SHAREHOLDER ACTIVISM DEFENSE: WHAT YOU NEED TO KNOW ABOUT THE SECURITIES LAWS, RULES AND PRACTICE Keith E. Gottfried Sean M. Donahue August 9, 2017 2017 Morgan, Lewis & Bockius LLP
SHAREHOLDER ACTIVISM DEFENSE: WHAT YOU NEED TO KNOW ABOUT THE SECURITIES LAWS, RULES AND PRACTICE 2017 Morgan, Lewis & Bockius LLP
Important Information This presentation is for educational and informational purposes only and is intended to provide a general introductory overview of the issues discussed. This presentation is not intended to provide a complete analysis of such issues. This presentation is also not intended, and should not be construed as, legal advice. Readers should not act upon the information contained in this presentation without professional counsel. Nor is this presentation intended to establish an attorney-client relationship. This presentation may be considered attorney advertising in some jurisdictions. The hiring of an attorney is an important decision that should not be based solely upon advertisements. 3
The Morgan Lewis Shareholder Activism Defense Team Keith E. Gottfried Washington, D.C. T 202.739.5947 F 202.739.3001 New York, NY T 212.309.6261 F 212.309.6001 Keith E. Gottfried is a partner in the New York, NY and Washington, DC offices of Morgan, Lewis & Bockius LLP where he leads the firm s shareholder activism defense practice. Keith counsels public companies, based in the United States and abroad, in a wide array of industries, including, among others, apparel, automotive, banking, casual dining, consumer goods, energy, life sciences, manufacturing, pharmaceuticals, real estate, retail, shipping, software, technology and waste management, with respect to preparing for and/or responding to high-profile proxy contests, special meeting demands, consent solicitations, withhold and vote-no campaigns, shareholder proposals and other activist shareholder campaigns as well as contests for corporate control and negotiated and contested M&A situations. Keith also advises public companies and their boards of directors on the latest techniques for making a company less vulnerable to activist shareholders, best practices for engaging with shareholders, strategic communications, corporate governance issues, board composition enhancement programs and board advisory matters. Frequently quoted by the national business media on issues relating to shareholder activism, Keith publishes and presents regularly on the strategies companies and boards of directors can apply to prepare for and respond to proxy contests and other activist shareholder campaigns. Keith is listed in Chambers USA: America s Leading Lawyers for Business, which ranks him as a leading corporate / M&A lawyer. 4
The Morgan Lewis Shareholder Activism Defense Team Sean M. Donahue Washington, D.C. T 202.739.5658 F 202.739.3001 New York, NY T 212.309.6112 F 212.309.6001 Sean M. Donahue is a partner-elect in the New York, NY and Washington, DC offices of Morgan, Lewis & Bockius LLP and a member of the firm s shareholder activism defense practice. Sean counsels public companies, based in the United States and abroad, in a wide array of industries with respect to preparing for and/or responding to high-profile proxy contests, special meeting demands, withhold and vote-no campaigns, shareholder proposals and other activist shareholder campaigns as well as contests for corporate control and negotiated and contested M&A situations. Sean also advises public companies and their boards of directors on the latest techniques for making a company less vulnerable to activist shareholders, best practices for engaging with shareholders, strategic communications, corporate governance issues, board composition enhancement programs and board advisory matters. Sean has been involved in numerous activist defense matters, including dozens of high-profile proxy contests where the activist sought the election to the target s board of directors of a minority or control nominee slate. Additionally, Sean counsels public companies on corporate governance, securities regulation, capital markets transactions, and NYSE and NASDAQ compliance issues. Prior to joining Morgan Lewis, Sean served as an attorney-adviser with the U.S. Securities and Exchange Commission (SEC) in the Division of Corporation Finance and our activism defense clients benefit from Sean s extensive experience with SEC disclosure issues, particularly those relating to contested solicitations. 5
KEY AREAS TO COVER
Key Areas to Cover What are Rule 14a-12 filings and when do they need to be filed? Overlap between Rule 14a-12 and Form 8-K filings What company communications are deemed solicitation material and how does the company avoid causing routine communications from being deemed solicitation materials that need to be filed as such? What special legends and disclaimers do companies need to use in activist defense situations? How does the presence of an activist situation change the company s disclosures in its Form 10-Q and Form 10-K (e.g., risk factors, forward-looking disclaimers, notes to financial statements, MD&A, etc.)? Proxy statement disclosures specific to contested solicitations (legends, background of the solicitation, discussion of opposing solicitation, voting mechanics, participant disclosures, etc.) When is a company required to file a preliminary proxy statement commenting on an activist matter (the contested form of proxy statement)? 7
Key Areas to Cover Best practices for preparing the proxy statement s background / chronology of the solicitation SEC review process for contested proxy statements Importance of a well-thought out timetable for SEC clearance of the proxy statement Pros and cons of using the company s proxy statement for messaging Avoiding SEC comments on proxy statements, fight letters and other shareholder communications prepared in connection with a contested solicitation Rule 14a-9 s prohibition against false and misleading statements Bedbug / poison pen letters to the SEC on the activist investor s proxy statement, fight letters and other shareholder communications Proxy card issues specific to contested solicitations Shareholder communications after filing a definitive proxy statement 8
ILLUSTRATIVE EVENTS IN AN ACTIVIST CAMPAIGN
Illustrative Events in an Activist Campaign Activist acquires more than 5% of Any Company s equity securities and files a Schedule 13D with the SEC. Activist buys 1% or more additional securities and/or takes other actions requiring an amendment to its Schedule 13D. Any Company issues press release commenting on the filing of the Schedule 13D or in response to other action taken by the activist (e.g., public critique of Any Company). Any Company announces its third-quarter earnings results. Any Company files its Quarterly Report on Form 10-Q for the quarter ended September 30, 2017. Any Company amends its bylaws and adopts corporate governance enhancements. Any Company announces it has added two new directors to its Board. Any Company comments on its receipt of the activist s advance notice of nomination. 10
Illustrative Events in an Activist Campaign Any Company announces its year-end earnings results. Any Company files its Annual Report on Form 10-K with the SEC. Any Company files Form 10-K/A with the SEC. Any Company issues press release announcing its annual meeting date. Any Company files preliminary proxy statement / proxy card with the SEC. Activist files preliminary proxy statement / proxy card with the SEC. Any Company sends SEC a poison pen letter on the activist s preliminary proxy statement and other soliciting materials. SEC issues comment letters to Any Company / activist. Any Company files definitive proxy statement / proxy card with the SEC. Activist files definitive proxy statement / proxy card with the SEC. Any Company issues press release enclosing its fight letter to shareholders and mails fight letter to shareholders. 11
Illustrative Events in an Activist Campaign Activist issues press release enclosing its fight letter to shareholders and mails fight letter to shareholders. Any Company creates website to serve as central repository for all proxy contest communications as well as information on voting and director nominees. Any Company CEO is quoted in Hometown Newspaper on proxy fight following an interview with reporter. Any Company files proxy advisory firm presentation with the SEC. Proxy advisory firms issue recommendations to institutional shareholders. Any Company / activist comments on proxy advisory firm reports. Any Company issues annual meeting reminder press release. Annual meeting of shareholders held. Any Company issues press release on annual meeting results. Any Company files Form 8-K with the SEC to report annual meeting results. 12
APPLICATION OF SECURITIES LAWS TO ILLUSTRATIVE EVENTS IN AN ACTIVIST CAMPAIGN
Activist Files a Schedule 13D with the SEC Rule 13d-1 Any person who, after acquiring directly or indirectly the beneficial ownership of any equity security of a class which is specified in paragraph (i) of this section, is directly or indirectly the beneficial owner of more than five percent of the class shall, within 10 days after the acquisition, file with the Commission a statement containing the information required by Schedule 13D. If the activist had previously filed a Schedule 13G, it needs to file a Schedule 13D within 10 days, if, and shall remain subject to those requirements for so long as, the person has acquired or holds the securities with a purpose or effect of changing or influencing control of the issuer, or in connection with or as a participant in any transaction having that purpose or effect. 14
Activist Files a Schedule 13D/A with the SEC Rule 13d-2 - If any material change occurs in the facts set forth in the Schedule 13D including, but not limited to, any material increase or decrease in the percentage of the class beneficially owned, the person or persons who were required to file the statement shall promptly file or cause to be filed with the Commission an amendment disclosing that change. For purposes of Rule 13d-2, an acquisition or disposition of beneficial ownership of securities in an amount equal to 1% or more of the class of securities shall be deemed material; acquisitions or dispositions of less than those amounts may be material, depending upon the facts and circumstances. While the word promptly is not defined in the rules and regulations relating to Schedule 13D, it has been interpreted by the SEC and relevant case law to mean one or two business days from the date of the event triggering disclosure. 15
Company Issues Press Release Commenting on the Filing of the Schedule 13D Is the press release solicitation material? Rule 14a-12 (solicitation before furnishing a proxy statement) any soliciting material published, sent or given to security holders must be filed with the Commission no later than the date the material is first published, sent or given to security holders. Rule 14a-12 filings (EDGAR tag - DEFA14A) are short, same-day filings made using Schedule 14A as a cover page to the written communication and must be filed on EDGAR by 5:30 p.m. ET on such day (Regulation S-T, Rule 13). The Company is not required to file every written communication it makes as soliciting material. Is the communication reasonably likely to result in the giving, withholding or revocation of a proxy? The Company must analyze each written communication on a case-by-case basis to determine whether the communication is a solicitation. If so, then the party must file the written communication under Rule 14a-12. 16
Company Announces its Third-Quarter Earnings Results Is earnings press release considered solicitation material that needs to be separately filed with the SEC pursuant to Rule 14a-12? Are any special legends required in earnings press release? The potential revisions to be made to forward-looking disclaimer in light of potential activist campaign? (e.g., risks related to costs, uncertainty and disruption caused by or related to the actions of activist shareholders). Is earnings conference call script solicitation material? Should the activist situation be referenced on the earnings call? Can the Company discuss activist situation with investors in 1:1 calls / meetings without triggering a filing requirement? Should the Company s investor presentation reference activist situation? Are any disclaimers / legends required to be added to investor presentation? 17
Company Files Its Quarterly Report on Form 10-Q Additional risk factor to be added? Actions of activist shareholders with respect to Any Company could be disruptive and potentially costly and the possibility that activist shareholders may contest, or seek changes that conflict with, our strategic direction could cause uncertainty about the strategic direction of our business. Activist shareholders may from time to time attempt to effect changes in our strategic direction and, in furtherance thereof, may seek changes in how Any Company is governed. While our Board of Directors and management team strive to maintain constructive, ongoing communications with all of Any Company s shareholders, including activist shareholders, and welcomes their views and opinions with the goal of working together constructively to enhance value for all shareholders, activist campaigns that contest, or conflict with, our strategic direction could have an adverse effect on us because: (i) responding to actions by activist shareholders can disrupt our operations, be costly and timeconsuming, and divert the attention of our Board and senior management from the pursuit of business strategies, which could adversely affect our results of operations and financial condition; (ii) perceived uncertainties as to our future direction may lead to the perception of a change in the direction of the business, instability or lack of continuity which may be exploited by our competitors, cause concern to our current or potential customers, may result in the loss of potential business opportunities and make it more difficult to attract and retain qualified personnel and business partners; and (iii) these types of actions could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business. 18
Company Amends Its Bylaws and Adopts Corporate Governance Enhancements Solicitation material pursuant to Rule 14a-12? Is a Schedule 14A required to be filed pursuant to Rule 14a-12? Form 8-K Item 5.03 & Item 8.01. Item 5.03 - Disclosures to be included. Item 8.01 - Disclosures to be included. Exhibits to be filed. Should 14a-12 box be checked on cover of Form 8-K? Any special legends required to be included in Form 8-K? Timing for filing (Form 8-K rules allow for four business days to pass but Rule 14a-12 requires a filing on the date of first use prior to 5:30 p.m. ET See Regulation S-T, Rule 13). 19
Company Announces it Has Added Two New Directors to its Board Solicitation material pursuant to Rule 14a-12? Is a Schedule 14A required to be filed pursuant to Rule 14a-12? Form 8-K Item 5.02 & Item 8.01. Item 5.02 - Disclosures to be included. Item 8.01 - Disclosures to be included. Can the press release be furnished as an Item 7.01 (Regulation FD Disclosure) Form 8-K or must it be filed under Item 8.01? Exhibits to be filed. Should 14a-12 box be checked on cover of Form 8-K? Any special legends required to be included in Form 8-K? Timing for filing (Form 8-K rules allow for 4 business days to pass but Rule 14a-12 requires a filing on the date of first use). 20
Company Announces It Has Added Two New Directors to Its Board Rule 14a-12 (Solicitation before furnishing a proxy) - If Rule 14a-12 is applicable, the press release must include a legend with the following information: The identity of the participants in the solicitation and a description of their direct or indirect interests, by security holdings or otherwise, or prominent legend advising security holders where they can obtain that information. Advising security holders to read the proxy statement when it is available because it contains important information (prominent legend required). Statement that investors can get the proxy statement, and any other relevant documents, for free at the Commission's website and describing which documents are available for free from the participants. 21
Company Announces It Has Added Two New Directors to Its Board Sample Rule 14a-12 legend: Important Additional Information and Where to Find It Any Company, Inc., its directors and certain of its executive officers are deemed to be participants in the solicitation of proxies from Any Company s shareholders in connection with the matters to be considered at Any Company s 2018 Annual Meeting of Shareholders. Information regarding the names of Any Company s directors and executive officers and their respective interests in Any Company by security holdings or otherwise can be found in Any Company s proxy statement for its 2017 Annual Meeting of Shareholders, filed with the Securities and Exchange Commission ( SEC ) on April [ ], 2017. To the extent holdings of Any Company s securities have changed since the amounts set forth in Any Company s proxy statement for the 2017 Annual Meeting of Shareholders, such changes have been reflected on Initial Statements of Beneficial Ownership on Form 3 or Statements of Change in Ownership on Form 4 filed with the SEC. These documents are available free of charge at the SEC s website at www.sec.gov. Any Company intends to file a proxy statement and accompanying WHITE proxy card with the SEC in connection with the solicitation of proxies from Any Company shareholders in connection with the matters to be considered at Any Company s 2018 Annual Meeting of Shareholders. Additional information regarding the identity of participants, and their direct or indirect interests, by security holdings or otherwise, will be set forth in Any Company s proxy statement for its 2018 Annual Meeting, including the schedules and appendices thereto. INVESTORS AND SHAREHOLDERS ARE STRONGLY ENCOURAGED TO READ ANY SUCH PROXY STATEMENT AND THE ACCOMPANYING WHITE PROXY CARD AND ANY AMENDMENTS AND SUPPLEMENTS THERETO AS WELL AS ANY OTHER DOCUMENTS FILED BY ANY COMPANY WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders will be able to obtain copies of the proxy statement, any amendments or supplements to the proxy statement, the accompanying WHITE proxy card, and other documents filed by Any Company with the SEC for no charge at the SEC s website at www.sec.gov. Copies will also be available at no charge at the Investor Relations section of Any Company s corporate website at www.anycompany.com or by contacting Any Company s Corporate Secretary at Any Company, Inc., 1111 Pennsylvania Avenue, Washington, DC 20004 or by calling Any Company s Corporate Secretary at (202) XXX--XXXX. 22
Company Announces It Has Added Two New Directors to its Board UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 9, 2016 (November 9, 2016) ANY COMPANY, INC. (Exact name of registrant as specified in its charter) (State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.) (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: N/A (Former Name or Former Address, if Changed Since Last Report): Not Applicable Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 23
Company Comments on Its Receipt of the Activist s Advance Notice of Nomination Solicitation material pursuant to Rule 14a-12? Schedule 14A required to be filed pursuant to Rule 14a-12? Is this a communication reasonably likely to result in the giving, withholding or revocation of a proxy? Form 8-K? Can this be furnished as an Item 7.01 Form 8-K? Can this be filed as an Item 8.01 Form 8-K? Press release must be filed with the SEC on date of first use. However, if press release is issued after 5:30 p.m. ET, then it can be filed the next business day (Regulation S-T, Rule 13d). Be careful about Rule 14a-9 issues on all Rule 14a-12 filings since the SEC s Staff can comment on these filings, and those comments, if not addressed to the SEC Staff s satisfaction, can slow down the SEC Staff s clearance of the Company s proxy statement. 24
Company Comments on its Receipt of the Activist s Notice of Nomination UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant Filed by a Party other than the Registrant Check the appropriate box: Preliminary Proxy Statement Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) Definitive Proxy Statement Definitive Additional Materials Soliciting Material Pursuant to 240.14a-12 ANY COMPANY, INC. (Name of Registrant as Specified in Its Charter) (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) Payment of Filing Fee (Check the appropriate box): No fee required. Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: Fee paid previously with preliminary materials: Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount previously paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: 25
Company Announces Its Year-end Earnings Results Is earnings press release considered solicitation material that needs to be separately filed with the SEC pursuant to Rule 14a-12? Are any special legends required in earnings press release? Potential revisions to be made to forward-looking disclaimer in light of potential activist campaign? (e.g., risks related to costs, uncertainty and disruption caused by or related to the actions of activist shareholders). Is earnings conference call solicitation material? Should the activist situation be referenced on the earnings call? Can the Company discuss activist situation with investors in 1:1 calls / meetings without triggering a filing requirement? Should the Company s investor presentation reference activist situation? Are any disclaimers / legends required to be added to investor presentation? 26
Company Files Its Annual Report on Form 10-K Additional risk factor to be added? How customized should this risk factor be? Actions of activist shareholders with respect to Any Company could be disruptive and potentially costly and the possibility that activist shareholders may contest, or seek changes that conflict with, our strategic direction could cause uncertainty about the strategic direction of our business. Activist shareholders may from time to time attempt to effect changes in our strategic direction and, in furtherance thereof, may seek changes in how Any Company is governed. While our Board of Directors and management team strive to maintain constructive, ongoing communications with all of Any Company s shareholders, including activist shareholders, and welcomes their views and opinions with the goal of working together constructively to enhance value for all shareholders, activist campaigns that contest, or conflict with, our strategic direction could have an adverse effect on us because: (i) responding to actions by activist shareholders can disrupt our operations, be costly and timeconsuming, and divert the attention of our Board and senior management from the pursuit of business strategies, which could adversely affect our results of operations and financial condition; (ii) perceived uncertainties as to our future direction may lead to the perception of a change in the direction of the business, instability or lack of continuity which may be exploited by our competitors, cause concern to our current or potential customers, may result in the loss of potential business opportunities and make it more difficult to attract and retain qualified personnel and business partners; and (iii) these types of actions could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business. Should the risk factors be expanded and reference the activist or should it remain generic? 27
Company Files Its Annual Report on Form 10-K Subsequent Event Footnote? On February [ ], 2018, Any Company received a letter from Any Activist, LLC, purporting to indicate that Any Activist intends to nominate [ ] candidates for election to our board of directors [and present [ ] shareholder proposals] for consideration by Any Company s shareholders at our 2018 Annual Meeting of shareholders. 28
Company Files Form 10-K/A with the SEC Instruction G to Form 10-K: The information required by Part III (Items 10, 11, 12, 13 and 14) may be incorporated by reference from the registrant s definitive proxy statement (filed or required to be filed pursuant to Regulation 14A) or definitive information statement (filed or to be filed pursuant to Regulation 14C) which involves the election of directors, if such definitive proxy statement or information statement is filed with the Commission not later than 120-days after the end of the fiscal year covered by the Form 10-K. For calendar year companies, the deadline this year is April 30, 2018. However, if such definitive proxy statement or information statement is not filed with the Commission in the 120-day period, the Items comprising the Part III information must be filed as part of the Form 10-K, or as an amendment to the Form 10-K, not later than the end of the 120-day period. 29
Company Files Form 10-K/A with the SEC Explanatory Note to Be Included in Form 10-K/A: This Amendment No. 1 to Form 10-K (this Amendment ) amends the Annual Report on Form 10-K for the fiscal year ended December 31, 2017 of Any Company, a Delaware corporation ( Any Company ), as originally filed with the Securities and Exchange Commission ( SEC ) on March 7, 2018 (the Original Form 10-K ). We are filing this Amendment to present the information required by Part III of Form 10-K that was previously omitted from the Original Form 10-K in reliance on General Instruction G.(3) to Form 10-K. Part IV, Item 15(b) (Exhibits 31.1 and 31.2) have also been amended and restated in their entirety to contain the currently dated certifications from the Company s principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. The certifications of the Company s principal executive officer and principal financial officer are attached to this Amendment No. 1 as Exhibits 31.3 and 31.4. Because no financial statements have been included in this Amendment No. 1 and this Amendment No. 1 does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 3, 4 and 5 of the certifications have been omitted. The Exhibit Index has also been amended and restated in its entirety to include the certifications as exhibits. Except as described above, no other changes have been made to the Original Form 10-K. This Amendment does not otherwise update information in the Original Form 10-K to reflect facts or events occurring subsequent to the filing date of the Original Form 10-K. This Amendment should be read in conjunction with the Original Form 10-K and with any of our filings made with the SEC subsequent to the filing of the Original Form 10-K. 30
Company Issues Press Release Announcing Its Annual Meeting Date No Form 8-K required for an announcement of the date of an annual meeting if no deadlines have changed from previous dates publicly disclosed Solicitation material pursuant to Rule 14a-12? Schedule 14A required to be filed pursuant to Rule 14a-12? Is this a communication reasonably likely to result in the giving, withholding or revocation of a proxy? Issues to be considered by the Company in setting the date of the annual meeting: State law (e.g., DGCL Section 211(c)). Bylaws / advance notice provisions (do deadlines shift if the annual meeting is delayed?). Stock exchange rules (may require an annual meeting prior to end of fiscal year). Rule 14a-8(e)(2) (Question 5): If the date of the Company s annual meeting is changed by more than 30 days from the date of the previous year's meeting, then the deadline for a Rule 14a-8 shareholder proposal is a reasonable time before the Company begins to print and send its proxy materials. Rule 14a-5(f): If the date of the next annual meeting is subsequently advanced or delayed by more than 30 calendar days from the date of the previous year's meeting, the registrant is required to, in a timely manner, inform shareholders of such change, and the new deadlines for submitting shareholder proposals, both pursuant to and outside of Rule 14a-8, by including a notice, in its earliest possible quarterly report on Form 10-Q or, if impracticable, any means reasonably calculated to inform shareholders (e.g., Form 8-K, Item 8.01). 31
Company Files Its Preliminary Proxy Statement with the SEC Rule 14a-6 - Requires a preliminary proxy statement and form of proxy to be filed with the SEC at least 10 calendar days prior to the date definitive copies of such material are first sent or given to security holders, or such shorter period prior to that date as the Commission may authorize upon a showing of good cause thereunder, unless the solicitation relates to any shareholders meeting at which the only matters to be acted upon are the enumerated items in Rule 14a-6. The exclusions in Rule 14a-6 from filing preliminary proxy material do not apply where the registrant comments upon or refers to a solicitation in opposition in connection with the meeting in its proxy material. The inclusion of a security holder proposal in the registrant's proxy material pursuant to Rule 14a-8 does not constitute a solicitation in opposition, even if the registrant opposes the proposal and/or includes a statement in opposition to the proposal. For purposes of calculating the 10-day period in Rule 14a-6, the date of filing is day one for purposes of counting the 10 calendar days. Ten calendar days must be complete before the materials are sent or given to security holders. Accordingly, the material may be sent or given to security holders at 12:01 a.m. on day eleven. As an example, assume the preliminary materials are filed on January 6. Calendar day 10, for purposes of Rule 14a-6, would be January 15, so the materials could be sent or given to security holders at 12:01 a.m. on January 16. (SEC Telephone Interpretation No. 14 and Rule 14a-6(k)). https://www.sec.gov/interps/telephone/cftelinterps_proxyrules-sch14a.pdf 32
Company Files Its Preliminary Proxy Statement with the SEC May a registrant rely on Rule 14a-6(a) to file a proxy statement in definitive form in a contested proxy solicitation for the election of directors by simply not referring to the solicitation in opposition in its proxy statement when the registrant knows, or reasonably should know, of the solicitation in opposition? SEC Staff s position from the Division of Corporation Finance Manual of Publicly Available Telephone Interpretations, Third Supplement July 2001. (https://www.sec.gov/interps/telephone/phonesupplement3.htm): Rule 14a-9 prohibits a registrant from omitting a material fact from its proxy statement at the time of the solicitation. The staff believes that it is inconsistent with this provision of Rule 14a-9 when the initial definitive proxy statement does not disclose the existence of a solicitation in opposition when the registrant knows, or reasonably should know, of a solicitation in opposition. The staff believes the existence of alternative nominees is material to security holders' voting decisions. Further, it is not appropriate for the registrant to omit this information from its initial proxy statement and wait to address the solicitation in opposition at a later time in the solicitation. It is also inappropriate to merely disclose the existence of the solicitation in opposition in a press release issued at the same time the registrant mails to shareholders the definitive proxy statement that omits the information. What is you find out about an opposing solicitation after you file definitive proxy statement with the SEC and mail to shareholders? 33
Company Files Its Preliminary Proxy Statement with the SEC The filing of revised material does not restart the 10 day time period unless the revised material contains material revisions or material new proposal(s) that constitute a fundamental change in the proxy material. (Note 1 to 14a-6(a)) Fundamental change is more than a mere material change Fundamental change not defined Even the date of the annual meeting is not a fundamental change Filling in blanks is not a fundamental change The Company s preliminary proxy statement and form of proxy filed pursuant to Rule 14a-6(a) should be clearly marked with the legend Preliminary Copy Subject to Completion. (Rule 14a-6(e)(1)) In computing time periods, the filing date shall be the first day of the time period and midnight of the last day shall be the end of the time period. (Rule 14a-6(k)) Advantages of Filing on a Friday For a filing accepted by the SEC on Friday at 5:29 p.m. ET, Friday, Saturday and Sunday are counted in calculating the 10 day waiting period required by Rule 14a-6(a). 34
Company Files Its Preliminary Proxy Statement with the SEC EDGAR tags: Preliminary Company proxy statement filing: PREC14A Revised Company preliminary proxy statement filing: PRER14A Definitive Company filing: DEFC14A Issues with the Company and Activist using the same EDGAR tag Transmittal Letters - A registrant that is filing proxy material in preliminary form only because the registrant has commented on or referred to a solicitation in opposition should indicate that fact in a transmittal letter when filing the preliminary material with the SEC. (Note 4 to Rule 14a-6(a)). Timing How many weeks should the preliminary proxy statement be filed in advance of the annual meeting? SEC review Expect SEC s Office of M&A to review the preliminary proxy statement and plan on needing three weeks from date of preliminary filing to complete the SEC review process. 35
Company Files Its Preliminary Proxy Statement with the SEC Disclosure differences in Company preliminary proxy statement in proxy contest from typical annual meeting proxy statement Legend on cover page and on proxy card Preliminary Copy Subject to Completion, Dated [ ], 2017. Application of Rule 14a-12(c) - Proxy rules require special disclosures for solicitations by any person or group of persons for the purpose of opposing a solicitation by any other person or group of persons with respect to the election or removal of directors at any annual or special meeting of security holders. Proxy statement should be formatted to make compliance with disclosure requirements obvious Background / chronology of the solicitation Area of focus for the SEC (but not specified in the rules). Background should be focused on interactions with activist. Not the time and place to cut and paste from fight letter. Majority of messaging will be in background. Needs to be Rule 14a-9 compliant Maintain a running chronology of activist-related contacts and events from Day 1 (as soon as the Company has been targeted). 36
Company Files Its Preliminary Proxy Statement with the SEC Disclosure differences in Company preliminary proxy statement in proxy contest from typical annual meeting proxy statement Application of NYSE Rule 452 no discretionary voting by brokers on any proposals whatsoever, including auditor ratification. Voting for Directors - If Company has majority voting in uncontested elections, then appropriate disclosure required to indicate that plurality voting is the voting standard for the election of directors. Who is making the solicitation? (Item 4(b)((1)) What methods will be employed to solicit shareholders? (Item 4(b)((1)) Which employees will be involved? If regular employees of the registrant or any other participant in a solicitation have been or are to be employed to solicit security holders, describe the class or classes of employees to be so employed, and the manner and nature of their employment for such purpose. (Item 4(b)((2)) Any soliciting agents retained? If specially engaged employees, representatives or other persons (e.g., proxy solicitors) have been or are to be employed to solicit security holders, state (i) the material features of any contract or arrangement for such solicitation and the identity of the parties, (ii) the cost or anticipated cost thereof and (iii) the approximate number of such employees or employees of any other person (naming such other person) who will solicit security holders). (Item 4(b)((3)) 37
Company Files its Preliminary Proxy Statement with the SEC Disclosure differences in Company preliminary proxy statement in proxy contest from typical annual meeting proxy statement Expense information - Item 4(b)(4) of Schedule 14A requires disclosure of total amount estimated to be spent and the total expenditures to date for, in furtherance of, or in connection with the solicitation of security holders. Includes costs of attorneys, accountants, public relations or financial advisers, solicitors, advertising, printing, transportation, litigation and other costs incidental to the solicitation. (Instruction 1 to Item 4(b)(4)) Expense disclosure in proxy statement should be consistent with expense disclosure in other SEC filings (e.g., 10-Q, 10-K, 8-K, etc.) Be prepared for investor reaction to expense disclosures Registrant may exclude the amount of such costs represented by the amount normally expended for a solicitation for an election of directors in the absence of a contest, and costs represented by salaries and wages of regular employees and officers, provided a statement to that effect is included in the proxy statement. (Instruction 1 to Item 4(b)(4)) Disclose who will bear the cost of the solicitation. If such cost is to be borne initially by any person other than the registrant, state whether reimbursement will be sought from the registrant, and, if so, whether the question of such reimbursement will be submitted to a vote of security holders. (Item 4(b)(5)) 38
Company Files Its Preliminary Proxy Statement with the SEC Disclosure differences in Company preliminary proxy statement in proxy contest from typical annual meeting proxy statement Participant information Item 5(b) of Schedule 14A requires disclosure of any substantial interest, direct or indirect, by security holdings or otherwise, of each participant in any matter to be acted upon at the meeting Participant is defined in paragraphs (a) (ii), (iii), (iv), (v) and (vi) of Instruction 3 to Item 4 of Schedule 14A. Generally includes the registrant, each director, each nominee for election as a director and each person whom solicits proxies (no requirements to include all executive officers if they are not soliciting proxies) In addition to confirming that there are no specific disclosures of any interests in the matters to be acted upon at the meeting that are required for any participant that is not already disclosed elsewhere in the proxy statement, disclosure will focus on the following: the amount of each class of securities of the registrant which the participant owns beneficially, directly or indirectly, the amount of each class of securities of the registrant which the participant owns of record but not beneficially, and with respect to all securities of the registrant purchased or sold within the past 2 years, the dates on which they were purchased or sold and the amount purchased or sold on each such date. 39
Company Files Its Preliminary Proxy Statement & Proxy Card with the SEC Disclosure differences in Company preliminary proxy statement in proxy contest from typical annual meeting proxy statement SEC Comments - SEC Staff will likely focus on proxy contest disclosures but SEC can comment on any aspect of proxy statement or proxy card. Present proxy statement in Q&A format to make required disclosures obvious Rule-check proxy statement very carefully and be sensitive to any comments that the SEC staff has been issuing during that proxy season. Avoid Rule 14a-9 issues (not only false and/or misleading statements, but also pejorative statements relating to the activist). Messaging in the Company s preliminary proxy statement Most of the messaging will be limited to the background section. OK to highlight bios and accomplishments of director nominees (but they need to be accurate). OK to highlight corporate governance practices. Goal is to minimize SEC comments / clear SEC quickly. 40
Company Files Its Preliminary Proxy Statement & Proxy Card with the SEC Disclosure differences in Company preliminary proxy card in proxy contest from typical annual meeting proxy card Legend on top of preliminary proxy card Preliminary Copy Subject to Completion, Dated [ ], 2017 Specify each proposal on proxy card as the Company s proposal or the activist s proposal. (Rule 14a-4(a)(3)) Avoid bundling proposals. (Rule 14a-4(a)(3)) Proxy should revoke all prior proxies. Proxy should indicate in bold-face type how the proxy holder will vote signed proxy cards with respect to matters as to which a choice is not specified by the security holder. (Rule 14a-4(b)(1)) Proxy should include complete power of substitution. Proxy should provide for the proxy holder to represent, vote, and act for the shareholder with all powers that the shareholder would have if personally present at the shareholders meeting. Proxy should confer discretionary authority to the proxy holder, consistent with Rule 14a- 4(c)(1), to act upon all matters incident to the conduct of the meeting and upon other matters that properly come before the shareholders meeting. 41
Activist Files Its Preliminary Proxy Statement & Proxy Card with the SEC Key areas to review: Filing parties on cover page. Participant disclosures Have all the participants been named? Voting mechanics Application of Rule 452. Background of the solicitation. Reasons for the solicitation (preview of activist s fight letter #1). Consistency with Schedule 13D and amendments thereto. Director nominee disclosures (bios, arrangements with activist, consistency with advance notice disclosures, independence issues). Persons making the solicitation. Methods to be used in making the solicitation. Interests of participants in the matters to be considered. Expenses incurred and/or to be incurred in connection with the solicitation. Plans to request expense reimbursement from the Company. Proxy card. 42
Activist Files Its Preliminary Proxy Statement with the SEC Review activist s proxy statement for Rule 14a-9 issues False and/or misleading statements. Predictions as to specific future market values. Statements which, directly or indirectly, impugn character, integrity or personal reputation. Statements which, directly or indirectly, makes charges concerning improper, illegal or immoral conduct or associations, without factual foundation (i.e., you cannot call a director crooked or claim that the board has failed to comply with its fiduciary duties). Claims made prior to a meeting regarding the results of a solicitation (i.e., you cannot publicize polls!) Has the activist failed to provide support for statements, opinions and beliefs that are not self-evident? (i.e., board members destroyed shareholder value ) Has the activist failed to couch a statement of belief as such and instead asserted it as though it was a statement of fact? 43
Company Sends Poison Pen Letter to the SEC Focus of Poison Pen Letter Should be focused on issues of concern to SEC Staff SEC disclosure issues, particularly those issues specific to proxy contests False and/or misleading statements Statements which, directly or indirectly, impugn character, integrity or personal reputation Statements which, directly or indirectly, make charges concerning improper, illegal or immoral conduct or associations, without factual foundation Statements made without proper support being provided Keep it simple and straightforward and easy for SEC Staff to read Should not be argumentative legal brief not helpful or necessary Can also cover activist s previously filed Rule 14a-12 solicitation materials as well as Schedule 13D Timing no later than 72 hours after activist files its preliminary proxy statement. Filed on EDGAR Filed as EDGAR CORRESP but not visible to the public on EDGAR (specify in document description that it is a complaint letter ) FOIA Confidential Treatment Letter pursuant to Rule 83 of the SEC s Rules on Information and Requests. Provide a letter to SEC FOIA office and SEC examiner requesting confidential treatment of poison pen letter 44
Company Issues Fight Letter #1 and Related Press Release DEFA14A filing required to be made for both communications - Both fight letter #1 and related press release are filed as definitive additional materials. Filed by the Registrant Filed by a Party other than the Registrant Check the appropriate box: Preliminary Proxy Statement Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) Definitive Proxy Statement Definitive Additional Materials Soliciting Material Pursuant to 240.14a-12 After a definitive proxy statement is filed / furnished to security holders, subsequent communications are no longer filed under Rule 14a-12 but instead are filed as other soliciting material under Rule 14a-6(b) but still using EDGAR tag DEFA14A. Fight letter and related press release must be filed on date of first use. If press release is issued after 5:30 p.m. ET, it can be filed on next business day. Should be reviewed carefully for any Rule 14a-9 issues. No SEC pre-clearance of definitive additional materials but SEC can still review and comment. 45
Company Issues Fight Letter #1 and Related Press Release Update private securities litigation reform act disclaimer May be completely different than the disclaimer being used in Any Company s other press releases and should include references to all forward-looking statements in fight letter, particularly those referencing the following: The anticipated proxy contest by Any Activist, LLC and the other participants in its solicitation. Any Company s ability to continue to execute on and implement its strategic plan. Any Company s opportunities for continued growth. Any Company s initiatives to improve its financial and operational performance and increase its growth and profitability. Any Company s future stock price. Any Company s ability to grow its business. Any Company s ability to enhance its competitive position. Any Company s ability to continue to maintain expense discipline. Any Company s actions taken or contemplated to enhance its long-term prospects and create value for its shareholders. Any Company s future operational and financial performance. The effect that the election of Any Company s nominees to the Any Company Board will have on Any Company s execution of its long-term plan and long-term shareholder value. 46
Company Issues Fight Letter #1 and Related Press Release Update private securities litigation reform act disclaimer to include references to all forward-looking statements in fight letter, particularly those referencing the following: All statements relating to expected financial performance (including without limitation statements involving growth and projections of revenue, margin, profitability, income (loss) from continuing operations, income (loss) per share from continuing operations, cash usage or generation, cash balance as of any future date, capital structure and other financial items). The plans and objectives of Any Company s management for future operations, customer relationships, products, services or investments. Whether Any Company will achieve growth and diversification. Whether the actions Any Company is taking will unlock shareholder value. Whether Any Company s recently outlined cost reduction plan will allow Any Company to become profitable on a non-gaap basis. Whether and the timing of when the results from the strategic growth plan that Any Company is executing will be fully reflected in its financial results and stock price. Disclaimer of no consents for quoted material if no consents have been obtained Any Company has neither sought nor obtained the consent from any third party to use any statements or information contained in this letter that have been obtained or derived from statements made or published by such third parties. Any such statements or information should not be viewed as indicating the support of such third parties for the views expressed herein. 47
Company Creates Proxy Contest Website DEFA14A filing required to be made Screenshots of entire website should be filed with SEC on the date that the website is first made publicly available prior to 5:30 p.m. ET. Website should be more of a repository for documents that have been previously publicly filed (e.g., proxy statement, press releases, fight letters, investor presentations, etc.) as opposed to a source of original content. Other information to be posted to the website may include links to SEC filings, director nominee information, voting information, annual meeting information, who to contact, and media coverage. Legends and disclaimers SEC legend. Forward-looking statements. Other broad disclaimers indicating no duty to update or correct, no representations and warranties as to the accuracy or completeness of the posted information, no liability for information posted to the website, no consents for use of third-party information, etc. 48
Company Creates Proxy Contest Website Sample Disclaimer: Any Company shall have no obligation to update or correct any information contained on this website even if it is aware that it is inaccurate or outdated. Any Company may also add, change, discontinue, remove or suspend any content posted on this website without notice and without liability at any time. No representation or warranty, express or implied, is made as to the accuracy or completeness of any information contained on this website. Any Company expressly disclaims any and all liability based, in whole or in part, on such information, any errors therein or omissions therefrom. Furthermore, Any Company reserves the right to modify or change its views or conclusions at any time in the future without notice. Any Company accepts no liability and will not be liable for any loss or damage arising directly or indirectly (including special, incidental or consequential loss or damage) from use of this website, including any loss, damage or expense arising from, but not limited to, any defect, error, imperfection, fault, omission, mistake or inaccuracy on this website, its contents or associated services, or due to any unavailability of the website or any part thereof or any contents or associated services. The information contained on this website does not recommend the purchase or sale of any security nor is it an offer to sell or a solicitation of an offer to buy any security. Furthermore, the information contained on this website is not intended to be, nor should it be construed or used as, investment, tax or legal advice. Any Company has neither sought nor obtained the consent from any third party to use any statements or information contained on this website that have been obtained or derived from statements made or published by such third parties. Any such statements or information should not be viewed as indicating the support of such third parties for the views expressed herein. This website is not intended for use by any person or entity in any jurisdiction or country where such use would be contrary to local law or regulation. 49
Company CEO Is Quoted in Hometown Newspaper on Proxy Fight DEFA14A filing required to be made Entire article may not need to be filed under DEFA14A but it could be filed (but if filing whole article, weigh pros and cons since it will be filed not furnished). Excerpt from article with quote from CEO is required to be filed on a DEFA14. Must be filed with SEC on the date of the article s first publication or internet posting. If article is published (or, posted to the internet, after 5:30 p.m. ET), then it can be filed the next business day. What if the quote for the reporter s article from the CEO or Board Chairman is directly from one of the Company s fight letters or press releases? 50
Company Files Proxy Advisory Firm Presentation with the SEC DEFA14A filing required to be made Must be filed with SEC on the date of the investor presentation s first use and prior to 5:30 p.m. ET. Email of presentation to proxy advisory firms should be regarded as first use. Should be carefully reviewed for any Rule 14a-9 issues. Is there any material non-public information included that raises Regulation FD concerns? GAAP / Non-GAAP reconciliation may be needed. Update forward-looking statement / private securities litigation reform act disclaimer. Include disclaimer of no consents for quoted material if no consents have been obtained (e.g., quoted analyst comments) ((Rule 14a- 12(c)(2)(ii)). 51
Company Files Proxy Advisory Firm Presentation with the SEC Update private securities litigation reform act disclaimer to include references to all forwardlooking statements in investor presentation, particularly those referencing the following: The anticipated proxy contest by Any Activist, LLC and the other participants in its solicitation. Any Company s ability to continue to execute on and implement its strategic plan. Any Company s opportunities for continued growth. Any Company s initiatives to improve its financial and operational performance and increase its growth and profitability. Any Company s future stock price. Any Company s ability to grow its business. Any Company s ability to enhance its competitive position. Any Company s ability to continue to maintain expense discipline. Any Company s actions taken or contemplated to enhance its long-term prospects and create value for its shareholders. Any Company s future operational and financial performance. The effect that the election of Any Company s nominees to the Any Company Board will have on Any Company s execution of its long-term plan and long-term shareholder value. The future effect of Any Company s strategic plan on Any Company s growth, profitability and total shareholder returns. 52
Company Files Proxy Advisory Firm Presentation with the SEC Update private securities litigation reform act disclaimer to include references to all forward-looking statements in investor presentation, including any of the following: All statements relating to expected financial performance (including without limitation statements involving growth and projections of revenue, margin, profitability, income (loss) from continuing operations, income (loss) per share from continuing operations, cash usage or generation, cash balance as of any future date, capital structure and other financial items). The plans and objectives of Any Company s management for future operations, customer relationships, products, services or investments. Whether Any Company will achieve growth and diversification. Whether the actions Any Company is taking will unlock shareholder value. Whether Any Company s recently-outlined cost reduction plan will allow Any Company to become profitable on a non-gaap basis. Whether and the timing of when the results from the strategic growth plan Any Company is executing will be fully reflected in its financial results and stock price. Disclaimer of no consents for quoted material if no consents have been obtained (Rule 14a-12(c)(2)(ii)) Any Company has neither sought nor obtained the consent from any third party to use any statements or information contained in this presentation that have been obtained or derived from statements made or published by such third parties. Any such statements or information should not be viewed as indicating the support of such third parties for the views expressed herein. 53
Company Issues Press Release Commenting on Proxy Advisory Firm Reports DEFA14A Filing - Press release is filed as definitive additional materials Filed by the Registrant Filed by a Party other than the Registrant Check the appropriate box: Preliminary Proxy Statement Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) Definitive Proxy Statement Definitive Additional Materials Soliciting Material Pursuant to 240.14a-12 Press release must be filed on date of first use. However, if press release is issued after 5:30 p.m. ET, then it can be filed the next business day. Rule 14a-12(c)(2)(ii) Except in the case of a public or official document or statement, state whether or not the consent of the author and publication has been obtained to the use of the previously published material as proxy soliciting material. 54
Company Issues Press Release on Annual Meeting Results Form 8-K Item 5.07 Press release can be filed as an exhibit to the Company s Item 5.07 Form 8-K (and referenced in Item 7.01 or Item 8.01) but is generally not required to be filed. No filing required under proxy rules since solicitation is concluded. Item 5.07 Form 8-K is required to be filed within four business days of annual meeting. The four business day period for filing Item 5.07 Form 8-K, begins to run on the day on which the meeting ended. The registrant is required to disclose in Item 5.07 Form 8-K the preliminary voting results if final results are not available by fourth business day after annual meeting. The registrant is required to file an amended report on Form 8-K under Item 5.07 to disclose the final voting results within four business days after the final voting results are known. No preliminary voting results need be disclosed under Item 5.07 if the registrant has already disclosed final voting results on Form 8-K. 55
PROXY CONTEST EDGAR TAGS
Proxy Contest EDGAR Tags (Company) SEC FILING Company Rule 14a-12 preliminary solicitation materials Company preliminary proxy statement Company revised preliminary proxy statement Company definitive proxy statement Company definitive additional solicitation materials (e.g., fight letter #1 and related press release) EDGAR TAG DEFA14A PREC14A PRER14A DEFC14A DEFA14A 57
Proxy Contest EDGAR Tags (Activist) SEC FILING EDGAR TAG Activist Rule 14a-12 preliminary solicitation materials Activist preliminary proxy statement Activist revised preliminary proxy statement Activist definitive proxy statement Activist definitive additional solicitation materials (e.g., fight letter #1 and related press release) DFAN14A PREC14A PRRN14A DEFC14A DFAN14A 58
Our Global Reach Our Locations Africa Asia Pacific Europe Latin America Middle East North America Almaty Astana Beijing* Boston Brussels Chicago Dallas Dubai Frankfurt Hartford Hong Kong* Houston London Los Angeles Miami Moscow New York Orange County Paris Philadelphia Pittsburgh Princeton San Francisco Santa Monica Shanghai* Silicon Valley Singapore Tokyo Washington, DC Wilmington *Our Beijing office operates as a representative office of Morgan, Lewis & Bockius LLP. In Shanghai, we operate as a branch of Morgan Lewis Consulting (Beijing) Company Limited, and an application to establish a representative office of the firm is pending before the Ministry of Justice. In Hong Kong, Morgan Lewis has filed an application to become a registered foreign law firm and is seeking approval with The Law Society of Hong Kong to associate with Luk & Partners.