Arthur J. Gallagher & Co S-3ASR, filed Dec 9, 2024
Arthur J. Gallagher & Co. (AJG)
Table of Contents
As filed with the Securities and Exchange Commission on December 9, 2024
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ARTHUR J. GALLAGHER & CO.
(Exact name of registrant as specified in its charter)
| Delaware | 6411 | 36-2151613 | ||
| (State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
2850 Golf Road
Rolling Meadows, Illinois
60008-4050
(630) 773-3800
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Walter D. Bay, Esq.
Vice President, General Counsel and Secretary
Arthur J. Gallagher & Co.
2850 Golf Road
Rolling Meadows, Illinois 60008-4050
(630) 773-3800
(Name, address, including zip code and telephone number, including area code, of agent for service)
COPIES TO:
| Andrew L. Fabens, Esq. Gibson, Dunn & Crutcher LLP 200 Park Avenue New York, New York 10166 (212) 351-4034 |
Jorge U. Juantorena, Esq. Lesley Janzen, Esq. Cleary Gottlieb Steen & Hamilton LLP One Liberty Plaza New York, New York 10006 (212) 225-2000 |
Approximate date of commencement of proposed sale of the securities to the public: From time to time after this registration statement becomes effective.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ☐
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☒
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
| Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
| Emerging growth company | ☐ | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act. ☐
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The information in this preliminary prospectus is not complete and may be changed. This preliminary prospectus is part of an effective registration statement filed with the Securities and Exchange Commission. This preliminary prospectus is not an offer to sell these securities and they are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED DECEMBER 9, 2024
PRELIMINARY PROSPECTUS
$
Arthur J. Gallagher & Co.
Common Stock
We are offering $ in shares of our common stock, $1.00 par value per share.
Our common stock is listed on the New York Stock Exchange under the symbol “AJG.” The last reported sale price of our common stock on the New York Stock Exchange on December 6, 2024, was $296.71 per share. You are urged to obtain current market data and should not use the market price as of December 6, 2024, as a prediction of the future market price of our common stock.
| Per share | Total | |||||||
| Public offering price |
$ | $ | ||||||
| Underwriting discounts and commissions |
$ | $ | ||||||
| Proceeds, before expenses, to us |
$ | $ | ||||||
We have granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase up to an additional $ in shares of common stock from us. If the underwriters exercise this option in full, the total underwriting discounts and commissions will be $ and total proceeds, before expenses, to us will be $ .
Investing in our common stock involves risks. See “Risk Factors” beginning on page 20 of this prospectus. You should also consider the risk factors described in the documents incorporated by reference into this prospectus, including the risk factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares of our common stock to purchasers on December , 2024.
Joint Book-Running Managers
| Morgan Stanley | BofA Securities |
The date of this prospectus is December , 2024.
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| UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION |
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| MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS |
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You should rely only on the information contained in or incorporated by reference in this prospectus or that is contained in any free writing prospectus prepared by us or on our behalf. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We and the underwriters take no responsibility for, and can provide no assurances as to the reliability of, any other information that others may give you. We are not, and the underwriters are not, making an offer to sell the common stock in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus and in the documents incorporated by reference herein or that is contained in any free writing prospectus issued by us is accurate only as of their respective dates. Our business, financial condition, results of operation and prospects may have changed since those dates.
PROHIBITION OF SALES TO EEA RETAIL INVESTORS—The shares of common stock are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Article 2(e) of Regulation (EU) 2017/1129 (as amended, the “Prospectus Regulation”). Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling packaged retail and insurance based investment products or otherwise making them available to retail investors in the EEA has been prepared and, therefore, offering or selling the shares of common stock or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
NOTICE TO PROSPECTIVE INVESTORS IN THE EEA—In the EEA, this prospectus and any other material in relation to the shares of common stock are only being distributed to, and are only directed at, “non-retail investors” (being persons who are not “retail investors” as defined in the section above titled “Prohibition of sales to EEA retail investors”) and any investment or investment activity to which this prospectus relates is available only to, and will be engaged in only with, non-retail investors. This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by any recipients to any other persons in the EEA. Any person in the EEA who is a “retail investor” should not act or rely on this prospectus or its contents.
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PROHIBITION OF SALES TO UK RETAIL INVESTORS—The shares of common stock are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the United Kingdom (“UK”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (as amended, and together with any statutory instruments made in exercise of the powers conferred by such Act, the “EUWA”); (ii) a customer within the meaning of the provisions of the Financial Services and Markets Act 2000 (as amended, the “FSMA”) and any rules or regulations made under the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a professional client as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA; or (iii) not a qualified investor as defined in Article 2 of Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the EUWA. Consequently, no key information document required by Regulation (EU) No 1286/2014 as it forms part of domestic law by virtue of the EUWA (the “UK PRIIPs Regulation”) for offering or selling packaged retail and insurance based investment products or otherwise making them available to retail investors in the UK has been prepared and, therefore, offering or selling the shares of common stock or otherwise making them available to any retail investor in the UK may be unlawful under the UK PRIIPs Regulation.
NOTICE TO PROSPECTIVE INVESTORS IN THE UK—In the UK, this prospectus and any other material in relation to the shares of common stock are only being distributed to, and are only directed at, “non-retail investors” (being persons who are not “retail investors” as defined in the section above titled “Prohibition of Sales to UK Retail Investors”) who are also: (i) persons having professional experience in matters relating to investments who fall within the definition of “investment professionals” in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”); (ii) high net worth bodies corporate, unincorporated associations and partnerships and trustees of high value trusts as described in Articles 49(2)(a) to (d) of the Order; or (iii) persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) in connection with the issue or sale of any shares of common stock may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by any recipients to any other persons in the UK. In the UK, any investment or investment activity to which this prospectus relates is only available to, and will be engaged in only with, relevant persons. Any person in the UK that is not a relevant person should not act or rely on this prospectus or its contents. The shares of common stock are not being offered to the public in the UK.
This prospectus has not been approved for the purposes of Section 21 of the FSMA by a person authorized under the FSMA. This prospectus is being distributed and communicated to persons in the UK only in circumstances in which Section 21(1) of the FSMA does not apply to us.
References in the sections above titled “Prohibition of sales to UK retail investors” and “Notice to prospective investors in the UK” to UK legislation include any successor legislation to that legislation.
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You should rely only on information contained in or incorporated by reference in this prospectus. We have not authorized anyone to give you any information or make any representation that is different from, or in addition to, that contained in this prospectus or in any of the materials that we have incorporated by reference into this document. If you are in a jurisdiction where offers to sell, or solicitations of offers to purchase, the common stock offered by this document are unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this document does not extend to you. The information contained in this prospectus (including the information contained in any document incorporated by reference in this prospectus) speaks only as of the date of each such document, unless the information specifically indicates that another date applies.
We include cross-references in this prospectus to captions in these materials where you can find additional related discussions. The table of contents in this prospectus provides the pages on which these captions are located.
Unless otherwise indicated or the context otherwise requires, references in this prospectus to the “Company,” “Gallagher,” “we,” “our” and “us” refer to both Arthur J. Gallagher & Co. and its consolidated subsidiaries. The term “you” refers to a prospective investor.
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CAUTIONARY STATEMENTS REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference herein contain certain statements related to future results, or state our intentions, beliefs and expectations or predictions for the future, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations or forecasts of future events and use words such as “anticipate,” “believe,” “estimate,” “expect,” “contemplate,” “forecast,” “project,” “intend,” “plan,” “potential” and other similar terms, and future or conditional tense verbs like “could,” “may,” “might,” “see,” “should,” “will” and “would.” You can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. For example, we may use forward-looking statements when addressing topics such as: statements regarding expected benefits of the proposed Transaction (as defined in “Summary—Recent Developments”); the benefits of the proposed Transaction, including future financial and operating results and synergies; the expected revenue, earnings per share (“EPS”), net earnings before interest, income taxes, depreciation, amortization and the change in estimated acquisition earnout payables (“EBITDAC”) and credit rating impacts of the proposed Transaction; the size and status of the combined organization within various jurisdictions; required regulatory approvals; expected timing of completion of the proposed Transaction; expected duration and cost of integration, and the anticipated financing of the proposed Transaction; the plans, objectives, expectations and intentions with respect to the Acquired Entity; the impact of general economic conditions, including inflation, interest rates and market uncertainty; the effects of geopolitical volatility, including repercussions from the wars in Ukraine and the Middle East; market and industry conditions, including competitive and pricing trends and the impact of large natural events; acquisition strategy including the expected size of our acquisition program; the expected impact of acquisitions and dispositions; and integrating recent acquisitions, including the expected benefits of our acquisition of the Willis Towers Watson plc treaty reinsurance brokerage operations (“Willis Re”), BCHR Holdings, L.P., and its subsidiaries, dba Buck (“Buck”), Cadence Insurance, Inc. (“Cadence Insurance”), Eastern Insurance Group, LLC (“Eastern Insurance”), My Plan Manager Group Pty Ltd (“My Plan Manager”) and other acquisitions larger than our typical tuck-in acquisitions and the expected duration and costs of integrating such large acquisitions; the development and performance of our services and products; changes in the composition or level of our revenues or earnings; our cost structure and the size and outcome of cost-saving or restructuring initiatives; future capital expenditures; future debt levels and anticipated actions to be taken in connection with maturing debt; future debt-to-earnings ratios; the outcome of contingencies; dividend policy; pension obligations; cash flow and liquidity; capital structure and financial losses; future actions by regulators; the outcome of existing regulatory actions, audits, reviews or litigation; the impact of changes in accounting rules; financial markets; interest rates; foreign exchange rates; matters relating to our operations; income taxes; expectations regarding our investments; human capital management, including diversity and inclusion initiatives; sustainability matters, including climate- resilience products and services and carbon emissions; and integrating recent acquisitions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors.
Potential factors that could impact results include:
| • | Risks related to the integration of the operations, businesses and assets acquired in the proposed Transaction into the Company; |
| • | The possibility that the proposed Transaction is not completed when expected or at all because required regulatory approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all; |
| • | The risk that our free cash generation is insufficient, or the financing required to fund the proposed Transaction is not obtained on the terms anticipated or at all; |
| • | Potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed Transaction; |
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| • | The possibility that the anticipated benefits of the proposed Transaction, including cost savings and expected synergies, are not realized when expected or at all, including as a result of the impact of, or issues arising from, the integration of the acquired operations; |
| • | Conditions imposed in order to obtain required regulatory approvals for the proposed Transaction; |
| • | Uncertainties in the global economy and equity and credit markets and their potential impact on the Company’s ability to finance the proposed Transaction on acceptable terms, at favorable pricing, in a timely manner, or at all; |
| • | The possibility that the proposed Transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; |
| • | Diversion of management’s attention from ongoing business operations and opportunities; |
| • | The inability to retain certain key employees of the operations acquired in the proposed Transaction or the Company; |
| • | Risks associated with increased leverage from the proposed Transaction; |
| • | Competitive and market responses to the proposed Transaction; |
| • | Uncertainties as to the timing of the consummation of the proposed Transaction and the ability of each party to consummate the proposed Transaction; |
| • | That financial information subsequently presented for the business acquired in the proposed Transaction in our subsequent public filings may be different from that presented herein; |
| • | Global economic and geopolitical events, such as fluctuations in interest and inflation rates; a recession or economic downturn; failures of financial institutions and other counterparties; a potential United States (U.S.) government shutdown or gridlock over increasing the U.S. debt ceiling; political violence and instability, including as a result of geo-economic fragmentation; |
| • | Economic conditions that result in financial difficulties for underwriting enterprises or lead to reduced risk-taking capital capacity, for example, as a result of large payouts related to extreme weather events, or to the failure of such enterprises, including the increased risk of errors and omissions (which we refer to as E&O) claims against us; |
| • | Risks that could negatively affect the success of our acquisition strategy, including the impact of economic uncertainty on our ability to source, review and price acquisitions; continuing consolidation in our industry and interest in acquiring insurance brokers on the part of private equity firms and newly public insurance brokers, which makes it more difficult to identify targets and in some cases makes them more expensive; inaccurate assumptions and failure to realize expected benefits; the risk that we may not receive timely regulatory approval of pending transactions; closing risks; execution risks; integration risks; poor cultural fit; the risk of post-acquisition deterioration leading to intangible asset impairment charges; and the risk we could incur or assume unanticipated liabilities such as cybersecurity issues or those relating to violations of anti-corruption and sanctions laws; |
| • | Risks related to Willis Re, Buck, Cadence Insurance, Eastern Insurance, My Plan Manager and other acquisitions larger than our usual tuck-in acquisitions, including risks related to our ability to successfully integrate operations (including with respect to technology and financial systems required to be converted as transition services agreements phase out from time to time), the possibility that our assumptions may be inaccurate resulting in unforeseen obligations or liabilities and failure to realize the expected benefits of these acquisitions; |
| • | Damage to our reputation, including as a result of sustainability matters, and the potential for the Internet and social media to magnify the effects of such reputational issues; |
| • | Failure to meet our sustainability-related aspirations, goals and initiatives or to comply with increasingly complex climate-related regulations including increased risks related to “greenwashing”; |
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| • | Emerging risks relating to the use of artificial intelligence (“AI”) in our business operations, including regulatory, data privacy and cybersecurity risks; |
| • | Failure to apply technology, data analytics and AI effectively in driving value for our clients through technology-based solutions, or failure to gain internal efficiencies and effective internal controls through the application of technology and related tools; |
| • | Risks associated with the use of AI in our business operations, including regulatory, data privacy, cybersecurity, E&O and competition risks; |
| • | Failure to attract and retain experienced and qualified talent, including our senior management team, or adequately plan and execute for the succession of such leaders; increased costs resulting from increased compensation and benefits packages as a result of a tighter labor market, and negative effects from restrictions on non-compete agreements at the state level; |
| • | A disaster or other significant disruption to business continuity for our own operations or those of third parties on which we rely, including cybersecurity incidents; natural disasters; political violence and unrest in the U.S. or elsewhere around the world; for example, our substantial operations in India could be negatively impacted as a result of the dispute between India and Pakistan involving the Kashmir region, rising tensions between India and China, incidents of terrorism in India, civil unrest or other reasons; |
| • | Sustained increases in the cost of employee benefits and compensation expenses; |
| • | Risks arising from our international operations and changes in international conditions, including the risks posed by political and economic uncertainty in certain countries (including repercussions from the wars in Ukraine and the Middle East), maintaining regulatory and legal compliance across multiple jurisdictions (such as those relating to violations of anti-corruption, sanctions and privacy laws, increasingly complex regulatory requirements related to climate change and sustainability issues and increased protectionism), tariffs, trade wars, climate change and other long-term sustainability matters and global health risks; |
| • | Risks related to changes in U.S. or foreign tax laws, including a U.S. or foreign tax rate change, potential changes in guidance related to the U.S. Inflation Reduction Act, the Organisation for Economic Co-operation and Development’s (OECD) global minimum corporate tax regime, and other local policy changes; |
| • | Competitive pressures, including as a result of innovation, in each of our businesses; |
| • | Volatility or declines in premiums or other adverse trends in the insurance industry; |
| • | The higher level of variability inherent in contingent and supplemental revenues versus standard commission revenues; |
| • | Risks particular to our benefit consulting operations, including risks related to the acquisition of Buck; |
| • | Risks particular to our third-party claims administrations operations, including risks related to the availability of RISX-FACS®, our proprietary risk management information system, wage inflation, staffing shortages, any slowing of the trend toward outsourcing claims administration and the concentration of large amounts of revenue with certain clients; |
| • | Climate risks, including the risk of a systemic economic crisis and disruptions to our business caused by the transition to a low-carbon economy; |
| • | Cyber-attacks or other cybersecurity incidents and the heightened risk of such attacks as a result of the wars in Ukraine and the Middle East; improper disclosure of confidential, personal or proprietary data and changes to laws and regulations governing cybersecurity and data privacy; |
| • | Unfavorable determinations related to contingencies and legal proceedings; |
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| • | Violations or alleged violations of the U.S. Foreign Corrupt Practices Act (which we refer to as FCPA), the United Kingdom (U.K.) Bribery Act 2010 or other anti-corruption laws and the Foreign Account Tax Compliance provisions of the Hiring Incentives to Restore Employment Act, and the outcome of any existing or future investigation, review, regulatory action or litigation; |
| • | Failure to comply with regulatory requirements, including those related to governance and control requirements in particular jurisdictions, international sanctions, including new sanctions laws as a result of the wars in Ukraine and the Middle East; laws relating to the disclosure of sustainability-related matters; laws relating to the use of AI, or a change in regulations or enforcement policies that adversely affects our operations (for example, relating to insurance broker compensation methods or restrictions on non-compete agreements); |
| • | Changes to our financial presentation from new accounting estimates and assumptions; |
| • | Intellectual property risks; |
| • | Risks related to our legacy clean energy investments, including intellectual property claims, environmental and product liability claims, environmental compliance costs and the risk of disallowance by the Internal Revenue Service of previously claimed tax credits; |
| • | The risk that our outstanding debt adversely affects our financial flexibility and restrictions and limitations in the agreements and instruments governing our debt; |
| • | The risk of credit rating downgrades; |
| • | The risk that we may not be able to receive dividends or other distributions from our subsidiaries, including the effects of significant changes in foreign exchange rates; |
| • | The risk of share ownership dilution when we issue common stock; and |
| • | Volatility of the price of our common stock. |
Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions, including the risk factors referred to above. Our future performance and actual results or outcomes may differ materially from those expressed in forward-looking statements. Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of, and are based on information available to us on, the date of the applicable document. Many of the factors that will determine these results are beyond our ability to control or predict. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Forward-looking statements speak only as of the date that they are made, and we do not undertake any obligation to update any such statements or release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect new information, future or unexpected events or otherwise, except as required by applicable law or regulation. In addition, historical, current and forward-looking sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future.
A detailed discussion of the factors that could cause actual results to differ materially from our published expectations is contained under the heading “Risk Factors” below and in our filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and any reports we file with the SEC in the future, which are incorporated by reference to this prospectus.
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The following summary should be read together with the information contained in other parts of this prospectus and the information incorporated by reference herein. This summary highlights selected information from this prospectus regarding the offering of the shares of common stock. You should read this prospectus, including the documents we incorporate by reference, carefully to understand fully the terms of the offering as well as other considerations that are important to you in making a decision to invest in the shares of our common stock. You should pay special attention to the “Risk Factors” section of this prospectus, and the “Risk Factors” section in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, to determine whether an investment in the shares of common stock is appropriate for you.
Our Company
We are engaged in providing insurance brokerage, reinsurance brokerage, consulting services, and third-party property/casualty claims settlement and administration services to entities and individuals around the world. In the nine-month period ended September 30, 2024, we generated approximately 65% of our revenues for the combined brokerage and risk management segments domestically and 35% internationally, primarily in Australia, Canada, New Zealand and the U.K. We have three reportable segments: brokerage, risk management and corporate. The brokerage and risk management segments contributed approximately 86% and 14%, respectively, to revenues during the nine-month period ended September 30, 2024. The corporate segment did not generate any significant revenues in the nine-month period ended September 30, 2024. Our major sources of operating revenues are commissions, fees and supplemental and contingent revenues from brokerage operations and fees from risk management operations. Interest income is earned on cash, cash equivalents and fiduciary cash and revenues are generated from premium financing.
Recent Developments
Transaction
On December 7, 2024, we entered into a Stock Purchase Agreement (the “Purchase Agreement”), by and among the Company, The AssuredPartners Group LP (the “Seller”) and Dolphin TopCo, Inc. (the “Acquired Entity”), pursuant to which the Company will acquire all of the issued and outstanding stock of the Acquired Entity for an aggregate purchase price of $13.45 billion in cash payable at closing, subject to certain customary adjustments as set forth in the Purchase Agreement (the “Transaction”). The Acquired Entity is the holding company of AssuredPartners, Inc., a Delaware corporation (together with its subsidiaries, “AssuredPartners”), a leading U.S. insurance broker with client capabilities across commercial property/casualty, specialty, employee benefits and personal lines and with operations in the U.K. and Ireland. The Acquired Entity’s revenues as reported were $2,222 million, $2,856 million and $2,556 million for the nine months ended September 30, 2024, the twelve months ended September 30, 2024 and the year ended December 31, 2023, respectively. The Acquired Entity’s pro forma Adjusted EBITDAC was $938 million for the twelve months ended September 30, 2024. Additionally, the Acquired Entity’s three-year average Organic Revenue growth rate was approximately 6%. The Company’s management applied certain adjustments to the Acquired Entity’s financial information to calculate the Acquired Entity’s pro forma Adjusted EBITDAC, including non-recurring legal, transaction-related, technology and acquisition-related compensation expense. See “Risk Factors—Certain financial information related to the Acquired Entity presented in this prospectus is derived from financial statements that are not included herein and include certain non-GAAP measures and investors are cautioned not to place undue reliance on such information.”
The Purchase Agreement contains representations, warranties and covenants related to the Transaction that are customary for a transaction of this nature, and the completion of the Transaction is dependent upon receipt of
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regulatory clearances in the U.S., the U.K. and Ireland and certain other customary closing conditions. The Purchase Agreement includes customary termination provisions of the parties, including if (i) the closing of the Transaction has not occurred on or prior to March 9, 2026 (as may be extended to July 7, 2026 in certain circumstances, as further described in the Purchase Agreement), and (ii) the other party has materially breached its representations, warranties or covenants, subject to certain negotiated cure periods as set forth in the Purchase Agreement. The Company’s obligations under the Purchase Agreement are not conditioned on the receipt of financing.
The Purchase Agreement has been filed as an exhibit to the Company’s Current Report on Form 8-K, filed on December 9, 2024, and is incorporated by reference into this prospectus to provide investors with information regarding its terms and conditions. It is not intended to provide any other factual information about the Company, the Seller or the Acquired Entity or any of their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of that agreement and as of specific dates, were solely for the benefit of the parties to the Purchase Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Purchase Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Purchase Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, the Seller or the Acquired Entity or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
We expect to use the net proceeds of this offering, available cash and available borrowings under our credit agreement, dated June 22, 2023, as amended (our “Revolving Credit Facility”), or other borrowings to fund the purchase price for the Transaction. Subject to market conditions and other factors, we expect to raise additional amounts to fund the purchase price for the Transaction in a public offering of our senior notes (the “concurrent notes offering”). See “Use of Proceeds.”
This offering is not conditioned on the closing of the Transaction or the concurrent notes offering, and there can be no assurance that either the concurrent notes offering or the Transaction will be completed. See “Risk Factors—There can be no assurance that the Transaction will be completed or that we will realize the expected benefits of the Transaction.”
Corporate Information
Our principal executive offices are located at 2850 Golf Road, Rolling Meadows, Illinois 60008-4050. Our telephone number is (630) 773-3800. Our website is http://www.ajg.com. The contents of our website are not a part of this prospectus.
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The following summary contains basic information about this offering. This summary is not intended to be complete. You should read the full text and more specific details contained elsewhere in this prospectus. For a more complete description of the shares of common stock, see “Description of Capital Stock” in this prospectus.
| Issuer |
Arthur J. Gallagher & Co., a Delaware corporation. |
| Common stock offered |
$ in shares. We have also granted the underwriters a 30-day option to purchase up to an additional $ in shares. |
| Common stock to be outstanding immediately following this offering |
shares (or shares if the underwriters exercise their option to purchase additional shares in full) (based on shares outstanding on September 30, 2024). |
| Use of proceeds |
We estimate that the net proceeds from the sale of the shares of our common stock will be approximately $ (or approximately $ if the underwriters exercise their option to purchase additional shares in full) after deducting underwriting discounts and commissions and offering expenses. |
| We expect to use the net proceeds of this offering to fund a portion of the cash consideration payable in connection with the Transaction and, to the extent that any proceeds remain thereafter, or if the Transaction is not completed, for general corporate purposes including other acquisitions. In addition to the net proceeds from this offering, we expect to use available cash, available borrowings under our Revolving Credit Facility or other borrowings to complete the Transaction. Subject to market conditions and other factors, we expect to raise additional amounts to fund the purchase price for the Transaction in the concurrent notes offering. |
| This offering is not conditioned on the closing of the Transaction and there can be no assurance that the Transaction will be completed. The shares offered hereby will remain outstanding whether or not the Transaction is completed. See “Use of Proceeds.” |
| Trading symbol for our common stock |
Our common stock is listed on the New York Stock Exchange under the symbol “AJG.” |
| United States federal income tax considerations |
For a discussion of certain United States federal income tax consequences of holding and disposing of shares of our common stock, see “Material U.S. Federal Income Tax Consequences.” |
| Risk factors |
You should carefully consider the information set forth in the section of this prospectus entitled “Risk Factors” as well as the other information included in or incorporated by reference into this prospectus, including the risk factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, before deciding whether to invest in the shares. |
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| Concurrent notes offering |
Subject to market conditions and other factors, we expect to raise additional amounts to fund the purchase price for the Transaction in a public offering of our senior notes. |
| This offering is not conditioned on the closing of the Transaction or the concurrent notes offering, and the closing of the concurrent notes offering is not conditioned on the closing of this offering or the Transaction. There can be no assurance that the concurrent notes offering or the Transaction will be completed. See “Risk Factors—There can be no assurance that the Transaction will be completed or that we will realize the expected benefits of the Transaction.” |
Except as otherwise indicated, all information in this prospectus:
| • | assumes that the underwriters will not exercise their option to purchase up to an additional $ in shares from the Company; |
| • | excludes 5,581,023 shares representing the maximum number of shares remaining for issuance pursuant to our Registration Statements on Form S-4 (File Nos. 333-214617 and 333-268400) in connection with acquisitions; |
| • | excludes 7,516,558 shares issuable upon the exercise of options outstanding as of September 30, 2024, with a weighted average exercise price of $147.28 per share and 2,258,915 shares issuable upon time vesting of restricted stock units and performance share units outstanding as of September 30, 2024; and |
| • | excludes 4,785,770 shares available for purchase under our Employee Stock Purchase Plan as of September 30, 2024. |
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial information set forth below has been prepared in accordance with Article 11 of Regulation S-X as amended and should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements.
The unaudited pro forma condensed combined financial information was derived from and should be read in conjunction with:
| • | Audited consolidated financial statements and accompanying notes of the Company as of and for the fiscal years ended December 31, 2023 (as contained in its Annual Report on Form 10-K filed with the SEC on February 9, 2024); |
| • | Unaudited consolidated financial statements and accompanying notes of the Company as of September 30, 2024 and for the nine months ended September 30, 2024 and 2023 (as contained in its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024 filed with the SEC on October 29, 2024); |
| • | Audited consolidated financial statements and accompanying notes of the Acquired Entity as of and for the year ended December 31, 2023 and unaudited consolidated financial statements and accompanying notes of the Acquired Entity as of September 30, 2024 and for the nine months ended September 30, 2024. |
The unaudited pro forma condensed combined financial information is based on the historical consolidated financial statements of the Company and the historical consolidated financial statements of the Acquired Entity, as adjusted to give effect to the Transaction, this offering and the concurrent notes offering (collectively, the “Transactions” and, when referring only to this offering and the concurrent notes offering, the “Acquisition Financing”). The unaudited pro forma condensed combined balance sheet as of September 30, 2024 gives effect to the Transactions as if they occurred or had become effective on September 30, 2024. The unaudited pro forma condensed combined statements of earnings for the nine months ended September 30, 2024 and the fiscal year ended December 31, 2023, give effect to the Transactions as if they occurred or had become effective on January 1, 2023. Further information about this basis of presentation is provided in Note 1 to this unaudited pro forma condensed combined financial information.
The following unaudited pro forma condensed combined financial information provides for pro forma adjustments giving effect to the Transactions.
The unaudited pro forma condensed combined financial information has been prepared by us using the acquisition method of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”). Gallagher has been treated as the acquirer in the Transaction for accounting purposes. The pro forma adjustments are based upon available information and certain assumptions that the Company believes are reasonable. The unaudited pro forma condensed combined financial information is provided for illustrative and informational purposes only and does not purport to represent or be indicative of the consolidated results of operations or financial condition of the Company had the Transactions been completed as of the dates presented and should not be construed as representative of the future consolidated results of operations or financial condition of the combined entity.
Provisional estimates of fair value of the Acquired Entity’s assets acquired and liabilities assumed will be subsequently reviewed and finalized within the first year of operations subsequent to the acquisition date to determine the necessity for adjustments. Fair value adjustments, if any, are most common to the values established for amortizable intangible assets, including expiration lists, trade name, and assembled workforce, with the offset to goodwill, net of any income tax effect. Provisional estimates of fair value were used by us to
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disclose the acquisition of the Acquired Entity as of the acquisition date. We are using independent third-party valuation specialists to assist us in determining the fair value of assets acquired and liabilities assumed for the Transaction. As of this filing, the specialists have not completed their analysis and thus these fair value estimates are provisional. These provisional fair value estimates will be subsequently reviewed and adjusted based on the results of this valuation.
As a result of the foregoing, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. Differences between these preliminary estimates and the final acquisition accounting may arise, and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial information and the combined Company’s future results of operations and financial position. See “Risk Factors—The unaudited pro forma condensed combined financial information reflecting the Transaction included in this prospectus is based on assumptions and is subject to change based on various factors” for further information.
The unaudited pro forma condensed combined financial information does not reflect any expected cost savings, operating synergies or revenue enhancements that the combined entity may achieve as a result of the acquisition or the costs necessary to achieve any such cost savings, operating synergies or revenue enhancements.
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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of September 30, 2024
(in millions)
| Arthur J. Gallagher & Co. As Reported |
Acquired Entity As Adjusted (Note 2) |
Acquisition Financing Adjustments |
Note 3 | Transaction Accounting Adjustments |
Note 4 | Pro Forma Combined |
||||||||||||||||||
| Cash and cash equivalents |
$ | 2,022.4 | $ | 376.9 | $ | 13,215.4 | (a) (b) | $ | (13,450.0 | ) | (b) | $ | 2,164.7 | |||||||||||
| Fiduciary assets |
30,836.3 | 703.9 | — | — | 31,540.2 | |||||||||||||||||||
| Accounts receivable, net |
3,988.8 | 654.5 | — | — | 4,643.3 | |||||||||||||||||||
| Other current assets |
435.2 | 142.9 | — | — | 578.1 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total current assets |
37,282.7 | 1,878.2 | 13,215.4 | (13,450.0 | ) | 38,926.3 | ||||||||||||||||||
| Fixed assets — net |
660.1 | 167.0 | — | — | 827.1 | |||||||||||||||||||
| Deferred income taxes |
1,016.8 | — | — | (1,016.8 | ) | (i) | — | |||||||||||||||||
| Other noncurrent assets |
1,361.8 | 130.1 | — | (71.6 | ) | (c) | 1,420.3 | |||||||||||||||||
| Right-of-use assets |
374.7 | 155.4 | — | — | 530.1 | |||||||||||||||||||
| Goodwill |
12,193.4 | 5,848.4 | — | 2,474.0 | (a) (b) (c) (d) |
20,515.8 | ||||||||||||||||||
| Amortizable intangible assets — net |
4,353.2 | 3,042.4 | — | 2,681.7 | (d) | 10,077.3 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total assets |
$ | 57,242.7 | $ | 11,221.5 | $ | 13,215.4 | $ | (9,382.7 | ) | $ | 72,296.9 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Fiduciary liabilities |
$ | 30,836.3 | $ | 703.9 | $ | — | $ | — | $ | 31,540.2 | ||||||||||||||
| Accrued compensation and other current liabilities |
3,222.5 | 703.0 | — | 10.0 | (f) | 3,935.5 | ||||||||||||||||||
| Deferred revenue — current |
680.8 | 69.8 | — | — | 750.6 | |||||||||||||||||||
| Premium financing debt |
259.9 | — | — | — | 259.9 | |||||||||||||||||||
| Corporate related borrowings — current |
200.0 | 33.3 | — | (33.3 | ) | (a) | 200.0 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total current liabilities |
35,199.5 | 1,510.0 | — | (23.3 | ) | 36,686.2 | ||||||||||||||||||
| Corporate related borrowings — noncurrent |
7,791.9 | 6,484.7 | 4,907.2 | (b) | (6,484.7 | ) | (a) | 12,699.1 | ||||||||||||||||
| Deferred revenue — noncurrent |
65.3 | 43.1 | — | — | 108.4 | |||||||||||||||||||
| Lease liabilities — noncurrent |
326.2 | 130.6 | — | — | 456.8 | |||||||||||||||||||
| Deferred tax liabilities — noncurrent |
96.0 | 396.1 | — | (319.6 | ) | (i) | 172.5 | |||||||||||||||||
| Other noncurrent liabilities |
1,554.2 | 111.9 | — | |
— |
|
1,666.1 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total liabilities |
45,033.1 | 8,676.4 | 4,907.2 | (6,827.6 | ) | 51,789.1 | ||||||||||||||||||
| Mezzanine equity |
||||||||||||||||||||||||
| Redeemable Series A Preferred Stock |
— | 297.5 | — | (297.5 | ) | (a) | — | |||||||||||||||||
| Stockholders’ equity |
||||||||||||||||||||||||
| Common stock |
219.4 | — | 31.0 | (a) | — | 250.4 | ||||||||||||||||||
| Capital in excess of par value |
7,697.4 | 2,384.3 | 8,277.2 | (a) | (2,384.3 | ) | (a) | 15,974.6 | ||||||||||||||||
| Retained earnings |
4,860.6 | (130.3 | ) | — | 120.3 | (a) (f) | 4,850.6 | |||||||||||||||||
| Accumulated other comprehensive loss |
(593.4 | ) | (6.4 | ) | — | 6.4 | (a) | (593.4 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Stockholders’ equity attributable to controlling interests |
12,184.0 | 2,545.1 | 8,308.2 | (2,555.1 | ) | 20,482.2 | ||||||||||||||||||
| Stockholders’ equity attributable to noncontrolling interests |
25.6 | — | — | — | 25.6 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total stockholders’ equity |
12,209.6 | 2,545.1 | 8,308.2 | (2,555.1 | ) | 20,507.8 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total liabilities, mezzanine equity, and stockholders’ equity |
$ | 57,242.7 | $ | 11,221.5 | $ | 13,215.4 | $ | (9,832.7 | ) | $ | 72,296.9 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
See accompanying notes to unaudited pro forma condensed combined financial information
7
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
For the Nine Months Ended September 30, 2024
(in millions, except per share data)
| Arthur J. Gallagher & Co. As Reported |
Acquired Entity As Adjusted (Note 2) |
Acquisition Financing Adjustments |
Note 3 | Transaction Accounting Adjustments |
Note 4 | Pro Forma Combined |
||||||||||||||||||||||
| Commissions |
$ | 5,193.2 | $ | 1,704.2 | $ | — | $ | — | $ | 6,897.4 | ||||||||||||||||||
| Fees |
2,723.3 | 330.3 | — | — | 3,053.6 | |||||||||||||||||||||||
| Supplemental revenues |
261.7 | — | — | — | 261.7 | |||||||||||||||||||||||
| Contingent revenues |
215.1 | 182.4 | — | — | 397.5 | |||||||||||||||||||||||
| Interest income, premium finance revenues and other income |
327.3 | 18.5 | — | — | 345.8 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Revenues before reimbursements |
8,720.6 | 2,235.4 | — | — | 10,956.0 | |||||||||||||||||||||||
| Reimbursements |
118.3 | — | — | — | 118.3 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total revenues |
8,838.9 | 2,235.4 | — | — | 11,074.3 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Compensation |
4,967.9 | 1,189.4 | — | 10.1 | (c) | 6,167.4 | ||||||||||||||||||||||
| Operating |
1,315.0 | 349.8 | — | — | 1,664.8 | |||||||||||||||||||||||
| Reimbursements |
118.3 | — | — | — | 118.3 | |||||||||||||||||||||||
| Interest |
279.4 | 439.5 | 204.8 | (c) | (439.5 | ) | (h) | 484.2 | ||||||||||||||||||||
| Depreciation |
131.5 | 28.4 | — | — | 159.9 | |||||||||||||||||||||||
| Amortization |
497.8 | 248.2 | — | 36.8 | (e) (h) | 782.8 | ||||||||||||||||||||||
| Loss on extinguishment of debt |
— | 3.4 | — | — | 3.4 | |||||||||||||||||||||||
| Change in estimated acquisition earnout payables |
(12.6 | ) | 68.6 | — | — | 56.0 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total expenses |
7,297.3 | 2,327.3 | 204.8 | (392.6 | ) | 9,436.8 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Earnings before income taxes |
1,541.6 | (91.9 | ) | (204.8 | ) | 392.6 | 1,637.5 | |||||||||||||||||||||
| Provision (benefit) for income taxes |
329.4 | (17.4 | ) | (53.2 | ) | (d) | 102.1 | (g) | 360.9 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Net earnings (loss) |
1,212.2 | (74.5 | ) | (151.6 | ) | 290.5 | 1,276.6 | |||||||||||||||||||||
| Net earnings attributable to noncontrolling interests |
7.8 | — | — | — | 7.8 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Net earnings attributable to controlling interests |
$ | 1,204.4 | $ | (74.5 | ) | $ | (151.6 | ) | $ | 290.5 | $ | 1,268.8 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Basic net earnings per share (5) |
$ | 5.51 | $ | 5.09 | ||||||||||||||||||||||||
| Diluted net earnings per share (5) |
$ | 5.40 | $ | 5.00 | ||||||||||||||||||||||||
See accompanying notes to unaudited pro forma condensed combined financial information
8
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
For the Twelve Months Ended December 31, 2023
(in millions, except per share data)
| Arthur J. Gallagher & Co. As Reported |
Acquired Entity As Adjusted (Note 2) |
Acquisition Financing Adjustments |
Note 3 | Transaction Accounting Adjustments |
Note 4 | Pro Forma Combined |
||||||||||||||||||||||
| Commissions |
$ | 5,865.0 | $ | 1,962.2 | $ | — | $ | — | $ | 7,827.2 | ||||||||||||||||||
| Fees |
3,144.7 | 392.6 | — | — | 3,537.3 | |||||||||||||||||||||||
| Supplemental revenues |
314.2 | — | — | — | 314.2 | |||||||||||||||||||||||
| Contingent revenues |
235.3 | 198.9 | — | — | 434.2 | |||||||||||||||||||||||
| Interest income, premium finance revenues and other income |
367.3 | 34.5 | — | — | 401.8 | |||||||||||||||||||||||
| Revenues before reimbursements |
9,926.5 | 2,588.2 | — | — | 12,514.7 | |||||||||||||||||||||||
| Reimbursements |
145.4 | — | — | — | 145.4 | |||||||||||||||||||||||
| Total revenues |
10,071.9 | 2,588.2 | — | — | 12,660.1 | |||||||||||||||||||||||
| Compensation |
5,681.2 | 1,389.3 | — | 11.8 | (c) | 7,082.3 | ||||||||||||||||||||||
| Operating |
1,689.7 | 407.8 | — | 10.0 | (f) | 2,107.5 | ||||||||||||||||||||||
| Reimbursements |
145.4 | — | — | — | 145.4 | |||||||||||||||||||||||
| Interest |
296.7 | 492.9 | 273.0 | (c) | (492.9 | ) | (h) | 569.7 | ||||||||||||||||||||
| Depreciation |
165.2 | 28.2 | — | — | 193.4 | |||||||||||||||||||||||
| Amortization |
531.3 | 248.0 | — | 156.0 | (e) (h) | 935.3 | ||||||||||||||||||||||
| Loss on extinguishment of debt |
— | 3.2 | — | — | 3.2 | |||||||||||||||||||||||
| Change in estimated acquisition earnout payables |
377.3 | 85.9 | — | — | 463.2 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Total expenses |
8,886.8 | 2,655.3 | 273.0 | (315.1 | ) | 11,500.0 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Earnings before income taxes |
1,185.1 | (67.1 | ) | (273.0 | ) | 315.1 | 1,160.1 | |||||||||||||||||||||
| Provision (benefit) for income taxes |
219.1 | (11.4 | ) | (71.0 | ) | (d) | 81.9 | (g) | 218.6 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Net earnings (loss) |
966.0 | (55.7 | ) | (202.0 | ) | 233.2 | 941.5 | |||||||||||||||||||||
| Net earnings (loss) attributable to noncontrolling interests |
(3.5 | ) | — | — | — | (3.5 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Net earnings attributable to controlling interests |
$ | 969.5 | $ | (55.7 | ) | $ | (202.0 | ) | $ | 233.2 | $ | 945.0 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Basic net earnings per share (5) |
$ | 4.51 | $ | 3.84 | ||||||||||||||||||||||||
| Diluted net earnings per share (5) |
$ | 4.42 | $ | 3.78 | ||||||||||||||||||||||||
See accompanying notes to unaudited pro forma condensed combined financial information
9
Table of Contents
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1 — Basis of presentation
The unaudited pro forma condensed combined financial information has been prepared by Gallagher in connection with the Company’s acquisition of the Acquired Entity.
The unaudited condensed combined pro forma financial information and related notes were prepared in accordance with Article 11 of Regulation S-X and are based on the historical consolidated financial statements of the Company and the historical consolidated financial statements of the Acquired Entity, as adjusted to give effect to the pro forma adjustments described below.
The pro forma adjustments to the statements of earnings have been prepared as if the Transactions occurred on January 1, 2023. The pro forma adjustments to the balance sheet have been prepared as if the Transactions occurred on September 30, 2024. The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial statements in accordance with Article 11 of Regulation S-X as amended. The pro forma adjustments are based on currently available information and certain estimates and assumptions, and therefore the actual effect of these transactions may differ from the pro forma adjustments.
Gallagher and the Acquired Entity’s historical financial statements were prepared in accordance with U.S. GAAP.
The audited consolidated financial statements and accompanying notes of the Acquired Entity as of and for the year ended December 31, 2023 and the unaudited condensed consolidated financial statements and accompanying notes of the Acquired Entity as of September 30, 2024 and for the nine months ended September 30, 2024 are attached as Exhibits 99.2 and 99.3 to Gallagher’s Current Report on Form 8-K filed with the SEC on December 9, 2024.
The accompanying unaudited pro forma condensed combined financial information and related notes were prepared using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”), with Gallagher considered the accounting acquirer of the Acquired Entity. ASC 805 requires, among other things, that the assets acquired, and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. For purposes of the unaudited pro forma condensed combined balance sheet, the purchase price consideration has been allocated to the assets acquired and liabilities assumed of the Acquired Entity based upon management’s preliminary estimate of their fair values as of September 30, 2024. The excess of the purchase price consideration over the fair value of assets acquired and liabilities assumed is allocated to goodwill. Accordingly, the purchase price allocation and related adjustments reflected in the unaudited pro forma condensed combined financial information are preliminary and subject to adjustment based on a final determination of fair value. The purchase price consideration as well as the estimated fair values of the assets and liabilities will be updated and finalized as soon as practicable, but no later than one year from the closing of the acquisition.
The pro forma adjustments are based upon available information and certain assumptions that Gallagher believes are reasonable. Management has included certain reclassification and policy alignment adjustments for consistency in presentation as indicated in the subsequent notes (see Note 2 for further details). The unaudited pro forma condensed combined financial information is provided for informational purposes only and does not purport to represent or be indicative of the consolidated results of operations or financial condition of the Company had the Transactions been completed as of the dates presented and should not be construed as representative of the future consolidated results of operations or financial condition of the combined entity.
10
Table of Contents
Note 2 — Reclassification adjustments
Certain balances were reclassified from the Acquired Entity’s historical financial statements so its presentation would be consistent with that of Gallagher. These reclassifications are based on management’s preliminary analysis and have no effect on separately reported net assets, equity or net earnings attributed to common shareholders of the Acquired Entity.
When the Company completes its detailed review of the Acquired Entity’s chart of accounts and accounting policies, additional reclassification adjustments could be identified that, when conformed, could have a material impact on the combined Company’s financial information. Refer to the table below for a summary of the reclassification adjustments made to the Acquired Entity’s unaudited condensed consolidated balance sheet as of September 30, 2024 to conform its presentation to that of Gallagher.
|
Arthur J. Gallagher & Co. Presentation |
Acquired Entity Presentation |
Historical Acquired Entity at September 30, 2024 |
Reclassification Adjustments |
Note | Historical Acquired Entity as adjusted For Arthur J. Gallagher & Co. |
|||||||||||||
| Cash and cash equivalents |
Cash and cash equivalents | 342.2 | 34.7 | (a | ) | 376.9 | ||||||||||||
| Restricted cash | 60.0 | (60.0 | ) | (a | ) | — | ||||||||||||
| Trust cash | 292.2 | (292.2 | ) | (a | ) | — | ||||||||||||
| Fixed maturity securities | 37.8 | (37.8 | ) | (b | ) | — | ||||||||||||
| Fiduciary assets |
— | 703.9 | (a | ) | 703.9 | |||||||||||||
| Accounts receivable, net |
Accounts receivable, net | 1,040.9 | (386.4 | ) | (a | ) | 654.5 | |||||||||||
| Prepaid expenses | 36.7 | (36.7 | ) | (b | ) | — | ||||||||||||
| Other current assets |
Other current assets | 68.4 | 74.5 | (b | ) | 142.9 | ||||||||||||
| Accounts receivable, noncurrent portion | 37.2 | (37.2 | ) | (c | ) | — | ||||||||||||
| Fixed assets — net |
Fixed assets — net | 167.0 | — | 167.0 | ||||||||||||||
| Deferred income taxes |
— | — | — | |||||||||||||||
| Other noncurrent assets |
Other noncurrent assets | 92.9 | 37.2 | (c | ) | 130.1 | ||||||||||||
| Right-of-use assets |
Operating lease right-of-use assets, net | 155.4 | — | 155.4 | ||||||||||||||
| Goodwill |
Goodwill | 5,848.4 | — | 5,848.4 | ||||||||||||||
| Amortizable intangible assets — net |
Definite-lived intangible assets, net | 3,042.4 | — | 3,042.4 | ||||||||||||||
| Total assets |
11,221.5 | — | 11,221.5 | |||||||||||||||
| Fiduciary liabilities |
— | 703.9 | (a | ) | 703.9 | |||||||||||||
| Long-term debt, net, current portion | 33.3 | (33.3 | ) | (d | ) | — | ||||||||||||
| Earn-out payables, current portion | 279.9 | (279.9 | ) | (e | ) | — | ||||||||||||
| Carrier payables | 567.4 | (567.4 | ) | (a | ) | — | ||||||||||||
| Accounts payable | 90.4 | |
(79.3 (11.1 |
) ) |
|
(a (f |
) ) |
— | ||||||||||
| Customer advances | 57.2 | (57.2 | ) | (a | ) | — | ||||||||||||
| Producer payables | 137.2 | (137.2 | ) | (f | ) | — | ||||||||||||
| Reserve for unpaid losses and loss adjustment expenses, current portion | 5.6 | (5.6 | ) | (f | ) | — | ||||||||||||
| Accrued expenses and other | 269.2 | (269.2 | ) | (f | ) | — | ||||||||||||
| Accrued compensation and other current liabilities |
— | 703.0 | (f | ) (e) | 703.0 | |||||||||||||
| Deferred revenue — current |
Deferred revenue — current | 69.8 | — | 69.8 | ||||||||||||||
| Corporate related borrowings — current |
— | 33.3 | (d | ) | 33.3 | |||||||||||||
| Corporate related borrowings — noncurrent |
— | 6,484.7 | (h | ) | 6,484.7 | |||||||||||||
11
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|
Arthur J. Gallagher & Co. Presentation |
Acquired Entity Presentation |
Historical Acquired Entity at September 30, 2024 |
Reclassification Adjustments |
Note | Historical Acquired Entity as adjusted For Arthur J. Gallagher & Co. |
|||||||||||||
| Deferred revenue — noncurrent |
Deferred revenue — noncurrent | 43.1 | — | 43.1 | ||||||||||||||
| Earn-out payables, noncurrent portion | 66.1 | (66.1 | ) | (g | ) | — | ||||||||||||
| Long-term debt, net, noncurrent portion | 6,484.7 | (6,484.7 | ) | (h | ) | — | ||||||||||||
| Reserve for unpaid losses and loss adjustment expenses, noncurrent portion | 22.5 | (22.5 | ) | (g | ) | — | ||||||||||||
| Operating lease liabilities, noncurrent portion | 130.6 | (130.6 | ) | (i | ) | — | ||||||||||||
| Lease liabilities — noncurrent |
— | 130.6 | (i | ) | 130.6 | |||||||||||||
| Deferred income taxes |
Deferred income taxes, net | 396.1 | — | 396.1 | ||||||||||||||
| Other noncurrent liabilities |
Other noncurrent liabilities | 23.3 | 88.6 | (g | ) | 111.9 | ||||||||||||
| Total liabilities |
8,676.4 | — | 8,676.4 | |||||||||||||||
| Redeemable Series A Preferred Stock | 297.5 | — | 297.5 | |||||||||||||||
| Total Mezzanine equity |
297.5 | — | 297.5 | |||||||||||||||
| Common stock |
— | — | — | |||||||||||||||
| Capital in excess of par value |
2,384.3 | — | 2,384.3 | |||||||||||||||
| Accumulated other comprehensive loss |
Accumulated other comprehensive (loss) income | (6.4 | ) | — | (6.4 | ) | ||||||||||||
| Retained earnings |
Retained earnings | (130.3 | ) | — | (130.3 | ) | ||||||||||||
| Total liabilities and stockholder’s equity |
11,221.5 | — | 11,221.5 | |||||||||||||||
| (a) | Represents the reclassification of the Acquired Entity’s “Restricted cash” amount to “Cash and cash equivalents” and the reclassification of “Trust Cash” and “Agency bill accounts receivables” amounts to “Fiduciary assets” to conform to Gallagher’s historical presentation. Additionally, represents the reclassification of the Acquired Entity’s “Carrier payables,” “Customer advances” and select “Accounts payable” amounts to “Fiduciary liabilities” to conform to Gallagher’s historical presentation. |
| (b) | Represents the combination and reclassification of the Acquired Entity’s “Fixed maturity securities” and “Prepaid expenses” amounts to “Other current assets” to conform to Gallagher’s historical presentation. |
| (c) | Represents the reclassification of the Acquired Entity’s “Accounts receivable, noncurrent portion” amounts to “Other noncurrent assets” to conform to Gallagher’s historical presentation. |
| (d) | Represents the combination and reclassification of the Acquired Entity’s “Long-term debt, net, current portion” amounts to “Corporate related borrowings — current” to conform to Gallagher’s historical presentation. |
| (e) | Represents the combination and reclassification of the Acquired Entity’s “Earn-out payables, current portion” amounts to “Accrued compensation and other current liabilities” to conform to Gallagher’s historical presentation. |
| (f) | Represents the combination and reclassification of the Acquired Entity’s “Accounts payable,” “Producer payables,” “Reserve for unpaid losses and loss adjustment expenses, current portion” and “Accrued expenses and other” amounts to “Accrued compensation and other current liabilities” to conform to Gallagher’s historical presentation. |
| (g) | Represents the combination and reclassification of the Acquired Entity’s “Earn-outs payables, noncurrent portion” and “Reserve for unpaid losses and loss adjustment expenses, noncurrent portion” amounts to “Other noncurrent liabilities” to conform to Gallagher’s historical presentation. |
| (h) | Represents the combination and reclassification of the Acquired Entity’s “Long-term debt, net, noncurrent portion” amounts to “Corporate related borrowings — noncurrent” to conform to Gallagher’s historical presentation. |
| (i) | Represents the combination and classification of the Acquired Entity’s “Operating lease liabilities, noncurrent portion” amounts to “Lease liabilities — noncurrent” to conform to Gallagher’s historical presentation. |
12
Table of Contents
Refer to the tables below for a summary of the reclassification adjustments made to the Acquired Entity’s unaudited condensed consolidated statements of comprehensive income for the nine months ended September 30, 2024 and the year ended December 31, 2023 to conform its presentation to that of Gallagher.
| Arthur J. Presentation |
Acquired Entity Presentation |
Historical Acquired Entity for the period ended September 30, 2024 |
Reclassification Adjustments |
Note | Historical Acquired Entity Adjusted for Arthur J. Gallagher & Co. |
|||||||||||||
| Commissions |
— | 1,704.2 | (a | ) | 1,704.2 | |||||||||||||
| Fees |
— | 330.3 | (a | ) | 330.3 | |||||||||||||
| Commissions and fees | 2,034.5 | (2,034.5 | ) | (a | ) | — | ||||||||||||
| Supplemental revenues |
— | — | — | |||||||||||||||
| Contingent revenues |
Contingent revenues | 182.4 | — | 182.4 | ||||||||||||||
| Investment income | 5.0 | (5.0 | ) | (b | ) | — | ||||||||||||
| Interest income, premium finance revenues and other income |
— | 18.5 | (b | ) (e) | 18.5 | |||||||||||||
| Interest income | 14.1 | (14.1 | ) | (b | ) | — | ||||||||||||
| Reimbursements |
— | — | — | |||||||||||||||
| Total revenues |
2,236.0 | (0.6 | ) | 2,235.4 | ||||||||||||||
| Compensation |
Compensation expense | 1,189.4 | — | 1,189.4 | ||||||||||||||
| Selling expense | 43.7 | (43.7 | ) | (c | ) | — | ||||||||||||
| Administrative expense | 300.9 | (300.9 | ) | (c | ) | — | ||||||||||||
| Transaction expense | 5.2 | (5.2 | ) | (c | ) | — | ||||||||||||
| Operating |
— | 349.8 | (c | ) | 349.8 | |||||||||||||
| Reimbursements |
— | — | — | |||||||||||||||
| Interest |
Interest | 439.5 | — | 439.5 | ||||||||||||||
| Depreciation and amortization expense | 276.6 | (276.6 | ) | (d | ) | — | ||||||||||||
| Depreciation |
— | 28.4 | (d | ) | 28.4 | |||||||||||||
| Amortization |
— | 248.2 | (d | ) | 248.2 | |||||||||||||
| Other (Income) expense, net | 0.6 | (0.6 | ) | (e | ) | — | ||||||||||||
| Debt extinguishment loss |
Debt extinguishment loss | 3.4 | — | 3.4 | ||||||||||||||
| Change in estimated acquisition earnout payables | 68.6 | — | 68.6 | |||||||||||||||
| Total expenses |
2,327.9 | (0.6 | ) | 2,327.3 | ||||||||||||||
| Earnings before income taxes |
(91.9 | ) | — | (91.9 | ) | |||||||||||||
| Provision (benefit) for income taxes |
Provision (benefit) for income taxes | (17.4 | ) | — | (17.4 | ) | ||||||||||||
| Net earnings |
(74.5 | ) | — | (74.5 | ) | |||||||||||||
| (a) | Represents the reclassification of the Acquired Entity’s “Commission and fees” amounts to “Commissions” and “Fees” to conform to Gallagher’s historical presentation. |
| (b) | Represents the combination and reclassification of the Acquired Entity’s “Investment income” and “Interest income” amounts to “Interest income, premium finance revenues and other income” to conform to Gallagher’s historical presentation. |
| (c) | Represents the combination and reclassification of the Acquired Entity’s “Selling expense,” “Administrative expense” and “Transaction expense” amounts to “Operating” to conform to Gallagher’s historical presentation. |
| (d) | Represents the reclassification of the Acquired Entity’s “Depreciation and amortization” amounts to “Depreciation” and “Amortization” to conform to Gallagher’s historical presentation. |
| (e) | Represents the reclassification of the Acquired Entity’s “Other (Income) expense, net” amounts to “Interest income, premium finance revenues and other income” to conform to Gallagher’s historical presentation. |
13
Table of Contents
| Arthur J. Presentation |
Acquired Entity Presentation |
Historical Acquired Entity for the period ended December 31, 2023 |
Reclassification Adjustments |
Note | Historical Acquired Entity adjusted for Arthur J. Gallagher & Co. |
|||||||||||
| Commissions |
— | 1,962.2 | (a) | 1,962.2 | ||||||||||||
| Fees |
— | 392.6 | (a) | 392.6 | ||||||||||||
| Commissions and fees | 2,354.8 | (2,354.8 | ) | (a) | — | |||||||||||
| Supplemental revenues |
— | — | — | |||||||||||||
| Contingent revenues |
Contingent revenues | 198.9 | — | 198.9 | ||||||||||||
| Investment income | 1.8 | (1.8 | ) | (b) | — | |||||||||||
| Interest income, premium finance revenues and other income |
— | 34.5 | (b) (e) | 34.5 | ||||||||||||
| Interest income | 27.8 | (27.8 | ) | (b) | — | |||||||||||
| Reimbursements |
— | — | — | |||||||||||||
| Total revenues |
2,583.3 | 4.9 | 2,588.2 | |||||||||||||
| Compensation |
Compensation expense | 1,389.3 | — | 1,389.3 | ||||||||||||
| Selling expense | 48.1 | (48.1 | ) | (c) | — | |||||||||||
| Administrative expense | 344.1 | (344.1 | ) | (c) | — | |||||||||||
| Transaction expense | 15.6 | (15.6 | ) | (c) | — | |||||||||||
| Operating |
— | 407.8 | (c) | 407.8 | ||||||||||||
| Interest |
Interest | 492.9 | — | 492.9 | ||||||||||||
| Depreciation and amortization expense | 276.2 | (276.2 | ) | (d) | — | |||||||||||
| Depreciation |
— | 28.2 | (d) | 28.2 | ||||||||||||
| Amortization |
— | 248.0 | (d) | 248.0 | ||||||||||||
| Other (Income) expense, net | (4.9 | ) | 4.9 | (e) | — | |||||||||||
| Debt extinguishment loss |
Debt extinguishment loss | 3.2 | — | 3.2 | ||||||||||||
| Change in estimated acquisition earnout payables | 85.9 | — | 85.9 | |||||||||||||
| Total expenses |
2,650.4 | 4.9 | 2,655.3 | |||||||||||||
| Earnings before income taxes |
(67.1 | ) | — | (67.1 | ) | |||||||||||
| Provision (benefit) for income taxes |
Provision (benefit) for income taxes | (11.4 | ) | — | (11.4 | ) | ||||||||||
| Net earnings |
(55.7 | ) | — | (55.7 | ) | |||||||||||
| (a) | Represents the reclassification of the Acquired Entity’s “Commission and fees” amounts to “Commissions” and “Fees” to conform to Gallagher’s historical presentation. |
| (b) | Represents the reclassification of the Acquired Entity’s “Investment income” and “Interest income” amounts to “Interest income, premium finance revenues and other income” to conform to Gallagher’s historical presentation. |
| (c) | Represents the combination and reclassification of the Acquired Entity’s “Selling expense,” “Administrative expense” and “Transaction expense” amounts to “Operating” to conform to Gallagher’s historical presentation. |
| (d) | Represents the reclassification of the Acquired Entity’s “Depreciation and amortization” amounts to “Depreciation” and “Amortization” to conform to Gallagher’s historical presentation. |
| (e) | Represents the reclassification of the Acquired Entity’s “Other (Income) expense, net” amounts to “Interest income, premium finance revenues and other income” to conform to Gallagher’s historical presentation. |
14
Table of Contents
Note 3 — Financing adjustments
Prior to the close of the Transaction, Gallagher signed the Purchase Agreement on December 7, 2024 to acquire the Acquired Entity. To finance the planned acquisition, Gallagher expects to:
| (a) | close on a follow-on offering of its common stock, whereby 31 million shares of common stock are expected to be issued for net proceeds of $8,308.2 million, after underwriting discounts and other expenses related to the offering. |
| (b) | close and fund a debt offering of $4,950 million aggregate principal amount with a weighted average interest rate of 5.40% (the “Notes”). |
Based on Gallagher’s financing for the Transaction, the impacts to the condensed combined pro forma balance sheet were as follows:
| (a) | Reflects the cash proceeds of $8,308.2 million, net of issuance costs and underwriting discounts related to the follow-on offering of common stock. |
| (b) | Reflects the cash proceeds, net of issuance costs and underwriting discounts, related to issuance of the Notes. These Notes were issued at a principal amount of $4,950 million with issuance costs and underwriting discounts of $42.8 million amortized over the life of the notes. |
The impacts to the condensed combined pro forma statements of earnings were as follows:
| (c) | Reflects the pro forma interest expense and amortized issuance costs and discounts adjustment for the nine months ended September 30, 2024 and year ended December 31, 2023, calculated as follows: |
| (in millions) | Amount | |||
| Notes principal |
$ | 4,950 | ||
| Annual weighted average interest rate |
5.40 | % | ||
| Annual interest on Notes |
$ | 270 | ||
| Total Notes issuance cost and underwriting discount |
$ | 42.8 | ||
| Notes term (years) |
12.5 | |||
| Annual amortized debt issuance cost and discount |
$ | 3.0 | ||
| Amortized debt issuance cost and discount for 9 months ended September 30, 2024 |
$ | 2.3 | ||
| Pro forma interest and amortization expense for 9 months ended September 30, 2024 |
$ | 204.8 | ||
| Pro forma interest and amortization expense for year-ended December 31, 2023 |
$ | 273.0 | ||
| (d) | Reflects the U.S. income tax benefit of the interest expense related to the Acquisition Financing using an estimated blended U.S. federal and state income tax rate of 26%. Because the adjustments contained in the unaudited pro forma condensed combined financial information are based on estimates, the effective tax rate herein will likely vary from the effective rate in periods subsequent to the Transaction. |
15
Table of Contents
Note 4 — Transaction accounting adjustments
Under the terms of the Purchase Agreement, the Company expects to acquire the Acquired Entity for total consideration of $13,450 million. The debt and equity transactions to raise the cash necessary to finance the planned acquisition are discussed in Note 3. The Company is not expected to assume any outstanding borrowings of the Acquired Entity. The following table summarizes the source of the estimated purchase consideration.
| (in millions) | Amount | |||
| Total purchase consideration |
$ | 13,450.0 | ||
|
|
|
|||
The following is a summary of the estimated fair values of the identifiable tangible and intangible assets acquired and liabilities assumed as if the Transaction occurred on September 30, 2024 (in millions):
| (in millions) | Amount | |||
| Cash and cash equivalents |
$ | 376.9 | ||
| Fiduciary assets |
703.9 | |||
| Accounts receivable, net of allowance for credit losses |
654.5 | |||
| Other current assets |
142.9 | |||
| Fixed assets, net |
167.0 | |||
| Goodwill |
8,322.4 | |||
| Definite-lived intangible assets, net |
5,724.1 | |||
| Operating lease right-of-use assets, net |
155.4 | |||
| Other noncurrent assets, net |
58.5 | |||
|
|
|
|||
| Total assets |
$ | 16,305.6 | ||
|
|
|
|||
| Fiduciary liabilities |
$ | 703.9 | ||
| Accrued compensation and other current liabilities |
703.0 | |||
| Deferred revenue, current |
69.8 | |||
| Deferred revenue, noncurrent |
43.1 | |||
| Lease liabilities, noncurrent |
130.6 | |||
| Deferred income taxes, noncurrent |
1,093.3 | |||
| Other noncurrent liabilities |
111.9 | |||
|
|
|
|||
| Total liabilities |
$ | 2,855.6 | ||
|
|
|
|||
The preliminary estimates are based on the data available to Gallagher and may change upon completion of the final purchase price allocation. Any change in the estimated fair value of the assets and liabilities acquired may have a corresponding impact on the amount of the goodwill. In addition, only intangible assets were evaluated for fair value. The goodwill amount represents the total purchase consideration less the preliminary fair value of net assets acquired. Goodwill will not be amortized but instead will be tested for impairment at least annually (or more frequently if indicators of impairment arise). When the Company completes its detailed review of the Acquired Entity’s accounting policies, additional reclassifications could be identified that, when confronted, could have a material impact on the combined Company’s financial information.
16
Table of Contents
The impacts to the condensed combined pro forma balance sheet from the Transaction were as follows:
| (in millions) | Amount | |||
| Cash consideration (b) |
$ | 13,450.0 | ||
| Elimination of deferred commissions (c) |
71.6 | |||
| Deferred tax adjustment (i) |
697.2 | |||
| Fair value step up of intangibles (d) |
(2,681.7 | ) | ||
| Elimination of historical Acquired Entity debt (a) |
(6,518.0 | ) | ||
| Elimination of historical Acquired Entity equity (a) |
(2,545.1 | ) | ||
|
|
|
|||
| Total adjustment to goodwill |
2,474.0 | |||
| Historical Acquired Entity goodwill |
5,848.4 | |||
|
|
|
|||
| Total goodwill from Transaction |
$ | 8,322.4 | ||
|
|
|
|||
| (a) | Reflects adjustment to write off the equity (including retained earnings) of the Acquired Entity and reflects the repayment of the Acquired Entity’s outstanding corporate borrowings, which is expected to occur as part of the transaction. |
| (b) | Reflects the $13,450 million cash transferred in connection with the close of the Transaction. |
| (c) | Reflects the reversal of deferred commissions in the Acquired Entity’s Balance Sheet and recording of expenses as incurred to the pro forma combined statement of earnings, consistent with Company’s accounting policy for costs to obtain contracts with customers. |
| (d) | Reflects the impact of fair value step up of acquired trade names and expiration lists, as compared to the carrying value for the Acquired Entity as of September 30, 2024. The estimated fair value of acquired trade names is $24.0 million, and the estimated value of expiration lists is $5,700 million. |
The impacts to the condensed combined pro forma statements of earnings from the Transaction were as follows:
| (e) | Reflects an adjustment to Amortization for the intangible expiration lists amortization expense based on the fair values and estimated useful life below. There was no previous expiration lists amortization expense in the Acquired Entity’s historical financial results to remove. |
| (in millions) | Amount | |||
| Expiration lists fair value |
$ | 5,700.0 | ||
| Estimated useful life |
15 years | |||
| Annual straight line amortization expense |
$ | 380.0 | ||
| 9 months straight line amortization expense |
$ | 285.0 | ||
Reflects an adjustment to Amortization for the intangible trade names amortization expense based on the fair values and estimated useful life below. The historical amortization related to trade names has been adjusted as noted in tickmark (h).
| (in millions) | Amount | |||
| Trade names fair value |
$ | 24.0 | ||
| Estimated useful life |
1 year | |||
| Annual straight line amortization expense |
$ | 24.0 | ||
| 9 months straight line amortization expense |
— | |||
| (f) | Reflects the estimated one-time transaction-related costs incurred which have not been reflected in the Company’s historical statements of earnings for the year ended December 31, 2023 or nine months ended September 30, 2024, or balance sheet as of September 30, 2024. |
17
Table of Contents
| (g) | Reflects the U.S. income tax expense of the Transaction pro forma adjustments using an estimated blended U.S. federal and state income tax rate of 26%. Because the adjustments contained in the unaudited pro forma condensed combined financial information are based on estimates, the effective tax rate herein will likely vary from the effective rate in periods subsequent to the Transaction. |
| (h) | Reflects the adjustment for the reversal of historical amortization and interest booked related to the Acquired Entity’s debt, which is written off in (a) above and is not expected to legally convey as part of the Transaction. |
| (i) | Reflects the deferred tax balance sheet adjustment for the impact of purchase price adjustments for the fair value of intangible assets. Additionally, reflects the reclassification of the Company’s deferred tax asset related to US book-tax differences to Deferred tax liabilities - noncurrent, to present the net deferred tax liability within Deferred tax liabilities - noncurrent: |
| (in millions) | Amount | |||
| Deferred tax liability for fair value intangible adjustment |
$ | 697.2 | ||
| Company DTA reclassified to Deferred tax liabilities – noncurrent |
(1,016.8 | ) | ||
|
|
|
|||
| Net deferred tax adjustment to Deferred tax liabilities – noncurrent |
$ | (319.6 | ) | |
|
|
|
|||
18
Table of Contents
Note 5 — Net earnings per share
Basic net earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding during the reporting period. Diluted net earnings per share is computed by dividing net earnings by the weighted average number of common and common equivalent shares outstanding during the reporting period. Common equivalent shares include incremental shares from dilutive stock options, which are calculated from the date of grant under the treasury stock method using the average market price for the period.
The following table sets forth the computation of pro forma basic and diluted net earnings per share (in millions, except per share data):
| (in millions) | Nine months Ended September 30, 2024 |
Year ended December 31, 2023 |
||||||
| Net earnings attributable to controlling interests of Gallagher |
$ | 1,204.4 | $ | 969.5 | ||||
| Net earnings attributable to controlling interests of Acquired Entity |
(74.5 | ) | (55.7 | ) | ||||
| Pro Forma adjustments to net earnings attributable to controlling interest |
138.9 | 31.2 | ||||||
|
|
|
|
|
|||||
| Pro Forma net earnings attributable to controlling interest |
1,268.8 | 945.0 | ||||||
|
|
|
|
|
|||||
| Weighted average number of common shares outstanding |
218.5 | 214.9 | ||||||
| Follow-on public offering |
31.0 | 31.0 | ||||||
|
|
|
|
|
|||||
| Pro Forma weighted average number of common shares outstanding |
249.5 | 245.9 | ||||||
| Dilutive effect of stock options using the treasury stock method |
4.4 | 4.4 | ||||||
|
|
|
|
|
|||||
| Pro Forma weighted average number of common and common equivalent shares outstanding |
253.9 | 250.3 | ||||||
| Pro Forma basic net earnings per share |
$ | 5.09 | $ | 3.84 | ||||
|
|
|
|
|
|||||
| Pro Forma diluted net earnings per share |
$ | 5.00 | $ | 3.78 | ||||
|
|
|
|
|
|||||
19
Table of Contents
Investing in our common stock involves risks, including the risks described below that are specific to shares of our common stock and those that could affect us and our business. You should not purchase shares of our common stock unless you understand these investment risks. Please be aware that other risks may prove to be important in the future. New risks may emerge at any time and we cannot predict such risks or estimate the extent to which they may affect our financial performance. Before purchasing any shares of our common stock, you should consider carefully the risks and other information in this prospectus and the documents incorporated by reference herein, including the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Risks Relating to the Proposed Transaction
There can be no assurance that the Transaction will be completed or that we will realize the expected benefits of the Transaction.
Our ability to complete the Transaction may also be negatively impacted by general market conditions, volatility in the capital and debt markets and the other risks described herein. Although we currently anticipate that the Transaction, should it occur, will be accretive to earnings per share (on an as adjusted earnings basis for estimated reduction in revenue as a result of non-renewal of clients, departed key brokers and other employees, and expected changes in operating expenses and other items that is not pursuant to U.S. GAAP) from and after its closing, this expectation is based on assumptions about our business, the operations to be acquired and preliminary estimates, which may change materially. As a result, should the Transaction occur, certain other amounts to be paid in connection with the Transaction may cause dilution to our earnings per share or decrease or delay the expected accretive effect of the Transaction and cause a decrease in the market price of our common stock. In addition, a change in one or more of these assumptions may result in a change in future earnings, which could be material.
We may encounter integration challenges and the Transaction may not perform as expected.
We can provide no assurance that we will be able to successfully integrate the operations acquired in the Transaction or achieve expected cost savings or synergies from such integration, that the acquired operations will perform as expected or that we will not incur unforeseen obligations or liabilities. It is possible that our experience in running the operations acquired in the Transaction will require us to adjust our expectations regarding the impact of the acquisition on our operating results. In addition, integration efforts are anticipated to be complex and may divert management attention and resources, which could adversely affect our operating results.
There can be no assurance that we will be able to secure the required financing in connection with the acquisition on acceptable terms, at favorable pricing, in a timely manner or at all.
We expect to finance the Transaction using the net proceeds of this offering, available cash and available borrowings under our Revolving Credit Facility, other borrowings and/or, subject to market conditions and other factors, the concurrent notes offering. The completion of the Transaction is not conditioned on our ability to obtain financing. If our ability to raise funds through the capital markets is impacted for any reason, including, but not limited to, a deterioration in our financial results, poor economic conditions, or stock market volatility, we may be unable to complete equity and/or debt offerings on acceptable terms, at favorable pricing, in a timely manner, or at all. Additionally, the cost of financing the Transaction could be more expensive than expected. If we are unable to obtain such financing as anticipated, we may be compelled to specifically perform our obligations to complete the Transaction or could otherwise be subject to claims under the Purchase Agreement, each of which could have a material adverse effect on the Company.
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The unaudited pro forma condensed combined financial information reflecting the Transaction included in this prospectus is based on assumptions and is subject to change based on various factors.
We and the Acquired Entity have no prior history as a combined company and our assets and operations have not been managed on a combined basis. As a result, our unaudited pro forma condensed combined financial information included in this prospectus, which was prepared in accordance with Article 11 of Regulation S-X, and historical financial statements of our and the Acquired Entity’s businesses are presented for informational purposes only and are not necessarily indicative of the financial position or results of operations that would have actually occurred had the Transaction and related financings been completed at or as of the dates indicated, nor is it indicative of the future operating results or financial position of the combined company if the Transaction and related financings are consummated.
Our unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies, or revenue enhancements that the combined company may achieve as a result of the Transaction, nor does it reflect the costs to integrate the operations of the Company or the costs necessary to achieve any cost savings, operating synergies, and revenue enhancements. Our unaudited pro forma condensed combined financial information included in this prospectus is based in part on certain assumptions regarding the Transaction and the related financings. We believe the assumptions underlying such unaudited pro forma condensed combined financial information are reasonable under the circumstances, however, such assumptions and estimates are preliminary and may not prove to be accurate over time. In addition, if and to the extent there are any changes in market conditions affecting the financings, then the pro forma condensed combined financial information and the future operating results or financial position of the combined company may be impacted, and such impact may be material. We have no obligation to update the pro forma condensed financial information incorporated by reference herein for any subsequent event and may not do so.
As a result, investors should not place any undue reliance on our unaudited pro forma financial information, and our actual results following the completion of the Transaction and related financings may differ from those that are anticipated.
Certain financial information related to the Acquired Entity presented in this prospectus is derived from financial statements that are not included herein and include certain non-GAAP measures and investors are cautioned not to place undue reliance on such information.
AssuredPartners is the operating subsidiary of the Acquired Entity. The Acquired Entity’s financial information for the twelve months ended September 30, 2024 presented in this prospectus is partially derived from AssuredPartners’ standalone financial statements that are not included or incorporated by reference in this prospectus. The AssuredPartners standalone financial statements are substantially similar to the consolidated financial statements of the Acquired Entity incorporated by reference into this prospectus except for certain differences as a result of ordinary course differences of presentation of certain line items and transactions involving the Acquired Entity. In addition, the Company’s management applied certain adjustments to the Acquired Entity’s financial information to calculate the Acquired Entity’s pro forma Adjusted EBITDAC, including non-recurring legal, transaction-related, technology and acquisition-related compensation expense. These adjustments are substantially similar to the adjustments management makes when calculating the Company’s non-GAAP measures included in this prospectus and assisted management in its assessment of the acquisition of the Acquired Entity. These non-GAAP measures should not be considered substitutes for any performance metric determined in accordance with GAAP. Investors are cautioned not to place undue reliance on the AssuredPartners’ financial information or the Acquired Entity’s non-GAAP measures.
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We have made certain assumptions relating to the Transaction which may prove to be materially inaccurate.
We have made certain assumptions relating to the Transaction, which assumptions involve significant judgement and may not reflect the full range of uncertainties and unpredictable outcomes inherent in the Transaction and may be materially inaccurate. These assumptions relate to numerous matters, including:
| • | our ability to realize the expected benefits of the Transaction; |
| • | projections of future revenue, EBITDAC and our earnings per share; |
| • | our ability to maintain, develop and deepen relationships with employees, including key brokers, and customers associated with the Acquired Entity; |
| • | our ability to issue equity and debt or any other financing, or to generate and maintain needed cash from operations, to complete the Transaction and the impact of such financing on our operating results or financial condition; |
| • | projections of future expenses and expense allocation relating to the Transaction and the Acquired Entity; |
| • | unknown or contingent liabilities associated with the Transaction or the Acquired Entity; |
| • | the amount of goodwill and intangibles that will result from the Transaction; |
| • | other purchase accounting adjustments that we may record in our financial statements in connection with the Transaction; |
| • | acquisition and integration costs, including restructuring charges and transaction costs; and |
| • | other financial and strategic risks of the Transaction. |
Risks Relating to the Offering
The price of our common stock may fluctuate significantly, and this may make it difficult for you to resell shares of common stock owned by you at times or at prices you find attractive.
The trading price of our common stock may fluctuate widely as a result of a number of factors, many of which are outside our control. In addition, the stock market is subject to fluctuations in the share prices and trading volumes that affect the market prices of the shares of many companies. These broad market fluctuations have adversely affected and may continue to adversely affect the market price of our common stock. Among the factors that could affect our stock price are:
| • | general economic and political conditions such as recessions, economic downturns or other factors like new pandemics, inflation, worsening international relations, the wars in Ukraine and the Middle East, tariffs, trade wars, political violence and unrest in the U.S. or around the world, or climate change and other long-term sustainability matters and global health risks; |
| • | fluctuations in our financial results, revenues and expenses; |
| • | quarterly variations in our operating results; |
| • | seasonality of our business cycle; |
| • | changes in the market’s expectations about our operating results; |
| • | our ability to control expenses; |
| • | loss of revenues; |
| • | foreign currency and exchange rate fluctuations; |
| • | our operating results failing to meet the expectation of securities analysts or investors in a particular period; |
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| • | changes in financial estimates and recommendations by securities analysts concerning us or the financial or professional services industries in general; |
| • | operating and stock price performance of other companies that investors deem comparable to us; |
| • | news reports relating to trends in our markets, including any expectations regarding an upcoming “hard” or “soft” market; |
| • | changes in laws and regulations affecting our business; |
| • | material announcements by us or our competitors; |
| • | the impact or perceived impact of developments relating to our acquisitions such as the Transaction, including the possible perception by securities analysts or investors that such acquisitions divert management attention from our core operations; |
| • | market volatility; |
| • | general conditions in the insurance industry, including changes or consolidation in the insurance brokerage industry, the volatility of or decline in premiums or other adverse trends in the insurance industry; |
| • | our investments in geographic expansion and to increase our presence in existing markets; |
| • | our ability to successfully execute our strategic growth plans; |
| • | cyber-attacks or other cybersecurity incidents; |
| • | legal proceedings; |
| • | regulatory requirements, including international sanctions and the U.S. Foreign Corrupt Practices Act, the UK Bribery Act 2010 or other anti-corruption laws and the Foreign Account Tax Compliance provisions of the Hiring Incentives to Restore Employment Act (which we refer to as FATCA); and |
| • | sales of substantial amounts of common shares by our directors, executive officers or significant stockholders or the perception that such sales could occur. |
In recent years, the stock market has experienced significant price and volume fluctuations. This volatility frequently has occurred without regard to the operating performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce our share price.
Our stock price may be negatively affected by fluctuations in our financial results.
The market price of our common stock may be subject to fluctuations due not only to general economic and stock market conditions but also to a change in sentiment in the market regarding our operations, business prospects, liquidity or this offering. Our operating results, revenues and expenses may also fluctuate for many other reasons, many of which are outside of our control, such as: competition; our ability to control expenses; loss of revenues; changes or consolidation in the insurance brokerage industry; the volatility of or declines in premiums or other adverse trends in the insurance industry; our investments in geographic expansion and to increase our presence in existing markets; interest rate fluctuations; successful execution of our strategic growth plans; managerial execution; employee retention; growing risks associated with international operations; foreign currency and exchange rate fluctuations; inflation; litigation; acquisitions of other companies or assets; or our investments in other corporate resources. In addition, changes in accounting policies or practices may affect our level of net income. Fluctuations in our financial results, revenues and expenses may cause the market price of our common stock to decline.
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There may be future sales or other dilution of our equity, which may adversely affect the market price of our common stock.
Except as described under “Underwriters,” we are not restricted from issuing additional shares of common stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. The issuance of any additional shares of common or of preferred stock or convertible securities could be substantially dilutive to holders of our common stock. Moreover, to the extent that we issue restricted stock units, stock appreciation rights, options or warrants to purchase our shares of our common stock in the future and those stock appreciation rights, options or warrants are exercised or as the restricted stock units vest, our shareholders may experience further dilution. Holders of our common stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders. The market price of our common stock could decline as a result of sales of shares of our common stock made after this offering or the perception that such sales could occur.
If securities or industry press or analysts cease covering our common stock, publish negative research or reports about our business, or if they change their recommendations regarding our common stock adversely, the share price and trading volume of our common stock could decline.
The trading market for shares of our common stock may be influenced by the articles, research and reports that industry or securities analysts and press publish about us or our business. If one or more of the analysts who cover us downgrade our common stock, or if industry press publishes negative articles about our company, the share price of our common stock would likely decline. If one or more of these analysts ceased coverage of our company or failed to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.
The common stock is equity and is subordinate to our existing and future indebtedness and preferred stock.
Shares of our common stock are equity interests in the Company and do not constitute indebtedness. As such, shares of our common stock will rank junior to all indebtedness and other non-equity claims on the Company with respect to assets available to satisfy claims on the Company, including in a liquidation of the Company. Additionally, our board of directors is authorized to issue series of preferred stock without any action on the part of holders of our common stock. Holders of our common stock are subject to the prior dividend and liquidation rights of any holders of our preferred stock or depositary shares representing such preferred stock then outstanding.
We have not identified any specific use of the net proceeds of this offering in the event the Transaction does not close.
Consummation of the Transaction is subject to a number of conditions and, if the Purchase Agreement is terminated for any reason, our board of directors and management will have broad discretion over the use of the net proceeds we receive in this offering and might not apply the net proceeds in ways that increase the trading price of our common stock. Since the primary purpose of this offering is to provide funds to pay a portion of the Transaction consideration, we have not identified a specific use for the net proceeds in the event the Transaction does not occur. Any funds received may be used by us for any corporate purpose, which may include the pursuit of other business combinations, expansion of our operations, share repurchases or other uses. The failure of our management to use the net proceeds from this offering effectively could have an adverse effect on our business and may have an adverse effect on our earnings per share.
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We estimate that the net proceeds from this offering will be approximately $ . If the underwriters exercise their option to purchase additional shares in full, the net proceeds of this offering will be approximately $ . “Net proceeds” is what we expect to receive after paying the underwriting discount and commissions and other estimated expenses of the offering.
We expect to use the net proceeds of this offering to fund a portion of the cash consideration payable in connection with the Transaction and, to the extent that any proceeds remain thereafter, or if the Transaction is not completed, for general corporate purposes including other acquisitions. In addition to the net proceeds from this offering, we expect to use available cash, available borrowings under our Revolving Credit Facility or other borrowings to complete the Transaction. Subject to market conditions and other factors, we expect to raise additional amounts to fund the purchase price for the Transaction in the concurrent notes offering.
This offering is not conditioned on the closing of the Transaction or the concurrent notes offering, and there can be no assurance that the Transaction will be completed. The closing of the concurrent notes offering is not conditioned on the closing of this offering or the closing of the Transaction. The shares offered hereby will remain outstanding whether or not the Transaction is completed.
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General
The following description of our capital stock is only a summary. For more complete information, you should refer to our restated certificate of incorporation (our “certificate of incorporation”), amended and restated by-laws (our “by-laws”) and any amendments thereto, which we have filed with the SEC. In addition, you should refer to the Delaware General Corporation Law, which also governs our structure, management and activities.
Common Stock
Under our certificate of incorporation, our board of directors, which we refer to as our board, is authorized to issue up to 400,000,000 shares of common stock. As of September 30, 2024, there were 219,445,507 shares of common stock issued and outstanding.
No Preemptive, Redemption or Conversion Rights
Our common stock is not subject to redemption or retirement, is not subject to sinking fund provisions, does not have any conversion rights and is not subject to call. No holder of our common stock has preemptive or other rights to subscribe for additional shares of any class of our stock.
Voting Rights
Each holder of our common stock is entitled to one vote for each share of such stock standing in his or her name on the books of the Company. Holders of shares of our common stock do not have cumulative voting rights in the election of directors.
Board of Directors
Our board is not classified. Our certificate of incorporation establishes that the number of directors shall not be less than three nor more than fifteen, with the exact number of directors to be fixed from time to time by, or in the manner provided in, our by-laws. Our by-laws provide that, within such limits, the number of directors shall be determined by resolution of our board.
No Action by Stockholder Written Consent
Our certificate of incorporation provides that any action required or permitted to be taken by the stockholders must be taken at a duly called annual or special meeting of the stockholders, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied.
Power to Call Special Stockholder Meeting
Under Delaware law, a special meeting of stockholders may be called by our board or by any other person authorized to do so in our certificate of incorporation or by-laws. Pursuant to our by-laws, special meetings of the stockholders may be called by the chairman of our board or our president. In addition, a special meeting of the stockholders shall be called by our president or secretary at the request in writing of a majority of our board.
Dividend Rights
The holders of our common stock are entitled to receive such dividends as our board may declare from time to time, provided that any and all preferred dividends on our preferred stock for the then-current quarter have been set aside or paid, and all prior quarterly dividends on our preferred stock have been paid in full.
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Rights Upon Liquidation
Upon our liquidation, the holders of our common stock will receive ratably, in proportion to the number of shares held, all of our net assets remaining after the payment of any liquidation preference payable with respect to any preferred stock that may then be outstanding.
Preferred Stock
Under our certificate of incorporation, our board is authorized to issue up to 1,000,000 shares of preferred stock. Our preferred stock may be issued in one or more series, and for such consideration as our board may determine. Our board is authorized to determine the voting power of each series of preferred stock, which may range from no voting power to a maximum of one vote per share. If our board does not explicitly provide the voting power of any series of our preferred stock in the resolution or resolutions providing for the issuance of such series, the holders of that series of preferred stock have no voting power with respect to any matter. Our board is also authorized to fix the designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as provided for in the resolution or resolutions providing for the issuance of such shares of preferred stock.
All shares of one series of preferred stock must be of equal rank and identical in all respects. No dividend may be paid or declared on any particular series of preferred stock unless dividends are to be paid or declared pro rata on all shares of preferred stock that rank equally as to dividends with such particular series, and are outstanding at such time.
Shares of our preferred stock that are redeemed, converted, exchanged, purchased, retired or surrendered to us, or that have been issued and reacquired in any manner, shall, upon compliance with any applicable provisions of The General Corporation Law of the State of Delaware, have the status of authorized and unissued shares of preferred stock and may be reissued by our board as part of the series of which they were originally a part, or may be reclassified into and reissued as part of a new series or as part of any other series. No holder of our preferred stock has preemptive or other rights to subscribe for additional shares of any class of our stock.
As of the date of this prospectus, no shares of our preferred stock are issued and outstanding.
Actions to Increase or Decrease Amount of Authorized Shares
Subject to the rights of any outstanding series of preferred stock, any amendment to our certificate of incorporation that may increase or decrease the authorized capital stock of any class or classes may be adopted by the affirmative vote of the holders of a majority of the outstanding shares of our voting stock.
Forum Selection Clause
Under our by-laws, unless the Company selects or consents in writing to the selection of an alternative forum: (a) the sole and exclusive forum for any complaint asserting any internal corporate claims, to the fullest extent permitted by law, and subject to applicable jurisdictional requirements, shall be the Delaware Court of Chancery (or, if the Delaware Court of Chancery does not have, or declines to accept, jurisdiction, another state court or a federal court located within the State of Delaware) and (b) the sole and exclusive forum for any complaint asserting a cause of action arising under the Securities Act of 1933, to the fullest extent permitted by law, shall be the federal district courts of the United States of America. This provision applies to “internal corporate” claims, including claims in the right of the Company: (A) that are based upon a violation of a duty by a current or former director, officer, employee or stockholder in such capacity, or (B) as to which the General Corporation Law of the State of Delaware confers jurisdiction upon the Delaware Court of Chancery. In addition, under our by-laws, any person or entity purchasing or otherwise acquiring or holding interest in shares of our stock, shall be deemed to have notice of and consented to the Forum Selection provisions of our by-laws.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS
The following is a summary of the material U.S. federal income tax consequences applicable to non-U.S. holders (as defined below) with respect to the acquisition, ownership and disposition of shares of our common stock, but does not purport to be a complete analysis of all potential tax considerations related thereto. This summary is based on current provisions of the Internal Revenue Code of 1986, as amended, (the “Code”), final, temporary and proposed Treasury regulations promulgated thereunder, administrative rulings and judicial opinions, all of which are subject to change, possibly with retroactive effect. We have not sought any ruling from the U.S. Internal Revenue Service (the “IRS”), with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions.
This summary is limited to non-U.S. holders who purchase shares of our common stock issued pursuant to this offering and who hold such shares of our common stock as “capital assets” within the meaning of Section 1221 of the Code. This discussion does not address all aspects of U.S. federal income taxation that may be important to a particular non-U.S. holder in light of that non-U.S. holder’s individual circumstances, nor does it address any alternative minimum tax, impact of the Medicare surtax on certain net investment income, any aspects of U.S. federal estate or gift tax laws or tax considerations arising under the laws of any non-U.S., state or local jurisdiction.
This discussion also does not address tax considerations applicable to a non-U.S. holder subject to special treatment under the U.S. federal income tax laws, including, without limitation:
| • | banks, insurance companies or other financial institutions; |
| • | partnerships or other pass-through entities; |
| • | tax-exempt organizations; |
| • | tax-qualified retirement plans; |
| • | dealers in securities or currencies; |
| • | traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; |
| • | certain U.S. expatriates; |
| • | controlled foreign corporations; |
| • | passive foreign investment companies; |
| • | persons that own, or have owned, actually or constructively, more than 5% of our common stock; and |
| • | persons that will hold common stock as a position in a hedging transaction, “straddle” or “conversion transaction” for tax purposes. |
Accordingly, we urge you to consult with your own tax advisors regarding the U.S. federal, state, local and non-U.S. income and other tax considerations of acquiring, holding and disposing of shares of our common stock.
If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of our common stock, the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. Any partner in a partnership holding shares of our common stock (and such partnership) should consult their own tax advisors.
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YOU ARE URGED TO CONSULT YOUR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS, AS WELL AS ANY TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF SHARES OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
Definition of Non-U.S. Holder
In general, a “non-U.S. holder” is any beneficial owner of shares of our common stock (other than a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) that is not a U.S. person. A “U.S. person” is a beneficial owner of shares of our common stock that, for U.S. federal income tax purposes, is:
| • | an individual citizen or resident of the United States; |
| • | a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
| • | an estate, the income of which is subject to U.S. federal income tax regardless of its source; or |
| • | a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) it has in effect a valid election under applicable Treasury regulations to be treated as a U.S. person. |
Distributions on Our Common Stock
Distributions, if any, on our common stock will generally constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, the excess will be treated first as reducing your adjusted basis in your shares of common stock, and, to the extent it exceeds such adjusted basis, as capital gain from the sale or exchange of such common stock, which will be treated as described under the section titled “— Gain on Sale or Other Taxable Disposition of Shares of Our Common Stock” below.
Dividends paid to a non-U.S. holder on shares of our common stock will generally be subject to U.S. federal withholding tax at a rate of 30%, or such lower rate as may be specified by an applicable income tax treaty. To receive the benefit of a reduced treaty rate, a non-U.S. holder must furnish to us or our paying agent a valid IRS Form W-8BEN (or other applicable form) certifying, under penalties of perjury, such non-U.S. holder’s qualification for the reduced rate.
If a non-U.S. holder holds shares of our common stock in connection with the conduct of a trade or business in the United States, and dividends paid on shares of our common stock are effectively connected with such non-U.S. holder’s U.S. trade or business (and, if required by an applicable income tax treaty, are attributable to a permanent establishment maintained by the non-U.S. holder in the United States), the non-U.S. holder will be exempt from the aforementioned U.S. federal withholding tax. To claim the exemption, the non-U.S. holder must furnish to us or our paying agent a properly executed IRS Form W-8ECI (or applicable successor form). Such effectively connected dividends will generally be subject to U.S. federal income tax on a net income basis at the same graduated U.S. federal income tax rates applicable to U.S. persons. A non-U.S. holder that is a corporation may also be subject to an additional branch profits tax equal to 30% (or such lower rate as may be specified by an applicable income tax treaty) on its effectively connected earnings and profits for the taxable year, as adjusted.
A non-U.S. holder that claims an exemption from withholding or the benefit of an applicable income tax treaty will generally be required to satisfy applicable certification and other requirements prior to the distribution
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date. Non-U.S. holders that do not timely provide us or our paying agent with the required certification may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.
Gain on Sale or Other Taxable Disposition of Shares of Our Common Stock
Subject to the discussion below regarding backup withholding, a non-U.S. holder will not generally be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of shares of our common stock, unless:
| • | the gain is effectively connected with a trade or business carried on by the non-U.S. holder in the United States and, if required by an applicable income tax treaty, the gain is attributable to a permanent establishment of the non-U.S. holder maintained in the United States; |
| • | the non-U.S. holder is an individual present in the United States for 183 days or more in the taxable year of disposition and certain other requirements are met; or |
| • | our common stock constitutes a “U.S. real property interest” by reason of our status as a “U.S. real property holding corporation,” or USRPHC, for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding your disposition of, or your holding period for, our common stock, and, in the case where shares of our common stock are regularly traded on an established securities market, you own, or are treated as owning, more than 5% of our common stock at any time during the foregoing period. |
We believe we currently are not, and we do not anticipate becoming, a USRPHC for U.S. federal income tax purposes.
Gain described in the first bullet point above will be subject to U.S. federal income tax on a net income basis at the same graduated U.S. federal income tax rates applicable to U.S. persons. A non-U.S. holder that is a corporation may also be subject to an additional branch profits tax equal to 30% (or such lower rate as may be specified by an applicable income tax treaty) on its effectively connected earnings and profits for the taxable year, as adjusted. Non-U.S. holders should consult any applicable income tax treaties that may provide for different rules.
Gain described in the second bullet point above will be subject to U.S. federal income tax at a flat 30% rate (or such lower rate as may be specified by an applicable income tax treaty), but may be offset by U.S. source capital losses realized during the same taxable year. Non-U.S. holders should consult any applicable income tax treaties that may provide for different rules.
Backup Withholding and Information Reporting
Generally, we must report annually to the IRS and to each non-U.S. holder the amount of dividends paid to, and the tax withheld with respect to, each non-U.S. holder. This information may also be made available to the tax authorities of the country in which the non-U.S. holder resides or is incorporated under the provisions of a specific treaty or agreement. Backup withholding will not generally apply to distributions to a non-U.S. holder provided the non-U.S. holder furnishes to us or our paying agent the required certification as to its non-U.S. status, such as by providing a valid IRS Form W-8BEN, W-8BEN-E or IRS Form W-8ECI, or certain other requirements are met. Notwithstanding the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person that is not an exempt recipient.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a credit against a non-U.S. holder’s U.S. federal income tax liability and may entitle such non-U.S. holder to a refund, provided the required information is timely furnished to the IRS.
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Foreign Accounts Tax Compliance Act (“FATCA”)
Under Sections 1471 through 1474 of the Code (such Sections commonly referred to as “FATCA”), a 30% United States federal withholding tax may apply to any dividends paid to (i) a “foreign financial institution” (as specifically defined in the Code) which does not provide sufficient documentation, typically on IRS Form W-8BEN-E, evidencing either (x) an exemption from FATCA, or (y) its compliance (or deemed compliance) with FATCA (which may alternatively be in the form of compliance with an intergovernmental agreement with the United States) in a manner which avoids withholding, or (ii) a “non-financial foreign entity” (as specifically defined in the Code) which does not provide sufficient documentation, typically on IRS Form W-8BEN-E, evidencing either (x) an exemption from FATCA, or (y) adequate information regarding certain substantial United States beneficial owners of such entity (if any). You are urged to consult your own tax advisor regarding these rules.
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Under the terms and subject to the conditions in an underwriting agreement dated as of the date of this prospectus (the “underwriting agreement”), the underwriters named below, for whom Morgan Stanley & Co. LLC and BofA Securities, Inc. are acting as representatives (the “Representatives”), have severally agreed to purchase, and we have agreed to sell to them, severally, the number of shares indicated below:
| Name |
Number of Shares |
|||
| Morgan Stanley & Co. LLC |
||||
| BofA Securities, Inc. |
||||
| Total |
||||
|
|
|
|||
The underwriting agreement provides that the obligations of the underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ option to purchase additional shares described below.
The underwriters propose to offer shares of common stock directly to the public at the public offering price listed on the cover page of this prospectus and may offer the shares to dealers at the public offering price less a concession not to exceed $ per share. After the initial offering of the shares of common stock to the public at the initial public offering price, the underwriters may change the public offering price and concessions.
We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an additional shares of common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered. The following table shows the per share and total public offering price, underwriting discounts and commissions and proceeds before expenses to us. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to an additional shares of common stock.
| Total | ||||||||||||
| Per Share |
No Exercise |
Full Exercise |
||||||||||
| Public offering price |
$ | $ | $ | |||||||||
| Underwriting discounts and commissions |
$ | $ | $ | |||||||||
| Proceeds, before expenses, to us |
$ | $ | $ | |||||||||
The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $ .
Our common stock has been approved for listing on the New York Stock Exchange with the trading symbol “AJG.”
We, all of our directors and certain of our officers have agreed that, without the prior written consent of Morgan Stanley & Co. LLC on behalf of the underwriters, we and they will not, and will not publicly disclose an intention to, during the period ending 45 days after the date of this prospectus (the “Restricted Period”):
| • | offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, |
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| directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock; |
| • | enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock, whether any such transaction described in this bullet or the immediately preceding bullet is to be settled by delivery of common stock or such other securities, in cash or otherwise; or |
| • | file any registration statement with the Securities and Exchange Commission relating to the offering of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock. |
In addition, each such person agrees that, without the prior written consent of Morgan Stanley & Co. LLC on behalf of the underwriters, such person will not, during the Restricted Period, make any demand for, or exercise any right with respect to, the registration of any shares of common stock or any security convertible into or exercisable or exchangeable for common stock, and also agrees to the entry of stop transfer instructions with the transfer agent and registrar of the common stock against the transfer of such person’s shares of common stock except in compliance with the restrictions described above.
The restrictions described in the immediately preceding paragraph do not apply to:
| • | the sale of shares to the underwriters; |
| • | the issuance by the Company of shares of common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus; |
| • | the establishment of a trading plan pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for the transfer of shares of common stock, provided that (i) such plan does not provide for the transfer of common stock during the Restricted Period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required or voluntarily made regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of common stock may be made under such plan during the Restricted Period; |
| • | the filing by the Company of a registration statement on Form S-8 or a successor form thereto in respect of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock (i) issued under or granted pursuant to stock plans described in this prospectus or (ii) issued under or granted pursuant to the Company’s UK Employee Share Incentive Plan; |
| • | the entry into an agreement providing for the issuance by the company of shares of common stock or any security convertible into or exercisable for common stock in connection with the acquisition by the Company or its subsidiaries of the securities, business, property or other assets of another person or entity or pursuant to an employee benefit plan assumed by the company in connection with such acquisition, and the issuance of any such securities pursuant to any such agreement; |
| • | the entry into an agreement providing for the issuance of shares of common stock or any security convertible into or exercisable for shares of common stock in connection with joint ventures, commercial relationships or other strategic transactions, and the issuance of any such securities pursuant to any such agreement, provided that in the case of any such transaction described in this bullet or the immediately preceding bullet, the aggregate number of shares of common stock or any security convertible into or exercisable for common stock shall not exceed 5% of the total number of shares of common stock issued and outstanding immediately following the completion of this offering; |
| • | grants of stock options, stock awards, restricted stock or other equity awards and the issuance of common stock or securities convertible into or exercisable for common stock (whether upon the exercise of stock options, the vesting of restricted stock units or otherwise) to employees, officers, directors, advisors or consultants of the company (i) pursuant to the terms of a plan in effect on the date |
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| of this prospectus and described in this prospectus or (ii) pursuant to any new plan that becomes effective after the date hereof for the purpose of granting retention, incentive, replacement or inducement awards, provided that the Company shall cause each newly appointed director or executive officer that is a recipient of such securities to enter into a lock-up agreement substantially in the form executed in connection with this offering covering the remainder of the Restricted Period; |
| • | transactions relating to shares of common stock or other securities acquired in open market transactions after the initial offering of the shares of common stock, provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made in connection with subsequent sales of common stock or other securities acquired in such open market transactions; |
| • | transfers of shares of common stock or any security convertible into common stock as a bona fide gift, distributions of shares of common stock or any security convertible into common stock to limited partners, general partners, managers, directors, officers, employees, members, stockholders or trust beneficiaries of such persons, transfers or dispositions of shares of common stock or any security convertible into or exercisable or exchangeable for common stock by will or other testamentary document or by intestacy, transfers or dispositions of shares of common stock or any security convertible into or exercisable or exchangeable for common stock to any trust for the direct or indirect benefit of such persons or the immediate family of such persons in a transaction not involving a disposition for value (for purposes of this letter agreement, “immediate family” shall mean any relationship by blood, marriage, domestic partnership or adoption no more remote than first cousin, and shall include any former spouse), transfers of shares of common stock or any security convertible into or exercisable or exchangeable for common stock that occur by operation of law pursuant to a qualified domestic order or in connection with a divorce settlement (provided that, in the case of any transfer or distribution described in this bullet, (i) each donee or distributee shall sign and deliver a lock-up agreement substantially in the form executed in connection with this offering, except that up to an aggregate of 50,000 shares of common stock may be transferred as a bona fide gift without the donee or distributee being required to sign and deliver a lock-up agreement substantially in the form executed in connection with this offering, and (ii) no filing under Section 16(a) of the Exchange Act, reporting a reduction in beneficial ownership of shares of common stock, shall be required or shall be voluntarily made during the Restricted Period); or |
| • | the exercise of options to purchase shares of common stock granted under a stock incentive plan or stock purchase plan described in this prospectus and outstanding as of the date of this prospectus or the exercise of warrants to purchase shares of common stock (or any security convertible into or exercisable or exchangeable for common stock) described in this prospectus and outstanding as of the date of this prospectus, provided that the underlying common stock continues to be subject to the restrictions set forth in the lock-up agreement and, provided further that any public filing or public announcement under Section 16(a) of the Exchange Act required or voluntarily made during the Restricted Period in connection with the exercise of such stock option or warrant shall clearly indicate in the footnotes thereto or comments section thereof that the filing relates to the exercise of a stock option or warrant, as the case may be, that no shares of common stock were sold by the reporting person and that the shares of common stock received upon exercise of the stock option or warrant are subject to a lock-up agreement with the underwriters of this offering. |
Morgan Stanley & Co. LLC, in its sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice.
In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of our common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of our common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales.
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Short sales may be “covered” shorts, which are short positions in an amount not greater than the underwriters’ option to purchase additional shares referred to above, or may be “naked” shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their option to purchase additional shares, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.
The underwriters have advised us that, pursuant to Regulation M of the Securities Act, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the Representatives purchases common stock in the open market in stabilizing transactions or to cover short sales, the Representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by it.
These activities may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the New York Stock Exchange, in the over-the-counter market or otherwise.
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make because of any of these liabilities.
The underwriters and their respective affiliates are full-service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities.
Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory, commercial banking and investment banking services for us or our affiliates, for which they received or will receive customary fees and expenses.
In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments, including serving as counterparties to certain derivative and hedging arrangements, and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own accounts and for the accounts of their customers, and such investment and securities activities may involve our securities or instruments. Such investment and securities activities may have involved, and in the future may involve, our securities and instruments. If any of the underwriters or their affiliates has a lending relationship with us, certain of those underwriters or their affiliates may hedge their credit exposure to us consistent with their customary risk management policies. Typically, such underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities. The underwriters and their respective affiliates may also make investment recommendations or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such securities and instruments. We expect that certain of the underwriters in this offering will also act as underwriters in the concurrent notes offering. Additionally, in connection with the Transaction, BofA Securities, Inc. is providing certain financial advisory services to the Company, and Morgan Stanley & Co. LLC is providing certain financial advisory services to the Acquired Entity (or one of its affiliates).
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Selling Restrictions
Canada
The shares of common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares of common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory.
The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
European Economic Area (“EEA”)
This prospectus has been prepared on the basis that any offer of the shares of common stock in any Member State of the EEA will be made pursuant to an exemption under the Prospectus Regulation from the requirement to publish a prospectus for offers of securities. The expression “Prospectus Regulation” means Regulation (EU) 2017/1129 (as amended or superseded). For the avoidance of doubt, whilst this document is referred to as a ‘prospectus,’ it is not a prospectus for the purposes of the Prospectus Regulation.
The shares of common stock are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the EEA. For the purposes of this provision:
| (a) | the expression “retail investor” means a person who is one (or more) of the following: |
| (i) | a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); |
| (ii) | a customer within the meaning of Directive (EU) 2016/97 (as amended, the “Insurance Distribution Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or |
| (iii) | not a qualified investor as defined in Article 2(e) of the Prospectus Regulation; and |
| (b) | the expression “offer” includes the communication in any form and by any means, presenting sufficient information on the terms of the offer and the securities to be offered, so as to enable an investor to decide to purchase or subscribe for those securities. |
Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling packaged retail and insurance based investment products or otherwise making them available to retail investors in the EEA has been prepared, and therefore offering or selling the shares of common stock or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
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In the EEA, this prospectus and any other material in relation to the shares of common stock are only being distributed to, and are only directed at, “non-retail investors” (being persons who are not “retail investors” as defined in this section titled “European Economic Area”) and any investment or investment activity to which this prospectus relates is available only to, and will be engaged in only with, non-retail investors. This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by any recipients to any other persons in the EEA. Any person in the EEA who is a “retail investor” should not act or rely on this prospectus or its contents. Each person in the EEA who purchases any of the shares of common stock will be deemed to have represented, warranted, acknowledged and agreed that they are a non-retail investor.
United Kingdom (“UK”)
This prospectus has been prepared on the basis that any offer of the shares of common stock in the UK will be made pursuant to an exemption from the requirement to publish a prospectus for offers of securities. For the avoidance of doubt, whilst this document is referred to as a ‘prospectus,’ it is not a prospectus for the purposes of UK law.
The shares of common stock are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the UK. For the purposes of this provision:
| (a) | the expression “retail investor” means a person who is one (or more) of the following: |
| (i) | a retail client as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (as amended, and together with any statutory instruments made in exercise of the powers conferred by such Act, the “EUWA”); |
| (ii) | a customer within the meaning of the provisions of the Financial Services and Markets Act 2000 (as amended, the “FSMA”) and any rules or regulations made under the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a professional client as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA; or |
| (iii) | not a qualified investor as defined in Article 2 of Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the EUWA; and |
| (b) | the expression “offer” includes the communication in any form and by any means, presenting sufficient information on the terms of the offer and the securities to be offered, so as to enable an investor to decide to purchase or subscribe for those securities. |
Consequently, no key information document required by Regulation (EU) No 1286/2014 as it forms part of domestic law by virtue of the EUWA (the “UK PRIIPs Regulation”) for offering or selling packaged retail and insurance based investment products or otherwise making them available to retail investors in the UK has been prepared, and therefore offering or selling the shares of common stock or otherwise making them available to any retail investor in the UK may be unlawful under the UK PRIIPs Regulation.
In the UK, this prospectus and any other material in relation to the shares of common stock are only being distributed to, and are only directed at, “non-retail investors” (being persons who are not “retail investors” as defined in this section “United Kingdom”) who are also: (i) persons having professional experience in matters relating to investments who fall within the definition of “investment professionals” in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”); (ii) high net worth bodies corporate, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2)(a) to (d) of the Order; or (iii) persons to whom an invitation or inducement to engage
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in investment activity (within the meaning of section 21 of the FSMA) in connection with the issue or sale of any shares of common stock may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by any recipients to any other persons in the UK. In the UK, any investment or investment activity to which this prospectus relates is only available to, and will be engaged in only with, relevant persons. Any person in the UK that is not a relevant person should not act or rely on this prospectus or its contents. Each person in the UK who purchases any of the shares of common stock will be deemed to have represented, warranted, acknowledged and agreed that they are a relevant person.
In the UK, the shares of common stock may not be offered other than by an underwriter that:
| • | has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the shares of common stock in circumstances in which Section 21(1) of the FSMA is complied with or does not apply; and |
| • | has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares of common stock in, from or otherwise involving the UK. |
References in this section titled “United Kingdom” to UK legislation include any successor legislation to that legislation.
Switzerland
This prospectus is not intended to constitute an offer or solicitation to purchase or invest in the shares of common stock. The shares of common stock may not be publicly offered, directly or indirectly, in Switzerland within the meaning of the Swiss Financial Services Act (“FinSA”) and no application has or will be made to admit the shares of common stock to trading on any trading venue (exchange or multilateral trading facility) in Switzerland. Neither this prospectus nor any other offering or marketing material relating to shares of common stock constitutes a prospectus pursuant to the FinSA, and neither this prospectus nor any other offering or marketing material related to shares of common stock may be publicly distributed or otherwise made publicly available in Switzerland.
Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (“DFSA”). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for this prospectus. The shares of common stock to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares of common stock offered should conduct their own due diligence on the shares of common stock. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
In relation to its use in the DIFC, this document is strictly private and confidential and is being distributed to a limited number of investors and must not be provided to any person other than the original recipient, and may not be reproduced or used for any other purpose. The interests in the securities may not be offered or sold directly or indirectly to the public in the DIFC.
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Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission or any other governmental agency, in relation to this offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the “Corporations Act”), and do not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the shares of common stock may only be made to persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares of common stock without disclosure to investors under Chapter 6D of the Corporations Act.
The shares of common stock applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares of common stock must observe such Australian on-sale restrictions.
This prospectus contains general information only and do not take account of the investment objectives, financial situation or particular needs of any particular person. They do not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Hong Kong
The shares of common stock have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the shares of common stock has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares of common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance.
Japan
The shares of common stock have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the “Financial Instruments and Exchange Law”) and each underwriter has agreed that it will not offer or sell any of the shares of common stock, directly or indirectly, in Japan or to, or for the account or benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to, or for the account or benefit of, others for re-offering or resale, directly or indirectly, in Japan or to, or for the account or benefit of, a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and governmental guidelines of Japan.
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Singapore
This prospectus has not been and will not be registered as a prospectus under the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”) by the Monetary Authority of Singapore, and the offer of the shares of common stock in Singapore is made primarily pursuant to the exemptions under Sections 274 and 275 of the SFA. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares of common stock may not be circulated or distributed, nor may the shares of common stock be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor as defined in Section 4A of the SFA (an “Institutional Investor”) pursuant to Section 274 of the SFA, (ii) to an accredited investor as defined in Section 4A of the SFA (an “Accredited Investor”) or other relevant person as defined in Section 275(2) of the SFA (a “Relevant Person”) and pursuant to Section 275(1) of the SFA, or to any person pursuant to an offer referred to in Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA and (where applicable) Regulation 3 of the Securities and Futures (Classes of Investors) Regulations 2018 or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable exemption or provision of the SFA.
It is a condition of the offer that where the shares of common stock are subscribed for or acquired pursuant to an offer made in reliance on Section 275 of the SFA by a Relevant Person which is:
| (a) | a corporation (which is not an Accredited Investor), the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an Accredited Investor; or |
| (b) | a trust (where the trustee is not an Accredited Investor), the sole purpose of which is to hold investments and each beneficiary of the trust is an individual who is an Accredited Investor, securities, |
or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation and the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within 6 months after that corporation or that trust has subscribed for or acquired the shares of common stock except:
| (1) | to an Institutional Investor, an Accredited Investor, a Relevant Person or which arises from an offer referred to in Section 275(1A) of the SFA (in the case of that corporation) or Section 276(4)(i)(B) of the SFA (in the case of that trust); |
| (2) | where no consideration is or will be given for the transfer; |
| (3) | where the transfer is by operation of law; |
| (4) | as specified in Section 276(7) of the SFA; or |
| (5) | as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018. |
Singapore Securities and Futures Act Product Classification—Solely for the purposes of its obligations pursuant to Sections 309B(1)(a) and 309B(1)(c) of the SFA, the Company has determined, and hereby notifies all relevant persons (as defined in Section 309A of the SFA) that the shares of common stock are “prescribed capital markets products” (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018) and “Excluded Investment Products” (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
Taiwan
The shares of common stock have not been and will not be registered or filed with, or approved by, the Financial Supervisory Commission of Taiwan, the Republic of China (“Taiwan”) and/or other regulatory
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authority of Taiwan pursuant to relevant securities laws and regulations and may not be sold, issued or offered within Taiwan through a public offering or in circumstances which could constitute an offer within the meaning of the Securities and Exchange Act of Taiwan or relevant laws and regulations that require a registration, filing or approval of the Financial Supervisory Commission of Taiwan and/or other regulatory authority of Taiwan. No person or entity in Taiwan has been authorized to offer, sell, distribute or otherwise intermediate the shares of common stock in Taiwan through a public offering or in any offering that requires registration, filing or approval of the Financial Supervisory Commission of Taiwan except pursuant to the applicable laws and regulations of Taiwan and the competent authority’s rulings thereunder.
United Arab Emirates
The shares of common stock have not been, and are not being, publicly offered, sold, promoted or advertised in the United Arab Emirates (including the Dubai International Financial Centre) other than in compliance with the laws of the United Arab Emirates (and the Dubai International Financial Centre) governing the issue, offering and sale of securities. Further, this prospectus does not constitute a public offer of securities in the United Arab Emirates (including the Dubai International Financial Centre) and are not intended to be a public offer. This prospectus has not been approved by or filed with the Central Bank of the United Arab Emirates, the Securities and Commodities Authority or the Dubai Financial Services Authority.
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The validity of the common stock offered hereby will be passed upon for us by Gibson, Dunn & Crutcher LLP, New York, New York. Certain legal matters will be passed upon for the underwriters by Cleary Gottlieb Steen & Hamilton LLP, New York, New York.
The consolidated financial statements and related financial statement schedule of Arthur J. Gallagher & Co. appearing in Arthur J. Gallagher & Co.’s Annual Report (Form 10-K) for the year ended December 31, 2023, and the effectiveness of Arthur J. Gallagher & Co.’s internal control over financial reporting as of December 31, 2023, have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon included therein, and incorporated herein by reference. Such consolidated financial statements and related financial statement schedule are incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
The audited historical financial statements of the Acquired Entity attached as Exhibit 99.2 in Arthur J. Gallagher & Co.’s Current Report on Form 8-K dated December 7, 2024 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are subject to the informational requirements of the Exchange Act and, in accordance with these requirements, we file annual, quarterly and current reports, proxy statements and other information relating to our business, financial condition and other matters with the SEC. We are required to disclose in such reports certain information, as of particular dates, concerning our operating results and financial condition, officers and directors, principal holders of securities, any material interests of such persons in transactions with us and other matters.
Our filings are available to the public through the website maintained by the SEC at http://www.sec.gov. Our filings are also available on our investor relations website at https://investor.ajg.com. You are encouraged to read the materials that we file with the SEC, which disclose important information about us. This information includes any filing we have made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. The information on our website or any other website is not incorporated by reference in this prospectus and should not be considered part of this prospectus or any other filing we make with the SEC.
The SEC allows us to “incorporate by reference” into this prospectus, which means that we can disclose important information to you by referring you to another document that we filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for any information superseded by information contained directly in this prospectus. These documents contain important information about us and our financial condition, business and results.
We are incorporating by reference our filings listed below and any additional documents that we may file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date we file this prospectus and before the termination of the offering of the securities made under this prospectus. These additional documents include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on
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Form 10-Q and Current Reports on Form 8-K; except we are not incorporating by reference any information furnished (but not filed) under Item 2.02 or Item 7.01 of any Current Report on Form 8-K or corresponding information furnished under Item 9.01 of Form 8-K (or included as an exhibit) in any past or future current report on Form 8-K that we may file with the SEC, unless specifically noted below:
| • | Our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 9, 2024; |
| • | The portions of our proxy statement for our 2024 annual meeting of stockholders filed with the SEC on March 22, 2024 that are incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended December 31, 2023; |
| • | Our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2024, June 30, 2024, and September 30, 2024, filed with the SEC on May 1, 2024, July 26, 2024 and October 29, 2024, respectively; |
| • | Our Current Report on Form 8-K filed on February 15, 2024, March 14, 2024, May 8, 2024, July 25, 2024 (Item 5.02 only), and December 9, 2024; and |
| • | The description of our common stock contained in our Registration Statement on Form 8-A (registration no. 0-13480), filed with the SEC on November 2, 1987, as updated by the description of our common stock contained in Exhibit 4.1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and all amendments or reports filed for the purpose of updating such descriptions. |
Information in this prospectus supersedes related information in the documents listed above and information in subsequently filed documents supersedes related information in both this prospectus and the incorporated documents.
You may request orally or in writing, and we will provide you with, a copy of these filings, at no cost, by calling us at (630) 773-3800 or by writing to us at the following address:
General Counsel
Arthur J. Gallagher & Co.
2850 Golf Road
Rolling Meadows, Illinois 60008-4050
These filings and reports can also be found on our investor relations website, located at https://investor.ajg.com. Additionally, you may obtain copies of any of these through the SEC’s website at http://www.sec.gov. The information on our website or any other website is not incorporated by reference in this prospectus and should not be considered part of this prospectus or any other filing we make with the SEC.
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$
Arthur J. Gallagher & Co.
Common Stock
Prospectus
December , 2024
Joint Book-Running Managers
Morgan Stanley
BofA Securities
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses (other than underwriting compensation) to be incurred by us in connection with the issuance and distribution of our securities being registered hereby are:
| Securities and Exchange Commission filing fee |
$ | * | ||
| Accounting fees and expenses |
60,000 | |||
| Legal fees and expenses |
475,000 | |||
| Printing and miscellaneous fees |
37,000 | |||
| Total expenses |
$ | ** |
| * | Deferred in accordance with Rules 456(b) and 457(r) of the Securities Act of 1933, as amended, or the Securities Act. |
| ** | Estimated expenses are not presently known. |
Item 15. Indemnification of Directors and Officers.
Gallagher is incorporated under the Delaware General Corporation Law (the “DGCL”).
Section 145(a) of the DGCL provides that a Delaware corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful.
Section 145(b) of the DGCL provides that a Delaware corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted under standards similar to those discussed above, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine that despite the adjudication of liability, but in view of all circumstances of the case, such person is fairly and reasonably entitled to be indemnified for such expenses which the Court of Chancery or such other court shall deem proper.
Section 145 of the DGCL further provides that to the extent a director or officer of a corporation has been successful in the defense of any action, suit or proceeding referred to in subsections (a) and (b) of Section 145 of the DGCL or in the defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith; and that indemnification provided for by Section 145 of the DGCL shall not be deemed exclusive of any other rights to which the indemnified party may be entitled; and that the corporation shall have power to purchase and maintain insurance on behalf of a director or officer of the corporation against any liability asserted against such
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person and incurred by such person in any such capacity or arising out of such person’s status as such whether or not the corporation would have the power to indemnify such person against such liability under Section 145 of the DGCL.
Section 102(b)(7) of the DGCL provides that a corporation’s certificate of incorporation may provide a provision that eliminates or limits the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provisions shall not eliminate or limit the liability of a director (1) for any breach of the director’s duty of loyalty to the corporation or its stockholders; (2) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (3) under Section 174 of the DGCL; or (4) for any transaction from which the director derived an improper personal benefit. No such provision shall eliminate or limit the liability of a director for any act or omission occurring before the date when such provision becomes effective.
Article Seven of Gallagher’s Amended and Restated By-laws provide for the indemnification of each of Gallagher’s directors, officers, employees or agents to the full extent permitted by applicable law, including, without limitation, the DGCL.
Article Seven of Gallagher’s Amended and Restated By-laws provides that Gallagher shall indemnify any person in connection with any action, suit or proceeding brought or threatened by reason of the fact that he or she is or was one of Gallagher’s directors, officers, employees or agents, or is or was serving at Gallagher’s request as a director, officer, employee or agent of another enterprise, against all costs actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to Gallagher’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Similar indemnity is permitted to be provided to such persons in connection with an action or suit by Gallagher or in Gallagher’s right, and provided further that such person shall not have been adjudged liable to Gallagher, unless, in view of all the circumstances of the case, the court in which the action or suit was brought determines that such person despite the adjudication of liability is fairly and reasonably entitled to indemnity for such expenses.
Article Twelve of Gallagher’s Restated Certificate of Incorporation eliminates the liability of Gallagher’s directors or officers for monetary damages for breach of fiduciary duty as a director or officer except to the extent such exemption from liability or limitation is not permitted by the DGCL. It further provides that any amendment, modification or repeal of the foregoing sentence will not adversely affect any right or protection of any of Gallagher’s directors or officers in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.
Gallagher also maintains and pays premiums on a directors’ and officers’ liability insurance policy and has entered into indemnity agreements with its directors and officers. The provisions of each indemnity agreement alter or clarify the statutory indemnification in the following respects: (1) indemnity will be explicitly provided for settlements in derivative actions; (2) prompt payment of litigation expenses will be provided in advance of indemnification; (3) prompt indemnification of advances of expenses will be provided unless a determination is made that the director or officer has not met the required standard; (4) the director or officer will be permitted to petition a court to determine whether his or her actions meet the standards required; and (5) partial indemnification will be permitted in the event that the director or officer is not entitled to full indemnification. In addition, each indemnity agreement specifically includes indemnification with respect to actions, suits or proceedings brought under and/or predicated upon the Securities Act and/or the Securities Exchange Act.
The preceding summary is qualified in its entirety by Gallagher’s Restated Certificate of Incorporation and Amended and Restated By-laws, and the indemnity agreements described above.
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Item 16. Exhibits
The following exhibits are filed herewith or incorporated herein by reference.
| ‡ | Filed herewith. |
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Item 17. Undertakings.
The undersigned registrant hereby undertakes:
| (a) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (1) | To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; |
| (2) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Filing Fee Tables” table in the effective registration statement; and |
| (3) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
provided, however, that paragraphs (1), (2) and (3) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
| (b) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (c) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
| (d) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: |
| (1) | Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and |
| (2) | Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date. |
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| (e) | That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| (1) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
| (2) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
| (3) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
| (4) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
| (f) | That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (g) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. |
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SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Rolling Meadows, State of Illinois, on the 9th day of December, 2024.
| ARTHUR J. GALLAGHER & CO. | ||
| By: | /s/ J. Patrick Gallagher, Jr. | |
| J. Patrick Gallagher, Jr. | ||
| Chairman and Chief Executive Officer (Principal Executive Officer) | ||
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We, the undersigned directors and officers, do hereby constitute and appoint Walter D. Bay and Douglas K. Howell, and each of them severally, our true and lawful attorneys-in-fact and agents with full power of substitution and re-substitution for us and in our name, place, and stead, to do any and all acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys-in-fact and agents may deem necessary or advisable to enable Arthur J. Gallagher & Co. to comply with the Securities Act, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this registration statement on Form S-3, including specifically, but without limitation, power and authority to sign for us or any of us, in our names in the capacities indicated below, any and all amendments (including pre- and post-effective amendments) hereto and any related registration statement and amendments thereto and to file the same, with all exhibits thereto, and other documents in connection therewith; and we do each hereby ratify and confirm all that said attorneys-in-fact and agents shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| Signatures | Title | Date | ||
| /s/ J. Patrick Gallagher, Jr. J. Patrick Gallagher, Jr. |
Chairman, Chief Executive Officer and Director (Principal Executive Officer) | December 9, 2024 | ||
| /s/ Douglas K. Howell Douglas K. Howell |
Vice President and Chief Financial Officer (Principal Financial Officer) | December 9, 2024 | ||
| /s/ Richard C. Cary Richard C. Cary |
Controller (Principal Accounting Officer) |
December 9, 2024 | ||
| /s/ Sherry S. Barrat Sherry S. Barrat |
Director | December 9, 2024 | ||
| /s/ Deborah H. Caplan Deborah H. Caplan |
Director | December 9, 2024 | ||
| /s/ Teresa H. Clarke Teresa H. Clarke |
Director | December 9, 2024 | ||
| /s/ D. John Coldman D. John Coldman |
Director | December 9, 2024 | ||
| /s/ Richard Harries Richard Harries |
Director | December 9, 2024 | ||
| /s/ David S. Johnson David S. Johnson |
Director | December 9, 2024 | ||
| /s/ Christopher C. Miskel Christopher C. Miskel |
Director | December 9, 2024 | ||
| /s/ Ralph J. Nicoletti Ralph J. Nicoletti |
Director | December 9, 2024 | ||
| /s/ Norman L. Rosenthal Norman L. Rosenthal |
Director | December 9, 2024 | ||
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Exhibit 1.1
[•] Shares
ARTHUR J. GALLAGHER & CO.
COMMON STOCK (PAR VALUE $1.00 PER SHARE)
UNDERWRITING AGREEMENT
[•], 2024
[•], 2024
Morgan Stanley & Co. LLC
1585 Broadway
New York, New York 10036
BofA Securities, Inc.
One Bryant Park
New York, NY 10036
Ladies and Gentlemen:
Arthur J. Gallagher & Co., a Delaware corporation (the “Company”), proposes to issue and sell to the several Underwriters named in Schedule I hereto (the “Underwriters”) [•] shares of its common stock, par value $1.00 (the “Firm Shares”). The Company also proposes to issue and sell to the several Underwriters not more than an additional [•] shares of its common stock, par value $1.00 (the “Additional Shares”) if and to the extent that Morgan Stanley & Co. LLC (“Morgan Stanley”) and BofA Securities, Inc. (“BofA Securities,” and together with Morgan Stanley, the “Representatives”), as representatives of the offering, shall have determined to exercise, on behalf of the Underwriters, the right to purchase such shares of common stock granted to the Underwriters in Section 2 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the “Shares.” The shares of common stock, par value $1.00 of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the “Common Stock.”
The Company has filed with the Securities and Exchange Commission (the “Commission”) an “automatic shelf registration statement” (as defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”)) on Form S-3 (File No. 333-[•]), including a prospectus, covering the public offering and sale of the Shares under the Securities Act and the rules and regulations promulgated thereunder (the “Securities Act Regulations”), which automatic shelf registration statement became effective upon filing under Rule 462(e) of the Securities Act Regulations (“Rule 462(e)”). Such registration statement, as of any time, means such registration statement as amended by any post-effective amendments thereto at such time, is hereinafter referred to as the “Registration Statement”; the prospectus used in connection with the offering of the Shares immediately prior to the Time of Sale (as defined below), is referred to herein as a “preliminary prospectus”; the final prospectus in the form first used to confirm sales of Shares (or in the form first made available to the Underwriters by the Company to meet requests of purchasers pursuant to Rule 173 under the Securities Act) is hereinafter referred to as the “Prospectus.” For purposes of this Agreement, “free writing prospectus” has the meaning set forth in Rule 405 under the Securities Act, “Time of Sale Prospectus” means the preliminary prospectus together with the documents and pricing information set forth in Schedule II hereto. “Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the Securities Act Regulations (“Rule 433”), including, without limitation, any “free writing prospectus” (as defined in Rule 405)
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relating to the Shares that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Shares or of the offering thereof that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g). “Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to investors, as evidenced by its being specified in Schedule II hereto. “Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus. As used herein, the terms “Registration Statement,” “preliminary prospectus,” “Time of Sale Prospectus” and “Prospectus” shall include the documents, if any, incorporated by reference therein as of the date hereof. The terms “supplement,” “amendment” and “amend” as used herein with respect to the Registration Statement, any prospectus supplement, the Time of Sale Prospectus or the Prospectus shall include all documents subsequently filed by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder (the “Exchange Act Regulations”), that are deemed to be incorporated by reference therein. “Time of Sale” means [•] p.m., New York City time, on [•], 2024 or such other time as agreed by the Company and the Representatives.
1. Representations and Warranties by the Company. The Company represents and warrants to each Underwriter at the Time of Sale and the Closing Date (as defined below), and agrees with each Underwriter, as follows:
(a) Compliance of the Registration Statement, the Prospectus and Incorporated Documents. The Company meets the applicable requirements for use of Form S-3 under the Securities Act. The Registration Statement is an automatic shelf registration statement under Rule 405 and the Shares have been and remain eligible for registration by the Company on such automatic shelf registration statement. Each of the Registration Statement and any post-effective amendment thereto has become effective under the Securities Act. No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the Securities Act, no notice of objection of the Commission to the use of the Registration Statement or any post-effective amendment thereto pursuant to Rule 401(g)(2) of the Securities Act Regulations (“Rule 401(g)(2)”) has been received by the Company, no order preventing or suspending the use of any preliminary prospectus or the Prospectus or any amendment or supplement thereto has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated. The Company has complied in all material respects with each request (if any) from the Commission for additional information.
Each of the Registration Statement and any post-effective amendment thereto, at the time of its effectiveness, each deemed effective date with respect to the Underwriters pursuant to Rule 430B(f)(2), the Time of Sale and the Closing Date complied and will comply in all material respects with the applicable requirements of the Securities Act and the Securities Act Regulations. Each preliminary prospectus and the Prospectus and any amendment or supplement thereto, at the time each was filed with the Commission, and, in each case, the Time of Sale and
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the Closing Date complied and will comply in all material respects with the applicable requirements of the Securities Act and the Securities Act Regulations, and each preliminary prospectus and the Prospectus delivered to the Underwriters for use in connection with this offering was identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
The documents incorporated or deemed to be incorporated by reference in the Registration Statement, the Time of Sale Prospectus and the Prospectus, when they became effective or at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the applicable requirements of the Exchange Act and the Exchange Act Regulations.
The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement (or any amendment or supplement thereto), the Time of Sale Prospectus or the Prospectus (or any amendment or supplement thereto) made in reliance upon and in conformity with information furnished to the Company in writing by any of the Underwriters through the Representatives expressly for use therein, it being understood and agreed that the only such information furnished by any Underwriter through the Representatives consists of the information described as such in Section 8(b) hereof (the “Underwriter Information”).
(b) Accurate Disclosure. Neither the Registration Statement nor any amendment thereto, at its effective time, as of the Time of Sale or on the Closing Date, contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. At the Time of Sale, neither (A) the Time of Sale Prospectus nor (B) any individual Issuer Limited Use Free Writing Prospectus, when considered together with the Time of Sale Prospectus, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Neither the Prospectus nor any amendment or supplement thereto, as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b) or on the Closing Date, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The documents incorporated or deemed to be incorporated by reference in the Registration Statement, the Time of Sale Prospectus and the Prospectus, at the time the Registration Statement became effective or when such incorporated documents were filed with the Commission, as the case may be, when read together with the other information in the Registration Statement, the Time of Sale Prospectus or the Prospectus, as the case may be, did not, does not and will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.
The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or any amendment thereto or the Time of Sale Prospectus or the Prospectus or any amendment or supplement thereto made in reliance upon and in conformity with the Underwriter Information.
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(c) Issuer Free Writing Prospectuses. No Issuer Free Writing Prospectus conflicts or will conflict with the information contained in the Registration Statement, any preliminary prospectus or the Prospectus, including any document incorporated by reference therein, that has not been superseded or modified. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement, the Time of Sale Prospectus or the Prospectus, the Company has promptly notified or will promptly notify the Representatives and has promptly amended or supplemented or will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict. The foregoing two sentences do not apply to statements in or omissions from any Issuer Free Writing Prospectus based upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter through the Representatives consists of the Underwriter Information.
(d) Testing-the Waters Materials. The Company (i) has not alone engaged in any Testing-the-Waters Communications other than Testing-the-Waters Communications with the consent of the Representatives (x) with entities that are qualified institutional buyers (“QIBs”) within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501(a)(1), (a)(2), (a)(3), (a)(7), (a)(8), (a)(9), (a)(12) or (a)(13) under the Securities Act (“IAIs”) and otherwise in compliance with the requirements of Section 5(d) of the Securities Act or (y) with entities that the Company reasonably believed to be QIBs or IAIs and otherwise in compliance with the requirements of Rule 163B under the Securities Act and (ii) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives had been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed or approved for distribution any Written Testing-the-Waters Communications other than those listed on Schedule III hereto. “Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on either Section 5(d) of, or Rule 163B under, the Securities Act. “Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act. Any individual Written Testing-the-Waters Communication prepared or authorized by the Company does not conflict with the information contained in the Registration Statement, the Time of Sale Prospectus or the Prospectus, complied in all material respects with the applicable provisions of the Securities Act and, when taken together with the Time of Sale Prospectus, as of the Time of Sale, did not, and as of the Closing Date, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(e) Distribution of Offering Material By the Company. The Company has not distributed and will not distribute, prior to the later of the Closing Date and the completion of the Underwriters’ distribution of the Shares, any offering material in connection with the offering and sale of the Shares other than the Registration Statement, the Time of Sale Prospectus, the Prospectus, any Issuer Free Writing Prospectus reviewed and consented to by the Representatives and listed on Schedule II hereto or any electronic road show or other written
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communications reviewed and consented to by the Representatives and listed on Schedule IV hereto (each a, “Company Additional Written Communication”). Each such Company Additional Written Communication, when taken together with the Time of Sale Prospectus, did not, and on the Closing Date will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Company Additional Written Communication based upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter through the Representatives consists of the Underwriter Information.
(f) Well-Known Seasoned Issuer. (A) At the original effectiveness of the Registration Statement, (B) at the time of the most recent amendment thereto for the purposes of complying with Section 10(a)(3) of the Securities Act (whether such amendment was by post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the Exchange Act or form of prospectus), (C) at the time the Company or any person acting on its behalf (within the meaning, for this clause only, of Rule 163(c) of the Securities Act Regulations) made any offer relating to the Shares in reliance on the exemption of Rule 163 under the Securities Act, (D) at the date of this Agreement and (E) at the Time of Sale, the Company was and is a “well-known seasoned issuer,” as defined in Rule 405 of the Securities Act.
(g) Company Not Ineligible Issuer. (A) At the time of filing the Registration Statement and any post-effective amendment thereto, (B) at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act Regulations) of the Shares, (C) at the date of this Agreement and (D) at the Time of Sale, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.
(h) Independent Accountants. The accountants who certified the financial statements and supporting schedules included in the Registration Statement, the Time of Sale Prospectus and the Prospectus are independent public accountants as required by the Securities Act, the Securities Act Regulations, the Exchange Act , the Exchange Act Regulations and the Public Company Accounting Oversight Board.
(i) Financial Statements; Non-GAAP Financial Measures. The financial statements and the related schedules and notes thereto of the Company and its consolidated subsidiaries included or incorporated by reference in the Registration Statement, the Time of Sale Prospectus and the Prospectus present fairly in all material respects the financial position of the Company and its consolidated subsidiaries as of the dates indicated and the consolidated results of their operations and the consolidated changes in their cash flows for the periods specified; except as otherwise disclosed in the related notes thereto, such consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods covered thereby; the other financial information included or incorporated by reference in the Registration Statement, the Time of Sale Prospectus or the Prospectus has been derived from the accounting records of the Company and its
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consolidated subsidiaries and presents fairly in all material respects the information shown thereby. Except as otherwise disclosed, the selected financial data and the summary financial information included in the Registration Statement, the Time of Sale Prospectus and the Prospectus present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included therein. Except as included or incorporated by reference therein, no historical or pro forma financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement, the Time of Sale Prospectus or the Prospectus under the Securities Act, the Securities Act Regulations, the Exchange Act or the Exchange Act Regulations. All disclosures contained or incorporated by reference in the Registration Statement, the Time of Sale Prospectus or the Prospectus, if any, regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply with Regulation G under the Exchange Act and Item 10 of Regulation S-K under the Securities Act, to the extent applicable.
(j) No Material Adverse Change. Except as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus, since the respective dates as of which information is given therein, (A) neither the Company nor any of its subsidiaries has sustained any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, (B) there has been no material adverse change, in the condition, financial or otherwise, or in the earnings, business affairs, business prospects or operations of the Company and its subsidiaries, taken as a whole, whether or not arising in the ordinary course of business (a “Material Adverse Change”), (C) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (D) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class or series of its capital stock, other than ordinary and customary dividends.
(k) Good Standing of the Company. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own or lease its property and conduct its business as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus and to enter into and perform its obligations under, and to consummate the transactions contemplated in, this Agreement, except to the extent that the failure to be so qualified or be in good standing would not, singly or in the aggregate, result in a material adverse effect on the business, properties, management, financial position, stockholders’ equity, or results of operations of the Company and its subsidiaries taken as a whole or on the performance by the Company of its obligations under this Agreement (a “Material Adverse Effect”). The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except where the failure so to qualify or to be in good standing would not, singly or in the aggregate, result in a Material Adverse Effect. The Company has furnished to the Representatives complete and correct copies of its charter and by-laws or similar organizational documents and all amendments thereto, and no change thereto is contemplated or has been authorized or approved by the Company or its securityholders.
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(l) Good Standing of Subsidiaries. Each “significant subsidiary” of the Company (as such term is defined in Rule 1-02 of Regulation S-X) (each, a “Significant Subsidiary” and, collectively, the “Significant Subsidiaries”) has been duly incorporated or validly formed, as applicable, is validly existing and in good standing under the laws of the jurisdiction of its incorporation or other organization, has the power and authority to own or lease its property and to conduct its business as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus and is duly qualified to transact business and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not, singly or in the aggregate, result in a Material Adverse Effect. Except as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus, all of the issued and outstanding shares of capital stock of or other equity interests in each Significant Subsidiary have been duly authorized and validly issued, are fully paid and non-assessable and are owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. As of December 31, 2023, the Significant Subsidiaries of the Company are included in Exhibit 21.1 to the Company’s most recent Annual Report on Form 10-K.
(m) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by the Company.
(n) Capital Stock. The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus.
(o) Authorization of Common Stock. The shares of Common Stock outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable.
(p) Authorization of Shares. The Shares have been duly authorized and, when issued, delivered and paid for in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of the Shares will not be subject to any preemptive or similar rights.
(q) Absence of Conflicts. The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of applicable law or the certificate of incorporation or by laws of the Company or any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary (each, a “Governmental Authority”), and no consent, approval, authorization or order of, or qualification with, any governmental body, agency or court is required for the performance by the Company of its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares.
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(r) Absence of Labor Dispute. No material labor dispute with the employees of the Company or any of its subsidiaries is pending, except as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus, or, to the knowledge of the Company, is imminent.
(s) Absence of Proceedings; Filing of Exhibits. There are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject (A) other than proceedings accurately described in all material respects in the Registration Statement, Time of Sale Prospectus and the Prospectus, and proceedings that would not have a Material Adverse Effect, or (B) that are required to be described in the Registration Statement, Time of Sale Prospectus or the Prospectus and are not so described; and there are no contracts, statutes, regulations, or other documents that are required to be described in the Registration Statement, Time of Sale Prospectus or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required.
(t) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any governmental body, agency or court is necessary or required for the performance by the Company of its obligations under this Agreement, in connection with the offering, issuance or sale of the Shares or the consummation of the transactions contemplated in this Agreement, except such as have been already obtained or as may be required under the Securities Act, the Securities Act Regulations, the securities laws of any state or non-U.S. jurisdiction or the rules of Financial Industry Regulatory Authority, Inc. (“FINRA”).
(u) Possession of Licenses and Permits. The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess any such certificates, authorizations or permits, singly or in the aggregate, would not have a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect.
(v) Title to Property. The Company and its subsidiaries have good and marketable title in fee simple to all real property owned by them, and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries taken as a whole, in each case free and clear of all liens, encumbrances and defects except such as (A) do not materially affect the value of such property or (B) do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries, or (C) would not have a Material Adverse Effect; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect, or do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries.
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(w) Possession of Intellectual Property. Except as would not, singly or in the aggregate, have a Material Adverse Effect, the Company and its subsidiaries own or possess, or can acquire on reasonable terms, all patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names currently employed by them in connection with the business now operated by them. Neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect.
(x) Insurance. Except as would not, singly or in the aggregate, have a Material Adverse Effect, (A) the Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; and (B) neither the Company nor any of its subsidiaries has been refused any insurance coverage sought or applied for. Neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not, singly or in the aggregate, have a Material Adverse Effect.
(y) Taxes; USRPHC. (i) The Company and each of its subsidiaries have filed all federal, state, local and foreign tax returns required to be filed through the date of this Agreement or have requested extensions thereof (except where the failure to file would not, singly or in the aggregate, have a Material Adverse Effect) and have paid all taxes required to be paid thereon (except for cases in which the failure to file or pay would not, singly or in the aggregate, have a Material Adverse Effect, or, except as currently being contested in good faith and for which reserves required by U.S. GAAP have been created in the financial statements of the Company), and no tax deficiency has been determined adversely to the Company or any of its subsidiaries which, singly or in the aggregate, has had (nor does the Company nor any of its subsidiaries have any notice or knowledge of any tax deficiency which could reasonably be expected to be determined adversely to the Company or its subsidiaries and which could reasonably be expected to have) a Material Adverse Effect; and (ii) the Company currently is not, and does not anticipate becoming, a “U.S. real property holding corporation,” for U.S. federal income tax purposes.
(z) Environmental Laws. The Company and its subsidiaries (i) are in compliance with any and all applicable foreign, Federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except with respect to items (i)-(iii) above where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a Material Adverse Effect.
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(aa) Periodic Review of Costs of Environmental Compliance. There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties of which the Company has knowledge) which would, singly or in the aggregate, have a Material Adverse Effect.
(bb) Accounting Controls and Disclosure Controls. The Company maintains effective internal control over financial reporting (as defined under Rule 13a-15 and 15d-15 of the Exchange Act Regulations) and a system of internal accounting controls sufficient to provide reasonable assurances that: (A) transactions are executed in accordance with management’s general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management’s general or specific authorization; (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences; and (E) the interactive data in eXtensible Business Reporting Language included or incorporated by reference in the Registration Statement, the Time of Sale Prospectus and the Prospectus fairly present the information called for in all material respects and is prepared in all material respects in accordance with the Commission’s rules and guidelines applicable thereto. Except as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus, since the end of the Company’s most recent audited fiscal year, there has been (1) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (2) no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company maintains an effective system of disclosure controls and procedures (as defined in Rule 13a-5 and Rule 15d-15 of the Exchange Act Regulations) that are designed to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and is accumulated and communicated to the Company’s management, including its principal executive officer or officers and principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure. The Company has carried out evaluations of the effectiveness of its disclosure controls and procedures as required by Rule 13a-15 of the Exchange Act and such disclosure controls and procedures were effective as of the end of the Company’s most recently completed fiscal quarter.
(cc) Compliance with the Sarbanes-Oxley Act. There is and has been no failure on the part of the Company or any of the Company’s directors or officers, in their capacities as such, to comply in all material respects with any applicable provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith, including Section 402 related to loans and Sections 302 and 906 related to certifications.
(dd) ERISA Compliance. Except as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus, (A) each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), for which the Company or any member of its “Controlled Group” (defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “Code”)) would have any liability (each, a
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“Plan”) has been maintained in compliance in all material respects with its terms and the requirements of any applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Code; (B) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Plan which would reasonably be expected to result in material liability, excluding transactions effected pursuant to a statutory or administrative exemption; (C) for each Plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no “accumulated funding deficiency” as defined in Section 412 of the Code, whether or not waived, has occurred or is reasonably expected to occur; (D) the fair market value of the assets of each Plan subject to Section 401(a) of the Code exceeds the present value of all benefits accrued under such Plan (determined based on those assumptions used to fund such Plan); (E) no “reportable event” (within the meaning of Section 4043(c) of ERISA) has occurred or is reasonably expected to occur; and (F) neither the Company nor any member of the Controlled Group has incurred, nor reasonably expects to incur, any liability under Title IV of ERISA (other than contributions to the Plan or premiums to the PBGC, in the ordinary course and without default) in respect of a Plan (including a “multiemployer plan,” within the meaning of Section 4001(a)(3) of ERISA).
(ee) Investment Company Act. The Company is not required, and upon the issuance and sale of the Shares as herein contemplated and the application of the net proceeds therefrom as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus will not be required, to register as an “investment company” under the Investment Company Act of 1940, as amended.
(ff) Absence of Manipulation. Neither the Company nor any subsidiary or other affiliate of the Company has taken, nor will the Company or any such subsidiary or other affiliate take, directly or indirectly, any action which is designed, or would be expected, to cause or result in, or which constitutes, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares.
(gg) Foreign Corrupt Practices Act. None of the Company or any of its subsidiaries, or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or other person acting on behalf of the Company or any of its subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of either (i) the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA, (ii) the U.K. Bribery Act 2010 (the “Bribery Act”) or (iii) any applicable anti-corruption laws and the Company, its subsidiaries and, to the knowledge of the Company, its other affiliates have conducted their businesses in compliance with the FCPA and the Bribery Act. The Company has instituted and maintains policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith and neither the Company nor any of its subsidiaries will use, directly or indirectly, the proceeds of the offering in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of any applicable anti-corruption laws.
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(hh) Anti-Money Laundering Laws. The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the applicable anti-money laundering statutes of all jurisdictions where the Company or any of its subsidiaries conducts business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Authority (collectively, the “Anti-Money Laundering Laws”). No action, suit or proceeding by or before any Governmental Authority involving the Company or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(ii) OFAC. (i) None of the Company or any of its subsidiaries, or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or other person acting on behalf of the Company or any of its subsidiaries is or is owned or controlled by one or more Persons that are (A) an individual or entity (“Person”) currently the subject or target of any sanctions administered or enforced by the United States Government, including, without limitation, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the United Nations Security Council, the European Union, His Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”) or (B) located, organized or resident in a country or territory that is the subject of Sanctions, and (ii) the Company will not use the proceeds of the sale of the Shares, or lend, contribute or otherwise make available such proceeds to any subsidiaries, joint venture partners or other Person, to fund any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions or in any other manner that will result in a violation by any Person (including any Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.
(jj) No Material Liability. Subsequent to the respective dates as of which information is given in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, (i) the Company and its subsidiaries, taken as a whole, have not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction; and (ii) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company and its subsidiaries, taken as a whole.
(kk) Lending and Other Relationships. Except as disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus, the Company (A) does not have any material lending or other relationship with any Underwriter or any bank, lending or other affiliate of any Underwriter and (B) does not intend to use any of the proceeds from the sale of the Shares to repay any outstanding debt owed to the Underwriter or any bank, lending or other affiliate of any Underwriter. There are no business relationships or related-party transactions involving the Company or any subsidiary or any other person required to be described in the Registration Statement, the Time of Sale Prospectus or the Prospectus that have not been described as required.
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(ll) Statistical and Market-Related Data and Information on the Transaction. Nothing has come to the attention of the Company that has caused the Company to believe that (A) any statistical and market-related data and (B) the information and financial and statistical data related to the Transaction (as defined in the Time of Sale Prospectus) included in the Registration Statement, the Time of Sale Prospectus or the Prospectus is not based on or derived from sources that the Company believes, after reasonable inquiry, to be reliable and accurate and, to the extent required, the Company has obtained the written consent to the use of such data from such sources.
(mm) Data Security Obligations. (i) The Company and each of its subsidiaries are presently in material compliance with all applicable laws, statutes, judgments, orders, rules and regulations of any court or arbitrator or other governmental or regulatory authority and any other legal obligations, in each case, relating to the collection, use, transfer, import, export, storage, protection, disposal and disclosure by the Company or any of its wholly owned subsidiaries of personal, personally identifiable, household, sensitive, confidential or regulated data (“Data Security Obligations”, and such data, “Data”); (ii) except as disclosed in the Company’s Current Report on Form 8-K filed on September 28, 2020, the Company has not received any notification of or complaint regarding and is unaware of any other facts that, individually or in the aggregate, would reasonably indicate non-compliance with any Data Security Obligation; and (iii) except as disclosed in the Company’s Current Report on Form 8-K filed on September 28, 2020, there is no material action, suit or proceeding by or before any court or governmental agency, authority or body pending or threatened alleging non-compliance with any Data Security Obligation.
(nn) Cybersecurity. Except as disclosed in the Registration Statement, the Time of Sale Prospectus or the Prospectus, or which would not have a Material Adverse Effect, (A) there has been no security breach or incident, unauthorized access or disclosure, or other compromise of or relating to the Company or its subsidiaries information technology and computer systems, networks, hardware, software, data and databases (including the data and information of their respective customers, employees, suppliers, vendors and any third party data maintained, processed or stored by the Company and its subsidiaries, and any such data processed or stored by third parties on behalf of the Company and its subsidiaries), equipment or technology (collectively, “IT Systems and Data”) and (B) neither the Company nor any of its subsidiaries have been notified of, and have no knowledge of any event or condition that could result in, any security breach or incident, unauthorized access or disclosure or other compromise to their IT Systems and Data. The Company has implemented and continues to enhance appropriate controls, policies, procedures, and technological safeguards to maintain and protect the integrity, continuous operation, redundancy and security of their IT Systems and Data reasonably consistent with industry standards and practices, or as required by applicable regulatory standards. The Company and its subsidiaries are presently in material compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification.
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2. Agreements to Sell and Purchase. The Company hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the terms and conditions hereinafter stated, agrees, severally and not jointly, to purchase from the Company the respective numbers of Firm Shares set forth in Schedule I hereto opposite its name at $ [•] a share (the “Purchase Price”).
On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to sell to the Underwriters the Additional Shares, and the Underwriters shall have the right to purchase, severally and not jointly, up to [•] Additional Shares at the Purchase Price, provided, however, that the amount paid by the Underwriters for any Additional Shares shall be reduced by an amount per share equal to any dividends declared by the Company and payable on the Firm Shares but not payable on such Additional Shares. The Representatives may exercise this right on behalf of the Underwriters in whole or from time to time in part by giving written notice not later than 30 days after the date of this Agreement. Any exercise notice shall specify the number of Additional Shares to be purchased by the Underwriters and the date on which such shares are to be purchased. Each purchase date must be at least one business day after the written notice is given and may not be earlier than the closing date for the Firm Shares or later than ten business days after the date of such notice. Additional Shares may be purchased as provided in Section 4 hereof solely for the purpose of covering sales of shares in excess of the number of the Firm Shares. On each day, if any, that Additional Shares are to be purchased (an “Option Closing Date”), each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as the Representatives may determine) that bears the same proportion to the total number of Additional Shares to be purchased on such Option Closing Date as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm Shares.
3. Terms of Public Offering. The Company is advised by the Representatives that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in the Representatives’ judgment is advisable. The Company is further advised by the Representatives that the Shares are to be offered to the public initially at $ [•] a share (the “Public Offering Price”) and to certain dealers selected by the Representatives at a price that represents a concession not in excess of $ [•] a share under the Public Offering Price.
4. Payment and Delivery. Payment for the Firm Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Firm Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on [•], 2024, or at such other time on the same or such other date, not later than [•], 2024, as shall be designated in writing by the Representatives. The time and date of such payment are hereinafter referred to as the “Closing Date.”
Payment for any Additional Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Additional Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on the date specified in the corresponding notice described in Section 2 or at such other time on the same or on such other date, in any event not later than ten business days after the date of such corresponding notice, as shall be designated in writing by the Representatives.
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The Firm Shares and Additional Shares shall be registered in such names and in such denominations as the Representatives shall request not later than one full business day prior to the Closing Date or the applicable Option Closing Date, as the case may be. The Firm Shares and Additional Shares shall be delivered to the Representatives on the Closing Date or an Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the Shares to the Underwriters duly paid, against payment of the Purchase Price therefor.
5. Conditions to the Underwriters’ Obligations. The obligations of the Company to sell the Shares to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Shares on the Closing Date are subject to the following conditions:
(a) Effectiveness of Registration Statement, etc. The Registration Statement was filed by the Company with the Commission not earlier than three years prior to the date hereof and became effective upon filing in accordance with Rule 462(e). Each preliminary prospectus, each Issuer Free Writing Prospectus and the Prospectus have been filed as required by Rule 424(b) (without reliance on Rule 424(b)(8)) and Rule 433, as applicable, within the time period prescribed by, and in compliance with, the Securities Act Regulations. No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the Securities Act, no notice of objection to the use of the Registration Statement or any post-effective amendment thereto pursuant to Rule 401(g)(2) has been received by the Company, no order preventing or suspending the use of any preliminary prospectus or the Prospectus or any amendment or supplement thereto has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated. The Company has complied with each request (if any) from the Commission for additional information. The Company shall have paid the required Commission filing fees relating to the Shares within the time period required by Rule 456(b)(1)(i) of the Securities Act Regulations without regard to the proviso therein and otherwise in accordance with Rules 456(b) and 457(r) of the Securities Act Regulations.
(b) Opinion of Counsel for Company. On the Closing Date, the Representatives shall have received (i) a written opinion to the effect set forth in Exhibit A hereto, dated the Closing Date, from Seth Diehl, Associate General Counsel – Securities, Governance & Risk of the Company, in form and substance reasonably satisfactory to the Representatives and (ii) a written opinion to the effect set forth in Exhibit B hereto and a negative assurance letter in customary form, each dated the Closing Date, of Gibson, Dunn & Crutcher LLP, counsel for the Company, in form and substance reasonably satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the other Underwriters. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers and other representatives of the Company and its subsidiaries and certificates of public officials.
(c) Opinion of Counsel for Underwriters. On the Closing Date, the Representatives shall have received an opinion and negative assurance letter, each dated the Closing Date, of Cleary Gottlieb Steen & Hamilton LLP, counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters with respect to the matters reasonably requested by the Representatives. In giving such opinion, such counsel may rely, as
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to all matters governed by the laws of jurisdictions other than the law of the State of New York, the General Corporation Law of the State of Delaware and the federal securities laws of the United States, upon the opinions of counsel satisfactory to the Representatives. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers and other representatives of the Company and its subsidiaries and certificates of public officials.
(d) Officer’s Certificate. On the Closing Date, the Representatives shall have received a certificate of the chief financial or chief accounting officer of the Company, dated the Closing Date, to the effect that (i) since the date hereof, there has been no Material Adverse Change, (ii) the representations and warranties of the Company in this Agreement are true and correct with the same force and effect as though expressly made at and as of the Closing Date, except those representations that address matters only as of a particular date, which are true and correct as of such sate, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Date, and (iv) the conditions specified in Section 5 hereof have been satisfied.
(e) CFO Certificate. At the time of the execution of this Agreement and on the Closing Date, the Representatives shall have received a certificate of the chief financial officer of the Company, dated the date hereof or the Closing Date, respectively, with respect to such matters and in such form as is reasonably satisfactory to the Representatives.
(f) Accountants’ Comfort Letters. At the time of the execution of this Agreement, the Representatives shall have received from (i) Ernst & Young LLP a letter with respect to the financial statements and financial information of the Company contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus and (ii) PricewaterhouseCoopers LLP a letter with respect to the financial statements and financial information of the [Target Company] contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus, each dated the date hereof and each in form and substance satisfactory to the Representatives, together with signed or reproduced copies of such letters for each of the other Underwriters, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters.
(g) Bring-down Comfort Letter. On the Closing Date, the Representatives shall have received from (i) Ernst & Young LLP a letter, dated as of the Closing Date, to the effect that they reaffirm the statements made in the letter furnished pursuant to Section 5(f) hereof, except that the specified date referred to shall be a date not more than two business days prior to the Closing Date and (ii) PricewaterhouseCoopers LLP a letter, dated as of the Closing Date, to the effect that they reaffirm the statements made in the letter furnished pursuant to Section 5(f) hereof, except that the specified date referred to shall be a date not more than two business days prior to the Closing Date.
(h) No Important Changes. (i) Since the execution of this Agreement or the respective dates of which information is given in the Registration Statement, the Time of Sale Prospectus or the Prospectus, there shall not have occurred any Material Adverse Change, which is, in the judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Shares, (ii) since the execution of this
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Agreement there shall not have been any change or decrease specified in the letter or letters referred to in Section 5(f) and (g) hereof which is, in the judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Shares and (iii) since the execution of this Agreement there shall not have been any decrease in or withdrawal of the rating of any securities of the Company or any of its subsidiaries by any “nationally recognized statistical rating organization” (as defined for purposes of Section 3(a)(62) of the Exchange Act) or any notice given of any intended or potential decrease in or withdrawal of any such rating or of a possible change in any such rating that does not indicate the direction of the possible change.
(i) Additional Documents. On the Closing Date, counsel for the Underwriters shall have been furnished with such documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Shares as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained.
(j) “Lock-up” Agreements. The “lock-up” agreements, each substantially in the form of Exhibit C hereto, between Morgan Stanley and certain officers, directors and employees of the Company relating to restrictions on sales and certain other dispositions of shares of Common Stock or certain other securities, delivered to Morgan Stanley on or before the date hereof, shall be in full force and effect on the Closing Date.
(k) Conditions of Underwriters’ Obligations. The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the delivery to the Representatives on the applicable Option Closing Date of the following:
(i) a certificate, dated the Option Closing Date and signed by an executive officer of the Company, confirming that the certificate delivered on the Closing Date pursuant to Section 5(d) hereof remains true and correct as of such Option Closing Date;
(ii) a certificate, dated the Option Closing Date and signed by the chief financial officer of the Company, confirming that the certificate delivered on the Closing Date pursuant to Section 5(e) hereof remains true and correct as of such Option Closing Date;
(iii) an opinion from Seth Diehl, Associate General Counsel – Securities, Governance & Risk of the Company, dated the Option Closing Date, relating to the Additional Shares to be purchased on such Option Closing Date and otherwise to the same effect as the opinion required by Section 5(b) hereof;
(iv) an opinion and negative assurance letter of Gibson, Dunn & Crutcher LLP, outside counsel for the Company, dated the Option Closing Date, relating to the Additional Shares to be purchased on such Option Closing Date and otherwise to the same effect as the opinion required by Section 5(b) hereof;
(v) an opinion and negative assurance letter of Cleary Gottlieb Steen & Hamilton, counsel for the Underwriters, dated the Option Closing Date, relating to the Additional Shares to be purchased on such Option Closing Date and otherwise to the same effect as the opinion required by Section 5(c) hereof;
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(vi) letters, each dated the Option Closing Date and in form and substance satisfactory to the Underwriters, from (i) Ernst & Young LLP, independent public accountants, and (ii) PricewaterhouseCoopers LLP, each substantially in the same form and substance as the letter furnished to the Underwriters pursuant to Section 5(g) hereof; provided that the letters delivered on the Option Closing Date shall use a “cut-off date” not earlier than two business days prior to such Option Closing Date; and
(vii) such other documents as the Representatives may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional Shares to be sold on such Option Closing Date and other matters related to the issuance of such Additional Shares.
(l) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Representatives by notice to the Company at any time at or prior to the Closing Date, and such termination shall be without liability of any party to any other party except as provided in Section 6(p) hereof and except that Sections 1, 8, 9, 14, 15 and 16 shall survive any such termination and remain in full force and effect.
6. Covenants of the Company. The Company covenants with each Underwriter as follows:
(a) Compliance with Commission Requests. The Company, subject to Section 6(b) hereof, will comply with the requirements of Rule 430B, and will promptly notify the Representatives, and confirm the notice in writing, (i) when, until the distribution of the Shares has been completed, any post-effective amendment to the Registration Statement or any new registration statement relating to the Shares shall become effective or any amendment or supplement to the Time of Sale Prospectus or the Prospectus shall have been used or filed, as the case may be, including any document incorporated by reference therein, (ii) until the distribution of the Shares has been completed, of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Time of Sale Prospectus or the Prospectus, including any document incorporated by reference therein, or for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or any notice of objection to the use of the Registration Statement or any post-effective amendment thereto pursuant to Rule 401(g)(2) or of the issuance of any order preventing or suspending the use of any preliminary prospectus or the Prospectus or any amendment or supplement thereto, or of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the Securities Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the Securities Act in connection with the offering of the Shares. The Company will effect all filings required under Rule 424(b), in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), but it being expressly
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understood that such filings shall be effected prior to the Closing Date, and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will make every reasonable effort to prevent the issuance of any stop, prevention or suspension order and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment. The Company shall pay the required Commission filing fees relating to the Shares within the time required by Rule 456(b)(1)(i) of the Securities Act Regulations without regard to the proviso therein.
(b) Continued Compliance with Securities Laws. The Company will comply with the Securities Act, the Securities Act Regulations, the Exchange Act and the Exchange Act Regulations so as to permit the completion of the distribution of the Shares as contemplated in this Agreement and in the Registration Statement, the Time of Sale Prospectus and the Prospectus. If at any time when a prospectus relating to the Shares is (or, but for the exception afforded by Rule 172 of the Securities Act Regulations (“Rule 172”), would be) required by the Securities Act to be delivered in connection with sales of the Shares any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) amend or supplement the Time of Sale Prospectus or the Prospectus in order that the Time of Sale Prospectus or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser or (iii) amend the Registration Statement or amend or supplement the Time of Sale Prospectus or the Prospectus, as the case may be, including, without limitation, any document incorporated therein by reference, in order to comply with the applicable requirements of the Securities Act, the Securities Act Regulations, the Exchange Act or the Exchange Act Regulations, the Company will promptly (A) give the Representatives written notice of such event or condition, (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the Time of Sale Prospectus or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representatives with copies of any such amendment or supplement and (C) file with the Commission any such amendment or supplement and use its best efforts to have any amendment to the Registration Statement declared effective by the Commission as soon as possible if the Company is no longer eligible to file an automatic shelf registration statement, provided that the Company shall not file or use any such amendment or supplement to which the Representatives or counsel for the Underwriters shall object.
(c) Filing or Use of Amendments or Supplements. The Company has given the Representatives notice of any filings made pursuant to the Exchange Act or Exchange Act Regulations within 48 hours prior to the Time of Sale and will give the Representatives notice of its intention to file or use any amendment to the Registration Statement or any amendment or supplement to the Time of Sale Prospectus or the Prospectus, whether pursuant to the Securities Act, the Securities Act Regulations, the Exchange Act or the Exchange Act Regulations or otherwise, from the Time of Sale to the later of (i) the time when a prospectus relating to the Shares is no longer required by the Securities Act (without giving effect to Rule 172) to be
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delivered in connection with sales of the Shares and (ii) the Closing Date, and will furnish the Representatives with copies of any such amendment or supplement a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such amendment or supplement to which the Representatives or counsel for the Underwriters shall reasonably object.
(d) Delivery of Registration Statements. The Company has furnished or will deliver to the Representatives and counsel for the Underwriters, without charge, one signed copy of the Registration Statement as originally filed and each amendment thereto (including conformed copies of exhibits filed therewith or incorporated by reference therein and documents incorporated or deemed to be incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also upon request deliver to the Representatives, without charge, a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(e) Delivery of Prospectuses. The Company has delivered to each Underwriter, without charge, as many copies of each preliminary prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the Securities Act. The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Shares is (or, but for the exception afforded by Rule 172, would be) required by the Securities Act to be delivered in connection with sales of the Shares, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(f) Blue Sky Qualifications. The Company will use its reasonable best efforts, in cooperation with the Underwriters, to qualify or register the Shares for offering and sale under (or obtain exemptions from the application of) the applicable securities laws of such states and non-U.S. jurisdictions as the Representatives may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Shares; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. The Company will advise the Representatives promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Shares for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use its reasonable best efforts to obtain the withdrawal thereof as soon as practicable.
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(g) Earnings Statements. The Company will timely file such reports pursuant to the Exchange Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to provide to the Underwriters the benefits contemplated by, the last paragraph of Section 11(a) of the Securities Act (which may be satisfied by a filing on the Commission’s EDGAR system).
(h) Use of Proceeds. The Company will use the net proceeds received by it from the sale of the Shares in the manner specified in the Registration Statement, the Time of Sale Prospectus and the Prospectus under the caption “Use of Proceeds.”
(i) Restriction on Sale of Common Stock. The Company covenants with each Underwriter that, without the prior written consent of the Representatives on behalf of the Underwriters, it will not, and will not publicly disclose an intention to, during the period ending 45 days after the date of the Prospectus (the “Restricted Period”), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause 1 or 2 above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise or (3) file any registration statement with the Commission relating to the offering of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock. The restrictions contained in the foregoing sentence shall not apply to (A) the Shares to be sold hereunder, (B) the issuance by the Company of shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof as described in each of the Time of Sale Prospectus and Prospectus, (C) the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act, for the transfer of shares of Common Stock, provided that (i) such plan does not provide for the transfer of Common Stock during the Restricted Period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required or voluntarily made regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of Common Stock may be made under such plan during the Restricted Period, (D) the filing by the Company of a registration statement on Form S-8 or a successor form thereto in respect of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (i) issued under or granted pursuant to stock plans disclosed in the Time of Sale Prospectus or (ii) issued under or granted pursuant to the Company’s UK Employee Share Incentive Plan, (E) the entry into an agreement providing for the issuance by the Company of shares of Common Stock or any security convertible into or exercisable for Common Stock in connection with the acquisition by the Company or its subsidiaries of the securities, business, property or other assets of another person or entity or pursuant to an employee benefit plan assumed by the Company in connection with such acquisition, and the issuance of any such securities pursuant to any such agreement, (F) the entry into an agreement providing for the issuance of shares of Common Stock or any security convertible into or exercisable for shares of Common Stock in connection with joint ventures, commercial relationships or other strategic transactions, and the issuance of any such securities pursuant to any such agreement provided that in the case of clauses (E) and (F), the aggregate number of shares of Common Stock or any security convertible into or exercisable for Common Stock shall not exceed 5% of the total number of shares of Common Stock issued and outstanding immediately following the completion of the transactions contemplated by this
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agreement, or (G) grants of stock options, stock awards, restricted stock, or other equity awards and the issuance of Common Stock or securities convertible into or exercisable for Common Stock (whether upon the exercise of stock options, the vesting of restricted stock units, or otherwise) to employees, officers, directors, advisors, or consultants of the Company (i) pursuant to the terms of a plan in effect on the date hereof and described in the Time of Sale Prospectus or (ii) pursuant to any new plan that becomes effective after the date hereof for the purpose of granting retention, incentive, replacement or inducement awards, provided that the Company shall cause each newly appointed director or executive officer that is a recipient of such securities to enter into a lock-up Agreement substantially in the form of Exhibit C covering the remainder of the Restricted Period.
(j) Reporting Requirements. The Company, during the period when a prospectus relating to the Shares is (or, but for the exception afforded by Rule 172, would be) required by the Securities Act to be delivered in connection with sales of the Shares, will file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by, and each such document will meet the applicable requirements of, the Exchange Act and Exchange Act Regulations.
(k) Issuer Free Writing Prospectuses. The Company agrees that, unless it obtains the prior written consent of the Representatives, it will not make any offer relating to the Shares that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433; provided that the Representatives will be deemed to have consented to the Issuer General Use Free Writing Prospectuses listed on Schedule II hereto and any “road show that is a written communication” within the meaning of Rule 433(d)(8)(i) that has been reviewed by the Representatives. The Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to, or deemed consented to, by the Representatives as an Issuer Free Writing Prospectus and that it has complied and will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement, any preliminary prospectus or the Prospectus or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives in writing and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
(l) Eligibility of Automatic Shelf Registration Statement Form. Until the earlier of (i) no Shares remaining unsold by the Underwriters and (b) the expiry of the period when a prospectus relating to the Shares is (or, but for the exception afforded by Rule 172, would be) required by the Securities Act to be delivered in connection with sales of the Shares, the Company receives a notice from the Commission pursuant to Rule 401(g)(2) or otherwise ceases to be eligible to use the automatic shelf registration statement form, the Company will (i) promptly notify the Representatives in writing, (ii) promptly file a new registration statement or
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post-effective amendment on the proper form relating to such Shares, in a form and substance satisfactory to the Underwriters, (iii) use its best efforts to cause such registration statement or post-effective amendment to be declared effective as soon as practicable and (iv) promptly notify the Representatives in writing of such effectiveness. The Company will take all other action necessary or appropriate to permit the public offering and sale of the Shares to continue as contemplated in the Registration Statement that was the subject of the Rule 401(g)(2) notice or for which the Company has otherwise become ineligible. References herein to the “Registration Statement” shall include such new registration statement or post-effective amendment, as the case may be.
(m) No Underwriter Free Writing Prospectuses. Not to take any action that would result in an Underwriter or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or on behalf of the Underwriter that the Underwriter otherwise would not have been required to file thereunder.
(n) Update Time of Sale Prospectus. If the Time of Sale Prospectus is being used to solicit offers to buy the Shares at a time when the Prospectus is not yet available to prospective purchasers and any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Time of Sale Prospectus in order to make the statements therein, in the light of the circumstances, not misleading, or if any event shall occur or condition exist as a result of which the Time of Sale Prospectus conflicts with the information contained in the Registration Statement then on file, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Time of Sale Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to any dealer upon request, either amendments or supplements to the Time of Sale Prospectus so that the statements in the Time of Sale Prospectus as so amended or supplemented will not, in the light of the circumstances when the Time of Sale Prospectus is delivered to a prospective purchaser, be misleading or so that the Time of Sale Prospectus, as amended or supplemented, will no longer conflict with the Registration Statement, or so that the Time of Sale Prospectus, as amended or supplemented, will comply with applicable law.
(o) Update Prospectus. If, during such period after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses the Representatives will furnish to the Company) to which Shares may have been sold by the Representatives on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) of the Securities Act) is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with applicable law.
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(p) Expenses. The Company will pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including without limitation (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of copies of each preliminary prospectus, each Issuer Free Writing Prospectus and the Prospectus and any amendments or supplements thereto as may, in each case, be reasonably requested for use in connection with the offering and sale of the Shares and any costs associated with electronic delivery of any of the foregoing by the Underwriters to investors, (iii) all costs and expenses incurred in connection with the transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable thereon, (iv) the fees and disbursements of the Company’s counsel, accountants and other advisors, (v) the qualification of the Shares under securities laws in accordance with the provisions of Section 6(f) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, in an amount not to exceed $15,000, (vi) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the Shares, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations, travel and lodging expenses of the Representatives and officers of the Company and any such consultants, and the cost of aircraft and other transportation chartered in connection with the road show, (vii) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by FINRA, if required, of the terms of the sale of the Shares, (viii) all costs and expenses incident to listing the shares on the NYSE, (ix) and (x) all other fees, costs and expenses incurred in connection with the performance of its obligations hereunder for which provision is not otherwise made in this Section. Except as provided in this Section 6(p) and Sections 8 and 9 hereof, the Underwriters shall pay their own expenses, including the fees and disbursements of their counsel.
(q) Certificate of Beneficial Ownership. The Company will deliver to each Underwriter (or its agent), on the date of execution of this Agreement, a properly completed and executed Certification Regarding Beneficial Owners of Legal Entity Customers, together with copies of identifying documentation, and the Company undertakes to provide such additional supporting documentation as each Underwriter may reasonably request in connection with the verification of the foregoing certification.
7. Covenants of the Underwriters. Each Underwriter, severally and not jointly, covenants with the Company not to take any action that would result in the Company being required to file with the Commission under Rule 433(d) a free writing prospectus prepared by or on behalf of such Underwriter that otherwise would not be required to be filed by the Company thereunder, but for the action of the Underwriter.
8. Indemnification.
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(a) Indemnification of Underwriters. The Company agrees to indemnify and hold harmless each Underwriter, its affiliates (as such term is defined in Rule 501(b) of the Securities Act Regulations), selling agents, officers and directors and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including any information deemed to be a part thereof pursuant to Rule 430B, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of or based upon any untrue statement or alleged untrue statement of a material fact included (A) in any preliminary prospectus, any Issuer Free Writing Prospectus, the Time of Sale Prospectus or the Prospectus (or any amendment or supplement thereto) or (B) in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Shares (“Marketing Materials”), including any Written Testing-the-Waters Communication, roadshow or investor presentations made to investors by the Company (whether in person or electronically), or the omission or alleged omission in any preliminary prospectus, any Issuer Free Writing Prospectus, the Time of Sale Prospectus or the Prospectus (or any amendment or supplement thereto) or in any Marketing Materials of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of or based upon any untrue statement or omission or alleged untrue statement or omission made in the Registration Statement (or any amendment thereto), including any information deemed to be a part thereof pursuant to Rule 430B, or in the Time of Sale Prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Underwriter Information.
(b) Indemnification of Company, Directors and Officers. Each Underwriter severally agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 8(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including any information deemed to be a part thereof pursuant to Rule 430B, or in the Time of Sale Prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Underwriter Information. The Company hereby acknowledges that the only Underwriter Information is: (A) the names of such Underwriter as presented on the front and back cover of the preliminary prospectus and the Prospectus and (B) the statements set forth (i) under the caption “Underwriters” in the table immediately following the first paragraph thereunder and (ii) under the caption “Underwriters” in the tenth paragraph, the eleventh paragraph and the twelfth paragraph, each as set forth in the preliminary prospectus and the Prospectus.
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(c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 8(a) hereof, counsel to the indemnified parties shall be selected by the Representatives, and, in the case of parties indemnified pursuant to Section 8(b) hereof, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the prior written consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of or based upon the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any Governmental Authority, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 8 or Section 9 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of or based upon such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 8(a) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.
9. Contribution. If the indemnification provided for in Section 8 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, from the offering of the Shares pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other hand, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.
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The relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, in connection with the offering of the Shares pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Shares pursuant to this Agreement (before deducting expenses) received by the Company, on the one hand, and the total underwriting discount received by the Underwriters, on the other hand, in each case as set forth on the cover of the Prospectus, bear to the aggregate initial public offering price of the Shares as set forth on the cover of the Prospectus.
The relative fault of the Company, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 9. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 9 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any Governmental Authority, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 9, no Underwriter shall be required to contribute any amount in excess of the underwriting discount received by such Underwriter in connection with the Shares underwritten by it and distributed to the public.
No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 9, each person, if any, who controls an Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each Underwriter’s affiliates, officers, directors and selling agents shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. The Underwriters’ respective obligations to contribute pursuant to this Section 9 are several in proportion to the aggregate principal amount of Shares set forth opposite their respective names in Schedule I hereto and not joint.
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The indemnity and contribution provisions contained in Section 8 and this Section 9 and the representations, warranties and other agreements contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter, any person controlling any Underwriter or any affiliate of any Underwriter or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares.
10. Termination.
(a) Termination. The Underwriters may terminate this Agreement by notice given by the Representatives to the Company, if after the execution and delivery of this Agreement and prior to or on the Closing Date or any Option Closing Date, as the case may be, (i) trading generally shall have been suspended or materially limited on, or by, as the case may be, any of the New York Stock Exchange or the NASDAQ Global Select Market, (ii) trading of any securities of the Company shall have been suspended on the New York Stock Exchange, (iii) a material disruption in securities settlement, payment or clearance services in the United States shall have occurred, (iv) any moratorium on commercial banking activities shall have been declared by Federal or New York State authorities or (v) there shall have occurred any outbreak or escalation of hostilities, or any change in financial markets or any calamity or crisis that, in the Representatives’ judgment, is material and adverse and which, singly or together with any other event specified in this clause (v), makes it, in the Representatives’ judgment, impracticable or inadvisable to proceed with the offer, sale or delivery of the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus or the Prospectus.
11. Effectiveness; Defaulting Underwriters. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or an Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in Schedule I bears to the aggregate number of Firm Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Representatives may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 11 by an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares to be purchased on such date, and arrangements satisfactory to the Representatives and the Company for the purchase of such Firm Shares are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case either the Representatives or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement, in the Time of Sale Prospectus, in the Prospectus or in any other documents or arrangements may be effected. If, on
28
an Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Additional Shares to be purchased on such Option Closing Date, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase the Additional Shares to be sold on such Option Closing Date or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder.
12. No Advisory or Fiduciary Relationship. The Company acknowledges that in connection with the offering of the Shares: (i) the Underwriters have acted at arm’s length, are not agents of, and owe no fiduciary duties to, the Company or any other person, (ii) the Underwriters owe the Company only those duties and obligations set forth in this Agreement, any contemporaneous written agreements and prior written agreements (to the extent not superseded by this Agreement), if any, (iii) the Underwriters may have interests that differ from those of the Company, and (iv) none of the activities of the Underwriters in connection with the transactions contemplated herein constitutes a recommendation, investment advice, or solicitation of any action by the Underwriters with respect to any entity or natural person. The Company waives to the full extent permitted by applicable law any claims it may have against the Underwriters arising from an alleged breach of fiduciary duty in connection with the offering of the Shares.
13. Recognition of the U.S. Special Resolution Regimes.
(a) In the event that any Underwriter that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.
(b) In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.
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For purposes of this Section 13, a “BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k). “Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b). “Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable. “U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
14. Parties. This Agreement shall each inure to the benefit of and be binding upon the Underwriters and the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters and the Company and their respective successors and the controlling persons, affiliates, selling agents, officers and directors referred to in Sections 8 and 9 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Underwriters and the Company and their respective successors, and said controlling persons, affiliates, selling agents, officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Shares from any Underwriter shall be deemed to be a successor by reason merely of such purchase.
15. Trial by Jury. Each of the Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
16. GOVERNING LAW. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CHOICE OF LAW PROVISIONS.
17. Consent to Jurisdiction. Each of the parties hereto agrees that any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby shall be instituted in (i) the federal courts of the United States of America located in the City and County of New York, Borough of Manhattan or (ii) the courts of the State of New York located in the City and County of New York, Borough of Manhattan (collectively, the “Specified Courts”), and irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any Specified Court, as to which such jurisdiction is non-exclusive) of the Specified Courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party’s address set forth above shall be effective service of process for any suit, action or proceeding
30
brought in any Specified Court. Each of the parties hereto irrevocably and unconditionally waives any objection to the laying of venue of any suit, action or proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any Specified Court that any such suit, action or proceeding brought in any Specified Court has been brought in an inconvenient forum.
18. TIME. TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
19. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. Counterparts may be delivered via facsimile, electronic mail (including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
20. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.
21. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.
22. Research Analyst Independence. The Company acknowledges that the Underwriters’ research analysts and research departments are required to be independent from their respective investment banking divisions and are subject to certain regulations and internal policies, and that such Underwriters’ research analysts may hold views and make statements or investment recommendations and/or publish research reports with respect to the Company, its subsidiaries and/or the offering of the Shares that differ from the views of their respective investment banking divisions. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any conflict of interest that may arise from the fact that the views expressed by their independent research analysts and research departments may be different from or inconsistent with the views or advice communicated to the Company by such Underwriters’ investment banking divisions. The Company acknowledges that each of the Underwriters is a full service securities firm and as such from time to time, subject to applicable securities laws, may effect transactions for its own account or the account of its customers and hold long or short positions in debt or equity securities of the companies that may be the subject of the transactions contemplated by this Agreement.
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23. General Provisions. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement shall not become effective until the execution of this Agreement by the parties hereto. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit.
Each of the parties hereto acknowledges that it is a sophisticated business person who was adequately represented by counsel during negotiations regarding the provisions hereof, including, without limitation, the indemnification provisions of Section 8 and the contribution provisions of Section 9, and is fully informed regarding said provisions. Each of the parties hereto further acknowledges that the provisions of Sections 8 and 9 hereto fairly allocate the risks in light of the ability of the parties to investigate the Company, its affairs and its business in order to assure that adequate disclosure has been made in the Registration Statement, the Time of Sale Prospectus and the Prospectus (and any amendments and supplements thereto), as required by the Securities Act and the Exchange Act .
24. Notices. All communications hereunder shall be in writing and effective only upon receipt and if to the Underwriters shall be delivered, mailed or sent to Morgan Stanley at 1585 Broadway, New York, New York 10036, Attention: Equity Syndicate Desk, with a copy to the Legal Department and BofA Securities at BofA Securities, Inc., One Bryant Park, New York, NY 10036, email: dg.ecm_execution_services@bofa.com, Attention: Syndicate Department, with a copy to: Email: dg.ecm_legal@bofa.com, Attention: ECM Legal; and if to the Company shall be delivered, mailed or sent to Arthur J. Gallagher & Co., 2850 Golf Road, 10th Floor, Rolling Meadows, Illinois 60008, attention General Counsel with a copy to Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, New York, Attention: Andrew L. Fabens.
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| Very truly yours, | ||
| ARTHUR J. GALLAGHER & CO. | ||
| By: |
| |
| Name: Douglas K. Howell | ||
| Title: Vice President and Chief Financial Officer | ||
[Signature Page to Underwriting Agreement]
| Accepted as of the date hereof
Morgan Stanley & Co. LLC
Acting severally on behalf of themselves and the several Underwriters named in Schedule I hereto. | ||
| By: | Morgan Stanley & Co. LLC | |
| By: |
| |
| Name: | ||
| Title: | ||
[Signature Page to Underwriting Agreement]
| Accepted as of the date hereof
BofA Securities, Inc.
Acting severally on behalf of themselves and the several Underwriters named in Schedule I hereto. | ||
| By: | BofA Securities, Inc. | |
| By: |
| |
| Name: | ||
| Title: | ||
[Signature Page to Underwriting Agreement]
SCHEDULE I
| Underwriter |
Number of Firm Shares To Be Purchased |
|||
| Morgan Stanley & Co. LLC |
[•] | |||
| BofA Securities, Inc. |
[•] | |||
| Total: |
[•] | |||
|
|
|
|||
I-1
SCHEDULE II
Preliminary Prospectus dated [•], 2024
[•] shares of common stock at $[•] per share
II-1
SCHEDULE III
Arthur J. Gallagher & Co. Investor Presentation, Transaction Summary,
dated [•], 2024
III-1
SCHEDULE IV
Arthur J. Gallagher & Co. Investor Presentation, Transaction Summary,
dated [•], 2024
IV-1
EXHIBIT C
FORM OF LOCK-UP AGREEMENT
[•] 2024
Morgan Stanley & Co. LLC
BofA Securities, Inc.
c/o Morgan Stanley & Co. LLC
1585 Broadway
New York, NY 10036
Ladies and Gentlemen:
The undersigned understands that Morgan Stanley & Co. LLC (“Morgan Stanley”) proposes to enter into an Underwriting Agreement (the “Underwriting Agreement”) with Arthur J. Gallagher & Co., a Delaware corporation (the “Company”), providing for the public offering (the “Public Offering”) by the several Underwriters, including Morgan Stanley (the “Underwriters”), of up to [•] shares (the “Shares”) of the common stock, par value $1.00 of the Company (the “Common Stock”). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Underwriting Agreement.
To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, and will not publicly disclose an intention to, during the period commencing on the date hereof and ending 45 days after the date of the final prospectus (the “Restricted Period”) relating to the Public Offering (the “Prospectus”), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock beneficially owned (as such term is used in Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), by the undersigned or any other securities so owned convertible into or exercisable or exchangeable for Common Stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (a) transactions relating to shares of Common Stock or other securities acquired in open market transactions after the completion of the Public Offering, provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made in connection with subsequent sales of Common Stock or other securities acquired in such open market transactions; (b) transfers of shares of Common Stock or any security convertible into Common Stock as a bona fide gift; (c) distributions of shares of Common Stock or any security convertible into Common Stock to limited partners general partners, managers, directors, officers, employees, members, stockholders or trust beneficiaries of the undersigned; (d) transfers or dispositions of shares of Common Stock or any
security convertible into or exercisable or exchangeable for Common Stock by will or other testamentary document or by intestacy; (e) transfers or dispositions of shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned in a transaction not involving a disposition for value (for purposes of this letter agreement, “immediate family” shall mean any relationship by blood, marriage, domestic partnership or adoption no more remote than first cousin, and shall include any former spouse); (f) transfers of shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock that occur by operation of law pursuant to a qualified domestic order or in connection with a divorce settlement (provided that in the case of any transfer or distribution pursuant to clause (b), (c), (d), (e), or (f), (i) each donee or distributee shall sign and deliver a lock-up agreement substantially in the form of this agreement, except that up to an aggregate of 50,000 shares of Common Stock may be transferred pursuant to clause (b) by all persons subject to a lock-up agreement related to the Public Offering substantially in the form of this agreement without the donee or distributee being required to sign and deliver a lock-up agreement substantially in the form of this agreement, and (ii) no filing under Section 16(a) of the Exchange Act, reporting a reduction in beneficial ownership of shares of Common Stock, shall be required or shall be voluntarily made during the Restricted Period); (g) the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of Common Stock, provided that (i) such plan does not provide for the transfer of Common Stock during the Restricted Period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required or voluntarily made regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of Common Stock may be made under such plan during the Restricted Period; or (h) the exercise of options to purchase shares of Common Stock granted under a stock incentive plan or stock purchase plan described in the Prospectus and outstanding as of the date of the Prospectus or the exercise of warrants to purchase shares of Common Stock (or any security convertible into or exercisable or exchangeable for Common Stock) described in the Prospectus and outstanding as of the date of the Prospectus, provided that the underlying Common Stock continues to be subject to the restrictions set forth in this agreement and, provided further that any public filing or public announcement under Section 16(a) of the Exchange Act required or voluntarily made during the Restricted Period in connection with the exercise of such stock option or warrant shall clearly indicate in the footnotes thereto or comments section thereof that the filing relates to the exercise of a stock option or warrant, as the case may be, that no shares of Common Stock were sold by the reporting person and that the shares of Common Stock received upon exercise of the stock option or warrant are subject to a lock-up agreement with the Underwriters of the Public Offering.
In addition, the undersigned agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the Restricted Period, make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s shares of Common Stock except in compliance with the foregoing restrictions.
The undersigned understands that the Company and the Underwriters are relying upon this agreement in proceeding toward consummation of the Public Offering. The undersigned further understands that this agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.
The undersigned acknowledges and agrees that the Underwriters have not provided any recommendation or investment advice nor have the Underwriters solicited any action from the undersigned with respect to the Public Offering of the Shares and the undersigned has consulted their own legal, accounting, financial, regulatory and tax advisors to the extent deemed appropriate. The undersigned further acknowledges and agrees that, although the Underwriters may provide certain Regulation Best Interest and Form CRS disclosures or other related documentation to you in connection with the Public Offering, the Underwriters are not making a recommendation to you to participate in the Public Offering or sell any Shares at the price determined in the Public Offering, and nothing set forth in such disclosures or documentation is intended to suggest that any Underwriter is making such a recommendation.
Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.
The undersigned understands that, if the Underwriting Agreement does not become
effective by [•], 2024, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the securities to be sold thereunder, the undersigned shall be released from all obligations under this agreement.
This agreement shall be governed by and construed in accordance with the laws of the State of New York.
| Very truly yours, |
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| (Name) |
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| (Address) |
Exhibit 5.1
December 9, 2024
Arthur J. Gallagher & Co.
2850 Golf Road
Rolling Meadows, Illinois 60008
| Re: | Arthur J. Gallagher & Co. |
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to Arthur J. Gallagher & Co., a Delaware corporation (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission (the “Commission”) of a Registration Statement on Form S-3 (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”), relating to the registration under the Securities Act and the proposed issuance and sale from time to time pursuant to Rule 415 under the Securities Act of shares of the Company’s common stock, par value $1.00 per share (the “Common Stock”).
In arriving at the opinion expressed below, we have examined originals, or copies certified or otherwise identified to our satisfaction as being true and complete copies of the originals, of such documents, corporate records, certificates of officers of the Company and of public officials and other instruments as we have deemed necessary or advisable to enable us to render this opinion. In our examination, we have assumed the genuineness of all signatures, the legal capacity and competency of all natural persons, the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as copies. As to any facts material to this opinion, we have relied to the extent we deemed appropriate and without independent investigation upon statements and representations of officers and other representatives of the Company and others.
We have assumed without independent investigation that:
(i) at the time any shares of Common Stock are sold pursuant to the Registration Statement (the “Relevant Time”), the Registration Statement and any supplements and amendments thereto (including post-effective amendments) will be effective and will comply with all applicable laws;
(ii) at the Relevant Time, a prospectus will have been prepared and filed with the Commission describing the shares of Common Stock offered thereby and all related documentation and will comply with all applicable laws;
(iii) all shares of Common Stock will be issued and sold in the manner stated in the Registration Statement and the applicable prospectus;
Gibson, Dunn & Crutcher LLP
200 Park Avenue | New York, NY 10166-0193 | T: 212.351.4000 | F: 212.351.4035 | gibsondunn.com
Arthur J. Gallagher & Co.
December 9, 2024
Page 2
(iv) at the Relevant Time, all corporate or other action required to be taken by the Company to duly authorize each proposed issuance of shares of Common Stock and any related documentation shall have been duly completed and shall remain in full force and effect;
(v) upon issuance of any shares of Common Stock, the total number of shares of Common Stock issued and outstanding will not exceed the total number of shares of Common Stock that the Company is then authorized to issue under its certificate of incorporation and other relevant documents;
(vii) at the Relevant Time, a definitive purchase, underwriting or similar agreement and any other necessary agreement with respect to any shares of Common Stock offered or issued will have been duly authorized by all necessary corporate or other action of the Company and duly executed and delivered by the Company and the other parties thereto.
Based on the foregoing and in reliance thereon, and subject to the assumptions, exceptions, qualifications and limitations set forth herein, we are of the opinion that, when shares of Common Stock have been duly executed (in the case of certificated shares) and delivered in accordance with the applicable definitive purchase, underwriting or similar agreement for the consideration provided for therein, such shares of Common Stock will be validly issued, fully paid and non-assessable
We consent to the filing of this opinion as an exhibit to the Registration Statement, and we further consent to the use of our name under the caption “Validity of the Common Stock” in the Registration Statement and the prospectus that forms a part thereof. In giving these consents, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Gibson, Dunn & Crutcher LLP
Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption “Experts” in this Registration Statement (Form S-3) and related Preliminary Prospectus of Arthur J. Gallagher & Co. for the registration of common stock and to the incorporation by reference therein of our reports dated February 9, 2024, with respect to the consolidated financial statements and related financial statement schedule of Arthur J. Gallagher & Co., and the effectiveness of internal control over financial reporting of Arthur J. Gallagher & Co., included in its Annual Report (Form 10-K) for the year ended December 31, 2023, filed with the Securities and Exchange Commission.
| /s/ Ernst & Young LLP |
| Ernst & Young LLP |
Chicago, Illinois
December 9, 2024
1
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of Arthur J. Gallagher & Co. of our report dated December 6th, 2024, relating to the financial statements of Dolphin Topco, Inc., which appears in Arthur J. Gallagher & Co.’s Current Report on Form 8-K dated December 7th, 2024. We also consent to the reference to us under the heading “Experts” in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Tampa, Florida
December 9th, 2024
1