TheCorporateCounsel.net Blog |
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Friday, April 16, 2004
Hear FASB Chair Bob Herz on Option Expensing! Don't forget Monday's NASPP webcast - "The FASB's Expensing Exposure Draft-What It Says and How to Implement It" - during which Bob Herz, Chair of the FASB; Paul Munter in KPMG's National Office; and Ted Buyniski of Mellon Human Resources & Investor Solutions will discuss the nuances of the exposure draft and explore the various alternatives available to implement the proposed new standards. An audio archive and transcript will be posted following the live webcast. The non-member fee for this special webcast is $495. If you wish to access this valuable program without paying this fee, you may simply take advantage of a no-risk trial. SEC Action over Best Price Rule Deemed Arbitrary and Capricious On April 6th, the US Court of Appeals for the DC District issued an opinion finding the SEC's "cease-and-desist" order against WHX Corporation to be arbitrary and capricious. Some of you may recall that in March 1997, WHX launched a hostile "two-step" tender offer for Dynamics Corporation of America. WHX's first-step tender offer for 19.9% - just below DCA's pill threshold - was initially structured to include a "record holder" condition requiring DCA shareholders to be a holder of record on the record date for DCA's upcoming annual meeting in order to be eligible to tender in the offer. WHX's goal was to acquire as many shares as possible with a right to vote at the annual meeting without triggering DCA's poison pill. At the time, WHX's lawyer contacted the SEC's Office of Mergers & Acquisitions on a pre-commencement basis seeking guidance as to whether the proposed record date condition would violate the All-Holders, Best-Price Rule (i.e. Rule 14d-10). Despite the informal advice of a staffer in OM&A that such a condition would violate Rule 14d-10, WHX proceeded to launch its tender offer with the record holder condition intact. After a threat of an SEC enforcement action, WHX amended its offer to eliminate the record holder condition. During the pendency of the offer, however, the SEC brought action against WHX for alleged violations of Rule 14d-10. An administrative law judge upon hearing the case ruled in WHX's favor. Ultimately, WHX's offer was unsuccessful because DCA was acquired by a white knight. Nevertheless, a year later the SEC proceeded to issue a "cease-and-desist" order against WHX, prohibiting the company from committing or causing future violations of the rule. Here is a copy of the opinion finding the SEC's action "arbitrary and capricious." Thanks to Jim Moloney of Gibson Dunn for this fine recap and analysis! Thursday, April 15, 2004
Our Analysis of Common Non-Gaap Measures In our "Regulation G/Non-Gaap Measures Portal," we have added a new "Analysis of Common Non-Gaap Measures." Among other matters, this analysis covers 13 common non-gaap measures, complete with links to sample disclosures. These common measures include: - Earnings Before Interest and Taxes ("EBIT") - Earnings Before Interest, Depreciation and Amortization ("EBITDA") - Earnings Before Interest, Taxes, Depreciation, Amortization and Rent ("EBITDAR") - Economic Value Added ("EVA") - Free Cash Flow ("FCF") - Funds from Operations ("FFO") - Net Asset Value ("NAV") - Net Operating Income ("NOI") - Net Operating Profit After Tax ("NOPAT") - Operating Cash Flow ("OCF") - Operating Earnings - Operating Profit - Standard & Poor's Core Earnings ABA Spring Meeting Notes on M&A At the ABA Spring Meeting in Seattle a week ago, new Office of Mergers & Acquisitions Chief Brian Breheny made these observations: - SEC considering amendments to “best price rule” - Rule 14d-10(a)(2) - to remedy differing approaches by courts - Staff considering expanding application of position re: “lock ups” in merger transactions to other situations, including restructurings - on October 27, 2003, the SEC settled enforcement proceeding for violation of “going private” rules in SEC v. Wilkerson - On April 1, the Second Circuit overturned a district court in this order and issued an injunction against Highland Capital in connection with MONY/AXA merger – sending photocopies of management’s proxy card to shareholders does constitute the furnishing of a “form of revocation” and is not an exempt solicitation Wednesday, April 14, 2004
US Sentencing Commission Votes to Amend Sentencing Guidelines Yesterday, the US Sentencing Commission issued a press release about last week's meeting during which the Commission voted unanimously to amend the existing organizational guidelines to make more stringent the guidelines’ criteria for effective compliance and ethics programs. The new amendments to the sentencing guidelines will be submitted to Congress by May 1st and will take effect November 1, 2004 - unless Congress disapproves them during a six-month review period. In our "Sentencing Guidelines" Practice Area, there is a recent 24-page memo from O'Melveny & Myers about the guidelines - and more to come as this develops. Retail Investors Communicating Online about their Voting Decisions The ability for investors to communicate online easily about their voting decisions is an interesting concept that is being borne to fruition as told in my interview with Brian Heil and Mark Frigon of ProxyMatters.com. Remember My Warning about Online Forms A few months back, I blogged a warning about using online forms as many are outdated. Along those lines, Richard Rafferty of Haynes & Boone points out that the Schedule 14A on the SEC's website - which was updated in March - doesn't reflect the changes to Schedule 14A made pursuant to the SEC's November release on "Disclosure Regarding Nominating Committee Functions and Communications Between Security Holders and Boards of Directors." SEC Adopts Foreign Banking Exemption from 402 and Proposes No S-8s for Shell Companies At an open Commission meeting yesterday, the SEC voted to adopt a rule that would exempt foreign banks from the insider lending prohibition of Section 13(k) of the '34 Act - as added by Section 402 of Sarbanes-Oxley. The SEC also proposed rules that would prohibit shell companies from using S-8s and would require these companies to file a 8-K when they ceased being a shell that would include all the requisite information for registering a class of securities. The SEC wants to stop the practice of reverse mergers of private operating companies into shell companies. Tuesday, April 13, 2004
Did I Speak Too Soon...SEC Notices PCAOB's Attestation Rulemaking It's a coincidence I'm sure, but after I blogged yesterday about waiting for the SEC to notice the PCAOB's rulemaking regarding attestations and internal controls - the SEC noticed it. There is a 21-day comment period. The compliance date for accelerated filers to comply with the SEC's requirements regarding management's internal control report is the first fiscal year ending on - or after - November 15, 2004. The new attestation standard will apply to the annual audit for that fiscal year. Other dates apply for non-accelerated filers and foreign private issuers. Company Sues Shareholder Proponent for Defamation Back in January, as reported recently by the Atlanta Journal-Constitution, Cintas Corp. filed a defamation lawsuit against against Timothy Smith, SVP of the investment firm Walden Asset Management. Cintas alleges he made defamatory remarks at its October annual meeting. According to the suit, Smith linked the company to a "sweatshop'' factory in Haiti. He was urging passage of a shareholder resolution calling on Cintas to assess the effectiveness of its vendor code of conduct and the compliance of its factories and suppliers. Apparently, Smith declined to comment on the case for the Journal-Constitution, but Amy Domini of Domini Social Investments, which sponsored the resolution with Walden, said that Cintas had ignored numerous attempts to discuss this issue before the meeting. Cintas is asking for damages of at least $75,000, plus unspecified punitive damages - and also wants Walden barred from repeating his sweatshop comparisons. I waited to blog about this lawsuit because it just doesn't seem like it could really happen in this era of improved shareholder relations...I'm not sure that Cintas was thinking about the bigger picture of IR as this likely will draw negative press - and the ire of other investors - for some time to come. Indemnification of Buyers in Acquisitions The April installment of "Carl's Corner" is up - regarding indemnification in acquisitions. As usual, Carl provides interesting commentary and annotated provisions. This is a topic that also has been addressed by the "Deal Guys Blog." Monday, April 12, 2004
SEC General Counsel Speaks Out on Lawyer Responsibilities At the end of the ABA's Business Law Section meeting in Seattle last Saturday, Giovanni Prezioso, the SEC's General Counsel, gave a speech that should serve as interesting reading. Among other topics, Giovanni noted that the SEC still is considering adoption of its outstanding "noisy withdrawal" proposal and that he believed that the SEC's existing rule pre-empts any state laws that are contradictory. Notably, he warned that the SEC is closing watching how lawyers apply the new standards and monitoring how the state bars address the issue of lawyers' obligations to clients. SEC "Notices" PCAOB's Auditing Standard No. 1 The SEC finally has "noticed" the PCAOB's Auditing Standard No. 1, which deals with what it means to say your audit complied with the PCAOB's auditing standards versus GAAS. As you might recall, the PCAOB is required to have all of its rules approved by the SEC before they become effective. It is my guess that odds are low to nil that the SEC won't approve any of the PCAOB's rules, but the SEC has been slow to move the PCAOB's rules through this process so far (e.g. we're still waiting for the SEC to notice the PCAOB's Standard No. 2 regarding internal controls). Imbedded in this notice appears to be a posturing - and important - reminder that "we're bigger than they are" (ie. that your financials must comply with the PCAOB rules but you'd better never forget the preeminent place of the SEC). The SEC also uses the occasion of this notice to announce that it will be coming out with an interpretive release of its own. Sample Annual Meeting Scripts Due to popular demand, we have created a new "Annual Stockholders' Meetings" Practice Area, complete with 2 sample annual meeting scripts in Word files. |
