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Initial Decision of an SEC Administrative Law JudgeIn the Matter of WHX CorporationINITIAL DECISION RELEASE NO. 173ADMINISTRATIVE PROCEEDING
UNITED STATES OF AMERICA
Appearances: Leo F. Orenstein and Josh Klein for the Division of Enforcement, Securities and Exchange Commission Richard M. Phillips, Charles R. Mills, and James E. Day of Kirkpatrick & Lockhart LLP for Respondent WHX Corporation Before: Carol Fox Foelak, Administrative Law Judge SUMMARY This Initial Decision dismisses charges against WHX Corporation. WHX was charged with violations under the Williams Act in connection with a failed 1997 takeover bid. Williams Act requirements are intended to provide enough time and information for shareholders to make informed decisions about takeover bids and to eliminate discriminatory treatment among those who desire to tender shares. WHX was charged with violating the "All Holders Rule" by improperly excluding some shareholders from its tender offer because, initially, it offered to purchase only shares accompanied by voting rights. WHX had informed the Commission of the voting rights condition and attempted to convince the Commission of its validity. The Commission was not convinced, and WHX removed the condition promptly, a few days after the offer commenced. The Decision concludes that WHX's conduct did not violate the rule and subject it to a sanction. WHX was also charged with making material changes to the offer on the last day without extending it for five business days as required. WHX allegedly changed the offer by waiving three conditions related to the target's anti-takeover defenses when it let the offer expire and bought tendered stock. The Decision concludes that the conditions had already been removed or were inapplicable when the offer expired, so there was no violation. The first, an impairing transaction condition, was removed after management of the target and a friendly bidder undertook such transactions. WHX removed that condition from its offering materials, increased the number of shares it offered to buy, raised the price, and extended the offer's duration. The other two conditions, a poison pill condition and a state anti-takeover provision, were not applicable when the offer closed, since WHX then owned 13% of the target's stock - under a 20% threshold. I. INTRODUCTION A. Procedural Background The Securities and Exchange Commission (Commission) initiated this proceeding by an Order Instituting Proceedings (OIP) on June 25, 1998, pursuant to Section 21C of the Securities Exchange Act of 1934 (Exchange Act). The undersigned held hearings in Washington, D.C. on March 15, 16, 17, 29 and April 9, 1999. The Division of Enforcement (Division) called three witnesses from whom testimony was taken, and Respondent called seven witnesses. Seventy-three exhibits were admitted into evidence - thirty-eight introduced by the Division, and thirty-five, by Respondent.1 The findings and conclusions in this Initial Decision are based on the record. Preponderance of the evidence was applied as the standard of proof. See Steadman v. SEC, 450 U.S. 91 (1981). Pursuant to the Administrative Procedure Act,2 the following posthearing pleadings were considered: Division's May 14, 1999, Proposed Findings of Fact and Conclusions of Law and Post-Hearing Brief; the Respondent's June 18 Proposed Findings of Fact and Conclusions of Law and its Post-Hearing Memorandum; and the Division's July 2 Post-Hearing Reply Brief. All arguments and proposed findings and conclusions that are inconsistent with this decision were considered and rejected. B. Allegations and Arguments of the Parties The issues in this proceeding concern the 1997 hostile tender offer made by Respondent WHX Corporation (WHX) for the stock of Dynamics Corporation of America (DCA). The OIP alleges that WHX violated Section 14(d)(4) of the Exchange Act and Rules 14d-4(c), 14d-6(d), and 14d-10(a)(1) thereunder.3 The OIP alleges that WHX's initial offer violated Rule 14d-10(a)(1) (All Holders Rule), in that it excluded some shareholders from participation. Further, the OIP alleges that WHX violated Rules 14d-4(c) and 14d-6(d) when the offer expired and WHX purchased tendered shares, because WHX allegedly materially altered the terms of the offer by waiving conditions related to DCA's anti-takeover defenses without extending the tender offer expiration date for a minimum of five business days to inform shareholders of the material change. The OIP alleges that WHX reaped ill-gotten gains of $1,382,319, reflecting the rise in the market price for DCA shares during the five business days after WHX closed the offer and purchased DCA shares. The Division seeks a cease and desist order and disgorgement of alleged ill-gotten gains of $1,382,319. Respondent contends that its initial offer did not violate the All Holders Rule, that it did not have fair notice that the All Holders Rule would prohibit the offer, and that it was reasonable in relying on the advice of counsel in going forward with the offer despite negative indications from Commission staff. Additionally, it removed the offending condition within a few days after the offer commenced once it learned that the Commission had authorized an enforcement action against it; thus no harm was done. Concerning the closing of the offer and alleged waiver of conditions, Respondent argues that the conditions either had been previously waived or were inapplicable at the time of closing. Further, it argues that, assuming WHX did commit violations, a cease and desist order is not warranted. Additionally it introduced evidence intended to show that the Division's calculation of the amount of alleged ill-gotten gains was speculative and unfounded in fact. II. FINDINGS OF FACT A. Participants in the Contest for Control of DCA 1. Respondent WHX Corporation WHX is a Delaware corporation with its principal place of business in New York City. Stip. ¶ 1. At all times relevant, WHX was a holding company owning subsidiaries engaged in manufacturing and distributing steel products; operating a casino and race track; and investing in securities. WHX's common stock was registered with the Commission pursuant to Section 12(b) of the Exchange Act and traded on the New York Stock Exchange (NYSE). Stip. ¶¶ 1, 2. As of year-end 1996, WHX had about $1.7 billion in assets and $1.2 billion in sales. Stip. ¶ 1. WHX had never been the subject of a Commission investigation or charge that it violated the securities laws prior to the investigation that led to this proceeding. 3/15 Tr. 110. SB Acquisition Corporation (SB), a New York corporation and a wholly owned subsidiary of WHX, was organized to acquire shares of DCA. Stip. ¶ 4. For purposes of this Initial Decision the reference "WHX" will include SB. a. Ronald LaBow Ronald LaBow has been chairman of the board of directors of WHX since 1991; he is responsible for corporate oversight and investments. 3/15 Tr. 109-10. LaBow's work has been in the investment business and bankruptcy restructuring; his education includes law and business degrees. 3/15 Tr. 106-08. Since 1990, LaBow has also been a general partner of Stonehill Investments, a firm that invests in distressed companies, and that developed as a result of his previous employment with the investment firm Neuberger & Berman. 3/15 Tr. 107-09. b. Outside Counsel Olshan Grundman Frome & Rosenweig (Olshan Grundman) had been outside counsel to WHX for seven or eight years prior to WHX's tender offer for DCA. 3/15 Tr. 114. The firm's professional relationship with LaBow dated back to 1986, when it was engaged by Neuberger & Berman. 3/15 Tr. 107. LaBow consulted principally with partner Ilan Reich on the takeover strategy. 3/15 Tr. 114. Another partner, Thomas Fleming, was kept informed during the planning stage and was the lead litigator in cases brought against and by WHX in the corporate control contest. 3/16 Tr. 4-7; Resp. Ex. 74. Reich is a convicted felon, having been convicted of securities fraud as part of the insider trading schemes of Dennis Levine, and was disbarred as a consequence. 3/16 Tr. 31-35, 54-59. He was readmitted to the New York State Bar in 1995 and hired by Olshan Grundman in 1996. 3/16 Tr. 32-35, 56, 59. See also Ilan Reich, 636 N.Y.S.2d 674 (App. Div. 1995). Neither party called Reich as a witness to testify at the hearing. Fleming has had many years of experience with contests for corporate control. 3/16 Tr. 4. He also represented Reich and LaBow when Commission staff took investigative testimony from them. 3/16 Tr. 37-38. c. Georgeson & Company WHX retained Georgeson & Company (Georgeson), a firm specializing in proxy solicitation, to act as "information agent" with respect to the hostile tender offer for DCA. 3/16 Tr. 64. Alan M. Miller was the senior account executive in the engagement; he was managing director and a member of the Georgeson board of directors when the WHX offer commenced in March 1997. 3/16 Tr. 64-65. As information agent, Georgeson's duties included distributing documents related to the offer to individual shareholders, directly, and to banks and brokers, to forward to beneficial owners of the securities. 3/16 Tr. 65. Furthermore, Georgeson was available to answer questions regarding the mechanics, terms and timing of the tender offer, and to provide assistance in filling out documents, such as the letter of transmittal. 3/16 Tr. 65. 2. DCA DCA, a New York corporation headquartered in Greenwich, Connecticut, was a diversified manufacturer of commercial and industrial products. DCA's common stock was registered with the Commission pursuant to Section 12(b) of the Exchange Act, and traded on the NYSE. Stip. ¶ 3. During the relevant period, DCA's stock was among the most thinly traded on the NYSE, averaging less than 10,000 shares a day during the year prior to June 13, 1997. 3/16 Tr. 70; Resp. Ex. 99 at 5, App. C. DCA's stock was held mostly in large blocks. 3/16 Tr. 70. For example, shares owned by funds managed at Dimensional Fund Advisors totaled about 9.26% of DCA's stock and were tendered into the WHX offer at issue in this proceeding. 3/15 Tr. 52, 57. DCA was acquired as of October 16, 1997, by CTS Corporation. Stip. ¶ 3. 3. CTS Corporation CTS Corporation (CTS) is a diversified manufacturer of electromechanical and electronic components for the automotive, computer equipment, communications equipment, instruments and controls, defense and aerospace, and consumer electronics markets. CTS operates manufacturing plants in the United States and abroad. Div. Ex. 32. B. WHX's Initial Offer to Purchase - March 31, 1997 LaBow concluded that DCA was an attractive investment in the first quarter of 1997, after meeting with Warren Lichtenstein, a large DCA shareholder. 3/15 Tr. 112. DCA, which owned 44% of CTS, had generated substantial profits in 1996. LaBow calculated that the $25 - $30 market price of DCA stock represented only the value of CTS, with no value being given for the DCA portion of the business. 3/15 Tr. 112-13. He advised the WHX executive committee that DCA stock was seriously undervalued, and WHX then purchased 109,600 shares, so that it owned about 2.9% of DCA. 3/15 Tr. 112-13; Div. Ex. 1 at 16, 32. At LaBow's behest, Reich devised a takeover strategy. 3/15 Tr. 114, 117-18. Shortly thereafter, on March 26, 1997, the WHX board of directors met to consider a takeover of DCA. LaBow reviewed the business profile of DCA, and Reich presented the terms of the proposed transaction. The board authorized the takeover, and in the event that the friendly offer was rejected, the board authorized a hostile tender offer for DCA. 3/15 Tr. 114; Resp. Ex. 21 at 00639-40. Reich devised the takeover strategy and prepared the tender offer documents. 3/15 Tr. 117-18, 3/16 Tr. 38-39. LaBow had principal responsibility at WHX for overseeing the effort. 3/15 Tr. 142. On March 27, LaBow wrote to Andrew Lozyniak, president and chairman of the board of DCA, proposing a friendly negotiated offer; WHX proposed to acquire all of the outstanding shares of DCA common stock at $40 per share. Resp. Ex. 23. LaBow further informed Lozyniak that WHX was authorized to pursue a proxy solicitation directly to the DCA stockholders at the upcoming annual meeting if DCA did not respond by the close of business on March 28. Div. Ex. 1 at 00683-84; Resp. Ex. 23. On March 28 Lozyniak acknowledged receipt of Labow's letter, but deferred response. Resp. Ex. 24. 1. Two-Step Hostile Takeover On March 31, 1997, WHX commenced its hostile tender offer. Div. Ex. 1. The takeover strategy involved a two-step process. The first step was a cash tender offer at $40 per share for a percentage of DCA (about 649,000 shares) that, together with the shares already owned by WHX, did not exceed 19.9 % of the outstanding shares. Div. Ex. 1 at 00665, 00667. Next, WHX intended to solicit proxies from DCA shareholders and elect a slate of four candidates backed by WHX to the DCA board of directors at the next annual shareholders' meeting, scheduled for May 2, 1997. Stip. ¶ 5; Div. Ex. 1 at 00684-85. At the time the offer commenced, the DCA board consisted of seven directors, four of whose terms would expire on May 2, 1997. Stip. ¶ 5. If WHX gained majority control of the DCA board, the new directors would vote to amend DCA's by-laws to facilitate a merger with WHX, whereby WHX would purchase for cash all remaining outstanding DCA shares for the same price per share that WHX paid on the front-end of the hostile tender offer. 3/15 Tr. 117; Stip. ¶ 5; Div. Ex. 1 at 00684-85. 2. Impediments to the Takeover The offer addressed some potential impediments to WHX's ability to effectuate the merger. 3/15 Tr. 114-18; Stip. ¶¶ 7-16. The impediments included: DCA's poison pill anti-takeover defense; New York Business Corporation Law (NYBCL) §912(b); the record date for the DCA board meeting; the waiting period under the Hart-Scott-Rodino Act (HSR); and impairing transactions. The provisions that dealt with these impediments -- the Specified Percentage term, Record Holder, HSR, and Impairing Transaction conditions -- were highlighted on the cover page of the offer.4 Div. Ex. 1 at 00665. The cover page of a tender offer document customarily states the conditions that are critical to the offer's consummation. Resp. Ex. 98 at ¶¶ 24-25. a. Poison Pill Throughout the period of WHX's tender offer, DCA had in effect a poison pill anti-takeover defense (poison pill), which it called a shareholder "Rights Agreement." The poison pill would be triggered if anyone acquired 20% or more of DCA's outstanding stock or made a tender offer for at least 25% of DCA stock without the approval of the DCA board. Stip. ¶ 8; Div. Ex. 4. A poison pill permits a takeover target to issue a new class of stock upon the occurrence of a triggering event, such as the acquisition or threat of acquisition of the target company's stock. Once a pill is triggered, existing shareholders who have received stock under a poison pill rights agreement obtain the right to redeem such stock at a premium. The result is a dilution of the value of the company, which tends to deter the takeover bid. DCA's poison pill was a so-called "flip-over" pill, which permitted stockholders to buy the acquirer's shares at a bargain price in the event of an unwelcome merger. 3/29 Tr. 25-26; Div. Ex. 4. See also Barron's Dictionary of Finance and Investment Terms 422 (4th ed. 1995). A poison pill like DCA's has the unintended consequence of being poisonous to the target as well as to the bidder. 3/29 Tr. 25-26. To avoid triggering DCA's poison pill, WHX offered to purchase only up to the percentage of DCA shares that would keep WHX's ownership of DCA below the 20% threshold level for triggering the pill (Specified Percentage term). Stip. ¶¶ 10-12; Div. Ex. 1 at 00665. DCA maintained its poison pill with respect to WHX throughout the tender offer, but rescinded it with respect to a friendly bid from CTS. 3/15 Tr. 135; Stip. ¶ 26; Div. Ex. 12 at 00924. b. New York Business Corporation Law §912(b) NYBCL § 912(b) provides that no New York corporation shall engage in any business combination with any shareholder that is a beneficial owner of 20% or more of the outstanding stock for a period of five years after the shareholder first acquired ownership of 20% of the outstanding stock, without the approval of the New York corporation's board of directors. Stip. ¶ 9; Div. Ex. 5. The Specified Percentage term, intended to keep WHX's ownership under 20%, avoided the potential effect of NYBCL § 912(b) and of the poison pill. The DCA board never approved a merger with WHX. WHX's plan was to attain control of the board through a proxy contest, then vote to approve the merger, and eliminate NYBCL § 912(b) and the poison pill impediments to a merger with WHX. 3/15 Tr. 136; Div. Exs. 1, 12 at 00924. c. Record Date for the DCA Meeting WHX had to elect its slate of candidates at DCA's annual meeting to succeed in the takeover. Thus, WHX needed the largest possible number of DCA shares that it could vote. 3/15 Tr. 117. When the offer commenced on March 31, however, the March 14 record date for the May 2 meeting had passed. If a shareholder purchased shares that settled after the record date, the vote would remain with the selling shareholder, not the purchaser.5 3/15 Tr. 120. As an economic matter, shares with voting rights were worth more than those without. 3/17 Tr. 22. Reich suggested a means to limit the offer to shares that could be voted. Accordingly, WHX placed a "Record Holder" condition in the offer, requiring shares to be tendered by a shareholder of record as of March 14 ("Record Holder") or by a shareholder who had obtained a proxy to vote the shares from the shareholder of record. 3/15 Tr. 120-21; Div. Ex. 1 at 00666. The offer disclosed that Commission staff had informally advised WHX that the Record Holder condition violated the All Holders Rule and explained the reasons why WHX disagreed with that position. Div. Ex. 1 at 00670. On March 24, Reich asked Commission staff for an exemption or no-action ruling from the All Holders Rule and from Rule 14e-1(b). Div. Ex. 19. Reich withdrew the no-action request the same day after the Commission's Office of Mergers and Acquisitions informed him that they did not issue no-action letters on the All Holders Rule. Div. Ex. 20. Reich counseled WHX that it could proceed with the offer; he would attempt to persuade the staff or the Commission that the Record Holder condition was consistent with the All Holders Rule. 3/15 Tr. 124. Reich believed that the Record Holder condition and the Specified Percentage term did not violate the rules; he was confident he could convince either the staff or the Commission that his interpretation was correct. 3/15 Tr. 123-25. Reich believed that the Commission had never previously challenged an alleged violation of the All Holders Rule.6 3/15 Tr. 123. In fact, WHX's was the only instance of a Record Holder condition in a takeover of an exchange listed company since the All Holders Rule was adopted. 3/17 Tr. 7, 27. LaBow had never heard of the All Holders Rule prior to being briefed by Reich. 3/15 Tr. 125. He relied on Reich's advice and decided to keep the Record Holder condition in the offer. 3/15 Tr. 122-25. In relying on counsel's advice, he believed that this was a gray area, and that retaining the condition was legal unless and until the Commission or a court ruled otherwise. 3/15 Tr. 124. d. Waiting Period Under the Hart-Scott-Rodino Act7 WHX conditioned the offer upon the expiration or termination of any applicable waiting period under the HSR (HSR condition). Div. Ex. 1 at 00665, 00692-93. The waiting period expired at 11:59 p.m. April 15, 1997. Div. Ex. 1 at 00693. The statement in Resp. Ex. 50 at 00217 that the waiting period expired April 16 is not inconsistent with this in view of the one minute before midnight expiration. e. Impairing Transactions WHX conditioned the offer on DCA's not having entered into any agreements having the effect of impairing WHX's ability to acquire DCA or otherwise diminishing the expected economic value to WHX of the acquisition of DCA (Impairing Transaction condition). Div. Ex. 1 at 00665, 00689-90. C. First Supplement - April 10, 1997 On Friday, April 4, 1997, Commission staff informed Reich that it would recommend that the Commission bring an enforcement action to enjoin the WHX tender offer unless WHX withdrew the Record Holder condition and the Specified Percentage term from the offer to Purchase. Stip. ¶ 17. On April 4 and 7, Reich wrote to the Commission addressing the matters raised by its staff. 3/15 Tr. 126; Stip. ¶ 17; Div. Exs. 23, 24. On April 8, the staff informed Reich that the Commission had authorized it to commence an action to enjoin WHX's tender offer. 3/15 Tr. 126, 3/16 Tr. 6; Stip. ¶ 18. At that time no tender offer materials had been mailed out, and no DCA shares had been tendered into the offer. 3/15 Tr. 126; Div. Ex. 6 at 00701. Reich advised the staff that WHX would withdraw the objectionable material, and on April 10, 1997, WHX amended the offer by a Supplement to the Offer to Purchase (Supplement or First Supplement). 3/16 Tr. 5-6; Stip. ¶ 20; Div. Ex. 6. He transmitted drafts of the Supplement and accompanying press release to Commission staff for its review, and incorporated the staff's comments in the final version. Resp. Exs. 6, 31, 35, 37. The Supplement explicitly changed the offer from one for a "Specified Percentage" of shares to an offer for "Up to 649,000 Shares" and deleted "[a]ll references in the Offer to Purchase to the Record Holder Condition." Div. Ex. 6 at 00701-02. The Supplement also increased the price WHX was offering, to $45 per share. Div. Ex. 6 at 00700. The Supplement's Introduction stated, "[e]xcept as otherwise set forth in this Supplement, the terms and conditions previously set forth in the Offer to Purchase remain applicable in all respects to the Offer, and this Supplement should be read in conjunction with the Offer to Purchase" (reservation clause). Div. Ex. 6 at 00701. A similar clause appeared at the end of the Supplement. Div. Ex. 6 at 00711. Material at the top of the cover page, highlighted in boldface all capitals, substituted the increased price for the original price, and "Up to 649,000 Shares" for "Specified Percentage." The HSR and Impairing Transaction conditions, in all capitals, were retained, and the Record Holder condition was dropped. Div. Ex. 6 at 00700. D. Second Supplement -- April 15, 1997 On April 14, 1997, the DCA board voted to (i) recommend that shareholders reject WHX's tender offer, (ii) explore alternative transactions, (iii) increase the number of board members from seven to nine and change the period of the directors' terms, (iv) provide provisional severance contracts, known as golden parachutes, to certain DCA officers; and (v) delay the Annual Meeting from May 2 to August 1, 1997. Stip. ¶ 20; Div. Ex. 8. DCA issued a press release reporting these measures. Div. Ex. 8 at 00717. Also on April 14, DCA filed a lawsuit against WHX in U.S. District Court, District of Connecticut. Div. Ex. 8 at 00718. DCA alleged, among other things, that the offer to Purchase and WHX's preliminary proxy materials contained materially false and misleading statements and omissions, and the suit sought corrective disclosures from WHX. Div. Ex. 8 at 00718. On April 15, 1997, in a Second Supplement to the Offer to Purchase (Second Supplement), WHX reported the defensive steps adopted the previous day by the DCA board, as well as the allegations contained in DCA's complaint. Div. Ex. 8. Like the First Supplement, the Second Supplement contained a reservation clause: Except as otherwise set forth in this Second Supplement, the terms and conditions previously set forth in the Offer to Purchase and the First Supplement remain applicable in all respects to the Offer, and this Second Supplement should be read in conjunction with the Offer to Purchase and the First Supplement. Div. Ex. 8 at 00714. The same reservation clause was reiterated at the end of the Second Supplement. Div. Ex. 8 at 00720. The material highlighted in all capitals on the cover page only contained the expiration date and the no minimum share statement. The Impairing Transaction and HSR conditions did not appear. Div. Ex. 8 at 00713. The HSR condition expired at 11:59 p.m. April 15, and thus was still in effect when the Second Supplement was issued. Div. Ex. 1 at 00693; Resp. Ex. 50 at 00217. E. Third Supplement - April 30, 1997 On April 29, 1997, the day WHX's tender offer was set to expire, U.S. District Judge Gerald L. Goettel preliminarily enjoined WHX from completing its tender offer for twenty days on the ground that the tender offer did not make sufficiently clear the impact of the NYBCL and the poison pill on the proposed merger of DCA with WHX. Div. Ex. 9 at 00727-31. WHX disclosed the court's ruling in an April 29 press release. Div. Ex. 9 at 00725. WHX issued the Third Supplement, dated April 30, 1997, to the Offer to Purchase (Third Supplement), the next day. Div. Ex. 9. At that time about 1.53 million shares (40% of the total shares outstanding) had been tendered into the offer. Div. Ex. 9 at 00725. In compliance with Judge Goettel's ruling, the Third Supplement increased disclosure concerning the poison pill and NYBCL § 912(b), which were also highlighted on the cover page. Div. Ex. 9 at 00722-27. The Third Supplement and a contemporaneous press release set forth certain new terms and conditions to the offer. Div. Ex. 9 at 00725. 1. "Any and All" and Extended Expiration Date of Offer The Third Supplement amended the offer, which previously was for "up to 649,000 shares," to an offer to buy "any and all shares" of DCA tendered, and also extended the expiration date to May 20, 1997. Div. Ex. 9 at 00722. WHX changed to "any and all" to enhance its credibility in the marketplace. 3/15 Tr. 147. "Any and all" was highlighted in boldface all capitals at the top of the cover page. Div. Ex. 9 at 00722. 2. Conditions and Corrective Disclosures In addition to making corrective disclosures, the Third Supplement set forth two new conditions, the Poison Pill condition and the NYBCL condition, which were also highlighted on the cover page. Div. Ex. 9 at 00722-27. Pursuant to these two conditions, the offer was conditioned on the WHX board being satisfied in its reasonable judgment that DCA's poison pill had been invalidated or was otherwise inapplicable and that the NYBCL was inapplicable. Changing the offer from "up to 649,000 shares" to "any and all" shares put WHX in greater jeopardy of running afoul of DCA's poison pill and NYBCL § 912(b). 3/15 Tr. 133; 3/16 Tr. 17; Div. Ex. 9. After the Third Supplement, WHX was committed to purchase all shares of DCA common stock tendered to it. Div. Ex. 9. The Impairing Transaction and HSR conditions did not appear in the Third Supplement. Like the previous supplements, the Third Supplement contained a reservation clause, which was reiterated at the end. Div. Ex. 9 at 00723, 00732. On May 9, 1997, the DCA board amended its poison pill. Instead of being triggered automatically by an offer for 25% or more of DCA's stock, the pill would be triggered as of a date to be determined by the board. Div. Exs. 10, 12 at 00923. Without the amendment, the poison pill would have been triggered automatically on May 10, as a result of WHX's April 30 amended offer to purchase any and all shares of DCA.8 Div. Ex. 10. F. Competing Bidding 1. DCA Agrees to a Friendly Merger with CTS -- May 11, 1997 On May 11, 1997, DCA announced that it had entered into a definitive merger agreement with CTS. Under that agreement, CTS commenced a cash tender offer for up to 49.9% of DCA's shares at a price of $55 per share, and agreed to convert each share that was not purchased in the offer in a second-step merger for .88 of a share of CTS's common stock. CTS's offer had a minimum share condition, which required at least 25% of DCA's common stock to be tendered to CTS. Stip. ¶ 25. The next day, May 12, DCA further amended its poison pill to make it inapplicable to the merger with CTS. Stip. ¶ 26. NYBCL § 912(b) was not an impediment to the CTS merger because the DCA board had approved the merger. On May 12, a day of heavy trading, DCA's stock price surged to $53 5/8 -- $9 1/2 above the closing price the day before. Div. Ex. 17; Resp. Exs. 100, 101. The $53 5/8 price was just below CTS's offer of $55 a share and substantially above WHX's offer of $45. 2. WHX Extends Offer Expiration Date to May 27, 1997 Pursuant to the Third Supplement, WHX's tender offer was set to expire May 20, 1997. On that day, WHX issued a press release extending the offer and withdrawal rights to midnight May 27, 1997. Resp. Ex. 70. As of May 20, approximately 850,000 shares had been tendered into WHX's offer and not withdrawn. Resp. Ex. 70. 3. Fourth Supplement - May 27, 1997 On May 27, 1997, WHX published its Fourth Supplement to the Offer (Fourth Supplement), which increased the offer price to $56, from $45, and extended the expiration date to June 13, coinciding with the expiration of CTS's tender offer, to enable WHX to compete with CTS on equal terms. 3/15 Tr. 129-30; Stip. ¶ 27; Div. Ex. 11. The Fourth Supplement disclosed that as of the previous business day, May 23, 420,000 shares remained tendered to WHX (430,000 fewer than on May 20). Div. Ex. 11 at 00735; Resp. Ex. 70. The cover page of the Fourth Supplement repeated the same conditions that appeared in the Third Supplement -- the poison pill and NYBCL conditions. Div. Ex. 9 at 00722, Div. Ex. 11 at 00734. The Fourth Supplement included WHX's May 27 press release, which stated that WHX's offer was superior to CTS's and "[t]he only impediment to the completion of our revised tender offer are the conditions that the anti-takeover devices deployed by the [DCA board] be rescinded, including the poison pill plan." Div. Ex. 11 at 00736. Like the previous supplements, the Fourth Supplement contained a reservation clause that was reiterated at the end. 4. WHX's Counterclaim in U.S. District Court - May 29, 1997 On May 29, 1997, WHX filed a counterclaim in the action initiated by DCA and pending in the U.S. District Court in Connecticut. WHX's motion sought a preliminary injunction to (i) bar DCA from relying upon its "poison pill" rights plan to impede WHX's tender offer; and (ii) direct DCA to take appropriate steps to eliminate the impediments to WHX's offer under NYBCL § 912(b). 3/16 Tr. 9, 11-13; Stip. ¶ 29; Resp. Ex. 74. The court denied the motion on June 13. Stip. ¶ 31 5. CTS Raises Price; Buys DCA Shares - June 2 & 13, 1997 On June 2, 1997, CTS raised its offer price to $56.25 per share. Div. Ex. 12 at 00924. On June 13 the CTS offer expired. After purchasing tendered shares, CTS owned 30.3% of DCA. Div. Ex. 15. G. WHX Buys Tendered Shares - June 13, 1997 WHX's tender offer also expired on June 13, 1997. At the close of its offer, 409,576 shares were tendered to WHX. Those shares, which represented 10.6% of DCA's common stock, combined with the 2.9% WHX already owned, put WHX's ownership of DCA at 13.5% when the tender offer closed. Stip. ¶ 32. Thus, the total remained below 20%, the threshold for acquisitions that triggered DCA's poison pill and NYBCL § 912(b).9 3/29 Tr. 27-28. When the offer expired, LaBow wished to purchase the shares that were deposited and believed that WHX had an obligation to do so. In his view the Impairing Transaction condition was no longer even an issue, and the Poison Pill and NYBCL conditions were inapplicable so that he could not have used any of these conditions as an excuse not to buy the shares. 3/15 Tr. 131-35, 3/16 Tr. 14-16. Further, Fleming advised LaBow that WHX was obliged to purchase the shares. 3/16 Tr. 14-16. WHX advised the depository for shares tendered into its offer that it would accept and pay for the shares remaining as of midnight June 13.10 WHX's June 13 letter notified the depository, Harris Trust Company, "that [WHX] accepts for payment . . . all [validly tendered] shares" and stated that it "hereby waives all of the conditions set forth in the Tender Offer, including, without limitation, [the Poison Pill and NYBCL conditions]."11 3/16 Tr. 108-118; Div. Exs. 13, 14. WHX considered the June 13 letter a housekeeping letter to get the shares released. WHX believed that the Poison Pill and NYBCL conditions did not apply since its ownership remained well under 20% after purchasing the tendered shares. It believed that the Impairing Transaction condition had been removed earlier. 3/15 Tr. 131-35, 3/16 Tr. 14-16, 109, 112-18. No shareholder ever complained about WHX's purchase of the tendered shares, and some shareholders thanked LaBow for doubling the share price. 3/15 Tr. 140. H. Dimensional Fund Advisors Dimensional Fund Advisors (DFA), a Santa Monica, California, investment house that focuses on small capitalization stocks, is a passive investor. 3/15 Tr. 47-49. Carl Snyder, a DFA portfolio manager, testified about DFA's actions concerning the WHX and CTS offers. 3/15 Tr. 47-97. Funds that he managed at DFA owned roughly 350,000 shares of DCA in 1997, and DFA tendered the shares into WHX's offer. 3/15 Tr. 52. DFA's shares comprised 86% of the 406,579 tendered shares that WHX acquired when its tender expired. Div. Ex. 14. As a passive investor, DFA does not do fundamental research on companies; instead, it monitors a stock's trading in the period just prior to the expiration of a tender offer and waits until the last minute to determine the best course of action. 3/15 Tr. 52-53, 77-79. DFA initially tendered its DCA shares into the WHX offer. It remained with the WHX offer after evaluating the CTS bid. 3/15 Tr. 53-57, 70-82. While the $56 WHX offer was for all cash, the CTS $56.25 offer was for a combination of stock and cash, and the CTS stock was not compatible with DFA's portfolio. Furthermore, transaction costs to liquidate the CTS stock would have exceeded the additional $.25 per share being offered by CTS. 3/15 Tr. 57. The presence or absence of the Impairing Transaction, Poison Pill, and NYBCL conditions in WHX's offer never entered into DFA's decision-making. DFA had concluded that, one way or the other, DCA would shortly cease to exist, and that it would tender into one of the offers. The only factors DFA considered were price and the comparison between an all-cash and a cash and stock deal. 3/15 Tr. 47-97 passim, 53-57, 71, 78-81. If WHX had extended its tender offer for five business days beyond June 13, DFA would not have withdrawn its tender and attempted to sell its shares in the market. 3/15 Tr. 57-58, 71-81, 96-97. Snyder noted that DCA was trading at $56.50 on June 13, when DFA tendered into the $56 WHX offer. 3/15 Tr. 58. Snyder could not have gotten a better deal than the $56 offer by selling the 350,000 shares into the market either on June 13 or a few days later when it was selling at $59. DCA was thinly traded, about 10,000 or 20,000 shares a day, and DFA would have received a discount bid for such a large sell order. 3/15 Tr. 58-59, 3/16 Tr. 70. At most DFA would have awaited further price competition between the bidders had WHX extended its offer. 3/15 Tr. 59-60. DFA had no complaint about WHX's closing its offer and acquiring DFA's tendered shares. 3/15 Tr. 62. I. Proxies Shares do not trade with proxies after a record date on the NYSE. 3/16 Tr. 78-79. They do, however, trade with proxies on the third market. 3/15 Tr. 40, 3/16 Tr. 81-82, 100. As a practical matter, the record holder date was a potential problem only for those stockholders, if any, who bought DCA stock between the March 14 record date and the March 31 announcement of WHX's offer. 3/15 Tr. 25-26. Those who bought after the announcement could instruct their brokers to obtain shares with proxies attached. 3/15 Tr. 25-26, 3/16 Tr. 81-82, 100. More than 90% of DCA's outstanding shares were registered in the name of CEDE & Company (CEDE) as record holder. 3/16 Tr. 71. CEDE is the nominee of the Depository Trust Company (DTC) and has no other business.12 4/9 Tr. 6-7. 1. DTC and CEDE DTC is the central securities depository, owned by broker-dealers and the NYSE, where stock and bond certificates are exchanged. It is a member of the Federal Reserve System. Essentially, DTC is a clearing corporation, the purpose of which is to facilitate the validation, delivery and settlement of securities transactions.13 Most of these exchanges now take place electronically by making book entry deliveries, and few paper certificates actually change hands. 4/9 Tr. 6. DTC is a product of the "back office" problem in the 1960s. At that time, excessive paper and physical delivery of securities certificates was slowing down trading. 4/9 Tr. 6. DTC accepts securities for deposit from its "participants," which include all the significant banks and broker-dealers. Delivery of those securities between participants is made by computerized book entries, rather than physical delivery of certificates, which remain in DTC's vault. 3/16 Tr. 71, 4/9 Tr. 5. DTC also provides to its participants related services, including collecting and passing on dividend and interest payments or making available rights that DTC has as the holder of record, such as voting rights. 4/9 Tr. 5-6. DTC does not know the identity of the beneficial owners -- the customers of the participants -- of the securities on deposit with it; rather, all DTC knows are the identities of its participants to whose accounts the securities are credited. 4/9 Tr. 7. DTC, a corporation, established CEDE, a partnership, as nominee because procedures for registration and delivery of securities are more cumbersome for corporations than for partnerships. 4/9 Tr. 6-7. When a transaction occurs between participants, CEDE makes a book entry record of the transaction and reduces the positions of the selling broker or bank and increases the position of the purchasing broker or bank. 3/16 Tr. 71-72. Carl Urist provided evidence concerning DTC and CEDE. 4/9 Tr. 4-37, 46-61. He is vice president and deputy general counsel of DTC and has been an attorney with DTC since 1975. 4/9 Tr. 4-5. 2. DTC's Omnibus Proxy When an issuer sets a record date for an annual meeting of stockholders, DTC passes on the voting rights that CEDE has as holder of record of the securities by filing an omnibus proxy with the issuer. The omnibus proxy assigns the voting rights to the participants who have that security on deposit on the record date. The omnibus proxy includes a list of the participants and the quantity of securities each has on deposit on the record date. DTC notifies each participant about the omnibus proxy and the quantity of shares credited to the participant so that the participant and DTC can reconcile their records. After DTC files the omnibus proxy, the issuer and the participants communicate directly. The issuer can send proxy materials to the participants and the participants can pass on the voting rights to their customers. 4/9 Tr. 7-8. If a mistake is found, DTC corrects it with a revised omnibus proxy. 4/9 Tr. 12-14. Much evidence was introduced on the question of whether DTC could file a revised omnibus proxy to accommodate stockholders who bought after the record date and wanted proxies to vote at the meeting. 3/15 Tr. 31-39, 44-46, 3/16 Tr. 69-79, 93-98, 100-01, 4/9 Tr. 5-37, 42-63; Div. Ex. 36; Resp. Exs. 82, 82-A, 112, 119-22. Whether or not DTC could or should file a revised omnibus proxy to accommodate post record date investors, it is clear that DTC would not do so. The evidence to support this finding was provided through Urist, on behalf of the Division. 4/9 Tr. 4-37, 46-61. Evidence intended to support a finding that DTC could file a revised omnibus proxy to accommodate post record date investors was introduced through Miller, on behalf of WHX. 3/16 Tr. 61-62, 69-79, 93-98, 100-01, 4/9 Tr. 42-45. To the extent that the testimony of Urist conflicts with that of Miller, Urist's is accepted. While Miller may be knowledgeable concerning proxy solicitations, Urist's knowledge of DTC's actual practices is considered more reliable because of his position with DTC. Additional evidence was introduced concerning the mechanics of tracing individual post record date selling beneficial owners or stockholders who held stock in their own names for the purpose of obtaining proxies. The evidence was introduced through Howard Spindel, a management consultant in the financial services industry, on behalf of the Division, and Miller, on behalf of WHX. 3/15 Tr. 20-31, 43-44, 3/16 Tr. 69-81. Spindel opined that it was impractical to trace such sellers because of continuous net settlement and the fungible nature of securities. Spindel's evidence was essentially uncontroverted except for testimony from Miller that the task would be made easier because DCA's stock was thinly traded in large blocks. 3/16 Tr. 70-71. There was no indication that such tracing was a usual occurrence or that sellers, if located, would give up their proxies with or without consideration. 3/16 Tr. 83-90. It is found that tracing post record date sellers would not have been a practical method of obtaining proxies. J. Subsequent Events On June 13, when WHX's and CTS's offers expired, DCA closed at $56 1/2. Div. Ex. 17; Resp. Ex. 100. On Monday, June 16, WHX issued a press release reiterating its belief that the DCA board had not been seeking the highest possible price for its assets. WHX described options that it was considering, including a new tender offer and buying more DCA stock. Div. Ex. 15. During that week the price of DCA stock rose; its highest point was $59 3/8 during Friday June 20. Div. Ex. 17 at 5; Resp. Ex. 99 at 3-4, 6. Subsequently, in an agreement announced July 18, following negotiations among WHX, CTS, and DCA, WHX agreed to support the CTS-DCA merger and exchange all of its shares for CTS shares. WHX declined a greenmail premium, and the remaining DCA stockholders were given a choice between all cash and cash plus stock in CTS. 3/15 Tr. 137-40; Div. Ex. 16. WHX still has about half the CTS stock it received, and LaBow is on excellent terms with the chairman and CEO of CTS. 3/15 Tr. 139-40. K. Effect of Extending WHX's Offer on DCA Stock Price Charles Lundelius, Jr., C.P.A., senior manager of the securities litigation group, in the dispute consulting practice in the Washington, D.C. offices of the accounting firm, Deloitte & Touche, testified as an expert witness on behalf of Respondent. 3/29 Tr. 93; Resp. Ex. 99 at 1-2. He was accepted as an expert in damages, securities valuations, and the price behavior of securities sold into thinly traded markets. 3/29 Tr. 93-113. His testimony addressed the factual and theoretical premises on which the Division alleged potential disgorgement liability, that is, the price behavior of DCA stock during the five business days after the WHX offer expired. 3/29 Tr. 93-169; Resp. Exs. 99-101. The OIP alleged, at ¶ II.F.2., that the price went as high as $59 3/8 during that time and that an economically rational shareholder who had tendered into WHX's offer would have withdrawn the shares. Lundelius opined that, had WHX extended its offer for five business days, the price of DCA would not have gone much higher than $56; further, assuming it had reached $59 3/8 on the last day of such an extension period, as it actually did on June 20, the economically rational shareholder would not have withdrawn tendered shares and could not have sold them into the market so as to realize a profit based on the $59 3/8 price. 3/29 Tr. 114-169; Resp. Exs. 99-101. Lundelius's opinion is accepted to find that, had WHX extended its offer until June 20, the DCA price would have remained close to $56. His opinion is also accepted to find that, assuming that WHX had extended and that the price did reach $59 3/8 on June 20, had shareholders withdrawn their tenders and attempted to liquidate their shares in the open market, the sell orders would have depressed the price to $56 or below. Lundelius's sophisticated calculations concerning his opinions accord with common knowledge that competition between two bidders tends to increase the price of a stock and that attempting to sell a large quantity of shares of thinly traded stock tends to depress its price.14 At the time WHX commenced its offer at $40, the price of DCA stock increased from about $33 to about $39. 3/29 Tr. 114-20; Div. Ex. 17 at 3; Resp. Exs. 100-01. The price behavior of DCA stock thereafter during the period of WHX's offer reflected the presence of either one or two bidders and the presence or absence of an expectation that a bidder's price might increase. When there was one bidder, the shares traded at or just below that bidder's price. When another bidder moved in with a markedly higher price, the shares traded just under that higher price. Then, with the expectation of further competing bids, the market price exceeded the higher outstanding bid and remained that way until it appeared the bidding was over, and then it moved back toward the higher bid. 3/29 Tr. 114-20. Following June 13, the two- bidder situation was continuing because of WHX's press release, and the share price went higher. Lundelius's study eliminated other explanations for the price change, taking into account historical data and outside factors that had affected DCA's price in the past.15 3/29 Tr. 120, 123-25; Resp. Ex. 99 at 6-7, Apps. D, E. Absent the press release, the two-bidder situation would not have been present, and the stock would have continued trading around $56. 3/29 Tr. 124-29; Resp. Ex. 99 at 6-8, Apps. D, E. Lundelius opined that an economically rational shareholder would not have withdrawn his shares from the tender to WHX. 3/29 Tr. 129; Resp. Ex. 99. Assuming, however, that the price did reach $59 3/8 on June 20, and the shareholder considered withdrawing, he had three options: remain in the tender, withdraw and attempt to sell in the market, and withdraw and stay on the sidelines. 3/29 Tr. 129-33. Staying on the sidelines is ruled out because the shareholder had already chosen to liquidate for cash rather than to obtain cash and stock by tendering into CTS's offer. Selling in the market would depress the price of such a thinly traded stock; an additional sale of 16,000 shares on June 20 would have depressed the price to about $56. 3/29 Tr. 133. Lundelius also opined based on a number of additional assumptions, for example, that CTS extended its offer, that all shares were withdrawn from the tender to WHX and not sold into the market, and that WHX attempted to buy the shares on the market, thus exerting upward pressure on the price. These hypothetical questions, however, ventured farther and farther from the facts that actually occurred, namely that WHX and CTS closed their offers and that the price rose and reached $59 3/8 at one point during the fifth business day thereafter, and on which the Division's calculation of ill-gotten gains and disgorgement is based. L. Expert Witnesses Paul G. Mahoney and Ronald J. Gilson testified as expert witnesses on behalf of Respondent. 3/17 Tr. 4-40; Resp. Ex. 97 (Mahoney); 3/29 Tr. 4-90; Resp. Ex. 98 (Gilson). Each opined mostly on ultimate facts and legal issues. Their evidence was accepted for the reasons set forth at 3/15 Tr. 5-6. To the extent that the evidence does not lead to findings of fact, it will be summarized here and relied upon as appropriate in the Conclusions of Law section of this Decision. 1. Paul G. Mahoney - Record Holder Condition Mahoney, professor of law at the University of Virginia, is accepted as an expert on hostile tender offers. His courses in securities regulation, corporate governance, and corporate finance deal with hostile tender offers, and he recently studied every acquisition of a NYSE or American Stock Exchange listed company during the years 1975 through 1991, amounting to 1,350 acquisitions, including hostile tender offers. Prior to his academic career he practiced with a leading Wall Street law firm, advising clients on corporate and securities law, including tender offers. 3/17 Tr. 4-7. WHX's Record Holder condition has been the only such condition since the date of the All Holders Rule. 3/17 Tr. 27-28, 34. Bidders usually deal with the problem posed by a target's poison pill by conditioning the offer on the board's withdrawing the poison pill rights or a court's invalidating them. 3/17 Tr. 27-28. DCA's shareholder meeting was of more than usual importance to WHX's effort to overcome DCA's anti-takeover defenses. This was because its board members had staggered two-year terms. 3/17 Tr. 27-28, 39. Mahoney's opinion is that WHX's Record Holder condition was not inconsistent with the All Holders Rule, contrasting it with the 1985 tender offer by Mesa Petroleum Co. for Unocal Corp. in which Unocal management defended itself against the hostile bid by a self tender that explicitly excluded stock owned by Mesa.16 In the WHX situation no shareholder was excluded as long as he could provide voting rights. He also opined that such an interpretation would serve the Williams Act's purpose of maintaining neutrality between bidder and management of the target and would benefit shareholders because a bidder would tend to pay more for shares with voting rights than without. 3/17 Tr. 11-23, 36; Resp. Ex. 97 at 2-4. For these reasons, Mahoney opined, Reich's advice to WHX was reasonable. In Mahoney's opinion, it was reasonable for WHX to rely on the advice of counsel and include the Record Holder condition when it commenced the offer and expect to resolve the issue before the offer expired. 3/17 Tr. 24-26; Resp. Ex. 97 at 4-5. The staff's contrary view could not be overlooked but was not dispositive. Otherwise, WHX would have been in a "Catch-22" situation where it would have had to choose not to take action that might well be legal, or face the possibility of an enforcement action if its good faith conclusion that the action was legal was wrong. Additionally it was reasonable for WHX to believe that if its condition violated the All Holders Rule, it could bring its offer into compliance by removing it sufficiently in advance of the expiration of the offer and notifying all shareholders. 2. Ronald J. Gilson - Impairing Transaction, Poison Pill, and NYBCL Conditions Gilson, professor of law and business at Columbia and Stanford Universities, is accepted as an expert on tender offers. He has written widely on the law and economics of corporate acquisitions, including the economics of typical transaction patterns. He was a reporter on the American Law Institute's corporate governance project, with responsibility for dealing with acquisitions like the one at issue. He also acts as a consultant to corporations in connection with transactions. He teaches courses in the law and finance of corporate acquisitions. His consulting and coursework deal with the practical aspects of acquisitions, but do not include drafting boilerplate. 3/29 Tr. 4-8, 40-50; Resp. Ex. 98 at 1-3. Gilson's testimony addressed WHX's alleged violation of Rules 14d-(4)(c) and 14d-(6)(d) by allegedly waiving the Impairing Transaction, Poison Pill, and NYBCL conditions when it purchased the tendered shares without extending the offer for five business days. It is established practice for the cover page of tender offer documents to state the conditions that are critical to the offer's consummation. Gilson opined that this serves the Williams Act's purpose to provide shareholders sufficient information to make informed decisions in response to takeover bids. Resp. Ex. 98 at ¶¶ 24-25. He further urged that an ambiguity in a tender offer document is properly construed against the offeror to prevent the use of ambiguities to avoid the obligation to purchase tendered shares. Gilson opined that the Impairing Transaction condition was removed in the Third Supplement by substitution, in that the highlighted Impairing Transaction and HSR conditions that had appeared in the First Supplement had been removed and replaced by the highlighted Poison Pill and NYBCL conditions. Further, WHX's behavior in bidding for "any and all" shares and raising its price in the Third and Fourth Supplements in the face of DCA's April 14 defensive actions and its May 11 merger agreement with CTS showed that it had waived the condition. Gilson recognized the ambiguity between this analysis and the reservation clause, but opined that a contrary conclusion would permit a bidder who appeared to have waived the condition to resurrect it at the last minute and avoid its obligation to purchase tendered shares. He opined that permitting a bidder to act on such a secret intent was inconsistent with the purposes of the Williams Act. For that reason he opined that an ambiguity should be construed against the bidder. The Second Supplement did not contain the Impairing Transaction and HSR conditions but was largely informational concerning DCA's defensive tactics. No new conditions were added. Gilson opined that the Poison Pill and NYBCL conditions were inapplicable at the time WHX purchased the tendered shares. Since WHX owned less than 20% of DCA after the purchase the NYBCL condition could not apply. The Poison Pill condition did not apply either. The DCA board had not voted to implement it against WHX's "any and all" offer, and following WHX's acquisition of less than 20% there was no longer an offer. Concerning the letter to the depository stating that WHX "waives" all conditions of the offer, he opined that the letter was merely a housekeeping document intended to get the shares released for purchase expeditiously. As an economic matter he concluded there was no economic significance to "waiving" the Poison Pill and NYBCL conditions since neither condition, as of June 13, would have allowed WHX not to continue. III. CONCLUSIONS OF LAW In this section it is concluded that WHX did not violate Exchange Act Section 14(d)(4) or Rules 14d-4(c), 14d-6(d), or 14d-10(a)(1). WHX's conduct of the tender offer did not violate Rule 14d-10(a)(1), the All Holders Rule. Additionally, WHX did not make material changes to the offer requiring it to be extended beyond its June 13 expiration when WHX purchased tendered shares. Thus WHX did not violate Rules 14d-4(c) and 14d-6(d). Thus, there was no violation of Exchange Act Section 14(d)(4). A. The Williams Act WHX was charged with violations under the Williams Act, as Sections 13(d) - (e) and 14(d) - (f) of the Exchange Act are known. The purpose of the Williams Act is to provide shareholders sufficient time and information about those planning takeover bids so as to make informed investment decisions and to eliminate discriminatory treatment among security holders who desire to tender their shares. The Williams Act is for the protection of investors and not intended to favor either the takeover bidder or existing management of the target. See Amendments to Tender Offer Rules: All-Holders and Best-Price, Final Rules, 51 Fed. Reg. 25873, 25874, 25876 (July 17, 1986), 36 SEC Docket 131, 132, 134 (All-Holders Rule). "The purpose of the Williams Act is to insure that public shareholders who are confronted by a cash tender offer for their stock will not be required to respond without adequate information regarding the qualifications and intentions of the offering party." Rondeau v. Mosinee Paper Co., 422 U.S. 49, 58-59 (1975) (citing S. Rep. No. 550, 90th Cong., 1st Sess. 2-4 (1967)). Sections 13(d) and 14(d), and the Commission's Rules thereunder, include disclosure requirements for those planning takeover bids. The Section 13(d) disclosure requirement is aimed at creeping acquisitions and open market or privately negotiated large block purchases. The Section 14(d) disclosure requirement is aimed at tender offers. Section 14(d)(4) provides, "[a]ny . . . 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 public interest or for the protection of investors." Thus, whether Section 14(d)(4) was violated depends on whether any of the alleged rule violations is proven. B. Rule 14d-10(a)(1) - the All Holders Rule The All Holders Rule, Rule 14d-10(a)(1), 17 C.F.R. § 240.14d-10(a)(1), provides, "[n]o bidder shall make a tender offer unless . . . [t]he tender offer is open to all security holders of the class of securities subject to the tender offer." The Commission adopted the rule in 1986, to preclude tender offer bidders from discriminating among holders of the securities that are the subject of the offer. The Commission explained why the rule was needed to achieve the investor protection purposes of the Williams Act. It stated that discriminatory tender offers could result in abuses since security holders who are excluded from an offer may be pressured to sell to those in the included class to participate at all in the premium offered. Those excluded would not receive information, would have their shares taken up on a first-come first-served basis, and would have no withdrawal rights. See All-Holders Rule, 51 Fed. Reg. at 25874, 36 SEC Docket at 132. The instant case is the first in which the Division has alleged that a bidder violated the rule. 1. Scienter WHX argues that scienter is an element of violation of Rule 14d-10, stating that Exchange Act Section 14(e), an antifraud provision, is the statutory authority for the adoption of the rule. The Division argues that Section 14(d), a disclosure provision, is the statutory authority. It is concluded that scienter is not an element of violation of the All Holders Rule since the Commission did not intend the rule to be an antifraud provision.17 Although the Commission cited both Sections 14(d) and (e) as authority for adopting the All Holders Rule, it explained that the rule is a disclosure provision and stated that it had ample authority to adopt the rule under Section 14(d). It stated that Section 14(e) provided additional authority but was not essential to the adoption of the rule. See All-Holders Rule, 51 Fed. Reg. at 25875-76, 36 SEC Docket at 133-34. An additional indication that Section 14(d), not 14(e), is the statutory authority is the numbering of the rule: 14d-10 (emphasis added). Also, as the Division suggests, scienter is conceptually inconsistent with a violation consisting of discrimination that can occur only if disclosed. Cf. Schreiber v. Burlington Northern, Inc., 472 U.S. 1, 5-8 (1985) (misrepresentation or nondisclosure a necessary element of violation of Exchange Act Sections 10(b) and 14(e)). In this instance WHX's counsel actually consulted Commission staff on the legality of the Record Holder condition before the offer even commenced. 2. Footnote 35 The record contains much speculation about the meaning of "footnote 35." Footnote 35 is appended to the Commission's statement that the All Holders Rule requires that "tender offers be open to all holders of the class of securities sought. The all holders requirement does not prohibit tender offers for fewer than all outstanding securities of a class, but provides that all security holders must be able to accept the tender offer if they so choose." All-Holders Rule, 51 Fed. Reg. at 25876 & n.35, 36 SEC Docket at 134 & n.35. Footnote 35 states, "`security holder' means both record holders and beneficial owners of the class of securities subject to the offer. Accordingly, a tender offer directed only to holders of record would not comply with the all holders requirement."18 All-Holders Rule, 51 Fed. Reg. at 25876 n.35, 36 SEC Docket at 134 n.35. The Division contends that "holders of record" means holders as of a record date, and, thus, that footnote 35 gave WHX fair notice that its Record Holder condition violated the All Holders Rule. It notes that WHX's offer defined "Record Holder" as "shareholders of record as of the close of business on March 14." WHX contends, however, that "holders of record" in footnote 35 means registered owners that may be nominees or street names, and, thus, that the footnote is irrelevant to its Record Holder condition. Footnotes are not the best source of authoritative rulings on a dispositive question. See McElroy Elecs. Corp. v. FCC, 990 F.2d 1351 (D.C. Cir. 1993); RCA Global Communications, Inc. v. FCC, 758 F.2d 722, 729-31 (D.C. Cir. 1985). Further, footnote 35 does not provide clear guidance; either interpretation is possible. Nonetheless, WHX's interpretation is more reasonable, considering the grammar and context of the "holders of record" phrase; it is also consistent with the definition of "holder of record" in Barron's Dictionary of Finance and Investment Terms 242 (4th ed. 1995). Thus, it is concluded that footnote 35 does not give notice that WHX's condition violated the All Holders Rule. 3. WHX's Conduct of the Offer Did Not Violate the All Holders Rule WHX's original offer appeared on its face to be open to all holders, as long as they could provide a proxy to vote at DCA's meeting. In fact, anyone who bought shares between March 14, DCA's record date, and March 31, when the offer commenced, faced a significant, if not insurmountable, barrier to obtaining such voting rights. Thus, as a practical matter, it was questionable whether the offer was open to such shareholders.19 WHX informed the Commission of the Record Holder condition and argued that it was consistent with the All Holders Rule. When WHX learned a few days after the offer commenced that it had failed to convince the Commission, it immediately removed the condition and made a curative disclosure. Under these circumstances it must be concluded that WHX's conduct of the offer did not violate the All Holders Rule. WHX attempted to convince the Commission of its viewpoint, the Commission was not convinced, and WHX immediately changed its offer and cleared the new language and press release with Commission staff. No harm was done by the few days the offer was arguably out of compliance. Indeed, to impose a sanction would be counterproductive. WHX was threatened with enforcement action if it did not remove the condition. It removed the condition, took every possible step to ensure that its amended offer complied with the All Holders Rule, and was subjected to enforcement action anyway. To impose a sanction after WHX changed its offer to conform to the Commission's instructions is a disincentive for similarly situated parties to comply with the Commission's views in the future. It was not unreasonable for WHX to follow advice of counsel.20 Reich suggested the Record Holder condition as a solution to the record date problem associated with WHX's takeover strategy. LaBow relied on Reich's advice that he could go forward with the condition, despite negative indications from Commission staff, while Reich attempted to convince the Commission that the condition complied with the All Holders Rule.21 Following Reich's advice concerning the questionable condition did no harm to the objectives of the Williams Act or the All Holders Rule since the condition was removed at an early stage of the offer. C. Rules 14d-4(c) and 14d-6(d) Rules 14d-4 and 14d-6 are, consistent with the purposes of the Williams Act, intended to ensure that security holders confronted with a tender offer are timely provided with adequate information about the offer in order to make an informed investment decision. At the time at issue, Rule 14d-4(c) provided, in pertinent part, "[i]f a tender offer has been published or sent or given to security holders . . . a material change in [that] information . . . shall be promptly disseminated to security holders in a manner reasonably designed to inform security holders of such change." An offer was required to remain open for a minimum of five business days from the date that a material change was first published, sent or given to security holders. See Interpretive Release Relating to Tender Offers Rules, 52 Fed. Reg. 11458, 11459 (Apr. 9, 1987), 38 SEC Docket 32, 33 (Interpretive Release). Rule 14d-6(d) provided, "[a] material change in the information published or sent or given to security holders shall be promptly disclosed to security holders in additional tender offer materials."22 The Division alleges that WHX waived the Impairing Transaction, Poison Pill, and NYBCL conditions on June 13 when it purchased the shares, and these were material changes that obligated WHX to extend the offer for five business days. Thus, the Division argues, WHX violated Rules 14d-4(c) and 14d-6(d). WHX counters that the conditions had been removed previously or were inapplicable when the offer expired so that it was entitled to purchase the tendered shares without extending the offer. The record contains much evidence and argument based on closely parsing the language of the supplements. For example, WHX argues that the Impairing Transaction and HSR conditions, which were highlighted on the cover page of the First Supplement, were eliminated by being replaced with the Poison Pill and NYBCL conditions, which were highlighted on the cover page of the Third Supplement. WHX acknowledges that the Impairing Transaction and HSR conditions were absent from the cover page of the Second Supplement, but discounts this fact by urging that the Second Supplement was merely informational, advising shareholders of DCA's defensive measures. The Division points to the reservation clause, which appeared twice in all supplements, and to the fact that the First Supplement removed the Record Holder condition explicitly, a method that differs from the alleged removal or inapplicability of the Impairing Transaction, Poison Pill, and NYBCL conditions, which must be inferred from the context. WHX argues that, if these conditions were still applicable on June 13 because of the reservation clause, WHX could have used "fine print" as an excuse not to buy the shares, if it chose, when its behavior in the face of DCA's defensive actions clearly indicated that it intended to go through with the offer anyway. There is a conflict between the reservation clause and WHX's behavior during and at the end of the offer. The reasoning of Judge Friendly in Electronic Specialty Co. v. International Controls Corp., 409 F.2d 937 (2d Cir. 1969), is helpful in evaluating the conflict and determining whether there were any last-minute material changes in the terms of the tender offer: Probably there will no more be a perfect tender offer than a perfect trial. Congress intended to assure basic honesty and fair dealing, not to impose an unrealistic requirement of laboratory conditions that might make the new statute a potent tool for incumbent management to protect its own interests against the desires and welfare of the stockholders. These considerations bear on the kind of judgment to be applied in testing conduct - of both sides - and also on the issue of materiality. As to this we reaffirm the test . . . whether `any of the stockholders who tendered their shares would probably not have tendered their shares' if the alleged violations had not occurred. 409 F.2d at 948 (citations omitted). See also SEC v. Steadman, 967 F.2d 636, 643 (D.C. Cir. 1992) (citing Basic Inc. v. Levinson, 485 U.S. 224, 231-32, 240 (1988)); TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976) (the standard of materiality is whether or not a reasonable investor would have considered the information important in deciding whether or not to invest). 1. The Conditions were Inapplicable or Long Since Removed as of June 13. First, it is concluded that the June 13 letter to Harris Trust Company, in which WHX stated it "waives" conditions, was a housekeeping document intended to get the shares released in the most expeditious manner possible. The answer to the question of whether WHX made material changes to the offer must be found elsewhere. Second, it must be kept in mind that WHX placed the Impairing Transaction, Poison Pill, and NYBCL conditions in the offer to protect itself from an obligation to purchase tendered shares that the tendering shareholders wanted to sell. Removing the conditions benefited these shareholders.23 Yet, if the conditions remained unless explicitly removed, WHX could have relied on, for example, the Impairing Transaction condition via the reservation clause, and refused to purchase tendered shares despite its actions over the previous two months. Since April 14, when DCA first announced defensive moves, WHX had increased its offer to "any and all," raised the price, and extended the expiration date. It had competed vigorously with the rival CTS offer. Tendering shareholders would have been surprised if, at the last minute, WHX refused to purchase their shares and relied on fine print to avoid the obligation to make good on its offer. Third, the fact that WHX removed the Record Holder condition explicitly is not inconsistent with a conclusion that other conditions disappeared or were removed by inference. Since WHX was threatened with enforcement action if it did not remove the Record Holder condition, it had reason to make its removal of the condition clear. Additionally, it conferred with Commission staff concerning the language of the supplement and press release that dealt with this. a. The Impairing Transaction Condition The Impairing Transaction condition had been removed long before June 13. DCA's April 14 defensive moves and its May 11 deal with CTS were impairing transactions. In response, WHX increased its offer to "any and all," raised the price, extended the expiration date, and competed vigorously with the CTS offer. Also, the Impairing Transaction condition did not appear in the April 15 Second Supplement and later supplements. This shows that WHX had removed the Impairing Transaction condition. Because of WHX's behavior, it would be irrational to rely on the reservation clause to conclude that the Impairing Transaction condition was applicable at the time the offer expired. b. The NYBCL and Poison Pill Conditions The NYBCL condition was not applicable at the time the offer expired. After purchasing the tendered shares, WHX owned 13% of DCA, well below the 20% threshold of NYBCL § 912(b). A "waiver" of the NYBCL condition would have been meaningless. On June 13 DCA's poison pill was still theoretically a threat to WHX's offer for "any and all" shares, since the DCA board, at any time prior to the close of the offer, could have determined a date on which the poisonous distribution of rights would occur. WHX had referred to the poison pill as an impediment in the May 27 Fourth Supplement, in which it urged the DCA board to rescind its anti-takeover defenses to let the DCA shareholders decide for themselves between the WHX and CTS offers. On May 29 it had sought an injunction to bar DCA from relying on the pill to impede WHX's offer. The pill would have been an impediment had WHX been able to attract more shares into its offer, but the number of shares tendered into its offer decreased between May 27 and June 13. When the offer closed on June 13, DCA had not implemented the pill's distribution of rights, and, upon purchase of the shares, WHX owned well under 20% and did not have an offer for any shares so the pill was by its own terms inapplicable at that time. 2. Alternatively, any Changes on June 13 were not Material. In the alternative, assuming, arguendo, that WHX waived the three conditions when it purchased the shares, the changes were not material. DFA, which tendered 86% of the shares tendered, would not have withdrawn had WHX extended the offer for five days. DFA, which is in the investment business, did not consider the presence or absence of the conditions important information in making its decision to tender. In fact, it did not consider the conditions at all in its decision-making. It was not probable that the remaining, unidentified, tendering shareholders would have withdrawn had the offer been extended. It would not have been rational to withdraw. Under the circumstances, like DFA, a reasonable shareholder would have considered the changes mere technicalities, not important information to consider in deciding whether to withdraw. Indeed, a reasonable shareholder would have considered the offer to be materially changed if WHX had decided to assert any of the three conditions as an excuse not to buy tendered shares. Thus, it must be concluded as a matter of law that the changes were not material. IV. ULTIMATE CONCLUSIONS No violation alleged in the OIP was proved. Accordingly, the proceeding will be dismissed. V. RECORD CERTIFICATION Pursuant to Rule 351(b) of the Commission's Rules of Practice, 17 C.F.R. § 201.351(b), it is certified that the record includes the items set forth as of the record index issued by the Secretary of the Commission on May 5, 2000. VI. ORDER IT IS ORDERED that this administrative proceeding IS DISMISSED. This order shall become effective in accordance with and subject to the provisions of Rule 360 of the Commission's Rules of Practice, 17 C.F.R. § 201.360. Pursuant to that rule, a petition for review of this initial decision may be filed within twenty-one days after service of the decision. It shall become the final decision of the Commission as to each party who has not filed a petition for review pursuant to Rule 360(d)(1) within twenty-one days after service of the initial decision upon him, unless the Commission, pursuant to Rule 360(b)(1), determines on its own initiative to review this initial decision as to any party. If a party timely files a petition for review, or the Commission acts to review as to a party, the initial decision shall not become final as to that party. ________________________
Footnotes
1 Citations to the hearing transcript are cited by hearing date and page number, for example, "3/15 Tr. 1." Citations to exhibits offered in the hearing by the Division and Respondent are noted as "Div. Ex. __," and "Resp. Ex. __," respectively. Citations to the parties' Stipulation of Facts are, "Stip. ¶ __." 2 See 5 U.S.C. § 557(c). 3 15 U.S.C. § 78n(d); 17 C.F.R. §§ 240.14d-4(c), -6(d), -10(a)(1) (1998). As a result of a subsequent amendment, Rules 14d-4(c) and -6(d) are now Rules 14d-4(d)(1) and -6(c), respectively, 17 C.F.R. §§ 240.14d-4(d)(1), -6(c). See Regulation of Takeovers and Security Holder Communications, Final Rules, 64 Fed. Reg. 61408, 61423, 61462-63 (Nov. 10, 1999), 70 SEC Docket 2924, 2937, 2976-77. 4 The cover page of the offer and of all supplements also highlighted the expiration date and a statement that the offer is not subject to any minimum number of shares being tendered. 5 The "record date" refers to the date on which a shareholder must own shares to be entitled to vote at the annual meeting. 6 The Record Holder condition was based on a tender offer document from a March 14, 1986, tender offer by DCA for CTS. 3/15 Tr. 123, 3/16 Tr. 68; Div. Ex. 22. That 1986 tender offer antedated the All Holders Rule. 7 The rules applicable to pre-merger activities, pursuant to the HSR, are found at 16 C.F.R. §§ 801-03. 8 Prior to the May 9, 1997 amendment, the applicable "Distribution Date" under the Rights Agreement was the "tenth day after the first public announcement of the . . . intent . . . to commence, a tender offer . . . for 25% or more of the outstanding shares of [DCA]." Div. Ex. 4 at 01694. 9 On June 4, the DCA board had voted not to redeem or amend the poison pill with regard to WHX's offer; it also determined not to approve WHX's offer for purposes of NYBCL § 912(b). Div. Ex. 12 at 00924. 10 The depository was responsible for receiving shares tendered, monitoring the amount of shares that were received, and reporting those amounts to WHX. As an escrow agent, when the tender offer expired, the depository was to turn over the tendered DCA shares to WHX, if appropriate. 3/16 Tr. 110; Div. Ex. 13. 11 The letter was signed by Stewart E. Tabin, WHX's assistant treasurer. 3/16 Tr. 107-08; Div. Ex. 13. Tabin, a lawyer and long time associate of LaBow, helped conduct the tender offer; his responsibilities included corresponding with attorneys and other agents representing WHX. 3/16 Tr. 107-09. 12 A nominee is a firm into whose name securities are transferred by agreement. Securities held in "street name," for example, are registered in the name of a broker (nominee) to facilitate transactions, although the customer remains the true owner. See Barron's Dictionary of Finance and Investment Terms 371 (4th ed. 1995). 13 See id. at 89, 135. 14 As discussed below in the Conclusions of Law section, the Division argues that WHX violated Exchange Act Rules 14d-4(c) and -6(d) when it purchased the tendered shares on June 13 instead of extending the offer for five business days. The Division argues that WHX was unjustly enriched as a result and requests disgorgement of $1,382,319, based on the difference between the $56 price WHX paid for the shares and the $59 3/8 price that DCA reached during June 20. Disgorgement is an equitable remedy that requires a violator to give up wrongfully obtained profits causally related to the proven wrongdoing. The Division has the burden of proving that its disgorgement figure reasonably approximates the amount of unjust enrichment. See SEC v. First City Fin. Corp., 890 F.2d 1215, 1230-32 (D.C. Cir. 1989); see also Hateley v. SEC, 8 F.3d 653, 655-56 (9th Cir. 1993). In light of the findings herein, there was no unjust enrichment and therefore, there can be no disgorgement if violations are proven. 15 Lundelius constructed two models to predict DCA share prices that might have occurred during a putative extension period. The models analyzed the change in price of DCA stock on a weekly basis, using data from January 2, 1990, through June 13, 1997. The Price-Change model measured and estimated the change in DCA's stock price from week to week keyed to two variables - the CTS stock price and the Russell 2000 small capitalization stock index (a proxy for the market reflecting earnings expectations for smaller companies traded on the NYSE) - that significantly affected change in DCA's stock price. Volume spikes were also factored into this analysis. 3/29 Tr. 120; Resp. Ex. 99 at 6-8, App. D. The second model, the Risk-Adjusted model, looked not just at the price change from week to week, but also accounted for changes in volatility of the stock, which is a measure of risk. 3/29 Tr. 120; Resp. Ex. 99 at 6-8, App. E. The Risk-Adjusted model incorporated some information from prior periods as well as the small cap index. 3/29 Tr. 120-21. 16 Unocal v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985) (upholding target management's issuer tender offer that excluded hostile bidder/shareholder from participation). The Commission adopted the All Holders Rule after Unocal and eliminated such exclusionary tender offers as a defensive strategy for publicly held companies. 17 The offhand statement in a footnote in Matsushita Electrical Industrial Co. v. Epstein, 516 U.S. 367, 370 n.1 (1996), is not dispositive.
18 For purposes of section 14(d) of the Exchange Act as well as Regulation 14D (which includes Rules 14d-1 through 14d-10), the term "security holder" is defined in Rule 14d-1(e)(3), to mean, "holders of record and beneficial owners of securities which are the subject of a tender offer." Rule 14d-1(e)(4) states that, "[t]he term `beneficial owner' shall have the same meaning as that set forth in Rule 13d-3." Rule 13d-3(a) defines a "beneficial owner" to include: [A]ny person who directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares . . . [v]oting power which includes the power to vote, or to direct the voting of, such security; and/or, . . . [i]nvestment power which includes the power to dispose, or to direct the disposition of such security (emphasis in original). 19 The effect of WHX's Record Holder condition is different from that of discriminatory offers described by the Commission as giving rise to the need for the All Holders Rule, as discussed supra. The Commission stated that shareholders excluded from an offer might be pressured to sell to included shareholders in order to participate in the premium offered and thus forgo such protections as receiving information and withdrawal rights. In contrast, there could be no pressure on DCA shareholders who could not supply voting rights to sell to those who had purchased their shares before the record date. No matter who owned them, shares without voting rights were excluded from WHX's offer. 20 Compare the reliance on advice of counsel defense to a violation in which willfulness is an element. See United States v. Powell, 513 F.2d 1249, 1251 (8th Cir. 1975) (reliance on advice of counsel defense is appropriate where willful action is an element of the violation and legal problems are present). The elements of a defense of reliance on advice of counsel require a showing of (1) a request for advice of counsel on the legality of a proposed action; (2) full disclosure of the relevant facts to counsel; (3) receipt of advice from counsel that the action to be taken will be legal; and (4) reliance in good faith on counsel's advice. See C.E. Carlson v. SEC, 859 F.2d 1429, 1436 (10th Cir. 1988) (citations omitted); SEC v. Savoy Indus., Inc., 665 F.2d 1310, 1315 n.28 (D.C. Cir. 1981) (citations omitted). Even when established, such reliance does not operate as an automatic defense, but is only one factor to be considered in determining the propriety of injunctive relief. See SEC v. Savoy Indus., 665 F.2d at 1315 n.28. 21 It was not unreasonable for WHX to rely on legal advice of Ilan Reich merely because he is a convicted felon. Cf. Stokes v. Lokken, 644 F.2d 779, 783 n.3 (8th Cir. 1981) (not reckless to rely on description of client's business by convicted felon). Further, Reich had been readmitted to the bar, and WHX's relationship with the Olshan Grundman law firm predated Reich's joining the firm. Reich's advice was not tainted by the type of deceptive activity that led to his conviction in the Dennis Levine insider trading scandal. Whether or not his advice was sound, Reich certainly did not conceal his recommendations or advise a course of deception. To the contrary, he proactively approached Commission staff. 22 The Commission has since amended Rules 14d-4(c) and 14d-6(d). Inter alia, Rule 14d-4(c) was re-designated 14d-4(d)(1), and new paragraph (d)(2)(i) added to specify that an offer must remain open for a minimum of five business days from the date that material changes are disseminated to security holders. Rule 14d-6 was revised; the language of Rule 14d-6(d) remained unchanged but was redesignated 14d-6(c). See Regulation of Takeovers and Security Holder Communications, Final Rules, 64 Fed. Reg. 61408, 61423, 61462-63 (Nov. 10, 1999), 70 SEC Docket 2924, 2937, 2976-77. The five-day rule, Rule 14d-4(d)(2)(i), is a codification of the Commission's long held view that an offer should remain open for a minimum of five business days from the date that a material change is first published, sent or given to security holders. See All-Holders Rule, 51 Fed. Reg. at 25879 n.70, 36 SEC Docket at 137 n.70; Interpretive Release, 52 Fed. Reg. at 11459, 38 SEC Docket at 33. 23 The theory of the Division's case requires focusing on shareholders who had already tendered (as opposed to those who had not) and whether they would have decided to withdraw. That is because of the Division's argument concerning ill-gotten gains and disgorgement. The Division argues that WHX was unjustly enriched because it purchased tendered shares instead of extending the offer, thus depriving shareholders of the opportunity to withdraw and obtaining gains measured by the difference between the price it paid and the market price of DCA five days later. To assume that more shareholders would have tendered into the offer during a five-day extension is inconsistent with the Division's theory of the case.
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