iThe SEC has updated its Form 8-K compliance & disclosure interpretations (C&DIs) with two new Q&As focused on Item 1.01, Entry into a Material Definitive Agreement. New Q&A 102.04 outlines what are generally viewed as material terms and conditions of a business combination agreement that is reportable under Item 1.01:
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The amount and nature of the consideration (or exchange ratio or formula for determining the same);
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The terms of or need for financing related to the transaction;
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Material terms related to security ownership or management structure of the resulting company after closing;
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Material conditions to closing; and
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The anticipated time frames for filing of required disclosure documents (registration statements, proxy statements, tender offer materials) and for closing of the transaction.
Q&A 102.04 also notes other information that should be included in a Form 8-K filing, such a statement that a material term of the business combination agreement has yet to be decided (if applicable), and the nature of the target company’s business, including whether it has operations, as well as any information disclosed by the target in its announcement of the business combination. New Q&A 102.05 addresses whether material agreements should be filed with the Form 8-K in which disclosure is contained under Item 1.01.
Such documents are not currently required to be filed with the Form 8-K announcement; however the new C&DI makes clear that the SEC expects such agreements to be filed as a best practice. The SEC Staff specifically points to changes in technology and changes in SEC rules that negate the need for the previous accommodation that allowed filers to omit exhibits from Item 1.01 8-K filings. Companies that have been in the habit of filing material agreements with their periodic reports only should take heed and update their internal policies and checklists to ensure such agreements are filed with the associated 8-K disclosing the agreement.
