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Section 102. Item 1.01 Entry into a Material Definitive Agreement
us SEC - C&DI - Exchange Act Form 8-K
Question 102.01
Question: If an agreement that was not material at the time the registrant entered into it becomes material at a later date, must the registrant file an Item 1.01 Form 8-K at the time the agreement becomes material?
Answer: No. If an agreement becomes material to the registrant but was not material to the registrant when it entered into, or amended, the agreement, the registrant need not file a Form 8-K under Item 1.01. In any event, the registrant must file the agreement as an exhibit to the periodic report relating to the reporting period in which the agreement became material if, at any time during that period, the agreement was material to the registrant. In this regard, the registrant would apply the requirements of Item 601 of Regulation S-K to determine if the agreement must be filed with the periodic report. [April 2, 2008]
Question 102.02
Question: Is a placement agency or underwriting agreement a material definitive agreement for purposes of Item 1.01? If so, does the requirement to disclose the parties to the agreement require disclosure of the name of the placement agent or underwriter? Would such disclosure render the safe harbor from the definition of an “offer” included in Securities Act Rule 135c not available for the Form 8-K filing?
Answer: The registrant must determine whether specific agreements are material using established standards of materiality and with reference to Instruction 1 to Item 1.01. If the registrant determines that such an agreement requires filing under Item 1.01, it may, as under Item 3.02, omit the identity of the underwriters from the disclosure in the Form 8-K to remain within the safe harbor of Rule 135c. [April 2, 2008]
Question 102.03
Question: Must a material definitive agreement be summarized in the body of the Form 8-K if it is filed as an exhibit to the Form 8-K?
Answer: Yes. Item 1.01 requires “a brief description of the material terms and conditions of the agreement or amendment that are material to the registrant.” Therefore, incorporation by reference of the actual agreement would not satisfy this disclosure requirement. In some cases, the agreement may be so brief that it may make sense to disclose all the terms of the agreement into the body of the Form 8-K. [April 2, 2008]
Question 102.04
Question: A registrant enters into a business combination agreement, such as a merger agreement, that is reportable under Item 1.01 of Form 8-K as a material definitive agreement. What material terms and conditions of the agreement should the registrant disclose in the Form 8-K?
Answer: Item 1.01 of Form 8-K requires a brief description of the terms and conditions of the agreement that are material to the registrant. Although the materiality of a term or condition of the business combination agreement will ultimately depend on the particular facts and circumstances, the following terms should generally be viewed as material and disclosed in the Form 8-K:
- the amount and nature of consideration offered for the business combination (or the method, exchange ratio, or formula for determining the consideration);
- any committed financing arrangements (e.g., PIPE investments), or the need for financing to close the business combination transaction, along with the material terms of such arrangements;
- any material terms regarding the securities ownership or management structure of the combined or surviving company after the closing of the business combination transaction;
- any material conditions to the closing of the transaction; and
- the anticipated timeframes for filing any Securities Act registration statement, proxy or information statement, or tender offer materials, as well as for the closing of the business combination transaction.
The Form 8-K also must include all other material information that is necessary to make the required disclosure, in light of the circumstances under which it is made, not misleading. See Exchange Act Rule 12b-20 and Exchange Act Section 10(b). For example, the registrant should consider disclosing the following information in the Form 8-K so that investors can evaluate the business combination agreement with the proper context:
- if a material term of the agreement has not yet been determined by the parties, the Form 8-K should affirmatively state so; and
- in the case where the registrant is the acquiror, the Form 8-K should briefly describe the nature of the target company’s business, including, at a minimum, whether it has existing operations or has generated revenues, as well as any information disclosed by the target company in announcing the business combination transaction. [March 22, 2022]
Question 102.05
Question: Under the factual circumstances described in Question 102.04 above, should the registrant file the material definitive agreement as an exhibit to the Item 1.01 Form 8-K?
Answer: Registrants are encouraged, as a best practice, to file the agreement as an exhibit to the Item 1.01 Form 8-K. The Commission did not require the material definitive agreement to be filed as an exhibit to the Item 1.01 Form 8-K due to the registrant’s need for time to (1) request confidential treatment of sensitive terms of the agreement and (2) prepare the agreement in the proper EDGAR format. See Release No. 33-8400 (March 16, 2004).
The Commission, however, recently amended Form 8-K to permit registrants to redact sensitive terms of a material definitive agreement without submitting a confidential treatment request. See Instructions 5 and 6 to Item 1.01 of Form 8-K; see also Release No. 33-10618 (March 20, 2019). The need for confidential treatment generally can no longer be the basis for declining to file the material definitive agreement as an exhibit to the Item 1.01 Form 8-K. This is consistent with the Commission’s previous views. See Release No. 33-8400 (“[W]e encourage companies to file the exhibit with the Form 8-K when feasible, particularly when no confidential treatment is requested.”).
Further, absent unusual circumstances, it should generally be feasible to prepare the agreement in the proper EDGAR format within the four business day timeframe for filing an Item 1.01 Form 8-K, given technological advances since 2004 and widespread availability of EDGAR filing services. Registrants that are unable to prepare the agreement in the proper EDGAR format and file the agreement as an exhibit should, as a best practice, provide an explanation in the Form 8-K. [March 22, 2022]
This is a work of the U.S. Government
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