SEC Facilitates Iran Sanctions Disclosure on New Form IRANNOTICE

On August 10, 2012, President Obama signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012.  Section 219 of the Act amends Section 13 of the Exchange Act to add new subsection (r), which requires an issuer that files under the Exchange Act to provide disclosure in its periodic report if during the reporting period it or any of its affiliates has knowingly engaged in certain specified activities involving contacts with or support for Iran or other identified persons involved in terrorism or the creation of weapons of mass destruction. 

By Final Rule adopted June 20 and to be effective on the date of its publication in the Federal Register, the SEC has adopted revisions to the EDGAR Filer Manual to introduce the new EDGARLink Online submission type IRANNOTICE that will be available for use with the implementation of EDGAR Release 13.0 on January 14, 2013.  The revisions also support PDF as an official filing format for submission types 497AD, 40-17G, 40-17G/A, 40-17GCS, 40-17GCS/A, 40-24B2, and 40-24B2/A.

Exchange Act Section 13(r) requires an issuer that includes a description of an identified activity in a periodic report to concurrently file with the SEC a notice that identifies the issuer and indicates that disclosure of the activity has been included in its periodic report.  The SEC has stated that issuers required to file the notice should prepare a separate document that includes the information required by the statute, convert it to ASCII or HTML as instructed by the EDGAR Filer Manual, and submit it using the new IRANNOTICE form type.

Orthopedics Co. Offers $190 Million Upfront Merger Consideration Plus Contingent Payments of up to $190 Million

Wright Medical Group, Inc. (NASDAQ: WMGI) registered common stock and contingent value rights, or CVRs, on a Form S-4 dated December 21 (file no. 333-185601) in connection with an agreement and plan of merger whereby BioMimetic Therapeutics, Inc. (NASDAQ: BMTI) will become a wholly owned subsidiary of Wright.  Pursuant to the merger agreement, each BioMimetic common share will be converted into the right to receive an upfront payment of $1.50 in cash and 0.2482 shares of Wright common stock. The upfront payment values BioMimetic at approximately $190 million.

Each BioMimetic share will also receive one tradable CVR, which entitles its holder to receive additional cash payments of up to $6.50 per share, which are payable upon receipt of FDA approval of Augment Bone Graft and upon achieving certain revenue milestones.  Augment Bone Graft is currently being marketed as an alternative to autograft procedures in Canada for foot and ankle fusions, in Australia and New Zealand for hindfoot and ankle fusions and has a PMA application pending before the FDA for hindfoot and ankle fusion indications.

Any contingent milestone payments will be paid in cash.  The CVR payments to BioMimetic shareholders are structured as follows:

• $3.50 per share upon FDA approval of Augment Bone Graft;
• $1.50 per share upon the achievement of $40 million in trailing twelve month sales for all products contributed by BioMimetic;
• $1.50 per share upon the achievement of $70 million in trailing twelve month sales for all products contributed by BioMimetic.

The latter two sales milestone payments cannot be made sooner than 24 and 36 months post-closing of the transaction, respectively.

 

The mix of cash and stock consideration is subject to adjustment, if necessary, under the merger agreement in relation to certain provisions of the NASDAQ Marketplace Rules.  Wright has agreed to use its reasonable best efforts to cause the CVRs to be approved for listing on The NASDAQ Global Select Market or The NASDAQ Global Market.  The legality of the CVRs and the shares of common stock to be issued pursuant to the merger will be passed upon for Wright by Wilson Sonsini Goodrich & Rosati.  Ropes & Gray has served as BioMimetic’s legal advisors.

New Class of Preferred Stock to be Issued as Merger Consideration

Document Security Systems, Inc. (NYSE MKT: DSS) registered common shares and a new class of preferred stock on November 23 in connection with a proposed merger with Lexington Technology Group, Inc., a private intellectual property monetization company (Form S-4, SEC File No. 333-185134).  Lexington stockholders will hold the largest percentage of the voting shares on a fully dilutive basis after the merger at 56% of the combined entity.  Because DSS will be issuing equity interests in order to acquire Lexington that results in a change of control in the combined entity, the transaction will be accounted for as a reverse acquisition. 

In addition to approval of the agreement and plan of merger at the special meeting of shareholders, DSS seeks to amend its certificate of incorporation to authorize a class of preferred stock that would be issued to holders of Lexington preferred shares who would, after giving effect to the merger and receipt of the merger consideration, beneficially own more than 9.99% of DSS common stock.  Holders of Lexington preferred stock who do not exceed the Beneficial Ownership Condition and accordingly will not receive DSS preferred stock (or warrants if the proposal to create the new class of preferred is not approved) will receive DSS common shares and the other types of merger consideration in exchange for their Lexington preferred stock based on the Common Stock Exchange Ratio as defined in the merger agreement. 

Lexington was formed in May 2012 to maximize the economic benefits of intellectual property assets through acquiring or internally developing patents or other intellectual property assets and then monetize such assets.  Through its wholly-owned subsidiary Bascom Research, Lexington currently develops software applications based on the Bascom Portfolio that are focused on applying computational and data structures to complex data sets in the medical field.  On October 3, Bascom initiated patent infringement lawsuits in the United States District Court for the Eastern District of Virginia against five companies, including Facebook, Inc. and LinkedIn Corporation, for unlawfully using systems that incorporate features claimed in patents owned by Bascom. The patents-in-suit relate to the data structure used by social and business networking web sites and Web 2.0 corporate intranets.

Submitting Confidential Draft Registration Statements Using EDGAR

As reported here on May 14, the SEC Division of Corporation Finance implemented a secure e-mail system to allow "emerging growth companies" as defined in the Jumpstart our Business Startups (JOBS) Act that have not previously sold securities under the 1933 Act to pre-file confidential registration statements.  On October 3, SEC staff posted a sample letter advising that as of October 1, 2012, such companies are able to submit draft registration statements using EDGAR.  

Issuers will need a CIK (Central Index Key) number to make the initial filing on EDGAR and must take a number of steps to prepare for that filing.  Filers with a CIK number can submit a request to convert their EDGAR status to an electronic filer.  When a filer makes its first EDGAR draft submission, it should submit it as a new draft registration statement, even if it is an amendment to a previously submitted version.  Each previously submitted draft registration statement, including exhibits, should be attached to the initial registration statement as a separate Exhibit 99 document.

Form S-20 is First Registration of Standardized Options in Ten Years

Canadian Derivatives Clearing Corp. ("CDCC"), the issuer of every put and call option that may be purchased or sold in transactions on Bourse de Montréal Inc. (the “Bourse”), filed a Form S-20 on October 3 to register 50 million contracts under the 1933 Act (SEC file no. 333-184288).  Each option relates to a particular underlying interest (a security listed on a recognized Canadian securities exchange, a Canadian government bond or a Canadian stock index or sub-index).  These options are not listed or traded on any securities exchanges in the United States, although certain of the underlying interests are traded on one or more U.S. exchanges.

Several U.S. exchanges are currently trading standardized options (“U.S. Options”) relating to foreign securities that are listed on U.S. exchanges, including certain securities of Canadian issuers who have securities listed on U.S. exchanges.  Certain U.S. Options relate to securities of Canadian issuers that are also underlying interests of the options to be offered by the issuer.  The options offered by CDCC and U.S. Options are not interchangeable and, although the terms and procedures applicable to the CDCC options and to U.S. Options are similar, they are not identical in all respects.

CDCC acts as the clearing facility through which the settlement of options transactions effected on the Bourse is made.  In addition to its role as a clearinghouse for exchange traded options on equities, bonds, stock indices and futures, CDCC acts as a clearinghouse for exchange-traded futures listed on the Bourse and for over the counter equity options.

Prior to the CDCC filing, the last pre-effective Form S-20 was filed by Options Clearing Corp. in March 2002.  At the time, Options Clearing was owned equally by the American Stock Exchange LLC, the Chicago Board Options Exchange, Inc., the International Securities Exchange LLC, the Pacific Exchange Inc. and the Philadelphia Stock Exchange, Inc.