Carrie A. Ratliff King & Spalding LLP February 14, 2018 Federal Registration of Offer and Sale of Securities Carrie A. Ratliff King & Spalding LLP February 14, 2018

Topic Overview What is a registered public offering? Legal and regulatory framework Overview of offering process The typical parties Types of public offerings Underwriting process Key documents Timing of IPOs and other non-shelf offerings Timing of shelf takedowns Forms and disclosure

What is a Registered Public Offering? A public offering is the process by which a company and/or its existing security holders sell securities (debt or equity) to the investing public in a transaction registered under the Securities Act of 1933 (Securities Act) Based on the principle that any transaction in securities must be registered under the Securities Act or made pursuant to an exemption from registration

Legal and Regulatory Framework The Securities Act of 1933 Sets forth disclosure standards Governs mechanics of the offering Imposes liability for violations State securities laws Generally preempted by federal law Stock exchanges Impose qualitative and quantitative listing standards Set forth corporate governance standards

Legal and Regulatory Framework Securities and Exchange Commission (SEC) SEC’s Division of Corporation Finance reviews registration statements Review focuses on: Compliance with technical disclosure requirements “Fair” and “balanced” disclosure for investors Accounting issues and financial disclosure Provide initial comments within 30 days of initial filing, if reviewing Financial Industry Regulatory Authority (FINRA) Reviews underwriting arrangements to ensure they are fair and reasonable to the issuer Imposes limitations on compensation of underwriters Underwriters are required to make representations

Overview of Offering Process -- The Typical Parties Issuer (the company/registrant) Selling shareholders (when applicable, typically in equity transactions) Underwriters (investment banks) Counsel to the issuer Counsel to the underwriters Auditor (independent registered public accounting firm) Agents Equity securities: transfer agent Debt securities: trustee Depository Trust Company (DTC) Financial printer Optional: Investor relations firm, compensation consultant

Overview of Offering Process -- Types of Public Offerings Primary offering: the issuer sells its securities (equity or debt) to the public The first public offering of equity securities by an issuer is commonly referred to as an “initial public offering” (IPO) After an IPO (usually within 6-12 months) the issuer may conduct a “follow-on” offering Secondary offering: existing shareholders of the issuer sell their holdings (typically equity) to the public The issuer does not receive any proceeds from a sale by shareholders Combined primary/secondary offering: both the issuer and existing shareholders sell shares to the public in the same offering Both the issuer and selling shareholders receive proceeds from the sale Exchange offer: the issuer exchanges unregistered restricted debt securities for registered debt securities

Types of Public Offerings -- Initial Offering Initial offering: A non-registrant offers securities for the first time on a public basis (typically equity securities in an IPO) Emerging Growth Companies (EGCs) can take advantage of the JOBS Act Confidential filing (now allowed for all companies) Reduced financial statements Reduced ongoing disclosure in some areas EGCs are generally companies with less than $1 billion of revenue IPOs are reviewed and commented on by the SEC Register a set amount of securities Accompanied by a roadshow / marketing effort See Annex A for indicative timeline

Types of Public Offerings -- Shelf Registration Shelf registration offering: The issuer or selling shareholders offer securities on a delayed or continuous basis from time to time from an effective registration statement If Form S-3 eligible (or smaller reporting company per FAST Act), provides ability to incorporate by reference future filings and avoid post-effective amendments Can register securities to sell when convenient Registration statement expires 3 years from effectiveness For well-known seasoned issuers ($700 million in public equity float (i.e., voting stock held by non-affiliates)): Registration statement automatically effective (no SEC review prior to effectiveness) Need not register a specific amount of securities and can add classes of securities at any time prior to sale by means of a post-effective amendment Immediate takedowns of securities permitted

Types of Public Offerings -- Subsequent Registration PIPE transaction: the issuer privately places equity securities with institutional investors and agrees to register the securities at a later date pursuant to a registration rights agreement Does not initially involve a public offering Issuer is required to effect a subsequent registration so that the investors can resell their shares without restriction Back-End Debt Exchange Offer: the issuer completes a 144A offering with sales to qualified institutional buyers (QIBs) and agrees to register the securities by a certain date pursuant to a registration rights agreement Issuer is required to effect a subsequent registration so that the investors can resell their securities without restriction Still subjects issuer to reporting requirements as a SEC registrant

Overview of Offering Process -- Registration Statement, Prospectus and UA Registration statement and prospectus Detailed disclosure document that must comply with SEC rules and regulations Forms prescribed by the SEC (e.g., Forms S-1 and S-3) Issuer has liability on documents Primarily drafted by the issuer and its counsel Underwriters provide “marketing spin” Underwriting agreement Sets forth the terms of the purchase and sale of securities between the underwriters and the issuer (and selling shareholders) Entered into after effectiveness of the registration statement and on “pricing” day, although negotiated well in advance Sets forth pricing terms, representations and warranties of the parties and required legal opinions Drafted by underwriters’ counsel

Overview of Offering Process -- Underwriting Enter into an underwriting agreement on the day of the “pricing” of the offering Firm commitment underwriting (typical): Underwriters, as principals, agree to purchase a specific amount of securities for resale to the public Underwriters assume the risk of resale for typically 2 business days Underwriters purchase the securities from the issuer or selling shareholders at a discount to the sale price to public ~1% to 3% for debt ~6-7% for an IPO ~5% for secondary offering Best efforts underwriting: Underwriters, as agents of the issuer, agree to use their best efforts to sell the securities to the public Underwriters do not assume the risk of resale Issuer and underwriters agree on min/max amounts to be offered

Overview of Offering Process -- Lock-up and Comfort Letter Lock-up agreements Typical in equity transactions, less prevalent in debt transactions Issuer, issuer’s officers and directors and selected shareholders agree, subject to limited exceptions, not to dispose of or hedge any of their securities during a specified period after the offering without the prior consent of the underwriters The typical lock-up period is 180 days for IPOs and 90 (sometimes 45) days for subsequent offerings Comfort letter A letter from the issuer’s auditor addressed to the underwriters and typically issuer’s board Comfort letters require the issuer’s auditors to review the financial information in the registration statement and to report the results of this review to the underwriters (an independent verification of certain financial information) Comforted data must be derived from financial records of the issuer that are subject to accounting controls Serves to evidence the underwriters’ due diligence defense under Section 11 of the Securities Act The form and content of comfort letters are governed by the AICPA’s auditing standards

Overview of Offering Process -- Legal Opinions Addressed to the underwriters from the issuer’s counsel and underwriters’ counsel Also serves to evidence the underwriters’ due diligence defense Covers many of the matters in the issuer’s representations and warranties from the underwriting agreement Validity of the securities to be issued Counsel’s “10b-5” or “negative assurances” statement guides much of their behavior during the offering process No untrue statements or omissions of material facts

Initial Offerings -- Three Distinct Time Periods Pre-submission/filing period Begins with the decision to pursue a public offering, followed by organizational meeting If an EGC, pursuant to JOBS Act, may meet with qualified institutional buyers and institutional accredited investors to “test the waters” and gauge investor interest prior to filing of registration statement Waiting period Begins with confidential submission / filing of the registration statement If an EGC, test the waters communications may continue, written offers may also be made pursuant to a preliminary prospectus Post-effective period Begins when the registration statement is declared effective Sales may be completed NOTE: Publicity restrictions apply during each period (see Annex B)

Key Tasks During Pre-submission / Filing Period Select Underwriters – “Bake-off” process Selection criteria: reputation, quality of research analysts, distribution capabilities and after market support Designate lead bookrunner Determine compensation split Provide input on underwriters’ counsel selection Be mindful of FINRA issues related to communications with analysts during solicitation period Determine underwriting arrangements “Green shoe”; typically 15% of shares to be sold Underwriting discount; typically 7% for an IPO; 5% for follow-ons Resolve who will participate Registration Rights Practical Considerations for Shareholders and Employees Primary / Secondary Split

Key Tasks During Pre-submission / Filing Period Prepare registration statement Strengths and strategies Identify key risks Management’s Discussion and Analysis of Financial Condition and Results of Operations Executive Compensation Disclosure (consider sensitivity around disclosure) Resolve capital structure issues Determine whether amendment or replacement of debt facilities will be necessary Determine any necessary reorganization and / or use of Up-C structure Any preferred stock issues and management agreement terminations Stock split Consider “corporate housekeeping issues” Additional senior management Additional financial reporting, legal, accounting or internal audit personnel Board composition and structure (additional independent directors, timing of any resignations, staggered board) Shareholders agreements / controlled company exemption Executive compensation program review Post-IPO executive officer and director compensation

Key Tasks During Pre-submission / Filing Period Underwriter business and accounting due diligence Interview key employees (e.g., CEO, CFO, COO, etc.) Site visits Subject matter diligence Interview certain key customers/suppliers Review management’s financial projections Ask questions of independent auditors Legal due diligence Underwriters’ counsel presents due diligence request lists (similar to version included in this package) Identify disclosure issues such as pending litigation, intellectual property matters, regulatory matters, etc. Review board minutes Capitalization diligence Related party transactions Determine S-1 exhibits

Key Tasks During Pre-submission / Filing Period Identify Key Accounting Issues Timing and financial statement requirements / staleness / re-audits Any acquisition financials or pro formas Cheap stock issues / timing of any new grants Confirm auditor independence (including Sponsor analysis) Negotiate underwriting documentation Underwriting agreement Comfort letter (will be negotiated between underwriters’ counsel and accountants) Lock-up agreements (see Annex C) Reserve Ticker Symbol Reservation with either exchange holds for both Valuation issues: Identify comparable companies Valuation is function of a multiple of next year’s projected earnings Anticipated price range for the securities

Key Tasks During Pre-submission / Filing Period Pick other members of the “Team” NYSE / Nasdaq (work through listing process and select specialist for any NYSE listing) Financial printer External PR/IR function Transfer agent Insurance broker Compensation consultant ECM Consultant (e.g., Solebury Capital) Meet with equity analysts Analyst day with analysts for all syndicate members Evaluate timing for sharing financial forecast

Key Tasks During Waiting Period Receive and respond to SEC comments on the registration statement Likely to involve multiple amendments submitted to or filed with the SEC Will need to update financials throughout process Registration statement must be filed (along with previous amendments) at least 21 days prior to launch of road show Last amendment prior to launch will include price range Prepare and conduct “roadshow” Members of senior management will participate Underwriters and management prepare slide deck; must be consistent with the preliminary prospectus; discuss long-term targets slide No written material can be used except the preliminary prospectus Roadshow will likely begin shortly before effectiveness, but SEC will have confirmed clearance Typically on road for about 7 days Prepare governance documents Articles, bylaws, committee charters, etc. (discuss state of incorporation and corporate opportunities statute) Equity compensation plan Any post-IPO registration rights or shareholder agreements

Key Tasks During Post-effective Period Submit preliminary range and/or “cheap stock” letter to SEC File Form 8-A 34 Act effectiveness NYSE/Nasdaq certification for listing Registration statement declared effective Price offering Negotiated by company and underwriters based on investor demand Consideration given to after-market performance File Form 3s with SEC for directors, officers and 10% holders Prepare final prospectus Will include final pricing Filed with SEC Close the offering Typically occurs 2 business days following pricing

Timing of Shelf Takedowns Once a shelf registration statement is on file, offering securities pursuant to the shelf can be a rapid process Includes a “base prospectus” Pricing information can be filed in a free writing prospectus Prepare prospectus supplement File within 2 business days of pricing Closing can occur as soon as 2 business days following pricing (used to be 3) The time necessary to conduct due diligence and draft the prospectus supplement may extend the otherwise rapid takedown process of a shelf registration

Forms and Disclosure Primary content is the prospectus, which includes detailed information about the issuer and the offering (See Annex C) Also includes undertakings, signatures of officers and directors and exhibits Registration statement forms may be thought of as checklists which indicate the items of information that must be disclosed Substantive information requirements are found in Regulation S-K

Forms and Disclosure Form S-1 (typical IPO form) Used when no other form is authorized Generally for issuers who have not been reporting under the Exchange Act for preceding 12 months Incorporation by reference permitted for previously filed SEC reports and “forward incorporation” permitted for smaller reporting companies per the FAST Act

Forms and Disclosure Form S-3 Issuers can have a public float of less than $75 million and register offerings on Form S-3, as long as: They satisfy the other eligibility requirements of Form S-3 (e.g., timely reporting for 12 months) They have a class of common equity listed on a national exchange The issuers do not sell more than 1/3 of their public float in primary offerings over a 12-calendar-month period preceding the filing They are not shell companies Backward and forward incorporation by reference permitted For well-known seasoned issuers ($700 million in public equity float (i.e., voting stock held by non-affiliates)): Registration statement automatically effective (no SEC review prior to effectiveness) Need not register a specific amount of securities and can add classes of securities at any time prior to sale by means of a post-effective amendment

Forms and Disclosure Form S-4 Available when a company is issuing securities in the following types of transactions, among others: Certain mergers Exchange offers for securities of the issuer or another entity A public reoffering or resale of any such securities acquired pursuant to the registration statement Allows incorporation by reference if the company meets the requirements for use of Form S-3 Registration statement often includes combined proxy statement and prospectus

Forms and Disclosure Form S-8 Used to register offerings pursuant to employee benefit plans Covered plans may include: Stock incentive plans Employee stock purchase plans Deferred compensation plans 401(k) plans Available for non-shell company issuers that have been compliant with the reporting requirements of the Exchange Act for the preceding 12 months Backward and forward incorporation by reference permitted Prospectus providing a description of the plan is not included with the filed registration statement but distributed to participants

Forms and Disclosure Typical exhibits Underwriting agreement Articles of incorporation and bylaws Form of the security and indenture Opinions regarding legality of securities and tax matters Material contracts Statements regarding computations Subsidiaries Consents Powers of attorney Note: CEO and CFO certifications do not apply to registration statements

Questions

Annex A: Typical IPO Execution Overview The IPO process typically takes 4-6 months from start to finish Typical SEC review process (2-3 months) SEC review is longest and most unpredictable aspect of IPO process Closing Executing Complete closing mechanics Establish investor relations function Begin executing on public company strategic plan Research analyst coverage Marketing Roadshow U.S. cities International leg Bookbuilding Pricing Allocation Waiting Develop marketing plan Management presentation Sales force memo Investor targets/mix Receive SEC clearance Publicly launch transaction Implementing Co-manager diligence Respond to SEC comments File amended S-1 and previous amendments with SEC Update financials (as necessary) Complete corporate governance tasks Planning Draft Registration Statement on Form S-1 Strengths/Strategies Business Section Risk Factors Prepare financials Conduct financial, business and legal due diligence Confidentially submit Initial S-1 to SEC File NYSE/NASDAQ Application Engage in "testing the waters" communications, if desired Develop strategic plan Analyze different alternatives Define the timetable Appoint advisers Resolve capital structure issues Evaluate potential IPO accounting issues Start acting like a public company Consider "testing the waters“ (if EGC)

Annex B: Publicity Restrictions Oral and written offers of any kind are prohibited prior to filing the registration statement, subject to important safe harbors, including “testing the waters” communications pursuant to the JOBS Act The objective is to avoid stimulating investor interest prior to an opportunity to see the legal selling document (i.e., the prospectus) – do not affirm rumors regarding a potential IPO “Offer” is construed broadly Includes any publicity or disclosure which has the effect of conditioning the public mind or arousing public interest in the issuer or its securities Pre-30 day safe harbor: All company communications, even if a technical “offer,” more than 30 days prior to filing the registration statement are permissible Must not refer to the offering Company takes reasonable steps within its control to prevent further distribution/publication during the 30-day pre-filing period Factual business information safe harbor: Subject to certain conditions, the regular release of ordinary course factual business information is permissible during the pre-filing period and at any other time in the offering process Forward-looking information is not protected Pre-filing announcement: A company may make a limited announcement of the proposed offering prior to filing a registration statement that contains no more than specified basic information and without naming the underwriters Pre-Filing Restrictions Pre-Filing Safe Harbors

Annex B: Publicity Restrictions Written offers can only be made pursuant to a preliminary prospectus or, in limited circumstances, a “free writing prospectus,” excluding “testing the waters” communications Oral offers are permitted Factual business information safe harbor continues to apply Post-filing announcement: A company may make a limited announcement of the proposed offering after filing a registration statement that contains no more than certain specified Rule 134 information The publicity constraints described above continue for a 25-day period following the effective date of the registration statement Counsel should review the company’s website for “offers;” the SEC views website and information accessed by hyperlinks as written statements by the issuer Impermissible emails to employees or articles may have to be filed with the prospectus SEC could require a company to engage in a cooling-off period Waiting Period Restrictions Post-effective Restrictions Practical Considerations What Could Happen?

Overview of an IPO Lock-up Early Lock-up Release Considerations Annex C: IPO Lock-ups A standard lock-up of 180 days will be required in an IPO, but there is the potential for an early lock-up release Overview of an IPO Lock-up Purpose of lock-up is to keep share price volatility resulting from new investor liquidity down as the IPO shares trade into a natural volume Upon lock-up release typical for increased share price volatility for a short time Standard lock-up of 180 days for pre-IPO shareholders including management and board Carveouts are standard for: 10b5-1 plan establishment (no sales) Acquisitions up to a specified cap Deviation from standard lock-up has the potential to raise investors attention and noise to the IPO marketing Business performance / execution since IPO Important to properly manage expectations and communication to the Street Under promise and over deliver based on analyst model Price appreciation: Important signal to price a secondary offering above the IPO price Public investor interest in added liquidity Rationale for selling: Consideration should be given to tenure of investment and rationale for selling Market conditions: Similar to IPO considerations Early Lock-up Release Considerations

Annex D: Prospectus Contents Information about the offering: Description of the securities being offered Use of proceeds Plan of distribution Names of underwriters Underwriters’ compensation Determination of offering price (in an IPO) Dilution information

Annex D: Prospectus Contents Information about the company: Description of the business and properties Description of pending legal proceedings Stock market and dividend information Selected financial data Management’s discussion and analysis of financial condition and results of operations (MD&A) Management information Compensation information Related party transactions Financial statements