October 16, 2003

Microsoft Receives Tender Offer No-Action

After my blog last night, the SEC posted its no-action response to a request from Microsoft that sought exemptive relief from certain tender offer provisions to conduct its option exchange program. The relief granted includes exemptions from:

– Rule 13e-4(f)(2)(ii) to permit Microsoft to terminate withdrawal rights for tendered options at the end of the Election Period.

– Rule 13e-4(f)(8)(i) to permit Microsoft to exclude certain options and certain option holders from the program.

– Rule 13e-4(f)(8)(ii) to permit Microsoft (i) to pay holders of Multi-year Grant Options less for those options than other options with similar terms, (ii) to pay option holders, who are entitled to a total payment in excess of $20,000, a portion of the payment on a deferred and contingent basis, (iii) to further defer the contingent payment portion due to senior management, and (iv) to calculate the initial payment due to senior management holders in certain foreign jurisdictions with adverse tax regimes based on the relevant increased tax imposed.

In addition, the SEC staff noted that it would not object nor take enforcement action if:

– the pricing structure has a final price that will be neither known nor paid until after the Averaging Period ends.

– the total payment for transferred options is determined after the Election Period and during the Averaging Period (i.e. Rules 13e-4(f)(1)(ii) and 14e-1(b)).

– the total payment for options is determined after the Election Period and pays holders for transferred options (i.e. Rules 13e-4(f)(5) and 14e-1(c)).