8-K Amendments Now Effective; Review Of First Filings

On Monday, Aug. 23, the SEC's accelerated 8-K amendments became effective.

As of that date, the number and type of events required to be reported on Form 8-K expanded significantly.

The amendments also shortened the filing deadline for most items to four business days, providing a limited safe harbor from certain liabilities.

The amendments represent an important trend toward “real time” reporting as outlined in Section 409 of Sarbanes-Oxley, opposed to the more traditional periodic reporting mandated by the SEC.

Last week, the SEC made available a new 8-K cover page, as well as instructions for use. The form has been re-organized, as several items have been added and renumbered. The document is available from the column at right, as are other recent columns and guidance.

For those in need of a quick refresher, here are the eight new items added to Form 8-K:

Entry into a material definitive agreement

Termination of such an agreement

Creation of a material direct financial

obligation or a material off-balance sheet

obligation

Triggering events that accelerate or increase

a material direct financial obligation or a

material off-balance sheet obligation

Exit or disposal activities that involve

material costs

Material impairment of assets

Notice of delisting of the company’s

securities, notice of failure to comply with

a continued listing standard, or transfer of

a securities listing

Non-reliance on previously issued

financial statements or a related audit

report or completed interim review

The two items that were transferred to Form 8-K from quarterly/annual reports relate to:

Unregistered sales of equity securities

Material modifications to rights of

security holders

The two expanded items on Form 8-K relate to:

Departure of directors and principal

officers, appointment of a new principal

officer, or election of a new director other

than at a stockholder meeting

Amendment of charter or by-laws or

change in fiscal year

Sample Disclosures

Though the amendments have been effective for only 24 hours, we culled through some of the first filings on Aug. 23 to provide subscribers a snapshot of the types of disclosures being made.

For simplicity, we chose the first item on the new Form 8-K, "Entry Into A Material Definitive Agreement" (Item 1.01).

Though most of the 8-Ks of this type were related to M&A activity, there were some exceptions. Cisco, for example, filed an 8-K related to a stock option grant for president and CEO John Chambers. And $84.6 million Cypress Communications disclosed an employment retention agreement entered into with three executive officers.

The requirement to disclose certain executive compensation agreements, like those of Chambers, is still a bit unclear. According to a recent FAQ published by the law firm of Gibson Dunn & Crutcher (available in box above, right), "We do not believe that a Form 8-K is required whenever an option is granted to a named

executive officer, provided that the company previously has filed the option plan and, if appropriate, the form of option agreement." According to the firm, existing regulations address when individual grant agreements are required to be filed; however, the FAQ does note that there are some situations that could trigger an 8-K filing, including a grant of "non-plan" options.

We've made available several examples below, including the filings from Cisco and Cypress, and we will continue to track disclosure trends in the coming months:

The Bank Holdings Discloses Definitive Agreement To Purchase CNA Trust of Costa Mesa, California

Unitrin Discloses Agreement To Settle Certain Obligations Related To Purchase Of Kemper Insurance Businesses

United Capital Discloses Voting Agreement Related To Its Holdings In Prime Hospitality, Which Are Being Acquired By An Affiliate Of The Blackstone Group

Spanish Broadcasting System Discloses A Subsidiary Has Agreed To Sell The Assets Of Two Los Angeles-Based Radio Stations To Styles Media Group

Cisco Discloses A Board Committee Has Granted CEO John Chambers A Stock Option To Purchase 1.5 Million Shares

Silicon Image Discloses That It Entered Into An Amended Employment Agreement And Consulting Agreement With Its CFO Robert Gargus

Cypress Communications Discloses Creation Of A "Key Executive Officer Retention Plan" to Encourage Dedication Of Certain Executives

Again, extensive details and commentary are in the box above, right.