Ch 3 Deck 11

Question 1

SEC Rule 14d-10 allows tender offers to be made only when the offer is open to

Answer 1

all security holders of the same class of securities as the tender offer

Question 2

Rule 14d-10 part d provides a safe harbor from tender offers begin open to all security holders for

Answer 2

• certain payments to executives

- negotiation of employee agreements

Question 3

Rule 14d-10 part d provides a safe harbor from tender offers begin open to all security holders but these must be approved by

Answer 3

target’s compensation committee
OR
board performing similar duties

Question 4

Rule 14e-1 sets forth various practices that may be illegal if done during

Answer 4

a tender offer.

Question 5

Rule 14e-1 tender offers says they tender offers must be extended by means of

Answer 5

issuing a press release or other form of public communication.

Question 6

Rule 14e-1 tender offers states that a bidder must pay for the shares promptly once the offer is terminated or

Answer 6

return the shares to the shareholder

Question 7

Rule 14e-1 tender offers states that a bidder must hold an offer open for

Answer 7

at least 20 days

Question 8

Rule 14e-1 tender offers states that a bidder may extend the length of an offering after

Answer 8

issuing a press release containing certain disclosures about the offer.

Question 9

Rule 14e-1 tender offers states that the Target company needs to make a statement to shareholders within

Answer 9

10 days of the date when shareholders are notified of the tender offer.

Question 10

Under Rule 14e-2 tender offers the Target has three options for communication of recommendations to shareholders

Answer 10

1. a statement disclosing that they recommend accepting or rejecting the offer
2. it is expressing no opinion and is neutral toward the offer
3. it is unable to take a position with respect to the bidder’s tender offer

Question 11

Under Rule 14e-2 tender offers the target must also file their recommendation

Answer 11

through form 14D-9 with the SEC within ten days of the commencement of the tender offer.

Question 12

Rule 14e-3 tender offers forbids making a tender offer based on

Answer 12

insider information

Question 13

Rule 14e-4 tender offers requires that persons making partial tender offers have

Answer 13

net long position greater than the amount tendered in the subject security or an equivalent security.

Question 14

A person’s net long position is

Answer 14

their long position (investments) minus their short position (debts)

Question 15

An equivalent security is

Answer 15

something that can be converted into or exchanged for the subject security.

Question 16

Rule 14e-5 tender offers prohibits covered persons from buying securities that are the subject of a tender offer unless

Answer 16

they are doing so as part of the tender offer, or the transaction meets other specified conditions.

Question 17

restrictions in a bond issue which make the bonds safer for investors

Answer 17

Negative covenants

Question 18

Negative covenants usually restrict

Answer 18

• the amount of dividends paid out to shareholders of a corporation
• how much additional debt the corporation can issue

Question 19

conditions that one party to an agreement must meet to avoid default under the agreement

Answer 19

Covenants

Question 20

Financial covenants are typically included in

Answer 20

a loan agreement

Question 21

Financial covenants are typically included in a loan agreement to ensure the borrowing institution

Answer 21

meets various standards mandated by the lending institution.