Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

A review of recent SEC comments on merger proxy statements indicates many of these comments were typical, and some are variations on a theme:

  • Rule 14a-6(a) requires that the form of proxy be on file for ten calendar days, yet no form of proxy appears to have been transmitted. Please amend the filing to include the form of proxy, or advise. In addition, please ensure that both the preliminary proxy statement and form of proxy are clearly marked as being preliminary. See Rule 14a-6(e)(1).
  • We note the statement in the first sentence of the tenth paragraph of the opinion attached as Annex C that [the financial advisors] and Company’s opinion may not be used without its prior written consent. Please revise the disclosure in this section to state, if true, that [the financial advisor] and Company has consented to the use of its opinion in this document.
  • We note the limitations on reliance by shareholders in the fairness opinion provided by the [financial advisor]. Specifically, we note the statements that the opinion is furnished for the use of the Special Committee and “may not be used for any other purpose without the [financial advisors] prior written consent.” Additionally, we have similar concerns with the statement that the opinion “should not be construed as creating any fiduciary duty on [the financial advisor’s] part to any party.” Please have the advisor revise the opinion to remove these limitations on reliance by shareholders. Alternatively, please disclose the basis for the advisor’s belief that shareholders cannot rely upon the opinion to support any claims against the [financial advisor] arising under applicable state law.
  • We note the disclaimer [that the parties and their financial advisors] do not assume “any responsibility for the validity, accuracy or completeness” of the projections. Please revise to eliminate the statement that these parties do not bear any responsibility for disclosure that was prepared and included in this Schedule 14A.
  • We note the disclosure on page X that ABC does not intend to revise its projections. Please revise this disclosure, as publicly available financial projections that no longer reflect management’s view of future performance should either be updated or an explanation should be provided as to why the projections are no longer valid.
  • We noticed the inclusion of cautionary language that indicates that XYZ undertakes no obligation to update… “even in the event that any of the assumptions underlying the financial projections are shown to be in error or change except to the extent required by applicable federal securities law.” Please advise us as to the circumstances that could arise where all of the assumptions shown are in error yet XYZ would bear no obligation to update. To the extent that no such circumstances exist, please revise the disclosure to remove the implication that compliance with the federal securities law is the exception in such instances, especially in the context of the proposed transaction. Consequently, it appears that XYZ does have an ongoing obligation to update and that the disclaimer appears to have been incorrectly cited as a matter of fact and law.
  • We note your disclosure that “information concerning the subject matter of the representations, warranties and covenants may change after the date of the merger agreement.” Please be advised that, notwithstanding the inclusion of a general disclaimer, you are responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make statements in the proxy statement not misleading.
  • We note your statement that investors “are not third-party beneficiaries under the merger agreement and should not rely on the representations, warranties and covenants or any descriptions…” While we recognize that you also advise investors to read your SEC disclosures, we believe that the cited language strongly implies that the information contained in the merger agreement is not disclosure subject to the federal securities laws. Please revise to remove this implication. We will not object if you advise readers that the information in the merger agreement should be read in conjunction with the other disclosures in the company’s filings with the SEC.
  • Please delete the XXX sentence in the second paragraph of this section, as well as the statement that the merger agreement’s inclusion in the filing is not intended “to provide investors with any other factual information regarding ABC, DEF, XYZ or their respective business,” as they inappropriately imply that readers should not rely on the representations, warranties and covenants described in this section and in the merger agreement.
  • We note that you may employ various methods to solicit proxies, including by telephone, electronic mail, letter, facsimile or in person. Be advised that all written soliciting materials, including any e-mails or scripts to be used in soliciting proxies over the telephone or any other medium, must be filed under the cover of Schedule 14A on the date of first use. Refer to Rule 14a-6(b) and (c). Please confirm your understanding.
  • Throughout this section you discuss that the board considered “potential standalone strategic alternatives.” Please expand your discussion of the nature of these alternatives and why other transactions were favored over these alternatives.
  • Please tell us what consideration you have given to including risk factor disclosure about the impact of the exclusive forum provisions in the merger agreement and your partnership agreement, on investors.
  • Please disclose here the total amounts your directors and executive officers may potentially receive in connection with the proposed merger, including potential change in control payments.


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