Page 366 - מיזוגים ורכישות - פרופ' אהוד קמר תשפב

 rolled over and cashed out in the same proportion as the target company shares
are to be converted into stock and cash (e.g., 50 percent of options are cashed out
and 50 percent are rolled over).

Note that the issue discussed above with respect to the equalization formula for
the cash and stock consideration will also be relevant here: namely, should the options
be rolled over at the fixed exchange ratio for the stock component or should the exchange
ratio be readjusted to reflect the blended value of the per share consideration being paid
for the target shares at the time of the closing.

The governing plan documents should be carefully reviewed in order to determine
whether the desired adjustment is permissible. In addition, care should be taken to
ensure that equity compensation awards are adjusted in a manner permitted under the
deferred compensation legislation embodied in Section 409A of the Internal Revenue
Code.

4. One-Step Versus Two-Step Acquisition Structures

As if all of the above were not complex enough, the evolution of the law relating
to exchange offers has added the potential for yet another layer of complexity in the
"going private" context.

In the context of a parent company taking a public subsidiary private, there may
be an additional reason to consider a two-step structure over a one-step merger,
particularly for Delaware corporations. Developments in Delaware case law over the last
five to ten years (Siliconix, Aquila) illustrate a process to take a publicly-traded subsidiary
private through a tender or exchange offer followed by a so-called "short form merger,"
which generally permits a parent corporation to merge with a subsidiary in which it owns
at least 90 percent of each class of stock without the need for a shareholder vote or action
by the subsidiary board. In Delaware, it is now clearer that this can be done while avoiding
the incremental litigation risk associated with the heightened "entire fairness" standard
often applicable to going private transactions in Delaware, and that such an approach will
not require the use of procedural devices such as a special committee of independent
directors at the subsidiary level to negotiate with the parent. However, after Vice
Chancellor Strine’s In re Pure Resources decision in 2002, reinforced by the Chancery
Court decision in the 2003 Motorola/Next Level litigation, parties still need to carefully
consider the wisdom in each particular case of empowering a special committee to at
least make a recommendation on the offer, and, in particular, (1) the need for a non-
waivable "majority of the minority" condition to the tender offer (with the minority not
including target management, who might have different interests in the transaction), (2)
the need for a promise by the controlling shareholder to consummate a short form

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