Victory Capital Holdings, Inc. 10-Q

Item 5. Other Information WestEnd Purchase Agreement On November 4, 2021, the Company entered into the WestEnd Purchase Agreement, pursuant to which the Company has agreed to purchase 100% of the equity interests of WestEnd on the terms and subject to the conditions therein. Founded in 2004, and headquartered in Charlotte, North Carolina, WestEnd is an ETF strategist advisor that provides financial advisors with a turnkey, core model allocation strategy for either a holistic solution or complementary source of alpha. The firm offers four primary ETF strategies and one large cap core strategy, all in tax efficient Separately Managed Account (SMA) structures. Subject to the adjustments described below, the WestEnd Purchase Price to be paid by the Company for the equity interests of WestEnd is (i) $480 million in cash paid at the WestEnd Closing, which is expected to be funded with proceeds of the incremental facility described below, and (ii) contingent earn-out payments described below. The earnout payments are payable if the WestEnd business achieves certain net revenue targets based on an annual growth rate for each of the four years following the WestEnd Closing, subject to certain “catch-up” provisions over a five and one half year period following the WestEnd Closing. A maximum of $320.0 million ($80.0 million per year) in earnout payments may be made following the WestEnd Closing. The WestEnd Purchase Price will be reduced if WestEnd does not obtain client consents relating to the assignment of WestEnd client contracts representing a certain level of revenue, and is further subject to adjustments for working capital, debt, cash and unpaid transaction expenses, as described in the WestEnd Purchase Agreement. 44 Table of Contents The WestEnd Closing is subject to (1) the receipt of client consents representing revenues of at least 80% of a baseline revenue amount, (2) the expiration of the applicable waiting period under the HSR Act, (3) the absence of any material adverse effect (as defined in the WestEnd Purchase Agreement) on the business of WestEnd, (4) certain WestEnd principals not having been terminated and not having resigned (or given notice of resignation) and employment documentation with such principals remaining in full force and effect and (5) other customary closing conditions. The WestEnd Acquisition is expected to close by the end of 2021, subject to the satisfaction or waiver of such conditions. The WestEnd Acquisition contains customary termination rights for the WestEnd and the Company, including in the event the WestEnd Acquisition is not consummated on or before May 4, 2022. The foregoing description of the WestEnd Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the WestEnd Purchase Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The WestEnd Purchase Agreement and the above description of the WestEnd Purchase Agreement have been included to provide investors with information regarding the terms of the WestEnd Purchase Agreement and are not intended to provide any other factual information about the Company, WestEnd or their respective affiliates. The representations, warranties and covenants contained in the WestEnd Purchase Agreement were made only for purposes of the WestEnd Purchase Agreement and as of specific dates, were solely for the benefit of the parties to the WestEnd Purchase Agreement and may be subject to limitations agreed upon by the parties in connection with negotiating the terms of the WestEnd Purchase Agreement, including being qualified by confidential disclosures made by each party to the other for the purposes of allocating contractual risk between them that differ from those applicable to investors. In addition, certain representations and warranties may be subject to a contractual standard of materiality different from those generally applicable to investors and may have been used for the purpose of allocating risk between the parties rather than establishing matters as facts. Information concerning the subject matter of the representations, warranties and covenants may change after the date of the WestEnd Purchase Agreement, which subsequent information may or may not be fully reflected in public disclosures by the Company. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of the Company, WestEnd or any of their respective affiliates or businesses. In connection with entering into the WestEnd Purchase Agreement, the Company secured commitments for a $505.0 million senior secured incremental first lien term loan B facility. Item 6. Exhibits EXHIBIT INDEX Exhibit No. Description 2.1 Unit Purchase Agreement, dated November 4, 2021, by and among Victory Capital Holdings, Inc., WestEnd Advisors, LLC, and the other parties listed thereto 31.1 Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002 31.2 Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002 32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002 32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002 101 The following information formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020, (ii) Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020, (iii) Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020, (iv) Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020, (v) Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2021 and 2020 and the three months ended June 30, 2021 and 2020 and the three months ended September 30, 2021 and 2020 and, (vi) Notes to Unaudited Condensed Consolidated Financial Statements for the nine months ended September 30, 2021 and 2020. 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) 45 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 8th day of November, 2021. VICTORY CAPITAL HOLDINGS, INC. By: /s/ MICHAEL D. POLICARPO Name: Michael D. Policarpo Title: President, Chief Financial Officer and Chief Administrative Officer 46