Question 1

Solicitation of proxies is regulated under:

Accepted Answer

A)  the Securities Act of 1933 
B)  the Securities Exchange Act of 1934 
C)  the Williams Act 
D)  the Proxy Solicitation Act of 1968 
E)  the Uniform Commercial Code 
A)  the Securities Act of 1933 
B)  the Securities Exchange Act of 1934 
C)  the Williams Act 
D)  the Proxy Solicitation Act of 1968 
E)  the Uniform Commercial Code

Question 2

A transaction in which two corporations combine such that afterwards only one of them still exists and owns all the assets previously owned by either corporation is called a:

Accepted Answer

A)  merger 
B)  tender offer 
C)  purchase of assets 
D)  share exchange 
A)  merger 
B)  tender offer 
C)  purchase of assets 
D)  share exchange

Question 3

When the management of the target corporation of a tender offer opposes the tender offer,it can:

Accepted Answer

A)  purchase the shares of its shareholders as treasury stock,but little more 
B)  petition the Securities and Exchange Commission to have the offer voided 
C)  exercise its appraisal rights 
D)  petition the board of directors to adopt a resolution prohibiting sale by the shareholders to the entity who made the tender offer 
E)  none of the above 
A)  purchase the shares of its shareholders as treasury stock,but little more 
B)  petition the Securities and Exchange Commission to have the offer voided 
C)  exercise its appraisal rights 
D)  petition the board of directors to adopt a resolution prohibiting sale by the shareholders to the entity who made the tender offer 
E)  none of the above

Question 4

Which of the following is not a possible consequence of including fraudulent information in a proxy solicitation?

Accepted Answer

A)  criminal action initiated by the justice department 
B)  fines imposed on shareholders who granted proxies 
C)  civil action by the Securities and Exchange Commission 
D)  an order requiring a new election on the matter for which proxies were sought 
E)  a suit by an injured shareholder for damages from the wrongdoer 
A)  criminal action initiated by the justice department 
B)  fines imposed on shareholders who granted proxies 
C)  civil action by the Securities and Exchange Commission 
D)  an order requiring a new election on the matter for which proxies were sought 
E)  a suit by an injured shareholder for damages from the wrongdoer

Question 5

Corporate shareholders do not have the right to vote on mergers and charter amendments.

Accepted Answer

A) True 
 B)False

Question 6

A shareholder loses the ability to exercise the appraisal right by voting in favor of the proposed action.

Accepted Answer

A) True 
 B)False

Question 7

Many states have enacted antitakeover statutes to regulate takeover activity within their states.However,there is a federal statute governing tender offers.Therefore,these state statutes are:

Accepted Answer

A)  constitutional 
B)  constitutional as long as it is possible to comply with both the state and federal laws 
C)  unconstitutional,because they violate the Commerce Clause 
D)  unconstitutional,because they violate the Supremacy Clause 
E)  unconstitutional,because they violate the First Amendment 
A)  constitutional 
B)  constitutional as long as it is possible to comply with both the state and federal laws 
C)  unconstitutional,because they violate the Commerce Clause 
D)  unconstitutional,because they violate the Supremacy Clause 
E)  unconstitutional,because they violate the First Amendment

Question 8

Which of the following best describes a merger?

Accepted Answer

A)  Two corporations jointly purchase a third corporation and operate it as a joint venture. 
B)  Two corporations are combined to form a new third corporation,and the original two corporations cease to exist. 
C)  Two corporations are combined,with one of the original corporations surviving and the other ceasing to exist. 
D)  One corporation acquires all of the shares of a second corporation,with both corporations retaining their separate legal existence,the second a subsidiary of the first. 
E)  One corporation sells substantially all of its assets to a second corporation,with both corporations retaining their separate legal existence. 
A)  Two corporations jointly purchase a third corporation and operate it as a joint venture. 
B)  Two corporations are combined to form a new third corporation,and the original two corporations cease to exist. 
C)  Two corporations are combined,with one of the original corporations surviving and the other ceasing to exist. 
D)  One corporation acquires all of the shares of a second corporation,with both corporations retaining their separate legal existence,the second a subsidiary of the first. 
E)  One corporation sells substantially all of its assets to a second corporation,with both corporations retaining their separate legal existence.

Question 9

The board of directors has a fiduciary duty to shareholders in taking action relative to a hostile takeover.

Accepted Answer

A) True 
 B)False

Question 10

Corporation L is the target of a hostile takeover by Corporation O.Corporation L's most valuable asset is its oil fields.To stop the takeover,Corporation L decides to sell its oil fields.This antitakeover technique is best described as:

Accepted Answer

A)  selling a crown jewel 
B)  a poison pill 
C)  a white knight merger 
D)  a reverse merger 
E)  greenmail 
A)  selling a crown jewel 
B)  a poison pill 
C)  a white knight merger 
D)  a reverse merger 
E)  greenmail

Question 11

A shareholder must be notified of the existence of his or her appraisal rights before a transaction such as a merger can be voted on.

Accepted Answer

A) True 
 B)False

Question 12

Many persons believe that it is too easy for corporations to take over other corporations,and point to the large reductions in workforces which frequently result following mergers.Should there be limits placed on the ability to lay off employees following a business combination? What are the advantages and disadvantages of limited regulation of merger activity?

Accepted Answer

Many argue that mergers act as

Question 13

In order for a proxy to become valid,the shareholder must:

Accepted Answer

A)  complete a written proxy document and file it with the SEC 
B)  complete a written proxy document,file it with the SEC,and receive the appropriate approval from the SEC 
C)  complete a written proxy document and deliver it to the proxy holder 
D)  complete a written proxy document and deliver it to the corporation 
E)  reach agreement with the proxy holder,but no written documentation is required 
A)  complete a written proxy document and file it with the SEC 
B)  complete a written proxy document,file it with the SEC,and receive the appropriate approval from the SEC 
C)  complete a written proxy document and deliver it to the proxy holder 
D)  complete a written proxy document and deliver it to the corporation 
E)  reach agreement with the proxy holder,but no written documentation is required

Question 14

Robin Corporation has made a tender offer to acquire 80 percent of the shares of Cardinal Corporation at $58 per share.Because only 68 percent of Cardinal's shares have been tendered,the board of Robin wants to raise its offer price to $65 per share.Robin must:

Accepted Answer

A)  cancel the first tender offer and start over 
B)  keep the higher offer open for at least 20 days 
C)  pay the $65 to all shareholders who accepted at $58 per share 
D)  not complete the merger unless at least 90 percent of Cardinal's shares are tendered 
A)  cancel the first tender offer and start over 
B)  keep the higher offer open for at least 20 days 
C)  pay the $65 to all shareholders who accepted at $58 per share 
D)  not complete the merger unless at least 90 percent of Cardinal's shares are tendered

Question 15

Most shareholder resolutions have a good chance of being enacted because large-scale investors usually support management.

Accepted Answer

A) True 
 B)False

Question 16

The purpose of a proxy is to:

Accepted Answer

A)  allow a shareholder to transfer shares to another 
B)  allow a shareholder to place shares in trust 
C)  allow a shareholder to assign her right to vote 
D)  allow a shareholder to assign her dividends to another 
E)  initiate a tender offer 
A)  allow a shareholder to transfer shares to another 
B)  allow a shareholder to place shares in trust 
C)  allow a shareholder to assign her right to vote 
D)  allow a shareholder to assign her dividends to another 
E)  initiate a tender offer

Question 17

In a merger of corporations,a dissenting shareholder may elect to receive the fair value of her share instead of being part of the restructuring.This is called the shareholders':

Accepted Answer

A)  dividend right 
B)  appraisal right 
C)  merger right 
D)  voting right 
E)  ultra vires right 
A)  dividend right 
B)  appraisal right 
C)  merger right 
D)  voting right 
E)  ultra vires right

Question 18

Company X wants to acquire Company Y.Company X gives some of its own stock (X stock)to all of the shareholders of Y Company in exchange for their Y stock.Afterwards,Company X owns all of the Company Y stock.This transaction is called a(n):

Accepted Answer

A)  merger 
B)  tender offer 
C)  purchase of assets 
D)  share exchange 
E)  hostile takeover 
A)  merger 
B)  tender offer 
C)  purchase of assets 
D)  share exchange 
E)  hostile takeover

Question 19

Over the years,Maple Corporation has gradually been acquiring the stock of Spruce Corporation.Maple Corporation has increased its purchases of Spruce Corporation in the current year.At the beginning of the year,Maple owned 64 percent of Spruce,but by early August owned 91 percent.What is the easiest and quickest method for Maple to merge with Spruce?

Accepted Answer

A)  complete a share exchange where Spruce is the surviving corporation 
B)  complete the merger in such a way that the number of common shares of Maple outstanding does not increase by more than 20 percent 
C)  complete a short-form merger requiring the approval only of the board of directors of Maple Corporation 
D)  complete a tender offer of Spruce 
A)  complete a share exchange where Spruce is the surviving corporation 
B)  complete the merger in such a way that the number of common shares of Maple outstanding does not increase by more than 20 percent 
C)  complete a short-form merger requiring the approval only of the board of directors of Maple Corporation 
D)  complete a tender offer of Spruce

Question 20

Which of the following is not true about tender offers?

Accepted Answer

A)  The offer must remain open at least 20 business days from the commencement of the offer. 
B)  The SEC must be notified of the terms of a tender offer at least 10 days before it is made. 
C)  If the offeror increases the tender price,that higher price must be paid even to those who already accepted the offer at the earlier,lower price. 
D)  Any increase in the price offered or the maximum number of shares that the offeror will take requires that the effective time of the offer be extended at least 10 days. 
E)  There is no appraisal right for persons who do not want to accept the offer. 
A)  The offer must remain open at least 20 business days from the commencement of the offer. 
B)  The SEC must be notified of the terms of a tender offer at least 10 days before it is made. 
C)  If the offeror increases the tender price,that higher price must be paid even to those who already accepted the offer at the earlier,lower price. 
D)  Any increase in the price offered or the maximum number of shares that the offeror will take requires that the effective time of the offer be extended at least 10 days. 
E)  There is no appraisal right for persons who do not want to accept the offer.

Exam 38: Corporate Acquisitions and Multinational Corporations

Solicitation of proxies is regulated under:

A transaction in which two corporations combine such that afterwards only one of them still exists and owns all the assets previously owned by either corporation is called a:

When the management of the target corporation of a tender offer opposes the tender offer,it can:

Which of the following is not a possible consequence of including fraudulent information in a proxy solicitation?

Corporate shareholders do not have the right to vote on mergers and charter amendments.

A shareholder loses the ability to exercise the appraisal right by voting in favor of the proposed action.

Many states have enacted antitakeover statutes to regulate takeover activity within their states.However,there is a federal statute governing tender offers.Therefore,these state statutes are:

Which of the following best describes a merger?

The board of directors has a fiduciary duty to shareholders in taking action relative to a hostile takeover.

Corporation L is the target of a hostile takeover by Corporation O.Corporation L's most valuable asset is its oil fields.To stop the takeover,Corporation L decides to sell its oil fields.This antitakeover technique is best described as:

A shareholder must be notified of the existence of his or her appraisal rights before a transaction such as a merger can be voted on.

In order for a proxy to become valid,the shareholder must:

Robin Corporation has made a tender offer to acquire 80 percent of the shares of Cardinal Corporation at $58 per share.Because only 68 percent of Cardinal's shares have been tendered,the board of Robin wants to raise its offer price to $65 per share.Robin must:

Most shareholder resolutions have a good chance of being enacted because large-scale investors usually support management.

The purpose of a proxy is to:

In a merger of corporations,a dissenting shareholder may elect to receive the fair value of her share instead of being part of the restructuring.This is called the shareholders':

Company X wants to acquire Company Y.Company X gives some of its own stock (X stock)to all of the shareholders of Y Company in exchange for their Y stock.Afterwards,Company X owns all of the Company Y stock.This transaction is called a(n):

Which of the following is not true about tender offers?

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