March 11, 2003
Orrick Corporate Law
Update
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New Requirements for Annual Reports
on Form 10-K
With the filing deadline for annual reports on Form 10-K
approaching for most of you, we want to remind you of several
new items that must be included in your Form 10-K due to recent
rulemaking by the Securities and Exchange Commission (the
“SEC”).
New Cover Page Requirements: Accelerated Filer
Identification and Public Float Disclosure
The SEC has revised the cover page requirements for the Form 10K. Each issuer must now indicate on the cover page of the Form
10-K whether it is an accelerated filer. An “accelerated filer” is any
issuer that meets all of the following conditions as of the end of its
most recent fiscal year:
•
The aggregate market value of the issuer’s voting and nonvoting common equity held by non-affiliates of the issuer is
$75 million or more (computed as of the last business day of
its most recently completed second fiscal quarter);
•
The issuer has been subject to Exchange Act reporting
requirements for a period of at least 12 calendar months;
•
The issuer has filed at least one previous annual report on
Form 10-K; and
•
The issuer is not eligible to use Forms 10-KSB and 10-QSB for
its annual and quarterly reports (i.e., small business issuer
forms).
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Accelerated filers will now face accelerated filing deadlines for their
Form 10-Ks and Form 10-Qs, which will be phased in over the
next three fiscal years, as follows:
•
Form 10-Ks will be required to be filed within 75 days after the
applicable fiscal year-end for fiscal years ending on or after
December 15, 2003 and before December 15, 2004, and within
60 days after the applicable fiscal year-end for fiscal years
ending on or after December 15, 2004; and
•
Form 10-Qs will be required to be filed within 40 days after the end of the fiscal
quarter for fiscal years ending on or after December 15, 2004 and before
December 15, 2005, and within 35 days after the end of the fiscal quarter for
fiscal years ending on or after December 15, 2005.
Each issuer must now also state on the cover page of the Form 10-K the aggregate
market value of the voting and non-voting common equity held by non-affiliates,
computed using the price at which the issuer’s common equity was last sold, or the
average bid and asked price of such common equity, as of the last business day of
the issuer’s most recently completed second fiscal quarter. For most issuers, this will
mean that disclosure about the issuer’s public float is required as of June 30, 2002.
Website Access to Exchange Act Reports
The SEC also has adopted a new rule requiring each accelerated filer to disclose in
any Form 10-K filed for a fiscal year ending after December 15, 2002, whether it
provides access to its Exchange Act filings through its website and encouraging all
issuers to provide their website address, if they have one. Specifically, under new
Item 101(e) of Regulation S-K, each accelerated filer must disclose:
•
Its website address, if it has one (issuers which are not accelerated filers are
encouraged, but not required to disclose their website address);
•
Whether it makes available free of charge on or through its website, if it has
one, annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and all amendments to those reports as soon as
reasonably practicable after such material is electronically filed with the SEC;
•
If it does not make the above filings available in this manner, the reasons it does
not do so (including, where applicable, that it does not have a website); and
•
If it does not make the above filings available in this manner, it voluntarily will
provide electronic or paper copies of its filings free of charge upon request.
An issuer may choose to comply by posting Exchange Act filings directly on its
website or, because the SEC now provides real-time access to filings through its
EDGAR website, hyperlinking to the SEC’s EDGAR website. An issuer may also
satisfy the posting requirements by hyperlinking to a third-party service if the
issuer’s Exchange Act filings are made available in the appropriate time frame and
access to the reports is free of charge to the user. The hyperlinks should direct the
reader specifically to the issuer’s filings, not to a home page or general search page
for the website.
If an issuer chooses to hyperlink to a third-party service, it should make sure that it
has carefully considered the reliability of the service in posting the reports and the
extent and nature of any other information that may be included on that website.
To address concerns about “adopting” information provided by a third-party
service, issuers using a hyperlink may want to provide the website visitor with an
intermediate screen stating that the visitor is leaving the issuer’s website and disclaim
responsibility for the accuracy of the information provided by the third-party
service.
Orrick, Herrington & Sutcliffe LLP
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The following is an example of the required website disclosure to be filed at the end
of Item 1 in Part I of the Form 10-K:
[Issuer]’s website is http://www.company.com. [Issuer] makes available
free of charge, on or through its website, its annual, quarterly and current
reports, and any amendments to those reports, as soon as reasonably
practicable after electronically filing such reports with the Securities and
Exchange Commission, or SEC. Information contained on [Issuer]’s
website is not part of this report.
Increased Disclosure of Equity Compensation Plan Information
Finally, the SEC has adopted new rules requiring increased disclosure about each
issuer’s equity compensation plans, with a focus on heightened disclosure of nonshareholder-approved plans for annual reports and proxy statements, including
those to be filed in 2003. Under Item 201(d) of Regulation S-K, an issuer must now
disclose, in a tabular presentation as of the end of its most recently completed fiscal
year, its compensation plans under which equity securities of the issuer may be
issued. The tabular presentation is to include the following information:
•
The aggregate number of securities to be issued upon the exercise of
outstanding compensatory options, warrants or rights to purchase securities
(including all company plans, individual agreements and acquired plans that may
have been assumed as the result of a merger);
•
The weighted average exercise price of such outstanding options, warrants and
rights; and
•
The number of securities remaining available for future issuance under the
issuer’s equity incentive plans.
The required information must be aggregated into two groups: (i) those plans or
agreements that have been approved by shareholders and (ii) those that have not.
The new rules also require a narrative description of all company equity
compensation plans not approved by shareholders. If that information is already
included in the issuer’s financial statements, the issuer may cross-reference to the
applicable portion of its financial statements.
Where the information is included in a proxy statement, and a pending proxy
proposal would have the effect of increasing the number of shares available for
issuance under a plan, the table should include the number of securities remaining
available for issuance under that plan, but should not include the number of the
proposed increase.
Each issuer must include the equity compensation plan disclosure table each year in
its Form 10-K or 10-KSB and, additionally, in its proxy statement whenever the
company is submitting a compensation plan for shareholder approval. In years that
the issuer is required to make disclosures in its proxy statement, the required
disclosure in the Form 10-K or 10-KSB may be satisfied by incorporating by
reference to the proxy statement, but only if the proxy statement involves the
election of directors and is filed not later than 120 days after the end of the issuer’s
fiscal year.
Orrick, Herrington & Sutcliffe LLP
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