An Overview of Regulatory

Considerations page.136-Page 155 7

1. Introduction
2. Environmental law
3. Federal securities law
4. Federal antitrust law
5. Waiting periods
6. Labor and employment law
1. Introduction
Merge and acquisition regulatory considerations divided into
(1) general regulatory for all types of M&As: such as antitrust or environmental,
employee benefits matters
(2) industry-specific regulatory: include federal and/or state regulators needed to
approve the transactions, each transaction requires specific type of governmental
approval such as federal communication commission(FCC) and pension benefit
guarantee (PBGC)

2. Environmental law
OSHA:Occupational Safety and Health Administration, required chemical manufacturers and others to
compile and report information on the presence and use of certain
chemicals on their premises
before 1970 1970- 1980 1986 1990
sellers had no obligation to Emergency Planning and
all require notifications to government

report about hazardous new laws for health and Community Right-to-Know
substances or its release environment enacted by congress (EPCRA) amend clean water act
Clean Water Act(CWA) it required:

Toxic sbustances control

Act(TSCA) (1) provide information about imposed significant enhanced air
Resource conservation& the presence of quality standards for
recovery extremely hazardous emissions of hazardous air pollutants,
ACT(RCRA) substances
Comperhensive environment
responses CERCLA (2) the obligation to notify
authorities immediately in the
event of a release

- the result was a patchwork of different but sometimes overlapping reporting requirements.
-- This complex
The seller webhave
should of federal and
its legal state environmental
counsel laws creates
obtain an environmental legal
audit issues
from for bothconsulting
a qualified the buyer firm
and the seller
prior in aactive
to the proposed mergerof
recruitment orpotential
acquisition
buyers
in order to assess its own liability under federal and state laws.
3. Federal securities law
Mergers and acquisitions among small and growing privately held companies do not
generally raise many issues or filing requirements under the federal securities laws,
specifically the Securities Act of 1933 and Exchange Act of 1934.
 But if one or both of the companies are publicly traded and therefore have registered their
securities under the Securities Act of 1933, a below are required:
 10-Q and 10-K reports: The acquiring company will usually be obligated to
include the information in its scheduled SEC reports if the acquisition is deemed to
be “significant.
 Registration statements: If the acquiring company plans to issue new securities as
part of the consideration to be given to the target’s shareholders, then a registration
statement should be filed with the SEC.
 Proxy information: If the proposed transaction must be approved by the
shareholders of either the acquiring company or the target, then the SEC’s special
proxy rules and regulations must be carefully followed.
 Tender offers: When a buyer of a publicly held company elects to make a tender
offer directly to the shareholders of the target, rather than negotiating through
management, then the filing requirements in the Williams Act must be followed.

4. Federal antitrust law

The central concern of federal government policy is with those acquisitions that increase
the danger that companies in a particular market will have market power
antitrust laws prohibit any acquisition of stock or assets that tends to substantially lessen
competition
Horizontal Acquisitions:
the DOJ and the FTC.These agencies have jointly issued their own set of merger
guidelines to help businesses assess the likelihood that their specific business transactions
may be challenged under the federal antitrust laws

Vertical Acquisitions:
Acquisitions involving suppliers and their customers could raise questions under the
antitrust laws. Courts, as well as earlier federal enforcement
policies, have expressed concerns that such acquisitions could foreclose access by
competitors to necessary suppliers or distribution outlets.
Conclusions: if the there are no huge barriers, the acquisition
may be allowed
5. Waiting periods
The parties to a reportable transaction may not consummate the transaction until the
statutory waiting period detailed in the H-S-R Act has expired. The waiting period begins
on the date that the FTC and DOJ receive the completed notification forms. The waiting
period will end on the thirtieth day following such receipt (for cash tender offers and
bankruptcy transactions, the waiting period is fifteen days).

6. Labor and employment law

There is a wide variety of federal and state labor and employment law
issues that must be addressed by the buyer and its counsel as part of its overall due diligence on
the seller’s business. This includes a
comprehensive review of the seller’s employment practices and manuals to ensure historical
compliance with the laws governing employment discrimination, sexual harassment, drug testing,
wages and hours, and so on, as well as its compliance with the Family and Medical Leave Act
(FMLA), the Americans with Disabilities Act (ADA), and the Worker Adjustment and Retraining
Notification Act (WARN), which governs plant closings and retraining requirements.

Figure 7-3

(a) Definitions.
(i) “Benefit Arrangement” means, whether qualified or unqualified, any benefit
arrangement, obligation, custom, or practice, whether or not legally enforceable, to provide
benefits, other than salary, as compensation for services rendered, to present or former
directors, employees, agents, or independent contractors, other than any obligation,
arrangement, custom, or practice that is an Employee Benefit Plan, including, without
limitation, employment agreements, severance agreements, executive compensation
arrangements, incentive programs or arrangements, rabbi or secular trusts, sick leave,
vacation pay, severance pay policies, plant closing benefits, salary continuation for disability,
consulting, or other compensation arrangements, workers’ compensation, retirement,
deferred compensation, bonus, stock option, ESOP or purchase, hospitalization, medical
insurance, life insurance, tuition reimbursement or scholarship programs, employee discount
arrangements, employee advances or loans, any plans subject to Section 125 of the Code, and
any plans or trusts providing benefits or payments in the event of a change of control, change
in ownership, or sale of a substantial portion (including all or substantially all) of the assets of
any business or portion thereof, in each case with respect to any present or former
employees, directors, or agents.
(ii) “Seller Benefit Arrangement” means any Benefit Arrangement sponsored or
maintained by Seller or with respect to which Seller has or may have any liability
(whether actual, contingent, with respect to any of its assets or otherwise), in each
case with respect to any present or former directors, employees, or agents of Seller
as of the Closing Date.
(iii) “Seller Plan” means any Employee Benefit Plan for which Seller is the “plan sponsor,”
as defined in Section 3(16)(B) of ERISA, or any Employee Benefit Plan maintained by Seller or
to which Seller is obligated to make payments, in each case with respect to any present or
former employees of Seller as of the Closing Date.
(iv) “Employee Benefit Plan” has the meaning given in Section 3(3) of ERISA.
(v) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and all regulations and rules issued thereunder, or any successor law.
(vi) “ERISA Affiliate” means any person that, together with Seller, would be or was at any
time treated as a single employer under Section 414 of the Code or Section 4001 of ERISA and
any general partnership of which either Seller is or has been a general partner.
(vii) “Pension Plan” means any Employee Benefit Plan described in Section 3(2) of ERISA.
(viii) “Multiemployer Plan” means any Employee Benefit Plan described in Section 3(37) of
ERISA.
(ix) “Welfare Plan” means any Employee Benefit Plan described in Section 3(1) of ERISA.

(b) Schedule contains a complete and accurate list of all Seller Plans and Seller Benefit
Arrangements. With respect, as applicable to Seller Plans and Seller Benefit Arrangements,
true, correct, and complete copies of all the following documents have been delivered to
Buyer and its counsel: (A) all documents constituting the Seller Plans and Seller Benefit
Arrangements, including but not limited to, insurance policies, service agreements, and
formal and informal amendments thereto, employment agreements, consulting
arrangements, and commission arrangements; (B) the most recent Forms 5500 or 5500 C/R
and any financial statements attached thereto and those for the prior three years; and (C)
the most recent summary plan description for the Seller Plans.

(c)Neither Seller nor any ERISA Affiliate maintains, contributes to, or is obligated to contribute
to, nor has either Seller or any ERISA Affiliate ever maintained, contributed to, or been
obligated to contribute to any Pension Plan or Multiemployer Plan. Neither Seller nor any
ERISA Affiliate has any liability (whether actual or conditional, with respect to its assets or
otherwise) to or resulting from any Employee Benefit Plan sponsored or maintained by a
person that is not a Seller or any ERISA Affiliate. Neither Seller nor any ERISA Affiliate has
or has ever had any obligations under any collective bargaining agreement. The Seller Plans
and Seller Benefit Arrangements are not presently under audit or examination (nor has
notice been received of a potential audit or examination) by the IRS, the Department of
Labor, or any other governmental agency or entity. All group health plans of each Seller and
their ERISA Affiliates have been operated in compliance with the requirements of Sections
4980B (and its predecessors) and 5000 of the Code, and each Seller has provided, or will
have provided before the Closing Date, to individuals entitled thereto all required notices
and coverage under Section 4980B with respect to any “qualifying event” (as defined
therein) occurring before or on the Closing Date.
(d) Schedule 3.19(d) hereto contains the most recent quarterly listing of workers’
compensation claims of the Sellers for the last three fiscal years.