UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): July 25, 2018

 


 

FOCUS FINANCIAL PARTNERS INC.

(Exact name of registrant as specified in its charter)

 


 

Delaware

 

001-38604

 

47-4780811

(State or other jurisdiction
of incorporation)

 

(Commission
File Number)

 

(IRS Employer
Identification No.)

 

825 Third Avenue, 27th Floor

New York, NY 10022

(Address of principal executive offices)

(Zip Code)

 

(646) 519-2456

Registrant’s Telephone Number, Including Area Code

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

 

 

 



 

Item 1.01                   Entry into a Material Definitive Agreement.

 

Underwriting Agreement

 

On July 25, 2018, Focus Financial Partners Inc., a Delaware corporation (the “Company”), and Focus Financial Partners, LLC, a Delaware limited liability company (“Focus LLC”), entered into an Underwriting Agreement (the “Underwriting Agreement”) with Goldman Sachs & Co. LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several underwriters named therein (the “Underwriters”), relating to the offer and sale of the Company’s Class A common stock, par value $0.01 per share. The Underwriting Agreement provides for the offer and sale (the “Offering”) of 16,216,217 shares of Class A common stock at a price to the public of $33.00 per share ($30.69 per share net of underwriting discounts). Pursuant to the Underwriting Agreement, the Company granted the Underwriters a 30-day option to purchase up to 2,432,432 additional shares of Class A common stock to cover overallotments, if any. On July 30, 2018, the Company announced that the Underwriters had exercised this option in full.

 

The material terms of the Offering are described in the prospectus, dated July 25, 2018 (the “Prospectus”), filed by the Company with the Securities and Exchange Commission (the “Commission”) on July 27, 2018, pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the “Securities Act”). The Offering is registered with the Commission pursuant to a Registration Statement on Form S-1, as amended (File No. 333- 225166), initially filed by the Company on May 24, 2018 (the “Registration Statement”).

 

The Underwriting Agreement contains customary representations and warranties, agreements and obligations, closing conditions and termination provisions. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments the Underwriters may be required to make because of any of those liabilities.

 

The Offering closed on July 30, 2018, and the Company received gross proceeds from the Offering (inclusive of gross proceeds from the exercise of the Underwriters’ option) of approximately $615.4 million (or $564.8 million net of underwriting discounts and estimated offering expenses payable by the Company). As described in the Prospectus, the Company used a portion of the net proceeds from the Offering to redeem outstanding limited liability company units in Focus LLC (“Focus LLC Units”) from certain existing holders. The Company contributed the remaining net proceeds to Focus LLC in exchange for Focus LLC Units. Focus LLC used a portion of such net proceeds to reduce indebtedness under its credit facilities and will use the remainder for acquisitions and general corporate business purposes.

 

As more fully described under the caption “Underwriting (Conflicts of Interest)” in the Prospectus, some of the Underwriters and/or their affiliates are lenders and/or agents under the Company’s credit facility and, accordingly, received a portion of the net proceeds from the Offering due to the repayment of borrowings thereunder. In addition, some of the Underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with the Company or its affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions.

 

Prior to the Offering, affiliates of KKR Capital Markets LLC, an Underwriter in the Offering, owned more than 10% of the outstanding Focus LLC Units.

 

The foregoing description is qualified in its entirety by reference to the full text of the Underwriting Agreement, which is attached as Exhibit 1.1 to this Current Report on Form 8-K and incorporated in this Item 1.01 by reference.

 

Focus LLC Agreement

 

On July 30, 2018, in connection with the Offering, the Company entered into the Fourth Amended and Restated Operating Agreement of Focus LLC (the “Focus LLC Agreement”). The amendments to the Focus LLC Agreement, among other things, admitted the Company as the sole managing member of Focus LLC. In accordance with the terms of the Focus LLC Agreement, each unitholder of Focus LLC (other than the Company) following the Offering (each, a “continuing owner”), subject to certain limitations, has the right to cause Focus LLC to redeem all or a portion of its vested common units and vested incentive units in Focus LLC (an “exchange right”). Upon an exercise of an exchange right with respect to vested incentive units, such incentive units will first be converted into a number

 

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of common units in Focus LLC that takes into account the then-current value of the common units (which is based on the value of the Company’s Class A common stock) and such incentive units’ aggregate hurdle amount. Upon an exercise of an exchange right with respect to vested common units, and immediately after the conversion of vested incentive units into common units as described in the preceding sentence, Focus LLC (or the Company) will acquire each tendered common unit for, at its election, (i) one share of the Company’s Class A common stock, subject to conversion rate adjustments for stock splits, stock dividends, reclassification and other similar transactions, or (ii) an equivalent amount of cash. In addition, in connection with any redemption of vested common units (other than common units received upon a conversion of incentive units as described in this paragraph), the corresponding shares of the Company’s Class B common stock will be cancelled.

 

The continuing owners will be permitted to exercise their exchange rights on a quarterly basis on designated dates. Except as otherwise permitted by the Focus LLC Agreement, continuing owners will only be permitted to exercise their exchange rights with respect to one-twelfth of the Focus LLC Units held by them at the closing of the Offering, with an ability to carry forward unused exchange rights to subsequent exchange dates, subject to certain registration rights in the Registration Rights Agreement (as defined below). The foregoing volume restrictions also apply to affiliates of Stone Point Capital LLC (together with its affiliates, “Stone Point”) and Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, “KKR” and, together with Stone Point, the “Continuing PE Holders”) as an aggregate limitation on their ability to sell Focus LLC Units or their shares of the Company’s Class A common stock received in connection with the Offering, subject to certain registration rights described in the Registration Rights Agreement.

 

The foregoing description is qualified in its entirety by reference to the full text of the Focus LLC Agreement, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated in this Item 1.01 by reference.

 

Registration Rights Agreement

 

On July 30, 2018, in connection with the Offering, the Company and Focus LLC entered into a registration rights agreement (the “Registration Rights Agreement”) with the Continuing PE Holders and the continuing owners. The Registration Rights Agreement contains the following liquidity rights:

 

·                  The Company will file a shelf registration statement to permit the resale of shares of the Company’s Class A common stock held by the Continuing PE Holders or issuable upon the exercise of exchange rights by continuing owners as soon as practicable following the one year anniversary of the Offering.

 

·                  The Continuing PE Holders have the right to demand up to three secondary underwritten offerings per year. The Company may initiate one additional underwritten offering per year for the benefit of the other continuing owners. The Continuing PE Holders and the other continuing owners may have participation rights with respect to any such underwritten offerings. The Company may also participate on a primary basis and issue and sell shares of its Class A common stock for its own account. The Company will use the proceeds from any such offering to purchase outstanding Focus LLC Units from continuing owners and pay related fees and expenses. In the event of any underwriter cutbacks, all participating holders will be treated equally and included pro rata based on their ownership of registrable shares at the closing of the Offering.

 

The Continuing PE Holders and the other continuing owners also have piggyback registration rights with respect to other underwritten offerings by the Company under certain circumstances.

 

These registration rights are subject to certain conditions and limitations. The Company is generally obligated to pay all registration expenses in connection with these registration obligations, regardless of whether a registration statement becomes effective or any sale is made in a public offering.

 

The foregoing description of the Registration Rights Agreement is qualified in its entirety by reference to the full text of the Registration Rights Agreement, which is attached as Exhibit 4.1 to this Current Report on Form 8-K and incorporated in this Item 1.01 by reference.

 

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Nomination Agreements

 

On July 30, 2018, in connection with the Offering, the Company entered into nomination agreements with investment vehicles affiliated with Stone Point and KKR (the “Nomination Agreements”). Pursuant to its Nomination Agreement, Stone Point has the right to nominate two members of the Company’s board of directors (the “Board”) for so long as it holds at least 50% of the interest it holds, in the form of the Company’s Class A and Class B common stock on a combined basis, on the closing date of the Offering, and one member of the Board for so long as it holds 5% of the Company’s Class A and Class B common stock outstanding on a combined basis. Stone Point has the right to nominate two directors, for so long as it has the right to nominate two members of the Board, and then one director, for so long as it has the right to nominate one member of the Board, for service on the compensation committee of the Board. Stone Point also has the right to nominate one director for service on the nominating and governance committee of the Board for so long as it has the right to nominate at least one member of the Board. Initially, Stone Point has nominated Fayez S. Muhtadie and James D. Carey to serve on the Board (the “Stone Point Directors”).

 

Pursuant to its Nomination Agreement, KKR has the right to nominate one member of the Board for so long as it holds at least 5% of the Company’s Class A and Class B common stock outstanding on a combined basis. KKR has the right to nominate one director for service on the nominating and governance committee of the Board and as an observer on the compensation committee of the Board, in each case, for so long as it has the right to nominate one member of the Board. Initially, KKR has nominated Christopher J. Harrington to serve on the Board (the “KKR Director”).

 

Any replacement directors nominated by Stone Point or KKR must be an employee or partner of Stone Point or KKR, respectively, of the same level of seniority within Stone Point or KKR as the initial directors designated by Stone Point or KKR, respectively, qualify as an independent director under the independence standards of NASDAQ and satisfy such other criteria set forth in the Nomination Agreements. In addition, the Nomination Agreements require Stone Point and KKR to vote their shares of the Company’s Class A and Class B common stock in favor of the Company’s Chief Executive Officer and Rajini Sundar Kodialam (or such other officer of the Company designated by the Chief Executive Officer and approved by the Board if Ms. Kodialam is no longer a member of the Board) for election to the Board.

 

The foregoing description of the Nomination Agreements is qualified in its entirety by reference to the full text of the Nomination Agreements, which are attached as Exhibit 4.2 and 4.3 to this Current Report on Form 8-K and incorporated in this Item 1.01 by reference.

 

Tax Receivable Agreements

 

On July 30, 2018, in connection with the Offering, the Company entered into two tax receivable agreements (the “Tax Receivable Agreements”), the first of which was entered into with (i) certain entities that held, directly or indirectly through entities referred to as “blockers,” convertible preferred units in Focus LLC prior to the Offering, (ii) certain entities affiliated with Centerbridge Partners, L.P. (together with its affiliates, “Centerbridge” and, together with Stone Point and KKR, the “private equity investors”) and (iii) the Continuing PE Holders, and the second of which was entered into with the continuing owners who are not Continuing PE Holders and certain other unitholders of Focus LLC prior to the Offering (the parties to the two agreements collectively, the “TRA holders”). The term of each Tax Receivable Agreement commenced upon the closing of the Offering and continues until all tax benefits that are subject to such Tax Receivable Agreement have been utilized or expired, unless the Company experiences a change of control (as defined in the Tax Receivable Agreements, which includes certain mergers, asset sales and other forms of business combinations) or the Tax Receivable Agreements terminate early (at the Company’s election or as a result of the Company’s breach), and the Company makes the termination payments specified in the Tax Receivable Agreements. The Tax Receivable Agreements generally provide for the payment by the Company to each TRA holder of 85% of the net cash savings, if any, in U.S. federal, state and local income and franchise tax that the Company actually realizes (computed using simplifying assumptions to address the impact of state and local taxes) or is deemed to realize in certain circumstances in periods after the Offering as a result of, as applicable to the relevant TRA holder, (i) certain increases in tax basis that occur as a result of the Company’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA holder’s Focus LLC Units in connection with the Offering or pursuant to the exercise of an exchange right, (ii) the increases in tax basis relating to the July 2017 acquisition by certain of the private equity investors that will be available to the Company as a result of its acquisition of the blockers in connection with the Offering and (iii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under the relevant Tax Receivable Agreement. The Company will retain the benefit of the remaining 15% of these cash savings.

 

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The foregoing description is qualified in its entirety by reference to the full text of the Tax Receivable Agreements, which are attached as Exhibit 10.2 and 10.3 to this Current Report on Form 8-K and incorporated in this Item 1.01 by reference.

 

2018 Omnibus Incentive Plan

 

The description of the Focus Financial Partners Inc. 2018 Omnibus Incentive Plan (the “Omnibus Plan”) provided below under Item 5.02 is incorporated in this Item 1.01 by reference. A copy of the Omnibus Plan is attached as Exhibit 10.4 to this Current Report on Form 8-K and is incorporated in this Item 1.01 by reference.

 

Item 2.03                   Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

On July 30, 2018, in connection with the Offering, Amendment No. 4 to First Lien Credit Agreement, dated as of June 29, 2018, among Focus LLC, as borrower, the lenders party thereto, Royal Bank of Canada, as term administrative agent, collateral agent and fronting bank, and Bank of America, N.A., as revolver administrative agent and letter of credit issuer (“Amendment No. 4”) became effective. Pursuant to Amendment No. 4, the first lien term loan was amended to reduce the interest rate to LIBOR plus a margin of 2.75% or the lender’s Base Rate (as defined in Amendment No. 4) plus a margin of 1.75%; provided that, from and after the later of (x) July 18, 2018 and (y) the first date on which Focus LLC has obtained public corporate family ratings of at least Ba3 (stable) from Moody’s and BB- (stable) from S&P, the foregoing rates shall be reduced to LIBOR plus a margin of 2.50% or the lender’s Base Rate plus a margin of 1.50%. Pursuant to Amendment No. 4, the first lien revolver was amended to increase the borrowing capacity to $650.0 million and extend the maturity date to 5 years from July 30, 2018. The first lien revolver was also amended to bear interest at LIBOR plus a margin of 2.00% with step downs to 1.75%, 1.50% and 1.25% or the lender’s Base Rate plus a margin of 1.00% with step downs to 0.75%, 0.50% and 0.25%, based on achievement of a specified First Lien Leverage Ratio (as defined in Amendment No. 4). Pursuant to Amendment No. 4, the first lien revolver unused commitment fee is 0.50% with step downs to 0.375% and 0.25% based on achievement of a specified First Lien Leverage Ratio. The first lien term loan was also amended to require Focus LLC to maintain a First Lien Leverage Ratio of not more than 6.25:1.00.

 

The foregoing description is qualified in its entirety by reference to the full text of Amendment No. 4, which is attached as 10.5 to this Current Report on Form 8-K and incorporated in this Item 2.03 by reference.

 

Item 3.02                   Unregistered Sales of Equity Securities.

 

As more fully described under the caption “Internal Reorganization” in the Prospectus, on July 30, 2018, in connection with the Offering, the Company used approximately $35.5 million of the net proceeds from the Offering to purchase outstanding Focus LLC Units from certain existing holders, not including any affiliates of Stone Point, KKR or Centerbridge. In addition, the Company acquired the blockers and certain existing holders exchanged all or a portion of their Focus LLC Units for an aggregate of 24,121,459 shares of the Company’s Class A common stock.  In some cases, such existing holders also received either compensatory stock options to purchase an aggregate of 386,832 shares of Class A common stock or non-compensatory stock options to purchase an aggregate of 348,577 shares of Class A common stock and cash. Certain continuing owners received an aggregate of 22,259,208 shares of the Company’s Class B common stock. The foregoing transactions were undertaken in reliance upon the exemption from the registration requirements of the Securities Act by Section 4(a)(2) thereof.

 

5



 

The information provided in Item 1.01 hereto under the heading “Focus LLC Agreement” is incorporated by reference into this Item 3.02.

 

Item 3.03                   Material Modification to Rights of Security Holders.

 

The information provided in Item 1.01 hereto under the headings “Registration Rights Agreement” and “Nomination Agreements” and in Item 5.03 hereto is incorporated by reference into this Item 3.03.

 

Item 5.02                   Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

Appointment of Directors

 

On July 25, 2018, effective simultaneously with the effectiveness of the Registration Statement, Rajini Sundar Kodialam, Fayez S. Muhtadie, Christopher J. Harrington, Deborah D. McWhinney and Noah Gottdiener were appointed as members of the Board. On July 30, 2018, James D. Carey was appointed as a member of the Board. Ruediger Adolf will continue as a member of the Board.

 

As compensation for services provided as a member of the Board, each of Messrs. Muhtadie, Gottdiener, Carey and Ms. McWhinney will receive approximately $60,000 per year. Mr. Gottdiener and Ms. McWhinney also received grants of 30,000 incentive unit awards with a threshold value equal to the initial public offering price of the Company’s Class A common stock. The awards will vest in equal installments over a period of three years provided that the directors continue to provide services to the Company.

 

Ms. McWhinney and Messrs. Muhtadie and Gottdiener will serve as members of the Company’s audit committee, of which Ms. McWhinney will be the chair. As members of the audit committee, Ms. McWhinney and Messrs. Muhtadie and Gottdiener will receive an additional fee of $20,000 per year. As chair of the audit committee, Ms. McWhinney will receive an additional fee of $10,000 per year.

 

Messrs. Gottdiener, Carey and Muhtadie will serve as members of the Company’s compensation committee, of which Mr. Gottdiener will be the chair. As members of the compensation committee, Messrs. Gottdiener, Carey and Muhtadie will receive an additional fee of $10,000 per year. As chair of the compensation committee, Mr. Gottdiener will receive an additional fee of $5,000 per year.

 

Ms. McWhinney, Mr. Muhtadie and Mr. Harrington will serve as members of the Company’s nominating and governance committee, of which Ms. McWhinney will be the chair. As members of the nominating and governance committee, Ms. McWhinney and Mr. Muhtadie will receive an additional fee of $10,000 per year. As chair of the nominating and governance committee, Ms. McWhinney will receive an additional fee of $5,000 per year.

 

Except as disclosed in the Registration Statement and the Prospectus, there are no arrangements or understandings between Messrs. Muhtadie, Harrington, Gottdiener and Carey and Mses. McWhinney and Kodialam and any other person pursuant to which he or she was selected as a director. Messrs. Muhtadie, Harrington, Gottdiener and Carey and Mses. McWhinney and Kodialam have no family relationship with any director or executive officer of the Company or any person nominated or chosen by the Company to become a director or executive officer.

 

Pursuant to the Nomination Agreements described above, Messrs. Muhtadie and Carey will be deemed to be Stone Point Directors and Mr. Harrington will be deemed a KKR Director. The Stone Point Directors have directed the Company to pay any fees earned for Board or committee service to Stone Point.

 

Indemnification Agreements

 

In connection with the Offering, the Company entered into Indemnification Agreements (“Indemnification Agreements”) with each of the executive officers and directors of the Company. These Indemnification Agreements require the Company to indemnify these individuals to the fullest extent permitted under Delaware law against liability that may arise by reason of their service to the Company, and to advance certain expenses incurred as a result of any proceeding against them as to which they could be indemnified.

 

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The foregoing description is qualified in its entirety by reference to the full text of the Indemnification Agreements, which are attached as Exhibits 10.6, 10.7, 10.8, 10.9, 10.10, 10.11, 10.12 and 10.13 to this Current Report on Form 8-K and incorporated into this Item 5.02 by reference.

 

2018 Omnibus Incentive Plan

 

On July 30, 2018, the Board adopted the Omnibus Plan for the employees, consultants and the directors of the Company and its affiliates who perform services for it. The Omnibus Plan provides for potential grants of the following awards with respect to shares of the Company’s Class A common stock, to the extent applicable: (i) incentive stock options qualified as such under U.S. federal income tax laws; (ii) non-qualified stock options or any other form of stock options; (iii) restricted stock awards; (iv) phantom stock awards; (v) restricted stock units; (vi) bonus stock; (vii) performance awards; (viii) annual cash incentive awards; (ix) any of the foregoing award types (other than incentive stock options) as awards related to Focus LLC Units; and (x) incentive units in Focus LLC, which are intended to constitute “profits interests” within the meaning of Revenue Procedures 93-27 and 2001-43 (collectively referred to as “awards”).

 

The compensation committee of the Board will generally oversee the Omnibus Plan pursuant to its terms and all applicable state, federal or other rules or laws, except in the event that the Board chooses to take action under the Omnibus Plan. The compensation committee has the power to determine to whom and when awards will be granted, determine the amount of awards (measured in cash, shares or units), proscribe and interpret the terms and provisions of each award agreement (the terms of which may vary), accelerate the vesting or exercise terms of an award, delegate duties under the Omnibus Plan and execute all other responsibilities permitted or required under the Omnibus Plan.

 

The maximum aggregate number of shares of the Company’s Class A common stock that may be issued pursuant to awards under the Omnibus Plan shall not exceed 6,000,000 shares (including such number of Focus LLC Units or other securities which can be exchanged or converted into shares). The reserve pool is subject to adjustment due to recapitalization or reorganization, or related to forfeitures or the expiration of awards, as provided under the Omnibus Plan. If the shares or units subject to any award are not issued or transferred, or cease to be issuable or transferable for any reason, including (but not exclusively) because shares or units are withheld or surrendered in payment of taxes or any exercise or purchase price relating to an award or because an award is forfeited, terminated, expires unexercised, is settled in cash or is otherwise terminated without a delivery of shares or units, those shares or units will again be available for issue, transfer or exercise pursuant to awards under the Omnibus Plan to the extent allowable by law. The Omnibus Plan also contains a provision that will add an additional number of shares equal to the lesser of (a) 3,000,000 shares, (b) 5% of the outstanding (vested and unvested) shares and Focus LLC Units of the last day of the previous year, and (c) an amount determined by the Board, each year between 2019 and 2028.

 

The foregoing description is qualified in its entirety by reference to the full text of the Omnibus Plan, which is attached as Exhibit 10.4 to this Current Report on Form 8-K and is incorporated in this Item 5.02 by reference.

 

Item 5.03                   Amendments to Articles of Incorporation or Bylaws; Changes in Fiscal Year.

 

Amended and Restated Certificate of Incorporation

 

On July 27, 2018, the Company amended and restated its Certificate of Incorporation (as amended and restated, the “Certificate of Incorporation”), which was filed with the Secretary of State of the State of Delaware on July 27, 2018.  A description of the Certificate of Incorporation is contained in the section of the Prospectus entitled “Description of Capital Stock” and is incorporated herein by reference.

 

The foregoing description and the description contained in the Prospectus are qualified in their entirety by reference to the full text of the Certificate of Incorporation, which is attached as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated in this Item 5.03 by reference.

 

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Amended and Restated Bylaws

 

On July 30, 2018, the Company amended and restated its Bylaws (as amended and restated, the “Bylaws”).  A description of the Bylaws is contained in the section of the Prospectus entitled “Description of Capital Stock” and is incorporated herein by reference.

 

The foregoing description and the description contained in the Prospectus are qualified in their entirety by reference to the full text of the Bylaws, which are attached as Exhibit 3.2 to this Current Report on Form 8-K and are incorporated in this Item 5.03 by reference.

 

Item 9.01                   Financial Statements and Exhibits.

 

(d)         Exhibits.

 

Exhibit No.

 

Description

 

 

 

1.1

 

Underwriting Agreement, dated as of July 25, 2018, by and among Focus Financial Partners Inc., Focus Financial Partners, LLC and Goldman, Sachs & Co. LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives of the several underwriters named therein

 

 

 

3.1

 

Amended and Restated Certificate of Incorporation of Focus Financial Partners Inc.

 

 

 

3.2

 

Amended and Restated Bylaws of Focus Financial Partners Inc.

 

 

 

4.1

 

Registration Rights Agreement, dated as of July 30, 2018, by and among Focus Financial Partners Inc., Focus Financial Partners, LLC and the other parties named therein

 

 

 

4.2

 

Nomination Agreement, dated as of July 30, 2018, by and among Focus Financial Partners Inc. and the affiliates of Stone Point Capital LLC named therein

 

 

 

4.3

 

Nomination Agreement, dated as of July 30, 2018, by and among Focus Financial Partners Inc. and the affiliates of Kohlberg Kravis Roberts & Co. L.P. named therein

 

 

 

10.1

 

Fourth Amended and Restated Operating Agreement of Focus Financial Partners, LLC

 

 

 

10.2

 

Tax Receivable Agreement, dated as of July 30, 2018, by and among Focus Financial Partners Inc. and the affiliates of the Private Equity Investors named therein

 

 

 

10.3

 

Tax Receivable Agreement, dated as of July 30, 2018, by and among Focus Financial Partners Inc. and the parties named therein

 

 

 

10.4

 

Focus Financial Partners Inc. 2018 Omnibus Incentive Plan

 

 

 

10.5

 

Amendment No. 4 to First Lien Credit Agreement, dated as of June 29, 2018, among Focus LLC, as borrower, the lenders party thereto, Royal Bank of Canada, as term administrative agent, collateral agent and fronting bank, and Bank of America, N.A., as revolver administrative agent and letter of credit issuer (incorporated herein by reference to Exhibit 10.11 to Focus Financial Partners Inc.’s Registration Statement on Form S-1 (File No. 333-225166) filed on June 29, 2018)

 

 

 

10.6

 

Indemnification Agreement (Ruediger Adolf)

 

 

 

10.7

 

Indemnification Agreement (Rajini Sundar Kodialam)

 

 

 

10.8

 

Indemnification Agreement (James Shanahan)

 

 

 

10.9

 

Indemnification Agreement (James D. Carey)

 

 

 

10.10

 

Indemnification Agreement (Fayez S. Muhtadie)

 

 

 

10.11

 

Indemnification Agreement (Christopher J. Harrington)

 

 

 

10.12

 

Indemnification Agreement (Deborah D. McWhinney)

 

 

 

10.13

 

Indemnification Agreement (Noah Gottdiener)

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

FOCUS FINANCIAL PARTNERS INC.

 

 

 

 

 

By:

/s/ J. Russell McGranahan

 

 

J. Russell McGranahan

 

 

General Counsel

 

 

 

Dated: July 31, 2018

 

 

 

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Exhibit 1.1

 

 

 

 

FOCUS FINANCIAL PARTNERS INC.

 

(a Delaware corporation)

 

16,216,217 Shares of Class A Common Stock

 

UNDERWRITING AGREEMENT

 

Dated: July 25, 2018

 



 

FOCUS FINANCIAL PARTNERS INC.

 

(a Delaware corporation)

 

16,216,217 Shares of Class A Common Stock

 

UNDERWRITING AGREEMENT

 

July 25, 2018

 

Merrill Lynch, Pierce, Fenner & Smith
Incorporated

One Bryant Park
New York, New York 10036

 

Goldman Sachs & Co. LLC
200 West Street
New York, New York 10282-2198

 

as Representatives of the several Underwriters

 

Ladies and Gentlemen:

 

Focus Financial Partners Inc., a Delaware corporation (the “Company”), and Focus Financial Partners, LLC, a Delaware limited liability company (the “Operating LLC”), agree with Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”), Goldman Sachs & Co. LLC (“Goldman”) and each of the other Underwriters named in Schedule A hereto (collectively, the “Underwriters,” which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Merrill Lynch and Goldman are acting as representatives (in such capacity, the “Representatives”), with respect to (i) the issuance and sale by the Company and the purchase by the Underwriters, acting severally and not jointly, of the respective numbers of shares of Class A Common Stock, par value $0.01 per share, of the Company (“Class A Common Stock”) set forth in Schedule A hereto and (ii) the grant by the Company to the Underwriters, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of 2,432,432 additional shares of Class A Common Stock.  The aforesaid 16,216,217 shares of Class A Common Stock (the “Initial Securities”) to be purchased by the Underwriters and all or any part of the 2,432,432 shares of Class A Common Stock subject to the option described in Section 2(b) hereof (the “Option Securities”) are herein called, collectively, the “Securities.”  The shares of Class A Common Stock and the shares of Class B Common Stock, par value $0.01 per share, of the Company (the “Class B Common Stock”) to be outstanding immediately after the Closing Time (as defined below) are herein called, collectively, the “Common Stock.”  In connection with  the Closing Time, the Company will complete a series of reorganization transactions (the “Reorganization”) as described under the heading “Internal Reorganization” in the Registration Statement, the General Disclosure Package and the Prospectus (each as defined below).  In connection with the Reorganization and the offering contemplated by this underwriting agreement (this “Agreement”), the Company will become the sole managing member of the Operating LLC, and will directly own a 64.4% membership interest in the Operating LLC consisting of common units of the Operating LLC.  Unless the context otherwise requires, any reference in this Agreement to the “Transactions” shall include the transactions contemplated by the Transaction Documents (as defined below) and the Reorganization.  In connection

 

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with the Reorganization, the offering contemplated by this Agreement and the Transactions, and as described in the Registration Statement, the General Disclosure Package and the Prospectus, (a) the Company will enter into a tax receivable agreement with certain investors in the Operating LLC (the “Tax Receivable Agreement”), (b) the Company will enter into a registration rights agreement with certain investors in the Operating LLC (the “Registration Rights Agreement”), (c) the operating agreement of the Operating LLC will be amended and restated to, among other things, add the Company as a member of the Operating LLC and designate the Company as the sole managing member of the Operating LLC (as so amended and restated, the “Fourth Amended and Restated Operating Agreement”) and (d) the certificate of incorporation of the Company will be amended and restated (the “Amended and Restated Certificate of Incorporation”).  This Agreement, the Tax Receivable Agreement, the Registration Rights Agreement, the Fourth Amended and Restated Operating Agreement and the Amended and Restated Certificate of Incorporation are collectively referred to herein as the “Transaction Documents.”

 

The Company has arranged for Fidelity Brokerage Services LLC, Fidelity Capital Markets, a division of National Financial Services LLC, and Canaccord Genuity Corp., together with its affiliate, Canaccord Genuity LLC  (collectively, the “DSP Manager”), to administer a directed share program, under which 1,621,621 shares of the Initial Securities to be purchased by the Underwriters (the “Reserved Securities”) shall be reserved for sale to certain persons designated by the Company (the “Invitees”) at the initial public offering price, as part of the distribution of the Securities by the Underwriters, subject to the terms of this Agreement, the applicable rules, regulations and interpretations of the Financial Industry Regulatory Authority, Inc. (“FINRA”), including without limitation FINRA Rule 5130(d), and all other applicable laws, rules and regulations, as set forth in the Prospectus.  To the extent that such Reserved Securities are not orally confirmed for purchase by Invitees by 8:00 A.M. (New York City time) on the first business day after the date of this Agreement, or such other time as shall be mutually agreed by the Company and the DSP Manager, such Reserved Securities shall be allocated to other Invitees up to the maximum amount of their confirmed order or otherwise offered to the public by the Underwriters as part of the public offering contemplated hereby as set forth in the Prospectus.

 

The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-1 (No. 333-225166), including the related preliminary prospectus or prospectuses, covering the registration of the sale of the Securities under the Securities Act of 1933, as amended (the “1933 Act”).  Promptly after execution and delivery of this Agreement, the Company will prepare and file a prospectus in accordance with the provisions of Rule 430A (“Rule 430A”) of the rules and regulations of the Commission under the 1933 Act (the “1933 Act Regulations”) and Rule 424(b) (“Rule 424(b)”) of the 1933 Act Regulations.  The information included in such prospectus that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective pursuant to Rule 430A(b) is herein called the “Rule 430A Information.”  Such registration statement, including the amendments thereto, the exhibits thereto and any schedules thereto, at the time it became effective, and including the Rule 430A Information, is herein called the “Registration Statement.”  Any registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein called the “Rule 462(b) Registration Statement” and, after such filing, the term “Registration Statement” shall include the Rule 462(b) Registration Statement.  Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information that was distributed to investors after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “preliminary prospectus”, and references herein to “the most recent preliminary prospectus” refer to the preliminary prospectus dated July 16, 2018, which is the most recent preliminary prospectus distributed to investors prior to the Applicable Time.  The final prospectus that discloses the public offering price, other Rule 430A Information and other final terms of the Securities and otherwise satisfies Section 10(a) of the 1933 Act, in the form first furnished to the Underwriters for use in connection with the offering of the Securities, is herein called the “Prospectus.”  For purposes of this Agreement, all references to the Registration Statement, any

 

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preliminary prospectus, the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system or any successor system (“EDGAR”).

 

As used in this Agreement:

 

“Applicable Time” means 6:30 P.M., New York City time, on July 25, 2018 or such other time as agreed by the Company and the Representatives.

 

“General Disclosure Package” means any Issuer General Use Free Writing Prospectuses issued at or prior to the Applicable Time, the most recent preliminary prospectus and the information included on Schedule B-1 hereto, all considered together.

 

“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the 1933 Act Regulations (“Rule 433”), relating to the Securities, including without limitation any “free writing prospectus” (as defined in Rule 405 of the 1933 Act Regulations (“Rule 405”)) relating to the Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Securities or of the offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).

 

“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a “bona fide electronic road show” as defined in Rule 433 (the “Bona Fide Electronic Road Show”)), as evidenced by its being specified in Schedule B-2 hereto.

 

“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.

 

“Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the 1933 Act.

 

“Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405.

 

SECTION 1.         Representations and Warranties.

 

(a)           Representations and Warranties by the Company and the Operating LLC.  Each of the Company and the Operating LLC, jointly and severally, represents and warrants to each Underwriter as of the date hereof, the Applicable Time, the Closing Time and any Date of Delivery (as defined below), and agrees with each Underwriter, as follows:

 

(i)            Registration Statement and Prospectuses.  Each of the Registration Statement and any amendment thereto has become effective under the 1933 Act.  No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the 1933 Act, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s and the Operating LLC’s knowledge,

 

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threatened by the Commission.  The Company has complied with each request (if any) from the Commission for additional information.

 

Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations.  Each preliminary prospectus, the Prospectus and any amendment or supplement thereto, at the time each was filed with the Commission, complied in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations.  Each preliminary prospectus delivered to the Underwriters for use in connection with this offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T of the 1933 Act (“Regulation S-T”).

 

(ii)           Accurate Disclosure.  Neither the Registration Statement nor any amendment thereto, at its effective time, at the Closing Time or at any Date of Delivery, contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.  As of the Applicable Time, none of (A) the General Disclosure Package, (B) any individual Issuer Limited Use Free Writing Prospectus, when considered together with the General Disclosure Package and (C) any individual Written Testing-the-Waters Communication, when considered together with the General Disclosure Package, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  Neither the Prospectus nor any amendment or supplement thereto (including any prospectus wrapper), as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b), at the Closing Time or at any Date of Delivery, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement (or any amendment thereto), the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) made in reliance upon and in conformity with written information furnished to the Company and the Operating LLC by any Underwriter through the Representatives expressly for use therein.  For purposes of this Agreement, the only information so furnished shall be the information in the first paragraph under the heading “Underwriting—Commissions and Discounts,” the information in the second, third and fourth paragraphs under the heading “Underwriting—Price Stabilization, Short Positions and Penalty Bids” and the information under the heading “Underwriting—Electronic Distribution” in each case contained in the Prospectus (collectively, the “Underwriter Information”).

 

(iii)          Issuer Free Writing Prospectuses.  No Issuer Free Writing Prospectus conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, and any preliminary or other prospectus deemed to be a part thereof that has not been superseded or modified.  The Company has made available a Bona Fide Electronic Road Show in compliance with Rule 433(d)(8)(ii) such that no filing of any “road show” (as defined in Rule 433(h)) is required in connection with the offering of the Securities.  The representations and warranties in this subsection shall not apply to statements in or omissions made in each such Issuer Free Writing Prospectus or prospectus in reliance upon and in conformity with the Underwriter Information.

 

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(iv)          Testing-the-Waters Materials.  Neither the Company nor the Operating LLC (A) has engaged in any Testing-the-Waters Communication other than Testing-the-Waters Communications with the consent of the Representatives with entities that are qualified institutional buyers within the meaning of Rule 144A under the 1933 Act or institutions that are accredited investors within the meaning of Rule 501 under the 1933 Act and (B) has authorized anyone other than the Representatives to engage in Testing-the-Waters Communications.  The Company and the Operating LLC reconfirm that the Representatives have been authorized to act on their behalf in undertaking Testing-the-Waters Communications.  Neither the Company nor the Operating LLC has distributed any Written Testing-the-Waters Communications other than those listed on Schedule B-3 hereto.

 

(v)           Company Not Ineligible Issuer.  At the time of filing the Registration Statement and any post-effective amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the 1933 Act Regulations) of the Securities and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405.

 

(vi)          Emerging Growth Company Status.  From the time of the initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any person authorized to act on its behalf in any Testing-the-Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the 1933 Act (an “Emerging Growth Company”).

 

(vii)         Independent Accountants.  (A) Deloitte & Touche LLP, who audited certain financial statements of the Company and the Operating LLC included in the Registration Statement, the General Disclosure Package and the Prospectus, is an independent registered public accounting firm with respect to the Company and the Operating LLC as required by the 1933 Act, the 1933 Act Regulations and the Public Company Accounting Oversight Board; and (B) Mayer Hoffman McCann P.C., who audited certain financial statements of SCS Financial Services LLC and its subsidiaries (collectively, “SCS”) included in the Registration Statement, the General Disclosure Package and the Prospectus, is an independent registered public accounting firm with respect to SCS as required by the 1933 Act, the 1933 Act Regulations and the Public Company Accounting Oversight Board.

 

(viii)        Financial Statements; Non-GAAP Financial Measures.  The historical financial statements included in the Registration Statement, the General Disclosure Package and the Prospectus, together with the related notes, present fairly the financial position of the entities purported to be shown at the dates indicated and the statements of income, members’ deficit and cash flows of the entities purported to be shown for the periods specified; said financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved.  The summary historical financial data included under the caption “Prospectus Summary—Summary Historical and Pro Forma Consolidated Financial Data”  and the selected historical financial data set forth under the caption “Selected Historical and Pro Forma Consolidated Financial Data” included in the Registration Statement, the General Disclosure Package and the Prospectus present fairly, in all material respects, the information shown therein and have been compiled on a basis consistent with that of the audited and unaudited financial statements, except as described  therein.  The pro forma financial statements and the related notes thereto included in the Registration Statement, the General Disclosure Package and the Prospectus present fairly, in all material respects, the information shown therein and have been prepared in accordance with the applicable

 

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requirements of Regulation S-X of the 1933 Act (“Regulation S-X”) with respect to pro forma financial statements and have been properly compiled, in all material respects, on the basis described therein, and the assumptions used in the preparation thereof are reasonable and the pro forma adjustments used therein are appropriate, in all material respects, to give effect to the transactions and circumstances referred to therein.  Except as included therein, no historical or pro forma financial statements are required to be included in the Registration Statement, the General Disclosure Package or the Prospectus under the 1933 Act or the 1933 Act Regulations.  All disclosures contained in the Registration Statement, the General Disclosure Package or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply with Regulation G of the Securities Exchange Act of 1934, as amended (the “1934 Act”) and Item 10 of Regulation S-K of the 1933 Act (“Regulation S-K”), to the extent applicable.

 

(ix)          No Material Adverse Change in Business.  Except as otherwise stated therein, since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company, the Operating LLC and their respective subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a “Material Adverse Effect”), (B) there have been no transactions entered into by the Company, the Operating LLC or any of their respective subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company, the Operating LLC and their respective subsidiaries considered as one enterprise, and (C)  there has been no dividend or distribution of any kind declared, paid or made by the Company or the Operating LLC on any class of its capital stock, in each case, other than in connection with the Reorganization or as described in the Registration Statement, the General Disclosure Package and the Prospectus.

 

(x)           Good Standing of the Company and the Operating LLC.  The Company and the Operating LLC have been duly organized and are validly existing as a corporation and limited liability company, respectively, in each case in good standing under the laws of the state of Delaware and have corporate or similar power and authority to own or lease their properties and to conduct their business as described in the Registration Statement, the General Disclosure Package and the Prospectus and to enter into and perform their obligations under this Agreement and the other Transaction Documents; and the Company and the Operating LLC are duly qualified as a foreign corporation and limited liability company, respectively, to transact business and are in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not reasonably be expected to result in a Material Adverse Effect.

 

(xi)          Good Standing of Subsidiaries.  Each “significant subsidiary” (as such term is defined in Rule 1-02 of Regulation S-X) of the Company after giving effect to the Reorganization (each, a “Subsidiary” and, collectively, the “Subsidiaries”), other than the Operating LLC, has been duly organized and is validly existing in good standing under the laws of the jurisdiction of its incorporation or organization, has corporate or similar power and authority to own or lease its properties and to conduct its business as described in the Registration Statement, the General Disclosure Package and the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not reasonably be expected to result in a Material Adverse Effect.  Except as otherwise disclosed in the Registration Statement, the General Disclosure Package and

 

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the Prospectus, immediately following the Reorganization, all of the issued and outstanding capital stock or limited liability company interests of each Subsidiary has been duly authorized and will be validly issued, will be fully paid and non-assessable (except as such non-assessability may be limited by Sections 18-303, 18-607 and 18-804 of the Delaware Limited Liability Company Act) and will be owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity (other than those arising under the First Lien Credit Agreement and Second Lien Credit Agreement (collectively, the “Credit Agreement”), each dated as of July 3, 2017, among the Operating LLC and certain subsidiaries, and Royal Bank of Canada, as Administrative Agent and the other lenders party thereto, each as amended).  None of the outstanding shares of capital stock or limited liability company interests of any Subsidiary were issued in violation of the preemptive or similar rights of any securityholder of such Subsidiary.  The only subsidiaries of the Company are (A) the subsidiaries listed on Exhibit 21.1 to the Registration Statement and (B) certain other subsidiaries which, considered in the aggregate as a single subsidiary, do not constitute a “significant subsidiary” as defined in Rule 1-02 of Regulation S-X.

 

(xii)         Capitalization.  As of March 30, 2018 and after giving effect to the  Reorganization and the issuance of the Initial Securities, and the application of the net proceeds therefrom, the authorized and issued and outstanding shares of capital stock of the Company would be as set forth in the Registration Statement, the General Disclosure Package and the Prospectus in the column with the heading entitled “Pro Forma” under the caption “Capitalization”.  The shares of capital stock of the Company to be outstanding immediately following the Reorganization have been duly authorized and immediately following the Reorganization will be validly issued and fully paid and non-assessable.  None of the shares of capital stock of the Company to be outstanding immediately following the Reorganization will have been issued in violation of the preemptive or other similar rights of any securityholder of the Company or the Operating LLC.

 

(xiii)        Authorization of Agreement.  This Agreement has been duly authorized, executed and delivered by each of the Company and the Operating LLC.

 

(xiv)        Authorization and Description of Securities.  The Securities to be purchased by the Underwriters from the Company have been duly authorized for issuance and sale to the Underwriters pursuant to this Agreement and, when issued and delivered by the Company pursuant to this Agreement against payment of the consideration set forth herein, will be validly issued and fully paid and non-assessable; and the issuance of the Securities is not subject to the preemptive or other similar rights of any securityholder of the Company or the Operating LLC.  The Common Stock conforms in all material respects to all statements relating thereto contained in the Registration Statement, the General Disclosure Package and the Prospectus and such description conforms in all material respects to the rights set forth in the instruments defining the same.

 

(xv)         Descriptions of the Transactions and Transaction Documents.  The statements made in the General Disclosure Package and the Prospectus insofar as they purport to constitute summaries of the terms of the Transaction Documents constitute accurate summaries of the terms of such Transaction Documents in all material respects.

 

(xvi)        Registration Rights.  There are no persons with registration rights or other similar rights to have any securities registered for sale pursuant to the Registration Statement or otherwise registered for sale or sold by the Company under the 1933 Act pursuant to this

 

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Agreement other than those rights that have been waived or that have been disclosed in the Registration Statement, the General Disclosure Package and the Prospectus.

 

(xvii)       Absence of Violations, Defaults and Conflicts.  Neither the Company, the Operating LLC nor any of their respective subsidiaries is (A) in violation of its charter, by-laws or similar organizational document, (B) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company, the Operating LLC or any of their respective subsidiaries is a party or by which it or any of them may be bound or to which any of the properties or assets of the Company, the Operating LLC or any such subsidiary is subject (collectively, the “Agreements and Instruments”), except for such defaults that would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect, or (C) in violation of any law, statute, rule, regulation, judgment, order, writ or decree of any arbitrator, court, governmental body, regulatory body, administrative agency or other authority, body or agency having jurisdiction over the Company, the Operating LLC or any of their respective subsidiaries or any of their respective properties, assets or operations (each, a “Governmental Entity”), except for such violations that would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  The execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated herein, therein and in the Registration Statement, the General Disclosure Package and the Prospectus (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described therein under the caption “Use of Proceeds”) and compliance by the Company and the Operating LLC with their respective obligations hereunder and under the other Transaction Documents have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any properties or assets of the Company, the Operating LLC or any of their respective subsidiaries pursuant to, the Agreements and Instruments (except for such conflicts, breaches, defaults or Repayment Events or liens, charges or encumbrances that would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect), nor will such action result in any violation of (A) the provisions of the charter, by-laws or similar organizational document of the Company, the Operating LLC or any of their respective subsidiaries or (B) any law, statute, rule, regulation, judgment, order, writ or decree of any Governmental Entity, except for, in the case of (B), such violations that would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  As used herein, a “Repayment Event” means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company, the Operating LLC or any of their respective subsidiaries.

 

(xviii)      Absence of Labor Dispute.  No labor dispute with the employees of the Company, the Operating LLC or any of their respective subsidiaries exists or, to the knowledge of the Company and the Operating LLC, is imminent, and neither the Company nor the Operating LLC is aware of any existing or imminent labor disturbance by the employees of any of its or any subsidiary’s principal service providers, customers or contractors, which, in either case, would reasonably be expected to result in a Material Adverse Effect.

 

(xix)        Absence of Proceedings.  Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, there is no action, suit, proceeding, inquiry or investigation before or brought by any Governmental Entity now pending or, to the knowledge of

 

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the Company and the Operating LLC, threatened against or affecting the Company, the Operating LLC or any of their respective subsidiaries, which would reasonably be expected to result in a Material Adverse Effect, or which would reasonably be expected to materially and adversely affect the consummation of the transactions contemplated in this Agreement or the other Transaction Documents or the performance by the Company of its obligations hereunder or thereunder; and the aggregate of all pending legal or governmental proceedings to which the Company, the Operating LLC or any such subsidiary is a party or of which any of their respective properties or assets is the subject which are not described in the Registration Statement, the General Disclosure Package and the Prospectus, including ordinary routine litigation incidental to the business, could not reasonably be expected to result in a Material Adverse Effect.

 

(xx)         Accuracy of Exhibits.  There are no contracts or documents which are required pursuant to the rules and regulations of the Commission to be described in the Registration Statement, the General Disclosure Package or the Prospectus or to be filed as exhibits to the Registration Statement which have not been so described and filed as required.

 

(xxi)        Absence of Further Requirements.  No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any Governmental Entity is necessary or required for the performance by the Company or the Operating LLC of their respective obligations hereunder or under the other Transaction Documents, in connection with the offering, issuance or sale of the Securities hereunder or the consummation of the transactions contemplated by this Agreement and the other Transaction Documents, except (A) such as have been already obtained or as may be required under the 1933 Act, the 1933 Act Regulations, the rules of the NASDAQ Stock Market LLC, state securities laws, the rules of FINRA or the laws and regulations of jurisdictions outside the United States in which the Reserved Securities are offered and (B) that, if not obtained would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect or materially impair the ability of the Company or the Operating LLC to consummate the transactions contemplated under this Agreement and the other Transaction Documents.

 

(xxii)       Possession of Licenses and Permits.  The Company, the Operating LLC and their respective subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate Governmental Entities necessary to conduct the business in the manner described in the General Disclosure Package and the Prospectus, subject to such qualifications as may be set forth in the General Disclosure Package and the Prospectus, except where the failure so to possess would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  The Company, the Operating LLC and their respective subsidiaries are in compliance with the terms and conditions of all Governmental Licenses, subject to such qualifications as may be set forth in the General Disclosure Package and the Prospectus, except where the failure so to comply would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  All of the Governmental Licenses are valid and in full force and effect, subject to such qualifications as may be set forth in the General Disclosure Package and the Prospectus, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  Neither the Company, the Operating LLC nor any of their respective subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to result in a Material Adverse Effect.

 

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(xxiii)      Title to Property.  The Company, the Operating LLC and their respective subsidiaries do not own any real property.   All of the leases and subleases material to the business of the Company, the Operating LLC and their respective subsidiaries, considered as one enterprise, and under which the Company, the Operating LLC or any of their respective subsidiaries leases properties described in the Registration Statement, the General Disclosure Package or the Prospectus, are in full force and effect, and neither the Company, the Operating LLC nor any such subsidiary has received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company, the Operating LLC or any such subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company, the Operating LLC or such subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease.

 

(xxiv)     Possession of Intellectual Property.  The Company, the Operating LLC and their respective subsidiaries own or possess, or can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, “Intellectual Property”) necessary to carry on their respective business now operated by them, except where the failure to own or possess such rights would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect, and neither the Company, the Operating LLC nor any of their respective subsidiaries has received any notice or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property, which infringement or conflict (if the subject of any unfavorable decision, ruling or finding), singly or in the aggregate, would reasonably be expected to result in a Material Adverse Effect.

 

(xxv)      Accounting Controls.  To the extent required by Rule 13a-15 under the rules and regulations of the Commission under the 1934 Act (the “1934 Act Regulations”), the Company, the Operating LLC and each of their respective subsidiaries maintain effective internal control over financial reporting (as defined under Rule 13a-15 and 15d-15 under the 1934 Act Regulations) and a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s general or specific authorization, as applicable; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, since the end of the Operating LLC’s most recent audited fiscal year, there has been (1) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (2) no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

(xxvi)     Compliance with the Sarbanes-Oxley Act.   Upon the effectiveness of the Registration Statement, the Company and, to the knowledge of the Company, the executive officers and directors of the Company, in their capacities as such, were, and at the Closing Time, will be, in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations promulgated thereunder.

 

(xxvii)    Payment of Taxes.  All tax returns of the Company, the Operating LLC and each of their respective subsidiaries required by law to be filed have been filed or extensions to file

 

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such returns have been timely requested (except in any case in which the failure to file would not, singly or in the aggregate, be reasonably expected to have a Material Adverse Effect) and all taxes shown by such returns, which are due and payable, have been paid, other than those being contested in good faith and for which adequate reserves have been provided or the nonpayment of which would not, singly or in the aggregate, be reasonably expected to have a Material Adverse Effect.

 

(xxviii)   Insurance.  The Company, the Operating LLC and their respective subsidiaries carry or are entitled to the benefits of insurance, with financially sound and reputable insurers, in such amounts and covering such risks as is prudent and customary in the businesses in which they are engaged, and all such insurance is in full force and effect.  Neither the Company nor the Operating LLC has any reason to believe that it or any of its subsidiaries will not be able (A) to renew its existing insurance coverage as and when such policies expire or (B) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not reasonably be expected to result in a Material Adverse Effect.

 

(xxix)     Investment Company Act.  Neither the Company nor the Operating LLC is required, and upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the Registration Statement, the General Disclosure Package and the Prospectus will be required, to register as an “investment company” under the Investment Company Act of 1940, as amended.

 

(xxx)      Absence of Manipulation.  Neither the Company, the Operating LLC nor any controlled affiliate of the Company or the Operating LLC has taken, nor will the Company, the Operating LLC or any such controlled affiliate take, directly or indirectly, any action which is designed, or would be expected, to cause or result in, or which constitutes, the stabilization or manipulation of the price of any security of the Company or the Operating LLC to facilitate the sale or resale of the Securities or to result in a violation of Regulation M under the 1934 Act.

 

(xxxi)     Foreign Corrupt Practices Act.  None of the Company, the Operating LLC, any of their respective subsidiaries or, to the knowledge of the Company and the Operating LLC, any director, officer, agent, employee, controlled affiliate or other person acting on behalf of the Company, the Operating LLC or any of their respective subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company and the Operating LLC and, to the knowledge of the Company and the Operating LLC, their respective controlled affiliates have conducted their businesses in compliance with the FCPA.  The Code of Conduct adopted by the Company in connection with the offering contemplated by this Agreement includes policies intended to ensure compliance with the FCPA.

 

(xxxii)    Money Laundering Laws.  The operations of the Company, the Operating LLC and their respective subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all

 

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jurisdictions where the Company, the Operating LLC and their respective subsidiaries conduct business and the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company, the Operating LLC or any of their respective subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company and the Operating LLC, threatened.

 

(xxxiii)   OFAC.  None of the Company, the Operating LLC, any of their respective subsidiaries or, to the knowledge of the Company and the Operating LLC, any director, officer, agent, employee, controlled affiliate or  representative of the Company, the Operating LLC or any of their respective subsidiaries is an individual or entity (“Person”) currently the subject or target of any  sanctions administered or enforced by the United States Government, including, without limitation, the U.S. Department of the Treasury’s Office of Foreign Assets Control, the United Nations Security Council, the European Union, Her Majesty’s Treasury or other relevant sanctions authority (collectively, “Sanctions”), nor is the Company or the Operating LLC located, organized or resident in a country or territory that is the subject of Sanctions; and the Company and the Operating LLC will not directly or indirectly use the proceeds of the sale of the Securities or lend, contribute or otherwise make available such proceeds to any subsidiaries, joint venture partners or other Person to fund any activities of or business with any Person or in any country or territory that, at the time of such funding, is the subject of  Sanctions or in any other manner that will result in a violation by any Person (including any Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.

 

(xxxiv)   Sales of Reserved Securities.  In connection with any offer and sale of Reserved Securities outside the United States, each preliminary prospectus, the Prospectus, any prospectus wrapper and any amendment or supplement thereto, at the time it was filed, complied and will comply in all material respects with any applicable laws or regulations of foreign jurisdictions in which the same is distributed.  Neither the Company nor the Operating LLC has offered, or caused the DSP Manager to offer, Reserved Securities to any person with the specific intent to unlawfully influence (i) a customer or service provider of the Company, the Operating LLC or any of their respective controlled affiliates to alter the customer’s or service provider’s level or type of business with any such entity or (ii) a trade journalist or publication to write or publish favorable information about the Company, the Operating LLC or any of their respective controlled affiliates, or their respective businesses.

 

(xxxv)    Statistical and Market-Related Data.  Any statistical and market-related data included in the Registration Statement, the General Disclosure Package or the Prospectus are based on or derived from sources that the Company believes, after reasonable inquiry, to be reliable and accurate and, to the extent required, the Company or the Operating LLC has obtained the written consent to the use of such data from such sources.

 

(xxxvi)   Maintenance of Rating.  Since the execution of this Agreement, there shall not have been any decrease in or withdrawal of the rating of any securities of the Company or any of its subsidiaries by any “nationally recognized statistical rating organization” (as defined in Section 3(a)(62) of the 1934 Act) or any notice given of any intended or potential decrease in or withdrawal of any such rating or of a possible change in any such rating that does not indicate the direction of the possible change.

 

(xxxvii)  Fair Summaries.  The statements in the Registration Statement, the General Disclosure Package and the Prospectus under the caption  “Certain Relationships and Related

 

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Party Transactions”, “Description of Capital Stock” and “Shares Eligible for Future Sale”, insofar as such statements summarize legal matters, agreements or documents discussed therein, are accurate summaries in all material respects of such legal matters, agreements or documents and present information required to be shown therein pursuant to the rules and regulations of the Commission.  The statements included in the Registration Statement, the General Disclosure Package and the Prospectus under the caption “Material U.S. Federal Income Tax Consequences for Non-U.S. Holders,” insofar as they purport to describe provisions of U.S. federal tax laws or legal conclusions with respect thereto, accurately summarize the matters referred to therein in all material respects.

 

(b)           Officer’s Certificates.  Any certificate signed by any officer of the Company or the Operating LLC delivered to the Representatives or to counsel for the Underwriters shall be deemed a representation and warranty by the Company and the Operating LLC to each Underwriter as to the matters covered thereby.

 

SECTION 2.         Sale and Delivery to Underwriters; Closing.

 

(a)           Initial Securities.  On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Underwriter, severally and not jointly, and each Underwriter, severally and not jointly, agrees to purchase from the Company, at the price per share set forth in Schedule A, that number of Initial Securities set forth in Schedule A opposite the name of such Underwriter, plus any additional number of Initial Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof, subject, in each case, to such adjustments among the Underwriters as the Representatives in their sole discretion shall make to eliminate any sales or purchases of fractional shares.

 

(b)           Option Securities.  In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the Underwriters, severally and not jointly, to purchase up to an additional 2,432,432 shares of Class A Common Stock, at the price per share set forth in Schedule A, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities.  The option hereby granted may be exercised for 30 days after the date hereof and may be exercised in whole or in part at any time from time to time upon notice by the Representatives to the Company setting forth the number of Option Securities as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Securities.  Any such time and date of delivery (a “Date of Delivery”) shall be determined by the Representatives, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time.  If the option is exercised as to all or any portion of the Option Securities, each of the Underwriters, acting severally and not jointly, will purchase that proportion of the total number of Option Securities then being purchased which the number of Initial Securities set forth in Schedule A opposite the name of such Underwriter bears to the total number of Initial Securities, subject, in each case, to such adjustments as the Representatives in their sole discretion shall make to eliminate any sales or purchases of fractional shares.

 

(c)           Payment.  Payment of the purchase price for and delivery of the Initial Securities shall be made at the offices of Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, New York 10017, or at such other place as shall be agreed upon by the Representatives and the Company, at 9:00 A.M. (New York City time) on the second (third, if the pricing occurs after 4:30 P.M. (New York City time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten business days after such date as shall be

 

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agreed upon by the Representatives and the Company (such time and date of payment and delivery being herein called “Closing Time”).

 

In addition, in the event that any or all of the Option Securities are purchased by the Underwriters, payment of the purchase price for and delivery of such Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Representatives and the Company, on each Date of Delivery as specified in the notice from the Representatives to the Company.

 

Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company against delivery to the Representatives for the respective accounts of the Underwriters for the Securities to be purchased by them.  It is understood that each Underwriter has authorized each Representative, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial Securities and the Option Securities, if any, which it has agreed to purchase.  Merrill Lynch, individually and not as representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial Securities or the Option Securities, if any, to be purchased by any Underwriter whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder.

 

SECTION 3.         Covenants of the Company and the Operating LLC.  The Company and the Operating LLC covenant, jointly and severally, with each Underwriter as follows:

 

(a)           Compliance with Securities Regulations and Commission Requests.  The Company, subject to Section 3(b), will comply with the requirements of Rule 430A, and will notify the Representatives promptly, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing or suspending the use of any preliminary prospectus or the Prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the 1933 Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the 1933 Act in connection with the offering of the Securities.  The Company will effect all filings required under Rule 424(b), in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus.  The Company will make every reasonable effort to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment.

 

(b)           Continued Compliance with Securities Laws.  The Company will comply with the 1933 Act and the 1933 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Registration Statement, the General Disclosure Package and the Prospectus.  If at any time when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172 of the 1933 Act Regulations (“Rule 172”), would be) required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue

 

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statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) amend or supplement the General Disclosure Package or the Prospectus in order that the General Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser or (iii) amend the Registration Statement or amend or supplement the General Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly (A) give the Representatives notice of such event, (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the General Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representatives with copies of any such amendment or supplement and (C) file with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representatives or counsel for the Underwriters shall object.  The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request.  The Company will give the Representatives notice of its intention to make any filings made pursuant to the 1934 Act or 1934 Act Regulations from the Applicable Time to the Closing Time and will furnish the Representatives with copies of any such documents a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representatives or counsel for the Underwriters shall reasonably object.

 

(c)           Delivery of Registration Statements.  The Company has furnished or will deliver to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (without exhibits) and will also deliver to the Representatives, without charge, a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) for each of the Underwriters.  The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

 

(d)           Delivery of Prospectuses.  The Company has delivered to each Underwriter, without charge, as many copies of each preliminary prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act.  The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the 1933 Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request.  The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.

 

(e)           Blue Sky Qualifications.  The Company will use its reasonable best efforts, in cooperation with the Underwriters, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representatives may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in any jurisdiction in which it is not otherwise so subject.

 

(f)            Rule 158.  The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings

 

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statement for the purposes of, and to provide to the Underwriters the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act.

 

(g)           Use of Proceeds.  The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the Registration Statement, the General Disclosure Package and the Prospectus under “Use of Proceeds.”

 

(h)           Listing.  The Company will use its reasonable best efforts to effect and maintain the listing of the Common Stock (including the Securities) on the NASDAQ Global Select Market.

 

(i)            Restriction on Sale of Securities.  During a period of 180 days from the date of the Prospectus, each of the Company and the Operating LLC will not, without the prior written consent of the Representatives, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any shares of Common Stock, any membership interests in the Operating LLC or any securities convertible into or exercisable or exchangeable for Common Stock or membership interests in the Operating LLC or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock or membership interests in the Operating LLC, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock, membership interests in the Operating LLC or other securities, in cash or otherwise.  The foregoing sentence shall not apply to (A) the Securities to be sold hereunder; (B) any shares of Common Stock issued by the Company or membership interests issued by the Operating LLC upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and referred to in the Registration Statement, the General Disclosure Package and the Prospectus; (C) any shares of Common Stock or membership interests in the Operating LLC issued or options to purchase Common Stock or membership interests in the Operating LLC granted as equity compensation pursuant to the operating agreement of the Operating LLC or any employee benefit plan referred to in the Registration Statement, the General Disclosure Package and the Prospectus; (D) any shares of Common Stock or membership interests in the Operating LLC issued as equity compensation pursuant to the operating agreement of the Operating LLC or any non-employee director stock plan or dividend reinvestment plan referred to in the Registration Statement, the General Disclosure Package and the Prospectus; (E) any shares of Common Stock or membership interests in the Operating LLC or options to purchase Common Stock or membership interests in the Operating LLC or such other securities of the Company, the Operating LLC or any of their respective affiliates issued, transferred or otherwise disposed of in connection with the Reorganization; (F) the filing of a registration statement on Form S-8 relating to, and the issuance and sale of any shares of Common Stock or membership interests in the Operating LLC pursuant to, the terms of a plan described in the Registration Statement, General Disclosure Package and the Prospectus or any plan in existence as of the date hereof; (G) any shares of Common Stock, membership interests in the Operating LLC or options to purchase Common Stock or membership interests in the Operating LLC or such other securities of the Company, the Operating LLC or any of their respective affiliates issued as consideration or contingent consideration for acquisitions of one or more companies (or its or their operating assets or stock, partnership interests, membership interests or other equivalent equity interests) by the Company, the Operating LLC or their respective subsidiaries pursuant to purchase agreements entered into prior to the date hereof, provided that each recipient thereof shall have executed a lock-up agreement for the remainder of the 180-day period in substantially the form of Exhibit C hereto or contained in Section 5 of Amendment No. 1 to the Third Amended and Restated Operating Agreement of the Operating LLC or (H) any shares of Common Stock, membership interests in the Operating LLC or options to purchase Common Stock or membership interests in the Operating LLC or such other securities of the Company, the Operating LLC or any of their respective affiliates issued as consideration for acquisitions of one or more companies (or its or their

 

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operating assets or stock, partnership interests, membership interests or other equivalent equity interests) by the Company, the Operating LLC or their respective subsidiaries, provided that (x) each recipient thereof shall have executed a lock-up agreement for the remainder of the 180-day period in substantially the form of Exhibit C hereto or contained in Section 5 of Amendment No. 1 to the Third Amended and Restated Operating Agreement of the Operating LLC, (y) the number of such shares of Common Stock, membership interests, options (on an as-exercised basis) or other securities that may be issued as consideration for each such acquisition may not exceed 5% of the total diluted common stock and units outstanding (as defined in the General Disclosure Package and the Prospectus) immediately following completion of the transactions contemplated by this Agreement (as adjusted for share splits, share dividends and other similar events after the date hereof, and inclusive of non-qualified and non-compensatory stock options issued in connection with the Reorganization and the offering contemplated by this Agreement to the extent they become dilutive) (such number of diluted common stock and units outstanding, the “Post-IPO Diluted Share Count”) and (z) the aggregate number of such shares of Common Stock, membership interests, options (on an as-exercised basis) or other securities that may be issued as consideration for all such acquisitions pursuant to this clause (H) shall not exceed 10% of the Post-IPO Diluted Share Count.  In addition, the Company and the Operating LLC hereby agree not to waive or release any party subject to the restrictions on transfer set forth in Section 5 of Amendment No. 1 to the Third Amended and Restated Operating Agreement of the Operating LLC or otherwise permit such section to be amended without the consent of each of the Representatives.

 

(j)            Release or Waiver of Lock-up Restrictions.

 

(i)            If the Representatives, in their sole discretion, agree to release or waive the restrictions set forth in a lock-up agreement described in Section 5(i) hereof for an officer, director or director nominee of the Company and provide the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit D hereto through a major news service at least two business days before the effective date of the release or waiver.

 

(ii)           Neither Representative shall agree to release or waive the restrictions on transfer set forth in Section 5 of Amendment No. 1 to the Third Amended and Restated Operating Agreement of the Operating LLC without the other Representative’s prior written consent.

 

(k)           Reporting Requirements.  The Company, during the period when a Prospectus relating to the Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the 1933 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and 1934 Act Regulations.  Additionally, the Company shall report the use of proceeds from the issuance of the Shares as may be required under Rule 463 under the 1933 Act.

 

(l)            Issuer Free Writing Prospectuses.  The Company agrees that, unless it obtains the prior written consent of the Representatives, it will not, and it will not permit the DSP Manager to, make any offer relating to the Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433; provided that the Representatives will be deemed to have consented to the Issuer Free Writing Prospectuses listed on Schedule B-2 hereto and any “road show for an offering that is a written communication” within the meaning of Rule 433(d)(8)(i) that has been reviewed by the Representatives.  The Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to, or deemed consented to, by the Representatives as an “issuer free writing prospectus,” as defined in Rule 433, and that it has complied

 

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and will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping.  If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement, any preliminary prospectus or the Prospectus or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.

 

(m)          Testing-the-Waters Materials.  If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.

 

(n)           Emerging Growth Company Status. The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Securities within the meaning of the Securities Act and (ii) completion of the 180-day restricted period referred to in Section 3(i).

 

SECTION 4.         Payment of Expenses.

 

(a)           Expenses.  The Company and the Operating LLC will jointly and severally pay or cause to be paid all expenses incident to the performance of their respective obligations under this Agreement, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of copies of each preliminary prospectus, each Issuer Free Writing Prospectus and the Prospectus and any amendments or supplements thereto and any costs associated with electronic delivery of any of the foregoing by the Underwriters to investors, (iii) the preparation, issuance and delivery of the certificates or security entitlements for the Securities to the Underwriters, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Securities to the Underwriters, (iv) the fees and disbursements of counsel, accountants and other advisors for the Company and the Operating LLC, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(e) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of a Blue Sky survey and any supplement thereto, (vi) the fees and expenses of any transfer agent or registrar for the Securities, (vii) the costs and expenses of the Company and the Operating LLC relating to investor presentations on any “road show” undertaken in connection with the marketing of the Securities, including without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and the cost of aircraft and other transportation chartered in connection with the road show, provided, however, that the Underwriters and the Company agree that the Underwriters shall pay or cause to be paid travel and lodging expenses of the Representatives, (viii) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by FINRA of the terms of the sale of the Securities up to an amount no greater than $50,000, (ix) the fees

 

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and expenses incurred in connection with the listing of the Securities on the NASDAQ Global Select Market and (x) all costs and expenses of the Underwriters, including the fees and disbursements of counsel for the Underwriters and DSP Manager, in connection with matters related to the Reserved Securities which are designated by the Company for sale to Invitees (other than the selling concession payable to the DSP Manager). It is understood, however, that, except as provided in this Section 4(a) and Section 6 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, stock transfer taxes on resale of any of the Securities by them and any advertising expenses connected with any offers they may make.

 

(b)           Termination of Agreement.  If this Agreement is terminated by the Representatives in accordance with the provisions of Section 5, Section 9(a)(i) or (iii) or Section 10 hereof, the Company and the Operating LLC shall jointly and severally reimburse the Underwriters for all of their reasonable and documented out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters.

 

SECTION 5.         Conditions of Underwriters’ Obligations.  The obligations of the several Underwriters hereunder are subject to the accuracy of the representations and warranties of the Company and the Operating LLC contained herein or in certificates of any officer of the Company or the Operating LLC delivered pursuant to the provisions hereof, to the performance by the Company and the Operating LLC of their respective covenants and other obligations hereunder, and to the following further conditions:

 

(a)           Effectiveness of Registration Statement; Rule 430A Information.  The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and, at the Closing Time, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the 1933 Act, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s and the Operating LLC’s knowledge, contemplated; and the Company and the Operating LLC have complied with each request (if any) from the Commission for additional information.  A prospectus containing the Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) without reliance on Rule 424(b)(8) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in accordance with the requirements of Rule 430A.

 

(b)           Opinion of Counsel for Company and the Operating LLC.  At the Closing Time, the Representatives shall have received the favorable opinion, dated the Closing Time, of Vinson & Elkins L.L.P., counsel for the Company and the Operating LLC, in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters substantially in the form of Exhibit A hereto and to such further effect as counsel to the Underwriters may reasonably request.

 

(c)         General Counsel Opinion.  At the Closing Time, the Representatives shall have received the favorable opinion, dated the Closing Time, of J. Russell McGranahan, general counsel for the Company, in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters substantially in the form of Exhibit B hereto and to such further effect as counsel to the Underwriters may reasonably request.

 

(d)           Opinion of Counsel for Underwriters.  At the Closing Time, the Representatives shall have received the favorable opinion, dated the Closing Time, of Davis Polk & Wardwell LLP, counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other

 

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Underwriters with respect to such matters as the Representatives may reasonably request, and such counsel shall have received such documents and information as they may reasonably request to enable them to pass upon such matters.

 

(e)           Officers’ Certificate.  At the Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company, the Operating LLC and their respective subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and the Representatives shall have received a certificate of the Chief Executive Officer or the President of the Company and of the chief financial or chief accounting officer of the Company, dated the Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties of the Company and the Operating LLC in this Agreement are true and correct with the same force and effect as though expressly made at and as of the Closing Time, (iii) the Company and the Operating LLC have complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time and (iv) no stop order suspending the effectiveness of the Registration Statement under the 1933 Act has been issued, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to their knowledge, contemplated.

 

(f)            Accountant’s Comfort Letters.  At the time of the execution of this Agreement, the Representatives shall have received from (i) Deloitte & Touche LLP a letter, dated such date, in form and substance satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the other Underwriters containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information of the Company and the Operating LLC contained in the Registration Statement, the General Disclosure Package and the Prospectus; and (ii) Mayer Hoffman McCann P.C. a letter, dated such date, in form and substance satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the other Underwriters containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information of SCS contained in the Registration Statement, the General Disclosure Package and the Prospectus..

 

(g)           Bring-down Comfort Letter.  At the Closing Time, the Representatives shall have received from each of Deloitte & Touche LLP and Mayer Hoffman McCann P.C. a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (f) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time.

 

(h)           Approval of Listing.  At the Closing Time, the Securities shall have been approved for listing on the NASDAQ Global Select Market, subject only to official notice of issuance.

 

(i)          No Objection.  FINRA has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements relating to the offering of the Securities.

 

(j)          Lock-up Agreements.  At the date of this Agreement, the Representatives shall have received an agreement substantially in the form of Exhibit C hereto signed by the persons listed on Schedule C hereto.

 

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(k)         Transactions Completed.  At the Closing Time, the Transactions shall have been completed as described in the Prospectus; each of the Transaction Documents (other than the Amended and Restated Certificate of Incorporation) shall have been executed and delivered; and the Amended and Restated Certificate of Incorporation shall have been filed with the Secretary of State for the State of Delaware.

 

(l)          Conditions to Purchase of Option Securities.  In the event that the Underwriters exercise their option provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of the Company contained herein and the statements in any certificates furnished by the Company and any of its subsidiaries hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Representatives shall have received:

 

(i)            Officers’ Certificate.  A certificate, dated such Date of Delivery, of the Chief Executive Officer or the President of the Company and of the chief financial or chief accounting officer of the Company confirming that the certificate delivered at the Closing Time pursuant to Section 5(e) hereof remains true and correct as of such Date of Delivery.

 

(ii)           Opinion of Counsel for Company.  If requested by the Representatives, the favorable opinion of Vinson & Elkins L.L.P., counsel for the Company, in form and substance satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(b) hereof.

 

(iii)          General Counsel Opinion.  If requested by the Representatives, the favorable opinion of J. Russell McGranahan, general counsel for the Company, in form and substance satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(c) hereof.

 

(iv)          Opinion of Counsel for Underwriters.  If requested by the Representatives, the favorable opinion of Davis Polk & Wardwell LLP, counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(d) hereof.

 

(v)           Bring-down Comfort Letters.  If requested by the Representatives, a letter from each of Deloitte & Touche LLP and Mayer Hoffman McCann P.C., in form and substance satisfactory to the Representatives and dated such Date of Delivery, substantially in the same form and substance as the letters furnished to the Representatives pursuant to Section 5(g) hereof, except that the “specified date” in the letters furnished pursuant to this paragraph shall be a date not more than three business days prior to such Date of Delivery.

 

(m)          Additional Documents.  At the Closing Time and at each Date of Delivery (if any) counsel for the Underwriters shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company and the Operating LLC in connection with the issuance and sale of the Securities as herein contemplated shall be reasonably satisfactory in form and substance to the Representatives and counsel for the Underwriters.

 

(n)           Termination of Agreement.  If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the

 

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purchase of Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several Underwriters to purchase the relevant Option Securities, may be terminated by the Representatives by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7, 8, 14, 15 and 16 shall survive any such termination and remain in full force and effect.

 

SECTION 6.         Indemnification.

 

(a)           Indemnification of Underwriters.  Each of the Company and the Operating LLC jointly and severally agrees to indemnify and hold harmless each Underwriter, its affiliates (as such term is defined in Rule 501(b) under the 1933 Act (each, an “Affiliate”)), its selling agents and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

 

(i)            against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included (A) in any preliminary prospectus, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto), or (B) in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Securities (“Marketing Materials”), including any roadshow or investor presentations made to investors by the Company (whether in person or electronically), or the omission or alleged omission in any preliminary prospectus, Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication, Prospectus or in any Marketing Materials of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(ii)           against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Company and the Operating LLC;

 

(iii)          against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by the Representatives), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;

 

provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in the Registration Statement (or any amendment thereto), including the Rule 430A Information, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Underwriter Information.

 

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(b)           Indemnification of Company and Operating LLC, Directors and Officers.  Each Underwriter severally agrees to indemnify and hold harmless the Company and the Operating LLC, their respective directors and director nominees, each of the Company’s officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Underwriter Information.

 

(c)           Actions against Parties; Notification.  Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement.  In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by the Representatives, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company and the Operating LLC.  An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party.  In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances.  No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

 

(d)           Settlement without Consent if Failure to Reimburse.  If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) or settlement of any claim in connection with any violation referred to in Section 6(e) effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 60 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

 

(e)           Indemnification for Reserved Securities.  In connection with the offer and sale of the Reserved Securities, each of the Company and the Operating LLC agrees jointly and severally to indemnify and hold harmless the Underwriters, their Affiliates and selling agents and each person, if any, who controls any Underwriter within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, from and against any and all loss, liability, claim, damage and expense (including, without limitation, any legal or other expenses reasonably incurred in connection with defending, investigating or

 

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settling any such action or claim), as incurred, (i) arising out of the violation of any applicable laws or regulations of foreign jurisdictions where Reserved Securities have been offered, (ii) arising out of any untrue statement or alleged untrue statement of a material fact contained in any prospectus wrapper or other material prepared by or with the consent of the Company for distribution to Invitees in connection with the offering of the Reserved Securities or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) caused by the failure of any Invitee to pay for and accept delivery of Reserved Securities which have been orally confirmed for purchase by any Invitee by 8:00 A.M. (New York City time) on the first business day after the date of this Agreement or (iv) related to, or arising out of or in connection with, the offering of the Reserved Securities.

 

SECTION 7.         Contribution.  If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Operating LLC, on the one hand, and the Underwriters, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Operating LLC, on the one hand, and of the Underwriters, on the other hand, in connection with the statements or omissions, or in connection with any violation of the nature referred to in Section 6(e) hereof, which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.

 

The relative benefits received by the Company and the Operating LLC, on the one hand, and the Underwriters, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company, on the one hand, and the total underwriting discount received by the Underwriters, on the other hand, in each case as set forth on the cover of the Prospectus, bear to the aggregate initial public offering price of the Securities as set forth on the cover of the Prospectus.

 

The relative fault of the Company and the Operating LLC, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company and the Operating LLC or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or any violation of the nature referred to in Section 6(e) hereof.

 

The Company, the Operating LLC and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7.  The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.

 

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Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities  underwritten by it and distributed to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

 

No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

 

For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and each Underwriter’s Affiliates and selling agents shall have the same rights to contribution as such Underwriter, and each director and director nominee of the Company or the Operating LLC, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company.  The Underwriters’ respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial Securities set forth opposite their respective names in Schedule A hereto and not joint.

 

SECTION 8.         Representations, Warranties and Agreements to Survive.  All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company or the Operating LLC submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any person controlling any Underwriter, its officers or directors or any person controlling the Company and (ii) delivery of and payment for the Securities.

 

SECTION 9.         Termination of Agreement.

 

(a)           Termination.  The Representatives may terminate this Agreement, by notice to the Company and the Operating LLC, at any time at or prior to the Closing Time (i) if there has been, in the judgment of the Representatives, since the time of execution of this Agreement or since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company, the Operating LLC and their respective subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representatives, impracticable or inadvisable to proceed with the completion of the offering or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the NASDAQ Global Select Market, or (iv) if trading generally on the NYSE MKT or the New York Stock Exchange or in the NASDAQ Global Select Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by order of the Commission, FINRA or any other governmental authority, or (v) a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States or with respect to Clearstream or Euroclear systems in Europe, or (vi) if a banking moratorium has been declared by either Federal or New York authorities.

 

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(b)           Liabilities.  If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6, 7, 8, 14, 15 and 16 shall survive such termination and remain in full force and effect.

 

SECTION 10.       Default by One or More of the Underwriters.  If one or more of the Underwriters shall fail at the Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the “Defaulted Securities”), the Representatives shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representatives shall not have completed such arrangements within such 24-hour period, then:

 

(i)            if the number of Defaulted Securities does not exceed 10% of the number of Securities to be purchased on such date, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or

 

(ii)           if the number of Defaulted Securities exceeds 10% of the number of Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the Underwriters to purchase, and the Company to sell, the Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of any non-defaulting Underwriter.

 

No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of its default.

 

In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the Underwriters to purchase and the Company to sell the relevant Option Securities, as the case may be, either the (i) Representatives or (ii) the Company shall have the right to postpone the Closing Time or the relevant Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration Statement, the General Disclosure Package or the Prospectus or in any other documents or arrangements.  As used herein, the term “Underwriter” includes any person substituted for an Underwriter under this Section 10.

 

SECTION 11.       Notices.  All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication.  Notices to the Underwriters shall be directed to Merrill Lynch at One Bryant Park, New York, New York 10036, attention of Syndicate Department (facsimile: (646) 855-3073), with a copy to ECM Legal (facsimile: (212) 230-8730), and Goldman at 200 West Street, New York, New York 10282-2198, Attention: Registration Department; notices to the Company or the Operating LLC shall be directed to it at 825 Third Avenue, 27th Floor, New York, New York 10022, attention of the General Counsel.

 

SECTION 12.       No Advisory or Fiduciary Relationship.  Each of the Company and the Operating LLC acknowledges and agrees that (a) the purchase and sale of the Securities pursuant to this Agreement, including the determination of the initial public offering price of the Securities and any related discounts and commissions, is an arm’s-length commercial transaction between the Company and the Operating LLC, on the one hand, and the several Underwriters, on the other hand, (b) in connection with the offering

 

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of the Securities and the process leading thereto, each Underwriter is and has been acting solely as a principal and is not the agent or fiduciary of the Company, the Operating LLC, any of their respective subsidiaries or their respective stockholders, creditors, employees or any other party, (c) no Underwriter has assumed or will assume an advisory or fiduciary responsibility in favor of the Company or the Operating LLC with respect to the offering of the Securities or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company, the Operating LLC or any of their respective subsidiaries on other matters) and no Underwriter has any obligation to the Company or the Operating LLC with respect to the offering of the Securities except the obligations expressly set forth in this Agreement, (d) the Underwriters and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company or the Operating LLC and (e) the Underwriters have not provided any legal, accounting, regulatory or tax advice with respect to the offering of the Securities and the Company and the Operating LLC have consulted their own respective legal, accounting, regulatory and tax advisors to the extent they deemed appropriate.

 

SECTION 13.       Parties.  This Agreement shall each inure to the benefit of and be binding upon the Underwriters, the Company and the Operating LLC and their respective successors.  Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters, the Company and the Operating LLC and their respective successors and the controlling persons and officers, directors and director nominees referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained.  This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Underwriters, the Company and the Operating LLC and their respective successors, and said controlling persons and officers, directors and director nominees and their heirs and legal representatives, and for the benefit of no other person, firm or corporation.  No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase.

 

SECTION 14.       Trial by Jury.  Each of the Company and the Operating LLC (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders, members and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

 

SECTION 15.       GOVERNING LAW.  THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW YORK WITHOUT REGARD TO ITS CHOICE OF LAW PROVISIONS.

 

SECTION 16.       Consent to Jurisdiction; Waiver of Immunity. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby (“Related Proceedings”) shall be instituted in (i) the federal courts of the United States of America located in the City and County of New York, Borough of Manhattan or (ii) the courts of the State of New York located in the City and County of New York, Borough of Manhattan (collectively, the “Specified Courts”), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a “Related Judgment”), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding.  Service of any process, summons, notice or document by mail to such party’s address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court.  The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such

 

28



 

court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum.

 

SECTION 17.       TIME. TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

 

SECTION 18.       Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement.

 

SECTION 19.       Effect of Headings.  The Section headings herein are for convenience only and shall not affect the construction hereof.

 

29



 

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company and the Operating LLC a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Underwriters, the Company and the Operating LLC in accordance with its terms.

 

 

 

Very truly yours,

 

 

 

FOCUS FINANCIAL PARTNERS INC.

 

 

 

 

 

By

/s/ Ruediger Adolf

 

 

Name:

Ruediger Adolf

 

 

Title:

Chief Executive Officer

 

 

 

 

FOCUS FINANCIAL PARTNERS, LLC

 

 

 

 

 

 

 

By

/s/ Ruediger Adolf

 

 

Name:

Ruediger Adolf

 

 

Title:

Chief Executive Officer

 

 

CONFIRMED AND ACCEPTED,
as of the date first above written:

 

GOLDMAN SACHS & CO. LLC

 

 

 

By

/s/ Matt Leavitt

 

Name:

Matt Leavitt

 

Title:

Managing Director

 

 

 

MERRILL LYNCH, PIERCE, FENNER & SMITH

 

INCORPORATED

 

 

 

 

 

By

/s/ Matthew Sharnoff

 

Name:

 Matthew Sharnoff

 

Title:

 Managing Director

 

 

For themselves and as Representatives of the other Underwriters named in Schedule A hereto.

 

[Signature Page to Underwriting Agreement]

 



 

SCHEDULE A

 

The initial public offering price per share for the Securities shall be $33.00.

 

The purchase price per share for the Securities to be paid by the several Underwriters shall be $30.69, being an amount equal to the initial public offering price set forth above less $2.31 per share, subject to adjustment in accordance with Section 2(b) for dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities.

 

Name of Underwriter

 

Number of
Initial Securities

 

Goldman Sachs & Co. LLC

 

4,005,406

 

Merrill Lynch, Pierce, Fenner & Smith
Incorporated

 

4,005,406

 

KKR Capital Markets LLC

 

2,367,570

 

BMO Capital Markets Corp.

 

1,297,297

 

RBC Capital Markets, LLC

 

1,297,297

 

SunTrust Robinson Humphrey, Inc.

 

1,297,297

 

Fifth Third Securities, Inc.

 

324,324

 

Keefe, Bruyette & Woods, Inc.

 

324,324

 

MUFG Securities Americas Inc.

 

324,324

 

Raymond James & Associates, Inc.

 

324,324

 

Regions Securities LLC

 

324,324

 

William Blair & Company, L.L.C.

 

324,324

 

 

 

 

 

Total

 

16,216,217

 

 

Sch A-1



 

SCHEDULE B-1

 

Pricing Terms

 

1.             The Company is selling 16,216,217 shares of Class A Common Stock.

 

2.             The Company has granted an option to the Underwriters, severally and not jointly, to purchase up to an additional 2,432,432 shares of Class A Common Stock.

 

3.             The initial public offering price per share for the Securities shall be $33.00.

 

SCHEDULE B-2

 

Free Writing Prospectuses

 

None.

 

SCHEDULE B-3

 

Written Testing-the-Waters Communications

 

Presentation provided to the Commission on May 17, 2018

 

Sch B - 1



 

SCHEDULE C

 

List of Persons and Entities Subject to Lock-up Letter

 

Ruediger Adolf

 

Rajini Sundar Kodialam

 

James Shanahan

 

James D. Carey

 

Fayez S. Muhtadie

 

Christopher J. Harrington

 

Deborah D. McWhinney

 

Noah Gottdiener

 

Leonard R. Chang

 

Christopher T. Dupuy

 

J. Russell McGranahan

 

Vamsi K. Yadlapati

 

Funds affiliated with KKR & Co. L.P.

 

Funds affiliated with Stone Point Capital LLC

 

Participants in directed share program

 

Sch C - 1



 

Exhibit A

 

FORM OF OPINION OF COMPANY’S COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 5(b)

 

A-1



 

Exhibit B

 

FORM OF OPINION OF GENERAL COUNSEL’S OPINION
TO BE DELIVERED PURSUANT TO SECTION 5(c)

 

B-1



 

Exhibit C

 

FORM OF LOCK UP LETTER

 

C-1



 

Exhibit D

 

FORM OF PRESS RELEASE

TO BE ISSUED PURSUANT TO SECTION 3(j)

 

Focus Financial Partners Inc.
[                 ], 20[      ]

 

Focus Financial Partners Inc. (the “Company”) announced today that BofA Merrill Lynch and Goldman Sachs & Co. LLC, the lead book-running managers in the Company’s recent public sale of [              ] shares of Class A common stock, is [waiving] [releasing] a lock-up restriction with respect to [             ] shares of the Company’s Class A common stock held by [certain officers or directors] [an officer or director] of the Company.  The [waiver] [release] will take effect on      ,          20    , and the shares may be sold on or after such date.

 

This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.

 

D-1


Exhibit 3.1

 

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
FOCUS FINANCIAL PARTNERS INC.

 

Focus Financial Partners Inc. (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the “DGCL”), hereby certifies as follows:

 

1.             The original Certificate of Incorporation of the Corporation (the “Original Certificate of Incorporation”) was filed with the Secretary of State of the State of Delaware on July 29, 2015.

 

2.             This Amended and Restated Certificate of Incorporation (this “Amended and Restated Certificate of Incorporation”), which restates and amends the Original Certificate of Incorporation, has been declared advisable by the board of directors of the Corporation (the “Board”), duly adopted by the stockholders of the Corporation and duly executed and acknowledged by the officers of the Corporation in accordance with Sections 103, 228, 242 and 245 of the DGCL.

 

3.             The Original Certificate of Incorporation is hereby amended and restated in its entirety to read as follows:

 

FIRST:  The name of the Corporation is Focus Financial Partners Inc.

 

SECOND:  The address of its registered office in the State of Delaware is The Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 in New Castle County, Delaware.  The name of its registered agent at such address is The Corporation Trust Company.

 

THIRD:  The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL as it currently exists or may hereafter be amended.

 

FOURTH:  The total number of shares of stock that the Corporation shall have the authority to issue is 1,500,000,000 shares of stock, classified as (i) 500,000,000 shares of preferred stock, par value $0.01 per share (“Preferred Stock”), (ii) 500,000,000 shares of Class A common stock, par value $0.01 per share (“Class A Common Stock”), and (iii) 500,000,000 shares of Class B common stock, par value $0.01 per share (“Class B Common Stock” and, together with the Class A Common Stock, the “Common Stock”).

 

1.             Provisions Relating to Preferred Stock.

 

(a)           Preferred Stock may be issued from time to time in one or more classes or series, the shares of each class or series to have such designations and powers, preferences and rights, and qualifications, limitations and restrictions thereof, as are stated and expressed herein and in the resolution or resolutions providing for the issue of such class or series adopted by the Board as hereafter prescribed (a “Preferred Stock Designation”).

 



 

(b)           Authority is hereby expressly granted to and vested in the Board to authorize the issuance of Preferred Stock from time to time in one or more classes or series, and with respect to each series of Preferred Stock, to fix and state by the resolution or resolutions from time to time adopted by the Board providing for the issuance thereof the designation and the powers, preferences, privileges, rights, qualifications, limitations and restrictions relating to each series of Preferred Stock, including, but not limited to, the following:

 

(i)            whether or not the class or series is to have voting rights, full, special or limited, or is to be without voting rights, and whether or not such series is to be entitled to vote as a separate class or series either alone or together with the holders of one or more other classes or series of stock;

 

(ii)           the number of shares to constitute the class or series and the designations thereof;

 

(iii)          the powers, preferences, privileges and relative, participating, optional or other special rights, if any, and the qualifications, limitations or restrictions thereof, if any, with respect to any series;

 

(iv)          whether or not the shares of any class or series shall be redeemable at the option of the Corporation or the holders thereof or upon the happening of any specified event, and, if redeemable, the redemption price or prices (which may be payable in the form of cash, notes, securities or other property), and the time or times at which, and the terms and conditions upon which, such shares shall be redeemable and the manner of redemption;

 

(v)           whether or not the shares of a series shall be subject to the operation of retirement or sinking funds to be applied to the purchase or redemption of such shares for retirement, and, if such retirement or sinking fund or funds are to be established, the annual amount thereof, and the terms and provisions relative to the operation thereof;

 

(vi)          the dividend rate, whether dividends are payable in cash, stock of the Corporation or other property, the conditions upon which and the times when such dividends are payable, the preference to or the relation to the payment of dividends payable on any other class or classes or series of stock, whether or not such dividends shall be cumulative or noncumulative, and if cumulative, the date or dates from which such dividends shall accumulate;

 

(vii)         the preferences, if any, and the amounts thereof which the holders of any class or series thereof shall be entitled to receive upon the voluntary or involuntary liquidation, dissolution or winding up of, or upon any distribution of the assets of, the Corporation;

 

(viii)        whether or not the shares of any class or series, at the option of the Corporation or the holder thereof or upon the happening of any specified event, shall be convertible into or exchangeable for, the shares of any other class or classes or of any other series of the same or any other class or classes or series, of stock, securities or other

 

2



 

property of the Corporation and the conversion price or prices or ratio or ratios or the rate or rates at which such exchange may be made, with such adjustments, if any, as shall be stated and expressed or provided for in such resolution or resolutions; and

 

(ix)          such other powers, privileges, preferences, rights, qualifications, limitations and restrictions with respect to any series as may to the Board seem advisable.

 

(c)           The shares of each series of Preferred Stock may vary from the shares of any other class or series thereof in any or all of the foregoing respects.

 

2.             Provisions Relating to Common Stock.

 

(a)           Except as may otherwise be provided in this Amended and Restated Certificate of Incorporation, each share of Common Stock shall have identical rights and privileges in every respect.  Common Stock shall be subject to the express terms of Preferred Stock and any series thereof.  Except as may otherwise be provided in this Amended and Restated Certificate of Incorporation, in a Preferred Stock Designation or by applicable law, the holders of shares of Common Stock shall be entitled to one vote for each such share upon all matters presented to the stockholders, the holders of shares of Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, and the holders of Preferred Stock shall not be entitled to vote at or receive notice of any meeting of stockholders.  Each holder of Common Stock shall be entitled to notice of any stockholders’ meeting in accordance with the bylaws of the Corporation (as in effect at the time in question) and applicable law on all matters put to a vote of the stockholders of the Corporation. Except as otherwise required in this Amended and Restated Certificate of Incorporation or by applicable law, the holders of Common Stock shall vote together as a single class on all matters (or, if any holders of Preferred Stock are entitled to vote together with the holders of Common Stock, the holders of Common Stock and the Preferred Stock shall vote together as a single class).

 

(b)           Notwithstanding the foregoing, except as otherwise required by applicable law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation (including any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Amended and Restated Certificate of Incorporation (including any Preferred Stock Designation) or pursuant to the DGCL.

 

(c)           Subject to the prior rights and preferences, if any, applicable to shares of Preferred Stock or any series thereof, the holders of shares of Class A Common Stock shall be entitled to receive ratably in proportion to the number of shares of Class A Common Stock held by them such dividends and distributions (payable in cash, stock or otherwise), if any, as may be declared thereon by the Board at any time and from time to time out of any funds of the Corporation legally available therefor. Dividends and other distributions shall not be declared or paid on the Class B Common Stock unless (i) the dividend consists of shares of Class B Common Stock or of rights, options, warrants or other securities convertible or exercisable into or exchangeable for shares of Class B Common Stock paid proportionally with respect to each outstanding share of Class B Common Stock and (ii) a dividend consisting of shares of Class A

 

3



 

Common Stock or of rights, options, warrants or other securities convertible or exercisable into or exchangeable for shares of Class A Common Stock on equivalent terms is simultaneously paid to the holders of Class A Common Stock. If dividends are declared on the Class A Common Stock or the Class B Common Stock that are payable in shares of Common Stock, or securities convertible into, or exercisable or exchangeable for Common Stock, the dividends payable to the holders of Class A Common Stock shall be paid only in shares of Class A Common Stock (or securities convertible into, or exercisable or exchangeable for Class A Common Stock), the dividends payable to the holders of Class B Common Stock shall be paid only in shares of Class B Common Stock (or securities convertible into, or exercisable or exchangeable for Class B Common Stock), and such dividends shall be paid in the same number of shares (or fraction thereof) on a per share basis of the Class A Common Stock and Class B Common Stock, respectively (or securities convertible into, or exercisable or exchangeable for the same number of shares (or fraction thereof) on a per share basis of the Class A Common Stock and Class B Common Stock, respectively). In no event shall the shares of either Class A Common Stock or Class B Common Stock be split, divided, or combined unless the outstanding shares of the other class shall be proportionately split, divided or combined.

 

(d)           In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of Preferred Stock or any series thereof, the holders of shares of Class A Common Stock shall be entitled to receive all of the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of Class A Common Stock held by them. The holders of shares of Class B Common Stock, as such, shall not be entitled to receive any assets of the Corporation in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation. A dissolution, liquidation or winding-up of the Corporation, as such terms are used in this paragraph (d), shall not be deemed to be occasioned by or to include any consolidation or merger of the Corporation with or into any other corporation or corporations or other entity or a sale, lease, exchange or conveyance of all or a part of the assets of the Corporation.

 

(e)           Shares of Class B Common Stock shall be exchangeable for shares of Class A Common Stock on the terms and subject to the conditions set forth in the Fourth Amended and Restated Limited Liability Agreement of Focus Financial Partners, LLC dated as of July 30, 2018, as it may be amended from time to time in accordance with its terms (the “LLC Agreement”). The Corporation will at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of issuance upon exchange of the outstanding shares of Class B Common Stock for Class A Common Stock pursuant to the LLC Agreement, such number of shares of Class A Common Stock that shall be issuable upon any such exchange pursuant to the LLC Agreement; provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of any such exchange of shares of Class B Common Stock pursuant to the LLC Agreement by delivering to the holder of shares of Class B Common Stock upon such exchange, in lieu of newly issued shares of Class A Common Stock, cash in the amount permitted by and provided in the LLC Agreement or shares of Class A Common Stock which are held in the treasury of the Corporation. All shares of Class A Common Stock that may be issued upon any such exchange shall, upon issuance in accordance with the LLC Agreement, be validly issued, fully paid and non-assessable.  All shares of Class B Common Stock exchanged shall be cancelled.

 

4



 

(f)            The number of authorized shares of Class A Common Stock, Class B Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the outstanding shares of stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL (or any successor provision thereto), and no vote of the holders of either Class A Common Stock, Class B Common Stock or Preferred Stock voting separately as a class shall be required therefor.

 

(g)           No stockholder shall, by reason of the holding of shares of any class or series of capital stock of the Corporation, have any preemptive or preferential right to acquire or subscribe for any shares or securities of any class or series, whether now or hereafter authorized, which may at any time be issued, sold or offered for sale by the Corporation, unless specifically provided for in a Preferred Stock Designation.

 

FIFTH:  The business and affairs of the Corporation shall be managed by or under the direction of the Board. The directors, other than those who may be elected by the holders of any series of Preferred Stock specified in the related Preferred Stock Designation, shall be divided, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as is reasonably possible, with the initial term of office of the first class to expire at the 2019 annual meeting of stockholders (the “Class I Directors”), the initial term of office of the second class to expire at the 2020 annual meeting of stockholders (the “Class II Directors”), and the initial term of office of the third class to expire at the 2021 annual meeting of stockholders (the “Class III Directors”), with each director to hold office until his successor shall have been duly elected and qualified or, if earlier, such director’s death, disability, resignation, disqualification or removal.  At each annual meeting of stockholders, directors elected to succeed those directors whose terms then expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election, with each director to hold office until his successor shall have been duly elected and qualified or, if earlier, such director’s death, disability, resignation, disqualification or removal.  The Board is authorized to assign members of the Board already in office to Class I, Class II or Class III at the time this Amended and Restated Certificate of Incorporation becomes effective, subject to the terms of any nomination agreements between the Corporation and any stockholder that may be in effect from time to time (as amended or supplemented in accordance with their terms, the “Nomination Agreements”). Subject to applicable law, the rights of the holders of any series of Preferred Stock specified in the related Preferred Stock Designation and the Nomination Agreements, any newly created directorship that results from an increase in the number of directors or any vacancy on the Board that results from the death, disability, resignation, disqualification or removal of any director or from any other cause shall be filled solely by the affirmative vote of a majority of the total number of directors then in office, even if less than a quorum, or by a sole remaining director and shall not be filled by the stockholders.  Any director elected to fill a vacancy not resulting from an increase in the number of directors shall hold office for the remaining term of his predecessor.  No decrease in the number of authorized directors constituting the Board shall shorten the term of any incumbent director.

 

Subject to the Nomination Agreement and the rights of the holders of shares of any series of Preferred Stock, if any, to elect additional directors pursuant to this Amended and Restated Certificate of Incorporation (including any Preferred Stock Designation thereunder), any director

 

5



 

may be removed only for cause, upon the affirmative vote of the holders of at least 662/3% of the outstanding shares of stock of the Corporation entitled to vote generally for the election of directors, acting at a meeting of the stockholders or by written consent (if permitted) in accordance with the DGCL, this Amended and Restated Certificate of Incorporation and the bylaws of the Corporation.

 

Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, if any, and to the Nomination Agreements, the number of directors shall be fixed from time to time in the manner provided in the bylaws of the Corporation.  Unless and except to the extent that the bylaws of the Corporation so provide, the election of directors need not be by written ballot.  There shall be no cumulative voting in the election of directors.

 

SIXTH:  Subject to the rights of holders of any series of Preferred Stock with respect to such series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be taken at a duly held annual or special meeting of stockholders and may not be taken by any consent in writing of such stockholders; provided that for so long as Kohlberg Kravis Roberts & Co. L.P. (“KKR”), Stone Point Capital LLC (“Stone Point”) and any investment funds or entities controlled or advised by KKR or Stone Point (collectively, the “Sponsor Entities”) collectively own at least 25% of the outstanding Common Stock, any action required or permitted to be taken by the stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the books in which proceedings of meetings of stockholders are recorded.  Delivery made to the Corporation’s registered office shall be made by hand, overnight courier or by certified or registered mail, return receipt requested.

 

SEVENTH:  Except as otherwise required by law and subject to the rights of the holders of any series of Preferred Stock, special meetings of stockholders of the Corporation may be called only by the Chief Executive Officer, the Chairman of the Board or the Board; provided that for so long as the Sponsor Entities collectively own at least 25% of the outstanding Common Stock, at the request of the holders of a majority of the shares of Common Stock held by the Sponsor Entities, the Board shall call a special meeting of stockholders of the Corporation.  Subject to the rights of holders of any series of Preferred Stock and the preceding proviso, the stockholders of the Corporation do not have the power to call a special meeting of stockholders of the Corporation.

 

EIGHTH:  In furtherance of, and not in limitation of, the powers conferred by the laws of the State of Delaware, the Board is expressly authorized to adopt, amend or repeal the bylaws of the Corporation without any action on the part of the stockholders of the Corporation; provided that any bylaw, and any powers thereby conferred, may be amended, altered or repealed by the stockholders of the Corporation by the vote of holders of not less than 662/3% in voting power of the then-outstanding shares of stock entitled to vote thereon, voting together as a

 

6



 

single class.  No bylaws hereafter made or adopted, nor any repeal of or amendment thereto, shall invalidate any prior act of the Board that was valid at the time it was taken.

 

NINTH:  No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as it now exists.  In addition to the circumstances in which a director of the Corporation is not personally liable as set forth in the preceding sentence, a director of the Corporation shall not be liable to the fullest extent permitted by any amendment to the DGCL hereafter enacted that further limits the liability of a director.

 

The Corporation shall have the power to indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director, officer, employee, agent or trustee of the Corporation, any predecessor of the Corporation or any subsidiary or affiliate of the Corporation, or serves or served at any other enterprise as a director, officer, employee, agent or trustee at the request of the Corporation or any predecessor to the Corporation.

 

Any amendment, repeal or modification of this Article Ninth shall be prospective only and shall not affect any limitation on liability of a director for acts or omissions occurring prior to the date of such amendment, repeal or modification.

 

TENTH:  The Corporation hereby expressly elects not to be governed by Section 203 of the DGCL.

 

1.             Provisions Relating to Business Combination.

 

Notwithstanding the foregoing, at any point in time at which any class of the Common Stock is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, the Corporation shall not engage in any business combination (as defined below) with any interested stockholder (as defined below) for a period of three (3) years following the time that such stockholder became an interested stockholder, unless:

 

(a)           prior to such time the Board approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

 

(b)           upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder (as defined below) owned (as defined below) at least 85% of the voting stock (as defined below) of the Corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (i) by persons (as defined below) who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

 

7



 

(c)           at or subsequent to such time the business combination is approved by the Board and authorized at an annual or special meeting of stockholders, by the affirmative vote of at least 662/3% of the outstanding voting stock of the Corporation which is not owned by the interested stockholder.

 

2.             Certain Defined Terms.

 

For purposes of this Article Tenth, the term:

 

(a)           affiliate” means a person that directly, or indirectly through one or more intermediaries, controls (as defined below), or is controlled by, or is under common control with, another person.

 

(b)           associate,” when used to indicate a relationship with any person, means: (i) any corporation, partnership, unincorporated association or other entity of which such person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock; (ii) any trust or other estate in which such person has at least a 20% beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same residence as such person.

 

(c)           business combination,” when used in reference to the Corporation and any interested stockholder of the Corporation, means:

 

(i)            any merger or consolidation of the Corporation or any direct or indirect majority-owned subsidiary of the Corporation (A) with the interested stockholder, or (B) with any other corporation, partnership, unincorporated association or other entity if the merger or consolidation is caused by the interested stockholder and as a result of such merger or consolidation Section 1 of this Article Tenth is not applicable to the surviving entity;

 

(ii)           any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a stockholder of the Corporation, to or with the interested stockholder, whether as part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation which assets have an aggregate market value equal to 10% or more of either the aggregate market value of all the assets of the Corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the Corporation;

 

(iii)          any transaction which results in the issuance or transfer by the Corporation or by any direct or indirect majority-owned subsidiary of the Corporation of any stock of the Corporation or of such subsidiary to the interested stockholder, except: (A) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which securities were outstanding prior to the time that the interested stockholder became such; (B) pursuant to a merger under Section 251(g) of the DGCL; (C) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of

 

8



 

securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which security is distributed, pro rata to all holders of a class or series of stock of the Corporation subsequent to the time the interested stockholder became such; (D) pursuant to an exchange offer by the Corporation to purchase stock made on the same terms to all holders of said stock; or (E) any issuance or transfer of stock by the Corporation; provided, however, that in no case under sub-clauses (C)-(E) of this clause (iii) shall there be an increase in the interested stockholder’s proportionate share of the stock of any class or series of the Corporation or of the voting stock of the Corporation (except as a result of immaterial changes due to fractional share adjustments);

 

(iv)          any transaction involving the Corporation or any direct or indirect majority-owned subsidiary of the Corporation which has the effect, directly or indirectly, of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the Corporation or of any such subsidiary which is owned by the interested stockholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or redemption of any shares of stock not caused, directly or indirectly, by the interested stockholder; or

 

(v)           any receipt by the interested stockholder of the benefit, directly or indirectly (except proportionately as a stockholder of the Corporation), of any loans, advances, guarantees, pledges, or other financial benefits (other than those expressly permitted in clauses (i)-(iv) above) provided by or through the Corporation or any direct or indirect majority-owned subsidiary.

 

(d)           control,” including the terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by contract, or otherwise. A person who is the owner of 20% or more of the outstanding voting stock of the Corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity, in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control shall not apply where such person holds voting stock, in good faith and not for the purpose of circumventing this Section 2, as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have control of such entity.

 

(e)           interested stockholder” means any person (other than the Corporation or any direct or indirect majority-owned subsidiary of the Corporation) that (i) is the owner of 15% or more of the outstanding voting stock of the Corporation, or (ii) is an affiliate or associate of the Corporation and was the owner of 15% or more of the outstanding voting stock of the Corporation at any time within the three (3) year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder, and the affiliates and associates of such person; provided, however, that the term “interested stockholder” shall not include or be deemed to include, in any case, (A) Trident (as defined below), any Trident Transferee (as defined below) or any of their respective affiliates or successors, or (B) any person whose ownership of shares in excess of the 15% limitation set forth herein is the result of any action taken solely by the Corporation, provided further, that each such person referred to

 

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under the foregoing sub-clauses (A)-(B) shall be an interested stockholder if simultaneously or thereafter such person acquires additional shares of voting stock of the Corporation and continues to satisfy the criteria in clauses (i) and (ii) of this definition at the time of such acquisition, except as a result of further corporate action not caused, directly or indirectly, by such person. For the purpose of determining whether a person is an interested stockholder, the voting stock of the Corporation deemed to be outstanding shall include stock deemed to be owned by the person through application of the definition of “owner” below but shall not include any other unissued stock of the Corporation which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. Notwithstanding anything to the contrary in this Article Tenth, any stockholder of the Corporation, with affiliate(s), associate(s), or other person(s) who may be deemed representatives of it serving as director(s) of the Corporation, shall not be deemed to own or to have acquired any shares of voting stock of the Corporation held by such other persons serving as director(s) of the Corporation to the extent such securities were issued by the Corporation to such director(s) in the ordinary course of business as compensation for their services as director(s) of the Corporation.

 

(f)            owner,” including the terms “own” and “owned,” when used with respect to any stock, means a person that individually or with or through any of its affiliates or associates:

 

(i)            beneficially owns such stock, directly or indirectly;

 

(ii)           has (A) the right to acquire such stock (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; provided, however, that a person shall not be deemed the owner of stock tendered pursuant to a tender or exchange offer made by such person or any of such person’s affiliates or associates until such tendered stock is accepted for purchase or exchange; or (B) the right to vote such stock pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the owner of any stock because of such person’s right to vote such stock if the agreement, arrangement or understanding to vote such stock arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to ten (10) or more persons; or

 

(iii)          has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in sub-clause (B) of clause (ii) above), or disposing of such stock with any other person that beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly, such stock.

 

(g)           person” means any individual, corporation, partnership, unincorporated association or other entity.

 

(h)           stock” means, with respect to any corporation, capital stock and, with respect to any other entity, any equity interest.

 

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(i)            Trident” means, collectively, Trident FFP LP and its affiliates (other than the Corporation).

 

(j)            Trident Transferee” means any person that: (i) acquires beneficial ownership of outstanding voting stock of the Corporation either (A) directly from Trident or any of its affiliates or successors, or (B) directly from a person described in sub-clause (A) above or from any other Trident Transferee; (ii) did not have beneficial ownership of more than 4.9% of the then outstanding voting stock of the Corporation prior to such acquisition; and (iii) is not (A) a national or global financial institution or insurance company or a regional bank that in each case derives at least 30% of its revenue from wealth management services or the sale of proprietary financial products (which for the avoidance of doubt, excludes life insurance and annuities), (B) an independent broker dealer, (C) a platform for or aggregator of registered investment advisers or broker-dealer teams, or (D) a holding company or acquisition vehicle of any entity described in the foregoing sub-clauses (A)-(C) of this clause (iii).

 

(k)           voting stock” means stock of any class or series entitled to vote generally in the election of directors.

 

ELEVENTH:  The Corporation shall have the right, subject to any express provisions or restrictions contained in this Amended and Restated Certificate of Incorporation or bylaws of the Corporation, from time to time, to amend this Amended and Restated Certificate of Incorporation or any provision hereof in any manner now or hereafter provided by applicable law, and all rights and powers of any kind conferred upon a director or stockholder of the Corporation by this Amended and Restated Certificate of Incorporation or any amendment hereof are subject to such right of the Corporation.

 

TWELFTH:  Notwithstanding any other provision of this Amended and Restated Certificate of Incorporation or the bylaws of the Corporation (and in addition to any other vote that may be required by applicable law, this Amended and Restated Certificate of Incorporation or the bylaws of the Corporation), the affirmative vote of the holders of at least 662/3% in voting power of the outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend, alter or repeal any provision of this Amended and Restated Certificate of Incorporation; provided that (a) a separate vote of holders of a majority of Common Stock held by the Sponsor Entities shall be required to amend, alter, repeal or adopt a provision of this Amended and Restated Certificate of Incorporation inconsistent with the following provisions: (i) so long as the Sponsor Entities own at least 25% of the outstanding Common Stock, the proviso in Article Sixth and the proviso in Article Seventh and (ii) so long as the Sponsor Entities own any Common Stock, Article Tenth, Article Fourteenth and this proviso in Article Twelfth, and (b) a separate vote of holders of a majority of Class B Common Stock shall be required to (i) amend, alter, repeal or adopt a provision of this Amended and Restated Certificate of Incorporation inconsistent with Section 2(e) of Article Fourth and (ii) amend, alter or repeal any other provision of Section 2 of Article Fourth that affects the holders of Class B Common Stock in a manner that is different or prejudicial relative to the holders of Class A Common Stock.

 

THIRTEENTH:  Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent

 

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permitted by applicable law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee, agent or trustee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation arising pursuant to any provision of the DGCL, this Amended and Restated Certificate of Incorporation or the Corporation’s bylaws, or (iv) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation governed by the internal affairs doctrine, in each such case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.  Unless the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the federal securities laws of the United States.  Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article Thirteenth.

 

FOURTEENTH:

 

1.             Certain Definitions.  For purposes of this Article Fourteenth, (i)”Affiliate” of any Person shall include any principal, member, director, partner, manager, shareholder, subsidiary, officer, employee or other representative of any Person that, directly or indirectly, is controlled by such Person, controls such Person or is under common control with such Person (with respect to the Sponsor-Affiliates, other than the Corporation and any entity that is controlled by the Corporation) or any Person that, directly or indirectly, is controlled by such Person, controls such Person or is under common control with such Person and (ii) “Person” shall mean any individual, corporation, general or limited partnership, limited liability company, joint venture, trust, association or any other entity.  “Sponsor-Affiliates” shall mean KKR and Stone Point, and each of their respective Affiliates.

 

2.             Certain Activities.  In anticipation of the benefits to be derived by the Corporation through its continued contractual, corporate and business relationships with the Sponsor-Affiliates and in anticipation and recognition that (i) certain directors, principals, officers, employees and/or other representatives of the Sponsor-Affiliates may serve as directors or officers of the Corporation, (ii) the Sponsor-Affiliates may now engage and may continue to engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, and (iii) members of the Board who are not employees of the Corporation (“Non-Employee Directors”) and their respective Affiliates may now engage and may continue to engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, the provisions of this Article Fourteenth are set forth to define the circumstances in which any duties of the Non-Employee Directors and the Sponsor-Affiliates to the Corporation or its stockholders would not be breached even if certain classes or categories of business opportunities are alleged to have been usurped by one or more of the Sponsor-Affiliates, the Non-Employee Directors or their respective Affiliates.

 

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3.             Certain Transactions.  None of (i) any Sponsor-Affiliate or (ii) any Non-Employee Director or his or her Affiliates (any such Person identified in clause (i) or (ii), an “Identified Person”) shall be in breach of any duty to the Corporation or its stockholders for directly or indirectly (A) engaging in a corporate opportunity in the same or similar business activities or lines of business in which the Corporation or any of the Affiliated persons has a reasonable expectancy interest or property right or (B) otherwise competing with the Corporation.  For the avoidance of doubt, subject to the Corporation’s insider trading policies, to the extent that any purchase, sale or other transaction by any Identified Person involving any securities or indebtedness of the Corporation or any of its Affiliates (or involving any hedge, swap, derivative or other instrument relating to or in respect of any of the foregoing securities or indebtedness) may be deemed to be a corporate opportunity or to be in competition with the Corporation, the Identified Persons shall be fully protected by the foregoing provisions of this Article Fourteenth in pursuing such purchase, sale or other transaction or in taking any other action in respect of or affecting such securities, indebtedness or other instrument.  The Corporation hereby renounces any reasonable expectancy interest or property right in any business opportunity which may be a corporate opportunity for both an Identified Person and the Corporation or any of its Affiliates, except as provided in Section 4 of this Article Fourteenth.  In the event that any Identified Person acquires knowledge of a potential transaction or other business opportunity which may be a corporate opportunity for itself, himself or herself and the Corporation or any of its Affiliates, such Identified Person would not be in breach of any applicable duty to the Corporation or its stockholders for failing to communicate or offer such transaction or other business opportunity to the Corporation or any of its Affiliates.  To the fullest extent permitted by law, no Identified Person can be held personally liable to the Corporation or its stockholders or creditors for any damages as a result of engaging in any of activities permitted pursuant to this Section 3 or which are stated in this Section 3 to constitute a breach of its, his or her duties to the Corporation or its stockholders if engaged in by such Identified Person.

 

4.             Usurping Certain Corporate Opportunities Are Breaches of Duty to the Corporation or its Stockholders.  The Corporation does not renounce its expectancy interest or property right in, and the provisions of Section 3 of this Article Fourteenth shall not apply to, any corporate opportunity that is (i) presented to any Non-Employee Director solely in such capacity and with respect to which no Sponsor-Affiliate of such Non-Employee Director independently receives notice or otherwise identifies such corporate opportunity, or (ii) is identified by any Non-Employee Director solely through disclosure by or on behalf of the Corporation.

 

5.             Exclusion.  In addition to and without limiting the foregoing provisions of this Article Fourteenth, a corporate opportunity shall not be deemed to be a potential corporate opportunity for the Corporation if the Corporation is not financially capable or contractually permitted or legally able to undertake it, or such opportunity is, from its nature, not in the line of the Corporation’s business or is of no practical advantage to it or such opportunity is one in which the Corporation has no reasonable expectancy interest or property right.

 

6.             Powers of the Board.  The enumeration and definition of particular powers of the Board included in the foregoing shall in no way be limited or restricted by reference to or inference from the terms of any other clause of this or any other Article of this Amended and Restated Certificate of Incorporation, or construed as or deemed by inference or otherwise in any

 

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manner to exclude or limit any powers conferred upon the Board under the DGCL now or hereafter in force.

 

7.             Amendment of this Article.  Any amendment, repeal or modification of this Article Fourteenth shall be prospective only and shall not affect any limitation on liability of a director for acts or omissions occurring prior to the date of such amendment, repeal or modification.

 

FIFTEENTH:  If any provision of this Amended and Restated Certificate of Incorporation becomes or is declared on any ground by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Amended and Restated Certificate of Incorporation, and the court will replace such illegal, void or unenforceable provision of this Amended and Restated Certificate of Incorporation with a valid and enforceable provision that most accurately reflects the Corporation’s intent, in order to achieve, to the maximum extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision.  The balance of this Amended and Restated Certificate of Incorporation shall be enforceable in accordance with its terms.

 

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IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated Certificate of Incorporation as of this 27th day of July, 2018.

 

 

FOCUS FINANCIAL PARTNERS INC.

 

 

 

 

 

By:

/s/ Ruediger Adolf

 

Name:

Ruediger Adolf

 

Title:

Chief Executive Officer and Chairman

 

Signature Page to Amended and Restated Certificate of Incorporation

 


Exhibit 3.2

 

AMENDED AND RESTATED BYLAWS OF

FOCUS FINANCIAL PARTNERS INC.

 

Incorporated under the Laws of the State of Delaware

 


 

ARTICLE I
OFFICES AND RECORDS

 

Section 1.1.           Registered Office.  The registered office of Focus Financial Partners Inc. (the “Corporation”) in the State of Delaware shall be located at The Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, and the name of the Corporation’s registered agent at such address is The Corporation Trust Company.  The registered office and registered agent of the Corporation may be changed from time to time by the board of directors of the Corporation (the “Board”) in the manner provided by applicable law.

 

Section 1.2.           Other Offices.  The Corporation may have such other offices, either within or without the State of Delaware, as the Board may designate or as the business of the Corporation may from time to time require.

 

Section 1.3.           Books and Records.  The books and records of the Corporation may be kept outside the State of Delaware at such place or places as may from time to time be designated by the Board.

 

ARTICLE II
STOCKHOLDERS

 

Section 2.1.           Annual Meeting.  If required by applicable law, an annual meeting of the stockholders of the Corporation shall be held at such date, time and place, if any, either within or without the State of Delaware, as may be fixed by resolution of the Board.  Any proper business may be transacted at the annual meeting.  The Board may postpone, reschedule or cancel any annual meeting of stockholders previously scheduled by the Board.

 

Section 2.2.           Special Meeting.  Except as otherwise required by law and subject to the rights of the holders of any series of preferred stock of the Corporation (“Preferred Stock”), special meetings of stockholders of the Corporation may be called only by the Chief Executive Officer, the Chairman of the Board or the Board;  provided that for so long as Kohlberg Kravis Roberts & Co. L.P. (“KKR”), Stone Point Capital LLC (“Stone Point”) and any investment funds or entities controlled or advised by KKR or Stone Point (collectively, the “Sponsor Entities”) collectively own at least 25% of the outstanding Common Stock (as defined in the Certificate of Incorporation (as defined below)), at the request of the holders of a majority of the shares of Common Stock held by the Sponsor Entities, the Board shall call a special meeting of stockholders of the Corporation. Subject to the rights of holders of any series of Preferred Stock and the preceding proviso, the stockholders of the Corporation do not have the power to call a special meeting of stockholders of the Corporation. The Board may postpone, reschedule or cancel any special meeting of the stockholders previously scheduled by the Board; provided that

 



 

the Board may not take any such action with respect to any special meeting of the stockholders previously scheduled by the Board at the request of the holders of a majority of the shares of Common Stock held by the Sponsor Entities pursuant to this Section 2.2 without the prior written consent of such holders.

 

Section 2.3.           Record Date.

 

(a)           In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by applicable law, not be greater than 60 nor fewer than ten days before the date of such meeting.  If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting, unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination.  If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.

 

(b)           In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be greater than 60 days prior to such action.  If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

 

(c)           Unless otherwise restricted by the Amended and Restated Certificate of Incorporation of the Corporation, as it may be amended from time to time (the “Certificate of Incorporation”), in order that the Corporation may determine the stockholders entitled to express consent to corporate action in writing without a meeting, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board. If no record date for determining stockholders entitled to express consent to corporate action in writing without a meeting is fixed by the Board, (i) when no prior action of the Board is required by applicable law, the record date for such purpose shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law, and (ii) if prior action by the Board is required by applicable law, the record date for such

 

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purpose shall be at the close of business on the day on which the Board adopts the resolution taking such prior action.

 

Section 2.4.           Stockholder List.  The Corporation shall prepare, at least ten days before every meeting of stockholders, a complete list of stockholders entitled to vote at the meeting of stockholders (provided, however, if the record date for determining the stockholders entitled to vote is fewer than ten days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the 10th day before the meeting date), arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in the name of such stockholder.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either on a reasonably accessible electronic network (provided that the information required to gain access to the list is provided with the notice of the meeting) or during ordinary business hours at the principal place of business of the Corporation.  The stock list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be examined by any stockholder who is present.  If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.  Except as otherwise provided by applicable law, the stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the list required by this section or to vote in person or by proxy at any meeting of the stockholders.

 

Section 2.5.           Place of Meeting.  The Board, the Chairman of the Board or the Chief Executive Officer, as the case may be, may designate the place of meeting for any annual meeting or for any special meeting of the stockholders.  If no designation is so made, the place of meeting shall be the principal executive offices of the Corporation.  The Board, acting in its sole discretion, may establish guidelines and procedures in accordance with applicable provisions of the Delaware General Corporation Law (the “DGCL”) and any other applicable law for the participation by stockholders and proxyholders in a meeting of stockholders by means of remote communications, and may determine that any meeting of stockholders will not be held at any place but will be held solely by means of remote communication.  Stockholders and proxyholders complying with such procedures and guidelines and otherwise entitled to vote at a meeting of stockholders shall be deemed present in person and entitled to vote at a meeting of stockholders, whether such meeting is to be held at a designated place or solely by means of remote communication.

 

Section 2.6.           Notice of Meeting.  Written or printed notice, stating the place, if any, day and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not fewer than ten days nor greater than 60 days before the date of the meeting, in a manner pursuant to Section 7.7 hereof, to each stockholder of record entitled to vote at such meeting.  The notice shall specify (a) the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting), (b) the place, if any, date and time of such meeting, (c) the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, (d) in the case of a special meeting, the purpose or

 

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purposes for which such meeting is called and (e) such other information as may be required by applicable law or as may be deemed appropriate by the Board, the Chairman of the Board or the Chief Executive Officer or the Secretary of the Corporation.  If the stockholder list referred to in Section 2.4 of these Bylaws is made accessible on an electronic network, the notice of meeting must indicate how the stockholder list can be accessed.  If the meeting of stockholders is to be held solely by means of electronic communications, the notice of meeting must provide the information required to access such stockholder list during the meeting.  If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid, addressed to the stockholder at his address as it appears on the stock transfer books of the Corporation.  The Corporation may provide stockholders with notice of a meeting by electronic transmission provided such stockholders have consented to receiving electronic notice in accordance with the DGCL.  Such further notice shall be given as may be required by applicable law.  Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the notice of meeting.  Meetings may be held without notice if all stockholders entitled to vote are present, or if notice is waived by those not present in accordance with Section 7.4 of these Bylaws.

 

Section 2.7.           Quorum and Adjournment of Meetings.

 

(a)           Except as otherwise provided by applicable law or by the Certificate of Incorporation, the holders of a majority in voting power of the outstanding shares of stock of the Corporation entitled to vote at the meeting (the “Voting Stock”), represented in person or by proxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be voted on by a class or series of stock voting as a class, the holders of a majority in voting power of the shares of such class or series shall constitute a quorum of such class or series for the transaction of such business.  For the avoidance of doubt, abstentions and broker non-votes shall be treated as present for purposes of determining the presence or absence of quorum.  Only the person presiding over the meeting may adjourn the meeting from time to time, whether or not there is such a quorum.  The stockholders present at a duly called meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

 

(b)           Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for greater than 30 days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.  At the adjourned meeting, the Corporation may transact any business that might have been transacted at the original meeting.

 

Section 2.8.           Proxies.  At all meetings of stockholders, a stockholder may vote by proxy executed in writing (or in such other manner prescribed by the DGCL) by the stockholder or by his duly authorized attorney-in-fact.  Any copy, facsimile transmission or other reliable reproduction of the writing or transmission created pursuant to this section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile transmission or other reproduction shall be a complete reproduction of the entire original writing or transmission.  No

 

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proxy may be voted or acted upon after the expiration of three years from the date of such proxy, unless such proxy provides for a longer period.  Every proxy is revocable at the pleasure of the stockholder executing it unless the proxy states that it is irrevocable and applicable law makes it irrevocable.  A stockholder may revoke any proxy that is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by filing another duly executed proxy bearing a later date with the Secretary of the Corporation.

 

Section 2.9.           Notice of Stockholder Business and Nominations.

 

(a)           Annual Meetings of Stockholders.

 

(i)            Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders at an annual meeting of stockholders may be made only (A) pursuant to the Corporation’s notice of meeting (or any supplement thereto), (B) by or at the direction of the Board or any committee thereof, subject to the obligations of the Corporation set forth in any nomination agreements between the Corporation and any stockholder that may be in effect from time to time (as amended or supplemented in accordance with their terms, the “Nomination Agreements”) or (C) by any stockholder of the Corporation who (1) was a stockholder of record at the time of giving of notice provided for in these Bylaws and at the time of the annual meeting, (2) is entitled to vote at the meeting and (3) complies with the notice procedures set forth in these Bylaws and applicable law as to such business or nomination; Section 2.9(a)(i)(C) of these Bylaws shall be the exclusive means for a stockholder to make nominations or submit other business (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and included in the Corporation’s notice of meeting) before an annual meeting of the stockholders.

 

(ii)           For any nominations or any other business to be properly brought before an annual meeting by a stockholder pursuant to Section 2.9(a)(i)(C) of these Bylaws, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, and such other business must otherwise be a proper matter for stockholder action under the DGCL.  To be timely, a stockholder’s notice shall be delivered to the Secretary of the Corporation by registered mail at the principal executive offices of the Corporation not earlier than the close of business on the 150th day and not later than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting (which anniversary, in the case of the first annual meeting of stockholders following the close of the Corporation’s initial public offering, shall be deemed to be May 1, 2019; provided, however, that in the event that the date of the annual meeting is greater than 30 days before or greater than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 150th day prior to the date of such annual meeting and not later than the close of business on the later of the 120th day prior to such annual meeting or, if the first public announcement of the date of such annual meeting is fewer than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation.  In no event shall any adjournment or postponement of an annual meeting or the

 

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announcement thereof commence a new time period for the giving of a stockholder’s notice as described above.  To be in proper form, a stockholder’s notice (whether given pursuant to this Section 2.9(a)(ii) or Section 2.9(b)) to the Secretary of the Corporation must:

 

(A)          set forth, as to the stockholder giving the notice and any Stockholder Associated Person (as defined below), (1) the name and address of such stockholder or Stockholder Associated Person, as they appear on the Corporation’s books, and of such Stockholder Associated Person, if any, (2) (I) the class or series and number of shares of stock or other securities of the Corporation that are, directly or indirectly, owned beneficially and of record by such stockholder or Stockholder Associated Person, (II) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of stock of the Corporation or otherwise (a “Derivative Instrument”), directly or indirectly owned beneficially by such stockholder or Stockholder Associated Person any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation, (III) a description of any proxy, contract, arrangement, understanding or relationship pursuant to which such stockholder or Stockholder Associated Person has a right to vote any shares of any security of the Corporation, (IV) any short interest in any security of the Corporation (for purposes of these Bylaws a person shall be deemed to have a “short interest” in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security) by such stockholder or Stockholder Associated Person, (V) any rights to dividends on the shares of the Corporation owned beneficially by such stockholder or Stockholder Associated Person that are separated or separable from the underlying shares of the Corporation, (VI) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder or Stockholder Associated Person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (VII) any performance-related fees (other than an asset-based fee) that such stockholder or Stockholder Associated Person is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of such stockholder’s or Stockholder Associated Person’s immediate family sharing the same household (which information, in each case, shall be supplemented by such stockholder and any Stockholder Associated Person not later than 10 calendar days after the record date for the meeting to disclose such information as of the record date), (3) any other information relating to such stockholder or Stockholder Associated Person, if any, that would be required to be disclosed in a proxy statement or other filings

 

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required to be made in connection with solicitations of proxies for, as applicable, the proposal or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, (4) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to bring such nomination or other business before the meeting, and (5) a representation as to whether such stockholder or any Stockholder Associated Person intends or is part of a group that intends to (I) deliver a proxy statement or form of proxy to holders of at least the percentage of the voting power of the Corporation’s outstanding stock required to approve or adopt the proposal or to elect each such nominee or (II) otherwise to solicit proxies or votes from stockholders in support of such proposal or nomination.  If requested by the Corporation, the information required under clauses (A)(1) and (A)(2) of the preceding sentence of this Section 2.9(a)(ii) shall be supplemented by such stockholder and any such Stockholder Associated Person not later than 10 days after the record date for notice of the meeting to disclose such information as of such record date;

 

(B)          if the notice relates to any business other than a nomination of a director or directors that the stockholder proposes to bring before the meeting, set forth (1) a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment) the reasons for conducting such business at the meeting and any material interest of such stockholder or Stockholder Associated Person, if any, in such business and (2) a description of all agreements, arrangements and understandings between such stockholder or Stockholder Associated Person, if any, and any other person or persons (including their names) in connection with the proposal of such business by such stockholder;

 

(C)          set forth, as to each person, if any, whom the stockholder proposes to nominate for election or reelection to the Board (1) all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the Corporation’s proxy statement as a nominee and to serving a full term as a director if elected) and (2) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder or Stockholder Associated Person, and each proposed nominee, and his respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the stockholder making the nomination and any Stockholder Associated Person on whose behalf the

 

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nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; and

 

(D)          with respect to each nominee for election or reelection to the Board, include a completed and signed questionnaire, representation and agreement required by Section 2.9(a)(iv) of these Bylaws. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee.

 

(iii)          Notwithstanding anything in the second sentence of Section 2.9(a)(ii) of these Bylaws to the contrary, in the event that the number of directors to be elected to the Board is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board at least 100 days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by these Bylaws shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

 

(iv)          To be eligible to be a nominee for election or reelection as a director of the Corporation, a proposed nominee must deliver (in accordance with the method, means and time periods prescribed for delivery of notice under Section 2.9(a)(ii) of these Bylaws and applicable law) to the Secretary at the principal executive offices of the Corporation (A) a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire the proposed nominee shall request in writing from the Secretary with at least 7 days’ prior notice); (B) a written representation and agreement (in the form provided by the Secretary upon written request) that such person (1) is not and will not become a party to (I) any agreement, arrangement or understanding (whether written or oral) with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote in such capacity on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (II) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (2) is not and will not become a party to any agreement, arrangement or understanding (whether written or oral) with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director of the Corporation that has not been disclosed to the Corporation, (3) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all

 

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applicable law and all applicable rules of the U.S. exchanges upon which the Common Stock of the Corporation is listed and all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and other guidelines of the Corporation, (4) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, intends to serve a full term if elected as a director of the Corporation and (5) will provide facts, statements and other information in all communications with the Corporation and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (C) a written director agreement (which agreement shall be provided by the Secretary upon written request and shall include, without limitation, such person’s agreement to abide by all policies applicable to directors of the Corporation, including a requirement to preserve and maintain the confidentiality of the Corporation’s material non-public information).

 

(v)           The foregoing notice requirements of this Section 2.9(a) shall be deemed satisfied by a stockholder with respect to business or a nomination if such stockholder has notified the Corporation of his intention to present a proposal or make a nomination at an annual meeting in compliance with the applicable rules and regulations promulgated under the Exchange Act and such stockholder’s proposal or nomination has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting.

 

(vi)          For purposes of this Section 2.9(a), “Stockholder Associated Person” of any stockholder shall mean (A) any person acting in concert with such stockholder, (B) any other beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder (other than a stockholder that is a depositary) and (C) any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such stockholder or such Stockholder Associated Person.

 

(b)           Special Meetings of Stockholders.

 

Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting.  Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to a notice of meeting (i) by or at the direction of the Board or any committee thereof, subject to the obligations of the Corporation set forth in the Nomination Agreements or (ii) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who (A) is a stockholder of record at the time of giving of notice provided for in these Bylaws and at the time of the special meeting, (B) is entitled to vote at the meeting, and (C) complies with the notice procedures set forth in these Bylaws.  In the event a special meeting of stockholders is called for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by Section 2.9(a)(ii) of these Bylaws with respect to any nomination (including the completed and signed questionnaire, representation and

 

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agreement required by Section 2.9(a)(ii) of these Bylaws) shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or, if the first public announcement of the date of such special meeting is fewer than 100 days prior to the date of such special meeting, the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting.  In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period for the giving of a stockholder’s notice as described above.

 

(c)           General.

 

(i)            Only such persons who are nominated in accordance with the procedures set forth in these Bylaws and the Nomination Agreements shall be eligible to serve as directors, and only such other business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in these Bylaws and applicable law.  Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, the person presiding over the meeting shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal or nomination shall be disregarded.

 

(ii)           For purposes of these Bylaws, “public announcement” shall mean disclosure in a press release reported by Dow Jones News Service, the Associated Press, or any other national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

 

(iii)          Notwithstanding the foregoing provisions of these Bylaws, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in these Bylaws; provided, however, that any references in these Bylaws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the requirements applicable to nominations or proposals as to any other business to be considered pursuant to Sections 2.9(a) or 2.9(b) of these Bylaws or the Nomination Agreements.  Nothing in these Bylaws shall be deemed to affect any rights (A) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act, (B) of the holders of any series of Preferred Stock if and to the extent provided for under applicable law, the Certificate of Incorporation or these Bylaws or (C) set forth in the Nomination Agreements.

 

(iv)          The Corporation may require any proposed stockholder nominee for director to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation.  Unless otherwise required by law, if the stockholder (or a qualified representative of the

 

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stockholder) making a nomination or proposal under this Section 2.9 does not appear at a meeting of stockholders to present such nomination or proposal, the nomination shall be disregarded and the proposed business shall not be transacted, as the case may be, notwithstanding that proxies in favor thereof may have been received by the Corporation.  For purposes of this Section 2.9, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.

 

Section 2.10.         Conduct of Business.  The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting.  The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate.  Except to the extent inconsistent with such rules and regulations as adopted by the Board, the person presiding over any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such presiding person, are appropriate for the proper conduct of the meeting.  Such rules, regulations or procedures, whether adopted by the Board or prescribed by the presiding person of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; (e) restrictions on the use of any audio or video recording devices at the meeting; and (f) limitations on the time allotted to questions or comments by participants.  The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered.  Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

 

Section 2.11.         Required Vote.  Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, at any meeting at which directors are to be elected, so long as a quorum is present, the directors shall be elected by a plurality of the votes validly cast in such election.  Unless otherwise provided in the Certificate of Incorporation, cumulative voting for the election of directors shall be prohibited.  Except as otherwise provided by applicable law, the rules and regulations of any stock exchange applicable to the Corporation, the Certificate of Incorporation, or these Bylaws, in all matters other than the election of directors and certain non-binding advisory votes described below, the affirmative

 

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vote of a majority in voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter shall be the act of the stockholders.  In non-binding advisory matters with more than two possible vote choices, the matter shall be deemed the recommendation of the stockholders if it has received a plurality of the votes.

 

Section 2.12.         Treasury Stock.  The Corporation shall not vote, directly or indirectly, shares of its own stock owned by it or any other corporation, if a majority of shares entitled to vote in the election of directors of such corporation is held, directly or indirectly by the Corporation, and such shares will not be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or such other corporation, to vote stock of the Corporation held in a fiduciary capacity.

 

Section 2.13.         Inspectors of Elections; Opening and Closing the Polls.  At any meeting at which a vote is taken by ballots, the Board by resolution may, and when required by applicable law, shall, appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives, to act at the meetings of stockholders and make a written report thereof.  One or more persons may be designated as alternate inspectors to replace any inspector who fails to act.  If no inspector or alternate has been appointed to act or is able to act at a meeting of stockholders and the appointment of an inspector is required by applicable law, the person presiding over the meeting shall appoint one or more inspectors to act at the meeting.  Each inspector, before discharging his duties, shall take and sign an oath to faithfully execute the duties of inspector with strict impartiality and according to the best of his ability.  The inspectors shall have the duties prescribed by applicable law.

 

Section 2.14.         Stockholder Action by Written Consent.  Subject to the rights of holders of any series of Preferred Stock with respect to such series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be taken at a duly held annual or special meeting of stockholders and may not be taken by any consent in writing of such stockholders; provided that for so long as the Sponsor Entities own at least 25% of the outstanding Common Stock, any action required or permitted to be taken by the stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the books in which proceedings of minutes of stockholders are recorded. Delivery made to the Corporation’s registered office shall be made by hand, overnight courier or by certified or registered mail, return receipt requested.

 

ARTICLE III
BOARD OF DIRECTORS

 

Section 3.1.           General Powers.  The business and affairs of the Corporation shall be managed by or under the direction of the Board elected in accordance with these Bylaws.  In addition to the powers and authorities by these Bylaws expressly conferred upon them, the Board

 

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may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these Bylaws required to be exercised or done by the stockholders.  The directors shall act only as a Board, and the individual directors shall have no power as such.

 

Section 3.2.                                 Number, Tenure and Qualifications.  Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances and the Nomination Agreements, the number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the Board. The election and term of directors shall be as set forth in the Certificate of Incorporation.

 

Section 3.3.                                 Regular Meetings.  Subject to Section 3.5, regular meetings of the Board shall be held on such dates, and at such times and places, as are determined from time to time by resolution of the Board.

 

Section 3.4.                                 Special Meetings.  Special meetings of the Board shall be called at the request of the Chairman of the Board, the Chief Executive Officer or a majority of the Board then in office.  The person or persons authorized to call special meetings of the Board may fix the place, if any, date and time of the meetings.  Any business may be conducted at a special meeting of the Board.

 

Section 3.5.                                 Notice.  Notice of any meeting of directors shall be given to each director at his business or residence in writing by hand delivery, first-class or overnight mail, courier service or facsimile or electronic transmission or orally by telephone.  If mailed by first-class mail, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five days before such meeting.  If by overnight mail or courier service, such notice shall be deemed adequately delivered when the notice is delivered to the overnight mail or courier service company at least 48 hours before such meeting.  If by facsimile or electronic transmission, such notice shall be deemed adequately delivered when the notice is transmitted at least 48 hours before such meeting.  If by telephone or by hand delivery, the notice shall be given at least 48 hours prior to the time set for the meeting and shall be confirmed by facsimile or electronic transmission that is sent promptly thereafter.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in the notice of such meeting, except for amendments to these Bylaws, as provided under Section 8.1.  A meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in accordance with Section 7.4 of these Bylaws.

 

Section 3.6.                                 Action by Consent of Board.  Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, including by electronic transmission, and the writing or writings or electronic transmissions are filed with the minutes of proceedings of the Board or committee.  Such consent shall have the same force and effect as a unanimous vote at a meeting, and may be stated as such in any document or instrument filed with the Secretary of State of the State of Delaware.

 

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Section 3.7.                                 Conference Telephone Meetings.  Members of the Board or any committee thereof may participate in a meeting of the Board or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting, except where such person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

 

Section 3.8.                                 Quorum.  Subject to Section 3.9, a whole number of directors equal to at least a majority of the Board shall constitute a quorum for the transaction of business, but if at any meeting of the Board there shall be less than a quorum present, a majority of the directors present may adjourn the meeting from time to time without further notice unless (a) the date, time and place, if any, of the adjourned meeting are not announced at the time of adjournment, in which case notice conforming to the requirements of Section 3.5 of these Bylaws shall be given to each director, or (b) the meeting is adjourned for more than 24 hours, in which case the notice referred to in clause (a) shall be given to those directors not present at the announcement of the date, time and place of the adjourned meeting.  The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board. The directors present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum.

 

Section 3.9.                                 Vacancies.  Subject to applicable law, the rights of holders of any series of Preferred Stock and the Nomination Agreements, any newly created directorship that results from an increase in the number of directors or any vacancy on the Board that results from the death, disability, resignation, disqualification or removal of any director or from any other cause shall be filled in accordance with the Certificate of Incorporation.

 

Section 3.10.                          Removal.  Subject to the rights of the holders of shares of any series of Preferred Stock, if any, to elect additional directors pursuant to the Certificate of Incorporation (including any certificate of designation thereunder) and the Nomination Agreements, any director may be removed only for cause, upon the affirmative vote of the holders of at least 662/3% of the outstanding shares of stock of the Corporation entitled to vote generally for the election of directors, acting at a meeting of the stockholders or by written consent (if permitted) in accordance with the DGCL, the Certificate of Incorporation and these Bylaws.

 

Section 3.11.                          Records.  The Board shall cause to be kept a record containing the minutes of the proceedings of the meetings of the Board and of the stockholders, appropriate stock books and registers and such books of records and accounts as may be necessary for the proper conduct of the business of the Corporation.

 

Section 3.12.                          Compensation.  Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board shall have authority to fix the compensation of directors, including fees and reimbursement of expenses.  The Corporation will cause each non-employee director serving on the Board to be reimbursed for all reasonable out-of-pocket costs and expenses incurred by him in connection with such service.

 

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Section 3.13.                          Regulations.  To the extent consistent with applicable law, the Certificate of Incorporation and these Bylaws, the Board may adopt such rules and regulations for the conduct of meetings of the Board and for the management of the affairs and business of the Corporation as the Board may deem appropriate.

 

ARTICLE IV
COMMITTEES

 

Section 4.1.                                 Designation; Powers.  The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation, subject to the obligations of the Corporation set forth in the Nomination Agreements.  Any such committee, to the extent permitted by applicable law and to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it.

 

Section 4.2.                                 Procedure; Meetings; Quorum.  Any committee designated pursuant to Section 4.1 shall choose its own chairman by a majority vote of the members then in attendance in the event the chairman has not been selected by the Board, shall keep regular minutes of its proceedings and report the same to the Board when requested, and shall meet at such times and at such place or places as may be provided by the charter of such committee or by resolution of such committee or resolution of the Board.  At every meeting of any such committee, the presence of a majority of all the members thereof shall constitute a quorum and the affirmative vote of a majority of the members present shall be necessary for the adoption by it of any resolution.  The Board shall adopt a charter for each committee for which a charter is required by applicable laws, regulations or stock exchange rules, may adopt a charter for any other committee, and may adopt other rules and regulations for the governance of any committee not inconsistent with the provisions of these Bylaws or any such charter, and each committee may adopt its own rules and regulations of governance, to the extent not inconsistent with these Bylaws or any charter or other rules and regulations adopted by the Board.

 

Section 4.3.                                 Substitution of Members.  The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee.  In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of the absent or disqualified member.

 

ARTICLE V
OFFICERS

 

Section 5.1.                                 Officers.  The officers of the Corporation shall be a Chairman of the Board, a Chief Executive Officer, a Chief Financial Officer, a Secretary and such other officers as the Board from time to time may deem proper.  The Chairman of the Board shall be chosen from among the directors.  All officers elected by the Board shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article V.  Such officers shall also have such powers and duties as from time to time may be

 

15



 

conferred by the Board or by any committee thereof.  The Board or any committee thereof may from time to time elect, or the Chairman of the Board or Chief Executive Officer may appoint, such other officers (including one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers) and such agents, as may be necessary or desirable for the conduct of the business of the Corporation.  Such other officers and agents shall have such duties and shall hold their offices for such terms as shall be provided in these Bylaws or as may be prescribed by the Board or such committee thereof or by the Chairman of the Board or Chief Executive Officer, as the case may be.

 

Section 5.2.                                 Election and Term of Office.  The officers of the Corporation shall be elected or appointed from time to time by the Board.  Each officer shall hold office until his successor shall have been duly elected or appointed and shall have qualified or until his death or until he shall resign, but any officer may be removed from office at any time by the affirmative vote of a majority of the Board or, except in the case of an officer or agent elected by the Board, by the Chairman of the Board or Chief Executive Officer.  Such removal shall be without prejudice to the contractual rights, if any, of the person so removed.  No elected officer shall have any contractual rights against the Corporation for compensation by virtue of such election beyond the date of the election of his successor, his death, his resignation or his removal, whichever event shall first occur, except as otherwise provided in an employment contract or under an employee deferred compensation plan.

 

Section 5.3.                                 Chairman of the Board.  The Chairman of the Board shall preside at all meetings of the stockholders and of the Board.  The Chairman of the Board shall be responsible for the general management of the affairs of the Corporation and shall perform all duties incidental to his office that may be required by law and all such other duties as are properly required of him by the Board.  He shall make reports to the Board and the stockholders, and shall see that all orders and resolutions of the Board and of any committee thereof are carried into effect.  The Chairman of the Board may also serve as Chief Executive Officer, if so elected by the Board.

 

Section 5.4.                                 Chief Executive Officer.  The Chief Executive Officer shall act in a general executive capacity and shall assist the Chairman of the Board in the administration and operation of the Corporation’s business and general supervision of its policies and affairs.  If the Chief Executive Officer is also a member of the Board, the Chief Executive Officer shall, in the absence of or because of the inability to act of the Chairman of the Board, perform all duties of the Chairman of the Board and preside at all meetings of stockholders and of the Board.  The Chief Executive Officer shall have the authority to sign, in the name and on behalf of the Corporation, checks, orders, contracts, leases, notes, drafts and all other documents and instruments in connection with the business of the Corporation.

 

Section 5.5.                                 Chief Financial Officer. The Chief Financial Officer shall act in an executive financial capacity. He shall assist the Chairman of the Board and the Chief Executive Officer in the general supervision of the Corporation’s financial policies and affairs.

 

Section 5.6.                                 President.  The President, if any, shall have such powers and shall perform such duties as shall be assigned to him by the Board.

 

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Section 5.7.                                 Senior Vice Presidents and Vice Presidents.  Each Senior Vice President and Vice President, if any, shall have such powers and shall perform such duties as shall be assigned to him by the Board.

 

Section 5.8.                                 Treasurer.  The Treasurer, if any, shall exercise general supervision over the receipt, custody and disbursement of corporate funds.  The Treasurer shall cause the funds of the Corporation to be deposited in such banks as may be authorized by the Board, or in such banks as may be designated as depositaries in the manner provided by resolution of the Board.  He shall have such further powers and duties and shall be subject to such directions as may be granted or imposed upon him from time to time by the Board, the Chairman of the Board or the Chief Executive Officer.

 

Section 5.9.                                 Secretary.  The Secretary shall keep or cause to be kept in one or more books provided for that purpose, the minutes of all meetings of the Board, the committees of the Board and the stockholders; he shall see that all notices are duly given in accordance with the provisions of these Bylaws and as required by applicable law; he shall be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; and he shall see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and in general, he shall perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board, the Chairman of the Board or the Chief Executive Officer.

 

Section 5.10.                          Vacancies.  A newly created elected office and a vacancy in any elected office because of death, resignation, or removal may be filled by the Board or any committee thereof for the unexpired portion of the term at any meeting of the Board or any committee thereof.  Any vacancy in an office appointed by the Chairman of the Board or the Chief Executive Officer because of death, resignation, or removal may be filled by the Chairman of the Board or the Chief Executive Officer.

 

Section 5.11.                          Action with Respect to Securities of Other Corporations.  Unless otherwise directed by the Board, the Chief Executive Officer shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of security holders of or with respect to any action of security holders of any other corporation or entity in which the Corporation may hold securities and otherwise to exercise any and all rights and powers that the Corporation may possess by reason of its ownership of securities in such other corporation.

 

ARTICLE VI
STOCK CERTIFICATES AND TRANSFERS

 

Section 6.1.                                 Uncertificated Shares and Transfers.  The shares of the Corporation shall be uncertificated, provided that the Corporation shall be permitted to issue such nominal number of certificates to securities depositories and further provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock

 

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shall be represented by certificates. The shares of the stock of the Corporation shall be transferred on the books of the Corporation, which may be maintained by a third party registrar or transfer agent, by the holder thereof in person or by his attorney, upon surrender for cancellation of certificates for at least the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require or upon receipt of proper transfer instructions from the registered holder of uncertificated shares and upon compliance with appropriate procedures for transferring shares in uncertificated form.

 

Each certificated share of stock shall be signed, countersigned and registered in such manner as the Board may by resolution prescribe, which resolution may permit all or any of the signatures on such certificates to be in facsimile.  In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

 

Section 6.2.                                 Lost, Stolen or Destroyed Certificates.  If at any time shares of the Corporation’s stock are represented by certificates, no certificate for shares or uncertificated shares of stock in the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the Corporation of a bond of indemnity in such amount, upon such terms and secured by such surety, as the Board or any financial officer may in its or his discretion require.

 

Section 6.3.                                 Ownership of Shares.  The Corporation shall be entitled to treat the holder of record of any share or shares of stock of the Corporation as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.

 

Section 6.4.                                 Regulations Regarding Certificates.  If at any time shares of the Corporation’s stock are represented by certificates, the Board shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration or the replacement of such certificates. The Corporation may enter into additional agreements with stockholders to restrict the transfer of stock of the Corporation in any manner not prohibited by the DGCL.

 

ARTICLE VII
MISCELLANEOUS PROVISIONS

 

Section 7.1.                                 Fiscal Year.  The fiscal year of the Corporation shall begin on the first day of January and end on the thirty-first day of December of each year.

 

Section 7.2.                                 Dividends.  Except as otherwise provided by law or the Certificate of Incorporation, the Board may from time to time declare, and the Corporation may pay, dividends on its outstanding shares of stock, which dividends may be paid in either cash, property or shares of stock of the Corporation.  A member of the Board, or a member of any committee designated

 

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by the Board, shall be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board, or by any other person as to matters the director reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation, as to the value and amount of the assets, liabilities or net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid.

 

Section 7.3.                                 Seal.  The seal of the Corporation shall be in such form as the Board may adopt.

 

Section 7.4.                                 Waiver of Notice.  Whenever any notice is required to be given to any stockholder or director of the Corporation under the provisions of the DGCL, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing, including by electronic transmission, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice.  Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the stockholders or the Board or committee thereof need be specified in any waiver of notice of such meeting.  Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

 

Section 7.5.                                 Resignations.  Any director or any officer, whether elected or appointed, may resign at any time by giving written notice, including by electronic transmission, of such resignation to the Chairman of the Board, the Chief Executive Officer, the President or the Secretary, and such resignation shall be deemed to be effective as of the close of business on the date said notice is received by the Chairman of the Board, the Chief Executive Officer, the President or the Secretary, or at such earlier or later time as is specified therein.  No formal action shall be required of the Board or the stockholders to make any such resignation effective.

 

Section 7.6.                                 Indemnification and Advancement of Expenses.

 

(a)                                 The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that he, or a person for whom he is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee, trustee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan (a “Covered Person”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee, trustee or agent, or in any other capacity while serving as a director, officer, employee, trustee or agent, against all expenses, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes and

 

19



 

penalties and amounts paid in settlement) reasonably incurred or suffered by such Covered Person in connection with such proceeding.

 

(b)                                 The Corporation shall, to the fullest extent not prohibited by applicable law as it presently exists or may hereafter be amended, pay the expenses (including attorneys’ fees) incurred by a Covered Person in defending any proceeding in advance of its final disposition; provided, however, that to the extent required by applicable law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined by final judicial decision from which there is no further right to appeal that the Covered Person is not entitled to be indemnified under this Section 7.6 or otherwise.

 

(c)                                  The rights to indemnification and advancement of expenses under this Section 7.6 shall be contract rights and such rights shall continue as to a Covered Person who has ceased to be a director, officer, employee, trustee or agent and shall inure to the benefit of his heirs, executors and administrators.  Notwithstanding the foregoing provisions of this Section 7.6, except for proceedings to enforce rights to indemnification and advancement of expenses, the Corporation shall indemnify and advance expenses to a Covered Person in connection with a  proceeding (or part thereof) initiated by such Covered Person only if such proceeding (or part thereof) was authorized by the Board.

 

(d)                                 If a claim for indemnification under this Section 7.6 (following the final disposition of such proceeding) is not paid in full within sixty days after the Corporation has received a claim therefor by the Covered Person, or if a claim for any advancement of expenses under this Section 7.6 is not paid in full within thirty days after the Corporation has received a statement or statements requesting such amounts to be advanced, the Covered Person shall thereupon (but not before) be entitled to file suit to recover the unpaid amount of such claim.  If successful in whole or in part, the Covered Person shall be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by applicable law.  In any suit brought by the Covered Person to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Covered Person is not entitled to be indemnified, or to such advancement of expenses, under this Section 7.6 or otherwise shall be on the Corporation.

 

(e)                                  The rights conferred on any Covered Person by this Section 7.6 shall not be exclusive of any other rights that such Covered Person may have or hereafter acquire under any statute, any provision of the Certificate of Incorporation, these Bylaws, any agreement or vote of stockholders or disinterested directors or otherwise.

 

(f)                                   This Section 7.6 shall not limit the right of the Corporation, to the extent and in the manner permitted by applicable law, to indemnify and to advance expenses to persons other than Covered Persons when and as authorized by appropriate corporate action.

 

(g)                                  Any Covered Person entitled to indemnification and/or advancement of expenses, in each case pursuant to this Section 7.6, may have certain rights to indemnification, advancement and/or insurance provided by one or more persons with whom or which such

 

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Covered Person may be associated.  The Corporation hereby acknowledges and agrees that (i) the Corporation shall be the indemnitor of first resort with respect to any proceeding, expense, liability or matter that is the subject of this Section 7.6, (ii) the Corporation shall be primarily liable for all such obligations and any indemnification afforded to a Covered Person in respect of a proceeding, expense, liability or matter that is the subject of this Section 7.6, whether created by law, organizational or constituent documents, contract or otherwise, (iii) any obligation of any persons with whom or which a Covered Person may be associated to indemnify such Covered Person and/or advance expenses or liabilities to such Covered Person in respect of any proceeding shall be secondary to the obligations of the Corporation hereunder, (iv) the Corporation shall be required to indemnify each Covered Person and advance expenses to each Covered Person hereunder to the fullest extent provided herein without regard to any rights such Covered Person may have against any other person with whom or which such Covered Person may be associated or insurer of any such person, and (v) the Corporation irrevocably waives, relinquishes and releases any other person with whom or which a Covered Person may be associated from any claim of contribution, subrogation or any other recovery of any kind in respect of amounts paid by the Corporation hereunder.

 

Section 7.7.                                 Notices.  Except as otherwise specifically provided herein or required by applicable law, all notices required to be given to any stockholder, director, officer, employee, trustee or agent shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mails, postage paid, or by sending such notice by commercial courier service, or by facsimile or other electronic transmission, provided that notice to stockholders by electronic transmission shall be given in the manner provided in Section 232 of the DGCL.  Any such notice shall be addressed to such stockholder, director, officer, employee, trustee or agent at his last known address as the same appears on the books of the Corporation.  Without limiting the manner by which notice otherwise may be given effectively, notice to any stockholder shall be deemed given: (a) if by facsimile, when directed to a number at which the stockholder has consented to receive notice; (b) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (c) if by posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (i) such posting and (ii) the giving of such separate notice; (d) if by any other form of electronic transmission, when directed to the stockholder; and (e) if by mail, when deposited in the mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation.

 

Section 7.8.                                 Facsimile and Electronic Signatures.  In addition to the provisions for use of facsimile or electronic signatures elsewhere specifically authorized in these Bylaws, facsimile or electronic signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board or a committee thereof.

 

Section 7.9.                                 Time Periods. In applying any provision of these Bylaws that require that an act be done or not done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.

 

Section 7.10.                          Reliance Upon Books, Reports and Records.  Each director, each member of any committee designated by the Board, and each officer of the Corporation shall, in the

 

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performance of his duties, be fully protected in relying in good faith upon the records of the Corporation and upon information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees designated by the Board, or by any other person as to the matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

 

Section 7.11.                          Severability.  Whenever possible, each provision or portion of any provision of these Bylaws will be interpreted in such manner as to be effective and valid under applicable law, but if any provision or portion of any provision of these Bylaws is held to be invalid, illegal  or unenforceable in any respect under any applicable law or rule in any jurisdiction, such provision or portion of any provision shall be severable and the invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and these Bylaws will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

 

Section 7.12.                          Forum for Adjudication of Disputes.  Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee, trustee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation arising pursuant to any provision of the DGCL, the Certificate of Incorporation or these Bylaws, or (d) any action asserting a claim against the Corporation or any director or officer or other employee of the Corporation governed by the internal affairs doctrine, in each such case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.  Unless the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the federal securities laws of the United States. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 7.12.

 

ARTICLE VIII
AMENDMENTS

 

Section 8.1.                                 Amendments.  Subject to the provisions of the Certificate of Incorporation, these Bylaws may be amended, altered or repealed (a) by the Board by resolution adopted by a majority of the directors present at any special or regular meeting of the Board at which a quorum is present if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting or (b) by the stockholders at any regular or special meeting of the stockholders upon the affirmative vote of at least 662/3% of the voting power of the shares of the Corporation entitled to vote thereon if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting.  No Bylaws hereafter made

 

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or adopted, nor any repeal of or amendment thereto, shall invalidate any prior act of the Board that was valid at the time it was taken.

 

Notwithstanding the foregoing, no amendment, alteration or repeal of Section 7.6 shall adversely affect any right or protection existing under these Bylaws immediately prior to such amendment, alteration or repeal, including any right or protection of a present or former director, officer or employee thereunder in respect of any act or omission occurring prior to the time of such amendment.

 

Notwithstanding the foregoing, so long as the Nomination Agreements with the Sponsor Entities remain in effect, the Board shall not approve any amendment, alteration or repeal of any provision of these Bylaws, or the adoption of any new Bylaw, that would be contrary to or inconsistent with the then applicable terms of such Nomination Agreements without the prior written consent of Stone Point or KKR, as applicable.

 

 

Date of Adoption: July 30, 2018

 

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Exhibit 4.1

 

FOCUS FINANCIAL PARTNERS INC.

 

 


 

REGISTRATION RIGHTS AGREEMENT

 


 

 

Dated July 30, 2018

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

ARTICLE I

 

 

DEFINITIONS

 

 

 

 

1.1

Certain Definitions

1

 

 

 

 

ARTICLE II

 

 

REGISTRATION RIGHTS

 

 

 

 

2.1

Shelf Registration Statement

5

2.2

Demand Registration Rights

6

2.3

Non-Private Equity Offerings and Company Primary Offerings

9

2.4

Registration Suspension

11

2.5

Holdback Agreement

12

2.6

Registration Procedures

13

2.7

Registration Expenses

17

2.8

Indemnification

18

2.9

Transfer of Registration Rights

21

2.10

Current Public Information

22

2.11

General Rules Applicable to Registration Statements

23

2.12

In-Kind Distributions

23

 

 

 

 

ARTICLE III

 

 

MISCELLANEOUS

 

 

 

 

3.1

Notices

23

3.2

Counterparts

23

3.3

Assignment

23

3.4

Termination

24

3.5

Descriptive Headings

24

3.6

Specific Performance

24

3.7

Governing Law

24

3.8

Severability

24

3.9

Waiver of Jury Trial; Consent to Jurisdiction

24

3.10

Amendments; Entire Agreement

25

3.11

Merger or Consolidation

25

3.12

No Recourse

25

 

 

 

EXHIBITS

 

 

 

 

Exhibit A

Form of Joinder

A-1

 

i



 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into as of July 30, 2018, by and among Focus Financial Partners Inc., a Delaware corporation (the “Company”), Focus Financial Partners, LLC, a Delaware limited liability company (“Focus LLC”), the members of Focus LLC listed on the schedule of Members maintained by Focus LLC from time to time (the “Members”) and the stockholders of the Company listed on the signature page hereof (collectively, the “Stockholders”).

 

WHEREAS, the Company and the Members are parties to the Fourth Amended and Restated Operating Agreement of Focus LLC, dated the date hereof (as amended from time to time, the “Operating Agreement”), establishing and setting forth, among other things, their agreement with respect to certain rights and obligations associated with ownership of Units, as defined in the Operating Agreement (the “Units”);

 

WHEREAS, as of the date hereof, the Company has completed an initial public offering of shares of its Class A Common Stock (the “Initial Public Offering”);

 

WHEREAS, in connection with the Initial Public Offering and the entry into the Operating Agreement, the Company has agreed to provide the registration rights set forth in this Agreement; and

 

WHEREAS, this Agreement is incorporated into, and forms an integral part of, the Operating Agreement.

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and obligations hereinafter set forth, the parties hereto hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1          Certain Definitions.  For the purposes of this Agreement, the following terms shall have the following meanings:

 

Adverse Disclosure” shall have the meaning set forth in Section 2.2.3 of this Agreement.

 

Affiliate” of any particular Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person.

 

Affiliated Investor” means, with respect to any Holder, (i) any investment fund or holding company that is directly or indirectly managed or advised by a manager or advisor of such Holder or any of its Affiliates and (ii) any of its Affiliates or any other Person who or which is otherwise an Affiliate of any such Holder (other than the Company and its subsidiaries).

 

Agreement” shall have the meaning set forth in the Preamble of this Agreement.

 

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Blocker Merger Agreements” means the Blocker Merger Agreements dated the date hereof, among the Company, certain of its subsidiaries, and the Members named therein.

 

Board of Directors” means the Board of Directors of the Company.

 

Business Day” means any day other than a Saturday, Sunday or legal holiday on which banks in New York, New York are authorized or obligated by law to close.

 

Class A Common Stock” means the Class A Common Stock, par value $0.01 per share, of the Company.

 

Class A Common Stock Equivalents” means any rights, warrants, options, convertible securities or indebtedness, exchangeable securities or indebtedness, or other rights, exercisable for or convertible or exchangeable into, directly or indirectly, Class A Common Stock and securities convertible or exchangeable into Class A Common Stock, whether at the time of issuance or upon the passage of time or the occurrence of such future event, including Units and the Class B Common Stock of the Company.

 

Company” shall have the meaning set forth in the Preamble of this Agreement.

 

Company Notice” shall have the meaning set forth in Section 2.3(a) of this Agreement.

 

Company Primary Offering” shall have the meaning set forth in Section 2.3(c) of this Agreement.

 

Demand Notice” shall have the meaning set forth in Section 2.2.2(b) of this Agreement.

 

Demand Offering” shall have the meaning set forth in Section 2.2.1(a) of this Agreement.

 

Demand Request” shall have the meaning set forth in Section 2.2.1(a) of this Agreement.

 

Effective Date” means effective date of the Company’s registration statement on Form S-1 filed in connection with the Initial Public Offering.

 

Exchange Act” means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations promulgated by the SEC thereunder.

 

Excluded Registration” means a registration under the Securities Act of (i) securities registered on Form S-4 or S-8 or any similar successor forms and (ii) securities registered to effect the acquisition of, or combination with, another Person, other than in each case the registration and sale of securities by the Company in which it receives cash proceeds.

 

FINRA” means the Financial Industry Regulatory Authority, Inc.

 

Focus LLC” shall have the meaning set forth in the Preamble of this Agreement.

 

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Holder” means any Member or Stockholder, including their Permitted Transferees, provided that a Person shall cease to be a Holder at the time such Person ceases to hold Registrable Shares.

 

Holder Affiliates” shall have the meaning set forth in Section 2.8(a) of this Agreement.

 

Informed Holder” means each Non-Private Equity Holder that has delivered written notice to the Company that such Non-Private Equity Holder wishes to receive each Demand Notice and each Company Notice, which written notice may be revoked by such Non-Private Equity Holder at any time by further written notice to the Company, with such revocation to be effective seven (7) days after receipt of such further notice.

 

Initial Public Offering” shall have the meaning set forth in the Recitals of this Agreement.

 

Inspectors” shall have the meaning set forth in Section 2.6(h) of this Agreement.

 

Issuer Free Writing Prospectus” means an issuer free writing prospectus, as defined in Rule 433 under the Securities Act, relating to an offer of Registrable Shares.

 

Launch Date” shall have the meaning set forth in Section 2.5(a) of this Agreement.

 

Lockup Period” shall have the meaning set forth in Section 2.5(b) of this Agreement.

 

Majority Requesting Holders” shall have the meaning set forth in Section 2.2.2(d) of this Agreement.

 

Material Adverse Effect” shall have the meaning set forth in Section 2.2.2(d) of this Agreement.

 

Members” shall have the meaning set forth in the Preamble of this Agreement.

 

Non-Private Equity Holders” shall mean Holders that are not Private Equity Holders.

 

“Non-Private Equity Offering” shall have the meaning set forth in Section 2.3(a).

 

Operating Agreement” shall have the meaning set forth in the Recitals of this Agreement.

 

Other Requesting Persons” shall have the meaning set forth in Section 2.2.2(b) of this Agreement.

 

Permitted Transferee” shall have the meaning set forth in Section 2.9(a) of this Agreement.

 

Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, a governmental entity or any department, agency or political subdivision thereof or any other entity.

 

3



 

“Piggyback Notice” shall have the meaning set forth in Section 2.3(a) of this Agreement.

 

“Piggyback Registration” shall have the meaning set forth in Section 2.3(c) of this Agreement.

 

Primary Shares” means shares of Class A Common Stock issued by the Company after the date hereof other than Synthetic Primary Shares.

 

Private Equity Holders” shall mean Holders that are Private Equity Investors or their Affiliates or Permitted Transferees.

 

Private Equity Investors” means Stone Point Capital LLC and Kohlberg Kravis Roberts & Co. L.P.

 

Prospectus” means the prospectus included in any Registration Statement, all amendments and supplements to such prospectus, including pre- and post-effective amendments to such Registration Statement, and all other material incorporated by reference in such prospectus.

 

Public Offering” means an underwritten Public Offering and sale of Class A Common Stock pursuant to a registration statement, including a “bought” deal or “overnight” Public Offering.

 

Records” shall have the meaning set forth in Section 2.6(h) of this Agreement.

 

register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

 

Registrable Shares” means (i) shares of Class A Common Stock issued to the Holders in connection with the Initial Public Offering, (ii) shares of Class A Common Stock issuable upon exchange of the Units held by the Holders at the closing of the Initial Public Offering, and (iii) shares of Class A Common Stock issuable upon exchange of Units issued after the Initial Public Offering and designated as Registrable Shares by the Company in connection with the issuance of such Units (subject to such limitations or qualifications as may be established in connection with issuance); provided, however, that Registrable Shares shall not include any shares of Class A Common Stock (A) that have been sold pursuant to an effective registration statement under the Securities Act, (B) that have been sold pursuant to Rule 144 under the Securities Act, (C) that have been transferred to anyone other than a Permitted Transferee, or (D) that have ceased to be outstanding.

 

Registration Expenses” shall have the meaning set forth in Section 2.7 of this Agreement.

 

Registration Statement” means a Shelf Registration Statement or a registration statement filed in order to effect a Demand Offering, a Non-Private Equity Offering or a Company Primary Offering.

 

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Registration Suspension” shall have the meaning set forth in Section 2.4 of this Agreement.

 

Required Filing Date” shall have the meaning set forth in Section 2.2.2(c) of this Agreement.

 

SEC” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

 

Securities Act” means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations promulgated by the SEC thereunder.

 

Shelf Eligibility Date” means the date following completion of twelve (12) calendar months after the Effective Date, whether or not on such date the Company becomes eligible to utilize Form S-3 to sell shares in a secondary offering on a delayed or continuous basis in accordance with Rule 415 under the Securities Act.

 

Shelf Period” shall have the meaning set forth in Section 2.1(b) of this Agreement.

 

Shelf Registration Statement” shall have the meaning set forth in Section 2.1(a) of this Agreement.

 

Shelf Resale” shall have the meaning set forth in Section 2.1(c) of this Agreement.

 

Standing Instructionsshall have the meaning set forth in Section 2.1(d) of this Agreement.

 

Standing Instructions Holders” means, at any time, the Non-Private Equity Holders who have given the Company Standing Instructions.

 

Stockholders” shall have the meaning set forth in the Preamble of this Agreement.

 

Synthetic Primary Shares” shall have the meaning set forth in Section 2.2.2(b) of this Agreement.

 

Units” shall have the meaning set forth in the Recitals of this Agreement.

 

ARTICLE II

 

REGISTRATION RIGHTS

 

2.1          Shelf Registration Statement.

 

(a)           As promptly as practicable following the Shelf Eligibility Date, the Company shall file with the SEC a shelf registration statement on Form S-3 or Form S-1 or a successor form (a “Shelf Registration Statement”) relating to the offer and sale on a delayed or continuous basis in accordance with Rule 415 under the Securities Act of all Registrable Shares by the Holders from time to time and shall use its reasonable best

 

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efforts to cause such Shelf Registration Statement to be declared effective by the SEC as promptly as reasonably practicable.

 

(b)           The Company shall use its reasonable best efforts to keep a Shelf Registration Statement continuously effective under the Securities Act in order to permit the Prospectus forming a part thereof to be usable by Holders until the date as of which all Registrable Shares covered by such Shelf Registration Statement have been sold thereunder or otherwise cease to be Registrable Shares (such period of effectiveness, the “Shelf Period”). The Company shall not be deemed to have used its reasonable best efforts to keep a Shelf Registration Statement effective during the Shelf Period if the Company voluntarily takes any action or omits to take any action that would result in Holders covered by a Shelf Registration Statement not being able to offer and sell any Registrable Shares pursuant to such Shelf Registration Statement during the Shelf Period, unless such action or omission is (x) a Registration Suspension (as defined below) or (y) required by applicable law.

 

(c)           Except as otherwise provided in this Agreement and subject to any applicable transfer restrictions in the Operating Agreement, the Blocker Merger Agreements and applicable law, each Holder shall be entitled, at any time and from time to time when a Shelf Registration Statement is effective, to sell its Registrable Shares then registered pursuant to such Shelf Registration Statement (each, a “Shelf Resale”). Except as otherwise provided in Section 2.2 below, a Holder initiating a Shelf Resale shall not be required to permit the offer and sale of Registrable Shares by any other Holders in connection with any such Shelf Resale.

 

(d)           The Company shall from time to time solicit from each Non-Private Equity Holder written instructions to include in any Demand Offering or Non-Private Equity Offering after the Shelf Eligibility Date a specified number of Registrable Shares so long as the price to the public per share of Class A Common Stock in such Demand Offering or Non-Private Equity Offering equals or exceeds one or more minimum prices specified by the Company (the “Standing Instructions”).  Each Non-Private Equity Holder who provided Standing Instructions may revoke or modify them by further written notice to the Company, which revocation or modification shall become effective seven (7) days after receipt of such further notice.

 

2.2          Demand Registration Rights.

 

2.2.1       Demand Requests.

 

(a)           Except as otherwise provided in this Section 2.2, at any time on or after the 180th day following the Effective Date, any one or more of the Private Equity Holders may request the Company in writing (a “Demand Request”) to sell all or any portion of its or their Registrable Shares in a Public Offering (each, a “Demand Offering”); provided, however, that in no event shall the Company be obligated under this Section 2.2 to effect more than one (1) Demand Offering on Form S-1 or a successor form in any 90-day period or more than three (3) Demand Offerings in any 12-month period commencing on the Effective Date and any anniversary thereof. Notwithstanding

 

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the foregoing, no Demand Request will be effective hereunder unless the net proceeds (net of underwriting fees and commissions) to the Private Equity Holders from the sale of the Registrable Shares included in such request are reasonably expected to exceed $50,000,000 or such request includes all Registrable Shares owned by the requesting Private Equity Holders at such time.

 

(b)           Notwithstanding the foregoing, no Demand Offering shall be deemed to have occurred for purposes of this Section 2.2.1 if the Registration Statement relating thereto (i) does not become effective, (ii) is not maintained effective for 90 days (or such shorter period as shall terminate when all Registrable Shares covered by such Registration Statement have been sold) or (iii) the Demand Offering pursuant to such Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court. The Company shall bear and pay all Registration Expenses (as provided in Section 2.7); provided, however, that in the event the Private Equity Holders revoke a Demand Offering (which revocation may only be made prior to the Company requesting acceleration of effectiveness of the relevant Registration Statement or, in the case of a shelf takedown, prior to the signing of an underwriting agreement or similar agreement) and the Company has incurred Registration Expenses and not been reimbursed by such Private Equity Holders, then such Demand Offering shall count as having been effected for purposes of this Section 2.2.1.

 

(c)           Notwithstanding the foregoing, if 20% or more of the Registrable Shares included in a Demand Request are excluded from the Demand Offering pursuant to Section 2.2.2(d) below, then the Private Equity Holders shall have the right, with respect to such exclusion, to request one additional Demand Offering during the relevant 12-month period.

 

2.2.2       General Procedures.

 

(a)           Each Demand Request shall specify: (i) the number of Registrable Shares proposed to be sold and (ii) the intended method of disposition, to the extent then known.

 

(b)           Upon receipt of any Demand Request, the Company shall promptly (but in any event within the shorter of (i) five (5) days and (ii) the number of days from the Demand Request to the date of such Demand Offering) give written notice (the “Demand Notice”) of such proposed Demand Offering to the other Private Equity Holders and, subject to the proviso, all Informed Holders; provided, however, the Company shall not provide any Demand Notice to any Non-Private Equity Holder who is not an Informed Holder and shall not be obligated to, but may use its discretion after consultation with the Private Equity Holders requesting such Demand Offering, to provide a Demand Notice to Informed Holders in connection with a Demand Offering that is a “bought deal” or an “overnight” Public Offering pursuant to an effective Shelf Registration Statement; provided that the delivery of such Demand Notice will not delay the proposed Demand Offering. Each other Private Equity Holder and Informed Holder that receives a Demand Notice shall have the right, exercisable by written notice to the

 

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Company within such period of time specified by the Company in such Demand Notice (but not to exceed five (5) days), to irrevocably elect to include in such Demand Offering such portion of its Registrable Shares as it may request (each such electing Informed Holder, an “Other Requesting Persons”).  Each Other Requesting Person may condition the inclusion of any Registrable Shares or any specified number of Registrable Shares in such Demand Offering on the price to the public per share of Class A Common Stock in such Demand Offering being equal to or exceeding one or more minimum prices specified by the Company in such Demand Notice.

 

Notwithstanding anything to the contrary in the immediately preceding paragraph, if Standing Instructions provide for Registrable Shares held by Standing Instructions Holders to be included in the Demand Offering, and the Demand Offering requested pursuant to this Section 2.2.2(b) is a “bought deal” or an “overnight” Public Offering pursuant to an effective Shelf Registration Statement after the Shelf Eligibility Date, the Company shall (absent other instructions by any Standing Instructions Holder) include in such Demand Offering shares of Class A Common Stock to be issued and sold by the Company for its own account (the “Synthetic Primary Shares”) and use the proceeds to the Company from such Demand Offering solely to purchase outstanding Units pursuant to such Standing Instructions and pay related fees and expenses. In such event, such Standing Instructions Holders shall not be included in a Demand Offering for a “bought deal” or an “overnight” Public Offering. In addition, no Non-Private Equity Holders shall be included in a Demand Offering for a ‘bought deal” or an “overnight” Public Offering unless the Company has delivered a Demand Notice to it and such Non-Private Equity Holder elects to be included in accordance with the terms of the immediately preceding paragraph.

 

(c)           Subject to Section 2.2.3, if a Shelf Registration Statement has not been declared effective by the SEC, upon receipt of any Demand Request, the Company shall (i) use its reasonable best efforts to file a Registration Statement as soon as reasonably practicable and in no event later than sixty (60) days in the case of a Registration Statement on Form S-1 and twenty (20) days in the case of a Registration Statement on Form S-3 (or, in each case, any successor form) after receiving such Demand Request (the “Required Filing Date”) and (ii) use its reasonable best efforts to cause such Registration Statement to be declared effective by the SEC as promptly as reasonably practicable.

 

(d)           The Holders of a majority of the Registrable Shares included in the Demand Request (the “Majority Requesting Holders”) shall have the right to select the investment banking firm or firms to manage the Demand Offering (which firms shall be represented by counsel designated by the Company), provided, that such selection shall be subject to the consent of the Company, which consent shall not be unreasonably withheld. If such firm or firms advise the Company and the Majority Requesting Holders that the inclusion of all Registrable Shares and Synthetic Primary Shares requested to be included in the Demand Offering would materially and adversely affect the price or success of the offering (a “Material Adverse Effect”), the Company shall include in such Demand Offering the number of Registrable Shares and Synthetic Primary Shares which can be so sold without causing a Material Adverse Effect pro rata among the Holders

 

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who delivered the Demand Request, the Other Requesting Persons and the Company on the basis of the number of Registrable Shares owned by each such Holder as of the date of this Agreement or joinder, as applicable (plus any additional Registrable Shares acquired thereafter) and, in the case of the Synthetic Primary Shares, the number of Registrable Shares owned by the Standing Instructions Holders as of the date of this Agreement or joinder, as applicable (plus any additional Registrable Shares acquired thereafter).

 

2.2.3       Deferral of Filing. If a Demand Request is received and there is not an effective Shelf Registration Statement on file with the SEC, the Company may, upon prior written notice to the Holders, defer (but not more than once in any 12-month period) the filing (but not the preparation) of the Registration Statement for the Demand Offering for a reasonable period of time not to exceed 60 days after the Required Filing Date (or, if longer, 60 days after the filing date of the registration statement contemplated by clause (ii) below) if (i) at the time the Company receives the Demand Request, the Company or any of its subsidiaries is engaged in confidential negotiations or other confidential business activities, disclosure of which would be required in connection with such Registration Statement (but would not be required if such Registration Statement were not filed), and the Board of Directors determines in good faith that such disclosure would be materially detrimental to the Company and its stockholders (an “Adverse Disclosure”), or (ii) prior to receiving the Demand Request, the Board of Directors had determined to effect a Company Primary Offering pursuant to Section 2.3, and the Company had taken substantial steps (including, without limitation, selecting a managing underwriter for such offering) and is proceeding with reasonable diligence to effect such offering. A deferral of the filing of a Registration Statement pursuant to this Section 2.2.3 shall be lifted, and the Registration Statement shall be filed promptly, if, in the case of a deferral pursuant to clause (i) of the preceding sentence, the negotiations or other activities are disclosed or terminated, or, in the case of a deferral pursuant to clause (ii) of the preceding sentence, the proposed Company Primary Offering is completed or abandoned. In order to defer the filing of a Registration Statement pursuant to this Section 2.2.3, the Company shall promptly (but in any event within five (5) days), upon determining to seek such deferral, deliver to each Holder requesting inclusion of Registrable Shares in the Demand Offering a certificate signed by an executive officer of the Company stating that the Company is deferring such filing pursuant to this Section 2.2.3 and an approximation of the anticipated delay. On the 20th day after the Private Equity Holders have received such certificate, the Demand Request shall be deemed withdrawn automatically unless, prior to such 20th day, the Private Equity Holders deliver to the Company a written notice to the effect that they do not want the Demand Request to be withdrawn.

 

2.3          Non-Private Equity Offerings and Company Primary Offerings.

 

(a)           Once per twelve-month period commencing on the Effective Date and any anniversary thereof, the Company may initiate a Public Offering for the benefit of the Non-Private Equity Holders (a “Non-Private Equity Offering”).  The Company may include in such Non-Private Equity Offering Synthetic Primary Shares and shall use the proceeds from the sale of such Synthetic Primary Shares to purchase outstanding Units from Standing Instructions Holders.  In addition, the Company may give written notice (the “Company Notice”) of such proposed Non-Private Equity Offering to all or some Informed Holders (whether or not they have provided Standing Instructions), who

 

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shall have the right, exercisable by written notice to the Company within five (5) days of such notice (or a shorter period specified by the Company in any Company Notice delivered in connection with a “bought deal” or an “overnight” Public Offering), to elect to include in such Non-Private Equity Offering such portion of their Registrable Shares as they may request (which such request shall supersede any outstanding Standing Instructions). The Company shall not provide any Company Notice to any Holder who is not an Informed Holder. The Company shall also deliver a Company Notice of such proposed Non-Private Equity Offering to all Private Equity Holders, who shall have the right, exercisable by written notice to the Company within five (5) days of such notice (or a shorter period specified by the Company in any Company Notice delivered in connection with a “bought deal” or an “overnight” Public Offering), to elect to include in such Non-Private Equity Offering such portion of their Registrable Shares as they may request.  Each Non-Private Equity Holder and each Private Equity Holder may condition the inclusion of any Registrable Shares or any specified number of Registrable Shares in such Non-Private Equity Offering on the price to the public per share of Class A Common Stock in such Non-Private Equity Offering being equal to or exceeding one or more minimum prices specified by the Company in such Company Notice. Subject to Section 2.3(b) below, the Company shall include in such Non-Private Equity Offering all such Registrable Shares so requested to be included therein; provided, however, that the Company may at any time, in its sole discretion, withdraw or cease proceeding with any such Non-Private Equity Offering.

 

(b)           If, in connection with a Non-Private Equity Offering, the managing underwriter advises the Company that the inclusion of all Synthetic Primary Shares and Registrable Shares requested to be included would cause a Material Adverse Effect, the Company shall include in such Non-Private Equity Offering the number of Synthetic Primary Shares and Registrable Shares which can be so sold without causing a Material Adverse Effect pro rata among the Holders who requested to be included in such Non-Private Equity Offering and the Company on the basis of the number of Registrable Shares owned by such Holders as of the date of this Agreement or joinder, as applicable, (plus any additional Registrable Shares acquired thereafter) and, in the case of the Synthetic Primary Shares, the number of Registrable Shares owned by the Standing Instructions Holders as of the date of this Agreement or joinder, as applicable (plus any additional Registrable Shares acquired thereafter).

 

(c)           Except with respect to a Demand Offering, the procedures for which are addressed in Section 2.2, or a Non-Private Equity Offering, the procedures for which are addressed in Section 2.3(a), if the Company proposes to do a Public Offering of Primary Shares (other than (i) the Initial Public Offering or (ii) an Excluded Registration) (aCompany Primary Offering) and to include in such Company Primary Offering Registrable Shares of any Holder or any Synthetic Primary Shares, then, each such time after the Initial Public Offering, the Company shall give prompt written notice of such Company Public Offering (no later than ten (10) days prior to the filing of the Registration Statement for such Company Primary Offering or, if such Company Primary Offering is pursuant to an effective Shelf Registration Statement, no later than two (2) Business Days prior to the launch of such Company Primary Offering (in each case, a “Piggyback Notice”)) to all of the Holders of Registrable Shares; provided, however, that

 

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the Company is permitted to withhold such Piggyback Notice solely in connection with one Company Primary Offering per twelve-month period. The Piggyback Notice shall offer such Holders the opportunity to include (or cause to be included) in such Company Primary Offering the number of Registrable Shares as each such Holder may request (a “Piggyback Registration”).  Subject to Section 2.3(d) hereof, the Company shall include in each such Company Primary Offering all Registrable Shares with respect to which the Company has received written requests for inclusion therein within five (5) days of such Piggyback Notice (or shorter as specified by the Company in the Piggyback Notice).  The Holders of Registrable Shares shall be permitted to withdraw all or part of the Registrable Shares from a Piggyback Registration at any time at least two (2) Business Days prior to the effective date or launch date, as applicable, of such Piggyback Registration. The Company shall not be required to maintain the effectiveness of the Registration Statement for a Piggyback Registration beyond the earlier to occur of (i) one hundred an eighty (180) days after the effective date thereof and (ii) consummation of the distribution by the holders of the applicable Registrable Shares included in such Registration Statement.

 

If any time after giving such Piggyback Notice and prior to the effective date of the Registration Statement filed in connection with such registration, or the launch date of the Company Primary Offering if pursuant to an effective Shelf Registration Statement, the Company shall determine for any reason not to register and sell the securities originally intended to be included in such registration, the Company may, at its election, give written notice of such determination to the Holders and thereupon the Company shall be relieved of its obligation to register and sell such Registrable Shares in connection with the registration and sale of securities originally intended to be included in such registration.

 

(d)           If, in connection with a Company Primary Offering, the managing underwriter advises the Company that the inclusion of all Primary Shares, Synthetic Primary Shares and Registrable Shares requested to be included would cause a Material Adverse Effect, the Company shall include in such Company Primary Offering the number of Primary Shares, Synthetic Primary Shares and other Registrable Shares which can be so sold without causing a Material Adverse Effect in the following order of priority: first, the Primary Shares, and second, Registrable Shares and Synthetic Primary Shares proposed to be included in the Company Primary Offering pro rata on the basis of the number of Registrable Shares owned by Holders who requested to be included in such Company Primary Offering as of the date of this Agreement or joinder, as applicable, (plus any additional Registrable Shares acquired thereafter) and in the case of Synthetic Primary Shares, the number of Registrable Shares owned by the Standing Instructions Holders as of the date of this Agreement or joinder, as applicable (plus any additional Registrable Shares acquired thereafter).

 

2.4          Registration Suspension. If the continued use of any Registration Statement filed and declared effective pursuant to this Agreement and which registers Registrable Shares at any time would require the Company to make an Adverse Disclosure, the Company may, upon giving written notice of such action to the Holders of Registrable Shares covered by such Registration Statement, suspend all such Holders’ ability to use such Registration Statement or otherwise make purchases of the Company’s securities for a reasonable period of time not in

 

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excess of forty-five (45) days and not more than twice in any twelve (12) month period (a “Registration Suspension”). Each such Holder shall keep confidential the fact that a Registration Suspension is in effect, the notice referred to above and its contents and the reason therefor unless and until otherwise notified by the Company, except (i) for disclosure to such Holder’s employees, agents and professional advisers who reasonably need to know such information for purposes of assisting the Holder with respect to its investment in the Company and agree to keep it confidential, (ii) for disclosures to the extent required in order to comply with reporting obligations to its limited partners or other direct or indirect investors who have agreed to keep such information confidential, (iii) if and to the extent such matters are publicly disclosed and (iv) as required by law, rule or regulation or legal process.  In the case of a Registration Suspension, upon receipt of such written notice, the Holders of Registrable Shares covered by the applicable Registration Statement agree to suspend use of the applicable Prospectus and any Issuer Free Writing Prospectus in connection with any sale or purchase of, or offer to sell or purchase, Registrable Shares, upon delivery of the notice referred to above. The Company shall immediately notify the Holders of Registrable Shares covered by the applicable Registration Statement upon the termination of any Registration Suspension, otherwise amend or supplement the applicable Prospectus and any Issuer Free Writing Prospectus, if necessary, so it does not contain any untrue statement or omission and furnish to the Holders of Registrable Shares covered by the applicable Registration Statement such numbers of copies of the applicable Prospectus and any Issuer Free Writing Prospectus as so amended or supplemented as the Holders may reasonably request.  The Company shall, if necessary, supplement or make amendments to the applicable Registration Statements as may reasonably be requested by a Holder of Registrable Shares covered by such Registration Statement.

 

2.5          Holdback Agreement.

 

(a)           In connection with any Demand Offering, the Company shall not effect any public sale of any shares of Class A Common Stock or Class A Common Stock Equivalents during the ten (10) Business Days, or such shorter period beginning with delivery of a Demand Notice or Company Notice, as applicable, prior to the anticipated date such Public Offering is expected to be launched (the “Launch Date”) and during such time period after the pricing of such Demand Offering (not to exceed 90 days or sixty (60) days after the first Demand Offering) as the Company and the managing underwriter may agree, in each case except as part of such Demand Offering, pursuant to an Excluded Registration or as otherwise agreed between the Company and the managing underwriter for such Demand Offering.

 

(b)           In connection with any Demand Offering, Non-Private Equity Offering or any Company Primary Offering, each Holder that participates in such Public Offering (including pursuant to Standing Instructions), shall not effect (subject to any exceptions the managing underwriter may agree) any public sale or private offer or distribution of any shares of Class A Common Stock or Class A Common Stock Equivalents during the ten (10) Business Days, or such shorter period beginning with delivery of a Demand Notice, Company Notice or Piggyback Notice, as applicable, or a notice by the Company to the Informed Holders or Standing Instructions Holders informing them of such Public Offering, prior to the anticipated Launch Date for any Public Offering and during such time period after the pricing of such Public Offering (not

 

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to exceed ninety (90) days (or sixty (60) days after the first Demand Offering)) (except as part of such Public Offering) as the managing underwriter may agree (the “Lockup Period”). Each Holder shall receive the benefit of any shorter Lockup Period or permitted exceptions (on a pro rata basis) agreed to by the managing underwriter for any Public Offering pursuant to this Agreement; provided, that nothing herein will prevent any Holder that is a limited liability company, partnership or corporation from making a distribution of shares of Class A Common Stock or Class A Common Stock Equivalents to the members, partners or stockholders thereof or a transfer to an Affiliate that is otherwise in compliance with the applicable securities laws, so long as such distributees or transferees agree to be bound by the restrictions set forth in this Section 2.5 (subject to any exceptions the managing underwriter may agree). Each such Holder agrees to execute a lock-up agreement in favor of the underwriters to such effect and, in any event, that the underwriters in any relevant Public Offering shall be third-party beneficiaries of this Section 2.5.

 

(c)           Any discretionary waiver or termination of the requirements under the foregoing provisions made by the managing underwriter shall apply to each Holder on a pro rata basis in accordance with the number of Registrable Shares owned by each such Holder.

 

(d)           The obligations of any person under this Section 2.5 are not in limitation of holdback or transfer restrictions that may otherwise apply by virtue of any other agreement or undertaking.

 

2.6          Registration Procedures. In connection with the Company’s obligations hereunder and subject to the applicable terms and conditions set forth herein, the Company shall as promptly as reasonably practicable:

 

(a)           prepare and file with the SEC a Registration Statement on any appropriate form under the Securities Act with respect to such Registrable Shares and use its reasonable best efforts to cause such Registration Statement to become effective by the SEC as promptly as reasonably practicable; and to remain continuously effective; provided, however, that before filing a Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto (including documents that would be incorporated or deemed to be incorporated therein by reference), the Company shall furnish or otherwise make available to the Private Equity Holders of the Registrable Shares covered by such Registration Statement, their counsel and the managing underwriters, if any, copies of all such documents proposed to be filed, which documents will be subject to the reasonable review and comment of such counsel and such other documents reasonably requested by such counsel, including any comment letter from the SEC, and, if requested by such counsel, provide such counsel reasonable opportunity to participate in the preparation of such Registration Statement and each Prospectus included therein and such other opportunities to conduct a reasonable investigation within the meaning of the Securities Act, including reasonable access to the Company’s books and records, officers, accountants and other advisors.  The Company shall not file any such Registration Statement (including a Shelf Registration Statement), Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto (including such

 

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document that, upon filing, would be incorporated or deemed to be incorporated by reference therein) with respect to a Demand Offering to which a Private Equity Holder covered by such Registration Statement, their counsel, or the managing underwriters, if any, shall reasonably object, in writing, on a timely basis, unless, in the opinion of the Company, such filing is necessary to comply with applicable law.

 

(b)           prepare and file with the SEC such pre- and post-effective amendments to such Registration Statement and supplements to such Registration Statement and the Prospectus and such amendments or supplements to any Issuer Free Writing Prospectus as may be necessary to comply with the Securities Act or as necessary to keep such Registration Statement effective for the period of time required by this Agreement, and comply with provisions of the Securities Act with respect to the disposition of all Registrable Shares covered by such Registration Statement during such period in accordance with the intended method or methods of disposition by the Holders thereof set forth in such Registration Statement;

 

(c)           furnish to each Holder of Registrable Shares covered by a Registration Statement and, in the event of a Public Offering, the underwriters of the securities being offered such number of copies of such Registration Statement, each amendment and supplement thereto, the Prospectus included in such Registration Statement (including each preliminary Prospectus), any documents incorporated by reference therein and such other documents as such Holder or underwriters may reasonably request in order to facilitate the disposition of the Registrable Shares owned by such Holder or the sale of such securities by such underwriters (it being understood that, subject to Section 2.4 and the requirements of the Securities Act and applicable state securities laws, the Company consents to the use of the Prospectus and any amendment or supplement thereto by each Holder and the underwriters in connection with the offering and sale of the Registrable Shares covered by the Registration Statement of which such Prospectus, amendment or supplement is a part); provided, however, that any such document available on the SEC’s EDGAR database shall satisfy any such obligation;

 

(d)           if applicable, use its reasonable best efforts to register or qualify such Registrable Shares under such other securities or blue sky laws of such jurisdictions as each Holder or, in the case of a Public Offering, the managing underwriter reasonably requests; use its reasonable best efforts to keep each such registration or qualification (or exemption therefrom) effective during the period in which such Registration Statement is required to be kept effective; and do any and all other acts and things which may be reasonably necessary or advisable to enable each Holder to consummate the disposition of the Registrable Shares owned by such Holder in such jurisdictions (provided, however, that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it or its subsidiaries would not otherwise be required to qualify but for this subparagraph or (ii) consent to general service of process in any such jurisdiction);

 

(e)           promptly notify each Holder of Registrable Shares covered by a Registration Statement and, in the case of a Public Offering, each underwriter (i) when a Prospectus or any prospectus supplement or amendment has been filed and, with respect

 

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to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of the issuance by any state securities or other regulatory authority of any order suspending the qualification or exemption from qualification of any of the Registrable Shares under state securities or “blue sky” laws or the initiation of any proceedings for that purpose, (iii) of any request by the SEC or any other federal or state governmental authority for amendments or supplements to the Registration Statement or related Prospectus or for additional information, (iv) if at any time the Company has reason to believe that the representations and warranties of the Company contained in any agreement (including any underwriting agreement) contemplated by Section 2.6(o) below cease to be true and correct, and (v) of the happening of any event which makes any statement made in a Registration Statement or related Prospectus untrue or which requires the making of any changes in such Registration Statement, Prospectus or documents incorporated therein by reference so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and, as promptly as practicable thereafter, prepare and file with the SEC and furnish a supplement or amendment so that, as thereafter deliverable to the purchasers of such Registrable Shares, such Prospectus will not contain any untrue statement of a material fact or omit a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

 

(f)            make generally available to the Company’s stockholders, as soon as reasonably practicable, an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 under the Securities Act;

 

(g)           in the case of a Public Offering, if requested by the managing underwriter or any Holder participating in such Public Offering, promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or any Holder reasonably requests to be included therein, including, without limitation, with respect to the Registrable Shares being sold by such Holder, the purchase price being paid therefor by the underwriters and with respect to any other terms of the underwritten offering of the Registrable Shares to be sold in such offering, and promptly make all required filings of such prospectus supplement or post-effective amendment;

 

(h)           promptly make available for inspection by any Holder disposing of Registrable Shares pursuant to any Registration Statement, any underwriter participating in any disposition pursuant to any Registration Statement, and any attorney, accountant or other agent or representative retained by any such Holder or underwriter (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “Records”) as shall be reasonably necessary to enable them to exercise their due diligence responsibility and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such Registration Statement; provided, however, that, unless the disclosure of such Records is necessary to avoid or correct a misstatement or omission in the Registration Statement or the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, the Company shall not be required to provide any information under this subparagraph (h) if (i) the Company

 

15



 

believes, after consultation with counsel for the Company, that to do so would cause the Company to forfeit an attorney-client privilege that was applicable to such information or (ii) if either (A) the Company is in the process of requesting or has requested and been granted from the SEC confidential treatment of such information contained in any filing with the SEC or documents provided supplementally or otherwise or (B) the Company reasonably determines in good faith that such Records are confidential and so notifies the Inspectors in writing unless prior to furnishing any such information with respect to (i) or (ii) such Inspectors requesting such information agrees to enter into a confidentiality agreement in customary form and subject to customary exceptions; and provided, further, that each Inspector agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action and to prevent disclosure of the Records deemed confidential;

 

(i)            in the case of a Public Offering, furnish to each Holder and underwriter participating in such Public Offering a signed counterpart of (A) an opinion or opinions of counsel to the Company and (B) a comfort letter or comfort letters from the Company’s independent public accountants and the independent public accountants who have audited any other financial statements (including with respect acquired businesses) included or incorporated by reference into the Prospectus, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the Holders or managing underwriter reasonably requests;

 

(j)            cause the Registrable Shares included in any Registration Statement to be (A) listed on each securities exchange, if any, on which similar securities issued by the Company are then listed prior to the effectiveness of such Registration Statement or (B) authorized to be quoted and/or listed (to the extent applicable) on an automated quotation system if the Registrable Shares so qualify;

 

(k)           provide a transfer agent and registrar for all Registrable Shares registered hereunder and provide a CUSIP number for the Registrable Shares included in any Registration Statement not later than the effective date of such Registration Statement;

 

(l)            cause its officers to use their reasonable best efforts to support the marketing of the Registrable Shares covered by the Registration Statement (including participation in “road shows”) taking into account the Company’s business needs;

 

(m)          cooperate with counsel to the Holders and, in the case of a Public Offering, each underwriter participating in the disposition of such Registrable Shares in connection with any filings required to be made with FINRA;

 

(n)           during the period when the Prospectus is required to be delivered under the Securities Act, promptly file all documents required to be filed with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act;

 

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(o)           in the case of a Public Offering, enter into such agreements (including underwriting agreements in the managing underwriter’s customary form) as are customary in connection with a Public Offering; and take all such other actions reasonably requested by the Holders of the Registrable Shares being sold in connection therewith (including those reasonably requested by the managing underwriters, if any) to expedite or facilitate the disposition of such Registrable Shares, and in such connection whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration, (i) make such representations and warranties to the Holders of such Registrable Shares and the underwriters, if any, with respect to the business of the Company and its subsidiaries, and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings, and, if true, confirm the same if and when requested and (ii) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures substantially to the effect set forth in Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and

 

(p)           advise each Holder of Registrable Shares covered by a Registration Statement, promptly after it shall receive notice or obtain knowledge thereof of the issuance of any stop order by the SEC suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued.

 

2.7          Registration Expenses. All expenses incident to the Company’s performance of or compliance with this Article II including, without limitation, all registration and filing fees, all fees and expenses associated with filings required to be made with FINRA (including, if applicable, the fees and expenses of any “qualified independent underwriter” as such term is defined in Rule 5121 of FINRA regulations, and of its counsel), as may be required by the rules and regulations of FINRA, fees and expenses of compliance with securities or “blue sky” laws (including reasonable fees and disbursements of counsel in connection with “blue sky” qualifications of the Registrable Shares), rating agency fees, printing expenses (including expenses of printing Prospectuses if the printing of Prospectuses is requested by a Holder), “road show” expenses, messenger and delivery expenses, the Company’s internal expenses (including without limitation all salaries and expenses of its officers and employees performing legal or accounting duties), the fees and expenses incurred in connection with any listing of the Registrable Shares, fees and expenses of counsel for the Company and its independent certified public accountants (including the expenses of any special audit or “cold comfort” letters required by or incident to such performance), fees and expenses of independent public accountants who have audited any other financial statements (including with respect acquired businesses) included or incorporated by reference into the Prospectus (including the expenses of any special audit or “cold comfort” letters required by or incident to such performance), securities acts liability insurance (if the Company elects to obtain such insurance), the fees and expenses of any special experts retained by the Company in connection with such registration, the fees and expenses of other persons retained by the Company and the reasonable and documented fees and expenses of one counsel for all Holders participating in a registration pursuant to this Agreement (the “Registration Expenses”) shall be borne by the Company whether or not any Registration

 

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Statement becomes effective or any sale is made in a Public Offering; provided, however, that in no event shall Registration Expenses include any underwriting discounts, commissions or fees attributable to the sale of the Registrable Shares or any accountants or other persons (except as set forth above) retained or employed by the Holders, which expenses shall be borne by the relevant Holders who retained or employed such Persons.

 

2.8          Indemnification. In the event any Registrable Shares are included in a Registration Statement under this Agreement:

 

(a)           The Company agrees to indemnify and hold harmless, to the fullest extent permitted by law, each Holder, and each of its employees, advisors, agents, representatives, members, partners, officers and directors and each Person who controls (within the meaning of the Securities Act or the Exchange Act) such Holder, and each of such controlling person’s employees, advisors, agents, representatives, members, partners, officers and directors (collectively, the “Holder Affiliates”) against any and all losses, claims, damages, liabilities, costs, judgments, fines, penalties, charges, amounts paid in settlement and expenses, joint or several (including, without limitation, attorneys’ fees and disbursements except as limited by Section 2.8(c)) based upon, arising out of, related to or resulting from any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto, or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, any filing made in connection with the qualification of the offering under the securities or other “blue sky” law of any jurisdiction in which Registrable Shares are offered, or any other offering document (including any related notification, or the like) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or preliminary Prospectus, in light of the circumstances under which they were made) not misleading, or any violation by the Company of the Securities Act or of the Exchange Act, or any violation by the Company of this Agreement and will reimburse each such Holder and Holder Affiliate for any legal or other expenses reasonably incurred in connection with investigating, defending or settling any such loss, claim, damage, liability, costs, judgment, fine, penalty, charge or actions or proceedings; except insofar as any such statements or omissions are made in reliance upon and in strict conformity with information or affidavits furnished in writing to the Company by such Holder or any Holder Affiliate for use in such Registration Statement, Prospectus or preliminary Prospectus or amendment thereof or supplement thereto. The reimbursements required by this Section 2.8(a) will be made by periodic payments during the course of the investigation or defense, as and when bills are received or expenses incurred.

 

(b)           Each participating Holder will furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement, Prospectus or preliminary Prospectus or amendment thereof or supplement thereto and, to the fullest extent permitted by law, each such Holder will indemnify the Company and its directors and officers and each Person who controls the Company (within the meaning of the Securities Act or the Exchange

 

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Act) against any and all losses, claims, damages, liabilities, costs, judgments, fines, penalties, charges, amounts paid in settlement and expenses (including, without limitation, reasonable attorneys’ fees and disbursements except as limited by Section 2.8(c)) resulting from any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, Prospectus, or any preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or preliminary Prospectus, in light of the circumstances under which they were made) not misleading, but only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission is contained in any information or affidavit so furnished in writing by such Holder or any of its Holder Affiliates specifically for inclusion in the Registration Statement, Prospectus or preliminary Prospectus or amendment thereof or supplement thereto; provided that the obligation to indemnify will be several, not joint and several, among such Holders, and the liability of each such Holder will be in proportion thereto and, provided, further, that such liability will be limited to the net proceeds received by such Holder from the sale of Registrable Shares (net of any underwriting discounts and commissions) pursuant to such Registration shall not be liable in any such case to the extent that prior to the filing of any such Registration Statement or Prospectus; provided, however, that such Holder shall not be liable in any such case to the extent that prior to the filing of any such Registration Statement, Prospectus or preliminary Prospectus or amendment thereof or supplement thereto, such Holder has furnished in writing to the Company information expressly for use in such Registration Statement, Prospectus or preliminary Prospectus or amendment thereof or supplement thereto which corrected or made not misleading information previously furnished to the Company.

 

(c)           Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give such notice shall not limit the rights of such Person except to the extent that the indemnifying party is materially prejudiced by such failure to give prompt notice) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any Person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (x) the indemnifying party has agreed to pay such fees or expenses or (y) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such Person. If such defense is not assumed by the indemnifying party as permitted hereunder, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld, conditioned or delayed). If such defense is assumed by the indemnifying party pursuant to the provisions of this Agreement, such indemnifying party shall not settle or otherwise compromise the applicable claim unless (i) such settlement or compromise contains a full and unconditional release of the indemnified party or (ii) the indemnified party otherwise consents in writing. An

 

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indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party, a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the reasonable fees and disbursements of such additional counsel or counsels.  Notwithstanding the foregoing, an indemnified party shall have the right to employ separate counsel at the indemnifying party’s expense to participate in the defense of a claim if the named parties to any such claim (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by outside counsel that there is an actual conflict of interest between the indemnifying party and indemnified party that would make it inappropriate in the reasonable judgment of such outside counsel for the same counsel to represent both the indemnified party and indemnifying party.

 

(d)           Each party hereto agrees that, if for any reason the indemnification provisions contemplated by Section 2.8(a) or 2.8(b) are unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities, costs, judgments, fines, penalties, charges, amounts paid in settlement or expenses (or actions in respect thereof) referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities, costs, judgments, fines, penalties, charges, amounts paid in settlement or expenses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the actions which resulted in the losses, claims, damages, liabilities, costs, judgments, fines, penalties, charges, amounts paid in settlement or expenses as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.8(d) were determined by pro rata allocation (even if the Holders or any underwriters or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 2.8(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities, costs, judgment, fines, penalties, charges, amounts paid in settlement or expenses (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or, except as provided in Section 2.8(c) defending any such action or claim. Notwithstanding the provisions of this Section 2.8(d), no Holder shall be required to contribute an amount greater than the proceeds (net of any underwriting discounts and commissions) received by such Holder with respect to the sale of any Registrable Shares. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of

 

20



 

the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders’ obligations in this Section 2.8(d) to contribute shall be several and not joint in proportion to the amount of Registrable Shares registered by them.

 

(e)           If indemnification is available under this Section 2.8, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 2.8(a) and 2.8(b) of this Agreement without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 2.8(d).

 

(f)            The indemnification and contribution provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director, or controlling Person of such indemnified party and will survive the transfer of securities.

 

(g)           Any indemnified parties pursuant to this Agreement shall be third-party beneficiaries of this Section 8.

 

(h)           The indemnity and contribution agreements contained in this Section 2.8 are in addition to any other liability that the indemnifying parties may otherwise have to the indemnified parties; provided that in no event shall any Holder of Registrable Shares be liable to any indemnified parties with respect to any untrue statement or alleged untrue statement or omission or alleged omission in any Registration Statement, Prospectus or any preliminary Prospectus or any amendment thereof or supplement thereto for any amount in excess of the amount by which the net proceeds to the indemnifying party from the sale of the Registrable Shares sold in the transaction that resulted in any liability, exceeds the amount of any damages that such indemnifying party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission (including as a result of any indemnification or contribution obligation hereunder).  Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provision in the underwriting agreement shall control.

 

2.9          Transfer of Registration Rights.

 

(a)           The rights of each Holder under this Agreement may be assigned to (i) a transferee of Registrable Shares that constitute at least 1% of the Company’s or Focus LLC’s outstanding Class A Common Stock or Units, as the case may be; provided, however, (i) that any such transfer is permitted in accordance with the Operating Agreement and any other applicable documents, (ii) that any such transfer is not pursuant to Rule 144 under the Securities Act or a registration statement filed pursuant to this Agreement, and (iii) that the Company is given written notice by such Holder at or within a reasonable time after said transfer, stating the name and address of such transferee and identifying the Registrable Shares with respect to which such registration rights are being

 

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transferred. Notwithstanding the foregoing, any Holder may: (A) transfer rights to a transferee of Registrable Shares if such transferee is (i) an Affiliate or Affiliated Investor of any Holder or (ii) any family member or trust for the benefit of any individual Holder; and (B) transfer rights in connection with effecting in-kind or similar distributions of all or part of its Registrable Shares to its direct or indirect equityholders, managers, employees, agents or representatives. Any such transferee permitted by this Section 2.9(a) (a “Permitted Transferee”) shall be required to execute the joinder agreement set forth in Exhibit A.

 

(b)           If the Company may at any time hereafter provide to any Person who is a holder of any securities of the Company or Focus LLC rights with respect to the registration of such securities under the Securities Act, such rights shall not be in conflict with or adversely affect any of the rights provided to the Holders in, or conflict (in a manner that adversely affects the Holders) with any other provisions included in, this Agreement; provided, however, that any rights which are the same as or equal to the rights provided in this Agreement will not be considered in conflict with or to adversely affect the rights of the Holders provided in this Agreement. To the extent the Company provides any right to others that are more favorable than those provided for herein, this Agreement shall be deemed to be automatically modified to ensure that such Holders will have the benefit of terms that are at least as favorable as those provided to such other Persons. The Company shall provide prompt notice to the Holders of any such modifications.

 

(c)           For the purposes of calculating any percentage of Class A Common Stock or Units, as the case may be, as contemplated by this Section 2.9, the term “Holder” shall include all Affiliates thereof owning any Registrable Shares.

 

2.10        Current Public Information.

 

(a)           With a view to making available to the Holders the benefits of certain rules and regulations of the SEC that may at any time permit the sale of securities to the public without registration, the Company agrees to use its reasonable best efforts to:

 

(i)            make and keep public information available, as those terms are defined in Rule 144 under the Securities Act, at all times from and after 90 days following the Effective Date;

 

(ii)           file with the SEC in a timely manner all reports and other documents required of the Company under the Exchange Act (at any time during which it is subject to such reporting requirements); and

 

(iii)          furnish to any Holder, so long as such Holder owns any Registrable Shares, upon the reasonable request by such Holder, (a) a written statement by the Company that it has complied with the reporting requirements of Rule 144 (at any time after 90 days after the Effective Date), and of the Securities Act and the Exchange Act (at any time after it has become subject to such

 

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reporting requirements), (b) a copy of the most recent annual or quarterly report of the Company and (c) such other reports and documents of the Company and other information in the possession of or reasonably obtainable by the Company as a Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing a Holder to sell any such securities without registration, provided, however, that any such document requested pursuant to clauses (b) or (c) above and available on the SEC’s EDGAR database shall satisfy any such obligation under clause (b) or (c) above.

 

(b)           Notwithstanding anything in this Section 2.10, the Company may deregister under Section 12 of the Exchange Act if it is then permitted to do so pursuant to the Exchange Act and the rules and regulations thereunder.

 

2.11        General Rules Applicable to Registration Statements.  No Holder may participate in any Demand Offering, Non-Private Equity Offering or Company Primary Offering unless such Holder (x) agrees to sell such Holder’s Registrable Shares on the basis provided in any underwriting arrangements described above and (y) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.

 

2.12        In-Kind Distributions.  If any Holder seeks to effectuate an in-kind distribution of all or part of its Registrable Shares to its direct or indirect equityholders pursuant to Section 2.9(a), the Company will, subject to applicable lockups, work with such Holder and the Company’s transfer agent to facilitate such in-kind distribution in the manner reasonably requested by such Holder.

 

ARTICLE III

 

MISCELLANEOUS

 

3.1          Notices.  All notices, elections, demands or other communications required or permitted to be made or given pursuant to this Agreement shall be in writing and shall be considered as properly given or made on the date of actual delivery if given by (a) personal delivery, (b) expedited overnight delivery service with proof of delivery, (c) via facsimile with confirmation of delivery or (d) electronic mail, addressed to the respective addressee(s). All notices hereunder to the Company or Focus LLC shall be mailed to it at the respective address of its principal place of business and all notices to the Holders shall be mailed to them at their last known addresses as shown on the books and records of the Company. Any Holder may change its address by giving notice in writing to the other Holders of its new address.

 

3.2          Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement.

 

3.3          Assignment.  This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and, subject to Section 2.9 their respective successors and assigns.

 

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3.4          Termination.  This Agreement shall terminate when no Registrable Shares remain outstanding; provided that Section 2.8 and Article III shall survive any termination hereof.

 

3.5          Descriptive Headings.  The descriptive headings of the several sections and paragraphs of this Agreement are inserted for reference only and shall not limit or otherwise affect the meaning hereof. References herein to Sections are references to Sections of this Agreement, except as otherwise indicated.

 

3.6          Specific Performance.  The parties hereto recognize and agree that money damages may be insufficient to compensate the Holders for breaches by the Company of the terms hereof and, consequently, that the equitable remedy of specific performance of the terms hereof will be available in the event of any such breach, without posting a bond or other undertaking, and this being in addition to any other remedy to which such party is entitled at law or in equity.

 

3.7          Governing Law.  THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO RULES OR PRINCIPLES OF CONFLICTS OF LAW REQUIRING THE APPLICATION OF THE LAW OF ANOTHER STATE.

 

3.8          Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible within a reasonable period of time.

 

3.9          Waiver of Jury Trial; Consent to Jurisdiction.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. Each party hereby irrevocably submits to the exclusive jurisdiction of the federal courts located in the State of Delaware or the Delaware Court of Chancery for the purpose of adjudicating any dispute arising hereunder. Each party hereby irrevocably and unconditionally waives and agrees not to plead or claim in any such court any objection to such jurisdiction, whether on the grounds of hardship, inconvenient forum or otherwise. Each party further agrees that service of any process, summons, notice or document by U.S. registered mail to such party’s address as provided pursuant to Section 3.1 shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction in this Section 3.9.

 

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3.10        Amendments; Entire Agreement.  Any amendment or waiver of, or any consent given under, any provision of this Agreement shall be in writing by the Company and each Private Equity Investor holding Registrable Shares; provided, that no amendment to this Agreement shall be effected if such amendment materially adversely affects a Holder or group of Holders in a manner that is disproportionate relative to the effect on any other Holder, unless such Holder or Holders holding a majority of the Registrable Shares of such group of Holders at the relevant time of determination consents thereto. Any waiver of any provision of this Agreement shall be subject to the same approval requirements as an amendment in the event that such amendment would have the same effect as such waiver. This Agreement supersedes all prior discussions, memoranda of understanding, agreements and arrangements (whether written or oral, including all correspondence), if any, between the parties with respect to the subject matter hereof, and this Agreement contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof.

 

3.11        Merger or Consolidation.  In the event the Company engages in a merger or consolidation in which the Registrable Shares are converted into securities of another company, appropriate arrangements will be made so that the registration rights provided under this Agreement continue to be provided to the Holders by the issuer of such securities. To the extent such new issuer, or any other company acquired by the Company in a merger or consolidation, was bound by registration rights obligations that would conflict with the provisions of this Agreement, the Company will, unless the Holders then holding at least a majority of the Registrable Shares otherwise agree, use its reasonable best efforts to modify any such “inherited” registration rights obligations so as not to interfere in any material respects with the rights provided under this Agreement. To the extent any such modification of “inherited” registration rights disproportionately and adversely impacts any Holder hereunder, such modification shall not be effective as to such Holder without the consent of such Holder.

 

3.12        No Recourse.  This Agreement may only be enforced against, and any claims or cause of action that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement may only be made against the entities that are expressly identified as parties hereto, and no past, present or future Affiliate, director, officer, employee, incorporator, member, manager, partner, stockholder, agent, attorney or representative of any party hereto shall have any liability for any obligations or liabilities of the parties to this Agreement or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby.

 

3.13        Acknowledgment.  Each of the Private Equity Holders acknowledges and agrees to comply with the liquidity limitations and restrictions on transfer set forth in Section 3.11 of the Operating Agreement.

 

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IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, have duly executed this Agreement as of the date first written above.

 

 

 

FOCUS FINANCIAL PARTNERS INC.

 

 

 

 

 

 

 

 

By:

/s/ Ruediger Adolf

 

 

 

Name:

Ruediger Adolf

 

 

 

Title:

Chief Executive Officer

 

 

 

 

 

FOCUS FINANCIAL PARTNERS, LLC

 

 

 

 

 

 

By:

Focus Financial Partners Inc.,

 

 

 

its managing member

 

 

 

 

 

 

 

 

 

 

By:

/s/ Ruediger Adolf

 

 

 

Name:

 Ruediger Adolf

 

 

 

Title:

Chief Executive Officer

 

SIGNATURE PAGES
REGISTRATION RIGHTS AGREEMENT
IN CONNECTION WITH FOURTH AMENDED AND RESTATED OPERATING AGREEMENT
FOCUS FINANCIAL PARTNERS, LLC

 



 

 

 

Stockholders

 

 

 

 

 

TRIDENT FFP LP

 

 

 

 

 

 

By:

Trident FFP GP LLC, its general partner

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Peter M. Mundheim

 

 

 

 

Name:

Peter M. Mundheim

 

 

 

 

Title:

Vice President & Assistant
Secretary

 

 

 

 

 

 

 

 

TRIDENT VI, L.P.

 

 

 

 

 

 

By:

Stone Point Capital LLC, its manager

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Peter M. Mundheim

 

 

 

 

Name:

Peter M. Mundheim

 

 

 

 

Title:

Principal

 

 

 

 

 

 

 

 

TRIDENT VI PARALLEL FUND, L.P.

 

 

 

 

 

 

By:

Stone Point Capital LLC, its manager

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Peter M. Mundheim

 

 

 

 

Name:

Peter M. Mundheim

 

 

 

 

Title:

Principal

 

 

 

 

 

 

 

 

TRIDENT VI DE PARALLEL FUND, L.P.

 

 

 

 

 

 

By:

Stone Point Capital LLC, its manager

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Peter M. Mundheim

 

 

 

 

Name:

Peter M. Mundheim

 

 

 

 

Title:

Principal

 

SIGNATURE PAGES
REGISTRATION RIGHTS AGREEMENT
IN CONNECTION WITH FOURTH AMENDED AND RESTATED OPERATING AGREEMENT
FOCUS FINANCIAL PARTNERS, LLC

 



 

 

 

KKR FREYA AGGREGATOR L.P.

 

 

 

 

 

 

By:

KKR Freya Aggregator GP LLC, its general partner

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ William J. Janetschek

 

 

 

 

Name:

William J. Janetschek

 

 

 

 

Title:

Chief Financial Officer

 

 

 

 

 

 

 

 

KKR AMERICAS XII (FREYA) BLOCKER PARENT L.P.

 

 

 

 

 

By:

KKR Associates Americas XII L.P., its general partner

 

 

 

 

 

 

By:

KKR Americas XII Limited, its general partner

 

 

 

 

 

 

 

By:

/s/ William J. Janetschek

 

 

 

 

Name:

William J. Janetschek

 

 

 

 

Title:

Director

 

 

 

 

 

 

 

 

KKR AMERICAS XII EEA (FREYA) BLOCKER PARENT L.P.

 

 

 

 

 

By:

KKR Associates Americas XII L.P., its general partner

 

 

 

 

 

 

By:

KKR Americas XII Limited, its general partner

 

 

 

 

 

 

 

By:

/s/ William J. Janetschek

 

 

 

 

Name:

William J. Janetschek

 

 

 

 

Title:

Director

 

SIGNATURE PAGES
REGISTRATION RIGHTS AGREEMENT
IN CONNECTION WITH FOURTH AMENDED AND RESTATED OPERATING AGREEMENT
FOCUS FINANCIAL PARTNERS, LLC

 



 

EXHIBIT A

 

FORM OF JOINDER

 

THIS JOINDER (this “Joinder”) is made and entered into as of [Ÿ] by the undersigned (the “New Holder”) in accordance with the terms and conditions set forth in that certain Registration Rights Agreement by and among Focus Financial Partners Inc., a Delaware corporation (the “Company”), Focus Financial Partners, LLC, a Delaware limited liability company (“Focus LLC”) and the Holders party thereto, dated as of [Ÿ] 2018 (as the same may be amended, restated or otherwise modified from time to time, the “Registration Rights Agreement”), for the benefit of, and for reliance upon by, the Company, Focus LLC and the Holders.

 

WHEREAS, New Holder has acquired certain Registrable Shares from [Ÿ].

 

WHEREAS, the New Holder desires to exercise certain rights granted to it under the Registration Rights Agreement; and

 

WHEREAS, the execution and delivery to the Company of this Joinder by the New Holder is a condition precedent to the New Holder’s exercise of any of its rights under the Registration Rights Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties to this Joinder hereby agree as follows:

 

(a)           Agreement to be Bound. The New Holder hereby agrees that upon execution of this Joinder, it shall become a party to the Registration Rights Agreement and shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Registration Rights Agreement as though an original party thereto and shall be deemed a Holder for all purposes thereof.

 

(b)           Successors and Assigns. Except as otherwise provided herein, this Joinder shall bind and inure to the benefit of and be enforceable by the Company and its successors, heirs and assigns.

 

(c)           Notices. For purposes of notices pursuant to the Registration Rights Agreement, all notices, requests and demands to the New Holder shall be directed to:

 

[Name]
[Address]

 

(d)           Further Assurances. The New Holder agrees to perform any further acts and execute and deliver any additional documents and instruments that may be necessary or reasonably requested by the Company to carry out the provisions of this Joinder or the Registration Rights Agreement.

 

(e)           Descriptive Headings. The descriptive headings of this Joinder are inserted for convenience only and do not constitute a part of this Joinder.

 

A-1



 

IN WITNESS WHEREOF, the parties hereto have executed this Joinder to the Registration Rights Agreement as of the date first written above.

 

 

 

FOCUS FINANCIAL PARTNERS INC.

 

 

 

 

 

 

 

 

 

 

By

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

FOCUS FINANCIAL PARTNERS, LLC

 

 

 

 

 

 

By:

Focus Financial Partners Inc.

 

 

 

Its Managing Member

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

[NEW HOLDER]

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

A-2


Exhibit 4.2

 

NOMINATION AGREEMENT

 

This NOMINATION AGREEMENT (this “Agreement”), dated as of July 30, 2018, is entered into by and between Focus Financial Partners Inc., a Delaware corporation (the “Company”), and each of the stockholders of the Company whose name appears on the signature pages hereto (each a “Principal Stockholder,” and collectively, the “Principal Stockholders”).

 

WHEREAS, in connection with, and effective upon, the completion of the underwritten initial public offering (the “IPO”) of shares of the Company’s Class A Common Stock (as defined below), the Principal Stockholders and the Company have entered into this Agreement to set forth certain understandings among such parties, including with respect to certain governance matters.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.1            Certain Definitions.  As used in this Agreement, the following terms shall have the following meanings:

 

Affiliate” means, with respect to any specified Person, a Person that directly or indirectly Controls or is Controlled by, or is under common Control with, such specified Person. For purposes of this Agreement, no party to this Agreement shall be deemed to be an Affiliate of another party to this Agreement solely by reason of the execution and delivery of this Agreement.

 

Affiliated Investor” means, with respect to any Principal Stockholder, (i) any investment fund or holding company that is directly or indirectly managed or advised by a manager or advisor of such Principal Stockholder and (ii) any of its Affiliates or any other Person who or which is otherwise an Affiliate of any such Principal Stockholder (other than the Company and its subsidiaries).

 

Beneficial Owner” of a security is a Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares (a) voting power, which includes the power to vote, or to direct the voting of, such security and/or (b) investment power, which includes the power to dispose of, or to direct the disposition of, such security. The terms “Beneficially Own” and “Beneficial Ownership” shall have correlative meanings. For the avoidance of doubt, for purposes of this Agreement, each of the Principal Stockholders is deemed to Beneficially Own the shares of Common Stock owned by it, notwithstanding the fact that such shares or other securities are subject to this Agreement.

 

Board” means the Board of Directors of the Company.

 

Class A Common Stock” means the shares of Class A common stock, par value $0.01 per share, of the Company, and any other capital stock of the Company into which such stock is reclassified or reconstituted.

 

Class B Common Stock” means the shares of Class B common stock, par value $0.01 per share, of the Company, and any other capital stock of the Company into which such stock is reclassified or reconstituted.

 

1



 

Common Stock” means the Class A Common Stock and the Class B Common Stock, collectively.

 

Competitor means (a) (i) a national or global financial institution or insurance company or a regional bank that in each case derives at least 30% of its revenue from wealth management services (which, for the avoidance of doubt, excludes life insurance and annuities), (ii) an independent broker dealer, or (iii) a platform for or aggregator of registered investment adviser or broker-dealer teams, or (b) a holding company or acquisition vehicle of any entity described in clause (a) of this definition.

 

Control” (including the terms “Controls,” “Controlled by” and “under common Control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

Initial Share Ownership” means, with respect to the Principal Stockholders, the number of shares of Common Stock held by the Principal Stockholders as of the closing of the IPO.

 

Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, any court, administrative agency, regulatory body, commission or other governmental authority, board, bureau or instrumentality, domestic or foreign and any subdivision thereof or other entity, and also includes any managed investment account.

 

Principal Stockholder Group” means the Principal Stockholders and any of their respective Affiliates and Affiliated Investors and their respective successors and permitted assigns.

 

Stone Point Directors” means the designees of the Principal Stockholders.

 

Section 1.2            Rules of Construction.

 

(a)           Unless the context requires otherwise:  (i) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms; (ii) references to Articles and Sections refer to articles and sections of this Agreement; (iii) the terms “include,” “includes,” “including” and words of like import shall be deemed to be followed by the words “without limitation”; (iv) the terms “hereof,” “hereto,” “herein” or “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement; (v) unless the context otherwise requires, the term “or” is not exclusive and shall have the inclusive meaning of “and/or”; (vi) defined terms herein will apply equally to both the singular and plural forms and derivative forms of defined terms will have correlative meanings; (vii) references to any law or statute shall include all rules and regulations promulgated thereunder, and references to any law or statute shall be construed as including any legal and statutory provisions consolidating, amending, succeeding or replacing the applicable law or statute; (viii) references to any Person include such Person’s successors and permitted assigns; and (ix) references to “days” are to calendar days unless otherwise indicated.

 

(b)           The headings in this Agreement are for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision thereof.

 

(c)           This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party that drafted or caused this Agreement to be drafted.

 

2



 

ARTICLE II
VOTING AND GOVERNANCE MATTERS

 

Section 2.1            Designees.

 

(a)           Upon the closing of the IPO, the Board shall initially consist of seven directors, including Ruediger Adolf, Rajini Sundar Kodialam, Fayez S. Muhtadie, Christopher J. Harrington, James D. Carey, Deborah D. McWhinney and Noah Gottdiener (the “Initial Directors”). The audit committee of the Board shall initially consist of three directors, including Fayez S. Muhtadie, Deborah D. McWhinney and Noah Gottdiener, the compensation committee of the Board shall initially consist of three directors, including Fayez S. Muhtadie, James D. Carey and Noah Gottdiener, and the nominating and governance committee of the Board shall initially consist of three directors, including Christopher J. Harrington, Fayez S. Muhtadie and Deborah D. McWhinney. Of the Initial Directors, Fayez S. Muhtadie and James D. Carey are each deemed to be Stone Point Directors. The Board will be divided into three classes serving staggered three-year terms. Class I, Class II and Class III directors will serve until the Company’s annual meetings of shareholders in 2019, 2020 and 2021, respectively. Ruediger Adolf, James D. Carey and Christopher J. Harrington will be assigned to Class I, Rajini Sundar Kodialam and Noah Gottdiener will be assigned to Class II, and Deborah D. McWhinney and Fayez S. Muhtadie will be assigned to Class III. From and after the closing of the IPO, the rights of the Principal Stockholders to designate directors to the Board and its committees shall be as set forth in the remainder of this Section 2.1. At the completion of the IPO, the Board shall include the applicable Stone Point Directors referred to in this paragraph (a), and such other individuals as shall be nominated and elected to the Board from time to time by the Board or the Company’s stockholders consistent herewith and with applicable law.

 

(b)           (i)            For so long as the Principal Stockholder Group Beneficially Owns a number of shares of Common Stock representing at least 50% of its Initial Share Ownership, the Company will take all necessary action (to the extent permitted by applicable law and to the extent such action is consistent with the fiduciary duties of the directors under Delaware law) to cause the Board to nominate for election at each annual or special meeting of shareholders at which directors are to be elected that number of individuals designated by the Principal Stockholders that, if elected, would result in two (2) Stone Point Directors serving on the Board. For so long as the Principal Stockholder Group Beneficially Owns a number of shares of Common Stock representing less than 50% of its Initial Share Ownership but at least 5% of the outstanding shares of Common Stock at any time, the Company will take all necessary action (to the extent permitted by applicable law and to the extent such action is consistent with the fiduciary duties of the directors under Delaware law) to cause the Board to nominate for election at each annual or special meeting of shareholders at which directors are to be elected that number of individuals designated by the Principal Stockholders that, if elected, would result in one (1) Stone Point Director serving on the Board. Any individuals, other than the Initial Directors, designated by the Principal Stockholders pursuant to this Section 2.1(b)(i) must satisfy the requirements for a replacement designee set forth in Section 2.1(c) hereof.

 

(ii)           Subject to applicable laws and stock exchange regulations, for so long as the Principal Stockholder Group Beneficially Owns a number of shares of Common Stock representing at least 50% of its Initial Share Ownership, the Company will take all necessary action (to the extent permitted by applicable law and to the extent such action is consistent with the fiduciary duties of the directors under Delaware law) to cause the Board to appoint two (2) Stone Point Directors to serve on the compensation committee of the Board and one (1) Stone Point Director to serve on the nominating and governance committee of the Board. Subject to applicable laws and stock exchange regulations, for so long as the Principal Stockholder Group Beneficially Owns a number of shares of Common Stock representing less than 50% of its Initial Share Ownership but at least 5% of the outstanding shares of Common Stock at any time, the Company will take all necessary action (to the extent permitted by

 

3



 

applicable law and to the extent such action is consistent with the fiduciary duties of the directors under Delaware law) to cause the Board to appoint one (1) Stone Point Director to serve on the compensation committee of the Board and one (1) Stone Point Director to serve on the nominating and governance committee of the Board.

 

(c)           In the event that the Principal Stockholders have nominated fewer than the total number of designees that the Principal Stockholders shall be entitled to nominate pursuant to Section 2.1(b), then the Principal Stockholders shall have the right, at any time and from time to time, to nominate such additional designee(s) to which it is entitled, in which case, the Company shall take all necessary corporate action (to the extent permitted by applicable law and to the extent such action is consistent with the fiduciary duties of the directors under Delaware law) to cause the Board to (x) increase the size of the Board as required to enable such Principal Stockholders to so nominate such additional designee(s), and (y) designate such additional designees nominated by the Principal Stockholders to fill such newly created vacancy or vacancies, as applicable.

 

(d)           Following the date of completion of the IPO and for so long as the Principal Stockholder Group is entitled to designate any Person to the Board pursuant to Section 2.1, the Board shall consist of seven members (other than as contemplated by Section 2.1(c) or Section 2.1(e) or to the extent necessary to comply with applicable law or listing standards). The size of the Board may be increased to up to nine members by adding up to two new independent directors.

 

(e)           Any Stone Point Director may be removed (with or without cause) from time to time and at any time by the Principal Stockholders upon notice to the Company.

 

(f)            In the event that a vacancy is created on the Board by the death, disability, resignation or removal of a Stone Point Director, the Principal Stockholders shall be entitled to designate an individual to fill the vacancy so long as (i) the total number of Stone Point Directors serving on the Board immediately following the filling of such vacancy will not exceed the total number of persons the Principal Stockholders are entitled to designate pursuant to Section 2.1(b)(i) on the date of such replacement designation and (ii) the replacement designee (A) is an employee or partner of any Principal Stockholder, (B) is of the same level of seniority within the applicable Principal Stockholder as one of the Initial Directors serving as a Stone Point Director, (C) will qualify as independent within the meaning of NASDAQ Rule 5605(a) and (D) does not serve on the board of directors or as an officer of a Competitor of the Company. The Company shall take all necessary action (to the extent permitted by applicable law and to the extent such action is consistent with the fiduciary duties of the directors under Delaware law) to cause such replacement designee to become a member of the Board as soon as reasonably possible.

 

(g)           The Company agrees to take all necessary action (to the extent permitted by applicable law and to the extent such action is consistent with the fiduciary duties of the directors under Delaware law) to cause the Board to include in the slate of nominees recommended by the Board for election at any meeting of stockholders called for the purpose of electing directors the Persons designated pursuant to this Section 2.1 (to the extent that directors of such nominee’s class are to be elected at such meeting for so long as the Board is classified) and to nominate and recommend each such individual to be elected as a director as provided herein, and to solicit proxies or consents in favor thereof. The Company is entitled to identify such individual as a Stone Point Director pursuant to this Agreement.

 

Section 2.2            Voting.  For so long as the Principal Stockholder Group Beneficially Owns a number of shares of Common Stock representing at least 5% of the outstanding shares of Common Stock at any time, the Principal Stockholders shall vote, or provide a written consent or proxy with respect to, their shares of Common Stock in favor of the Chief Executive Officer and Rajini Sundar Kodialam (provided that she is an employee of the Company) for election to the Board, and to take all other steps

 

4



 

within the Principal Stockholders’ power to ensure that the composition of the Board is as set forth in Section 2.1 hereof. If Rajini Sundar Kodialam is no longer a member of the Board, the Principal Stockholders shall take all necessary action to cause the Stone Point Directors to vote in favor of such other officer of the Company designated by the Chief Executive Officer and approved by the Board for appointment to the Board and thereafter vote, or provide a written consent or proxy with respect to, their shares of Common Stock in favor of such officer for election to the Board.

 

Section 2.3            Restrictions on Other Agreements.  The Principal Stockholders shall not, directly or indirectly, grant any proxy or enter into or agree to be bound by any voting trust, agreement or arrangement of any kind with respect to its shares of Common Stock if and to the extent the terms thereof conflict with the provisions of this Agreement (whether or not such proxy, voting trust, agreement or agreements are with other holders of shares of Common Stock that are not parties to this Agreement or otherwise).

 

ARTICLE III
INFORMATION

 

Section 3.1            Access.  Each Stone Point Director is permitted to disclose to the Principal Stockholder Group information about the Company and its Affiliates that he or she receives as a result of being a Director, subject to his or her fiduciary duties under Delaware law.

 

Section 3.2            VCOC. With respect to the Principal Stockholder Group and, at the request of the Principal Stockholder Group, each Affiliate thereof that indirectly has an interest in the Company, in each case that is intended to qualify as a “venture capital operating company” as defined in 29 C.F.R. Section 2510.3-101 (each, a “VCOC Investor”), the Company shall, and shall cause Focus Financial Partners, LLC to, execute a side letter with each VCOC Investor in the form attached hereto as Annex A and each VCOC Investor shall have the supplemental rights and obligations provided in such side letter.

 

ARTICLE IV
 EFFECTIVENESS AND TERMINATION

 

Section 4.1            Effectiveness.  This Agreement shall become effective upon the closing of the IPO.  To the extent the closing of the IPO does not occur, the provisions of this Agreement shall be without any force or effect.

 

Section 4.2            Termination.  This Agreement shall terminate upon the delivery of written notice to the Company by the Principal Stockholders.  Further, at such time as the Principal Stockholder Group no longer Beneficially Owns at least 5% of the outstanding shares of Common Stock at any time, all rights and obligations of the Principal Stockholder Group under this Agreement shall terminate.

 

ARTICLE V
MISCELLANEOUS

 

Section 5.1            Notices.  All notices, requests, demands and other communications under this Agreement shall be in writing and shall be personally delivered, sent by nationally recognized overnight courier, mailed by registered or certified mail or be sent by facsimile or electronic mail to such party at the address set forth below (or such other address as shall be specified by like notice).  Notices will be deemed to have been duly given hereunder if (i) personally delivered, when received, (ii) sent by nationally recognized overnight courier, one business day after deposit with the nationally recognized overnight courier, (iii) mailed by registered or certified mail, five business days after the date on which it is so mailed, and (iv) sent by facsimile or electronic mail, on the date sent so long as such communication

 

5



 

is transmitted before 5:00 p.m. in the time zone of the receiving party on a business day, otherwise, on the next business day.

 

(a)           If to the Company, to:

 

Focus Financial Partners Inc.
825 Third Avenue, 27
th Floor
New York, NY 10022
Attention: General Counsel

 

(b)           If to the Principal Stockholders, to:

 

Stone Point Capital LLC

20 Horseneck Lane

Greenwich, CT 06830

Attention: Peter Mundheim

 

Section 5.2            Severability.  The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or any circumstance, is found to be invalid or unenforceable in any jurisdiction, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.

 

Section 5.3            Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, taken together, shall be considered one and the same agreement.

 

Section 5.4            Entire Agreement; No Third Party Beneficiaries.  This Agreement (a) constitutes the entire agreement and supersedes all other prior agreements, both written and oral, among the parties hereto with respect to the subject matter hereof and (b) except as provided in Section 3.2 with respect to any individual associated with the Principal Stockholder Group, is not intended to confer upon any Person, other than the parties hereto, any rights or remedies hereunder.

 

Section 5.5            Further Assurances.  Each party hereto shall execute, deliver, acknowledge and file such other documents and take such further actions as may be reasonably requested from time to time by the other parties hereto to give effect to and carry out the transactions contemplated herein. The Company shall not directly or indirectly take any action that is intended to, or would reasonably be expected to result in, any Principal Stockholder Group entity being deprived of the rights contemplated by this Agreement.

 

Section 5.6            Governing Law; Equitable Remedies.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF). The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties hereto shall be entitled to an injunction or injunctions and other equitable remedies to prevent breaches of this Agreement and to enforce specifically the terms and

 

6



 

provisions hereof in any of the Selected Courts (as defined below), this being in addition to any other remedy to which they are entitled at law or in equity. Any requirements for the securing or posting of any bond with respect to such remedy are hereby waived by each of the parties hereto. Each party hereto further agrees that, in the event of any action for an injunction or other equitable remedy in respect of such breach or enforcement of specific performance, it will not assert the defense that a remedy at law would be adequate.

 

Section 5.7            Consent To Jurisdiction.  With respect to any suit, action or proceeding (“Proceeding”) arising out of or relating to this Agreement, each of the parties hereto hereby irrevocably (a) submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware and the United States District Court for the District of Delaware and the appellate courts therefrom (the “Selected Courts”) and waives any objection to venue being laid in the Selected Courts whether based on the grounds of forum non conveniens or otherwise and hereby agrees not to commence any such Proceeding other than before one of the Selected Courts; provided, however, that a party may commence any Proceeding in a court other than a Selected Court solely for the purpose of enforcing an order or judgment issued by one of the Selected Courts; (b) consents to service of process in any Proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, or by recognized international express carrier or delivery service, to their respective addresses referred to in Section 5.1 hereof; provided, however, that nothing herein shall affect the right of any party hereto to serve process in any other manner permitted by law; and (c) TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY ACTION ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS AGREEMENT, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AND AGREES THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS AGREEMENT AND TO HAVE ALL MATTERS RELATING TO THIS AGREEMENT BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

 

Section 5.8            Amendments; Waivers.

 

(a)           No provision of this Agreement may be amended or waived unless such amendment or waiver is in writing and signed (i) in the case of an amendment, by each of the parties hereto, and (ii) in the case of a waiver, by each of the parties against whom the waiver is to be effective.

 

(b)           No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

Section 5.9            Assignment.  Neither this Agreement nor any of the rights or obligations hereunder shall be assigned or delegated by any of the parties hereto without the prior written consent of the other parties; provided, however, that any Principal Stockholder may assign any of its respective rights hereunder to any of its Affiliated Investors. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.

 

7



 

Section 5.10         No Recourse.  This Agreement may only be enforced against, and any claims or cause of action that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement may only be made against the entities that are expressly identified as parties hereto, and no past, present or future Affiliate, director, officer, employee, incorporator, member, manager, partner, stockholder, agent, attorney or representative of any party hereto shall have any liability for any obligations or liabilities of the parties to this Agreement or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby.

 

[Signature page follows.]

 

8



 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

 

 

COMPANY:

 

 

 

 

 

FOCUS FINANCIAL PARTNERS INC.

 

 

 

 

 

 

 

 

By:

/s/ Ruediger Adolf

 

 

 

Name:

Ruediger Adolf

 

 

 

Title:

Chief Executive Officer

 

[Signature Page to Nomination Agreement]

 



 

 

 

PRINCIPAL STOCKHOLDERS:

 

 

 

 

 

TRIDENT FFP LP

 

 

 

 

 

 

By:

Trident FFP GP LLC, its general partner

 

 

 

 

 

 

 

 

 

 

By:

/s/ Peter M. Mundheim

 

 

 

Name:

Peter M. Mundheim

 

 

 

Title:

Vice President & Assistant Secretary

 

 

 

 

 

 

 

 

 

TRIDENT VI, L.P.

 

 

 

 

 

 

By:

Stone Point Capital LLC, its manager

 

 

 

 

 

 

 

 

 

 

By:

/s/ Peter M. Mundheim

 

 

 

Name:

Peter M. Mundheim

 

 

 

Title:

Principal

 

 

 

 

 

 

 

 

 

TRIDENT VI PARALLEL FUND, L.P.

 

 

 

 

 

 

By:

Stone Point Capital LLC, its manager

 

 

 

 

 

 

 

 

 

 

By:

/s/ Peter M. Mundheim

 

 

 

Name:

Peter M. Mundheim

 

 

 

Title:

Principal

 

 

 

 

 

 

 

 

 

TRIDENT VI PARALLEL FUND, L.P.

 

 

 

 

 

 

By:

Stone Point Capital LLC, its manager

 

 

 

 

 

 

 

 

 

 

By:

/s/ Peter M. Mundheim

 

 

 

Name:

Peter M. Mundheim

 

 

 

Title:

Principal

 

[Signature Page to Nomination Agreement]

 



 

ANNEX A

 

[See attached.]

 



 

Trident VI, L.P.
Trident VI Parallel Fund, L.P.
Trident VI DE Parallel Fund, L.P.
Trident FFP LP

 

c/o Stone Point Capital LLC
20 Horseneck Lane
Greenwich, CT 06830

 

Dear Sirs/Madams:

 

This letter confirms that Focus Financial Partners Inc., a Delaware corporation (the “Company”), has agreed to provide Trident VI, L.P., Trident VI Parallel Fund, L.P., Trident VI DE Parallel Fund, L.P. and Trident FFP LP (each, an “Investor”), and each Investor is entitled to, the following contractual management rights, in addition to any rights that an Investor may have or become entitled to under any constituent documents of, or agreements with, the Company and notwithstanding anything in the constituent documents or such agreements to the contrary:

 

(a)         Each Investor (and its designated representative) shall be entitled to visit and inspect any of the offices and properties of the Company and its subsidiaries, including its and their books and records, and to discuss its and their affairs, finances and accounts with the company’s officers and senior management, at such times as Investor may reasonably request, during normal business times and upon reasonable notice.

 

(b)         The Company shall deliver to each Investor:

 

1.              (i) within 45 days after the end of each of the first three quarters of each fiscal year of the Company, the consolidated balance sheets of the Company and its subsidiaries as of the end of such period, and consolidated statements of income and cash flows of the Company and its subsidiaries for the period then ended prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis, except as otherwise noted therein, and subject to the absence of footnotes and to year-end adjustments; (ii) within 120 days after the end of each fiscal year of the Company, a consolidated balance sheet of the Company and its subsidiaries as of the end of such year, and consolidated statements of income and cash flows of the Company and its subsidiaries for the year then ended prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis, except as otherwise noted therein, together with an auditor’s report thereon of a firm of established national reputation; and (iii) as soon as reasonably available, to the extent the Company is required by law or pursuant to the terms of any outstanding indebtedness of the Company to prepare such reports, any annual reports, quarterly reports and other periodic reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, actually prepared by the Company as soon as available; provided, however, that to the extent such

 



 

information is posted by the Company on the Securities and Exchange Commission’s website within the time periods provided for herein, the delivery of such information shall be deemed satisfied; and

 

2.              at any time during which such Investor does not have a representative designated to serve on the Board of Directors of the Company (the “Board”), upon written request by the Investor, copies of all materials provided to the Board, subject to appropriate protections with respect to preservation of attorney-client privilege and subject to any determination by the Company’s counsel that the provision of such materials to the Investors would result in a breach by the Company of a confidentiality obligation of the Company.

 

(c)          Each Investor (and its designated representative) shall be entitled to routinely consult with and advise the Board, officers and/or directors of the Company and its subsidiaries with respect to all matters relating to the business, operations and affairs of the Company and its subsidiaries.

 

(d)         To the extent consistent with applicable law (and with respect to events which require public disclosure, only following the Company’s public disclosure thereof through applicable securities law filings or otherwise), the Company shall inform each Investor or its designated representative in advance with respect to any significant corporate actions, including, without limitation, extraordinary dividends, mergers, acquisitions or dispositions of assets, issuances of significant amounts of debt or equity and material amendments to the constituent documents of the Company, and to provide such Investor or its designated representative with the right to consult with the Company with respect to such actions.

 

(e)          The Company agrees to consider, in good faith, the recommendations of the Investor and/or its designated representative in connection with the matters on which it is consulted or advised as described above, recognizing that the ultimate discretion with respect to all such matters shall be retained by the Company.

 

(f)           The rights set forth in this letter are intended to satisfy the requirement of contractual management rights for purposes of qualifying the investment in the Company by each Investor as a “venture capital investment” (as defined in 29 C.F.R. § 2510.3-101 (the “Plan Assets Regulation”).  The Company agrees that if legal counsel for an Investor reasonably concludes that the rights granted hereby should be altered or amended to preserve the qualification of such Investor’s investment as a “venture capital investment” (within the meaning of the Plan Assets Regulation), whether on account of a change in applicable law, regulation, judicial or administrative interpretation or otherwise, the Company and such Investor shall reasonably cooperate in good faith to agree upon mutually satisfactory management rights which satisfy the Plan Assets Regulations or such other applicable law or regulation.

 



 

Each Investor agrees, and will require each designated representative of the Investor to agree, to hold in confidence and not use or disclose to any third party (other than its legal counsel and accountants) any confidential information provided to or learned by such party in connection with the Investor’s rights under this letter agreement except as may otherwise be required by law or legal, judicial or regulatory process, provided that such Investor takes reasonable steps to minimize the extent of any such required disclosure, including informing the Company in advance thereof and taking reasonable steps to seek a protective order prior thereto.  Each Investor is aware that, in exercising its rights hereunder, it may receive material non-public information about the Company and its subsidiaries pursuant to this letter agreement or upon exercise of its rights hereunder, and each Investor agrees that it is aware of, and shall comply with, applicable federal and state securities laws that restrict any person who has material, non-public information about a company from purchasing or selling securities of the company or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities.

 

In the event the Investor or any of its affiliates transfers all or any portion of their investment in the Company to an affiliated entity that is intended to qualify as a “venture capital operating company” under the Plan Asset Regulation, such transferee shall be afforded the same rights with respect to the Company afforded to an Investor hereunder and shall be treated, for such purposes, as a third party beneficiary hereunder.  Further, in the event the Company engages in a restructuring or similar transaction, any resulting entity or entities shall be subject to this Agreement in the same manner as the Company.

 

This letter agreement and the rights and the duties of the parties hereto shall be governed by, and construed in accordance with, the laws of the State of Delaware (without giving effect to conflict of laws principles thereof) and may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument.  This letter agreement may only be amended by an agreement in writing signed by each of the parties hereto.

 

The rights and duties described herein shall terminate and be of no further force or effect upon the Investor no longer holding, directly or indirectly through one or more subsidiaries, together with its affiliates, any securities of the Company.

 

[Remainder of Page Intentionally Left Blank]

 



 

 

 

Very truly yours,

 

 

 

 

 

Focus Financial Partners Inc.

 

 

 

 

 

By:

 

 

 

 

 

 

Name: Ruediger Adolf

 

 

 

 

 

Title: Chief Executive Officer

 

[Signature Page to VCOC Letter]

 



 

Agreed and Accepted:

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

[Signature Page to VCOC Letter]

 


Exhibit 4.3

 

NOMINATION AGREEMENT

 

This NOMINATION AGREEMENT (this “Agreement”), dated as of July 30, 2018, is entered into by and between Focus Financial Partners Inc., a Delaware corporation (the “Company”), and each of the stockholders of the Company whose name appears on the signature pages hereto (each a “Principal Stockholder,” and collectively, the “Principal Stockholders”).

 

WHEREAS, in connection with, and effective upon, the completion of the underwritten initial public offering (the “IPO”) of shares of the Company’s Class A Common Stock (as defined below), the Principal Stockholders and the Company have entered into this Agreement to set forth certain understandings among such parties, including with respect to certain governance matters.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

Section 1.1            Certain Definitions.  As used in this Agreement, the following terms shall have the following meanings:

 

Affiliate” means, with respect to any specified Person, a Person that directly or indirectly Controls or is Controlled by, or is under common Control with, such specified Person. For purposes of this Agreement, no party to this Agreement shall be deemed to be an Affiliate of another party to this Agreement solely by reason of the execution and delivery of this Agreement.

 

Affiliated Investor” means, with respect to any Principal Stockholder, (i) any investment fund or holding company that is directly or indirectly managed or advised by a manager or advisor of such Principal Stockholder and (ii) any of its Affiliates or any other Person who or which is otherwise an Affiliate of any such Principal Stockholder (other than the Company and its subsidiaries).

 

Beneficial Owner” of a security is a Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares (a) voting power, which includes the power to vote, or to direct the voting of, such security and/or (b) investment power, which includes the power to dispose of, or to direct the disposition of, such security. The terms “Beneficially Own” and “Beneficial Ownership” shall have correlative meanings. For the avoidance of doubt, for purposes of this Agreement, each of the Principal Stockholders is deemed to Beneficially Own the shares of Common Stock owned by it, notwithstanding the fact that such shares or other securities are subject to this Agreement.

 

Board” means the Board of Directors of the Company.

 

Class A Common Stock” means the shares of Class A common stock, par value $0.01 per share, of the Company, and any other capital stock of the Company into which such stock is reclassified or reconstituted.

 

Class B Common Stock” means the shares of Class B common stock, par value $0.01 per share, of the Company, and any other capital stock of the Company into which such stock is reclassified or reconstituted.

 

Common Stock” means the Class A Common Stock and the Class B Common Stock, collectively.

 

1



 

Competitor means (a) (i) a national or global financial institution or insurance company or a regional bank that in each case derives at least 30% of its revenue from wealth management services (which, for the avoidance of doubt, excludes life insurance and annuities), (ii) an independent broker dealer, or (iii) a platform for or aggregator of registered investment adviser or broker-dealer teams, or (b) a holding company or acquisition vehicle of any entity described in clause (a) of this definition.

 

Control” (including the terms “Controls,” “Controlled by” and “under common Control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

Initial Share Ownership means, with respect to the Principal Stockholders, the number of shares of Common Stock held by the Principal Stockholders as of the closing of the IPO.

 

KKR Director” means the designee of the Principal Stockholders.

 

Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, any court, administrative agency, regulatory body, commission or other governmental authority, board, bureau or instrumentality, domestic or foreign and any subdivision thereof or other entity, and also includes any managed investment account.

 

Principal Stockholder Group” means the Principal Stockholders and any of their respective Affiliates and Affiliated Investors and their respective successors and permitted assigns.

 

Section 1.2            Rules of Construction.

 

(a)           Unless the context requires otherwise:  (i) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms; (ii) references to Articles and Sections refer to articles and sections of this Agreement; (iii) the terms “include,” “includes,” “including” and words of like import shall be deemed to be followed by the words “without limitation”; (iv) the terms “hereof,” “hereto,” “herein” or “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement; (v) unless the context otherwise requires, the term “or” is not exclusive and shall have the inclusive meaning of “and/or”; (vi) defined terms herein will apply equally to both the singular and plural forms and derivative forms of defined terms will have correlative meanings; (vii) references to any law or statute shall include all rules and regulations promulgated thereunder, and references to any law or statute shall be construed as including any legal and statutory provisions consolidating, amending, succeeding or replacing the applicable law or statute; (viii) references to any Person include such Person’s successors and permitted assigns; and (ix) references to “days” are to calendar days unless otherwise indicated.

 

(b)           The headings in this Agreement are for convenience and identification only and are not intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision thereof.

 

(c)           This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party that drafted or caused this Agreement to be drafted.

 

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ARTICLE II
VOTING AND GOVERNANCE MATTERS

 

Section 2.1            Designees.

 

(a)           Upon the closing of the IPO, the Board shall initially consist of seven directors, including Ruediger Adolf, Rajini Sundar Kodialam, Fayez S. Muhtadie, Christopher J. Harrington, James D. Carey, Deborah D. McWhinney and Noah Gottdiener (the “Initial Directors”). The audit committee of the Board shall initially consist of three directors, including Fayez S. Muhtadie, Deborah D. McWhinney and Noah Gottdiener, the compensation committee of the Board shall initially consist of three directors, including Fayez S. Muhtadie, James D. Carey and Noah Gottdiener, and the nominating and governance committee of the Board shall initially consist of three directors, including Christopher J. Harrington, Fayez S. Muhtadie and Deborah D. McWhinney. Of the Initial Directors, Christopher J. Harrington is deemed to be a KKR Director. The Board will be divided into three classes serving staggered three-year terms. Class I, Class II and Class III directors will serve until the Company’s annual meetings of shareholders in 2019, 2020 and 2021, respectively. Ruediger Adolf, James D. Carey and Christopher J. Harrington will be assigned to Class I, Rajini Sundar Kodialam and Noah Gottdiener will be assigned to Class II, and Deborah D. McWhinney and Fayez S. Muhtadie will be assigned to Class III. From and after the closing of the IPO, the rights of the Principal Stockholders to designate directors to the Board and its committees shall be as set forth in the remainder of this Section 2.1. At the completion of the IPO, the Board shall include the applicable KKR Director referred to in this paragraph (a), and such other individuals as shall be nominated and elected to the Board from time to time by the Board or the Company’s stockholders consistent herewith and with applicable law.

 

(b)           (i)            For so long as the Principal Stockholder Group Beneficially Owns a number of shares of Common Stock representing at least 5% of the outstanding shares of Common Stock at any time, the Company will take all necessary action (to the extent permitted by applicable law and to the extent such action is consistent with the fiduciary duties of the directors under Delaware law) to cause the Board to nominate for election at each annual or special meeting of shareholders at which directors are to be elected that number of individuals designated by the Principal Stockholders that, if elected, would result in one (1) KKR Director serving on the Board. Any individuals, other than the Initial Directors, designated by the Principal Stockholders pursuant to this Section 2.1(b)(i) must satisfy the requirements for a replacement designee set forth in Section 2.1(c) hereof.

 

(ii)           Subject to applicable laws and stock exchange regulations, for so long as the Principal Stockholder Group Beneficially Owns a number of shares of Common Stock representing at least 5% of the outstanding shares of Common Stock at any time, the Company will take all necessary action (to the extent permitted by applicable law and to the extent such action is consistent with the fiduciary duties of the directors under Delaware law) to cause the Board to appoint one (1) KKR Director to serve on the nominating and governance committee of the Board and permit one (1) KKR Director to serve as an observer of the compensation committee of the Board (the “Observer”). The Observer, in his or her capacity as such, shall be entitled to: (A) receive written notice of all meetings of the compensation committee, (B) attend all meetings of the compensation committee, whether in person or by means of conference telephone or other communications equipment by which all persons participating in the meeting can hear each other, (C) receive a copy of all materials which are furnished to the members of the compensation committee, in their capacities as such, at the same time and in the same manner as such materials are furnished to the members of the compensation committee, (D) participate in all discussions conducted at such meetings, and (E) receive copies of the minutes of all such meetings of the compensation committee as and when such copies are distributed to the members of the compensation committee. The Observer shall not constitute a member of the compensation committee and shall not be entitled to vote on, or consent to, any matters presented to the compensation committee.

 

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(c)           In the event that the Principal Stockholders have nominated fewer than the total number of designees that the Principal Stockholders shall be entitled to nominate pursuant to Section 2.1(b), then the Principal Stockholders shall have the right, at any time and from time to time, to nominate such additional designee(s) to which it is entitled, in which case, the Company shall take all necessary corporate action (to the extent permitted by applicable law and to the extent such action is consistent with the fiduciary duties of the directors under Delaware law) to cause the Board to (x) increase the size of the Board as required to enable such Principal Stockholders to so nominate such additional designee(s), and (y) designate such additional designees nominated by the Principal Stockholders to fill such newly created vacancy or vacancies, as applicable.

 

(d)           Following the date of completion of the IPO and for so long as the Principal Stockholder Group is entitled to designate any Person to the Board pursuant to Section 2.1, the Board shall consist of seven members (other than as contemplated by Section 2.1(c) or Section 2.1(e) or to the extent necessary to comply with applicable law or listing standards). The size of the Board may be increased to up to nine members by adding up to two new independent directors.

 

(e)           Any KKR Director may be removed (with or without cause) from time to time and at any time by the Principal Stockholders upon notice to the Company.

 

(f)            In the event that a vacancy is created on the Board by the death, disability, resignation or removal of a KKR Director, the Principal Stockholders shall be entitled to designate an individual to fill the vacancy so long as (i) the total number of KKR Directors serving on the Board immediately following the filling of such vacancy will not exceed the total number of persons the Principal Stockholders are entitled to designate pursuant to Section 2.1(b)(i) on the date of such replacement designation and (ii) the replacement designee (A) is an employee or partner of any Principal Stockholder, (B) is of the same level of seniority within the applicable Principal Stockholder as the Initial Director serving as a KKR Director, (C) will qualify as independent within the meaning of NASDAQ Rule 5605(a) and (D) does not serve on the board of directors or as an officer of a Competitor of the Company. The Company shall take all necessary action (to the extent permitted by applicable law and to the extent such action is consistent with the fiduciary duties of the directors under Delaware law) to cause such replacement designee to become a member of the Board as soon as reasonably possible.

 

(g)           The Company agrees to take all necessary action (to the extent permitted by applicable law and to the extent such action is consistent with the fiduciary duties of the directors under Delaware law) to cause the Board to include in the slate of nominees recommended by the Board for election at any meeting of stockholders called for the purpose of electing directors the Persons designated pursuant to this Section 2.1 (to the extent that directors of such nominee’s class are to be elected at such meeting for so long as the Board is classified) and to nominate and recommend each such individual to be elected as a director as provided herein, and to solicit proxies or consents in favor thereof. The Company is entitled to identify such individual as a KKR Director pursuant to this Agreement.

 

Section 2.2            Voting.  For so long as the Principal Stockholder Group Beneficially Owns a number of shares of Common Stock representing at least 5% of the outstanding shares of Common Stock at any time, the Principal Stockholders shall vote, or provide a written consent or proxy with respect to, their shares of Common Stock in favor of the Chief Executive Officer and Rajini Sundar Kodialam (provided that she is an employee of the Company) for election to the Board, and to take all other steps within the Principal Stockholders’ power to ensure that the composition of the Board is as set forth in Section 2.1 hereof. If Rajini Sundar Kodialam is no longer a member of the Board, the Principal Stockholders shall take all necessary action to cause the KKR Director to vote in favor of such other officer of the Company designated by the Chief Executive Officer and approved by the Board for appointment to