The SEC's Division of Corporation Finance has issued a series of answers to Frequently Asked Questions (the "FAQ") with respect to the SEC's Form 8-K current reporting requirements.
On November 23, 2004, the staff of the SEC's Division of Corporation Finance released the FAQ stating its position on 30 frequently raised issues under the SEC's expanded Form 8-K requirements. The FAQ may be found online at http://www.sec.gov/divisions/corpfin/form8kfaq.htm. The questions and answers relate in large part to reporting of compensatory arrangements and entry into or termination of other material agreements. They also address reporting of off-balance sheet arrangements and other accounting-related events, and departures or appointments of officers and directors. The staff's responses emphasize the staff's view that each registrant's disclosure controls and procedures must be designed to permit reporting within the short period required by Form 8-K. The FAQ is not a rule or interpretation of the SEC but, as a practical matter, may be relied upon until the SEC or its staff indicates otherwise.
Events that otherwise would trigger the Form 8-K filing requirements, except for reports that a registrant's financial statements or independent auditor's report no longer may be relied upon, that occur within four business days of the filing of a quarterly or annual report may be reported in that periodic report and need not be reported on a Form 8-K. (Q 1)
A Form 8-K trigger event with respect to a subsidiary of a registrant, if material to the registrant, triggers a requirement for the registrant to file a Form 8-K. (Q 2)
Entry Into Or Termination OfA Material Definitive Agreement (Items 1.01 And 1.02 Of Form 8-K)- Miscellaneous
An agreement that was immaterial when entered into does not trigger a Form 8-K filing requirement if it later becomes material. However, when it becomes material, it must be filed as an exhibit to the periodic report for the period during which it became material. (Q 3)
If a registrant determines that an underwriting agreement or placement agency agreement is material, it may omit the identification of the underwriters or placement agents in its Form 8-K filing in order to preserve the safe harbor from the definition of "offer" under Rule 135c. (Q 4)
If an agreement has an advance notice of termination provision and notice is given, a Form 8-K filing requirement is triggered, even if the registrant intends to negotiate continuation of the agreement. However, renewal of an agreement, in the absence of a termination notice, does not trigger a Form 8-K filing requirement. (Qs 15 and 16)
If an agreement terminates on a specified date unless a party sends a renewal notice, termination of the agreement in the absence of a renewal notice would not trigger a filing requirement. However, sending a renewal notice that is not rejected triggers a Form 8-K filing requirement on the rejection cutoff date. (Q 17)
Entry Into A Material Definitive Agreement - Compensation Arrangements
A "summary sheet" provided to directors that memorializes the terms of directors' compensation would trigger a Form 8-K filing requirement. The filing would have to be made within four business days of entry into the agreement (which could be an oral agreement) memorialized by the summary sheet. (Q 5)
Entry into or amendment of an employment agreement with a "named executive officer," including a newly appointed executive officer, triggers a Form 8-K filing requirement. The appointment of a new executive officer triggers a separate Form 8-K filing requirement. (Q 6)
Entry into or amendment of a material employment agreement with an officer other than a "named executive officer," including an officer whose appointment otherwise triggers a Form 8-K filing requirement, also triggers a Form 8-K filing requirement. (Q 7)
Generally, adoption of an equity compensation plan or a cash bonus plan in which executive officers may participate triggers a filing requirement. However, if the plan is subject to stockholder approval, the Form 8-K filing requirement is not triggered until that approval is obtained. (Qs 8 and 12)
If the form of agreement under a compensation plan, which together with the plan describes all the material features of the arrangement, is filed as an exhibit, individual agreements would not have to be filed unless they vary in material respects from the form. However, the terms of compensation arrangements with newly appointed officers may have to be disclosed under another Item of Form 8-K. (Qs 9. 10 and 11)
If a previously filed cash bonus plan does not describe the specific performance goals and business criteria for the performance period, such as EBITDA, or awards were made although the performance goals were not reached, individual awards to executive officers would trigger separate Form 8-K filing requirements. However, consistent with the SEC's proxy rules, target levels with respect to specific quantitative or qualitative performance would not have to be disclosed. (Qs 13 and 14)
Creation Of, Or Events That Accelerate Or Increase, A Material Direct Financial Obligation OrA Material Obligation Under An Off-Balance Sheet Arrangement (Items 2.03 And 2.04 Of Form 8-K)
A Form 8-K filing requirement is triggered by the creation of a material contingent obligation under an off-balance sheet arrangement and the report must be filed within the earlier of the fourth business day after the contingent obligation is created or the day on which an executive officer of the registrant becomes aware of its creation, regardless of whether the registrant is a party to the off-balance sheet arrangement. The SEC staff takes the position that the registrant should have the required disclosure controls and procedures to allow timely filing of a Form 8-K in these circumstances. (Q 18)
If a registrant replaces or refunds a long-term debt obligation with a similar obligation, whether a Form 8-K is required to be filed is a question of materiality, which must be determined based on the particular facts and circumstances. (Q 19)
If a counterparty is required to give a notice of or declare a default before an obligation is accelerated or increased and no such notice or declaration has been given, no Form 8-K filing requirement is triggered. However, if no such notice or declaration is required, the default triggers the filing requirement. (Q 20)
Costs Associated with Exit or Disposal Activities (Item 205 of Form 8-K):
Questions 21 and 22 relate to the application of technical accounting issues under Statement of Financial Accounting Standards No. 146 and are not dealt with in this article.
Non-Reliance on Financial Statements or an Audit Report (Item 4.02 of Form 8-K):
If a registrant files a Form 8-K to report that its financial statements no longer may be relied upon, it need not file a second Form 8-K to report that the registrant's independent auditors have reached the same conclusion. (Q 23)
Departure Of Directors Or Principal Officers; Election Of Directors; Appointment Of Officers(Item 5.02 Of Form 8-K)
If a director or "principal officer" (a term not synonymous with "executive officer") gives oral or written notice of his or her resignation or retirement or. in the case of a director. refusal to stand for reelection at the next annual meeting, the notice triggers a Form 8-K filing requirement and the report must specify the effective date of resignation or retirement. Consideration or discussion of these matters, however, is not required to be reported. Whether communications represent only consideration or discussion requires a facts and circumstances analysis, and the SEC staff takes the position that the registrant must have the required disclosure controls and procedures in place to determine whether a communication is, in fact, a resignation. retirement or refusal to stand for reelection. (Qs 24 and 28)
If a registrant does not renominate a director, no Form 8-K filing is required, unless the director then resigns or retires before the annual meeting. (Q 25)
If a registrant appoints a new principal officer, it may delay filing the required Form 8-K until the time of the public announcement of the appointment. In addition, it may delay reporting of material agreements with that officer and his or her election to the board of directors until that announcement. (Q 26)
The circumstances for termination of a material agreement with a terminated officer may be described in the report as "in conjunction with the officer's departure," rather than giving the reasons for the termination. (Q 27)
The removal and reassignment of a principal officer's duties and responsibilities, even if he or she remains an employee, constitutes a "termination" and triggers a Form 8-K filing requirement. (Q 29)
Amendments To Governing Instruments (Item 5.03 Of Form 8-K)
The restatement of a registrant's articles of incorporation, without substantive amendment, does not trigger a Form 8-K filing requirement. (Q 30)
Julie M. Allen is a Partner in the Corporate Department of Proskauer Rose LLP and Co-Chair of the Firm's Capital Markets Group in New York. She can be reached at (212) 969-3155. Allan R. Williams is a Partner in the Firm's Corporate Department and Co-Chair of the Capital Markets Group in New York. He can be reached at (212) 969-3220. Richard H. Rowe is a Partner in the Firm's Corporate Department in the firm's Washington, D.C. office and a member of the Capital Markets Group. He can be reached at (202) 316-3726.