2015 SRS Acquiom M&A Claims Study

Transcription

1 2015 SRS Acquiom M&A Claims Study An analysis of post-closing activity in private-target M&A deals Shareholder Representation Escrow Solutions Payments Administration

2 The Single-Source M&A Partner Engaging a single provider simplifies your deal. We believe there are better ways to get private M&A deals done and are passionate for what we do and obsessive in how we do it. Work with us on your next deal and experience the difference for yourself. Close your deal using any combination of solutions: Representations & Warranties Insurance NEW Escrows Payments Administration Shareholder Representation Get the Best Outcome as a Result of Our Experience Exceptional Service with Innovative Investment Options to Fit Your Deal The Only Platform to Pay All Parties, and with Same-Day Payments Expert Team Of Professionals Advocating for You More Experience, More Data, Better Results High-Touch Service LOTs Completed Online in 10 Minutes One-Time Flat Fee Provides Certainty Trusted Name in M&A Claims Advocacy No Need to Hire a Separate Broker Simple Process, Fast Set-Up Avoid Escrow- Fee Hassles Quick Answers to Payee Questions Timely Updates on Payment Status Maintain Control Over Key Decisions Minimize Lawsuit Risk Quickly Add Escrows for Excluded Risks Improve Economics Through Higher Yield Streamlined Process for Returning Users All Claim Types Handled Slide 2

3 About this Study > The 2015 SRS Acquiom Claims Study Sample This study analyzes purchase price adjustments, indemnification claims and earnout activity across 720 private-target deals on which SRS served as shareholder representative from Q through Q4 2014, including nearly 1,000 individual indemnification claims. This study also examines 440 deals with escrows that have reached the scheduled release date or were fully claimed before such time ( expiredescrow deals ), allowing us to analyze activity over the life of such deals. > $108 billion in deal value $97 billion paid at closing and $11 billion at risk in escrow, not including potential earnout payments. > Why Our Study is Unique As shareholder representative, we have access to seller management, shareholders and all deal documents and manage all post-closing matters. Most information from these sources is not publicly available or reported in other studies. Our goal is to arm deal professionals who negotiate and advise on private-target transactions with robust, reliable information that cannot be found elsewhere. SRS Acquiom received claim notices with varying levels of specificity, and the claim resolution process is not always the result of communication supported by formal documentation between the parties. Categorization of claim and resolution data is often subjective. Therefore, the conclusions presented in this study may be subject to important qualifications not expressly articulated herein. All information herein is subject to change. Slide 3

4 Table of Contents Key Points...6 Deal Set Overview Transaction Values Deal Structures and Buyer Types Claim Subject Matter Mix of Claim Types, by Deal Closing Year...11 Post-Closing Purchase Price Adjustments Adjustment Direction and Key Figures Claim Sizes...14 Indemnification Claim Activity Claim Activity Generally Claim Sizes Claim Activity by Transaction Value Claim Activity by Escrow Size Claim Activity by Buyer Type Resolution Time by Claim Type Baskets Expense Funds...23 Earn-outs...25 Glossary...26 Slide 4

5 Key Points > Activity across all deals was frequent - 68% of expired-escrow deals * had post-closing activity relating to indemnification claims, purchase price adjustments and/or earnouts - 60% of expired-escrow deals had claims against the escrow (including purchase price adjustments) > Claim activity was significant in deals with claims - The average deal with claims had 2.7 claims seeking a total of 24% of the escrow - 18% of deals with claims had claims exceeding half of the escrow - 9% of deals with claims had claims litigated or arbitrated, driving use of expense funds > Post-closing purchase price adjustments ( PPAs ) occurred often - 65% of deals with a PPA mechanism had an adjustment > Non life sciences ** earnout milestones were paid at least in part over half of the time - 56% of milestones that came due were paid to some degree - 15% of milestones initially claimed as missed were disputed and negotiated to a payout for shareholders * Expired-escrow deals includes deals where selling shareholders have no further escrow-based indemnification obligations. ** For a detailed analysis of SRS Acquiom s life sciences deals, including earnouts, please see the 2012 SRS Life Sciences M&A Study. Slide 5

6 Deal Set Overview Slide 6

7 Transaction Values Data set: all deals closing Transaction values * >$250MM to $750MM 14% More than $750MM 2% $25MM or less 22% >$100MM to $250MM 23% >$25MM to $50MM 19% >$50MM to $100MM 20% * Transaction value includes escrowed amounts but does not include potential earnout payments. Slide 7

8 Deal Structures and Buyer Types Data set: all deals closing Deal structures Buyer types Asset purchase 5% Financial 8% Stock purchase 14% Private 20% Foreign 9% Merger 81% Public 63% Slide 8

9 Claim Subject Matter Data set: all deals closing Subject matter as % of all claims (~1,000 claims) Subset: breaches of R&W (~600 claims) Fraud 1% Purchase price adjustment* 23% Fees/costs 14% Breach of rep or warranty 58% Undisclosed liabilities 11% Other 10% Capitalization 8% Customer contracts 6% Employeerelated 10% Financial statement 7% Breach of fiduciary duty 2% Appraisal 2% Tax 31% Regulatory compliance 4% Intellectual property 13% * Claims pursuant to a post-closing purchase price adjustment mechanism (e.g. working capital). Slide 9

10 Mix of Claim Types, by Deal Closing Year Data set: expired-escrow deals closing Mix of claim types (each column sums to 100%), by deal closing year 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Appraisal Breach of Fiduciary Duty Capitalization Customer Contract Employee Fees and Costs Financial Statement Fraud Intellectual Property Other Purchase Price Adjustment Regulatory Tax Undisclosed Liabilities Slide 10

11 Post-Closing Purchase Price Adjustments Slide 11

12 Post-Closing Purchase Price Adjustments ( PPAs ) Data set: deals with PPAs Adjustment direction Key figures Statement delivered, no adjustment 6% > 77%: deals with a PPA mechanism > 33%: PPA statements delivered after the contractual deadline No PPA statement delivered 29% > 0.4%: median PPA claim size, as a percentage of transaction value - The average was 1.3% Surplus (sellerfavorable) 17% Claim (buyerfavorable) 48% Slide 12

13 Post-Closing Purchase Price Adjustments ( PPAs ) Data set: deals with PPAs PPA claim sizes as % of transaction value PPA claim sizes in dollars Up to 0.25% 42% Up to $50k 15% >0.25% to 0.5% 16% >$50k to $150k 23% >0.5% to 1% 16% >$150k to $500k 31% >1% to 2% 14% >2% to 5% 6% >$500k to $2MM 23% >5% to 10% 4% >$2MM to $10MM 6% >10% to 40%* 2% >$10MM* 2% * Encompasses the maximum values in this data set. Slide 13

14 Indemnification Claim Activity Slide 14

15 Claim Activity Generally Data set: expired-escrow deals closing % of deals that received each claim type Key figures Negative PPA* Tax Fees/costs 18% 14% 48% > 60%: deals with at least one escrow claim, including negative PPAs - 25% had more than one claim Intellectual property Undisclosed liabilities 11% 8% > 1.6: average number of claims per deal, including deals without claims Employee 8% in deals with claims Other R&W Capitalization 7% 6% > 13%: average escrow amount claimed per deal, including deals without claims Customer contract 5% - 24% of the escrow in deals with claims Financial statement Appraisal rights Breach of fiduciary duty Regulatory compliance 4% 3% 3% 2% > 6% of all deals had claims match or exceed the escrow - 9% of all deals had claims for half or more of the escrow amount Fraud 1% * Includes only deals with a post-closing purchase price adjustment ( PPA ) mechanism. PPAs are discussed on slides 12 and 13. Slide 15

16 Claim Sizes Data set: all deals closing Claim sizes Average claim size as % of the escrow, by type >$2MM to $10MM 9% >$10MM 3% Up to $50k 26% Fraud Breach of fiduciary duty Customer contract 41% 26% 100% >$500k to $2MM 18% Intellectual property Financial statement Undisclosed liabilities 23% 17% 14% Tax 5% Regulatory 5% >$150k to $500k 21% >$50k to $150k 23% Employee Fees/costs Appraisal 5% 2% 1% Capitalization 1% > 21% of expired-escrow deals had claims totaling more than $1MM Slide 16

17 Claim Activity by Transaction Value Data set: expired-escrow deals closing Claim frequency based on transaction value Claim size based on transaction value Deals with a claim Up to $50MM >$50MM to $100MM >$100MM to $200MM Average claims per deal* 57% % % 1.5 Average % of escrow claimed, deals with claims Average % of escrow claimed, all deals 29% Up to $50MM 16% 28% >$50MM to $100MM 16% 17% >$100MM to $200MM 10% >$200MM to $500MM 66% 2.0 >$200MM to $500MM 9% 15% >$500MM to $1.5B** 64% 2.1 >$500MM to $1.5B** 10% 18% * Including deals with no claims. ** Encompasses the maximum values in this data set. Slide 17

18 Claim Activity by Escrow Size Data set: expired-escrow deals closing Claim frequency based on escrow size Claim size based on escrow size Deals with a claim Average claims per deal* Average % of escrow claimed, deals with claims Escrow size as % of transaction value Up to 5% >5% to 10% >10% to 15% >15% to 20% >20% to 50%** 55% % % % 57% Average % of escrow claimed, all deals Up to 5% 27% 21% >5% to 10% 12% 19% >10% to 15% 10% 31% >15% to 20% 20% 31% >20% to 50%** 18% 51% * Including deals with no claims. ** Encompasses the maximum values in this data set. Slide 18

19 Claim Activity by Buyer Type Data set: expired-escrow deals closing Claim frequency based on buyer type Claim size based on buyer type Deals with a claim Average claims per deal* Average % of escrow claimed, deals with claims Average % of escrow claimed, all deals Public 57% 1.5 Public 12% 22% Private 59% 1.4 Private 16% 30% Financial 74% 1.9 Financial 24% 34% Foreign 68% 1.7 Foreign 10% 15% * Including deals with no claims. Slide 19

20 Resolution Time by Claim Type Data set: all deals closing Months to resolve contested claims, on average * Key figures Appraisal 15 > 7 months: average across contested claims Breach of fiduciary duty Customer contract Financial statement > 4 months: average across all claims and all resolution methods (including claims resolved without objection) Intellectual property Regulatory 8 8 > 5% of expired-escrow deals with claims had one or more claims litigated or arbitrated Undisclosed liabilities Capitalization 8 7 > Fraud claims were often made and resolved in tandem with other claims Fees/costs 7 Tax 6 Employee 5 Fraud 3 * Only includes claims resolved as of the publication date. Does not include claims that have not yet been resolved and which may materially extend average resolution times. Slide 20

21 Baskets Data set: expired-escrow deals closing Basket types, by deal Claim activity by basket type * Combination 2% No basket 3% Average number of claims per deal Average % of escrow claimed, deals with claims Average % of escrow claimed, all deals 1.7 Deductible 37% First dollar 58% First dollar 12% 23% 1.5 Deductible 26% 16% * Combination baskets are excluded here due to small sample size. Slide 21

22 Expense Funds Data set: all deals closing Expense fund sizes Key figures Over $500k 8% >$250k to $500k 19% >$150k to $250k 30% Up to $50k 12% >$50k to $150k 31% > 96% of deals closing in 2014 had expense funds > Median size: - $200, % of transaction value (inversely correlated to deal size) > 75% of expired-escrow deals used less than 10% of the expense fund > Larger median size in deals with earnouts % of transaction value (excluding potential earnout value) for deals with an earnout % of transaction value for deals without an earnout Slide 22

23 Earnouts Slide 23

24 Earnouts Data set: 66 non life sciences * milestone events that have come due Milestone achievement rates Key figures Paid (within range of sellers' expectations) 50% Missed 44% > 68% of expired-escrow deals with earnouts had escrow claims - 58% of expired-escrow deals without earnouts had escrow claims > 15% of earnout milestones initially claimed as missed were disputed and negotiated to a payout for shareholders > 88% of earnout milestones in this data set were based on financial metrics (e.g., revenue, earnings) Paid (fell short of sellers' expectations) 6% * For a detailed analysis of SRS Acquiom s life sciences deals, including earnouts, please see the 2012 SRS Life Sciences M&A Study. Slide 24

25 Representations and Warranties Insurance Slide 25

26 Representations & Warranties Insurance Overview Risk allocation shapes every M&A deal Indemnification obligations can be collateralized by an escrow, a holdback, representations and warranties Insurance (RWI), or a combination of these tools RWI allocates some or all risk of loss to an insurer When the buyer is the insured, RWI can replace or reduce the need for an escrow When the sellers are the insured, they remain liable under the M&A agreement but RWI compensates them against covered losses Slide 26

27 Representations & Warranties Insurance More popular among financial buyers (PE) Strategic buyers not using the tool very much yet - still a preference for cash escrows About 80% of policies issued are buy-side policies Buy-side policies: Ø Often used to enhance bid by eliminating sellers indemnification risk Ø Maximizes IRR for sellers (all deal cash paid at closing) Ø Covers seller fraud (but insurer can go after sellers) Slide 27

28 Representations & Warranties Insurance Sell-side policies Ø Adds certainty to purchase price (escrow is no longer a maybe ) Ø Allows sellers to distribute closing proceeds with little or no risk of a clawback Ø Maximize IRR via faster distribution of proceeds Ø Coverage binds at the deal level, so passive or minority shareholders are protected also Slide 28

29 RWI Fast Facts 1. Premium The premium is typically 3 5% of the insured amount 2. Deductible The policy deductible (the retention ) is often 1 3% of the deal s purchase price when the buyer is the insured, or the escrow amount when the sellers are the insured 3. Policy Forms Policies are tailored to each transaction, and repeat policyholders can often start with a previously negotiated form if engaging the same insurer 4. Process The premium, coverage and underwriting process each differ slightly depending on which party is insured 5. Alternatives Uninsurable risks can be collateralized with special escrows Slide 29

30 Benefits and Drawbacks of RWI Benefits ü Enhances the buyer s bid (in buy-side policies) ü Protects relationships against disputes (in buyside policies) ü Enhances sellers IRR where RWI negates the need for an escrow or contingency reserves, maximizing distributable proceeds at closing ü Adds certainty to the purchase price received by sellers ü Allows sellers to exit without fear of a clawback (in sell-side policies above the escrow) ü Reduces credit risk borne by the Buyer (in sellside policies above the escrow) x x x x Drawbacks The premium is an additional transaction cost, resulting in less proceeds overall for distribution Underwriting may add complexity and time to deal negotiations Policies may have material exclusions, requiring special-purpose escrows or alternative insurance Claims must be negotiated with an insurer Slide 30

31 Buying Process 3 Phases Solicit RWI Bids Deal parties provide the latest draft of the M&A agreement, disclosure schedules, and Seller financials to SRS Acquiom for solicitation of bids. Negotiate Preliminary Terms Underwriters review the information and provide non-binding quotes and preliminary terms. SRS Acquiom assists the parties in analyzing bids and negotiating to obtain optimal coverage. Escrows or alternative insurance can be obtained for excluded matters. Underwrite and Bind the Policy A bid is chosen and final underwriting commences. Binding terms are issued in a final policy that is paid for and bound at closing. Slide 31

32 Typical Policy Exclusions These exclusions can often be addressed through special-purpose escrows or insurance, both available through SRS Acquiom.! Known or Heightened Risks Known bases for claims Matters in the disclosure schedule Matters that are difficult to diligence Post-Closing Purchase Price Adjustments Such as adjustments to Net Working Capital Seller Fraud (when the Sellers are the insured) But coverage for Seller fraud is generally available when the Buyer is the insured Slide 32

33 Banking and SEC Reforms Impacting M&A Escrows Slide 33

34 Historic Escrow Allocation Based on 1,400 SRS Deals $17B $25B 15% 10% Bank Deposits 75% Money Market Funds Treasury Funds $127B Slide 34

35 2a-7 Reforms - Overview July 23, 2014 New SEC regulations adopted Most significant changes take effect next month on October 14, 2016! 3 Big New Features of Institutional Money Market Funds: 1. Floating NAV no longer pegged to $1 2. Permitted to impose a liquidity fee of up to 2% 3. Permitted to impose redemption gates up to 10 days Slide 35

36 2a-7 Reforms What it Means to You? The result? 1. Combination of floating NAV and liquidity fee means investors will not have certainty of receiving 100% back, which introduces a new, non-deal economic risk 2. Lower yields are likely as fund managers will be motivated to be much more conservative in their investing to avoid the above problems; higher expenses also (compliance, legal, etc.) 3. Banks unlikely to waive fees, more likely to increase fees Bottom line Institutional Money Market Mutual Funds simply may no longer be a good option for M&A escrows. Too many potential complications make them easier to avoid. M&A deal parties will need to scout other alternatives. Slide 36

37 Some Suggestions on What to Do Now Bank Deposits GSIBs will still be here, of course, and it may take time for these new regulations to fully drip down to the escrow groups different banks will react differently Look to non-gsib banks Off-Balance-Sheet Options Repurchase Agreements (Repos)? Commercial Paper? (neither is really tested or designed for M&A escrows) SRS Acquiom has bank deposit and off-balance-sheet solutions for M&A escrows that solve these issues. If you d like to learn more about them, give us a call. Slide 37

38 A Few Practical Tips Slide 38

39 7 Practical Tips > Privilege - Make sure that pre-closing deal communications are owned by the sellers and that the privilege also follows the sellers. - See our white paper on the Great Hill case on this point. > Information Rights - Make sure that your agreement has robust information rights if you are on the sell-side. Defending a claim can be very difficult without them. > Payroll Taxes - The employer portion of payroll taxes on post-closing payments. Figure out who pays them and make it clear in the agreements. - This is usually not a big-dollar issue, but can end up holding up an escrow release as the parties try to figure it out. > Expense Fund - Set aside a decent expense fund. Without it, the sellers' ability to defend itself in a dispute can be severely impaired. > Escrow Contribution Clarity - Make sure that your allocation spreadsheet is clear in terms of who contributed what to escrow and who gets money back out and that it matches up with the words in the agreement. - It may seem obvious, but we see issues with this all the time, particularly around management incentive plans, liquidation preferences, etc. Slide 39

40 7 Practical Tips (con t) > Dispute Settlement Alternative - Nearly every deal has a dispute resolution provision that provides for either courtroom litigation (usually Delaware) or arbitration. - However, in our experience, nearly all disputes can be resolved short of a formal dispute proceeding. - An intermediate step of a settlement conference assisted by a third party neutral (i.e. a mediation), whether suggested or required, that is expressly set forth in the agreement would help reduce the likelihood of litigation. > PPA Teeth - Many deals have a purchase price adjustment provision, but not every deal addresses what happens if a PPA statement is not delivered by the buyer within the time established (late delivery is common). - Usually the agreement is silent. If the PPA is delivered late and contains a large negative adjustment in favor of the buyer, this may lead to a dispute. - Greater clarity as to the consequences of a late PPA may reduce the likelihood of a formal dispute process. Slide 40

41 Glossary Slide 41

42 Glossary A D > Appraisal rights Shareholders statutory right under state law to seek judicial determination of the value of their shares when the corporation is party to a merger. Appraisal rights claims are third-party claims where the buyer seeks indemnification for payments made, or that might be made, to dissenting shareholders. > Basket Common provision within the indemnification section of a merger agreement. The basket is a mechanism whereby a party cannot collect on an indemnification claim until its total claimed losses reach a specific threshold amount. The three general categories are deductible, first dollar, and combination. > Capitalization claim These claims are typically made because a person or entity has claimed that they are entitled to additional merger consideration based upon inaccuracies in the closing capitalization and/or consideration spreadsheet. Includes former and current employees of the target that claim they are due additional merger consideration based on options or similar equity-based pay. > Combination basket Example: Sellers shall not be required to indemnify Buyer for Losses until the aggregate amount of all such Losses exceeds $500,000 (the Threshold ) in which event Sellers shall be responsible only for Losses in excess of $300,000 (the Deductible ). > Customer contract claim Third-party or direct claim type. Claims are placed in this category where the buyer s claim is based on a customer contract of the target. Common examples include claims that the target failed to provide a contracted service or product to the customer. Does not include claims involving contracts with vendors or suppliers of the target. > Deductible (a.k.a. overflow ) basket Example: Sellers shall not be required to indemnify Buyer for Losses until the aggregate amount of all such Losses exceeds $300,000 (the Deductible ) in which event Sellers shall be responsible only for Losses exceeding the Deductible. > Dissenting shareholder A selling shareholder that has chosen to exercise appraisal rights under state law. Slide 42

43 Glossary E F > Employee claim Third-party claim type. Examples of claims in this category include claims by former employees involving non-equity based compensation and lawsuits by former employees for discrimination or harassment. > Escrow In the M&A context, a portion of the transaction consideration that is held to secure the selling shareholders indemnification obligations to the buyer. After a pre-determined period of time has passed (the escrow period ), any amount in the escrow account not claimed by the buyer is released to the selling shareholders. This study does not distinguish between escrows and holdback accounts retained by the buyer for the same purpose. > Expense fund A voluntary fund set aside by the shareholders from the merger consideration at closing for potential third-party expenses that might be incurred during the post-closing period. > Expired-escrow deal A deal that has reached the escrow release date. The escrow in such a deal may still be held by the escrow agent or buyer if there are outstanding indemnification claims, but any escrow-based obligation of shareholders to indemnify the buyer for new claims has expired. > Fees and costs claim Can be either a direct or third-party claim. These claims may be based on terms such as seller s obligation to pay outstanding transaction costs, or costs relating to audits or litigation disclosed prior to closing. > Financial buyer Buyer that acquires a target as an investment rather than for the purpose of expanding its own business or for other strategic purposes. Slide 43

44 Glossary F P > Financial statements claim Direct claim type. These claims are based on an alleged breach of representations and warranties regarding the accuracy of the target s financial statements. This may also include claims for a net working capital adjustment included in the indemnification section rather than as a dedicated, short-term post-closing adjustment mechanism. > First dollar (a.k.a. tipping ) basket Example: Sellers shall not be required to indemnify Buyer for Losses until the aggregate amount of all such Losses exceeds $500,000 (the Threshold ) in which event Sellers shall be responsible for the aggregate amount of all Losses, regardless of the Threshold. > Foreign buyer Includes foreign companies headquartered outside of the US. Both public and private foreign companies are included. > Fraud claim Claim based on the buyer s allegations that the target and/or selling shareholders committed fraud and/or intentional misrepresentation in connection with the transaction. Common examples include allegations that the target intentionally misrepresented its financial condition or fraudulently concealed certain liabilities. > Indemnification Where one party secures another against suffered losses. In the M&A context, the selling parties almost always agree to indemnify the buyer against certain types of losses that could be suffered in connection with the transaction. > Intellectual property claim Usually a third-party claim type. IP claims are often based on alleged patent infringement by the target. Can also include a direct claim by the buyer that the target s proprietary technology had defects. > Purchase price adjustment ( PPA ) A common deal feature where the transaction consideration is adjusted shortly after closing in accordance with a specified financial metric. While there are a number of metrics used to determine the adjustment, the most common is some variation of a net working capital formula. As a result, claims in this category are commonly referred to as Net Working Capital claims. The adjustment can be in favor of either the buyer or selling shareholders. Slide 44

45 Glossary O T > Other breaches of reps & warranties claim May be either a direct or third-party claim type. This category includes claims that do not fit into other categories included in this study, typically because they are infrequent. Examples of claims in this category include an alleged breach of the no broker representation and an alleged breach of the material changes representation and related covenants. > Private buyer Non-public companies headquartered in the U.S. Also includes companies whose stock is traded on the OTCBB or Pink Sheets. > Public buyer Acquiring companies listed on U.S. public stock exchanges, e.g. NYSE or NASDAQ. > Regulatory claim Claims in this category are based on an alleged breach of the representations and warranties dealing with the target s compliance with applicable laws. > Representations & warranties In the context used in this study, a section of the merger agreement where certain assurances made by the target as to the existence or non-existence of certain facts. These facts typically concern the condition of the target as of the time it is acquired. > Stock purchase agreement Transaction where the buyer purchases the outstanding shares of the target directly from the selling shareholders, resulting in the target becoming a subsidiary of the buyer. > Target The selling or acquired company in a merger or acquisition transaction. > Tax claim Tax claims are based on the target s alleged failure to pay applicable state, federal or foreign taxes. Includes, among others, income, sales, and use taxes. Slide 45

46 Glossary T U > Transaction value The enterprise value to be paid by the buyer according to the transaction agreement. Does not include contingent consideration or adjustments to the purchase price. > Undisclosed liabilities claim These claims are based on the target s alleged failure to disclose a liability in the disclosure schedules. The undisclosed liabilities representation is sometimes used as a catch-all by buyers for unexpected third party claims that do not fit under the financial statements or material contracts representations. The most common example is a buyer s claim that the target did not disclose outstanding obligations to a vendor, supplier or other partner. Slide 46

47 Phone: Website: srsacquiom.com Data Inquiries: Prospective Clients: Existing Clients: The information herein may not be stripped of any copyright or trademark information or copied, published or used, in whole or in part, unless first expressly authorized in writing by SRS Acquiom LLC. In preparing this study, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of our clients or which was otherwise reviewed by us. The terms of the agreements surveyed for this study vary widely and are subject to competing interpretations; therefore the conclusions presented in this study are subject to important qualifications not expressly articulated herein. SRS Acquiom makes no representations as to, and no party shall be entitled to rely upon, the legal, regulatory or tax implications of the matters referred to in this study, and neither SRS Acquiom nor any of its managers, officers, employees or agents shall incur any responsibility or liability whatsoever to any party in respect of the contents of this study or any matters referred to in, or discussed as a result of, this document. Slide 47