Excerpt from Current Issues and Rulemaking Projects Outline (November 14, 2000)

Section VIII.A.9. Current Disclosure, Legal and Processing Issues – Disclosure, Legal and Processing Issues – Related Public and Private Offerings

Some companies with pending registration statements have advised the staff that they intend to withdraw the registration statement and shortly thereafter complete the offering without registration in reliance upon the Section 4(2) private offering exemption. This appears to be proposed for both timing and disclosure reasons. In the staff's view, this procedure ordinarily would not be consistent with Section 5 of the Securities Act. The filing of a registration statement for a specific securities offering (as contrasted with a generic shelf registration) constitutes a general solicitation for that securities offering, thus rendering Section 4(2) unavailable for the same offering. In addition, the procedure raises significant integration issues under the traditional five factor test (Securities Act Release No. 4552 (November 6, 1962)) and the staff's integration policy positions, because the subsequent private offering does not appear to be a separate offering.

A related issue arises when a company files a registration statement to register issuances of securities to purchasers who committed to purchase securities from the issuer before the filing of the registration statement on the condition that the securities be registered before issuance. It appears that the purpose of this procedure is to provide the purchasers with registered (rather than restricted) securities. The staff does not believe that this procedure is consistent with the registration provisions of the Securities Act, which cover offers and sales of securities, not issuances. In this situation, it appears that the offers were made and the commitments obtained before filing in reliance upon the Section 4(2) private placement exemption. If so, the registration statement should cover resales by the purchasers, not issuances to the purchasers.

The use of "lock-up agreements" in business combination transactions is common. What is not common or consistent is the extent to which these agreements may be used to lock up target shareholders beyond key executives and "blocking" shareholders of the target. While the signing of a lock-up agreement may constitute the making of an investment decision, the staff, noting the realities of these transactions, traditionally has not raised issues with respect to these agreements in connection with acquisitions of public companies. However, the staff has raised issues concerning recently filed acquisition registration statements where 100% of the target shares are locked up or the "lock-up" group is expanded to include non-traditional "members" such as middle management. [Note that the Commission has proposed to address lock-up agreements and related public and private offerings in Securities Act Release No. 7606A (November 13, 1998).]

http://www.sec.gov/divisions/corpfin/guidance/ci111400ex_sas_ppo.htm