December 10, 2004

(Slight) Silver Lining in Merck’s Change-of-Control Arrangements

Laura Thatcher of Alston & Bird – a Task Force member – notes a silver lining in Merck’s broad-based (and in my mind, not very responsibile) COC arrangements announced a few weeks back. Laura notes that the arrangements follow the movement towards tightening up of the definition of “Good Reason” in the sense that Merck limits the more hair-trigger change-in-status provision to Management Committee members and provides a somewhat harder Good Reason trigger for others.

For example, for Management Committee members, Good Reason includes the typical “significant adverse change” in the executive’s authority, duties, responsibilities or position (including title, reporting level and status as a Section 16 officer). For others, Good Reason does not include a change in the person’s title or status as a Section 16 officer, or a change of less than two levels in the position to which the person reports.

Laura also notes that Merck moves in the right direction by providing less stringent procedural hurdles for a finding of “Cause” for executives other than Management Committee members (i.e. no need to get Board action to fire such a person for Cause). Finally, the excise tax gross-up is limited to the Management Committee members, with a modified cut-back approach for others.

However, these are small favors in Merck’s scheme – particularly given that there will likely be a diminution of duty in any deal that Merck doesn’t lead, so these might as well be single triggers. I tried to be positive. Learn more about responsible provisions in executive contracts in the Employment Agreements Practice Area.

Best Practice Guidelines Governing Analyst/Corporate Issuer Relations

This week, a joint CFA Institute and NIRI task force released final Best Practice Guidelines Governing Analyst/Corporate Issuer Relations. Among the issues covered by the Guidelines are:

– Information Flow between Analysts and Corporate Issuers
– Analyst Conduct
– Corporate Communication and Providing Analysts with Access to Management
– Reviewing Sell-Side Analyst Reports by Corporate Issuers
– Issuer Paid Research

New SEC Filing Fees

As noted in the SEC’s 6th Fee Advisory, President Bush finally signed the omnibus appropriations bill that includes the SEC’s funding for fiscal year 2005. Accordingly, effective this upcoming Monday – the 13th – the Section 6(b) fee rate applicable to the registration of securities and the Section 14(g) fee rate applicable to proxy solicitations and statements in corporate control transactions will decrease to $117.70 per million.

SEC’s Asset-Backed Proposal to Be Considered

Next Wednesday, the SEC is holding an open Commission meeting to consider adopting the far-reaching asset-backed proposal.