Securities Lawyer's Deskbook                          published by The University of Cincinnati College of Law

Rule 14e-5 -- Prohibiting Purchases Outside of a Tender Offer

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1. Unlawful activity. As a means reasonably designed to prevent fraudulent, deceptive or manipulative acts or practices in connection with a tender offer for equity securities, no covered person may directly or indirectly purchase or arrange to purchase any subject securities or any related securities except as part of the tender offer. This prohibition applies from the time of public announcement of the tender offer until the tender offer expires. This prohibition does not apply to any purchases or arrangements to purchase made during the time of any subsequent offering period as provided for in Rule 14d-11 if the consideration paid or to be paid for the purchases or arrangements to purchase is the same in form and amount as the consideration offered in the tender offer.
   
   
2. Excepted activity. The following transactions in subject securities or related securities are not prohibited by paragraph (a) of this section:
   
   
   1. Exercises of securities. Transactions by covered persons to convert, exchange, or exercise related securities into subject securities, if the covered person owned the related securities before public announcement;
      
      
   2. Purchases for plans. Purchases or arrangements to purchase by or for a plan that are made by an agent independent of the issuer;
      
      
   3. Purchases during odd-lot offers. Purchases or arrangements to purchase if the tender offer is excepted under Rule 13e-4(h)(5);
      
      
   4. Purchases as intermediary. Purchases by or through a dealer-manager or its affiliates that are made in the ordinary course of business and made either:
      
      
      1. On an agency basis not for a covered person; or
         
         
      2. As principal for its own account if the dealer-manager or its affiliate is not a market maker, and the purchase is made to offset a contemporaneous sale after having received an unsolicited order to buy from a customer who is not a covered person;
         
         
   5. Basket transactions. Purchases or arrangements to purchase a basket of securities containing a subject security or a related security if the following conditions are satisfied:
      
      
      1. The purchase or arrangement to purchase is made in the ordinary course of business and not to facilitate the tender offer;
         
         
      2. The basket contains 20 or more securities; and
         
         
      3. Covered securities and related securities do not comprise more than 5% of the value of the basket;
         
         
   6. Covering transactions. Purchases or arrangements to purchase that are made to satisfy an obligation to deliver a subject security or a related security arising from a short sale or from the exercise of an option by a non- covered person if:
      
      
      1. The short sale or option transaction was made in the ordinary course of business and not to facilitate the offer;
         
         
      2. In the case of a short sale, the short sale was entered into before public announcement of the tender offer; and
         
         
      3. In the case of an exercise of an option, the covered person wrote the option before public announcement of the tender offer;
         
         
   7. Purchases pursuant to contractual obligations. Purchases or arrangements to purchase pursuant to a contract if the following conditions are satisfied:
      
      
      1. The contract was entered into before public announcement of the tender offer;
         
         
      2. The contract is unconditional and binding on both parties; and
         
         
      3. The existence of the contract and all material terms including quantity, price and parties are disclosed in the offering materials;
         
         
   8. Purchases or arrangements to purchase by an affiliate of the dealer- manager. Purchases or arrangements to purchase by an affiliate of a dealer-manager if the following conditions are satisfied:
      
      
      1. The dealer-manager maintains and enforces written policies and procedures reasonably designed to prevent the flow of information to or from the affiliate that might result in a violation of the federal securities laws and regulations;
         
         
      2. The dealer-manager is registered as a broker or dealer under Section 15(a) of the Act;
         
         
      3. The affiliate has no officers (or persons performing similar functions) or employees (other than clerical, ministerial, or support personnel) in common with the dealer-manager that direct, effect, or recommend transactions in securities; and
         
         
      4. The purchases or arrangements to purchase are not made to facilitate the tender offer;
         
         
   9. Purchases by connected exempt market makers or connected exempt principal traders. Purchases or arrangements to purchase if the following conditions are satisfied:
      
      
      1. The issuer of the subject security is a foreign private issuer, as defined in Rule 3b-4(c);
         
         
      2. The tender offer is subject to the United Kingdom's City Code on Takeovers and Mergers;
         
         
      3. The purchase or arrangement to purchase is effected by a connected exempt market maker or a connected exempt principal trader, as those terms are used in the United Kingdom's City Code on Takeovers and Mergers;
         
         
      4. The connected exempt market maker or the connected exempt principal trader complies with the applicable provisions of the United Kingdom's City Code on Takeovers and Mergers; and
         
         
      5. The tender offer documents disclose the identity of the connected exempt market maker or the connected exempt principal trader and disclose, or describe how U.S. security holders can obtain, information regarding market making or principal purchases by such market maker or principal trader to the extent that this information is required to be made public in the United Kingdom; and
         
         
   10. Purchases during cross-border tender offers. Purchases or arrangements to purchase if the following conditions are satisfied:
       
       
       1. The tender offer is excepted under Rule 13e-4(h)(8) or Rule 14d-1(c);
          
          
       2. The offering documents furnished to U.S. holders prominently disclose the possibility of any purchases, or arrangements to purchase, or the intent to make such purchases;
          
          
       3. The offering documents disclose the manner in which any information about any such purchases or arrangements to purchase will be disclosed;
          
          
       4. The offeror discloses information in the United States about any such purchases or arrangements to purchase in a manner comparable to the disclosure made in the home jurisdiction, as defined in Rule 13e-4(i)(3) [Editor's note: There is no subparagraph (3) to paragraph (i) of Rule 13e-4.]; and
          
          
       5. The purchases comply with the applicable tender offer laws and regulations of the home jurisdiction.
          
          
3. Definitions. For purposes of this section, the term:
   
   
   1. Affiliate has the same meaning as in Rule 12b-2;
      
      
   2. Agent independent of the issuer has the same meaning as in Rule 100(b);
      
      
   3. Covered person means:
      
      
      1. The offeror and its affiliates;
         
         
      2. The offeror's dealer-manager and its affiliates;
         
         
      3. Any advisor to any of the persons specified in paragraph (c)(3)(i) and (ii) of this section, whose compensation is dependent on the completion of the offer; and
         
         
      4. Any person acting, directly or indirectly, in concert with any of the persons specified in this paragraph (c)(3) in connection with any purchase or arrangement to purchase any subject securities or any related securities;
         
         
   4. Plan has the same meaning as in Rule 100(b);
      
      
   5. Public announcement is any oral or written communication by the offeror or any person authorized to act on the offeror's behalf that is reasonably designed to, or has the effect of, informing the public or security holders in general about the tender offer;
      
      
   6. Related securities means securities that are immediately convertible into, exchangeable for, or exercisable for subject securities; and
      
      
   7. Subject securities has the same meaning as in Item 1000.
      
      
4. Exemptive authority. Upon written application or upon its own motion, the Commission may grant an exemption from the provisions of this section, either unconditionally or on specified terms or conditions, to any transaction or class of transactions or any security or class of security, or any person or class of persons.

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