Page 384 - מיזוגים ורכישת חברות - ברקלי תשפא

Sarbanes‐Oxley in the context of a part‐cash/part‐stock merger for the period during
which the plan administrator tabulates elections. Companies engaging in these
transactions should be aware of these tabulation periods and related blackout periods,
so they can alert the plan participants and directors and executive officers that they will
be prohibited from engaging in transactions prescribed by applicable rules during the
specified period.

Since some individual shareholders may have a strong interest in obtaining a tax‐
free exchange of their shares, in some cash‐election mergers special provisions have been
made to provide certain shareholders with a preferential right to receive all stock even if
there is not enough stock to go around to satisfy all‐stock elections (e.g., NationsBank’s
1993 acquisition of MNC). In the context of a significant minority shareholder who is being
asked to support a transaction through a shareholder agreement and who may be
required to agree to transfer restrictions on his, her or its shares prior to the closing of
the transaction (or if a key employee is being asked to agree to non‐compete and/or non‐
solicit restrictions or other special obligations following closing), preferential or
differential treatment can usually be justified especially where the shareholder’s support
for the transaction is important to its success. Further, use of a stock/cash value
equalization approach, as outlined above, may help to mitigate concerns regarding special
treatment as to the allocation of the various forms of consideration.

Other possible approaches include structuring the transaction so that there is a
modest economic incentive built into the pricing and election mechanics to encourage
shareholders who are less tax‐sensitive to accept cash in lieu of stock. More elaborate
mechanisms are at least theoretically possible (such as Dutch auction elections for the
scarce shares, or obtaining information regarding the tax status of shareholders for use
in setting priorities to receive consideration in the allocation process), but are likely
impractical.

3. Treatment of Employee Stock Options and Other Stock‐Based Awards

In the context of any complex pricing formula and mixed consideration
acquisition, it will be necessary to determine the treatment of employee stock options
and other stock‐based incentive awards settled in shares of common stock. For example,
the parties may provide that employee stock options will be:

 rolled over into options on acquiror shares at the applicable exchange ratio on the
stock component;

 fully cashed out; or

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