Question 1

Creating an employee stock ownership plan to fight a tender offer is illegal under the Smith Act.

Accepted Answer

A) True 
 B)False

Question 2

Hostile tender offers can be made without any prior attempt by a tender offeror to acquire the target company through a voluntary merger or purchase.

Accepted Answer

A) True 
 B)False

Question 3

When a party wants to make a proxy solicitation of shareholders in a publicly-held corporation,what must occur following the filing of the proxy materials with the Securities and Exchange Commission?

Accepted Answer

A)  Before sending out the proxy solicitation, that party must wait until receiving the appropriate Securities and Exchange Commission approval of the solicitation materials. 
B)  The Securities and Exchange Commission will prepare a statement of its position on the matter connected with the proxy solicitation, and this must be sent out along with the proxy solicitation materials. 
C)  The Securities and Exchange Commission will make the solicitation public, and allow a public comment period. 
D)  A period of ten days must pass, during which time the Securities and Exchange Commission can notify the party soliciting proxies that additional disclosures are needed. 
E)  After a period of ten days has passed, the party must seek permission from the Securities and Exchange Commission to send out the solicitation materials. 
A)  Before sending out the proxy solicitation, that party must wait until receiving the appropriate Securities and Exchange Commission approval of the solicitation materials. 
B)  The Securities and Exchange Commission will prepare a statement of its position on the matter connected with the proxy solicitation, and this must be sent out along with the proxy solicitation materials. 
C)  The Securities and Exchange Commission will make the solicitation public, and allow a public comment period. 
D)  A period of ten days must pass, during which time the Securities and Exchange Commission can notify the party soliciting proxies that additional disclosures are needed. 
E)  After a period of ten days has passed, the party must seek permission from the Securities and Exchange Commission to send out the solicitation materials.

Question 4

SnatchUup Corporation has made a hostile tender offer for the shares of Protective Corporation.The management of Protective has made numerous statements to the shareholders about horrible consequences if SnatchUup is successful in its bid.Finally,the management of Protective has entered into an agreement to reacquire all Protective shares from SnatchUup that SnatchUup already owns.Protective will pay one hundred and fifteen percent of market value for these shares.In connection with this proposal,SnatchUup has agreed to drop its hostile takeover attempt.John,a shareholder,has sued the managers of Protective over its actions.What terms are used for the agreements reached,and are they legal?

Accepted Answer

The agreement to buy back the stock at a

Question 5

Management or any other party soliciting proxies from shareholders must prepare a proxy statement that fully describes the matter for which the proxy is being solicited,who is soliciting the proxy,and any other pertinent information.

Accepted Answer

A) True 
 B)False

Question 6

Even if management is not in favor of the resolution,so long as the shareholder has a right to raise a shareholder's resolution,management must include the shareholder's resolution in the corporation's proxy materials.

Accepted Answer

A) True 
 B)False

Question 7

In an ordinary merger,what approvals are needed?

Accepted Answer

A)  recommendation by both boards of directors and votes of the shareholders of both corporations 
B)  votes by both boards of directors, but the corporations' shareholders need not approve 
C)  vote by the board of directors of the surviving corporation, and for the corporation that does not survive, recommendation by the board of directors and an approval vote by the shareholders 
D)  for both corporations, a vote by the shareholders, but no action by the boards of directors is necessary 
E)  no approvals are needed by the surviving corporation, and for the corporation that does not survive, recommendation by the board of directors and an approval vote by the shareholders 
A)  recommendation by both boards of directors and votes of the shareholders of both corporations 
B)  votes by both boards of directors, but the corporations' shareholders need not approve 
C)  vote by the board of directors of the surviving corporation, and for the corporation that does not survive, recommendation by the board of directors and an approval vote by the shareholders 
D)  for both corporations, a vote by the shareholders, but no action by the boards of directors is necessary 
E)  no approvals are needed by the surviving corporation, and for the corporation that does not survive, recommendation by the board of directors and an approval vote by the shareholders

Question 8

In a proxy contest involving management on one side and dissenting shareholders on the other side,what is true about the right to recover the costs incurred in conducting the proxy fight?

Accepted Answer

A)  Neither side can recover its costs in the proxy contest. 
B)  If the contest involves a policy issue, the winning side can recover its costs from the losing side. 
C)  The victorious side can always recover its costs from the corporation in a contest involving a policy issue. 
D)  Management is the only side that can ever recover its costs from the corporation in a proxy contest involving a personal issue. 
E)  Each side can recover its costs from the corporation in a proxy contest involving matters of policy, regardless of the outcome. 
A)  Neither side can recover its costs in the proxy contest. 
B)  If the contest involves a policy issue, the winning side can recover its costs from the losing side. 
C)  The victorious side can always recover its costs from the corporation in a contest involving a policy issue. 
D)  Management is the only side that can ever recover its costs from the corporation in a proxy contest involving a personal issue. 
E)  Each side can recover its costs from the corporation in a proxy contest involving matters of policy, regardless of the outcome.

Question 9

In fighting a hostile takeover,which of the following will usually occur in connection with a standstill agreement?

Accepted Answer

A)  a reverse tender offer 
B)  a "greenmail" payment 
C)  the sale of a "crown jewel" 
D)  the adoption of a "poison pill" 
E)  a "white knight" merger 
A)  a reverse tender offer 
B)  a "greenmail" payment 
C)  the sale of a "crown jewel" 
D)  the adoption of a "poison pill" 
E)  a "white knight" merger

Question 10

Share exchanges are often used to create holding company arrangements.

Accepted Answer

A) True 
 B)False

Question 11

Under the Securities Exchange Act of 1934 and applicable rules,a shareholder may submit a resolution to be considered by other shareholders if:

Accepted Answer

A)  the shareholder has owned at least $2,000 worth of shares of the company's stock or 1 percent of all shares of the company for at least one year. 
B)  the shareholder has owned at least $3,000 worth of shares of the company's stock or 2 percent of all shares of the company for at least one year. 
C)  the shareholder has owned at least $5,000 worth of shares of the company's stock or 2 percent of all shares of the company for at least six months. 
D)  the shareholder has owned at least $10,000 worth of shares of the company's stock or 2 percent of all shares of the company for at least six months. 
E)  the shareholder has owned at least $100,000 worth of shares of the company's stock or 2 percent of all shares of the company for at least one year. 
A)  the shareholder has owned at least $2,000 worth of shares of the company's stock or 1 percent of all shares of the company for at least one year. 
B)  the shareholder has owned at least $3,000 worth of shares of the company's stock or 2 percent of all shares of the company for at least one year. 
C)  the shareholder has owned at least $5,000 worth of shares of the company's stock or 2 percent of all shares of the company for at least six months. 
D)  the shareholder has owned at least $10,000 worth of shares of the company's stock or 2 percent of all shares of the company for at least six months. 
E)  the shareholder has owned at least $100,000 worth of shares of the company's stock or 2 percent of all shares of the company for at least one year.

Question 12

Jim "Thorny" Johnson is a shareholder of Staid Corporation and is the informal head of a dissident group.Thorny has engaged in three proxy contests with Staid's Board of Directors.In the first,Thorny sought to recall one of the board members because of personal dislike.This effort was successful.In the second,Thorny sought to have the company stop doing business with nations that have not signed the Montreal Protocol of 1987 dealing with phasing out of substances thought to deplete atmospheric ozone.This effort was unsuccessful.Thorny's third proxy contest sought having his pet poodle,Alicia,named the official mascot of Staid Corporation.This effort was successful,mainly because the board thought if they did this,Thorny would not bother them in future proxy contests.The board members and Thorny incurred substantial expenses in conducting these proxy contests.Can either side recover any of these costs,and from whom?

Accepted Answer

The first and third are personal issues,

Question 13

Under what circumstances must a dissenting shareholder pay for the court costs and appraisal costs in connection with a corporation's petition of the court to determine the value of the shares?

Accepted Answer

A)  under no circumstances 
B)  if the dissenting shareholder acted arbitrarily or in bad faith, in disputing the amount that the corporation had determined to be the fair value of the shares 
C)  if the amount determined as the fair value by the court is higher than the amount the corporation had determined 
D)  if the amount determined as the fair value by the court is either higher or lower than the amount the corporation had determined 
E)  in all circumstances where the dissenting shareholder has objected to the amount the corporation had determined is the fair value 
A)  under no circumstances 
B)  if the dissenting shareholder acted arbitrarily or in bad faith, in disputing the amount that the corporation had determined to be the fair value of the shares 
C)  if the amount determined as the fair value by the court is higher than the amount the corporation had determined 
D)  if the amount determined as the fair value by the court is either higher or lower than the amount the corporation had determined 
E)  in all circumstances where the dissenting shareholder has objected to the amount the corporation had determined is the fair value

Question 14

Share exchanges are often used to create:

Accepted Answer

A)  general partnerships 
B)  limited partnerships 
C)  corporations 
D)  limited liability companies 
E)  holding company arrangements 
A)  general partnerships 
B)  limited partnerships 
C)  corporations 
D)  limited liability companies 
E)  holding company arrangements

Question 15

State antitakeover statutes are usually enacted to protect local state businesses from being taken over by other businesses,particularly out-of-state businesses,which might close certain plants located in the state,move certain business operations out of state,lay off employees who are residents of the state,and cause a decrease in tax revenues of the state.

Accepted Answer

A) True 
 B)False

Question 16

What is a tender offer?

Accepted Answer

A)  an offer made directly to the shareholders of a target corporation for those shareholders' shares 
B)  an offer made directly to the board of directors of the corporation to be acquired 
C)  an offer made by the use of proxies granted by the shareholders of the corporation to be acquired 
D)  an offer to acquire another corporation that has been approved by the Securities and Exchange Commission prior to the making of the offer 
E)  an offer made directly to the shareholders of a target corporation for merger 
A)  an offer made directly to the shareholders of a target corporation for those shareholders' shares 
B)  an offer made directly to the board of directors of the corporation to be acquired 
C)  an offer made by the use of proxies granted by the shareholders of the corporation to be acquired 
D)  an offer to acquire another corporation that has been approved by the Securities and Exchange Commission prior to the making of the offer 
E)  an offer made directly to the shareholders of a target corporation for merger

Question 17

A transaction in which two corporations combine,such that afterwards neither of the combining corporations continues to exist,but instead a new corporation is formed,is called a:

Accepted Answer

A)  merger. 
B)  consolidation. 
C)  purchase of assets. 
D)  share exchange. 
E)  hostile takeover. 
A)  merger. 
B)  consolidation. 
C)  purchase of assets. 
D)  share exchange. 
E)  hostile takeover.

Question 18

If management desires to solicit proxies from shareholders,it must:

Accepted Answer

A)  file the proposed proxy, proxy statement and other solicitation material with the Securities and Exchange Commission, and obtain SEC approval at the same time that the materials are sent to shareholders. 
B)  file the proposed proxy, proxy statement and other solicitation material with the Securities and Exchange Commission at least thirty days in advance of the time that the materials are sent to shareholders. 
C)  file the proposed proxy, proxy statement, and other solicitation material with the Securities and Exchange Commission at least ten days in advance of the time that the materials are sent to shareholders. 
D)  file the proposed proxy, proxy statement, and other solicitation material with the Securities and Exchange Commission at least ten days in advance of the time materials are sent to shareholders, but only if financial statements will be distributed. 
E)  not file anything with the Securities and Exchange Commission, unless the SEC receives complaints about the materials that are distributed. 
A)  file the proposed proxy, proxy statement and other solicitation material with the Securities and Exchange Commission, and obtain SEC approval at the same time that the materials are sent to shareholders. 
B)  file the proposed proxy, proxy statement and other solicitation material with the Securities and Exchange Commission at least thirty days in advance of the time that the materials are sent to shareholders. 
C)  file the proposed proxy, proxy statement, and other solicitation material with the Securities and Exchange Commission at least ten days in advance of the time that the materials are sent to shareholders. 
D)  file the proposed proxy, proxy statement, and other solicitation material with the Securities and Exchange Commission at least ten days in advance of the time materials are sent to shareholders, but only if financial statements will be distributed. 
E)  not file anything with the Securities and Exchange Commission, unless the SEC receives complaints about the materials that are distributed.

Question 19

In a "short form" merger,which approvals are needed?

Accepted Answer

A)  votes by both boards of directors, but shareholders need not approve 
B)  vote by the board of directors of the surviving corporation, and for the corporation that does not survive, recommendation by the board of directors and an approval vote by the shareholders 
C)  an approval vote by the board of directors of the surviving corporation 
D)  for both corporations, a vote by the shareholders, but no action by the board of directors is necessary 
E)  no approvals are needed by the surviving corporation, and for the corporation that does not survive, recommendation by the board of directors and an approval vote by the shareholders 
A)  votes by both boards of directors, but shareholders need not approve 
B)  vote by the board of directors of the surviving corporation, and for the corporation that does not survive, recommendation by the board of directors and an approval vote by the shareholders 
C)  an approval vote by the board of directors of the surviving corporation 
D)  for both corporations, a vote by the shareholders, but no action by the board of directors is necessary 
E)  no approvals are needed by the surviving corporation, and for the corporation that does not survive, recommendation by the board of directors and an approval vote by the shareholders

Question 20

If a parent corporation owns ________ percent or more of the outstanding shares of a subsidiary corporation,a ________ -form merger procedure may be followed to merge the two corporations.

Accepted Answer

A)  50; short 
B)  66 2/3rds; short 
C)  50; long 
D)  66 2/3rds; long 
E)  90; short 
A)  50; short 
B)  66 2/3rds; short 
C)  50; long 
D)  66 2/3rds; long 
E)  90; short

Exam 29: Corporate Acquisitions and Multinational Corporations

Creating an employee stock ownership plan to fight a tender offer is illegal under the Smith Act.

Hostile tender offers can be made without any prior attempt by a tender offeror to acquire the target company through a voluntary merger or purchase.

When a party wants to make a proxy solicitation of shareholders in a publicly-held corporation,what must occur following the filing of the proxy materials with the Securities and Exchange Commission?

Management or any other party soliciting proxies from shareholders must prepare a proxy statement that fully describes the matter for which the proxy is being solicited,who is soliciting the proxy,and any other pertinent information.

Even if management is not in favor of the resolution,so long as the shareholder has a right to raise a shareholder's resolution,management must include the shareholder's resolution in the corporation's proxy materials.

In an ordinary merger,what approvals are needed?

In a proxy contest involving management on one side and dissenting shareholders on the other side,what is true about the right to recover the costs incurred in conducting the proxy fight?

In fighting a hostile takeover,which of the following will usually occur in connection with a standstill agreement?

Share exchanges are often used to create holding company arrangements.

Under the Securities Exchange Act of 1934 and applicable rules,a shareholder may submit a resolution to be considered by other shareholders if:

Under what circumstances must a dissenting shareholder pay for the court costs and appraisal costs in connection with a corporation's petition of the court to determine the value of the shares?

Share exchanges are often used to create:

What is a tender offer?

A transaction in which two corporations combine,such that afterwards neither of the combining corporations continues to exist,but instead a new corporation is formed,is called a:

If management desires to solicit proxies from shareholders,it must:

In a "short form" merger,which approvals are needed?

If a parent corporation owns ________ percent or more of the outstanding shares of a subsidiary corporation,a ________ -form merger procedure may be followed to merge the two corporations.

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If a parent corporation owns percent or more of the outstanding shares of a subsidiary corporation,a -form merger procedure may be followed to merge the two corporations.