Planning for an IPO D&O Insurance Considerations

1. Planning for an IPO D&O Insurance Considerations March 2014

2. IPO D&O Underwriting Profile / Risk Factors • Size of offering / Projected Market Capitalization / Public Float • Selling Shareholders • Regulatory Compliance • Experience of management with IPOs and public company experience • Use of funds from the offering • Address Risk Factors identified in S-1 • Earnings Guidance • Profitability of the Company / Projected financials post offering • Managing Growth • Industry / Barriers to Entry / Innovation • Debt levels and liquidity positions • Corporate Governance Policies – board composition, audit and compensation committee, SOX procedures, financial reporting protocols, evaluation of key accounting measures, insider trading protocols, etc. • Go-Forward Strategy • Plans for a secondary offering • M&A Activity • Litigation

3. Private to Public Coverage Considerations • Road Show Coverage (Private company policy) • Claims made by security holders for failure to undertake / complete IPO • Includes the preparation for any public offering including presentations • Properly address SEC exposures • Coverage for SEC exposures (‘33 Act and ‘34 Act) will be included in public program. • Public form to incept the date of the pricing. • Scope of Entity Coverage – How coverage will change • Private Form – entity coverage for all claims alleging wrongful acts. • Public Form – entity coverage only applies to security claims. • Transition • Option #1 - Private form cancelled at pricing date and public form incepts with full continuity • Lose non-securities entity coverage. • Unearned premium credited against public form premiums. More cost efficient. • Option #2 – Private form, six year run-off (tail) purchased and new public form incepts at pricing date. • Maintains entity coverage for non-securities claims. • Potential issues with claims that bridge the pricing date. Can be mitigated with properly crafted policy language. • Public companies generally carry higher limits and use market capitalization as a key metric when benchmarking limits. Potential damages (loss of shareholder value) will drive estimated damages and settlements. Encourage securities claim loss modeling.

4. JOBS Act IPOs – D&O Insurance Market Conditions • D&O Underwriters view JOBS Act IPOs as having more risk. • Reduced disclosure requirements • No immediate requirement of SOX 404 auditor attestation • Underwriters Will Offer Less Capacity • Typical IPO has little trouble securing $10M in primary layer capacity. • JOBS Act Companies will receive fewer options for $10M (many carriers will only offer $5M). • Higher Retentions • 2 years ago – “typical” small IPO or public company renewal would have a securities retention as low as $250K. • Now – smaller public companies are seeing pressure on retentions, and separate M&A retentions of $1Mor above. • JOBS Act IPOs – likely to see retentions starting at $750K - $1M for all claims. • Pricing – smaller IPOs generally see primary layer pricing in the high teens per $million of limit. JOBS Act IPOs generally fall between $20K and $30K per $million. • Terms and Conditions – generally the same as other public companies / IPOs. Market evolving. • IPO Players: • AIG, AXIS, XL – Lockton has had the most success with these carriers. • Others: ACE, Chubb, CNA, Zurich, Beazley, Hiscox, Great American, AWAC, ARCH, and Travelers.

5. IPO Timeline and Company Risk Profile Pre-Filing Period Waiting Period Quiet Period IPO Filing Process – Securities Act of 1933 Exposure 1933/1934 Exposure Ongoing advice, claims service/support. Delivery of policies within 60 days. Lockton to provide an overview of the IPO and Insurance process, submission information required by underwriters and initial consultation. Implementation and Completion of Marketing. Insurance underwriting meetings. D&O Insurance Program Planning / Preparations Begin Timeline drafted Coverage incepts 12:01 AM to cover all past acts and those actions within the policy period Quotes Received and terms/pricing finalized. Lockton alerted as to the potential offering date 95 Days 1 – 10 Days 120 Days 60 – 45 Days 30 Days 15 Days 10 – 1 Days Pricing Day Exposure to SEC Laws Work on the registration statement commences. Due diligence meeting; underwriting agreement drafted; audit completed; board meetings; legal matters resolved; first draft of prospectus completed. Initial filings done; SEC review and “cooling off” period begins; red herring distributed; sales effort and road show undertaken; meetings on due diligence; Blue Sky filings completed. Public offering begins; underwriting agreements signed; comfort letter given to underwriter; press release distributed and tombstone ad run. SEC comment letter received and response to; pricing amendment filed; acceleration requested. IPO PreparationsOrganizational Meeting/ Management Due Diligence Presentations Underwriter chosen and other key planning completed Closing proceeds received; final documents and certificates exchanged; accountant provides underwriter final comfort letter