Brocade Communications Systems, Inc. (the
Company
or
we
) will hold its special meeting of stockholders
on January 26, 2017 at 2:00 pm, local time, at the Hyatt Regency Santa Clara, located at 5101 Great America Parkway, Santa Clara, California 95054. We are holding the meeting for the following purposes:
1. To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of November 2, 2016 (as it may be amended or
assigned from time to time, the
Merger Agreement
), by and among the Company, Broadcom Limited, a limited company organized under the laws of the Republic of Singapore (
Ultimate Parent
), Broadcom Corporation, a
California corporation and an indirect subsidiary of Ultimate Parent (
Broadcom Corporation
), and Bobcat Merger Sub, Inc., a Delaware corporation and, on the date the Company entered into the Merger Agreement, a direct wholly owned
subsidiary of Broadcom Corporation (
Merger Sub
). On December 19, 2016, Broadcom Corporation assigned all of its rights under the Merger Agreement and transferred all of the issued and outstanding capital stock of Merger Sub
to LSI Corporation, a Delaware corporation and an indirect subsidiary of Ultimate Parent (
LSI
). In accordance with the terms of the Merger Agreement, such assignment does not relieve Ultimate Parent, Broadcom Corporation or Merger
Sub of any of their respective obligations under the Merger Agreement or enlarge, alter or change any obligation of any other party under the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company
(the
Merger
) and the Company will continue its existence as a wholly owned subsidiary of LSI. A copy of the Merger Agreement is attached as
Annex A
to the accompanying proxy statement.
2. To approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient
votes at the time of the special meeting to approve the proposal to adopt the Merger Agreement.
3. To approve, on an advisory
(non-binding) basis, specified compensation that will or may become payable to the named executive officers of the Company in connection with the Merger (the
Brocade Advisory Proposal on Specified Compensation
).
4. To transact any other business that may properly come before the special meeting, or any adjournment or postponement of the special meeting,
by or at the direction of the board of directors of the Company (the
Company Board
).
In accordance with our
bylaws, the close of business on December 12, 2016 has been fixed as the record date for the determination of the stockholders entitled to notice of, and to vote at, the meeting or any adjournment thereof. All stockholders of record are
cordially invited to attend the special meeting in person.
If you are a stockholder of record, voting in person at the special meeting will revoke any proxy
previously submitted. If you hold your shares of Company Common Stock through a bank, brokerage firm or other nominee, you should follow the procedures provided by your bank, brokerage firm or other nominee in order to vote.
The Company Board has unanimously determined that the Merger Agreement and Merger are fair to, advisable and in the best interests of the
Companys stockholders and has unanimously adopted and approved in all respects the Merger Agreement and the other transactions contemplated by the Merger Agreement.
The Company Board made its determination after consultation with its legal and financial advisors
and consideration of a number of factors.
The Company Board unanimously recommends that you vote FOR
the proposal to adopt the Merger Agreement; FOR the proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies; and FOR the Brocade Advisory Proposal on Specified Compensation.
If you plan
to attend the special meeting in person, please mark the designated box on the enclosed proxy card. Alternatively, if you utilize the Internet voting system, please indicate your plans to attend the special meeting when prompted to do so by the
system. If you are a stockholder of record, you should bring the top half of the enclosed proxy card as your admission card and present the card upon entering the special meeting. If you are planning to attend the special meeting and your shares are
held in street name by a bank, brokerage firm or other nominee, you should ask the bank, brokerage firm or other nominee for a legal proxy or bring your most recent account statement to the special meeting so that we can verify your
ownership of Company Common Stock. Please note, however, that if your shares are held in street name and you do not bring a legal proxy from the record owner, you will be able to attend the special meeting, but you will not be able to
vote at the special meeting.
Stockholders of the Company who do not vote in favor of the proposal to adopt the Merger Agreement will have
the right to seek appraisal of the fair value of their shares of Company Common Stock, as determined in accordance with Section 262 of the General Corporation Law of the State of Delaware (
DGCL
), if they deliver a demand for
appraisal before the vote is taken on the Merger Agreement and comply with all the requirements of Delaware law, including Section 262 of the DGCL, which are summarized in the accompanying proxy statement, and if other events as specified in
Section 262 of the DGCL occur. Section 262 of the DGCL is reproduced in its entirety in
Annex C
to the accompanying proxy statement.
The accompanying proxy statement provides a detailed description of the Merger and the Merger Agreement. We urge you to read the accompanying
proxy statement, including any documents incorporated by reference, and the annexes carefully and in their entirety. If you have any questions concerning the Merger or the proxy statement of which this notice forms a part, would like additional
copies of the proxy statement or need help voting your shares of Company Common Stock, please contact the Companys proxy solicitor:
Stockholders who do not expect to attend the special meeting in person, but wish their Company Common Stock to be voted on matters to be
transacted at the special meeting, are urged to sign, date and mail the enclosed proxy in the accompanying envelope, to which no postage need be affixed if mailed in the United States. You also have the option of voting your shares by telephone or
on the Internet. Voting instructions are printed on your proxy card. If you vote by telephone or Internet, you do not need to mail back your proxy. Voting promptly, regardless of the number of shares you hold, will aid the Company in reducing the
expense of additional proxy solicitation. The giving of such proxy does not affect your right to vote in person in the event you attend the meeting.
If you hold both book entry shares at Wells Fargo Bank,
N.A. and certificated shares, the paying agent will mail you a letter of transmittal that you must complete and return to the paying agent. Once the paying agent receives your properly completed letter of transmittal and stock certificate(s), the
paying agent will mail you a payment check in the amount of the aggregate Merger Consideration for your certificated shares and for your book entry shares.
For a
description of these interests, see the section of this proxy statement entitled The Merger Interests of Certain Persons in the Merger beginning on page 64.
Also, under the Merger Agreement, the parties are not required to consummate the Merger until any review or investigation
by CFIUS of the Merger has been concluded and either (i) the parties have received written notice that a determination by CFIUS has been made that there are no unresolved issues of national security in connection with the transactions
contemplated by the Merger Agreement, or (ii) the President of the United States has determined not to use his powers to unwind, suspend or prohibit the consummation of the transactions contemplated by the Merger Agreement.
If your shares of
Company Common Stock are held in street name through a bank, brokerage firm or other nominee, you are considered the beneficial owner of those shares of Company Common Stock. In that case, this proxy statement has been
forwarded to you by your bank, brokerage firm or other nominee. As the beneficial owner, you have the right to direct your bank, brokerage firm or other nominee how to vote those shares of Company Common Stock by following their instructions for
voting.
If you are a stockholder of record, you may vote your shares of
Company Common Stock with respect to which you are the stockholder of record at the special meeting in any of the following ways:
If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the
shares represented by your properly signed proxy will be voted
FOR
the proposal to adopt the Merger Agreement,
FOR
the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional
proxies and
FOR
the Brocade Advisory Proposal on Specified Compensation.
These should each be voted and/or returned separately as described elsewhere in this proxy statement in
order to ensure that all of your shares are voted.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement and the documents to which we refer you in this proxy statement, as well as information included in oral statements or
other written statements made or to be made by us, contain statements that, in our opinion, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be typically identified by such words as may, will, should, would, expect,
anticipate, plan, likely, believe, estimate, project, intend, potential, predict, aim, and other similar expressions, among
others, which appear in a number of places in this proxy statement (and the documents to which we refer you in this proxy statement) and include, but are not limited to, all statements relating directly or indirectly to the timing or likelihood of
consummating the Merger, plans for future growth and other business development activities as well as capital expenditures, financing sources and the effects of regulation and competition and all other statements regarding our intent, plans, beliefs
or expectations or those of our directors or officers. These forward-looking statements reflect the current analysis of existing information and are subject to various risks and uncertainties. As a result, caution must be exercised in relying on
forward-looking statements. Due to known and unknown risks, our actual results may differ materially from our expectations or projections.
The following factors, among others, could cause our actual results to differ materially from those described or implied in these
forward-looking statements:
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the risk that the conditions to the closing of the Merger are not satisfied (including a failure of our stockholders to approve, on a timely basis or otherwise, the Merger and the risk that regulatory approvals required
for the Merger, including antitrust approvals and clearance from CFIUS, are not obtained, on a timely basis or otherwise, or are obtained subject to conditions that are not anticipated);
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the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement and risk that the circumstances of such termination could require us to pay Parent a $195 million
termination fee;
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litigation or other legal proceedings relating to the Merger;
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uncertainties as to the timing of the consummation of the Merger and the ability of each of the Company, Ultimate Parent and Parent to consummate the Merger;
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risks that the proposed transaction disrupts the current plans and operations, and diverts the attention of management or employees of the Company or Ultimate Parent;
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the ability of the Company to retain and hire key personnel;
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competitive responses to the proposed Merger;
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unexpected costs, charges or expenses resulting from the Merger;
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potential adverse reactions or changes to business relationships resulting from the announcement or consummation of the Merger; and
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legislative, regulatory and economic developments.
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The foregoing review of important factors
that could cause actual events to differ from expectations should not be construed as exhaustive and should be read in conjunction with statements that are included herein and elsewhere, including the risk factors included in the Companys and
Ultimate Parents respective most recent Annual Reports on Form 10-K and more recent other reports filed with the SEC. The Company and Ultimate Parent can give no assurance that the conditions to the Merger will be satisfied. Except as required
by applicable law, neither the Company nor Ultimate Parent undertakes any obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or
otherwise.
22
PARTIES TO THE MERGER
The Company
Brocade
Communications Systems, Inc.
130 Holger Way
San Jose,
California 95134
(408) 333-8000
The
Company is a Delaware corporation with its headquarters in San Jose, California. The Company is a leading supplier of networking hardware, software, and services, including Storage Area Networking solutions and Internet Protocol Networking
solutions, for businesses and organizations of various types and sizes. For more information about the Company, please visit our website at
http://www.brocade.com
. Our website address is provided as an inactive textual reference only. The
information contained on our website is not incorporated into, and does not form a part of, this proxy statement or any other report or document we file with or furnish to the SEC. For more information, see the section of this proxy statement
entitled Where You Can Find More Information, beginning on page 120. The Company Common Stock is publicly traded on NASDAQ under the symbol BRCD.
Ultimate Parent
Broadcom
Limited
1 Yishun Avenue 7
Singapore 768923
(65) 6755-7888; and
1320 Ridder Park Drive
San Jose, California 95131
(408) 433-8000
Ultimate Parent is incorporated under the laws of the Republic of Singapore and is co-headquartered in Singapore and San Jose, California.
Ultimate Parent is a leading designer, developer and global supplier of a broad range of analog and digital semiconductor connectivity solutions. Ultimate Parents extensive product portfolio serves four primary end markets: wired
infrastructure, wireless communications, enterprise storage and industrial. Applications for Ultimate Parents products in these end markets include data center networking, home connectivity, broadband access, telecommunications equipment,
smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems, and displays. For more information about Ultimate Parent, please visit its website at
http://www.broadcom.com
. This website address is provided as an inactive textual reference only. The information contained on this website is not incorporated into, and does not form a part of, this proxy statement or any other report or
document we file with or furnish to the SEC. For more information, see the section of this proxy statement entitled Where You Can Find More Information, beginning on page 120. The common stock of Ultimate Parent is publicly traded on
NASDAQ under the symbol AVGO.
Broadcom Corporation
Broadcom Corporation
1320 Ridder Park Drive
San Jose, California 95131
(408) 433-8000
Broadcom Corporation is a California corporation and an indirect subsidiary of Ultimate Parent. On December 19, 2016, Broadcom
Corporation assigned all of its rights under the Merger Agreement and transferred all of the issued and outstanding capital stock of Merger Sub to LSI. In accordance with the terms of the Merger
23
Agreement, such assignment does not relieve Ultimate Parent, Broadcom Corporation or Merger Sub of any of their respective obligations under the Merger Agreement or enlarge, alter or change any
obligation of any other party under the Merger Agreement.
LSI
LSI Corporation
1320 Ridder Park Drive
San Jose, California 95131
(408) 433-8000
LSI is a Delaware corporation and an indirect subsidiary of Ultimate Parent. On December 19, 2016, Broadcom Corporation assigned all of
its rights under the Merger Agreement and transferred all of the issued and outstanding capital stock of Merger Sub to LSI. In accordance with the terms of the Merger Agreement, such assignment does not relieve Ultimate Parent, Broadcom Corporation
or Merger Sub of any their respective obligations under the Merger Agreement or enlarge, alter or change any obligation of any other party under the Merger Agreement.
Merger Sub
Bobcat Merger Sub,
Inc.
1320 Ridder Park Drive
San Jose, California 95131
(408) 433-8000
Merger Sub is a Delaware
corporation that was formed by Broadcom Corporation and its affiliates solely for the purpose of entering into the Merger Agreement and completing the transactions contemplated by the Merger Agreement. Merger Sub is a wholly owned subsidiary of LSI
and has not engaged in any business except for activities incidental to its formation and as contemplated by the Merger Agreement. Upon the consummation of the Merger, Merger Sub will cease to exist and the Company will continue as the surviving
corporation.
24
THE SPECIAL MEETING
Time, Place and Purpose of the Special Meeting
This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by the Company Board for use at the special
meeting to be held on January 26, 2017 at 2:00 pm, local time, at the Hyatt Regency Santa Clara, located at 5101 Great America Parkway, Santa Clara, California 95054, or at any postponement or adjournment thereof. At the special meeting,
holders of Company Common Stock will be asked to approve the proposal to adopt the Merger Agreement, to approve the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies if there are
insufficient votes at the time of the special meeting to approve the proposal to adopt the Merger Agreement and to approve the Brocade Advisory Proposal on Specified Compensation.
Our stockholders must approve the proposal to adopt the Merger Agreement in order for the Merger to occur. If our stockholders fail to approve
the proposal to adopt the Merger Agreement, the Merger will not occur. A copy of the Merger Agreement is attached as
Annex A
to this proxy statement, and we encourage you to read it carefully in its entirety.
Recommendation of the Board of Directors
After careful consideration of various factors described in the section of this proxy statement entitled The Merger Reasons
for the Merger; Recommendation of the Board of Directors, beginning on page 43, the Company Board unanimously (1) determined that the proposed Merger Agreement and Merger were fair to, advisable and in the best interests of the
Companys stockholders, (2) approved the Merger Agreement and the other transactions contemplated by the Merger Agreement, (3) directed that a special meeting of the Companys stockholders be held for the purposes of voting on
the adoption of the Merger Agreement, and (4) recommended that the stockholders vote in favor of the adoption of the Merger Agreement and approve the Merger and the other transactions contemplated by the Merger Agreement.
In considering the recommendation of the Company Board with respect to the proposal to adopt the Merger Agreement, you should be aware that
our directors and executive officers have interests in the Merger that are different from, or in addition to, yours. The Company Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Merger
Agreement and the Merger, and in recommending that the Merger Agreement be adopted by the stockholders of the Company. For more information, see the section of this proxy statement entitled The Merger Interests of Certain Persons in the
Merger beginning on page 64.
The Company Board unanimously recommends that you vote FOR the proposal to adopt the
Merger Agreement; FOR the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies; and FOR the Brocade Advisory Proposal on Specified Compensation.
Record Date and Quorum
We have fixed the close of business on December 12, 2016 as the record date for the special meeting, and only holders of record of Company
Common Stock on the record date are entitled to vote at the special meeting. You are entitled to receive notice of, and to vote at, the special meeting if you owned shares of Company Common Stock at the close of business on the record date. On the
record date, there were 406,282,345 shares of Company Common Stock issued and outstanding and entitled to vote. Each share of Company Common Stock entitles its holder to one vote on each matter properly coming before the special meeting.
The holders of a majority of the voting power of the issued and outstanding shares of Company Common Stock entitled to vote thereat, present
in person or represented by proxy, will constitute a quorum for the transaction of business at the special meeting. Shares of Company Common Stock for which a stockholder directs an abstention from voting, as well as broker
non-votes (as described below), will be counted for purposes of establishing a quorum. A quorum is necessary to transact business at the special meeting. Once a
25
share of Company Common Stock is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and any adjournment of the special meeting.
However, if a new record date is set for the adjourned special meeting, then a new quorum will have to be established. In the event that a quorum is not present at the special meeting, it is expected that the special meeting will be adjourned or
postponed.
Attend
ance
If you are a stockholder of record, that is, you hold your shares in an account with our transfer agent, Wells Fargo Bank, N.A., or you have a
Company stock certificate, you may attend the special meeting by presenting a photo identification acceptable to us, such as a valid drivers license or passport.
If your shares are held in street name, that is, you hold your shares in an account with a bank, brokerage firm or other nominee,
you may also attend the special meeting by presenting a photo identification acceptable to us, such as a valid drivers license or passport. However, you may not vote your shares in person at the special meeting unless you follow your broker or
banks procedures for obtaining a legal proxy and then present that legal proxy for verification at the special meeting.
Vote Required
Approval of the proposal to adopt the Merger Agreement requires the affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock entitled to vote on the matter. For the proposal to adopt the Merger Agreement, you may vote
FOR
,
AGAINST
or
ABSTAIN
. Abstentions will not be counted as votes cast in
favor of the proposal to adopt the Merger Agreement, but will count for the purpose of determining whether a quorum is present.
If you fail to submit a proxy or to vote in person at the special meeting, or abstain, it will have the same effect as
a vote AGAINST the proposal to adopt the Merger Agreement.
Assuming a quorum is present, approval of the proposal to
adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies, requires the affirmative vote of the holders of a majority of the Company Common Stock having voting power present in person or represented
by proxy at the special meeting and entitled to vote on the matter. For the proposal to adjourn the special meeting, you may vote
FOR
,
AGAINST
or
ABSTAIN
. For purposes of this proposal,
abstentions will be counted in tabulating the votes cast and will have the same effect as a vote
AGAINST
the proposal. Broker non-votes will not be counted in tabulating the votes cast and will not have an effect on the proposal
to adjourn the special meeting. If you fail to submit a proxy or vote in person at the special meeting, the shares of Company Common Stock not voted will not be counted in respect of, and will not have an effect on, the proposal to adjourn the
special meeting.
Assuming a quorum is present, approval of the Brocade Advisory Proposal on Specified Compensation requires the
affirmative vote of the holders of a majority of the Company Common Stock having voting power present in person or represented by proxy at the special meeting and entitled to vote on the matter. For the Brocade Advisory Proposal on Specified
Compensation, you may vote
FOR
,
AGAINST
or
ABSTAIN
. For purposes of this proposal, abstentions will be counted in tabulating the votes cast and will have the same effect as a vote
AGAINST
the proposal. Broker non-votes will not be counted in tabulating the votes cast and will not have an effect on the Brocade Advisory Proposal on Specified Compensation. If you fail to submit a proxy or vote in person at the
special meeting, the shares of Company Common Stock not voted will not be counted in respect of, and will not have an effect on, the Brocade Advisory Proposal on Specified Compensation.
If you are a stockholder of record, this proxy statement and proxy card have been sent directly to you by the Company. If your shares are held
in street name in an account with a bank, brokerage firm or other nominee, this proxy statement has been forwarded to you by your bank, brokerage firm or other nominee. As the beneficial
26
owner of Company Common Stock, you have the right to direct your bank, brokerage firm or other nominee how to vote your shares by following their instructions for voting.
Most stockholders can vote over the Internet or by telephone. You can also vote your shares by completing and returning the appropriate
portion of the enclosed proxy card or, if you hold shares in street name, a voting instruction form. If Internet and telephone voting are available to you, you can find voting instructions in the materials sent to you.
You can revoke your proxy (including any Internet or telephone vote) at any time before it is exercised by timely delivery of a properly
executed, later-dated proxy or by voting in person at the special meeting.
How you vote will in no way limit your right to vote at the
meeting if you later decide to attend in person. However, if your shares are held in street name, you must obtain a legal proxy, executed in your favor, from your brokerage firm or other holder of record, to be able to vote at the
meeting.
All shares entitled to vote and represented by your properly completed proxy received prior to the meeting and not revoked will
be voted at the meeting in accordance with your instructions.
If you choose to vote by mailing the appropriate portion of the enclosed
proxy card, your proxy card must be received before the special meeting begins.
Please do not send in your stock certificates with your proxy card.
After the Merger is consummated, if you are a record holder of certificated shares of Company
Common Stock, a separate letter of transmittal and instructions for use in effecting the surrender of stock certificates will be mailed to you that will enable you to receive the Merger Consideration in exchange for your stock
certificates.
If you vote by proxy, regardless of the method you choose to vote, the individuals named on the enclosed proxy
card, and each of them, with full power of substitution, or your proxies, will vote your shares of Company Common Stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your
shares of Company Common Stock should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the special meeting.
If you properly sign your proxy card but do not mark the boxes showing how your shares of Company Common Stock should be voted on a matter,
the shares of Company Common Stock represented by your properly signed proxy will be voted
FOR
the proposal to adopt the Merger Agreement,
FOR
the proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies and
FOR
the Brocade Advisory Proposal on Specified Compensation.
If you
have any questions or need assistance voting your shares, please call Innisfree M&A Incorporated, the Companys proxy solicitor, toll-free at (888) 750-5834 from the U.S. or Canada. Banks and brokers may call collect at
(212) 750-5833.
It is important that you vote your shares of Company Common Stock promptly.
Whether or not you plan to attend the special meeting, please complete, date, sign and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope, or submit your proxy by telephone or the Internet.
Stockholders who attend the special meeting may revoke their proxies by voting in person.
Shares Held by the
Companys Directors and Executive Officers
As of December 12, 2016, the record date, the directors and executive
officers of the Company owned and were entitled to vote, in the aggregate, 3,110,223 shares of Company Common Stock, representing approximately 1% of the outstanding shares of Company Common Stock on the record date. The directors and executive
officers have informed the Company that they currently intend to vote all of their shares of Company Common Stock
FOR
the proposal to adopt the Merger Agreement,
FOR
the proposal to adjourn the special meeting,
if necessary or appropriate, to solicit additional proxies and
FOR
the Brocade Advisory Proposal on Specified Compensation.
27
Pursuant to the Support Agreement, which is attached to this proxy statement as
Annex
D
, our directors and executive officers are obligated to, among other things, vote their shares of Company Common Stock in favor of the proposal to adopt the Merger Agreement. For more information, see the section of this proxy statement
entitled The Support Agreement beginning on page 106.
Proxies and Revocation
Any stockholder of record entitled to vote at the special meeting may submit a proxy by telephone, over the Internet, or by returning the
appropriate portion of the enclosed proxy card in the accompanying prepaid reply envelope, or may vote in person by appearing at the special meeting. If your shares of Company Common Stock are held in street name through a bank,
brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your shares of Company Common Stock using the instructions provided by your bank, brokerage firm or other nominee. If you fail to submit a
proxy or to vote in person at the special meeting, or do not provide your bank, brokerage firm or other nominee with voting instructions, as applicable, your shares of Company Common Stock will not be voted on the proposal to adopt the Merger
Agreement, which will have the same effect as a vote
AGAINST
the proposal to adopt the Merger Agreement, but will not have an effect on approval of the proposal to adjourn the special meeting or the Brocade Advisory Proposal on
Specified Compensation.
You have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time
before it is exercised, by voting at a later date through any of the methods available to you or by attending the special meeting and voting in person. If your shares of Company Common Stock are held in street name by your bank,
brokerage firm or other nominee, please follow the instructions you receive from your bank, brokerage firm or other nominee to change your vote.
Adjournments and Postponements
Although it is not currently expected, the special meeting may be adjourned or postponed,
including for the purpose of soliciting additional proxies as described in the section of this proxy statement entitled Authority to Adjourn the Special Meeting (Proposal No. 2) beginning on page 110, if there are insufficient votes
at the time of the special meeting to approve the proposal to adopt the Merger Agreement or if a quorum is not present at the special meeting. Other than an announcement to be made at the special meeting of the time, date and place of an adjourned
meeting, an adjournment generally may be made without notice. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow the Companys stockholders who have already sent in their proxies
to revoke them at any time prior to their use at the special meeting that was adjourned or postponed.
Anticipated Date
of Completion of the Merger
We are working toward completing the Merger as soon as possible. Assuming timely satisfaction of necessary
closing conditions, including regulatory approvals and the approval by our stockholders of the proposal to adopt the Merger Agreement, we presently anticipate that the Merger will be completed in the second half of our fiscal year 2017, which begins
on April 30, 2017 and ends on October 28, 2017.
Rights of Stockholders Who Seek Appraisal
If the Merger is consummated, Company stockholders who properly demand appraisal of their shares, who do not vote in favor of the adoption of
the Merger Agreement, who continuously hold such shares through the effective time of the Merger and who meet certain other conditions and statutory requirements described herein will be entitled to appraisal rights in connection with the Merger
under Section 262 of the DGCL. This means that such stockholders will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the fair value of their shares of Company Common
Stock, exclusive of any
28
elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court
(subject, in the case of interest payments, to any voluntary cash payments made by Company pursuant to subsection (h) of Section 262 of the DGCL, as described in more detail in the section of this proxy statement entitled Appraisal
Rights beginning on page 112). Due to the complexity of the appraisal process, stockholders who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.
Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to
Section 262 of the DGCL could be more than, the same as or less than the value of the consideration that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares.
To exercise appraisal rights under Section 262 of the DGCL, the stockholder of record must (1) submit a written demand for appraisal
to the Company before the vote is taken on the proposal to adopt the Merger Agreement; (2) not vote, in person or by proxy, in favor of the proposal to adopt the Merger Agreement; and (3) continue to hold the subject shares of Company
Common Stock of record through the effective time of the Merger. The failure to follow exactly the procedures specified under the DGCL may result in the loss of appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal
proceedings in respect of the Company unless certain stock ownership conditions are satisfied by the stockholders seeking appraisal, as described further in the section of this proxy statement entitled Appraisal Rights beginning on
page 112. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, and a copy of the relevant section of the DGCL regarding appraisal rights is attached as
Annex C
to this proxy
statement. If you hold your shares of Company Common Stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or other nominee to determine the appropriate procedures for the
making of a demand for appraisal on your behalf by your bank, broker or other nominee.
Solicitation of Proxies;
Payment of Solicitation Expenses
We have engaged Innisfree M&A Incorporated to assist in the solicitation of proxies and provide
related advice and informational support for a services fee of $20,000, plus customary disbursements. We have also agreed to indemnify Innisfree M&A Incorporated against losses arising out of its provision of these services on our behalf. In
addition, the Company may also reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares of Company Common Stock for their expenses in forwarding soliciting materials to beneficial owners of
Company Common Stock and in obtaining voting instructions from those owners. Directors, officers and employees of ours may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional
amounts for soliciting proxies.
Householding
We use a practice approved by the SEC called householding. Under this practice, stockholders who have the same address and last
name and do not participate in electronic delivery of proxy materials receive only one copy of our proxy materials at that address, unless one or more of those stockholders has notified us that they wish to receive individual copies. If you are a
record holder and would like to receive a separate copy of this proxy statement, please contact our transfer agent, Wells Fargo Shareowner Services, by telephone at (800) 468-9716 or by facsimile at (651) 450-4033. If you are a beneficial
owner and would like to receive a separate copy of this proxy statement, please contact your brokerage firm. Each stockholder who participates in householding will continue to be able to access or receive a separate proxy card.
If you share an address with another Company stockholder and would like to start or stop householding for your account, please contact our
Investor Relations Group at (408) 333-8000, write to Investor Relations, Brocade Communications Systems, Inc., 130 Holger Way, San Jose, California 95134, or send an email to our Investor Relations Group at investor-relations@brocade.com.
29
Please be aware that if you choose to access those materials over the Internet, you may incur
costs such as telephone and Internet access charges for which you will be responsible.
Allowing us to household materials or electing to
view them over the Internet will help us save on the cost of printing and distributing those materials and reduce the impact on the environment.
Questions and Additional Information
If you have more questions about the Merger, the special meeting or how to submit your proxy,
or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please contact our proxy solicitor:
Innisfree M&A Incorporated
501
Madison Avenue, 20th Floor
New York, NY 10022
Stockholders may call toll-free: (888) 750-5834
Banks and brokers may call collect: (212) 750-5833
30
THE MERGER
This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement
as
Annex A
. You should read the entire Merger Agreement carefully as it is the legal document that governs the Merger.
General
The Merger Agreement provides that Merger Sub will merge with and into the Company. The Company will be the surviving
corporation in the Merger and will continue to do business following the Merger as a wholly owned subsidiary of LSI. As a result of the Merger, the Company will cease to be a publicly traded company. If the Merger is consummated, you will not own
any shares of the capital stock of the surviving corporation.
In the Merger, each outstanding share of Company Common Stock, except
for the Excluded Shares, will be converted into the right to receive $12.75 in cash, without interest, less any required tax withholding.
Background of the Merger
The following chronology summarizes the key meetings and events that led to the signing of the Merger
Agreement. This chronology does not purport to catalogue every conversation among the Corporate Development Committee of the Company Board (the
Corporate Development Committee
), the Transaction Committee of the Company Board (the
Transaction Committee
), the Company Board or the representatives of the Company, Ultimate Parent, Parent, and other parties.
The Company Board regularly evaluates the Companys strategic direction and ongoing business plans with a view toward strengthening the
Companys business and enhancing stockholder value. As part of this evaluation, the Company Board has, from time to time, considered exploring a variety of strategic alternatives. These have included, among others: (1) the continuation of
the Companys current business plan; (2) investment in, and development of, new products; (3) opportunities for potential expansion into new business lines through acquisitions and combinations of the Company with other businesses
such as the Companys recent acquisitions of Ruckus Wireless, Inc. (
Ruckus
), Connectem Inc., and the SteelApp virtual application delivery controller product line from Riverbed Technology, Inc.; and (4) a possible sale
of the Company or one or more of its business units.
In May 2016, Mr. Tom Krause, Vice President of Corporate Development and Acting
Chief Financial Officer of Ultimate Parent, contacted Mr. Ted Rado, Vice President of Corporate Development of the Company, to arrange a meeting with Mr. Rado.
On May 19, 2016, Messrs. Krause and Rado held a meeting in which Mr. Krause expressed Ultimate Parents interest in exploring
an acquisition of the Companys fibre channel business. They did not discuss price or any other potential terms. However, Mr. Krause stated that, if a transaction were going to be completed, Ultimate Parent would want to enter into it
expeditiously. Messrs. Krause and Rado also discussed scheduling a meeting to introduce Mr. Carney and Mr. Hock E. Tan, the Chief Executive Officer and President of Ultimate Parent.
On May 27, 2016, the Company completed its previously announced acquisition of Ruckus.
On June 2, 2016, Mr. Ken Hao, a Managing Partner and Managing Director at Silver Lake Partners, met with Mr. Carney following an introduction
from Evercore that occurred in May 2016. Mr. Hao is also a member of the board of directors of Ultimate Parent and Silver Lake Partners is a long-term investor in Ultimate Parent. Mr. Hao expressed an interest in exploring ways in which Silver
Lake might engage in a variety of strategic transactions with Brocade. Mr. Hao also noted that he was aware that Mr. Krause had expressed Ultimate Parents interest in acquiring the Companys fibre channel business, and Mr. Carney
indicated to Mr. Hao that the Companys fibre channel business was not for sale.
31
Later on June 2, 2016, Mr. Carney met with Mr. Tan, who expressed Ultimate Parents interest
in acquiring the Companys fibre channel business. Mr. Carney informed Mr. Tan that the Company was focused on executing its standalone strategy and integration of Ruckus. Mr. Carney stated that the Company was not interested in selling its
fibre channel business.
On June 6, 2016, Mr. Tan called Mr. Carney to indicate Ultimate Parents interest in
acquiring the Company as a whole and to suggest a follow-up in person meeting to discuss Ultimate Parents interest further. Mr. Carney informed Mr. Tan again that the Company was not seeking a sale of the entire Company, but that he
would bring to the Company Boards attention any unsolicited proposal that he received and that the Company Board, consistent with its fiduciary duties, would evaluate any such proposal in due course.
On June 7, 2016, during a previously scheduled Company Board meeting, Mr. Carney informed the Company Board about his discussions
with Mr. Tan and Ultimate Parents interest in acquiring the Companys fibre channel business, or, if necessary, the Company as a whole, emphasizing that Mr. Tan did not provide a specific offer. The Company Board indicated that
it concurred with Mr. Carneys prior position on behalf of the Company with respect to Ultimate Parents interest in acquiring the fibre channel business or the Company as a whole and confirmed that it would evaluate any bona fide
proposal put forth by any party for a sale of the entire Company.
Later in June 2016, Mr. Carney spoke with Mr. Tan and
conveyed the Companys position with respect to Ultimate Parents interest in acquiring the Companys fibre channel business, or the Company as a whole, as determined at the Company Board meeting on June 7, 2016. Messrs. Tan and
Carney decided to hold an in person meeting in July 2016.
On July 12, 2016, Mr. Carney met with Messrs. Tan and Hao to discuss
Ultimate Parents interest in a potential acquisition of the entire Company. Mr. Carney requested that they provide the Company with a written offer or indication of interest that he could bring back to the Company Board. Messrs. Tan and
Hao indicated that Ultimate Parent would submit an indication of interest and a due diligence request list shortly.
On July 14,
2016, Ultimate Parent delivered via email to Mr. Carney a written non-binding confidential indication of interest for the acquisition of the entire Company, which did not contain any information as to price for the acquisition (the
Initial Indication of Interest
). Ultimate Parent indicated in the Initial Indication of Interest that it would be willing to proceed on an accelerated timeframe and further indicated that it would expect a period of exclusive
negotiations in connection with negotiating a transaction. On the same date, Mr. Krause delivered to Mr. Carney a draft non-disclosure agreement, a request to commence due diligence reviews and an agenda for a meeting requested by Ultimate
Parent, at which representatives of the Company would be asked to provide a management presentation to Ultimate Parent.
Later on
July 14, 2016, Company management notified the Company Board of the Companys receipt of the Initial Indication of Interest and requested the members availability for a Company Board meeting.
On July 20, 2016, the Company Board met, with members of Company management and representatives of Evercore and the Companys
outside legal advisor, Wilson Sonsini Goodrich & Rosati (
Wilson Sonsini
), in attendance. Evercore was invited to the meeting due to Evercores expertise and knowledge of and familiarity with the Companys
business and the industry in which the Company operates, Evercores engagements by the Company for advice on the Companys recent acquisitions (including Ruckus), and Evercores early assistance with arranging discussions between the
Company and Ultimate Parent. Evercore indicated that it had previously been engaged by a committee of the board of directors of Broadcom Corporation in connection with the acquisition of Broadcom Corporation by Avago Technologies Limited, which was
completed in February 2016. The Company Board discussed the Initial Indication of Interest and whether to engage with Ultimate Parent in discussions concerning a strategic transaction. The representatives of Wilson Sonsini discussed with the members
of the Company Board their fiduciary duties under Delaware law in the context of a potential sale of the
32
Company as well as other legal considerations in connection with such a transaction. The Company Board discussed the process for engaging in an exploration of the Companys value on a
standalone basis and in connection with a potential strategic transaction and the possibility of evaluating the interest of other parties in acquiring the Company. The Company Board also briefly discussed the engagement of Evercore to assist the
Company and the Company Board with the process and noted Evercores early engagement in the initial interaction with Ultimate Parent and its historical service to the Company. After discussion, the Company Board determined that Company
management should prepare for and schedule a management presentation with Ultimate Parent and provide financial and other due diligence materials to Ultimate Parent at that time to explore the possibility of a strategic transaction. Management
discussed with the Company Board certain strategic considerations and the potential timing of a meeting with Ultimate Parent and recommended that it take place in September, after the close of the Companys third fiscal quarter (
Q3
FY16
) on July 30, 2016 and the Companys planned announcement of the Q3 FY16 financial results on August 25, 2016, so that Company management could focus on the close of Q3 FY16 and the financial results from Q3 FY16 would
be publicly available. The Company Board concurred with managements proposed timing of the meeting in September, and following a conversation between Mr. Carney and Mr. Tan, the meeting was subsequently scheduled for
September 14, 2016.
After the Company Board meeting, upon Mr. Carneys direction, Dan Fairfax, Senior Vice President and
Chief Financial Officer, contacted Evercore to discuss the terms of its engagement and core fee constructs. On July 21, 2016, Evercore sent to Mr. Fairfax a summary of past transactions and fees paid to investment bankers for those
transactions, for reference.
On July 22, 2016, the Company received a draft engagement letter agreement from Evercore pursuant to
which Evercore would serve as the Companys financial advisor in connection with the exploration of a potential sale of the Company as well as other strategic options (the
Engagement Letter
). For the reasons described above
and the Companys past experience with Evercore, the Company determined that it was more efficient and effective to engage Evercore rather than to assess potential, alternative financial advisors.
On July 30, 2016, the Company closed its Q3 FY16.
On August 25, 2016, the Company announced its Q3 FY16 financial results as previously scheduled.
On August 30, 2016, Mr. Carney met with Mr. Tan at Mr. Tans request to further discuss a potential strategic
transaction between the Company and Ultimate Parent. Mr. Tan reiterated Ultimate Parents interest in a strategic transaction and indicated that Ultimate Parent would be prepared to submit a revised indication of interest with pricing
after the conclusion of the September 14, 2016 presentation by Company management to Ultimate Parent.
On September 8, 2016, the
Company finalized and executed a non-disclosure agreement with Ultimate Parent dated September 6, 2016, which provided, among other things, for a twelve-month standstill restriction on Ultimate Parent that would, among other things,
restrict Ultimate Parents rights to acquire securities of the Company outside of a negotiated strategic transaction with the Company and which restriction would terminate if the Company entered into an acquisition transaction with any third
party.
On September 12, 2016, the Corporate Development Committee held its standing meeting, with members of Company management and
representatives of Evercore and Wilson Sonsini in attendance. Also attending the meeting at the Corporate Development Committees invitation was Company Board member and Chairwoman of the Audit Committee, Ms. Judy Bruner. The Corporate
Development Committee is a standing committee of the Company Board whose purpose is to work with Company management to review, consider and in certain cases approve potential strategic and investment transactions that are consistent with the
Companys strategy and to act as the formal liaison to the Company Board in connection with such activities. The Corporate Development Committee also has the authority to approve the engagement of financial advisors. The members of the
Corporate Development Committee were Messrs. Dave Roberson (Chairman), Dave House and John Gerdelman and
33
Ms. Kim Goodman. At the meeting, the Corporate Development Committee reviewed and approved the terms of the Engagement Letter with Evercore, which had previously been negotiated between
Evercore and the Company management, and, given the proposed transaction for which Evercore was to be engaged, determined that the Committee also should have its approval of the Engagement Letter ratified by the full Company Board at a Company Board
meeting scheduled for the following day. The Corporate Development Committee also reviewed due diligence materials with Wilson Sonsini, including a management presentation (which included the September Management Case (as defined in the section of
this proxy statement entitled The Merger Certain Company Forecasts beginning on page 58)) that was to be provided to representatives of Ultimate Parent during the upcoming meeting with Ultimate Parent on September 14, 2016.
Representatives of Evercore presented its materials for discussion at the Company Board meeting the following day, including a preliminary financial analysis of the Company that was based on the September Management Case and the Research Case
Forecasts (as defined in the section of this proxy statement entitled The Merger Certain Company Forecasts beginning on page 58). The Corporate Development Committee provided input for the management presentation and asked that
Company management provide the requested due diligence materials to Ultimate Parent later that day, in preparation for the September 14, 2016 meeting.
Later on September 12, 2016, the Company provided the September Management Case and other requested due diligence materials to Ultimate
Parent.
On September 13, 2016, the Company Board met, with members of Company management and representatives of Evercore and Wilson
Sonsini in attendance. At the meeting, Mr. Carney described to the Company Board his meetings with Messrs. Tan and Hao, relayed Ultimate Parents interest in a potential strategic transaction with the Company and noted a scheduled
management presentation with Ultimate Parent the following day. Representatives of Evercore discussed with the Company Board potential strategic options for the Company, as well as the preliminary financial analysis of the Company that was based on
the September Management Case and the Research Case Forecasts and information regarding Ultimate Parent. The Company Board discussed the Companys strategic alternatives, including potential approaches for engaging with Ultimate Parent and
conducting an outreach process to gauge the interest of third parties in a strategic transaction with the Company. The representatives of Wilson Sonsini discussed with the members of the Company Board their fiduciary duties with respect to a
potential acquisition of the Company under Delaware law. At the meeting, the Company Board ratified the Corporate Development Committees approval of the Engagement Letter and directed Company management to execute the Engagement Letter.
On September 14, 2016, the parties held a due diligence meeting at the offices of Latham & Watkins LLP
(
Latham & Watkins
), outside legal counsel to Ultimate Parent. Present at the meeting for Ultimate Parent were Messrs. Tan, Krause, Charles Kawwas, Senior Vice President and Chief Sales Officer, and Ram Velaga, Senior Vice
President and General Manager, Switching Products, as well as two representatives of Silver Lake Partners, Mr. Hao and Mr. Ryan Bone, who were providing assistance to Ultimate Parent in conducting a financial analysis of a potential
transaction. Present at the meeting for the Company were Messrs. Carney, Rado, Fairfax, and Ken Cheng, Chief Technology Officer and Senior Vice President, Corporate Development and Emerging Business. The members of Company management present at the
meeting made a presentation concerning the Company, including an overview of the Company and its business segments, including market positioning, growth opportunities, and the September Management Case.
On September 15, 2016, Messrs. Carney and Tan met to continue to discuss a potential strategic transaction between the Company and
Ultimate Parent. At the meeting, Mr. Tan verbally indicated that Ultimate Parent would be delivering a written non-binding indication of interest related to the acquisition of the Company for a cash price of $12.00 per share of Company Common
Stock.
On September 16, 2016, the Company executed the Engagement Letter with Evercore.
34
Later on September 16, 2016, Ultimate Parent delivered to the Company a confidential
non-binding indication of interest to acquire the Company at a price of $12.00 per share in cash (the
September 16 Indication of Interest
). The price represented a premium of approximately 34% to the Companys closing stock
price that day. The September 16 Indication of Interest indicated that the acquisition would not be subject to any financing conditions. The September 16 Indication of Interest also indicated that Ultimate Parent sought to reach execution
of a definitive agreement by October 30, 2016.
Also on September 16, 2016, as a follow-up to an introductory phone call that
had taken place on August 12, 2016, between a representative of a private equity sponsor, which we refer to as Sponsor A, and Mr. Rado, representatives of the Company, including Messrs. Carney and Rado, met with a senior representative of
Sponsor A to introduce each party to the business of the other party and to discuss Sponsor As interest in various potential strategic transactions involving Sponsor A, one of Sponsor As portfolio companies, and the Company. An
acquisition of the Company by Sponsor A was not one of the possible strategic transactions discussed at such meeting.
On
September 17, 2016, the Corporate Development Committee met, with members of Company management and representatives of Evercore and Wilson Sonsini in attendance, to discuss the September 16 Indication of Interest. Also attending the
meeting at the Corporate Development Committees invitation was Ms. Bruner. The members of the Corporate Development Committee discussed their views on the proposed $12.00 per share purchase price, as well as potential responses to
Ultimate Parent, including potential approaches to negotiate for a higher per share purchase price. The Corporate Development Committee determined that the Company would not respond to Ultimate Parent until after both Companys regularly
scheduled analyst day that was scheduled to take place on September 21, 2016 and a meeting of the full Company Board to review and discuss the September 16 Indication of Interest.
On September 21, 2016, as had been previously scheduled, the Company conducted its annual analyst day in New York City, which included in
person presentations to a gathering of its institutional stockholders and other financial analysts, many of whom wrote regular reports on the financial performance and future outlook of the Company. The presentations included the Companys
updated two-year financial model, as well as its estimated structural tax rate and cash flow models. The analyst day presentations were webcast and made available on the Companys website. Also on September 21, 2016 and throughout the rest
of that week, Company executives had follow-up meetings with institutional stockholders and financial analysts in New York, Boston, Chicago, Toronto, Dallas and San Francisco to present and discuss the information presented at the analyst day
meeting.
On September 23, 2016, the Corporate Development Committee met, with members of Company management and representatives of
Evercore and Wilson Sonsini in attendance, to discuss potential responses to the September 16 Indication of Interest (including identifying factors that might be advanced by the Company in discussions with Ultimate Parent to achieve an
increased proposed price), a list of potential third parties that the Company could consider contacting as part of a process for exploring potential strategic alternatives for the Company, and the timing for next steps. Also attending the meeting at
the Corporate Development Committees invitation was Ms. Bruner. The representatives of Evercore discussed Evercores updated preliminary financial analysis of the Company that was based on the September Management Case and the
Research Case Forecasts and updated to reflect the details of the September 16 Indication of Interest.
On September 25, 2016,
the Company Board met, with members of Company management and representatives of Evercore and Wilson Sonsini in attendance. The representatives of Evercore discussed Evercores updated preliminary financial analysis of the Company that was
based on the September Management Case and the Research Case Forecasts as well as the proposal that Ultimate Parent had articulated to acquire the entire Company and then divest the Companys IP Networking business. The Company Board discussed
potential responses to the Ultimate Parent proposal, including identifying key factors that might be advanced by the Company in discussions with Ultimate Parent to achieve an increased proposed price. Representatives of Evercore also discussed with
the Company Board a list of potential third parties that the Company could consider
35
contacting as part of a process for exploring potential strategic alternatives for the Company. The Company Board instructed Mr. Carney to respond to Ultimate Parent that $12.00 per share
did not represent sufficient value and was not a price the Company Board would accept, but that representatives of the Company would be available to meet with Ultimate Parent to discuss additional factors that would support an increase in the price
to be paid by Ultimate Parent. The Company Board also determined not to contact third parties regarding their potential interest in a strategic transaction with the Company until receiving from Ultimate Parent a revised proposal containing a
potentially acceptable purchase price.
Later on September 25, 2016, at the direction of the Company Board, Mr. Carney contacted
Mr. Tan and indicated that $12.00 per share was not a price that the Company Board would accept. Messrs. Carney and Tan agreed that Messrs. Rado and Krause would meet to discuss additional factors that could support an increase in the purchase
price for the Company.
On September 30, 2016, Messrs. Rado and Krause met. Mr. Rado presented a number of factors that the
Company believed could support a higher purchase price for the Company, including standalone value creation projects already underway at the Company and additional opportunities for synergies. Mr. Krause agreed to consider such factors, but
indicated during the meeting that it would be highly unlikely that these factors would support a major price movement.
On October 2,
2016, Messrs. Carney and Tan spoke by telephone. Mr. Carney indicated that the Company Board would not support a transaction with Ultimate Parent unless there was a higher price than $13.00 per share. Mr. Tan stated that he could not
support a price at that level, but that he would be convening a meeting of Ultimate Parents board of directors to authorize a revised acquisition proposal providing for a per share purchase price of $12.75. Mr. Tan indicated that the
revised proposed purchase price would be a best and final proposal from Ultimate Parent and that, if the Company Board elected to proceed based on that proposal, Ultimate Parent would expect to work toward signing a definitive agreement
within thirty days. The proposed purchase price represented a premium of approximately 38.1% to the Companys closing stock price on September 30, 2016, the most recent trading day.
On October 3, 2016, the Company received a confidential non-binding indication of interest (the
October 3 Indication of
Interest
) from Ultimate Parent with a purchase price of $12.75 per Company share in cash. The October 3 Indication of Interest provided that it was Ultimate Parents best and final proposal and that Ultimate Parent
wished to execute a definitive agreement by October 30, 2016.
On October 4, 2016, the Corporate Development Committee met,
with members of Company management and representatives of Evercore and Wilson Sonsini in attendance, to discuss the October 3 Indication of Interest. Also attending the meeting at the Corporate Development Committees invitation was
Ms. Bruner. The Corporate Development Committee received an update from Messrs. Carney and Rado on recent conversations with representatives of Ultimate Parent and discussed additional opportunities for advocating for a higher purchase price
from Ultimate Parent. After discussion, the Corporate Development Committee determined to recommend to the Company Board that the $12.75 per share purchase price proposed by Ultimate Parent was sufficient to continue negotiations with Ultimate
Parent, and that given Ultimate Parents indication that the price contained in the October 3 Indication of Interest was a best and final proposal, it was unlikely that further negotiation between the Company and Ultimate
Parent, without any third-party competing bids, would yield further increases in the purchase price from Ultimate Parent. The Corporate Development Committee, members of Company management, and representatives of Evercore and Wilson Sonsini then
discussed the parameters of an outreach process to validate whether there were any other interested parties that might be interested in engaging in a potential strategic transaction with the Company that would result in a per share purchase price
exceeding $12.75. At the conclusion of that discussion, the Corporate Development Committee determined to recommend to the Company Board that the Company contact the most likely potential acquirers (including strategic buyers and private equity
sponsors) as determined by Company management, Evercore and the Company Board. The Corporate Development Committee also determined to recommend to the Company Board
36
that the Company Board form a transaction committee to oversee and direct Company management and engage with the Companys advisors with respect to the exploration, evaluation and
negotiation of strategic alternative transactions, including with respect to the October 3 Indication of Interest.
On
October 5, 2016, the Company Board met, with members of Company management and representatives of Evercore and Wilson Sonsini in attendance. The representatives of Evercore presented a summary of its updated preliminary financial analysis of
the Company, based on the October 3 Indication of Interest, the September Management Case and the Research Case Forecasts. The representatives of Wilson Sonsini discussed with the members of the Company Board their fiduciary duties under
Delaware law. The Company Board heard the recommendations of the Corporate Development Committee and Evercore regarding the strategy for engaging with Ultimate Parent and soliciting additional third-party interest. After discussion, the Company
Board concurred with the recommendations of the Corporate Development Committee and Evercore to continue engagement with Ultimate Parent, and further instructed Company management and Evercore to contact four strategic acquirers and four private
equity sponsors (including Sponsor A), selected by the Company Board with advice from Evercore on the basis of (1) likely interest in engaging in a strategic transaction with the Company and (2) financial capacity to engage in a strategic
transaction with the Company. In addition, in light of the potentially significant workload involved in negotiating with Ultimate Parent and managing the solicitation process, and the possibility that in connection with such exploration Company
management might need feedback and direction on relatively short notice, the Company Board created the Transaction Committee. The Transaction Committee, which was a subcommittee of the Corporate Development Committee, was authorized to oversee and
direct Company management and engage with the Companys advisors with respect to the exploration, evaluation and negotiation of strategic transactions, including the October 3 Indication of Interest, and to report to the Company Board on a
regular basis for the Company Board to determine whether to approve any such transactions. The Company Board retained the authority to approve any transaction. The Company Board appointed Mr. Roberson, the Chairman of the Corporate Development
Committee, and Mr. House, a member of the Corporate Development Committee and the Chairman of the Company Board, to serve on the Transaction Committee because of their experience with strategic transactions and availability to assist with the
process.
Later on October 5, 2016, at the direction of the Company Board, Mr. Carney contacted Mr. Tan and indicated that
the Company would need to conduct a solicitation process to determine whether any third parties might have an interest in engaging in a strategic transaction with the Company.
Also on October 5, 2016, Ultimate Parent commenced its full due diligence process, including by delivering a legal due diligence request
list and conducting an initial due diligence call with the Company. Throughout the remainder of October 2016, representatives of Ultimate Parent, the Company and their respective legal counsels convened on multiple occasions to discuss due diligence
matters.
On October 5 and 6, 2016, at the request of the Company Board, members of Company management and representatives of
Evercore contacted the eight parties previously selected by the Company Board with advice from Evercore, including four potential strategic acquirers and four private equity sponsors. Of the parties contacted, two of the potential strategic
acquirers promptly declined to participate in the process, and the other two potential strategic acquirers indicated that they would need to review the opportunity before deciding whether to participate. All four of the private equity sponsors
agreed to participate in the process and received draft non-disclosure agreements, which did not contain any standstill provisions.
On October 6, 2016, one of the private equity sponsors, which we refer to as Sponsor B, submitted a request to Evercore that it be
permitted to collaborate as a co-bidder with an additional strategic acquirer with which it had a relationship.
On October 7, 2016,
the Transaction Committee met, with members of Company management and representatives of Evercore and Wilson Sonsini in attendance, to receive an update on the initial feedback from the parties contacted in the solicitation process. Representatives
of Evercore reported that two of the strategic
37
acquirers contacted had declined to participate in the process, that the Company was awaiting responses from the other two potential strategic acquirers, and that all four private equity sponsors
contacted had agreed to participate in the process. The Transaction Committee also discussed Sponsor Bs request that it be permitted to collaborate as a co-bidder with an additional strategic acquirer.
Later on October 7, 2016, based on feedback from, and at the request of, the Transaction Committee, Evercore responded to Sponsor B and
indicated that Sponsor B would be permitted to collaborate with the aforementioned strategic acquirer in the manner requested.
On
October 8, 2016, at a follow-up introductory meeting requested by Sponsor A and set up by Mr. Rado for the purpose of meeting in person, Mr. Carney met with the managing partner of Sponsor A to discuss various potential commercial
relationships, which discussions did not reference any acquisition transaction between the parties.
On October 10, 2016, one of the
strategic acquirers contacted by Evercore formally confirmed that it was not interested in engaging in a strategic transaction with the Company.
On October 11, 2016, the Transaction Committee met, with members of Company management and representatives of Evercore and Wilson Sonsini
in attendance, to receive an update on the solicitation process. Representatives of Evercore reported on the responses to date from strategic acquirers. The Transaction Committee inquired of Evercore and Company management about other strategic
acquirers which might have interest in a potential strategic transaction with the Company and, after review of other potential strategic acquirers, the Transaction Committee determined that it was relatively unlikely that any strategic acquirers
other than those already contacted would have an interest in pursuing a strategic transaction with the Company at that time. The Transaction Committee also reviewed a draft bid process letter prepared, at the Transaction Committees request, by
Evercore for delivery to the participants in the solicitation process. The Transaction Committee also discussed the timing for requesting proposals from potential bidders. Representatives from Wilson Sonsini again reviewed with the Transaction
Committee the Company Boards fiduciary duties under Delaware law to potential acquisitions.
Later on October 11, 2016, after
the Transaction Committee meeting and at the Transaction Committees request, Evercore delivered a bid process letter to the four private equity sponsors which had expressed interest in participating in a potential strategic transaction with
the Company, requesting preliminary submissions of indications of interest by October 18, 2016.
During the week of October 10,
2016, members of Company management and representatives of Evercore held confidential management presentation sessions with representatives of each of the four private equity sponsors contacted in the solicitation process, all of which had signed
non-disclosure agreements with the Company. Information communicated during such sessions included an overview of the Company and its business segments, market positioning, growth opportunities, and the September Management Case.
On October 13, 2016, the last of the four strategic acquirers in the solicitation process contacted Mr. Carney to confirm that it
was not interested in engaging in a strategic transaction with the Company.
On October 14, 2016, Messrs. Carney, Tan and Hao had a
meeting, in which they discussed due diligence matters and timing for execution of a definitive agreement.
On October 15, 2016, the
Transaction Committee met, with members of Company management and representatives of Evercore and Wilson Sonsini in attendance, to discuss the status of the transaction. Representatives of Evercore reported that Sponsor B and its co-bidder had
indicated that Sponsor Bs co-bidder was primarily interested in the wireless businesses of the Company and Sponsor B was interested in the remaining portion of the Company. In response, the Transaction Committee discussed alternatives to a
sale of the entirety of the Company, including a sale of the various businesses of the Company in separate sale transactions
38
and whether such a piecemeal sale transaction could yield a higher aggregate value for the Companys stockholders, particularly given that Ultimate Parents expressed interest was only
in the Companys fibre channel business. The Transaction Committee discussed, with input from Evercore, the likely valuation of the Companys various businesses on a standalone basis. In addition, the Transaction Committee discussed the
substantial risks associated with pursuing such a strategy, including the difficulty in conducting parallel sales processes, the complexity of separating businesses within the Company, and the diversion of Company management from the operation of
the businesses of the Company in a prolonged solicitation process. The Transaction Committee also considered that Ultimate Parent had required an expeditious timeframe for the signing of a definitive agreement and the substantial delay occasioned by
a separate solicitation process might cause Ultimate Parent to abandon its interest in acquiring the Company. After discussion and input from Evercore, the Transaction Committee determined that a piecemeal sale was not likely to result in
substantially greater stockholder value, particularly taking into account the considerable risks associated with such a strategy. The Transaction Committee also received an update on the status of Ultimate Parents due diligence review and the
expected timing for execution of a definitive agreement.
Also on October 15, 2016, at the request of the Transaction Committee,
Evercore distributed a draft of a merger agreement, prepared by Wilson Sonsini and reviewed by Company management (the
Bid Process Merger Agreement
), to the four private equity sponsors that had previously received the bid process
letter.
Also on October 15, 2016, one of the four private equity sponsor participants, which we refer to as Sponsor C, verbally
indicated to Evercore that it was likely to bid in the range of $11.00 to $11.50 per share. Based on feedback from, and at the request of, the Transaction Committee, Evercore informed Sponsor C that a price of $11.00 to $11.50 per share would not be
competitive. In response, Sponsor C indicated that it was unlikely that it could increase its value beyond the range it had suggested.
On
October 16, 2016, another of the four private equity sponsor participants, which we refer to as Sponsor D, communicated to Evercore that it was not interested in continuing to explore an acquisition transaction due to its concerns regarding the
projected declining revenue from the Companys fibre channel business.
On October 17, 2016, representatives of
Latham & Watkins delivered to Wilson Sonsini an initial draft of a proposed merger agreement by and among Ultimate Parent, the Company, Broadcom Corporation, an indirect subsidiary of Ultimate Parent, and Merger Sub. Among other terms, the
initial merger agreement (1) proposed a termination fee be paid by the Company in the event of the acceptance of a superior proposal, but did not propose the amount of such termination fee, (2) required that the Company take actions to
cooperate with Parent in a sale of the non-fibre channel businesses, (3) provided that in the event of a regulatory challenge to the transaction, Ultimate Parent would not be required to divest or hold separate any business to obtain antitrust
consent and would not be required to take any significant actions to obtain clearance from the Committee on Foreign Investment in the United States, and (4) required the Company to agree to certain covenants that in effect would require it to
terminate an internal restructuring that it was currently undertaking to integrate its recently completed acquisition of Ruckus. The draft agreement was accompanied by a request that the Company agree to a twenty-one-day exclusivity period beginning
on October 21, 2016.
On October 18, 2016, Sponsor A submitted a non-binding indication of interest at a proposed purchase
price of $11.50 to $12.00 per share, together with a list of material issues related to the previously distributed Bid Process Merger Agreement.
Also on October 18, 2016, Sponsor C submitted a non-binding indication of interest at an offer price of $11.50 to $12.00 per share.
Also on October 18, 2016, Sponsor B communicated to Evercore that it would not be submitting a bid due to difficulty in supporting a bid
price that would be a meaningful premium to the Companys then-current trading price.
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On October 19, 2016, Messrs. Rado and Krause had a conversation regarding due diligence
matters, the development of a communications plan, the effect that the Companys pending restructuring activities would have on Ultimate Parents interest in consummating an acquisition of the Company and timing for execution of a
definitive agreement.
Later on October 19, 2016, the Transaction Committee met, with members of Company management and
representatives of Evercore and Wilson Sonsini in attendance, to receive an update on the solicitation process and to review the status of Ultimate Parents due diligence. Representatives of Evercore updated the Transaction Committee regarding
the two proposals received from private equity sponsors, as well as the feedback from the two private equity sponsors that declined to submit proposals. The Transaction Committee instructed Evercore to communicate to the two bidders that had made
proposals that the purchase prices included in their respective proposals were insufficient, but to continue to work with both bidders to answer any additional due diligence questions and encourage them to increase their bids.
Later on October 19, 2016, at the request of the Transaction Committee, Evercore contacted both Sponsor A and Sponsor C to inform them
that the purchase prices included in their respective proposals were insufficient.
On October 20, 2016, Sponsor A responded to
Evercore by indicating that subject to positive results on additional business due diligence on the trajectory of the Companys business and potential cost savings, Sponsor A would consider potentially raising its bid to $12.25 per share, but
that any higher price would be challenging. Sponsor A did not subsequently deliver a written revised indication of interest with an offer price of $12.25 per share.
Also on October 20, 2016, the Compensation Committee of the Company Board held a standing meeting, during which the Compensation
Committee discussed, among other matters, the potentially negative effects that the uncertainty resulting from the negotiation and announcement of an acquisition transaction could have on employee retention, and discussed Company executives
work with the Compensation Committees compensation consultant to review other recent acquisitions for potential models of retention programs and otherwise to explore possible retention programs to mitigate such potentially negative effects.
On October 21, 2016, the Company Board met, with members of Company management and representatives of Evercore and Wilson Sonsini in
attendance, to receive an update on the solicitation process and to review the status of Ultimate Parents due diligence, the negotiation of the merger agreement with Ultimate Parent, Ultimate Parents request for exclusivity and potential
timing for execution of the merger agreement. Representatives of Evercore updated the Company Board regarding the two proposals received from Sponsor A and Sponsor C, as well as the feedback from Sponsor B and Sponsor D, the two private equity
sponsors that declined to submit proposals. The Company Board discussed how to manage the further discussions with the two remaining private equity sponsors and the importance of continuing to engage in discussions with them while negotiations with
Ultimate Parent were ongoing.
On October 22, 2016, the Transaction Committee met, with members of Company management and
representatives of Evercore and Wilson Sonsini in attendance, to discuss updates to conversations with Sponsor A and Sponsor C, and determined to continue to engage with both bidders while negotiations with Ultimate Parent were ongoing and to
provide both bidders with any requested additional due diligence information.
On October 24, 2016, the Transaction Committee met,
with members of Company management and representatives of Evercore and Wilson Sonsini in attendance, to discuss the principal issues in Ultimate Parents initial draft of the merger agreement and the proposed responses from Company management
and Wilson Sonsini.
On October 25, 2016, representatives of Wilson Sonsini sent to representatives of Latham & Watkins a
revised draft of the merger agreement, based on feedback from the Transaction Committee the previous day, that contemplated (1) a termination fee equal to 2.5% of the Companys equity value payable upon the Companys
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acceptance of a competing acquisition proposal and other related circumstances, (2) confirmation that any asset sale transaction would not be a condition to closing the Company acquisition,
(3) a commitment by Ultimate Parent to take remedial actions, so long as such actions do not have a material adverse effect on the business of the Company and its subsidiaries, if required in connection with obtaining regulatory clearances,
(4) a reverse termination fee payable by Parent if the transaction is terminated due to regulatory obstacles and (5) flexibility to continue to engage in Ruckus-related restructuring.
On October 26, 2016, during a conversation regarding the status of due diligence between Messrs. Rado and Krause, Mr. Krause
reiterated the request for exclusivity, and, subsequent to the conversation, representatives of Latham & Watkins delivered a draft exclusivity agreement to representatives of Wilson Sonsini that contemplated a twenty-one-day exclusivity
period.
On October 27, 2016 Messrs. Carney and Tan discussed Ultimate Parents request for exclusivity. Mr. Carney
indicated that as there were still other bidders in the process, it was not appropriate to grant Ultimate Parent exclusivity at such time. Mr. Carney further indicated that if Ultimate Parent wanted exclusive negotiations, Ultimate Parent would
need to increase the purchase price reflected in the October 3 Indication of Interest. Mr. Tan stated that Ultimate Parent would not increase the price that Ultimate Parent had proposed.
On October 28, 2016, the Transaction Committee met, with members of Company management and representatives of Evercore and Wilson Sonsini
in attendance, to discuss Ultimate Parents request for exclusivity and a potential timeline for executing a transaction with Ultimate Parent. The Transaction Committee determined that it would not authorize granting exclusivity and that
Company management, as well as representatives of Evercore and Wilson Sonsini, should continue working with Ultimate Parent toward executing a transaction. Representatives from Evercore updated the Transaction Committee on communications between
Company management and Sponsor A and Sponsor C, respectively, regarding due diligence matters and the likely process for a definitive acquisition agreement.
Also on October 28, 2016, Messrs. Carney, Krause, Rado, Tan and Fairfax met to discuss the Companys forecasted results for the
fourth quarter of fiscal 2016 and first quarter of fiscal 2017 (which were a portion of the October Management Case (as defined in the section of this proxy statement entitled The Merger Certain Company Forecasts beginning on page
58)) as well as outstanding open issues of negotiation in the transaction, including potential designs of retention programs that could be adopted to retain Company employees after the signing and announcement of the definitive agreement, including
those where amounts would be paid based on service beyond the closing date. During that meeting, the participants also discussed potentially establishing a bonus program tied to the sale of the Companys IP Networking business, in which the
amount payable under the program would be based on the transaction value of such sale.
On October 29, 2016, each of Sponsor A and
Sponsor C reiterated to Evercore its interest in an acquisition of the Company, but each expressed skepticism about its ability to consummate a transaction above $12.00 per share.
Also on October 29, 2016, the Company Board met, with members of Company management, representatives of Wilson Sonsini and Evercore in
attendance. Representatives of Wilson Sonsini provided an update to the Company Board on the status of negotiations on the merger agreement and the significant open points of negotiations between the Company and Ultimate Parent, including the
obligation to cooperate with Ultimate Parents proposed sale of the Companys IP Networking business post-signing and the various factors that affect closing certainty, and the regulatory covenants. The Company Board asked questions of
Wilson Sonsini and Company management and provided guidance to Wilson Sonsini and Company management on the Company Boards views on the points of negotiation. Representatives of Evercore updated the Company Board on the status of discussions
with Sponsor A and Sponsor C, the two remaining private equity sponsors, including Evercores view that it was unlikely that such sponsors would be able to increase their bids above $12.00 per share if given additional time to perform due
diligence and the effect of granting such additional time on the potential strategic transaction with Ultimate Parent.
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Between October 29 and November 2, 2016, representatives of Wilson Sonsini and
Latham & Watkins met both telephonically and in person at the offices of Latham & Watkins to finalize the terms of the merger agreement. During this period, the Transaction Committee met five times, on
October 29, October 30, October 31 and twice on November 1, each time to receive updates from representatives of Evercore and Wilson Sonsini and members of Company management, and to give direction and input on the
negotiations. At the Transaction Committee meeting on October 29, 2016, the Transaction Committee also determined to recommend to the Company Board that the payment to Evercore of a discretionary fee, which was contemplated by the Engagement Letter,
reflecting the Companys satisfaction with Evercores services be approved. Also during such period, representatives of Wilson Sonsini negotiated the terms of the Support Agreement on behalf of the Companys directors and executive
officers with Latham & Watkins, pursuant to which those persons would vote in favor of approval of the proposed transaction.
On October 30, 2016, Messrs. Carney and Tan spoke by telephone. They discussed retention programs for Company employees and agreed that
the Company would adopt a general employee retention fund of $50 million for its employees (other than its Chief Executive Officer and his direct reports), under which participants would be entitled to bonuses on the basis of continued employment
following the closing of the merger transaction, as its retention program to address the employee retention concerns after the signing and announcement of the definitive agreement. Also, the parties determined not to pursue a potential bonus program
tied to the successful sale of the Companys IP Networking business.
On October 31, 2016, Messrs. Carney and Tan met and
discussed certain key unresolved issues in the merger agreement, including the regulatory covenants, as well as further parameters on the previously discussed general employee retention fund.
Also on October 31, 2016, news reports speculated that the Company was the subject of a potential acquisition transaction and the trading
price of Company Common Stock closed at $10.60 per share (up from a closing price of $8.69 on Friday, October 28, 2016).
On
November 1, 2016, news reports speculated that Ultimate Parent was the likely acquirer in a potential acquisition of the Company and that a sale of the Companys non-fibre channel business would be contemplated. The trading price of
Company Common Stock closed at $11.24 per share.
Also on November 1, 2016, the parties finalized the negotiations on the draft of the
merger agreement. The final negotiated draft of the merger agreement contemplated (1) a termination fee of $195 million payable upon the Companys acceptance of a competing acquisition proposal and other related circumstances, (2) confirmation
that any asset sale transaction would not be a condition to closing the Company acquisition, (3) that Ultimate Parent would be required to agree to certain limited remedial measures in connection with obtaining regulatory approval, but would not be
obligated to pay a reverse termination fee, and (4) restrictions on the Companys ability to continue to engage in Ruckus-related restructuring.
Also on November 1, 2016, the Company Board met, with members of Company management and representatives of Wilson Sonsini and Evercore in
attendance. The representatives of Wilson Sonsini discussed with the members of the Company Board their fiduciary duties under Delaware law. The representatives of Evercore discussed certain financial aspects of the $12.75 per share acquisition
proposal made by Ultimate Parent, including a financial analysis of the Company based on the October Management Case, together with a summary of the updates from the September Management Case to the October Management Case, and the Research Case
Forecasts. Following this presentation, the representatives of Evercore rendered an oral opinion to the Company Board, subsequently confirmed in its written opinion dated November 2, 2016, to the effect that, as of the date of such opinion, and
based upon and subject to the assumptions, procedures, factors, qualifications and limitations set forth therein, the Merger Consideration was fair, from a financial point of view, to the holders of the shares of Company Common Stock entitled to
receive such Merger Consideration. For more information, see the section of this proxy statement entitled The Merger Opinion of Evercore Group L.L.C. beginning on page 48. The representatives of Wilson Sonsini then reviewed with
the Company Board the material terms of the
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final Merger Agreement. The members of the Company Board discussed potential reasons for and against entering into the merger. After this discussion, the Company Board, after considering the
factors more fully described in the section of this proxy statement entitled The Merger Opinion of Evercore Group L.L.C. beginning on page 48, unanimously: (1) determined that the Merger Agreement and the Merger were fair to,
advisable and in the best interests of the Companys stockholders; (2) adopted and approved the Merger Agreement and the other transactions contemplated thereby; (3) directed that a special meeting of the Companys stockholders
be held for the purposes of voting on the adoption of the Merger Agreement; and (4) recommended that the Companys stockholders vote in favor of the adoption of the Merger Agreement and approve the Merger and the other transactions
contemplated by the Merger Agreement. The Company Board also authorized members of Company management to sign the Merger Agreement. The Corporate Development Committee provided its recommendation that Evercore be paid the discretionary fee
contemplated by the Engagement Letter, reflecting the Companys satisfaction with Evercores services and the Company Board approved the payment of such fee.
On November 2, 2016, prior to the opening of trading of the Company Common Stock on NASDAQ, the Company, Ultimate Parent, Broadcom
Corporation and Merger Sub signed the Merger Agreement, and the directors and executive officers of the Company signed the Support Agreement. The Company and Ultimate Parent then issued a joint press release announcing the entry into the Merger
Agreement.
On December 19, 2016, Broadcom Corporation assigned all of its rights under the Merger Agreement and transferred all of
the issued and outstanding capital stock of Merger Sub to LSI. In accordance with the terms of the Merger Agreement, such assignment does not relieve Ultimate Parent, Broadcom Corporation or Merger Sub of any of their respective obligations under
the Merger Agreement or enlarge, alter or change any obligation of any other party under the Merger Agreement.
Reasons
for the Merger; Recommendation of the Board of Directors
At a meeting held on November 1, 2016, the Company Board unanimously
(1) determined that the Merger Agreement and Merger were fair to, advisable and in the best interests of the Companys stockholders, (2) adopted and approved the Merger Agreement and the other transactions contemplated thereby,
(3) directed that a special meeting of the Companys stockholders be held for the purposes of voting on the adoption of the Merger Agreement, and (4) recommended that the Companys stockholders vote in favor of the adoption of
the Merger Agreement and approve the Merger and the other transactions contemplated by the Merger Agreement.
In evaluating the Merger
Agreement, the Merger and the other transactions contemplated by the Merger Agreement, the Company Board consulted with our senior management team, as well as our outside legal and financial advisors, and considered a number of factors, among
others, including the following material factors (which factors are not necessarily presented in any order of relative importance):
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the Company Boards knowledge and understanding of the Company and the industry in which it operates and the Company Boards view of the Companys business strategy, current and projected financial
condition, current earnings and earnings prospects;
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the fact that the Merger Consideration of $12.75 per share in cash to be received by the holders of Company Common Stock in the Merger represents a significant premium over the market price at which Company Common Stock
traded prior to the announcement of the execution of the Merger Agreement, including the fact that the Merger Consideration of $12.75 per share in cash represents an approximate premium of:
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46.7% based on the closing price per share of $8.69 on October 28, 2016, the last full trading day before the publication of media reports concerning a potential strategic transaction involving the Company; and
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38.1% based on the average closing price per share of $9.18 over the 3-month period ending November 1, 2016, the last trading day prior to the public announcement of the execution of the Merger Agreement;
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Evercores oral opinion delivered to the Company Board on November 1, 2016, and subsequently confirmed by the written opinion of Evercore to the Company Board dated November 2, 2016, to the effect that,
as of the date of such opinion, and based upon and subject to the assumptions, procedures, factors, qualifications and limitations set forth in such written opinion, the Merger Consideration was fair, from a financial point of view, to the holders
of the shares of Company Common Stock entitled to receive such Merger Consideration, and Evercores related financial analyses presented to the Company Board in connection with the delivery of its oral opinion. You are urged to read
Evercores written opinion, which is set forth in its entirety in
Annex B
to this proxy statement, and the discussion of the opinion and Evercores analyses in the section of this proxy statement entitled The Merger
Opinion of Evercore Group L.L.C. beginning on page 48;
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the fact that the Merger Consideration is all cash, which provides certainty of value and liquidity to our stockholders for their shares of Company Common Stock, while eliminating the effect of long-term business and
execution risk to our stockholders, compared to continuing to operate the Company as a stand-alone entity;
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the belief of the Company Board that the Merger Consideration of $12.75 per share is more favorable to our stockholders than the potential value that might result from other alternatives reasonably available to the
Company (including the alternative of remaining a stand-alone public company and other strategic or recapitalization strategies that might be pursued as a stand-alone public company);
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the assessment that, among those other strategic alternatives, pursuing a strategic process whereby the different businesses of the Company are sold in separate transactions would:
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not be reasonably likely to create greater value for our stockholders than the Merger, taking into account execution risk, business, competitive, industry and market risk, tax implications, and the Company Boards
view of the separate value of the businesses of the Company after considering the advice of Company management and Evercore;
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potentially jeopardize the interest of Ultimate Parent and other potential bidders in a potential strategic transaction for the entire Company; and
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potentially divert management attention and resources from the operation of the Companys business, including other strategic opportunities and operational matters;
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after reviewing publicly available and other financial information with respect to Ultimate Parent with the assistance of legal and financial advisors, and considering Ultimate Parents representations contained in
the Merger Agreement, the Company Boards assessment that Ultimate Parent has adequate financial resources to pay the aggregate Merger Consideration and aggregate Cash Out Payments and to pay off existing indebtedness of the Company;
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the fact that the obligations of Parent, Ultimate Parent and Merger Sub to consummate the Merger are not subject to any conditions relating to the financing of the Merger;
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the fact that the Merger Consideration of $12.75 per share reflected extensive negotiations between the parties and their respective advisors, and the Company Boards and its financial advisors belief that
the agreed price was the highest price per share Ultimate Parent was willing to agree to and higher than any other proposal received or likely to be received by the Company;
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the fact that the Company conducted a process of soliciting alternative offers to the Ultimate Parent offer, during which the Company contacted eight additional parties identified as the most likely interested
candidates for an acquisition transaction, including four strategic parties and four private equity sponsors; from that process, no strategic parties were interested in engaging in discussions with the Company, and, of the four private equity
sponsors contacted, only two made proposals to acquire the Company, both of which were significantly below the $12.75 per share offer price of Ultimate Parent;
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the terms and conditions of the Merger Agreement and related transaction documents, including:
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the limited and otherwise customary conditions to the parties obligations to consummate the Merger, including the commitment by Parent to obtain applicable regulatory approvals and assume the risks related to
certain conditions and requirements that may be imposed by regulators in connection with securing such approvals, and the absence of a financing condition;
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the requirement that the Merger will only be effective if approved by the holders of a majority of the outstanding shares of Company Common Stock;
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prior to approval of the Merger by our stockholders, our ability, under certain limited circumstances, to furnish information to, and conduct negotiations with, third parties regarding an Acquisition Proposal (as
defined below);
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prior to approval of the Merger by our stockholders, our ability, subject to certain conditions, to terminate the Merger Agreement in order to accept a Superior Proposal (as defined below), subject to paying or causing
to be paid to Parent the Company Termination Fee of $195 million (equal to approximately 3% of the equity value of the transaction), which the Company Board determined, with the assistance of its legal and financial advisors, was reasonable in light
of, among other things, the benefits of the Merger to our stockholders, the typical size of such fees in similar transactions and the belief that a fee of such size would not preclude or unreasonably restrict the emergence of alternative transaction
proposals as more fully described in the section of this proxy statement entitled The Merger Agreement Termination Fee beginning on page 102;
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our ability to seek to specifically enforce Parents obligations under the Merger Agreement, including Parents obligations to consummate the Merger, and our ability to seek to obtain damages in the event of
willful breach by Parent of its obligations if the Merger Agreement is terminated;
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the ability of the Company Board, subject to certain conditions, to change its recommendation supporting the Merger, regardless of the existence of a competing or superior Acquisition Proposal, to the extent the Company
Board determines that such action is necessary to comply with its fiduciary duties to our stockholders under the DGCL;
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the customary nature of the other representations, warranties and covenants of the Company in the Merger Agreement;
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the fact that the terms and conditions of the Merger Agreement minimize, to the extent reasonably practicable, the risk that a condition to closing would not be satisfied and also provide reasonable flexibility to
operate our business during the pendency of the Merger; and
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the fact that consummation of the Merger is not conditioned on consummation of any Potential Asset Sale Transaction (as defined in the section of this proxy statement entitled The Merger Agreement Potential
Asset Sale Transaction beginning on page 85);
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after multiple meetings with management, the Company Boards consideration of our business, strategy, assets, financial condition, capital requirements, results of operations, competitive position, historical and
projected financial performance, the nature of the industry in which we compete, the risks and upside potential relating thereto and the potential impact of those factors on the trading price of Company Common Stock (which cannot be quantified
numerically);
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the fact that the Merger Agreement permits the Company to declare, set aside and pay regular quarterly cash dividends of up to $0.055 per share of Company Common Stock during the period prior to the consummation of the
Merger;
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the risks and uncertainties associated with maintaining our existence as an independent company and the opportunities presented by the Merger, including the risks and uncertainties with respect to:
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achieving our growth plans in light of the current and foreseeable market conditions, including the risks and uncertainties in the U.S. and global economy generally and the high-performance storage and IP networking
industries specifically;
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the general risks and market conditions that could affect the price of our common stock;
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the risk factors set forth in our Form 10-K for the fiscal year ended October 29, 2016 and subsequent reports filed with the SEC and the matters described under the section of this proxy statement entitled
Cautionary Statement Regarding Forward-Looking Statements, beginning on page 22; and
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the inherent uncertainty of attaining managements internal financial projections, including those set forth in the section of this proxy statement entitled The Merger Certain Company Forecasts
beginning on page 58, including the fact that our actual financial results in future periods could differ materially and adversely from the projected results;
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the extensive negotiation process with Ultimate Parent, which was conducted at arms length, the fact that our senior management and our legal advisors were directly involved throughout the negotiations, and the
fact that a committee of the Company Board met regularly to provide oversight and direction over the negotiation process; and
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the availability of appraisal rights under Delaware law to holders of shares of Company Common Stock who do not vote in favor of the adoption of the Merger Agreement and comply with all of the required procedures under
Delaware law, which provides those eligible stockholders with an opportunity to have a Delaware court determine the fair value of their shares, which may be more than, less than, or the same as the amount such stockholders would have received under
the Merger Agreement.
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The Company Board also considered a variety of potentially negative factors in its deliberations
concerning the Merger Agreement and the Merger, including the following (which factors are not necessarily presented in any order of relative importance):
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the fact that the consummation of the Merger will generally preclude the Companys stockholders from having any ongoing equity participation in the Company and, as such, current stockholders of the Company will
cease to participate in the Companys future earnings or growth, if any, or to benefit from increases, if any, in the value of Company Common Stock, including any appreciation in value that could be realized as a result of improvements to the
Companys operations;
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the potential risk of diverting management attention and resources from the operation of the Companys business, including other strategic opportunities and operational matters, while working toward the
consummation of the Merger;
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the potential negative effect of the pendency of the transaction on the Companys business, including its relationships with employees, customers, contract manufacturers, component suppliers, channel partners and
other business partners;
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the fact that the Company has incurred and will continue to incur significant transaction costs and expenses in connection with the Merger, regardless of whether the Merger is consummated;
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the risk that certain key members of our senior management might choose not to remain employed with the Company prior to the consummation of the Merger;
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that we are obligated to pay Parent the Company Termination Fee if the Merger Agreement is terminated under certain circumstances;
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that, subject to certain limited exceptions, during the term of the Merger Agreement, the Company is prohibited
from soliciting, initiating, seeking or knowingly encouraging, facilitating, inducing or
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supporting any announcement, communication, inquiry, expression of interest, proposal or offer with respect to a competing proposal for the Company;
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that the Merger is conditioned on the receipt of regulatory approvals and clearances, including the expiration or termination of the waiting period under the HSR Act, review and clearance by CFIUS in the United States,
and the receipt of affirmative approval or clearance required under the antitrust laws of the Peoples Republic of China, the European Union and Japan, which present a risk that the applicable governmental authorities may condition their grant
of required approvals or consents on the imposition of unfavorable terms or conditions or that such approvals and consents will not be able to be obtained at all, and, therefore, the Merger may not be consummated in a timely manner or at all;
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the risk that the Merger may not be consummated despite the parties efforts or that consummation may be unduly delayed, even if the requisite approval is obtained from our stockholders, including the possibility
that conditions to the parties obligations to consummate the Merger may not be satisfied, the potential resulting disruptions to the Companys business, and the effect on the trading price of Company Common Stock;
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the fact that the Company may be unable to obtain stockholder approval for the transactions contemplated by the Merger Agreement;
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the potential negative effect of the pendency of a Potential Asset Sale Transaction on the Companys business, including the diversion of management and employee attention, potential employee attrition and the
potential effect on our business and our customer, partner and supplier relationships;
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the Merger Agreements restrictions on the conduct of the Companys business prior to the consummation of the Merger, generally requiring the Company to conduct its business only in the ordinary course,
subject to specific limitations, which may delay or prevent the Company from undertaking business opportunities that may arise pending consummation of the Merger;
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the fact that the Companys executive officers and directors may have interests in the transactions contemplated by the Merger Agreement that are different from, or in addition to, those of the Companys other
stockholders, and the risk that these interests might influence their decision with respect to the transactions contemplated by the Merger Agreement (as more fully described in the section of this proxy statement entitled The Merger
Interests of Certain Persons in the Merger beginning on page 64); and
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the fact that the receipt of cash in exchange for shares of Company Common Stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes.
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After considering the foregoing potentially positive and potentially negative factors, the Company Board concluded that the potentially
positive factors relating to the Merger Agreement and the Merger outweighed the potentially negative factors.
The foregoing discussion of
the information and factors considered by the Company Board is not intended to be exhaustive, but includes the material factors considered by the Company Board. In view of the variety of factors considered in connection with its evaluation of the
Merger, the Company Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have
given different weights to different factors. The Company Board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The
Company Board based its recommendation on the totality of the information presented to it, including the input from the Companys senior management and advisors.
In considering the recommendation of the Company Board with respect to the proposal to adopt the Merger Agreement, you should be aware that
our directors and executive officers have interests in the Merger that are different from, or in addition to, yours. The Company Board was aware of and considered these interests, among
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other matters, in evaluating and negotiating the Merger Agreement and the Merger, and in recommending that the Merger Agreement be adopted by the stockholders of the Company. For more
information, see the section of this proxy statement entitled The Merger Interests of Certain Persons in the Merger beginning on page 64.
The Company Board unanimously recommends that you vote FOR the proposal to adopt the Merger Agreement; FOR the
proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies; and FOR the Brocade Advisory Proposal on Specified Compensation.
Opinion of Evercore Group L.L.C.
The Company retained Evercore to act as its financial advisor in connection with the Merger. As part of this engagement, the Company requested
that Evercore evaluate whether the Merger Consideration is fair, from a financial point of view, to the holders of the shares of Company Common Stock entitled to receive such Merger Consideration. At a meeting of the Company Board on November 1,
2016, Evercore rendered an oral opinion to the Company Board, subsequently confirmed in its written opinion dated November 2, 2016, to the effect that, as of such date, and based upon and subject to the assumptions, procedures, factors,
qualifications and limitations set forth in Evercores written opinion, the Merger Consideration was fair, from a financial point of view, to the holders of the shares of Company Common Stock entitled to receive such Merger Consideration.
The full text of Evercores written opinion dated November 2, 2016 is attached as
Annex B
and is incorporated by reference in
its entirety to this proxy statement. Evercores opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Evercore in rendering
its opinion. We encourage all stockholders of the Company to read Evercores opinion carefully and in its entirety. Evercores opinion was directed to the Company Board and addresses only the fairness from a financial point of view of the
Merger Consideration to the holders of shares of Company Common Stock entitled to receive such Merger Consideration, as of the date of the opinion, and not any other aspects of the Merger Consideration or the Merger. The summary of the Evercore
opinion set forth below is qualified in its entirety by reference to the full text of the opinion.
In connection with its opinion,
Evercore:
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reviewed certain publicly available business and financial information relating to the Company that Evercore deemed to be relevant, including publicly available research analysts estimates;
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reviewed certain non-public historical financial statements and other non-public historical financial and operating data relating to the Company prepared and furnished to Evercore by management of the Company;
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reviewed certain non-public projected financial data relating to the Company under alternative business assumptions prepared and furnished to Evercore by management of the Company;
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reviewed certain non-public historical and projected operating data relating to the Company prepared and furnished to Evercore by management of the Company;
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discussed the past and current operations, financial projections and current financial condition of the Company with management of the Company (including their views on the risks and uncertainties of achieving such
projections);
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reviewed the reported prices and the historical trading activity of Company Common Stock;
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compared the financial performance of the Company and its stock market trading multiples with those of certain other publicly traded companies that Evercore deemed relevant;
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compared the financial performance of the Company and the valuation multiples relating to the Merger with those of certain other transactions that Evercore deemed relevant;
|
48
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reviewed the Merger Agreement; and
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performed such other analyses and examinations and considered such other factors that Evercore deemed appropriate.
|
For purposes of its analysis and opinion, Evercore assumed and relied upon, without undertaking any independent verification of, the accuracy
and completeness of all of the information publicly available, and all of the information supplied or otherwise made available to, discussed with, or reviewed by Evercore, and Evercore assumed no liability therefor. With respect to the projected
financial data relating to the Company referred to above, Evercore assumed that it had been reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of management of the Company as to the future
financial performance of the Company under the alternative business assumptions reflected therein. Evercore expressed no view as to any projected financial data relating to the Company or the assumptions on which they are based. For more information
about the financial projections, see the section of this proxy statement entitled The Merger Certain Company Forecasts, beginning on page 58.
For purposes of rendering its opinion, Evercore assumed, in all respects material to its analysis, that the representations and warranties of
each party contained in the Merger Agreement are true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the Merger Agreement and that all conditions to the consummation of the Merger
will be satisfied without material waiver or modification thereof. Evercore further assumed that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of the Merger will be obtained without any material
delay, limitation, restriction or condition that would have an adverse effect on the consummation of the Merger or materially reduce the benefits to the holders of Company Common Stock of the Merger.
Evercore did not make or assume any responsibility for making any independent valuation or appraisal of the assets or liabilities of the
Company, nor was Evercore furnished with any such appraisals, nor did Evercore evaluate the solvency or fair value of the Company under any state or federal laws relating to bankruptcy, insolvency or similar matters. Evercores opinion was
necessarily based upon information made available to Evercore as of the date of the opinion, and financial, economic, market and other conditions as they existed and could be evaluated on the date of the opinion. It is understood that subsequent
developments may affect Evercores opinion and that Evercore does not have any obligation to update, revise or reaffirm its opinion.
Evercore was not asked to pass upon, and expressed no opinion with respect to, any matter other than the fairness to the holders of Company
Common Stock, from a financial point of view, of the Merger Consideration. Evercore did not express any view on, and its opinion does not address, the fairness of the proposed transaction to, or any consideration received in connection therewith by,
the holders of any other securities, creditors or other constituencies of the Company, nor as to the fairness of the amount or nature of any compensation (other than the Merger Consideration in respect of Company Common Stock) to be paid or payable
to any of the officers, directors or employees of the Company, or any class of such persons, whether relative to the Merger Consideration or otherwise. For purposes of its opinion, Evercore assumed that any modification to the structure of the
transaction will not vary in any respect material to Evercores analysis. Evercores opinion did not address the relative merits of the Merger as compared to other business or financial strategies that might be available to the Company,
nor did it address the underlying business decision of the Company to engage in the Merger. Evercores opinion did not constitute a recommendation to the Company Board or to any other persons in respect of the Merger, including as to how any
holder of shares of Company Common Stock should vote or act in respect of the Merger. Evercore is not a legal, regulatory, accounting or tax expert and Evercore assumed the accuracy and completeness of assessments by the Company and its advisors
with respect to legal, regulatory, accounting and tax matters.
Summary of Material Financial Analyses
The following is a brief summary of the material financial analyses that were reviewed with the Company Board on November 1, 2016. The summary
of Evercores financial analyses described below is not a complete
49
description of the analyses underlying its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant
methods of financial analyses and the application of those methods to the particular circumstances and, therefore, is not readily susceptible to summary description.
In arriving at its opinion, Evercore did not draw, in isolation, conclusions from or with regard to any factor or analysis considered by it.
Rather, Evercore made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of the analyses. Considering selected portions of the analyses and reviews in the summary set forth
below, without considering the analyses and reviews as a whole, could create an incomplete or misleading view of the analyses and reviews underlying Evercores opinion.
For purposes of its analyses and reviews, Evercore considered industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of the Company. No company, business or transaction used in Evercores analyses and reviews as a comparison is identical to the Company, the Merger or the Merger Consideration,
and an evaluation of the results of those analyses and reviews is not entirely mathematical. Rather, the analyses and reviews involve complex considerations and judgments concerning financial and operating characteristics and other factors that
could affect the acquisition, public trading or other values of the companies, businesses or transactions used in Evercores analyses and reviews. The estimates contained in Evercores analyses and reviews and the ranges of valuations
resulting from any particular analysis or review are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by Evercores analyses and
reviews. In addition, analyses and reviews relating to the value of companies, businesses or securities do not purport to be appraisals or to reflect the prices at which companies, businesses or securities actually may be sold. Accordingly, the
estimates used in, and the results derived from, Evercores analyses and reviews are inherently subject to substantial uncertainty.
The summary of the analyses and reviews provided below includes information presented in tabular format. In order to fully understand
Evercores analyses and reviews, the tables must be read together with the full text of each summary. The tables alone do not constitute a complete description of Evercores analyses and reviews. Considering the data in the tables below
without considering the full description of the analyses and reviews, including the methodologies and assumptions underlying the analyses and reviews, could create a misleading or incomplete view of Evercores analyses and reviews.
Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as
it existed on or before October 28, 2016 (the last full trading day before the publication of media reports concerning a potential strategic transaction involving the Company) and is not necessarily indicative of current market conditions.
Discounted Cash Flow Analysis
As part of
its analysis, Evercore performed a discounted cash flow analysis, which is a method used to estimate the implied present value of an asset by calculating the present value of the estimated future cash flows to be generated by that asset. The present
value of those future cash flows is then obtained by discounting those future cash flows or amounts by a discount rate.
Evercores
discounted cash flow analysis was intended to estimate the implied present value, as of October 31, 2016, of (1) the unlevered, after-tax free cash flows that the Company would generate during the period from November 1, 2016 through October 31,
2021, plus (2) the estimated terminal value of the Company as of October 31, 2021, using both the terminal value methodology and the perpetuity growth methodology. Evercore performed its discounted cash flow analysis for the Company on a standalone
basis and assumed the mid-year cash flow discounting convention. Evercore conducted its discounted cash flow analysis based on the financial
50
projections included in the October Management Case and the Research Case Forecasts (each as defined in the section entitled The Merger Certain Company Forecasts, beginning on
page 58).
Under the terminal value multiple methodology, Evercore estimated a terminal value for the Company by applying a multiple
of 5.0x to 7.0x (representing an implied perpetuity growth rate of approximately -2.8% to 2.5% based on the assumed discount rate range) to the projected earnings before interest, tax, depreciation, amortization and stock-based compensation expense
(
Adjusted EBITDA
) of the Company in the twelve-month period ended October 31, 2021. Evercore estimated the terminal value multiple based on the financial projections included in each of the October Management Case and the Research
Case Forecasts, the trading multiples for the companies included in the selected publicly traded companies analysis described below, and its professional judgment given the nature of the Company and its business and industry. The cash flows and the
terminal value were then discounted to present value using a range of discount rates from 8.5% to 11.0%, based on an estimate of the Companys weighted average cost of capital. Evercore estimated the Companys weighted average cost of
capital based on application of the capital asset pricing model, details regarding the capitalization of the companies included in the selected publicly traded companies analysis described below, and its professional judgment given the nature of the
Companys business and its industry. The resulting range of implied enterprise values for the Company was then reduced by the amount of the Companys projected net debt (calculated as debt less cash and cash equivalents) as of October 31,
2016 and the amount of the Companys noncontrolling interests (calculated as the noncontrolling interest balance as of July 31, 2016 based on available public filings), to produce a range of implied equity values for the Company. Under the
terminal value multiple methodology, Evercores discounted cash flow analysis indicated implied per-share equity values for the Company on a standalone basis of approximately (a) $10.45 to $14.65 based on the financial projections included
in the October Management Case and (b) $8.10 to $11.40 based on the financial projections included in the Research Case Forecasts, in each case, rounded to the nearest five cents.
Under the perpetuity growth methodology, Evercore estimated a terminal value for the Company by applying a perpetuity growth rate of 0.0% to
1.0% to the estimated unlevered free cash flow for the twelve-month period ended October 31, 2021, adjusted to assume an equivalent level of projected capital expenditure and projected depreciation and amortization. The cash flows and terminal value
were then discounted to present value using the same range of discount rates as described above, and converted to implied equity value using the same adjustments as described above. Under the perpetuity growth methodology, Evercores discounted
cash flow analysis indicated implied per-share equity values for the Company on a standalone basis of approximately (a) $10.85 to $15.90 based on the financial projections included in the October Management Case and (b) $8.20 to $11.95
based on the financial projections included in the Research Case Forecasts, in each case, rounded to the nearest five cents.
Selected Publicly Traded
Companies Analysis
Evercore reviewed publicly available financial and market information for the Company and the selected public
companies listed in the table below, which were the companies Evercore deemed most relevant to consider in relation to the Company, based on Evercores professional judgment and experience.
Evercore reviewed, among other things, the share prices of the selected public companies as a multiple of estimated earnings per share
(
EPS
), or the ratio of share price over earnings (the
P/E ratio
), for calendar years 2016 and 2017. The EPS for all of the selected public companies generally excludes the impact of stock-based compensation
expense, amortization of acquired finite-lived intangibles and certain other expenses that Evercore considered, in its professional judgment and experience, to be non-recurring in nature. The financial projections of the selected publicly traded
companies used by Evercore for this analysis were based on publicly available estimates from research analysts and, in the case of the Company, based on, where available, historical financial and operating data for the period from January 1, 2016
through October 31, 2016 and the financial projections included in the October Management Case and the Research Case Forecasts for the period from November 1, 2016 through the end of fiscal year 2021. The P/E ratios, as well as the revenue and
Adjusted EBITDA multiples, for calendar years 2016 and 2017 for each of the selected public companies are set forth in the table below. Moreover, the Companys EPS estimates for the calendar years 2016 and 2017 were calculated
51
by applying fractional calendarization to the fiscal year figures in the October Management Case and the Research Case Forecasts to arrive at calendar year figures.
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Selected Public Company
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Enterprise Value /
Revenue
|
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|
Enterprise Value /
Adjusted EBITDA
|
|
|
P/E
|
|
|
CY2016E
|
|
|
CY2017E
|
|
|
CY2016E
|
|
|
CY2017E
|
|
|
CY2016E
|
|
|
CY2017E
|
|
Enterprise Networking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cisco
|
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|
2.4x
|
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|
|
2.4x
|
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|
|
7.2x
|
|
|
|
7.0x
|
|
|
|
13.1x
|
|
|
|
12.7x
|
|
Citrix
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|
3.6x
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|
|
|
3.4x
|
|
|
|
10.1x
|
|
|
|
9.6x
|
|
|
|
16.5x
|
|
|
|
15.2x
|
|
Juniper
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|
1.9x
|
|
|
|
1.8x
|
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|
|
6.9x
|
|
|
|
6.5x
|
|
|
|
13.2x
|
|
|
|
12.4x
|
|
F5 Networks
|
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|
3.9x
|
|
|
|
3.7x
|
|
|
|
10.1x
|
|
|
|
9.2x
|
|
|
|
18.0x
|
|
|
|
16.7x
|
|
Arista
|
|
|
5.3x
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|
|
4.4x
|
|
|
|
18.2x
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|
|
|
15.8x
|
|
|
|
31.0x
|
|
|
|
26.9x
|
|
Ubiquiti
|
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|
5.7x
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|
|
5.1x
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|
|
15.8x
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|
|
|
14.4x
|
|
|
|
19.9x
|
|
|
|
18.0x
|
|
NetScout
|
|
|
2.2x
|
|
|
|
2.1x
|
|
|
|
8.5x
|
|
|
|
7.8x
|
|
|
|
15.3x
|
|
|
|
13.5x
|
|
Mellanox
|
|
|
2.6x
|
|
|
|
2.2x
|
|
|
|
9.7x
|
|
|
|
8.2x
|
|
|
|
13.2x
|
|
|
|
11.3x
|
|
Gigamon
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|
|
6.0x
|
|
|
|
4.8x
|
|
|
|
24.8x
|
|
|
|
19.2x
|
|
|
|
49.2x
|
|
|
|
32.0x
|
|
Netgear
|
|
|
1.0x
|
|
|
|
1.0x
|
|
|
|
7.7x
|
|
|
|
7.3x
|
|
|
|
17.2x
|
|
|
|
16.4x
|
|
Infoblox (Unaffected)
1
|
|
|
3.1x
|
|
|
|
2.9x
|
|
|
|
20.4x
|
|
|
|
15.9x
|
|
|
|
45.0x
|
|
|
|
32.9x
|
|
Radware
|
|
|
1.5x
|
|
|
|
1.4x
|
|
|
|
18.7x
|
|
|
|
16.5x
|
|
|
|
NM
|
2
|
|
|
35.8x
|
|
A10 Networks
|
|
|
1.8x
|
|
|
|
1.6x
|
|
|
|
NM
|
3
|
|
|
24.5x
|
|
|
|
NM
|
4
|
|
|
NM
|
2
|
Extreme Networks
|
|
|
0.7x
|
|
|
|
0.6x
|
|
|
|
5.8x
|
|
|
|
6.3x
|
|
|
|
13.1x
|
|
|
|
10.3x
|
|
Aerohive Networks
|
|
|
1.4x
|
|
|
|
1.2x
|
|
|
|
NM
|
4
|
|
|
NM
|
4
|
|
|
NM
|
4
|
|
|
NM
|
4
|
Mean
|
|
|
2.9x
|
|
|
|
2.6x
|
|
|
|
12.6x
|
|
|
|
12.0x
|
|
|
|
22.1x
|
|
|
|
19.6x
|
|
Median
|
|
|
2.4x
|
|
|
|
2.2x
|
|
|
|
10.1x
|
|
|
|
9.4x
|
|
|
|
16.8x
|
|
|
|
16.4x
|
|
|
|
|
|
|
|
|
Network Security
:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palo Alto Networks
|
|
|
8.8x
|
|
|
|
6.7x
|
|
|
|
NM
|
3
|
|
|
NM
|
3
|
|
|
NM
|
2
|
|
|
NM
|
2
|
Checkpoint
|
|
|
7.5x
|
|
|
|
7.0x
|
|
|
|
13.7x
|
|
|
|
12.8x
|
|
|
|
18.3x
|
|
|
|
17.5x
|
|
Fortinet
|
|
|
3.7x
|
|
|
|
3.1x
|
|
|
|
21.8x
|
|
|
|
17.0x
|
|
|
|
NM
|
2
|
|
|
40.9x
|
|
FireEye
|
|
|
2.8x
|
|
|
|
2.4x
|
|
|
|
NM
|
4
|
|
|
NM
|
3
|
|
|
NM
|
4
|
|
|
NM
|
4
|
Mean
|
|
|
5.7x
|
|
|
|
4.8x
|
|
|
|
17.7x
|
|
|
|
14.9x
|
|
|
|
18.3x
|
|
|
|
29.2x
|
|
Median
|
|
|
5.6x
|
|
|
|
4.9x
|
|
|
|
17.7x
|
|
|
|
14.9x
|
|
|
|
18.3x
|
|
|
|
29.2x
|
|
|
|
|
|
|
|
|
Communications Equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nokia
|
|
|
0.7x
|
|
|
|
0.7x
|
|
|
|
6.7x
|
|
|
|
5.6x
|
|
|
|
29.2x
|
|
|
|
17.5x
|
|
Motorola Solutions
|
|
|
2.6x
|
|
|
|
2.6x
|
|
|
|
9.4x
|
|
|
|
9.1x
|
|
|
|
16.9x
|
|
|
|
16.1x
|
|
Ericsson
|
|
|
0.6x
|
|
|
|
0.6x
|
|
|
|
6.2x
|
|
|
|
5.6x
|
|
|
|
16.8x
|
|
|
|
14.5x
|
|
ZTE Corp.
|
|
|
0.6x
|
|
|
|
0.6x
|
|
|
|
9.1x
|
|
|
|
8.7x
|
|
|
|
17.1x
|
|
|
|
15.8x
|
|
Ciena
|
|
|
1.1x
|
|
|
|
1.0x
|
|
|
|
7.6x
|
|
|
|
6.8x
|
|
|
|
11.9x
|
|
|
|
9.6x
|
|
Infinera
|
|
|
1.1x
|
|
|
|
1.1x
|
|
|
|
8.1x
|
|
|
|
8.6x
|
|
|
|
24.7x
|
|
|
|
26.1x
|
|
ADTRAN
|
|
|
1.2x
|
|
|
|
1.2x
|
|
|
|
14.2x
|
|
|
|
11.4x
|
|
|
|
26.7x
|
|
|
|
24.3x
|
|
ADVA AG
|
|
|
0.6x
|
|
|
|
0.5x
|
|
|
|
5.8x
|
|
|
|
4.0x
|
|
|
|
19.8x
|
|
|
|
10.3x
|
|
Mean
|
|
|
1.1x
|
|
|
|
1.1x
|
|
|
|
8.4x
|
|
|
|
7.5x
|
|
|
|
20.4x
|
|
|
|
16.8x
|
|
Median
|
|
|
0.9x
|
|
|
|
0.9x
|
|
|
|
7.9x
|
|
|
|
7.7x
|
|
|
|
18.5x
|
|
|
|
16.0x
|
|
(1)
|
On 9/19/2016, Vista announced its acquisition of Infoblox; Infoblox financials show unaffected data as of 9/16/2016
|
(2)
|
Denoted as NM Not Meaningful as multiple is greater than 50.0x
|
(3)
|
Denoted as NM Not Meaningful as multiple is greater than 25.0x
|
(4)
|
Denoted as NM Not Meaningful as multiple is negative
|
Evercore estimated a
reference range of P/E ratios of 9.0x to 13.0x for the fiscal year ending October 31, 2017, based on its review of the P/E ratios for the selected public companies for calendar years 2016 and 2017 (including taking into account growth rates and
other relevant considerations relating to the Company and the
52
selected public companies identified above) and its experience and professional judgment. This analysis indicated implied equity values per share for the Company of approximately (a) $9.30
to $13.45 based on the financial projections included in the October Management Case and (b) $9.05 to $13.05 based on the financial projections included in the Research Case Forecasts, in each case, rounded to the nearest five cents.
Selected Precedent Transactions Analysis
Evercore reviewed, to the extent publicly available, financial information relating to 28 precedent transactions involving companies that
Evercore considered to be relevant to the Companys business and industry. Evercore selected these transactions because they represented transactions of which Evercore was aware that were announced between July 2008 and October 2016 involving
companies in the networking infrastructure hardware and software industry verticals, which Evercore considered, in its professional judgment and experience, most relevant to the proposed transaction. No company, business or transaction used in this
analysis is identical or directly comparable to the Company or the proposed transaction. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments
concerning differences in financial and operating characteristics and other factors that could affect the relative values of the selected companies.
Evercore reviewed transaction values and calculated the enterprise value implied for each target company (based on the consideration paid in
the selected transaction) as a multiple of the target companys estimated Adjusted EBITDA (based on publicly available research analysts estimates) over the next 12 months (
NTM
, estimated for the next 12 month period
starting from the date of transaction announcement). The financial data used by Evercore for the selected transactions were based on publicly available information at the time of announcement of the relevant transaction.
53
The announcement date, enterprise value, and enterprise value to NTM Adjusted EBITDA multiples
for each of the precedent transactions are set forth in the table below.
|
|
|
|
|
|
|
|
|
|
|
Announcement
Date
|
|
Acquirer
|
|
Target
|
|
Enterprise Value
(in millions)
|
|
|
Enterprise Value /
NTM Adjusted
EBITDA
|
9/19/2016
|
|
Vista Equity Partners
|
|
Infoblox
|
|
|
$1,339
|
|
|
20.8x
|
9/14/2016
|
|
Extreme Networks
|
|
Zebra Technologies, WLAN Business
|
|
|
$55
|
|
|
NA
|
7/8/2016
|
|
Siris Capital
|
|
Polycom
|
|
|
$1,300
|
|
|
7.1x
|
6/15/2016
|
|
Cavium
|
|
QLogic
|
|
|
$988
|
|
|
7.9x
|
4/4/2016
|
|
Brocade
|
|
Ruckus Wireless
|
|
|
$1,246
|
|
|
16.6x
|
10/12/2015
|
|
Dell
|
|
EMC
|
|
|
$68,378
|
|
|
9.2x
|
5/27/2015
|
|
Fortinet
|
|
Meru Networks
|
|
|
$34
|
|
|
NA
|
4/22/2015
|
|
Francisco Partners
|
|
Procera Networks
|
|
|
$143
|
|
|
NA
|
3/2/2015
|
|
HP
|
|
Aruba Networks
|
|
|
$2,772
|
|
|
11.9x
|
2/25/2015
|
|
Avago Technologies
|
|
Emulex
|
|
|
$609
|
|
|
6.2x
|
12/15/2014
|
|
Thoma Bravo
|
|
Riverbed Technology
|
|
|
$3,434
|
|
|
9.7x
|
11/10/2014
|
|
Mitel Networks
|
|
ShoreTel
|
|
|
$505
|
|
|
15.0x
|
10/13/2014
|
|
NetScout
|
|
Danaher Communications Business
|
|
|
$2,619
|
|
|
NA
|
4/15/2014
|
|
Zebra Technologies
|
|
Motorola Solutions, Enterprise Business
|
|
|
$3,450
|
|
|
NA
|
12/16/2013
|
|
Avago Technologies
|
|
LSI
|
|
|
$5,905
|
|
|
11.5x
|
11/13/2013
|
|
Hon Hai
|
|
Ubee Interactive
|
|
|
$781
|
|
|
NA
|
11/11/2013
|
|
Mitel
|
|
Aastra Technologies
|
|
|
$281
|
|
|
7.0x
|
9/12/2013
|
|
Extreme Networks
|
|
Enterasys Networks
|
|
|
$180
|
|
|
NA
|
2/4/2013
|
|
Oracle
|
|
Acme Packet
|
|
|
$1,660
|
|
|
29.2x
|
3/26/2012
|
|
Oclaro
|
|
Opnext
|
|
|
$138
|
|
|
43.3x
|
1/30/2012
|
|
Siemens
|
|
RuggedCom Inc.
|
|
|
$381
|
|
|
NA
|
12/9/2011
|
|
Thoma Bravo
|
|
Blue Coat Systems
|
|
|
$890
|
|
|
11.3x
|
11/7/2011
|
|
Siris Capital Group (Consortium)
|
|
Tekelec
|
|
|
$510
|
|
|
9.0x
|
7/19/2011
|
|
Riverbed Technology
|
|
Zeus Technology
|
|
|
$125
|
|
|
NA
|
11/16/2010
|
|
Juniper Networks
|
|
Trapeze Networks
|
|
|
$152
|
|
|
NA
|
11/11/2009
|
|
HP
|
|
3Com
|
|
|
$2,798
|
|
|
21.7x
|
10/1/2009
|
|
Cisco Systems
|
|
Tandberg
|
|
|
$3,300
|
|
|
NA
|
7/21/2008
|
|
Brocade
|
|
Foundry
|
|
|
$2,000
|
|
|
13.7x
|
|
|
|
|
|
|
|
75
th
Percentile:
|
|
|
16.6x
|
|
|
|
|
|
|
|
Mean:
|
|
|
14.8x
|
|
|
|
|
|
|
|
Median:
|
|
|
11.5x
|
|
|
|
|
|
|
|
25
th
Percentile:
|
|
|
9.0x
|
Evercore then applied a reference range of NTM Adjusted EBITDA multiples of 7.0x to 11.0x, derived by Evercore
based on its review of the precedent transactions (including taking into account growth rates and other relevant considerations relating to the Company and the precedent transactions identified above) and its experience and professional judgment, to
the estimated NTM Adjusted EBITDA as of October 31, 2016 of the Company, based on the research analysts estimates of NTM Adjusted EBITDA included in the Research Case Forecasts. A range of implied equity values for the Company was then
calculated by reducing the range of implied enterprise values by the amount of the Companys projected net debt (calculated as debt less cash and cash equivalents) and noncontrolling interests as of October 31, 2016. This analysis indicated a
per-share equity value reference range of approximately $9.80 to $15.85 for the Company, rounded to the nearest five cents.
54
Sum of the Parts Analysis
Evercore conducted a sum of the parts valuation analysis to calculate the enterprise value of four components of the Companys business
(its Storage Networking component; its Switching, Routing, and Analytics (
SRA
) and Software Networking component; its Campus component; and its Ruckus component) on a stand-alone basis, using the discounted cash flow methodology
and the revenue multiple methodology, and based on forecasts included in the October Management Case. In its analysis, and upon advice of the Companys management, Evercore assumed no transactional costs or tax leakage costs in the separation
of the Company into its various components.
For the Storage Networking component, Evercore performed a discounted cash flow analysis to
estimate the implied enterprise value as of October 31, 2016, using (1) the unlevered, after-tax free cash flows that were projected to be generated by the Company from the period from November 1, 2016 through October 31, 2021, plus (2) the
estimated terminal value of the Company as of October 31, 2021 based on a perpetuity growth rate of -6.0% to -4.0%, reflecting the Companys perspective on the prospects for the Storage Networking component. The total cash flows were then
discounted to present value using an estimate range of discount rates from 8.5% to 11.0%. Evercore estimated the Storage Networking components weighted average cost of capital based on application of the capital asset pricing model and its
professional judgment given the nature of the Storage Networking component. The resulting range of implied enterprise values for the Storage Networking component was approximately $2.8 billion to $3.6 billion.
For the SRA and Software Networking component, Evercore performed a discounted cash flow analysis to estimate the implied enterprise value as
of October 31, 2016, using (1) the unlevered, after-tax free cash flows that were projected to be generated by the Company from the period from November 1, 2016 through October 31, 2026, plus (2) the estimated terminal value of the Company as of
October 31, 2026 based on an Adjusted EBITDA multiple of 10.0x to 12.0x. Evercore estimated the terminal value multiple based on the financial projections provided by the Companys management, the trading multiples for the companies included in
the selected publicly traded companies analysis, and its professional judgment given the nature of the SRA and Software Networking component. The total cash flows were then discounted to present value using an estimate range of discount rates from
8.5% to 11.0%. Evercore estimated the SRA and Software Networking components weighted average cost of capital based on application of the capital asset pricing model and its professional judgment given the nature of the SRA and Software
Networking component. The resulting range of implied enterprise values for the SRA and Software Networking component was approximately $1.1 billion to $1.6 billion.
For the Campus component, Evercore assumed a multiple range of 1.0x to 1.5x managements projection of the Companys estimated
fiscal year 2017 revenue. The multiple range was derived by analyzing the results from an analysis of the revenue multiples for the companies included in the selected publicly traded companies analysis and took into account qualitative judgments for
the nature of the business. The resulting range of implied enterprise values for the Campus component was approximately $0.3 billion to $0.5 billion.
For the Ruckus component, Evercore performed a discounted cash flow analysis to estimate the implied enterprise value as of October 31, 2016,
using (1) the unlevered, after-tax free cash flows that were projected to be generated by the Ruckus business from the period from November 1, 2016 through October 31, 2021, plus (2) the estimated terminal value of Ruckus as of October 31, 2021
based on an Adjusted EBITDA multiple of 9.0x to 11.0x. Evercore estimated the terminal value multiple based on the financial projections provided by the Companys management, the trading multiples for the companies included in the selected
publicly traded companies analysis, and its professional judgment given the nature of the Ruckus component. The total cash flows were then discounted to present value using an estimate range of discount rates from 11.5% to 13.5%. Evercore estimated
the Ruckus components weighted average cost of capital based on application of the capital asset pricing model and its professional judgment given the nature of the Ruckus component. The resulting range of implied enterprise values for the
Ruckus component was approximately $1.5 billion to $1.9 billion.
55
Separately, for the Ruckus component, Evercore also performed a valuation analysis using the
historical acquisition cost of Ruckus, as of May 2016, in addition to using the discounted cash flow methodology. Based on publicly available historical financial statements, the implied enterprise value for the Ruckus component was determined to be
approximately $1.2 billion (calculated using the total Ruckus purchase equity value of approximately $1.4 billion less available balance sheet cash of approximately $0.2 billion).
Evercore then took the aggregate value of the four combined operations, netted their value against the amount of the Companys projected
net debt and noncontrolling interests as of October 31, 2016 and divided such amount by the fully diluted number of shares of Company Common Stock outstanding as of such date to imply a per share value for Company Common Stock. Using the discounted
cash flow methodology for Ruckus, this analysis indicated an implied equity value per share range for the Company of approximately $12.30 to $16.50, rounded to the nearest five cents. Using the historical acquisition cost of Ruckus, this analysis
indicated an implied equity value per share range for the Company of approximately $11.60 to $14.85, rounded to the nearest five cents.
Illustrative
Present Value of Future Share Price
Evercore performed an illustrative analysis of the implied present value of the future price per
share of Company Common Stock, which is designed to provide an indication of the present value of a theoretical future value of a companys equity as a function of such companys estimated EPS and its assumed price to future EPS multiple,
plus anticipated dividends. For this analysis, Evercore used the projected financial data for fiscal years 2017, 2018 and 2019 included in each of the October Management Case and the Research Case Forecasts. For both sets of financial projections,
Evercore assumed, at the Companys direction, quarterly cash dividends of $0.055/share commencing in the first quarter of fiscal year 2017, increasing to $0.065/share in the third quarter of fiscal year 2017, $0.075/share in the third quarter
of fiscal year 2018, and $0.085/share in the third quarter of fiscal year 2019.
In calculating the implied present value of future share
price per share of Company Common Stock, Evercore first calculated the implied future share price of Company Common Stock by multiplying the estimated fiscal year 2019 EPS by the Companys assumed P/E ratio of 11.0x for the last twelve month
(
LTM
) period ending October 31, 2019. Evercore then discounted the implied total share price back to October 31, 2016 using a discount rate of 11.5%, reflecting an estimate of the Companys cost of equity. Finally,
Evercore added the cumulative present value of anticipated future dividends per share of Company Common Stock payable to the stockholders of the Company through the end of fiscal year 2019, using the same discount rate of 11.5%. This analysis
resulted in a range of implied present values per share of Company Common Stock of approximately (a) $9.85 to $15.10 based on the financial projections included in the October Management Case and (b) $7.45 to $11.30 based on the financial
projections included in the Research Case Forecasts, in each case, rounded to the nearest five cents.
Other Factors
Evercore also reviewed and considered other factors, which were not considered part of its financial analyses in connection with rendering its
advice, but were referenced for informational purposes, including, among other things, the precedent premia, illustrative leveraged buyout, analysts price targets and 52-week trading range analyses described below.
Premiums Paid Analysis
Evercore reviewed and analyzed premiums paid in precedent transactions since January 2006. Based on its professional judgment and premiums in
precedent transactions for acquisitions where the target was based in the U.S., Evercore applied a reference range of premiums of 20% to 50% to the unaffected price of the Company as of October 28, 2016 of $8.69. This analysis indicated a per share
equity value reference range of approximately $10.45 to $13.05 for the Company, rounded to the nearest five cents.
56
Illustrative Leveraged Buyout Analysis
Evercore performed a hypothetical leveraged buyout analysis to determine the prices at which a financial sponsor might effect a leveraged
buyout of the Company. Evercore utilized Adjusted EBITDA projections provided by the Companys management in performing its analysis. Evercore assumed a transaction date of October 31, 2016 and a five-year investment period ending on October
31, 2021. Evercore also assumed cost savings of $100 million at announcement, in addition to $25 million in on-going cost savings, and a minimum cash requirement of $250 million. Evercore selected the leverage multiple, financing terms, exit
multiple and target internal rate of return based upon the application of its professional judgment and experience.
The following table
summarizes Evercores analysis, with the implied value per share of Company Common Stock rounded to the nearest five cents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Source of Financial Projections
Through FY2021
|
|
Illustrative Sponsor
Required IRR
|
|
Total Leverage
|
|
|
Exit EV/
Adj. EBITDA
Multiples
|
|
|
Implied Value Per
Share of Company
Common Stock ($)
|
|
October Management Case
|
|
15.0% 25.0%
|
|
|
5.25x
|
|
|
|
5.0x 7.0x
|
|
|
|
9.90 13.65
|
|
Research Case Forecasts
|
|
15.0% 25.0%
|
|
|
5.25x
|
|
|
|
5.0x 7.0x
|
|
|
|
8.65 11.30
|
|
Analyst Price Targets
Evercore reviewed publicly available share price targets of research analysts estimates known to Evercore as of October 28, 2016, noting
that the low and high share price targets ranged from $8.00 to $13.00 for the Company.
52-Week Trading Range
Evercore reviewed historical trading prices of shares of Company Common Stock during the 52-week period ended October 28, 2016, noting that the
low and high closing prices during such period ranged from $7.67 to $10.86 for the Company.
Miscellaneous
Under the terms of Evercores engagement, Evercore has provided the Company with financial advisory services and delivered a written
fairness opinion to the Company Board in connection with the proposed transaction. Pursuant to the terms of its engagement letter, Evercore is entitled to receive (1) an opinion fee of $2 million, regardless of the conclusion reached therein,
which was earned upon delivery of its fairness opinion and which is fully creditable, to the extent previously paid, against any transaction fee payable and (2) a transaction fee, comprised of a success fee and a discretionary component (the payment
of which was approved by the Company Board at a meeting on November 1, 2016), currently estimated to total approximately $35.6 million, which Evercore will earn subject to and upon the consummation of the Merger. In addition, the Company has
agreed to reimburse Evercore for up to $125,000 of expenses (including external legal fees, expenses and disbursements) incurred in connection with its engagement and to indemnify Evercore and any of its members, partners, officers, directors,
advisors, representatives, employees, agents, affiliates or controlling persons, if any, against certain liabilities and expenses arising out of Evercores engagement, any services performed by Evercore in connection therewith or any
transaction contemplated thereby.
Evercore may, in the future, provide certain financial and other services to Ultimate Parent and
certain of its affiliates, for which Evercore may receive compensation. Evercore notes that, while it has not, during the period from October 2013 to October 2016, performed any investment banking advisory and/or capital markets services to Ultimate
Parent for which it received compensation, Evercore did advise Broadcom Corporation in its February 2016 sale to Avago Technologies Limited, both of which are now owned by Ultimate Parent, and Evercore did receive $10 million in connection with such
engagement. Evercores prior engagement with Broadcom Corporation was disclosed to the Company Board prior to the engagement by the Company of Evercore.
57
Evercore did not recommend any specific amount of consideration to the Company Board or
management or that any specific amount of consideration constituted the only appropriate consideration in the transaction for the holders of Company Common Stock.
In the ordinary course of business, Evercore or its affiliates may actively trade the securities, or related derivative securities, or
financial instruments of the Company, Ultimate Parent and their respective affiliates, for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities or instruments.
The issuance of Evercores opinion was approved by an opinion committee of Evercore.
The Company Board engaged Evercore to act as a financial advisor based on its qualifications, expertise, reputation and knowledge of and its
familiarity with the Companys business and affairs and the industry in which the Company operates. Evercore is an internationally recognized investment banking firm and is regularly engaged in the valuation of businesses in connection with
mergers and acquisitions, leveraged buyouts, competitive biddings, private placements and valuations for corporate and other purposes.
Certain Company Forecasts
Management Case Forecasts
The Company does not, as a matter of course, make public projections as to its future financial performance. The Company management provided an
initial set of financial projections to Ultimate Parent, the other parties who participated in the solicitation process for an acquisition transaction, and Evercore, which the Company approved for Evercore to rely on and use in performing its
preliminary financial analyses (such financial projections, together with the extrapolations derived from such projections described below, the
September Management Case
). The Company management subsequently updated the September
Management Case (1) to reflect Company managements updated view of the Companys fiscal year 2016 performance, (2) to adjust back to historical norms the level of capital expenditures starting from fiscal year 2018 onwards to
reflect the end of a one-time capital project that was scheduled to be completed in fiscal year 2017, and (3) to reflect certain forecasts prepared in October 2016 in connection with the Companys annual goodwill impairment analysis (such
financial projections, together with the extrapolations derived from such projections described below, the
October Management Case
), and provided the October Management Case to Evercore, approving Evercore to rely on and use the
October Management Case in performing its financial analyses and rendering its fairness opinion. The projections for the fourth quarter of fiscal year 2016 and the first quarter of fiscal year 2017 included in the October Management Case were also
provided to Ultimate Parent. Both the September Management Case and the October Management Case were for fiscal years 2016 through 2021, and included Company managements financial projections for fiscal years 2016 through 2019 and
extrapolations derived therefrom for (a) fiscal years 2020 and 2021 for the Company generally and (b) fiscal years 2020 through 2026 for the switching, routing and analytics and software networking component of the Companys business
for use in the sum of the parts valuation of that component (described in The Merger Opinion of Evercore Group L.L.C. beginning on page 48). The extrapolations were derived by projecting forward the general trends from fiscal
years 2016 through 2019 but assuming slowing revenue growth rates as well as an eventual plateauing of operating margins to reflect the anticipated maturation of the Companys businesses. The September Management Case and the October Management
Case, which, together with the Research Case Forecasts, constituted the alternative business assumptions reviewed by Evercore in connection with its financial analysis, are referred to collectively as the
Management Case
Forecasts
.
Research Case Forecasts
The Company Board reviewed certain financial projections created using averages of publicly available research analysts estimates for
fiscal years 2016 through 2018 (such financial projections, together with the extrapolations derived from such projections described below, the
Research Case Forecasts
). The Research
58
Case Forecasts included extrapolated financial projections for fiscal years 2019 through 2021 created by projecting trends, with adjustments, observed in the research analysts estimates
utilized in preparing the financial projections used for fiscal years 2016 through 2018. The Research Case Forecasts are based solely on the mathematical aggregation of publicly available information prepared by third party research analysts. The
research analysts estimates utilized in the Research Case Forecasts: (1) were not prepared with any input from the Company management; (2) do not reflect all potentially relevant information available to the Company management; and
(3) do not reflect any exercise of judgment by the Company management. As such, the inclusion of the Research Case Forecasts in this proxy statement should not be regarded as an indication that the Company, the Company Board, its advisors, or
any other person considered, or now considers, the Research Case Forecasts to be a reliable prediction of actual future results.
Additional
Information Concerning the Management Case Forecasts and the Research Case Forecasts
The summaries of the Management Case Forecasts
and the Research Case Forecasts (collectively, the
Forecasts
) are included in this proxy statement solely to give the Companys stockholders access to information that was made available to the Company Board and Evercore in
connection with the Companys strategic and financial review process and portions of which were made available to Ultimate Parent and the other parties who participated in the solicitation process in connection with their due diligence review
of the Company. The Forecasts were not prepared with a view toward public disclosure or complying with accounting principles generally accepted in the United States (
GAAP
). In addition, the Forecasts were not prepared with a view
toward complying with the guidelines established by the SEC, or by the American Institute of Certified Public Accountants with respect to prospective financial information. The Forecasts are not fact and should not be relied upon as being
necessarily indicative of future results. Readers of this proxy statement are cautioned not to place undue reliance on the Forecasts.
Neither the Companys independent registered public accounting firm nor any other independent accountants or other professional advisors
have: (1) compiled, reviewed, audited, examined or performed any procedures with respect to the Forecasts; (2) expressed any opinion or any other form of assurance on such information or the achievability of the results reflected in such
information; or (3) assumed any responsibility for the Forecasts. The Companys independent registered public accounting firm disclaims any association with the Forecasts.
Readers of this proxy statement are cautioned not to place undue reliance on the summaries of the Forecasts set forth below. The Forecasts are
forward-looking statements. For information on factors that may cause the Companys future results to materially vary, see the section of this proxy statement entitled Cautionary Statement Regarding Forward-Looking Statements,
beginning on page 22. Although the Forecasts are presented with numerical specificity, they reflect numerous assumptions and estimates as to future events, which, with respect to the Management Case Forecasts, the Company management believed
were reasonable at the time that such Management Case Forecasts were prepared, taking into account the relevant information available to the Company management at the time. The Company management did not assess any of the assumptions or estimates
utilized by research analysts in preparing the publicly available research analysts estimates upon which the Research Case Forecasts were based. However, this information is not fact and should not be relied upon as being necessarily
indicative of actual future results and none of the Company, the Company Board, its advisors, or any other person considered has made or makes any representation to any person regarding the ultimate performance of the Company compare to the
information contained in the Forecasts. Important factors that may affect actual results and cause the Forecasts not to be achieved include (but are not limited to): (1) general economic conditions; (2) the accuracy of certain accounting
assumptions; (3) changes in actual or projected cash flows; (4) competitive pressures; and (5) changes in tax laws. In addition, the Forecasts do not take into account any circumstances or events occurring after the date that they
were prepared and do not give effect to the Merger or any of the other transactions contemplated by the Merger Agreement. Furthermore, the Forecasts do not take into account the effect of the entry into the Merger Agreement or any failure of the
Merger to be completed and should not be viewed as accurate or continuing in that context. As a result, there can be no assurance that the
59
Forecasts will be realized, and actual results may be materially better or worse than those contained in the Forecasts. The inclusion of this information should not be regarded as an indication
that the Company Board, the Company or any other recipient of this information considered, or now considers, the Forecasts to be predictive of actual future results. The Forecasts are not included in this proxy statement in order to induce any
Company stockholder to vote in favor of any proposal to be considered at the special meeting.
None of the Company, the Company Board, its advisors (including, but not limited to, Evercore), or any other person intends to update or otherwise
revise the Forecasts to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the Forecasts are shown to be in error or no longer
appropriate.
The September Management Case
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016E
|
|
|
2017E
|
|
|
2018E
|
|
|
2019E
|
|
|
2020E(2)
|
|
|
2021E(2)
|
|
|
|
(in millions, except per share amounts)
|
|
Revenue
|
|
$
|
2,338
|
|
|
$
|
2,630
|
|
|
$
|
2,814
|
|
|
$
|
3,046
|
|
|
$
|
3,268
|
|
|
$
|
3,441
|
|
Non-GAAP Gross Profit (3)(4)
|
|
$
|
1,578
|
|
|
$
|
1,761
|
|
|
$
|
1,911
|
|
|
$
|
2,061
|
|
|
$
|
2,193
|
|
|
$
|
2,303
|
|
Non-GAAP Operating Income(5)
|
|
$
|
510
|
|
|
$
|
578
|
|
|
$
|
710
|
|
|
$
|
801
|
|
|
$
|
834
|
|
|
$
|
873
|
|
Non-GAAP EBITDA(6)
|
|
$
|
597
|
|
|
$
|
680
|
|
|
$
|
818
|
|
|
$
|
918
|
|
|
$
|
959
|
|
|
$
|
1,005
|
|
Non-GAAP Net Income(7)
|
|
$
|
395
|
|
|
$
|
424
|
|
|
$
|
529
|
|
|
$
|
603
|
|
|
$
|
630
|
|
|
$
|
663
|
|
Non-GAAP EPS(8)
|
|
$
|
0.95
|
|
|
$
|
1.03
|
|
|
$
|
1.29
|
|
|
$
|
1.47
|
|
|
$
|
1.54
|
|
|
$
|
1.62
|
|
Capex
|
|
($
|
77
|
)
|
|
($
|
90
|
)
|
|
($
|
96
|
)
|
|
($
|
104
|
)
|
|
($
|
112
|
)
|
|
($
|
118
|
)
|
Unlevered Free Cash Flow(9)
|
|
|
|
|
|
$
|
330
|
|
|
$
|
459
|
|
|
$
|
513
|
|
|
$
|
538
|
|
|
$
|
578
|
|
(1)
|
For each of fiscal years 2016, 2017, 2018, 2020 and 2021, the Companys fiscal year end is the final Saturday in October. For fiscal year 2019, the Companys fiscal year end is the first Saturday in November.
|
(2)
|
The September Management Case projections for fiscal years 2020 and 2021 were prepared by extrapolating from trends in the September Management Case projections for fiscal years 2016 through 2019 as described above.
|
(3)
|
Non-GAAP Gross Profit is calculated as GAAP gross profit less stock-based compensation expense, amortization expense associated with acquired intangibles and, for fiscal year 2016 only, the impact to cost of revenues
from certain purchase accounting adjustments to inventory.
|
(4)
|
The Non-GAAP Gross Profit amounts presented in the table for fiscal years 2016 and 2017 represent the amounts provided to Ultimate Parent as part of the September Management Case. The Non GAAP Gross Profit amounts for
fiscal years 2016 and 2017 reviewed by the Company Board for the September Management Case in certain instances were $1,588 and $1,774, respectively. These differences were immaterial and did not affect the results of any financial analyses reviewed
by the Company Board. Such differences were eliminated when the Management Case Forecasts were updated to the October Management Case, which was used by Evercore in the financial analysis for its fairness opinion and reviewed by the Company Board in
approving the Merger on November 1, 2016.
|
(5)
|
Non-GAAP Operating Income is calculated as GAAP operating income less stock-based compensation expense, acquisition and integration expense, amortization expense associated with acquired intangibles, restructuring
charges, asset impairment charges, gains or losses relating to sales of assets and, for fiscal year 2016 only, the impact to cost of revenues from certain purchase accounting adjustments to inventory.
|
(6)
|
Non-GAAP EBITDA is calculated as GAAP earnings before interest, taxes, depreciation and amortization (including amortization expense associated with acquired intangibles), adjusted to exclude stock-based compensation
expense, acquisition and integration expense, restructuring charges, asset impairment charges, gains or losses relating to sales of assets and, for fiscal year 2016 only, the impact to cost of revenues from certain purchase accounting adjustments to
inventory.
|
(7)
|
Non-GAAP Net Income is calculated as GAAP net income less stock-based compensation expense, acquisition and
integration expense, amortization expense associated with acquired intangibles, restructuring charges, asset impairment charges, gains or losses relating to sales of assets, the non-cash portion of the interest expense on the Companys 1.375%
convertible senior unsecured notes due 2020 (the
Non-Cash
Interest Expense
) and, for fiscal year 2016 only, the impact to cost of revenues from certain purchase
|
60
|
accounting adjustments to inventory and the effects of certain intercompany transactions on the tax provision. The Company also excludes the tax impact of all such adjustments.
|
(8)
|
The Company derives Non-GAAP EPS from Non-GAAP Net Income using the same measures of outstanding shares as are used to calculate net income per share in accordance with GAAP.
|
(9)
|
Unlevered Free Cash Flow is calculated as GAAP earnings before interest and taxes, adjusted for depreciation and amortization (including amortization expense associated with acquired intangibles), capital expenditures,
changes in working capital, changes in deferred revenue, stock-based compensation expense, acquisition and integration expense, restructuring charges, asset impairment charges, gains or losses relating to sales of assets and, for fiscal year 2016
only, the impact to cost of revenues from certain purchase accounting adjustments to inventory. Calculations of Unlevered Free Cash Flow were not included in the financial projections provided to Ultimate Parent or to the other parties who
participated in the solicitation process.
|
The October Management Case
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016E
|
|
|
2017E
|
|
|
2018E
|
|
|
2019E
|
|
|
2020E(2)
|
|
|
2021E(2)
|
|
|
|
(in millions, except per share amounts)
|
|
Revenue
|
|
$
|
2,333
|
|
|
$
|
2,630
|
|
|
$
|
2,814
|
|
|
$
|
3,046
|
|
|
$
|
3,215
|
|
|
$
|
3,365
|
|
Non-GAAP Gross Profit(3)
|
|
$
|
1,583
|
|
|
$
|
1,761
|
|
|
$
|
1,911
|
|
|
$
|
2,061
|
|
|
$
|
2,166
|
|
|
$
|
2,260
|
|
Non-GAAP Operating Income(4)
|
|
$
|
528
|
|
|
$
|
578
|
|
|
$
|
710
|
|
|
$
|
801
|
|
|
$
|
864
|
|
|
$
|
901
|
|
Non-GAAP EBITDA(5)
|
|
$
|
615
|
|
|
$
|
679
|
|
|
$
|
814
|
|
|
$
|
914
|
|
|
$
|
980
|
|
|
$
|
1,022
|
|
Non-GAAP Net Income(6)
|
|
$
|
411
|
|
|
$
|
424
|
|
|
$
|
529
|
|
|
$
|
603
|
|
|
$
|
654
|
|
|
$
|
685
|
|
Non-GAAP EPS(7)
|
|
$
|
0.98
|
|
|
$
|
1.03
|
|
|
$
|
1.29
|
|
|
$
|
1.47
|
|
|
$
|
1.60
|
|
|
$
|
1.67
|
|
Capex
|
|
($
|
77
|
)
|
|
($
|
90
|
)
|
|
($
|
93
|
)
|
|
($
|
101
|
)
|
|
($
|
104
|
)
|
|
($
|
109
|
)
|
Unlevered Free Cash Flow(8)
|
|
|
|
|
|
$
|
329
|
|
|
$
|
459
|
|
|
$
|
514
|
|
|
$
|
577
|
|
|
$
|
607
|
|
(1)
|
For each of fiscal years 2016, 2017, 2018, 2020 and 2021, the Companys fiscal year end is the final Saturday in October. For fiscal year 2019, the Companys fiscal year end is the first Saturday in November.
|
(2)
|
The October Management Case projections for fiscal years 2020 and 2021 were prepared by extrapolating from trends in the October Management Case projections for fiscal years 2016 through 2019 as described above.
|
(3)
|
Non-GAAP Gross Profit is calculated as GAAP gross profit less stock-based compensation expense, amortization expense associated with acquired intangibles and, for fiscal year 2016 only, the impact to cost of revenues
from certain purchase accounting adjustments to inventory.
|
(4)
|
Non-GAAP Operating Income is calculated as GAAP operating income less stock-based compensation expense, acquisition and integration expense, amortization expense associated with acquired intangibles, restructuring
charges, asset impairment charges, gains or losses relating to sales of assets and, for fiscal year 2016 only, the impact to cost of revenues from certain purchase accounting adjustments to inventory.
|
(5)
|
Non-GAAP EBITDA is calculated as GAAP earnings before interest, taxes, depreciation and amortization (including amortization expense associated with acquired intangibles), adjusted to exclude stock-based compensation
expense, acquisition and integration expense, restructuring charges, asset impairment charges, gains or losses relating to sales of assets and, for fiscal year 2016 only, the impact to cost of revenues from certain purchase accounting adjustments to
inventory.
|
(6)
|
Non-GAAP Net Income is calculated as GAAP net income less stock-based compensation expense, acquisition and integration expense, amortization expense associated with acquired intangibles, restructuring charges, asset
impairment charges, gains or losses relating to sales of assets, the Non-Cash Interest Expense and, for fiscal year 2016 only, the impact to cost of revenues from certain purchase accounting adjustments to inventory and the effects of certain
intercompany transactions on the tax provision. The Company also excludes the tax impact of all such adjustments.
|
(7)
|
The Company derives Non-GAAP EPS from Non-GAAP Net Income using the same measures of outstanding shares as are used to calculate net income per share in accordance with GAAP.
|
61
(8)
|
Unlevered Free Cash Flow is calculated as GAAP earnings before interest and taxes, adjusted for depreciation and amortization (including amortization expense associated with acquired intangibles), capital expenditures,
changes in working capital, changes in deferred revenue, stock-based compensation expense, acquisition and integration expense, restructuring charges, asset impairment charges, gains or losses relating to sales of assets and, for fiscal year 2016
only, the impact to cost of revenues from certain purchase accounting adjustments to inventory. Calculations of Unlevered Free Cash Flow were not included in the subset of the October Management Case provided to Ultimate Parent.
|
The Research Case Forecasts
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016E
|
|
|
2017E
|
|
|
2018E
|
|
|
2019E(2)
|
|
|
2020E(2)
|
|
|
2021E(2)
|
|
|
|
(in millions, except per share amounts)
|
|
Revenue
|
|
$
|
2,329
|
|
|
$
|
2,577
|
|
|
$
|
2,645
|
|
|
$
|
2,714
|
|
|
$
|
2,785
|
|
|
$
|
2,858
|
|
Non-GAAP Gross Profit
|
|
$
|
1,571
|
|
|
$
|
1,737
|
|
|
$
|
1,782
|
|
|
$
|
1,829
|
|
|
$
|
1,877
|
|
|
$
|
1,926
|
|
Non-GAAP Operating Income
|
|
$
|
509
|
|
|
$
|
562
|
|
|
$
|
594
|
|
|
$
|
611
|
|
|
$
|
641
|
|
|
$
|
672
|
|
Non-GAAP EBITDA
|
|
$
|
596
|
|
|
$
|
663
|
|
|
$
|
697
|
|
|
$
|
719
|
|
|
$
|
752
|
|
|
$
|
786
|
|
Non-GAAP Net Income
|
|
$
|
392
|
|
|
$
|
408
|
|
|
$
|
432
|
|
|
$
|
443
|
|
|
$
|
455
|
|
|
$
|
467
|
|
Non-GAAP EPS
|
|
$
|
0.93
|
|
|
$
|
1.00
|
|
|
$
|
1.06
|
|
|
$
|
1.08
|
|
|
$
|
1.11
|
|
|
$
|
1.14
|
|
Capex
|
|
($
|
80
|
)
|
|
($
|
81
|
)
|
|
($
|
83
|
)
|
|
($
|
85
|
)
|
|
($
|
87
|
)
|
|
($
|
89
|
)
|
Unlevered Free Cash Flow
|
|
|
|
|
|
$
|
333
|
|
|
$
|
404
|
|
|
$
|
418
|
|
|
$
|
440
|
|
|
$
|
462
|
|
(1)
|
For each of fiscal years 2016, 2017, 2018, 2020 and 2021, the Companys fiscal year end is the final Saturday in October. For fiscal year 2019, the Companys fiscal year end is the first Saturday in November.
|
(2)
|
The projections included in the Research Case Forecasts for fiscal years 2019 through 2021 were prepared by extrapolating from trends in the Research Case Forecasts for fiscal years 2016 through 2018, as described
above.
|
Non-GAAP Financial Measures
Non-GAAP Gross Profit, Non-GAAP Operating Income, Non-GAAP EBITDA, Non-GAAP Net Income, Non-GAAP EPS and Unlevered Free Cash Flow are non-GAAP
financial measures. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in accordance with GAAP. The calculations of non-GAAP financial measures reflected in the
Forecasts may differ from others in the Companys industry and are not necessarily comparable with measures with similar titles used by other companies. The Company strongly encourages you to review all of its financial statements and publicly
filed reports in their entirety and to not rely on any single financial measure.
The Management Case Forecasts
The Company management believes non-GAAP financial measures provide useful information to investors by offering (1) the ability to make
more meaningful period-to-period comparisons of the Companys ongoing operating results, (2) the ability to make more meaningful comparisons of the Companys operating performance relative to its competitors, (3) the ability to
better identify trends in the Companys underlying business and to perform related trend analyses and (4) a better understanding of how management plans and measures the Companys underlying business. The non-GAAP financial measures
utilized in the September Management Case and the October Management Case constitute forward-looking information, and the Company believes that a quantitative reconciliation of each such non-GAAP financial measure to the most comparable financial
measure calculated and presented in accordance with GAAP cannot be made available without unreasonable efforts. A reconciliation of these non-GAAP financial measures would require the Company to quantify at least two or more of the following:
capital expenditures, changes in working capital, changes in deferred revenue, stock-based compensation expense, acquisition and integration expense, amortization expense associated with acquired
62
intangibles, asset impairment charges, restructuring charges, gains or losses relating to sales of assets, the Non-Cash Interest Expense, and, for fiscal year 2016 only, the impact to cost of
revenues from certain purchase accounting adjustments to inventory and the effects of certain intercompany transactions on the tax provision. A reconciliation of these non-GAAP financial measures would also require the Company to quantify the tax
impact of each of the foregoing. All but the Non-Cash Interest Expense, the purchase accounting adjustments to inventory and the effects of certain intercompany transactions on the tax provision cannot be reliably quantified due to the combination
of variability and volatility of such components and may, depending on the size of the components, have a significant impact on the reconciliation. The Company is able to quantify the Non-Cash Interest Expense because the interest rate is fixed. The
Non-Cash Interest Expense is expected to be $15.4 million, $16.2 million, $17.0 million, $17.9 million and $3.0 million during fiscal years 2016, 2017, 2018, 2019 and 2020, respectively. The Company is able to quantify the fiscal year 2016 purchase
accounting adjustments to inventory, which are expected to total $36.8 million, because the Company has already made such an estimate as part of its preliminary purchase consideration allocation to the fair value of the assets acquired and
liabilities assumed in connection with the Companys acquisition of Ruckus Wireless, Inc. in May 2016. The Company is able to quantify the fiscal year 2016 effects of certain intercompany transactions on the tax provision, which are expected to
total $27.9 million, because those transactions were completed prior to September 2016.
The Research Case Forecasts
As noted above, the Research Case Forecasts were derived solely from the mathematical aggregation of publicly available estimates of the
Companys future performance prepared by third party research analysts. Each of those research analysts independently determined the nature of the adjustments to be made in calculating the non-GAAP financial measures included in its published
reports, and those adjustments may differ not only from one research analyst to another but also from the adjustments made by the Company in calculating the non-GAAP financial measures included in the Management Case Forecasts. Accordingly, for each
non-GAAP financial measure presented as part of the Research Case Forecasts, the Company is unable to (i) provide a specific definition of each such non-GAAP financial measure, (ii) present the most directly comparable financial measure
calculated and presented in accordance with GAAP, or (iii) reconcile each such non-GAAP financial measure with any GAAP financial measure without unreasonable efforts.
Financing of the Merger
We anticipate that the total funds needed to complete the Merger, including:
|
|
|
payment of fees and expenses related to the Merger;
|
|
|
|
payment to holders of existing indebtedness of the Company; and
|
|
|
|
payment to the Companys stockholders and holders of equity awards of the amounts due to them under the Merger Agreement,
|
will be funded through a combination of:
|
|
|
available cash from Ultimate Parent, the Company or their respective subsidiaries; and
|
|
|
|
new borrowings by Parent, Ultimate Parent or any of their respective subsidiaries.
|
We believe
that Parents available debt, together with new borrowings by Parent, Ultimate Parent or any of their respective subsidiaries and available cash from the combined balance sheet of the Company, Parent and Ultimate Parent, will be sufficient to
complete the Merger, but we cannot assure you of that. Although obtaining debt financing is not a condition to the completion of the Merger, the failure of Parent, Ultimate Parent or any of their respective subsidiaries to obtain any amount of debt
financing could result in the failure of the Merger to be consummated.
63
Closing and Effective Time of Merger
Unless the parties otherwise agree in writing, the closing of the Merger will take place no later than the fourth business day following the
date on which the last of the conditions to closing of the Merger (described under the section of this proxy statement entitled The Merger Agreement Conditions to the Merger beginning on page 99) has been satisfied or waived
(other than those conditions that by their nature are to be satisfied or waived at the closing of the Merger, but subject to the satisfaction or waiver of such conditions), or at such other date and time as Parent and the Company have otherwise
agreed in writing, provided that if the closing of the Merger would occur on a date that is within the 15-day period prior to the closing of any Ultimate Parent fiscal quarter, Parent may elect to defer the closing of the Merger until the opening of
business on the first business day of the immediately succeeding fiscal quarter.
Payment of Merger Consideration and
Surrender of Stock Certificates
If your shares of Company Common Stock are held on your behalf by a bank, brokerage firm or other
nominee, although each bank, brokerage firm or other nominee establishes its own procedures, we believe that payment for those shares will be deposited in your account with such bank, brokerage firm or other nominee promptly after consummation of
the Merger. If you hold only book entry shares at Wells Fargo Bank, N.A., we believe that the paying agent will mail you a check in the amount of the Merger Consideration for those shares approximately one week after consummation of the Merger. If
you hold Company stock certificates and the shares represented by that certificate have not been delivered to a government authority under unclaimed property, escheat or similar laws, the paying agent will mail you a letter of transmittal within
three business days of the consummation of the Merger that you must complete and return to the paying agent. Once the paying agent receives your properly completed letter of transmittal and stock certificate(s), the paying agent will mail you a
payment check in the amount of the aggregate Merger Consideration for your certificated shares and for your book entry shares, if any.
You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the
paying agent without a letter of transmittal.
If you hold Company stock certificates, you will not be entitled to receive the Merger
Consideration until you deliver a duly completed and executed letter of transmittal to the paying agent. You must also surrender your stock certificate or certificates to the paying agent.
If you have lost a stock certificate, or if it has
been stolen or destroyed, then to receive your Merger Consideration with respect to the shares of Company Common Stock represented by that stock
certificate, you will have to make an affidavit of the loss, theft or destruction of that stock
certificate and, if required by Parent or the surviving corporation, post a bond as indemnity against any claim that may later be made with respect to such stock certificate.
If ownership of your shares is not registered in the transfer records
of the Company, a check for any cash to be delivered will only be issued if the applicable letter of transmittal is accompanied by all documents reasonably required by the Company to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid or are not applicable.
Interests of Certain Persons in the Merger
When considering the recommendation of the Company Board that you vote to approve the proposal to adopt the Merger Agreement, you should be
aware that our directors and executive officers have interests in the Merger that are different from, or in addition to, those of our stockholders generally. The Company Board was aware of and considered these interests, among other matters, in
evaluating and negotiating the Merger Agreement and the Merger, and in recommending that the Merger Agreement be adopted by the stockholders of the Company. In the discussion below, we have quantified payments and benefits on a pre-tax basis to our
executive officers and to our non-employee directors. For the purposes of the agreements and plans described below, the completion of the transactions contemplated by the Merger Agreement will constitute a change in control and/or merger of the
Company, as applicable.
64
Treatment of Equity-Based Awards
Pursuant to the Companys equity incentive plans and programs, certain Company equity awards held by its executive officers and directors
that are outstanding immediately prior to the consummation of the Merger will be cashed out or assumed by Ultimate Parent at the effective time of the Merger, as described in more detail in the section of the proxy statement entitled The
Merger Agreement Treatment of Company Common Stock, Options and Restricted Stock Units beginning on page 80.
We
maintain and/or administer the 1999 Stock Plan (as amended and restated, the
1999 Plan
), 1999 Director Plan (as amended and restated, the
1999 Director Plan
), 2009 Stock Plan (as amended and restated, the
2009 Plan
), 2009 Director Plan (as amended and restated, the
2009 Director Plan
), and Inducement Award Plan (as amended and restated, the
Inducement Plan
, and, collectively with the
1999 Plan, the 1999 Director Plan, the 2009 Plan, and the 2009 Director Plan, the
Equity Plans
). Our executive officers and non-employee directors hold certain stock options to purchase shares of Company Common
Stock granted under an Equity Plan (
Options
), restricted stock unit awards covering shares of Company Common Stock granted under an Equity Plan (
RSU Awards
) and restricted stock unit awards granted under an
Equity Plan the vesting of which is subject to performance goals immediately prior to the closing date of the Merger (
PSU Awards
). Each of the Options, RSU Awards and PSU Awards was granted under the Equity Plans and is subject to
an award agreement between such award holder and us. As of November 1, 2016, our directors and executive officers held outstanding Options to purchase an aggregate of 5,307,000 shares of Company Common Stock, RSU Awards covering an
aggregate of 1,389,817 shares of Company Common Stock and PSU Awards covering an aggregate of 1,320,787 shares of Company Common Stock at target performance achievement levels (or an aggregate of 1,981,181 shares of Company Common Stock at
maximum performance achievement levels).
Vesting of all Options and RSU Awards held by non-employee directors will accelerate in
accordance with the applicable Equity Plans.
Under each of the 1999 Plan and the 1999 Director Plan, in the event of a merger of the
Company with or into another corporation in which the successor corporation does not assume or substitute for an Option or an RSU Award granted under such plans, the award will become fully vested, and with respect to an Option, be exercisable for a
specified period of time (including underlying shares that otherwise would not be vested or exercisable). If an Option or RSU Award granted under the 1999 Director Plan is assumed or substituted for and, following such assumption or
substitution, the non-employee directors status as a member of the Company Board or as a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the non-employee director, the award or the
equivalent award will become fully vested and, with respect to an Option, exercisable.
The 2009 Plan, the 2009 Director Plan and the
Inducement Plan provide that in the event of a change in control (as defined in the applicable Equity Plan and which the Merger constitutes) of the Company in which the successor corporation does not assume or substitute for an Option, RSU Award, or
PSU Award granted under such Equity Plan, the award will become fully vested, and with respect to an Option, be fully exercisable for a specified period of time (including underlying shares that would not otherwise be vested or exercisable), and PSU
Awards granted under the 2009 Plan will vest based on all performance goals or other vesting criteria being deemed achieved at 100% of target levels. If an Option or RSU Award granted under the 2009 Director Plan is assumed or substituted for
and, following such assumption or substitution, the non-employee directors status as a member of the Company Board or as a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the
non-employee director, the award or the equivalent award will become fully vested and, with respect to an Option, exercisable.
We are a
party to certain PSU Award agreements with certain of our executive officers that govern PSU Awards granted under the 2009 Plan, the vesting of which is based in part on the achievement of a performance goal relating to the Companys Stock
Price Performance as measured against the NASDAQ Telecom Stock Price Performance over a specified performance period or periods. As defined in the PSU Award agreement: (i) the
65
Companys Stock Price Performance generally refers to the percentage increase or decrease in the change in share price plus reinvestment of any dividends (referred to as total return), of a
share of Company Common Stock for the last 60 market trading days in the applicable performance period over the first 60 market trading days beginning 30 market trading days before the first day of the performance period and (ii) the NASDAQ Telecom
Stock Price Performance generally refers to the percentage increase or decrease in the total return of a share of the NASDAQ Telecommunications Index as measured with respect to the same periods with respect to a performance period as applicable to
the Companys Stock Price Performance in the immediately clause (i).
Under each of the PSU Award agreements, if a change in control
(as defined in the 2009 Plan and which the Merger constitutes) of the Company occurs while the applicable award holder is a service provider to us or our subsidiaries and before the last day of the applicable performance period, then (i) the
PSU Awards performance period will be deemed to end on the closing of the change in control, (ii) the number of Eligible Units will be determined as of the closing date of the Merger, (iii) 50% of the Eligible Units will become
vested as of immediately prior to and contingent upon the change in control, and (iv) the remaining 50% of the Eligible Units will be scheduled to vest on the one-year anniversary of the closing date of the change in control subject to the
applicable executive officer remaining a service provider to us or our parent or subsidiaries through such date. However, in the event of a change in control of the Company that occurs during the period beginning November 1, 2018, and
ending October 28, 2019, then with respect to PSU Awards granted to our executive officers in 2016, in lieu of clause (iv) in the immediately preceding sentence, the remaining 50% of the Eligible Units will vest immediately prior to and
contingent on such change in control.
No non-employee director will be a Continuing Service Provider, and therefore, each of the Options
and RSU Awards outstanding and unvested as of immediately prior to the effective time of the Merger that is held by a non-employee director will vest immediately prior to the effective time of the Merger and will be cashed out in exchange for the
Cash Out Payment pursuant to the terms of the applicable Equity Plan and the Merger Agreement.
For vesting acceleration in connection
with certain qualifying terminations of employment for our executive officers, see also the section of this proxy statement entitled The Merger Interests of Certain Persons in the Merger Change of Control Retention
Agreements beginning on page 69.
66
The following table shows, as of May 2, 2017, for each person who has been an executive
officer since November 1, 2015, (i) the number of shares of Company Common Stock held by him or her (including any beneficial ownership), (ii) the value of such shares of Company Common Stock held by him or her, (iii) the number
of shares of Company Common Stock subject to vested In-the-Money Options held by him or her, (iv) the Cash Out Payment that he or she will receive for such vested In-the-Money Options upon consummation of the Merger, (v) the number of
shares of Company Common Stock subject to Options held by him or her to be assumed by Ultimate Parent, (vi) the value of the Options held by him or her to be assumed by Ultimate Parent, (vii) the number of shares subject to RSU Awards
and PSU Awards held by him or her to be assumed by Ultimate Parent, (viii) the value of such RSU Awards and PSU Awards held by him or her to be assumed by Ultimate Parent upon the consummation of the Merger, and (ix) the total value of
such Options, RSU Awards and PSU Awards held by him or her to be assumed by Ultimate Parent upon the consummation of the Merger, in each case, calculated assuming the Merger is consummated on May 2, 2017, and that each executive officer
will be a Continuing Service Provider. The values in the table below are based on the Merger Consideration of $12.75. The actual values of the assumed Options, RSU Awards and PSU Awards are to be based on the Exchange Ratio, which cannot be
determined until the closing date of the Merger. The amounts shown represent neither the value of the awards for accounting purposes nor the amount, if any, that actually will be realized by the individual with respect to any awards, and do not
reflect any taxes payable by the individual.
|
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|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Number of
Shares Held
(#)(1)(2)
|
|
|
Value of
Shares
Held
($)(3)
|
|
|
Number of
Shares
Subject
to
Vested
In-the-Money
Options
(#)
|
|
|
Cash
Out
Payment for
Vested
In-the-Money
Options
($)(4)
|
|
|
Number of
Shares
Subject
to Options
to be
Assumed
(#)(5)
|
|
|
Value of
Options
to be
Assumed
($)(4)
|
|
|
Number of
Shares
Subject to
RSU Awards
and PSU
Awards to
be Assumed
(#)(6)
|
|
|
Value of
RSU
Awards and
PSU Awards
to be
Assumed
($)(3)
|
|
|
Total
Value of
Options,
RSU
Awards
and PSU
Awards
to be
Assumed
($)
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lloyd A. Carney
|
|
|
558,417
|
|
|
|
7,119,817
|
|
|
|
3,006,250
|
|
|
|
18,948,625
|
|
|
|
203,750
|
|
|
|
493,975
|
|
|
|
1,608,883
|
|
|
|
20,513,258
|
|
|
|
21,007,233
|
|
Daniel W. Fairfax
|
|
|
318,735
|
|
|
|
4,063,871
|
|
|
|
113,875
|
|
|
|
368,783
|
|
|
|
37,125
|
|
|
|
91,478
|
|
|
|
415,976
|
|
|
|
5,303,694
|
|
|
|
5,395,172
|
|
Jeffrey P. Lindholm
|
|
|
204,225
|
|
|
|
2,603,869
|
|
|
|
343,250
|
|
|
|
1,967,670
|
|
|
|
39,750
|
|
|
|
96,360
|
|
|
|
142,773
|
|
|
|
1,820,356
|
|
|
|
1,916,716
|
|
Ken K. Cheng
|
|
|
795,021
|
|
|
|
10,136,518
|
|
|
|
118,125
|
|
|
|
390,775
|
|
|
|
36,875
|
|
|
|
93,025
|
|
|
|
391,613
|
|
|
|
4,993,066
|
|
|
|
5,086,091
|
|
Gale E. England
|
|
|
131,605
|
|
|
|
1,677,964
|
|
|
|
352,833
|
|
|
|
2,133,826
|
|
|
|
45,167
|
|
|
|
164,854
|
|
|
|
291,983
|
|
|
|
3,722,783
|
|
|
|
3,887,637
|
|
Ellen A. ODonnell
|
|
|
19,673
|
|
|
|
250,831
|
|
|
|
217,708
|
|
|
|
713,061
|
|
|
|
97,292
|
|
|
|
307,839
|
|
|
|
297,348
|
|
|
|
3,791,187
|
|
|
|
4,099,026
|
|
(1)
|
Assumes that any vested In-the-Money Options that are scheduled to expire prior to May 2, 2017, will be exercised prior to such expiration and all of the underlying shares will be issued to the executive officer
and that any shares underlying RSU Awards that are scheduled to vest on or prior to May 2, 2017, will be issued to the executive officer. Also assumes that the shares issued under such awards will be held by the executive officer through the
assumed closing date of the Merger. Mr. Lindholm holds an RSU Award pursuant to which, as of November 1, 2016, a total of 18,750 shares of Company Common Stock are scheduled to vest prior to May 2, 2017, in accordance with its
vesting schedule.
|
(2)
|
Includes shares purchased on behalf of the executive officer under the ESPP on December 1, 2016. For more information, see the section of this proxy statement entitled The Merger AgreementTreatment of
Purchase Rights under the 2009 Employee Stock Purchase Plan beginning on page 82.
|
(3)
|
The value of each share of Company Common Stock held by the executive officer and each share of Company Common Stock underlying RSU Awards and PSU Awards held by the executive officer is based on the Merger
Consideration of $12.75.
|
(4)
|
The value of each Option is (i) the excess (if any) of $12.75 over the exercise price per share of the Option, multiplied by (ii) the number of shares of Company Common Stock subject to the portion of the
Option that remains outstanding and unexercised as of May 2, 2017.
|
(5)
|
All Options held by executive officers that are to be assumed by Ultimate Parent are In-the-Money Options.
|
(6)
|
The number of shares of Company Common Stock in the table that represent shares of Company Common Stock
underlying PSU Awards are based on maximum achievement of the applicable performance goals that will be measured based on actual performance over the shortened performance period that ends upon the closing of the Merger in accordance with the terms
of the applicable PSU Award agreement. The following table provides, as of May 2, 2017, the number of shares subject to PSU Awards held by each executive officer assuming target and
|
67
|
maximum performance achievement, as well as the value (in accordance with footnote 3 above) of such shares assuming target and maximum performance achievement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Number of Shares
Subject to PSU Awards
Assuming Target
Performance
Achievement
(#)
|
|
|
Value of Shares Subject
to PSU Awards Assuming
Target Performance
Achievement
($)
|
|
|
Number of Shares
Subject to PSU Awards
Assuming
Maximum
Performance
Achievement
(#)
|
|
|
Value of Shares Subject
to PSU Awards Assuming
Maximum Performance
Achievement
($)
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lloyd A. Carney
|
|
|
742,900
|
|
|
|
9,471,975
|
|
|
|
1,114,350
|
|
|
|
14,207,963
|
|
Daniel W. Fairfax
|
|
|
165,481
|
|
|
|
2,109,883
|
|
|
|
248,222
|
|
|
|
3,164,831
|
|
Jeffrey P. Lindholm
|
|
|
55,000
|
|
|
|
701,250
|
|
|
|
82,500
|
|
|
|
1,051,875
|
|
Ken K. Cheng
|
|
|
155,535
|
|
|
|
1,983,071
|
|
|
|
233,303
|
|
|
|
2,974,613
|
|
Gale E. England
|
|
|
105,374
|
|
|
|
1,343,519
|
|
|
|
158,061
|
|
|
|
2,015,278
|
|
Ellen A. ODonnell
|
|
|
96,497
|
|
|
|
1,230,337
|
|
|
|
144,746
|
|
|
|
1,845,512
|
|
The following table shows as of May 2, 2017, for each person who has been a
non-employee
director since November 1, 2015, (i) the number of shares of Company Common Stock held by him or her (including any beneficial ownership), (ii) the value of such shares of Company Common
Stock held by him or her, (iii) the number of shares of Company Common Stock subject to In-the-Money Options held by him or her, (iv) the Cash Out Payment that he or she will receive for such In-the-Money Options upon consummation of the
Merger, (v) the number of shares of Company Common Stock subject to RSU Awards held by him or her, (vi) the Cash Out Payment for the RSU Awards held by him or her, and (vii) the total Cash Out Payment for Options and RSU Awards
held by him or her, in each case, calculated assuming the Merger is consummated on May 2, 2017, and that each non-employee director will not be a Continuing Service Provider. None of the non-employee directors holds any PSU Awards. The
values in the table below are based on the Merger Consideration of $12.75. The amounts shown represent neither the value of the awards for accounting purposes nor the amount, if any, that actually will be realized by the individual with respect to
any awards, and do not reflect any taxes payable by the individual.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Number of
Shares
Held
(#)(1)
|
|
|
Value of
Shares Held
($)(2)
|
|
|
Number of
Shares
Subject
to
In-the-Money
Options
(#)(3)
|
|
|
Cash Out
Payment
for
In-the-Money
Options
($)(4)
|
|
|
Number of
Shares
Subject to
RSU Awards
(#)(5)
|
|
|
Cash Out
Payment for
RSU Awards
($)(2)
|
|
|
Total Cash
Out Payment
for
In-the-Money
Options
and
RSU Awards
($)
|
|
Non-Employee Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Judy Bruner
|
|
|
154,474
|
|
|
|
1,969,544
|
|
|
|
40,000
|
|
|
|
285,100
|
|
|
|
15,687
|
|
|
|
200,009
|
|
|
|
485,109
|
|
Renato A. DiPentima
|
|
|
246,800
|
|
|
|
3,146,700
|
|
|
|
60,000
|
|
|
|
403,300
|
|
|
|
15,687
|
|
|
|
200,009
|
|
|
|
603,309
|
|
Alan L. Earhart
|
|
|
111,974
|
|
|
|
1,427,669
|
|
|
|
20,000
|
|
|
|
144,100
|
|
|
|
15,687
|
|
|
|
200,009
|
|
|
|
344,109
|
|
John W. Gerdelman
|
|
|
223,474
|
|
|
|
2,849,294
|
|
|
|
60,000
|
|
|
|
403,300
|
|
|
|
15,687
|
|
|
|
200,009
|
|
|
|
603,309
|
|
Kim C. Goodman
|
|
|
24,438
|
|
|
|
311,585
|
|
|
|
|
|
|
|
|
|
|
|
15,687
|
|
|
|
200,009
|
|
|
|
200,009
|
|
David L. House
|
|
|
328,224
|
|
|
|
4,184,856
|
|
|
|
75,000
|
|
|
|
473,700
|
|
|
|
15,687
|
|
|
|
200,009
|
|
|
|
673,709
|
|
L. William Krause
|
|
|
197,204
|
|
|
|
2,514,351
|
|
|
|
70,000
|
|
|
|
460,300
|
|
|
|
15,687
|
|
|
|
200,009
|
|
|
|
660,309
|
|
David E. Roberson
|
|
|
86,974
|
|
|
|
1,108,919
|
|
|
|
|
|
|
|
|
|
|
|
15,687
|
|
|
|
200,009
|
|
|
|
200,009
|
|
Sanjay Vaswani
|
|
|
217,974
|
|
|
|
2,779,169
|
|
|
|
55,000
|
|
|
|
368,950
|
|
|
|
15,687
|
|
|
|
200,009
|
|
|
|
568,959
|
|
(1)
|
Assumes that any vested In-the-Money Options that are scheduled to expire prior to May 2, 2017, will be
exercised prior to such expiration and all of the underlying shares will be issued to the non-employee director and that any shares underlying RSU Awards that are scheduled to vest on or prior to May 2, 2017, will be issued to the
non-employee director. Also assumes that the shares issued under such awards will be held by the non-employee director through the assumed closing date of the Merger. As of November 1, 2016, each non-employee director holds an RSU Award
covering 20,223 shares of Company Common Stock that is scheduled to vest prior to May 2, 2017, in accordance with its vesting schedule. As of November 1, 2016, Mr. House holds an additional
|
68
|
RSU Award covering 5,000 shares of Company Common Stock and Mr. Roberson holds an additional RSU Award covering 16,666 shares of Company Common Stock, each of which is scheduled to vest
prior to May 2, 2017, in accordance with its vesting schedule.
|
(2)
|
The value of each share of Company Common Stock held by the
non-employee
director and each share of Company Common Stock underlying RSU Awards held by the non-employee director is
based on the Merger Consideration of $12.75.
|
(3)
|
All Options held by non-employee directors are vested In-the-Money Options.
|
(4)
|
The value of each Option is (i) the excess (if any) of $12.75 over the exercise price per share of the Option, multiplied by (ii) the number of shares subject to the portion of the Option that remains
outstanding and unexercised as of May 2, 2017.
|
(5)
|
Reflects the automatic, non-discretionary RSU Award that each non-employee director will receive under the 2009 Director Plan on the date of the Companys next annual meeting of stockholders, assuming that such
meeting occurs on or before the closing date, assumed to be May 2, 2017. Under the 2009 Director Plan, each such automatic RSU Award will cover a number of shares of Company Common Stock equal to $200,000 divided by the closing market
price of a share of Company Common Stock on such annual meeting date, and rounded up to the nearest whole share. The amount in the table above assumes that the closing market price of Company Common Stock on the date of the next annual meeting will
be equal to the amount of the Merger Consideration of $12.75.
|
Change of Control Retention Agreements
We are a party to a Change of Control Retention Agreement with each of our executive officers (a
Retention Agreement
),
pursuant to which the executive officer may become eligible to receive certain severance benefits upon specified qualifying terminations of employment. Under the Retention Agreements, if we terminate the applicable executive officers
employment without Cause (as described below) or the executive officer resigns for Good Reason (as described below), and such termination occurs within the time period beginning on the date that is three months before a change of control (as defined
in the Retention Agreement and which the Merger constitutes) and ending on the date that is 12 months after a change of control (the
Change of Control Period
), he or she will receive, subject to the terms and conditions of
such agreement:
|
(i)
|
a lump-sum payment equal to 12 months (or in Mr. Carneys case, 24 months) of his or her base salary as in effect immediately prior to the termination date of his or her employment;
|
|
(ii)
|
a lump-sum payment equal to 100% (or in Mr. Carneys case, 200%) of his or her target cash bonus under our Senior Leadership Plan for the fiscal year in which the termination of employment occurs;
|
|
(iii)
|
reimbursement for premiums paid for medical, dental, and vision benefits for the executive officer and his or her eligible dependents for up to 12 months (or in Mr. Carneys case, 18 months);
|
|
(iv)
|
extension of the post-termination exercise period for his or her outstanding and vested Options as of the termination date of his or her employment so that such awards will remain exercisable until the nine-month
anniversary of the termination date, but in no event beyond the earlier of its original maximum term or the 10
th
anniversary of the awards original grant date; and
|
|
(v)
|
immediate vesting with respect to all unvested equity awards that were granted to him or her on or before the date of the agreement or during the term of the agreement.
|
Under the Retention Agreements, if we terminate the applicable executive officers employment without Cause and the termination does not
occur during the Change of Control Period, he or she instead will receive only (a) the salary severance described in clause (i) above except that Mr. Carneys salary severance will be equal to 30 months of salary,
(b) reimbursement of premiums described in clause (iii) above except that Mr. Carneys reimbursement will cover up to 12 months, and (c) the extension of the post-termination exercise period described in
clause (iv) above, but not the severance benefits described in clauses (ii) or (v) above.
69
The amounts of the salary severance, bonus severance, and
Company-paid
premiums for medical, dental, and vision benefits for each of the named executive officers assuming a qualifying termination during the Change of Control Period is set forth in the table further
below. In the event of a qualifying termination during the Change of Control Period, Ms. ODonnells severance under her Retention Agreement would include: $430,000 of salary severance, $387,000 of target bonus severance, and $21,662
in Company-paid premiums for medical, dental, and vision benefits.
The receipt of any severance benefits under each of the Retention
Agreements is subject to the applicable executive officer (i) entering into and not revoking a separation agreement and release of claims in a form provided by us, (ii) complying with a non-disparagement covenant during the 12-month period
following termination of the executive officers employment, and (iii) complying with the terms of his or her confidential information agreement with us.
In addition, each Retention Agreement provides that, if any payment or benefits provided by the Retention Agreement would constitute a
parachute payment within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
Code
) and would therefore be subject to an excise tax under Section 4999 of the Code, then such
payments and benefits will be either: (i) reduced to the largest portion of the payments and benefits that would result in no portion of the payments and benefits being subject to the excise tax; or (ii) not reduced, whichever, after
taking into account all applicable federal, state and local income taxes and the excise tax, results in the applicable executive officers receipt, on an after-tax basis, of the greater amount of payments and benefits.
For purposes of the Retention Agreements, Cause generally means: (i) the executive officers willful and continued
failure to perform the duties and responsibilities of his or her position that is not corrected within a
30-day
correction period that begins upon delivery to the executive officer of a written demand for
performance from the Company Board that describes the basis for belief of the Company Board that the executive officer has not substantially performed his or her duties; (ii) any act of personal dishonesty taken by the executive officer in
connection with his or her responsibilities as an employee of the Company with the intention or reasonable expectation that such may result in substantial personal enrichment of the executive officer; (iii) the executive officers
conviction of, or plea of
nolo contendere
to, a felony that the Company Board reasonably believes has had or will have a material detrimental effect on our reputation or business; or (iv) the executive officer materially breaching his or
her confidential information agreement, which breach is (if capable of cure) not cured within 30 days after we deliver written notice to the executive officer of the breach.
For purposes of the Retention Agreements, Good Reason generally means the occurrence of any of the following, without the
applicable executive officers consent: (i) a material reduction of the executive officers duties, title, authority or responsibilities in effect immediately prior to a Change of Control (provided, however that in
Mr. Carneys case, a material reduction of his duties, title, authority or responsibilities will be deemed to occur if following a Change of Control: (x) he is no longer serving as the chief executive officer of the succeeding entity
or (y) although serving as chief executive officer of the succeeding entity, such entity is not a company whose stock is listed for trading on a major U.S. stock exchange); (ii) a material reduction in the executive officers base
salary or target annual cash incentive compensation; (iii) the Companys failure to obtain the assumption of the agreement by the successor; or (iv) the Companys requiring the executive officer to relocate his or her principal
place of business or the Company relocating its headquarters, in either case to a facility or location outside of a 35 mile radius from the executive officers current principal place of employment; provided, however, that the executive officer
only will have Good Reason if he or she gives written notice to the Companys Chief Executive Officer (or in Mr. Carneys case, the Company Board) of the event or circumstance constituting Good Reason within 90 days of its
initial occurrence and such event or circumstance is not cured within 30 days after the executive officer gives such written notice. The executive officers actions approving any of the foregoing changes (that otherwise may be
considered Good Reason) will be considered consent for the purposes of such Good Reason definition.
70
Future Stockholder Proposals
If the Merger is consummated, we will not have public stockholders and there will be no public participation in any future meeting of
stockholders. However, if the Merger is not completed, stockholders will continue to be entitled to attend and participate in stockholder meetings. We will hold an annual meeting in 2017 only if the Merger has not already been completed. Pursuant to
Rule 14a-8 under the Exchange Act, some stockholder proposals may be eligible for inclusion in our proxy statement relating to our 2017 annual meeting, if held. These stockholder proposals must be submitted, along with proof of ownership of our
stock in accordance with Rule 14a-8(b)(2), to our principal executive offices, in care of our Corporate Secretary. Failure to deliver a proposal by one of these means may result in it not being deemed timely received. In order to be included in our
proxy materials for our 2017 annual meeting, we must have received stockholder proposals prepared in accordance with the proxy rules on or before October 29, 2016, unless the date of our 2017 annual meeting is held more than 30 days before or
after April 7, 2017, in which case stockholder proposals must be received at a reasonable time before we begin to print and send our proxy statement for the annual meeting.
Under our bylaws, any stockholder who intends to present a proposal or a nomination for director for our 2017 annual meeting that is not
intended to be included in our proxy statement and form of proxy relating to the 2017 annual meeting must give notice to us in accordance with the requirements set forth in our bylaws not later than the 45th day or earlier than the 75th day before
the first anniversary of the date that we first mailed our proxy materials for our previous years annual meeting. If the date of the 2017 annual meeting is advanced more than 30 days prior to or delayed by more than 60 days after the first
anniversary of the date of our 2016 annual meeting, then, in order to be timely, notice by the stockholder must be so received by our Corporate Secretary not earlier than the close of business on the 90th day prior to the 2017 annual meeting and not
later than the close of business on the later of (i) the 60th day prior to the 2017 annual meeting, or (ii) the 10th day following the day on which we first make a public announcement of the date of the 2017 annual meeting. You can obtain
a copy of the full text of the bylaw provisions by writing to our Corporate Secretary, Brocade Communications Systems, Inc., 130 Holger Way, San Jose, California 95134.
In order for a stockholder to nominate one or more director candidates to be included in our proxy statement and form of proxy relating to the
2017 annual meeting pursuant to the proxy access provisions set forth in Section 2.15 of our bylaws, the stockholder must give us notice in accordance with the requirements set forth in our bylaws within the time periods set forth
above.
Our bylaws require that certain information, acknowledgments, representations and/or undertakings with respect to the proposal or
the nominee, as applicable, and the stockholder making the proposal or the nomination be set forth in or provided with the notice. You can obtain a copy of the full text of the bylaw provisions by writing to our Corporate Secretary, Brocade
Communications Systems, Inc., 130 Holger Way, San Jose, California 95134. Our bylaws have been publicly filed with the SEC and can also be found on our website at www.brocade.com, in the Corporate Governance section of our Investor Relations
webpage.
If a stockholder fails to meet these deadlines and fails to satisfy the requirements of Rule 14a-4 under the Exchange Act, the
Company may exercise discretionary voting authority under proxies it solicits to vote on any such proposal as it determines appropriate. Further, the Company reserves the right to reject, rule out of order or take other appropriate action with
respect to any proposal that does not comply with the requirements described above and other applicable requirements.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file
at the SEC public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public at the
SEC website at
www.sec.gov
. You also may obtain free copies of the documents we file with the SEC, including this proxy statement, by going to the Investor Relations page of our corporate website at
www.brcd.com/financials.cfm
. Our
website address is provided as an inactive textual reference only. The information provided on our website, other than copies of the documents listed below that have been filed with the SEC, is not part of this proxy statement, and therefore is not
incorporated herein by reference.
Statements contained in this proxy statement, or in any document incorporated by reference in this
proxy statement, regarding the contents of any contract or other document, are not necessarily complete and each such statement is qualified in its entirety by reference to that contract or other document filed as an exhibit with the SEC. The SEC
allows us to incorporate by reference into this proxy statement documents we file with the SEC. This means that we can disclose important information to you by referring you to those documents. The information incorporated by reference
is considered to be a part of this proxy statement, and later information that we file with the SEC will update and supersede that information. We incorporate by reference the documents listed below and any documents filed by us pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement and before the date of the special meeting.
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Annual Report on Form 10-K for the fiscal year ended October 29, 2016 (filed with the SEC on December 16, 2016).
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Information furnished under Item 2.02 or Item 7.01 of any Current Report on Form 8-K, including related exhibits, is not and will
not be incorporated by reference into this proxy statement.
Any person, including any beneficial owner of Company Common Stock, to whom
this proxy statement is delivered may request copies of proxy statements and any of the documents incorporated by reference in this document or other information concerning us, without charge, by written request directed to the Corporate Secretary,
Brocade Communications Systems, Inc., 130 Holger Way, San Jose, California 95134 or by telephonic request by calling (408) 333-8000, or from our proxy solicitor, Innisfree M&A Incorporated, at 501 Madison Avenue, 20th Floor, New York, New
York 10022, or from the SEC through the SEC website at the address provided above. Documents incorporated by reference are available without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by
reference into those documents.
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM
ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE YOUR SHARES OF COMPANY COMMON STOCK
AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED DECEMBER 20, 2016. YOU SHOULD NOT ASSUME THAT THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
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Annex A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BROADCOM
LIMITED,
BROADCOM CORPORATION,
BOBCAT MERGER SUB, INC.
AND
BROCADE
COMMUNICATIONS SYSTEMS, INC.
NOVEMBER 2, 2016
TABLE OF CONTENTS
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A-ii
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Schedules
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Schedule 1.01
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Top OEM Customers
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Schedule 6.08
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Potential Sale Assets
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Schedule 7.01(e)
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Certain Regulatory Matters
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Schedule 8.01(b)
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Antitrust Jurisdictions
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Exhibits
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Exhibit A
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Certificate of Merger
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Exhibit B
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Form of Amended and Restated Certificate of Incorporation of the Surviving Corporation
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this
Agreement
), dated as of November 2, 2016, is entered into by and among Brocade
Communications Systems, Inc., a Delaware corporation (the
Company
), Broadcom Limited, a limited company organized under the laws of the Republic of Singapore (
Ultimate Parent
), Broadcom Corporation, a California
corporation and an indirect subsidiary of Ultimate Parent (
Parent
), and Bobcat Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent (
Merger Sub
).
RECITALS
WHEREAS, the
board of directors of Merger Sub and the board of directors of the Company (the
Company Board of Directors
) have unanimously approved and declared advisable and in the best interests of each corporation and its respective
stockholders, and the board of directors of Ultimate Parent and the board of directors of Parent have unanimously approved and declared advisable, this Agreement and the transactions contemplated hereby, including the merger of Merger Sub with and
into the Company, with the Company as the surviving corporation (the
Merger
), as more fully provided in this Agreement and in accordance with the General Corporation Law of the State of Delaware (the
DGCL
);
WHEREAS, the Company Board of Directors has unanimously recommended the adoption of this Agreement to its stockholders;
WHEREAS, contemporaneously with the execution and delivery of this Agreement, and as an inducement to Parents willingness to enter into
this Agreement, certain stockholders of the Company are executing a support agreement in favor of Parent (the
Support Agreement
); and
WHEREAS, Ultimate Parent, Parent, Merger Sub and the Company desire to make certain representations, warranties and agreements in connection
with the Merger and also to prescribe certain conditions to the Merger.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements set forth herein, as well as
other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, Ultimate Parent, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE 1.
Definitions
Section 1.01
Definitions
.
(a) As used in this Agreement,
the following terms have the following meanings:
Acquired Companies
means, collectively, the Company
and each of its Subsidiaries.
Acquired Company Employees
mean all employees of the Acquired Companies
who (i) as of immediately following the Effective Time, continue to be employed by any Acquired Company, or (ii) remain or become, as of immediately following the Effective Time, employees of the Surviving Corporation.
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Acquired Company Service Providers
mean all non-employee
service providers of the Acquired Companies who, as of immediately following the Effective Time, continue their service with the Acquired Companies, other than any such service providers who are ineligible to be included on a registration statement
filed by Ultimate Parent on Form S-8.
Acquisition Proposal
means, other than any proposal (which may be
in the form of an expression of interest) or offer from Ultimate Parent, Parent or any of their Subsidiaries, any proposal (which may be in the form of an expression of interest) or offer (whether or not in writing) contemplating an Acquisition
Transaction.
Acquisition Transaction
means, other than the transactions contemplated by this Agreement,
any transaction or series of transactions involving:
(i) the sale, lease, exchange, transfer, license, disposition
(including by way of merger, consolidation, amalgamation, share exchange, business combination, issuance of securities, acquisition of securities, recapitalization, tender offer, exchange offer or other similar transaction or the liquidation or
dissolution of one or more of the Acquired Companies) or acquisition of any business or businesses or assets that, in any such case, constitute or account for 15% or more of the consolidated net revenues, net income or net assets of the Acquired
Companies, taken as a whole; or
(ii) any merger, consolidation, amalgamation, share exchange, business combination,
issuance of securities, acquisition of securities, recapitalization, tender offer, exchange offer or other similar transaction (other than any such transaction by any Company Subsidiary by or with the Company or any other Company Subsidiary) (A) in
which a Person or group (as defined in the Exchange Act) of Persons directly or indirectly acquires beneficial or record ownership of securities representing more than 15% of the outstanding securities of any class of voting securities
(or instruments convertible into or exercisable or exchangeable for more than 15% of any such class) of the Company or any of its Subsidiaries whose businesses or assets constitute or account for 15% or more of the consolidated net revenues, net
income or net assets of the Acquired Companies, taken as a whole; or (B) in which the Company or any of its Subsidiaries whose businesses or assets constitute or account for 15% or more of the consolidated net revenues, net income or net assets of
the Acquired Companies, taken as a whole issues securities representing more than 15% of any class of its outstanding voting securities (or instruments convertible into or exercisable or exchangeable for more than 15% of any such class).
provided
, that in no event shall any Potential Asset Sale Transaction constitute an Acquisition Transaction.
Affiliate
means, with respect to any Person, any other Person directly or indirectly controlling, controlled
by, or under common control with such Person. For purposes of this definition, control, when used with respect to any specified Person, means the power to direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through ownership of voting securities or by contract or otherwise, and the terms controlling and controlled by have correlative meanings to the foregoing.
Applicable Law
means, with respect to any Person, any federal, state, local, municipal, foreign or other
law, constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or
applicable to such Person, as amended unless expressly specified otherwise.
Business Day
means a day,
other than Saturday, Sunday or other day on which commercial banks in New York, New York or the Republic of Singapore are authorized or required by Applicable Law to close.
CFIUS
means the Committee on Foreign Investment in the United States or any successor body.
CFIUS Clearance
means that any review or investigation by CFIUS of the transactions contemplated by this
Agreement shall have been concluded, and either (i) the parties shall have received written notice that a determination by CFIUS has been made that there are no unresolved issues of national security in
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connection with the transactions contemplated by this Agreement, or (ii) the President of the United States shall have determined not to use his or her powers pursuant to Exon-Florio to unwind,
suspend or prohibit the consummation of the transactions contemplated by this Agreement.
Closing Date
Payments
means (i) the payment in full, in cash, of the aggregate Merger Consideration, RSU Consideration, PSU Consideration and Option Consideration required to be paid by Parent and Merger Sub in connection with the consummation of the
Transaction, (ii) the payment of all costs, fees and expenses required to be paid by Parent and Merger Sub in connection with the Merger and (iii) the payment of any other amounts required to be paid by Parent and Merger Sub in connection with the
consummation of the Transaction.
Code
means the Internal Revenue Code of 1986, as amended.
Company Balance Sheet
means the consolidated unaudited balance sheet of the Company as of the Company
Balance Sheet Date and the notes thereto, as contained in the Company SEC Documents.
Company Balance Sheet
Date
means July 30, 2016.
Company Capital Stock
means the Company Common Stock and the
Company Preferred Stock.
Company Common Stock
means the common stock, $0.001 par value, of the Company.
Company Compensatory Award
means each Company Option, Company PSU Award, Company RSU Award and other
equity-based award denominated in Company Common Stock that was granted pursuant to a Company Stock Plan.
Company
Disclosure Schedule
means the disclosure schedule dated the date of this Agreement regarding this Agreement that has been provided by the Company to Parent.
Company ESPP
means the Companys 2009 Employee Stock Purchase Plan, as amended and restated.
Company IP
means all Intellectual Property Rights owned or purported to be owned by any Acquired Company.
Company IP Contract
means any Contract to which any Acquired Company is party or by which any Acquired
Company is bound, that contains any assignment or license of, or covenant not to assert or enforce, any Intellectual Property Right or that otherwise relates to any Company IP or any Technology or Intellectual Property Rights developed by, with, or
for any Acquired Company, or licensed by, with or to any Acquired Company.
Company Material Adverse
Effect
means any effect, event, change, occurrence, development or state of facts (whether or not foreseeable as of the date of this Agreement) that, individually or when taken together with all other effects, events, changes, occurrences,
developments or states of facts, is or would reasonably be expected to be materially adverse to the business, assets, liabilities, results of operations or financial condition of the Acquired Companies, taken as a whole;
provided
, that in no
event shall any of the following be considered in determining whether such material adverse effect has occurred or would reasonably be expected to occur:
(i) any change in general economic or political conditions in the United States or any other country or region in the world in
which the Acquired Companies conduct business (but only, in each case, to the extent such changes do not, individually or in the aggregate, have a disproportionate impact on the Acquired Companies, taken as a whole, relative to other Persons in
similar businesses);
(ii) any change in the financial, credit or securities markets in general (including changes in
interest rates and exchange rates) in the United States or any other country or region in the world in which the Acquired Companies conduct business (but only, in each case, to the extent such changes do not, individually or in the aggregate, have a
disproportionate impact on the Acquired Companies, taken as a whole, relative to other Persons in similar businesses);
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(iii) any events, circumstances, changes or effects that generally affect the
industries in which any of the Acquired Companies operate (but only, in each case, to the extent such events, circumstances, changes or effects do not, individually or in the aggregate, have a disproportionate impact on the Acquired Companies, taken
as a whole, relative to other Persons in similar businesses);
(iv) any change after the date hereof in GAAP, other
applicable accounting rules or Applicable Law which is applicable to the Acquired Companies, the operation of the business of any Acquired Company, or any of their respective properties or assets (but only, in each case, to the extent such changes
do not, individually or in the aggregate, have a disproportionate impact on the Acquired Companies, taken as a whole, relative to other Persons in similar businesses);
(v) any changes in the market price or trading volume of Company Common Stock or any failure to meet internal or published
projections, forecasts or revenue or earning predictions for any period (provided that the underlying causes of such changes or failures may be considered in determining whether there has been or would reasonably be expected to be a Company Material
Adverse Effect);
(vi) acts of war or terrorism, earthquakes, hurricanes, tsunamis, tornados, floods, mudslides, wild fires
or other natural disasters and other similar events in the United States or any other country or region in the world in which the Acquired Companies conduct business (but only, in each case, to the extent such disasters or events do not,
individually or in the aggregate, have a disproportionate impact on the Acquired Companies, taken as a whole, relative to other Persons in similar businesses);
(vii) the entry into, announcement and pendency of this Agreement and the transactions contemplated hereby and the
performance of this Agreement by the Acquired Companies (including, for the avoidance of doubt, (A) any loss of revenue or earnings, (B) any loss of, or change in, the relationship of the Company or any of its Subsidiaries, contractual or otherwise,
with its customers, suppliers, vendors, lenders, employees or investors, or (C) any impact to the extent resulting from the actions or transactions contemplated by Section 6.08, in either case, arising out of the execution, delivery or performance
of this Agreement and the pendency of the transactions contemplated hereby); or
(viii) the existence of any litigation, in
and of itself (but, for the avoidance of doubt, not the facts or circumstances underlying such litigation), arising from allegations of a breach of fiduciary duty relating to this Agreement or the transactions contemplated by this Agreement.
Company Option
means any option to purchase Company Common Stock which was granted pursuant to a Company
Stock Plan.
Company Preferred Stock
means the preferred stock, $0.001 par value, of the Company.
Company Products
means the products and services currently designed, developed, manufactured, offered,
provided, marketed, licensed, sold, distributed, supported or otherwise made available by or for any Acquired Company, including any product or service currently under development by any Acquired Company.
Company PSU Award
means any award of restricted stock units (or the portion of such award, as applicable)
with respect to Company Common Stock which was granted pursuant to a Company Stock Plan and as of immediately prior to the Closing Date, is subject to vesting based on the achievement of any performance goals or market-based conditions.
Company RSU Award
means any award of restricted stock units with respect to Company Common Stock which was
granted pursuant to a Company Stock Plan that, as of immediately prior to the Closing Date, is not subject to vesting based on the achievement of any performance goals or market-based conditions.
Company Software
means Software the Copyright in which is owned by an Acquired Company.
Company Stock Plans
means the Companys 1999 Stock Plan, as amended and restated, the Companys
1999 Director Plan, as amended and restated, the Companys 2009 Stock Plan, as amended and
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restated, the Companys 2009 Director Plan, as amended and restated, the 2001 McDATA Equity Incentive Plan, and the Companys Inducement Award Plan, as amended and restated.
Company Termination Fee
means an amount equal to $195,000,000.
Consent
means any approval, consent, ratification, permission, waiver or authorization (including any
Permit).
Contract
means any contract, agreement, indenture, note, bond, loan, license, sublicense,
subcontract, purchase order, instrument, lease or any other binding commitment, arrangement or undertaking of any nature, whether oral or written.
Convertible Note Hedge Obligations
means, collectively, (i) the call option transaction confirmations, each
dated January 8, 2015, between the Company and each of JPMorgan Chase Bank, National Association, London Branch, Deutsche Bank AG, London Branch, and Wells Fargo Bank, National Association, as amended by those side letters, each dated January 8,
2015, between the Company and each of JPMorgan Chase Bank, National Association, London Branch, Deutsche Bank AG, London Branch, and Wells Fargo Bank, National Association and (ii) the additional call option transaction confirmations, each dated
January 9, 2015, between the Company and each of JPMorgan Chase Bank, National Association, London Branch, Deutsche Bank AG, London Branch, and Wells Fargo Bank, National Association, as amended by those side letters, each dated January 9, 2015,
between the Company and each of JPMorgan Chase Bank, National Association, London Branch, Deutsche Bank AG, London Branch, and Wells Fargo Bank, National Association.
Credit Agreement
means the Credit Agreement, dated as of May 27, 2016, by and among the Company, the lenders
party thereto and Wells Fargo Bank, National Association, as administrative agent.
Environmental Laws
means Applicable Laws governing pollution or protection of human health or the environment (including ambient air, surface water, ground water, land surface or subsurface strata and natural resources), including Applicable Laws governing production,
use, storage, treatment, transportation, disposal, handling, emissions, discharges, releases or threatened releases of, or exposure to, Hazardous Substances or the investigation, clean-up or remediation of Hazardous Substances.
Environmental Permits
means applicable permits, licenses, certificates, approvals and authorizations of
Governmental Authorities required by Environmental Laws for the business of the Acquired Companies.
ERISA
means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder, or any successor statute, rules and regulations thereto.
ERISA Affiliate
means,
with respect to any entity, trade or business, any other entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first entity, trade or business,
or that is a member of the same controlled group as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.
Exchange Act
means the Securities Exchange Act of 1934.
FCPA
means the Foreign Corrupt Practices Act of 1977.
GAAP
means generally accepted accounting principles in the United States.
Government Contract
means any prime contract, subcontract, purchase order, task order, delivery order,
teaming agreement, joint venture agreement, basic ordering agreement, pricing agreement, letter contract or other similar arrangement of any kind that is currently active in performance or that has been active in performance at any time in the five
year period prior to the Effective Time with (i) any Governmental Authority; (ii) any prime contractor of a Governmental Authority in its capacity as a prime contractor; or (iii) any higher-tier subcontractor with respect to any contract of a type
described in clauses (i) or (ii) above. A task, purchase or delivery order under a Government Contract shall not constitute a separate Government Contract, for purposes of this definition, but shall be part of the Government Contract to which
it relates.
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Governmental Authority
means any: (i) nation, state,
commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (ii) federal, state, local, municipal, foreign or other government; (iii) governmental or quasi-governmental authority of any nature
(including any governmental division, department, agency, commission, instrumentality, organization, unit or body and any court or other tribunal); (iv) any non-governmental agency, tribunal or entity that is vested by a governmental agency with
applicable jurisdiction; or (v) self-regulatory organization (including NASDAQ).
Hazardous Substances
means any hazardous or toxic pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive, or reactive substance, waste or material, including petroleum, its derivatives, by-products and petroleum hydrocarbons, regulated
under applicable Environmental Law.
HSR Act
means the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
In-the-Money Company Options
means Company Options with an exercise price per share of Company
Common Stock subject thereto that is less than the Merger Consideration.
Intellectual Property Rights
means and includes all past, present and future rights of the following types anywhere in the world, whether now known or hereafter existing under the laws of any jurisdiction: (i) United States and foreign patents, including utility models,
industrial designs and design patents, and applications and disclosures relating thereto (and any patents that issue as a result of those patent applications), and any renewals, reissues, reexaminations, extensions, continuations,
continuations-in-part, continuing prosecution applications, provisionals, divisions and substitutions relating to any of the patents and patent applications, as well as all related foreign patent and patent applications that are counterparts to such
patents and patent applications (collectively,
Patents
), including all members of the Patent Families of such Patents; (ii) United States and foreign trademarks, trade names, service marks, service names, trade dress, logos,
slogans, corporate names, brand names, collective membership marks, certification marks, and other forms of indicia of origin, whether registered or unregistered, and the goodwill associated therewith, together with any registrations and
applications for registration thereof (collectively,
Trademarks
); (iii) rights in works of authorship including any United States and foreign copyrights and rights under copyrights, whether registered or unregistered, including
exclusive exploitation rights and moral rights, and any registrations and applications for registration thereof (collectively,
Copyrights
); (iv) United States and foreign mask work rights or equivalents, and registrations and
applications for registration thereof; (v) rights in databases and data collections (including knowledge databases, customer lists and customer databases) under the laws of the United States or any other jurisdiction, whether registered or
unregistered, and any applications for registration therefor; (vi) trade secret rights and other rights in know-how and confidential or proprietary information (including any rights resulting from research and development, and rights in discoveries,
improvements, formulas, compositions, commercially practiced processes, business plans, designs, drawings, specifications, technical data, customer data, financial information, pricing and cost information, bills of material, or other similar
information); (vii) URLs and domain names, including any registrations thereof; (viii) inventions (whether or not patentable) and improvements thereto; (ix) all claims and causes of action arising out of or related to any past, current or
future infringement, misappropriation, interference or violation of any of the foregoing; and (x) other proprietary or intellectual property rights now known or hereafter recognized in any jurisdiction worldwide.
Intervening Event
means any event, fact, circumstance, development or occurrence that is material to the
Acquired Companies, taken as a whole (other than any event, fact, circumstance, development or occurrence resulting from a breach of this Agreement by the Company) that was not known to the Company Board of Directors on or prior to the date of this
Agreement which event, fact, circumstance, development or occurrence becomes known to the Company Board of Directors prior to receipt of the Required Company Stockholder Approval;
provided
,
however
, that in no event shall any event,
fact, circumstance, development or occurrence resulting from or relating to any of the following give rise to an Intervening Event: (i) any Acquisition Proposal; (ii) the public announcement of discussions among the parties regarding a potential
transaction, the public announcement, execution, delivery or performance of this Agreement, the identity of Ultimate Parent, Parent or Merger Sub, or the public announcement, pendency or consummation of the
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transactions contemplated hereby; (iii) any change in the trading price or trading volume of Company Common Stock on NASDAQ or any change in the Companys credit rating (although for
purposes of clarity, any underlying facts, events, changes, developments or set of circumstances, with respect to this clause (iii) relating to or causing such change may be considered, along with the effects or consequences thereof); (iv) the fact
that the Company has exceeded or met any projections, forecasts, revenue or earnings predictions or expectations of the Company or any securities analysts for any period ending (or for which revenues or earnings are released) on or after the date
hereof (although for purposes of clarity, any underlying facts, events, changes, developments or set of circumstances relating to or causing such material improvement or improvements may be considered, along with the effects or consequences
thereof); (v) changes in GAAP, other applicable accounting rules or Applicable Law (including the accounting rules and regulations of the SEC) or, in any such case, changes in the interpretation thereof after the date hereof; or (vi) any changes in
general economic or political conditions, or in the financial, credit or securities markets in general (including changes in interest rates, exchange rates, stock, bond and/or debt prices).
IRS
means the United States Internal Revenue Service or any successor thereto.
Knowledge
means, (i) with respect to the Acquired Companies the actual knowledge of each of Lloyd A. Carney,
Ken K. Cheng, Gale E. England, Daniel W. Fairfax, Jeffrey P. Lindholm and Ellen A. ODonnell, and (ii) with respect to Ultimate Parent, Parent and Merger Sub, the actual knowledge of each of Hock E. Tan, Thomas H. Krause, Jr., Charles B.
Kawwas, Henry S. Samueli, Bryan T. Ingram and Patricia H. McCall.
Leased Real Property
means each
parcel of real property leased by the Company or one of the other Acquired Companies.
Lien
means any
mortgage, lien (statutory or otherwise), pledge, charge, security interest, deed of trust, deed to secure debt, deed of restriction, right of first offer or right of first refusal, easement, right-of-way, title defect, encumbrance, lease, sublease,
collateral assignment, hypothecation or other adverse claim of any kind (excluding licenses of or other grants of rights to use Intellectual Property Rights), including any restriction on use, voting, transfer, receipt of income or exercise of any
other attribute of ownership. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such property or asset.
OFAC
means the Office of Foreign Assets Control of the U.S. Treasury Department.
Owned Real Property
means
the real property owned, or reflected as owned on the Company Balance Sheet, by any Acquired Company, together with all buildings and other structures, facilities or improvements located thereon.
Patent Family
means (i) all Patents in the same priority chain (i.e., all Patents that claim priority to the
same non-provisional application or applications, and all Patents from which priority is claimed by the identified Patent); (ii) all corresponding foreign Patents; and (iii) all Patents that are subject to a terminal disclaimer that disclaims the
term of any such Patent beyond the term of any member of the family.
Pending Reorganization
means the
integration and legal rationalization project by the Acquired Companies currently in progress as of the date hereof, which includes, among other things, the reorganization, formation, merger, liquidation and/or dissolution of certain Subsidiaries of
the Company, the transfer of employees of the Company and its Subsidiaries among various Subsidiaries and the transfer of assets and liabilities among various Subsidiaries of the Company.
Person
means an individual, corporation, partnership, limited liability company, association, trust or other
entity or organization, including a Governmental Authority.
Proceeding
means any action, suit,
litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit or examination commenced, brought, conducted or heard by or before, or otherwise involving, any
arbitrator, arbitration panel, court or other Governmental Authority.
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Proxy Statement
means the proxy statement to be sent to the
Companys stockholders in connection with the Company Stockholder Meeting.
Qualifying Compensatory Company
Award
means any Compensatory Company Award the vesting of which is not subject to acceleration as a result of the consummation of the transactions contemplated by this Agreement.
Registered IP
means all Intellectual Property Rights that are registered, recorded, filed or issued under
the authority of any Governmental Authority, including all Patents, registered Copyrights, applications to register Copyrights, registered Trademarks, applications to register Trademarks (including intent-to-use applications), registered mask works,
domain names and all applications for any of the foregoing.
Related Person
means any director, officer,
or member of any of their immediate family (as such term is defined in Rule 16a-1 of the Exchange Act), of any Acquired Company.
Representatives
means a Persons officers, directors, employees, agents, attorneys, accountants,
advisors and other authorized representatives.
SEC
means the United States Securities and Exchange
Commission.
Securities Act
means the Securities Act of 1933.
Software
means any and all computer programs, operating systems, applications systems, firmware or software
code of any nature, which is currently operational, including all object code, Source Code, RTL code, Gerber files, GDSII files, executable code or data files; rules, definitions or methodology derived from any of the foregoing; and any derivations,
updates, enhancements and customizations of any of the foregoing, and any related processes, know-how, APIs, user interfaces, command structures, menus, buttons and icons, flow-charts, and related documentation, operating procedures, methods, tools,
developers kits, utilities, developers notes, technical manuals, user manuals and other documentation thereof, including comments and annotations related thereto; whether in machine-readable form, programming language or any other
language or symbols and whether stored, encoded, recorded or written on disk, tape, film, memory device, paper or other media of any nature.
Source Code
means Software in human-readable form, including related programmer comments and annotations,
build scripts, test scripts, help text, data and data structures, instructions and other documentation for such computer software code that enables a programmer to understand and modify such Software.
Standard Software
means generally commercially available, off-the-shelf or
shrink-wrapped Software that is not redistributed with or used in the development or provision of the Company Products.
Standards Body
means any, standard setting organization, industry body or other group that is involved in
setting, publishing or developing any industry standards applicable to the products or services offered, provided, distributed or sold by the Acquired Companies or the Patents included in the Company IP.
Subsidiary
means, with respect to any Person, any entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person. For avoidance of doubt, Guizhou Huiling Technology Co., Ltd
shall not be deemed a Subsidiary of the Company.
Superior Proposal
means any
bona fide
written
Acquisition Proposal (with all references to 15% in the definition of Acquisition Transaction being treated as references to 50% for these purposes) that is made by a third party that the Company Board of Directors determines in good faith, after
consultation with its outside legal counsel and financial advisors, is reasonably capable of being consummated, and if consummated would be more favorable to the Companys stockholders (in their capacity as such) from a financial point of view
than the Transaction, taking into account (i) all financial, regulatory, legal and other
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aspects of such Acquisition Proposal (including the existence of financing conditions, the conditionality of any financing commitments and the likelihood and timing of consummation) and (ii) any
adjustment to the terms and conditions of this Agreement agreed to by Parent and Ultimate Parent in writing pursuant to Section 6.03(g) in response to such Acquisition Proposal.
Tax
means any and all taxes, including any net income, alternative or add-on minimum, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits, license, registration, recording, documentary, conveyancing, gains, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental
or windfall profit, custom duty, escheat or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest, penalty, addition to tax or additional amount imposed by any governmental authority
responsible for the imposition of any such tax (United States (federal, state or local) or foreign).
Tax
Costs
means (i) any Taxes resulting from any action requested by Parent pursuant to Section 6.07 (taking into account the tax benefit of any deductions or credits associated with the incurrence or payment of such Taxes and including a full
gross-up for any additional Taxes imposed with respect to amounts payable pursuant to Section 6.07(e)), and (ii) the amount that is the product of (A) any reduction, utilization or elimination of net operating losses, credits or other Tax
attributes by reason of any action taken at the direction of Parent pursuant to Section 6.07 multiplied by (B) the highest U.S. federal, state and local marginal income tax rate in effect for a corporation organized in the United States.
Tax Return
means any return, report, declaration, claim for refund, information return or other document
(including schedules thereto, other attachments thereto, amendments thereof, or any related or supporting information) filed or required to be filed with any taxing authority in connection with the determination, assessment or collection of any Tax,
or the administration of any laws, regulations or administrative requirements relating to any Tax.
Technology
means and includes diagrams, inventions (whether or not patentable), invention disclosures,
know-how, methods, network configurations and architectures, proprietary information, protocols, layout rules, schematics, semiconductor design information, including, bills of material, build instructions, test instructions, test reports,
performance data, tooling requirements, procedures, manufacturing processes, packaging and other specifications, verification tools, development tools, technical data, Software, algorithms, subroutines, methods, techniques, URLs, IP cores, net
lists, photomasks, domain names, web sites, works of authorship, drawings, graphics, documentation (including lab notebooks, instruction manuals, samples, studies and summaries), databases and data collections, advertising copy, marketing materials,
product roadmaps, personnel information, supplier information, customer lists, customer contact and registration information, customer correspondence, customer purchasing histories and any other forms of technology, in each case whether or not
embodied in any tangible form and including all tangible embodiments of any of the foregoing.
Top OEM
Customers
means those parties identified as Top OEM Customers on
Schedule 1.01
hereto and each of their respective Affiliates.
Transaction
means the Merger and the other transactions contemplated by this Agreement.
Triggering Event
shall be deemed to have occurred if: (i) the Company Board of Directors shall have effected
a Change of Board Recommendation (it being understood that for purposes of this definition, a Change of Board Recommendation shall be effected if the Company Board Recommendation shall no longer be unanimous); (ii) the Company shall have failed to
include in the Proxy Statement the Company Board Recommendation or a statement to the effect that the Company Board of Directors has determined that the Transaction is in the best interests of the Companys stockholders; (iii) the Company Board
of Directors shall have approved, endorsed or recommended any Acquisition Proposal; (iv) the Company shall have entered into any letter of intent or any other Contract relating to any Acquisition Transaction (other than a confidentiality agreement
permitted pursuant to Section 6.03(d)); (v) a tender or exchange offer relating to securities of the Company shall have been commenced and the Company shall not have publicly
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filed or disclosed, within ten Business Days after the commencement of such tender or exchange offer, a statement (including on a Solicitation/Recommendation Statement on Schedule 14D-9)
that the Company recommends rejection of such tender or exchange offer; (vi) an Acquisition Proposal is publicly announced, and the Company fails to issue a press release reaffirming the Company Board Recommendation within ten Business Days after
such Acquisition Proposal is announced; or (vii) any of the Acquired Companies or any Representative of any of the Acquired Companies shall have willfully breached in any material respect any provision of Section 6.03.
Ultimate Parent Ordinary Shares
means the ordinary shares in the capital of Ultimate Parent.
Warrants
means, collectively, (i) the base warrant confirmations, each dated January 8, 2015, between the
Company and each of JPMorgan Chase Bank, National Association, London Branch, Deutsche Bank AG, London Branch, and Wells Fargo Bank, National Association, in reference to the Notes and (ii) the additional warrant confirmations, each dated January 9,
2015, between the Company and each of JPMorgan Chase Bank, National Association, London Branch, Deutsche Bank AG, London Branch, and Wells Fargo Bank, National Association, in reference to the Notes.
Willful Breach
means a willful, intentional and material breach of this Agreement by a party hereto having
knowledge that the action taken or not taken constitutes a breach of this Agreement.
(b) Each of the
following terms is defined in the Section set forth opposite such term:
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Term
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Section
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401(k) Plan
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6.05
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4062(e) Event
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4.18(d)
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Agreement
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Preamble
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Alternative Acquisition Agreement
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6.03(g)(i)
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Anti-Takeover Law
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4.24
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Antitrust Laws
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4.03
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Assumed Option
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3.05(b)
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Assumed PSU Award
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3.05(f)
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Assumed RSU Award
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3.05(d)
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Book-Entry Shares
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3.01(b)
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Call Spread Dealers
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7.10(b)
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Cancelled Shares
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3.01(d)
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Capitalization Date
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4.05(a)
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Cashed Out Company Options
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3.05(a)
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Cashed Out Company PSU Award
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3.05(g)
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Cashed Out Company RSU Award
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3.05(e)
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Cashed Out Compensatory Award
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3.05(g)
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Certificate
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3.01(b)
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Certificate of Merger
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2.02(a)
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Change of Board Recommendation
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6.02(c)
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Closing
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2.01
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Closing Date
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2.01
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Company
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Preamble
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Company Board of Directors
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Recitals
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Company Board Recommendation
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4.02(b)
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Company Closing Certificate
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8.02(d)(i)
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Company Cure Period
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9.01(h)
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Company ESPP Rights
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7.04(b)
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Company Financial Advisor
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4.22
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Company Financial Statements
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4.06(c)
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Company Fundamental Representations
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8.02(a)(ii)
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Term
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Section
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Company Material Contract
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4.09(a)
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Company SEC Documents
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4.06(a)
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Company Securities
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4.05(c)
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Company Retention Agreement
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7.08(d)
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Company Stockholder Meeting
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6.02(a)
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Company Technology
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4.14(b)
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Confidentiality Agreement
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7.03(a)
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Copyrights
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1.01
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D&O Indemnitee
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7.05(a)
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D&O Insurance
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7.05(b)
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Debt Financing
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6.07(a)
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Delaware Secretary of State
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2.02(a)
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DGCL
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Recitals
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Dissenting Shares
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3.06(a)
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DSS
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4.10(e)
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Effective Time
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2.02(a)
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Employee Plans
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4.18(b)
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End Date
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9.01(b)
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Enforceability Exceptions
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4.02(a)
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Exchange Fund
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3.02(a)
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Exchange Ratio
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3.05(b)
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Exon-Florio
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7.01(c)
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Final Exercise Date
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7.04(b)
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Foreign Plan
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4.18(c)
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Indenture
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7.10(a)
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Intervening Event Notice Period
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6.03(f)(i)
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Malicious Code
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4.14(h)
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Merger
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Recitals
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Merger Consideration
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3.01(a)
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Merger Sub
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Preamble
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NDA
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4.09(a)(ii)
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Notes
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7.10(a)
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Notice Period
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6.03(g)(i)
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Option Consideration
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3.05(a)
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Original Date
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6.02(b)
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Other Interested Party
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6.03(c)
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Parent
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Preamble
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Parent Closing Certificate
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8.03(c)
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Parent Cure Period
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9.01(i)
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Parent Fundamental Representations
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8.03(a)(i)
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Parent Plans
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7.08(b)
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Patents
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1.01
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Paying Agent
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3.02(a)
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PBGC
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4.18(d)
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Pension Plan
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4.18(d)
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Permits
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4.16
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Permitted Liens
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4.13(a)(vi)
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Potential Asset Sale Transaction
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6.08(a)
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Potential Sale Assets
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6.08(a)
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PSU Consideration
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3.05(g)
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Term
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Section
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Quarter-End Deferral Period
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2.01
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Real Property Lease
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4.12(b)
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Required Company Stockholder Approval
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4.02(a)
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RSU Consideration
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3.05(e)
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Sarbanes-Oxley Act
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4.06(e)
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Significant Customer
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4.21(a)
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Significant Supplier
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4.21(b)
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Support Agreement
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Recitals
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Surviving Corporation
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2.02(a)
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Trade Sanctions
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4.10(c)
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Trademarks
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1.01
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U.S. Employee Plans
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4.18(f)
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Ultimate Parent
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Preamble
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WARN Act
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4.18(m)
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Section 1.02
Definitional and
Interpretative Provisions
.
(a) The words hereof, herein and
hereunder and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
(b) The captions herein are included for convenience of reference only and shall be ignored in the
construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified.
(c) All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a
part of this Agreement as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement.
(d) Any singular term in this Agreement shall be deemed to include the plural, and any plural term the
singular, and words denoting either gender shall include both genders as the context requires. Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning.
(e) Whenever the words include, includes or including are used in this
Agreement, they shall be deemed to be followed by the words without limitation, whether or not they are in fact followed by those words or words of like import.
(f) The use of the word or shall not be exclusive unless expressly indicated otherwise.
(g) The word party shall, unless the context otherwise requires, be construed to mean a party
to this Agreement. Any reference to a party to this Agreement or any other agreement or document contemplated hereby shall include such partys successors and permitted assigns.
(h) Unless otherwise specifically indicated, all references to dollars or $ shall
refer to the lawful currency of the United States.
(i) A reference to any legislation or to any
provision of any legislation shall include any modification, amendment, re-enactment thereof, any legislative provision substituted therefor and all rules, regulations and statutory instruments issued or related to such legislation.
(j) The word will, when referring to an action by a party, shall be construed to have the same
meaning and effect as the word shall.
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(k) Unless otherwise specifically indicated, any agreement or
instrument defined or referred to herein or in any agreement or instrument that is referred to herein shall mean such agreement or instrument as from time to time amended, modified or supplemented, including by waiver or consent.
(l) Any rule of construction to the effect that ambiguities are to be resolved against the drafting party
shall not be applied in the construction or interpretation of this Agreement. No prior draft of this Agreement nor any course of performance or course of dealing shall be used in the interpretation or construction of this Agreement. No
parol evidence shall be introduced in the construction or interpretation of this Agreement unless the ambiguity or uncertainty in issue is plainly discernable from a reading of this Agreement without consideration of any extrinsic
evidence. Although the same or similar subject matters may be addressed in different provisions of this Agreement, the parties intend that, except as reasonably apparent on the face of the Agreement or as expressly provided in this Agreement,
each such provision shall be read separately, be given independent significance and not be construed as limiting any other provision of this Agreement (whether or not more general or more specific in scope, substance or content). The doctrine
of election of remedies shall not apply in constructing or interpreting the remedies provisions of this Agreement or the equitable power of a court considering this Agreement or the transactions contemplated hereby.
(m) Other than any Company SEC Document publicly available on the SECs Electronic Data Gathering
Analysis and Retrieval System, a document shall be deemed to have been made available to Parent only if such document has been made available in the virtual data room established by the Company for the purposes of the transactions
contemplated by this Agreement or if such document has been directly made available or delivered to Parent or one of its Representatives, including via email or via in-person review no later than 11:59 p.m. (Pacific Time) on October 31, 2016.
ARTICLE 2.
Description of the Transaction
Section 2.01
The Closing
. The consummation of the
Transaction (the
Closing
) shall take place at the offices of Latham & Watkins LLP, 140 Scott Drive, Menlo Park, California 94025 at 8:00 a.m. Pacific Time on a date to be specified by the parties, which shall be no later than
the fourth Business Day after the satisfaction or waiver (to the extent permitted hereunder) of the last of the conditions set forth in Article 8 to be satisfied or waived (other than those conditions that by their nature are to be satisfied or
waived at the Closing, but subject to the satisfaction or waiver (to the extent permitted hereunder) of such conditions), or at such other date, time or location as Parent and the Company may otherwise agree in writing; provided that, in the event
that pursuant to the foregoing terms, the Closing would occur on a date that is within the 15-day period prior to the closing of any Ultimate Parent fiscal quarter (
Quarter-End Deferral Period
), at Parents written election
delivered to the Company no later than three Business Days prior to the date on which the Closing would have otherwise occurred (and
provided
, that (i) such election shall be irrevocable upon delivery and effective as of 12:01 A.M., Pacific
Time on the date on which the Closing would have otherwise occurred, and (ii) upon effectiveness thereof, each of the conditions to the obligations of Ultimate Parent, Parent and Merger Sub set forth in Article 8 (other than Section 8.01(c) and
Section 8.02(b) solely with respect to a Willful Breach occurring after the date of such election), shall be deemed to have been irrevocably fulfilled in all respects and Parent shall have irrevocably waived its right to terminate this Agreement
pursuant to Article 9 (other than pursuant to Section 9.01(a), Section 9.01(c) and Section 9.01(h)(ii) solely for a Willful Breach by the Company occurring after the date of such election), the Closing shall take place as of the opening of business
on the first Business Day of the immediately succeeding fiscal quarter (
provided
, that in the case of such election, the Company shall have no right to terminate pursuant to Section 9.01(b) until the second Business Day of the immediately
succeeding fiscal quarter), unless another time, date or place is agreed to in writing by Parent and Company. The date on which the Closing actually takes place is referred to in this Agreement as the
Closing Date
.
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Section 2.02
The
Merger
.
(a) Contemporaneously with, or as promptly as practicable after the Closing, the parties
shall cause the Merger to be consummated by filing with the Secretary of State of the State of Delaware (the
Delaware Secretary of State
) a certificate of merger in the form attached hereto as
Exhibit A
(the
Certificate of Merger
) and executed in accordance with the relevant provisions of the DGCL, and shall make all other filings or recordings required under the DGCL in order to consummate the Merger. The Merger shall become
effective at the time the Certificate of Merger has been filed with the Delaware Secretary of State or at such later time as shall be agreed upon by Parent and the Company and specified in the Certificate of Merger (the
Effective
Time
). As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue its existence as a wholly owned subsidiary of Parent under the laws of the State of Delaware. The
Company, in its capacity as the corporation surviving the Merger, is sometimes referred to in this Agreement as the
Surviving Corporation
.
(b) The Merger shall have the effects set forth in this Agreement, the Certificate of Merger and the
applicable provisions of the DGCL.
(c) Subject to Section 7.05, at the Effective Time, (i) the
certificate of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated in its entirety to read in the form attached hereto as
Exhibit B
, and as so amended, shall be the certificate of
incorporation of the Surviving Corporation and (ii) the bylaws of Merger Sub in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation, except that the name of the corporation set forth therein shall be
changed to the name of the Company, in each case, until thereafter amended in accordance with the DGCL and as provided in such certificate of incorporation or bylaws.
(d) From and after the Effective Time, unless otherwise determined by Parent prior to the Effective Time,
the officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation and, unless otherwise determined by Parent prior to the Effective Time, the directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, in each case, until their respective successors are duly elected, appointed or qualified or until their earlier death, resignation or removal in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation. On or prior to the Closing Date, the Company shall deliver to Parent resignations of the directors of the Company to be effective as of the Effective Time, in a form reasonably acceptable
to Parent.
(e) If, at any time after the Effective Time, the Surviving Corporation shall consider or
be advised that any further deeds, assignments or assurances in law or any other acts are necessary or desirable to (i) vest, perfect or confirm, of record or otherwise, in the Surviving Corporation its right, title or interest in, to or under any
of the property, rights, privileges, powers and franchises of the Company or (ii) otherwise carry out the provisions of this Agreement, the Company and its officers and directors shall be deemed to have granted to the Surviving Corporation an
irrevocable power of attorney to execute and deliver all such deeds, assignments or assurances in law and to take all acts necessary, proper or desirable to vest, perfect or confirm title to and possession of such property, rights, privileges,
powers and franchises in the Surviving Corporation and otherwise to carry out the provisions of this Agreement, and the officers and directors of the Surviving Corporation are authorized in the name of the Company or otherwise to take any and all
such action.
ARTICLE 3.
Conversion of Securities
Section 3.01
Effect of Merger on Capital Stock
.
(a) At
the Effective Time, by virtue of the Merger and without any action on the part of Ultimate Parent, Parent, Merger Sub or the Company or their respective stockholders, each share of Company Common
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Stock issued and outstanding immediately prior to the Effective Time (other than the Cancelled Shares, any Subsidiary-held Shares, and except for any Dissenting Shares) shall be cancelled and
extinguished and automatically converted into and shall thereafter represent the right to receive an amount in cash equal to $12.75 (such amount of cash hereinafter referred to as the
Merger Consideration
), payable to the holder
thereof, without interest, in accordance with Section 3.02.
(b) From and after the Effective Time, all
of the shares of Company Common Stock converted into the Merger Consideration pursuant to this Article 3 shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate
(each, a
Certificate
) and each holder of a non-certificated share of Company Common Stock represented by book-entry (each, a
Book-Entry Share
) outstanding immediately prior to the Effective Time previously
representing any such shares of Company Common Stock shall thereafter cease to have any rights with respect to such securities, except the right to receive the Merger Consideration, without interest.
(c) Without limiting the other provisions of this Agreement, if at any time during the period between the
date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of the Company shall occur by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, or
any stock dividend thereon with a record date during such period, the Merger Consideration shall be equitably adjusted to reflect such reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, or stock
dividend thereon.
(d) At the Effective Time, all shares of Company Common Stock that are (i) owned
directly by Ultimate Parent, Parent, Merger Sub or any other direct or indirect Subsidiary of Ultimate Parent or (ii) held in treasury of the Company immediately prior to the Effective Time (the
Cancelled Shares
) shall, by virtue
of the Merger, and without any action on the part of the holder thereof, be cancelled and retired without any conversion thereof and shall cease to exist and no payment shall be made in respect thereof. Each share of Company Common Stock held
by any Subsidiary of the Company immediately prior to the Effective Time (the
Subsidiary-held Shares
) shall be converted into such number of shares of common stock, par value $0.001 per share, of the Surviving Corporation to
ensure that each such Subsidiary owns the same percentage of the Surviving Corporation immediately following the Effective Time as such Subsidiary owned in the Company immediately prior to the Effective Time and no cash or other consideration shall
be delivered in exchange therefor.
(e) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each issued and outstanding share of common stock, par value $0.001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid
and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation.
Section 3.02
Surrender and Payment
.
(a) Prior to the Effective Time, Parent shall select a reputable bank or trust company to act as Paying
Agent in the Merger (the
Paying Agent
) for the payment of (i) the Merger Consideration in respect of each share of Company Common Stock outstanding immediately prior to the Effective Time represented by a Certificate and each
Book-Entry Share outstanding immediately prior to the Effective Time, in each case, other than the Cancelled Shares and the Subsidiary-held Shares, and except for any Dissenting Shares and (ii) the Option Consideration, PSU Consideration and RSU
Consideration payable by the Paying Agent pursuant to Section 3.05. At or immediately after the Effective Time, Ultimate Parent shall cause Parent to, and Parent shall, deposit or cause to be deposited with the Paying Agent cash in an amount
sufficient to pay the aggregate Merger Consideration, RSU Consideration, PSU Consideration and Option Consideration required to be paid by the Paying Agent in accordance with this Agreement (such cash shall be referred to in this Agreement as the
Exchange Fund
). In the event the Exchange Fund shall be insufficient to make the payments in connection with the Merger Consideration contemplated by Section 3.01 or the Option Consideration, PSU Consideration or RSU
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Consideration contemplated by Section 3.05, Ultimate Parent shall cause Parent to, and Parent shall, promptly (and in any case within two Business Days of learning of any such insufficiency)
deposit or cause to be deposited additional funds with the Paying Agent in an amount that is equal to the deficiency in the amount required to make such payment. The Paying Agent shall, pursuant to irrevocable instructions, deliver the Merger
Consideration contemplated to be issued pursuant to Section 3.01 and the Option Consideration, PSU Consideration and RSU Consideration contemplated to be issued pursuant to Section 3.05 out of the Exchange Fund. The Exchange Fund shall not be
used for any other purpose.
(b) As soon as reasonably practicable after the Effective Time and in any
event not later than the third Business Day following the Effective Time, Parent will cause the Paying Agent to send to each holder of record of shares of Company Common Stock (other than the Cancelled Shares and the Subsidiary-held Shares and
except for any Dissenting Shares) (i) a letter of transmittal (which shall specify that delivery of such Certificates or transfer of such Book-Entry Shares shall be deemed to have occurred, and risk of loss and title to the Certificates or
Book-Entry Shares, as applicable, shall pass, only upon proper delivery of the Certificates (or effective affidavits of loss in lieu thereof) or transfer of the Book-Entry Shares to the Paying Agent) in such form as Parent and the Company may
reasonably agree, for use in effecting delivery of shares of Company Common Stock to the Paying Agent, and (ii) instructions for use in effecting the surrender of Certificates (or effective affidavits of loss in lieu thereof) or transfer of the
Book-Entry Shares in exchange for the Merger Consideration.
(c) Upon (i) surrender to the Paying Agent
of Certificates (or effective affidavits of loss in lieu thereof) for cancellation, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be
reasonably required pursuant to such instructions or (ii) compliance with the reasonable procedures established by the Paying Agent for delivery of Book-Entry Shares, the holder of such Certificates or Book-Entry Shares shall be entitled to receive
in exchange therefor, in cash, the Merger Consideration in respect of the Company Common Stock formerly represented by such Certificate or Book-Entry Share, and the Certificates or Book-Entry Shares so surrendered shall forthwith be
cancelled. No interest shall be paid or will accrue on any cash payable to holders of Certificates or Book-Entry Shares pursuant to the provisions of this Article 3.
(d) If any cash payment is to be made to a Person other than the Person in whose name the applicable
surrendered Certificate is registered, it shall be a condition precedent to such payment that the Person requesting such payment shall pay any transfer Taxes required by reason of the making of such cash payment to a Person other than the registered
holder of the surrendered Certificate or shall establish to the satisfaction of the Paying Agent that such Tax has been paid or is not payable. If any portion of the Merger Consideration is to be registered in the name of a Person other than
the Person in whose name the applicable surrendered Certificate is registered, it shall be a condition to the registration thereof that the surrendered Certificate shall be properly endorsed or otherwise be in proper form for transfer and that the
Person requesting such delivery of the Merger Consideration shall pay to the Paying Agent any transfer Taxes required as a result of such registration in the name of a Person other than the registered holder of such Certificate or establish to the
satisfaction of the Paying Agent that such Tax has been paid or is not payable.
(e) After the
Effective Time, there shall be no further registration of transfers of shares of Company Common Stock. From and after the Effective Time, the holders of Certificates or Book-Entry Shares representing shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with respect to such shares of Company Common Stock except as otherwise provided in this Agreement or by Applicable Law. If, after the Effective Time, Certificates are
presented to the Paying Agent, the Surviving Corporation or Parent, they shall be cancelled and exchanged for the consideration provided for, and in accordance with the procedures set forth, in this Article 3.
(f) Any portion of the Exchange Fund that remains unclaimed by the holders of shares of Company Common
Stock or holders of Cashed Out Compensatory Awards after the date which is one year following the Effective Time shall be returned to Parent upon demand. Any holder of shares of Company Common Stock who
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has not exchanged such holders shares of Company Common Stock for the Merger Consideration in accordance with this Section 3.02 and any holder of a Cashed Out Compensatory Award who has not
received the Option Consideration, PSU Consideration and RSU Consideration in accordance with Section 3.05 prior to that time shall thereafter look only to Parent for delivery of the Merger Consideration, RSU Consideration, PSU Consideration or
Option Consideration in respect of such holders shares of Company Common Stock or Cashed Out Compensatory Award. Notwithstanding the foregoing, none of Ultimate Parent, Parent, the Company or the Surviving Corporation shall be liable to
any holder of shares of Company Common Stock or Cashed Out Compensatory Awards for any Merger Consideration, RSU Consideration, PSU Consideration or Option Consideration delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws. Any Merger Consideration, RSU Consideration, PSU Consideration or Option Consideration remaining unclaimed by holders of shares of Company Common Stock or holders of Cashed Out Compensatory Awards immediately prior to
such time as such amounts would otherwise escheat to or become property of any Governmental Authority shall, to the extent permitted by Applicable Law, become property of Parent free and clear of any claims or interest of any Person previously
entitled thereto.
(g) Any portion of the Merger Consideration deposited with the Paying Agent pursuant
to this Section 3.02 to pay for shares of Company Common Stock for which appraisal rights shall have been properly and validly demanded in compliance with the provisions of Section 262 of the DGCL shall be returned to Parent upon demand.
(h) All Merger Consideration, RSU Consideration, PSU Consideration or Option Consideration issued and paid
upon conversion of the Company Common Stock or the Cashed Out Compensatory Awards, respectively, in accordance with the terms of this Agreement, shall be deemed to have been issued and paid in full satisfaction of all rights pertaining to such
Company Common Stock or Cashed Out Compensatory Awards, as the case may be.
Section
3.03
Lost Certificates
. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or
destroyed and, if required by Parent or the Surviving Corporation, the posting by such Person of a bond, in such reasonable amount as the Surviving Corporation may reasonably direct, as indemnity against any claim that may be made against it with
respect to such Certificate, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration to be paid in respect of the shares of Company Common Stock represented by such Certificate as contemplated
by this Article 3.
Section 3.04
Withholding
Rights
. Each of Ultimate Parent, Parent, Merger Sub and the Surviving Corporation shall be entitled to deduct and withhold, or cause the Paying Agent to deduct and withhold, from any amount otherwise payable to any Person pursuant to
this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment pursuant to the Code or under any provision of federal, state, local or foreign Applicable Law. To the extent that amounts are so
deducted or withheld and paid over to the appropriate taxing authority by Ultimate Parent, Parent, Merger Sub, the Surviving Corporation or the Paying Agent, as the case may be, such deducted or withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
Section 3.05
Treatment of Company Compensatory Awards
.
(a) At the Effective Time, by virtue of the Merger and without any action on the part of the holders
thereof, each In-the-Money Company Option that is outstanding and vested (including any unvested In-the-Money Company Options that are outstanding as of immediately prior to the Effective Time, not assumed pursuant to Section 3.05(b) and vest in
connection with the Transaction contemplated by this Agreement by virtue of such non-assumption pursuant to the terms of the applicable Company Stock Plan) as of immediately prior to the Effective Time (
Cashed Out Company Options
)
shall be cancelled immediately prior to the Effective Time and converted into the right to receive an amount in cash equal to the product obtained by
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multiplying (i) the aggregate number of shares of Company Common Stock subject to such Company Option immediately prior to the Effective Time and (ii) the excess of the Merger Consideration less
the exercise price per share of such Company Option (the
Option Consideration
), without interest and subject to applicable tax withholdings. Each holder of a Cashed Out Company Option shall be entitled to receive in exchange
for the cancellation thereof the Option Consideration with respect to each share of Company Common Stock subject to such outstanding Cashed Out Company Option and the Company shall cause such payment to be made to the holder of such Company Option,
if a current or former employee of the Company, through the payroll system of the Surviving Corporation or, if not a current or former employee of the Company, through the Paying Agent, in each case, payable as soon as practicable following the
Closing Date (and, in the case of current or former employees of the Company, in no event later than the next regularly scheduled payroll run of the Surviving Corporation following the Closing Date), provided that in the event that any Cashed Out
Company Option is subject to Section 409A of the Code, as jointly determined by Parent and the Company, the payment of the amount of cash with respect thereto shall be delayed to the extent necessary to comply with Section 409A of the Code.
(b) At the Effective Time, each In-the-Money Company Option that is outstanding and unvested, and each
Company Option that is not an
In-the-Money
Company Option that is outstanding, as of immediately prior to the Effective Time and, in each case, is held by an Acquired
Company Employee or Acquired Company Service Provider shall be assumed by Ultimate Parent and converted automatically at the Effective Time into an option denominated in Ultimate Parent Ordinary Shares having, subject to Applicable Law, the same
terms and conditions as the Company Option (each, an
Assumed Option
), except that (i) each such Assumed Option will be exercisable (or will become exercisable in accordance with its terms) for that number of whole Ultimate Parent
Ordinary Shares equal to the product of (A) the number of shares of Company Common Stock that were issuable upon exercise of such Company Option immediately prior to the Effective Time, multiplied by (B) a fraction (such ratio, the
Exchange
Ratio
), the numerator of which is the Merger Consideration and the denominator of which is the volume weighted average price for an Ultimate Parent Ordinary Share for the twenty trading days immediately prior to (and excluding) the Closing
Date as reported by Bloomberg, L.P., and rounding such product down to the nearest whole number of Ultimate Parent Ordinary Shares, (ii) the per share exercise price for the Ultimate Parent Ordinary Shares issuable upon exercise of such Assumed
Option will be equal to the quotient determined by dividing (A) the exercise price per share of Company Common Stock at which such Company Option was exercisable immediately prior to the Effective Time by (B) the Exchange Ratio, and rounding such
quotient up to the nearest whole cent and (iii) all references to the Company in the applicable Company Stock Plans and the stock option agreements will be references to Ultimate Parent.
The Company will not take any action to accelerate the vesting of any Company Options (other than to implement any existing agreements or arrangements for such acceleration in effect as of the date of
this Agreement). As soon as reasonably practicable, Ultimate Parent will use reasonable best efforts to issue to each Person who holds an Assumed Option a document evidencing the foregoing assumption of such Company Option by Ultimate Parent.
(c) All Company Options which are not Cashed Out Company Options or Assumed Options shall be cancelled
as of immediately prior to the Effective Time in exchange for no consideration. In no event shall the Company Options described in this Section 3.05(c) be assumed by Ultimate Parent.
(d) At the Effective Time each Company RSU Award that is outstanding immediately prior to the Effective
Time and is held by an Acquired Company Employee or Acquired Company Service Provider shall be assumed by Ultimate Parent and converted automatically at the Effective Time into an award consisting of that number of restricted share units denominated
in Ultimate Parent Ordinary Shares having, subject to Applicable Law, the same terms and conditions as the Company RSU Award (each assumed and converted Company RSU Award, an
Assumed RSU
Award
), except that (i) each such
Assumed RSU Award will entitle the holder, upon settlement, to that number of whole Ultimate Parent Ordinary Shares equal to the product of (A) the number of shares of Company Common Stock that were issuable with regard to the related Company RSU
Award immediately prior to the Effective Time, multiplied by (B) the Exchange Ratio, and rounding such product down
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to the nearest whole number of Ultimate Parent Ordinary Shares and (ii) all references to the Company in the applicable Company Stock Plans and the Company RSU Award agreements will
be references to Ultimate Parent. The Company will not take any action to accelerate the vesting of any portion of any Company RSU Award (other than to implement any existing agreements or arrangements for such acceleration in effect as of the
date of this Agreement). As soon as reasonably practicable, Ultimate Parent will issue to each Person who holds an Assumed RSU Award a document evidencing the foregoing assumption of the related Company RSU Award by Ultimate Parent.
(e) At the Effective Time, by virtue of the Merger and without any action on the part of the holders
thereof, each Company RSU Award that is not an Assumed RSU Award (
Cashed Out Company RSU Award
) shall vest in full and be cancelled immediately prior to the Effective Time and converted into the right to receive an amount in cash
equal to the product obtained by multiplying (i) the aggregate number of shares of Company Common Stock subject to such Company RSU Award immediately prior to the Effective Time and (ii) the Merger Consideration (the
RSU
Consideration
), without interest and subject to applicable tax withholdings. Each holder of an outstanding Cashed Out Company RSU Award shall be entitled to receive in exchange for the cancellation thereof the RSU Consideration with
respect to each share of Company Common Stock subject to such outstanding Company RSU Award and the Company shall cause such payment to be made to the holder of such Company RSU Award, if a current or former employee of the Company, through the
payroll system of the Surviving Corporation or, if not a current or former employee of the Company, through the Paying Agent, in each case, payable as soon as practicable following the Closing Date (and, in the case of current or former employees of
the Company, in no event later than the next regularly scheduled payroll run of the Surviving Corporation following the Closing Date),
provided
, that in the event that any Cashed Out Company RSU Award is subject to Section 409A of the Code,
as jointly determined by Parent and the Company, the payment of the amount of cash with respect thereto shall be delayed to the extent necessary to comply with Section 409A of the Code.
(f) As of the Closing Date, each Company PSU Award shall be treated in accordance with the terms of the
Company PSU Award agreement governing such Company PSU Award, including that (i) the Performance Period (as defined in the applicable Company PSU Award agreement) in respect of such Company PSU Award shall be deemed to end on the Closing Date,
(ii) the number of Calculated RSUs (as defined in the applicable Company PSU Award agreement) shall be determined as of the Closing Date, (iii) 50% of the Calculated RSUs under the Company PSU Award shall become vested as of immediately
prior to the Effective Time, (iv) the portion of the Company PSU Award covering the Calculated RSUs shall be treated as a Company RSU Award and in the manner as specified in Section 3.05(d) or 3.05(e), as applicable, provided that any such
Calculated RSUs that shall be subject to the treatment specified in Section 3.05(d) shall be scheduled to vest on the one (1) year anniversary of the Closing Date based on continued Service Provider (as defined in the Companys
2009 Stock Plan) status through such date, subject to any accelerated vesting as may be specified under any plan, agreement or other arrangement applicable to such Company PSU Award. The Company will not take any action to accelerate the
vesting of any portion of any Company PSU Award (other than to implement any existing agreements or arrangements for such acceleration in effect as of the date of this Agreement).
(g) Not less than 30 days prior to the Effective Time, the Company shall send a written notice in a form
reasonably acceptable to Parent to each holder of an outstanding Company Option, Company PSU Award or Company RSU Award that shall inform such holder of the treatment of the Company Options, Company PSU Awards and Company RSU Awards provided in this
Section 3.05.
(h) Notwithstanding anything in this Section 3.05 or otherwise in this Agreement to the
contrary, the conversion of Company Options, Company PSU Award and Company RSU Awards provided for in this Section 3.05 shall be effected in a manner consistent with Section 409A of the Code.
(i) Following the Effective Time, no holder of a Company Compensatory Award or any participant in any
Company Stock Plan, or other Company Employee Plan or employee benefit arrangement of the Company
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or under any employment agreement shall have any right hereunder to acquire any capital stock or other equity interests (including any phantom stock or stock appreciation rights) in
the Company, any of its Subsidiaries or the Surviving Corporation.
Section
3.06
Dissenting Shares
.
(a) Notwithstanding anything to the
contrary in this Agreement, shares of Company Common Stock that are outstanding immediately prior to the Effective Time and that are held by any Person who is entitled to demand and properly demands appraisal of such shares pursuant to, and who
complies in all respects with, Section 262 of the DGCL (any such shares being referred to as
Dissenting Shares
) shall not be converted into or represent the right to receive the Merger Consideration as provided in Section 3.01(a),
but shall be entitled only to such rights as are granted by the DGCL to a holder of Dissenting Shares. If any such Person shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262 of the DGCL,
then the right of such Person to receive those rights under Section 262 of the DGCL shall cease and such shares shall be deemed automatically to have been converted into, as of the Effective Time, and to represent only, the right to receive the
Merger Consideration in accordance with Section 3.01(a), without interest thereon, upon surrender of a Stock Certificate or Book-Entry Share representing such shares in accordance with Section 3.02.
(b) The Company shall give Parent prompt notice of any written demands received by the Company for
appraisal of any shares of Company Common Stock pursuant to the DGCL, any withdrawal of any such demand and any other demand, notice or instrument delivered to the Company pursuant to the DGCL. Parent shall have the right to participate in,
direct and control all negotiations and Proceedings with respect to such demands for appraisal under Section 262 of the DGCL. The Company shall not, except with the prior written consent of Parent, (i) voluntarily make any payment or settlement
offer with respect to any demands, applications, notices or instruments for appraisal for Dissenting Shares, (ii) settle or offer to settle any such demands, (iii) waive any failure to timely deliver a written demand or to timely take any other
action for appraisal in accordance with the DGCL or (iv) agree to do any of the foregoing.
ARTICLE 4.
Representations and Warranties of the Company
Subject to Section 10.05, except (i) as set forth in the Company Disclosure Schedule or (ii) as disclosed in the Company SEC Documents filed
by the Company with the SEC or furnished by the Company to the SEC, in each case, on or after January 1, 2014 but prior to the date hereof (but, in each case, (A) without giving effect to any amendment thereof filed with, or furnished to the SEC on
or after the date hereof and (B) excluding any disclosures contained under the heading Risk Factors, any disclosure of risks included in any forward-looking statements disclaimer and any other disclosures contained or
referenced therein that are general, cautionary, predictive or forward-looking in nature), but only to the extent such Company SEC Documents are publicly available on the SECs Electronic Data Gathering Analysis and Retrieval System and such
disclosure is reasonably apparent from a reading of such Company SEC Documents that such disclosure relates to such Section of Article 4 below (it being understood that this clause (ii) shall not be applicable to Section 4.02, Section 4.05 or
Section 4.22), the Company represents and warrants to Ultimate Parent, Parent and Merger Sub:
Section
4.01
Corporate Existence and Power
.
(a) The Company is a
corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all corporate power and authority required to carry on its business as currently conducted. The Company is duly qualified to do
business as a foreign corporation and, where such concept is recognized, is in good standing in each jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified and
in good standing has not had, either individually or in the aggregate, a Company Material Adverse Effect.
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(b) Section 4.01(b) of the Company Disclosure Schedule sets
forth a true, correct and complete list of the Companys Subsidiaries as of the date of this Agreement. Each of the Subsidiaries of the Company (i) has been duly organized and is validly existing and, where such concept is recognized, in
good standing under the Applicable Laws of the jurisdiction of its organization; (ii) is duly licensed or qualified to do business and, where such concept is recognized, is in good standing as a foreign entity in all jurisdictions in which the
conduct of its business or the activities it is engaged makes such licensing or qualification necessary, except where the failure to be so licensed, qualified and in good standing has not had, either individually or in the aggregate, a Company
Material Adverse Effect; and (iii) has all corporate or other organizational power and authority required to carry on its business as now conducted.
(c) The Company has made available to Parent accurate and complete copies of: (i) the certificate of
incorporation and bylaws, including all amendments thereto through the date hereof, of the Company and (ii) the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a
meeting) of the stockholders of the Company, the Company Board of Directors and all committees thereof since January 1, 2014 through the date hereof. No Acquired Company is in violation of any of the provisions of the certificate of
incorporation or bylaws (or equivalent constituent documents), including all amendments thereto, of such Acquired Company.
Section 4.02
Corporate Authorization
.
(a) The Company has
all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated by this Agreement. The execution, delivery and performance by the Company of
this Agreement have been duly and validly authorized by all necessary corporate action on the part of the Company and the Company Board of Directors, subject only to the approval of the Companys stockholders as described below, and no other
corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Agreement or for the Company to consummate the transactions contemplated by this Agreement (other than, with respect to the Merger, the
filing of the Certificate of Merger with the Delaware Secretary of State). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Ultimate Parent, Parent and
Merger Sub, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency the relief of debtors,
fraudulent transfer, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors rights and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies
(collectively, the
Enforceability Exceptions
). The affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock is the only vote of the holders of any of the Company Capital Stock necessary
to adopt this Agreement and thereby approve the Merger and the other transactions contemplated hereby (the
Required Company Stockholder Approval
).
(b) At a meeting duly called and held, the Company Board of Directors has (i) unanimously determined
that this Agreement and the Merger, are fair to, advisable and in the best interests of the Companys stockholders, (ii) unanimously approved this Agreement and the transactions contemplated hereby and (iii) unanimously resolved (subject to
Section 6.03(f)) to recommend adoption of this Agreement and approval of the Merger and the other transactions contemplated hereby by the stockholders of the Company (such recommendation, the
Company Board Recommendation
).
Section 4.03
Governmental Authorization
. The execution,
delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby require no action by or in respect of, or filing with, any Governmental Authority other than (i) the filing of the
Certificate of Merger with the Delaware Secretary of State and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business, (ii) compliance with any applicable requirements of the HSR Act and
any other laws analogous to the HSR Act existing in foreign jurisdictions (together with the HSR
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Act,
Antitrust Laws
), (iii) compliance with any applicable requirements of the Exchange Act and any other applicable U.S. state or federal securities, takeover or blue
sky laws, (iv) compliance with any applicable requirements of Exon-Florio and (v) compliance with any applicable rules of NASDAQ, and except where failure to take any such actions or filings would not materially impair the ability of the
Company to consummate the transactions contemplated by this Agreement or have, individually or in the aggregate, a Company Material Adverse Effect.
Section 4.04
Non-Contravention
. The execution, delivery and
performance by the Company of this Agreement, the consummation by the Company of the transactions contemplated hereby and the compliance by the Company with any of the provisions of this Agreement do not and will not (i) contravene, conflict with or
result in any violation or breach of any provision of the certificate of incorporation or bylaws (or comparable organizational documents) of any Acquired Company, (ii) assuming compliance with the matters referred to in Section 4.03, and subject to
obtaining the Required Company Stockholder Approval, contravene, conflict with or result in a violation or breach of any Applicable Law, (iii) assuming compliance with the matters referred to in Section 4.03, and subject to obtaining the Required
Company Stockholder Approval, require any consent or other action by any Person under, constitute a default, or an event that, with or without notice or lapse of time or both, would constitute a default, under, or cause or permit the termination,
cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which any Acquired Company is entitled under any Company Material Contract or any Permit governing the operation of the business by the Acquired
Companies or (iv) result in the creation or imposition of any Lien (other than a Permitted Lien) on any asset of any Acquired Company, except in the case of clauses (ii), (iii), and (iv) above, any such violation, breach, default, right,
termination, amendment, acceleration, cancellation, loss or Lien that would not have, individually or in the aggregate, a Company Material Adverse Effect or prevent, materially delay or materially impair the ability of the Company to perform its
obligations under this Agreement or to consummate the Merger.
Section
4.05
Capitalization; Subsidiaries
.
(a) The authorized capital
stock of the Company consists of 800,000,000 shares of Company Common Stock and 5,000,000 shares of Company Preferred Stock. As of October 31, 2016 (the
Capitalization Date
), there were outstanding (i) 402,322,145 shares of
Company Common Stock, (ii) zero shares of Company Preferred Stock, (iii) Company Options to purchase an aggregate of 7,666,426 shares of Company Common Stock (of which options to purchase an aggregate of 5,374,559 shares of Company Common Stock were
exercisable), (iv) 3,051,554 shares of Company Common Stock underlying Company PSU Awards (based on maximum achievement), and (v) 25,864,403 shares of Company Common Stock underlying Company RSU Awards. 24,469,180 shares of Company Common Stock were
authorized for issuance pursuant to the Company ESPP, of which a maximum of 5,995,413 shares of Company Common Stock will be issued with respect to the purchase period in effect under the Company ESPP on the date of this Agreement.
(b) As of the Capitalization Date, the Company has reserved 41,021,082 shares of Company Common Stock for
issuance on exercise, vesting or other conversion to Company Common Stock of Company Compensatory Awards. All outstanding shares of Company Common Stock have been, and all shares that may be issued pursuant to the Company Stock Plans will be,
when issued in accordance with the respective terms thereof, duly authorized and validly issued and are fully paid and nonassessable. There are no shares of Company Common Stock that are subject to vesting or forfeiture
restrictions. Section 4.05(b) of the Company Disclosure Schedule contains, as of the Capitalization Date, a complete and correct list of each outstanding Company Option, Company PSU Awards and Company RSU Awards, including, the holders
name (except for employees of the Acquired Companies at a level below senior director or as prohibited by Applicable Law), the holders employee identification number, date of grant, the number of shares of Company Common Stock subject to such
Company Compensatory Award as of the date of this Agreement, exercise price, vesting schedule (including the number of vested and unvested shares as of the date of this Agreement), the number of shares of Company Common Stock vested and unvested as
of the date of this Agreement, whether such Company Compensatory Award is an incentive stock option within the meaning of Section 422 of the Code, and the date on which such
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Company Compensatory Award expires and whether the vesting of such Company Compensatory Award shall be subject to any acceleration in connection with the Transaction.
(c) Except as provided in Section 4.05(a) and for changes since the Capitalization Date resulting from (w)
the exercise, vesting or other conversion to Company Common Stock of Company Compensatory Awards outstanding on such date or granted after the date of this Agreement in accordance with the terms of this Agreement, (x) the grant of Company
Compensatory Awards after the date of this Agreement in accordance with the terms of this Agreement, (y) the right of employees of any Acquired Company to purchase shares of Company Common Stock pursuant to the Company ESPP, and (z) conversion of
the Notes and exercise of the Warrants, there are no outstanding (i) shares of capital stock or voting securities of the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the
Company or (iii) options or other rights to acquire from the Company, or other obligation of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the
Company (the items in clauses (i), (ii) and (iii) being referred to collectively as the
Company Securities
).
(d) All outstanding shares of Company Common Stock have been issued and granted in compliance with (i) all
applicable securities laws and other Applicable Laws and (ii) all requirements set forth in applicable Contracts.
(e) All shares of the Companys capital stock that the Company has repurchased, redeemed or otherwise
reacquired were reacquired in compliance with (i) the applicable provisions of the DGCL and all other Applicable Law and (ii) all requirements set forth in applicable restricted stock purchase agreements and other applicable Contracts. Other
than obligations to settle or repurchase the Warrants, Notes and the 4.625% Senior Notes due 2023 issued pursuant to the Indenture, dated January 22, 2013, among the Company, the guarantors party thereto and Wells Fargo Bank, National Association,
there are no outstanding obligations of the Company to repurchase or redeem any of its securities.
(f) All outstanding shares of capital stock of the Subsidiaries of the Company are validly issued, fully
paid (to the extent required under the applicable governing documents), nonassessable, and free and clear of any Liens (other than Permitted Liens). There are no outstanding contractual obligations of any Subsidiary of the Company to
repurchase, redeem or otherwise acquire any of its capital stock or other equity interests.
(g) All
outstanding shares of capital stock of the Subsidiaries of the Company are owned, directly or indirectly, by the Company. No Subsidiary of the Company has or is bound by any outstanding subscriptions, options, warrants, calls, commitments,
rights agreements or agreements of any character calling for it to issue, deliver or sell, or cause to be issued, delivered or sold any of its equity securities or any securities convertible into, exchangeable for or representing the right to
subscribe for, purchase or otherwise receive any such equity security or obligating such Subsidiary to grant, extend or enter into any such subscriptions, options, warrants, calls, commitments, rights agreements or other similar agreements (except,
in each case, to or with an Acquired Company).
(h) None of the
Acquired Companies has agreed or is obligated to, directly or indirectly, make any future investment in or capital contribution or advance to any Person, other than any investments or capital contributions solely among the Acquired Companies in the
ordinary course of business.
Section 4.06
Company SEC Documents;
Company Financial Statements
.
(a) The Company has filed or furnished all registration statements,
proxy statements and other statements, reports, schedules, forms and other documents (including all exhibits and all other information incorporated by reference) required to be filed or furnished by it with the SEC during the period since January 1,
2014, and all amendments thereto (the
Company SEC Documents
). All statements, reports, schedules, forms and other documents required to have been filed by the Company with the SEC have been so filed on a timely
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basis. None of the Companys Subsidiaries is required to file any documents with the SEC. As of the time it was filed with the SEC (or, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing): (i) each of the Company SEC Documents complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be) and (ii) none of
the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they
were made, or are to be made, not misleading.
(b) There are no outstanding unresolved comments with
respect to the Company or the Company SEC Documents noted in comment letters or other correspondence received by the Company or its attorneys from the SEC, and, to the Knowledge of the Company, none of the Company SEC Documents is the subject of
outstanding SEC comments and there are no pending (i) formal or informal investigations of the Company by the SEC or (ii) inspection of an audit of the Companys financial statements by the Public Company Accounting Oversight Board. Since
January 1, 2014, there has been no material written complaint, allegation, assertion or claim that any Acquired Company has engaged in illegal accounting or auditing practices. Since January 1, 2014, no current or former attorney representing
any Acquired Company has reported in writing evidence of a material violation of securities laws or breach of fiduciary duty by the Company or any of its officers, directors, employees or agents to the board of directors of the Company or any
committee thereof or to any director or executive officer of the Company. Since January 1, 2014, no Acquired Company has received from the SEC any requests (whether formal or informal) for the production of documents.
(c) The financial statements (including any related notes and schedules) included in the Company SEC
Documents (collectively, the
Company Financial Statements
): (i) complied, at the time of their respective filing with the SEC, in all material respects with the applicable accounting requirements and published rules and
regulations of the SEC, the Exchange Act and the Securities Act applicable thereto, (ii) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered (except as may be indicated in the notes to such Company
Financial Statements or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC, and except that the unaudited Company Financial Statements may not contain footnotes and are subject to normal and recurring year-end adjustments,
none of which individually or in the aggregate will be material in amount) and (iii) fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the respective dates thereof and
the consolidated results of operations and cash flows of the Company and its consolidated Subsidiaries for the periods covered thereby (except that the unaudited Company Financial Statements may not contain footnotes and are subject to normal and
recurring year-end adjustments, none of which individually or in the aggregate will be material in amount).
(d) The Company has established and maintains, adheres to and enforces a system of internal controls over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) which are effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance
with GAAP, including policies and procedures that (i) require the maintenance of records that in reasonable detail accurately and fairly reflect the material transactions and dispositions of the assets of the Acquired Companies, (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Acquired Companies are being made only in accordance with appropriate
authorizations of management and the Company Board of Directors and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of the Acquired Companies. The Company
is, and at all times since January 1, 2014, has been in compliance in all material respects with the applicable listing and other rules and regulations of NASDAQ, and has not since January 1, 2014 through the date hereof received any written notice
from NASDAQ asserting any non-compliance with any such rules and regulations that remains unresolved.
(e) With respect to each annual report on Form 10-K and each quarterly report on Form 10-Q
included in the Company SEC Documents, the chief executive officer and chief financial officer of the Company
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have made all certifications required by the Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act
) and any related rules and regulations promulgated by the SEC and, since January
1, 2014, NASDAQ, as of their respective dates, and the statements contained in any such certifications are complete and correct as of their respective dates.
(f) The disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of
the Exchange Act) of the Company are reasonably designed to ensure that all 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 rules and forms of the SEC, and that all such information is accumulated and communicated to the management of the Company, including its principal executive and principal financial officer, to allow timely decisions
regarding required disclosure.
(g) Neither the Company nor any of its Subsidiaries is a party to, nor
does it have any commitment to become a party to, any off-balance sheet joint-venture, off-balance sheet partnership or any other off-balance sheet arrangements (as defined in Item 303(a) of Regulation S-K of the SEC).
Section 4.07
Absence of Certain
Changes
.
Between the Company Balance Sheet Date and the date of this Agreement, (a) a Company Material Adverse Effect has not occurred, (b) the business of the Acquired Companies has been conducted in the ordinary course
consistent with past practices and (c) no Acquired Company has taken any action that, if taken after the date of this Agreement, would require consent pursuant to Section 6.01.
Section 4.08
No Undisclosed
Liabilities
.
Except as would not have, individually or in the aggregate, a Company Material Adverse Effect, no Acquired Company has any liabilities or obligations of a type required to be reflected on a balance sheet in
accordance with GAAP other than (a) liabilities or obligations disclosed and provided for in the Company Balance Sheet or in the notes thereto; (b) liabilities or obligations that have been incurred by the Acquired Companies since the Company
Balance Sheet Date in the ordinary course of business and consistent with past practice; (c) liabilities or obligations under the Contracts identified in Section 4.09(a) of the Company Disclosure Schedule (but not from any breach or default
thereunder); (d) the liabilities or obligations identified in Section 4.08 of the Company Disclosure Schedule; and (e) liabilities or obligations arising under or contemplated or permitted by this Agreement.
Section 4.09
Company Material Contracts
.
(a) As of the date of this Agreement, no Acquired Company is party to or bound by any of the following
Contracts currently in effect (a Contract responsive to any of the following categories being hereinafter referred to as a
Company Material Contract
):
(i) any lease (whether of real or personal property) providing for annual rentals of
$2,000,000 or more;
(ii) any Contract pursuant to which any material Intellectual
Property Rights or material Technology that are used, or held for use by any Acquired Company in connection with (I) the Company Products or (II) the current conduct of the business of any Acquired Company is, or is required to be, licensed, sold,
assigned or otherwise conveyed or provided to any Acquired Company (other than (A) Contracts for Standard Software, (B) non-disclosure agreements entered into in the ordinary course of business consistent with past practice (each, an
NDA
), (C) customary invention assignment agreements with employees and independent contractors entered into in the ordinary course of business consistent with past practice (
Invention Assignment Agreements
) and
(D) Contracts related to membership in any Standards Body);
(iii) other than (A) NDAs
and (B) Contracts for the purchase, sale or non-exclusive license of Company Products or Technology used with the Company Products entered into in the ordinary course of business consistent with past practice, any Contract pursuant to which any
material Intellectual
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Property Right or material Technology or any other material right (whether or not currently exercisable) or interest in any material Company IP is required to be licensed (whether or not such
license is currently exercisable), sublicensed, sold, assigned or otherwise conveyed or provided to a third party by any Acquired Company, or pursuant to which any Acquired Company has agreed not to enforce any Intellectual Property Right against
any third party;
(iv) any Contract imposing any material restriction on any Acquired
Companys right or ability, or, after the Effective Time, the right or ability of the Surviving Corporation or any of its Subsidiaries (A) to compete in any line of business or market or in any geographic area or with any Person or which would
so limit the freedom of the Surviving Corporation or any of its Subsidiaries after the Closing Date (including granting exclusive rights or rights of first refusal to license, market, sell or deliver any of the Company Products or any related
Technology or Intellectual Property Right), (B) to acquire any product, asset or services from any other Person, to sell any product or other asset to or perform any services for any other Person or to transact business or deal in any other manner
with any other Person, in each case, with whom the Acquired Companies conduct business or (C) to develop or distribute any material Company IP or material Company Technology, in each case, other than pursuant to Contracts for Standard Software and
NDAs;
(v) any (A) Contract that includes a covenant not to sue, other than Contracts
relating to membership in any Standards Body or which are licenses to Intellectual Property Rights or (B) any settlement agreement (x) requiring payment of $2,000,000 or more by any Acquired Company that has not been fully performed or (y) imposing
material restrictions on the operation of the business of the Acquired Companies as currently conducted, in each case, other than non-exclusive licenses of Company IP;
(vi) any Contract (including any Government Contract) that has not been fully performed for
the purchase of materials, supplies, goods, services, equipment or other assets, in connection with which any Acquired Company has made payments to the applicable counterparty of $10,000,000 or more in the 12 month period ending July 30, 2016,
except any Contract that is a purchase order for materials, supplies, goods, services, equipment or other assets entered into by any Acquired Company in the ordinary course of business consistent with past practice or Contracts contemplated by
Section 4.09(a)(xi);
(vii) any Contract (including any Government Contract) that has not
been fully performed for the sale or distribution by any Acquired Company of materials, supplies, goods, services, equipment or other assets, in connection with which any Acquired Company has received payments from the applicable counterparty of
$10,000,000 or more in the 12 month period ending July 30, 2016, except other than any Contract that is a purchase order for materials, supplies, goods, services, equipment or other assets entered into by any Acquired Company in the ordinary course
of business consistent with past practice;
(viii) any Contract with the Companys Top OEM Customers in such Top OEM
Customers capacity as a Top OEM Customer;
(ix) any Contract providing for any
other Person with most favored nation terms, including such terms for pricing;
(x) any material partnership, joint venture or any sharing of revenues, profits, losses,
costs or liabilities or any other similar Contract (including any material Contract providing for joint research, development, marketing or distribution) other than the sharing of costs in the ordinary course of business consistent with past
practice;
(xi) any Contract relating to the acquisition or disposition by any Acquired
Company of any business (whether by merger, sale of stock, sale of assets or otherwise) entered into after January 1, 2014;
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(xii) any mortgages, indentures, guarantees,
loans or credit agreements, security agreements or other Contracts relating to indebtedness or the borrowing of money or extension of credit (including reimbursement obligations in respect of letters of credit) or the deferred purchase price of
property (in either case, whether incurred, assumed, guaranteed or secured by any asset), in each case, in excess of $3,000,000 and other than any Contract only between or among Acquired Companies;
(xiii) any Contract relating to the acquisition, issuance or transfer of any Company
Securities and/or amounts of cash determined by reference to the value of any Company Securities, options relating to any Company Securities and/or any such Contract (other than Company Compensatory Awards outstanding as of the date of this
Agreement or granted after the date hereof in accordance with the terms of this Agreement and other than the Convertible Note Hedge Obligations and the Warrants);
(xiv) any Contract relating to any equity, interest rate, currency or commodity derivatives
or hedging transaction, other than the Convertible Note Hedge Obligations, the Warrants and Employee Plans;
(xv) any Contract under which (A) any Person (other than any Acquired Company) is
guaranteeing any liabilities or obligations of any Acquired Company, (B) any Acquired Company is directly or indirectly guaranteeing liabilities or obligations of any other Person other than any Acquired Company (in each case other than endorsements
for the purposes of collection in the ordinary course of business) or (C) any Acquired Company has take-or-pay obligations;
(xvi) any Contract providing for the creation of any Lien, other than a Permitted Lien, with
respect to any asset (including Intellectual Property Rights or other intangible assets) material to the conduct of the business of the Acquired Companies as currently conducted, taken as a whole;
(xvii) any Contract which contains any provisions requiring any Acquired Company to
indemnify any other party (excluding indemnities contained in agreements for the purchase, sale or license of Company Products or indemnities in connection with the licensing of Technology to vendors in the ordinary course of business consistent
with past practice or Real Property Leases), which indemnity is material to the Acquired Companies, taken as a whole;
(xviii) any material Contract with any Related Person, other than any Employee Plans; and
(xix) any employment, severance, retention, bonus or other similar agreement with any
current or former employee, officer, director, advisor or individual consultant of any Acquired Company pursuant to which any Acquired Company has any material current or future rights or obligations, other than any Employee Plans.
(b) The Company has made available to Parent accurate and complete copies of all written Company Material
Contracts required to be identified in Section 4.09(a) of the Company Disclosure Schedule, including all material amendments thereto and any extensions of the term of such Contract. Section 4.09(a) of the Company Disclosure Schedule provides an
accurate description of the material terms of each Company Material Contracts required to be identified in Section 4.09(a) of the Company Disclosure Schedule that is not in written form.
(c) Except as would not have, individually or in the aggregate, a Company Material Adverse Effect, (A) each
Company Material Contract is a valid and binding agreement of the Acquired Company party thereto, and (except for any such Company Material Contract that has expired or terminated in accordance with its terms after the date hereof) is in full force
and effect, subject to the Enforceability Exceptions and (B) no Acquired Company is and, to the Knowledge of the Company, no other party thereto is in default or breach in any material respect under the terms of any such Company Material Contract
and, to the Knowledge of the Company, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) will, or would reasonably be expected to, (i) result in a violation or breach of any such
Company Material Contract, (ii) give any Person the right to declare a default under any Company Material Contract, (iii) give any Person the
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right to accelerate the maturity or performance of any Company Material Contract or (iv) give any Person the right to cancel, terminate or modify any Company Material Contract.
(d) Since January 1, 2014 through the date hereof, no Acquired Company has received any written notice of
any material violation or breach of, default under or intention to cancel any Company Material Contract, except as would not have, individually or in the aggregate, a Company Material Adverse Effect.
(e) Except as would not have, individually or in the aggregate, a Company Material Adverse Effect, as of
the date hereof, no Person is renegotiating, or has a right (or, to the Knowledge of the Company, has asserted a right) pursuant to the terms of any Company Material Contract to renegotiate, any amount paid or payable to any Acquired Company under
any Company Material Contract or any other material term or provision of any Company Material Contract (other than pricing discussions in the ordinary course of business).
(f) Section 4.09(f) of the Company Disclosure Schedule sets forth a list of the Acquired Companies
top ten distributors by revenue for the nine-month period ending July 30, 2016.
(g) Section 4.09(g) of
the Company Disclosure Schedule sets forth a list of the Acquired Companies top 20 direct customers who the Company has identified as Governmental Authorities (other than any customers whose identities the Acquired Companies are not permitted
to disclose pursuant to Applicable Law or the applicable Government Contracts).
Section
4.10
Compliance with Applicable Laws
.
(a) Each Acquired Company
(i) is, and has at all times since October 27, 2013 through the date hereof been, in compliance with Applicable Laws; and (ii) to the Knowledge of the Company, since January 1, 2014 through the date hereof has not received written notice from any
Governmental Authority alleging that any Acquired Company is in violation of any Applicable Law, except, in the case of each of clauses (i) and (ii), for such non-compliance and violations that would not have, individually or in the aggregate, a
Company Material Adverse Effect.
(b) Each Acquired Company is, and has at all times during the past
five years been, in material compliance with (i) United States and (ii) to the Knowledge of the Company, foreign export control laws and regulations, including: the U.S. Export Administration Act and implementing Export Administration Regulations;
the U.S. Arms Export Control Act and implementing International Traffic in Arms Regulations; and the EU Dual-Use Regulation, Council Regulation (EC) No 428/2009 (and associated amendments). Without limiting the foregoing, as of the date hereof,
there are no pending or, to the Knowledge of the Company, threatened claims or investigations by any Governmental Authority of potential violations against any Acquired Company with respect to export activity or licenses or other approvals.
(c) Each Acquired Company and, to the Knowledge of the Company, their respective officers, directors, and
employees, is, and has at all times in the past five years been, in compliance with all Applicable Laws relating to economic or trade sanctions, including, without limitation, all economic or trade sanctions imposed, administered, or enforced by (i)
the U.S. government, including those administered by OFAC or the U.S. Department of State, or (ii) the United Nations Security Council, the European Union, or Her Majestys Treasury of the United Kingdom (
Trade
Sanctions
). No Acquired Company, or, to the Knowledge of the Company, their respective officers, directors, or employees, nor any agent or other Person associated with or acting on behalf of any Acquired Company is, or is owned by one
or more Persons that are, currently or the in the past five years, (a) the target of Trade Sanctions, nor (b) located, organized, or resident in a country or territory that is the target of Trade Sanctions, including Cuba, Iran, North Korea, Sudan,
Syria, and the Crimea Region of Ukraine. No Acquired Company, or, to the Knowledge of the Company, their respective officers, directors, or employees, nor any agent or other Person associated with or acting on behalf of any Acquired Company
has, directly or indirectly, participated in the past five years in any prohibited or unlawful transaction or dealing involving a Person or entity that is the target of Trade Sanctions, or with any Person or entity located, organized, or resident in
a country or territory that is the target of Trade Sanctions.
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(d) In the past five years, no Acquired Company has and, to
the Knowledge of the Company, no agent, employee or other Person acting on behalf of any Acquired Company has, directly or indirectly:
(i) made or agreed to make any unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity and related in any way to any Acquired Companys business;
(ii) made or agreed to make any unlawful payment to any foreign or domestic government
official or employee, foreign or domestic political parties or campaigns, official of any public international organization, or official of any state-owned enterprise;
(iii) violated any provision of the FCPA, or any other Applicable Laws relating to
anti-corruption or anti-bribery; or
(iv) made or agreed to make any bribe, payoff,
influence payment, kickback or other similar unlawful payment.
(e) Section 4.10(e) of the Company
Disclosure Schedule sets forth all facility security clearances held by the Acquired Companies that the Company is permitted by Applicable Law to disclose. Except as set forth in Section 4.10(e) of the Company Disclosure Schedule, to the Knowledge
of the Company: (i) the Acquired Companies are in compliance in all material respects with all applicable national security laws and obligations, including those specified in the National Industrial Security Program Operating Manual (DOD 5220.22-M);
(ii) there are no facts or circumstances that currently exist that would reasonably be expected to result in the suspension or termination of any facility security clearance held by any Acquired Company or any personnel security clearance held by
any Acquired Company Employee; (iii) each Acquired Company holds and, since January 1, 2014, has held, at least a satisfactory rating from the Defense Security Service (
DSS
) with respect to such Acquired Companys
facility security clearances and there are no liabilities or obligations relating to or arising from any failure which may have occurred to maintain at least a satisfactory rating from DSS; and (iv) since January 1, 2014, there has been
no unauthorized disclosure of classified information by Acquired Company Employees.
Section
4.11
Litigation
.
(a) As of the date of this Agreement, there is
no pending Proceeding or, to the Knowledge of the Company, investigation, and, to the Knowledge of the Company, since October 27, 2013 through the date hereof, no Person has threatened in writing to commence any Proceeding or, to the Knowledge of
the Company, investigation: (i) against any Acquired Company or any of the assets owned by any Acquired Company or any Person whose liability any Acquired Company has or may have retained or assumed, either contractually or by operation of law, in
each case, as would have, individually or in the aggregate, a Company Material Adverse Effect or that would or would reasonably be expected to require the payment of $5,000,000 or more by an Acquired Company; or (ii) that challenges, or that would
reasonably be expected to have the effect of preventing, materially delaying, making illegal or materially impeding the Transaction.
(b) There is no order, writ, injunction, judgment or decree to which any Acquired Company or any of the
assets owned or used by any Acquired Company is subject or which materially interferes with the right of the Acquired Companies, taken as a whole, to conduct their business.
Section 4.12
Real Property
.
(a) Section 4.12(a) of the Company Disclosure Schedule contains a complete and correct list of the Owned
Real Property (including the owner thereof and the street address of each parcel of Owned Real Property). The Company or one or more of the Acquired Companies has good and marketable fee simple title (or the equivalent in the applicable
jurisdiction) to the Owned Real Property free and clear of any and all Liens, other than Permitted Liens. No Owned Real Property is being marketed for sale, or is under contract to be sold. No Acquired Company is obligated under or a party
to any option, right of first refusal or other contractual right to purchase, acquire, sell, assign or dispose of any Owned Real Property or any portion thereof or interest
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therein. Except as set forth on Section 4.12(a)(i) of the Company Disclosure Schedule or non-monetary liens set forth in title reports, commitments or policies made available to Parent or
that are recorded against the Owned Real Property in the public record, none of the Acquired Companies have leased or otherwise granted any Person the right to use or occupy any Owned Real Property. No Acquired Company has received written
notice of a material violation of any material ordinances, regulations or building, zoning or other similar laws with respect to the Owned Real Property.
(b) The Company or one of the other Acquired Companies has a valid leasehold interest in the Leased Real
Property. Section 4.12(b) of the Company Disclosure Schedule lists each lease, sublease, license or other occupancy agreement or arrangement relating to the occupancy of any Leased Real Property by any Acquired Company (each, a
Real
Property Lease
) and sets forth the address for each lease.
(c) The applicable Acquired
Companys interest in the Leased Real Property is not subject to any Liens, except for Permitted Liens. No Acquired Company has received written notice from a Governmental Authority of a material violation of any material ordinances,
regulations or building, zoning or other similar laws with respect to the Leased Real Property material to the conduct of the business of the Acquired Companies as currently conducted, taken as a whole. An Acquired Company has the right to use
and occupy the Leased Real Property for the full term of the Real Property Lease relating thereto. None of the Acquired Companies have subleased or otherwise granted any Person the right to use or occupy any Leased Real Property.
(d) To the Knowledge of the Company, there is no pending or threatened condemnation proceeding or special
assessment with respect to any of the Owned Real Property or any Leased Real Property.
(e) Except as
set forth on Section 4.12(e) of the Company Disclosure Schedule, all improvements located on the Owned Real Property are, in the aggregate, in good condition and repair (normal wear and tear accepted), other than as would not materially impair the
conduct of the Acquired Companies business at such Owned Real Property.
Section
4.13
Properties
.
(a) Except as would not have, individually or
in the aggregate, a Company Material Adverse Effect, as of the date hereof, the Company or one of the other Acquired Companies has good and marketable, indefeasible, fee simple title to, or in the case of leased property and assets, has valid
leasehold interests in, all tangible personal property and assets reflected on the Company Balance Sheet or acquired after the Company Balance Sheet Date, except for personal property and assets sold since the Company Balance Sheet Date in the
ordinary course of business consistent with past practices. None of such property or assets is subject to any Lien, except:
(i) Liens disclosed on the Company Balance Sheet;
(ii) statutory Liens for current taxes not yet due or not yet delinquent or Taxes that are
being contested in good faith by appropriate proceedings (and for which accruals or reserves have been established in accordance with GAAP on the Company Balance Sheet);
(iii) Liens imposed by Applicable Laws such as materialmens, mechanics,
carriers, workmens and repairmens liens (and in the case of materialmens, mechanics, carriers, workmens and repairmens liens, such Liens are for amounts not yet delinquent or that are being contested
in good faith by appropriate proceedings and for which accruals or reserves have been established in accordance with GAAP on the Company Balance Sheet);
(iv) Liens arising under conditional sale agreements, capital leases or other title
retention agreements with a vendor or lessor;
(v) restrictions on transfer of
securities imposed by applicable state and U.S. federal securities laws;
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(vi) with respect to Intellectual Property
Rights, nonexclusive licenses granted in the ordinary course of business;
(vii) Liens
granted pursuant to the Credit Agreement and related guarantees, pledge agreements or security documents that have or may be entered into pursuant to the terms of the Credit Agreement; or
(viii) Liens which do not, individually or in the aggregate, materially detract from the
value to the Acquired Companies or materially interfere with any present or intended use or occupancy of such property or assets by the Acquired Companies (clauses (i) through (viii) of this Section 4.13 are, collectively, the
Permitted
Liens
).
(b) The equipment owned by each Acquired Company that is material to the operation
of business by the Acquired Companies as currently conducted taken as a whole is in good operating condition and repair and has been reasonably maintained (giving due account to the age and length of use of same, ordinary wear and tear excepted),
and is adequate and suitable for its present uses.
Section
4.14
Intellectual Property
.
(a) Section 4.14(a) of the
Company Disclosure Schedule accurately identifies as of November 1, 2016 (i) each material item of Registered IP in which any Acquired Company has or purports to have an ownership interest of any nature (whether exclusively, jointly with
another Person, or otherwise), (ii) the jurisdiction in which such item of Registered IP has been registered or filed and the applicable application, registration, or serial or other similar identification number, (iii) any other Person that has an
ownership interest in such item of material Registered IP and the nature of such ownership interest and (iv) all material unregistered Trademarks used in connection with any Company Product.
(b) No Acquired Company has transferred ownership of (whether a whole or partial interest), or granted any
exclusive right to use, any material Company IP to any Person. No Acquired Company has transferred ownership of (whether a whole or partial interest), or granted any exclusive right to use, any material Technology in which the Company owns or
purports to own the underlying Intellectual Property Rights to any other Person, other than that Technology the Acquired Companies have sold, distributed or licensed, in the form of Company Products, or transferred, distributed, or licensed in the
form of copies of such Company Technology, in each case, in the ordinary course of business (
Company Technology
).
(c) The Acquired Companies exclusively own all right, title and interest to and in the material Company IP
and Company Technology free and clear of any Liens (other than Permitted Liens and non-exclusive licenses granted by the Acquired Companies in the ordinary course consistent with past practice). The Acquired Companies have a policy requiring
each Person who is or was an employee, officer, director, consultant or contractor of any Acquired Company and who is or was involved in the creation or development of any material Company IP or material Company Technology has signed an agreement
containing (i) an assignment to the applicable Acquired Company of all Intellectual Property Rights in such Persons contribution to the Company IP and Company Technology, and (ii) non-disclosure obligations for the protection of trade secrets
of the Acquired Companies.
(d) To the Knowledge of the Company, no material Company IP is invalid or
not subsisting, or unenforceable. To the Knowledge of the Company, the Acquired Companies have made all filings and payments and taken all other actions required to be made or taken to maintain each item of material Company IP that is
Registered IP in full force and effect by the applicable deadline and otherwise in accordance with all Applicable Laws. No application for any material Registered IP that has been filed by or on behalf of any of the Acquired Companies at any
time since January 1, 2014 through the date hereof has been abandoned or allowed to lapse.
(e) Each of
the Acquired Companies owns or otherwise has the right to use all Technology and Intellectual Property Rights which are material to the conduct of business of the Acquired Companies as
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currently conducted, taken as a whole, and is used in, held for use in, or necessary for the conduct the business of the Acquired Companies as currently conducted; provided that the foregoing is
not a representation or warranty of non-infringement which representation and warranty is solely as set forth in Section 4.14(f).
(f) To the Knowledge of the Acquired Companies, the (i) material Company Products currently offered for
sale and (ii) conduct of the business of the Acquired Companies as currently conducted have not and do not (A) infringe, misappropriate, use or disclose without authorization, or otherwise violate any Intellectual Property Right of any other Person,
or (B) constitute unfair competition or trade practices under the laws or any relevant jurisdiction. To the Knowledge of the Company, no material claims of infringement, misappropriation, or similar claim involving Intellectual Property Rights
of another Person or related Proceeding or investigation is pending or threatened against any Acquired Company or against any Person who would be entitled to be indemnified or reimbursed by any Acquired Company with respect to such claim, Proceeding
or investigation. To the Knowledge of the Company, no Acquired Company has from January 1, 2014 through the date hereof, received any written notice alleging infringement, misappropriation, or violation of any Intellectual Property Right of
another Person that the Acquired Companies have reason to believe is, individually or in the aggregate, material to the business of the Acquired Companies.
(g) The Acquired Companies take commercially reasonable measures to protect, safeguard and maintain the
confidentiality of, and otherwise protect and enforce their rights in all material proprietary information which is owned by an Acquired Company and which the Acquired Companies hold as a trade secret.
(h) Except as would not have, individually or in the aggregate, a Company Material Adverse Effect, to the
Knowledge of the Company, none of the Company Software (or third party Software incorporated in Company Products) contains any bug, defect or error that materially and adversely affects the use, functionality or performance of such Software or any
product or system containing or used in conjunction with such Software in any material respect. To the Knowledge of the Company, no material Company Software or material third party Software incorporated in Company Products contains any
back door, drop dead device, time bomb, Trojan horse, virus, worm, spyware or adware (as such terms are commonly understood in the software industry) or
any other code designed or intended to have, any of the following functions: (i) disrupting, disabling, harming or otherwise impeding in any manner the operation of, or providing unauthorized access to, a computer system or network or other device
on which such code is stored or installed or (ii) compromising the privacy or data security of user data or damaging or destroying any data or file without the users consent (collectively,
Malicious Code
). Each Acquired
Company implements commercially reasonable measures designed to prevent the introduction of Malicious Code into material Company Software, including firewall protections and regular virus scans consistent with industry practice.
(i) To the Knowledge of the Company, no material Source Code for any Company Software embodied in any
Company Product, has been delivered, licensed, or made available to any escrow agent or any other Person who is not either a current or former employee of any Acquired Company, or a Person to whom any Acquired Company has otherwise made any such
Source Code available in the ordinary course of business pursuant to reasonable confidentiality terms. To the Knowledge of the Company, no Acquired Company has any duty or obligation (whether present, contingent, or otherwise) to deliver,
license, or make available the material Source Code for any Company Product to any escrow agent or other Person. The consummation of the transactions contemplated by this Agreement will not result in the delivery, license or disclosure of any
material Source Code for any Company Product to any other Person who is not, as of the date of this Agreement, either an employee of any Acquired Company, or a Person to whom any Acquired Company otherwise makes any such material Source Code
available in the ordinary course of business pursuant to reasonable confidentiality terms.
(j) To the
Knowledge of the Company as of the date of this Agreement, no Company Software incorporated into or otherwise distributed with Company Products is subject to any copyleft or other obligation or condition (including any obligation or
condition under any open source license such as the GNU Public License, Lesser GNU Public License, or Mozilla Public License) that could require, or could condition the use or
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distribution of such Company Software or portion thereof on, (A) the disclosure, licensing or distribution of any Source Code for any portion of such Company Software, or (B) the granting to
licensees of the right to make derivative works or other modifications to such Company Software or portions thereof, (C) the licensing under terms that allow the Company Software or portions thereof or interfaces therefor to be reverse engineered,
reverse assembled or disassembled (other than by operation of law), or (D) redistribution at no license fee.
(k) No Governmental Authority or any public or private university, college or other educational or research
institution has or could claim material rights in any material Company IP as a result of funding, facilities or personnel of such Governmental Authority, public or private university, college or other educational or research institution which were
used, directly or indirectly, to develop or create, in whole or in part, such Company IP.
(l) Section
4.14(l) of the Company Disclosure Schedule contains a list of all Standards Bodies which, to the Knowledge of the Company, any of the Acquired Companies participates in or contributes to.
Section 4.15
Insurance Coverage
. The Company has
made available to Parent a list of, and accurate and complete copies of, all material insurance policies and fidelity bonds relating to the assets, business, operations, employees, officers or directors of the Acquired Companies, taken as a whole,
each of which is in full force and effect as of the date hereof. There is no claim in excess of $25,000,000 by any Acquired Company pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds or in respect of which such underwriters have reserved their rights. All premiums payable under all such policies and bonds have been paid and each Acquired Company has otherwise complied in all material
respects with the terms and conditions of all such policies and bonds. As of the date hereof, the Company has no Knowledge of any termination of, material premium increase (other than ordinary course premium increases) with respect to, or
material alteration of coverage under, any of such policies or bonds threatened in writing.
Section
4.16
Licenses and Permits
. Except in each case as would not have, individually or in the aggregate, a Company Material Adverse Effect, (i) the Acquired Companies have, and at all times since
October 27, 2013 have had, all licenses, permits, qualifications, accreditations, approvals and authorizations of any Governmental Authority (collectively, the
Permits
), and have made all necessary filings required under
Applicable Law, necessary to conduct the business of the Acquired Companies; (ii) since January 1, 2013 through the date hereof, no Acquired Company has received any written notice of any violation of or failure to comply with any Permit or any
actual or possible revocation, withdrawal, suspension, cancellation, termination or material modification of any Permit which is unresolved as of the date hereof; and (iii) each such Permit has been validly issued or obtained and is in full force
and effect.
Section 4.17
Tax Matters
. Except as
would not have or would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect,
(a) all Tax Returns required to be filed by or with respect to an Acquired Company have been timely filed
(taking into account any extension of time within which to file) and all such Tax Returns are true, correct and complete in all respects and have been completed in accordance with Applicable Law;
(b) all Taxes of each Acquired Company (whether or not shown to be due and payable on any Tax Return) have
been timely paid (other than Taxes being contested in good faith by appropriate proceedings and for which adequate reserves have been established on the Company Financial Statements in accordance with GAAP), no Acquired Company has incurred any
liability for Taxes since the date of the most recent Company Financial Statements other than in the ordinary course of business consistent with past practice, and each Acquired Company has made available to Parent or its legal counsel copies of all
U.S. federal income and other material Tax Returns for such Acquired Company filed since the fiscal year ended October 31, 2012;
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(c) no deficiency for, or adjustment in respect of, any amount
of Taxes has been proposed or asserted in writing or assessed by any Governmental Authority against any Acquired Company that remains unpaid;
(d) there are no audits, suits, proceedings, claims, examinations or other administrative or judicial
proceedings ongoing, pending, or, to the Knowledge of the Company, threatened or proposed with respect to any Taxes of any Acquired Company;
(e) there are no waivers or extensions of any statute of limitations currently in effect with respect to
Taxes of any Acquired Company and no written claim has ever been made by any Governmental Authority in a jurisdiction where an Acquired Company does not file Tax Returns that such Acquired Company is or may be subject to Tax in that jurisdiction,
which claim has not subsequently resolved;
(f) all Taxes required to be withheld or collected by an
Acquired Company have been withheld and collected and, to the extent required by Applicable Law, timely paid to the appropriate Governmental Authority, including in connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party;
(g) there are no Liens for Taxes upon any property or
assets of any Acquired Company, except for Liens for Taxes not yet due and payable and for which adequate reserves have been established in accordance with GAAP;
(h) in the last three years, no Acquired Company has been a party to any transaction treated by the parties
as a distribution to which Section 355 of the Code applies;
(i) no Acquired Company (i) has during the
past six years been a member of an affiliated group (within the meaning of Section 1504(a) of the Code) or filed or been included in a combined, a consolidated, unitary or other group foreign, state or local Tax Return (other than the affiliated
group of which an Acquired Company is the common parent) or (ii) has any liability for the Taxes of any other Person (other than an Acquired Company) under (A) Treasury Regulations Section 1.1502-6 or any similar provision of state, local or foreign
Tax law or as a transferee or successor, (B) by contract (other than pursuant to customary provisions in contracts entered into the ordinary course of business the primary purpose of which does not relate to Tax) or (C) otherwise. No Acquired
Company is a party to any Tax sharing agreement, Tax allocation agreement or similar arrangement (including Tax indemnity arrangement) (other than pursuant to customary provisions in contracts entered into the ordinary course of business the primary
purpose of which does not relate to Tax);
(j) no Acquired Company has engaged in a listed transaction
within the meaning of Treasury Regulations Section 1.6011-4(b)(2); and
(k) the Company has not been a
United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the past five years.
Section 4.18
Employees and Employee Benefit Plans
.
(a) Section 4.18(a) of the Company Disclosure Schedule sets forth an accurate and complete list of the
individuals name (except for employees of the Acquired Companies at a level below senior director or as prohibited by Applicable Law), employee identification number, titles, annual base salary (or wage rate), commission and any other cash
compensation or bonus opportunity of all employees of the Acquired Companies as of the date of this Agreement, principal work location, work visa status, accrued vacation time and classification. The services provided by each such employee are
terminable at the will of the Acquired Company employing such individual.
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(b) Section 4.18(b) of the Company Disclosure Schedule sets
forth an accurate and complete list identifying each material employee benefit plan, as defined in Section 3(3) of ERISA, each material employment, severance or similar Contract and each other plan or arrangement (written or oral)
providing for compensation, bonuses, commission, profit-sharing, stock option or other stock related rights or other forms of incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangements), health or
medical benefits, employee assistance program, disability or sick leave benefits, workers compensation, supplemental unemployment benefits, severance benefits, retention benefits, change of control payments, post-employment or retirement
benefits and other time-off benefits (including compensation, pension, health, medical or life insurance benefits) which is maintained, administered or contributed to by any Acquired Company or any ERISA Affiliate of the Acquired Companies and
covers any employee or former employee of any Acquired Company, or with respect to which such Acquired Company has any liability, other than governmentally administered plans and plans mandated by Applicable Law. Such plans are referred to
collectively herein as the
Employee Plans
.
(c) The Company has furnished or made
available to Parent (i) accurate and complete copies of all documents constituting each Employee Plan (or a written summary thereof with respect to any Employee Plan that is maintained for the benefit of any employee or service provider (or former
employee or service provider) who performs services outside the United States (each, a
Foreign Plan
) or to any other Employee Plan that has not been documented in writing) to the extent currently effective, including all
amendments thereto and all related trust documents, (ii) the three most recent available annual reports (Form 5500 and all schedules and financial statements attached thereto), if any, required under ERISA or the Code in connection with each
Employee Plan, (iii) if the Employee Plan is funded, the most recent annual and periodic accounting of Employee Plan assets, (iv) the most recent summary plan description together with the summary(ies) of material modifications thereto, if any,
required under ERISA with respect to each Employee Plan, (v) material correspondence within the past two years to or from any Governmental Authority relating to any Employee Plan and (vi) accurate and complete copies of the most recent IRS
determination (or opinion) letters with respect to each such applicable Employee Plan. The Company will furnish or make available to Parent, promptly upon request by Parent after the date hereof, any material written Contracts requested by
Parent relating to each Employee Plan to the extent currently effective, including administrative service agreements and group insurance contracts.
(d) Section 4.18(d) of the Company Disclosure Schedule sets forth each Employee Plan any Acquired Company
or any ERISA Affiliate of the Acquired Companies (or any predecessor thereof) sponsors, maintains or contributes to, or has in the preceding six years sponsored, maintained or contributed to, subject to Title IV of ERISA or Section 412 or 430 of the
Code (each, a
Pension Plan
). With respect to each Pension Plan: as of the date hereof, (i) no liability to the Pension Benefit Guaranty Corporation (the
PBGC
) has been incurred (other than for premiums
payable in the ordinary course); (ii) no notice of intent to terminate any such Pension Plan has been filed with the PBGC or distributed to participants therein and no amendment terminating any such Pension Plan has been adopted; (iii) no
proceedings to terminate any such Pension Plan instituted by the PBGC are pending or, to the Knowledge of the Company, are threatened and no event or condition has occurred which would reasonably be expected to constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer, any such Pension Plan; (iv) no such Pension Plan is in at risk status, within the meaning of Section 430 of the Code or Section 303 of ERISA; (v) except for
the execution and delivery of this Agreement and the transactions contemplated by this Agreement, no reportable event within the meaning of Section 4043 of ERISA (for which the 30-day notice requirement has not been waived by the PBGC)
has occurred within the last six years; (vi) no Lien has arisen or would reasonably be expected to arise as a result of actions or inactions under ERISA or the Code on the assets of the Company or its Subsidiaries (other than any Lien imposed by the
PBGC to the extent arising under Section 4062(e) of ERISA as a result of the transactions contemplated by this Agreement); (vii) there has been no cessation of operations at a facility subject to the provisions of Section 4062(e) of ERISA
(
4062(e) Event
) within the last six years (other than a 4062(e) Event to the extent arising from the execution and delivery of this Agreement and the transactions contemplated by this Agreement); and (viii) no such Pension Plan
has failed to satisfy the minimum funding standards set forth in Sections 412 and 430 of the Code or Sections 302 and 303 of ERISA.
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(e) No Acquired Company or any ERISA Affiliate of the Acquired
Companies (nor any predecessor thereof) contributes to, or has in the preceding six years contributed to, any multiemployer plan, as defined in Section 3(37) or 4001(a)(3) of ERISA, a multiple employer plan, as defined in Section 413(c) of the Code,
or a multiple employer welfare arrangement, as defined in Section 3(40) of ERISA.
(f) Except as would
not have a Company Material Adverse Effect, each Acquired Company (i) has performed all material obligations required to be performed by such Acquired Company under each Employee Plan established or maintained for the benefit of any employee or
service provider (or former employee or service provider) who performs services in the United States of America (the
U.S. Employee Plans
) and (ii) is not in material default with respect to or in material violation of, and has no
Knowledge of any material default or violation by any other party to, any U.S. Employee Plan. Except as would not have a Company Material Adverse Effect, each U.S. Employee Plan (i) has been established and maintained in accordance with its
terms and in compliance in all material respects with Applicable Law, including ERISA and the Code and (ii) that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter (or opinion letter, if
applicable), or has pending or has time remaining in which to file, an application for such determination from the IRS, and, to the Knowledge of the Company, there is no reason why any such determination (or opinion) letter should be revoked or not
be reissued.
(g) Except as provided in this Agreement or as required by Applicable Law, the
consummation of the transactions contemplated by this Agreement will not (either alone or together with any other event, including a subsequent termination of employment or services) entitle any current or former employee or independent contractor
of any Acquired Company to severance pay or accelerate the time of payment or vesting or trigger any payment of funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any Employee Plan (including any acceleration of vesting with respect to a Company Compensatory Award held by employees of an Acquired Company as a result of the Transaction or any termination of employment in
connection therewith). No payment or benefit (including vesting of Company Compensatory Awards) that will or may be made by any Acquired Company or their ERISA Affiliates to any current or former employee or other service provider of any
Acquired Company is reasonably expected to be characterized as a parachute payment within the meaning of Section 280G(b)(2) of the Code. There is no Contract by which any Acquired Company is bound to compensate any employee for
excise taxes paid pursuant to Section 4999 of the Code.
(h) Except as set forth on the Company Balance
Sheet, no Acquired Company or ERISA Affiliate of the Acquired Companies has any material current or projected liability in respect of post-employment or post-retirement health, medical or life insurance benefits for retired, former or current
employees of any Acquired Company or any ERISA Affiliate of the Acquired Companies, except as required to avoid excise tax under Section 4980B of the Code or except for the continuation of coverage through the end of the calendar month in which
termination from employment occurs. No condition exists that would prevent any Acquired Company or any ERISA Affiliate of the Acquired Companies from amending or terminating any Employee Plan that is an employee welfare benefit plan
as defined in Section 3(1) of ERISA in accordance with its terms.
(i) Except as would not have a
Company Material Adverse Effect, with respect to each Employee Plan which is maintained for the benefit of any employee or service provider (or former employee or service provider) who performs services outside the United States, each Foreign Plan
(i) is in material compliance with the provisions of the Applicable Laws of each jurisdiction in which such Foreign Plan is maintained and has been administered in all material respects in accordance with its terms; (ii) has no material
unfunded liabilities that, as of the Effective Time will not be offset by insurance or fully accrued; and (iii) which, under the Applicable Laws of the applicable foreign country, is required to be registered or approved by any Governmental
Authority has been so registered or approved.
(j) Each material nonqualified deferred
compensation plan (as defined in Section 409A(d)(1) of the Code) maintained or sponsored by any Acquired Company has been operated in material compliance with Section 409A of the Code and the guidance issued thereunder.
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(k) No Acquired Company is a party to or bound by, or is
currently negotiating in connection with entering into, any collective bargaining agreement or other labor-related contract or arrangement with a labor union, works council or similar organization. Since October 31, 2010, to the Knowledge of
the Company, there have been no attempts by any labor union, works council or similar organization to organize any employees of the Acquired Companies. Each Acquired Company is in compliance with all Applicable Laws regarding employment,
employment practices, terms and conditions of employment, employment safety and health, immigration, wages and hours, and employee-independent contractor classification, and with respect to employees each Acquired Company (i) is not liable for
any arrears of wages, severance pay or any Taxes or any penalty for failure to comply with any of the foregoing and (ii) is not liable for any payment to any trust or other fund governed by or maintained by or on behalf of any Governmental
Authority, with respect to unemployment compensation benefits, social security or other benefits for employees (in each case, other than routine payments to be made in the ordinary course of business and consistent with past practice), except in
each case, for any non-compliance or failure to withhold, report or pay which would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. There are no pending, or the Knowledge of the Company,
threatened Proceedings or, to the Knowledge of the Company, investigations, pertaining to employment or employment practices between any Acquired Company and any of its respective current or former employees, in each case, as would reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(l) To the
Knowledge of the Company, no employee of any Acquired Company at the level of director or above is in material violation of any term of any employment agreement, noncompetition agreement or any restrictive covenant to a former employer relating to
the right of any such employee to be employed by any Acquired Company because of the nature of the business conducted or to the use of trade secrets or proprietary information of any former employer.
(m) Each Acquired Company is in compliance in all material respects with the Worker Adjustment and
Retraining Notification Act of 1988, as amended (
WARN Act
), or any similar Applicable Law relating to plant closings and
layoffs.
Section 4.19
Environmental Matters
.
(a) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material
Adverse Effect: (i) no written notice, notification, demand, request for information, citation, summons or order has been received, no complaint has been filed, no penalty has been assessed and no Proceeding or, to the Knowledge of the Company,
investigation, is pending or, to the Knowledge of the Company, is threatened by any Governmental Authority or other Person affecting any Acquired Company and, with respect to any of the foregoing, alleging violation of any Environmental Law; (ii)
each Acquired Company is, and has at all times since January 1, 2014 been, in material compliance with applicable Environmental Laws and applicable Environmental Permits; (iii) none of the properties currently or, to the Companys Knowledge,
formerly owned, leased or operated by the Company or any of its Subsidiaries contains any Hazardous Substance in amounts exceeding levels which would constitute violations of applicable Environmental Laws by the Company or any of its Subsidiaries;
(iv) there have been no releases of any Hazardous Substance at, onto, or from any properties presently or, to the Companys Knowledge, formerly owned, leased or operated (during or resulting or arising from the time such former properties were
owned, leased or operated) by the Company, in violation of applicable Environmental Laws; and (v) to the Knowledge of the Company, there are no pending liabilities or obligations of any Acquired Company under applicable Environmental Law for release
of any Hazardous Substance.
(b) The Company has made available to Parent material, applicable and
relevant environmental reports and results of investigations of which the Company has Knowledge and that are in its possession pertaining to the business of any Acquired Company or any property or facility of any Acquired Company for which such
Acquired Company has ongoing liability.
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The representations set forth in this Section 4.19 constitute the sole and exclusive
representations and warranties of the Company relating to environmental matters.
Section
4.20
Related Person Transactions
. Except for compensation or other employment arrangements in the ordinary course of business, there are no Contracts, transactions, arrangements or understandings
between the Company or any of its Subsidiaries, on the one hand, and any Related Person, on the other hand, that would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC in the Companys Form 10-K or proxy
statement pertaining to an annual meeting of stockholders.
Section
4.21
Customers; Suppliers
.
(a) Section 4.21(a) of the Company
Disclosure Schedule sets forth an accurate and complete list of each customer who, in either the year ended October 31, 2015 or the nine months ended July 30, 2016 was one of the 20 largest sources of revenues for the Acquired Companies, based on
amounts paid or payable (each, a
Significant Customer
). None of the Acquired Companies has any outstanding material disputes with a Significant Customer other than in the ordinary course of business consistent with past
practice, and, to the Knowledge of the Company, no Acquired Company has received written notice of the intention of a Significant Customer to seek to materially reduce the scale of the business conducted with the Acquired Companies. To the
Knowledge of the Company, as of the date hereof, none of the Acquired Companies has received written notice from any Significant Customer that such customer shall not continue as a customer of the Acquired Companies (or the Surviving Corporation or
Parent) after the Closing or that such customer intends to terminate or materially modify any existing material Contract with the Acquired Companies (or the Surviving Corporation or Parent).
(b) Section 4.21(b) of the Company Disclosure Schedule sets forth an accurate and complete list of the
accounts payable incurred in respect of, each supplier or other service provider of the Acquired Companies that accounted for more than $25,000,000 of the accounts payable incurred by the Acquired Companies, on a consolidated basis, for the year
ended October 31, 2015 or the nine months ended July 30, 2016 (each a
Significant Supplier
). As of the date hereof, none of the Acquired Companies has received any written notice from any Significant Supplier that such
supplier shall not continue as a supplier of the Acquired Companies (or the Surviving Corporation or Parent) after the Closing or that such supplier intends to terminate or materially modify existing Contracts with the Acquired Companies (or the
Surviving Corporation or Parent).
Section 4.22
No
Brokers
. Except for Evercore Group L.L.C. (the
Company Financial Advisor
), an accurate and complete copy of whose engagement agreement (and all indemnification and other agreements related to such agreement pursuant
to which the Company Financial Advisor would be entitled to any payment, commission, fees or expenses in connection with the Merger or any other transactions contemplated by this Agreement) has been provided to Ultimate Parent, there is no
investment banker, broker, finder or other financial intermediary that has been retained by or is authorized to act on behalf of any Acquired Company who might be entitled to any fee or commission from any Acquired Company in connection with the
transactions contemplated by this Agreement.
Section 4.23
Fairness
Opinion
. The Company Board of Directors has received the opinion of the Company Financial Advisor to the effect that, as of the date of such opinion, and based upon and subject to the various qualifications and assumptions set forth
therein, the Merger Consideration is fair, from a financial point of view, to the holders of the shares of Company Common Stock entitled to receive such Merger Consideration. The Company has been authorized by the Company Financial Advisor to
permit the inclusion of such opinion in its entirety in the Proxy Statement. A signed copy of the written opinion will be delivered to Parent promptly after receipt thereof by the Company.
Section 4.24
Takeover Statutes
. Assuming the accuracy of
the representation contained in Section 5.07, the Company Board of Directors has taken all actions so that the restrictions applicable to business combinations contained in Section 203 of the DGCL are, and will be, inapplicable to the execution,
delivery and performance
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of this Agreement and to the consummation of the transactions contemplated by this Agreement. No other fair price, moratorium, control share acquisition,
business combination or other similar anti-takeover statute or regulation of any Governmental Authority (each, an
Anti-Takeover Law
) is applicable to the Company or the Transaction.
ARTICLE 5.
Representations and Warranties of Ultimate Parent,
Parent and Merger Sub
Subject to Section 10.05, Ultimate Parent, Parent and Merger Sub each represent and warrant to the Company:
Section 5.01
Corporate Existence and Power
. Each of
Ultimate Parent, Parent and Merger Sub is a limited company or corporation, as applicable, in each case duly organized or incorporated, as applicable, validly existing and in good standing under the laws of the jurisdiction of its organization or
incorporation, as applicable.
Section 5.02
Corporate
Authorization
.
Each of Ultimate Parent, Parent and Merger Sub has all requisite limited company or corporate power and authority, as applicable, to execute and deliver this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated by this Agreement. The execution, delivery and performance by each of Ultimate Parent, Parent and Merger Sub of this Agreement have been duly and validly authorized by all necessary action on the
part of Ultimate Parent, Parent and Merger Sub (subject, with respect to Merger Sub, only to approval by its sole stockholder), and no other corporate proceedings on the part of Ultimate Parent, Parent and Merger Sub are necessary to authorize the
execution and delivery of this Agreement or for each of Ultimate Parent, Parent and Merger Sub to consummate the transactions contemplated by this Agreement (other than, with respect to the Merger, the filing of the Certificate of Merger with the
Delaware Secretary of State). This Agreement has been duly and validly executed and delivered by Ultimate Parent, Parent and Merger Sub and, assuming the due authorization, execution and delivery by the Company of this Agreement, constitutes
the legal, valid and binding obligation of each of Ultimate Parent, Parent and Merger Sub, enforceable against each of them in accordance with its terms, subject to the Enforceability Exceptions.
Section 5.03
Governmental Authorization
. The execution,
delivery and performance by each of Ultimate Parent, Parent and Merger Sub of this Agreement and the consummation by Ultimate Parent, Parent and Merger Sub of the transactions contemplated hereby require no action by or in respect of, or filing
with, any Governmental Authority other than (i) the filing of the Certificate of Merger with the Delaware Secretary of State, (ii) compliance with Antitrust Laws, (iii) compliance with any applicable requirements of the Securities Act, the Exchange
Act and any other applicable U.S. state or federal securities, takeover or blue sky laws, (iv) compliance with any applicable requirements of Exon-Florio, (v) compliance with any applicable rules of NASDAQ and (vi) except where failure
to take any such actions or filings would not materially impair the ability of Ultimate Parent, Parent or Merger Sub to consummate the transactions contemplated by this Agreement.
Section 5.04
Non-Contravention
. The execution, delivery
and performance by each of Ultimate Parent, Parent and Merger Sub of this Agreement, the consummation by each of Ultimate Parent, Parent or Merger Sub of the transactions contemplated hereby and the compliance by each of Ultimate Parent, Parent or
Merger Sub with any of the provisions of this Agreement does not and will not (i) contravene, conflict with or result in any violation or breach of any provision of the certificate of incorporation or bylaws (or comparable organizational documents)
of Ultimate Parent, Parent or Merger Sub, nor (ii) assuming the consents, approvals, authorizations and compliance with the matters referred to in Section 5.03 have been received and any condition precedent to such consents, approvals,
authorizations and compliance has been satisfied, conflict with or result in a violation
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or breach of any Applicable Law to each of Ultimate Parent, Parent or Merger Sub or by which any property or asset of Ultimate Parent, Parent or Merger Sub is bound or affected, except in the
case of this clause (ii), any such conflict or violation that would not prevent, materially delay or materially impair the ability of Ultimate Parent, Parent or Merger Sub to perform its obligations under this Agreement or to consummate the
Transaction.
Section 5.05
Litigation
.
(a) As of the date of this Agreement, there is no pending Proceeding or, to the Knowledge of Ultimate
Parent, Parent or Merger Sub, investigation, or, to the Knowledge of Ultimate Parent, Parent or Merger Sub, threatened in writing against Ultimate Parent, Parent or Merger Sub that challenges, or that would reasonably be expected to have the effect
of preventing, materially delaying or making illegal, the Transaction.
(b) There is no order, writ,
injunction, judgment or decree to which any of Ultimate Parent, Parent or Merger Sub are subject and which would materially impair the ability of Ultimate Parent, Parent or Merger Sub to consummate the transactions contemplated by this Agreement.
Section 5.06
No Brokers
. Except for BMO Capital
Markets, there is no investment banker, broker, finder or other financial intermediary that has been retained by or is authorized to act on behalf of any of Ultimate Parent or its Subsidiaries who might be entitled to any fee or commission from
Ultimate Parent or any of its Subsidiaries in connection with the transactions contemplated by this Agreement.
Section 5.07
Ownership of Company Capital Stock
. Ultimate Parent, Parent and Merger Sub and their respective Subsidiaries do not beneficially own (as such term is used in Rule 13d-3
promulgated under the Exchange Act) any shares of Company Common Stock or other securities of the Company or any options, warrants or other rights to acquire Company Common Stock or other securities of, or any other economic interest (through
derivative securities or otherwise) in, the Company.
Section
5.08
Sufficient Funds
. Parent has currently available cash funds or available borrowing capacity under committed credit facilities in the aggregate sufficient to satisfy all of Parents and
Merger Subs obligations under this Agreement, including to consummate the Merger and to pay the Merger Consideration, to repay all obligations of the Company under the Credit Agreement and to pay all amounts payable pursuant to Article 3.
ARTICLE 6.
Covenants of the Company
Section 6.01
Conduct of the Company
. From the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement in accordance with Section 9.01, except as
expressly contemplated by this Agreement (including as contemplated by Section 6.08), the Company shall, and shall cause each Acquired Company to, conduct its business in the ordinary course consistent with past practice and use its reasonable best
efforts to (i) preserve intact its present business organization, operations and assets, (ii) maintain in effect all of its material foreign, federal, state and local Permits, (iii) keep available the services of present officers and key employees
of the Acquired Companies and (iv) preserve intact its relationships with the customers, lenders and suppliers of the Acquired Companies and others having material business relationships with them. Without limiting the generality of the
foregoing, except as expressly contemplated by this Agreement (including as contemplated by Section 6.08), as set forth on Section 6.01 of the Company Disclosure Schedule, or pursuant to the written consent of Parent (which consent shall not be
unreasonably withheld, conditioned or delayed other than with respect to (A) Section 6.01(b) to the extent relating to dividends or distributions by the Company and (B) Section 6.01(r)), the Company shall not, and shall cause each of the other
Acquired Companies not to:
(a) amend its certificate of incorporation, bylaws or other similar
organizational documents (whether by merger, consolidation or otherwise);
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(b) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in respect of any Company Securities or securities of any other Acquired Company, or redeem, repurchase or otherwise acquire or offer to redeem, repurchase or otherwise
acquire any Company Securities or securities of any other Acquired Company, other than (i) regular quarterly cash dividends payable by the Company in respect of Company Common Stock in the ordinary course of business consistent with past practice in
an amount not exceeding $0.055 per share of Company Common Stock in any fiscal quarter and with a record date set forth on Section 6.01(b) of the Company Disclosure Schedule,
(ii) dividends
declared and paid by any Subsidiary of the Company to the Company or another Subsidiary of the Company, and (iii) settlement or termination of the Warrants in accordance with Section 7.10 and conversions of the Notes in accordance with the terms of
such Notes on the date of this Agreement;
(c) (i) issue, deliver or sell, or authorize the issuance,
delivery or sale of, any shares of any Company Securities or securities of any other Acquired Company, other than the issuance of any shares of Company Common Stock in accordance with the Company ESPP, upon the exercise of Company Options,
settlement of Company PSU Awards or Company RSU Awards or conversion of the Notes that, in each case, are outstanding on the date of this Agreement in accordance with the terms of such awards or securities on the date of this Agreement or granted
after the date hereof in accordance with the terms of this Agreement; (ii) settlement or termination of the Warrants in accordance with Section 7.10, or (iii) amend any term of any Company Security or the security of any other Acquired Company
(whether by merger, consolidation or otherwise) including an amendment of a Company Compensatory Award to provide for acceleration of vesting as a result of the Transaction or a termination of employment or service related to the Transaction (other
than as required by the terms of any Employee Plan in effect as of October 31, 2016 and other than an amendment of the Warrants in accordance with Section 7.10);
(d) incur any capital expenditures except as contemplated by the Companys fiscal 2017 budget and
capital expenditure plan in effect as of the date of this Agreement and made available to Parent prior to the date of this Agreement (provided, that for purposes of Section 4.07, the reference to the fiscal 2017 budget and capital expenditure plan
shall be deemed to be the fiscal 2016 budget and capital expenditure plan with respect to the 2016 fiscal year);
(e) acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or
indirectly, any businesses, divisions of businesses or material portion of assets thereof, other than the acquisition of properties or assets of any Acquired Company by any other Acquired Company;
(f) sell, lease, license or otherwise transfer, or create or incur any Lien (other than Permitted Liens)
on, any of the material assets (including any material Intellectual Property Rights and other material intangible assets), securities, properties, interests or businesses of the Acquired Companies other than (i) purchases of Patents with a fair
market value of less than $1,000,000, (ii) non-exclusive licenses in the ordinary course of business consistent with past practice of less than $2,000,000, (iii) grant licenses to any Intellectual Property Rights required by any Standards Body of
which any Acquired Company is a member or (iv) settlements not to exceed $3,000,000;
provided
that in no event shall the Acquired Companies grant any exclusive licenses of any Intellectual Property Rights without Parents prior written
consent;
(g) make any loans, advances or capital contributions to, or investments in, (i) any
Affiliate (excluding an Affiliate that is an Acquired Company) of any Acquired Company other than in the ordinary course of business consistent with past practice, except as may be required under the Credit Agreement, and (ii) any Person other than
an Affiliate of any Acquired Company in an amount in excess of $2,000,000;
(h) make any payments to any
Related Person, other than in the ordinary course of business consistent with past practice or pursuant to an Employee Plan in effect as of the date hereof or otherwise permitted to be established after the date hereof in accordance with the terms
of this Agreement;
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(i) create, incur, assume, suffer to exist or otherwise be
liable with respect to any indebtedness for borrowed money other than (i) letters of credit issued and maintained by the Company in the ordinary course of business, (ii) loans or advances from one Acquired Company to another Acquired Company and
(iii) indebtedness outstanding as of the date of this Agreement;
(j) (i) other than in the
ordinary course of business consistent with past practice (including renewals consistent with the terms thereof) amend or modify in any material respect or terminate (excluding terminations upon expiration of the term thereof in accordance with the
terms thereof) any Company Material Contract or (ii) enter into any Contract (other than any non-material amendments entered into in the ordinary course of business consistent with past practice) that would have been a Company Material Contract had
it been entered into prior to the date of this Agreement, provided, that if another subsection of this Section 6.01 governs conduct or actions of the same type or nature as this Section 6.01(j), and such other subsection expressly permits such
conduct or actions to be taken by the Acquired Companies in conflict with this Section 6.01(j), then the Acquired Companies shall be permitted to take such conduct or action;
(k) fail to maintain, or allow to lapse, or abandon, including by failure to pay the required fees in any
jurisdiction, any material Intellectual Property Rights used in or otherwise material to the conduct of business of the Acquired Companies as currently conducted;
(l) other than pursuant to the terms of an applicable plan or agreement identified on Section 6.01(l) or
Section 4.18 of the Company Disclosure Schedule, or as required by Applicable Law (including to avoid adverse tax consequences under Section 409A of the Code, but, in such case, subject to Parents prior review): (i) grant or increase any
change-in-control, severance or termination pay to (or amend any such existing arrangement with) any director, officer, consultant or employee of any Acquired Company, (ii) increase benefits payable under any existing change-in-control, severance or
termination pay policies, (iii) establish, adopt or amend (except as required by Applicable Law) any collective bargaining or work council agreement, (iv) establish, adopt or amend (except as required by Applicable Law) any bonus, commission,
profit-sharing, thrift, pension, retirement, deferred compensation, stock option, restricted stock or other Employee Plan covering any director, officer, advisor, consultant or employee of any Acquired Company; (v) promote any employee at the level
of senior director or above; (vi) increase compensation, bonus, commission or other benefits payable to any director, officer or employee of any Acquired Company; (vii) enter into any employment or consulting agreement with any existing or
prospective employee or other service provider of the Acquired Companies (except for arrangements entered into in the ordinary course of business consistent with past practices that are either (A) terminable at will where permitted by Applicable Law
or (B) consistent with the Companys past practices with respect to notice periods, termination payments and similar provisions where at-will employment is not permitted by Applicable Law); or (viii) terminate any employee at the level of Vice
President or above of any Acquired Company, or in respect of the SAN Business, at the level of senior director or above (in each case, other than for cause).
(m) change any Acquired Companys methods of accounting or accounting practices, except as required by
concurrent changes in GAAP or SEC rules and regulations, in either case as agreed to by its independent public accountants;
(n) commence, settle or offer or propose to settle, (i) any Proceeding involving or against any Acquired
Company (other than (A) Proceedings set forth in Section 6.01(n) of the Company Disclosure Schedule, or (B) any other settlement that does not require payment by the Acquired Companies in excess of $3,000,000 as its sole remedy), (ii) any
stockholder litigation or dispute against any Acquired Company or any of its officers or directors or (iii) any Proceeding that relates to the transactions contemplated hereby, in each case, other than in the ordinary course of business;
(o) make or change any material Tax election; settle or compromise any claim, notice, audit report,
proceeding or assessment in respect of material Taxes; change (or file a request to change) any annual Tax
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accounting period; adopt or change any material accounting method for Taxes; file any material amended Tax Return; enter into any Tax allocation agreement, Tax sharing agreement, Tax indemnity
agreement (other than pursuant to customary provisions in contracts entered into in the ordinary course of business the primary purpose of which does not relate to Tax), pre-filing agreement, advance pricing agreement, cost sharing agreement or
closing agreement relating to any material Tax; surrender or forfeit any right to claim a material Tax refund; make any application for, negotiate or conclude any material Tax ruling or arrangement with a Governmental Authority; or consent to any
extension or waiver of the statute of limitations period applicable to any material Tax claim or assessment;
(p) form or acquire any Subsidiaries;
(q) (i) adopt a plan of complete or partial liquidation or dissolution, or (ii) consummate any merger,
amalgamation, consolidation, restructuring, recapitalization or other reorganization (other than the Merger);
(r) (i) transfer a material amount of cash or cash equivalents to the United States from any foreign
jurisdiction other than pursuant to Section 6.07(d) or (ii) take any action in furtherance of the Pending Reorganization; or
(s) agree, resolve or commit to do any of the foregoing.
Section 6.02
Stockholder Approval; Notice
.
(a) The Company shall take all action in accordance with Applicable Law and the certificate of incorporation
and bylaws of the Company to establish a record date, duly call, give notice of, convene and hold a meeting of the holders of shares of Company Common Stock to vote on the adoption of this Agreement (the
Company Stockholder
Meeting
). The Company Stockholder Meeting shall be held on a date selected by the Company in consultation with Parent as promptly as reasonably practicable, and in any event (to the extent permissible under Applicable Law) the
Original Date shall be within 45 days following the date on which the Proxy Statement is cleared by the SEC, for the purpose of obtaining the Required Company Stockholder Approval. The Company shall (i) ensure that the Company Stockholder
Meeting is called, noticed, convened, held and conducted, and that all Persons solicited in connection with the Company Stockholder Meeting are solicited, in compliance with all Applicable Law and (ii) subject to and without limiting the rights of
the Company Board of Directors to effect a Change of Board Recommendation pursuant to Section 6.03(f) or Section 6.03(g), use reasonable best efforts to solicit from its stockholders proxies in favor of the adoption of this Agreement and to obtain
the Required Company Stockholder Approval, including such actions as are required by Applicable Law. The adoption of this Agreement, the adjournment of the Company Stockholder Meeting, as necessary, to solicit additional proxies if there are
insufficient votes in favor of adoption of this Agreement, and the advisory vote required by Rule 14a-21(c) under the Exchange Act shall be the only matters which the Company shall propose to be acted on by the Companys stockholders at the
Company Stockholder Meeting unless otherwise approved in writing by Parent.
(b) The Company shall
consult with Parent regarding the date of the Company Stockholder Meeting and shall not postpone or adjourn the Company Stockholder Meeting without the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned or
delayed);
provided
,
however
, if on the date for which the Company Stockholder Meeting is scheduled (the
Original Date
), the Company has not received proxies representing a sufficient number of shares for the Required
Company Stockholder Approval, whether or not a quorum is present, Parent shall have the right to require the Company, and the Company shall have the right, to postpone or adjourn the Company Stockholder Meeting to a date which shall not be more than
30 days after the Original Date. If the Company continues not to receive proxies representing a sufficient number of shares for the Required Company Stockholder Approval, whether or not a quorum is present, the Company may, in its sole
discretion, make one or more successive postponements or adjournments of the Company Stockholder Meeting as long as the date of the Company Stockholder Meeting is not postponed or adjourned to a date beyond
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the End Date in reliance on this subsection. Notwithstanding the foregoing, the Company may postpone or adjourn the Company Stockholder Meeting if (i) the Company is required to postpone or
adjourn the Company Stockholder Meeting by Applicable Law or (ii) the Company Board of Directors or any authorized committee thereof shall have determined in good faith (after consultation with outside legal counsel) that it is necessary or
appropriate to postpone or adjourn the Company Stockholder Meeting in order to give holders of shares of Company Common Stock sufficient time to evaluate any information or disclosure that the Company has sent or otherwise made available to such
holders by issuing a press release, filing materials with the SEC or otherwise (including in connection with any Change of Board Recommendation).
(c) Subject to Section 6.03: (i) the Proxy Statement shall include the Company Board Recommendation
and (ii) the Company Board Recommendation shall not be withdrawn, modified or qualified in any manner adverse to Parent, and no resolution by the Company Board of Directors or any committee thereof to withdraw or modify the Company Board
Recommendation in a manner adverse to Parent shall be adopted or publicly proposed (any of the foregoing a
Change of Board Recommendation
).
(d) Nothing contained in this Section 6.02 shall prohibit the Company Board of Directors from disclosing to
the stockholders of the Company a position contemplated by Rule 14e-2(a) and Rule 14d-9 promulgated under the Exchange Act;
provided
,
however
, that any disclosure other than a stop, look and listen or similar communication
of the type contemplated by Rule 14d-9(f) under the Exchange Act, an express rejection of any applicable Acquisition Proposal or an express reaffirmation of the Companys recommendation to the stockholders of the Company in favor of the
adoption of the Agreement, together with a factual description of events or actions leading up to such disclosure that have been taken by the Company and that are permitted under Section 6.03 or actions taken or notices delivered to Ultimate Parent
or Parent by the Company that are required by Section 6.03 shall, in each case, be deemed to be a Change of Board Recommendation hereunder, including for purposes of Section 9.01(f).
(e) Without limiting the generality of the foregoing, the Company agrees that, unless this Agreement is
terminated in accordance with Section 9.01, (i) the Companys obligation to duly call, give notice of, convene and hold the Company Stockholder Meeting shall not be affected by the withdrawal, amendment or modification of the Company Board
Recommendation and (ii) the Companys obligations pursuant to this Section 6.02 shall not be affected by the commencement, public proposal, public disclosure or communication to the Company of any Acquisition Proposal (whether or not a Superior
Proposal). Unless this Agreement is terminated in accordance with Section 9.01, the Company agrees that it shall not submit to the vote of the stockholders of the Company any Acquisition Proposal (whether or not a Superior Proposal) prior to
the vote of the Companys stockholders with respect to the adoption of this Agreement at the Company Stockholder Meeting.
Section 6.03
No Solicitation
.
(a) The Company shall, and
shall cause each of its Representatives and each of the other Acquired Companies (and each of their respective Representatives) to, immediately cease and cause to be terminated any and all existing activities, discussions or negotiations with any
Persons (other than Ultimate Parent, Parent and their Representatives) conducted on or prior to the date of this Agreement with respect to any Acquisition Proposal, and shall promptly after the date of this Agreement instruct each Person that has in
the twelve months prior to the date of this Agreement executed a confidentiality agreement relating to an Acquisition Proposal with or for the benefit of the Company to promptly return or destroy, in accordance with the terms of such confidentiality
agreement, all information, documents and materials relating to the Acquisition Proposal or to the Acquired Companies and their businesses previously furnished by or on behalf of the Acquired Companies or any of their respective Representatives to
such Person or such Persons Representatives. Promptly following the date of this Agreement, the Company shall provide Parent with a certificate signed by the Companys Chief Executive Officer that shall certify the Companys
compliance with this Section 6.03(a).
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(b) Except as expressly permitted by this Section 6.03, from
the date of this Agreement until the earlier of the Effective Time or the termination of this Agreement in accordance with Section 9.01, the Company shall not, and shall cause each of the other Acquired Companies and their respective directors,
executives and other officers not to, and will not authorize or direct any of its or the other Acquired Companies respective employees, consultants or Representatives to, directly or indirectly: (i) solicit, initiate, seek or knowingly
encourage, facilitate, induce or support, or knowingly take any action to solicit, initiate, seek or knowingly encourage, facilitate, induce or support any announcement, communication, inquiry, expression of interest, proposal or offer that
constitutes or that would reasonably be expected to lead to, an Acquisition Proposal from any Person (other than Ultimate Parent, Parent and their Representatives); (ii) enter into, participate in, maintain or continue any discussions or
negotiations relating to, any Acquisition Proposal with any Person (other than Ultimate Parent, Parent and their Representatives), other than solely to state that the Acquired Companies and their Representatives are prohibited hereunder from
engaging in any such discussions or negotiations or solely to the extent necessary to clarify terms or financial capabilities with respect to an Acquisition Proposal which has been received for the Company, in order for the Company Board of
Directors to be able to have sufficient information to make the determination described in Section 6.03(d); (iii) furnish to any Person (other than Ultimate Parent, Parent and their Representatives) any non-public information that would reasonably
be expected to be used for the purposes of formulating any inquiry, expression of interest, proposal or offer relating to an Acquisition Proposal from a Person (other than any information disclosed in the ordinary course consistent with past
practices and not known by the Company to be used for the purposes of formulating any inquiry, expression of interest, proposal or offer relating to an Acquisition Proposal); (iv) accept any Acquisition Proposal or enter into any agreement relating
to any Acquisition Proposal (other than a confidentiality agreement pursuant to Section 6.03(d)) with any Person (other than Ultimate Parent, Parent and their Representatives); or (v) submit any Acquisition Proposal or any matter related thereto to
the vote of the stockholders of the Company.
(c) From the date of this Agreement until the earlier of
the Effective Time or the termination of this Agreement in accordance with Section 9.01, the Company shall promptly (and in any event within 24 hours after Knowledge of the Company or any of the members of its Board of Directors of receipt) provide
Parent with: a copy (if in writing) or written summary of material terms (if oral, which written summary may be delivered by email) of any expression of interest, proposal or offer relating to an Acquisition Proposal (including any material
modification thereto, which shall include any communications as to the proposed amount or form of consideration, financing terms, if any, and closing conditions), or a copy (if in writing) or written summary (if oral, which written summary may be
delivered by email) of any request for non-public information that would reasonably be expected to be used for the purposes of formulating any inquiry, expression of interest, proposal or offer relating to an Acquisition Proposal from a Person
(other than any information disclosed in the ordinary course consistent with past practices and not known by the Company to be used for the purposes of formulating any inquiry, expression of interest, proposal or offer relating to an Acquisition
Proposal), that is, to the Knowledge of the Company or any of the members of its Board of Directors of receipt, received by any Acquired Company or any Representative of any Acquired Company from any Person (other than Parent), including in such
description the identity of the Person from which such inquiry, expression of interest, proposal, offer or request for information was received (the
Other Interested Party
). Without limiting the foregoing, the Company shall
promptly (and in any event within 24 hours) notify Parent orally and in writing (which may be by email) if the Company determines to begin providing information or to engage in discussions or negotiations concerning an Acquisition Proposal pursuant
to Section 6.03(d).
(d) Notwithstanding Section 6.03(b), if at any time prior to the adoption of this
Agreement by the Required Company Stockholder Approval: (i) the Company has received a bona fide written Acquisition Proposal from a third party; (ii) the Company has not materially breached this Section 6.03 with respect to such Acquisition
Proposal or such third party; (iii) the Company Board of Directors determines in good faith, after consultation with its financial advisors and outside counsel, that such Acquisition Proposal constitutes or is reasonably likely to result in a
Superior Proposal; and (iv) after consultation with its outside counsel, the Company Board of Directors determines in good faith that such action is necessary to comply with its fiduciary duties to the stockholders of the Company under the DGCL,
then the Company may (A) furnish information with
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respect to the Acquired Companies to the Person making such Acquisition Proposal and its Representatives and (B) participate in discussions or negotiations with the Person making such Acquisition
Proposal and its Representatives and financing sources regarding such Acquisition Proposal;
provided
that the Company (x) shall not, and shall not allow any of its Representatives or any other Acquired Company or any of its Representatives
to, disclose any information to such Person without first entering into a confidentiality agreement containing customary limitations on the use and disclosure of all nonpublic written and oral information furnished to such Person by or on behalf of
any of the Acquired Companies (provided such confidentiality agreement need not contain standstill provisions);
provided
further
, to the extent such confidentiality agreement does not include a standstill provision or
contains a standstill provision more favorable than the standstill provision contained in Section 6 of the Confidentiality Agreement, such standstill provision in the Confidentiality Agreement shall be inoperative and of no further force or effect,
and (y) shall promptly provide to Parent any information concerning the Acquired Companies provided to such other Person which was not previously provided to Parent.
(e) The Company shall not, and shall cause each other Acquired Company not to, terminate, waive, amend or
modify any provision of, or grant permission under, any standstill or confidentiality agreement to which any Acquired Company is a party, and the Company shall, and shall cause each other Acquired Company to, enforce the provisions of each such
agreement.
(f) Notwithstanding anything to the contrary contained in this Agreement, at any time prior
to the adoption of this Agreement by the Required Company Stockholder Approval, the Company Board of Directors may make a Change of Board Recommendation for a reason unrelated to an Acquisition Proposal (it being understood and agreed that any
Change of Board Recommendation proposed to be made in relation to an Acquisition Proposal may only be made pursuant to and in accordance with the terms of Section 6.03(g)) if the Company Board of Directors has determined in good faith, after
consultation with its outside counsel, that, in light of an Intervening Event and taking into account the results of any negotiations with Parent as contemplated by clause (ii) below and any offer from Parent contemplated by clause (iii) below, that
such action is necessary to comply with fiduciary duties owed by the Company Board of Directors to the stockholders of the Company under the DGCL;
provided
,
however
, that the Company Board of Directors may not make a Change of Board
Recommendation pursuant to the foregoing unless:
(i) the Company shall have provided
prior written notice to Parent, at least four Business Days in advance (the
Intervening Event Notice Period
), of the Companys intention to make a Change of Board Recommendation (it being understood that the delivery of such
notice and any amendment or update thereto and the determination to so deliver such notice, update or amendment shall not, by itself, constitute a Change of Board Recommendation or otherwise give rise to a Triggering Event), which notice shall
specify the Company Board of Directors reason for proposing to effect such Change of Board Recommendation;
(ii) prior to effecting such Change of Board Recommendation, the Company shall, and shall
cause the Company Representatives to, during the Intervening Event Notice Period negotiate with Parent in good faith (to the extent Parent desires to negotiate) to make such adjustments in the terms and conditions of this Agreement in such a manner
that would obviate the need for the Company Board of Directors to effect such Change of Board Recommendation; and
(iii) Parent shall not have, within the aforementioned four Business Day period, made a
written, binding and irrevocable (through the expiration of such period) offer to modify the terms and conditions of this Agreement that the Company Board of Directors has in good faith determined (after consultation with its outside legal counsel
and its financial advisor) would obviate the need for the Company Board of Directors to effect such Change of Board Recommendation.
(g) Notwithstanding anything to the contrary contained in this Agreement, if the Company receives an
Acquisition Proposal that the Company Board of Directors determines in good faith, after consultation with outside counsel and its financial advisors, constitutes a Superior Proposal, after giving effect to all of the
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adjustments to the terms of this Agreement that may be offered by Parent (including pursuant to clause (ii) below), the Company Board of Directors may at any time prior to the adoption of this
Agreement by the Required Company Stockholder Approval, if the Company Board of Directors determines in good faith, after consultation with outside counsel, that such action is necessary to comply with fiduciary duties owed by the Company Board of
Directors to the stockholders of the Company under the DGCL, (y) effect a Change of Board Recommendation with respect to such Superior Proposal or (z) terminate this Agreement to enter into a definitive agreement with respect to such Superior
Proposal;
provided
,
however
, that the Company shall not terminate this Agreement pursuant to the foregoing clause (z), and any purported termination pursuant to the foregoing clause (z) shall be void and of no force or effect, unless
the Company complies with the provisions of Section 9.01(g) and Section 9.03 in the time frames specified therein; and
provided
,
further
that the Company Board of Directors may not effect a Change of Board Recommendation pursuant to
the foregoing clause (y) or terminate this Agreement pursuant to the foregoing clause (z) unless (A) the Acquired Companies shall not have materially breached this Section 6.03 with respect to such Superior Proposal or the party making such Superior
Proposal and (B):
(i) the Company shall have provided prior written notice to Parent,
at least four Business Days in advance (the
Notice Period
), of the Companys intention to take any action permitted under clause (y) or (z) above with respect to such Superior Proposal, which notice shall specify the material
terms and conditions of such Superior Proposal (including the identity of the party making such Superior Proposal), and shall have contemporaneously provided a copy of the relevant proposed transaction agreements with the party making such Superior
Proposal and all other material documents, including the definitive agreement with respect to such Superior Proposal (the
Alternative Acquisition Agreement
); and
(ii) prior to effecting such Change of Board Recommendation or terminating this Agreement to
enter into a definitive agreement with respect to such Superior Proposal, the Company shall, and shall cause its Representatives to, during the Notice Period, negotiate with Parent in good faith (to the extent Parent desires to negotiate) to make
such adjustments in the terms and conditions of this Agreement so that such Acquisition Proposal ceases to constitute a Superior Proposal. In the event of any revisions to the Superior Proposal, the Company shall be required to deliver a new
written notice to Parent and to comply with the requirements of this Section 6.03(g) with respect to such new written notice, except that references to the four Business Day period above shall be deemed references to a two Business Day period.
For the avoidance of doubt, any actions taken by the Company in accordance with this Section 6.03(g) shall not be deemed to constitute a Change of Board
Recommendation.
(h) Neither the Company nor the Company Board of Directors shall take any action to
exempt any Person (other than Parent, Merger Sub and their respective Affiliates) from the provisions of control share acquisitions contained in Section 203 of the DGCL or any other Anti-Takeover Law or otherwise cause such restrictions
not to apply, in each case unless such actions are taken simultaneously with a termination of this Agreement pursuant to Section 9.01(g).
(i) The Company agrees that any violation of the restrictions set forth in this Section 6.03 by any
Representative of any of the Acquired Companies (other than any employee or consultant of an Acquired Company who is not a director, executive or other officer of an Acquired Company) shall be deemed to be a breach of this Agreement (including this
Section 6.03) by the Company.
(j) Promptly following the date of this Agreement, the Company will send
a notice (which may be delivered via email) to direct employees of the Acquired Companies to comply with the terms of Section 6.03(a) and Section 6.03(b);
provided
that the class of employees to receive such notice and the content of such
notice shall be mutually agreed to by Parent and the Company and shall include finance, business development and legal employees.
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Section 6.04
Access to
Information
. Subject to Applicable Law, from the date of this Agreement until the Effective Time, upon reasonable notice and during normal business hours, the Company shall and shall cause each other Acquired Company to (a) give
Parent and its Representatives reasonable access to the offices, properties, books and records of the Acquired Companies, (b) furnish to Parent and its Representatives such financial and operating data and other information relating to the Acquired
Companies as such Persons may reasonably request and (c) instruct the Representatives of the Acquired Companies to cooperate with Parent in its investigation of the Acquired Companies; provided, however, that the Acquired Companies shall not be
required to provide access to any information or documents which would, in the reasonable judgment of the Company (after consultation with outside legal counsel), (i) breach any agreement with any Person to which the Acquired Companies are party or
otherwise bound, (ii) constitute a waiver of the attorney-client or other privilege held by any of the Acquired Companies, or (iii) otherwise violate any Applicable Law (it being agreed that the Company shall give notice to Parent of the fact that
it is withholding such information or documents pursuant to clauses (i) through (iii) above and thereafter the Company and Parent shall reasonably cooperate (including by entering into a joint defense or similar agreement) to cause such information
to be provided in a manner that would not reasonably be expected to waive the applicable privilege or protection or violate the applicable restriction). Any investigation pursuant to this Section 6.04 shall be conducted in such manner as not to
interfere unreasonably with the conduct of the business of the Acquired Companies and shall be subject to the Companys reasonable security measures. Notwithstanding the foregoing, Parent shall not have access to personnel records of the
Acquired Companies relating to individual performance or evaluation records, medical histories or other information, the disclosure of which would result in the violation of Applicable Law.
Section 6.05
Termination of Employee Plans
. Unless
Parent directs the Company otherwise in writing no later than five Business Days prior to the Effective Time, the Company Board of Directors (or the board of directors of the applicable Acquired Company) shall adopt resolutions terminating,
effective at least one day prior to the Effective Time, any Employee Plan qualified under Section 401(a) of the Code and containing a Code Section 401(k) cash or deferred arrangement (each, a
401(k) Plan
). Prior to the
Effective Time, the Company shall provide Parent with executed resolutions of its Board of Directors (or the board of directors of the applicable Acquired Company) authorizing such termination and amending any such 401(k) Plan commensurate with its
termination to the extent necessary to comply with all Applicable Laws. The Company shall also take (and shall cause each applicable Acquired Company to take) such other actions in furtherance of the termination of each 401(k) Plan as Parent
may reasonably require.
Section 6.06
Notices of Certain
Events
.
(a) From the date of this Agreement until the Effective Time, the Company shall promptly
notify Parent of:
(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental Authority (A) delivered in
connection with the transactions contemplated by this Agreement or (B) indicating that a material Permit is revoked or about to be revoked or that a Permit is required in any jurisdiction in which such material Permit has not been obtained;
(iii) any actions, suits, claims, investigations or proceedings commenced or, to the
Knowledge of the Company, threatened against, relating to or involving or otherwise affecting any Acquired Company, that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 4.11 or Section
4.14, as the case may be, or that relate to the consummation of the transactions contemplated by this Agreement;
(iv) any inaccuracy in or breach of any representation, warranty or covenant contained in
this Agreement such that the conditions in Section 8.02(a) or Section 8.02(b) would not be satisfied;
(v) any written notice from NASDAQ asserting any non-compliance with any applicable listing
and other rules and regulations of NASDAQ; and
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(vi) any event, condition, fact or
circumstance that would make the timely satisfaction of any of the conditions set forth in Article 8 impossible, unlikely or materially delayed.
(b) From the date of this Agreement until the Effective Time, Ultimate Parent, Parent and Merger Sub shall
promptly notify the Company of:
(i) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental Authority delivered in
connection with the transactions contemplated by this Agreement;
(iii) any actions,
suits, claims, investigations or proceedings commenced or, to the Knowledge of the Parent, threatened against, relating to or involving or otherwise affecting Ultimate Parent, Parent or Merger Sub that relate to the consummation of the transactions
contemplated by this Agreement;
(iv) any inaccuracy in or breach of any representation,
warranty or covenant contained in this Agreement such that the conditions in Section 8.03(a) or Section 8.03(b) would not be satisfied; and
(v) any event, condition, fact or circumstance that would make the timely satisfaction of
any of the conditions set forth in Article 8 impossible, unlikely or materially delayed.
(c) No
information or knowledge obtained in any investigation or notification pursuant to this Section 6.06, Section 6.04, Section 7.01 or otherwise shall affect or be deemed to modify any representation or warranty contained herein, the covenants or
agreements of the parties hereto or the conditions to the obligations of the parties hereto under this Agreement and no such notice, information or knowledge shall be deemed to supplement or amend the Company Disclosure Schedule for the purpose of
determining whether any of the conditions set forth in Article 8 has been satisfied.
Section
6.07
Financing Cooperation
.
(a) The Company agrees to use
reasonable best efforts to provide such assistance (and to cause the other Acquired Companies, and to use reasonable best efforts to cause its and their respective Representatives, to provide such assistance) with any debt financing undertaken by
Ultimate Parent, Parent or any of their respective Subsidiaries in connection with the transactions contemplated by this Agreement (the
Debt Financing
) as is reasonably requested by Parent. Such assistance shall include, at
the reasonable request of Parent and upon reasonable prior notice, (i) activities reasonably undertaken (or proposed to be undertaken) in connection with the underwriting, syndication or other marketing of the Debt Financing, including participating
in a reasonable and limited number of meetings, drafting sessions, rating agency presentations and due diligence sessions, (ii) furnishing Parent and its financing sources with all financial and other information reasonably required by Parents
financing sources in connection with the Debt Financing, including financial statements, financial data, audit reports and other information regarding the Acquired Companies as reasonably requested by Parent and of a type and form and for periods,
in each case, customarily included in offering documents and syndication materials used to syndicate credit facilities and in offering documents used in private placements of securities under Rule 144A of the Securities Act (which, for the avoidance
of doubt, will not include (or be deemed to require the Company to prepare) any (1) pro forma financial statements or adjustments (including regarding any synergies, cost savings, ownership or other post-Closing adjustments) or projections, (2)
description of all or any portion of the Debt Financing, including any description of notes, (3) risk factors relating to all or any component of the Debt Financing, (4) financial statements in respect of its Subsidiaries, other than as
may be required under Section 6.08(a)(v), or (5) other information required by Rule 3-09, Rule 3-10 or Rule 3-16 of Regulation S-X, any Compensation, Discussion and Analysis required by Item 402(b) of Regulation S-K, any information required by
Items 10 through 14 of Form 10-K or any other information customarily excluded from an offering memorandum for private placements of non-convertible high-yield bonds pursuant to Rule 144A), (iii) assisting Parent and its lenders in the preparation
of customary prospectuses, bank books, offering memoranda, information packages and other customary marketing materials, (iv) furnishing Ultimate Parent and
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its direct and indirect Subsidiaries and their underwriters and lenders promptly with all documentation and other information required by regulatory authorities under applicable know your
customer and anti-money laundering rules and regulations and all information reasonably necessary to obtain title and survey, (v) assisting in the preparation of (but not executing and delivering) definitive financing documents, (vi) assisting
Parent in connection with its preparation of pro forma financial information and pro forma financial statements to the extent reasonably requested by Parent; (vii) using reasonable best efforts to cause its accountants to provide customary
comfort letters (including customary negative assurances) under customary circumstances; and (viii) cooperating with Parent to the extent within the control of the Company, and taking all corporate actions, in each case
subject to the occurrence of the Closing, reasonably requested by Parent to permit the consummation of the Debt Financing. The Company shall provide (x) audited consolidated balance sheets and related statements of income and cash flows of the
Company for any completed fiscal year ending after the date hereof and at least 90 days prior to the Closing Date and (y) unaudited consolidated balance sheets and related statements of income and cash flows of the Company for each completed fiscal
quarter ending after the date hereof and at least 45 days prior to the Closing Date (but excluding the fourth quarter of any fiscal year). Any information provided to Parent or any other Person pursuant to this Section 6.07(a) shall be subject
to the Confidentiality Agreement.
(b) Notwithstanding anything in this Agreement to the contrary, (i)
neither the Company nor any of its Subsidiaries shall be required to pay any commitment or other similar fee or reimburse any expenses or enter into any definitive agreement or incur any other liability or obligation in connection with the Debt
Financing prior to the Effective Time, (ii) none of the Company or any of its Subsidiaries shall be required to take any action that will conflict with or violate the Companys or such Subsidiarys organizational documents or any
Applicable Laws or result in the contravention of, or that would reasonably be expected to result in a violation or breach of or default under, any Material Contract to which the Company or any of its Subsidiaries is a party, and (iii) none of the
Company nor any of its Subsidiaries will be required to give any indemnities that are effective prior to the Effective Time, take any action that would unreasonably interfere with the conduct of the business or the Company and its Subsidiaries or
provide any information the disclosure of which is prohibited or restricted under Applicable Law or is legally privileged. In addition, no action, liability or obligation of the Company, any of its Subsidiaries or any of their respective
Representatives pursuant to any certificate, agreement, arrangement, document or instrument relating to the Debt Financing will be effective until the Effective Time, and neither the Company nor any of its Subsidiaries will be required to take any
action pursuant to any certificate, agreement, arrangement, document or instrument (including being an issuer or other obligor with respect to the Debt Financing) that is not contingent on the occurrence of the Closing or that must be effective
prior to the Effective Time. Nothing in this Agreement will require (A) any officer or Representative of the Company or any of its Subsidiaries to deliver any certificate or opinion or take any other action pursuant to Section 6.07 or any other
provision of this Agreement that could reasonably be expected to result in personal liability to such officer or Representative, or (B) the Companys board of directors to approve any financing or Contracts related thereto prior to the
Effective Time.
(c) Parent and Merger Sub each acknowledge and agree that obtaining the Debt Financing
is not a condition to the Closing, and that if the Debt Financing has not been obtained, Parent and Merger Sub will each continue to be obligated, subject to the satisfaction or waiver of the conditions set forth in Section 8.01 and 8.02, to
consummate the Merger.
(d) At the request of Ultimate Parent or Parent, subject to Applicable Law and
the organizational documents of the Company and its Subsidiaries, the Company shall, and shall cause its Subsidiaries to, do all things necessary, proper or advisable (including by reasonably cooperating with Ultimate Parent or Parent) to make
available (by way of a dividend, a loan, or such other method, in each case as and to the extent requested by Ultimate Parent or Parent) any cash, cash equivalents and marketable securities (which shall be liquidated for cash at the request of
Ultimate Parent or Parent) of the Company and its Subsidiaries, wherever held, for the funding of the consummation of the Transaction, including the amounts payable in connection with the consummation of the Transaction, as close as reasonably
practicable but at least one Business Day prior to the Closing Date.
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(e) Parent shall promptly, upon request by the Company,
reimburse the Company and its Subsidiaries, as applicable, for all reasonable and documented out-of-pocket costs and expenses (including any attorneys fees and Tax Costs) incurred by the Company or its Subsidiaries, as applicable, in
connection with the assistance of the Company and its Subsidiaries, as applicable, contemplated by this Section 6.07. Parent shall indemnify and hold harmless the Company and its Subsidiaries (and its Representatives) from and against any and
all losses, damages, claims, costs or other expenses (including Tax Costs) suffered or incurred by any of them in connection with the actions contemplated by this Section 6.07. Notwithstanding anything to the contrary in this Section 6.07,
Parent shall have no obligation to reimburse or indemnify or hold harmless the Company or its Subsidiaries or Representatives for Tax Costs unless the Closing shall fail to occur within 14 days of the repatriation of such funds at Parents
direction. In the event of a termination of this Agreement, the Company shall use commercially reasonable efforts to mitigate any losses, damages, claims, costs, Tax Costs or other expenses subject to reimbursement pursuant to this Section 6.07,
including by rescinding any dividends or other distributions declared, paid or otherwise made if permitted by Applicable Law and otherwise practicable in the Companys reasonable discretion.
Section 6.08
Potential Asset Sale Transactions
.
(a) Between the date of this Agreement and the Effective Time, to the extent requested by Parent, the
Company shall, and shall cause its Subsidiaries and its and their respective Representatives to, reasonably cooperate with Parent and its Subsidiaries and its and their respective Representatives, to facilitate Parents sale, disposition or
other transfer (any such transaction undertaken at Parents request, a
Potential Asset Sale Transaction
), at or after the Effective Time, of certain assets or ownership interests held by the Company or its Subsidiaries set
forth on
Schedule 6.08
hereto (any such assets or interests being
Potential Sale Assets
), including to the extent reasonably requested by Parent:
(i) permit Persons who Parent identifies to the Company as potential purchasers of the
Potential Sale Assets to conduct (and cooperate with such potential purchasers) customary due diligence investigations with respect to such Potential Sale Assets (provided that any such potential purchaser executes and delivers to the Company
a customary confidentiality agreement in a form reasonably satisfactory to the Company);
(ii) use reasonable best efforts to seek consents or approvals as may be required under any
Contract or Applicable Law that may be applicable to a proposed sale, disposition or other transfer of the Potential Sale Assets,
provided
that, in connection therewith, no Acquired Company will be required to agree to (A) the payment of a
consent fee, profit sharing payment or other consideration (including increased or accelerated payments) (unless such fee, payment or other consideration is solely due on or after the Effective Time), or (B) the provision of additional
security (including a guaranty);
(iii) deliver such notices and make such filings
relating to the sale, disposition or other transfer of Potential Sale Assets, but solely to the extent conditioned on the consummation of the Closing; and
(iv) use reasonable best efforts to assist Parent in connection with any sale process
undertaken by Parent or its Affiliates to sell, dispose of or otherwise transfer the Potential Sale Assets, including by (A) entering into confidentiality agreements on customary terms reasonably satisfactory to the Company with potential purchasers
of any Potential Sale Assets, (B) furnishing information regarding any Potential Sale Assets to potential purchasers thereof, (C) using reasonable best efforts to cause senior management and other Representatives of the Company and its Subsidiaries
to participate in a reasonable number of meetings, presentations and due diligence sessions with potential purchasers of the Potential Sale Assets and their Representatives and (D) assisting with the preparation of materials for potential purchasers
of the Potential Sale Assets, including information memoranda, related presentations and similar documents; and
(v) use reasonable best efforts to prepare financial statements and other financial data
reasonably requested by Parent in connection with any Potential Asset Sale Transaction.
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(b) In connection with any Potential Asset Sale Transaction,
to the extent reasonably requested by Parent, the Company shall, and shall cause its Subsidiaries to reasonably cooperate with Parent in preparing for and negotiating legal documentation for the:
(i) transfer of the Potential Sale Assets, any employees of the Company or its Subsidiaries
or any capital stock or equity interests of any of the Companys Subsidiaries to one or more wholly owned Subsidiaries of the Company on terms designated by Parent, but solely to the extent effective upon or after the Effective Time and
conditioned on the consummation of the Closing;
(ii) transfer and assignment of, at or
after the Effective Time and conditioned on the consummation of the Closing, the Companys and its Subsidiaries Contracts that constitute Potential Sale Assets (to the extent permitted by Applicable Laws), and, to the extent permitted by
Applicable Laws, any permits, approvals, or authorizations of any Governmental Authority, to one or more wholly owned Subsidiaries of the Company on terms designated by Parent; and
(iii) arrangement for such transition and support services to the purchaser(s) of the
Potential Sale Assets on the terms designated by Parent as are reasonably necessary to operate the Potential Sale Assets or the business of Parent and its Subsidiaries during a specified transition period following the consummation of any Potential
Asset Sale Transaction.
provided
that none of the transactions contemplated by this Section 6.08(b) shall be required to be consummated until on or
after the Effective Time.
(c) Notwithstanding anything to the contrary in this Section 6.08,
(i) in connection with any Potential Asset Sale Transaction, no Acquired Company shall be
required (but, for the avoidance of doubt, shall be permitted in its discretion), (A) to execute any Contract (other than customary confidentiality agreements referred to above); (B) to incur any liability or obligation prior to the Effective Time;
(C) to agree to restrictions on its business or operations prior to the Effective Time, (D) to execute any Contract, agree to any restrictions, or take any other action, in each case, that would violate any Law, including the HSR Act or other
Antitrust Law; (E) to waive or amend any terms of this Agreement or agree to pay any fees or reimburse any expenses prior to the Effective Time for which it has not received prior reimbursement or is not otherwise indemnified by or on behalf of
Parent; (F) to give any indemnities in connection with the Potential Asset Sale Transactions that are effective prior to the Effective Time; (G) to make any inter-company distributions of cash prior to the Effective Time, other than as
contemplated by Section 6.07(d); (H) to take any action that, in the reasonable determination of the Company, would unreasonably and materially interfere with the conduct of the business of the Company and its Subsidiaries; (I) to record any
documents in the public record prior to the Effective Time; or (J) to retain the employment of any employees or non-employee service providers of the Acquired Companies;
(ii) nothing in this Section 6.08 will require (A) any Representative of the Acquired
Companies to deliver any certificate or opinion or take any other action under this Section 6.08 that could reasonably be expected to result in personal liability to such Representative; (B) the board of directors (or other equivalent body) of
any Acquired Company to approve any Potential Asset Sale Transaction; (C) any Acquired Company to take any action that would conflict with or violate its organizational documents, any Applicable Laws or result in a material violation or
material breach of, or material default under, any Contract (so long as the provisions of the Contract were not entered into with the purpose of avoiding the provisions of this Section 6.08); or (D) the Acquired Companies to provide any
information (1) the disclosure of which is prohibited under Applicable Law or (2) where access to such information would (x) constitute a waiver of the attorney-client or other privilege held by any of the Acquired Companies, or
(y) violate or cause a default pursuant to, or give a third Person the right terminate or accelerate the rights pursuant to, any Contract to which the Company or any of its Subsidiaries is a party or otherwise bound;
provided
, that the
Company shall give notice to Parent of the fact that it is withholding such information or documents pursuant to this clause (D) and thereafter
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the Company, Parent and any applicable potential purchasers of the Potential Sale Assets shall reasonably cooperate (including by entering into a joint defense or similar agreement) to cause such
information to be provided in a manner that would not reasonably be expected to waive the applicable privilege or protection or violate the applicable restriction.
(iii) the Acquired Companies and Parent shall mutually cooperate to enact appropriate
protective measures regarding access to information that may be reasonably designated by the Company as competitively sensitive by potential purchasers of any Potential Sale Assets (which may include redactions, clean-room procedures, electronic
dataroom restrictions, in-person diligence requirements or other measures); and
(iv) in
the event that Parent determines that it would be advantageous to consummate any Potential Asset Sale Transaction as of immediately prior to the Effective Time, the Acquired Companies shall be permitted, in their sole discretion, to take such
actions as such Acquired Companies deem necessary or desirable in order to facilitate the consummation of such transaction as of immediately prior to the Effective Time.
(d) The consummation of any of the transactions contemplated by this Section 6.08 shall be contingent upon
the occurrence of the Effective Time and effective no earlier than the Effective Time (it being understood that, subject to Section 6.08(c), Parent and Merger Sub may (but the Company shall not be required to do so) enter into agreements or
arrangements with a third party to cause the Company to enter into Contracts or arrangements at or after the Effective Time). Parent shall reimburse the Company for all reasonable and documented out-of-pocket fees and expenses of the Acquired
Companies incurred by the Acquired Companies in connection with actions taken pursuant to this Section 6.08 at the request of Parent. The Acquired Companies and their respective Representatives will be indemnified and held harmless by Parent
from and against any and all liabilities, losses, damages, claims, costs, expenses (including attorneys fees), interest, awards, judgments, penalties and amounts paid in settlement, in each case, which are actually suffered or incurred by them
to the extent resulting from any third party claim resulting from actions taken by them pursuant to this Section 6.08 at the request of Parent;
provided, however, that the foregoing shall not apply in the event of willful misconduct or gross
negligence by any Acquired Company or their respective Representatives.
(e) None of the
representations, warranties or covenants of the Company or any of its Subsidiaries in this Agreement shall be deemed breached or violated by any transactions requested by Parent pursuant to this Section 6.08.
(f) Parent and Merger Sub each acknowledge and agree that neither the execution nor the consummation of the
Potential Asset Sale Transactions or the timing thereof, including identification of a purchaser or purchasers for such transactions, are a condition to the Closing. If the Potential Asset Sale Transactions have not been agreed to or
consummated, Parent and Merger Sub will each continue to be obligated, subject to the satisfaction or waiver of the conditions set forth in Section 8.01 and Section 8.02, to consummate the Merger.
ARTICLE 7.
Additional Covenants of the Parties
Section 7.01
Appropriate Action; Consents; Filings
.
(a) Each of the Company, Ultimate Parent, Parent and Merger Sub shall use reasonable best efforts to: (i)
take, or cause to be taken, all appropriate actions and do, or cause to be done, and to assist and cooperate with the other parties hereto in doing all things necessary, proper or advisable under Applicable Law or otherwise to consummate and make
effective the transactions contemplated by this Agreement as promptly as practicable;
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(ii) obtain from any Governmental Authority any consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained by Ultimate Parent or the Company or any of
their respective Subsidiaries, or to avoid any Proceeding by any Governmental Authority, in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated herein, including the
Merger; and (iii) as promptly as reasonably practicable, (and in any event within ten Business Days after the date hereof with respect to the HSR Act), make all necessary registrations, declarations, submissions and filings, and thereafter make any
other required registrations, declarations, submissions and filings, and pay any fees due in connection therewith, with respect to this Agreement and the Transaction required under the Exchange Act, any other applicable federal or state securities
laws, the HSR Act, any applicable Antitrust Laws, and any other Applicable Law;
provided
,
that the parties shall cooperate with each other in connection with (x) preparing and filing the Proxy Statement and any other required
filings, (y) determining whether any action by or in respect of, or filing with, any Governmental Authority is required, in connection with the consummation of the Transaction and (z) seeking any such actions, consents, approvals or waivers or
making any such filings,
provided
,
further
that the preparation and filing of the Proxy Statement shall be governed by Section 7.02. The parties shall furnish to each other all information required for any application or other
filing under the rules and regulations of any Applicable Law in connection with the transactions contemplated by this Agreement.
(b) The parties shall give (or shall cause their respective Subsidiaries to give) any notices to third
parties, and use, and cause their respective Subsidiaries to use, their reasonable best efforts to obtain any third party consents, (i) necessary, proper or advisable to consummate the transactions contemplated by this Agreement, (ii) required to be
disclosed in the Company Disclosure Schedule or (iii) required to prevent a Company Material Adverse Effect from occurring prior to or after the Effective Time;
provided
,
however
that the parties shall coordinate and cooperate in
determining whether any actions, consents, approvals or waivers are required to be obtained from parties to any Company Material Contracts in connection with consummation of the Transaction and seeking any such actions, consents, approvals or
waivers;
provided
,
further
, that no Acquired Company will be required to agree to the payment of a consent fee, profit sharing payment or other consideration (including increased or accelerated payments), or the provision
of additional security (including a guaranty), in connection with the Merger, including in connection with obtaining any consent, except, in each case, to the extent conditioned on the consummation of the Closing.
(c) As promptly as practicable after the execution of this Agreement, the parties shall prepare, prefile,
and then and as promptly as practicable thereafter, but in no event earlier than five Business Days thereafter, file with CFIUS a joint voluntary notice pursuant to Section 721 of the Defense Production Act of 1950, 50 U.S.C. app. § 2170, as
amended (
Exon-Florio
) with respect to the transactions contemplated by this Agreement. Each party to this Agreement shall provide CFIUS with any additional or supplemental information requested by CFIUS or its member agencies
during the Exon-Florio review process as promptly as practicable, and in all cases within the amount of time allowed by CFIUS. Subject to Applicable Law, the parties will consult and cooperate with one another in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party relating to proceedings under Exon-Florio. The parties, in cooperation with each other, shall use their respective
reasonable best efforts to finally and successfully obtain the CFIUS Clearance as promptly as practicable.
(d) Without limiting the generality of anything contained in this Section 7.01, each party shall: (i) give
the other parties prompt notice of the making or commencement of any request, inquiry, investigation, action or legal proceeding by or before any Governmental Authority with respect to the Transaction; (ii) keep the other parties informed as to the
status of any such request, inquiry, investigation, action or legal proceeding; and (iii) promptly inform the other parties of any communication to or from the Federal Trade Commission, the Department of Justice or any other domestic or foreign
Governmental Authority regarding the Transaction. Each party hereto will consult and cooperate with the other parties and will consider in good faith the views of the other parties in connection with any filing, analysis, appearance,
presentation, memorandum, brief, argument, opinion, proposal or other communication prior to submission in connection with the Transaction and shall take reasonable account of each others views. In addition, except as may be prohibited by
any Governmental
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Authority or by any Applicable Law, in connection with any such request, inquiry, investigation, action or legal proceeding, each party hereto will permit authorized representatives of the other
parties to be present at each meeting, conference or telephone call relating to such request, inquiry, investigation, action or legal proceeding and to have access to and be consulted in connection with any document, opinion, proposal or other
communication made or submitted to any Governmental Authority in connection with such request, inquiry, investigation, action or legal proceeding.
(e) Notwithstanding anything to the contrary in this Agreement, in connection with the receipt of any
necessary approvals or clearances of a Governmental Authority (including under the HSR Act or Exon-Florio or with respect to DSS or other U.S. national security agencies), neither Ultimate Parent nor the Company (nor any of their respective
Subsidiaries or Affiliates) shall be required to (and, without the consent of Parent (which consent may be withheld in its sole discretion), the Company shall not and shall not permit any of its Subsidiaries or Affiliates to) sell, hold separate or
otherwise dispose of or conduct their business in a specified manner, or agree to sell, hold separate or otherwise dispose of or conduct their businesses in a specified manner, or enter into or agree to enter into a voting trust arrangement, proxy
arrangement, hold separate agreement or arrangement or similar agreement or arrangement with respect to the assets, operations or conduct of their business in a specified manner, or permit the sale, holding separate or other disposition
of, any assets of Ultimate Parent, the Company or their respective Subsidiaries or Affiliates;
provided
, that Ultimate Parent agrees that if necessary to receive the necessary approvals or clearances of a Governmental Authority required under
the HSR Act or any applicable Antitrust Laws in the jurisdictions set forth on
Schedule 8.01(b)
, Exon-Florio or with respect to DSS or other U.S. national security agencies, Ultimate Parent will agree (and will cause its Subsidiaries to
agree) to (i) the sale, divestiture, license or other disposition or holding separate (through the establishment of a trust or otherwise) of any Potential Sale Asset so long as such agreement or commitment is on commercially reasonable terms
(including commercially reasonable timeframes), and does not include any obligation or commitment of the Company, Ultimate Parent or their respective Affiliates beyond that related solely to the Potential Sale Assets or the operation thereof; and
(ii) the actions set forth on
Schedule 7.01(e)
.
(f) To the extent reasonably requested by
Parent, the Company shall use reasonable best efforts to, and shall cause its Subsidiaries to use reasonable best efforts to, take, or cause to be taken, all appropriate actions and do, or cause to be done, all things necessary, proper or advisable
under Applicable Law or otherwise (including any reorganization or restructuring) to seek any consent, license, permit, waiver, approval, authorization or order related to the maintenance, continuation or transfer of any facility or personnel
security clearances held by the Acquired Companies; provided that no such reorganization or restructuring transactions shall be required to be consummated until immediately prior to the Effective Time.
Section 7.02
Proxy Statement
.
(a) As promptly as practicable after the date of this Agreement (and in any event within 15 Business Days
after the date of this Agreement, if practicable),
the Company shall prepare, in consultation with Parent, and cause to be filed with the SEC a preliminary Proxy Statement and use all reasonable
efforts, in consultation with Parent, to:
(i) obtain and furnish the information
required to be included by the SEC in the preliminary Proxy Statement;
(ii) respond
promptly to any comments made by the SEC or its staff with respect to the preliminary Proxy Statement;
(iii) cause a definitive Proxy Statement (together with any amendments and supplements
thereto) to be mailed to its stockholders containing all information required under Applicable Law to be furnished to the Companys stockholders in connection with the Merger and the transactions contemplated by this Agreement as soon as
reasonably practicable (and in any event within five Business Days) following the later of (i) receipt and resolution of the SEC comments on the preliminary Proxy Statement and (ii) the expiration of the 10-day waiting period provided in Rule
14a-6(a) promulgated under the Exchange Act;
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(iv) promptly amend or supplement any
information provided by it for use in the preliminary or definitive Proxy Statement (including any amendments or supplements thereof) if and to the extent that it shall have become false or misleading in any material respect and take all steps
necessary to cause the Proxy Statement as so amended or supplemented to be filed with the SEC and to be disseminated to the Companys stockholders, in each case as and to the extent required by Applicable Law; and
(v) cause the preliminary and definitive Proxy Statements, on each relevant filing date, on
the date of mailing to the Companys stockholders and at the time of the Company Stockholder Meeting, not to contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they are made, not misleading, and cause the Proxy Statement to comply as to form in all material respects with the provisions of the Exchange Act and the rules and
regulations promulgated thereunder.
(b) Parent and its counsel shall be given a reasonable opportunity
to review and comment on the preliminary and the definitive Proxy Statement and any amendment or supplement to the preliminary or the definitive Proxy Statement, as the case may be, each time before any such document is filed with the SEC, and the
Company shall give reasonable and good faith consideration to any comments made by Parent and its counsel. Parent shall furnish to the Company all information concerning Ultimate Parent, Parent and Merger Sub required by the Exchange Act and
the rules and regulations promulgated thereunder to be set forth in the Proxy Statement and shall otherwise assist and cooperate with the Company in the preparation of the Proxy Statement and the resolution of comments from the SEC (or the staff of
the SEC). Notwithstanding the foregoing, the Company shall have no responsibility with respect to any information supplied by Ultimate Parent, Parent or Merger Sub for inclusion or incorporation by reference in the Proxy Statement. The
Company shall provide Parent and its counsel with (i) any comments or other communications, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Proxy Statement promptly
after receipt of those comments or other communications and (ii) a reasonable opportunity to participate in the response of the Company to those comments and to provide comments on that response (to which reasonable and good faith consideration
shall be given), including by participating with the Company or its counsel in any discussions or meetings with the SEC or its staff.
(c) Parent shall use all reasonable efforts to:
(i) cause the information supplied or to be supplied by or on behalf of Ultimate Parent,
Parent and Merger Sub in writing expressly for inclusion or incorporation by reference in the Proxy Statement not to contain, on the date of the mailing to the Companys stockholders and at the time of the Company Stockholder Meeting, any
untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading; and
(ii) promptly inform the Company if at any time prior to the Effective Time, any event
relating to Ultimate Parent, Parent or any of their respective Affiliates, officers or directors should be discovered by Parent which is required to be set forth in a supplement to the Proxy Statement.
Section 7.03
Confidentiality; Public Announcements
.
(a) Ultimate Parent and the Company hereby acknowledge and agree to continue to be bound by the
Confidentiality Agreement dated as of September 6, 2016, by and between Ultimate Parent and the Company (the
Confidentiality Agreement
).
(b) Without limiting any other provision of this Agreement, each of Ultimate Parent and the Company shall
consult with the other and issue a joint press release with respect to the execution of this Agreement, which such joint press release shall include an announcement regarding the potential sale, disposition or other transfer of the Potential Sale
Assets. Thereafter, neither the Company nor Ultimate Parent, nor any of
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their respective Subsidiaries, shall issue any press release or other announcement (to the extent not previously publicly disclosed or made in accordance with this Agreement) with respect to this
Agreement, the transactions contemplated hereby or any Acquisition Proposal without the prior consent of the other party (such consent not to be unreasonably withheld, conditioned or delayed), except (i) as such press release or other announcement
may be required by Applicable Law or the applicable rules of a national securities exchange, in which case the party required to issue the release or make the announcement shall use its reasonable best efforts to provide the other party with a
reasonable opportunity to review and comment on such release or announcement in advance of its issuance or (ii) in connection with a Change of Board Recommendation if and to the extent permitted by the terms of this Agreement.
Section 7.04
Form S-8; ESPP; Assumption of Company Compensatory
Awards
.
(a) With respect to the Assumed Options, Assumed PSU Awards and Assumed RSU Awards, Ultimate
Parent shall prepare and file with the SEC a registration statement on Form S-8 with respect to the Ultimate Parent Ordinary Shares issuable upon exercise of Assumed Options or settlement of Assumed PSU Awards and Assumed RSU Awards promptly, but in
any event no later than 5 Business Days, following the Effective Time. The Company and its counsel shall cooperate with and assist Ultimate Parent in the preparation of such registration statement. For the avoidance of doubt, the Form S-8
registration statement shall not cover any Cashed Out Compensatory Awards.
(b) The Company shall take
such action as may be necessary to (i) cause any offering period and purchase period (or similar period during which shares may be purchased) underway as of the date of this Agreement under the Company ESPP to be terminated as of no later than three
business days immediately preceding the Effective Time (the Final Exercise Date); (ii) make any pro-rata adjustments that may be necessary to reflect any shortened offering period or purchase period (or similar period), but otherwise
treat any such shortened offering period or purchase period (or similar period) as a fully effective and completed offering period or purchase period, as applicable, for all purposes under the Company ESPP; (iii) cause each participants shares
purchase right under the Company ESPP (the
Company ESPP Rights
) outstanding as of the Final Exercise Date to be exercised as of the Final Exercise Date; (iv) provide that no further offering periods or purchase periods (or similar
periods during which shares may be purchased) shall commence under the Company ESPP on or after the date of this Agreement; (v) provide that no individual who is not participating in the Company ESPP as of the date of this Agreement may commence
participation in the Company ESPP on or after the date of this Agreement; (vi) terminate the Company ESPP as of the Final Exercise Date, provided, however, that termination of the Company ESPP shall be subject to the consummation of the
Merger. Each outstanding option under the Company ESPP on the Final Exercise Date shall be exercised on such date for the purchase of Company Common Stock in accordance with the terms of the Company ESPP. On the Final Exercise Date, the
funds credited as of such date under the Company ESPP within the associated accumulated payroll withholding account for each participant under the Company ESPP will be used to purchase shares in accordance with the terms of the Company ESPP, and
each share purchased by a participant of the Company ESPP and issued thereunder will be cancelled at the Effective Time and converted into the right to receive the Merger Consideration pursuant to Section 3.01, subject to withholding of applicable
income and employment withholding Taxes. No further Company ESPP Rights will be granted or exercised under the Company ESPP after the Final Exercise Date (except for the right to receive the Merger Consideration pursuant to this Section
7.04(b)). The Company shall provide timely notice of the setting of the Final Exercise Date and termination of the Company ESPP in accordance with the Company ESPP (which termination will be subject to the consummation of the Merger).
(c) As soon as reasonably practicable following the date of this Agreement and in any event prior to the
Effective Time, the Company Board of Directors (or, if appropriate, any committee administering the Company Stock Plans) shall adopt such resolutions that are necessary for the assumption and conversion of the Company Compensatory Awards and for the
treatment of Cashed Out Compensatory Awards as set forth in Section 3.05.
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Section
7.05
Indemnification of Officers and Directors
.
(a) Parent and
Merger Sub agree that, subject to Applicable Law, all rights to exculpation or indemnification for acts or omissions occurring prior to the Effective Time existing as of the date of this Agreement in favor of the current and former directors and
officers of any Acquired Company and his or her heirs and personal representatives (each, a
D&O Indemnitee
), as provided in the Companys or each of its Subsidiaries respective articles or certificates of
incorporation or bylaws (or comparable organizational or governing documents) or in any agreement between any Acquired Company and such D&O Indemnitee, shall survive the Transaction and shall continue in full force and effect in accordance with
their terms following the Effective Time, and Parent shall cause the Surviving Corporation to fulfill and honor such obligations to the maximum extent permitted by Applicable Law. In addition, for a period of six years following the Effective
Time, Parent shall, and shall cause the Surviving Corporation and its Subsidiaries to, cause the certificate of incorporation and bylaws (or comparable organizational or governing documents) of the Surviving Corporation and its Subsidiaries to
contain provisions with respect to indemnification and exculpation that are at least as favorable as the indemnification and exculpation provisions contained in the certificate of incorporation and bylaws (or comparable organizational or governing
documents) of the Company and its Subsidiaries, as applicable, immediately prior to the Effective Time, and during such six-year period, such provisions shall not be amended, repealed or otherwise modified in any manner that would adversely affect
the rights of any D&O Indemnitee, except as required by Applicable Law.
(b) Prior to the Effective
Time, the Company shall obtain and fully pay the premium for the non-cancellable extension of the directors and officers liability coverage of the Companys existing directors and officers insurance policies and the
Companys existing fiduciary liability insurance policies (collectively, the
D&O Insurance
), in each case for a claims reporting or discovery period of at least six years from and after the Effective Time with respect to
any claim related to any period of time at or prior to the Effective Time from an insurance carrier with the same or better credit rating as the Companys current D&O Insurance carrier with respect to directors and officers
liability insurance in an amount and scope at least as favorable as the Companys existing policies;
provided
,
however
, that in no event shall the cost of such policies exceed 250% of the last annual premium paid therefor prior to
the Effective Time;
provided
further
, that if the annual premiums of such insurance coverage exceed such amount, the Company shall be obligated to obtain a policy with the greatest coverage available, with respect to matters occurring
prior to the Effective Time, for a cost not exceeding such amount.
(c) The provisions of this Section
7.05 shall survive the Closing and are intended to be for the benefit of, and enforceable by, each D&O Indemnitee, and nothing in this Agreement shall affect any indemnification rights that any such D&O Indemnitee may have under the
certificate of incorporation or bylaws of any Acquired Company or any Contract or Applicable Law. Notwithstanding anything in this Agreement to the contrary, the obligations under this Section 7.05 shall not be terminated or modified in such a
manner as to adversely affect any D&O Indemnitee without the consent of such D&O Indemnitee.
(d) In the event that the Company, the Surviving Corporation or any of their Subsidiaries (or any of their
respective successors or assigns) shall consolidate or merge with any other person and shall not be the continuing or surviving corporation or entity in such consolidation or merger, or transfers at least fifty percent (50%) of its properties and
assets to any other person, then in each case proper provision shall be made so that the continuing or surviving corporation or entity (or its successors or assigns, if applicable), or transferee of such assets, as the case may be, shall, unless
such corporation or entity (or its successors or assigns, if applicable) is otherwise bound by the obligations set forth in this Section 7.05 by Applicable Law, assume the obligations set forth in this Section 7.05.
Section 7.06
Section 16 Matters
. Prior to the Effective
Time, the Company shall take such actions as are required to cause the disposition of Company Common Stock, Company Options, Company PSU Awards, Company RSU Awards or other convertible securities in connection with the Merger by each individual who
is
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subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company to be exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 under the
Exchange Act.
Section 7.07
Stockholder
Litigation
. The Company shall (i) as promptly as practicable (and in any event, within two Business Days after Knowledge of the Company or any of the members of its Board of Directors of receipt) inform Parent orally and in writing of
any stockholder litigation or other Proceedings brought or threatened in writing against the Company or any of its directors or officers relating to the Transaction and keep Parent fully informed with respect to the status thereof (including by
promptly furnishing to Parent and its Representatives such information relating to such stockholder litigation as such Persons may reasonably request, including all pleadings with respect thereto), (ii) give Parent the opportunity and right to
participate in the defense of any such stockholder litigation at Parents sole cost and expense, including in any and all Proceedings related to any such stockholder litigation and any proposed settlement or disposition thereof and (iii) not
cease to defend, consent to the entry of any judgment, offer to settle, enter into any settlement or take any other material action with respect to any such stockholder litigation or Proceeding without the prior written consent of Parent.
Section 7.08
Employee Matters
.
(a) For a period of one year following the Closing Date, Ultimate Parent shall, or shall cause the Surviving
Corporation to, provide each Acquired Company Employee with base salary, bonus opportunity, severance, health and welfare benefits which are no less favorable than the base salary, bonus opportunity, severance, health and welfare benefits,
respectively, that each such Acquired Company Employee is entitled or eligible to receive from any Acquired Company as of immediately prior to the Effective Time.
(b) Ultimate Parent further agrees that, from and after the Closing Date, Ultimate Parent shall, or shall
cause the Surviving Corporation, to the extent permitted under such plans and under Applicable Law, to grant all of the Acquired Company Employees credit for any service with such Acquired Company earned prior to the Closing Date (i) for eligibility
and vesting purposes and (ii) for purposes of vacation accrual and severance benefit determinations under any benefit or compensation plan, program, agreement or arrangement that may be established or that is maintained by Ultimate Parent or the
Surviving Corporation or any of its Subsidiaries on or after the Closing Date (but not benefit accrual under any defined benefit plan or frozen benefit plan or vesting under any equity incentive plan) to the same extent as such Acquired Company
Employee was entitled, before the Effective Time, to credit for such service under any similar plan in which such Acquired Company Employee participated or was eligible to participate immediately prior to the Effective Time; provided, however, that
such service shall not be recognized or credited to the extent that such recognition would result in a duplication of benefits provided to the Acquired Company Employee, for purposes of qualifying for subsidized early retirement benefits or to the
extent that such service was not recognized under any similar Employee Plan of the Company in which the Acquired Company Employee participated or was eligible to participate immediately prior to the Effective Time. In addition, for purposes of
each benefit plan of Ultimate Parent or the Surviving Corporation or any of its Subsidiaries on or after the Closing Date (
Parent Plans
) providing medical, dental, pharmaceutical, vision and/or other health benefits to any
Acquired Company Employee, Ultimate Parent shall use reasonable best efforts to (A) cause to be waived all pre-existing condition exclusions and actively-at-work requirements and similar limitations, eligibility waiting periods and evidence of
insurability requirements to the extent waived or satisfied by an Acquired Company Employee and his or her covered dependents under any Employee Plan as of the Closing Date and (B) for the plan year in which the Effective Time occurs, cause any
deductible, co-pay, co-insurance and covered out-of-pocket expenses paid by any Acquired Company Employee (or covered dependent thereof) during the portion of the plan year in which such Acquired Company Employee participated in an Employee Plan to
be taken into account for purposes of satisfying the corresponding deductible, coinsurance and maximum out-of-pocket provisions after the Closing Date under any applicable Parent Plan in the applicable plan year.
(c) As soon as administratively practicable following the Effective Time, all participants in any 401(k)
Plan of the Company shall become participants in the comparable 401(k) Plan arrangement of Ultimate
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Parent or an Affiliate of Ultimate Parent, and Ultimate Parent shall establish or designate a comparable 401(k) Plan arrangement of Ultimate Parent or an Affiliate of Ultimate Parent to receive
any rollover distributions from such 401(k) Plans of the Company, including rollover of any outstanding loans held by participants of such plans.
(d) Without limiting the generality of the foregoing, as of the Effective Time, Ultimate Parent shall, or
shall cause the Surviving Corporation, to honor the change in control, retention, and severance agreements, arrangements and policies set forth in Section 7.08 of the Company Disclosure Schedule (each a
Company Retention
Agreement
), and to refrain from amending or terminating any such Company Retention Agreement prior to the first anniversary of the Effective Time (or such later time as specified in the applicable Company Retention Agreement), except such
amendments as may be necessary to avoid the imposition of a tax under Section 409A of the Code; provided that, nothing herein shall prevent Ultimate Parent or an Affiliate of Ultimate Parent from amending any such agreement or plan thereafter in
accordance with its terms.
(e) Ultimate Parent shall require that any acquirer of any Potential Sale
Assets provide, for a period of one year following the completion of any Potential Asset Sale Transaction, to each Acquired Company Employee who becomes an employee or other service provider of such acquirer as of immediately following the
completion of the applicable Potential Asset Sale Transaction, with (i) each of base salary or, as applicable, base wage rates, and bonus opportunity no less favorable in the aggregate than the base salary or, as applicable, base wage rates and
bonus opportunity that each such Acquired Company Employee is entitled or eligible to receive from any Acquired Company as of immediately prior to the Effective Time and (ii) employee benefits that are no less favorable than those employee benefits
provided to similarly situated employees (including with respect to seniority, length of service and location of employment) of such acquirer.
(f) The provisions of this Section 7.08 are not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder or create any third-party beneficiary rights in any employee or former employee (including any beneficiary or dependent thereof) or service provider or former service provider (including any beneficiary or
dependent thereof) of the Acquired Companies in any respect, including in respect of continued employment (or resumed employment), or create any such rights in any such persons in respect of any benefits that may be provided, directly or indirectly,
under any Employee Plan, Parent Plan or any employee or service provider program or arrangement of Ultimate Parent or any of its subsidiaries (including any Employee Plan of the Company prior to the Effective Time), and nothing herein shall be
deemed to amend any Employee Plan or Parent Plan to reflect the terms of this Section 7.08.
Section
7.09
Third Party Consents
. Notwithstanding anything to the contrary in this Agreement, in connection with obtaining any approval or consent in connection with the Transaction that may be required
from any Person under any Contract, (a) without the prior written consent of Parent (which such consent shall not be unreasonably withheld, conditioned or delayed), none of the Company or any Acquired Company shall pay or commit to pay to such
Person whose approval or consent is being solicited any material cash or other consideration or incur any material liability or other obligation due to such Person (other than any payments which are expressly required pursuant to the terms of such
Contract with such Person in effect as of the date of this Agreement) and (b) none of Ultimate Parent, Parent or Merger Sub shall be required to pay or commit to pay to such Person whose approval or consent is being solicited any cash or other
consideration, make any commitment or incur any liability or other obligation
Section
7.10
Treatment of Certain Indebtedness
.
(a) The Company, the
Surviving Corporation and Parent shall take all necessary action to execute and deliver to the Trustee (as defined in that certain Indenture, dated as of January 14, 2015 (the
Indenture
), under which the Companys 1.375%
Convertible Senior Notes due 2020 (the
Notes
) were issued, between the Company and Wells Fargo Bank, National Association, as Trustee) a supplemental indenture to the Indenture, in form satisfactory to the Trustee and Parent,
pursuant to the terms of Section 14.07 of the Indenture, to provide, among other things, that on and after the Effective Time, each holder of the Notes shall have the right to convert
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such Notes into the conversion consideration determined by reference to the consideration receivable upon consummation of the Merger in respect of each share of Company Common Stock in accordance
with, and subject to, the provisions of the Indenture (including any applicable increase in the Conversion Rate or decrease in the Conversion Price (each as defined in the Indenture) thereunder in connection with the Merger)
in each case in accordance with, and subject to the Indenture (including without limitation the time periods specified therein), as a result of the execution and delivery of this Agreement, the Merger and the other transactions contemplated by this
Agreement. Prior to the Effective Time, the Company shall otherwise comply with all the other terms of the Indenture. The Company shall provide Parent and its Representatives reasonable opportunity to review
and comment on any written notice or communication to or with holders of the Notes or with the Trustee under the Indenture at least one (1) Business Day prior to the dispatch or making thereof, and the Company shall give reasonable and good faith
consideration to any comments made by Parent or its Representatives. Without the written consent of Parent, the Company will not make any change to the method of settlement for the Notes currently provided as the default settlement method in Section
14.02(a)(iii) of the Indenture (i.e., Combination Settlement (as defined in the Indenture) with a Specified Dollar Amount (as defined in the Indenture) of $1,000 per Note).
(b) The Company will use commercially reasonable efforts to cooperate with Parent to obtain the consent of
the Call Spread Dealers (as defined below) to terminate the Convertible Note Hedge Obligations at or as promptly as practicable following the Effective Time. The Company will use commercially reasonable efforts to involve Parent in connection
with any discussions, negotiations or agreements with JPMorgan Chase Bank, National Association, London Branch, Deutsche Bank AG, London Branch, and Wells Fargo Bank, National Association (the
Call Spread Dealers
) or any of their
respective Affiliates (including each other counterparty to the Warrants and the Convertible Note Hedge Obligations) with respect to any determination, adjustment, cancellation, termination, exercise, settlement or computation in connection with the
Warrants or the Convertible Note Hedge Obligations, including with respect to any cash amounts and/or shares of Company Common Stock that may be receivable, issuable, deliverable or payable by the Company pursuant to the Warrants or the Convertible
Note Hedge Obligations, and the Company will give prior notice to Parent of any such discussions, negotiations or agreements;
provided
that if such prior notice is not reasonably practicable, the Company shall give Parent notice of any such
discussions, negotiations or agreements promptly after such discussions, negotiations or agreements, with a description in reasonable detail thereof. The Company (i) prior to the Effective Time, will not, and will cause its Representatives not
to, without Parents prior written consent, such consent not to be unreasonably withheld, delayed or conditioned (x) make any amendments, modifications or other changes to the terms of, or agree to any adjustment under or amounts due upon
termination, cancellation or early settlement of, the Warrants or the Convertible Note Hedge Obligations, or (y) exercise any right it may have to terminate, or cause the early settlement or cancellation of, any of the Warrants or Convertible Note
Hedge Obligations and (ii) will keep Parent fully informed of all such discussions and negotiations. The Company will use commercially reasonable efforts to timely take all such other actions as may be required in accordance with, and subject
to, the terms of the Warrants and the Convertible Note Hedge Obligations, including delivery of any notices or other documents or instruments required to give effect to the foregoing or in connection with the consummation of the Merger, each of
which will be so delivered substantially in the form previously provided to Parent for Parents review other than to address comments provided by Parent or its Representatives. In addition, the Company will promptly (and, in any event,
within five Business Days) provide to Parent a copy of any written notice received from the Call Spread Dealers in connection with the Warrants or the Convertible Note Hedge Obligations (including any written notice with respect to any
determination, adjustment, cancellation, termination, exercise, settlement or computation in connection with the Warrants or the Convertible Note Hedge Obligations). For the avoidance of doubt, nothing contained herein this Agreement shall
prohibit the Company from settling upon conversion of the Notes in accordance with the terms of the Indenture and complying with the terms of the Convertible Note Hedge Obligations in connection therewith and nothing herein shall require the Company
to effect a termination or settlement of the Convertible Note Hedge Obligations or the Warrants prior to the Effective Time.
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ARTICLE 8.
Conditions to the Transaction
Section 8.01
Conditions to the Obligations of Each
Party
.
The respective obligations of the Company, Ultimate Parent, Parent and Merger Sub to consummate the Merger are subject to the satisfaction (or written waiver by all parties, if permissible under Applicable Law) of the
following conditions:
(a)
Required Company Stockholder Approval
. This Agreement shall
have been duly adopted by the Required Company Stockholder Approval.
(b)
Governmental
Approvals
. The waiting period (and any extension thereof) applicable to the consummation of the Transaction under the HSR Act shall have expired or been terminated and, on the Closing Date, there shall not be in effect any voluntary
agreement between Ultimate Parent or its Subsidiaries and the Company, on the one hand, and the Federal Trade Commission or the Department of Justice, on the other, pursuant to which the parties have agreed not to consummate the Merger for any
period of time. Any affirmative approval or clearance required under any Antitrust Laws in the foreign jurisdictions identified on
Schedule 8.01(b)
shall have been obtained or deemed to have been obtained.
(c)
No Injunction
. No temporary restraining order, preliminary or permanent injunction or
other order or decree issued by any Governmental Authority of competent jurisdiction shall be in effect which prohibits or prevents the consummation of the Transaction on the terms contemplated herein, and no Applicable Law shall have been enacted
or be deemed applicable to the Transaction that makes consummation of the Transaction illegal.
Section
8.02
Conditions to the Obligations of Ultimate Parent, Parent and Merger Sub
. The obligations of Ultimate Parent, Parent and Merger Sub to consummate the Merger are subject to the satisfaction (or
written waiver exclusively by each of Ultimate Parent, Parent and Merger Sub, if permissible under Applicable Law), at or prior to the Closing, of the following further conditions:
(a) Representations and Warranties.
(i) The representations and warranties made by the Company in Section 4.07(a) shall have
been accurate in all respects as of the date of this Agreement and shall be accurate as of the Closing Date as if made on the Closing Date.
(ii) Each of the representations and warranties made by the Company in Sections 4.01(a),
4.02, 4.05(a), 4.05(c), 4.05(g), 4.23 and 4.24 (collectively, together with the representations and warranties made by the Company in Section 4.07(a), the
Company Fundamental Representations
) shall have been accurate in all
material respects as of the date of this Agreement and shall be accurate in all material respects as of the Closing Date as if made on the Closing Date, except for representations and warranties that speak as of a particular date, which shall be
accurate in all material respects as of such date (it being understood that the representations and warranties in Section 4.05(a) shall be deemed to be inaccurate in all material respects if the Companys actual fully diluted capitalization as
of the Capitalization Date exceeds by more than 1,200,000 shares the Companys fully diluted capitalization set forth in Section 4.05(a)); provided, however, that, for purposes of determining the accuracy of such representations and warranties
(except for Section 4.01(a)), all materiality or similar qualifications, contained or incorporated directly or indirectly in such representations and warranties shall be disregarded; and
(iii) Each of the representations and warranties made by the Company in this Agreement other
than the Company Fundamental Representations shall have been accurate in all respects as of the date of this Agreement and shall be accurate in all respects as of the Closing Date as if made on the Closing Date, in each case, (A) except for
representations and warranties that speak as of a particular date,
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which shall be accurate in all respects as of such date, (B) except where the failure to be so accurate (considered collectively) has not had and would not reasonably be expected to have, a
Company Material Adverse Effect and (C) without giving effect to any Company Material Adverse Effect or other materiality qualifications, or any similar qualifications, contained or incorporated directly or indirectly in such
representations and warranties.
(b)
Covenants
. Each of the covenants and obligations
that the Company is required to comply with or to perform at or prior to the Closing shall have been complied with and performed in all material respects.
(c)
No Company Material Adverse Effect
. Since the date of this Agreement, there shall not
have occurred any Company Material Adverse Effect that is continuing.
(d)
Executed Agreements and
Documents
. Parent shall have received the following agreements and documents, each of which shall be in full force and effect:
(i) a certificate executed on behalf of the Company by its Chief Executive Officer and its
Chief Financial Officer (the
Company Closing Certificate
) and to the effect that the conditions set forth in Sections 8.02(a), 8.02(b) and 8.02(c) have been duly satisfied; and
(ii) written resignations of all directors of the Company, to be effective as of the
Effective Time.
(e)
FIRPTA Certificate
. Parent shall have received a duly executed
certificated, dated not more than thirty days prior to the Closing Date, certifying that (i) the Company is not and in the preceding five-year period has never been a United States real property holding corporation as defined in Section
897(c)(2) of the Code and the Treasury Regulations promulgated thereunder and (ii) none of the equity interests in the Company constitutes a United States real property interest as defined in Section 897(c) of the Code and the Treasury
Regulations promulgated thereunder, which certificate shall be in accordance with Treasury Regulations Sections 1.897-2(h) and 1.1445-2(c)(3) and in a form reasonably satisfactory to Parent.
(f)
Litigation
. There shall not be pending by any Governmental Authority any Proceeding
that seeks to prevent the consummation of the Transaction or that seeks to require the taking of any action or the imposition of any remedy that is not required of Ultimate Parent pursuant to Section 7.01(e).
(g)
CFIUS
. CFIUS Clearance shall have been obtained.
Section 8.03
Conditions to the Obligations of the
Company
.
The obligations of the Company to consummate the Merger are subject to the satisfaction (or written waiver exclusively by the Company, if permissible under Applicable Law), at or prior to the Closing, of the
following further conditions:
(a) Representations and Warranties.
(i) Each of the representations and warranties made by Ultimate Parent, Parent and Merger
Sub in Sections 5.01, 5.02 and 5.03 (collectively, the
Parent Fundamental Representations
) shall have been accurate in all material respects as of the date of this Agreement and shall be accurate in all material respects as of the
Closing Date as if made on the Closing Date, except for representations and warranties that speak as of a particular date, which shall be accurate in all material respects as of such date; provided, however, that, for purposes of determining the
accuracy of such representations and warranties, all materiality or similar qualifications, contained or incorporated directly or indirectly in such representations and warranties shall be disregarded; and
(ii) Each of the representations and warranties made by Ultimate Parent, Parent and Merger
Sub in this Agreement other than the Parent Fundamental Representations shall have been accurate in all respects as of the date of this Agreement and shall be accurate in all respects as of the Closing Date
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as if made on the Closing Date, in each case, (A) except for representations and warranties that speak as of a particular date, which shall be accurate in all respects as of such date, (B) except
where the failure to be so accurate (considered collectively) has not had and would not reasonably be expected to have a material adverse effect on the ability of Ultimate Parent, Parent and Merger Sub to consummate the Merger and (C) without giving
effect to any materiality or similar qualifications, contained or incorporated directly or indirectly in such representations and warranties.
(b)
Covenants
. Each of the covenants and obligations that Ultimate Parent, Parent and
Merger Sub are required to comply with or to perform at or prior to the Closing shall have been complied with and performed in all material respects.
(c)
Parent Closing Certificate
. The Company shall have received a certificate executed on
behalf of Parent by its authorized representative and to the effect that the conditions set forth in Sections 8.03(a) and 8.03(b) have been duly satisfied (the
Parent Closing Certificate
).
ARTICLE 9.
Termination
Section 9.01
Termination
. Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated and the Merger and the Transaction may be abandoned at any
time prior to the Effective Time notwithstanding receipt of the Required Company Stockholder Approval (except as expressly noted), only as follows:
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if the Transaction has not been consummated on or before May 1, 2017
(the
End Date
);
provided
,
however
, that the right to terminate this Agreement under this Section 9.01(b) shall not be available to any party whose material breach of this Agreement has been the cause of, or resulted
in, the failure of the Transaction to occur on or prior to such date;
provided
,
further
, that if the conditions set forth in Section 8.01(b), Section 8.02(f) (to the extent relating to the matters set forth in Section 8.01(b) or
Section 8.02(g)) or Section 8.02(g) shall not have been satisfied or waived as of the End Date but all other conditions set forth in Article 8 shall have been satisfied or waived (other than those conditions that by their terms are to be satisfied
at the Closing, but provided that such conditions shall then be capable of being satisfied if the Closing were to take place on such date), then either the Company or Parent may, in its sole and exclusive discretion, extend the End Date to August 1,
2017 (the
Initial Extension Date
) by providing the other party written notice of such extension on or before the End Date;
provided
,
further
, that if the conditions set forth in Section 8.01(b), Section 8.02(f) (to
the extent relating to the matters set forth in Section 8.01(b) or Section 8.02(g)) or Section 8.02(g) shall not have been satisfied or waived as of the Initial Extension Date but all other conditions set forth in Article 8 shall have been satisfied
or waived (other than those conditions that by their terms are to be satisfied at the Closing, but provided that such conditions shall then be capable of being satisfied if the Closing were to take place on such date), then either the Company or
Parent may, in its sole and exclusive discretion, extend the Initial Extension Date to November 1, 2017 by providing the other party written notice of such extension on or before the Initial Extension Date;
(c) by either Parent or the Company, if a Governmental Authority of competent jurisdiction shall have
issued any order, injunction or other decree or taken any other action (including the failure to have taken an action), in each case, which has become final and non-appealable and which permanently restrains, enjoins or otherwise prohibits the
Transaction;
(d) by Parent if there shall have occurred a Company Material Adverse Effect since the
date of this Agreement that is continuing;
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(e) by either Parent or the Company if (i) the Company
Stockholder Meeting (including any adjournments and postponements thereof) shall have been held and completed and the Companys stockholders shall have voted on a proposal to adopt this Agreement and (ii) this Agreement shall not have been
adopted at such meeting (and shall not have been adopted at any adjournment or postponement thereof) by the Required Company Stockholder Approval;
provided
,
however
, that a party shall not be permitted to terminate this Agreement
pursuant to this Section 9.01(e) if the failure to obtain such stockholder approval results from a breach of this Agreement by such party at or prior to the Effective Time;
(f) by Parent if a Triggering Event shall have occurred;
(g) by the Company, if prior to the adoption of this Agreement by the Required Company Stockholder
Approval, the Company Board of Directors shall have determined to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal to the extent permitted by, and in accordance with Section 6.03(g); provided, that the Company
shall not be permitted to terminate this Agreement pursuant to this Section 9.01(g) unless (i) the Company is entering into an Alternative Acquisition Agreement with respect to such Superior Proposal in accordance with Section 6.03(g) and (ii) the
Company shall have made or caused to be made the payment required to be made to Parent pursuant to Section 9.03(b)(iii);
(h) by Parent, if (i) any representation or warranty of the Company contained in this Agreement shall be
inaccurate or shall have become inaccurate as of a date subsequent to the date of this Agreement (as if made on such subsequent date) such that the condition set forth in Section 8.02(a) would not be satisfied, or (ii) the covenants or obligations
of the Company contained in this Agreement shall have been breached in any material respect such that the condition set forth in Section 8.02(b) would not be satisfied;
provided
,
however
, that if an inaccuracy or breach is
curable by the Company during the 30-day period after Parent notifies the Company in writing of the existence of such inaccuracy or breach (the
Company Cure Period
), then Parent may not terminate this Agreement under this Section
9.01(h) as a result of such inaccuracy or breach prior to the expiration of the Company Cure Period unless the Company is no longer continuing to exercise reasonable best efforts to cure such inaccuracy or breach; and
(i) by the Company, if (i) any representation or warranty of Ultimate Parent, Parent or Merger Sub
contained in this Agreement shall be inaccurate or shall have become inaccurate as of a date subsequent to the date of this Agreement (as if made on such subsequent date) such that the condition set forth in Section 8.03(a) would not be satisfied or
(ii) the covenants or obligations of Ultimate Parent, Parent or Merger Sub contained in this Agreement shall have been breached in any material respect such that the condition set forth in Section 8.03(b) would not be satisfied;
provided
,
however
, that if an inaccuracy or breach is curable by Ultimate Parent, Parent or Merger Sub during the 30-day period after the Company notifies Parent in writing of the existence of such inaccuracy or breach (the
Parent Cure
Period
), then the Company may not terminate this Agreement under this Section 9.01(i) as a result of such inaccuracy or breach prior to the expiration of the Parent Cure Period unless Ultimate Parent, Parent or Merger Sub, as applicable,
is no longer continuing to exercise reasonable best efforts to cure such inaccuracy or breach.
The party desiring to terminate this
Agreement pursuant to this Section 9.01 (other than pursuant to Section 9.01(a)) shall give a notice of such termination to the other party setting forth a brief description of the basis on which such party is terminating this Agreement.
Section 9.02
Effect of Termination
.
If this
Agreement is terminated pursuant to Section 9.01, then this Agreement shall become void and of no effect without liability of any party (or any Representative, stockholder or Affiliate of such party) to the other party hereto; provided that: (a) the
parties shall, in all events, remain bound by and continue to be subject to the provisions set forth in the Confidentiality Agreement, Section 6.07(e), Section 6.08(d), Section 7.03, this Section 9.02, Section 9.03 and Article 10, which shall
survive any termination of this Agreement and (b) neither Ultimate Parent, Parent or Merger Sub, on the one hand, nor the Company, on the other hand, shall be relieved of any obligation or liability arising from any Willful Breach.
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Section 9.03
Expenses;
Termination Fees
.
(a) Except as set forth in this Section 9.03, all fees and expenses
incurred in connection with the preparation, negotiation and performance of this Agreement and the consummation of the transactions contemplated by this Agreement shall be paid by the party incurring such expenses, whether or not the Transaction is
consummated;
provided
,
however
, that Parent and the Company shall share equally all fees and expenses, other than attorneys fees, incurred in connection with the filing by the parties hereto of the premerger notification and
report forms relating to the Transaction under the HSR Act and the filing of any notice or other document under any applicable foreign antitrust law or regulation.
(b) If, but only if, this Agreement is terminated:
(i) (x) by Parent or the Company pursuant to Section 9.01(b) and (y) (A) an Acquisition
Proposal has been made to the Company after the date hereof and has not been withdrawn prior to the termination of this Agreement and (B) within 12 months of the termination of this Agreement, the Company (1) enters into a definitive agreement for
the consummation of an Acquisition Proposal and such Acquisition Proposal is subsequently consummated (regardless of whether such consummation occurs within the 12-month period) or (2) consummates any Acquisition Transaction, then the Company shall
pay, or cause to be paid, to Parent the Company Termination Fee concurrently with the consummation of such transaction if such consummation takes place on a Business Day, and on the next Business Day if the consummation takes place on a day other
than a Business Day (provided, however, that for purposes of this Section 9.03(b)(i), the references to 15% in the definition of Acquisition Transaction shall be deemed to be references to 50%);
(ii) (x) by Parent or the Company pursuant to Section 9.01(e) and (y) (A) an Acquisition
Proposal has been made to the Company after the date hereof and has not been withdrawn prior to the date of the Company Stockholders Meeting (including any adjournments and postponements thereof), (B) such Acquisition Proposal was publicly disclosed
prior to the date of the Company Stockholders Meeting (including any adjournments and postponements thereof) and (C) within 12 months of the termination of this Agreement, the Company (1) enters into a definitive agreement for the consummation of an
Acquisition Proposal and such Acquisition Proposal is subsequently consummated (regardless of whether such consummation occurs within the 12-month period) or (2) consummates an Acquisition Transaction, then the Company shall pay, or cause to be
paid, to Parent the Company Termination Fee concurrently with the consummation of such transaction if such consummation takes place on a Business Day, and on the next Business Day if the consummation takes place on a day other than a Business Day
(provided, however, that for purposes of this Section 9.03(b)(ii), the references to 15% in the definition of Acquisition Transaction shall be deemed to be references to 50%); or
(iii) by Parent pursuant to Section 9.01(f) or by the Company pursuant to Section 9.01(g),
then the Company shall pay, or cause to be paid, to Parent the Company Termination Fee concurrently with such termination if the termination takes place on a Business Day, and on the next Business Day if the termination takes place on a day other
than a Business Day.
(c) Each of the Company, Ultimate Parent, Parent and Merger Sub acknowledges that
(i) the agreements contained in this Section 9.03 are an integral part of the transactions contemplated by this Agreement, (ii) without these agreements, Ultimate Parent, Parent, Merger Sub and the Company would not enter into this Agreement and
(iii) any amount payable pursuant to this Section 9.03 is not a penalty, but rather is liquidated damages in a reasonable amount that will compensate Ultimate Parent, Parent and Merger Sub in the circumstances in which such amount is
payable. The parties hereto acknowledge and hereby agree that in no event shall the Company be required to pay the Company Termination Fee on more than one occasion. Notwithstanding anything to the contrary in this Agreement, if the
Company Termination Fee shall become due and payable in accordance with this Section 9.03, from and after such termination and payment of the Company Termination Fee in full pursuant to and in accordance with this Section 9.03, the Company shall
have no further liability of any kind for any reason in connection with this Agreement or the Transaction other than as set forth in Section 9.02(b) and this Section 9.03.
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(d) Any amounts payable by the Company pursuant to Section
9.03(b) shall be in addition to any amounts payable by the Company pursuant to Section 9.03(a). Any amounts payable pursuant to this Section 9.03 shall be paid by wire transfer of same day funds in accordance with this Section 9.03 to an
account designated by Parent, provided that such payments can be delayed and such delay will not give rise to a breach of the Companys obligations under this Section 9.03 if Parent fails to provide the Company with wiring instructions at least
two Business Days prior to the date such fee is to be paid. If the Company fails to pay when due any amount payable under this Section 9.03, then (i) the Company shall reimburse Parent for all reasonable, documented out-of-pocket costs and
expenses (including fees and disbursements of counsel) incurred in connection with the collection of such overdue amount and the enforcement by Parent of its rights under this Section 9.03 and (ii) the Company shall pay to Parent interest on such
overdue amount (for the period commencing as of the date such overdue amount was originally required to be paid and ending on the date such overdue amount is actually paid to Parent in full) at the rate of interest per annum equal to the Prime
Rate as set forth on the date such payment became past due in
The Wall Street Journal
Money Rates column, plus 350 basis points.
ARTICLE 10.
Miscellaneous
Section 10.01
Notices
. All notices, requests and other communications required or permitted under, or otherwise made in connection with, this Agreement, shall be in writing and shall be deemed to have
been duly given (a) when delivered, if delivered, in person, (b) if sent by email transmission prior to 6:00 p.m. recipients local time, upon transmission when receipt is confirmed, (c) if sent by email transmission after 6:00 p.m.
recipients local time and receipt is confirmed, the Business Day following the date of transmission, (d) on receipt after dispatch by registered or certified mail, postage prepaid, (e) on the next Business Day if transmitted by national
overnight courier (with confirmation of delivery), in each case, addressed as follows:
if to Ultimate Parent, Parent or Merger Sub, to:
Broadcom Corporation
1320
Ridder Park Drive
San Jose, California 95131
Email: bobcat.notices@broadcom.com
Attention: Patricia McCall:
with a copy to (which shall not constitute notice):
Latham & Watkins LLP
140
Scott Drive
Menlo Park, California 94025
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Attention:
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|
Christopher L. Kaufman
Anthony J. Richmond
Chad G. Rolston
|
Email:
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christopher.kaufman@lw.com
tony.richmond@lw.com
chad.rolston@lw.com
|
if to the Company, to:
Brocade Communications Systems, Inc.
130 Holger Way
San Jose,
California 95134
Attention: General Counsel
Email: nodonne@brocade.com
A-67
with a copy to (which shall not constitute notice):
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650
Page Mill Road
Palo Alto, CA 94304
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Attention:
|
|
Martin W. Korman
Bradley L. Finkelstein
C. Derek Liu
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Email:
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mkorman@wsgr.com
bfinkelstein@wsgr.com
dliu@wsgr.com
|
or to such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other
parties hereto.
Section 10.02
Remedies Cumulative; Specific
Performance
. The rights and remedies of the parties hereto shall be cumulative (and not alternative). The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in
accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions of this Agreement in addition to any
other remedy to which they are entitled to at law or in equity, in each case without the requirement of posting any bond or other type of security. Each of the parties agrees that it will not oppose the granting of an injunction, specific
performance and other equitable relief on the basis that any other party has an adequate remedy at law.
Section 10.03
No Survival of Representations and
Warranties
. The representations and warranties of contained herein and in any certificate or other writing delivered at the Closing pursuant hereto shall not survive the Effective Time.
Section 10.04
Amendments and Waivers
.
(a) Any provision of this Agreement may be amended or waived prior to the Effective Time if, but only if,
such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement or, in the case of a waiver, by each party against whom the waiver is to be effective;
provided
,
however
, that no
amendment or waiver shall be made subsequent to receipt of the Required Company Stockholder Approval which requires further approval of the stockholders of the Company pursuant to the DGCL without such further stockholder approval.
(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by Applicable Law.
Section
10.05
Disclosure Schedule References
. The parties hereto agree that any reference in a particular Section of the Company Disclosure Schedule shall only be deemed to be an exception to (or, as applicable, a disclosure
for purposes of) (a) the representations and warranties (or covenants, as applicable) of the relevant party that are contained in the corresponding Section of this Agreement and (b) any other representations and warranties of such party that are
contained in this Agreement, but in the case of clause (b) only if the relevance of that reference as an exception to (or a disclosure for purposes of) such representations and warranties would be reasonably apparent to an individual who has read
that reference and such representations and warranties. The listing of any matter on a partys disclosure schedule shall not be deemed to constitute an admission by such party, or to otherwise imply, that any such matter is material, is
required to be disclosed by such party under this Agreement or falls within relevant minimum thresholds or materiality standards set forth in this Agreement. No
A-68
disclosure in a partys disclosure schedule relating to any possible breach or violation by such party of any Contract or Applicable Law shall be construed as an admission or indication that
any such breach or violation exists or has actually occurred. In no event shall the listing of any matter in a partys disclosure schedule be deemed or interpreted to expand the scope of such partys representations, warranties and/or
covenants set forth in this Agreement.
Section 10.06
Binding Effect; Benefit;
Assignment
.
(a) The provisions of this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns. Except with respect to Section 7.05, no provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any
Person other than the parties hereto and their respective successors and permitted assigns.
(b) No
party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto, except that, after the Effective Time, Parent or Merger Sub may transfer or assign its rights and
obligations under this Agreement, in whole or from time to time in part, to (i) one or more of their Affiliates at any time and (ii) after the Effective Time, to any Person;
provided
that such transfer or assignment shall not relieve Ultimate
Parent, Parent or Merger Sub of its obligations hereunder or enlarge, alter or change any obligation of any other party hereto or due to Ultimate Parent, Parent or Merger Sub. Any purported assignment in violation of this Section 10.06(b) shall
be void.
Section 10.07
Governing Law
. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of laws that would require the application of the laws of any other jurisdiction.
Section 10.08
Jurisdiction
. Each of the parties hereto irrevocably consents to
the exclusive jurisdiction and venue of the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or
federal court within the State of Delaware) in connection with any matter based upon or arising out of this Agreement or the matters contemplated herein, agrees that process may be served upon them in any manner authorized by the laws of the State
of Delaware for such persons and irrevocably waives, to the fullest extent permitted by Applicable Law, and covenants not to assert or plead any objection it may now or hereafter have to the laying of the venue of any such suit, action or proceeding
in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.
Section 10.09
Waiver of Jury Trial
. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATED
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF ULTIMATE PARENT, PARENT, MERGER SUB OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
Section 10.10
Counterparts; Effectiveness
. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by all of the other parties hereto. Until and unless each party has received a counterpart hereof signed by the other parties hereto, this Agreement shall have no effect and no party shall have any right or obligation
hereunder (whether by virtue of any other oral or written agreement or other communication). The exchange of a fully executed Agreement (in counterparts or otherwise) by electronic transmission in .PDF format or by facsimile shall be sufficient
to bind the parties to the terms and conditions of this Agreement.
Section
10.11
Entire Agreement
. This Agreement, the Confidentiality Agreement and each of the documents, instruments and agreements delivered in connection with the transactions contemplated by this
A-69
Agreement, including each of the Exhibits and the Company Disclosure Schedule, constitute the entire agreement between the parties with respect to the subject matter of this Agreement and
supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement.
Section 10.12
Severability
. If any term, provision, covenant or restriction of
this Agreement or the application thereof is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated
as originally contemplated to the fullest extent possible.
Section 10.13
Ultimate
Parent
. Ultimate Parent shall cause Parent to comply with and perform all of Parents obligations under this Agreement in accordance with the terms hereof.
Section 10.14
Time is of the Essence
. Time is of the essence with respect to the
performance of this Agreement.
(Signature Page Follows)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the date first written above.
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BROCADE COMMUNICATIONS SYSTEMS, INC.
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By:
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/s/ Lloyd Carney
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Name: Lloyd Carney
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Title: Chief Executive Officer
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BROADCOM LIMITED
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By:
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/s/ Hock E. Tan
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Name: Hock E. Tan
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Title: President and Chief Executive Officer
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BROADCOM CORPORATION
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By:
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/s/ Hock E. Tan
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Name: Hock E. Tan
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Title: President and Chief Executive Officer
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BOBCAT MERGER SUB, INC.
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By:
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/s/ Hock E. Tan
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Name: Hock E. Tan
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Title: President and Chief Executive Officer
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[Signature Page to Agreement
and Plan of Merger]
A-71
Annex B
November 2, 2016
The Board of Directors of
Brocade Communications Systems
130 Holger Way
San Jose, CA
95134
Members of the Board of Directors:
We understand that Brocade Communications Systems, a Delaware corporation (the
Company
), proposes to enter
into an Agreement and Plan of Merger, dated as of the date hereof (the
Merger Agreement
), with Broadcom Limited (
Ultimate Parent
), Broadcom Corporation, an indirect subsidiary of Ultimate Parent
(
Parent
), and Bobcat Merger Sub, Inc., a direct wholly owned subsidiary of Parent (
Merger Sub
). Pursuant to the Merger Agreement, among other things, Merger Sub will merge with and into the Company, with
the Company surviving the merger (the
Merger
), the Company will become a wholly owned subsidiary of Parent, and each outstanding share of common stock of the Company, par value $0.001 per share (
Company Common
Stock
), other than (i) shares that are owned directly by Ultimate Parent, Parent or Merger Sub, or any other direct or indirect Subsidiary of Ultimate Parent, (ii) shares held in treasury by the Company, (iii) shares as to
which dissenters rights have been properly demanded and (iv) shares held by any Subsidiary of the Company, will be converted into the right to receive $12.75 in cash (the
Merger Consideration
). The terms and
conditions of the Merger are more fully set forth in the Merger Agreement and terms used herein and not defined shall have the meanings ascribed thereto in the Merger Agreement.
The Board of Directors has asked us whether, in our opinion, the Merger Consideration is fair, from a financial point of view,
to the holders of shares of Company Common Stock entitled to receive such Merger Consideration.
In connection with
rendering our opinion, we have, among other things:
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(i)
|
reviewed certain publicly available business and financial information relating to the Company that we deemed
to be relevant, including publicly available research analysts estimates;
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(ii)
|
reviewed certain non-public historical financial statements and other non-public historical financial and
operating data relating to the Company prepared and furnished to us by management of the Company;
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(iii)
|
reviewed certain non-public projected financial data relating to the Company under alternative business
assumptions prepared and furnished to us by management of the Company;
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(iv)
|
reviewed certain non-public historical and projected operating data relating to the Company prepared and
furnished to us by management of the Company;
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(v)
|
discussed the past and current operations, financial projections and current financial condition of the
Company with management of the Company (including their views on the risks and uncertainties of achieving such projections);
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E
VERCORE
G
ROUP
L.L.C. 55 E
AST
52
ND
S
TREET
N
EW
Y
ORK
, NY 10055 T
EL
: 212.857.3100 F
AX
: 212.857.3101
B-1
Letter to the Board of Directors of
Brocade Communications Systems
November 2, 2016
Page 2
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(vi)
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reviewed the reported prices and the historical trading activity of the Company Common Stock;
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(vii)
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compared the financial performance of the Company and its stock market trading multiples with those of certain
other publicly traded companies that we deemed relevant;
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(viii)
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compared the financial performance of the Company and the valuation multiples relating to the Merger with
those of certain other transactions that we deemed relevant;
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(ix)
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reviewed the Merger Agreement; and
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(x)
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performed such other analyses and examinations and considered such other factors that we deemed appropriate.
|
For purposes of our analysis and opinion, we have assumed and relied upon, without undertaking any
independent verification of, the accuracy and completeness of all of the information publicly available, and all of the information supplied or otherwise made available to, discussed with, or reviewed by us, and we assume no liability
therefor. With respect to the projected financial data relating to the Company referred to above, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of
management of the Company as to the future financial performance of the Company under the alternative business assumptions reflected therein.
We express no view as to any projected financial data relating to the Company or the assumptions on
which they are based.
For purposes of rendering our opinion, we have assumed, in all respects material to our analysis,
that the representations and warranties of each party contained in the Merger Agreement are true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the Merger Agreement and that all
conditions to the consummation of the Merger will be satisfied without material waiver or modification thereof. We have further assumed that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of
the Merger will be obtained without any material delay, limitation, restriction or condition that would have an adverse effect on the consummation of the Merger or materially reduce the benefits to the holders of the Company Common Stock of the
Merger.
We have not made nor assumed any responsibility for making any independent valuation or appraisal of the assets or
liabilities of the Company, nor have we been furnished with any such appraisals, nor have we evaluated the solvency or fair value of the Company under any state or federal laws relating to bankruptcy, insolvency or similar matters. Our opinion
is necessarily based upon information made available to us as of the date hereof and financial, economic, market and other conditions as they exist and as can be evaluated on the date hereof. It is understood that subsequent developments may
affect this opinion and that we do not have any obligation to update, revise or reaffirm this opinion.
We have not been
asked to pass upon, and express no opinion with respect to, any matter other than the fairness to the holders of Company Common Stock, from a financial point of view, of the Merger Consideration. We do not express any view on, and our opinion
does not address, the fairness of the proposed transaction to, or any consideration received in connection therewith by, the holders of any other securities, creditors or other constituencies of the Company, nor as to the fairness of the amount or
nature of any compensation (other than the Merger Consideration in respect of Company Common Stock) to be paid or payable
B-2
Letter to the Board of Directors of
Brocade Communications Systems
November 2, 2016
Page 3
to any of the officers, directors or employees of the Company, or any class of such persons, whether relative to the Merger Consideration or otherwise. We have assumed that any modification
to the structure of the transaction will not vary in any respect material to our analysis. Our opinion does not address the relative merits of the Merger as compared to other business or financial strategies that might be available to the
Company, nor does it address the underlying business decision of the Company to engage in the Merger. This letter, and our opinion, does not constitute a recommendation to the Board of Directors or to any other persons in respect of the Merger,
including as to how any holder of shares of Company Common Stock should vote or act in respect of the Merger. We are not legal, regulatory, accounting or tax experts and have assumed the accuracy and completeness of assessments by the Company
and its advisors with respect to legal, regulatory, accounting and tax matters.
We will receive a fee for our services
upon the rendering of this opinion. The Company has also agreed to reimburse our expenses and to indemnify us against certain liabilities arising out of our engagement. We will also be entitled to receive a success fee if the Merger is
consummated. Prior to this engagement, we, Evercore Group L.L.C., and its affiliates provided financial advisory services to the Company and had received fees for the rendering of these services including the reimbursement of
expenses. During the two year period prior to the date hereof, Evercore Group L.L.C. acted as the Companys financial advisor in connection with the Companys acquisition of Ruckus Wireless, Inc., in connection with which
transaction we received a fee for our services. With respect to the Ultimate Parent we have not performed any investment banking advisory and/or capital markets services for which we have received compensation. We note that we did advise
Broadcom Corporation in its sale to Avago Technologies Limited, both of which are now owned by Ultimate Parent, and we did receive fees in connection with such engagement. We may provide financial or other services to the Company, Ultimate
Parent, Parent and their affiliates in the future and in connection with any such services we may receive compensation.
In the ordinary course of business, Evercore Group L.L.C. or its affiliates may actively trade the securities, or related
derivative securities, or financial instruments of the Company, Ultimate Parent, Parent and their respective affiliates, for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in
such securities or instruments.
This letter, and the opinion expressed herein is addressed to, and for the information
and benefit of, the Board of Directors in connection with their evaluation of the proposed Merger. The issuance of this opinion has been approved by an Opinion Committee of Evercore Group L.L.C.
Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Merger Consideration is fair, from
a financial point of view, to the holders of the shares of Company Common Stock entitled to receive such Merger Consideration.
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Very truly yours,
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EVERCORE GROUP L.L.C.
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By:
|
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/s/ Jeffrey M. Reisenberg
|
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Jeffrey M. Reisenberg
|
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Managing Director
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B-3
Annex C
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
§ 262. Appraisal rights
(a)
Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date
of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be
entitled to an appraisal by the Court of Chancery of the fair value of the stockholders shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a corporation; the words stock and share mean and include what is ordinarily meant by those words; and the words depository receipt mean a receipt or
other instrument issued by a depository representing an interest in 1 or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or
consolidation to be effected pursuant to § 251 (other than a merger effected pursuant to § 251(g) of this title and, subject to paragraph (b)(3) of this section, §251(h) of this title), § 252, § 254,
§255, §256, § 257, § 258, § 263 or § 264 of this title:
(1) Provided, however, that,
except as expressly provided in §363(b) of this title, no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of the meeting of stockholders to act upon the agreement of merger or consolidation, were either: (i) listed on a national securities exchange or (ii) held of record by more than 2,000
holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving
corporation as provided in § 251(f) of this title.
(2) Notwithstanding paragraph (b)(1) of this section, appraisal rights under
this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 255,
256, 257, 258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing
paragraphs (b)(2) a. and b. of this section; or
d. Any combination of the shares of stock, depository receipts and cash in lieu of
fractional shares or fractional depository receipts described in the foregoing paragraphs (b)(2) a., b. and c. of this section.
(3) In the
event all of the stock of a subsidiary Delaware corporation party to a merger effected under §251(h), §253 or §267 of this title is not owned by the parent immediately prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(4) In the event of an amendment to a corporations certificate of incorporation
contemplated by §363(a) of this title, appraisal rights shall be available as contemplated by §363(b) of this title, and the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as practicable, with the word amendment substituted for the words merger or consolidation, and the word
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corporation substituted for the words constituent corporation and/or surviving or resulting corporation.
(c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares
of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the
corporation. If the certificate of incorporation contains such a provision, the provisions of this section, including those set forth in subsections (d), (e) and (g) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for notice of such meeting (or such members who received notice in accordance with
§255(c) of this title) with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) of this section that appraisal rights are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section and, if 1 of the constituent corporations is a nonstock corporation, a copy of §114 of this title. Each stockholder electing to demand the appraisal of such stockholders shares shall
deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholders shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholders shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to § 228, §251(h), §253, or § 267 of this title, then
either a constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such
notice a copy of this section and, if 1 of the constituent corporations is a nonstock corporation, a copy of § 114 of this title. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice or, in the case of a merger approved pursuant to §251(h) of
this title, within the later of the consummation of the offer contemplated by §251(h) of this title and 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such
holders shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holders shares. If such notice did not
notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such
holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice or, in the case of a merger approved pursuant to §251(h) of this title,
later than the later of the consummation of the offer contemplated by §251(h) of this title and 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and
who has demanded appraisal of such holders shares in
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accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice
is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) of this section hereof and who is otherwise entitled to appraisal rights, may commence an appraisal proceeding by filing a petition in the Court of Chancery demanding a determination of the value of
the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named
party shall have the right to withdraw such stockholders demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) of this section hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth
the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under
subsection (d) of this section hereof, whichever is later. Notwithstanding subsection (a) of this section, a person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person
may, in such persons own name, file a petition or request from the corporation the statement described in this subsection.
(f) Upon
the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition
was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting
corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place
fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved
by the Court, and the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the
Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder. If immediately before the merger or consolidation the shares of the class or series of stock of the constituent corporation as to which appraisal rights are available were listed on a national securities exchange, the Court shall
dismiss the proceedings as to all holders of such shares who are otherwise entitled to appraisal rights unless (1) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of the class or series eligible for
appraisal, (2) the value of the consideration provided in the merger or consolidation for such total number of shares exceeds $1 million, or (3) the merger was approved pursuant to §253 or §267 of this title.
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(h) After the Court determines the stockholders entitled to an appraisal, the appraisal
proceeding shall be conducted in accordance with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding the Court shall determine the fair value of the shares exclusive of any
element of value arising from the accomplishment or expectation of the merger or consolidation, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into
account all relevant factors. Unless the Court in its discretion determines otherwise for good cause shown, and except as provided in this subsection, interest from the effective date of the merger through the date of payment of the judgment shall
be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment. At
any time before the entry of judgment in the proceedings, the surviving corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter as provided herein only upon the sum of
(1) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Court, and (2) interest theretofore accrued, unless paid at that time. Upon application by the surviving or resulting corporation
or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any stockholder whose
name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholders certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Courts decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the
circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys fees and the
fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.
(k) From and after the
effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other
distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be
filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholders demand for an appraisal and an acceptance of the
merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder
to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the
Court deems just; provided, however that this provision shall not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholders demand for appraisal
and to accept the terms offered upon the merger or consolidation within 60 days after the effective date of the merger or consolidation, as set forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.
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Annex D
SUPPORT AGREEMENT
This
SUPPORT AGREEMENT
(this
Agreement
), dated as of November 2, 2016, is by and among Broadcom Corporation, a
California corporation (
Parent
), Broadcom Limited, a limited company organized under the laws of the Republic of Singapore (
Ultimate Parent
), and the individuals set forth on
Schedule A
hereto (each a
Stockholder
and collectively, the
Stockholders
).
WHEREAS
, as of the date hereof, each
Stockholder is the holder of the number of shares of common stock, par value $0.001 per share (
Common Stock
), of Brocade Communications Systems, Inc., a Delaware corporation (the
Company
), set forth opposite
such Stockholders name on
Schedule A
(all such shares set forth on
Schedule A
, together with any shares of Common Stock of the Company that are hereafter issued to or otherwise acquired or owned by such Stockholder prior to the
termination of this Agreement being referred to herein as the
Subject Shares
);
WHEREAS
, Parent, Ultimate Parent,
Bobcat Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent (
Merger Sub
), and the Company propose to enter into an Agreement and Plan of Merger (as may be amended from time to time, the
Merger Agreement
), which provides, among other things, for the merger of Merger Sub with and into the Company, with the Company continuing as the surviving corporation (the
Merger
), upon the terms and subject to
the conditions set forth in the Merger Agreement (capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Merger Agreement); and
WHEREAS
, as a condition to its willingness to enter into the Merger Agreement, each of Parent and Ultimate Parent has required that the
Stockholders, and as an inducement and in consideration therefor, the Stockholders (in the Stockholders capacity as holders of the Subject Shares) have agreed to, enter into this Agreement.
NOW, THEREFORE
, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth
below and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:
ARTICLE I.
VOTING
AGREEMENT; GRANT OF PROXY
Each Stockholder hereby covenants and agrees that:
1.1
Voting of Subject Shares
. Unless this Agreement shall have been
terminated pursuant to
Section 4.2
(the date of such termination, the
Termination Date
), at every meeting of the holders of Company Common Stock (the
Company Stockholders
), however called, and at every
adjournment or postponement thereof, such Stockholder shall, or if such Stockholder is not the record owner or otherwise does not have sole voting power in respect of such Subject Shares, shall use its reasonable best efforts to cause the holder of
record on any applicable record date to, be present (in person or by proxy) and to vote (or consent to be voted) such Stockholders Subject Shares (a) in favor of (i) adoption of the Merger Agreement and (ii) approval of any proposal to
adjourn or postpone the meeting to a later date, if there are not sufficient votes for the adoption of the Merger Agreement on the date on which such meeting is held; (b) against any Acquisition Proposal; and (c) in favor of any other matter
considered at any such meeting of the Company Stockholders which the Company Board of Directors has (A) determined is necessary for the consummation of the Merger, (B) disclosed in the Proxy Statement or other written materials distributed to all of
the Companys stockholders and (C) recommended that the Companys stockholders adopt.
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1.2
No Inconsistent Arrangements
.
(a) Except as provided hereunder or under the Merger Agreement, until the earlier of the
termination of this Agreement pursuant to
Section 4.2
and receipt of the Required Company Stockholder Approval, such Stockholder shall not, directly or indirectly, (i) create any Lien on any Subject Shares, other than restrictions
imposed by Applicable Law or pursuant to this Agreement (collectively,
Permitted Liens
), (ii) transfer, sell, assign, gift or otherwise dispose of (collectively,
Transfer
), or enter into any contract with
respect to any Transfer of any Subject Shares or any interest therein, (iii) grant or permit the grant of any proxy, power of attorney or other authorization in or with respect to any Subject Shares, or (iv) deposit or permit the deposit
of any Subject Shares into a voting trust or enter into a voting agreement or arrangement with respect to any Subject Shares.
(b) Notwithstanding anything in
Section 1.2(a)
to the contrary, such Stockholder may
Transfer Subject Shares (i) to any of its Affiliates or any member of such Stockholders immediate family (i.e., spouse, lineal descendant or antecedent, brother or sister, adopted child or grandchild or the spouse of any child, adopted child,
grandchild or adopted grandchild), (ii) to a trust for the benefit of such Stockholder or any member of such Stockholders immediate family, (iii) by will or operation of law, (iv) in connection with or for the purpose of personal tax-planning
or estate-planning, (v) for charitable purposes or as charitable gifts or donations or (vi) pursuant to the terms of a 10b5-1 plan of such Stockholder that is in existence on the date hereof;
provided
, that a Transfer referred to in clause
(i) through (v) of this
Section 1.2(b)
shall be permitted only if the transferee agrees in writing to be bound by the terms of this Agreement. In addition, notwithstanding anything in this Agreement to the contrary, each Stockholder may
make (A) with respect to such Stockholders Company Options, Transfers (or cancellations) of the underlying Subject Shares in payment of the exercise price of such Stockholders Company Options, or (B) with respect to such
Stockholders Company Options, restricted stock unit awards covering Company Common Stock granted pursuant to a Company Stock Plan (
RSU Awards
), or performance-based restricted stock unit awards covering Company Common Stock
granted pursuant to a Company Stock Plan (
PSU Awards
), (x) Transfers (or cancellations) of the underlying Subject Shares in order to satisfy Taxes applicable to the exercise of such Stockholders Company Options, or (y)
Transfers (or cancellations) of Subject Shares, PSU Awards or RSU Awards in order to satisfy Taxes applicable to the vesting or settlement of such Stockholders PSU Awards or RSU Awards.
1.3.
No Exercise of Appraisal Rights
. Such Stockholder agrees not to exercise any
appraisal rights or dissenters rights in respect of such Stockholders Subject Shares that may arise with respect to the Merger.
1.4.
Documentation and Information
. Such Stockholder shall permit and hereby
authorizes Company, Parent and Ultimate Parent to publish and disclose in all documents and schedules filed with the SEC, and any press release or other disclosure document that Company, Parent or Ultimate Parent, respectively, reasonably determine
to be necessary in connection with the Merger and any transactions contemplated by the Merger Agreement, such Stockholders identity and ownership of such Stockholders Subject Shares and the nature of such Stockholders commitments
and obligations under this Agreement.
1.5.
Irrevocable
Proxy
.
Such Stockholder hereby revokes (or agrees to cause to be revoked) any proxies that such Stockholder has heretofore granted with respect to such Stockholders Subject Shares. Such Stockholder hereby
irrevocably appoints Parent as attorney-in-fact and proxy for and on behalf of such Stockholder, for and in the name, place and stead of such Stockholder, to: (a) attend any and all meetings of the Company Stockholders, (b) vote, express
consent or dissent or issue instructions to the record holder to vote such Stockholders Subject Shares in accordance with the provisions of
Section
1.1
at any and all meetings of the Company Stockholders or in
connection with any action sought to be taken by written consent of the Company Stockholders without a meeting and (c) grant or withhold, or issue instructions to the record holder to grant or withhold, consistent with the provisions of
Section
1.1
, all written consents with respect to such Stockholders Subject Shares at any and all meetings of the Company Stockholders or in connection with any action sought to be taken by written consent without a
meeting. Parent agrees not to exercise the proxy granted herein for any
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purpose other than the purposes described in this Agreement. The foregoing proxy shall be deemed to be a proxy coupled with an interest and is irrevocable (and as such shall survive and not
be affected by the death, incapacity, mental illness or insanity of such Stockholder, as applicable) until the Termination Date. Such Stockholder authorizes such attorney and proxy to substitute any other Person to act hereunder, to revoke any
substitution and to file this proxy and any substitution or revocation with the Secretary of the Company. Such Stockholder hereby affirms that the proxy set forth in this
Section 1.5
is given in connection with and granted in
consideration of and as an inducement to Parent, Ultimate Parent and Merger Sub to enter into the Merger Agreement and that such proxy is given to secure the obligations of such Stockholder under
Section 1.1
.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder, severally but not jointly, represents and warrants to Parent and Ultimate Parent that:
2.1.
Authorization; Binding Agreement
. Such Stockholder has full legal
capacity, right and authority to execute and deliver this Agreement and to perform such Stockholders obligations hereunder and to consummate the transactions contemplated hereby. Such Stockholder has full power and authority to execute,
deliver and perform this Agreement. This Agreement has been duly and validly executed and delivered by such Stockholder, and constitutes a valid and binding obligation of such Stockholder enforceable against such Stockholder in accordance with
its terms, subject to laws of general application relating to bankruptcy, insolvency, the relief of debtors, fraudulent transfer, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors
rights, rules of law governing specific performance, injunctive relief and other equitable remedies (regardless of whether enforceability is considered in a proceeding in equity or at Law) (the
Enforceability Exceptions
).
2.3.
Ownership of Subject Shares; Total Shares
. Such Stockholder is the record or
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such Stockholders Subject Shares and has good title to such Stockholders Subject Shares free and clear of any Lien (including any restriction on the right to vote
or otherwise transfer such Stockholders Subject Shares), except (a) for Permitted Liens, (b) as provided hereunder, (c) pursuant to any applicable restrictions on transfer under the Securities Act, the Exchange Act or other applicable
securities Law, and (d) subject to any risk of forfeiture with respect to any shares of Common Stock granted to such Stockholder under an employee benefit plan of the Company (clauses (a), (b), (c) and (d), collectively, the
Transfer
Limitation Exceptions
). The Subject Shares listed on
Schedule
A
opposite such Stockholders name constitute all of the shares of Common Stock of the Company owned by such Stockholder as of the
date hereof (and, for the sake of clarity, does not include unexercised Company Options (or the Shares underlying such Company Options), unvested RSU Awards (or the Shares underlying such RSU Awards), or unvested PSU Awards (or the Shares underlying
such PSU Awards). Except pursuant to this Agreement, no Person has any contractual right or obligation to purchase or otherwise acquire any of such Stockholders Subject Shares.
2.4.
Voting Power
. Except as set forth on
Schedule A
, such
Stockholder has full voting power, with respect to such Stockholders Subject Shares, and, subject to the Transfer Limitation Exceptions, full power of disposition, full power to issue instructions with respect to the matters set forth herein
and full power to agree to all of the matters set forth in this Agreement, in each case with respect to all of such Stockholders Subject Shares. None of such Stockholders Subject Shares are subject to any proxy, voting trust or
other agreement or arrangement with respect to the voting of such Stockholders Subject Shares, except as provided hereunder.
2.5.
Reliance
. Such Stockholder has had the opportunity to review the Merger
Agreement and this Agreement with counsel of such Stockholders own choosing. Such Stockholder understands and acknowledges that Parent, Ultimate Parent and Merger Sub are entering into the Merger Agreement in reliance upon such
Stockholders execution, delivery and performance of this Agreement.
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2.6
Absence of Litigation
. With
respect to such Stockholder, as of the date hereof, there is no action, suit, investigation or proceeding pending against, or, to the knowledge of such Stockholder, threatened against, such Stockholder or any of such Stockholders properties or
assets (including such Stockholders Subject Shares) that could reasonably be expected to materially prevent, delay or impair the ability of such Stockholder to perform its obligations hereunder or to consummate the transactions contemplated
hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND ULTIMATE PARENT
Each of Parent and Ultimate Parent represents and warrants to the Stockholders that:
3.1.
Organization; Authorization
. Each of Parent and Ultimate Parent is a
corporation and limited company, respectively, in each case duly incorporated or organized, as applicable, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, as applicable. The
consummation of the transactions contemplated hereby are within each of Parents and Ultimate Parents corporate powers and have been duly authorized by all necessary corporate actions on the part of Parent and Ultimate Parent. Each
of Parent and Ultimate Parent has full power and authority to execute, deliver and perform this Agreement.
3.2.
Binding Agreement
. This Agreement has been duly authorized, executed and
delivered by each of Parent and Ultimate Parent, and constitutes a valid and binding obligation of each of Parent and Ultimate Parent enforceable against each of them in accordance with its terms, subject to the Enforceability Exceptions.
ARTICLE IV
MISCELLANEOUS
4.1.
Notices
. All notices, requests and other communications to any party
hereunder shall be in writing and shall be deemed given if delivered, (a) if to Parent or Ultimate Parent, in accordance with the provisions of the Merger Agreement and (b) if to any Stockholder, personally, by email or sent by a nationally
recognized overnight courier service, such as Federal Express, to such Stockholders address set forth on the signature pages hereto, or to such other address, email address as such Stockholder may hereafter specify in writing to Parent and
Ultimate Parent for the purpose of notice to such parties, with a copy sent to the Company, in accordance with the provisions of the Merger Agreement.
4.2.
Termination
. This Agreement shall terminate automatically, without any
notice or other action by any Person, upon the earlier of (a) the termination of the Merger Agreement in accordance with its terms, (b) the Effective Time, and (c) the date of any amendment to, or waiver or modification of, the Merger
Agreement that reduces the amount or changes the form of consideration payable to the Companys stockholders pursuant to the Merger Agreement. Upon termination of this Agreement, no party shall have any further obligations or liabilities
under this Agreement; provided, however, that (x) nothing set forth in this
Section 4.2
shall relieve any party from liability for any fraud or willful and material breach of this Agreement prior to termination hereof, and (y) the provisions
of this Article IV shall survive any termination of this Agreement. The representations and warranties herein shall not survive the termination of this Agreement.
4.3.
Amendments and Waivers
. Any provision of this Agreement may be amended or
waived if such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement or, in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by either
party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
4.5.
Binding Effect; Benefit; Assignment
. The provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. No provision of this
D-4
Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any person other than the parties hereto and their respective successors and
assigns. None of the parties hereto may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto, except that Parent and Ultimate Parent may transfer or assign
its rights and obligations under this Agreement, in whole or from time to time in part, to one or more of its Affiliates at any time; provided, that such transfer or assignment shall not relieve Parent or Ultimate Parent of any of its obligations
hereunder. Any purported assigned in violation of this
Section 4.5
shall be void.
4.6.
Governing Law; Venue
. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to its rules of conflict of laws. Each of Parent, Ultimate Parent and each of the Stockholders hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of Delaware Court of Chancery, or if no such state court has proper jurisdiction, then the Federal court of the U.S. located in the State of Delaware, and appellate courts therefrom (collectively, the
Delaware Courts
) for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees not to commence any litigation relating thereto except in such courts), waives any objection to
the laying of venue of any such litigation in the Delaware Courts and agrees not to plead or claim in any Delaware Court that such litigation brought therein has been brought in any inconvenient forum. Each of the parties hereto agrees that
service of process may be made on such party by prepaid certified mail with a proof of mailing receipt validated by United States Postal Service constituting evidence of valid service to the address provided pursuant to
Section
4.1
. Service made pursuant to the foregoing sentence shall have the same legal force and effect as if served upon such party personally within the State of Delaware. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
4.7.
Counterparts
. The parties may execute this Agreement in two or more
counterparts, each of which will be deemed an original and all of which, when taken together, will be deemed to constitute one and the same agreement. Any signature page hereto delivered by e-mail (including in portable document format (pdf),
as a joint photographic experts group (jpg) file, or otherwise) shall be binding to the same extent as an original signature page, with regard to any agreement subject to the terms hereof or any amendment thereto and may be used in lieu of the
original signatures for all purposes.
4.8.
Entire Agreement
. This Agreement
constitutes the entire agreement among the parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, among the parties with respect to its subject matter.
4.9.
Severability
. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either party. Upon such a determination, the parties
shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to
the fullest extent possible.
4.10.
Specific Performance
. The parties hereto agree that Parent and
Ultimate Parent would be irreparably damaged if for any reason any Stockholder fails to perform any of its obligations under this Agreement and that Parent and Ultimate Parent may not have an adequate remedy at law for money damages in such event.
Accordingly, each of Parent and Ultimate Parent shall be entitled to specific performance and injunctive and other equitable relief to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof
in any Delaware Court, in addition to any other remedy to which they are entitled at law or in equity, in each case without posting bond or other security, and without the necessity of proving actual damages.
D-5
4.11.
Headings
. The Section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.
4.12.
No Presumption
. This Agreement shall be construed without regard to any presumption or rule
requiring construction or interpretation against the party drafting or causing any instrument to be drafted.
4.13.
Further Assurances
. Each of the parties hereto will execute and deliver, or cause to be executed
and delivered, all further documents and instruments and use their respective reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary under Applicable Law to perform their respective
obligations as expressly set forth under this Agreement.
4.14.
Interpretation
. Unless the
context otherwise requires, as used in this Agreement: (a) or is not exclusive; (b) including and its variants mean including, without limitation and its variants; (c) words defined in the singular have the
parallel meaning in the plural and vice versa; (d) words of one gender shall be construed to apply to each gender; and (e) the terms Article, Section and Schedule refer to the specified Article, Section or
Schedule of or to this Agreement.
4.15
Obligations; Capacity as Stockholders
. The obligations
of each Stockholder under this Agreement are several and not joint, and no Stockholder shall have any liability or obligation under this Agreement for any breach hereunder by any other Stockholder. Each Stockholder signs this Agreement solely
in such Stockholders capacity as a stockholder of the Company, and not in such Stockholders capacity as a director, officer or employee of the Company or any of its Subsidiaries or in such Stockholders capacity as a trustee or
fiduciary of any employee benefit plan or trust. Notwithstanding anything herein to the contrary, nothing herein shall in any way restrict a director or officer of the Company in the exercise of his or her fiduciary duties as a director or
officer of the Company or in his or her capacity as a trustee or fiduciary of any employee benefit plan or trust or prevent or be construed to create any obligation on the part of any director or officer of the Company or any trustee or fiduciary of
any employee benefit plan or trust from taking any action in his or her capacity as such director, officer, trustee or fiduciary.
4.16
Company Stock Plans
. Nothing in this Agreement shall be construed to obligate a Stockholder to
exercise, or take any (or refrain from taking any) other action with respect to, any Company Options, RSU Awards or PSU Awards.
4.17
No Agreement Until Executed
. Irrespective of negotiations among the parties or the exchanging
of drafts of this Agreement, this Agreement shall not constitute or be deemed to evidence a contract, agreement, arrangement or understanding between the parties hereto unless and until (a) the board of directors of the Company has approved, for
purposes of any applicable anti-takeover laws and regulations, and any applicable provision of the Companys organizational documents, the possible acquisition of the Company by Parent and Ultimate Parent pursuant to the Merger Agreement, (b)
the Merger Agreement is executed by all parties thereto, and (c) this Agreement is executed by all parties hereto.
(
Signature page
follows
)
D-6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
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BROADCOM CORPORATION
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By:
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/s/ Hock E. Tan
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Name:
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Hock E. Tan
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Title:
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President and Chief Executive
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Officer
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BROADCOM LIMITED
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By:
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/s/ Hock E. Tan
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Name:
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Hock E. Tan
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Title:
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President and Chief Executive
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Officer
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[Signature Page to Support Agreement]
D-7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
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STOCKHOLDER
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By:
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/s/ Lloyd A. Carney
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Name:
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Lloyd A. Carney
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Title:
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Address:
130 Holger Way
San Jose, CA 95134
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Email address:
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[redacted]
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[Signature Page to Support Agreement]
D-8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
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STOCKHOLDER
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By:
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/s/ Judy Bruner
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Name:
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Judy Bruner
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Title:
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Address:
130 Holger Way
San Jose, CA 95134
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Email address:
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[redacted]
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[Signature Page to Support Agreement]
D-9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
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STOCKHOLDER
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By:
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/s/ Ken K. Cheng
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Name:
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Ken K. Cheng
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Title:
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Address:
130 Holger Way
San Jose, CA 95134
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Email address:
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[redacted]
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[Signature Page to Support Agreement]
D-10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
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STOCKHOLDER
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By:
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/s/ Renato A. DiPentima
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Name:
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Renato A. DiPentima
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Title:
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Address:
130 Holger Way
San Jose, CA 95134
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Email address:
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[redacted]
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[Signature Page to Support Agreement]
D-11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
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STOCKHOLDER
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By:
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/s/ Alan L. Earhart
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Name:
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Alan L. Earhart
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Title:
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Address:
130 Holger Way
San Jose CA, 95134
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Email address:
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[redacted]
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[Signature Page to Support Agreement]
D-12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
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STOCKHOLDER
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By:
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/s/ Gale E. England
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Name:
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Gale E. England
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Title:
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Address:
130 Holger Way
San Jose, CA 95134
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Email address:
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[redacted]
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[Signature Page to Support Agreement]
D-13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
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STOCKHOLDER
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By:
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/s/ Daniel W. Fairfax
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Name:
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Daniel W. Fairfax
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Title:
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Address:
130 Holger Way
San Jose, CA 95134
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Email address:
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[redacted]
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[Signature Page to Support Agreement]
D-14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
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STOCKHOLDER
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By:
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/s/ John W. Gerdelman
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Name:
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John W. Gerdelman
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Title:
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Address:
130 Holger Way
San Jose, CA 95134
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Email address:
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[redacted]
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[Signature Page to Support Agreement]
D-15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
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STOCKHOLDER
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By:
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/s/ Kim C. Goodman
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Name:
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Kim C. Goodman
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Title:
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Address:
130 Holger Way
San Jose, CA 95134
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Email address:
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[redacted]
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[Signature Page to Support Agreement]
D-16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
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STOCKHOLDER
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By:
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/s/ David L. House
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Name:
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David L. House
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Title:
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Address:
130 Holger Way
San Jose, CA 95134
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Email address:
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[redacted]
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[Signature Page to Support Agreement]
D-17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
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STOCKHOLDER
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By:
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/s/ L. William Krause
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Name:
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L. William Krause
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Title:
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Address:
130 Holger Way
San Jose, CA 95134
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|
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Email address:
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[redacted]
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[Signature Page to Support Agreement]
D-18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
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STOCKHOLDER
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By:
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/s/ Jeffrey P. Lindholm
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Name:
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Jeffrey P. Lindholm
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Title:
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Address:
130 Holger Way
San Jose, CA 95134
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Email address:
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[redacted]
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[Signature Page to Support Agreement]
D-19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
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STOCKHOLDER
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By:
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/s/ Ellen A. ODonnell
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Name:
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Ellen A. ODonnell
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Title:
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Address:
130 Holger Way
San Jose, CA 95134
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Email address:
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[redacted]
|
[Signature Page to Support Agreement]
D-20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
|
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STOCKHOLDER
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By:
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/s/ David E. Roberson
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Name:
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David E. Roberson
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Title:
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Address:
130 Holger Way
San Jose, CA 95134
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Email address:
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[redacted]
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[Signature Page to Support Agreement]
D-21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the
date first written above.
|
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STOCKHOLDER
|
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By:
|
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/s/ Sanjay Vaswani
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Name:
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Sanjay Vaswani
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Title:
|
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Address:
130 Holger Way
San Jose, CA 95134
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|
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Email address:
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[redacted]
|
[Signature Page to Support Agreement]
D-22
Schedule A
|
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Name of Stockholder
|
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No. Shares
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Judy Bruner
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114,251
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Lloyd A. Carney
|
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558,417
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Ken K. Cheng
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735,021
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Renato A. DiPentima
|
|
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126,577
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Alan L. Earhart
|
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91,751
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Gale E. England
|
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131,605
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Daniel W. Fairfax
|
|
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318,122
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|
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John W. Gerdelman
|
|
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183,251
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Kim C. Goodman
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4,215
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David L. House
|
|
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248,001
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L. William Krause
|
|
|
156,981
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|
|
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Jeffrey P. Lindholm
|
|
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185,475
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|
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David E. Roberson
|
|
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50,085
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|
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Sanjay Vaswani
|
|
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157,751
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Ellen ODonnell
|
|
|
18,809
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D-A-1
Shareowner Services P.O. Box 64945 St. Paul, MN 55164-0945FOR Proposals 1, 2 and 3.
1. To adopt the Agreement and Plan of Merger, dated as of November 2, 2016,
as it may be
amended or assigned from time to time, by and among Brocade
Communications Systems, Inc. (Brocade), Broadcom Limited, Broadcom
Corporation and Bobcat Merger Sub, Inc. (as assigned by Broadcom
Corporation to LSI
Corporation, the merger agreement). For Against Abstain
2. To approve the adjournment of the special meeting, if necessary or
appropriate, to solicit additional proxies if there are insufficient votes
at the time of the
special meeting to approve the proposal to adopt
the merger agreement. For Against Abstain
3. To approve, on an advisory (non-binding) basis, specified compensation
that will or may
become payable to the named executive officers of
Brocade in connection with the merger. For Against Abstain
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED AS
THE BOARD RECOMMENDS.
Date
Signature(s) in Box
Please sign exactly as your name(s) appears on Proxy. If held in joint
tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide the full name of the corporation and title of authorized officer signing the Proxy.
Address Change Mark box, sign, and indicate changes below:
TO VOTE BY INTERNET OR TELEPHONE,
SEE REVERSE SIDE OF THIS PROXY CARD.
TO VOTE BY MAIL AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL ITEMS BELOW, SIMPLY SIGN, DATE AND RETURN THIS PROXY CARD.
Please fold here Do not separate
The Board of Directors Recommends a
Vote
BROCADE COMMUNICATIONS SYSTEMS, INC.
SPECIAL
MEETING OF STOCKHOLDERS
Hyatt Regency Santa Clara 5101 Great America Parkway Santa Clara, California 95054
January 26, 2017 2:00 p.m. Pacific Time
Proxy
This proxy is solicited by the Board of Directors for use at the Special Meeting of Stockholders on January 26, 2017.
This proxy, when properly executed and returned, will be voted as you specify on the reverse side.
If no choice is specified, the proxy will be voted FOR Proposals 1, 2 and 3.
By
signing and returning the proxy, you revoke all prior proxies and appoint David L. House, Lloyd A. Carney, Ellen A. ODonnell and Daniel W. Fairfax, and each of them, with full power of substitution, to vote your shares on the matters shown on
the reverse side and any other matters which may properly come before the Special Meeting and all adjournments and postponements thereof.
Vote by Internet,
Telephone or Mail
24 Hours a Day, 7 Days a Week
Your phone or Internet vote
authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.
INTERNET PHONE MAIL
www.proxypush.com/brcd 1-866-883-3382
Mark, sign and date your proxy
Use the Internet to vote your proxy Use a touch-tone telephone to card and return it in the
until 11:59 p.m. (Eastern Time) vote your proxy until 11:59 p.m. postage-paid envelope provided.
on January, 25, 2017. (Eastern Time) on January, 25, 2017.
If you vote your proxy by Internet
or by Telephone, you do NOT need to mail back your Proxy Card.