Jack be Nimble, Jack be Quick:

Planning for Financings

in Volatile Markets

July 12, 2016

Presented by:

Geoffrey Goodman, Wells Fargo

Gregory Ogborn, Wells Fargo

Anna Pinedo, Morrison & Foerster

James Tanenbaum, Morrison & Foerster

2

Agenda • During today’s session, we will address:

• General market conditions and the current IPO market

• The late-stage private placement market

• Financings in close proximity to, or concurrent with, an IPO

• Other financing alternatives

• Financing alternatives for public companies

2

3

Market Overview

and

the U.S. IPO Market

3

4

2016 YTD Has Been A Tale of Two Markets Given Macro Headlines

Wide Variations in Market Sentiment Driven By Geopolitical and US Economic Focused Headlines

2016 YTD Equity Market Performance Overview

14.8x

15.3x

15.8x

16.3x

16.8x

17.3x

12/31/15 2/16/16 4/4/16 5/21/16 7/8/16

S&P 500 NTM P/E Multiple

16.9x

Long Term Historical Average (15.8x)

2016 YTD S&P 500 NTM P/E Multiple

Source: Bloomberg, Factset. Market data as of 7/8/16

Valuations Remain Above Long-Term Historical Average

4

Q1 2016

“Stocks Decline Amid Focus on Central Banks”

“U.S. Stocks Tumble, Cap Worst Five-Day Start to Year on Record”

“U.S. Stocks Extend Worst Start on Record”

“Nasdaq Composite Near Bear Market”

“Dollar Plunges Most in 7

Years”

“U.S. Stocks With Markets Around the World as Rout Deepens”

“Equities Suffer Worst Week Since 2011”

“Signs of Inflation Temper Optimism on Growth”

“Stocks Rally to January Levels Amid Oil Bounce”

“Stocks Fluctuate, Euro Rallies”

“China Stimulus Boosts Commodities”

“Whipsaw Quarter for U.S. Stocks

Ends” “Stocks Add to 8-Week Highs”

“Rally Sparked by Dovish

Message”

“Strongest Three-Day Rally Since August”

“Investors Embrace ECB Measures”

“Oil Stabilizes”

“Minutes Underline Fed Caution”

“Energy Shares Lead Rebound”

“Stocks Drop Most in 2 Weeks”

“S&P 500 at Four Month High ”

“Retailers Stifle U.S. Stocks in Week as Growth Worries

Mount”

“Concerns Higher

Rates

Will Weigh on

Growth”

“Growth Anxiety Returns”

“Optimistic Economy Can Handle Higher

Rates”

“Stocks Tumble With Bonds on Fed Rate Rhetoric”

“Stocks Slip to 3-Week Lows”

“Stocks Cap S&P 500 Strongest Week Since March”

“Oil Near 10-month

High”

“Weak Payroll Spur Growth

Concerns”

“Stocks Selloff as Potential

‘Brexit’ Drives Flight to Safety”

“Stocks Plunge

Most in 10-

Months after

U.K. Exit

Vote”

“Stocks Rebound, but Jitters Linger”

Q2 2016

5

84

88

92

96

100

104

108

1/1/16 2/1/16 3/4/16 4/4/16 5/6/16 6/6/16 7/8/16

DJIA S&P 500 NASDAQ Russell 2000

Source: FactSet, Dealogic, Bloomberg and Wells Fargo Economics Note: Market data as of 7/8/16

Key Equity Market Drivers and Themes

U.S. Economy / Fed Rate Policy Global Growth

What Is Driving the Equity Market?

Equity Market Environment

$0.149

$0.151

$0.153

$0.155

$0.157

$0.159

$0.161

$0.163

1,800

1,850

1,900

1,950

2,000

2,050

2,100

2,150

1/1/15 4/3/15 7/4/15 10/5/15 1/5/16 4/6/16 7/8/16

USD

/ C

NY

S&P

50

0

S&P 500 USD / CNY

Major Indices Performance

Chinese currency devaluation

As of 7/8 2016 YTD 2015

Dow Jones 18,146.7 4.1% (2.2%)

S&P 500 2,129.9 4.2% (0.7%)

Nasdaq 4,956.8 (1.0%) 5.7%

Russell 2000 1,177.4 3.7% (5.7%)

New Issue ”Go/No-Go” Checklist

Oil Prices

$25

$30

$35

$40

$45

$50

$55

$60

$65

1,800

1,850

1,900

1,950

2,000

2,050

2,100

2,150

1/1/15 4/3/15 7/4/15 10/5/15 1/5/16 4/6/16 7/8/16

Lig

ht

Cru

de O

il (

$/B

bl)

S&

P 5

00

S&P 500 Light Crude Oil ($/Bbl)

Volatility (VIX)

10

15

20

25

30

35

40

45

1/1/14 6/3/14 11/3/14 4/5/15 9/5/15 2/5/16 7/8/16

CBOE Market Volatility Index

Benchmark for High Volatility

What Investors

Want to See…2016 YT D Perform ance

Dow Jones: +4.1%

Positive Mom entum in S&P 500: +4.2%

Major Indices Nasdaq: (1.0%)

Russell 2000: +3.7 %

VIX T rading

Below 20

Positive Returns in

Recent Equity Deals

Strength in the

Broader U.S. Econom y

Stability in Oil Prices /

the Global Econom y

1Q 2016 GDP: +0.8%

Oil Prices: +22.6%

13.20

20 Most Recent IPOs

(Offer/Current): +21.7 %

20 Most Recent FOs

(Offer/Current): +22.8%

4.0%

9.8% 9.8%

20.6% 20.2%

24.9% 26.6%

Jul '16 Sep '16 Nov '16 Dec '16 Feb '17 Mar '17 May '17

Curr

ent

Pro

bability o

f Rate

Hik

e

FOMC Meeting Date

Brexit sent the VIX up by ~50%, its

largest single-day gain since August 24

Markets stabilizing post-”Brexit” impact After dropping 74% to 14.82 last week, the VIX drops

another 11% to 13.20 as markets level out post “Brexit”

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Vola

tility In

dex

# o

f In

itia

l Public O

fferings

IPO Volume CBOE Market Volatility Index

Lower Volatility Provides Improved Environment for IPO Issuance

VIX vs. IPO Issuance

24 IPOs have priced in Q2, compared to just 8 in Q1

Despite the recent increase in volatility following the Brexit outcome, we would expect the market to recover and IPO issuance to resume in the near term

Sources: Bloomberg; Note: Market data as of 7/8/16

7

Summary Statistics

Source: Capital IQ, Company filings, FactSet, Dealogic and Renaissance Capital Note: Market data as of 7/8/16; ¹ Reflects S&P performance from middle of each month to current period

Recent IPOs Continue to Represent an Attractive Asset Class

($ Millions) 4/14/16 4/19/16 4/21/16 4/26/16 5/11/16 5/11/16 5/12/16 5/23/16 5/25/16 5/25/16 6/09/16 6/09/16 6/22/16

IndustryFinancial

Institutions

Real Estate /

GamingTechnology Gaming Consumer Industrials Technology

Financial

InstitutionsConsumer Industrials Industrials EdTech Software

Deal Size $290.6 $1,207.5 $112.0 $531.4 $54.0 $241.5 $119.0 $80.1 $1,175.6 $169.1 $192.0 $45.6 $172.5

Market

Cap. @ IPO$1,817.9 $4,527.0 $1,129.4 $2,259.2 $159.6 $830.4 $821.7 $326.7 $5,066.8 $859.8 $999.3 $373.6 $1,255.5

IPO Pricing

vs. RangeIn Range In Range Below In Range Below In Range In Range Below In Range In Range Below In Range Above

Offer to

Current %+36.2% +27.5% (1.0%) +14.2% +0.9% +75.0% +91.1% +0.4% +9.0% +11.4% 0.0% +3.5% +136.9%

2016 Non-Healthcare IPOs Have Performed Well to Date

Monthly IPO Volume IPOs in Recent Months Are Outperforming

Above,

8.3%

Low End -

Midpoint,

25.0%

Midpoint -

High End,

33.3%

Midpoint,

25.0%

Below, 16.7%

Average Offer/Current: +31.2%

S&P 500 YTD Performance: 4.2%

IPO Pricing vs. Range:

54

32 2

4 4

6

5

1

4

6

1

$4,844.6

$1,166.4

$531.3

$0.0

$264.1

$128.2

$2,386.1

$2,103.1

$418.9

0

2

4

6

8

10

12

Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16

Healthcare Non-Healthcare Total $ Volume ($MM)

(16.0%)

1.3%

28.5%

0.0%

121.9%

(6.1%)

6.0%

20.8%

32.1%

5.2% 5.3% 4.2%

13.3% 14.2%

5.7%

2.4% 4.1%

2.8%

Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16

Average Offer/Current S&P Performance / Current

11 Non-Healthcare IPOs Priced in Q2

vs. 0 in Q1

Zero IPOs in January

¹

8

18

4 43 3

10

$2

$1 $0

$2

$1$1

$0$0

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18

20

Healthcare FinancialInst.

Tech.,Telecom, &

Svcs.

Consumer& Retail

Industrials Real Estate Energy &Power

Deal Count Proceeds

Biopharma Represents 42% of Priced 2016 IPOs

Source: Dealogic, FactSet, company filings; market data as of 7/8/16

(16%)

(5%)(9%)

1%

(9%)

8%

0%

14% 14%

8%

58%

29% 28%

0%

Healthcare Financial

Inst.

Consumer &

Retail

Tech. & Svcs. Industrials Real Estate Energy &

Power

File / Offer Offer / Current

2016 IPO Performance by Sector

2016 YTD IPO Activity by Sector

Biopharma Continues to Dominate the IPO Market

Key Healthcare IPO Market Themes

13% 11%

27%

39%44%

55%

7% 9%

20%

27%32%

42%

2011 2012 2013 2014 2015 2016

Healthcare IPOs as % of Total IPOs

Biopharma IPOs as % of Total IPOs

($ in Billions)

Deal Count: 65

Proceeds ($B): $7.5

2015 Healthcare IPOs

n=18

(Average statistics for 2016 YTD IPOs)

Cautious investor sentiment for small-cap / early stage stories

Many issuers are in the wings evaluating potential market windows to launch

Significant participation from existing investors in biotechnology offerings

Activity dominated by crossover investor-driven biopharma transactions

9

162

18 159 6

0

20

100% Primary 1 - 20%

Secondary

21 - 40%

Secondary

41 - 60%

Secondary

61 - 80%

Secondary

81 - 99%

Secondary

100%

Secondary

87

31

20

107

02

100% Primary 1 - 20%Secondary

21 - 40%Secondary

41 - 60%Secondary

61 - 80%Secondary

81 - 99%Secondary

100%Secondary

Primary/Secondary Selling Trends

All IPOs Since 2014 1 All Tech IPOs Since 2012

Source: Dealogic, FactSet. Market data as of 7/8/16 1 Excludes ADR issuances, BDCs, MLPs, REITs, deal sizes below $75MM and market caps below $250MM

11

41

61

50

33 34

< 10% 10 - 15% 15 - 20% 20 - 25% 25 - 30% >30%

Num

ber

of

IPO

s

100% Primary

56%

Mixed43%

100% Secondary

1%

12

4648

22

18

11

< 10% 10 - 15% 15 - 20% 20 - 25% 25 - 30% >30%

Num

ber

of

IPO

s

Base Deal Size as % of Post-Deal Market Cap

All IPOs Since 2014 1 All Tech IPOs Since 2012

100% Primary,

70%

Mixed, 21%

100%

Secondary, 9%

Mean 21.2%

Median 20.0%

Mean 19.2%

Median 17.2%

Precedent IPO Sizing/Structuring Analysis

10

Overview of IPO Critical Tasks and Timeline

Hire Advisors

Lead Bookrunner

Auditors

Company counsel

SEC Review 2,3

SEC reviews prospectus, including financial statements

Typically three to four rounds of comments for an IPO (eight to ten weeks)

Update financials

Add co-managers

File with $ price-range

Due Diligence

Business

Financial

Legal

Accounting

Research

Financial Projections

Develop detailed financial projections (five years)

Financial Statements

Three years audited financials 1

Five years selected financials 1

SOX and internal financial controls

Marketing & Pricing

Investor targeting

Management dry-run

Salesforce presentations and teach-ins

Roadshow (one-on-ones and group events)

Bookbuilding

Pricing and allocation

Closing

Corporate Structure & Reorganization

Suitability of current corporate organization vs. reorganization

Tax structuring and implications

Corporate Governance & Board

Composition of board of directors

Search for independent directors

Board committees (audit, nomination and compensation)

Compliance with SOX

Potential management changes/additions

Capital Structure

Use of proceeds

Optimize capital structure and financing needs

Dividend policy

Elimination of preferred equity and converts

IPO Prospectus

Key marketing document

Underwriters provide outline/investment highlights

Company counsel drafts prospectus

Roadshow Slides

Underwriters craft slides with company

Executive Compensation

Determine compensation packages for executive management and board (including stock/options)

Approximately 18 Weeks

1 Potential to use two years of audited financial statements under the JOBS Act 2 SEC Review can take significantly longer 3 SEC review may be confidential under the JOBS Act

Organizational Meeting

Pre-Organization Meeting Preparation Filing Preparation

(Four to Six Weeks) SEC Review (Eight

to Ten Weeks)

Marketing & Pricing

(Two Weeks)

11

Illustrative Key Terms of an Initial Public Offering

Item Sam ple Recom m endation Considerations

15 - 20% of market cap Deal size dependent on: 1) need for primary proceeds; 2) deal size relative to issuer size;

3) desire for liquidity from insiders / financial sponsors; 4) target metrics (i.e., leverage).

Company raises primary capital to fund new product development and other growth initiatives.

Secondary shares provide liquidity to selling shareholders.

15% standard Over-allotment option allows the bookrunning manager to stabilize the stock

in the aftermarket; often includes secondary shares.

180 day s (standard for IPOs) Lock-up period "locks-up" key insiders, company and management from selling stock immediately

post-offering; ability to "break" lock-up if stock performs post offering.

No more than 5% of shares

offered, if at allAllows "friends and family " of an IPO issuer to purchase a limited number of shares at the IPO price. Total DSP

program shares are ty pically 5% of the offering size.

NASDAQ / NY SE No impact on transaction execution. Considerations regarding listing include: listing requirements,

filing and ongoing fees, governance requirements, exchange listing of peers. Reserve sy mbol early .

7 - 8 day s Roadshow includes management meeting with investors through 1x1 meetings and group functions.

Can include international stops, depending on investor receptiv ity .

80% - 85% Institutional Favor quality holders who own relevant comparables and express intent to own for the long-term.

15% - 20% Retail Separate and distinct distribution channel. Lower turnover and less price sensitive investors.

7 .00% Represents fees issuer pay s to underwriters. Consists of management fee, underwriting fee and

selling concession .

2 - 3 Bookrunners Lead underwriters responsible for execution of the transaction. Number varies on offering size.

2 - 3 Co-Managers Incremental role in marketing the deal - primarily add value post-deal with relevant banking

coverage and aftermarket trading support.

TBD Dependent on company requirements and market conditions. Considerations include seasonality of

business, preparedness of company , availability of audited financials, and timing of capital needs.T im ing

Prim ary vs. Secondary

Over-allotm ent Option

Roadshow

Gross Spread

Underwriters

Deal Size

Lock-up Period

Exchange Listing

Distribution

Directed Share Program

("DSP")

Up to 100% primary shares, with

potential for secondary portion

4

12

Underwriters’ salesforce presentations

7-8 day roadshow

40 - 50 1x1 meetings

3 group lunches (NY, Boston, SF)

Conference calls to reach those investors who do not get physical meetings

Maximize demand by targeting key regions – New York, Boston, Mid-Atlantic, Midwest, West Coast

7:30am Prep w/ underwriters

8:00am 1x1 meeting

9:15am 1x1 meeting

10:30am 1x1 meeting

12:00pm Group lunch

1:45pm 1x1 meeting

3:00pm 1x1 meeting

4:15pm 1x1 meeting

6:00pm Private dinner

The Overall Marketing Plan Typical Day on the Road Roadshow Priorities

Daily Update: Markets, events, meetings

Travel packs: Investor bios, sector holdings, investment methodologies, track record

Transparent feedback: Investor comments on positioning, valuation and issues of concern

Open Book Policy: Update on institutional and retail demand, likelihood and timing of expected orders; price sensitivity

Manage Message: Carefully coordinate message to investors

Mid-Atlantic

Boston

San Francisco Chicago

Denver

Los Angeles

San Diego

New York

Minneapolis

1

2 3

4

5

5

6 7

8

Indicates day number of roadshow

Illustrative Roadshow Schedule

13

Late-Stage Private Placements

13

14

Rationale • There may be a variety of different motivations for a late stage or pre-

IPO private placement

• Company may want to defer IPO and need to raise additional capital prior to the

IPO

• Company may want to take out early friends and family and angel investors and

“clean up” balance sheet or provide partial liquidity for longstanding holders

• Company may want to bring in strategic investors

• Company may be advised that it should prepare itself for the IPO by gaining

support and validation from key sector investors that are opinion leaders

• Company and bankers may want to “de-risk” IPO by bringing in cross-over

investors that will also invest in the IPO

• Company may be advised that an up round will make higher IPO pricing easier for

IPO investors to accept

• May be quite sector dependent

This is MoFo. 15

Market trends U.S. LATE STAGE ACTIVITY BY QUARTER

This is MoFo. 16

Market trends (cont’d)

17

Late stage investment characteristics • Impact on structuring and negotiating

• These transactions typically are made into existing, relatively mature companies

• Late stage

• Proven product viability

• Exhibit signs of increasing adoption and revenue growth

• Focused on marketing and sales

• Very late stage

• Cash flow is dependable

• Past initial hyper-growth period and reasonable to expect sale or IPO

within 12 – 24 months

18

Late stage investment characteristics (cont’d)

• New investors face companies with larger and more diverse groups of existing

shareholders

• Founders, current/former management, employees, seed, family, high net-

worth, early stage institutional venture and professional angels

• Each group has different levels of involvement, varying rights and

protections tied to equity and divergent objectives for their investment

• Founders/management may be significantly diluted by investment — need to

create alternative incentives for them

• Start-up, seed investors may desire quicker exit at lower valuation

• As we will discuss, investors in late stage private placements include cross-over

funds (often accustomed to investing in IPOs), strategic investors knowledgeable

about specific sectors, and sovereign wealth funds

19

• Focus on document preparation and diligence

• Thorough preparation enables tight time frame once we go to market

• Timing: 3 – 4 weeks, faster if marketing documents are started

Preparation

• Goal is to narrow the field of potential partners to the most interested/competitive who will then be invited to fully diligence the company

• At the end of the marketing phase, a select group of prospective investors will be chosen to meet with management and complete full due diligence

• Timing: 2 – 3 weeks

Marketing

• Provide selected investors access to key management members and material documents/financials in online data room

• Culminates in final Term Sheet proposals

• Timing: 4 – 5 weeks

Diligence

• Selected investor is given some period of exclusivity to work with the company to complete documentation

• Term sheet provides framework for key terms, but some negotiations remain

• Timing: 2 – 3 weeks

Closing

Pre-IPO Process Overview

20

Late stage (or pre-IPO) private placements

• Terms for the late-stage round

• Liquidation preference: are investors asking for a liquidation preference over

common stock? over other classes of outstanding preferred stock?

• Anti-dilution protections: most include weighted average anti-dilution adjustments

(as opposed to full ratchets)

• Voting rights: class votes or “super voting” rights

• IPO protections

• Investors now commonly ask for and expect to receive IPO protection

• Blocking rights: IPO price must be as high as the last private round or at a

specified premium to the last private round price

• IPO ratchet: late stage investor receives additional shares (as in Square) if

the IPO price is less than the last private round (or other specified price)

• Valuation concerns

• Announced SEC enforcement area of interest

• Down-round considerations

21

Protective provisions — charter/contractual

• High valuations at later stage yield minority investments and therefore

protective provisions are usually stronger

• Negotiate to include strong affirmative covenants

• Financial and other information delivery rights

• Registration rights and rights in M&A

• Redemption rights

• Negotiate to include strong negative covenants

• Specify the actions that the company may or may not take without specific vote of

the class

• Usually include all of the “ordinary course” provisions from venture – related to

sales of company or assets, bankruptcy, expansion of option pool, IPO or sale

• Expanded to include financial covenants, additional of debt, acquisition strategy,

partnerships, management changes, etc.

• Contractual remedies for failure particularly with affirmative covenants – e.g.,

right to take over board if fail to redeem

22

Transfer and investment restrictions

• Investments with strategic partners raise additional concerns, such as

a need to consider standstill provisions, special transfer restrictions,

restrictions on investments in competitors

• Transfer to “competitors”

• More heavily negotiated definition of competitors to whom investor may not

transfer—current and future competitors

• Negotiated “update” rights to list of competitors

• Related – negotiation of the right for strategic investor to make investment in

competitors of company

• Particularly important to issuer if investment is coupled with strategic

partnership

• Key is definition of competitor – by type of product and/or by name – and

update rights over time

• Also negotiation regarding steps to be taken if investor buys into a competitor

either directly or indirectly

23

Stand-still provisions

• Investment by strategic investors

• Stand-still provisions more common in M&A transactions

• Sometimes asked of investors in late stage deals, particularly of

strategies

• Investor is obligated to refrain from actions that relate to acquisition

of control of the issuer including making proposals to acquire the

issuer, buying shares, or launching a proxy contest

• Exceptions

• Negotiated sale

• Agreed-to-limits

• Other investor action

24

Right of first look for M&A • Investment by strategic investors

• Right of first offer

• Notice period

• Negotiation period

• Other potential rights

• Right of first refusal

• Investor friendly

• Chilling effect on competitive M&A

• Terms of transaction

25

Board seat • Investment by strategic investors

• Private company issues

• Board seat or observation rights?

• May have confidentiality issues with board seat if equity investment

is combined with strategic partnership

• Need to carefully consider composition of board – particularly given

approval of M&A – and incentives of early investors, particularly in

event of liquidation event

• Often necessary to push for removal of certain board members so

early investors do not have too much control in M&A

26

Secondary purchases • Secondary purchases — often combine investment directly in issuer

with purchase in secondary directly from existing stockholders

• “Cross-purchase” structure

• Less cash from investment available for company

• Typically purchase of common stock from management and employees to provide

liquidity

• Can also purchase preferred from previous investors particularly those that need

exit given LP demands

• Note issues particularly with liquidation preferences and other terms not

desirable to late stage investor

• Can’t change charter rights of class but can change contractual rights

• In contract rights, particularly important to ensure that you can bundle

secondary shares with primary securities for co-sale, tag and registration

rights

27

Tender offers • Disclosure and process issues under the tender offer

• Use of third party platform (e.g., Nasdaq Private Market) but administrative hassle

• Not subject to tender offer rules but important that it be “fair” particularly if insiders

are selling

• Information prepared by the issuer and included in OTP but investor effecting the

purchase and taking

• Note issues with options (net exercise feature)

• Issues with international stockholders/employees — tender offer rules in different

countries

• Mitigate risk through indemnification

• Also need true-up in company issued securities recommended as opposed to

allowing a “double dip” by participants

• Risks mitigated further by purchasing directly from issuer and requiring

issuer to effect tender

28

Leading Private Equity Capital Capabilities

Wells Fargo has significant expertise raising private capital for both pre and post-IPO issuers, driven in large part by the quality of our dialogue with leading crossover institutional accounts

Additional WFS Pre-IPO Marketing Events

Provides capital for growth initiatives

including strategic acquisitions and

international expansion

$300 Million Strategic Investment from

Sole Placement Agent

Provides capital for growth initiatives including strategic

acquisitions and international

expansion

Pending

Project Lotus

$35 Million Private Placement

Sole Placement Agent

Lead generation technology

platform

Provides capital for growth initiatives

including strategic acquisitions and

international expansion

Provides capital for growth initiatives

including strategic acquisitions and

international expansion

$27 Million Private Placement

Placement Agent

$300 Million Strategic Investment from

Financial Advisor to Lumos Sole Placement Agent

Accelerated the ongoing

transformation into a pure-play fiber bandwidth infrastructure

provider

Diversified shareholder base

before IPO

$120 Million PIPE

Sole Placement Agent

Supports future growth and

general partnership

purposes

$32 Million Registered Direct

Sole Underwriter

New capital provides support to

continued development and expansion with a planned ramp-up

in production

$125 Million Strategic Investment from

Exclusive Financial Advisor To American Express

Created a strategic partnership that

would help American Express gain access to the digital payment

market

Provides capital for growth initiatives

including strategic acquisitions and

international expansion

$240 Million Private Placement

Lead Placement Agent

Raised capital to support growth

during a opportunistic

economic climate for reinsurance-based companies

Selected Investors Accessed During Marketing

Cr

os

so

ve

r

Ins

titu

tio

ns

O

the

r L

ate

Sta

ge

In

ve

sto

rs

U

ltr

a H

igh

N

et

Wo

rth

29

WFS Acts as Sole Placement Agent for Gett on $300 Million Strategic Equity Investment by VW

Transaction Overview

On May 24, 2016, Gett, Inc. (“Gett” or the “Company”) and

Volkswagen Group (“Volkswagen” or “VW”) announced

the establishment of a strategic partnership together with

an investment of $300 million1

Gett will use the proceeds to further accelerate growth,

including expanding its on-demand mobility services in

Europe

Gett has a strong track record of both organic and

inorganic growth, including its acquisition of Radio Taxis

in March 2016

Gett is an on-demand mobility company that enables consumers to instantly book

on-demand transportation, delivery and logistics

A leading provider in the European ride hailing market, Gett is available in more

than 60 cities worldwide, including London, Moscow, Tel Aviv and NYC

Gett’s convenient and highly efficient mobility solution is equally successful with

consumers and businesses. It is trusted by more than 4,000 leading corporations

worldwide

The business model is based exclusively on licensed drivers who have a permit to

carry passengers and are committed to providing safe, reliable mobility

The Company has development facilities based in Israel

Gett has raised over $520 million in funding since inception and was selected by

Forbes as one of the “top 15 explosively growing companies”

Volkswagen is a leading automobile manufacturer and the largest carmaker in Europe

Delivered 9.9 million vehicles to customers in 2015

12.3% of the world passenger cars and 24.4% of the Western Europe new cars are

made by VW

Company Overviews

Transformative strategic investment that supports Gett’s continued expansion in

current and new markets

Furthers VW strategy to generate a substantial share of its future revenue from new

business models focused on mobility services

Partnership provides opportunities for VW to provide services to Gett’s large and

growing driver base

Opportunity to grow demand for Gett’s offering within the corporate segment by

leveraging VW’s corporate client base

Transaction Rationale

Strategic Equity Investment from

Sole Placement Agent

$300 Million

Note: 1 Closing of the transaction is subject to satisfactory completion of closing conditions, including regulatory approvals

30

Well-Coordinated Process to Find the Right Partner for Gett

Roadmap to Successful Execution

Init

ial

Ou

tre

ac

h

~90 Crossover

Institutions

~50 Late Stage VC / Private Equity

Investors

~20 Strategic Investors

Volkswagen Moves into Exclusive Phase 2 Diligence

~160 Total Investors Approached

~20+

Investors Indicated Interest and Moved into Phase 1 Diligence

Signed Term Sheet and Exclusivity Request Is Received from Volkswagen

~50

1x1 Investor Meetings During Company Marketing

Purchase Agreement Signed and Transaction Announced

Core Gett Deal Team

Senior Management

Jon Weiss Brian Maier

Andy Sanford

Gerry Walters Dan Nash

Felix Burmeister

Beau Bohm Greg Ogborn

Adam Stoeckel

Tech Investment Banking

Equity Capital Markets

Corporate Access

GICG

Equity Sales

Equity Syndicate

Enterprise Travel & Mobility

Legal

Tech M&A

Financial Sponsors

Auto Coverage

International

Tulip Capital

San Francisco

Charlotte

New York London

Hong Kong

Atlanta

Frankfurt

Toronto

Tel Aviv

~70+ dedicated professionals across 9 cities worldwide

Jerry Serowik Marc Ogborn

Steve Moss Branden Avishar

Equity Syndicate Auto Coverage

Dan Bricken Calvin Tarlton

International

31

Wells Fargo Maintains an Active Dialogue with the World’s Largest Non-Bank Investors

Canada Pension Plan Investment Board (CPPIB) operates at an arm’s length from federal and provincial governments to invest the funds of the Canada Pension Plan

CAD $269 Billion

Investor AUM Description

Canada

Caisse de Depot (CDP) managers portfolios for pension funds and institutions in Quebec and invests in global stocks across all market caps.

CAD $265 Billion

Ontario Teachers’ Pension Plan (OTPP) is Canada's largest single-profession pension

CAD $155 Billion

Ontario Municipal Employees Retirement System (OMERS) is one of Canada’s leading pension funds and serves 450,000 local members

CAD $72 Billion

British Columbia Investment Management Corporation (BCIMC) manages pension and retirement funds for public sector clients.

CAD $114 Billion

PSP Investments managers the pension plans for the federal public service, Canadian armed forces, and the Royal Canadian Mounted Police employees

CAD $112 Billion

United States

Berkshire Hathaway is an Omaha, Nebraska conglomerate holding company. The Corporate Development team of Berkshire Hathaway seeks to stay competitive and continually evolve into new markets and trends by acquisitions

$132 Billion

Investor AUM Description

Middle East

APAC

Abu Dhabi Investment Authority was founded in 1976 to invest on behalf of the Government of the Emirate of Abu Dhabi and manage its excess oil reserves

$773 Billion

Qatar Investment Authority is the sovereign wealth fund of the State of Qatar, and Qatar Holding (QH) is the strategic and direct investment arm of QIA

$256 Billion

KIA manages Kuwait’s foreign investments portfolios and is responsible for Kuwait’s General Reserve Fund and the Future Generations Fund

$256 Billion

The Singaporean government established the Government of Singapore Investment Corp. (GIC) sovereign wealth fund in 1981

$320 Billion

$177 Billion

Temasek Holdings (Pte), Ltd. is an investment company based in Singapore and was founded in 1974

The South Korean government established the Korea Investment Corp. (KIC) in 2005. KIC manages funds assigned to it from the Ministry of Finance’s Foreign Exchange Stabilization Fund, Bank of Korea (Korea’s central bank) and other public funds

$72 Billion

32

Valuation • How are the shares of privately held companies valued and who is

responsible for valuations?

• The IPO prices for many companies that have gone public have been lower than

the prices at which these companies had last raised capital privately and lower

than the prices at which secondary private transactions were completed

• Private companies also have been able to raise money at higher premiums than

their direct competitors who are public

• What does this suggest, if anything?

• Are investors no longer applying a “liquidity discount”?

• Is the premium associated with the liquidation preference that typically

accompanies preferred stock rounds only?

• In IPOs, investment banks in pricing the IPOs and IPO investors demand an

“IPO discount” (“IPO underpricing”)

• When VCs or “cross over investors” participate in successive private

financing rounds, often they can negotiate for themselves downside

protection, including protection should the company go public at a lower

valuation—but what about participants in secondary private markets?

33

Valuation (cont’d)

34

Valuation (cont’d)

• Can the late stage investor/fund face any liability in connection with

valuation issues?

• Is the investor buying newly issued shares or shares from an existing holder?

• Is the existing holder selling to the late stage investor sophisticated? Can s/he

evaluate the company and its value as well as the late stage investor?

• What information is available to the existing holder? Does the late stage investor

have more information? Better information?

• Will the late stage investor be shaping the IPO? Influencing the IPO price?

35

Investors are Highly Sensitive to Crossover Round Valuations

Step-up Analysis for Healthcare IPOs

Summary Average Performance 2015 – 2016 YTD

Source: FactSet and Dealogic. Data as of 7/8/16

Number of IPOs with Crossover:

2016 biopharma IPO activity has been driven by crossover investor desire for liquidity

Investors are currently less willing to pay a premium to crossover round valuations in the absence of meaningful milestone achievements between crossover round and IPO

Median:

Average Step-up

2015-2016 YTD:

Gene Editing/Therapy: 1.7x

Non-Gene Editing/Therapy: 1.5x

% of HC IPOs with

Crossovers50.0% 40.0% 100.0% 42.9% 57.1% 33.3% 66.7% 100.0% 50.0% 100.0% 50.0% NA NA 100.0% 100.0% 50.0% 50.0% 75.0%

1.9x

1.3x

1.0x

2.6x

1.5x1.4x

1.9x

2.9x

1.8x

1.1x1.2x

1.1x1.0x

1.0x

1.2x

1.0x

4 2 1 3 4 4 4 3 3 6 2 0 0 4 2 1 3 3

January '15 February'15

March '15 April '15 May '15 June '15 July '15 August '15 September'15

October '15 November'15

December'15

January '16 February'16

March '16 April '16 May '16 June '16

1.3x

File / Offer

IPO with Crossover (8.8%)

IPO without Crossover (8.6%)

Offer / Current

IPO with Crossover (14.3%)

IPO without Crossover (17.8%)

36

Blurred Lines between Financings

36

37

Financings in close proximity • We will discuss a few common scenarios

• Issuer engaged in discussions with investment banks about a potential IPO.

Investment banks recommended that the issuer commence working on the

potential IPO while also pursuing an institutional private placement. In the course

of the issuer’s discussions, the issuer has received interest from potential strategic

investors.

• Issues to consider in advising the issuer and its financial

intermediaries:

• Valuation of institutional private placement: will institutional investors seek to

invest at a lower valuation? if so, what adjustments are triggered in prior rounds?

how will a down-round be explained in the context of an anticipated IPO? will there

be a milestone or valuation-creation event between completion of the institutional

private placement and the IPO?

• What forecasts or projections have been shared with the institutional investors?

are these the same as those shared with research analysts? have research

analysts had an opportunity to conduct their own diligence?

38

Financings in close proximity (cont’d)

• What will be the financial statement impact of the financing?

• Are the institutional investors negotiating rights for themselves that will affect the

IPO? an acquisition?

• What other information has been shared with the institutional investors

• Securities law issues: are all of the investors “institutional accredited investors” or

“QIBs” so that if conversations were received as testing-the-waters discussions

there would not be a Section 5 issue?

• What kind of contractual commitment (if any) can be obtained from institutional

investors regarding their participation in the IPO?

• Indication of interest: is this something that can be disclosed in the IPO

prospectus?

• Contractual commitment to participate in another private placement

contemporaneous with the IPO

• Rules for “anchor” or “cornerstone” investors in the United States differ from

those in Europe and Asia

• No “confirmed” order in the U.S. without the pricing terms – cannot begin an

offering as a private placement and continue it as a public offering

39

Financings in close proximity (cont’d)

• Issuer has submitted its IPO registration statement to the SEC; issuer

was already in discussions about a late-stage private placement but

the placement had not come to fruition at the time the IPO

registration statement was submitted; IPO process has been

elongated as a result of market volatility. Issuer needs additional

funds. IPO underwriters also want to test the waters.

• Do you need to focus on integration of the various potential offerings? or in

potential gun-jumping issues?

• Does analysis change if the IPO is on file?

40

Financings in close proximity - integration

• Prevents circumvention of registration requirements by separating

single non-exempt offering into several exempt offerings

• Six-month safe harbor ─ Rule 502(a)

• SEC’s integration doctrine may apply to an offering that otherwise

qualifies for an exemption under Regulation D

41 This is MoFo. |41

Financings in close proximity –

integration – five-factor test

Under SEC’s integration doctrine, the following factors (“five

factors”) are considered in determining whether one sale of

securities by an issuer will be integrated with (i.e., treated as part of

the same offering as) a prior or subsequent offer or sale of

securities by the issuer:

Part of a single financing plan;

Issuances of the same class of securities;

Sales occur at or about the same time;

Same type of consideration is received; and

Proceeds will be used for same general purpose.

42 This is MoFo. |42

Financings in close proximity –

integration ─ SEC interpretive guidance

C&DI 139.25, which addresses a side-by-side private offering (under

Section 4(a)(2) or Rule 506) with a registered public offering without

having to limit the private offering to QIBs and a small number of

large institutional accredited investors

The focus is on how the investors in the private offering are solicited

Investors were not identified or contacted in connection with the public offering

Investors did not contact the issuer as a result of the general solicitation by

means of the registration statement

43 This is MoFo. |43

Financings in close proximity

Keeping track of the various offering processes

Which categories of potential investors will be contacted? by whom? to participate

in which offering?

What materials are used for each potential financing?

Who has received what information from the company and from the placement

agent?

Will all of the information that has been shared with potential investors be included

in the IPO prospectus?

Who has received material non-public information? SEC has made clear that it is

focused on “MNPI” or informational asymmetries

If an investor participated in an institutional private placement and received

information that will not be in the IPO prospectus, is there a basis on which it

can participate in the IPO?

44 This is MoFo. |44

Venture and mezzanine debt

Most pre-IPO companies traditionally have focused on equity

offerings; however, business development companies (BDCs),

venture debt lenders and other sources of capital also should be

considered

Structure of venture and BDC debt investments

Principal negotiating issues

45

Other Financing Approaches

45

46

Merging with and into an already public

company

• Using the life sciences sector as an example, there are a number of

public companies that were successful in raising capital to fund their

clinical development, but which have failed trials.

• Instead of liquidating and distributing their capital to stockholders,

these companies may be interested in considering merger

opportunities

• An issuer that has already commenced its IPO preparations but has

found that its IPO has been delayed may consider a reverse merger

into the already public company

• Unlike the “reverse mergers” into shell companies, which raise a

number of concerns, a reverse merger into an operating company

can be a worthwhile alternative

46

47

Regulation A+ Tier 2 offering, with a

listing

• An issuer that already commenced its IPO preparations and has found that

its IPO may be delayed may consider a Tier 2 Regulation A offering with a

contemporaneous stock exchange listing

• The disclosures prepared for a Form S-1 can easily be repurposed and used

to prepare a Form 1-A for a Regulation A offering

• Bankers may not have identified investor interest in an amount sufficient

(from the bankers’ perspective) for a traditional IPO; however, an issuer can

only raise up to $50 million in a Tier 2 Regulation A offering. The

expectations are that a Tier 2 Regulation A offering will not be as big as a

traditional IPO, so this offering format may provide a lower threshold for the

offering size

• By listing concurrently with the completion of the Regulation A offering, the

issuer will have a class of stock that it can use for stock-based compensation

awards, partnering transactions, or other purposes

• Furthermore, securities sold in a Tier 2 Regulation A offering are not

considered “restricted securities,” so funds that have limits on the

47

48

Regulation A+ Tier 2 offering, with a

listing (cont’d)

• Percentage of their portfolio that they can invest in private placements will be

able to invest in the offering

• Moreover, by establishing a public market for its securities, the issuer will

have many more options going forward, whether to provide liquidity for

existing VC and PE sponsors or to raise additional capital for its own

corporate purposes

• Following completion of the Tier 2 offering with listing, the issuer will be

considered an “EGC”

• It may be the case that investment banks that are disinclined to undertake

what they consider to be small IPOs may be more receptive to assisting with

what might be viewed as a large Regulation A Tier 2 offering

48

49

Exchange Act listing, without a capital

raise

• An issuer that already has undertaken the work required in

connection with an IPO may find it worthwhile to repurpose its Form

S-1 into a Registration Statement on Form 10, which is an Exchange

Act registration statement, and list its securities on an exchange

• The Form 10 enables an issuer to enter the SEC reporting regime

• After a Form 10 is cleared through the SEC, the issuer will be a

reporting company, responsible for periodic SEC filings, as well as

subject to Sarbanes-Oxley requirements

• A Form 10 registration statement cannot be used to raise capital

• If the issuer wants to raise capital, it would have to conduct an

exempt offering prior to, or alongside, the Form 10 registration

process

• The issuer might consider a Reg D/Rule 506 offering to accredited

investors, or a Rule 144A offering to QIBs, or a combination of these

49

50

Exchange Act listing, without a capital

raise (cont’d)

• Assuming that the issuer had its Form 10 declared effective, and also

listed its securities on an exchange, it may subsequently raise capital

through exempt offerings (a private placement, a PIPE transaction, a

144A offering) or through a registered follow-on offering

• For a registered follow on offering, the issuer will still need to use a

Form S-1 to register the offered securities

• If the issuer did not list its securities on an exchange (just on OTC

BB), and the issuer wants to do a follow-on offering, it should

consider trying to move up to Nasdaq or NYSE MKT in conjunction

with the follow-on in order to address blue sky concerns

50

51

The RE-IPOSM

51

This is MoFo. 52

Foreign exchanges • Foreign securities exchanges, such as the AIM, the TASE, the

Frankfurt exchange, and various of the Nordic exchanges, have been

successful in attracting strong, technology-based companies across a

range of sectors

• Founders, sponsors, or others may have advocated to have these

companies list their securities on these exchanges in order to create

a liquidity opportunity, as well as to provide a “currency” for potential

acquisitions or stock-based awards

• However, many of these exchanges have failed to develop any real

liquidity for their listed companies and the stocks have languished as

a result of market structure issues (i.e., “small currencies,” lack of

market makers, exchange rules), rather than as a result of company-

specific concerns

This is MoFo. 53

Recapitalization The company could then be recapitalized as follows:

• An institutional private placement in the United States completed “at market” by

reference to the home country securities exchange (which, by definition, will be

lower than the valuation that would be ascribed for a similarly situated company

listed on a U.S. securities exchange)

• In its home country, the company will undertake to register the resale of the

securities purchased in the private placement

• The institutional private placement is followed by a rights offering in the company’s

home country to existing stockholders, allowing existing stockholders to participate

at the same price as the new institutional holders

• Contemporaneously with the institutional private placement and the rights offering,

the company will proceed to undertake an IPO in the United States as an EGC

relying on the confidential submission process; the IPO could include a resale

component, or subsequent to the IPO, the company could file a resale for the

institutional investors

54

Financing Alternatives

for

Public Companies

54

This is MoFo. 55

Market trends • Privates have become more “public”

• In an effort to improve access to capital and minimize liquidity discounts, hybrid

financing techniques have become more important

• SEC’s Office of Risk Fin published a study in 2015 (“Capital Raising in the U.S.:

An Analysis of the Market for Unregistered Securities Offerings, 2009 - 2014”)

which showed that from 2009 to 2014 there was a shift from public to private or

hybrid offerings

• The shortened Rule 144 holding period, and the popularity of PIPE transactions,

and other hybrids contributed to the rise of private or targeted offering techniques

• The new Section 4(a)(7) resale exemption likely also will contribute to reducing the

liquidity discount associated with “restricted securities”

• JOBS Act changes to general solicitation rules will make privates even less private

• Perhaps more importantly, public offerings are becoming less “public”

• Due to market developments, such as heightened volatility and concerns about

investor front-running, fewer public offerings involve traditional marketing

• Most public offerings begin as confidentially marketed public offerings

This is MoFo. 56

Market trends (cont’d)

• Overall, companies rely on unannounced deals (PIPEs, registered

directs, CMPOs, and bought deals)

• Reliance on unannounced deals is unlikely to abate

• As among deal formats, reliance on PIPE transactions has declined.

More companies are eligible to use a Form S-3 for takedowns

(completed as registered directs or as underwritten confidentially

marketed public offerings). However, as has been the case since

PIPE transactions were created, PIPE transactions become

increasingly important in volatile markets.

57

Life Sciences Financing Spectrum for Structured Finance

Debt Structure

Traditional Lenders

Equity

Venture Lenders/BDCs

Royalty Funds Structured

Debt/Equity Private Placements

Convertible 144A Hedge Funds Mutual Funds

Venture Capital

Cost of Capital Most Expensive Least Expensive

Market Size ($) Market Size ($)

58

• High levels of global volatility has limited the accessibility of the equity follow-on market

• Companies are actively considering alternative financing vehicles to meet their capital needs at a lower cost of capital than may be achievable in the traditional markets

• Transaction structures completed this year include:

• 144A Convertible Debt

• Privately placed convertible debt

• PIPE – unregistered common stock targeted to private equity buyers

• Common stock with warrant coverage

• Royalty agreements

Recent Structured Debt / PIPE Transactions

¹Conversion premium at the closing market price on 1/25/16 is equal to 22.5% Source: Private Placement Tracker, FactSet Market data as of 7/8/16

Select Recent Healthcare PIPE/Structured Finance Transactions

Structured Finance Market

Announcement

Date Company Name Ticker Security Sold

Gross

Proceeds

Market

Cap

Proceeds

% of

Mkt. Cap.

Pricing Prem.

/

Discount at

Anc.

Conversion

Prem. /

Discount

at Anc. Term Coupon

Warrant

Coverage

Warrant

Prem.

at Anc.

Offer /

1-Day

Offer /

7-Day

Offer /

Current Top Investor

6/3/2016 Pieris Pharmaceuticals, Inc. PIRSConvertible Preferred Stock /

Units (Common Stock + Warrants)$16.5 $70.1 23.5% - 3.3% - - 59.1% 28.2% (4.1%) (15.9%) (15.4%) BVF, Inc.

6/3/2016 Lion Biotechnologies Inc. LBIO Convertible Preferred Stock / Common Stock 100.0 292.8 34.2% (21.2%) - - - - - 36.7% 26.2% 43.3% Unnamed Investors

5/27/2016 Aclaris Therapeutics, Inc. ACRS Common Stock 20.0 400.2 5.0% (6.1%) - - - 19.6% - 8.1% 9.2% 8.8% Aisling Capital

5/16/2016 Neo Therapeutics, Inc. NEOS Term Loan 60.0 124.7 48.1% - - 72 13.0% - - (3.6%) (2.8%) 20.6% Deerfield Management

5/4/2016 Relypsa, Inc. RLYP Senior Secured Term Loans 150.0 750.1 20.0% - - 30 11.5% - - (19.6%) (20.3%) 16.5% Athyrium Capital Mgmt

4/4/2016 Sorrento Therapeutics, Inc. SRNE Common Stock 150.0 241.7 62.1% (11.9%) - - - 19.6% 34.9% 11.9% 20.0% 20.9% Ally Bridge Group

3/28/2016 Veracyte, Inc. VCYT Term loan + $5MM Equity Offering Participation Rights 40.0 136.5 29.3% - - 72 12.0% - - 10.2% 6.7% 1.8% Visium Healthcare Partners

3/15/2016 Orexigen Therapeutics Inc. OREX Convertible Senior Secured Notes 165.0 101.9 161.9% - 7.1% - - 10.0% 114.3% (24.3%) (17.8%) (36.4%) Baupost Group, LLC

3/14/2016 Connecture, Inc. CNXR Convertible Preferred Stock 52.0 67.1 77.5% - 47.1% - 8.0% - - (12.1%) (3.3%) (16.3%) Francisco Partners, L.P.

3/7/2016 Argos Therapeutics, Inc. ARGS Common Stock + Warrants 49.7 114.7 43.3% (1.6%) - - - 75.0% (3.3%) (8.9%) (0.8%) 14.6% Pharmstandard International S.A.

2/29/2016 Coherus Biosciences Inc. CHRS Convertible Senior Secured Notes 100.0 561.2 17.8% - 54.9% 73 8.2% - - 4.1% 38.1% 19.3% HealthCare Royalty Partners

2/25/2016 TESARO, Inc. TSRO Common Stock 154.8 1,471.3 10.5% (4.1%) - - - - - 18.8% 24.3% 152.1% New Enterprise Associates

2/16/2016 Invacare Corporation IVC Convertible Senior Unsecured Notes 130.0 529.9 24.5% - (1.1%) 60 5.0% - - (23.9%) (29.0%) (23.7%) Unnamed Investors

2/4/2016 KemPharm Inc. KMPH Convertible Senior Unsecured Notes 86.3 214.1 40.3% - 15.5% 60 5.5% - - (3.2%) (14.8%) (71.1%) Deerfield Management

1/25/2016 Novavax, Inc. NVAX Convertible Senior Unsecured Notes 325.0 1,786.5 18.2% - 2.9%¹ 84 3.8% - - (14.7%) (23.9%) 15.1% Unnamed Investors

1/19/2016 Acorda Therapeutics Inc. ACOR Common Stock 75.0 1,721.9 4.4% (16.5%) - - - - - 14.0% 16.9% (21.3%) Unnamed Investors

1/6/2016 Essa Pharma, Inc. EPIX Units (Common Stock + Warrants) 15.0 105.2 14.3% (29.0%) - - - 150.0% (29.0%) 2.2% (4.5%) (40.9%) Clarus Ventures

1/4/2016 Halozyme Pharmaceuticals HALO Royalty-Backed Debt Financing 150.0 2,220.9 6.8% - - Dependent

on Royalty

8.75% +

3-Month

LIBOR

- - (5.4%) (28.6%) (47.4%) Pharmakon Advisors

59

Select Investors and Structured Finance Transactions

Investor Select Transactions

AMAG Pharma - (August, 2015) $500MM in 7.875% senior notes due in

2023

Cipher Pharma - (April, 2015) $100MM 10.25% senior secured notes

due in 2020. Issued with warrants for 600,000 common shares

Avinger (October, 2015) - $55MM term loan - Initial amount $30MM with

four years of interest payments, additional $20MM in two contingent

$10MM tranches

ViewRay (June, 2015) - Initial access to $30MM in debt financing with

interest over three years. Option to draw a further $20MM upon achieving

certain milestones

Navidea (May, 2015) - $50MM loan with 14% annual interest rate and

term of six years. Additional $10MM funding available through December

2016

Ceterix Orthopedics (May, 2015) - $35MM term loan agreement

TearLab Corporation (March, 2015) - $15MM term loan with 13%

annual interest, $20MM additional funding available through September

2016 at its option. 6-year maturity

AAC Holdings (October, 2015) - $25MM in subordinated convertible

debt, $25MM subordinated debt. Additional $50MM subordinated debt

facility subject to certain conditions

Depomed (March, 2015) - $375MM debt financing. Right to prepay the

tranches

Shine Medical Technologies (October, 2014) - $125MM term sheet,

milestone-driven debt financing

OMNIlife science, Inc. (April, 2014) - $27.5MM debt financing

Coherus Biosciences (February, 2016) - $100MM senior convertible

notes with 8.2% annual interest due in 2022. Conversion price at a 60%

premium to the average stock price over the prior 15 trading days

Raptor Pharmaceutical (July, 2015) - $60MM in 8% notes convertible at

$17.50 per share and $10MM additional funding pursuant to a revised

synthetic royalty loan agreement

Invuity, Inc. (March, 2014) - $15MM debt financing, concurrent with

$21MM equity deal (Series E)

Agile Therapeutics (February, 2015) - $25MM term loan. Hercules also

was granted a warrant to purchase 180,274 shares of common stock

Investor Select Transactions

Quotient Biodiagnostics (November 2015) - $50MM senior credit facility

Counsyl (August, 2015) - $40MM senior credit facility

Flexion Therapeutics (August, 2015) - $30MM senior credit facility

Sarepta Therapeutics (June, 2015) - $40MM senior credit facility

Agenus Inc (September, 2015) - $115MM royalty deal (Oberland receives

rights to 100% sales of GSX's shingles and malaria prophylactic vaccine

products until the loan is repaid)

BioMedica (May, 2015) - $50MM loan facility, $25MM drawn immediately

and the remainder taken at $5MM tranches

Unilife Corp. (March, 2014) - $40MM, 10.25% per annum, 6-year

maturity. Two additional $10MM tranches

Aerocrine (April, 2013) - $35MM term loan, administrator and funded

$25MM with 7-year maturity

Careview Communications (June, 2015) - $40MM debt financing, two

tranches each having a 5-year maturity

Paradigm Spine (February, 2014) - $75MM senior secured financing, 5-

year maturity

Tengion Inc (July, 2015) - Participant in $18.5MM senior convertible

notes

Outset Medical (June, 2015) - Participant in $40MM debt financing

Novocure (January, 2015) - $100MM term loan, $25MM at closing and

$75MM available through 6/30/16. 5-year agreement from initial funding

VIVUS (March, 2013) - $50MM drawn and $60MM additional at VIVUS

discretion. No payments in first year, 5-year maturity

SynCardia (December, 2013) - $10MM structured debt and synthetic

royalty financing

InSite Vision (April, 2013) - Sale of Besivance royalty for $15MM and

$1MM milestone

Note: Transaction detail disclosed in public press releases

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PIPE market trends

Number of Deals Dollars Raised

2015 981 $57 billion

2014 1,333 $34.6 billion

2013 1,275 $23.8 billion

2012 1,253 $36.1 billion

2011 1,246 $29 billion

2010 1,529 $39 billion

2009 1,272 $42 billion

*Data: Total Placements/Total Dollars 2009 –2015

PrivateRaise.com

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This is MoFo. 61

Strategic uses of PIPE transactions • PIPE transactions remain an important alternative in a number of

instances, including:

• As a means of structuring a venture capital or private equity-type investment

(which may take place in a distressed context)

• In circumstances where the issuer is seeking to finance an acquisition

• For a smaller issuer, when the smaller issuer has already tapped out its shelf

registration statement or needs to preserve its shelf capacity

• For selling stockholders (to place selling securityholder stock in an orderly way)

This is MoFo. 62

VC/Private equity PIPE • Venture capital or private equity funds will often invest in public

companies – either to increase their position or as a new investment if valuations make it attractive.

• Often a VC or a PE fund will invest in a public company as part of a recapitalization transaction.

• Why should these be structured as PIPE transactions?

• Highly customized security;

• Usually the investor will want to do its own diligence and is likely to acquire

material and non-public information that will not be capable of being disclosed by

the issuer after the transaction is completed (so the VC/PE firm will continue to be

restricted);

• The investors will likely want other contractual protections (affirmative/negative

covenants, information rights);

• The investors may want board representation;

• The investors will not be as focused on their resale opportunities or if they are

insiders/control persons will face other limitations

This is MoFo. 63

VC/Private equity PIPE (cont’d)

• These deals raise a host of issues that usually do not arise in other

PIPE transactions:

• Change of control issues:

• Company’s agreements

• Poison pill/rights plan

• NASDAQ or other change of control provisions

• Dilution for other shareholders and litigation risk

• Change of control premium issues

• Fiduciary duty and other governance issues

• Fairness opinions

This is MoFo. 64

PIPE to finance an acquisition • Why a PIPE?

• Marketing reasons:

• It may be important to share with potential purchasers a fair bit of information

about the acquisition (all material non-public information) and restrict their

ability to trade for an extended period of time

• Important to assess when this information will be shared broadly and/or when

the information will become stale

• Lack of “current information:”

• Is the acquisition material?

• Is pro forma information required to be filed?

• Pro forma information may not be available

• A comfort letter may not be available that could cover the financial information

• These considerations may make it impossible to undertake a registered

offering

This is MoFo. 65

PIPE for smaller issuers • Smaller issuers are subject to the 1/3 cap for primaries.

• Unfortunately, the cap may not provide sufficient flexibility for the issuer to raise much needed capital.

• An alternative for the issuer is to structure a PIPE or a 144A or other exempt offering alongside a take down off of a shelf (subject to the 1/3 cap):

• Things to consider:

• General solicitation issues: an issuer contemplating a PIPE or other exempt

offering in close proximity to a public offering should consider whether the public

offering may have been a “general solicitation” that renders the offering exemption

unavailable for the PIPE.

This is MoFo. 66

PIPE for selling securityholders • A significant securityholder or group of securityholders may wish to

dispose of their securities.

• These securities may be restricted securities because:

• They were acquired in an exempt offering, or

• The securityholders are affiliates of the issuer (“control stock”)

• Why should these be structured as PIPE transactions?

• Permits the securityholders to dispose of their securities in an organized manner

without disrupting the market for the issuer’s securities.

• Helps to avoid the downward pressure on the issuer’s stock price as a result of

alternative means of disposing of the securities, such as:

• Dribbling out securities over a period of weeks

• Dumping the issuer’s stock in a block trade

• The transaction is not announced until definitive purchase agreements are signed

(the issuer’s stock will not suffer the downward pressure associated with an

overhang).

This is MoFo. 67

PIPE for selling securityholders (cont’d)

• How is this accomplished?

• By utilizing the Section 4(a)(1½) exemption:

• Can be used by institutional investors to resell restricted securities purchased in a

private placement.

• Can also be used by affiliates for the sale of control securities when Rule 144 is

unavailable.

• In a Section 4(a)(1½) transaction: • The seller must sell in a “private” offering to an investor that satisfies the

qualifications (for example, sophistication, access to information, etc.) of an investor in a Section 4(a)(2) private offering, and

• The investor must agree to be subject to the same restrictions imposed on the seller in relation to the securities (for example, securities with a restricted legend).

• Other considerations: • Requires the issuer’s cooperation to effect the PIPE transaction.

• Purchase agreement contains both issuer and selling securityholder reps & warranties.

This is MoFo. 68

Weighing the Alternatives

This is MoFo. 69

Why choose a registered direct? • Over a PIPE transaction?

• Same efficient marketing: If an issuer has an effective shelf registration

statement, a registered direct offering can be marketed as a PIPE transaction —

on a “stealth” basis.

• Often a preliminary prospectus is filed, making the offering known to the

public. However, the issuer and placement agent may agree not to file a

preliminary prospectus supplement until late in the process.

• Often better pricing: Investors receive registered, freely transferable securities,

thus, no ‘liquidity’ discount.

• Prompt Pricing and Closing: If the issuer has an effective shelf registration

statement (or is a WKSI that can file an automatically effective shelf) the offering

can be priced and closed promptly. In some cases, pricing can occur overnight or

in a few days.

• Not limited to accredited investors: Because these transactions are registered,

offerings can be made to any potential investor, subject to suitability requirements.

This is MoFo. 70

Why choose a registered direct? (cont’d)

• Over a traditional underwritten follow-on offering?

• Short selling: In a fully marketed underwritten offering, the market has advance

notice of the potential offering, and market participants may begin shorting the

issuer’s common stock in anticipation of the offering.

• Potentially better pricing: Depending on the length of the marketing period and

general market conditions, shorting activity in the issuer ’s securities may cause

the market price of the issuer ’s stock to decline (sometimes significantly) by the

pricing date. As a result, the pricing in a marketed follow-on generally may be

lower than the price in a registered direct offering.

• Speed and Costs: Registered directs are typically faster (and cheaper) than firm

commitment deals.

• No capital commitment: From the placement agent’s perspective, a registered

direct offering does not require any capital.

This is MoFo. 71

Registered directs • A registered direct is most efficient when the issuer already has an effective

primary shelf registration statement.

• A selling stockholder also may use a registered direct offering to sell its

shares—either alone or with primary (issuer) shares.

• A registered direct offering is a “distribution” for Regulation M purposes.

• Assess the applicable Regulation M restricted period; file Regulation M notice.

• There is no overallotment option in a registered direct offering.

• An over-allotment option relates principally to stabilizing in connection with a firm

commitment offering and is not applicable to a best efforts agency deal like a

registered direct offering, where a specified number of shares are sold to the

investors directly.

• A placement agent cannot engage in market stabilizing transactions in a best efforts

agency transaction, only in passive market making activities.

• NASDAQ and other 20% rule limitations are being applied to registered directs

unless agents can demonstrate a broad distribution that includes retail investor

participation.

• The 1/3 cap on primaries apply for smaller public companies.

This is MoFo. 72

Why a confidentially marketed public offering

(CMPO)?

• Assumes that the issuer already has an effective shelf registration

statement. Things to consider:

• Will the eventual offering be a public or a private offering?

• Is the issuer’s disclosure grid current? Is it necessary to file updated risk factors?

Is it necessary to provide guidance on the current quarter? on write-downs? on

anticipated ratings actions?

• What is the best approach for updating the issuer’s disclosures (if needed)?

• Plan ahead all of the required (or desired) filings (e.g., these may include: 8-K,

preliminary prospectus supplement or FWP, term sheet, press release, final

prospectus supplement).

This is MoFo. 73

Why a confidentially marketed public offering

(CMPO)? (cont’d)

• Over a registered direct offering? In general, many of the advantages of a

registered direct offering also apply in the context of a pre-marketed public

offering.

• Wider distribution: An advantage of a registered direct offering is that it is marketed

in a targeted manner. However, that often means that the offering is not as widely

distributed as other public offerings, in which case a pre-marketed public offering

may be attractive (it can be opened up to retail investors).

• 20% rule: If an issuer anticipates offering and selling a number of shares that

exceeds 20% of the total shares outstanding prior to the offering, and those shares

will be sold at a discount, a registered direct offering may not be considered a “public

offering” under the rules of the applicable exchange; thus presenting shareholder

vote issues under the 20% rule. A pre-marketed public offering may be an attractive

alternative because it is underwritten (important for NASDAQ) and in the second

(public) stage can be opened up to a broader universe of offerees.

• Perceived better pricing: Many issuers still view an underwritten offering to be the

most desirable financing alternative.

• Underwriter can stabilize or over-allot (if it chooses to do so): Depending on

market conditions, this may be important.

This is MoFo. 74

Bought Deals

This is MoFo. 75

Bought deals • Firm commitment transaction (sometimes referred to as an

“overnighter”) wherein the underwriter purchases the securities from

the issuer without pre-marketing

• An issuer or a selling securityholder may need certainty of execution, and, as a

result, may prefer a bought deal to a CMPO

• Generally, a bought deal will only be feasible for a WKSI

• Usually, it is easier to execute a bought deal following the filing of a 10-Q or 10-K

when the issuer’s disclosures are current

• The underwriter must use its best efforts to re-sell the securities

(once purchased)

• Bought deal volumes have increased as issuers selling new shares

and PE/VC sponsors reselling their shares have sought greater

certainty on deal execution and pricing

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This is MoFo. 76

Bought deals (cont’d)

This is MoFo. 77

Process • An underwritten public offering (unlike a block trade, which may be agented, and

may involve restricted securities). The issuer and the underwriter enter into an

underwriting agreement containing all of the “standard” provisions

• The underwriters undertake customary diligence for a shelf takedown. The

process is abbreviated, and, as a result of the compressed time period, caution

should be exercised.

• The issuer may “bid” out the deal

• Usually, in the context of a deal that is being bid out, the issuer will have designated

underwriters’ counsel. In advance of notifying potential bidding banks, the issuer and

its counsel will have worked with designated underwriters’ counsel to obtain a draft

comfort letter, negotiate an underwriting agreement, and confirm that other deliverables

will be available at closing

• There is no pre-announcement. The deal is announced once the underwriting

agreement is executed. Investors would not be able to front-run the transaction.

• Sometimes, the issuer may announce the deal after market close and keep it open until

before market open the following day.

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This is MoFo. 78

Communications • Typically, the transaction will be announced promptly after market close through the

issuance of a launch press release that will comply with Rule 134

• After the launch, it remains critical to maintain the confidentiality of the price that the

underwriters have agreed to pay the issuer (or the selling security holder) for the

securities.

• After the overnight marketing, underwriters may express confidence that they have

allocated the entire block of securities to accounts. However, the pricing

announcement should be deferred until all investor orders have been confirmed

• A gross proceeds number may be calculated and disclosed but this would not inform

the market of the price paid by the underwriters

• The underwriting discount and the fixed price are not in and of themselves material

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This is MoFo. 79

Trading • After completion of a bought deal (completion in this context means the sale

by the issuer to the underwriter), the underwriter will re-sell the securities

• The underwriter may re-sell all of the securities at a fixed price (that price may

vary)

• The underwriter may re-sell the securities at varying prices

• The underwriter may hold shares in a proprietary account

• The underwriter may allocate to asset management accounts (subject to

compliance with applicable policies)

• Communications and trade reporting may vary depending on the

underwriter’s execution

• The issuer will disclose that the underwriter may vary the price at which the

securities are offered to the public and sell the securities from time to time in

various types of transactions. There is no announcement at pricing of a

single price paid to the issuer because the underwriters may still be long the

securities.

79