that the 
amendments providing for the exemption and the safe harbor to the best-
price rule provide sufficient certainty to parties desiring to engage 
in a tender offer such that any concern regarding continued litigation 
under the best-price rule as a result of the removal of ``during'' is 
reduced.
---------------------------------------------------------------------------

    \90\ See, e.g., letters from ABA; Dechert; and Law Firm Group.
---------------------------------------------------------------------------

    The exemption and the safe harbor adopted today provide that, 
presuming certain requirements are met, consideration paid pursuant to 
certain arrangements will not be prohibited by the best-price rules. 
Parties may be able to challenge whether the provisions of the 
exemption or the safe harbor have been met. Complying with the 
conditions of the exemption and safe harbor, therefore, may be a cost 
of complying with the best-price rule.
    To the extent parties choose to rely upon the safe harbor, bidders 
and/or subject companies, in the case of third-party tender offers, or 
issuers and/or affiliates, in the case of issuer tender offers, may 
need to take extra steps--such as obtaining approval of the 
compensatory arrangement by directors--to comply with the safe harbor. 
However, most bidders, issuers, affiliates and subject companies are 
already required to have a compensation committee or a committee 
performing similar functions, so the cost of forming, organizing and 
convening a committee should be a cost that already is being incurred 
by most bidders, issuers, affiliates or subject companies. Companies 
without such a committee will incur a cost, most likely in the form of 
legal fees.
    Further, bidders, issuers, affiliates or subject companies may 
already have their compensation committee or a committee performing 
similar functions approve specific employment compensation, severance 
or other employee benefit arrangements in the ordinary course of 
performing its duties. These bidders, issuers, affiliates or subject 
companies would not incur additional costs to comply with the amended 
best-price rule and, even if they are not already engaging their 
committees to perform this function, the costs should be limited to the 
time and expense associated with reviewing the specific arrangement and 
holding a meeting of the committee. With respect to subject company 
approval, it is possible that subject company directors may already be 
reviewing arrangements executed in connection with negotiated 
acquisitions \91\ in order to meet their State law fiduciary duties 
when considering and determining whether to recommend the transaction 
to the security holders of the subject company.\92\
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    \91\ See, e.g., Item 1012(a) of Regulation M-A (17 CFR 
229.1012(a)), which requires a statement as to whether the subject 
company is advising security holders in a third-party tender offer 
to accept or reject the tender offer or to take other action.
    \92\ See, e.g., letters from ABA and SIA.
---------------------------------------------------------------------------

    To the extent parties choose to rely upon the exemption, we 
recognize there may be similar costs associated with adhering to the 
exemption. While we have not dictated the manner or method by which we 
expect the parties to meet the requirements of the exemption, we expect 
that, at the very least, it will take the parties time to make a 
determination as to whether the compensatory arrangement meets the 
requirements of the exemption. The time it takes for the parties to 
make this determination is a cost but we believe that the cost should 
be minimal.
    Under the amendments, some compensatory arrangements may qualify 
for the safe harbor provision with approval by a committee of the 
bidder's board. Since the bidder's board does not typically owe a 
fiduciary duty to security holders of the subject company, the 
amendments could impose costs on security holders of the subject 
company by making it possible for transactions to occur without 
safeguards associated with directors' fiduciary duties. However, such 
costs are likely to be limited because they would be dependent upon the 
ability of security holders of the subject company to anticipate such 
transactions and contract in advance of the transaction with 
management, employees, or other security holders of the subject 
company. In addition, such costs may be limited to the extent that 
other rights of action, such as litigation in State courts, exist for 
security holders in the subject company.
    Finally, the rule may introduce costs associated with new 
litigation risks. It is possible that the amended best-price rule will 
simply shift the litigation to State law; security holders may claim 
that directors have breached their fiduciary duties in approving the 
compensatory arrangement.\93\ In

[[Page 65404]]

addition, or alternatively, they may claim that the provisions of the 
exemption or safe harbor were not satisfied. Whether a successful claim 
can be made against members of the board of directors for breach of 
their fiduciary duties or for failure to satisfy the provisions of the 
exemption or safe harbor is uncertain. As a result, the potential costs 
associated with identifying the alleged illegal behavior and bringing a 
claim of liability could be imposed on potential plaintiffs. We note 
that commenters, when asked about shifting litigation to State law 
issues, did not object, so long as no remedy would be available under 
the best-price rule.\94\
---------------------------------------------------------------------------

    \93\ We requested comment about whether this potential outcome 
should impact the structure of the amendments to the best-price 
rule. Certain commenters noted that the fiduciary duties owed by the 
bidder's directors to the bidder's security holders would guide 
their actions and, therefore, provide some level of protection. See, 
e.g., the ABA letter.
    \94\ See, e.g., letters from Law Firm Group and NYCBA.
---------------------------------------------------------------------------

D. Small Business Issuers

    Although the amended rules apply to small business issuers, we do 
not anticipate any disproportionate impact on small business issuers. 
Like other issuers, small business issuers should incur relatively 
minor compliance costs, and should find it unnecessary to hire extra 
personnel. It is possible that the safe harbor, for the reasons 
mentioned above, will cause small business issuers in particular to 
incur some cost due to the establishment of an appropriate approving 
body and the time and expense of reviewing the compensatory arrangement 
and convening a meeting. This is because small business issuers are 
less likely to have the pre-existing infrastructure in place. But we do 
not believe that these costs are unreasonable in order to ensure that 
the purpose of the best-price rule is met. Further, the exemption and 
safe harbor available under the amended rules are non-exclusive methods 
of complying with the best-price rule so any additional costs incurred 
are voluntary.
    The issues of equal treatment among security holders in the context 
of tender offers affect small business issuers as much as they affect 
larger issuers. Thus, we do not believe that applying the amendments to 
small business issuers would be inconsistent with the policies 
underlying the small business issuer disclosure system.

V. Consideration of Burden on Competition and Promotion of Efficiency, 
Competition and Capital Formation

    Section 3(f) of the Exchange Act \95\ and Section 2(c) of the 
Investment Company Act \96\ require the Commission, whenever it engages 
in rulemaking, to consider or determine if an action is necessary or 
appropriate in the public interest and to consider whether the action 
would promote efficiency, competition, and capital formation. In 
addition, Section 23(a)(2) of the Exchange Act requires the Commission, 
when making rules under the Exchange Act, to consider the impact such 
rules would have on competition.\97\ Exchange Act Section 23(a)(2) 
prohibits the Commission from adopting any rule that would impose a 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Exchange Act.
---------------------------------------------------------------------------

    \95\ 15 U.S.C. 78c(f).
    \96\ 15 U.S.C. 80a-2(c).
    \97\ 15 U.S.C. 78w(a)(2).
---------------------------------------------------------------------------

    The amendments to the best-price rule are intended to improve 
market efficiency by providing greater clarity to bidders, subject 
companies and security holders as to the situations in which compliance 
with the best-price rule has been met. Courts rendering decisions 
arising from allegations of a violation of the best-price rule have 
differed in their approach to resolving these claims and the resulting 
uncertainty has left parties who want to engage in a tender offer 
unsure about how to proceed. The amendments are intended to clarify the 
application of the best-price rule where employment compensation, 
severance or other employee benefit arrangements have been or are 
expected to be entered into in contemplation of an acquisition of 
securities that is structured as a tender offer. Specifically, the 
amendments provide for an exemption and a safe harbor provision from 
the best-price rule for certain arrangements that either meet certain 
requirements or that are approved by independent directors. The 
resulting clarity should make the determination as to whether to engage 
in a tender offer a more viable one for bidders, issuers, affiliates 
and subject companies, resulting in a positive effect upon market 
efficiency.
    As to the impact on competition, the amendments to the best-price 
rule are intended to have a positive impact on competition among the 
alternative mechanisms for completing acquisitions. Bidders desiring to 
acquire another entity by conducting a tender offer would have the 
benefit of the amendments to the best-price rule that delineate the 
instances in which the negotiation or execution of employment 
compensation, severance or other employee benefit arrangements would 
not run afoul of the requirements of the best-price rule. Previously, 
the existence of compensatory arrangements might have caused parties to 
hesitate before engaging in a tender offer in order to weigh the 
potential benefits of the acquisition carefully against the potential 
for liability for a best-price rule violation. Ultimately, the parties 
may have declined to pursue a tender offer as an alternative to a 
statutory merger in completing the transaction. The amendments, 
however, are designed to alleviate the need to hesitate and, therefore, 
increase competition between these alternative acquisition mechanisms. 
Having more acquisition structures available to parties contemplating 
an acquisition is a positive effect of the rule upon competition.
    We acknowledge the possibility that, because bidders, issuers, 
affiliates and subject companies may desire to take advantage of the 
safe harbor to the best-price rule where arrangements approved by an 
appropriate approving body of directors meet the requirements of the 
safe harbor and therefore consideration paid pursuant to such 
arrangement are not prohibited by the rule, those bidders, issuers, 
affiliates and subject companies may need to reevaluate whether they 
have an approving body and adequate policies and procedures in place to 
take advantage of the safe harbor. Such an evaluation could place a 
limitation on the ability of the parties to move quickly and 
efficiently in pursuing an acquisition, which could diminish the 
beneficial effect on market efficiency and competition. We believe, 
however, that the approval of directors is an important step in the 
availability of the safe harbor and, therefore, any increased efforts 
or costs that need to be expended to comply with the safe harbor are 
appropriate to provide equal treatment of security holders. Further, we 
believe that we have provided sufficient flexibility in the operation 
of the safe harbor to ease this potential impact. We also have provided 
an exemption that does not require director approval.
    The amendments should promote capital formation, as they are 
intended to significantly reduce the uncertainty caused by the varying 
judicial interpretations of the best-price rule. The clarifications to 
the best-price rule are expected to have the effect of alleviating 
regulatory disincentives to structuring an acquisition of securities as 
a tender offer, as compared to a statutory merger, where the best-price 
rule is inapplicable. It is difficult to estimate the magnitude of 
these effects, if or when they would occur, and the extent to which 
they will be offset by the costs of the amendments, nor have we 
received comments on their likely magnitude.

[[Page 65405]]

    We requested comment on these matters in the Proposing Release. We 
received no comments in response to these specific requests, but some 
comments touched on these issues. Commenters generally expressed 
support for the proposal to amend the best-price rule, given the 
structural impediments to the use of tender offers as a result of the 
case law that has developed.\98\ They generally believed that the 
amendments would provide clarity and greater certainty to the tender 
offer process.\99\
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    \98\ See, e.g., letter from Law Firm Group.
    \99\ See, e.g., letters from ABA and NYCBA.
---------------------------------------------------------------------------

VI. Final Regulatory Flexibility Act Analysis

    This Final Regulatory Flexibility Act Analysis has been prepared in 
accordance with the Regulatory Flexibility Act. This analysis relates 
to proposed revisions to the tender offer best-price rule under the 
Exchange Act to clarify that the rule applies only with respect to the 
consideration offered and paid for securities tendered in an issuer or 
third-party tender offer and should not apply to consideration offered 
and paid according to employment compensation, severance or other 
employee benefit arrangements entered into with security holders of the 
subject company. The amendments provide an exemption and safe harbor 
from the strictures of the best-price rule for arrangements that meet 
certain criteria or that are approved by independent directors, 
respectively.

A. Reasons for the Proposed Amendments

    The best-price rule was adopted originally to provide fair and 
equal treatment of all security holders of the class of securities that 
are the subject of a tender offer by requiring that the consideration 
paid to any security holder is the highest paid to any other security 
holder in the tender offer. We proposed amendments to the best-price 
rule on December 16, 2005. The amendments we adopt today are, in most 
respects, consistent with the proposed amendments but include certain 
revisions made in response to concerns raised by commenters. The 
objectives of the changes are as follows:
    First, we want to make it clear that compensatory arrangements 
between security holders and the subject company or bidder are not 
captured by the application of the best-price rule. We believe that 
amounts paid pursuant to employment compensation, severance or other 
employee benefit arrangements should not be included in the 
consideration paid for tendered securities. These payments are made for 
a different purpose, to provide compensation in exchange for services 
rendered or in connection with severance or similar events.
    Second, since the adoption of the best-price rule, it has been the 
basis for litigation brought in connection with tender offers in which 
it is claimed that the best-price rule was violated as a result of the 
bidder in a tender offer entering into new, or adopting the subject 
company's pre-existing, employment compensation, severance or other 
employee benefit arrangements with security holders of the subject 
company. In the process of resolving these claims, courts have 
interpreted the best-price rule in different ways. We are adopting 
changes to the rule to alleviate the uncertainty that the various 
interpretations of the best-price rule by courts have produced.
    Finally, we want to reduce the regulatory disincentive to structure 
acquisitions of securities in the form of tender offers, as compared to 
statutory mergers, to which the best-price rule does not apply. We 
understand that the prospect of the uncertain application of the best-
price rule that has arisen as a result of the case law has made parties 
averse to the use of tender offers as a means to accomplish 
extraordinary transactions, and we believe the amendments to the rule 
will reduce this aversion to the use of tender offers.

B. Significant Issues Raised by Public Comment

    An Initial Regulatory Flexibility Analysis was prepared in 
accordance with the Regulatory Flexibility Act in connection with the 
Proposing Release, and we solicited comments on any impact the proposed 
changes might have on any aspect of our IRFA. We did not receive any 
public comments that responded directly to the IRFA or that dealt 
directly with the proposal's impact on small business issuers.

C. Small Entities Subject to the Proposed Rules

    The changes to the best-price rule will affect issuers that are 
small businesses. Exchange Act Rule 0-10(a) \100\ defines an issuer, 
other than an investment company, to be a ``small business'' or ``small 
organization'' for purposes of the Regulatory Flexibility Act if it had 
total assets of $5 million or less on the last day of its most recent 
fiscal year. An investment company is considered to be a ``small 
business'' or ``small organization'' if it, together with other 
investment companies in the same group of related investment companies, 
has net assets of $50 million or less as of the end of its most recent 
fiscal year.\101\ These are the types of entities that we refer to as 
small entities in this discussion. We estimate that there are 
approximately 2,500 public issuers, other than investment companies, 
that may be considered small businesses. We estimate that there are 
approximately 230 investment companies that may be considered small 
businesses. Of these 230 investment companies that may be considered 
small businesses, we estimate that 94 are closed-end investment 
companies, including closed-end investment companies electing to be 
treated as business development companies, as defined in Section 
2(a)(48) of the Investment Company Act,\102\ that may be affected by 
the proposed amendments.
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    \100\ 17 CFR 240.0-10(a).
    \101\ 17 CFR 270.0-10.
    \102\ 15 U.S.C. 80a-2(a)(48).
---------------------------------------------------------------------------

    The Commission received a total of 412 issuer and 141 third-party 
tender offer schedules in its 2006 fiscal year. We estimate that half 
of the 14 issuer tender offer schedules were filed by subject companies 
that were small business issuers and the other half were filed by 
investment companies that are small businesses as that term is defined 
for purposes of the Regulatory Flexibility Act.\103\ We further 
estimate that 18 of the third-party tender offer schedules received by 
the Commission in its 2006 fiscal year were tender offers where the 
target companies were small business issuers.\104\ We note that our use 
of small business issuers is a broader category of issuers than small 
entities. Therefore, we believe that the amendments are likely to 
affect a limited number of small business issuers and, for the same 
reason, an even smaller number of small entities that are reporting 
companies.
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    \103\ A small business issuer is defined as a company that, 
among other things, has revenues of less than $25,000,000. See 
Securities Act Rule 405 (17 CFR 230.405).
    \104\ No investment company that is a small business, as that 
term is defined for purposes of the Regulatory Flexibility Act, 
conducted a third-part tender offer in the 2006 fiscal year of the 
Commission.
---------------------------------------------------------------------------

    We requested comment on the number of small entities that would be 
impacted by our proposals, including any available empirical data. We 
received no responses to our request.

D. Reporting, Recordkeeping and Other Compliance Requirements

    The amendments to the best-price rule are expected to result in 
relatively small costs to all bidders and subject companies, large or 
small. Even before

[[Page 65406]]

our proposed amendments, the best-price rule required bidders to pay 
any security holder pursuant to the tender offer the highest 
consideration paid to any other security holder for securities tendered 
in the tender offer. Therefore, the changes to the best-price rule 
should not impose significant additional costs, if any, and should not 
require any specialized professional skills. The task of complying with 
the changes could be performed by the same person or group of persons 
responsible for compliance under the rules that were in effect before 
today's amendments at a minimal incremental cost.
    We understand that the exemption and safe harbor from the best-
price rule may impose extra steps on the bidder and/or subject company 
to comply with the exemption and safe harbor, and such compliance could 
entail new costs. For example, with respect to the safe harbor for 
compensatory arrangements that are approved by the directors of the 
bidder or subject company, most bidders and subject companies already 
are required to have a compensation committee or a committee performing 
similar functions, so the cost of forming and organizing a committee 
should be a cost that already is being incurred by the bidder or 
subject company. This is particularly the case where the bidder or 
subject company either has a class of securities listed on a registered 
national securities exchange or on an automated inter-dealer quotation 
system of a national securities association because the listing 
standards of each generally impose certain requirements regarding the 
formation and composition of the members of the board of directors and 
its committees.
    Small entities or organizations may be less likely to have a class 
of securities listed on a registered national securities exchange or on 
an automated inter-dealer quotation system of a national securities 
association. As a result, it is possible that small entities or 
organizations will be less likely to have the pre-existing 
infrastructure in place for a compensation committee or a committee 
performing similar functions to approve employment compensation, 
severance or other employee benefit arrangements. Such small entities 
or organizations likely will incur additional costs to take advantage 
of this safe harbor. The cost, however, should be limited to the 
expense of organizing a committee, reviewing the specific arrangement 
and holding a meeting of the committee. We believe these costs are 
appropriate to promote equal treatment of security holders in the 
application of the best-price rule.
    With respect to the exemption for compensatory arrangements that 
meet certain requirements, all bidders or subject companies that choose 
to avail themselves of this exemption will need to make a determination 
as to whether the arrangement at issue meets the requirements. This 
determination likely will entail additional costs, even if only in the 
form of the additional time it will take to make this determination. 
However, the amendments do not mandate any particular method or 
procedure that a bidder or subject company must follow in making this 
determination.
    Both the exemption and the safe harbor, however, are optional 
provisions and serve as non-exclusive methods to ensure compliance with 
the best-price rule. This means that bidders and subject companies that 
are small entities or organizations will not be required to take 
advantage of the provision, so any additional expenses that may be 
incurred, if any, would be optional on the part of the small entity or 
organization. We acknowledge, however, that the cost of foregoing the 
application of the exemption or safe harbor might be significant if 
there is a risk of potential liability where a compensatory arrangement 
is found to violate the best-price rule and the cost of that violation 
is expected to be greater than the cost of complying with the exemption 
or safe harbor. In that circumstance, entities would be likely to 
structure transactions as statutory mergers.

E. Agency Action To Minimize Effect on Small Entities

    The Regulatory Flexibility Act directs us to consider significant 
alternatives that would accomplish the stated objectives while 
minimizing any significant adverse impact on small entities or 
organizations. In connection with the proposals, we considered the 
following alternatives:
    1. Establishing different compliance or reporting requirements or 
timetables that take into account the resources of small entities;
    2. The clarification, consolidation, or simplification of the 
compliance or reporting requirements for small entities;
    3. The use of performance rather than design standards; and
    4. An exemption for small entities from coverage of the best-price 
rule, or any part thereof, for small entities.
    We have considered a variety of reforms to achieve our regulatory 
objectives. However, we believe that the original intent of the best-
price rule, to require equal treatment of security holders, would not 
be served by a best-price rule that applied only to bidders and subject 
companies of a certain size. Further, we believe that uniform rules 
applicable to all bidders and subject companies, regardless of size, 
are necessary to alleviate the uncertainty that the parties to tender 
offers face. Therefore, the establishment of different requirements for 
small entities would not be practicable, nor would it be in the public 
interest. For similar reasons, the clarification, consolidation or 
simplification of the compliance and reporting requirements for small 
entities also would not be practicable.
    Although the best-price rule generally employs performance 
standards rather than design standards, the amendments to the rule 
would implement certain design standards in order to clarify that the 
rule should not apply where employment compensation, severance or other 
employee benefit arrangements are made or will be made or have been 
granted or will be granted, as long as they have been approved by the 
directors of an appropriate approving body of either the bidder or the 
subject company. We intend for the implementation of design standards, 
in this case, to be more useful to bidders and subject companies 
because the circumstances in which the best-price rule would likely be 
inapplicable will be delineated clearly. This should provide greater 
certainty in the application of the rule and the enforcement of the 
application of the rule. Therefore, implementing design rather than 
performance standards in the application of the rule appears to be more 
effective in promoting compliance with the rule, as amended.
    As discussed above, most bidders and subject companies that engage 
in tender offers and are subject to the best-price rule are not small 
entities or organizations, as defined for purposes of the Regulatory 
Flexibility Act. Further, where small entities are bidders and/or 
subject companies in the tender offer, the proposed changes to the 
best-price rule, in general, and the invocation of the exemption or 
safe harbor, in particular, impose minimal additional costs or burdens. 
Therefore, exempting small entities from the best-price rule altogether 
would not be justified in this context.

VII. Statutory Basis

    The amendments to the best-price rule are adopted pursuant to 
Sections 3(b), 13, 14, 23(a) and 36 of the Exchange Act, as amended, 
and Section 23(c) of the Investment Company Act, as amended. The 
amendments to the Rules of Practice are adopted pursuant to

[[Page 65407]]

Section 19 of the Securities Act, as amended and Sections 4A, 19 and 23 
of the Exchange Act, as amended.

VIII. Text of the Rules and Amendments

List of Subjects

17 CFR Part 200

    Administrative practice and procedure; Authority delegations 
(Government Agencies).

17 CFR Part 240

    Reporting and recordkeeping requirements, Securities.


0
In accordance with the foregoing, the Securities and Exchange 
Commission amends Title 17, chapter II of the Code of Federal 
Regulations as follows:

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

0
1. The general authority citation for part 200, subpart A is revised to 
read as follows:

    Authority: 15 U.S.C. 77o, 77s, 77sss, 78d, 78d-1, 78d-2, 78w, 
78ll(d), 78mm, 80a-37, 80b-11, and 7202, unless otherwise noted.
* * * * *

0
2. Amend Sec.  200.30-1 (e)(11) by removing the phrase ``pursuant to 
Rule 14d-10(e) (Sec.  240.14d-10(e) of this chapter)'' and by adding 
the phrase ``pursuant to Rule 14d-10(f) (Sec.  240.14d-10(f) of this 
chapter)'' in its place.

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

0
3. The general authority citation for part 240 is revised to read as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 
78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 
80b-11, and 7201 et seq.; and 18 U.S.C. 1350, unless otherwise 
noted.
* * * * *

0
4. Amend Sec.  240.13e-4 by revising paragraph (f)(8)(ii), 
redesignating paragraph (f)(12) as paragraph (f)(13) and adding new 
paragraph (f)(12) to read as follows:


Sec.  240.13e-4  Tender offers by issuers.

* * * * *
    (f) * * *
    (8) * * *
    (ii) The consideration paid to any security holder for securities 
tendered in the tender offer is the highest consideration paid to any 
other security holder for securities tendered in the tender offer.
* * * * *
    (12)(i) Paragraph (f)(8)(ii) of this section shall not prohibit the 
negotiation, execution or amendment of an employment compensation, 
severance or other employee benefit arrangement, or payments made or to 
be made or benefits granted or to be granted according to such an 
arrangement, with respect to any security holder of the issuer, where 
the amount payable under the arrangement:
    (A) Is being paid or granted as compensation for past services 
performed, future services to be performed, or future services to be 
refrained from performing, by the security holder (and matters 
incidental thereto); and
    (B) Is not calculated based on the number of securities tendered or 
to be tendered in the tender offer by the security holder.
    (ii) The provisions of paragraph (f)(12)(i) of this section shall 
be satisfied and, therefore, pursuant to this non-exclusive safe 
harbor, the negotiation, execution or amendment of an arrangement and 
any payments made or to be made or benefits granted or to be granted 
according to that arrangement shall not be prohibited by paragraph 
(f)(8)(ii) of this section, if the arrangement is approved as an 
employment compensation, severance or other employee benefit 
arrangement solely by independent directors as follows:
    (A) The compensation committee or a committee of the board of 
directors that performs functions similar to a compensation committee 
of the issuer approves the arrangement, regardless of whether the 
issuer is a party to the arrangement, or, if an affiliate is a party to 
the arrangement, the compensation committee or a committee of the board 
of directors that performs functions similar to a compensation 
committee of the affiliate approves the arrangement; or
    (B) If the issuer's or affiliate's board of directors, as 
applicable, does not have a compensation committee or a committee of 
the board of directors that performs functions similar to a 
compensation committee or if none of the members of the issuer's or 
affiliate's compensation committee or committee that performs functions 
similar to a compensation committee is independent, a special committee 
of the board of directors formed to consider and approve the 
arrangement approves the arrangement; or
    (C) If the issuer or affiliate, as applicable, is a foreign private 
issuer, any or all members of the board of directors or any committee 
of the board of directors authorized to approve employment 
compensation, severance or other employee benefit arrangements under 
the laws or regulations of the home country approves the arrangement.
    Instructions to paragraph (f)(12)(ii): For purposes of determining 
whether the members of the committee approving an arrangement in 
accordance with the provisions of paragraph (f)(12)(ii) of this section 
are independent, the following provisions shall apply:
    1. If the issuer or affiliate, as applicable, is a listed issuer 
(as defined in Sec.  240.10A-3 of this chapter) whose securities are 
listed either on a national securities exchange registered pursuant to 
section 6(a) of the Exchange Act (15 U.S.C. 78f(a)) or in an inter-
dealer quotation system of a national securities association registered 
pursuant to section 15A(a) of the Exchange Act (15 U.S.C. 78o-3(a)) 
that has independence requirements for compensation committee members 
that have been approved by the Commission (as those requirements may be 
modified or supplemented), apply the issuer's or affiliate's definition 
of independence that it uses for determining that the members of the 
compensation committee are independent in compliance with the listing 
standards applicable to compensation committee members of the listed 
issuer.
    2. If the issuer or affiliate, as applicable, is not a listed 
issuer (as defined in Sec.  240.10A-3 of this chapter), apply the 
independence requirements for compensation committee members of a 
national securities exchange registered pursuant to section 6(a) of the 
Exchange Act (15 U.S.C. 78f(a)) or an inter-dealer quotation system of 
a national securities association registered pursuant to section 15A(a) 
of the Exchange Act (15 U.S.C. 78o-3(a)) that have been approved by the 
Commission (as those requirements may be modified or supplemented). 
Whatever definition the issuer or affiliate, as applicable, chooses, it 
must apply that definition consistently to all members of the committee 
approving the arrangement.
    3. Notwithstanding Instructions 1 and 2 to paragraph (f)(12)(ii), 
if the issuer or affiliate, as applicable, is a closed-end investment 
company registered under the Investment Company Act of 1940, a director 
is considered to be independent if the director is not, other than in 
his or her capacity as a member of the board of directors or any board 
committee, an ``interested person'' of the investment company, as 
defined in section 2(a)(19)

[[Page 65408]]

of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(19)).
    4. If the issuer or affiliate, as applicable, is a foreign private 
issuer, apply either the independence standards set forth in 
Instructions 1 and 2 to paragraph (f)(12)(ii) or the independence 
requirements of the laws, regulations, codes or standards of the home 
country of the issuer or affiliate, as applicable, for members of the 
board of directors or the committee of the board of directors approving 
the arrangement.
    5. A determination by the issuer's or affiliate's board of 
directors, as applicable, that the members of the board of directors or 
the committee of the board of directors, as applicable, approving an 
arrangement in accordance with the provisions of paragraph (f)(12)(ii) 
are independent in accordance with the provisions of this instruction 
to paragraph (f)(12)(ii) shall satisfy the independence requirements of 
paragraph (f)(12)(ii).
    Instruction to paragraph (f)(12): The fact that the provisions of 
paragraph (f)(12) of this section extend only to employment 
compensation, severance and other employee benefit arrangements and not 
to other arrangements, such as commercial arrangements, does not raise 
any inference that a payment under any such other arrangement 
constitutes consideration paid for securities in a tender offer.
* * * * *

0
5. Amend Sec.  240.14d-10 by revising paragraph (a)(2), redesignating 
paragraphs (d) and (e) as paragraphs (e) and (f) and adding new 
paragraph (d) to read as follows:


Sec.  240.14d-10  Equal treatment of security holders.

    (a) * * *
    (2) The consideration paid to any security holder for securities 
tendered in the tender offer is the highest consideration paid to any 
other security holder for securities tendered in the tender offer.
* * * * *
    (d)(1) Paragraph (a)(2) of this section shall not prohibit the 
negotiation, execution or amendment of an employment compensation, 
severance or other employee benefit arrangement, or payments made or to 
be made or benefits granted or to be granted according to such an 
arrangement, with respect to any security holder of the subject 
company, where the amount payable under the arrangement:
    (i) Is being paid or granted as compensation for past services 
performed, future services to be performed, or future services to be 
refrained from performing, by the security holder (and matters 
incidental thereto); and
    (ii) Is not calculated based on the number of securities tendered 
or to be tendered in the tender offer by the security holder.
    (2) The provisions of paragraph (d)(1) of this section shall be 
satisfied and, therefore, pursuant to this non-exclusive safe harbor, 
the negotiation, execution or amendment of an arrangement and any 
payments made or to be made or benefits granted or to be granted 
according to that arrangement shall not be prohibited by paragraph 
(a)(2) of this section, if the arrangement is approved as an employment 
compensation, severance or other employee benefit arrangement solely by 
independent directors as follows:
    (i) The compensation committee or a committee of the board of 
directors that performs functions similar to a compensation committee 
of the subject company approves the arrangement, regardless of whether 
the subject company is a party to the arrangement, or, if the bidder is 
a party to the arrangement, the compensation committee or a committee 
of the board of directors that performs functions similar to a 
compensation committee of the bidder approves the arrangement; or
    (ii) If the subject company's or bidder's board of directors, as 
applicable, does not have a compensation committee or a committee of 
the board of directors that performs functions similar to a 
compensation committee or if none of the members of the subject 
company's or bidder's compensation committee or committee that performs 
functions similar to a compensation committee is independent, a special 
committee of the board of directors formed to consider and approve the 
arrangement approves the arrangement; or
    (iii) If the subject company or bidder, as applicable, is a foreign 
private issuer, any or all members of the board of directors or any 
committee of the board of directors authorized to approve employment 
compensation, severance or other employee benefit arrangements under 
the laws or regulations of the home country approves the arrangement.
    Instructions to paragraph (d)(2): For purposes of determining 
whether the members of the committee approving an arrangement in 
accordance with the provisions of paragraph (d)(2) of this section are 
independent, the following provisions shall apply:
    1. If the bidder or subject company, as applicable, is a listed 
issuer (as defined in Sec.  240.10A-3 of this chapter) whose securities 
are listed either on a national securities exchange registered pursuant 
to section 6(a) of the Exchange Act (15 U.S.C. 78f(a)) or in an inter-
dealer quotation system of a national securities association registered 
pursuant to section 15A(a) of the Exchange Act (15 U.S.C. 78o-3(a)) 
that has independence requirements for compensation committee members 
that have been approved by the Commission (as those requirements may be 
modified or supplemented), apply the bidder's or subject company's 
definition of independence that it uses for determining that the 
members of the compensation committee are independent in compliance 
with the listing standards applicable to compensation committee members 
of the listed issuer.
    2. If the bidder or subject company, as applicable, is not a listed 
issuer (as defined in Sec.  240.10A-3 of this chapter), apply the 
independence requirements for compensation committee members of a 
national securities exchange registered pursuant to section 6(a) of the 
Exchange Act (15 U.S.C. 78f(a)) or an inter-dealer quotation system of 
a national securities association registered pursuant to section 15A(a) 
of the Exchange Act (15 U.S.C. 78o-3(a)) that have been approved by the 
Commission (as those requirements may be modified or supplemented). 
Whatever definition the bidder or subject company, as applicable, 
chooses, it must apply that definition consistently to all members of 
the committee approving the arrangement.
    3. Notwithstanding Instructions 1 and 2 to paragraph (d)(2), if the 
bidder or subject company, as applicable, is a closed-end investment 
company registered under the Investment Company Act of 1940, a director 
is considered to be independent if the director is not, other than in 
his or her capacity as a member of the board of directors or any board 
committee, an ``interested person'' of the investment company, as 
defined in section 2(a)(19) of the Investment Company Act of 1940 (15 
U.S.C. 80a-2(a)(19)).
    4. If the bidder or the subject company, as applicable, is a 
foreign private issuer, apply either the independence standards set 
forth in Instructions 1 and 2 to paragraph (d)(2) or the independence 
requirements of the laws, regulations, codes or standards of the home 
country of the bidder or subject company, as applicable, for members of 
the board of directors or the

[[Page 65409]]

committee of the board of directors approving the arrangement.
    5. A determination by the bidder's or the subject company's board 
of directors, as applicable, that the members of the board of directors 
or the committee of the board of directors, as applicable, approving an 
arrangement in accordance with the provisions of paragraph (d)(2) are 
independent in accordance with the provisions of this instruction to 
paragraph (d)(2) shall satisfy the independence requirements of 
paragraph (d)(2).
    Instruction to paragraph (d): The fact that the provisions of 
paragraph (d) of this section extend only to employment compensation, 
severance and other employee benefit arrangements and not to other 
arrangements, such as commercial arrangements, does not raise any 
inference that a payment under any such other arrangement constitutes 
consideration paid for securities in a tender offer.
* * * * *

    Dated: November 1, 2006.

    By the Commission.
Nancy M. Morris,
Secretary.
 [FR Doc. E6-18815 Filed 11-7-06; 8:45 am]

BILLING CODE 8011-01-P
