FREE WRITING WITH RESPECT TO Mergers--WAVE OF THE FUTURE?

SECTION 2
Forms
Title 2
Title 3
Title 4

SECTION 3
Securities Act
Exchange Act
Sarbanes-Oxley Act
SOX TABLE
Title 5

SECTION 4
'33 ACT Reg
'34 ACT Reg
Reg. S-K
 

Title 5
Title 6

A significant aspect of the regime relating to business combinations effective January 1, 2000 is the extent to which communications outside of the prescribed documents can be used before and after the filing of the registration statement and before distribution of the proxy statement/prospectus in the case of a business combination. An issuer registering securities on Form S-4 in connection with a merger, other business combination, or an exchange offer may make an offer to sell or solicit offers to buy prior to the filing of a registration statement subject to a number of conditions.[1] First, from and including the first public announcement of the proposed transaction to the filing of the registration statement all written communications relating to the transaction are filed with the Commission on the date of first use.[2] Second, each written communication must include a prominent legend urging the investors to read the documents filed or to be filed with the Commission, advising as to the documents available from the offeror, and stating that the documents filed or to be filed with the Commission are or will be available at the Commission’s web site for free.[3] Third, the filing must identify the filer, the company that is the subject of the offering, and the subject company’s Exchange Act file number in the right-hand upper corner.[4] Fourth, if as is usually the case, the transaction will involve a vote of security holders, the offer must be made in accordance with the provisions of the applicable proxy rules under the Exchange Act . The trigger to when written communications that might be deemed an offer used before the filing of a registration statement can be filed and become entitled to the newly constructed safe harbor for such filings, is the first public announcement of the proposed transaction. The first public announcement for this purpose is “any oral or written communication by a participant [in the transaction] that is reasonably designed to, or has the effect of, informing the public or security holders in general about the business combination transaction.”[5] In view of the broad definition, a communication could constitute such a public announcement, notwithstanding it was not intended to be such. If it is, if it is written, it has to be filed, and all subsequent written communications have to be filed or constitute a violation of Section 5(c).

The use of free writing after the registration statement follows the identical pattern, except once the registration statement is filed, the free writing filings must include the number of the registration statement filing in the upper right-hand corner.[6] A pre-filing announcement of the forthcoming offering complying with Rule 135 must also be filed, but a post-filing Rule 134 communication does not have to be filed.[7] Rule 425 makes it clear that all documents required to be filed thereunder are deemed a prospectus; hence, subjecting them to potential Section 12(a)(2) liability for false or misleading statements contained therein.[8] In the other direction, it is expressly provided that the failure to file a written communication required to be filed under Rule 425, shall not be deemed a violation of Sections 5(b) or 5(c) of the Securities Act if a good faith effort is made to comply with the filing requirements and a filing is made as soon as practicable after discovery of the failure to file. The provision allowing offers prior to the filing of the registration statement would be meaningless as to transactions requiring a vote of shareholders without a corresponding exemption under the proxy rules for what might otherwise constitute a proxy solicitation prior to the distribution of the proxy statement. Rule 14a-12 of the proxy rules, heretofore applicable to proxy contests was also amended to allow communications generally before a proxy statement is distributed to security holders subject to a number of limitations.