Opposition Brief — Starkman v. Marathon Oil Co.
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No. 85-1029 Suprema Gantt, WS,
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IN THE
opty F SPANIOL, JR,
Supreme Court of the United States
October Term, 1985
IRVING STARKMAN, M.D., Trustee of the Irving Starkman,
M.D., S.C., Defined Benefit Pension Fund and Trust,
Petitioner,
v.
MARATHON OIL COMPANY, H.D. HOOPMAN,
C.H. BARRE, V.G. BEGHINI, J.H. HERRING, and
W.E. SWALES,
Respondents.
On Petition for a Writ of Certiorari to the United States
Court of Appeals for the Sixth Circuit
BRIEF FOR THE RESPONDENTS
IN OPPOSITION
Erwin N. Griswo_p
Joun L. Straucn*
Joun M. NEwMAN, JR.
Rogert R. WELLER
Joun W. Epwarps II
JAMEs R. JOHNSON
Jones, Day, Reavis & PoGuE
1700 Huntington Building
Cleveland, Ohio 44115
(Z16) 348-3939
Attorneys for Respondents
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* Counsel of Record
Counterstatement of the Questions Presented
1. Whether, in connection with a tender offer, and in
light of this Court’s decision in 7'SC Industries, Ine. vy.
Northway, Inc., 426 U.S. 488 (1976), information respect-
ing the purties to, and terms of, negotiations concerning a
possible merger of a publicly-held corporation is *‘mate-
rial’? for purposes of the federal securities laws, unless
and until an agreement in principle for the merger has
been reached?
2. Whether, in the same circumstances, a corporation,
which was the target of a tender offer and which, pursuant
to a specific Instruction of the SEC, disclosed that it was
considering a number of alternatives to the tender offer,
including a merger, but did not disclose the participants
in, or terms of, negotiations concerning such a merger until
an agreement in principle had been reached, violated the
federal securities laws by the disclosures it made?
5. Were the disclosures made by Re sponcents adequate
to inform the public and its shareholders of all facts re-
quired to be disclosed by the federal securities laws?
Statement of the Parties to this Proceeding Pursuant
to Rule 28.1 of this Court
Respondent Marathon Oil Company is now a wholly-
owned subsidiary of United States Steel ( ‘orporation, and
portions of its business are operated as separate, wholly-
owned subsidiaries of United States Steel Corporation. In
addition to its whoily-owned subsidiaries, Marathon Oil
Company is affiliated with the following entities:
Arctic LNG Transportation Company
Badger Pipe Line Company
City Point Oil Terminal, Inc.
CLAM Petroleum Company
Cook Inlet Pipe Line Company
Deutsche Transalpine Olleitung GmbH
Explorer Pipeline Company
Graveap, Ine.
Green Bay Terminal Corporation
Kenai LNG Corporation
LOCAP, Inc.
LOOP Ine.
Oasis Oil Company of Libya, Ine.
Oil Insurance Limited
Petroleum Terminals, Ine.
Pilot Oil Corporation
Platte Pipe Line Company
Polar LNG Shipping Corporation
Russell Stewart Oil Co.
Societa Italiana Per L’Oleodotto Transalpino, S. p.A.
Transalpine Finance Holdings S.A.
Transalpine Olleitung Osterreich GmbH
West Shore Pipe Line Company
Wolverine Pipe Line Company
In addition to subsidiaries which are w holly-owned, United
States Steel Corporation is affiliated with the following
entities :
Athlone Prospecting & Development Corporation, Ltd.
lirst National Bank (Albion, Pa.)
ti-<
Companhia Meridional de Mineracao
Brazaco-Mapri Industries Metalurgicas S.A.
ITW-Mapri (51% owned by Brazaco-Mapri)
Mecania Walsywa, Ltda.
Companhia Siderurgica Paulista ‘¢Cosipa’’
Merinds Mineracao
Mineraeao Buritirama Ltda.
Mineracao Carajas, Ltda.
Mineracao Maraba, Ltda.
Mineracao Xingu, Ltda.
Termerid Mineracao, SA
Torremco Soe. Min. KE. Com. Ltda.
Deepsea Ventures, Inc.
Ocean Mining Associates
FHS Stahlverformung GmbH
FHS Automotive Parts Manufacturing Ltd.
Industria de Tubos y Perfiles, S.A. (Intuperas)
Minerales Ordaz C.A.
Les Entreprises du Lae Lucault Ine.
Sidbec-Normines, Inc.
U.S. Steel France
Zaerust Chrome Mines, Limited
Northern Tier Pipeline Co.
USS MaxTech Company, Inc.
USS MaxTech Company, Ltd.
USS MaxTex Company (Japan), Ltd.
USS Technology (Japan), Ltd.
ACE Holdings, Ltd.
Adela Investment Company, 8..\.
Altos Hornos de Viseaya, S.A. (ATV)
Associated Ore & Metal Corporation, Ltd.
Avsteel SWA, Ltd.
Blue Grass Phosphate Company
Chrome Deposit Corp. (Court Holdings J.V.)
Jupiter Mining and Prospecting Co. (Pty.) Ltd,
Kappa Mining & Prospecting Co., Ltd.
La Pointe Iron Company
Navios Corporation
Iv
Navios Ship Management Services, Ine.
Oresteel Investments (Proprietary), Ltd.
P.T. Pacific Wikkel Indonesia
Sigma Mining & Prospecting Co. (Pty.)-Ltd.
Societe Des Mines De Fer De Guinea Pour L’Exploita-
tion Des Monts Nimba (Mifergui Nimba)
Tilden Iron Mining Company
West Union Canal Company, The
Bartow Chemical Products
Century ITI Associates
Fort Meade Chemical Products
Double Eagle Steel Coating Co.
Live Oax Uranium Operations
Rockland Joint Venture
RMI Company
Tenneco/USS Chemicals Joint Venture
e
TABLE OF CONTENTS
PAGE
Counterstatement of the Questions Presented
Statement of the Parties to this Proceeding Pursuant
to Rule 28.1 of this Court il
Table of Authorities vl
Opinions Below 1
Statutes and Regulations Involved 2
Il. Statement 2
A. The Transzction At Issue 2
1. Communications From Marathor To Its
Shareholders 3
2 Marathon’s Actions Following The Mobil
Offer 5
3. U.S. Steel’s Offer 6
4. Petitioner’s Sale Of His 50 Shares Of
Marathon Stock 7
B. Vhe Proceedings Beiow 7
Il. Summary of Argument 8
[lJ]. Reasons For Denying The Writ 10
A. The Decision Below Is Supported By Ap
plicable SEC Regulations And A Consistent
Line Of Decisions Holding That Preliminary
Merger Negotiations Need Be Disclosed Only
If And When An Agreement In Principle
Has Been Reached 10
Vi
1. Respondents’ Disclosures Were Ex-
pressly Authorized By Applicahle SEC
Rules
The Decisions Below Are Amply Sup-
ported By Prior Precedent
te
3. The Established Rule Governing Dis-
closure Of Pending Merger Negotiations
Is Premised Upon Sound Policy
B. The Established Kule Governing Disclosure
Of Merger Negotiations Is Fully Consistent
With This Court’s Decision In TSC Indus-
tries, Inc. v. Northway, Inc., 426 U.S. 488
(1976)
IV. Conelusion
Avpendix
Securities Exchange Act of 1934:
§10(b), 15 U.S.C. § 78j(b)
§ 14(d)(4), 15 U.S.C. § 78n(d) (4)
$14(e), 15 U.S.C. § 78n(e)
§ 28(a)(1), 15 U.S.C. § 78w(a)(1)
Rules and Regulations of the Securities and Exchange
Commission :
Rule 10b-5, 17 C.FLR. § 240.10b-5
Rule 14d-9, 17 C.F.R. § 240.14d-9
Rule 14e-2, 17 C.FLR. § 240.14e-2
Schedule 14D-9, 17 C.F.R. § 240.14d-101
PAGE
15
17
20
A-1
1A
1A
2A
2A
3A
4A
8A
9A
TABLE OF AUTHORITIES
Cases:
Berg v. First American Bankshares, Ine., | 1984-85
Transfer Binder] Fed. See. L. Rep. (CCH)
PAGE
] 92,011 (D.D.C. 1985) 19
Bucher v. Shnmway, [1979-80 Transfer Binder] Fed.
Sec. L. Rep. (CCH) 997,142 (S.D.N.Y. 1979),
aff’d mem., 622 F.2d 572 (2d Cir.), cert. denied,
449 U.S. 841 (1980) 13
Caravan Mobile Home Sales, Inc. v. Lehman Brothers
Kuhn Loeb Inc., 769 F.2d 561 (9th Cir. 1985) 19
Corenco Corp. v. Schiavone & Sons, Inc., 488 F.2d 207
(2d Cir. 1973) 1]
Crane Co. v. Anaconda Co., 411 1°. Supp. 1208 (S.D.
N.Y. 1975) 13
Freschi v. Grand Coal Venture, 583 F. Supp. 780
(S.D.N.Y. 1984) 19
Greenfield v. Heublein, Inc., 742 F.2d 751 (3d Cir.
1984), cert. denied, U.S. ——, 105 S. Ct.
1189, 84 L.Ed. 2d 336 (1985) 13, 14, 16
Gulf Corp. v. Mesa Petroleum Co., 582 F. Supp. 1110
(D. Del. 1984) 11
In re Carnation Co., Exchange Act. Rel. No. 22214,
[1984-85 Transfer Binder] Fed. Sec. L. Rep.
(CCH) % 83,801 (July 8, 1985) 14
In re Transocean Tender Offer Securities Litigation,
427 F. Supp. 1211 (N.D. Til. 1977) 11
James Blackstone Memorial Library. Association v.
Gulf, M. & O. R. Co., 264 F.2d 445 (7th Cir.), cert.
denied, 361 U.S. 815 (1959)
13
PAGE
Klausner v. Ferro, 604 F. Supp. 1188 (E.D.N.Y. 1985) 19
Levin v. Marder, 343 F. Supp. 1050 (W.D. Pa. 1972) 14
Levinson v. Basic, Inc., [1984-85 Transfer Binder]
Fed. See. L. Rep. (CCH) § 91,801 (N.D. Ohio
1984), appeal pending, No. 84-8730 (6th Cir.) 13
Marathon Oil Co. v. Mobil Corp., 5380 F. Supp. 315
(N.D. Ohio), aff'd, 669 F.2d 378 (6th Cir. 1981),
cert. denied, 455 U.S. 982 (1982) sy)
Michaels v. Michaels, 767 F.2d 1185 (7ih “ir. 1985),
pet. for cert. filed, No. 85-752 (Nov. 1, 885) 14,15
Missouri Portland Cement Co. v. H. K. Porter Co.,
535 F.2d 388 (Sth Cir. 1976) 13
Piper v. Chris-Craft Industries, Inc., 430 U.S. 1 (1977) 7
Radol v. Thomas, 556 F. Supp. 586 (S.D. Ohio 1983),
aff’d, 772 F.2d 244 (6th Cir. 1985), pet. for cert.
filed, No. 85-1030 (Dec. 13, 1985) 7,11
Reiss v. Pan American World Airways, Inc., 711 F.2d
11 (2d Cir. 1983) 13, 16
Revlon, Inc. v. Pantry Pride, Inc., [Current] Fed. See.
L. Rep. (CCH) § 92,348 (D. Del. 1985) 13
Schreiber v. Burlington Nor‘ hern, Inc., ——— U.S. .
105 S. Ct. 2458, 86 L. Ed. 2d 11 (1985) 7
Scott v. Multi-Amp Corp., 386 F. Supp. 44 (D.N.J.
1974) 13
SEC v. Geon Industries, Inc., 531 F.2d 39 (2d Cir.
1976) 14
Staffin v. Greenberg, 672 F.2d 1196 (3d Cir. 1982) 13, 15
Susquehanna Corp. v. Pan American Sulphur Co., 423
F.2d 1075 (5th Cir. 1970) 13
Thomas v. Duralite Co., 524 F.2d 577 (3d Cir. 1975) i4
TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438
(1976) 9, 17-18
Statutes:
Securities Exchange Act of 1934:
§ 10(b), 15 U.S.C. § 78j(b)
§ 14(d) (4), 15 U.S.C. § 78n(d)(4)
§14(e), 15 U.S.C. § 78n(e)
§ 23(a)(1), 15 U.S.C. § 78w(a) (1)
Rules and Regulations:
SEC Rule 10b-5, 17 C.F.R. § 240.10b-5
SEC Rule 144-9, 17 C.F.R. § 240.14d-9
SEC Rule 14e-2, 17 C.F.R. § 240.14e-2
SEC Schedule 14D-9, 17 C.F.R. § 240.14d-101
PAGR
i
10
10
10-11, 13
IN THE
Supreme Court of the Uniteh States
October Term, 1985
No. 85-1029
[InvinG STARKMAN, M.I)., Trustee of the Irving Starkman.
M.D., S.C., Defined Benefit Pension Fund and Trust,
Petitioner.
MaRATHON O11 Company, H.D. Hoopman, C.H. Barre,
V.G. Becuint, J.H. Herrinec, and W.E. Swa.es,
Respondents.
On Petition for a Writ of Certiorari to the United States
Court of Appeals for the Sixth Circuit
BRIEF FOR THE RESPONDENTS
IN OPPOSITION
Opinions Below
The Opinion of the Court of Appeals for the Sixth
Circuit, dated September 13, 1985, is reported at 772 F.2d
231. A copy is included in the Appendix to the Petition.
The opinion of the District Court for the Southern District
of Ohio is unreported, and a copy is included in the Ap-
pendix to the Petition.
Statutes and Regulations Involved
The following statutes and regulations are cited in this
Brief and reproduced in the Appendix:
Securities Exchange Act of 1934:
‘ 10(b), 15 U.S.C. § 78}(b) 1A
\ 14(d) (4), 15 U.S.C. § 78n(d) (4) 1A
\14(e), 15 U.S.C. § 78n(e) ZA
§ 23(a), 15 U.S.C. § 78w(a) 2A
Rules and Regulations of the Securities and
Exchange Commission :
Rule 10b-5, 17 C.F.LR. § 240.10b-5 3A
Rule 140-9, 17 CLF.R. § 240.14d-9 4A
Rule 14e-2, 17 C.F.R. § 240.14e-2 SA
Schedule 141D-9, 17 C.F.R. § 240.14d-101 GA
s
Statement
A. The Transaction At Issue
Petitioner purchased 50 shares of the common stock of
Respondent Marathon Oil Company (‘‘Marathon”’ or the
‘‘Company’’)' on the New York Stock Exchange on Janu-
ary 14, 1980. The average trading price of Marathon
stock on that date was $49.125 per share.
On October 30, 1981, Mobil Corporation (‘‘Mobil’’)
announced a tender offer for 40 million shares of Marathon
1. The individual respondents were officers and directors of
Marathon at the time of the transactions at issue in this case. The
seven other directors of Marathon at that time were not joined as
defendants.
- .
wv
stock (approximately 68% of the shares outstanding) at
$85 per share.
The following day, the Marathon Board of Directors
met to consider the Mobil offer. After receiving advice
from management, outside legal counsel, and Marathon’s
financial advisor, The First Boston Corporation (‘‘ First
Boston’’), the Board unanimously (with one director ab-
sent) determined that Mobil’s tender offer was ‘‘grossly
inadequate’? and recommended that the shareholders re-
ject that offer. The Board also proposed a series of reso-
lutions, described below, in furtherance of its opposition
to Mobil’s offer.
1. Communications From Marathon To Its Shareholders
On November 2, 1981, Marathon filed with the Securities
and Exchange Commission (‘‘SEC’’) its Schedule 14D-9
responding to Mobil’s tender offer. Attached thereto were
copies of the letter sent by the Company to its share-
holders on November 2, 1981, its Press Release of the
same date, and First Boston’s written opinion dated October
31, 1981 stating its conclusion that Mobil’s offer was
‘‘orossly inadequate from a financial point of view.’’ The
Schedule 14D-9 was also mailed to Marathon’s shareholders.
During the period of November 2-18, 1981, Marathon’s Press
Releases, published advertisements, and communications to
shareholders were filed with the SEC as exhibits to Amend-
ments 1-10 of Marathon’s Schedule 14D-9.°- Through those
communications, Marathon’s shareholders were informed of
Marathon’s unwavering opposition to the Mobil offer and
of the fact that Marathon was actively pursuing alterna-
tives to that transaction.
2. Copies of Marathon’s Schedule 14D-9 and Amendments 1-10
thereto were filed with the District Court as Exhibits to the Affidavit
of G. R. Jetton in Support of Defendants’ Motion for Summary
Judgment. (R. 66). That motion and its attachments were also in-
cluded in the Joint Appendix filed in the Sixth Circuit.
4
In its Schedule 14D-9, Marathon informed its share-
holders:
(1) That the Board had unanimously (with one
director absent) determined that Mobil’s offer of $85
per share for 40 million shares was ‘‘grossly inade-
quate’’ and recommended that shareholders reject the
Mobil offer (Item 4(a));
(2) That the Board’s conclusion and recommenda-
tions were based, inter alia, upon First Boston’s writ-
ten opinion that Mobil’s offer was ‘‘grossly inadequate
from a financial point of view’* (id., Item 4(b)(i):
Ex. 4);
(3) That the Board had authorized the filing of
litigation to resolve the ‘‘serious antitrust and other
legal questions’’ raised by the Mobil offer (7d., Item
4(b)(vii)) ;
(4) That, although the Board believed it was an
inopportune time to sell the Company and that inde-
pendence was preferable (Item 4(b)(iv)), it had re-
solved ‘‘to explore and investigate, with the assist-
ance and advice of First Boston,’’ certain ‘‘possible
transactions, including, without limitation, repur-
chases of Company Common Shares, the public or
private sale of equity or other securities of the Com-
pany, @ business combination between the Company
and another company, the acquisition of a significant
interest im or the entire Company or of one or more
of its significant business segments by another com-
pany, a joint venture between the Company and one
or more other companies, the acquisition by the Com-
pany of all or part of the business of another company,
a complete or partial liquidation of the Company or
the declaration of an extraordinary dividend.’ (id.,
Item 7) ;° and
3. Emphasis has been added to quotations here and throughout
this Brief, except where otherwise noted.
(5) That, with respect to the transactions to be
explored by Marathon, there could ‘‘be no assurance
that these activities will result in any transaction
being recommended to the Board of Directors or that
any transaction whieh is recommended will be author-
ized or consummated,’’ that the Board’s future
activities with respect to any transaction ‘‘may be de-
pendent upon Mobil’s future actions with respeet to
the Mobil offer,’’ and that the Board had adopted a
‘*resolution with respect to the need for confidentiality
with respect to the parties to, and nossible terms of,
any transactions or proposals of the type referred to
im the preceding portion of this Item 7a) during
negotiations with respect to any such transactions.’
(7d.).
2. Marathon’s Actions Following The Mobil Offer
As announced in its Schedule 14D-9, Marathon filed an
action under the antitrust laws against Mobil on Novem-
ber 1, 1981. That action was proceeding during the events
at issue in this case. Hearings on Marathon’s motion for
a preliminary injunction began on November 17, 1981; a
preliminary injunction was granted on November 30, 1981
and affirmed by the Sixth Cirenit on December 23, 1981;
review by this Court was denied. Marathon Ou Co. v.
Mobil Corp., 530 F. Supp. 315 (N.D. Ohio), aff’d, 669 F.2d
378 (6th Cir. 1981), cert. denied, 455 U.S. 982 (1982).
Consistent with the disclosures in its Schedule 14D-9,
Marathon began immediately to explore alternatives to the
Mobil offer, including, inter alia, ‘‘a business combination
with another company.’’ With First Boston’s assistance,
Marathon made contacts with approximately 35 companies.
Representatives of Marathon first met with repre-
sentatives of United States Steel Corporation (‘‘U.S.
Steel’’) on November 10, 1981. Negotiations respecting
6
a possible business combination between the two companies
continued at various times until November 19, 1981.
During the same period in which it was négotiating with
U.S. Steel, Marathon was also engaged in discussions with
Gulf Oil Corporation (‘‘Gulf’’) and Allied Industries, Ine.
(‘*Allied’’) respecting a possible business combination
with each cf those companies.
3. U.S. Steel’s Offer
On November 15, 1981, U.S. Steel’s Board authorized
its Chairman, David Roderick, to make an offer to Mara-
thon to aequire the Company through a tender offer and
subsequent merger. Later that day, Mr. Roderick com-
municated U.S. Steel’s offer by telephone te a meeting of
Marathon’s Board. After receiving U.S. Steel’s offer, the
Marathon Board considered a number of alternatives, in-
cluding tentative, indefinite proposals which had been re-
ceived from Gulf and Allied, and then voted to aeeept U.S.
Steel’s offer. Both the communication of U.S. Steel’s
offer and the Marathon Board’s vote to aecept it took
place after the stock markets had closed on November 18,
1981.
After the Marathon Board’s acceptance had been ecom-
municated to U.S. Steel, representatives of the two com-
panies negotiated and drafted an Agreement of Merger
during the evening of November 18 and the morning of
November 19, 1951. The Agreement was signed, and the
proposed transaction was announced publicly on November
19, 1981.
U.S. Steel offered to purchase 80 million shares of
Marathon stock (about 51°) for $125 per share in cash
and to exchange each of the reinaining shares in a merger
for a $100 principal amount, 12-year, 1242%, guaranteed
Note, then valued at approximately $86. Thus, as of No-
vember 18, 1981, the ‘‘blended’’ value of the U.S. Steel
offer was approximately $106 per share.‘
4. Petitioner’s Sale Of His 506 Shares
Of Marathon Stock
Petitioner alleged in his Second Amended Complaint
that he sold his 50 shares of Marathon stock in the open
market on November 18, 1981. He claims to have received
$78 per share, for an estimated profit of about $29 per
share over the average price on the day he bought those
shares. Why he chose to sell on that particular day is not
explained.
Starkman does not dispute, however, that prior to his
sale of 50 shares for $78 per share, he had received Mara-
thon’s communication advising him, inter alia, that the
Board and First Boston had determined Mobil’s offer of
$85 per share for 40 million shares to be ‘‘grossly inade-
quate’’ and that the Board was actively pursuing alter-
natives to the Mobil offer.
B. The Proceedings Below
In the action whieh he filed on December 31, 1981 and
which was transferred to the District Court for the South-
ern District of Ohio, Petitioner claimed that Respondents
had violated §10(b) of the Securities Exchange Act of
1934, 15 U.S.C. § 78j(b) (the ‘*1934 Act’’), and Rule 10b-5
thereunder,*® committed ‘‘common law fraud,’’ and breached
4. (51% x $125) + (49% x $8) = $105.89. U.S. Steel’s
offer was ultimately accepted by the vast majority oi Marathon’s
shareholders. See Radol v. Thomas, 556 F. Supp. 586 (S.D. Ohio
1983), aff'd, 772 F.2d 244 (6th Cir. 1985), pet. for cert. filed,
No. 85-1030 (Dec. 13, 1985).
5. Inasmuch as the wrongs alleged to have been committed by
Respondents were “in connection with a tender offer,” Petitioner's
claims should more properly have been stated under § 14(e) of the
1934 Act, 15 U.S.C. § 78n(e). See generally Schreiber v. Burling-
ton Northern, Inc., U.S. , 105 S.Ct. 2458, 86 L. Ed. 2d 11
(1985); Piper v. Chris-Craft Indus., Inc., 430 U.S. 1 (1977).
their fiduciary duties by failing to disclose certain spec-
ulative projections of asset valnes, forecasted earnings,
and the fact that Marathon was negotiating with U.S. Steel
with respect to a possible business combination between
the two companies.
This case was originally consolidated with some 13
other actions against Marathon, U.S. Steel, and certain
of their officers and directors pending in the Southern
District of Ohio before Chief Judge Carl B. Rubin and
captioned Radol, et al. v. Thomas, et al., Civil Action No.
C-1-82-13 (S.D. Ohio). The Radol case was tried to a jury
between May 23 and June 21, 1983. The judgment entered
on the defense verdict in Radol was affirmed by the Sixth
Circuit (772 F.2d 244), and a petition for certiorari seek-
ing review of that decision is pending before this Court
(No. 85-1030). Prior to the trial, Judge Rubin granted
Petitiener’s motion to sever this case from Radol.
On February 8, 1984, Chief Judge Rubin granted sum-
mary judgment dismissing all of Petitioner’s claims. The
Sixth Cireuit affirmed. 772 F.2d 231. Petitioner seeks
review in this Court of only the portions of the decisions
below which held that Respondents’ disclosures respecting
the pending negotiations with U.S, Steel were fully in ac-
cordance with federal law.
Summary of Argument
This case involves none of the factors listed in Rule 17
which would justify the exercise of this Court’s discretion
to grant the writ of certiorari. The decision of the District
Court, affirmed by the Court of Appeals, involved the ap-
plication of a settled principle of law established by nu-
merous prior decisions and embodied in an applicable reg-
ulation of the SEC.
a]
Respondent Marathon was the target of a hostile tender
offer. In its public response, pursuant to an express reg-
ulation of the SEC, Marathon disclosed that it was consid-
ering a number of alternatives, including a possible merger.
It made contacts with numerous companies and held dis
cussions concerning a possible merger with at least three
companies. IJt did not disclose the identity of those with
whom it had such discussions or the details thereof until it
had reached an agreement for a merger with U.S. Steel.
Relying upon the applicable SEC regulations and
numerous prior decisions, the courts below held that the
participants in, and details of, preliminary negotiations
involving a possible merger of a publicly-held corporation
need not be disclosed unless and until an agreement in
principle has been reached. The established rule is soundly
based upon the policy of protecting investors from the
potentially misleading, premature disclosure of merger
negotiations, which frequently do not result in agreement.
The rule also fosters freedom of negotiation by tender
offer targets.
The entry of summary judgment was appropriate in
this case, where there was no factual dispute and it was
clear as a matter of law that Respondents’ disclosures had
been fully in accord with the governing principles of fed-
eral securities law. This Court did not, as Petitioner sug
gesis, read Rule 56 out of the Federal Rules of Civil Pro-
cedure in securities cases when it decided TSC Industries,
Inc. v. Northway, Inc.. 426 U.S. 438 (1976).
1)
Til.
Reasons For Denying The Writ
A. The Decision Below Is Supported By Applicable
SEC Regulations And A Consistent Line Of Decisions
Holding That Preliminary Merger Negotiations
Need Be Disclosed Only If And When An
Agreement In Principle Has Been Reached.
The District Court and the Sixth Circuit both held that
Respondents’ disclosures of Marathon’s efforts to develop
an alternative to the Mobil Offer complied fully with the
requirements of federal law. Petitioner acknowledges that
[Item 7(a) of Marathon’s Schedule 14D-9 disclosed that the
Board had resolved to explore and investigate :
‘certain types of possible transactions, including,
without limitation ... a business combination between
the Company and another company, the acquisition of
a significant interest in or the entire Company or of
one or more of its significant business segments by
another company... .”’
!
Petitioner does not deny that that disclosure was true
(i.e., that the Board did so resolve) or that Marathon did
undertake such investigations. Instead, he contends that
the disclosure was inadequate and violated federal law,
because Marathon did not disclose that it was negotiating
with U.S. Steel until the two companies had reached agree-
ment on the terms of their business combination.
1. Respondents’ Disclosures Were Expressly
Authorized By Applicable SEC Rules.
Petitioner's contention is contrary to SEC Rules 14d-9
and 14e-2, 17 C.F.R. §§ 240.14d-9 and 240.14e-2, which
govern the disclosure obligations of a tender offer target.
11
Those rules require a target company, such as Marathon,
to disclose the items specified in Schedule 14D-9, 17 C.F.R.
§ 240.14d-101. Item 7 of Schedule 14D-9, in turn, requires
disclosure of negotiations by the target which would result
in an extraordinary transaction, such as a tender offer or
merger, but the SEC’s Instruction to Item 7 explicitly
provides :°
“If no agreement in principle has yet been reached,
the possible terms of any transaction or the parties
thereto need not be disclosed if in the opinion of the
Board of Directors of the subject company such dis-
closure would jeopardize continuation of such nego-
tiations. Im such event, disclosure that negotiations
are being undertaken or are underway and are in the
preliminary stages will be sufficient.’’
Pursuant to the SEC’s Instruction, Marathon disclosed
that exploratory negotiations were ‘‘being undertaken’’
and, further, disclosed in Item 7(a) of its Schedule 14D-9
that:
‘*At its October 31, 1981 meeting, the Board of
Directors adopted a resolution with respect to the need
for confidentiality with respect to the parties to, and
possible terms of, any transactions or proposals of the
types referred to in the preceding portion of this Item
7(a) during negotiations with respect to any such
transactions.’’
Marathon’s disclosure in its Schedule 14D-9 that it was
exploring a variety of alternatives, including undertaking
6. It is well established that the specific disclosure requirements
imposed by SEC Rules 14d-9 and I4e-2 are the only disclosure
requirements imposed upon a tender offer target. Kadol v. Thomas,
772 F.2d 244, 254-55 (6th Cir. 1985), pet. for cert. filed, No. 85-
1030 (Dec. 13, 1985); Corenco Corp. v. Schiavone & Sons, Inc.,
488 F.2d 207, 218 (2d Cir. 1973); /n re Transocean Tender Offer
Securities Litigation, 427 F. Supp. 1211 (N.D. Ill. 1977). See
Gulf Corp. v. Mesa Petroleum Co., 582 F. Supp. 1110, 1116 (D.
Del. 1984).
”
-
negotiations for a possible business combination, and of
the Board’s deter™~. ‘on of the need for confidentiality
‘‘with respect to ies to, and possible terms of, any
transactions or pruposeis’’ were thus squarely within the
terms of the SEC’s requirements. Section 23(a)(1) of the
1934 Act, 15 U.S.C. § 78w(a)(1), expressly provides that
no liability can be imposed under that Act for:
‘*TA]ny act done or omitted in good faith in con
formity with a rule, regulation, or Order of the Com-
mission ... notwithstanding that such rule, regulation,
or Order may thereafter be amended or rescinded or
determined by judicial or other authority to be invalid
for any reason.”’
2. The Decisions Below Are Amply Supported
By Prior Precedent.
Even absent the specifie SEC Instruction with which
Respondents complied, however, Petitioner’s claim would
be deficient as a matter of law under the long line of deci-
sions which have consistently refused to require disclosure
of the participants ing or terms of, pending negotiations
respecting a possible merger of a publicly-traded corpo-
ration, unless and until an agreement in principle has been
reached. The Sixth Cirenit recognized that its affirmance
of summary judgment against Petitioner’s merger dis-
closure claim was amply supported by prior precedent (772
F.2d at 248):
‘‘The SEC and the courts have enunciated a firm rule
regarding a tender offer target’s duty to disclose on-
going negotiations: so long as merger or acquisition
diseussions are preliminary, general disclosure of the
fact that such alternatives are being considered will
suffice to adequately inform shareholders ; a duty to dis-
close the possible terms of any transaction and the
parties thereto arises only after an agreement in prin
ls
ciple, regarding such fundamental terms as price and
strueture, has been reached. See ltem 7 of Schedule
14D-9, 17 C.F.R. § 240.14d-101 (1984); Greenfield v.
Heublein, Inc., 742 F.2d 751, 756-57 (8d Cir, 1984), cer?
denied, —-~ U.S. —.-, 105 S. Ct. 1189, 84 L.Edl.2d 336
(1985) (Rejecting an ‘intent te merge’ trigger stand
ard); Staffin vo Greenberg, G72 P.2d 1126, 1207 (8d Cir.
1982); Reiss v. Pan Av oricen World Airways, Tne. 711
F.2d 11, 14 (2d Cir. 1983).""
Accord, Missouri Portland Cement Co. v. iA. Porter Ce.
535 F.2d 388, 397-98 (Sth Cir. 1876); Susquehanna Corp, vy.
Pan American Suiphur Co., 423 F.2d 1075, LOS4-86 (Sth Cir.
1970); Levinson v. Basic, Ine., [1984-85 Transfer Binder |
Fed. See. L. Rep. (CCH) § 91,801 (N.D. Ohio 1984), appeal
pending, No. 84-3730 (6th Cir.) ; Bucher vo Shumway, [1979
80 Transfer Binder] Fed. See. L. Rep. (CCH) § 97,142 (S.D.
N.Y. 1979), aff'd mem., 622 F.2d 572 (2d Cir.), cert. denied,
449 U.S, 841 (1980); Crane Co. v. Anaconda Co., 411 F.
Supp. 1208, 1210 (S.D.N.Y. 1975); Scott vy. Multi-Amp
Corp., 886 F. Supp. 44, 65 (D.N.J. 1974). See also James
Blackstone Memorial Library Association v. Gulf, M. & 0.
R. Co., 264 F.2d 445, 450-51 (7th Cir.), cert. dented, 361 U.S.
$15 (1959) (pending negotiations for sale of corporate asset
need not be disclosed to seller of shares); Revlon, Tne. v.
Pantry Pride, Inc., [Current] Fed. See, L. Rep, (CCT)
§ 92.348 (D. Del. 1985) (by analogy to rule applicable to
merger disclosures, tender offer need not be disclosed until
terms of the offer are set and bidder has decided to go
forward).
The foregoing authorities show the maccuracy of Pet:
tioner’s assertion (Pet. 19) that the rule apphed by the
Sixth Circuit in this case is ‘‘whollv without precedent.”’
Indeed, Petitioner cites no cases which contradict the es
tablished principle that the detail. concerning preliminary
merger negotiations involving a publiely-held corporatios
i4
need not be disclosed unless and until an ‘‘agreement in
principle’’ has been reached.’
Petitioner asserts (Pet. 14n.) that the ‘‘SEC has ex-
pressed the opinion that Greenfield [v. Heublein, Inc.,
supra, 742 F.2d 751] was wrongly decided,’’ citing In re
Carnation Co., Exchange Act Rel. No. 22214, [1984-85
Transfer Binder] Fed. Sec. L. Rep. (CCH) { 83,801 (July
8, 1985). To the extent that Petitioner suggests that the
SEC expressed disagreement in Carnation with the rule
defining when a duty to disclose merger negotiations arises,
the footnote is erroneous and misleading. In Carnation,
the SEC held that it was false and misleading for an is-
suer to respond to an inquiry regarding a rise in its stock
price by stating that it knew of no reason for the rise and
was not in merger negotiations, when in fact it was in
merger negotiations. As the Sixth Cireuit noted (772
F.2d at 243 n.9), the SEC in Carnation disagreed with
the Greenfield decision on that issue alone. (J/d., p. 87,596
u.8). Carnation does not, however, address the issue of
7. The courts have fashioned certain, limited exceptions to the
rule against disclosure of preliminary merger negotiations, none of
which is relevant to the instant case. Most recently, in Michaels v.
Michaels, 767 F.2d 1185, 1195-98 (7th Cir. 1985), pet. for cert.
filed, No. 85-752 (Nov. 1, 1985), the Seventh Circuit recognized
the general rule against disclosure of preliminary negotiations in-
volving a publicly-traded company but held that it does not apply
in the context of a purchase of stock from one of three shareholders
in a close corporation, because the consideration of protecting the
market and public shareholders from premature disclosure does not
apply. See also SEC v. Geon Indus., Inc., 531 F.2d 39, 46-48 (2d
Cir. 1976) (Insider who ‘“‘tipped’” pending merger negotiations
violated § 10(b), even though negotiations were too tentative to be
disclosed publicly) ; Thomas v. Durclite Co., 524 F.2d 577, 584-85
(3d Cir. 1975) (Where, prior to purchasing shares in a close cor-
poration, buyer misrepresented financial health of corporation and
postponed negotiations for a likely merger to avoid disclosure to
seller, liability was imposed under § 10(b)); Levin v. Marder, 343
F. Supp. 1050 (W.D. Pa. 1972) (refusing to grant summary judg-
ment in favor of insider who bought shares in close corporation with-
out disclosing favorable merger proposal; to the extent decision goes
beyond close corporation context, it is overruled by later Third Cir-
cuit decisions in Staffin and Greenfield ).
1D
when a tender offer target which discloses that it is consid
ering undertaking merger negotiations must disclose the
identity of potential merger partners, the prices being con-
sidered, or other details of its negotiations—-and that is the
only issue which Petitioner seeks to have reviewed in this
ease. As to that issue, the SEC’s position has been stated
in its Instructions to Schedule 14D-9, which is discussed
above and with which Respondents complied.
3. The Established Rule Governing Disclosure Of
Pending Merger Negotiations Is Premised
Upon Sound Policy.
As the Sixth Cireuit explained in its decision below,
the established rule governing disclosure of preliminary
merger negotiations is premised upon a policy of protecting
public shareholders and the marketplace from potentially
misleading information (772 F.2d at 243):
‘‘The rationale emerging from these cases is that
when dealing with complex bargaining which may fail
as well as succeed and which may succeed on terms
which vary greatly from those originally anticipated,
the disclosure of preliminary discussions could very
easily mislead shareholders as te the prospects of
success, and by making public an impending offer, push
the price of the target’s stock toward the expected
tender price, thereby depriving shareholders of the
primary inducement to tender—a premium above mar-
ket price—and forcing the offeror to abandon its plan
or greatly increasing the cost of the offer. See Stajfin
v. Greenberg, 672 F.2d at 1207.”’
Accord, Michaels v. Michaels, supra, 767 F.2d at 1196
(‘‘{T]o avoid any misleading caused by disclosing that a
company is discussing merger possibilities, both the Third
Cireuit and a panel of the Second Cireuit have held that
the existence of preliminary merger negotiations is imma-
terial as a matter of law.... [F Jor publicly-traded stock,
16
the shareholders’ right to know outweighs the need to
protect them from potentially misleading disclosures only
when the negotiating parties have reached agreement on
price and structure.’’); Reiss v. Pan American World Air-
ways, Inc., 711 F.2d 11, 14 (2d Cir. 1983) (‘‘Such nego-
tiations are inherently fiuid and the eventual outcome is
shrouded in uncertainty. Disclosure niay in fact be more
misleading than secrecy so far as investment decisions are
coneerned.’’); Greenfield +. Heublein, Inc., 742 F.2d 751,
756 (3d Cir. 1984), cert. dented, U.S. ——, 105 S. Ct.
1189, 84 L.Ed. 2d 336 (1985) (‘‘We reasoned that because
disclosure of such tentative discussions may itself be mis-
leading to shareholders, preliminary merger discussions
are immaterial as a matter of law.... Thus, we further
held that ‘{w]here an agreement in principle [to merge}
has been reached, a duty to disclose does exist.’ Staffin.
672 F.2d at 1207.°’) (emphasis in original).
The policy underlying the established rule followed by
the SEC and the courts is sound. Indeed, although Peti-
tioner seeks review of the Sixth Cireuit’s decision, he
suggests no feasible alternative to the rule applied beiow.
The established disclosure rule applied by the Sixth
Circuit in this case provides a practical and certain guide-
line for disclosure by target companies. That rule recog-
nizes the realities of the business world. It provides share-
holders with information on the target’s activities but does
not foree disclosure of information which is inherently spec-
ulative and could well be misleading to shareholders and
the marketplace. Further, it does not hamper unneces-
sarily the efforts of target companies to develop alterna-
tives to inadequate tender offers. which, in turn, benefits
shareholders.
Petitioner’s claims that he was ‘‘deceived’’ into selling
his shares by any actions of Respondents were properly
rejected by the courts below. In the first place, Petitioner
sold his shares for a price which was $7 per share lower
ly
than the $85 Mobil offer which Marathon’s Board and First
Boston had determined to be ‘‘grossly inadeqnate.’’ See:
ondly, Petitioner’s claims of ‘‘concealment ... of Mar-
athon’s efforts to find a white knight’’ (Pet. 21) are belied
by Marathon’s disclosures of its consideration of numer-
ous alternatives, including a ‘‘business combination with
another company.’ Petitioner evidently had no faith in
Marathon’s ability to develop an alternative to Mobil’s
offer and chose to sell his shares before Respondents’ ef-
forts bore fruit in the Merger Agreement with U.S. Steel.
His decision turned out to be unwise, but it is not, and
should not be, actionable under the federal securities laws.
B. The Established Rule Governing Disclosure Of
Merger Negctiations Is Fully Consistent With
This Court’s Decision In TSC Industries, Inc. v.
Northway, Inc., 426 U.S. 438 (1976).
Faced with the overwhelming precedent supporting the
decisions below, Petitioner argues that the established
rule governing disclosure of merger negotiations is in-
consistent with this Court’s decision in TSC Industries.
Inc. v. Northway, Inc., 426 U.S. 488 (1976). In TSC In-
dustries, this Court developed an objective test for the
‘‘materiality’’ of facts under the federal securities laws.
(Id. at 449). It also held that the question of materiality
is a ‘‘mixed question of law and fact’’ and that assessments
of such questions are (id. at 450) (citations omitted) :
8. Equally unfounded is Petitioner's claim that he relied upon
Marathon’s statements that it wished to remain independent. As the
District Court and the Sixth Circuit (772 F.2d at 243) held, those
statements “were not misleading when read in their full context, and
at most expressed a sincere hope which the board found unrealistic
under the pressure of Mobil’s offer.” Independence clearly was
preferable to the only alternative available when the statements were
made—Mobil’s “grossly inadequate” tender offer. In the same doc-
ument, however, Marathon disclosed that its Board had resolved to
explore a number of alternatives to the Mobil offer. some of which
clearly entailed loss of Marathon’s independence.
18
‘‘peculiarly ones for the trier of fact. Only if the
established omissions are so ‘obviously important to
an investor that reasonable minds cannot differ on the
question of materiality’ is the ultimate issue of ma-
teriality appropriately resolved ‘as a matter of law’
by summary judgment.’’
Contrary to the manner in which Petitioner seeks to
read the 7SC Industries decision, this Court did not fore-
close the use of summary judgment under Fed. R. Civ. Pro.
56 in securities cases, as the above quotation confirms.*
To the contrary, this Court expressly recognized in TSC
Industries that ‘‘[s]ome information is of such dubious
significance that insistence on its disclosure may accom-
plish more harm than good.’’ (Jd. at 448). Where, as in
this instance, the agency charged with enforeing federal
securities laws and with prescribing rules for the protection
of investors in tender offers’? and the lower courts have
consistently held that premature disclosure of merger ne-
gotiations is of such dubious significance and holds such
great potential to mislead investors that disclosure should
not be required as a matter of law, the imposition of sum-
mary judgment is entirely appropriate’' The collective
9. In TSC Industries, this Court provided two specific examples
of the appropriateness of summary judgment in securities cases. At
pp. 453-54 n.15, this Court suggested that: “If, for example, the proxy
statement in this case had failed to reveal National’s 34% stock
interest in TSC ... these omissions would have rendered the state-
ment materially misleading as a matter of law... .” This Court
also found that “it cannot have been materially misleading to fail to
disclose” certain stock purchases, in the absence of an improper.
manipulative purpose. /d. at 463.
10. §14(d)(4) of the 1934 Act, 15 U.S.C. §78n(d)(4) au-
thorizes the SEC to prescribe rules and regulations respecting “[a]ny
solicitation or recommendation . . . to accept or reject a tender offer
. . aS necessary or appropriate in the public interest or for the
protection of investors.”’
11. In accordance with the strictures of TSC IJndustries, Inc..,
the lower courts have granted summary judgment in those cases.
(footnote continued on next page)
1)
experience in this area has confirmed the soundness of the
established rule that the details of negotiations concerning
the possible merger of a publicly-held corporation, prior
to an agreement in principle, are not material as a matter
of law and need not be disclosed.
Because the undisputed facts of record established that
Respondents’ disclosures in response to the Mobil offer
compiled in all respects with the 1934 Act, the court below
was entirely justified in affirming summary judgment
against Petitioner.
such as this one, where it was clear as a matter of law that omitted
information was not material. See, e.g., Caravan Mobile Home
Sales, Inc. vy. Lehman Brothers Kuhn Loeb, Inc., 769 F.2d 561 (9th
Cir. 1985); Berg v. First American Bankshares, Inc., [1984-85
Transier Binder] Fed. Sec. L. Rep. (CCH) § 92.011 (D.D.C. 1985) :
Klausner v. Ferro, 604 F. Supp. 1188 (E.D.N.Y. 1985) ; Freschi v.
Grand Coal Venture, 583 F. Supp. 780 (S.D.N.Y. 1984).
20
IV.
Conclusion
The decisions below applied sound and established prec-
edent in a manner consistent with the federal securities
laws and this Court’s prior decisions. None of the con-
siderations governing the exercise of this Court’s discre-
tion to grant the writ of certiorari set forth in Rule 17 is
presented in this case.
Accordingly, for the foregoing reasons, the Petition for
a Writ of Certiorari to the Court of Appeals for the Sixth
(ireuit should he denied.
Respectfully submitted,
ERWIN N. GRISWOLD
Joun L. Straucn*
Joun M. NEwMan, JR.
Rospert R. WELLER
Joun W. Epwarps I]
JAmEs R. JOHNSON
Jones, Day, Reavis & Pocur
1700 Huntington Building
Cleveland, Ohio 44115
(216) 348-3939
Attorneys for Respondents
* Counsel of Record
Dated: January 15, 1986.
APPENDIX
§10(b) of the Securities Exchange Act of 1934, 15
U.S.C. § 78j(b)
Manipulative and deceptive devices
It shall b> unlawful for any person, directly or in
directly, by the use of any means or instrumentality of
interstate conimerce or of the mails, or of any facility of
any national securities exchange—
‘ » *
(b) To use or employ, in connection with the purchase
or sale of any security registered on a national securities
exchange or any security not so registered, any manipula
tive or deceptive device or contrivance in contravention
of such rules and regulations as the Commission may pre
scribe as necessary or appropriate in the public interest
or for the protection of investors.
§ 14(d)(4) of the Securities Exchange Act of 1934, 15
U.S.C. § 78n(d) (4)
Recommendations Regarding Acceptance or
Rejection of Tender Offer
Any solicitation or recommendation to the holders of
such a security to accept or reject a tender offer or request!
or invitation for tenders shall be made in accordance with
such rules and regulations as the Commission may prescribe
as necessary or appropriate in the publie interest or for
the protection of investors.
Fr
§ 14(e) of the Securities Exchange Act of 1934, 15 U.S.C.
§$ 78n(e)
Untrue statement of material fact or omisison of fact
with respect to tender offer
(ec) It shall be unlawful for any person to make any
untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements
made, in the light of the circumstances under which they
are made, not misleading, or to engage in any fraudulent,
deceptive, or manipulative acts or practices, in connection
with any tender offer or request or invitation for tenders,
or any solicitation of security holders in opposition to or
in favor of any such offer, request, or invitation. The
Commission shall, for the purposes of this subsection, by
rules and regulations define, and preser!be means reason-
ably designed to prevent, such acts and practices as are
fraudulent, deceptive, or manipulative.
§$ 23(a)(1) of the Securities Exchange Act of 1934, 15
U.S.C. § 78w(a)(1)
Rules, regulations, and orders; annual reports
(a) Power to make rules and regulations; considerations;
public disclosure
(1) The Commission, the Board of Governors of the
Mederal Reserve System, and the other agencies enumer-
ated in section 7S8e(a)(34) of this title shall each have
power to make such rules and regulations as may be neces-
sary or appropriate to implement the provisions of this
chapter for which they are responsible or for the execu-
tion of the functions vested in them by this chapter, and
may for such purposes classify persons, securities, trans
actions, statements, applications, reports, and other mat-
ters within their respective jurisdictions, and prescribe
greater, lesser, or different reenirements for different
classes thereof. No provision of this ehapter in posing
any liability shall appiy to any act dene or omitted in good
faith in conformity with a rule, reeulaiion, or order of
the Commission, the Board of Governors of the Federal
Reserve System, other ageney enumerctcod in section 7T8e
(a) (34) of this title, any self-reenia‘ory organization, not
withstanding that such rule, regulation, or order may there
after be amended or rescind cd or deferiiined by judicial or
other authority to be invalid fo Vv roason.
SEC Rule 10b-5, 17 C.F .R. § 240.10b-5
Employment of Manipulative and Deceptive Devices
[t shall be unlawful for any person, directly or in
directly, by the use of any means or instrumentality of
interstate commerce, or of the mails, or of any facility «!
any national securities exchang
(a) to employ any device, scheme, or artifice
defraud, |
(b) to make any untrue statement of a material
fact or to omit to state a material fact nocessary in
order to make the statements made, in the lieht of the
circumstances under which thev were minde, not mis
leading, or
(c) to engage in any act. practice, or course of
8] PSs F ich operates or wont oOpnperare as a frand
busin which 0} Md
or deceit upon any person,
in connection with the Nurchase or sale of anv security.
4A
SEC Rule 14d-9, 17 C.F.R. § 240.14d-9
Solicitation/Recommendation Statements with Respect
to Certain Tender Offers —
(a) Filing and transmittal of recommendation state
ment. No solicitation or recommendation to security hold-
ers shall be made by any person described in paragraph
(d) of this section with respect to a tender offer for such
securities unless as soon as practicable on the date such
solicitation or recommendation is first published or sent or
given to security kolders such person complies with the
following subparagraphs.
(1) Such person shall file with the Commission eight
copies of a Tender Offer Solicitation/Recommendation
Statement on Schedule 14D-9 (240.14d-101), including all
exhibits thereto; and
(2) If such person is either the subject company or an
affiliate of the subject company,
(i) Such person shall hand deliver a copy of the
Schedule 14D-9 to the bidder at its principal office or
at the address of the person authorized to receive
notices and communications (which is set forth on the
cover sheet of the bidder’s Schedule 14D-1 (4 240.14d-
100) filed with the Commission; and
(ii) Such person shall give telephonic notice (which
notice to the extent possible shall be given prior to the
opening of the market) of the information required by
Items 2 and 4(a) of Schedule 14D-9 and shall mail a
copy of the Schedule to each national securities ex-
change where the class of securities is registered and
listed for trading and, if the class is authorized for
quotation in the NASDAQ interdealer quotation sys-
tem, to the National Association of Securities Dealers,
Ine. (“‘NASD’’).
JA
(3) If such person is neither the subject company nor
an affiliate of the subject company,
(i) Such person shall mail a copy of the schedule
to the bidder at its principal ofiice or at the address
of the person authorized to receive notices and com-
munications (which is set forth on the cover sheet of
the bidder’s Schedule 14D-1 (4 240.14d-100) filed with
the Commission) ; and
(ii) Such person shall mail a copy of the Schedule
to the subject company at its principal office.
(b) Amendments. If any material change occurs in
the information set forth in the Schedule 14D-9 (§ 240.14d-
101) required by this section, the person who filed such
Schedule 14D-9 shall:
(1) File with the Commission eight copies of an amend-
ment on Schedule 14D-9 (§ 240.14d-101) disclosing such
change promptly, but not later than the date such material
is first published, sent or given to security holders; and
(2) Promptly deliver copies and give notice of the
amendment in the same manner as that specified in para-
graph (a)(2) or paragraph (a)(3) of this section, which-
ever is applicable; and
(3) Promptly disclose and disseminate such change in
a manner reasonably designed to inform security holders
of such change.
(c) Information required in solicitation or recommen-
dation. Any solicitation or recommendation to holders of
a class of securities referred to in section 14(d)(1) of the
Act with respect to a tender offer for such securities shall
include the name of the person making such solicitation
or recommendation and the information required by Items
1, 2, 3(b), 4, 6, 7 and 8 of Schedule 14D-9 (4 240.14d-101)
or a fair and adequate summary thereof: Provided, how-
6A
ever, That such solicitation or recommendation may omit
any of such information previously furnished to security
holders of such class of securities by such person with re-
spect to such tender offer.
(d) Applicability.
(1) Except as is provided in paragraphs (d) (2) and (e)
of this section, this section shall only apply to the follow-
ing persons:
(i) The subject company, any director, officer, em-
ployee, affiliate or subsidiary of the subject company ;
(ii) Any record holder or beneficial owner of any
security issued by the subject company, by the bidder,
or by any affiliate of either the subject company or
the bidder; and
(iii) Any person who makes a solicitation or ree-
ommendation to security holders on behalf of any of
the foregoing or on behalf of the bidder other than by
means of a solicitation or recommendation to security
holders which has been filed with the Commission pur-
suant to this section or Rule 14d-3 (§ 240.14d-3).
(2) Notwithstanding paragraph (d)(1) of this section,
this section shall not apply to the following persons:
(i) A bidder who has filed a Schedule 14D-1
(§ 240.14d-101) pursuant to Rule 14d-3 (§ 240.14d-3) ;
(ii) Attorneys, banks, brokers, fiduciaries or in-
vestment advisers who are not participating in a
tender offer in more than a ministerial capacity and
who furnish information and/or advice regarding such
tender offer to their customers or clients on the un-
solicited request of such customers or clients or solely
pursuant to a contract or a relationship providing for
advice to the customer or client to whom the informa-
tion and/or advice is given.
7A
(e) Stop-look-and-lsten commumecation. This section
shall not apply to the subject company with respect to a
communication by the subject company to its securily hold-
ers which only:
(1) Identifies the tender offer by the bidder ;
(2) States that such tender offer is under consideration
by the subject company’s board of directors and/or man-
agement ;
(3) States that on or before a specified date (which shall
be no later than 10 business days from the date of com-
mencement of such tender offer) the subject company will
advise such security holders of (i) whether the subject
company recommends acceptance or rejection of such
tender offer; expresses no opinion and remains neutral
toward such tender offer; ev is unable to take a position
with respect to such tender offer and (ii) the reason(s)
for the position taken by the subject company with respect
to the tender offer (including the inability to take a posi-
tion) ; and
(4) Requests such security holders to defer making a
determination whether to accept or reject such tender offer
until they have been advised of the subject company’s posi-
tion with respect thereto pursuant to paragraph (e)(3) of
this section.
(f) Statement of management's position. \ statement
by the subject company of its position with respect to a
tender offer which is required to be published or sent or
given to security holders pursuant to Rule 14e-2 shall be
deemed to constitute a solicitation or recommendation
within the meaning of this section and section 14(d)(4) of
the Act.
&A
SEC Rule 14e-2, 17 C.F.R. § 240.14e-2
Position of Subject Company with Respect
to a Tender Offer
(a) Position of subject company. As a means reasonably
designed to prevent fraudulent, deceptive or manipulative
acts or practices within the meaning of section 14(e) of the
Act, the subject company, no later than 10 business days
from the date the tender offer is first published or sent
or given, shall publish, send or give to security holders a
statement disclosing that the subject company :
(1) Recommends acceptance or rejection of the bidder’s
tender offer;
(2) Expresses no opinion and is remaining neutral
toward the bidder’s tender offer; or
(3) Is unable to take a position with respect to the
bidder’s tender offer.
Such statement shall also include the reason(s) for the
position (including the inability to take a position) dis-
closed therein.
(b) Material change. If any material change occurs
in the disclosure required by paragraph (a) of this section,
the subject company shall promptly publish, send or give
a statement disclosing such material change to security
holders.
9A
SEC Schedule 14D-S, 17 C.F.R. § 14d-101
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Seeurities Exchange Act of 1924
(Amendment No. )
(Name of Subject Company )
(Name of Person(s) Filing Statement )
(Title of Class of Securities)
(CUSIP Number of Class of Securities)
(Name, address and telephone number of person
authorized to receive notice and communications
on behalf of the person(s) filing statement)
Instructions: Eight copies of this statement. including
all exhibits, should be filed with the Commission.
General Instructions: A. The item numbers and cap-
tions of the items shall be included but the text of the items
is to be omitted. The answers to the items shall be so
prepared as to indicate clearly the coverage of the itenis
without referring to the text of the items. Answer every
item. If an item is inapplicable or the answer is in the
negative so state.
1OA
B. Information contained in exhibits to the statement
may be incorporated by reference in answer or partial an-
swer to any item or sub-item of the statement unless it
would render such answer misleading, incomplete, unclear
or confusing. Material incorporated by reference shall be
clearly identified in the reference by page, paragraph, cap-
tion or otherwise. .An express statement that the specified
matter is incorporated by reference shall be made at the
particular place in the statement where the information is
required. .\ copy of any information or a copy of the per-
tinent pages of a document containing such information
which is incorporated by reference shall be submitted with
this statement as an exhibit and shall be deemed to be filed
with the Commission for all purposes of the Act.
IveM 1. SeEcuRITY AND SuspsecT COMPANY
State the title of the class of equity securities to which
this statement relates and the name and the address of
the principal executive offices of the subject company.
[rem 2. TENDER OFFER OF THE BIDDER
Identify the tender offer to which this statement relates,
the name of the bidder and the address of its principal
executive offices or, if the bidder is a natural person, the
bidder’s residence or business address (which may be
based on the bidder’s Schedule 14D-1 [§ 240.14d-100] filed
with the Commission).
Irem 3. Ipentiry anp BackcRrounp
(a) State the name and business address of the person
tiling this statement.
(b) if material, describe any contract, agreement, ar-
rangement or understanding and any actual or potential
conflict of interest between the person filing this state-
ment or its affiliates and: (1) the subject company, its
executive officers, directors or affiliates; or (2) the bidder,
its executive officers, directors or affiliates.
11A
Instruction: If the person filing this statement is the
subject company and if the materiality requirement of Item
3(b) is applicable to any contract, agreement, arrangement
or understanding between the subject company or any af-
filiate of the subject company and any executive officer or
director of the subject company, it shall not be necessary
to include a description thereof in this statement, or in any
solicitation or recommendation published, sent or given to
security holders if such information, or information which
does not differ materially from such information, has been
disclosed in any proxy statement, report or other com-
munication sent within one year of the filing date of this
statement by the subject company to the then holders of
the securities and has been filed with the Commission:
Provided That this statement and the solicitation or recom-
mendation published, sent or given to security holders shall
contain specific reference to such proxy statement, report
or other communication and that a copy of the pertinent
portion(s) thereof is filed as an exhibit to this statement.
Item 4. THe Souicrratrion on RECOMMENDATION
(a) State the nature of the solicitation or the recom-
mendation. If this statement relates to a recommendation,
state whether the person filing this statement is advising
security holders of the securities being sought by the bid-
der to accept or reject the tender offer or to take other
action with respect to the tender offer and, if so, furnish
a description of such other action being recommended. If
the person filing this statement is the subject company and
a recommendation is not being made, state whether the
subject company is either expressing no opinion and is
remaining neutral toward the tender offer or is unable to
take a position with respeet to the tender offer.
(b) State the reason(s) for the position (including the
inability to take a position) stated in (a) of this Item.
ZA
Instruction: Conelusory statements. such as ‘‘*The
tender offer is in the best interest of shareholders,’’ will
not be considered sufficient disclosure in response to
Item 4(b). :
Item 5. Persons Rerainep, EMPLOYED OR
To Bre ComMPENSATED
Identify any person or class of persons employed, re-
tained or to be compensated by the person filing this state-
ment or by any person on its behalf, to make solicitations
or recommendations to security holders and describe
briefly the terms of such employment, retainer or arrange-
ment for compensation.
Irem 6. Recent Transactions AND INTENT Witn RESPECT
To SEcuURITIES
(a) Describe any transaction in the securities referred
to in Item 1 which was effected during the past 60 days by
the person(s) named in response to Item 3(a) and by any
executive officer, director, affiliate or subsidiary of such
person(s).
(b) To the extent known by the person filing this state-
ment, state whether the persons referred to in Item 6(a)
presently intend to tender to the bidder, sell or hold securi-
ties of the class of securities being sought by the bidder
which are held of record or beneficially owned by such per-
sons.
Item 7. Certain NEGOTIATIONS AND TRANSACTIONS By THE
Sussgect Company
(a) If the person filing this statement is the subject
company, state whether or not any negotiation is being
undertaken or is underway by the subject company in re-
sponse to the tender offer which relates to or would result
in:
ISA
(1) An extraordinary transaction such as a lierger or
reorganization, involving the subject company or any sub-
sidiary of the subject company ;
(2) A purchase, sale or transfer of a material amount
of assets by the subject company or any subsidiary of the
subject company ;
(3) A tender offer for or other acquisition of securities
by or of the subject company; or
(4) Any material change in the present capitalization
or dividend policy of the subject company.
Instruction: If no agreement in principle has yet been
reached, the possible terms of any transaction or the parties
thereto need not be disclosed if in the opinion of the Board
of Directors of the subject company such disclosure would
jeopardize continuation of such negotiations. In such
event, disclosure that negotiations are being undertaken
or are underway and are in the preliminary stages will be
sufficient.
(b) Describe any transaction, board resolution, agree-
ment in principle, or a signed contract in response to the
tender offer, other than one described pursuant to Item
3(b) of this statement, which relates to or would result in
one or more of the matters referred to in Item 7(a)(1),
(2), (3) or (4).
Irem 8. ApprrionaL InFormMation To Br FuRNISHED
Furnish such additional information, if any, as may be
necessary to make the required statements, in light of the
circumstances under which they are made, not materially
misleading.
14A
Item 9. MarerraL To Be Fitep As Exuisits
Furnish a copy of:
(a) Any written solicitation or recommendation which
is published or sent or given to security holders in connec-
tion with the solicitation or recommendation referred to
in Item 4.
(b) If any oral solicitation or recommendation to secur-
ity holders is to be made by or on behalf of the person filing
this statement, any written instruction, or other niaterial
which is furnished to the persons making the actual oral
solicitation or recommendation for their use, directly or
indirectly, in connection with the solicitation or recommen-
dation.
(c) Any contract, agreement, arrangement or under-
standing described in Item 3(b) or the pertinent portion(s)
of any proxy statement, report or other communication
referred to in Item 3(b).
Signature, After reasonable inquiry and to the best of
my knowledge and belief, I certify that the information set
forth in this statement is true, complete and correct.
(Date) (Signature)
(Name and Title)
Instruction: The original statement shall be signed by
each person on whose behalf the statement is filed or his
authorized representative. If the statement is signed on
behalf of a person by his authorized representative (other
than an executive officer of a corporation or a general part-
ner of a partnership), evidence of the representative’s
authority to sign on behalf of such person shall be filed
with the statement. The name and any title of each person
who signs the statement shall be typed or printed beneath
the signature.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.