The Practical Corporate & Securities Law Blog

By Broc Romanek

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Getting Sued as Acquiror's Counsel

There is a pretty interesting blog today in the Deal's Guy Blog regarding a scary new case blaming acquiror's counsel for lack of disclosure - here is an excerpt from that blog: "How many times have you delivered disclosure schedules that contained a one-line reference to a set of closing docs that evidence an otherwise complex transaction? In light of Vega, can you sleep at night knowing that you’ve “properly disclosed.” What happened to caveat emptor and opposing counsel’s obligation to its client to figure out what’s in that stack of documents?"

The Filing of Schedule 13Ds

As we head into the unofficial end of the summer, I thought I would ruminate about the latest doings by the colorful owner of the Washington Redskins - and they are not sport-related. Dan Snyder filed a Schedule 13D for Six Flags on Monday, noting that he had been buying up stock recently and intended to pressure management to make changes (it is noteworthy perhaps that well known M&A lawyer, Dennis Block, was hired to prepare the 13D).

The next day, long-time 11% owner Bill Gates (yes, that Bill Gates) files a 13D also expressing displeasure with management and noting that he might seek a board seat. In the press, these two business giants say they are not working in concert, which is believable given that Gates has owned his shares for five years (he had filed a Schedule 13G and amended it three times). Whatever they do, I hope they don't get rid of the old bald dude from those commercials...

Nasdaq Rule 2710 Clean-Up

For those of you wanting to be as accurate as possible, here are some corrections to Rule 2710 - either to the Rule itself or the CCH version of it:

1.In the CCH looseleaf text of Rule 2710, as amended, the Fifth Exception for Purchases Based on a Prior Investment History states that a prior investment must be at least one year before the filing of the offering - but the right language is "two years." The two years was in the NTM04-13 announcing adoption of the rule, in the SEC approval order, and in Amendment No. 9 to the filing (the last amendment with the full text filed). The error stems from the second publication for comment which erroneously included one year. (I only wish it were one year, to be consistent with new Rule 2790.)

2. The errors in the published text of the amended rule in Notice to
Members 04-13 have been corrected in the CCH looseleaf version, which are that:

"a. the Listed Securities definition covers markets registered with the SEC pursuant to Section 11A of the Securities Exchange Act of 1934, i.e., Nasdaq; and

b. the exemptions from the lock-up requirements for securities that are not an item of value cover Listed Securities.

2. The NASD staff takes the position that the availability of the S-3/Rule 415 exception from filing is determined at the time of each takedown off a shelf registration (of course, based on the pre-1992 standards for the form). Thus, a shelf registration could come into and out of compliance with the filing exception during the life of the shelf."
posted by broc at 8:58 AM

 
Another Breeden Report

The 500+ Breeden Report regarding Hollinger International was filed yesterday on a 8-K - and makes very interesting reading! "Summer drinks" that cost $24, 950! What was in those drinks?

As the NY Times and other major business publications explore at length today, the role of each director is closely dissected in the report (e.g. Mr. Perle admitted that he never understood the underlying transactions before signing off on them).

If your compensation committee members can't understand the basic tally sheets that we are posting on CompensationStandards.com - they will want to hear all about them during our October 20th major compensation conference! And avoid being mentioned adversely in a report like this - not to mention the liability...

The Form N-PX's are In!

Yesterday was the deadline for investment companies and mutual funds to disclose their voting records for the first time. These disclosures are made on Form N-PX. Over 1000 of these forms were filed during this first mutual fund "proxy season," with Fidelity alone filing more than 130 of them. Here is a sample if you want to see what they entail,

Nasdaq Proposes Shareholder Approval Requirement Exception for Discounted Private Placements

The SEC has published a Nasdaq proposal to provide an exception from the shareholder approval requirements for purchases of the issuer's securities by officers, directors, employees or consultants when such issuances are not made as part of a public offering and are for less than the greater of book or market value of the stock. Nasdaq is proposing to amend Rule 4350(i)(A) - and the related interpretation in IM-4350-5 - to provide this de minimis shareholder approval exception solely in these limited circumstances:

1. officers, directors, employees, or consultants are sold discounted stock as part of, or in connection with, sales to third parties, at the same price and on the same terms, and that do not involve any public offering;

2. the total number of shares sold to all such officers, directors, employees or consultants, either individually or in the aggregate, be less than five percent of the total shares to be issued in the transaction, and

3. the shares issued or to be issued in the transaction aggregated with all other discounted sales to officers, directors, employees, or consultants during the preceding 12-month period do not exceed one percent of the total shares outstanding at the beginning of the 12-month period.

Further, although not required by the proposed amendments to the text of Rule 4350(i)(1)(A), the changes to IM-4350-5 state that Nasdaq intends that the new exception will only be used in situations where third parties investing in the company require a minimum level of participation by company insiders as a condition to their investment.
posted by broc at 5:51 AM

 
September E-Minders is Up!

We have posted our September issue of our complimentary monthly e-mail newsletter. FYI, you can sign up to receive it by email by just inputting your email address into this form.

By the way, Blawg rates this blog as the 2nd most popular legal-related blog, out of 630 blogs (by the way, "number of hits" on that site is the number of folks that click on their link to my blog; this blog averages about 3900 visits per day). Not bad, but I'm gunning for #1 - you can rate this blog on that site too ...

Update on Ability to Hold Online Annual Meetings

Without much publicity, several states have joined Delaware to allow companies to hold their annual meetings solely online. In 2001, the Michigan Corporate Statute was amended to provide for shareholder meetings to be held "solely by means of remote communication" unless otherwise restricted by the articles or bylaws (see MCLA Sections 450.1405(3) and (4)). Oklahoma also amended Section 1056 of its Corporations Code in 2001 to permit a meeting consisting solely of remote attendance. Both of these provisions are essentially the same as Section 211 of the Delaware General Corporation Law.

Maryland also now allows for meetings by remote communication, but with a twist. Maryland law provides that the board shall provide a physical place for a meeting of the shareholders at the request of a shareholder (see §2-503 Corporations and Association Article, Annotated Code of Maryland). In comparison, Delaware's §211 gives the board sole discretion and doesn’t provide a right of shareholders to request a physical meeting site, so Maryland law is considerably more restrictive than Delaware or Michigan.

Highlighted by the fact that companies are required to disclosure the nature of director attendence at their meetings, holding a pure online meeting continues to be dangerous from an IR perspective.

Why Discounted Stock Options (or Discounted Stock SARs) – And Not Premium-Priced Options – Might Become Popular After FAS 123 Is Revised

Stewart Reifler of Vedder Price contributed this useful practice pointer to CompensationStandards.com - a hot topic along the lines of the new plenary session just announced for the NASPP Annual Conference entitled "Stock SARs: Everything You Need to Know About Implementing The New Equity Vehicle of Choice."

posted by broc at 5:58 AM

 
Sample 8-K In-House Memo Regarding Material Definitive Agreements

Following on the heels of the popular Sample 8-K In-House Memo for Reporting Chain Insiders that we posted last week, we have posted a Sample 8-K In-House Memo Regarding Material Definitive Agreements in a Word file.

This new sample memo is designed to help explain the tricky thresholds within the concept of "material definitive agreements" to employees in the reporting chain, complete with instructions on how to proceed if an agreement might be considered material for a particular company based on the parameters specified in the memo (the memo has blanks to tailor these parameters for a particular company).

We have posted this sample memo in our "Form 8-K" Practice Area and our Sample Document Library. And don't forget to keep those 8-K questions coming to broc.romanek@thecorporatecounsel.net for our September 23rd webcast on the topic!

SEC Finally Blesses PCAOB's New Documentation Standards

Last week, the SEC approved the PCAOB's Auditing Standard No. 3, which require auditors to retain their records for seven years - and in sufficient detail so that an experienced auditor with no previous connection to the engagement could read them and understand clearly what work had been performed, who performed the work and why the auditor reached its conclusions. The PCAOB had finalized this standard back in early June, so it still is taking the SEC quite a bit of time to approve the PCAOB's standards.


posted by broc at 5:26 AM