Securities Update

SEC Revises Form 8-K

On March 11, 2004, the Securities and Exchange Commission adopted its long-awaited amendments to Form 8-K, the form for filing current reports under the Securities Exchange Act of 1934. The amendments added eight new mandated disclosure items to Form 8-K, transferred two items to Form 8-K from other periodic reports and revised two of the previous Form 8-K disclosure items. The SEC shortened the filing deadline for most disclosure items to four business days after the occurrence of a specified triggering event and also reorganized the Form 8-K disclosure items into topical categories. Similar changes were made to Form 8-KSB for small business issuers. See Release No. 33-8400; 34-49424.

The Form 8-K amendments will cause a significant change in the way public companies address disclosure. In addition to shortening the time for most Form 8-K filings, the Form 8-K amendments will increase the number of Form 8-K filings that many companies will have to make. To be prepared to adapt to the new reporting requirements, public companies will need to sensitize their officers, employees and disclosure committees to the need to consider whether the actions they are taking will now give rise to current report-ing requirements. Companies will need to accelerate the timeframe in which they involve the persons charged with public reporting in operational decisions. The Form 8-K amendments heighten the need to make current reporting requirements a prominent focus of corporate activity.

This Securities Update describes the changes required by amended Form 8-K and provides some practical considerations for their application.

The new Form 8-K requirements are effective for triggering events occurring on or after August 23, 2004 and apply to all companies that are subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, other than foreign private issuers that file annual reports on Form 20-F or Form 40-F.

The following outlines the new Form 8-K numbering sys-tem and reporting topics.

Item 1.01 - Entry into a Material Definitive Agreement (new requirement)

Item 1.02 - Termination of a Material Definitive Agreement (new requirement)

Item 1.03 - Bankruptcy or Receivership (existing Item 3)

Item 2.01 - Completion of Acquisition or Disposition of Assets (existing Item 2)

Item 2.02 - Results of Operations and Financial Condition (existing Item 12)

Item 2.03 - Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant (new requirement)

Item 2.04 - Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement (new requirement)

Item 2.05 - Costs Associated with Exit or Disposal Activities (new requirement)

Item 2.06 - Material Impairments (new requirement)

Item 3.01 - Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing (new requirement)

Item 3.02 - Unregistered Sales of Equity Securities (existing disclosure requirement transferred to Form 8-K)

Item 3.03 - Material Modifications to Rights of Security Holders (existing disclosure requirement transferred to Form 8-K)

Item 4.01 - Changes in Registrant’s Certifying Accountant (existing Item 4)

Item 4.02 - Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review (new requirement)

Item 5.01 - Changes in Control of Registrant (existing Item 1)

Item 5.02 - Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers (revised existing Item 6)

Item 5.03 - Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year (revised existing Item 8)

Item 5.04 Temporary Suspension of Trading Under Registrant’s Employee Benefit Plans (existing Item 11)

Item 5.05 - Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics (existing Item 10)

Item 7.01 - Regulation FD Disclosure (existing Item 9)

Item 8.01 - Other Events (existing Item 5)

Item 9.01 - Financial Statements and Exhibits (existing Item 7)

Item 1.01 - Entry into a Material Definitive Agreement

New Item 1.01 requires the disclosure of entry into, or material amendment of, a material definitive agreement entered into by a company that is not made in the ordinary course of business. The definition of a material definitive agreement is consistent with the existing exhibit requirement contained in Item 601(b)(10) of Regulation S-K, which is, in effect, incorporated by reference into this new item. A material definitive agreement is one that provides for obligations that are material to and enforceable against a company, or rights that are material to the company and enforceable by the company against one or more parties to the agreement, regardless of whether the agreement remains subject to stated conditions, such as customary closing conditions, completion of due diligence or regulatory approval. However, a non-binding letter of intent or memorandum of understanding that also contains some binding, but non-material, elements, such as a confidentiality agreement or a no-shop agreement, does not need to be filed because, in these cases, the binding provisions are not material. However, any other binding provisions must be individually examined.

A company must disclose: .The date on which the agreement was entered into, or amended;

• The identity of the parties to the agreement;

• A brief description of any material relationship between the company or its affiliates and any of the parties, other than in respect of the agreement or amendment; and

• A brief description of the terms and conditions of the agreement or amendment that are material to the company.

It is important to note that the agreement itself need not be filed as an exhibit to the Form 8-K, but can be filed as an ex-hibit to the next periodic report instead.

If the material definitive agreement relates to a business combination or other extraordinary corporate transaction, the filing of the Form 8-K may constitute the first public announcement for purposes of Rule 165 (announcements relating to business combinations) under the Securities Act of 1933 and Rule 14d-2(b) (commencement of a tender offer) under the Exchange Act and thereby trigger a filing obligation under those rules. Form 8-K has been revised to allow a company to check one or more boxes on the cover page to indicate that the company is simultaneously satisfying its filing obligation under those rules, provided that the Form 8-K contains all of the information required by those rules and the appropriate EDGAR tags are included in the sub-mission header.

Item 1.02 - Termination of a Material Definitive Agreement

New Item 1.02 requires disclosure if a material definitive agreement not made in the ordinary course of business is terminated, and such termination is material to the company, other than termination (i) by the expiration of the agreement on its stated termination date or (ii) as the result of all parties completing their obligations under the agreement.

A company must disclose:

• The date of the termination;

• The identity of the parties to the agreement;

• A brief description of any material relationship between the company or its affiliates and any of the parties, other than as a result of the agreement;
• A brief description of the terms and conditions that are material to the company;
• A brief description of the material circumstances surrounding the termination; and
• Any material early termination penalties incurred by the company.

No disclosure under this item is required during negotiations or discussions regarding termination of a material definitive agreement unless and until the agreement has been terminated. In addition, no disclosure is required if a company believes in good faith that the agreement has not been terminated, unless the company has received a notice of termination pursuant to the terms of the agreement.

Item 2.03 - Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant

New Item 2.03 requires disclosure if a company becomes obligated under a direct financial obligation that is material to the company. A direct financial obligation is:

• A long-term debt obligation, as defined in Item 303(a)(5)(ii)(A) of Regulation S-K;
• A capital lease obligation, as defined in Item 303(a)(5)(ii)(B) of Regulation S-K;
• An operating lease obligation, as defined in Item 303(a)(5)(ii)(C) of Regulation S-K; and
• A short-term debt obligation, which is a payment obligation under a borrowing arrangement that is scheduled to mature within one year, that arises other than in the ordinary course of business.

In the case of such a direct obligation, a company must disclose:

• The date on which the company became obligated on the direct financial obligation and a brief description of the transaction or agreement creating the obligation;
• The amount of the obligation, together with its payment terms and, if applicable, a brief description of the material terms under which it may be accelerated or increased and the nature of any recourse provisions that would enable the company to recover from third parties; and
• A brief description of the other terms and conditions of the transaction or agreement that are material to the company.

New Item 2.03 also requires disclosure if a company be-comes directly or contingently liable for an obligation that is material to the company arising out of an off-balance sheet arrangement. An off-balance sheet arrangement is used as defined in Item 303(a)(4)(ii) of Regulation S-K.

In the case of such an obligation, a company must disclose:

• The date on which the company became directly or contingently liable on the obligation;
• A brief description of the transaction or agreement creating the arrangement and obligation;
• A brief description of the nature and amount of the obligation of the company under the arrangement, including the material terms under which it may become a direct obligation, if applicable, or may be accelerated or increased, and the nature of any recourse provisions that would enable the company to recover from third parties;
• The maximum potential amount of future payments (undiscounted and not reduced by any potential offsetting amounts, such as recourse payments) that the company may be required to make, if different; and
• A brief description of the other terms and conditions of the obligation or arrangement that are material to the company.

A company must file a Form 8-K under this item when it enters into an agreement that is enforceable against it, whether or not subject to conditions, under which the direct financial obligation will arise or be created or issued. If there is no agreement, the company must provide the disclosure within four business days after the occurrence of the closing or settlement of the transaction or arrangement under which the direct financial obligation arises or is created.

A company must provide the required disclosure regarding an off-balance sheet arrangement, whether or not the company is also a party to the transaction or agreement creating the contingent obligation. If neither the company nor any affiliate is a party to the transaction or agreement, the four business day period for reporting begins on the fourth business day after the earlier of (i) the day on which the contingent obligation is created or arises and (ii) the day on which an executive officer of the company becomes aware of the contingent obligation.

If a company enters into a facility, program or similar arrangement that creates or may give rise to direct financial obligations in connection with multiple transactions, the company must disclose its entering into of the facility, program or similar arrangement, and its obligations, to the extent the obligations are material, as they arise or are created under the facility or program (including when a series of previously undisclosed individually immaterial obligations becomes material in the aggregate).

If the obligation required to be disclosed under Item 2.03 is a security, or a term of a security, that has been or will be sold pursuant to an effective registration statement, the company is not required to file a Form 8-K, provided that the prospectus relating to the sale contains the information required by Item 2.03 and is filed within the time period required by Rule 424 under the Securities Act.

Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement

New Item 2.04 requires disclosure if a triggering event causing an increase or acceleration of a direct financial obligation of the company occurs and the consequences of the event are material to the company.

In this case, a company must disclose:

• The date of the triggering event and a brief description of the agreement or transaction under which the direct financial obligation was created and is increased or accelerated;
• A brief description of the triggering event;
• The amount of the direct financial obligation, as increased if applicable, and the terms of payment or acceleration that apply; and
• Any other material obligations of the company that may arise, be accelerated or become direct financial obligations as a result of the triggering event or the increase or acceleration of the direct financial obligation.

New Item 2.04 also requires disclosure if a triggering event occurs that causes a company’s obligation under an off-balance sheet arrangement to increase or be accelerated, or causes a company’s contingent obligation under an off-balance sheet arrangement to become a direct financial obligation of the company, and the consequences of the event are material to the company.

In this case, a company must disclose:

• The date of the triggering event and a brief description of the off-balance sheet arrangement;
• A brief description of the triggering event;
• The nature and amount of the obligation, as increased if applicable, and the terms of payment or acceleration that apply; and
• Any other material obligations of the company that may arise, increase, be accelerated or become direct financial obligations as a result of the triggering event or the increase or acceleration of the obligation under the off-balance sheet arrangement or its becoming a direct financial obligation.

Disclosure is required if a triggering event occurs in respect of a company’s obligation under an off-balance sheet arrangement and the consequences are material to the company, whether or not the company is also a party to the transaction or agreement under which the triggering event occurs.

No disclosure is required unless and until a triggering event has occurred in accordance with the terms of the relevant agreement, transaction or arrangement, including, if required, the sending to the company of notice of the occurrence of a triggering event pursuant to the terms of the agreement, transaction or arrangement and the satisfaction of all conditions to such occurrence, except the passage of time. In addition, no disclosure is required if the company believes, in good faith, that no triggering event has occurred, unless the company has received an appropriate notice.

The terms "direct financial obligation" and "off-balance sheet arrangement" are used as defined in Item 2.03, but a direct financial obligation also includes an obligation arising out of an off-balance sheet arrangement that is accrued under FASB Statement of Financial Accounting Standards No. 5, Accounting for Contingencies, as a probable loss contingency. The term "triggering event" means an event, including an event of default, event of acceleration or similar event, as a result of which a direct financial obligation of the company or an obligation of the company arising under an off-balance sheet arrangement is increased or becomes accelerated or as a result of which a contingent obligation of the company arising out of an off-balance sheet arrangement becomes a direct financial obligation of the company.

Item 2.05 - Costs Associated with Exit or Disposal Activities

New Item 2.05 requires disclosure when the board of directors, a committee of the board of directors, or an authorized officer if board action is not required, commits the company to an exit or disposal plan or otherwise disposes of a long-lived asset or terminates employees under a plan of termina-tion described in paragraph 8 of FASB Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities, under which material charges will be incurred under generally accepted accounting principles applicable to the company.

In this case, a company must disclose:

• The date of the commitment to the course of action and a description of the course of action, including the facts and circumstances leading to the expected action and the expected completion date;
• For each major type of cost associated with the course of action, an estimate of the total amount or range of amounts expected to be incurred in connection with the action;
• The company’s estimate of the total amount or range of amounts expected to be incurred in connection with the action; and
• The company’s estimate of the amount or range of amounts of the charge that will result in future cash expenditures. 

If the company is unable to make a good faith estimate at the time it files the Form 8-K, it must amend the Form 8-K with-in four business days after the time it is able to formulate an estimate.

Item 2.06 - Material Impairments

New Item 2.06 requires disclosure when a company’s board of directors, a committee of the board of directors, or an authorized officer if board action is not required, concludes that a material charge for impairment to one or more of the company’s assets, including, without limitation, an impairment of securities or goodwill, is required under generally accepted accounting principles applicable to the company.

Based on discussions with the staff of the SEC, in this case "material" should be interpreted as material to the company, rather than material to the asset under consideration.

In this case, a company must disclose:

• The date of the conclusion that a material charge is required and a description of the impaired asset or assets and the facts and circumstances leading to the conclusion that the charge for impairment is required;
• The company’s estimate of the amount or range of amounts of the impairment charge; and
• The company’s estimate of the amount or range of amounts of the impairment charge that will result in future cash expenditures.

If the company is unable to make a good faith estimate at the time of filing the Form 8-K, it must amend the Form 8-K at the time it is able to formulate an estimate.

No Form 8-K is required to be filed if the conclusion regarding the material charge is made in connection with the preparation, review or audit of the company’s financial statements at the end of a fiscal quarter or year and the plan is disclosed in the company’s periodic report for that period.

Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing

New Item 3.01 requires a company to report its receipt of a notice from the national securities exchange or national securities association having an automated inter-dealer quotation system (such as The Nasdaq Stock Market) that maintains the principal listing for any class of the company’s common equity, indicating that:

• The company or the class of its securities does not satisfy a rule or standard for the continued listing on the exchange or association;
• The exchange has submitted an application under Rule 12d2-2 under the Exchange Act to the SEC to delist such class of the company’s securities; or
• The association has taken all necessary steps under its rules to delist the security from its automated inter-dealer quota-tion system.

In this case, a company must disclose:

• The date that it received the notice;
• The rule or standard for continued listing that the company fails, or has failed, to satisfy; and
• Any action or response that, at the time of filing, the company has determined to make in response to the notice.

The new item also requires disclosure if a company has notified the national securities exchange or national securities association that maintains the principal listing for any class of the company’s common equity that the company is aware of any material noncompliance with a rule or standard for continued listing on the exchange or association.

In this case, a company must disclose:

• The date that the company provided such notice to the exchange or association;
• The rule or standard for continued listing on the exchange or association that the company fails, or has failed, to satisfy; and .
• Any action or response that, at the time of filing, the company has determined to take regarding its noncompliance.

If the national securities exchange or association that maintains the principal listing for any class of the company’s common equity, in lieu of suspending trading in or delisting such class of the company’s securities, issues a public reprimand letter or similar communication indicating that the company has violated a rule or standard of the exchange or association, the company must state the date and summarize the contents of the letter or communication.

If a company’s board of directors, a committee of the board of directors or the officer of the company authorized to take such action if board action is not required, has taken definitive action to cause the listing of a class of its common equity to be with-drawn from the national securities exchange, or terminated from the automated inter-dealer quotation system of a national securities association, which exchange or association maintains the principal listing for such class of securities, or the class of equity securities is moved from one exchange or association to another, the company must describe the action taken and state the date of the action.

The disclosure required by new Item 3.01 must be provided even if the company has the benefit of a grace period or similar extension period during which it may cure the deficiency that triggers the disclosure requirement.

Disclosure is not required where delisting is the result of:

• The entire class of securities having been called for redemption, maturity or retirement and, if required by the terms of the securities, funds sufficient for the payment of all such securities having been deposited with an agency authorized to make such payments and such funds having been made available to securityholders;
• The entire class of security having been redeemed or paid at maturity or retirement;
• The instruments representing the entire class of securities having come to evidence, by operation of law or otherwise, other securities in substitution therefor and representing no other right, except, if true, the right to receive an immediate cash payment; or
• All rights pertaining to the entire class of securities having been extinguished.

An early warning notice that merely informs a company that it is in danger of falling out of compliance with a listing rule or standard does not require disclosure.

New Item 3.01 could result in a company filing multiple reports on Form 8-K. For example, a report is required to be filed when notice of noncompliance with the listing requirement is received and a second when the security is actually delisted.

Item 3.01 does not apply to companies whose securities are quoted on automated inter-dealer quotation systems, such as the over-the-counter bulletin board and the Electronic Pink Sheets, that do not give companies the choice to list their securities or impose listing standards.

Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review

New Item 4.02 requires disclosure if and when a company’s board of directors, a committee of the board of directors, or an authorized officer if board action is not required, concludes that any of the company’s previously issued financial state- ments covering one or more years or interim periods should no longer be relied upon because of an error in the financial statements as addressed in Accounting Principles Board Opinion No. 20.

In this case, a company must disclose:

• The date of the conclusion regarding the non-reliance and an identification of the financial statements and years or periods covered that should no longer be relied upon;
• A brief description of the facts underlying the conclusion to the extent known to the company at the time of filing; and
• A statement of whether the audit committee, or the board of directors in the absence of an audit committee, or authorized officer, discussed with the company’s independent account the subject matter giving rise to the conclusion.

In addition, disclosure must be provided if a company is advised by, or receives notice from, its independent accountant that disclosure should be made or action should be taken to prevent future reliance on a previously issued audit report or completed interim review related to previously issued financial statements.

In this case, a company must disclose:

• The date on which the company was so advised or notified;
• Identification of the financial statements that should no longer be relied upon;
• A brief description of the information provided by the accountant; and
• A statement of whether the audit committee, or the board of directors in the absence of an audit committee, or authorized officer, discussed the subject matter giving rise to the notice with the independent accountant.

If the company receives this advice or notice from its independent accountant, the company must provide the independent accountant with a copy of the disclosures it is making under Item 4.02 no later than the same day it files these disclosures with the SEC. The company also must re-quest the independent accountant to furnish to the company as promptly as possible a letter addressed to the SEC stating whether the accountant agrees with the statements made by the company and, if not, stating the respects in which it does not agree. The company must then amend its previously filed Form 8-K by filing the independent accountant’s letter with-in two business days of the company’s receipt of the letter.

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

Item 5.02 requires disclosure if a director resigns or refuses to stand for reelection since the date of the last annual meeting of shareholders due to a disagreement with the company, known to an executive officer of the company, on any matter relating to the company’s operations, policies or practices, or is removed for cause. As revised, this requirement expands on the existing requirement contained in Item 6 of Form 8-K.

In this case, a company must now disclose:

• The date of the director’s resignation, refusal to stand for reelection or removal;
• Any positions held by the director on any committee of the board of directors at the time of the director’s resignation, refusal to stand for reelection or removal; and
• A brief description of the circumstances representing the disagreement that management believes caused, in whole or in part, the director’s resignation, refusal to stand for reelection or removal.

If the director furnishes the company with any written correspondence concerning the circumstances surrounding his or her resignation, refusal to stand for reelection or removal, the company must file a copy of the correspondence as an exhibit to the Form 8-K regardless of whether the director requests that the company take such action. The company must provide the director with a copy of the disclosures it is making in response to this item no later than the day that the company files the disclosure with the SEC. The company must also provide the director with the opportunity to furnish a letter addressed to the company as promptly as possible stating whether he or she agrees with the company’s disclosures in response to this item and, if not, the respects in which he or she does not agree. The company must file any letter it receives from the director with the SEC as an exhibit by amendment to the previously filed Form 8-K within two business days after receipt by the company.

Item 5.02 also requires disclosure when specified officers retire, resign or are terminated and when a director retires, resigns, is removed or refuses to stand for reelection for any reason other than as a result of a disagreement or for cause. The specified officers are the company’s principal executive officer, president, principal financial officer, principal ac-counting officer, principal operating officer or any person performing similar functions.

Item 5.02 requires disclosure when the company appoints, or first makes public announcement of the appointment if the company intends to make a public announcement of the appointment other than by means of a report on Form 8-K, new specified officers. The specified officers are the same as those identified in the previous paragraph.

If this is the case, a company must disclose:

• The officer’s name;
• The officer’s position;
• The date of appointment;
• Information regarding the background of the officer;
• Information regarding certain related transactions between the new officer and the company; and
• A brief description of the material terms of any employment agreement between the company and the officer.

Item 5.02 further requires disclosure if a new director is appointed to the board, other than by a vote of securityholders at an annual meeting of shareholders.

If this is the case, a company must disclose:

• The director’s name;
• The date of election;
• A brief description of any arrangement or understanding pursuant to which the new director was elected as a director;
• Any committees to which the new director has been, or at the time of the disclosure is expected to be, named; and
• Information regarding certain related party transactions between the new director and the company.

To the extent that any of the information is not determined or is not available at the time that the Form 8-K is filed, the company must include a statement to this effect in the filing and then must file an amendment to the Form 8-K filing containing the required information within four business days after the information is determined or becomes available.

Disclosure need not be provided in response to this item if the company is a wholly-owned subsidiary of a company with a class of securities registered under Section 12 of the Ex-change Act or that is required to file reports under Section 15(d) of the Exchange Act.

Item 5.03 Amendments to Articles of Incorporation or By-laws; Change in Fiscal Year

Item 5.03 requires a company with a class of equity securities registered under Section 12 of the Exchange Act that amends its articles of incorporation or bylaws without having pro-posed the amendment in a previously filed proxy statement, to disclose the effective date of the amendment, a description of the provision adopted or changed and, if applicable, the previous provision.

In each case the text of the amendment must be filed as an exhibit to the Form 8-K and a complete copy of the articles of incorporation or bylaws, as amended or restated, must be filed as an exhibit to the next periodic report filed by the company.

If a company with a class of equity securities registered under Section 12 of the Exchange Act determines to change its fiscal year from that used in its most recent filing with the SEC by means other than a submission to a vote of securityholders, or by an amendment to its articles of incorporation or bylaws, Item 5.03 requires the company to disclose the date of the determination, the date of the new fiscal year end and the form on which the report covering the transition period will be filed.

Item 3.02 Unregistered Sales of Equity Securities

Item 3.02 requires disclosure of the information specified in paragraphs (a) and (c) through (e) of Item 701 of Regulation S-K regarding a company’s sale of equity securities in a transaction that is not registered under the Securities Act. This disclosure is currently required in Form 10-Q and 10-K. Disclosure is not required until the company enters into an agreement enforceable against it, whether or not subject to conditions, under which the equity securities are to be sold. This means that the Form 8-K could be required to be filed before the transaction closes. If there is no such agreement, the company must provide the disclosure within four business days after the occurrence of the closing or settlement of the transaction or arrangement under which the equity securities are sold.

No disclosure on Form 8-K is required if the equity securities sold in the aggregate since the company’s last report on Form 8-K filed under Item 3.02 or the company’s last periodic re-port, whichever is more recent, constitute less than 1% of the number of shares outstanding of that class. In the case of a small business issuer, the threshold is 5%, rather than the 1% that applies to other companies.

Item 3.03 Material Modifications to Rights of Security Holders

Item 3.03 requires disclosure of material modifications to the rights of the holders of any class of the company’s registered securities and a brief description of the general effect of such modification on such rights. This disclosure is currently required in Form 10-Q.

The SEC has revised many of the existing disclosure requirements to, among other things, eliminate some unnecessary disclosures and to make the requirements more readable, such as by breaking out embedded lists from the text and moving some language from the text into an instruction to the item.

Under amended Form 8-K, companies will generally be required to file a Form 8-K within four business days of a triggering event, rather than the current five to 15 calendar days, with no ability to extend this new, much shorter deadline. A conforming change has been made to the exhibit require-ments to allow the financial statements to be filed within 71 calendar days, rather than the current 60 calendar days, after the date of the initial report on Form 8-K. As an example, if a triggering event occurs on a Wednesday, the Form 8-K filing deadline will generally be the following Tuesday. This accelerated filing requirement does not affect the filing deadline for disclosures under Regulation FD (new Item 7.01), and does not apply to voluntary disclosures (new Item 8.01) and the filing of certain exhibits.

The new Form 8-K also accelerates the filing deadline for Item 5.04, old Item 11, with respect to temporary suspensions of trading under a company’s employee benefit plans so that it will now be required to be filed by the earlier of the fourth business day after the company receives the notice of a suspension or the same date on which the company transmits a timely notice to an affected officer or director.

The failure to timely file a Form 8-K regarding new Items 1.01, 1.02, 2.03, 2.04, 2.05, 2.06 and 4.02(a) will not, by it-self, be deemed a violation of Section 10(b) and Rule 10b-5 of the Exchange Act, unless the company is otherwise under an obligation to disclose the information. For example, if a company is repurchasing its securities and therefore has a duty to disclose all material non-public information, the failure to disclose this information will not be protected by the Form 8-K safe harbor. However, a failure to timely file will continue to be a violation of Form 8-K and can be the subject of an SEC enforcement action. This Form 8-K safe harbor will only exist until the filing of the next periodic report on Form 10-K or Form 10-Q. After that filing, the implication is that liability under Section 10(b) and Rule 10b-5 could arise if disclosure is not provided in the periodic re-port. Of course, material misstatements or omissions in a Form 8-K will continue to be subject to Section 10(b) and Rule 10b-5 liability.

The failure to timely file a Form 8-K regarding new Items 1.01, 1.02, 2.03, 2.04, 2.05, 2.06 and 4.02(a) will not result in a loss of eligibility to use Form S-2 or Form S-3. However, a company must be current with respect to these and other Form 8-K items at the time of filing a registration statement on Form S-2 or Form S-3 to be eligible to use Form S-2 or Form S-3.

The failure to timely file a report on Form 8-K will not affect the ability of a person to rely on Rule 144 in connection with resales of the company’s securities. However, in the Form 144 the selling securityholder will continue to be required to represent that the seller does not have material nonpublic information and therefore it could be difficult for an insider to rely on Rule 144 if the company has not filed all of its reports on Form 8-K.

In light of the fact that some items have been moved from Form 10-Q and Form 10-K to Form 8-K and that items that were required to be disclosed on a Form 8-K but were not should be disclosed in the next periodic report, Form 10-Q and Form 10-K have been revised to reflect these changes.

• Each company’s disclosure controls and procedures must be revised to comply with the new requirements.

• For most of the triggering events, the drafting of the Form 8-K should now occur simultaneously with the underlying transaction. For example, under the existing requirements, a material acquisition or merger is not required to be reported until 15 calendar days after the closing of the transaction and entering into a material credit facility is not required to be reported until the next periodic report. Under the new requirements, a Form 8-K is required to be filed within four business days of entering into the agreement. These disclosures are no longer something that can wait until after the transaction has been signed and the dust has settled. The drafting of the Form 8-K must be in process while the agreement is being negotiated.

• When preparing Form 8-K disclosure, it is important to remember that although the rules of Form 8-K may not expressly require management to analyze the impact of a reportable event, any disclosure made in a report on Form 8-K must include all material information, if any, that is necessary to make the required disclosure, in light of the circumstances under which it is made, not misleading.

• The filing deadlines for most of the existing Form 8-K requirements have been accelerated. So most items that previously could be filed within 5 to 15 calendar days, including Item 1 (Changes in Control of the Registrant), Item 2 (Acquisition or Disposition of Assets), Item 3 (Bankruptcy or Receivership), Item 4 (Changes in Registrant’s Certifying Accountant), Item 6 (Resignation of Registrant’s Directors), Item 8 (Change in Fiscal Year) and Item 10 (Amendments to the Registrant’s Code of Ethics or Waiver of a Provision of the Code of Ethics) must now be filed within four business days of the triggering event. It is important to be aware of the new filing deadlines as the effective date of the revised form approaches.

• Careful consideration needs to be given as to what constitutes a material contract. When material contracts are being filed as exhibits to the Form 10-K or Form 10-Q, it is relatively easy to err on the side of filing the contract as an exhibit, even if there was an argument that it might not be material. Under the amended Form 8-K framework, however, if a contract is deemed to be a material contract, it will trigger an independent filing requirement and material amendments to that con-tract will also trigger a Form 8-K filing requirement.

• It is also important to remember in the context of the material contract filing requirement that contracts with an executive officer whose compensation is identified in the proxy statement are deemed material. Therefore, amending an employment agreement or entering into a severance agreement with a named executive officer will trigger a Form 8- K filing. Similarly, the adoption or amendment of certain employee benefit plans could also trigger a Form 8-K filing.

• The SEC has made clear that exhibits filed in response to Items 2.02 (Results of Operations and Financial Condition) and Item 7.01 (Regulation FD Disclosure) are deemed furnished rather than filed unless the company specifically states that they are to be deemed filed. As a result, it will no longer be necessary for companies to add language in their Form 8-K to try and make clear that the exhibits relating to these items, like the disclosure to which they relate, are to be deemed furnished.

• If on or after August 23, 2004 a company amends a Form 8- K report that was filed before August 23, 2004, the company must use the new numbering system when filing the amendment.

• Although the new requirements are prospective only, some events occurring after August 23, 2004 (such as a material amendment to a material definitive agreement) will trigger disclosure even though the agreement itself was entered into before August 23, 2004. For example, a material agreement entered into on August 15, 2004 is not required to be filed on Form 8-K as it occurs before the effective date of the revised form of August 23, 2004. However, a material modification of that agreement that occurs on August 25, 2004 would require the filing of a Form 8-K.

• If an event falls under multiple reporting categories, the Form 8-K must identify each of the items it is being filed under. 

Copyright © 2007, Mayer, Brown, Rowe & Maw LLP. and/or Mayer Brown International LLP. This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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