Accelerated and Expanded Form 8-K Disclosure

• New Disclosures
• Relocated Disclosures
• Expanded Disclosures
• Filing Deadline
• Filing of Exhibits
• Special Treatment of New
• Disclosure Items
• Rule 144 Requirements
• No Section 906 Certification
• Required under the Sarbanes-Oxley Act of 2002
• Start Preparing Now

Recently, the Securities and Exchange Commission approved substantial changes to the Form 8-K filing requirements. Effective August 23, 2004, the filing timeline for most Form 8-K items will be shortened to four business days.

In addition, the new rules add eight required disclosure items, transfer two disclosure items from Forms 10-Q and 10-K, and expand two existing disclosure items. This article presents a brief summary of the most significant changes.

The new rules add the following to the list of events that must be reported on Form 8-K:

• Entry into, or material amendment of, a material definitive agreement not made in the ordinary course of business (this will include some management compensation agreements);

• Termination (other than by completion or expiration) of a material definitive agreement not made in the ordinary course of business, if termination is material to the reporting company;

• Creation of a material direct financial obligation or a material direct or contingent obligation arising out of an off-balance sheet arrangement, whether or not the reporting company is a party to the arrangement;

• Acceleration of, or increase in, a direct financial obligation or off-balance sheet obligation, if material to the reporting company;

• Commitment to exit a business, dispose of assets, or terminate employees, if material charges will be incurred by the reporting company under GAAP; .

• Determination that material charges for impairment to assets (including impairment of securities or goodwill) are required under GAAP, unless the determination is made in connection with preparation of the next periodic report and is disclosed in that report in a timely manner;

• Determination that investors should no longer rely on any previously issued financial statements;

• Notice from the reporting company's independent accountants that action should be taken to prevent future reliance on previously issued audit reports or reviews; and

• Notice of delisting from a securities exchange or of failure to satisfy a continued listing standard, receipt of a letter of reprimand from an exchange, voluntary withdrawal from listing, or transfer of listing from one exchange to another.

The new rules move the following two disclosure items from annual and quarterly reports to Form 8-K:

• Unregistered sales of equity securities by the reporting company; and

• Material modification of the rights of security holders.

The new rules require additional disclosure regarding:

• The departure or appointment of directors or principal officers; and

• Amendments to Articles of Incorporation or Bylaws or change in fiscal year.

Under the new rules, a Form 8-K generally must be filed within four business days of a triggering event. Financial statements and pro forma financial information required in connection with a business acquisition must be filed within 71 calendar days after the deadline for the Form 8-K reporting the transaction. The recent amendments do not affect the filing deadlines for Regulation FD or voluntary filings.

A material definitive agreement reportable on Form 8-K, as noted in inNew Disclosuresln above, need not be filed as an exhibit to the Form 8-K. However, it must be filed as an exhibit to the reporting company's next periodic report or registration statement.

The new rules afford special treatment to the new reportable items described under inNew Disclosuresln above except the last two bullet points in that section, which relate to listing matters and to notice that action should be taken to prevent future reliance on audit reports or reviews.

• Safe Harbor. The recent amendments include a limited safe harbor, which provides that a failure to make a timely filing of a Form 8-K required solely by these items will not constitute a violation of Section 10(b) or Rule 10b-5 of the Securities Exchange Act of 1934. This safe harbor only addresses a failure to file a Form 8-K, and does not cover material misstatements or omissions in a Form 8-K or any other failure to comply with securities laws. In addition, this safe harbor extends only until the due date of the next periodic report for the relevant period. At that point, all required disclosures must be current. .

• Eligibility to Use Forms S-2 and S-3. The SEC revised Forms S-2 and S-3 to provide that the failure to timely file a Form 8-K required by these items will not render a reporting company ineligible to use Form S-2 or S-3. However, a reporting company must be current in its Form 8-K filings at the time of the Form S-2 or S-3 filing.

The SEC clarified that a reporting company's failure to timely file a Form 8-K will not affect a security holder's ability to sell pursuant to Rule 144. This applies to all Form 8-K items. However, the selling security holder must still represent that he or she does not have inside information.

The SEC and Department of Justice have concluded that Section 906 of the Sarbanes-Oxley Act does not apply to Form 8-K.

Reporting companies should start preparing now for the new Form 8-K requirements.

• Reporting companies should consider whether to limit the number of persons authorized to enter into reportable transactions. These persons, as well as all directors and management personnel, should be advised of the new Form 8-K rules and instructed to provide advance notice of reportable events.

• Reporting companies should reconsider their existing disclosure controls and procedures in light of the new Form 8-K rules. For example, internal reporting procedures may need to be expanded to address the new reportable items, and internal reporting deadlines may require acceleration due to the shortened Form 8-K deadline.

• Given the shorter filing deadline, reporting companies should discuss the content of the Form 8-K prior to the occurrence of a reportable event.

• The recent amendments effect a number of other technical changes, including the renumbering of reportable items. Therefore, the new rules should be reviewed carefully when preparing a Form 8- K on or after August 23.

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