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Cleary GottliebJ.P.Morgan Adam FleisherNeila Radin Pamela Marcogliese April 23, 2013 U.S. Securities Regulation & Offerings: What Corporate Counsel Need.

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Presentation on theme: "Cleary GottliebJ.P.Morgan Adam FleisherNeila Radin Pamela Marcogliese April 23, 2013 U.S. Securities Regulation & Offerings: What Corporate Counsel Need."— Presentation transcript:

1 Cleary GottliebJ.P.Morgan Adam FleisherNeila Radin Pamela Marcogliese April 23, 2013 U.S. Securities Regulation & Offerings: What Corporate Counsel Need to Know

2 I.Securities Act of 1933 II.Securities Exchange Act of 1934 III.Annex A: Spotlight on Financial Statements IV.Annex B: Sample Timelines Overview 1

3 Part I: Securities Act of 1933

4 I.Statutory Framework  Introduction  Registration, Exemption or Liability  Exemptions  Publicity & “Gun-Jumping”  Emerging Growth Companies II.Deal Mechanics  Timeline  Due Diligence  Key Disclosure Items  Terms of Debt  Underwriting / Purchase Agreements  Comfort Letters  Legal Opinions  SEC Comment Letters Securities Act of

5 Statutory Framework

6 5 Securities Act of 1933Securities Exchange Act of 1934  Basic rule: registration  Major exceptions Nature of security –Gov. securities, nonprofits –Short-term commercial paper –Certain exchanges –Fairness hearings –≤ $50m / 12 mos. (not effective yet) Nature of transaction –4(a)(2): private placement by issuer Rule 144A sale / resale Rule 144 resale –Regulation S: offshore transactions –4(a)(1): resale not by issuer, UW or dealer –“4(1½)”: traditional private resale –4(a)(3): trade by dealer  Continuous reporting system Reporting by public companies Reporting by shareholders of public companies Introduction

7  Basic rule: register each offer & sale (including resale) with SEC unless exemption available Issuer sale (primary) & each resale (secondary) Even if previously sold in registered offering  What is an offer? Every attempt or offer to dispose of, or solicitation of offer to buy, a security or interest in a security, for value  What is a security? Very broadly defined  Liability Investor put: for failure to register or use of a non-compliant prospectus SEC enforcement proceedings, criminal sanctions Registration, Exemption or Liability 6

8 How the Public Market Works: Sections 4(a)(1) & 4(a)(3) 7  4(a)(1): exempts resales other than by issuers, affiliates, UWs or dealers Affiliate  Facts & circumstances analysis  Control persons  Usually officers, directors, 10%+ stockholders Underwriter  Traditional underwriters  Statutory underwriters  4(a)(3): generally exempts trades by dealers not acting as UWs 4(a)(1) & 4(a)(3): not available for resales of restricted securities

9 Section 4(a)(2): Private Placements by Issuer 8  Transactions by issuer not involving “public offering” (not defined) Securities placed = “restricted securities” No general solicitation / general advertising Regulation D safe harbor  Offer only to accredited investors (AIs) + up to 35 sophisticated purchasers  File Form D with SEC; limited disclosure if only AIs  Often used as guidance when not strictly followed

10 Section 4(a)(2): Private Placements by Issuer 9  Resales after 4(a)(2) private placement Rule 144  Safe harbor for public resale Rule 144A  Safe harbor for private resale to qualified institutional buyers (QIBs) “Section 4(1½)”  Private resale to sophisticated purchasers Regulation S  Offshore transactions SEC-registered A/B exchange offer or resale shelf  Allows public resale after private placement

11  Restricted securities Holding period after issued / last held by issuer / affiliate  6 months for current reporting issuers  Otherwise 1 year  “Control” securities = securities held by affiliates Affiliates cannot resell under 4(a)(1) If affiliate resells privately, buyer takes restricted securities  Holding period starts again If affiliate complies w/ 144 & resells publicly, buyer takes unrestricted securities  File Form 144; follow volume & (for equity) manner of sale requirements Rule

12 Rule 144 Decision Tree 11 Is the selling person an affiliate of the issuer? Does the person hold restricted securities or just control securities? Does the person hold restricted securities? How long have the securities been held? How long have the securities been outstanding and held by non-affiliates? Was the person an affiliate during the preceding three months? Dribble sales are permitted (i.e., sales subject to current public information, volume, manner of sale limitations for equity securities and notice filing) regardless of the holding period Control securities No restrictions on sale No Yes Restricted securities Six months or more Less than six months Is the issuer a reporting company with current public information? No sales are permitted under Rule 144 Less than six months Six months or more No sales are permitted under Rule 144 No Yes No sales are permitted under Rule 144 Yes No Is the issuer a reporting company with current public information? Dribble sales are permitted after one-year holding period Dribble sales are permitted YesNo Yes No No restrictions on sale Sales are permitted after one-year holding period

13 Rule 144A & Regulation S 12 RuleRequirementsDetails 144A: safe harbor for resale to QIBs Sell to QIBs onlyInstitutions that own / invest as least $100m of securities Pursuant to JOBS Act, offers to non-QIBs would be permitted Limited publicityNo general solicitation or general advertising (GS/GA) Pursuant to JOBS Act, GS/GA would be permitted NoticeMust give buyers notice that buying restricted securities FungibilityAt issuance, securities cannot be fungible with U.S.-listed security Required information Brief statement of the nature of the business + 2 years’ financial statements, audited to extent reasonably available But in practice generally use detailed offering document Regulation S: exempt offshore transactions Offshore onlyOutside US & in some cases to non-US persons only Limited publicityNo “directed selling efforts” (DSE) in US JOBS Act does not change this Required information Depends on home country requirements & risk assessment But in practice generally use detailed offering document

14 Any communications that can be considered "offers" under the '33 Act must comply with the statutory prospectus filing requirements of the Act Publicity & “Gun-Jumping” Prohibitions 13  No offers, absent exemption from registration / exception from definition of “offer” Problem areas: management speeches, press releases, internet Do not initiate new publicity, but ok to release factual information if continues past practice Safe harbor for regularly released forward-looking information by reporting companies – but market still considers risky  Offers permitted, but not sales Written offers must meet the requirements of statutory prospectus or free writing prospectus (FWP) Post-filing general rule Pre-filing general rule  No GS/GA (Rule 144A) No release of info about any aspect of offering / any other info that could encourage interest in offering But JOBS Act would permit GS/GA for 144A offers  No DSE (Reg S) No activities undertaken for the purpose of, or could result in, conditioning market in US 144A / Reg S general rule

15 Two-prong test to be an EGC  Annual gross revenues < $1 billion recent fiscal year (GAAP / IFRS)  ≤ $1 billion non-convertible debt securities issued last 3 years Excludes bank debt & A/B exchange debt When you lose EGC status  Last day of fiscal year 5 years after common stock IPO  Last day of financial year with annual gross revenues > $1 billion  Issue > $1 billion non-convertible debt securities in previous 3 years  Becoming “large accelerated filer” ($700m float & reporting 1 year)  EGC status is one-way street; cannot be reset Cut-off date  IPO on / after Dec. 9, 2011 IPO includes filing of employee benefit plans on Form S-8 JOBS Act: Emerging Growth Companies (EGCs) 14

16 Deal Mechanics

17 Diligence  Kickoff meeting: discuss timeline & key issues  Preliminary offering doc (file w/ SEC / FINRA if registered)  Pricing term sheet; confirm sales  Purchase / UW agreement; comfort letter  Final offering document (file if registered)  Pay for & deliver securities  Legal opinions, bring-down comfort letter, other docs Timeline Launch Pricing Closing 16 Kickoff  Purchase / UW agreement & OM / prospectus  If registered, file S-1 (one-off deals) or S-3 (shelf)  Road show  DD: legal, accounting, financial, management Doc. Prep

18 Due Diligence – Liability Risk 17 Applicable ProvisionParties liableLiable for… Deals subject to liabilityDefenses Section 11 (’33 Act) All deal participants Material misstatements or omissions in registration statement Registered onlyDD defense for UWs, not issuers: reasonable investigation (non- expertized disclosure) reasonable belief (expertized disclosure) Section 12 (’33 Act) Issuer and communication made on behalf of issuer Material misstatements or omissions in any communication for offer / sale of securities (e.g. FWPs, oral communications) Registered onlyDD defense Rule 10b- 5 (’34 Act) All deal participants who “made” statements Material misstatements or omissions in any communication in connection with purchase / sale of securities Registered and exempt transactions Show no fraudulent intent—scienter; usually accomplished by conducting due diligence Why conduct due diligence?

19  Detailed discussion of risks Business / industry Securities-related  Results of operations  Liquidity & capital resources  Market risk (current, interest rates, derivatives)  Detailed discussion of D&O compensation  Debt: terms of notes / guarantees, incl. covenants, default, etc.  Equity: authorized shares, voting rights, restrictions on shareholder action  Generally 3 years income & cash flow; 2 years balance sheet  Plus any interim period Risk Factors Mgt’s Disc’n & Analysis (MD&A ) Comp Disc’n & Analysis (CD&A) Description of Securities Financial Statements (see below) 18 Key Disclosure Items in Offering Document

20  One-offs Available to all issuers (Form S-1 / F-1) Include all disclosure items except final pricing terms File final terms & any late-breaking information on FWP  Shelf offerings Eligibility: Generally, issuers with 12 months’ timely reporting and minimum public float (Form S-3 / F-3)  Generally must file new shelf every 3 years  Can carry over unsold securities & unused SEC fees Base prospectus  General info on securities that may be offered, incl. terms & risk factors  Open-ended use of proceeds & plan of distribution  Incorporate ’34 Act reports by reference (both historical & going forward) Prospectus supplement  Covers particulars of security offered, amount sold, terms of sale  Includes underwriting section for takedown 19 Shelf vs. One-Off Offerings

21  Description of notes (in offering document) Typically negotiated first; terms then reflected in indenture UWs advise on terms with view to marketability / pricing  Indenture Contract b/t issuer & trustee—establishes terms of securities Bondholders = third-party beneficiaries Trust Indenture Act (TIA) qualification required for registered offerings Terms of Debt 20

22  Parties Issuer, UWs / initial purchasers & any selling stockholders or guarantors  Key components Purchase & sale of securities by UWs from issuer / sellers to market Describes UW % Liability / risk allocation through reps & warranties, indemnities Covenants on conduct of transaction Expense coverage / reimbursement Closing conditions (officer certificates, comfort letters & opinions) Closing mechanics Lock-up agreements (company, D&O, shareholders) Underwriting / Purchase Agreements 21

23  Delivery Pricing & bring-down at closing  Purpose DD defense (banks, officers & directors)  Content Whether audited financials comply with Reg. S-X Alert UWs of adverse changes since last financials Negative assurance (135-day limit)  No material modification needed to unaudited interim financials to conform with GAAP / Reg. S-X  During “change period,” no material changes to key line items  Change period: date of last financials to 3-5 days before comfort letter (cut-off date) Comfort Letters 22

24  Timing, providers & beneficiaries Usually negotiated before sign UW agreement Opinion / 10b-5 for UWs Opinion or “reliance” letter from issuer’s counsel to trustee in debt deals Providers  Issuer’s counsel: outside, local counsel (if applicable), inside  Underwriters’/ initial purchasers’ counsel  Typical content (among other things) V alid existence, good standing Power to own properties / conduct business & enter transaction Due authorization, execution & delivery of transaction docs & securities Description of securities & tax disclosure accurate Validity & enforceability of transaction docs / debt securities No conflicts with org docs, material contracts or law Compliance with form requirements (registered) No registration necessary (unregistered) Not aware of material misstatements / omissions (10b-5) Legal Opinions 23

25  Types of review Full: examine all disclosure in filing & incorporated documents Limited: focus on selected issues—e.g., accounting, MD&A  Likelihood of review Offering context  IPO / first-time ’34 Act registrations: almost always full review  S-3/F-3 by well-known seasoned issuers (WKSIs): not subject to pre-effective review (b/c automatically effective on filing)  Other cases: depends on how recently ’34 Act reports were reviewed, whether novel / unique securities are offered, industry, “hot button” disclosure issues Exchange Act context (must be reviewed at least every 3 yrs)  Recent material restatements of financials  Higher stock price volatility  Large capitalization  Disparities in price-to-earnings ratios  Operations affect material sector of the economy SEC Comment Letters – Overview 24

26 Part II: Securities Exchange Act of 1934

27 I. Introduction II. Required Filings  Select Required Filings  Select Events Requiring an 8-K Filing III. Watch What You Say!  Material Nonpublic Information  Communications with Analysts  Regulation FD Securities Exchange Act of

28 Introduction 27  Exchange Act Reporting Triggers List on national securities exchange (NYSE / NASDAQ) SEC-registered offering > $10m in assets, & class of equity held by ≥ 2000 persons or ≥ 500 non-AIs  Reporter Categories Non-accelerated filer (NAF) Accelerated filer (AF)  Exchange Act reporting for ≥ 12 calendar months  Filed at least one Form 10-K  Market value of common equity held by non-affiliates at most recent June 30 ≥ $75M Large accelerated filer (LAF)  Same as AF, except market value ≥ $700M

29 Required Filings

30 10% HOLDERS + INSIDERS: FORMS 3, 4, 55% HOLDERS – SCHEDULES 13D, 13G CURRENT REPORT ON FORM 8-KPROXY STATEMENT QUARTERLY REPORT ON FORM 10-QANNUAL REPORT ON FORM 10-K Select Required Filings  Deadline 90 days after FYE (NAF) 75 days after FYE (AF) 60 days after FYE (LAF)  File 4 business days after event, with certain exceptions  To correct unintentional selective disclosure under Reg. FD, deadline is promptly (< 24 hours)  Generally, file w/in 10 days of ≥ 5%  Disclose intentions, arrangements, financing  13G = short-form annual alternative for certain holders w/o control intent / influence  Deadline 45 days after FYE (NAF) 40 days after FYE (AF) 40 days after FYE (LAF)  File definitive proxy 120 days after FYE if incorporated into 10-K  Report ownership on Form 3 w/in 10 days  Report trades on Form 4 w/in 2 business days  Report other transactions on Form 5 29

31 Item 1.01 – Entry Material Agreement  Material agreements & material amendments to material agreements  Generally not required to file agreement as exhibit to 8-K Can be filed with periodic report for that period Item 1.02 – Termination Material Agreement  Other than by expiration on stated termination date  No disclosure required for mere negotiations / discussions Select Events Requiring 8-K Filing 30 Item 2.01 – Acquisition / Disposition Assets  For “significant amount of assets”  Disclose source of funds for acquisition if material relationship to source  Report related transactions if significant in aggregate  May need to file financials & pro formas (see Annex A) Item 2.02 – Results of Operations & Fin. Condition  For earnings releases & updates of earlier announcement / release  Not required for slides, transcript or recording of earnings call so long as certain requirements met  Info = “furnished”, not “filed”

32 Item 2.03 – Financial Obligations  Entry into material direct obligation / direct or contingent liability for material obligation due to off-b/s arrangement  Disclose date, amount / max exposure, material terms Item 5.02 – Officers & Directors  Directors removed for cause, resign, refuse re-election  Directors newly elected, except by vote at shareholder meeting  Certain execs resign, retire, terminated  Certain execs newly appointed  Comp arrangements for certain execs adopted / modified Select Events Requiring 8-K Filing 31 Item 5.03 – Org Docs; Fiscal Year  If org docs amended without proposal in proxy statement  Required for change in fiscal year other than by vote at shareholder meeting or amendment to org docs Item 5.05 – Code of Ethics  Covers code of applicable to CEO, CFO & other finance execs  Required for failure to respond to violation (implicit waiver)

33 Item 5.07 – Submission to Vote of Holders  Prelim results filed w/in 4 business days of meeting  Final results filed w/in 4 business days once known  Excludes proxy to vote at stockholders meeting Item 7.01 – Regulation FD Disclosure  Information required pursuant to Regulation FD may either be disclosed under this item or under Item 8.01, within 24 hours of the occurrence of the selective disclosure Select Events Requiring 8-K Filing 32 Item 8.01 – Other Events  Reg. FD disclosure (filed)  Disclosure of important events not otherwise required  Reg. FD disclosure (unless filed under 8.01) (furnished) Item 7.01 – Regulation FD Disclosure

34 Watch What You Say!

35 Material Nonpublic Information 34  No general obligation to disclose MNPI Exception: disclosure required by securities laws No obligation to correct / confirm market rumors unless attributable to company  If info disclosed, cannot contain material misstatements or omissions  No selective disclosure of MNPI Regulation FD Potential 10b-5 liability

36 Unusual / unanticipated earnings results Pending / proposed transactions - mergers, acquisitions, dispositions, offerings Developments affecting financial stability / liquidity Gain / loss of significant customer / supplier Dividend policy changes Significant product announcements - defects, modifications, recalls Significant contingency / litigation exposure Senior management changes ► ► ► ► ► ► ► Material Nonpublic Information – Typical Examples Amendments to debt terms ► Defaults ► 35 ►

37 Designate specified execs to communicate with analysts Do not reconfirm guidance Do not disclose MNPI unless disclosed to public at same time Make each presentation using text reviewed by senior execs & counsel Guidelines for Communications with Analysts 36

38 Avoid responding to inquiries in nonpublic forum unless certain response does not include MNPI Do not distribute reports or hyperlink to them on company’s website If requested to review report, do not comment except to correct errors of fact. Do not comment on forecasts or judgments If asked about matter not ripe for disclosure, say “no comment” Guidelines for Communications with Analysts 37

39 Regulation FD 38  Prohibits selective disclosure of MNPI to Market professionals & security holders Not applicable to communications with someone who  Owes duty of confidentiality  Expressly agrees to maintain info in confidence Not applicable to “foreign private issuers,” but usually followed  Remedying selective disclosure If intentional, disclose simultaneously to public  “ Intentional” = issuer knows / reckless not knowing MNPI being disclosed If unintentional, disclose “promptly” to public (w/in 24 hours) Public disclosure: method(s) reasonably designed to provide broad, non- exclusionary distribution to public  Violations subject to SEC enforcement actions, but not Rule 10b-5 liability or private causes of action

40 Siebel Regulation FD – Four Enforcement Scenarios  Facts - CEO spoke to individuals at invitation-only conference & said, contrary to public statements three weeks earlier, Siebel expected sales to be in line / previous years Penalty - $250k fine 39 Schering-Plough  Facts - CEO met in private meetings with analysts & portfolio managers, & through words, tone, emphasis & demeanor, disclosed MNPI Penalty - Schering-Plough $1m fine; CEO $50k fine Office Depot  Facts - At direction of CEO & CFO, IR called analysts before earnings to signal would not meet consensus estimates. Not stated explicitly, but referred to prior statements of officials & other companies with lower-than- expected results Penalty - Office Depot $1m fine; execs $50k fine each Flowserve  Facts - CEO privately reaffirmed guidance to analysts. Resulted in increase in price & trading volume. IR waited > 53 hours after selective disclosure & nearly 26 hours after analyst’s report before filing 8-K Penalty - Flowserve $350k fine; CEO $50k fine

41 Reg. FD in Social Media Age 40  2008: SEC guidance on use of websites for Reg. FD purposes (Sun Microsystems)  2010/11: WebMediaBrands comment letter correspondence on CEO tweets about acquisitions, stock option purchases, new services Company: tweets were not MNPI & were linked to company’s web site SEC staff dropped matter  2012: SEC indicates potential enforcement action against Netflix & CEO based on CEO Facebook posting Post reached 200,000 followers & arguably was not MNPI  April 2013: SEC decides not to proceed further in Netflix & issues report

42  New guidance Permits company & employees to use social media to report material info w/o violating Reg. FD, so long as two conditions are met  Must use “recognized channel of distribution”  Must alert market to channels used & info that may be disclosed using them  Practical Implications Give market details of social media channels used Proceed with caution if using personal social media channels Exercise care in selecting channels & be sure to use them Consider whether concurrent means of dissemination appropriate Review communications & social media policies & training materials Ensure compliance with other communications rules & safe harbors Implement appropriate disclosure controls & procedures Reg. FD in Social Media Age 41

43 Annex A: Spotlight on Financial Statements

44 I.Introduction II.Financial Statements and Pro Formas Requirements  High-Level Overview for Acquisitions  Financial Statements & Pro Formas Requirements  Three Tests to Measure Significance of a Business  What Financial Statements of Acquired Business are Required?  What Pro Forma Financial Information is Required? Financial Statements 43

45  Requirements are for registered offerings 144A: no mandatory requirements but typically same / almost same financials as in registered deal  Regulation S-X 3 years’ audited income & cash flow statements; 2 years’ audited balance sheet Generally unaudited interim financial statements for each interim period Plus any more recently disclosed financial data  Accounting Principles US GAAP required (U.S. reporting companies) IFRS now permitted instead of US GAAP (reporting FPIs) Full US GAAP reconciliation required if non-IFRS  Separate Financial Statements Pro formas Acquired company financials Significant equity investor financials Introduction 44

46 Financial Statements and Pro Formas Requirements – High-Level Overview for Acquisitions 45 <20% No financial statements + No pro formas No financial statements + No pro formas No financial statements + No pro formas 20%-40% No financial statements + No pro formas 1 yr financial statements + any interim period + Pro formas No financial statements + No pro formas 40%-50% No financial statements + No pro formas 2 yrs financial statements + any interim period + Pro formas No financial statements + No pro formas >50% No financial statements + No pro formas 2 yrs balance sheets, 3 yrs income statements and cash flows + any interim period * + Pro formas * 2 yrs balance sheets, 3 yrs income statements and cash flows + any interim period + Pro formas How significant is acquisition? A significant acquisition of a business is probable A significant acquisition of a business is completed File 8-K w/in 4 days. W/in 75 days of completion also provide… * or before going effective Before going effective… A significant acquisition of assets is completed File 8-K w/in 4 days

47 Financial Statements and Pro Formas Requirements 46  Threshold question: acquiring or disposing of a “business”? “Business” defined in Reg. S-X Rule 11-01(d)  Sufficient continuity of operations?  Presumption that separate entity, sub or division is “business”  Lesser component also may be “business,” based on facts & circumstances – Whether nature of revenue-producing activity remains same – Whether aspects of operations remain same—e.g., facilities, employee base, distribution system, sales force, customer base, operating rights, production techniques, trade names  Next question: Is transaction significant? 3 tests (see below)

48 ASSET INVESTMENT INCOME Three Tests to Measure Significance of a Business  Compare share of acquired business’s total assets to registrant’s consolidated total assets  Include ordinary receivables & other working capital amounts not acquired because working capital will be needed after acquisition  Compare total GAAP purchase price of the acquired business, with certain adjustments, to registrant’s consolidated total assets  Compare equity in acquired business’s income from continuing operations before taxes, extraordinary items & cumulative effect of change in accounting principle to that of registrant 47 As of registrant’s most recent fiscal year…

49 If no test exceeds 20% If any exceeds 20% but none exceeds 40% If any exceeds 40% but none exceeds 50% If any test exceeds 50% What Financial Statements of Acquired Business are Required?  Financial statements not required  If aggregate impact of individually insignificant businesses acquired since date of most recent audited balance sheet > 50%, financial statements covering at least substantial majority of businesses acquired shall be furnished, for most recent fiscal year & any required interim periods  In this case, furnish financial statements for most recent fiscal year & any interim periods  Furnish consolidated financial statements for most recent fiscal year & any required interim periods  Deadline: 75 days after completion  Registration statements need not include financial statements if acquisition not yet consummated or if final prospectus/ mailing date is ≤ 74 days after consummation  Furnish consolidated financial statements for two most recent fiscal years & any required interim periods  Deadline: 75 days after completion  Registration statements need not include financial statements if acquisition not yet consummated or if final prospectus/ mailing date is ≤ 74 days after consummation  Furnish consolidated balance sheets for two most recent fiscal years, consolidated statements of income and cash flows for three most recent fiscal years & any required interim periods  Deadline: 75 days after completion  Registration statements must include financial statements of acquired or to-be- acquired business 48

50 If any significance test exceeds 20% What Pro Forma Financial Information is Required?  Furnish Pro forma condensed balance sheet as of end of most recent period for which consolidated balance sheet of registrant is required Pro forma condensed statements of income for most recent fiscal year and any required interim period  Note that pro formas for acquired business need not be included if separate financial statements not included  Test also applies to disposition of significant business  Also general catchall if otherwise material 49

51 Annex B: Sample Timelines

52 Registered Offerings – The WKSI: Timeline for shelf registration and takedowns 51 WKSI decides to put up a shelf Filing with the SEC and FINRA  Draft registration statement  Due diligence and FINRA questionnaires by designated underwriters’ counsel  Draft form underwriting agreement  Agree on comfort letter “circle-up” and work with auditors on comfort letter  Work on “statistical circle-up” to confirm data not covered by comfort letter  Compile exhibits Automatic shelf prep Closing (typically T+3- 5 days) Registration statement automatically effective  File term sheet as free writing prospectus, if applicable  Execute underwriting agreement  Receive auditors’ comfort letter Pricing Shelf takedowns  Confirm sales  File prospectus supplement or free writing prospectus with SEC One month or less 3 trading days Marketing  Draft term sheet  Preliminary prospectus supplement  Free writing prospectus  E-roadshow

53 Organizational (“Kickoff”) meeting Initial filing with the SEC and FINRA  Draft registration statement  Due diligence and FINRA questionnaires  Draft underwriting agmt  Agree on comfort letter “circle-up” and work with auditors on comfort letter  Work on “statistical circle- up” to confirm data not covered by comfort letter  Compile exhibits File with the SEC File with FINRA SEC and FINRA comments  Prepare responses to SEC and FINRA comments  Revise registration statement  SEC and FINRA comment process repeats until all comments are cleared (usually several rounds)  Continue due diligence  Wait for SEC comments (typically 30 days) & FINRA comments  Continue to negotiate underwriting agreement  Finalize comfort letter and statistical circle-up Pre-filing Period Waiting Period All SEC comments cleared by SEC Send to SEC acceleration requests at least T-2 from Pricing  Print and circulate preliminary prospectus (“red herring”)  Start the road show with potential investors  Finalize underwriting agreement and auditors’ comfort letter Closing (typically T+3-5 days) SEC declares registration statement effective  File term sheet as free-writing prospectus, if applicable  Execute underwriting agreement  Receive auditors’ comfort letter Pricing Post-effective Period File final prospectus with SEC under Rule 424 (T+2) 2-3 months or longer ~1 month3-4 weeks or longer3-4 weeks3 trading days Registered Offerings – The non-WKSI: Timeline for non-shelf deals and non-WKSI shelf registrations 52

54 144A Offerings – Timeline 53 Organizational (“Kickoff”) meeting  Draft offering memorandum  Conduct due diligence  Negotiate purchase agreement  Negotiate comfort letter and “circle-up”  Prepare E-roadshow  Work on “statistical circle-up”  Print and circulate preliminary offering memorandum  Start the road show with potential investors Pricing  Pre-closing Closing (typically T+3-5 days )  Execute purchase agreement  Finalize final offering memorandum Launch Usually 2 months or longer (but sometimes much shorter) Range from 1 day to a few weeks 3 trading days

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