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The American Stock Exchange appreciates the opportunity to comment on the recommendations of the SEC Advisory Committee on Tender Offers in connection with your Subcommittee's review of current regulation of tender offers and its effect on the future of our nation's capital markets. The Advisory Committee Report dealt with highly complex issues of great significance in the tender offer area and is thus crucial to any review of this area.

The Exchange itself plays a limited role in the regulation of tender offers. However, the recommendations of the Advisory Committee are of interest to the Exchange, since a tender offer often significantly affects the market for, or continued listing eligibility of, a listed security. Although we recognize that mergers and takeovers have had a profound effect on the economy, the Exchange can only quantify the effect of business combinations by citing the number of transactions that have led to the delisting of Amex-listed companies: 1982 and 22 in 1983.

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The Exchange's perspective on tender offers accords with Advisory Committee Recommendation 3, which broadly outlines the objective of federal regulation of takeovers as embodied in the Williams Act -- even-handed treatment of bidder and target while at the same time protecting the interests of investors. We also agree with Recommendation 7 that federal regulation is necessary to ensure the integrity of the markets and to protect shareholders and market participants against fraud and non-disclosure of material information. The Exchange has continually emphasized the obligation to make clear, complete, and timely disclosure to shareholders of all material transactions affecting listed companies and therefore strongly supports Recommendation 20, which urges amendment

of the Commission's disclosure rules to require a clear and concise statement of the price, terms, and key conditions of a tender offer. We understand the frustration of shareholders, confronted by a many-paged document from which they must extract the key points and weigh the alternatives available to them.

Over the years, the Exchange has imposed, through its listing standards, requirements which supplement federal and state regulation of tender offers. For example, Recommendation 31 states that approval by shareholders of a bidder with respect to an acquisition should continue to be an internal matter between shareholders and management, subject only to applicable state law. In that regard, Section 712 of the Amex Company Guide requires shareholder approval of the present or potential issuance of 20%* or more of a company's outstanding stock, or securities convertible into common stock, in connection with its issuance as sole or partial consideration for an acquisition of the stock or assets of another company. Therefore, if a bidder intends to issue a significant amount of such securities, shareholder approval must be received before the shares may be issued and approved for listing.

Recommendations 33 through 43, which cover the regulation of defensive tactics, focus on the adoption with shareholder approval of charter and by-law provisions such as supermajority votes and staggered boards which may have a "shark repellant" or anti-takeover effect. The Exchange has long enforced a policy with respect to its listed companies that such provisions should be reasonable and consistent with state law. Restraints on voting or on free transferability which are brought into play upon attainment of a specified percentage of ownership have generally been considered by the Exchange to be unreasonable, except in those few industries where the restraint is sanctioned by federal law (e.g., Federal Maritime Act restraints on foreign ownership).

The percentage drops to 5% of outstanding common stock "if any individual director, officer or substantial shareholder has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction".

Since the Exchange's complementary role in the regulation of tender offers is a limited one as described above, we will not be commenting critically on the other more technical recommendations of the Advisory Committee. However, we want to call your attention to four important recommendations where there is no corresponding Amex requirement, but which we feel address important market concerns that should be looked at closely by your Committee. With regard to regulation of bidders, in order to allow all of a company's shareholders to share in premiums often paid in takeover transactions, Recommendation 14 would require that once an acquiror reaches 20% of a company's stock, further purchases would have to be made via a tender offer to all shareholders. As a disincentive to partial and two-tier tender offers which the Committee felt were often coercive to shareholders, Recommendation 16 sets the minimum period such transactions must stay open at approximately two weeks longer than for "any and all" tender offers. With regard to defensive tactics, Recommendation 36 would require that supermajority charter provisions be adopted, and periodically ratified, by an equivalent supermajority of shareholder votes. Under Recommendation 37, companies would have to publicly disclose and submit for an annual shareholder advisory vote certain change of control policies and compensation arrangements.

We would also like to note that we have joined in a separate response being submitted to you by the Options Clearing Corporation and several participant options exchanges. That letter, which confines its comments to those Advisory Committee recommendations related to options trading, opposes the adoption of Recommendation 47 which asks that the SEC revise its interpretation of the short tender rule (Rule 10b-4) to prevent writers of in-the-money call options from tendering the underlying stock. It also opposes a suggestion in the text accompanying Recommendation 47 that the Commission may wish to consider the effect on the options market of changing Rule 10b-4 to require that exercisers of call options be treated as not owning the securities subject to the option until the underlying security is delivered.

We await with interest the forthcoming response of the SEC to these and to the other recommendations of the Advisory Committee, as well as the results of your Committee's current review of the tender offer area. the Exchange can be of any further assistance in the Committee's work, please do not hesitate to call on us.

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Sincerely,

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Thank you for extending an invitation to Aetna Life and Casualty
Company, through Mr. Donald G. Conrad, to participate in your
Subcommittee's comprehensive review of the adequacy of current
federal regulation of tender offers.

As the parent company of the nation's largest investor-owned life
insurance company and one of the largest insurers of
casualty-property coverages, Aetna is very concerned about the
preservation of state insurance holding company statutes that
regulate the acquisition of insurance companies. Aetna closely
followed the activities of the SEC Advisory Committee on Tender
Offers. The SEC Advisory Committee showed a lack of sensitivity for
the arguments of the insurance industry to preserve the fabric of
these statutes by concluding that the insurance company takeover
provisions should be made procedurally compatible with the Williams
Act. We feel that that conclusion shows a fundamental lack of
understanding of the McCarran-Ferguson Act which carves out an area
of protective insurance regulation for the states where the
protection of policyholder interests is at stake. The procedural
features of the insurance holding company statutes relating to the
acquisition of insurers were designed to protect those policyholder
interests. While Aetna will not comment individually on this
conflict, we direct your attention to the comment letter of the
American Council of Life Insurance which has been submitted to your
Subcommittee. Aetna is a member of that association and supports the
substance of the comment. Aetna would also like to direct your
attention to the comment letter which will be submitted by the
American Insurance Association, an association of casualty-property
insurers of which Aetna is a member.

Again, thank you for inviting Aetna to participate in your
Subcommittee's study of tender offers.

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This letter is submitted in response to your letter to Alan C. Greenberg of December 5, 1983 requesting Bear Stearns' comments on the need for tender offer legislation and on the recommendations made by the SEC Advisory Committee on Tender Offers.

In general, we at Bear Stearns & Co. believe there are certain matters as to which legislation would be highly desirable, although not necessarily along the lines recommended by the SEC Advisory Committee. Our feelings about each of the Committee's proposals are set forth as an appendix to this letter.

We think the Committee's good ideas were (1) that exchange offers be placed on a par with cash tender offers, (2) that Schedule 130 filings be required before a purchaser crosses the 5% threshold rather than 10 days afterwards, and (3) that a purchaser may not acquire shares of an issuer other than by tender offer or by direct purchase from the issuer if, after the purchase, he has more than 20% of the voting power of the issuer. This last proposal is desirable in that it would eliminate the creeping control situation such as in the Evans Products acquisition effort by Victor Posner, and it would eliminate the loophole used by Sun in its acquisition of 34% of Becton, Dickinson. However, we think the proposal should be modified to allow sale of a large block by a single seller to a single purchaser where the position of the public shareholders is unaffected.

We think the proposals in a second group were on the right track but were probably not adequate to accomplish their desired purposes. In this category, we put: (1) the proposal that issuer buyouts of specific shareholders who have held their shares for less than two years be submitted to a vote of the other shareholders when a premium will be paid, (2) the proposal that partial offers be kept open for two weeks longer than offers for all of a company's outstanding shares, and (3) the proposals revising the applicable dates for proration and withdrawal.

38-709 O-84-18

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