PROPOSAL 3: THE ADJOURNMENT PROPOSAL
Oclaro stockholders are being asked to approve a proposal that will authorize the adjournment, assuming a quorum is present, of the special
meeting one or more times, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the Merger Proposal at the time of the special meeting.
If this proposal is approved, the special meeting could be adjourned to any date. If the special meeting is adjourned, Oclaro stockholders who
have already submitted their proxies will be able to revoke them at any time prior to their use with respect to the Merger Proposal. If you sign and return a proxy and do not indicate how you wish to vote on any proposal, or if you indicate that you
wish to vote in favor of the Merger Proposal but do not indicate a choice on the Adjournment Proposal, your shares of Oclaro common stock will be voted
FOR
the Adjournment Proposal.
If a quorum is not present or represented at the special meeting, then the Oclaro stockholders entitled to vote at the special meeting,
present in person or represented by proxy, or if no stockholder is present, any Oclaro officer entitled to preside at or to act as secretary of the meeting, shall have power to adjourn the meeting. When a special meeting is adjourned for less than
30 days, notice need not be given of the adjourned meeting if the time and place of the adjourned meeting, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such
adjourned meeting, are announced at the special meeting at which the adjournment is taken. At the adjourned meeting, Oclaro may transact any business that might have been transacted at the original special meeting. If the adjournment is for 30 days
or more, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Oclaro stockholder of record entitled to vote at the meeting. An adjournment of the special meeting
may be desirable to, among other things, solicit additional proxies if there are not sufficient votes at the time of the special meeting to approve the Merger Proposal, allow reasonable additional time for the filing and distribution of any
supplemental or amended disclosure to be disseminated to and reviewed by Oclaro stockholders prior to the special meeting, or otherwise with the consent, or upon the request, of Lumentum.
Required Vote
The affirmative vote, in person or by proxy, of the holders of a majority of the voting power of the outstanding shares of Oclaro common stock
present in person or represented by proxy at the special meeting and voting on the matter is required to approve the Adjournment Proposal.
Recommendation of the Oclaro Board
The Oclaro Board unanimously recommends that Oclaro stockholders vote
FOR
the Adjournment Proposal.
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THE MERGER
The following is a discussion of the Merger and the material terms of the Merger Agreement between Lumentum and Oclaro. You are urged to read the Merger
Agreement carefully and in its entirety, a copy of which is attached as
Annex
A
to this proxy statement/prospectus and incorporated by reference herein.
Effects of the Merger
Subject to the terms and conditions of the Merger Agreement and the applicable provisions of Delaware law, at the effective time of the first
merger (the Effective Time), Merger Sub will be merged with and into Oclaro (the First Step Merger), with Oclaro surviving the First Step Merger as a wholly owned subsidiary of Lumentum. At the effective time of the second
merger, which will be as soon as practicable after the effective time on the closing date of the First Step Merger, and as part of a single integrated transaction with the First Step Merger, Oclaro will be merged with and into Merger Sub LLC (the
Second Step Merger and, together with the First Step Merger, the Merger), with Merger Sub LLC surviving as a direct wholly owned subsidiary of Lumentum.
At the Effective Time, by virtue of the Merger, Oclaro stockholders will receive, in exchange for each share of Oclaro common stock issued and
outstanding immediately prior to the Effective Time (other than (x) Oclaro common stock held by Lumentum, Oclaro or any direct or indirect wholly owned subsidiary of Lumentum or Oclaro, in each case immediately prior to the Effective Time and
(y) shares held by Oclaro stockholders who are entitled to and who properly exercise appraisal rights under Section 262 of the DGCL) (1) $5.60 in cash without interest, and (2) 0.0636 of a share of Lumentum common stock, subject
to the conditions and restrictions set forth in the Merger Agreement.
With regard to the Merger Consideration, if the aggregate number of
shares of Lumentum common stock to be issued in connection with the Merger (including all Lumentum common stock which may be issued in the future pursuant to the conversion of Oclaro Options, Oclaro RSUs, or Oclaro Restricted Stock (collectively,
Oclaro Compensatory Awards)) would exceed the Stock Threshold, then (A) the Exchange Ratio will be reduced to the minimum extent necessary (rounded down to the nearest one thousandth) such that the aggregate number of shares of
Lumentum common stock to be issued in connection with the Merger (including all shares of Lumentum common stock which may be issued after the closing pursuant to Oclaro Compensatory Awards) does not exceed the Stock Threshold and (B) the Cash
Consideration for all purposes will be increased on a per share basis by an amount equal to $68.975 (the closing sales price of a share of Lumentum common stock on March 9, 2018, the last trading day before the day on which Lumentum and Oclaro
announced the execution of the Merger Agreement), multiplied by the difference between the initial Exchange Ratio and the Exchange Ratio.
Background of the Merger
Oclaro operates in the optical communications market. The Oclaro Board regularly reviews and assesses Oclaros financial and operational
performance, business risks and opportunities, competition and strategy. Additionally, the Oclaro Board and management periodically review and evaluate developments in the optical communications market and strategic opportunities and alternatives
available to Oclaro as part of Oclaros efforts to strengthen its business and long-term prospects, and enhance value for its stockholders.
Beginning in 2014, the Oclaro Board formed a belief that the optical communications market was changing and that the industry would experience
consolidation in the coming years in order to create the breadth and scale necessary for companies to succeed in the long term. In order to ensure that Oclaro was prepared to participate in any such consolidation (whether through acquisition of
other companies, disposition of Oclaro or its assets, or otherwise), the Oclaro Board instructed management to evaluate strategic alternatives, including through contacting other participants in the industry, in order to stay abreast of potential
opportunities and strategic alternatives as they arise. During 2014 through 2017, the opportunities and alternatives considered at times by the
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Oclaro Board and management included, among other things, a sale of the company, potential acquisitions of other companies, strategic investments, divestiture of assets, business collaborations
and other strategic transactions.
On May 22, 2014, Oclaro entered into an engagement letter with Jefferies to act as Oclaros
exclusive financial advisor to provide Oclaro with financial advice and assistance in connection with the possible sale, disposition or other business transaction involving all or a material portion of its equity or assets and the possible
acquisition of all or a material portion of one or more third parties. In addition, Jefferies has assisted in Oclaros review and assessment of its financial condition (including strategic transactions that could improve its balance sheet) and
prospects as a standalone company. Oclaro selected Jefferies to act as its financial advisor based on Jefferies qualifications, expertise, reputation, and knowledge of the optical communications industry and the businesses of Oclaro and other
parties that operate in the optical communications industry.
Beginning in June 2014 through July 2017, with the assistance of
representatives of Jefferies, Oclaro management periodically communicated with other companies to discuss potential strategic opportunities, including a sale of the company, potential acquisitions of other companies, strategic investments,
divestiture of assets and business collaborations, but the Oclaro Board did not direct Oclaro management or Jefferies to undertake an auction to sell the company.
After recently participating in discussions regarding potential areas of business collaboration between Oclaro and Company A during which
Company A indicated its interest in a potential acquisition of Oclaro, on March 16 and March 31, 2017, Greg Dougherty, Oclaros chief executive officer, and other members of the Oclaro management met with members of management from
Company A for the purpose of Company As due diligence review of Oclaros businesses, financial condition and results of operations with respect to a potential acquisition of Oclaro by Company A. Oclaro previously entered into a
confidentiality agreement, dated February 16, 2017, with Company A.
On May 1, 2017, Mr. Dougherty met with the chief
executive officer of Company A to discuss Company As interest in acquiring Oclaro. During this discussion, the chief executive officer of Company A stated that his company was interested in acquiring Oclaro for an aggregate purchase price of
$1.5 billion.
At a meeting of the audit committee of the Oclaro Board on May 5, 2017 (at which all members of the Oclaro Board
were present other than one director), the directors and members of Oclaro management discussed, among other matters, Company As preliminary indication of interest. During this meeting, the directors concluded that Company As indication
of interest was insufficient, and directed Mr. Dougherty to inform Company As chief executive officer that Company A would need to increase the value of its indication of interest in order for Oclaro to move forward with discussions
concerning a transaction with Company A.
On May 10, 2017, Mr. Dougherty again met with the chief executive officer of Company A
to discuss a potential acquisition of Oclaro by Company A. During this meeting, Mr. Dougherty informed Company As chief executive officer that Company As proposal was insufficient and that Company A would need to increase the value
of its indication of interest in order for Oclaro to move forward with discussions concerning a transaction with Company A.
On
May 12, 2017, a member of Oclaro management requested that Company A return or destroy all confidential information provided to Company A by Oclaro because Company A had not increased the value of its indication of interest.
On May 18, 2017, Mr. Dougherty and another member of Oclaro management met with the chief executive officer and another member of
management of Company B to discuss a potential strategic transaction between the companies.
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At a meeting of the Oclaro Board that began on July 25, 2017, Mr. Dougherty
provided an overview of potential strategic alternatives, noting that no specific proposals were under current consideration and that any discussions with potential partners were solely of an exploratory nature. The Oclaro Board discussed various
strategic alternatives and determined that Oclaro should continue to explore strategic alternatives during fiscal year 2018, and directed Mr. Dougherty to do so as a key initiative for fiscal year 2018.
On October 4, 2017, Mr. Dougherty contacted a member of Company C management to invite a discussion about whether Oclaro and Company
C should consider a potential strategic transaction. The member of Company C management indicated that he would inform Company Cs chief executive officer of Mr. Doughertys inquiry.
On October 6, 2017, members of management from Oclaro and Company B met to discuss business updates of both companies, Oclaros
financial forecasts and a potential combination between the companies. Later on October 6, 2017, Mr. Dougherty informed the Oclaro Board of this meeting.
At a meeting of the Oclaro Board on November 6, 2017 at which representatives of Oclaro management, Jones Day and Jefferies were present,
the Oclaro Board approved the formation of the M&A Committee of the Oclaro Board to assist the board in its oversight of managements efforts relating to, and discussions with third parties concerning, potential strategic transactions
involving Oclaro, including responding to and directing management in a timely manner to address transaction-related developments between scheduled meetings of the Oclaro Board. The M&A Committee is comprised of Mr. Dougherty, Kendall Cowan
and Ian Small.
On November 7, 2017, Mr. Dougherty spoke with the chief executive officer of Company D to discuss potential
partnering opportunities and a potential strategic transaction between Oclaro and Company D.
On November 8, 2017,
Mr. Dougherty met with Alan Lowe, Lumentums chief executive officer while both were attending a conference. During this meeting, Mr. Lowe informed Mr. Dougherty that Lumentum was interested in acquiring Oclaro, but did not
indicate Lumentums valuation of Oclaro.
On November 23, 2017, Mr. Dougherty spoke with the chief executive officer of
Company D where they discussed a potential business combination between Oclaro and Company D.
On November 27, 2017,
Mr. Dougherty met with the chief executive officer of Company D to further discuss a potential business combination between Oclaro and Company D.
Later on November 27, 2017, Mr. Dougherty and other members of the Oclaro management met with Company Ds chief executive
officer and other members of Company D management to conduct preliminary due diligence reviews of the companies and discuss a potential business combination.
On November 28, 2017, Mr. Dougherty and another member of Oclaro management met with Mr. Lowe and another member of Lumentum
management to discuss each companys business, strategic challenges and operations, as well as Lumentums potential acquisition of Oclaro.
On November 29, 2017, Mr. Dougherty and another member of Oclaro management met with representatives of Company E, a Chinese private
equity firm, during which Company E provided an introduction to the firm and indicated that Company E was interested in acquiring Oclaro.
On December 1, 2017, Mr. Dougherty and the chief executive officer of Company F discussed Oclaros potential acquisition of
Company F.
On December 3, 2017, Oclaro entered into a nondisclosure agreement with Company D, and Company Ds chief executive
officer informed Mr. Dougherty that he authorized members of Company D management to conduct further due diligence of Oclaro and meet with their counterparts at Oclaro to assess a potential acquisition of Oclaro.
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On December 4, 2017, Oclaro entered into a nondisclosure agreement with Company F.
At a meeting of the Oclaro Board on December 7, 2017, Mr. Dougherty provided the Oclaro Board with an update on potential strategic
alternatives. Mr. Dougherty informed the Oclaro Board that, among other things, (i) Oclaro had signed a nondisclosure agreement with Company D and that Company D had begun conducting its due diligence review of Oclaro, (ii) Company F
had begun a process to sell Company F and Oclaro had entered into a nondisclosure agreement with Company F with respect thereto and the company had initiated its preliminary due diligence review of Company F, (iii) Company E had expressed a
desire to acquire Oclaro and (iv) Lumentum had expressed interest in acquiring Oclaro.
On December 14, 2017, in response to
Mr. Doughertys inquiry as to the status of Company Ds interest in pursuing an acquisition of Oclaro, including with respect to making a possible offer to acquire Oclaro, the chief executive officer of Company D informed
Mr. Dougherty that Company D remained interested in acquiring Oclaro and that Company D had retained a financial advisor.
On
December 15, 2017, Oclaro entered into a nondisclosure agreement with Lumentum.
On December 19, 2017, members of Oclaro
management and Company D management met for the purpose of furthering Company Ds due diligence review of Oclaro, during which they reviewed Oclaros business outlook, financial forecasts, product roadmap, competition and other matters
related to Oclaros operations.
Also on December 19, 2017, members of Oclaro management and Company F management and
representatives of Jefferies met for the purpose of conducting Oclaros due diligence review of Company F and discussing the potential acquisition of Company F by Oclaro.
On December 20, 2017, members of Oclaro management and Lumentum management met to continue discussions regarding Lumentums
potential acquisition of Oclaro.
On December 21, 2017, Mr. Dougherty spoke with the chief executive officer of Company D
regarding Company Ds interest in acquiring Oclaro.
On January 2 and 3, 2018, Mr. Dougherty and Mr. Lowe communicated
regarding Lumentums interest in a potential acquisition of Oclaro.
Between January 2 and 4, 2018, Mr. Dougherty and the
chief executive officer of Company D exchanged communications regarding Company Ds interest in a potential business combination with Oclaro.
On January 5, 2018, members of Oclaro management and Company D management met for the purpose of Company Ds due diligence on
Oclaro, including reviewing the business opportunities and continuing to build a financial model for the transaction.
On January 9,
2018, Mr. Dougherty and another member of Oclaro management met with representatives of Company E regarding Company Es interest in acquiring Oclaro. During this meeting, the attendees discussed the difficulty that Company E may have in
obtaining required regulatory approvals to acquire Oclaro.
At a meeting of the Oclaro Board on January 9, 2018 at which
representatives of Oclaro management and Jefferies were present, the Oclaro Board discussed the challenges and opportunities Oclaro faced as a standalone company and received an update on potential strategic alternatives being pursued by management
at the Oclaro Boards direction. With respect to the challenges facing Oclaro, the Oclaro Board considered that (i) Oclaros revenue was expected to remain flat over the next 12 months, and (ii) Oclaro needed to achieve further
market diversification and develop or acquire technologies to enable vertical integration and scale, particularly in the context of increasing customer verticalization and industry disaggregation. With respect to strategic alternatives,
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among other things, Mr. Dougherty informed the Oclaro Board that Lumentum and Company D continued to be interested in acquiring Oclaro. Mr. Dougherty and representatives of Jefferies
also provided an overview of Oclaros potential acquisition of Company F. Following discussion, the Oclaro Board authorized management to make an offer to acquire Company F and to continue discussions with parties interested in pursuing a
strategic transaction with Oclaro.
On January 12, 2018, Mr. Lowe informed Mr. Dougherty that the Lumentum Board met on
January 11 and expressed support for Lumentum acquiring Oclaro, but that Lumentum needed to conduct further analyses prior to submitting an offer.
On January 15, 2018, on behalf of Oclaro, Mr. Dougherty submitted a
non-binding
indication
of interest to acquire Company F.
On January 17, 2018, representatives of Company E conducted a site visit to Oclaros
fabrication facility in Italy to assess Company Es interest in potentially acquiring Oclaros lithium niobate business.
On
January 20, 2018, Mr. Dougherty spoke with the chief executive officer of Company D, who expressed his companys continuing interest in pursuing a business combination with Oclaro. He also updated Mr. Dougherty on Company
Ds results of operations, and Mr. Dougherty informed the chief executive officer of Company D that Oclaro was updating its financial forecast.
At a meeting of the Oclaro Board that began on January 23, 2018, Mr. Dougherty provided the Oclaro Board with an update on potential
strategic alternatives and discussed several considerations when analyzing the strategic alternatives being pursued by Oclaro, including the sustainability of Oclaros revenue and gross margins, the slowdown in the datacenter market and the
business outlook for China. The Oclaro Board assessed Oclaros prospects remaining as an independent company, undertaking acquisitions, and selling the company or a portion of its assets.
On February 1, 2018, a representative of Jefferies spoke with Company Fs financial advisor to discuss the status of Company
Fs review of Oclaros indication of interest.
On February 8, 2018, the chief executive officer of Company D informed
Mr. Dougherty that, while Company D was still interested in a transaction with Oclaro, it would likely need at least two weeks to further assess a transaction with Oclaro in light of Company Ds earnings announcement.
Also on February 8, 2018, a member of Oclaro management spoke with a representative of Company E regarding Company Es interest in
Oclaros Italy-based lithium niobate business.
On February 12, 2018, Mr. Dougherty and Mr. Lowe met to discuss a
potential transaction between Oclaro and Lumentum, focusing on due diligence matters, organizational matters, and synergies analysis. Following the meeting, Mr. Dougherty provided Mr. Lowe with an updated financial forecast for Oclaro.
On February 12 and 13, 2018, a member of Oclaro management and a representative of Company E conferred regarding Company Es
interest in Oclaros Italy-based lithium niobate business.
On February 14, 2018, Mr. Dougherty spoke with the chief
executive officer of Company D regarding their companys respective businesses and future prospects, during which the chief executive officer of Company D indicated that Company D would be willing to acquire Oclaro for $8.00 per share of Oclaro
common stock in a combination of cash and Company D common stock, but would not be able to offer a greater purchase price.
On
February 15, 2018, Mr. Lowe informed Mr. Dougherty that the Lumentum Board supported Lumentums acquisition of Oclaro, and that Lumentum was prepared to offer $8.35 per share of Oclaro common
83
stock, consisting of a mix of cash and stock at a ratio to be agreed upon by the companies. Mr. Lowe also indicated that Lumentum was prepared to move quickly and desired to announce the
transaction by March 12, 2018, in advance of a scheduled industry conference. Mr. Dougherty informed Mr. Lowe that, if Lumentum submitted the offer in writing, he would present the offer to the Oclaro Board, but indicated that he
expected that the Oclaro Board would require a higher price.
Later on February 15, 2018, Lumentum submitted a
non-binding
written indication of interest to acquire Oclaro at a purchase price of $8.35 per share of Oclaro common stock, consisting of cash consideration of $6.60 in cash and Lumentum common stock equivalent to
$1.75 (which we refer to herein as the February 15 Lumentum offer). The offer letter indicated that Lumentum would not require any financing contingency as part of a definitive merger agreement.
At a meeting of the Oclaro Board on February 21, 2018 at which management and representatives of Jones Day and Jefferies were present,
Mr. Dougherty provided the Oclaro Board with an update on potential strategic alternatives. Mr. Dougherty advised the Oclaro Board that a sale transaction involving Company E would likely not be feasible due to regulatory concerns, but
that Company E may be interested in acquiring Oclaros Italy-based lithium niobate business based on discussions between a member of Oclaro management and a representative of Company E. Mr. Dougherty also informed the Oclaro Board that
Company Fs financial advisor informed Jefferies that Oclaros January 15, 2018 offer to acquire Company F was insufficient, and that Company F intended to wait until after it announced its earnings in March 2018 to continue
discussions. Mr. Dougherty further informed the Oclaro Board of his February 14, 2018 conversation with the chief executive officer of Company D who had informed him that Company D remained interested in acquiring Oclaro, but would not be
able to offer a purchase price of greater than $8.00 per share of Oclaro common stock. A representative of Jones Day then provided a review of the Oclaro Boards fiduciary duties. Mr. Dougherty then discussed the February 15 Lumentum
offer with the Oclaro Board. Representatives of Jefferies also discussed and reviewed with the Oclaro Board its preliminary valuation analysis of Oclaro, the then-current status of discussions with potential counterparties, including Company D and
Company F, and the February 15 Lumentum offer. Following a discussion, the Oclaro Board authorized Mr. Dougherty to continue discussion with Lumentum and present a counteroffer to Lumentum of $9.90 per share of Oclaro common stock,
comprised of cash and Lumentum common stock with the Lumentum common stock portion capped at 19.9% of Lumentums outstanding shares.
Later on that same date, Mr. Dougherty presented to Mr. Lowe the counteroffer of $9.90 per share of Oclaro common stock, stating
that the Oclaro Board did not believe the February 15 Lumentum offer adequately valued Oclaro, including expected synergies of the combined company. Mr. Lowe rejected the Oclaro counteroffer, but restated Lumentums desire to reach an
agreement and announce the transaction by March 12, 2018. Mr. Dougherty responded that, if a price were agreed upon, Oclaro would try to meet Lumentums preferred timeline.
On February 22, 2018, Mr. Lowe informed Mr. Dougherty that the Lumentum Board had met and remained interested in Lumentum
acquiring Oclaro. Mr. Lowe indicated that Lumentum agreed to Oclaros proposal regarding the balance of merger consideration between cash and Lumentum common stock and proposed a total consideration of $9.00 per share of Oclaro common
stock, and reiterated Lumentums desire to move quickly to announce a transaction.
Also on February 22, 2018, representatives
of Jefferies and Lumentums financial advisor, Deutsche Bank Securities Inc. (Deutsche Bank), discussed Lumentums offer and the anticipated timeline to announcement of a transaction.
At a meeting of the M&A committee of the Oclaro Board on February 22, 2018, at which Oclaro management and representatives of Jones
Day and Jefferies were present, Mr. Dougherty provided the committee members with an update on his discussions with Mr. Lowe. Following discussion, the M&A committee directed
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Mr. Dougherty to continue to negotiate with Lumentum and authorized him to negotiate for the best price available to Oclaro stockholders between $9.00 and $9.90 per share of Oclaro common
stock, with an initial counteroffer of $9.70 per share of Oclaro common stock.
On February 23, 2018, Mr. Dougherty informed
Mr. Lowe that the Oclaro Board authorized him to propose a purchase price of $9.70 per share of Oclaro common stock. Mr. Lowe indicated that the Lumentum Board had not authorized him to increase Lumentums offer above $9.00 per share
of Oclaro common stock, but that he would speak to the Lumentum Board regarding Oclaros counterproposal.
Later on February 23,
2018, Mr. Lowe advised Mr. Dougherty that the Lumentum Board had authorized an offer of $9.40 per share of Oclaro common stock, with the previously agreed upon split of cash and Lumentum common stock, and that this was Lumentums best
and final offer. Mr. Lowe also stated that Lumentums offer was contingent on Oclaro agreeing to enter into an exclusivity agreement. Mr. Dougherty asked Mr. Lowe to submit Lumentums proposal in a written
non-binding
offer, and indicated that he would present the revised offer to the Oclaro Board.
On that
same day, Mr. Dougherty spoke with a member of Company C management to gauge Company Cs potential interest in acquiring Oclaro. The member of Company C management informed Mr. Dougherty that Company Cs acquisition priorities
did not include a telecommunication component company, and that it was unlikely Company C would be interested in acquiring Oclaro at this time. The member of Company C management stated that he would discuss it further internally.
At a meeting of the M&A committee of the Oclaro Board on February 23, 2018 at which management and representatives of Jones Day were
present, Mr. Dougherty updated the committee on his discussions with Mr. Lowe. Mr. Dougherty also informed the committee that he had initiated discussions with Company C in light of Lumentums demand that Oclaro enter into an
exclusivity agreement. The committee also discussed other potential strategic parties that may be interested and have the ability to consummate a strategic transaction with Oclaro, including Company A (recounting Company As chief executive
officers prior oral offer to Mr. Dougherty on May 1, 2017 to acquire Oclaro for $1.5 billion). The committee authorized and directed Mr. Dougherty to request that Lumentum provide an updated written offer by February 25,
2018, ratified Mr. Doughertys actions with respect to Company C and authorized and directed Mr. Dougherty to continue discussions with Company C, and to reach out to Company A to gauge its interest in, and ability to consummate, a
potential acquisition of Oclaro. Following the committee meeting, Mr. Dougherty contacted the chief executive officer of Company A to arrange a meeting.
On February 24, 2018, Lumentum submitted a revised
non-binding
written offer to acquire Oclaro at
a purchase price of $9.40 per share of Oclaro common stock, with the agreed upon split of cash and Lumentum common stock consideration, as well as a draft exclusivity agreement that provided for a thirty day period during which Oclaro would
negotiate exclusively with Lumentum.
On February 25, 2018, representatives of Jefferies and Deutsche Bank discussed Lumentums
offer of $9.40 per share, including the split of cash and Lumentum common stock consideration.
At a meeting of the Oclaro Board also on
February 25, 2018 at which management and representatives of Jones Day and Jefferies were present, Mr. Dougherty provided the Oclaro Board with a summary of the discussions of the February 23
rd
M&A committee meeting. Mr. Dougherty then updated the Oclaro Board on his discussions with Mr. Lowe, advising that Mr. Lowe stated that the $9.40 per share offer represented
Lumentums best and final offer. Mr. Dougherty also recounted that he had communicated to Mr. Lowe that the Oclaro Board expected a member of the Oclaro Board would be appointed to the Lumentum Board following the closing of the
merger and that Mr. Lowe commented that this proposal was reasonable and he would present it to the Lumentum Board for its consideration. Representatives of Jefferies then reviewed with the Oclaro Board an overview of their preliminary
financial analyses of the revised Lumentum offer, including different metrics and
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time periods used to value Lumentums common stock for purposes of determining the exchange ratio. A representative of Jones Day provided an overview of the Oclaro Boards fiduciary
duties. Following discussion, the Oclaro Board directed management to advise Lumentum that the Oclaro Board was willing to proceed with discussions at a purchase price of $9.40 per share, but intended to pursue a methodology of valuing the Lumentum
common stock portion of the merger consideration in a manner that would set the exchange ratio closer to the date of Lumentums February 24
th
non-binding
written offer, rather than based on the respective then-current trading prices of Oclaros and Lumentums common stock.
Mr. Dougherty then provided the Oclaro Board with an update on other potential strategic parties. Mr. Dougherty advised the Oclaro
Board that he had spoken with a member of Company C management who stated that it was unlikely Company C would submit an offer to acquire Oclaro, but he would discuss the matter internally and provide Mr. Dougherty with an update.
Mr. Dougherty then recounted his May 1, 2017 discussion with Company As chief executive officer where Company As chief executive officer indicated that he would be interested in acquiring Oclaro for $1.5 billion. Following
discussion, the Oclaro Board directed Mr. Dougherty to resume discussions with Company A.
The meeting continued with
Mr. Dougherty reviewing additional strategic parties that may be interested in a strategic transaction with Oclaro. Mr. Dougherty noted that a transaction with Company B was unlikely because it did not appear that Company B was interested
in pursuing a strategic transaction with Oclaro and it would be difficult for Company B to structure a transaction that would offer consideration comparable to, or better than, the consideration offered in the proposed transaction with Lumentum.
Mr. Dougherty then reminded the Oclaro Board that the chief executive officer of Company D had recently indicated that Company D could not offer more than $8.00 per share of Oclaro common stock. Mr. Dougherty then recounted the past
discussions with Company E and the potential regulatory issues associated with a transaction with Company E. The Oclaro Board then discussed whether to contact other potential buyers in light of Lumentums latest offer, and identified Company A
and Company C as the most likely companies to have both an interest and the ability to acquire Oclaro. The Oclaro Board then instructed management to contact Company A and Company C to determine whether they had an interest in pursuing an
acquisition of Oclaro at this time. The Oclaro Board also reviewed the draft Lumentum exclusivity agreement and, if Lumentum were to continue to demand that Oclaro sign an exclusivity agreement as a condition to Lumentum proceeding with a
transaction, authorized the M&A committee to review and approve an exclusivity agreement and provide authority to Mr. Dougherty to negotiate the terms of an exclusivity agreement.
Following the meeting, Mr. Dougherty informed Mr. Lowe that the Oclaro Board had authorized Oclaro management to move forward with
negotiating a transaction with Lumentum at $9.40 per share of Oclaro common stock, subject to reaching an agreement on the methodology of valuing Lumentums common stock for purposes of determining the exchange ratio.
On February 26, 2018, Mr. Dougherty and Mr. Lowe met to discuss the companies respective management teams and the
combined companys prospective management team, as well as the timeline and activities for the coming weeks.
Also on
February 26, 2018, representatives of Jefferies discussed with representatives of Company As financial advisor Oclaros financial and timing expectations, including Oclaros desire to receive a proposal from Company A by
March 2, 2018, and provided a nondisclosure agreement for Company A that contained a standstill provision.
Also on February 26,
2018, Mr. Dougherty and the chief executive officer of Company A discussed Company As interest in acquiring Oclaro. During this discussion, the chief executive officer of Company A indicated to Mr. Dougherty that Company A had the
bandwidth, desire and ability to pursue a transaction with Oclaro, that such a transaction would be an all cash acquisition, that he understood that Oclaro would like a response from Company A by March 2, 2018 and that the offer would need to
be higher than the $1.5 billion proposal made on May 1, 2017.
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During the period between February 26, 2018 and March 11, 2018, Oclaros and
Lumentums respective management and advisors conducted due diligence of the other company.
On February 26 and 27, 2018,
Mr. Dougherty and Mr. Lowe outlined their respective thoughts regarding the due diligence process. During this exchange, Mr. Lowe reiterated Lumentums request that Oclaro enter into an exclusivity agreement before Lumentum would
expend additional resources and dedicate the time needed to pursue the transaction.
On February 27, 2018, representatives of
Jefferies and Company As financial advisor discussed entry into the nondisclosure agreement between the companies.
At a meeting of
the Oclaro Board on February 27, 2018 at which representatives of Jones Day were present, Mr. Dougherty provided a summary of the discussions with Lumentum, Company A and Company C. Mr. Dougherty noted that he had followed up with
Company C earlier in the day, but had not yet received a response and would follow up with Company C following the meeting. Mr. Dougherty also updated the Oclaro Board on his discussion with the chief executive officer of Company A.
Mr. Dougherty then provided an update on his discussions with Lumentum, and Lumentums continued demand that Oclaro sign an exclusivity agreement with Lumentum.
Later that day, Company C informed Mr. Dougherty that Company C would not be submitting an offer to acquire Oclaro as Company C was
focused on other strategic priorities at this time.
At a meeting of the M&A committee of the Oclaro Board on February 28, 2018
at which representatives of Jones Day were present, Mr. Dougherty provided an update on discussions with Company A. He told the committee that a representative of Company As financial advisors had informed a representative of Jefferies
that Company A was unwilling to sign a nondisclosure agreement that contained a standstill provision and that, if a standstill was a condition to Company A signing a nondisclosure agreement, Company A would base its offer solely on publicly
available information, even though such an offer may not appropriately value Oclaro. Following discussion, the M&A committee determined that it was in the best interests of the Oclaro stockholders to provide Company A with nonpublic information
to facilitate Company As submission of a proposal that fully values Oclaro (which outweighed the risk associated with proceeding without a standstill provision), and directed Mr. Dougherty to proceed with negotiating a nondisclosure
agreement with Company A without a standstill provision and to provide Company A with diligence information.
On March 1, 2018,
Oclaro entered into a nondisclosure agreement with Company A that did not contain a standstill provision.
At a meeting of the Oclaro
Board on March 1, 2018 at which representatives of Jones Day and Jefferies were present, Mr. Dougherty informed the Oclaro Board that Company C would not be submitting an offer. Mr. Dougherty then noted that Lumentum and Oclaro had
both begun their respective due diligence on the other and that each party was likely to open its electronic data room later that day. Mr. Dougherty also summarized developments with respect to Company A, including Company As
unwillingness to sign a nondisclosure agreement with a standstill provision, the decision made by the M&A committee of the Oclaro Board to enter with Company A into a nondisclosure agreement without a standstill provision and that management had
provided Company A with certain financial projections.
On that same day, the Oclaro and Lumentum management teams and their respective
advisors met to conduct further due diligence on each of the companies, including an assessment of potential synergies. Additionally, both Oclaro and Lumentum provided the other and their advisors with access to their electronic data rooms for the
purpose of assisting each parties due diligence review.
Later that day, members of the Oclaro and Company A management teams and
their respective financial advisors met to conduct Company As due diligence review of Oclaro.
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On the morning of March 2, 2018, a representative of Company As financial advisor
informed a representative of Jefferies that the highest consideration Company A would offer in connection with the acquisition of Oclaro was $9.00 per share of Oclaro common stock. During this discussion, the representative of Jefferies asked the
representative of Company As financial advisor if there was any information that Oclaro could provide Company A that may inform Company As valuation and potentially allow it to increase its offer. The representative of Company As
financial advisor replied that there was not any such information. The representative of Jefferies then informed Oclaros management of this conversation.
Also on March 2, 2018, Mr. Dougherty and Mr. Lowe discussed the metrics and time periods used for determining the exchange
ratio. Mr. Lowe reiterated that Lumentum would require Oclaro to enter into an exclusivity agreement in order for Lumentum to continue with the process.
Later that day, Mr. Dougherty and the chief executive officer of Company D met to discuss Company Ds interest in acquiring Oclaro.
At this meeting, the chief executive officer of Company D orally increased Company Ds offer to $8.25 per share of Oclaro common stock, and indicated that Company D was also willing to wait until the third quarter of calendar year 2018 to
re-engage
in transaction discussions provided that the trading price of Company Ds stock had returned to an acceptable level.
At a meeting of the Oclaro Board on March 3, 2018 at which representatives of Jones Day were present, Mr. Dougherty informed the
Oclaro Board that a representative of Company As financial advisor had orally informed a representative of Jefferies that Company A would not offer more than $9.00 per share of Oclaro common stock and that there was no additional information
that Oclaro could provide that could increase that offer. Mr. Dougherty then gave an update on discussions with Company D, noting that Company D continued to be interested in a transaction with Oclaro and had provided an oral offer of $8.25 per
share. Mr. Dougherty then updated the Oclaro Board on his March 2, 2018 discussions with Mr. Lowe and the chief executive officer of Company D. Representatives of Jones Day provided the Oclaro Board an overview of the draft
exclusivity agreement provided by Lumentum and, following discussion, the Oclaro Board authorized and directed Mr. Dougherty to negotiate and enter into an exclusivity agreement with Lumentum for a period through March 19, 2018 on
substantially the terms presented to the Oclaro Board or such other terms that are approved by the M&A committee of the Oclaro Board.
On March 3, 2017, the Oclaro and Lumentum management teams and their respective advisors met to further conduct each companys
business due diligence review of the other.
Also, on March 3, 2018, Mr. Dougherty and Mr. Lowe had another discussion
concerning the methodology for determining the exchange ratio. In addition, Mr. Lowe also expressed Lumentums preference that the companies work together during the pendency of the merger to select the member of the Oclaro Board who would
join the Lumentum Board.
At a meeting of the Oclaro Board on March 4, 2018 at which representatives of Jones Day and Jefferies were
present, Mr. Dougherty provided an update on discussions with Lumentum. Mr. Dougherty then noted that Lumentum would prefer for Oclaro and Lumentum to work together during the pendency of the merger to select the member of the Oclaro Board
who would join the Lumentum Board following the closing of the merger. Following discussion, the Oclaro Board authorized and directed Mr. Dougherty to continue negotiating the metrics and time periods used for determining the exchange ratio.
Mr. Dougherty then discussed whether retention packages were necessary to retain Oclaros key executives through the closing of the proposed merger. Following discussion, the Oclaro Board concluded that Oclaros existing arrangements
with key executives were sufficient to retain the executives through the closing of the proposed merger.
On the same day, representatives
of Jefferies and Lumentums financial advisor discussed calculation of the exchange ratio and the resulting effect on the cash portion of the consideration. The representatives of Jefferies and Deutsche Bank also discussed the length of the
exclusivity period.
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Later that day, at a meeting of the M&A committee of the Oclaro Board at which
representatives of Jones Day and Jefferies were present, Mr. Dougherty conveyed the proposal discussed between the representatives of Jefferies and Deutsche Bank, which represented a material increase in the implied value of the merger
consideration as of that date compared to the implied value of $9.40 per share that had previously been discussed by the parties. Mr. Dougherty then noted that Lumentum had requested an exclusivity period that would expire on March 14,
2018 with an automatic ten day renewal period if the parties were still negotiating in good faith toward a transaction. Representatives of Jones Day reviewed the negotiated terms of the exclusivity agreement with Lumentum. Following discussion, the
M&A committee of the Oclaro Board authorized and directed Mr. Dougherty to enter into an exclusivity agreement with Lumentum for a period ending on March 14, 2018, with automatic ten day renewal periods if the parties were still
negotiating in good faith toward a transaction, on substantially the terms presented to the committee.
Following the meeting of the
M&A committee of the Oclaro Board, Oclaro and Lumentum entered into an exclusivity agreement providing for an exclusive negotiation period beginning on March 4, 2018 and concluding at 11:59 p.m., Pacific time, on March 14, 2018, which
would automatically be extended to 11:59 p.m., Pacific time, on March 24, 2018 if the parties were still negotiating the potential transaction in good faith at the end of the initial period.
Later that day, on behalf of Lumentum, representatives of Wilson Sonsini Goodrich & Rosati sent an initial draft of the merger
agreement to representatives of Jones Day.
On March 5, 2018, the Oclaro and Lumentum management teams and their respective advisors
met to continue Oclaros due diligence review of Lumentum.
At a meeting of the M&A committee of the Oclaro Board on
March 6, 2018 at which representatives of Jones Day and Jefferies were present, a member of Oclaro management informed the Oclaro Board that Oclaro and Lumentum had entered into an exclusivity agreement and agreed upon a methodology for
calculating the Lumentum common stock portion of the merger consideration. The committee was also provided an update on the status of Oclaros and Lumentums respective due diligence reviews.
On March 7, 2018, on behalf of Oclaro, representatives of Jones Day sent a revised draft of the merger agreement to representatives of
Wilson Sonsini Goodrich & Rosati, which included a revised proposal with respect to, among other things, (i) restrictions on Oclaros and Lumentums operations during the pendency of the merger, (ii) Oclaros
ability to entertain unsolicited proposals, (ii) each parties obligation to obtain required regulatory approvals, (iii) the amount of the termination fee payable by Oclaro and the events giving rise to payment of the fee,
(iv) closing conditions and (v) provisions relating to employee benefits.
During the period between March 7, 2018 and
March 11, 2018, members of Oclaro and Lumentum management and representatives of Jones Day and Wilson Sonsini Goodrich & Rosati negotiated the unresolved terms of the merger agreement.
At a meeting of the Oclaro Board on March 8, 2018 at which representatives of management, Jones Day and Jefferies were present,
Mr. Dougherty provided an update regarding Oclaros quarterly financial performance. Representatives of Jefferies provided a preliminary financial analysis of the proposed merger with Lumentum, noting that the nominal value of the merger
consideration was $9.74 as of the close of market on March 7, 2018 based on the exchange ratio agreed to by the parties. Representatives of Jones Day reviewed issues relating to whether gains arising from receipt of the stock portion of the
merger consideration would be immediately taxable to Oclaro stockholders for U.S. federal income tax purposes, following which, the Oclaro Board directed management to find a solution that would enhance the likelihood that the stock portion of the
merger consideration would receive
tax-deferred
treatment, but that such considerations would be just one of the factors considered by the Oclaro Board when determining whether to approve the transaction.
Representatives of Jones Day then reviewed the draft merger agreement and the status of negotiations related thereto, including (i) the
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structure of the transaction, (ii) the representations and warranties to be made by Oclaro and Lumentum, (iii) the covenants that Oclaro and Lumentum would have to comply with
(including Oclaros operating covenants), (iv) each partys obligations to obtain necessary regulatory approvals (including required antitrust approvals), (v) the closing conditions set forth in the merger agreement (including
the condition related to receipt of antitrust approvals in the United States and China), (vi) Lumentums obligation to obtain the financing necessary to fund the cash portion of the merger consideration, (vii) the obligation of Lumentum
(or its subsidiaries after the merger) to indemnify Oclaros directors and officers following the merger, (viii) the requirement that Lumentum appoint one of Oclaros directors to the Lumentum Board effective immediately following the
closing, (ix) the various termination rights of Oclaro and Lumentum and (x) the fees that may be payable in connection with any such termination.
At a meeting of the Oclaro Board on March 10, 2018 at which representatives of management, Jones Day and Jefferies were present, members
of Oclaro management and representatives of Jones Day contributed to a presentation providing an overview to the Oclaro Board of the results of the financial, accounting and legal due diligence of Lumentum that had been conducted by and on behalf of
Oclaro. Representatives of Jones Day also provided an update on the status of their regulatory analysis of a transaction with Lumentum and reviewed the antitrust related provisions of the Merger Agreement, including the regulatory efforts that
Lumentum would be required to undertake to obtain the required regulatory approvals and the reverse termination fee that Lumentum would be required to pay to Oclaro if the merger was terminated due to a failure to obtain regulatory approvals, noting
that Lumentum had agreed to the concept of a reverse termination fee and had proposed the amount of $50 million. Following discussion, the Oclaro Board directed management and Jones Day to seek an increase in the amount of the reverse
termination fee from Lumentum. Representatives of Jones Day also provided an update on issues relating to whether gains arising from receipt of the stock portion of the merger consideration would be immediately taxable to Oclaro stockholders for
U.S. federal income tax purposes, following which, the Oclaro Board directed management to attempt to ensure that the Lumentum common stock portion of the merger consideration receive deferred tax treatment, but not at the expense of obtaining the
highest possible value for Oclaro stockholders. Representatives of Jefferies then reviewed Jefferies preliminary financial analysis of the Merger Consideration. Representatives of Jones Day also reviewed the terms and conditions of the debt
commitment letter from Lumentums financing source.
At a meeting of the Oclaro Board on March 11, 2018 at which representatives
of management, Jones Day and Jefferies were present, the Oclaro Board met to review the terms and conditions of the proposed transaction with Lumentum, including the terms and conditions of the final Merger Agreement which had been previously
distributed to the Oclaro Board. At that meeting, representatives of Jones Day reviewed the fiduciary duties of the Oclaro Board in determining whether to remain as a stand-alone company or to agree to the sale of the company to Lumentum. The Oclaro
Board discussed the terms of the Merger Agreement and determined that Lumentum had satisfactorily addressed each of the matters related to the Merger Agreement that were previously raised by the Oclaro Board, including an increase in the amount of
the reverse breakup fee from $50 million to $80 million. Representatives of Jefferies then provided the Oclaro Board with Jefferies fairness opinion analysis relating to the proposed transaction. The Oclaro Board, with the advice and
assistance of representatives of Jefferies, Jones Day and Oclaros management, then evaluated and discussed the terms of the final Merger Agreement and the transactions contemplated thereby. Following discussion by the Oclaro Board,
representatives of Jefferies rendered its opinion to the Oclaro Board to the effect that, as of March 11, 2018 and based upon and subject to the various assumptions made, procedures followed, matters considered and limitations on the scope of
the review undertaken as set forth in its opinion, the per share merger consideration consisting of 0.0636 shares of Lumentum common stock and $5.60 in cash to be received by the holders of Oclaro common stock pursuant to the Merger Agreement was
fair, from a financial point of view, to such holders. The Oclaro Board discussed various factors to be taken into account in their deliberations concerning approving the Merger Agreement with Lumentum, including discussions held by Oclaro
management with various parties concerning their interest in pursuing a strategic transaction with Oclaro, the offers made by Company A and Company D, the benefits and risks associated with remaining an independent company, and other factors deemed
relevant by the Oclaro Board, including the factors described below in the section titled Reasons for the Merger. After discussion and
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consideration of the financial and other information presented, the Oclaro Board unanimously determined that the Merger Agreement, the performance by Oclaro of its obligations thereunder and the
consummation of the transactions contemplated thereby were advisable and fair to, and in the best interests of, Oclaro and its stockholders.
Later that day, the Merger Agreement and related documents were executed and delivered by each of Oclaro and Lumentum.
On March 12, 2018, Oclaro and Lumentum issued a joint press release announcing the execution of the Merger Agreement.
Recommendation of the Oclaro Board; Oclaros Reasons for the Merger
At its March 11, 2018 meeting held to evaluate the proposed Merger, the Oclaro Board unanimously approved the Merger Agreement and
determined that the terms of the Merger are fair to and in the best interests of Oclaros stockholders. The Oclaro Board recommends that Oclaros stockholders vote:
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1.
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FOR
the Merger Proposal;
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2.
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FOR
the Compensation Proposal; and
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3.
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FOR
the Adjournment Proposal.
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In evaluating the Merger and the Merger
Agreement and arriving at its determination, the Oclaro Board consulted with Oclaros senior management, Oclaros financial advisor, Jefferies, and Oclaros outside legal counsel, Jones Day, and considered a number of substantive
factors, both positive and negative, and potential benefits and detriments of the merger to Oclaro and its stockholders. The Oclaro Board believed that, taken as a whole, the following factors supported its decision to approve the proposed Merger
(which are not in any relative order of importance):
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Merger Consideration
. The value of the Merger Consideration to be received by Oclaro stockholders in relation to (1) the market prices of Oclaro common stock prior to the Oclaro Boards approval of the
Merger Agreement; (2) the Oclaro Boards assessment, based on the directors and Oclaro managements experience and knowledge of the industry and discussions with, and presentations from, representatives of Jefferies, of the
value of Oclaro as an independent entity; and (3) the value that could potentially be obtained through other strategic alternatives available to Oclaro.
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Premium to Trading Price of Oclaro Common Stock
. The fact that the implied value of the Merger Consideration of $9.99 per share at the time of signing, based on the $68.98 closing price per share of Lumentum
common stock on March 9, 2018, the last full trading day before the announcement that Oclaro and Lumentum had entered into the Merger Agreement, represented a significant premium over the market prices at which Oclaro common stock had
previously traded during this period, including a premium of approximately:
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27% over the closing price per share of Oclaro common stock on March 9, 2018; and
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50% over the
30-day
volume weighted average price per share of Oclaro common stock as of March 9, 2018.
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Uncertainty of Future Common Stock Market Price
. The Oclaro Board considered Oclaros business, assets, financial condition, results of operations, management, competitive position and prospects, as well as
current and anticipated industry, international, economic, and stock and credit market conditions. The Oclaro Board also considered Oclaros financial plan, including the initiatives and the potential execution risks associated with such plan.
In connection with these considerations, the Oclaro Board considered the attendant risk that if Oclaro remained independent, Oclaro common stock may not trade at levels equal to or greater than the value of the Merger Consideration in the near term,
over an extended period of time, or at all.
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Negotiations with Lumentum
. The benefits that Oclaro and its advisors were able to obtain during its negotiations with Lumentum, including an increase in Lumentums offer price per share from the beginning
of the process to the end of the negotiations and a significant improvement in transaction certainty. The Oclaro Board believed that the consideration reflected in the Merger Agreement was the best transaction that could be obtained by Oclaro
stockholders from Lumentum at the time, and that there was no assurance that a more favorable opportunity to sell Oclaro would arise later or through any alternative transaction.
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Significant Portion of Merger Consideration in Cash
. The fact that a large portion of the Merger Consideration will be paid in cash, giving Oclaro stockholders the opportunity to immediately realize value for a
significant portion of their investment and providing certainty of value. The Oclaro Board also considered the fact that Oclaro stockholders would be able to reinvest the Cash Consideration received in the Merger in Lumentum common stock if they
desired to do so.
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Fixed Stock Portion of Merger Consideration
. The fact that, because the Stock Consideration is a fixed ratio with respect to shares of Lumentum common stock, Oclaro stockholders will have the opportunity to
benefit from any increase in the trading price of shares of Lumentum common stock between the announcement of the Merger Agreement and the completion of the Merger and that the Cash Consideration, which makes up 56% of the Merger Consideration, will
limit the impact of a decline in the trading price of Lumentum common stock on the aggregate value of the Merger Consideration.
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Oclaro Representative Board Seat
. The fact that a member of the Oclaro Board, as mutually determined, will join the Lumentum Board upon the closing of the transaction.
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Participation in Potential Upside
. The fact that, since a portion of the Merger Consideration will be paid in Lumentum common stock, Oclaro stockholders will benefit from an approximately 16% pro forma continuing
equity ownership in Lumentum. As a result, Oclaro stockholders will have the opportunity to participate in any future earnings or growth of the combined company and future appreciation in the value of Lumentum common stock following the Merger
should they determine to retain the Lumentum common stock payable in the Merger, including as a result of achieving the benefits to the combined company that could result from the Merger, such as breadth, market diversification and scale.
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Expected Cost Synergies
. The expectation that the combined company will recognize anticipated annualized cost synergies following consummation of the Merger, which Oclaro stockholders will benefit from as
continuing stockholders of Lumentum. The Oclaro Board also considered that there can be no assurance that any particular amount of such synergies will be achieved following completion of the Merger or the time frame within which they may be
achieved.
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Financial Analysis and Opinion of Jefferies
. The financial analysis presented by Jefferies to the Oclaro Board of Directors and opinion of Jefferies to the Oclaro Board of Directors to the effect that, as of
March 11, 2018 and based upon and subject to the various assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken as set forth in its opinion, the Merger Consideration to be received by the
holders of shares of Oclaro common stock pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. Jefferies opinion is described in further detail below under Opinion of Oclaros Financial
Advisor beginning on page 96 of this proxy statement/prospectus.
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Regulatory Efforts to Consummate the Merger
. The obligation of Lumentum in the Merger Agreement to use reasonable best efforts to obtain such approvals, consents and clearances of governmental authorities
required to consummate the Merger, and that therefore Lumentum may be required to comply with conditions or limitations imposed by governmental authorities, subject to certain exceptions.
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Likelihood of Consummation
. The likelihood that the Merger would be completed, in light of, among other things, the conditions to the Merger, the absence of a financing condition, and the efforts required to
obtain regulatory approvals.
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Terms of the Merger Agreement
. The terms and conditions of the Merger Agreement, including:
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the representations, warranties and covenants of the parties, the conditions to the parties obligations to complete the Merger and their ability to terminate the Merger Agreement;
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the provisions of the Merger Agreement that allow Oclaro to engage in negotiations with, and provide information to, a third party that makes an unsolicited written bona fide proposal relating to an alternative
transaction, if the Oclaro Board has determined in good faith, after consultation with its outside legal counsel and financial advisors, that such proposal constitutes or would reasonably be expected to lead to a transaction that is superior to the
proposed transaction with Lumentum and Oclaro complies with certain procedural requirements;
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the provisions of the Merger Agreement that allow the Oclaro Board to change its recommendation in favor of the adoption of the Merger Agreement in response to a Superior Proposal and/or terminate the Merger Agreement
in order to accept a Superior Proposal if the Oclaro Board has determined in good faith, after consultation with its outside legal counsel and financial advisors, that failure to take such action would reasonably be likely to be inconsistent with
the directors fiduciary duties, subject to Oclaros compliance with certain procedural requirements;
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the provisions of the Merger Agreement that allow the Oclaro Board to change its recommendation in favor of the adoption of the Merger Agreement (other than in response to the receipt of a written unsolicited bona fide
proposal relating to an alternative transaction, which is subject to the preceding
sub-bullet
above) as a result of an intervening event, if the Oclaro Board has determined in good faith, after consultation
with its outside legal counsel, that failure to take such action would reasonably be likely to be inconsistent with its directors fiduciary duties, subject to certain conditions;
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the belief of the Oclaro Board that the termination fee provisions were not likely to unduly discourage competing third-party proposals or reduce the price of such proposals, that such provisions are customary for
transactions of this size and type, and that the $63 million termination fee, representing approximately 3.5% of the equity value implied by the proposed transaction, was reasonable in the context of comparable transactions;
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the ability of Oclaro to specifically enforce the terms of the Merger Agreement, including in the event of a failure of Lumentum to obtain financing for the Merger; and
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the fact that, if either Oclaro or Lumentum terminated the Merger Agreement as a result of a failure to obtain regulatory approvals (subject, in certain circumstances, to the satisfaction of other closing conditions),
Lumentum would be obligated to pay Oclaro an $80 million termination fee.
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Strategic Alternatives
. The Oclaro Board, with the assistance of representatives of Jefferies and Jones Day, considered the strategic, business and legal considerations relating to a potential transaction with
Lumentum and the risks and benefits of a potential transaction compared to other potential strategic alternatives, including acquiring companies and disposing of
non-core
assets, and concluded that while each
of such other potential alternatives had a variety of qualitative factors that could make it attractive or cause concerns, a potential transaction with Lumentum would likely deliver value to Oclaro stockholders that was higher than the values that
could be achieved for Oclaro stockholders in other potential strategic alternatives.
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Industry Consolidation
. The expected consolidation of the optical communications industry, which will make it more difficult for Oclaro to compete as a stand-alone company longer term.
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Absence of Competing Offers
. The Oclaro Board noted that, since September 30, 2017, Oclaro
(i) engaged in discussions with six parties (including Lumentum) potentially interested in acquiring Oclaro, (ii) received preliminary
non-binding
oral indications of interest from three of these
interested parties (including Lumentum) and (iii) received only one written Acquisition Proposal, which was
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submitted by Lumentum at a significantly higher valuation than reflected in the indications of interest submitted by other interested parties. The Oclaro Board also believed that the benefits of
soliciting interest from other potential parties were outweighed by a number of risks, including that such solicitation would further increase market speculation and the potential for leaks, and jeopardize or, at a minimum, delay the proposed
transaction with Lumentum. The Oclaro Board also observed that, in the event that any third party were to seek to make a business combination or Acquisition Proposal, Oclaro retained the ability to consider unsolicited proposals after the execution
of the Merger Agreement until the meeting of the Oclaro stockholders to vote on the merger proposal and to enter into an agreement with respect to a Superior Proposal under certain circumstances (concurrently with terminating the Merger Agreement
and paying a $63 million termination fee to Lumentum).
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Lumentums Business and Oclaros Due Diligence Review
. The Oclaro Board considered the information provided by, and discussions with, Oclaros management regarding Lumentums business, results
of operations and financial and market position, and Oclaro managements expectations concerning Lumentums future prospects and opportunities for long-term growth, including opportunities that might be available to the combined company
that would likely not be available to Oclaro as an independent company. The Oclaro Board also considered the results of the due diligence investigation that Oclaros senior management conducted with the assistance of its advisors on Lumentum.
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Strength of the Combined Company
. The projected financial strength of the combined company and its ability to fund required investments to retain leadership in the optical networking industry.
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Complementary Products
. The products and development capabilities of Oclaro and Lumentum are complementary, and should enable the combined company to offer broader product value to customers of both companies.
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Financing Strength of Lumentum
. The likelihood that Lumentum would be able to finance the Merger given Lumentums financial resources, financial profile, and the financing commitments that it obtained from
DBNY.
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Availability of Appraisal Rights
. The fact that appraisal rights would be available to holders of Oclaro common stock 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), and that there was no condition in the Merger Agreement relating
to the maximum number of shares of Oclaro common stock that could dissent from the Merger.
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Stockholders Ability to Reject the Merger
. The Oclaro Board considered the fact that the Merger is subject to approval by Oclaro stockholders, who would be free to reject the Merger.
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Stock Consideration May
Not be Taxable
. The fact that the Stock Consideration may not be immediately taxable to Oclaro stockholders for U.S. federal income tax purposes.
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The Oclaro Board also considered certain other uncertainties, risks and potentially negative factors in its deliberations concerning the
Merger, including the following (which are not in any relative order of importance):
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Fixed Stock Consideration
. The fact that because the Stock Consideration is a fixed exchange ratio of shares of Lumentum common stock to Oclaro common stock, Oclaro stockholders could be adversely affected by a
decrease in the trading price of Lumentum common stock during the pendency of the Merger, and the fact that the Merger Agreement does not provide Oclaro with a price collar, a price-based termination right or other similar protection. The Oclaro
Board determined that this structure was appropriate and the risk acceptable in view of factors such as:
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the Oclaro Boards review of the relative intrinsic values and financial performance of Lumentum and Oclaro; and
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the fact that a majority of the Merger Consideration will be paid in a fixed cash amount which limits the impact of a decline in the trading price of Lumentum common stock on the value of the Merger Consideration.
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Possible Failure to Achieve Synergies
. The challenges inherent in the combination of two business enterprises of the size and scope of Oclaro and Lumentum, including the risk that the potential benefits and
synergies sought in the Merger will not be realized or will not be realized within the expected time period and the other risks and uncertainties that could adversely affect the combined companys operating results.
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Smaller Ongoing Equity Participation in the Combined Company by Oclaro Stockholders
. The fact that because approximately 44% of the Merger Consideration will be in the form of Lumentum common stock, Oclaro
stockholders will have a smaller ongoing equity participation in the combined company (and, as a result, a smaller opportunity to participate in any future earnings or growth of the combined company and future appreciation in the value of Lumentum
common stock following the merger) than they have in Oclaro. The Oclaro Board considered, however, that Oclaro stockholders would be able to reinvest the cash received in the Merger by purchasing Lumentum common stock if they desired to do so.
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Regulatory Risk
. The risk that necessary regulatory approvals may be delayed, conditioned or denied.
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Terms of Lumentum Financing Commitments
. The fact that the financing commitment letters obtained by Lumentum are subject to closing conditions similar to those found in the Merger Agreement, including the
absence of a material adverse effect on Oclaro.
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Risk of
Non-Completion
. The possibility that the Merger might not be completed, including as a result of the failure to obtain regulatory approvals or the failure of Oclaro
stockholders to approve the Merger Proposal, and the effect the resulting public announcement of the termination of the Merger Agreement may have on:
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the trading price of Oclaro common stock; and
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Oclaros business and operating results, particularly in light of the costs incurred in connection with the transaction.
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Possible Deterrence of Competing Offers
. The risk that various provisions of the Merger Agreement, including the requirement that Oclaro must pay to Lumentum a termination fee of $63 million if the Merger
Agreement is terminated under certain circumstances, may discourage other parties potentially interested in an acquisition of, or combination with, Oclaro from pursuing that opportunity.
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Possible Disruption of the Business and Costs and Expenses
. The possible disruption to Oclaros business that may result from the Merger, the resulting distraction of Oclaros management and potential
attrition of Oclaros employees, as well as the costs and expenses associated with completing the Merger and the adverse effect of uncertainties that arise prior to completion of the Merger, including on Oclaros ability to attract, retain
and motivate key personnel pending completion of the Merger.
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Restrictions on Operation of Oclaros Business
. The requirement that Oclaro conduct its business in all material respects in the ordinary course prior to completion of the Merger and subject to specified
restrictions unless Lumentum provides its prior written consent (which consent may not be unreasonably withheld, delayed or conditioned), which might delay or prevent Oclaro from undertaking certain new business opportunities that might arise
pending completion of the merger.
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Merger Consideration Taxable
. The fact that any gains arising from the receipt of the Cash Consideration would be immediately taxable to Oclaro stockholders for U.S. federal income tax purposes and that the Stock
Consideration may be immediately taxable to Oclaro stockholders for U.S. federal income tax purposes.
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Other Risks
. The risks described under Risk Factors beginning on page 57 of this proxy statement/prospectus.
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The Oclaro Board concluded that the potentially negative factors associated with the proposed Merger were significantly outweighed by the
potential benefits that it expected the Oclaro stockholders would achieve as a result of the Merger, including the belief of the Oclaro Board that the proposed Merger would maximize the immediate value of Oclaro stockholders shares and
minimize the risks and uncertainty affecting the future prospects of Oclaro, including the potential execution risks associated with its stand-alone financial plan. Accordingly, the Oclaro Board determined that the Merger Agreement and the
transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, Oclaro and Oclaro stockholders.
In addition, the Oclaro Board was aware of and considered the interests that Oclaros directors and executive officers may have with
respect to the Merger that differ from, or are in addition to, their interests as stockholders of Oclaro generally, as described under Interests of Oclaros Directors and Executive Officers in the Merger beginning on page 108
of this proxy statement/prospectus.
The foregoing discussion of the information and factors considered by the Oclaro Board is not
exhaustive, but Oclaro believes it includes all the material factors considered by the Oclaro Board. In view of the wide variety of factors considered in connection with its evaluation of the Merger and the complexity of these matters, the Oclaro
Board did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative or specific weight or values to any of these factors. Rather, the Oclaro Board viewed its position and recommendation as being based on an
overall analysis and on the totality of the information presented to and factors considered by it. In addition, in considering the factors described above, individual directors may have given different weights to different factors. After considering
this information, the Oclaro Board approved the Merger Agreement and the transactions contemplated thereby, including the Merger, and recommended that Oclaro stockholders adopt the Merger Agreement.
This explanation of Oclaros reasons for the Merger and other information presented in this section is forward-looking in nature and,
therefore, should be read in light of the factors described under Special Note Regarding Forward-Looking Statements beginning on page 69 of this proxy statement/prospectus.
Opinion of Oclaros Financial Advisor
In May 2014, Oclaro retained Jefferies to act as Oclaros exclusive financial advisor in connection with the Oclaro Boards
consideration of certain potential strategic transactions, including a possible sale of, or other business combination involving, Oclaro. At the meeting of the Oclaro Board on March 11, 2018, Jefferies rendered its opinion to the Oclaro Board
to the effect that, as of March 11, 2018 and based upon and subject to the various assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken as set forth in its opinion, the Merger
Consideration to be received by the holders of shares of Oclaro common stock pursuant to the Merger Agreement was fair, from a financial point of view, to such holders.
The full text of the written opinion of Jefferies, dated as of March 11, 2018, to the Oclaro Board is attached as Annex B to this
proxy statement/prospectus. Jefferies opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Jefferies in rendering its opinion. Oclaro
encourages you to read Jefferies opinion carefully and in its entirety. Jefferies opinion was directed to the Oclaro Board (in its capacity as such) and addresses only the fairness, from a financial point of view, to the holders of
shares of Oclaro common stock of the Merger Consideration to be received by such holders pursuant to the Merger Agreement as of the date of the opinion. It does not address the relative merits of the Merger as compared to any alternative transaction
or opportunity that might be available to Oclaro, nor does it address the underlying business decision by Oclaro to engage in the Merger or the terms of the Merger Agreement or
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the documents referred to therein. Jefferies opinion does not constitute a recommendation as to how any holder of Oclaro common stock should vote or act with respect to the Merger or any
matter related thereto. The summary of the opinion of Jefferies set forth below is qualified in its entirety by reference to the full text of the opinion.
In arriving at its opinion, Jefferies, among other things:
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reviewed a draft dated March 11, 2018 of the Merger Agreement;
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reviewed certain publicly available financial and other information about Oclaro and Lumentum;
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reviewed certain information furnished to Jefferies by Oclaros management, including financial forecasts and analyses, relating to the business, operations and prospects of Oclaro (which we refer to in this
section as the Oclaro Forecasts; for further information regarding such Oclaro Forecasts, see the February Projections as defined and described below under Certain Unaudited Prospective Financial
Information);
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reviewed certain information furnished to Jefferies by Lumentums management, including financial forecasts and analyses, relating to the business, operations
and prospects of Lumentum (the Lumentum Forecasts and, together with the Oclaro Forecasts, the Forecasts);
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held discussions with members of senior management of Oclaro concerning the matters described in the second, third and fourth bullet above and held discussions with members of senior management of Lumentum concerning
the Lumentum Forecasts;
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reviewed the share trading price history and valuation multiples for Oclaro common stock and compared them with those of certain publicly traded companies that Jefferies deemed relevant;
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compared the proposed financial terms of the Merger with the financial terms of certain other transactions that Jefferies deemed relevant; and
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conducted such other financial studies, analyses and investigations as Jefferies deemed appropriate.
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In Jefferies review and analysis and in rendering its opinion, Jefferies assumed and relied upon, but did not assume any responsibility
to independently investigate or verify, the accuracy and completeness of all financial and other information that was supplied or otherwise made available by Oclaro or Lumentum or that was publicly available to Jefferies (including, without
limitation, the information described above), or that was otherwise reviewed by Jefferies. Jefferies relied on assurances of the management of Oclaro (with respect to information concerning Oclaro) and management of Lumentum (with respect to
information concerning Lumentum) that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. In its review, Jefferies did not obtain any independent evaluation or appraisal of any of the assets
or liabilities of, nor did Jefferies conduct a physical inspection of any of the properties or facilities of, Oclaro or Lumentum, nor was Jefferies furnished with any such evaluations or appraisals of such physical inspections, nor did Jefferies
assume any responsibility to obtain any such evaluations or appraisals.
With respect to the Forecasts provided to and examined by
Jefferies, Jefferies noted in its opinion that projecting future results of any company is inherently subject to uncertainty. With respect to the Oclaro Forecasts, Jefferies was advised by Oclaro that such Oclaro Forecasts were reasonably prepared
on bases reflecting the best currently available estimates and good faith judgments of the management of Oclaro as to the future financial performance of Oclaro. With respect to the Lumentum Forecasts, Jefferies was advised by Lumentum that such
Lumentum Forecasts were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Lumentum as to the future financial performance of Lumentum. Jefferies expressed no opinion as to
the Forecasts or the assumptions on which they were made and Jefferies assumed that the Forecasts would be realized in the amounts and at the times projected.
Jefferies opinion was based on economic, monetary, regulatory, market and other conditions existing and which could be evaluated as of
the date of its opinion. Jefferies expressly disclaimed any undertaking or
97
obligation to advise any person of any change in any fact or matter affecting Jefferies opinion of which Jefferies became aware after the date of its opinion.
Jefferies made no independent investigation of, and expressed no view or opinion as to, any legal, regulatory, accounting or tax matters
affecting Oclaro, Lumentum or the Merger, and Jefferies assumed the correctness in all respects material to Jefferies analysis of all legal, regulatory, accounting and tax advice given to the Oclaro Board, including, without limitation, with
respect to changes in, or the impact of, tax laws, regulations and governmental and legislative policies on Oclaro and Lumentum and advice as to the legal, regulatory, accounting and tax consequences of the terms of, and transactions contemplated
by, the Merger Agreement to Oclaro and its stockholders. In addition, in preparing its opinion, Jefferies did not take into account any tax consequences of the transactions contemplated by the Merger Agreement to any holder of Oclaro common stock.
Jefferies assumed that the final form of the Merger Agreement would be substantially similar to the last draft reviewed by it. Jefferies also assumed that the Merger would be consummated in accordance with the terms of the Merger Agreement, without
waiver, modification or amendment of any term, condition or agreement and in compliance with all applicable laws, documents and other requirements and that in the course of obtaining the necessary regulatory or third party approvals, consents and
releases for the Merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on Oclaro, Lumentum or the contemplated benefits of the Merger.
Jefferies opinion was for the use and benefit of the Oclaro Board (in its capacity as such) in its consideration of the Merger, and
Jefferies opinion did not address the relative merits of the transactions contemplated by the Merger Agreement as compared to any alternative transaction or opportunity that might be available to Oclaro, nor did it address the underlying
business decision by Oclaro to engage in the Merger or the terms of the Merger Agreement or the documents referred to therein. Jefferies opinion does not constitute a recommendation as to how any holder of shares of Oclaro common stock should
vote on the Merger or any matter related thereto. In addition, Jefferies was not asked to address, and its opinion did not address, the fairness to, or any other consideration of, the holders of any class of securities, creditors or other
constituencies of Oclaro, other than the holders of shares of Oclaro common stock. Jefferies expressed no opinion as to what the value of the Lumentum common stock would be when issued or the price at which shares of Oclaro common stock or Lumentum
common stock will trade at any time. Furthermore, Jefferies did not express any view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be received by any of Oclaros officers,
directors or employees, or any class of such persons, in connection with the Merger relative to the Merger Consideration to be received by holders of shares of Oclaro common stock. Jefferies opinion was authorized by the Fairness Committee of
Jefferies.
In connection with rendering its opinion, Jefferies performed a variety of financial and comparative analyses, which are
summarized below. The preparation of a fairness opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis or summary description. With respect to the Oclaro selected publicly traded companies,
the Lumentum selected publicly traded companies and the selected transactions analyses summarized below, no company or transaction used as a comparison was identical or directly comparable to Oclaro, Lumentum or the Merger, respectively. These
analyses necessarily involved complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the companies or transactions concerned.
Jefferies believes that its analyses and the summary below must be considered as a whole. Considering any portion of Jefferies
analyses or the factors considered by Jefferies or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the
processes underlying the conclusion expressed in Jefferies analyses and opinion. In addition, Jefferies may have given various analyses more or less weight than other analyses, and may have deemed various assumptions more or less probable than
other assumptions, so that implied reference ranges resulting from any particular analysis described below should not be taken to be Jefferies view of Oclaros actual value. Accordingly, the conclusions reached by Jefferies are based on
all analyses and factors taken as a whole and also on the application of Jefferies own experience and judgment.
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In performing its analyses, Jefferies made numerous assumptions with respect to industry
performance, general business, economic, monetary, regulatory, market and other conditions and other matters, many of which are beyond Oclaros and Jefferies control. The analyses performed by Jefferies are not necessarily indicative of
actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. Estimates of the financial value of companies do not purport to be appraisals or necessarily reflect the prices at which
companies or securities actually may be sold or acquired. Accordingly, the estimates used in, and the range of the valuations resulting from, any particular analysis described below are inherently subject to substantial uncertainty.
The analyses performed were prepared solely as part of Jefferies analysis of the fairness, from a financial point of view, of the Merger
Consideration to be received by holders of shares of Oclaro common stock pursuant to the Merger Agreement, and were provided to the Oclaro Board in connection with the delivery of Jefferies opinion. The consideration payable in the Merger was
determined through negotiation between Oclaro and Lumentum, and the decision by Oclaro to enter into the Merger Agreement was solely that of the Oclaro Board. Jefferies opinion and financial analyses were only one of many factors considered by
the Oclaro Board in its evaluation of the consideration and should not be viewed as determinative of the views of the Oclaro Board or Oclaros management with respect to the Merger or the consideration payable in the Merger.
The following is a summary of the material financial analyses performed by Jefferies in connection with Jefferies delivery of its
opinion and presentation to the Oclaro Board at its meeting on March 11, 2018. The financial analyses summarized below include information presented in tabular format. In order to fully understand Jefferies financial analyses, the tables
must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data described below without considering the full narrative description of the financial
analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Jefferies financial analyses. The following summary does not purport to be a complete description of all financial
analyses performed by Jefferies and factors considered in connection with Jefferies opinion. 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
March 9, 2018, and is not necessarily indicative of current or future market conditions.
Transaction Overview
For purposes of its opinion, Jefferies calculated the implied value of the Merger Consideration, as of March 11, 2018, to be approximately
$9.99, which was determined by adding the cash portion of the Merger Consideration of $5.60 per share of Oclaro common stock to $4.39, the implied value of the stock portion of the Merger Consideration that was derived by multiplying the closing
price of $68.975 per share of Lumentum common stock as reported by NASDAQ on March 9, 2018, the last full trading day prior to the announcement of the Merger, by the exchange ratio of 0.0636 of a share of Lumentum common stock per each share of
Oclaro common stock.
Jefferies also noted, for reference purposes only, that the implied Merger Consideration, as of March 11, 2018,
of $9.99 represented an implied premium of approximately:
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27% over the closing price per share of Oclaro common stock on March 9, 2018, the full last trading day prior to the announcement of the Merger;
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30% over the volume weighted average price, or VWAP, per share of Oclaro common stock during the
5-trading
day period immediately preceding March 9, 2018;
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35% over the VWAP per share of Oclaro common stock during the
10-trading
day period immediately preceding March 9, 2018;
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41% over the VWAP per share of Oclaro common stock during the
20-trading
day period immediately preceding March 9, 2018;
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50% over the VWAP per share of Oclaro common stock during the
30-trading
day period immediately preceding March 9, 2018;
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(5)% over the
52-week
high closing price per share of Oclaro common stock of $10.48 on June 6, 2017; and
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77% over the
52-week
low closing price per share of Oclaro common stock of $5.65 on February 5, 2018.
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Discounted Cash Flow Analysis
Jefferies
performed a discounted cash flow analysis to estimate the present value as of June 30, 2018 of Oclaros unlevered free cash flows through the fiscal year ending 2022 using the February Projections provided by Oclaros management. The
terminal value of Oclaro was then calculated by using perpetuity growth rates of Oclaros estimated free cash flow in fiscal year 2022, as provided by Oclaros management, ranging from 4.0% to 6.0%, which range was selected by Jefferies in
its professional judgment. The present values of the free cash flows and the terminal value of Oclaro were then calculated using discount rates ranging from 11.0% to 13.0%, which were based on the estimated weighted average cost of capital for
Oclaro. Jefferies determined implied enterprise values for Oclaro, then added projected cash and cash equivalents and subtracted projected total debt each as of June 30, 2018 and as provided by Oclaros management, to determine implied
equity values per share of Oclaro common stock. This analysis indicated an implied equity reference range per share of Oclaro common stock of $7.55 to $11.79, compared to the implied Merger Consideration as of March 11, 2018, of $9.99.
Selected Publicly Traded Companies Analysis
Jefferies reviewed publicly available financial and stock market information of the following six selected publicly traded optical components
and subsystems segment companies that Jefferies in its professional judgment considered generally relevant to Oclaro for purposes of its financial analyses, which we refer to as the Oclaro selected publicly traded companies, and compared
such information with similar financial data of Oclaro provided by Oclaros management to Jefferies:
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Acacia Communications, Inc.,
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Applied Optoelectronics, Inc.,
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NeoPhotonics Corporation
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In its analysis, Jefferies derived multiples for each of the Oclaro
selected publicly traded companies, including Lumentum, by reviewing the trading price per share of each of the Oclaro selected publicly traded companies as of March 9, 2018 (the last full trading day prior to announcement of the Merger) as a
multiple of estimated adjusted earnings per share, for calendar year 2018, which is referred to below as CY 2018E Adjusted EPS
,
and for calendar year 2019, which is referred to below as CY 2019E Adjusted EPS. Estimated
financial information of the Oclaro selected publicly traded companies was based on publicly available consensus median research analysts estimates, other than Lumentums fully diluted share count, which was provided to Jefferies by
Lumentums management.
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This analysis indicated the following:
Oclaro Selected Publicly Traded Companies Multiples
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Benchmark
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High
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Low
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Median
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CY 2018E Adjusted EPS (1)
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24x
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13x
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17x
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CY 2019E Adjusted EPS (2)(3)
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25x
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9x
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14x
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(1)
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The multiples for the following companies were excluded from the high, low and median statistics because they were greater than 30.0x or below zero and were considered not meaningful: Acacia Communications, Inc., EMCORE
Corporation and NeoPhotonics Corporation.
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(2)
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The multiples for the following company was excluded from the high, low and median statistics because they were greater than 30.0x and were considered not meaningful: NeoPhotonics Corporation.
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(3)
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The multiple for the following company was excluded from the high, low and median statistics because it was not available: EMCORE Corporation.
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Using the reference ranges for the benchmarks set forth below, which ranges were selected by Jefferies in its professional judgment, and
Oclaros estimated adjusted earnings per share, for calendar year 2018 and 2019, as provided by Oclaros management as part of the February Projections, to determine implied equity reference ranges per share of Oclaro common stock, as
compared, in each case, to the implied Merger Consideration, as of March 11, 2018, of $9.99.
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Benchmark
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Multiple Range
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Implied Equity Reference
Range Per Share of
Oclaro Common Stock
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CY 2018E Adjusted EPS
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15.0x 17.0x
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$
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6.80 $7.71
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CY 2019E Adjusted EPS
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13.0x 15.0x
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$
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8.40 $9.70
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None of the Oclaro selected publicly traded companies are identical to Oclaro. In evaluating the Oclaro
selected publicly traded companies, Jefferies made numerous judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond Oclaros and
Jefferies control. Mathematical analysis, such as determining the median, is not in itself a meaningful method of using the Oclaro selected publicly traded companies data.
Selected Transactions Analysis
Jefferies
reviewed, among other things, financial data relating to 11 selected transactions in the optical components industry announced since October 2010 having implied transaction values greater than $50 million and listed below that Jefferies in
its professional judgment considered generally relevant to Oclaro for the purposes of its financial analyses, which we refer to as the selected transactions.
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Month and Year
Announced
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Acquiror
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Target
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January 2017
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Consortium led by Redview Capital and Asia-IO
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Source Photonics
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April 2016
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Corning Incorporated
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Alliance Fiber Optic Products, Inc.
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May 2015
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Ciena Corporation
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Cyan, Inc.
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April 2015
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Infinera Corporation
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Transmode AB
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November 2014
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Koch Optics, Inc.
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Oplink Communications, Inc.
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October 2013
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Pace plc
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Aurora Networks, Inc.
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October 2013
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II-VI
Incorporated
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Oclaros amplifier business
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September 2013
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II-VI
Incorporated
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Oclaros semiconductor laser business
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Month and Year
Announced
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Acquiror
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Target
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April 2013
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Avago Technologies Limited
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CyOptics, Inc.
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March 2012
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Oclaro
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Opnext, Inc.
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October 2010
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Francisco Partners
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Source Photonics
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In its analysis, Jefferies derived multiples for each of the selected transactions, calculated as the
transaction value divided by each target companys last twelve months, or LTM, revenue prior to announcement, which is referred to below as Transaction Value/LTM Revenue.
This analysis indicated the following:
Selected Transactions Multiples
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Benchmark
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High
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Low
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Median
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Transaction Value/LTM Revenue
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3.9x
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0.4x
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1.5x
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Using the reference ranges for the benchmarks set forth below, which ranges were selected by Jefferies in its
professional judgment, and Oclaros estimated revenue for fiscal year 2018, provided by Oclaros management as part of the February Projections, Jefferies determined implied enterprise values for Oclaro, then added projected cash and
cash equivalents and subtracted projected total debt as of June 30, 2018 provided by Oclaros management as part of the February Projections and dividing by the fully diluted shares of Oclaro common stock provided by Oclaros
management to determine an implied equity reference range per share of Oclaro common stock set forth below, as compared to the implied Merger Consideration, as of March 11, 2018, of $9.99.
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Benchmark
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Multiple Range
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Implied Equity Reference
Range Per Share of
Oclaro Common Stock
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Transaction Value/LTM Revenue
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1.5x 2.0x
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$
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6.24 $7.79
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No transaction selected by Jefferies for its analysis is identical to the Merger. In evaluating the Merger,
Jefferies made numerous judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond Oclaros and Jefferies control. Mathematical
analysis, such as determining the median, is not in itself a meaningful method of analyzing transaction data.
Other Information
Jefferies observed certain additional information that was not considered part of Jefferies financial analysis with respect to its
opinion but were noted for references purposes only, including the following:
Oclaro
Using publicly available information, Jefferies reviewed the premia offered in 86 technology industry mergers and acquisitions transactions
that were announced between January 1, 2008 and March 9, 2018 and having a transaction value of between $1 billion and $3 billion. For each of these transactions, Jefferies calculated the premium represented by the offer price or
merger consideration over the target companys closing price one trading day and one trading month (20 trading days) prior to the transactions announcement. The review indicated the following premia for those time periods prior to
announcement:
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Time Period Prior to Announcement
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25th Percentile
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75th Percentile
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One-Day
Premium
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14
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%
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41
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%
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One-Month
Premium
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21
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%
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48
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%
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Applying a reference range of the 25th and the 75th percentile for each of the time periods
described above to Oclaros stock price of $7.75 on March 8, 2018, one trading day before the last full trading day prior to announcement of the Merger and Oclaros stock price of $6.71 on February 9, 2018, one trading month
prior to announcement of the Merger, Jefferies derived implied equity reference ranges per share of Oclaro common stock of $8.84 to $10.93 with respect to the one trading day premium prior to announcement of the Merger, and $8.12 to $9.93 with
respect to the one trading month premium prior to announcement of the Merger, in each case, as compared to the implied Merger Consideration, as of March 11, 2018, of $9.99.
Jefferies also reviewed 14 recently published, publicly available research analysts reports for Oclaro. These research analysts
reports set a median
12-month
undiscounted price target of $8.00 per share of Oclaro common stock, with a high of $10.00 per share and a low of $5.00 per share, as compared to the implied Merger Consideration,
as of March 11, 2018, of $9.99.
Lumentum
In order to assist the Oclaro Board in evaluating certain market perspectives on Lumentum on a standalone basis, Jefferies derived multiples
for each the following six selected publicly traded optical components and subsystems segment companies that Jefferies in its professional judgment considered generally relevant to Lumentum for comparative purposes, which we refer to as the
Lumentum selected publicly traded companies:
|
|
|
Acacia Communications, Inc.,
|
|
|
|
Applied Optoelectronics, Inc.,
|
|
|
|
NeoPhotonics Corporation, and
|
Jefferies reviewed the trading price per share for each of the Lumentum selected
publicly trading companies as of March 9, 2018 (the last full trading day prior to announcement of the Merger) as a multiple of estimated CY 2018E Adjusted EPS and CY 2019E Adjusted EPS. Estimated financial information of the Lumentum selected
publicly traded companies, including Oclaro, was based on publicly available consensus median research analysts estimates, other than Oclaros fully diluted share count, which was provided to Jefferies by Oclaros management.
The approximate low to high CY 2018E Adjusted EPS multiples observed for the Lumentum selected publicly traded companies (excluding the
multiples for Acacia Communications, Inc., EMCORE Corporation and NeoPhotonics Corporation because they were greater than 30.0x or below zero and were considered not meaningful) were 13x to 24x (with a median of 19x), and the approximate low to
high CY 2019E Adjusted EPS multiples observed for the Lumentum selected publicly traded companies (excluding the multiple for EMCORE Corporation because it was not available and excluding the multiple for NeoPhotonics Corporation because it was
greater than 30.0x and considered not meaningful) were 9x to 25x (with a median of 14x), respectively. The approximate CY 2018E Adjusted EPS and CY 2019E Adjusted EPS multiples for Lumentum based on publicly available consensus median research
analysts estimates were 17x and 14x, respectively, and the CY 2018E Adjusted EPS multiple based on the Lumentum Forecasts provided by Lumentum management was 16x. The Lumentum Forecasts did not include Lumentums estimated adjusted EPS
for calendar year 2019. None of the Lumentum selected publicly traded companies are identical to Lumentum.
Jefferies also observed the
closing price per share of Lumentum common stock on March 9, 2018 (the full last trading day prior to the announcement of the Merger) and the VWAP during the
30-trading
day,
60-trading
day,
90-trading
day,
180-trading
day and last twelve months immediately preceding March 9, 2018, which
103
indicated approximate VWAPs for Lumentum common stock over such periods of $51.59 per share to $55.39 per share of Lumentum common stock, as compared to the closing price per share of Lumentum
common stock on March 9, 2018 of $68.975.
Jefferies also reviewed 16 recently published, publicly available research analysts
reports for Lumentum. These research analysts reports set a median
12-month
undiscounted price target of $75.50 per share of Lumentum common stock, with a high of $101.00 per share and a low of $55.00
per share, as compared to the closing price per share of Lumentum common stock on March 9, 2018 of $68.975.
General
Jefferies opinion was one of many factors taken into consideration by the Oclaro Board in making its determination to approve the Merger
and should not be considered determinative of the views of the Oclaro Board or Oclaro management with respect to the Merger Agreement, the Merger or the Merger Consideration.
Jefferies was selected by Oclaro based on Jefferies qualifications, expertise and reputation. Jefferies is an internationally recognized
investment banking and advisory firm. Jefferies, as part of its investment banking business, is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private placements, financial restructurings and other financial services.
On May 22, 2014, Oclaro entered into an engagement letter with Jefferies to act as Oclaros exclusive financial advisor to provide
Oclaro with financial advice and assistance in connection with the possible sale, disposition or other business transaction involving all or a material portion of its equity or assets and the possible acquisition of all or a material portion of one
or more third parties, and to render an opinion to the Oclaro Board as to the fairness, from a financial point of view, to the holders of Oclaro common stock of the Merger Consideration to be received by such holders pursuant to the Merger
Agreement. In connection with the Merger, Oclaro has agreed to pay Jefferies a transaction fee, based upon a percentage of the transaction value implied by the Merger Consideration, in the amount of approximately $30.1 million, of which
$1 million was payable upon delivery of its opinion (regardless of the conclusion reached therein) and is creditable against the transaction fee, and the remainder of which is payable contingent upon the consummation of the Merger. Oclaro has
also agreed to reimburse Jefferies for certain of its reasonable expenses incurred and to indemnify Jefferies against liabilities, including liabilities under federal securities laws, arising out of or in connection with the services rendered and to
be rendered by Jefferies under its engagement. In the past, Jefferies has provided financing services to Oclaro and may continue to do so and has received, and may receive, fees for the rendering of such services. Specifically, during the two years
prior to the date of its opinion, Jefferies received fees from Oclaro for financing services in the amount of approximately $6.3 million. During the two years prior to the date of its opinion, Jefferies did not receive any fees from Lumentum
for financing or financial advisory services. In addition, Jefferies maintains a market in the securities of Oclaro and, in the ordinary course of its business, Jefferies and its affiliates may trade or hold securities of Oclaro or Lumentum and/or
their respective affiliates for its own account and for the accounts of its customers and, accordingly, may at any time hold long or short positions in those securities. In addition, Jefferies may seek to, in the future, provide financial advisory
and financing services to Oclaro, Lumentum or entities that are affiliated with Oclaro or Lumentum, for which Jefferies would expect to receive compensation.
Certain Unaudited Prospective Financial Information
Oclaro does not, as a matter of course, publicly disclose forecasts or projections as to future performance, earnings or other results, other
than Oclaros quarterly guidance, due to the inherent difficulty of accurately predicting financial performance for future periods and the possibility that the underlying assumptions and estimates may prove incorrect. However, in normal course
for internal purposes and in connection with the process leading to the Merger Agreement, Oclaro prepared certain projections and estimates of future financial and operating performance for Oclaro for its fiscal years 2018 through 2022.
104
Oclaro management prepared
non-public
financial
projections and operating data for Oclaro as a stand-alone company, without giving effect to the Merger, in December 2017 (which we refer to as the December Projections), in January 2018 (which we refer to as the
January Projections) and in February 2018 (which we refer to as the February Projections, the December Projections, the January Projections and the February Projections are together referred to
as the Oclaro Projections). The January Projections reflected downward adjustments to the December Projections to reflect Oclaros actual financial results for the quarter ended December 30, 2018, and also reflected
Oclaro managements revised view of Oclaros financial prospects as of the date such projections were prepared. The February Projections reflected adjustments to the January Projections to reflect Oclaros actual financial
results for January 2018 and Oclaro managements revised view of Oclaros financial prospects as of the date such projections were prepared. Oclaros management also expanded the January Projections to include fiscal year
2022 for the purposes of Jefferies preparation of its opinion.
The December Projections assumed that Oclaros business
would achieve revenue growth over the forecast period, supporting a compound annual growth rate (CAGR) of 28.7% from 2018 to 2020 for overall Oclaro revenue, a CAGR of 49.4% for Adjusted EBITDA, and a CAGR of 51.4% for
non-GAAP
net income (all as defined below). The January Projections assumed that Oclaros business would achieve revenue growth over the forecast period, supporting a CAGR of 12.5% from 2018 to 2021 for
overall Oclaro revenue, a CAGR of 19.4% for Adjusted EBITDA, a CAGR of 18.9% for
non-GAAP
net income and a CAGR of 17.0% for Adjusted EPS (as defined below). The December Projections and
January Projections were provided to the Oclaro Board and to Jefferies. In connection with the evaluation of a possible transaction with Lumentum, Oclaro provided Lumentum with the December Projections and the January Projections.
The February Projections assumed that Oclaros business would achieve revenue growth over the forecast period, supporting a
CAGR of 10.9% from 2018 to 2022 for overall Oclaro revenue, a CAGR of 16.2% for Adjusted EBITDA, a CAGR of 10.6% for
non-GAAP
net income and a CAGR of 9.3% for Adjusted EPS. The February Projections were
provided to the Oclaro Board and to Jefferies, and were not provided to Lumentum.
The financial information set forth below is included
solely to give Oclaro stockholders access to relevant portions of such financial projections and is not included in this proxy statement/prospectus to influence any Oclaro stockholder to vote in favor of the merger or for any other purpose,
including whether or not to seek appraisal rights with respect to a stockholders shares of Oclaro common stock.
The Oclaro
Projections were not prepared with a view toward public disclosure, nor were they prepared with a view toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants
with respect to prospective financial information, but, in the view of Oclaro management, were prepared on a reasonable basis, reflecting the best currently available estimates and judgments at the time of their preparation. This information
represents estimates of future performance and not historical facts, and should not be relied upon as being necessarily indicative of future results, and Oclaro stockholders are cautioned not to place undue reliance on the prospective financial
information.
Neither Oclaros independent auditors, nor any other independent accountants, have compiled, examined, or performed any
procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any
association with, the prospective financial information. The reports of the independent registered public accounting firms incorporated by reference into this proxy statement/prospectus relate to the historical financial information of Oclaro and
Lumentum, respectively. Such reports do not extend to the Oclaro Projections and should not be read to do so. The Oclaro Projections include non-GAAP financial measures. Non-GAAP financial measures are not prepared in accordance with GAAP and should
be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. The Oclaro Projections may differ from published analyst estimates and forecasts and do not take into account any
events or circumstances after the date they were prepared, including the announcement of the Merger.
105
The Oclaro Projections were based on numerous variables and assumptions that are inherently
uncertain and may be beyond Oclaros managements control. Important factors that may affect actual results and result in such forecasts not being achieved include: the occurrence of any event, change or other circumstances that could give
rise to the termination of the merger agreement and the inability to complete the merger due to the failure to obtain stockholder approval of the merger or the failure to satisfy other conditions to completion of the merger, including that a
governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction, and risks and uncertainties pertaining to Oclaros business, including the risks and uncertainties detailed in its public periodic
filings with the SEC. In addition, the Oclaro Projections may be affected by Oclaros ability to achieve strategic goals, objectives and targets over the applicable period. The assumptions upon which the Oclaro Projections were based
necessarily involve judgments with respect to, among other things, future economic, competitive and regulatory conditions and financial market conditions and future business decisions that may not be realized and that are inherently subject to
significant business, economic, competitive and regulatory uncertainties and contingencies, including, among other things, the inherent uncertainty of the business and economic conditions affecting the industry in which we operate, and the risk and
uncertainties described under the section titled Special Note Regarding Forward-Looking Statements beginning on page 69 of this proxy statement/prospectus, all of which are difficult or impossible to predict accurately and many of which
are beyond Oclaros control and, upon consummation of the merger, will be beyond the control of Lumentum and the surviving corporation. The Oclaro Projections also reflect assumptions as to certain business decisions that are subject
to change.
The Oclaro Projections were developed by Oclaro management on a standalone basis without giving effect to the transactions
contemplated by the merger agreement, and therefore the Oclaro Projections do not give effect to the merger and the other transactions contemplated by the merger agreement or any changes to Oclaros operations or strategy that may be
implemented after the consummation of the merger, including any costs incurred in connection with the merger and the other transactions contemplated by the merger agreement. Furthermore, the Oclaro Projections do not take into account the effect of
any failure of the transactions contemplated by the merger agreement to be completed and should not be viewed as accurate or continuing in that context.
Accordingly, there can be no assurance that the Oclaro Projections will be realized, and actual results may vary materially from those shown
in the below financial information. The inclusion of the Oclaro Projections in this proxy statement/prospectus should not be regarded as an indication that any of Oclaro, Jefferies, Lumentum, Merger Sub or Merger Sub LLC or any of their respective
affiliates, officers, directors, advisors or other representatives considered or consider the Oclaro Projections necessarily predictive of actual future events, and the Oclaro Projections should not be relied upon as such. None of Oclaro, Jefferies,
Lumentum, Merger Sub or Merger Sub LLC or any of their respective affiliates, officers, directors, advisors or other representatives can give any assurance that actual results will not differ from the Oclaro Projections, and Oclaro undertakes no
obligation to update or otherwise revise or reconcile the Oclaro Projections to reflect circumstances existing after the date such Oclaro Projections were generated or to reflect the occurrence of future events even in the event that any or all of
the assumptions underlying the Oclaro Projections are shown to be in error. For example, the Oclaro Projections do not take into account Oclaros expected loss of revenue from ZTE as a result of the Denial Order, which will have a negative
impact on Oclaros revenues for the fiscal year ending June 30, 2018, and is anticipated to have a negative impact on Oclaros revenues in future periods during which the Denial Order remains in effect. None of Oclaro, or, to the
knowledge of Oclaro, Lumentum, Merger Sub or Merger Sub LLC, intends to make publicly available any update or other revisions to the Oclaro Projections. None of Oclaro or its respective affiliates, officers, directors, advisors or other
representatives has made or makes any representation to any stockholder or other person regarding the ultimate performance of Oclaro compared to the information contained in the Oclaro Projections or that forecasted results will be achieved. Oclaro
has made no representation to Lumentum, Merger Sub or Merger Sub LLC, in the merger agreement or otherwise, concerning the Oclaro Projections.
106
The Oclaro Projections include certain
non-GAAP
financial measures, including
non-GAAP
operating income, adjusted EBITDA, free cash flow and adjusted earnings per share (in each case, as defined below). Certain of the Oclaro Projections set forth herein may
be considered
non-GAAP
financial measures.
Non-GAAP
financial measures should not be considered in isolation from, or as a substitute for, financial information
presented in compliance with GAAP, and
non-GAAP
financial measures as used by Oclaro may not be comparable to similarly titled amounts used by other companies.
In light of the foregoing factors and the uncertainties inherent in the Oclaro Projections, Oclaro stockholders are cautioned not to place
undue, if any, reliance on the Oclaro Projections.
December Projections
(Dollars in millions, except for per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017A
|
|
|
2018E
|
|
|
2019E
|
|
|
2020E
|
|
Revenue
|
|
$
|
601
|
|
|
$
|
555
|
|
|
$
|
657
|
|
|
$
|
919
|
|
Gross Margin
|
|
$
|
237
|
|
|
$
|
206
|
|
|
$
|
255
|
|
|
$
|
360
|
|
Non-GAAP
Operating Income (1)
|
|
$
|
131
|
|
|
$
|
88
|
|
|
$
|
131
|
|
|
$
|
210
|
|
Adjusted EBITDA (2)
|
|
$
|
152
|
|
|
$
|
119
|
|
|
$
|
177
|
|
|
$
|
266
|
|
Free Cash Flow (3)
|
|
$
|
79
|
|
|
$
|
53
|
|
|
$
|
132
|
|
|
$
|
214
|
|
January Projections
(Dollars in millions, except for per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017A
|
|
|
2018E
|
|
|
2019E
|
|
|
2020E
|
|
|
2021E
|
|
Revenue
|
|
$
|
601
|
|
|
$
|
551
|
|
|
$
|
580
|
|
|
$
|
709
|
|
|
$
|
784
|
|
Gross Margin
|
|
$
|
237
|
|
|
$
|
212
|
|
|
$
|
232
|
|
|
$
|
280
|
|
|
$
|
304
|
|
Non-GAAP
Operating Income (1)
|
|
$
|
131
|
|
|
$
|
94
|
|
|
$
|
109
|
|
|
$
|
145
|
|
|
$
|
159
|
|
Adjusted EBITDA (2)
|
|
$
|
152
|
|
|
$
|
125
|
|
|
$
|
149
|
|
|
$
|
193
|
|
|
$
|
212
|
|
Free Cash Flow (3)
|
|
$
|
79
|
|
|
$
|
66
|
|
|
$
|
111
|
|
|
$
|
148
|
|
|
$
|
168
|
|
Adjusted EPS (4)
|
|
$
|
0.79
|
|
|
$
|
0.55
|
|
|
$
|
0.61
|
|
|
$
|
0.79
|
|
|
$
|
0.88
|
|
February Projections
(Dollars in millions, except for per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017A
|
|
|
2018E
|
|
|
2019E
|
|
|
2020E
|
|
|
2021E
|
|
|
2022E
|
|
Revenue
|
|
$
|
601
|
|
|
$
|
551
|
|
|
$
|
580
|
|
|
$
|
709
|
|
|
$
|
784
|
|
|
$
|
835
|
|
Gross Margin
|
|
$
|
237
|
|
|
$
|
212
|
|
|
$
|
232
|
|
|
$
|
279
|
|
|
$
|
304
|
|
|
$
|
323
|
|
Non-GAAP
Operating Income (1)
|
|
$
|
131
|
|
|
$
|
94
|
|
|
$
|
109
|
|
|
$
|
144
|
|
|
$
|
159
|
|
|
$
|
173
|
|
Adjusted EBITDA (2)
|
|
$
|
152
|
|
|
$
|
125
|
|
|
$
|
149
|
|
|
$
|
192
|
|
|
$
|
212
|
|
|
$
|
227
|
|
Free Cash Flow (3)
|
|
$
|
79
|
|
|
$
|
66
|
|
|
$
|
111
|
|
|
$
|
147
|
|
|
$
|
168
|
|
|
$
|
179
|
|
Unlevered Free Cash Flow (5)
|
|
$
|
|
|
|
$
|
32
|
|
|
$
|
53
|
|
|
$
|
80
|
|
|
$
|
78
|
|
|
$
|
104
|
|
Adjusted EPS (6)
|
|
$
|
0.79
|
|
|
$
|
0.54
|
|
|
$
|
0.53
|
|
|
$
|
0.69
|
|
|
$
|
0.75
|
|
|
$
|
0.78
|
|
(1)
|
Non-GAAP
Operating Income is a
non-GAAP
financial measure calculated by starting with Gross Margin (as shown in the table above) and
deducting total operating expense.
|
(2)
|
Adjusted EBITDA is a
non-GAAP
financial measure calculated by starting with
non-GAAP
Operating Income (as shown in the table above) and
adding back share based compensation, fixed asset disposal and restructuring / M&A charges.
|
(3)
|
Free cash flow is a
non-GAAP
financial measure calculated by starting with
non-GAAP
Adjusted EBITDA (as shown in the table above) and
deducting capital expenditures.
|
107
(4)
|
Adjusted EPS is a
non-GAAP
financial measure calculated by starting with
Non-GAAP
Operating Income (as shown in the table above) and adding
interest income, interest expense and the provision of tax, then dividing that sum by the forecasted diluted share count. The January Projections assume provision of taxes based on
non-GAAP
tax rates for
fiscal years 2018 to 2021 of 2%, 5%, 5% and 3%, respectively. The December Projections did not include Adjusted EPS.
|
(5)
|
Unlevered free cash flow is a
non-GAAP
financial measure calculated by starting with net operating profit after taxes, adding depreciation and amortization, and subtracting
capital expenditures and changes in net working capital, through the fiscal year ending 2022. Unlevered free cash flow was calculated by Jefferies using the February Projections and was not calculated for the December Projections or the
January Projections, either by Jefferies or Oclaro.
|
(6)
|
Adjusted EPS is a
non-GAAP
financial measure calculated by starting with
Non-GAAP
Operating Income (as shown in the table above) and adding
interest income, interest expense and the provision of tax, then dividing that sum by the forecasted diluted share count. The February Projections assume provision of taxes based on
non-GAAP
tax rates for
fiscal years 2018 of 3%, 2019 to 2021 of 17% and 2022 of 21%.
|
Interests of Oclaros
Directors and Executive Officers in the Merger
When considering the recommendation of the Oclaro Board with respect to the Merger, you
should be aware that Oclaros executive officers and directors may have interests in the Merger that are different from, or in addition to, those of Oclaros stockholders more generally. These interests may present such executive officers
and directors with actual or potential conflicts of interest. The Oclaro Board was aware of these interests during its deliberations on the merits of the Merger and in deciding to recommend that Oclaro stockholders vote to adopt the Merger
Agreement.
Set forth below are the descriptions of the directors and executive officers interests including, but are not
limited to, the treatment in the Merger of Oclaros equity awards, severance plans and other rights that may be held by Oclaros directors and executive officers, and the indemnification of current and former Oclaro directors and officers
by the surviving company. The dates used in the discussions below to quantify certain of these interests have been selected for illustrative purposes only, and they do not necessarily reflect the dates on which certain events will occur.
Treatment of Oclaro Equity Awards in the Merger
The equity compensation held by Oclaros executive officers will generally be treated in the Merger in the same manner as similar awards
held by other employees of Oclaro. See the section titled The Merger AgreementTreatment of Oclaro Options and Other Equity-Based Awards beginning on page 125 of this proxy statement/prospectus. In connection with the Merger, and in
order to clarify how the performance goals for Oclaro performance stock units (PSUs) granted in 2017 (which would be impacted by the integration of Oclaros operations with those of Lumentum) would be measured at the effective time
of the Merger for purposes of determining
pay-out
levels and to incentivize Oclaros executive officers to remain with Oclaro through the consummation of the Merger, the compensation committee of the
Oclaro Board determined that such Oclaro PSUs will be converted, contingent upon the occurrence of the Effective Time, into time-based awards vesting through August 2020, with the underlying performance milestones deemed achieved based on the
maximum level of achievement (150% of target). All outstanding Oclaro restricted stock awards held by
non-employee
directors of Oclaro will vest in full on the Effective Time in accordance with their terms and
conditions.
The following table provides a summary of the Oclaro restricted stock awards, restricted stock unit awards
(RSUs), PSUs and stock options held by Oclaros directors and executive officers as of May 1, 2018, which is the assumed date of the closing of the Merger for the purposes of this table. The following table also assumes that no
Oclaro directors or executive officers will be granted additional equity awards after May 1, 2018, the latest practicable date before the filing of this proxy statement/prospectus. In accordance with applicable SEC
108
rules, the dollar values below are based on a per share price of Oclaro common stock of $10.01, which is the average closing price of Oclaro common stock on NASDAQ over the first five business
days following the first public announcement of the merger on March 12, 2018, rounded up to the nearest whole cent.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Oclaro
Stock
Options
(#)(1)
|
|
|
Oclaro
RSUs (#)
|
|
|
Oclaro
PSUs
(#)(2)
|
|
|
Oclaro
Restricted
Stock
Awards
(#)(3)
|
|
|
Total
Consideration
in respect of
Equity
Awards
($)
|
|
Greg Dougherty
|
|
|
31,560
|
|
|
|
331,326
|
|
|
|
432,150
|
|
|
|
|
|
|
$
|
7,807,707
|
|
Pete Mangan
|
|
|
15,000
|
|
|
|
161,235
|
|
|
|
206,235
|
|
|
|
|
|
|
$
|
3,790,275
|
|
Yves LeMaitre
|
|
|
23,200
|
|
|
|
151,235
|
|
|
|
191,235
|
|
|
|
|
|
|
$
|
3,434,785
|
|
David Teichmann
|
|
|
85,000
|
|
|
|
120,298
|
|
|
|
148,735
|
|
|
|
|
|
|
$
|
3,347,570
|
|
Adam Carter
|
|
|
100,000
|
|
|
|
107,905
|
|
|
|
115,405
|
|
|
|
|
|
|
$
|
3,067,333
|
|
Craig Cocchi
|
|
|
|
|
|
|
130,000
|
|
|
|
120,000
|
|
|
|
|
|
|
$
|
2,502,500
|
|
Walter Jankovic
|
|
|
|
|
|
|
160,000
|
|
|
|
|
|
|
|
|
|
|
$
|
1,601,600
|
|
Thomas Gordon Beck Mason
|
|
|
|
|
|
|
109,575
|
|
|
|
99,575
|
|
|
|
|
|
|
$
|
2,093,592
|
|
Lisa Paul
|
|
|
60,000
|
|
|
|
94,155
|
|
|
|
102,905
|
|
|
|
|
|
|
$
|
2,455,571
|
|
Marissa Peterson
|
|
|
17,046
|
|
|
|
|
|
|
|
|
|
|
|
18,762
|
|
|
$
|
296,385
|
|
Edward Collins
|
|
|
35,779
|
|
|
|
|
|
|
|
|
|
|
|
18,762
|
|
|
$
|
369,358
|
|
Kendall Cowan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,762
|
|
|
$
|
187,808
|
|
Denise Haylor
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,346
|
|
|
$
|
133,593
|
|
Ian Small
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,153
|
|
|
$
|
421,952
|
|
William L. Smith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,762
|
|
|
$
|
187,808
|
|
Joel A. Smith III
|
|
|
31,560
|
|
|
|
|
|
|
|
|
|
|
|
18,762
|
|
|
$
|
353,120
|
|
(1)
|
All stock options are fully vested with the exception of (a) 521 unvested stock options held by David Teichmann, (b) 8,334 unvested stock options held by Adam Carter and (c) 10,000 unvested stock options held by Lisa
Paul.
|
(2)
|
In connection with the Merger, the Oclaro Board determined that the Oclaro PSUs granted to Oclaros executive officers in August 2017 will be converted, contingent upon the occurrence of the Effective Time, into
time-based awards vesting through August 2020, with the underlying performance milestones deemed achieved based on the maximum level of achievement (150% of target). The amounts in this column reflect the number of PSUs at 150% of target.
|
(3)
|
All outstanding Oclaro restricted stock awards held by
non-employee
directors of Oclaro will vest in full on the Effective Time in accordance with their terms and conditions.
|
Employment Agreement with Mr. Greg Dougherty
Oclaros employment agreement with Mr. Greg Dougherty provides that if Oclaro terminates his employment without cause
(and other than for death or disability) or if he resigns his employment with good reason (a Qualifying Termination), then he will be eligible to receive the following payments and benefits:
|
|
|
A cash payment equal to the sum of twice his annual base salary and twice his target annual cash incentive award opportunity;
|
|
|
|
Accelerated vesting of all outstanding and unvested or unearned restricted stock and/or restricted stock unit awards which vest based on his continued employment; and
|
|
|
|
A monthly payment in the amount of $6,000 for 24 months in lieu of continuing other benefits, such as health and welfare benefits.
|
In addition, if Mr. Doughertys employment is terminated as the result of a Qualifying Termination on or within twelve months
following a change in control of Oclaro (which includes the merger), then the payments
109
and benefits to which he would be eligible would include, in addition to those set forth above for a Qualifying Termination, accelerated vesting of all outstanding and unvested or unearned
restricted stock and/or restricted stock unit awards, whether or not vesting is based on his continued employment.
To receive the
severance benefits under his employment agreement with Oclaro, Mr. Dougherty must sign, and allow to become effective within 30 days after the Qualifying Termination, Oclaros standard form of release of claims.
Executive Severance and Retention Agreements
Each of Oclaros executive officers other than Mr. Dougherty is a party to an Executive Severance and Retention Agreement (the
Retention Agreement). The Retention Agreement provides that if an executive officer dies or his or her employment with Oclaro is terminated without cause (and not due to disability), in either case more than 30 days prior to
a change in control of Oclaro (which includes the merger), the executive officer will be eligible to receive a lump sum cash payment, in addition to accrued benefits, comprised of the following amounts:
|
|
|
an amount (the Pro Rata Bonus) equal to the product of (i) the average of the executive officers bonuses earned during the last three full fiscal years (or such lesser number of years in which the
executive earned a bonus), divided by 2, and (ii) a fraction, the numerator of which is the number of days before the separation from service (as defined under Treasury Regulations
Section 1.409A-1(h))
in the current bonus period applicable to the current bonus, and the denominator of which is the total number of days in the current bonus period applicable to the current bonus; and
|
|
|
|
an amount equal to the result obtained by multiplying the executive officers reference salary by a fraction, the numerator of which is eight months plus one additional month of base salary for each
whole year of the executive officers employment (up to a maximum of 18 months) and the denominator of which is 12.
|
However, if the employment of an executive officer is terminated without cause (and not due to disability), upon his or her death,
or the executive officer resigns for good reason on or within 12 months following, or within 30 days before, a change in control of Oclaro (which includes the Merger), and only if such termination constitutes a separation
from service, the executive officer will be eligible to receive a lump sum cash payment, in addition to accrued benefits, comprised of the following amounts:
|
|
|
an amount equal to 1.5 times the executive officers reference salary then in effect;
|
|
|
|
an amount equal to the average of the executive officers bonuses earned during the last 3 full fiscal years (or such lesser number of years in which the executive earned a bonus); and
|
|
|
|
an amount equal to $72,000 which the executive officer may, but is not required to, use to continue his or her existing group health coverage (medical, dental, and vision) then in effect.
|
In addition to the above payment, the executive officer will also receive full acceleration of his or her outstanding equity awards and will
have until the earliest of (i) the first anniversary of the separation from service, (ii) the expiration of the original term of the option or (iii) on the first date on which a change in control occurs if options are not assumed or
replaced by the successor entity, in order to exercise any outstanding stock option accelerated in accordance with such provisions.
To
receive any payments or benefits under the Retention Agreement, the executive officer must sign, and allow to become effective not later than the 55th day after the executive officers separation from service, a separation agreement and release
in a form reasonably acceptable to Oclaro that contains, among other standard provisions, the form of release of claims in substantially the form attached to the Retention Agreement. In addition, the executive officer must also continue to comply
with his or her continuing obligations to Oclaro under applicable law and his or her confidential information and inventions assignment agreement. Payments will be made in a single lump sum on or before the 55th day after the executive
officers separation from service.
110
See the section titled
Quantification of Potential Payments and Benefits
to Oclaros Named Executive Officers in Connection with the Merger below for an estimate of the value of the payments and benefits due to Oclaros named executive officers upon a qualifying termination at or following the Effective
Time. None of Oclaros executive officers are entitled to any
gross-up
payments in respect of any excise taxes imposed on excess parachute payments under Sections 280G and 4999 of the
Code.
Compensation and Benefit Arrangements Following the Effective Time
The Merger Agreement provides that Lumentum will, or will cause the surviving company to, provide each employee of Oclaro or its subsidiaries
who continues to be employed by Lumentum or the surviving company or any of their respective subsidiaries following the effective time (referred to as continuing employees) with certain compensation and benefits during the period commencing at the
Effective Time and ending on the first anniversary of the Effective Time, as described below in the section titled The Merger AgreementEmployee Matters beginning on page 141.
Quantification of Potential Payments and Benefits to Oclaros Named Executive Officers in Connection with the Merger
The information set forth in the table below is intended to comply with Item 402(t) of the SECs
Regulation S-K,
which requires disclosure of information about certain compensation for each named executive officer of Oclaro that is based on, or otherwise relates to, the Merger. For additional details
regarding the terms of the payments and benefits described below, see the discussion under the caption Interests of Oclaros Directors and Executive Officers in the Merger above.
The amounts shown in the table below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the
relevant date, including the assumptions described below and in the footnotes to the table, and do not reflect certain compensation actions that may occur before completion of the Merger, including certain compensation actions that Oclaro is
permitted to take as described below in the section titled The Merger AgreementRestrictions on Oclaros Business Pending the Closing. As a result, the amount, if any, that a named executive officer actually receives in the
Merger may materially differ from the amounts set forth in the table. For purposes of calculating the amounts set forth in the table, the following assumptions were used:
|
|
|
A per share price of Oclaro common stock of $10.01, which is the average closing price of Oclaro common stock on NASDAQ over the first five business days following the first public announcement of the merger on
March 12, 2018, rounded up to the nearest whole cent;
|
|
|
|
The effective time of the Merger is May 1, 2018, which is the assumed date of the closing of the Merger solely for purposes of the disclosure in this section;
|
|
|
|
Each of the named executive officers was either involuntarily terminated without cause or the named executive officer resigned for good reason (as such terms are defined in the relevant
employment agreement or change in control severance agreement), entitling each such named executive officer to the cash severance payments, employee benefits and accelerated equity vesting described above under Interests of Oclaros
Directors and Executive Officers in the Merger, in either case, on or immediately following the assumed effective time of May 1, 2018; and
|
|
|
|
Quantification of outstanding equity awards is calculated based on the outstanding equity awards held by each named executive officer as of May 1, 2018, the latest practicable date before the filing of this proxy
statement/prospectus, and the assumption that no additional equity awards are granted to the named executive officers after such date.
|
111
Golden Parachute Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name (1)
|
|
Cash ($)(2)
|
|
|
Equity ($)(3)
|
|
|
Perquisites/
Benefits ($) (4)
|
|
|
Total ($)
|
|
Greg Dougherty
|
|
|
2,400,000
|
|
|
|
7,642,395
|
|
|
|
144,000
|
|
|
|
10,186,395
|
|
Pete Mangan
|
|
|
757,750
|
|
|
|
3,678,374
|
|
|
|
72,000
|
|
|
|
4,508,124
|
|
Yves LeMaitre
|
|
|
757,750
|
|
|
|
3,428,124
|
|
|
|
72,000
|
|
|
|
4,257,874
|
|
David Teichmann
|
|
|
706,380
|
|
|
|
2,697,308
|
|
|
|
72,000
|
|
|
|
3,475,688
|
|
Adam Carter
|
|
|
646,904
|
|
|
|
2,304,672
|
|
|
|
72,000
|
|
|
|
3,023,576
|
|
(1)
|
Jim Haynes, who was a named executive officer for fiscal year 2017, retired on March 31, 2018, at which time his then-outstanding equity awards were forfeited. He received no change in control benefits in
connection with his retirement.
|
(2)
|
The estimated amounts listed in this column represent the double-trigger cash severance payments that Oclaros named executive officers would be entitled to receive in connection with a qualifying
termination of employment, assuming such termination occurred at or immediately following the Effective Time. For additional information regarding these amounts, see the section titled Interests of Oclaros Directors and Executive
Officers in the Merger beginning on page 108 of this proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Base Salary
Severance ($)
|
|
|
Non-Equity
Incentive
Compensation
Severance ($)
|
|
|
Total ($)
|
|
Greg Dougherty
|
|
|
1,200,000
|
|
|
|
1,200,000
|
|
|
|
2,400,000
|
|
Pete Mangan
|
|
|
525,000
|
|
|
|
232,750
|
|
|
|
757,750
|
|
Yves LeMaitre
|
|
|
525,000
|
|
|
|
232,750
|
|
|
|
757,750
|
|
David Teichmann
|
|
|
495,000
|
|
|
|
211,380
|
|
|
|
706,380
|
|
Adam Carter
|
|
|
450,000
|
|
|
|
196,904
|
|
|
|
646,904
|
|
(3)
|
The estimated amounts listed in this column represent the estimated aggregate value that Oclaros named executive officers would be entitled to receive in connection with the double trigger acceleration
of their outstanding and unvested equity awards, assuming such named executive officers incurred a qualifying termination of employment at or immediately following the Effective Time, as set forth in more detail below. For additional information
regarding the named executive officers rights to accelerated vesting of outstanding equity awards, see the section titled Interests of Oclaros Directors and Executive Officers in the Merger beginning on page 108 of this
proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Aggregate
Value of
Unvested
Oclaro Options
($)
|
|
|
Aggregate
Value of
Unvested
Oclaro RSUs
($)
|
|
|
Aggregate
Value of
Unvested
Oclaro PSUs
($)
|
|
|
Total ($)
|
|
Greg Dougherty
|
|
|
|
|
|
|
3,316,573
|
|
|
|
4,325,822
|
|
|
|
7,642,395
|
|
Pete Mangan
|
|
|
|
|
|
|
1,613,962
|
|
|
|
2,064,412
|
|
|
|
3,678,374
|
|
Yves LeMaitre
|
|
|
|
|
|
|
1,513,862
|
|
|
|
1,914,262
|
|
|
|
3,428,124
|
|
David Teichmann
|
|
|
4,288
|
|
|
|
1,204,183
|
|
|
|
1,488,837
|
|
|
|
2,697,308
|
|
Adam Carter
|
|
|
69,339
|
|
|
|
1,080,129
|
|
|
|
1,155,204
|
|
|
|
2,304,672
|
|
(4)
|
The estimated amounts listed in this column represent double trigger lump sum cash payments that may but are not required to be used for continuing other benefits, such as health and welfare benefits, and
that Oclaros named executive officers would be entitled to receive in connection with a qualifying termination of employment, assuming such termination occurred at or immediately following the Effective Time. For additional information
regarding these amounts, see the section titled Interests of Oclaros Directors and Executive Officers in the Merger beginning on page 108 of this proxy statement/prospectus.
|
112
Indemnification and Insurance
The Merger Agreement provides that all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior
to the Effective Time in favor of certain indemnified parties, including the directors and executive officers of Oclaro, will survive the Merger and continue in full force and effect in accordance with their terms, as set forth in the Oclaro
organizational documents or any indemnification agreements in existence at the time of execution of the Merger Agreement, for six years following the effective time.
The Merger Agreement requires Lumentum to cause the surviving company to maintain, for a period of six years after the Effective Time,
Oclaros existing directors and officers liability insurance policy, or substantially comparable insurance on terms with respect to coverage and amounts no less favorable to the insured.
Lumentum Board Seat
Prior to the
Effective Time, Lumentum shall appoint one member of the Oclaro Board to serve as a member of the Lumentum Board effective as of immediately after the Effective Time to serve until the next annual meeting of Lumentum stockholders in accordance with
the Lumentum Charter and the Lumentum Bylaws.
Treatment of Oclaro Options and Other Equity-Based Awards
The Merger Agreement provides that at the Effective Time, each Oclaro RSU that is outstanding and unvested immediately before the
Effective Time (and does not vest as a result of the Merger) will be assumed by Lumentum on substantially the same terms and conditions as applied to the related Oclaro RSU immediately before the Effective Time (including the applicable vesting
schedule), except the number of shares of Lumentum common stock subject to each Assumed RSU will equal the product of (i) the number of shares of Oclaro common stock underlying the applicable unvested Oclaro RSU immediately before the Effective
Time (with any performance milestones deemed achieved based on maximum level of performance) multiplied by (ii) the Equity Award Exchange Ratio (rounded down to the nearest whole share).
The Merger Agreement also provides that any vested and unsettled Oclaro RSU and each outstanding and unvested share of Oclaro Restricted Stock
as of immediately before the Effective Time will be treated as outstanding Oclaro common stock and will receive the Merger Consideration, subject to applicable tax withholding.
The Merger Agreement also provides that except as provided in the next paragraph, each Oclaro Option that is outstanding, whether vested or
unvested, immediately before the Effective Time will be assumed by Lumentum on substantially the same terms and conditions as applied to the related Oclaro Option immediately before the Effective Time (including the applicable vesting schedule),
except (A) the number of shares of Lumentum common stock subject to each Assumed Option will equal the product of (x) the number of shares of Oclaro common stock underlying such Assumed Option immediately before the Effective Time
multiplied by (y) the Equity Award Exchange Ratio (rounded down to the nearest whole share), and (B) the per share exercise price of each Assumed Option will equal the quotient determined by dividing (x) the exercise price per share
of such Assumed Option immediately before the Effective Time by (y) the Equity Award Exchange Ratio (rounded up to the nearest whole cent).
The Merger Agreement also provides that each Cancelled Oclaro Option will be cancelled and converted into the right to receive the Merger
Consideration in respect of each net option share of Oclaro common stock covered by such Cancelled Oclaro Option, subject to applicable tax withholding. The number of net option shares will be determined under a formula
specified in the Merger Agreement that takes into account the exercise price of such Cancelled Oclaro Option. Any fractional net option shares (after aggregating all shares
113
represented by all Cancelled Oclaro Options held by such holder) will be settled in cash based on the cash equivalent value of the Merger Consideration, subject to applicable tax withholding. If
the exercise price per share of any Cancelled Oclaro Option is equal to or greater than the Merger Consideration, such Oclaro Option will be cancelled without payment.
The Merger Agreement also provides that each Oclaro SAR that is outstanding, whether vested or unvested, will be cancelled and converted into
the right to receive, a cash amount equal to the product of (x) the number of shares of Oclaro common stock issuable upon exercise of the Oclaro SAR, multiplied by (y) the excess, if any of (1) the cash equivalent value of the Merger
Consideration over (2) the strike price of such Oclaro SAR, subject to applicable tax withholding.
The Merger Agreement also
provides that any applicable taxes required to be withheld from the Merger Consideration payable in respect of vested Oclaro RSUs, Oclaro Restricted Stock, and Cancelled Oclaro Options will first reduce the Cash Consideration portion of the Merger
Consideration, with any remaining amount reducing the Stock Consideration portion of the Merger Consideration (with the value of the stock portion for purposes of such deduction determined based on the Parent Average Closing Price).
Financing
Source and Amount of Funds
Lumentum plans to finance the Merger with approximately $413.6 million of cash from the combined balance sheets of Lumentum and Oclaro,
approximately $647.5 million in Lumentum common stock, and approximately $550 million in new term loans (the Debt Financing). These amounts are sufficient to (1) pay Oclaros stockholders the amounts due to them under
the Merger Agreement, (2) refinance or otherwise discharge any outstanding indebtedness of Oclaro required to be repaid at the Closing, and (3) pay any fees, expenses and taxes incurred in connection with the Merger.
On March 11, 2018, in connection with execution of the Merger Agreement, Lumentum entered into a Commitment Letter with DBNY and DBSI
pursuant to which DBNY committed to provide to Lumentum a senior secured term loan facility in an aggregate principal amount of up to $550 million (the Committed Term Loan Facility), subject to the execution of definitive
documentation and the satisfaction of customary closing conditions. Lumentum expects to enter into definitive documentation for the Committed Term Loan Facility concurrently with the consummation of the transactions contemplated by the Merger
Agreement. In addition to the Committed Term Loan Facility, DBSI has agreed to assist Lumentum with the syndication of additional uncommitted term loans in an aggregate principal amount of up to $250 million upon the request of Lumentum (the
Uncommitted Term Loan Facility and, together with the Committed Term Loan Facility, the Term Loan Facilities). The Uncommitted Term Loan Facility is not committed and is subject to DBSIs ability to syndicate such loans
in full prior to the Closing Date. In the event that the Uncommitted Term Loan Facility is successfully syndicated on or prior to the Closing Date, such Uncommitted Term Loan Facility would be included in the definitive documentation for the
Committed Term Loan Facility.
DBNYs commitment to provide the Committed Term Loan Facility under the Commitment Letter expires on
the first to occur of (1) 5:00 p.m., New York City time, on December 11, 2018, subject to the extension of such time to 5:00 p.m., New York City time, on March 11, 2019, pursuant to the terms of the Merger Agreement, (2) the date
of the valid termination or abandonment of the Merger Agreement in accordance with its terms, and (3) the date of the closing of the Merger without the use of the Committed Term Loan Facility.
The availability of the Committed Term Loan Facility is conditioned on the consummation of the Merger in accordance with the Merger Agreement
and on other conditions including, without limitation, the following (subject, in each case, to customary certain funds provisions):
|
|
|
execution of final definitive documentation with respect to the Committed Term Loan Facility;
|
114
|
|
|
absence of any Company Material Adverse Effect (as defined in the Merger Agreement) since March 11, 2018;
|
|
|
|
absence of Oclaro indebtedness (other than certain Oclaro indebtedness permitted to survive Closing);
|
|
|
|
subject to certain limitations, the taking of certain actions necessary to establish and perfect a security interest in specified items of collateral;
|
|
|
|
delivery of customary legal opinions, a solvency certificate in a
pre-agreed
form, and certain other customary resolutions, certificates and other documents;
|
|
|
|
delivery of certain historical financial statements (including pro forma financial statements) of Lumentum and Oclaro;
|
|
|
|
accuracy of specified representations and warranties in the Merger Agreement and the accuracy in all material respects of specified representations and warranties to be contained in the definitive documentation for the
Committed Term Loan Facility;
|
|
|
|
delivery of documentation and other information about the borrowers and guarantors required under applicable know your customer and anti-money laundering rules and regulations (including the PATRIOT Act);
|
|
|
|
payment of certain fees and expenses; and
|
|
|
|
the lead arrangers shall have received information required to prepare a customary confidential information memorandum for the Committed Term Loan Facility and shall have been afforded a period at least 15 consecutive
business days after the date on which the Form
S-4
is declared effective to attempt to syndicate the Committed Term Loan Facility and solicit the required approvals (provided that if, on July 10, 2018,
DBSI and Lumentum determine in good faith that the effective date of the Form
S-4
could occur between August 1, 2018 and August 15, 2018, such 15 consecutive business day period shall instead
commence on July 16, 2018).
|
Under the Committed Term Loan Facility, Lumentum will be able to borrow under (1) a
Base Rate, which is defined as a fluctuating rate per annum equal to the greatest of (A) the prime rate then in effect, (B) the federal funds rate then in effect, plus 0.50%, and (C) the LIBOR rate determined on the basis
of a
one-month
interest period (and giving effect to a LIBOR floor of 0.00%), plus 1.00% or (2) an adjusted LIBOR rate, subject to a floor of 0.00%, plus, in each case, an applicable
margin. Lumentum expects the term loans under the Committed Term Loan Facility to have an applicable margin of 2.50% in the case of LIBOR rate loans and 1.50% in the case of Base Rate loans (provided, however, that the applicable margin
set forth in the definitive documentation for the Committed Term Loan Facility may be higher or lower depending on market conditions at the time of syndication).
The obligations under the Term Loan Facilities will be guaranteed by certain material domestic subsidiaries of Lumentum, including, without
limitation, Oclaro. The obligations under the Term Loan Facilities will be Lumentums and the guarantors senior secured obligations, secured by a lien on substantially all of Lumentums and each guarantors assets (collectively,
the Collateral) and will rank senior to any of Lumentums and each guarantors unsecured indebtedness to the extent of the value of the Collateral.
The definitive documentation governing the Term Loan Facilities will contain customary affirmative and negative covenants, including covenants
that limit or restrict Lumentums and its subsidiaries ability to, among other things, incur indebtedness, grant liens, undergo certain fundamental changes, dispose of assets, make investments, enter into transactions with affiliates, and
make certain restricted payments, in each case subject to limitations and exceptions to be set forth in the definitive documentation governing the Term Loan Facilities. The definitive documentation governing the Term Loan Facilities will also
contain customary events of default that include, among other things, certain payment defaults, covenant defaults, cross-defaults to other indebtedness, change of control defaults, judgment defaults, and bankruptcy and insolvency defaults. The Term
Loan Facilities will not be subject to any financial maintenance covenants.
115
Lumentum has agreed to use, and to cause its subsidiaries to use, reasonable best efforts to
consummate the Debt Financing on the terms and subject to the conditions described in the Commitment Letter. If any portion of the Debt Financing (including after giving effect to the exercise of any market flex provisions contained in
the Commitment Letter or any other agreements entered into in connection therewith) becomes unavailable to Lumentum on the terms and conditions contemplated by the Commitment Letter, Lumentum must use its reasonable best efforts to obtain
alternative financing on terms and conditions not materially less favorable in the aggregate to Lumentum than those set forth in the Commitment Letter and in an amount at least equal to the amount (taking into account cash on hand and other sources
of funds available to Lumentum) required to consummate the Merger.
As of the date of this proxy statement/prospectus, no alternative
financing arrangements or alternative financing plans have been made in the event that the Committed Term Loan Facility is not available. The availability of the Committed Term Loan Facility is subject to certain conditions but is not subject to due
diligence or other similar conditions. Further, the Commitment Letter contains customary certain funds provisions which materially limit the number and scope of conditions precedent to the funding of the new credit facilities on the
Closing Date. However, such financing may not be considered certain.
The definitive documentation governing the Term Loan Facilities has
not been finalized and, accordingly, the actual terms of the Term Loan Facilities may differ from those described in this proxy statement/prospectus.
Oclaro cannot assure you that the amounts committed under the Commitment Letter, together with Lumentums and Oclaros combined cash
and cash equivalents on hand, will be sufficient to satisfy the Cash Consideration. Those amounts might be insufficient if, among other things, DBNY (or any other commitment party under the Commitment Letter) fails to fund the committed amounts in
breach of its financing commitment or if the conditions to such commitment are not met. Although obtaining the proceeds of any financing, including the financing under the Commitment Letter, is not a condition to the consummation of the Merger, the
failure of Lumentum to obtain any portion of the Debt Financing (or any alternative financing) may result in the failure of the Merger to be consummated, in which case Lumentum would be in material breach of its obligations under the Merger
Agreement.
Board of Directors and Management After the Merger
For information on Lumentums current directors and executive officers, please see Lumentums Proxy Statement for its 2017 Annual
Meeting of Stockholders, filed with the SEC on September 19, 2017, and Lumentums Current Report on
Form 8-K, filed
with the SEC on November 8, 2017. For information on Oclaros
current directors and executive officers, please see Oclaros Proxy Statement for its 2017 Annual Meeting of Stockholders, filed with the SEC on September 27, 2017. See the section titled Where You Can Find More Information
beginning on page 169 of this proxy statement/prospectus.
Regulatory Clearances Required for the Merger
Lumentum and Oclaro have each agreed to take certain actions in order to obtain regulatory clearance required to consummate the
Merger. The Merger is subject to review by the DOJ and FTC under the HSR Act. Under this statute, Lumentum and Oclaro are required to make
pre-merger
notification filings and await the expiration or early
termination of the statutory waiting period prior to completing the Merger. Lumentum and Oclaro submitted
pre-merger
notification filings under HSR Act on March 23, 2018. The parties received notice from
the FTC of early termination of the waiting period on April 4, 2018, which satisfies the closing conditions under the Merger Agreement related to receipt of antitrust approval in the United States. The Merger is also subject to review by
governmental authorities in the Peoples Republic of China and requires
pre-merger
notification and the observance of an applicable waiting period in the Peoples Republic of China.
During or after the statutory waiting periods and clearance of the Merger, and even after completion of the Merger, the DOJ, the FTC or
governmental authorities in the Peoples Republic of China could challenge or seek
116
to block the Merger under relevant antitrust laws, as such governmental authority may deem necessary or desirable in the public interest. Other governmental authorities or competition agencies
with jurisdiction over the Merger could also initiate action to challenge or block the Merger. In addition, in some jurisdictions, a competitor, customer or other third party could initiate a private action under the antitrust laws challenging or
seeking to enjoin the Merger, before or after it is completed. Lumentum and Oclaro cannot be sure that a challenge to the Merger will not be made or that, if a challenge is made, Lumentum and/or Oclaro will prevail.
Dividends
The Merger Agreement provides that no dividends or other distributions with a record date after the Effective Time with respect to Lumentum
common stock will be paid to the holder of any shares of Oclaro common stock until such holder properly surrenders its shares in accordance with the procedures described in the section titled Exchange Agent; Letter of Transmittal
beginning on page 127 of this proxy statement/prospectus. After proper surrender, Lumentum will cause such holder to be paid, without interest, (i) the amount of dividends or other distributions with a record date after the Effective Time and
theretofore paid with respect to such shares of Lumentum common stock to which such holder is entitled pursuant to the Merger Agreement and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date subsequent to such surrender payable with respect to such shares of Lumentum common stock.
Listing of Shares of Lumentum Common Stock
It is a condition to the completion of the Merger that the shares of Lumentum common stock to be issued to Oclaro stockholders be approved for
listing on NASDAQ prior to the Effective Time, subject to official notice of issuance.
Delisting and
Deregistration of Oclaro Common Stock
Upon completion of the Merger, shares of Oclaro common stock currently listed on NASDAQ will be
delisted on NASDAQ and will subsequently be deregistered under the Exchange Act.
Appraisal Rights
If the Merger is completed, holders of shares of Oclaro common stock who do not vote in favor of the adoption of the Merger Agreement, who
continuously hold such shares as of immediately prior to and through the Effective Time of the Merger and who properly demand appraisal of their shares may be entitled to appraisal rights in connection with the Merger under Section 262 of the
DGCL
The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in
its entirety by the full text of Section 262 of the DGCL, which is attached to this proxy statement/prospectus as
Annex
C
and incorporated herein by reference. The following summary does not constitute any legal or
other advice nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262 of the DGCL. All references in Section 262 of the DGCL and in this summary to a stockholder or a
holder of shares are to the record holder of Oclaro common stock unless otherwise noted herein. Only a holder of record of Oclaro common stock is entitled to demand appraisal rights for the shares registered in that holders name. A
person having a beneficial interest in shares of Oclaro common stock held of record in the name of another person, such as a broker, bank or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly
and in a timely manner to perfect appraisal rights.
If you hold your shares of Oclaro common stock through a broker, bank or other nominee and you wish to exercise appraisal rights, you should consult with your broker, bank or the other
nominee.
Any stockholder contemplating the exercise of such appraisal rights should review carefully the provisions of
Section 262 of the DGCL, particularly the procedural steps required to properly demand and perfect such
117
rights.
Failure to follow the steps required by Section
262
of the DGCL for demanding and perfecting appraisal rights may result in the loss of such rights.
Under
Section 262 of the DGCL, holders of shares of Oclaro common stock who (i) do not vote in favor of the adoption of the Merger Agreement; (ii) continuously are the record holders of such shares through the Effective Time; and
(iii) otherwise follow the procedures set forth in Section 262 of the DGCL may be entitled to have their shares appraised by the Court of Chancery and to receive payment in cash of the fair value of the shares, exclusive of any
element of value arising from the accomplishment or expectation of the Merger, as determined by the Court of Chancery, together with interest to be paid upon the amount determined to be fair value, if any, as determined by the Court of Chancery.
However, immediately before the Merger, Oclaro common stock will be listed on a national exchange. Therefore, pursuant to Section 262(g) of the DGCL, after an appraisal petition has been filed, the Court of Chancery will dismiss appraisal
proceedings as to all holders of shares of common stock who asserted appraisal rights unless (a) the total number of shares for which appraisal rights have been pursued and perfected exceeds 1% of the outstanding shares of Oclaro common stock
as measured in accordance with subsection (g) of Section 262 of the DGCL or (b) the value of the Merger Consideration in respect of such shares exceeds $1 million. We refer to these conditions as the ownership
thresholds. Unless the Court of Chancery, in its discretion, determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective Time through the date the judgment is paid at 5% over
the Federal Reserve discount rate (including any surcharge) as established from time to time during such period; provided, however, that at any time before the Court of Chancery enters judgment in the appraisal proceeding, the surviving company may
pay to each stockholder entitled to appraisal an amount in cash, in which case any such interest will accrue after the time of such payment only on the amount that equals 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 of Chancery and (2) interest theretofore accrued, unless paid at such time. The surviving company is under no obligation to make such voluntary cash payment prior to such entry of
judgment.
Under Section 262 of the DGCL, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting, must notify each of its stockholders who was such on the record date for notice of such meeting with respect to shares for which appraisal rights are available that appraisal rights are
available and include in the notice a copy of Section 262 of the DGCL. This proxy statement/prospectus constitutes Oclaros notice to stockholders that appraisal rights are available in connection with the Merger, and the full text of
Section 262 of the DGCL is attached to this proxy statement/prospectus as
Annex
C
. Any holder of Oclaro common stock who wishes to exercise appraisal rights, or who wishes to preserve such holders right to do so,
should review the following discussion and
Annex
C
carefully because failure to timely and properly comply with the procedures specified will result in the loss of appraisal rights. A stockholder who loses his, her or its
appraisal rights will be entitled to receive the Merger Consideration described in the Merger Agreement (without interest). Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of common stock,
Oclaro believes that if a stockholder considers exercising such rights, such stockholder should seek the advice of legal counsel.
Oclaro
stockholders wishing to exercise the right to seek an appraisal of their shares of common stock must do
ALL
of the following:
|
|
|
the stockholder must not vote in favor of the proposal to adopt the Merger Agreement;
|
|
|
|
the stockholder must deliver to Oclaro a written demand for appraisal before the vote on the adoption of the Merger Agreement at the special meeting;
|
|
|
|
the stockholder must continuously hold the shares from the date of making the demand through the Effective Time (a stockholder will lose appraisal rights if the stockholder transfers the shares before the Effective
Time); and
|
|
|
|
the stockholder or the surviving company must file a petition in the Court of Chancery requesting a determination of the fair value of the shares within 120 days after the Effective Time. The surviving company is under
no obligation to file any such petition and has no intention of doing so.
|
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In addition, for any stockholders to exercise appraisal rights, at least one of the
ownership thresholds must be met.
Filing Written Demand
. Any holder of Oclaro common stock wishing to exercise appraisal rights
must deliver to Oclaro, before the vote on the adoption of the Merger Agreement at the special meeting, a written demand for the appraisal of the stockholders shares, and that stockholder must not vote, in person or by proxy, such shares in
favor of the adoption of the Merger Agreement. A holder of shares of Oclaro common stock wishing to exercise appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of
record through the Effective Time, since such person will lose his, her or its appraisal rights if the shares are transferred prior to the effective date of the Merger. A proxy that is submitted and does not contain voting instructions will, unless
timely revoked, be voted in favor of the adoption of the Merger Agreement, and it will constitute a waiver of the stockholders right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder
who submits a proxy and who wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the adoption of the Merger Agreement or abstain from voting on the adoption of the Merger Agreement. Neither voting against
the adoption of the Merger Agreement, nor submitting a proxy against the adoption of the Merger Agreement, nor abstaining from voting or failing to vote on the proposal to adopt the Merger Agreement, will in and of itself constitute a written demand
for appraisal satisfying the requirements of Section 262 of the DGCL. The written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the Merger Agreement. The written demand must reasonably inform
Oclaro of the identity of the holder as well as the intention of the holder to demand an appraisal of the fair value of the shares held by the holder. A stockholders failure to make the written demand prior to the taking of the
vote on the adoption of the Merger Agreement at the special meeting will constitute a waiver of appraisal rights.
Only a holder of record
of shares of Oclaro common stock is entitled to demand an appraisal of the shares registered in that holders name. A demand for appraisal in respect of shares of Oclaro common stock should be executed by or on behalf of the holder of record,
fully and correctly, as the holders name appears on the holders stock certificates, should specify the holders name and mailing address and the number of shares registered in the holders name, and must state that the person
intends thereby to demand appraisal of the holders shares in connection with the Merger. If the shares are owned of record in a fiduciary or representative capacity, such as by a trustee, guardian or custodian, execution of the demand should
be made in that capacity, and if the shares are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an agent for two
or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record
owner or owners. If the shares are held in street name by a broker, bank or nominee, the broker, bank or nominee may exercise appraisal rights with respect to the shares held for one or more beneficial owners while not exercising the
rights with respect to the shares held for other beneficial owners; in such case, however, the written demand should set forth the number of shares as to which appraisal is sought and where no number of shares is expressly mentioned the demand will
be presumed to cover all shares of Oclaro common stock held in the name of the record owner.
STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE ACCOUNTS OR OTHER NOMINEE FORMS AND WHO WISH TO EXERCISE APPRAISAL RIGHTS ARE URGED TO CONSULT WITH THEIR
BANKS, BROKERS OR OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE MAKING OF A DEMAND FOR APPRAISAL BY SUCH A NOMINEE.
All written demands for appraisal pursuant to Section 262 of the DGCL should be sent or delivered to Oclaro, Inc., 225 Charcot Avenue,
San Jose, California 95131, Attn: Corporate Secretary.
At any time within 60 days after the Effective Time, any stockholder who has
not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the Merger Consideration by delivering to Merger Sub LLC, as the surviving company, a written
119
withdrawal of the demand for appraisal and an acceptance of the Merger Consideration. Any such attempt to withdraw the demand made more than 60 days after the Effective Time will require written
approval of the Surviving Company). No appraisal proceeding in the Court of Chancery will be dismissed as to any stockholder without the approval of the Court of Chancery, and such approval may be conditioned upon such terms as the Court of Chancery
deems just; provided, however, that any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the Merger Consideration within 60 days after
the Effective Time. If the surviving company does not approve a request to withdraw a demand for appraisal and to accept the Merger Consideration when that approval is required, or if the Court of Chancery does not approve the dismissal of an
appraisal proceeding, the stockholder will be entitled to receive only the appraised value determined in any such appraisal proceeding, which value could be less than, equal to or more than the consideration being offered pursuant to the Merger
Agreement.
Notice by the Surviving Company
. Within 10 days after the Effective Time, the surviving company, or its successors or
assigns, will notify each holder of Oclaro common stock, who has complied with Section 262 of the DGCL, and who has not voted in favor of the adoption of the Merger Agreement, of the date on which the Merger became effective.
Filing a Petition for Appraisal
. Within one hundred and 120 days after the Effective Time, but not thereafter, the surviving company or
any holder of Oclaro common stock who has complied with Section 262 of the DGCL and is entitled to appraisal rights under Section 262 of the DGCL may commence an appraisal proceeding by filing a petition in the Court of Chancery, with a
copy served on the surviving company, or its successors or assigns, in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares held by all Oclaro stockholders entitled to appraisal. The surviving
company is under no obligation to and has no present intention to file a petition and holders should not assume that the surviving company will file a petition or initiate any negotiations with respect to the fair value of the shares of Oclaro
common stock. Accordingly, any holders of shares of Oclaro common stock who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of shares of Oclaro common stock within the time and
in the manner prescribed in Section 262 of the DGCL. The failure of a holder of Oclaro common stock to file such a petition in the period and manner specified in Section 262 of the DGCL could nullify the stockholders previous written
demand for appraisal.
Within 120 days after the Effective Time, any holder of Oclaro common stock who has complied with the requirements
for exercise of appraisal rights will be entitled, upon written request, to receive from the surviving company a statement setting forth the aggregate number of shares not voted in favor of the adoption of the Merger Agreement and with respect to
which demands for appraisal have been received and the aggregate number of holders of such shares. The statement must be mailed to the requesting stockholder within 10 days after a written request therefor has been received by the surviving company
or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. Notwithstanding the foregoing, a person who is the beneficial owner of shares of Oclaro common 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 seeking appraisal or request from the surviving company, or its successors or assigns, the statement described in this paragraph. As noted above, however, the
demand for appraisal can only be made by a stockholder of record.
If a petition for an appraisal is timely filed by a holder of shares of
Oclaro common stock and a copy thereof is served upon the surviving company, the surviving company will then be obligated within 20 days after such service to file with the Delaware Register in Chancery a duly verified list (the Verified
List) containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached. Upon the filing of any such petition, the Court of
Chancery may order that notice of the time and place fixed for the hearing on the petition be mailed to the surviving company and all of the stockholders shown on the Verified List at the addresses stated therein. Such notice will also be published
at least one week before the day of the hearing in a newspaper of general circulation
120
published in the City of Wilmington, Delaware, or in another publication determined by the Court of Chancery. The costs of these notices are borne by the surviving company.
After notice to the stockholders as required by the Court of Chancery, the Court of Chancery is empowered to conduct a hearing on the petition
to determine those stockholders who have complied with Section 262 of the DGCL and who have become entitled to appraisal rights thereunder. The Court of Chancery may require the stockholders who demanded payment for their shares to submit their
stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceeding; and if any stockholder fails to comply with the direction, the Court of Chancery may dismiss the proceedings as to such stockholder. The
Court of Chancery will dismiss appraisal proceedings as to all Oclaro stockholders who assert appraisal rights unless (a) the total number of shares for which appraisal rights have been pursued and perfected exceeds 1.0% of the outstanding
shares of Oclaro common stock as measured in accordance with subsection (g) of Section 262 of the DGCL or (b) the value of the Merger Consideration in respect of the shares for which appraisal rights have been pursued and perfected
exceeds $1,000,000.
Determination of Fair Value
. After the Court of Chancery determines the holders of Oclaro common stock
entitled to appraisal and that at least one of the ownership thresholds above has been satisfied in respect of the Oclaro stockholders seeking appraisal rights, 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 of Chancery shall determine the fair value of the shares, exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the Court of Chancery in its discretion determines otherwise for good cause shown, interest from the Effective Time 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. However, the surviving company has the right, at any point prior to the Court of Chancerys entry of judgment in the proceedings, to make a voluntary cash payment to each stockholder seeking appraisal. If
the surviving company makes a voluntary cash payment pursuant to subsection (h) of Section 262 of the DGCL, interest will accrue thereafter only on the sum of (i) the difference, if any, between the amount paid by the surviving
company in such voluntary cash payment and the fair value of the shares as determined by the Court of Chancery and (ii) interest theretofore accrued, unless paid at that time.
In determining fair value, the Court of Chancery will take into account all relevant factors. In
Weinberger
v. UOP,
Inc.
, the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that proof of value by any techniques or methods that are generally considered acceptable in
the financial community and otherwise admissible in court should be considered, and that [f]air price obviously requires consideration of all relevant factors involving the value of a company. The Supreme Court of Delaware stated
that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw
any light on future prospects of the merged corporation. Section 262 of the DGCL provides that fair value is to be exclusive of any element of value arising from the accomplishment or expectation of the merger. In
Cede
& Co.
v. Technicolor, Inc.
, the Delaware Supreme Court stated that such exclusion is a narrow exclusion [that] does not encompass known elements of value, but which rather applies
only to the speculative elements of value arising from such accomplishment or expectation. In
Weinberger
, the Supreme Court of Delaware also stated that elements of future value, including the nature of the enterprise, which are known
or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.
Oclaro stockholders
considering seeking appraisal should be aware that the fair value of their shares as so determined by the Court of Chancery could be less than, the same as or more than the Merger Consideration and that an investment banking opinion as to the
fairness from a financial point of view of the Merger Consideration is not an opinion as to, and may not in any manner address, fair value under Section 262 of the DGCL.
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Although Oclaro believes that the Merger Consideration is fair, no representation is made as
to the outcome of the appraisal of fair value as determined by the Court of Chancery, and Oclaro stockholders should recognize that such an appraisal could result in a determination of a value lower or higher than, or the same as, the Merger
Consideration. None of the parties to the Merger anticipates offering more than the Merger Consideration to any stockholder of Oclaro exercising appraisal rights, and each of the parties to the Merger Agreement reserves the right to make a voluntary
cash payment pursuant to subsection (h) of Section 262 of the DGCL and to assert, in any appraisal proceeding, that for purposes of Section 262 of the DGCL, the fair value of a share of Oclaro common stock is less than the
Merger Consideration.
Upon application by the surviving company or by any stockholder entitled to participate in the appraisal
proceeding, the Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any holder of shares of Oclaro common stock whose name appears on the
Verified List and, if such shares are represented by certificates and if so required, who has submitted such stockholders certificates of stock to the Delaware Register in Chancery, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights or that neither of the ownership thresholds is met. The Court of Chancery will direct the payment of the fair value of the Oclaro shares, together with interest, if any, by the
surviving company to the stockholders entitled thereto. Payment will be made to each such stockholder, in the case of holders of uncertificated stock, forthwith, and in the case of holders of shares represented by certificates, upon the surrender to
the surviving company of the certificate(s) representing such stock. The Court of Chancerys decree may be enforced as other decrees in such court may be enforced. If a petition for appraisal is not timely filed or if neither of the ownership
thresholds is met, then the right to an appraisal will cease. The costs of the appraisal proceedings (which do not include attorneys fees or the fees and expenses of experts) may be determined by the Court of Chancery and taxed upon the
parties as the Court of Chancery deems equitable under the circumstances. Upon application of a stockholder, the Court of Chancery may also order all or a portion of the expenses incurred by a stockholder in connection with an 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. In the absence of such an order, each party bears its own
expenses.
From and after the Effective Time, no Oclaro stockholder who has demanded appraisal rights will be entitled to vote such shares
of Oclaro common stock for any purpose or to receive payment of dividends or other distributions on the stock, except dividends or other distributions on the holders shares of Oclaro common stock, if any, payable to stockholders as of a time
prior to the Effective Time. If any stockholder who demands appraisal of shares of Oclaro common stock under Section 262 of the DGCL fails to perfect or effectively loses or withdraws such holders right to appraisal, the
stockholders shares of Oclaro common stock will be deemed to have been converted at the Effective Time into the right to receive the Merger Consideration, without interest. A stockholder will fail to perfect, or effectively lose or withdraw,
the holders right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time, if neither of the ownership thresholds is met or if the stockholder delivers to the surviving company a written withdrawal of such
stockholders demand for an appraisal and an acceptance of the Merger, either within 60 days after the Effective Time or thereafter with the written approval of the surviving company. Once a petition for appraisal is filed with the Court of
Chancery, however, the appraisal proceeding may not be dismissed as to any stockholder who commenced the proceeding or joined that proceeding as a named party without the approval of the Court of Chancery. Failure to comply strictly with all of the
procedures set forth in Section 262 of the DGCL may result in the loss of a stockholders statutory appraisal rights.
In
view of the complexity of Section 262 of the DGCL, Oclaro stockholders wishing to exercise appraisal rights are encouraged to consult legal counsel before attempting to exercise those rights.
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Litigation
Five lawsuits have been filed by purported stockholders of Oclaro challenging the Merger. The first suit, a putative class action styled as
Nicholas Neinast v. Oclaro, Inc., et al
., No. 5:18-cv-03112-VC, was filed in the United States District Court for the Northern District of California on May 24, 2018, and is against Oclaro, its directors, Lumentum, Merger Sub, and Merger Sub
LLC (the
Neinast
Lawsuit). Three additional suits, styled as
Gerald F. Wordehoff v. Oclaro, Inc., et al
., No. 5:18-cv-03148-NC (the
Wordehoff
Lawsuit),
Walter Ryan v. Oclaro, Inc., et al
., No.
3:18-cv-03174 (the
Ryan
Lawsuit), and
Jayme Walker v. Oclaro, Inc., et al
., No. 3:18-cv-03203 (the
Walker
Lawsuit), were also filed in the United States District Court for the Northern District of
California on, respectively, May 25, 2018, May 29, 2018, and May 30, 2018. The
Wordehoff
Lawsuit, the
Ryan
Lawsuit, and the
Walker
Lawsuit name Oclaro and its directors as defendants. The
Ryan
Lawsuit, like the
Neinast
Lawsuit, is a putative class action. A fifth suit, a putative class action styled as
Adam Franchi v. Oclaro, Inc., et al.,
No. 1:18-cv-00817-UNA, was filed in the United States District Court for the District of Delaware on May
30, 2018, and is against Oclaro, its directors, Lumentum, Merger Sub, and Merger Sub LLC
(the
Franchi
Lawsuit
, and, with the
Neinast
Lawsuit
, the
Wordehoff
Lawsuit, the
Ryan
Lawsuit, and the
Walker
Lawsuit, the Lawsuits).
The Lawsuits allege that Oclaro and its directors violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder by
disseminating an incomplete and misleading Form S-4, including proxy statement/prospectus. The Lawsuits further allege that Oclaros directors violated Section 20(a) of the Exchange Act by failing to exercise proper control over the person(s)
who violated Section 14(a) of the Exchange Act. The
Neinast
Lawsuit additionally alleges that Oclaros directors breached fiduciary duties by entering into the Merger, and also names Lumentum, Merger Sub, and Merger Sub LLC as violators
of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. The
Franchi
Lawsuit additionally names Lumentum, Merger Sub, and Merger Sub LLC as violators of Section 20(a) of the Exchange Act.
The Lawsuits seek, among other things, injunctive relief preventing the parties from consummating the Merger, rescission of the transactions
contemplated by the Merger Agreement should they be consummated, and litigation costs, including attorneys fees. The Lawsuits also seek damages to be awarded to the plaintiff and any class if the Merger is consummated. In addition, the
Wordehoff
Lawsuit seeks injunctive relief directing defendants to disseminate a true and complete proxy statement/prospectus and declaratory relief that defendants violated Sections 14(a) and/or 20(a) of the Exchange Act and Rule 14a-9
promulgated thereunder.
Defendants deny the allegations of the Lawsuits, believe that this proxy statement/prospectus discloses all
material information, and believe that Oclaros directors upheld their fiduciary duties to Oclaro and its shareholders. The defendants intend to defend the Lawsuits vigorously.
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THE MERGER AGREEMENT
The following discussion summarizes material provisions of the Merger Agreement entered into by Lumentum, Merger Sub, Merger Sub LLC and Oclaro. This
summary does not propose to be complete and is qualified in its entirety by reference to the complete copies of the Merger Agreement, which is attached as
Annex
A
to this proxy
statement/prospectus. The rights and obligations of the parties are governed by the express terms and conditions of the Merger Agreement and not by this summary. The Merger Agreement should not be read alone, but should instead be read in
conjunction with the other information provided elsewhere in this proxy statement/prospectus, including the annexes and the documents incorporated by reference into this proxy statement/prospectus, before making any decisions regarding the Merger
Proposal.
The Merger Agreement is described in this proxy statement/prospectus only to provide you with information regarding its terms and
conditions and is not intended to provide any factual information about Lumentum, Oclaro or their respective businesses. The representations, warranties and covenants contained in the Merger Agreement have been made solely for the benefit of the
parties to the Merger Agreement. In addition, such representations, warranties and covenants: (1) have been made only for purposes of the Merger Agreement; (2) have been qualified by certain disclosures made by the parties to one another
not reflected in the text of the Merger Agreement; (3) may be subject to materiality qualifications contained in the Merger Agreement which may differ from what may be viewed as material by you; (4) were made only as of March 11, 2018
or dates specified in the Merger Agreement; and (5) have been included in the Merger Agreement for the purpose of allocating risk between the contracting parties rather than establishing matters as facts. Accordingly, the summary of the Merger
Agreement is included in this proxy statement/prospectus only to provide you with information regarding the terms of the Merger and not to provide you with any other factual information regarding Lumentum, Oclaro or their respective businesses.
Moreover, information concerning the subject matter of the representations, warranties and covenants may change after March 11, 2018, which subsequent information may or may not be fully reflected in Lumentums or Oclaros public
disclosures.
The Merger
On March 11, 2018, Lumentum, Oclaro, Merger Sub and Merger Sub LLC entered into the Merger Agreement, pursuant to which Lumentum agreed to
acquire Oclaro by way of a merger of Merger Sub with and into Oclaro, with Oclaro as the interim surviving corporation, followed as soon as practicable by a merger of Oclaro with and into Merger Sub LLC, with Merger Sub LLC continuing as the
surviving entity and as a wholly owned subsidiary of Lumentum.
Merger Consideration
Each of the Lumentum Board and the Oclaro Board have approved the Merger Agreement, which provides for the merger of Merger Sub with and into
Oclaro, followed as soon as practicable by the merger of Oclaro with and into Merger Sub LLC. Upon the Closing, Merger Sub LLC will be the surviving corporation and will become a wholly owned subsidiary of Lumentum. Each share of Oclaro common stock
that is issued and outstanding immediately prior to the Closing (other than (x) Oclaro common stock held by Lumentum, Oclaro or any direct or indirect wholly owned subsidiary of Lumentum or Oclaro, in each case immediately prior to the
Effective Time and (y) shares held by Oclaro stockholders who are entitled to and who properly exercise appraisal rights under Section 262 of the DGCL) will be converted into the right to receive (1) $5.60 in cash without interest
(the Cash Consideration) and (2) 0.0636 of a validly issued, fully paid and nonassessable share of Lumentum common stock (the Exchange Ratio), par value $0.001 per share, subject to adjustments set forth in the Merger
Agreement (the Stock Consideration, and together with the Cash Consideration, the Merger Consideration). The maximum number of shares of Lumentum common stock that will be issued in connection with the Merger is equal to
19.9% of the issued and outstanding shares of Lumentum common stock as of immediately prior to the Effective Time (the Stock Threshold). To the extent that the number of shares of Lumentum common stock issuable in the Merger would exceed
the Stock Threshold, the ratio of shares of Lumentum common stock issued
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as Stock Consideration shall be reduced such that the Stock Threshold is not exceeded, and the Cash Consideration per share of Oclaro common stock will be increased by an amount representing the
difference between the initial Exchange Ratio and the Exchange Ratio following adjustment as described in this section. If, after the date of the Merger Agreement and prior to the Closing, any change in the outstanding shares of capital stock, or
securities convertible or exchangeable into or exercisable for shares of capital stock, of Oclaro or Lumentum shall occur as a result of any reclassification, recapitalization, stock split (including reverse stock split) or combination, exchange or
readjustment of shares, or any stock dividend or any similar event, or any record date for any such purpose shall be established, the Merger Consideration and any other amounts payable pursuant to the Merger Agreement shall be appropriately
adjusted.
In lieu of any fractional share of Lumentum common stock that otherwise would be issuable pursuant to the Merger, each holder
of shares of Oclaro common stock who otherwise would be entitled to receive a fraction of a share of Lumentum common stock pursuant to the Merger (after aggregating all shares represented by the certificates representing shares of Company Common
Stock (the Certificates) and uncertificated shares of Company Common Stock (the Uncertificated Shares) of such holder) will be paid an amount in cash (without interest) equal to (i) the fraction of a share (after
aggregating all shares represented by the Certificates and Uncertificated Shares of such holder) of Lumentum common stock to which such holder would otherwise be entitled multiplied by (ii) the Parent Average Closing Price.
At the Effective Time, subject to the provisions of Merger Agreement, the certificate of incorporation of Oclaro shall be amended and restated
in its entirety to read identically to the certificate of incorporation of Merger Sub, as in effect immediately prior to the Effective Time, and such amended and restated certificate of incorporation shall become the certificate of incorporation of
Oclaro after the Effective Time until amended in accordance with the applicable provisions of Delaware law and such certificate of incorporation. Unless otherwise determined by Lumentum prior to the effective time of the Second Step Merger, the
certificate of formation and the limited liability company agreement of Merger Sub LLC as in effect immediately prior to the effective time of the Second Step Merger shall be the certificate of formation and the limited liability company agreement
of the Surviving Company in the Second Step Merger until thereafter amended in accordance with the applicable provisions of Delaware law and such limited liability company agreement; provided, however, that at the effective time of the Second Step
Merger, the limited liability company agreement of the Surviving Company shall be amended so that the name of the Surviving Company shall be Oclaro, LLC.
Treatment of Oclaro Options and Other Equity-Based Awards
The Merger Agreement provides that at the Effective Time, each Oclaro RSU that is outstanding and unvested immediately before the Effective
Time (and does not vest as a result of the Merger) will be assumed by Lumentum on substantially the same terms and conditions as applied to the related Oclaro RSU immediately before the Effective Time (including the applicable vesting schedule),
except the number of shares of Lumentum common stock subject to each Assumed RSU will equal the product of (i) the number of shares of Oclaro common stock underlying the applicable unvested Oclaro RSU immediately before the Effective Time (with
any performance milestones deemed achieved based on maximum level of performance) multiplied by (ii) the Equity Award Exchange Ratio (rounded down to the nearest whole share).
The Merger Agreement also provides any vested and unsettled Oclaro RSU and each outstanding and unvested share of Oclaro Restricted Stock as
of immediately before the Effective Time will be treated as outstanding Oclaro common stock and will receive the Merger Consideration, subject to applicable tax withholding.
The Merger Agreement also provides that, except as provided in the next paragraph, each Oclaro Option that is outstanding, whether vested or
unvested, immediately before the Effective Time will be assumed by Lumentum on substantially the same terms and conditions as applied to the related Oclaro Option immediately before the Effective Time (including the applicable vesting schedule),
except (A) the number of shares of
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Lumentum common stock subject to each Assumed Option will equal the product of (x) the number of shares of Oclaro common stock underlying such Assumed Option immediately before the Effective
Time multiplied by (y) the Equity Award Exchange Ratio (rounded down to the nearest whole share), and (B) the per share exercise price of each Assumed Option will equal the quotient determined by dividing (x) the exercise price per
share of such Assumed Option immediately before the Effective Time by (y) the Equity Award Exchange Ratio (rounded up to the nearest whole cent).
The Merger Agreement also provides that each Cancelled Oclaro Option will be cancelled and converted into the right to receive the Merger
Consideration in respect of each net option share of Oclaro common stock covered by such Cancelled Oclaro Option, subject to applicable tax withholding. The number of net option shares will be determined under a formula
specified in the Merger Agreement that takes into account the exercise price of such Cancelled Oclaro Option. Any fractional net option shares (after aggregating all shares represented by all Cancelled Oclaro Options held by such holder) will be
settled in cash based on the cash equivalent value of the Merger Consideration, subject to applicable tax withholding. If the exercise price per share of any Cancelled Oclaro Option is equal to or greater than the Merger Consideration, such
Cancelled Oclaro Option will be cancelled without payment.
The Merger Agreement also provides that each Oclaro SAR that is outstanding,
whether vested or unvested, will be cancelled and converted into the right to receive, a cash amount equal to the product of (x) the number of shares of Oclaro common stock issuable upon exercise of the Oclaro SAR, multiplied by (y) the
excess, if any of (1) the cash equivalent value of the Merger Consideration over (2) the strike price of such Oclaro SAR, subject to applicable tax withholding.
The Merger Agreement also provides that any applicable taxes required to be withheld from the Merger Consideration payable in respect of
vested Oclaro RSUs, Oclaro Restricted Stock, and Cancelled Oclaro Options will first reduce the Cash Consideration portion of the Merger Consideration, with any remaining amount reducing the Stock Consideration portion of the Merger Consideration
(with the value of the stock portion for purposes of such deduction determined based on the Parent Average Closing Price).
Closing and Effective Time
Upon the terms and subject to the conditions set forth in the Merger Agreement, on the Closing Date,
Lumentum, Merger Sub and Oclaro will cause the First Step Merger to be consummated under Delaware law by filing a certificate of merger in customary form and substance (the Certificate of Merger) with the Secretary of State of the State
of Delaware (the Delaware Secretary of State) in accordance with the applicable provisions of Delaware law (the time of such filing and acceptance by the Delaware Secretary of State, or such later time as may be agreed in writing by
Lumentum, Merger Sub and Oclaro and specified in the Certificate of Merger, being referred to herein as the Effective Time). As soon as practicable after the Effective Time, Lumentum shall cause the Second Step Merger to be consummated
under Delaware law by filing a certificate of merger in customary form and substance with the Delaware Secretary of State in accordance with the applicable provisions of Delaware law and the Second Step Merger shall be effective at the time of such
filing and acceptance by the Delaware Secretary of State.
In the Merger Agreement, Lumentum and Oclaro have agreed that the Closing Date
shall be no later than the second business day following the satisfaction or waiver (to the extent permitted thereunder) of the last of to be satisfied or waived of the conditions to Closing (other than those conditions that by their nature are to
be satisfied at Closing, but subject to the satisfaction or waiver (to the extent permitted thereunder), of those conditions), or at such other location, date and time as Oclaro, Merger Sub and Lumentum mutually agree upon in writing; provided,
however, if the Marketing Period has not ended at the time when Closing would otherwise be required to occur, the Closing will occur on the earlier of (i) a business day before or during such Marketing Period specified by Lumentum on two
business days prior written notice to Oclaro, and (ii) the first business day after the expiration of the Marketing Period subject to satisfaction or waiver of the last of the conditions to the
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Closing, or at such other date and time as Lumentum and Oclaro mutually agreed upon in writing. The date upon which the Closing shall actually occur pursuant hereto is referred to herein as the
Closing Date.
Conversion of Shares
The conversion of each Oclaro share into the right to receive the Merger Consideration will occur automatically at the Effective Time.
Exchange Agent; Letter of Transmittal
Prior to the Effective Time, Lumentum will designate a bank or trust company reasonably acceptable to Oclaro to act as the payment agent for
the Merger (the Exchange Agent). The Exchange Agent shall also act as the agent for Oclaro stockholders for purposes of, among other things, receiving and holding certificates representing shares of Oclaro common stock and uncertificated
shares and shall obtain no rights or interests in the shares of Oclaro common stock represented thereby. At or prior to the Effective Time, Lumentum shall deposit (or cause to be deposited) with the Exchange Agent for payment to the holders of
Oclaro common stock pursuant to the provisions of the Merger Agreement (i) evidence of Lumentum common stock issuable pursuant to the Merger in book-entry form sufficient to pay the aggregate Stock Consideration, (ii) by transfer of
immediately available funds, an amount of cash sufficient to pay the aggregate Cash Consideration, and (iii) by transfer of immediately available funds, an amount of cash sufficient to pay any fractional cash amounts due to holders of Oclaro
common stock under the Merger Agreement (such amount referenced in clauses (ii) and (iii) together with the evidence of book-entry shares of Lumentum common stock, the Exchange Fund).
As promptly as practicable following the Effective Time, Lumentum and Merger Sub will instruct the Exchange Agent to mail within three
business days after the Effective Time to each holder of record (as of immediately prior to the Effective Time) of shares of Oclaro common stock a letter of transmittal in customary form and containing customary provisions (which shall specify that
delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificates (or affidavits of loss in lieu thereof) or transfer of the Uncertificated Shares to the Exchange Agent). This mailing will also contain
instructions on how to surrender the Oclaro common stock, whether in certificate or book-entry form, in exchange for the Merger Consideration.
Lumentum shall instruct the Exchange Agent to pay such Merger Consideration and cash in lieu of fractional shares within five Business Days
following the later to occur of (x) the Effective Time or (y) the Exchange Agents receipt of such Certificate (or affidavit of loss in lieu thereof) or agents message, and the Certificate (or affidavit of loss in
lieu thereof) or Uncertificated Share so surrendered will be cancelled. No interest shall be paid or accrued on the cash payable upon the surrender or transfer of such Certificate or Uncertificated Share. The shares of Lumentum common stock issued
and paid and cash amount paid in accordance with the Merger Agreement upon conversion of the shares of Oclaro common stock (including any cash paid in lieu of fractional shares) will be deemed to have been issued and paid in full satisfaction of all
rights pertaining to the shares of Oclaro common stock.
If any portion of the Merger Consideration is to be delivered to a person or
entity other than the holder in whose name any surrendered certificate is registered, it will be a condition of such exchange that (1) the certificate surrendered must be properly endorsed or must be otherwise in proper form for transfer and
(2) the person or entity requesting such payment pays any transfer or other similar taxes required by reason of the payment of the Merger Consideration to a person or entity other than the registered holder of the certificate surrendered or
will establish to the satisfaction of the surviving corporation and the Exchange Agent that such tax has been paid or is not required to be paid.
Appraisal Rights
If a holder of shares of Oclaro common stock does not vote in favor of the Merger Proposal, properly demands appraisal and otherwise complies
with applicable Delaware law and does not effectively withdraw his,
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her or its demand for, or lose the right to, appraisal of such Oclaro common stock in compliance with Section 262 of the DGCL and if certain other statutory requirements described herein are
met, such shares will not be converted into the right to receive the Merger Consideration, but instead, at the Effective Time, will become entitled only to payment of the fair value of such shares determined in accordance with applicable Delaware
law. However, if any such holder votes, in person or by proxy, in favor of the Merger Proposal, fails to properly demand appraisal, fails to comply with applicable Delaware law, or otherwise waives, withdraws or loses the right to payment of the
fair value of such dissenting shares under applicable Delaware law, then the right of such holder to be paid the fair value of such holders dissenting shares will cease and such dissenting shares will be deemed to have been converted as of the
Effective Time into, and to have become exchangeable solely for the right to receive, without interest or duplication, the Merger Consideration with respect to such shares.
For additional information about appraisal rights upon completion of the Merger, see the section titled The MergerAppraisal
Rights beginning on page 117 of this proxy statement/prospectus, which detailed description is qualified by reference to the full text of Section 262 of the DGCL as attached as
Annex
C
to this proxy
statement/prospectus.
Withholding
Each of the Exchange Agent, Lumentum, the Surviving Company and the Exchange Agent will be entitled to deduct and withhold from the
consideration otherwise payable under the Merger Agreement the amounts they are required to deduct and withhold under any applicable tax law. If Lumentum, the Surviving Company or the Exchange Agent deducts and withholds any such amounts, such
amounts shall be timely remitted to the appropriate taxing authority and will be treated for all purposes of the Merger Agreement as having been paid to the persons from whom they were withheld.
Dividends and Distributions
The Merger Agreement provides that no dividends or other distributions with a record date after the Effective Time with respect to Lumentum
common stock will be paid to the holder of any shares of Oclaro common stock until such holder properly surrenders its shares in accordance with the procedures described in the Exchange Agent; Letter of Transmittal section beginning on
page 127 of this proxy statement/prospectus. After proper surrender, Lumentum will cause such holder to be paid, without interest, (i) the amount of dividends or other distributions with a record date after the Effective Time and theretofore
paid with respect to such shares of Lumentum common stock to which such holder is entitled pursuant to the Merger Agreement and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and with a payment date subsequent to such surrender payable with respect to such shares of Lumentum common stock.
Representations and Warranties of Lumentum, Merger Sub and Oclaro
The Merger Agreement contains representations and warranties made by Lumentum, Merger Sub, Merger Sub LLC and Oclaro to, and solely for the
benefit of, each other. You should not rely on the representations and warranties in the Merger Agreement as characterizations of the actual state of facts about Lumentum or Oclaro and should see the section titled Where You Can Find More
Information beginning on page 169 of this proxy statement/prospectus for the location of documents that are incorporated by reference into this proxy statement/prospectus for information regarding Lumentum and Oclaro and their respective
businesses.
The Merger Agreement contains customary representations and warranties made by Oclaro relating to its business regarding,
among other things:
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corporate matters, including organization, power to conduct its business and qualification and good standing;
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corporate matters, including organization, power to conduct its business and qualification and good standing for each of its subsidiaries;
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authority to execute and deliver the Merger Agreement, and subject to in the case of the Merger to obtaining the Oclaro stockholder consent, to consummate the transaction contemplated and to perform its obligations
pursuant to the Merger Agreement;
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the Oclaro Board unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, (ii) determined that the Merger Agreement and the
transactions contemplated thereby, including the Merger, are fair to and in the best interests of Oclaro and its shareholders, (iii) approved the Merger Agreement and the transactions contemplated thereby, including the Merger,
(iv) directed that the adoption of the Merger Agreement be submitted to a vote of the shareholders of Oclaro at the Oclaro Special Meeting and (v) resolved to recommend that the holders of shares of Oclaro common stock adopt the Merger
Agreement in accordance with the applicable provisions of Delaware law;
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absence of contraventions or conflicts with organizational documents as a result of the Merger, as well as absence of consents from governmental entities required to be obtained in connection with the Merger;
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the accuracy of filings with the Securities and Exchange Commission;
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reports and financial statements, including their preparation in accordance with U.S. GAAP, filing or furnishing with the relevant governmental entities or regulatory authorities, and compliance with the relevant laws
and regulations, and that such reports and financial statements fairly present, in all material respects, the relevant financial position and results of operations;
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maintenance of disclosure controls and procedures and internal control over financial reporting;
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information supplied for inclusion or incorporation by reference in this document and other similar documents;
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the absence of undisclosed liabilities;
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the absence of certain changes since December 31, 2017 through March 11, 2018, with respect to the business of Oclaro and its subsidiaries, and the absence of a Material Adverse Effect in that period;
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the existence of and compliance with material contracts;
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compliance with laws and government regulations;
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compliance with and possession of all material permits, including from Governmental Entities, entities required to operate Oclaros business;
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the absence of certain legal proceedings, orders, claims and actions;
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the largest customers and suppliers and lack of written notice of termination or
non-renewal
of such relationships;
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the preparation and timely filing of taxes and the accuracy and completeness of certain tax matters;
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compliance with applicable environmental laws;
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compliance with applicable laws related to employee benefits and the Employment Retirement Income Security Act of 1974, as amended;
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the existence of employee benefit plans;
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the absence of collective bargaining agreements and other employment and labor matters;
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title and rights to, and condition of, properties, including real property;
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sufficiency of, and valid title or right to use, all personal property and assets that are material to Oclaros business;
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ownership of or right to intellectual property, and absence of infringement;
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compliance with material terms of all laws related to export controls and import restrictions and any approvals related thereto;
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the existence and maintenance of insurance;
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compliance with Anti-Bribery Laws (as defined in the Merger Agreement);
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the absence of undisclosed related party transactions, except as not required by applicable law;
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the absence of undisclosed investment banker, broker or finder fees payable in connection with the Merger;
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the receipt of an opinion of Oclaros financial advisor; and
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Oclaro and its affiliates not being interested stockholders (as defined in Section 203 of the DGCL) of Lumentum.
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The Merger Agreement contains customary representations and warranties made by Lumentum, Merger Sub and Merger Sub LLC relating to their
respective businesses regarding, among other things:
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corporate matters, including organization, power to conduct its business and qualification and good standing;
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corporate matters, including organization, power to conduct their business and qualification and good standing for each of their subsidiaries;
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authority relative to execution, delivery and performance of the Merger Agreement;
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absence of contraventions or conflicts with organizational documents as a result of the Merger, as well as absence of consents from governmental entities required to be obtained in connection with the Merger;
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the absence of certain material litigation, claims and actions;
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information supplied for inclusion or incorporation by reference in this document and other similar documents;
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the accuracy of filings with the SEC;
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reports and financial statements, including their preparation in accordance with U.S. GAAP, filing or furnishing with the relevant governmental entities or regulatory authorities, and compliance with the relevant laws
and regulations, and that such reports and financial statements fairly present, in all material respects, the relevant financial position and results of operations;
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maintenance of disclosure controls and procedures and internal control over financial reporting;
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the absence of undisclosed liabilities;
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the absence of certain changes since December 31, 2017 through March 11, 2018, with respect to Lumentum and its subsidiaries, and the absence of a Material Adverse Effect in that period;
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compliance with laws and government regulations;
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compliance with and possession of all material permits, including from governmental entities, entities required to operate Oclaros business;
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the absence of undisclosed investment banker, broker or finder fees payable in connection with the Merger;
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the operations of Merger Sub and Merger Sub LLC;
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financing related to the Merger;
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Lumentum and its affiliates not being interested stockholders (as defined in Section 203 of the DGCL) of Oclaro;
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actions taken surrounding exemption from the restrictions on business combinations and voting requirements contained in Section 203 of the DGCL;
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compliance with applicable environmental laws;
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the preparation and timely filing of taxes and the accuracy and completeness of certain tax matters; and
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absence of infringement of intellectual property rights.
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The representations and warranties
in the Merger Agreement do not survive the Effective Time.
Oclaros representations and warranties are qualified by the information
included in (1) Oclaro Disclosure Letter delivered to Lumentum on March 11, 2018 (the Oclaro Disclosure Letter) and (2) certain of Oclaros filings with the SEC. Lumentums, Merger Subs and Merger Sub
LLCs representations and warranties are qualified by the information included in (1) the Lumentum Disclosure Letter delivered to Oclaro on March 11, 2018 (the Lumentum Disclosure Letter) and (2) certain of
Lumentums filings with the SEC.
Many of the representations and warranties made by each of Lumentum, Merger Sub, Merger Sub LLC and
Oclaro are qualified by a material adverse effect standard (that is, they will not be deemed untrue or incorrect unless their failure to be true or correct, individually or in the aggregate, has had or would reasonably be expected to
have a material adverse effect). Certain of the representations and warranties are qualified by a general materiality standard or by a knowledge standard. For the purpose of the Merger Agreement, a material adverse effect has the meaning
set forth below under the section titled Material Adverse Effect.
Material Adverse Effect
The Merger Agreement provides that a Material Adverse Effect means any fact, event, occurrence, circumstance, change or
effect (any such item, an Effect) that, individually or when taken together with all other Effects that exist at the date of determination of the occurrence of the Material Adverse Effect, is or is reasonably likely to have a material
adverse effect on the business, operations, financial condition or results of operations of Lumentum or Oclaro and their respective subsidiaries taken as a whole;
provided
,
however
, that in no event shall any Effect resulting from or
arising out of any of the following, either alone or in combination, be taken into account (including the impact thereof) when determining whether a Material Adverse Effect has occurred or may, would or could occur:
(a) general economic conditions in the United States or any other country or region in the world, general conditions in the financial markets
in the United States or any other country or region in the world or general political conditions in the United States or any other country or region in the world;
(b) general conditions in the industries in which Lumentum or Oclaro or any of their respective subsidiaries conduct business;
(c) changes in applicable laws, orders or U.S. GAAP (or the interpretation thereof); acts of war, terrorism or sabotage in the United States
or any other country or region in the world (or any escalation with respect thereto);
(d) acts of war, terrorism or sabotage in the
United States or any other country or region in the world (or any escalation with respect thereto);
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(e) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other
natural disasters, weather conditions and other similar events in the United States or any other country or region in the world;
(f) any
failure by Lumentum or Oclaro or any of their respective subsidiaries to meet published analysts estimates, internal or external projections or forecasts of revenues, earnings or other financial or business metrics for any period, in and of
itself (it being understood that the underlying cause(s) of any such failure may be taken into account unless otherwise excluded by this definition);
(g) any decline in the market price or change in the trading volume of, or the suspension of trading in, Lumentum or Oclaros common
stock, in and of itself (it being understood that the underlying cause(s) of any such decline, change or suspension may be taken into account unless otherwise excluded by this definition);
(h) any actions or omissions required of Lumentum, Merger Sub or Merger Sub LLC under the Merger Agreement or taken at the request of Oclaro
or any of its affiliates;
(i) any actions or omissions required of Oclaro under the Merger Agreement or taken at the request of Lumentum,
Merger Sub or Merger Sub LLC or any of their respective affiliates;
(j) any claims, actions or legal proceeding arising from allegations
of breach of fiduciary duty or otherwise relating to the Merger Agreement, the Merger or any transaction contemplated by the Merger Agreement;
(k) the public announcement, pendency or consummation of the Merger Agreement or the transactions contemplated hereby, including the identity
of, or the effect of any fact or circumstance relating to, Lumentum or any of its affiliates (including any impact on the relationship of Oclaro or any of its subsidiaries, contractual or otherwise, with its customers, suppliers, distributors,
vendors, licensors, licensees, lenders, employees or partners); or
(l) the public announcement, pendency or consummation of the Merger
Agreement or the transactions contemplated hereby, including the identity of, or the effect of any fact or circumstance relating to, Oclaro or any of its affiliates (including any impact on the relationship of Lumentum or any of its subsidiaries,
contractual or otherwise, with its customers, suppliers, distributors, vendors, licensors, licensees, lenders, employees or partners).
In
the case of each of clauses (a), (b), (c), (d) and (e) above, the Effects may be taken into account when determining whether a Material Adverse Effect has occurred to the extent such Effects have a disproportionate adverse impact on the
business, operations, financial condition or results of operations of Lumentum or Oclaro or their respective affiliates, taken as a whole, relative to other participants in the industries in which the Lumentum, Oclaro and their respective affiliates
conduct business, in which case only the incremental disproportionate impact may be taken into account in determining whether there has been a Material Adverse Effect.
Restrictions on Oclaros Business Pending the Closing
Under the Merger Agreement, Oclaro has agreed, subject to certain exceptions set forth in the Merger Agreement, on behalf of itself and its
subsidiaries that it will conduct its business in the ordinary course of business consistent in all material respects with past practice and use commercially reasonable efforts to preserve intact its current business organization, maintain its
existing relationships with its customers and suppliers and keep available the services of its present executive officers and key employees.
In particular, Oclaro has agreed on behalf of itself and its subsidiaries to certain restrictions on its and their ability to, from the date
of the Merger Agreement until the earlier of the Effective Time or the termination of the Merger Agreement, among other things:
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amend its organizational documents;
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other than dividends or distributions made by any direct or indirect wholly-owned subsidiary of Oclaro to Oclaro or one of its subsidiaries, split, combine, subdivide, amend the terms of or reclassify any shares of
capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, shares or property or any combination thereof) in respect of any shares of capital stock, or make any other actual, constructive or deemed distribution in
respect of the shares of capital stock;
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adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of Oclaro or any of its subsidiaries (other than (i) the transactions
contemplated by the Merger Agreement, and (ii) transactions between Oclaro and any direct or indirect wholly owned subsidiary of Oclaro or between direct or indirect wholly owned subsidiaries of Oclaro);
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(i) incur or assume any long-term or short-term debt or issue any debt securities, except for (A) short-term debt incurred to fund operations of the business in the ordinary course of business consistent with past
practice and (B) loans or advances to or from direct or indirect wholly-owned subsidiaries, (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any
other person except with respect to obligations of direct or indirect wholly-owned subsidiaries of Oclaro, (iii) make any loans, advances or capital contributions to or investments in any other person except for travel advances in the ordinary
course of business consistent with past practice to employees or members of the Oclaro Board or any of its subsidiaries or (iv) mortgage or pledge any of its or its subsidiaries assets, tangible or intangible, or create or suffer to exist
any lien thereupon (other than liens permitted under the Merger Agreement), and (C) purchase money financings and capital leases entered into in the ordinary course of business with a value of $1,000,000 individually and $5,000,000 in the
aggregate;
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except as required by applicable law, the terms of the Merger Agreement or the terms of any employee plan, (i) enter into, adopt, amend (including acceleration of vesting), modify or terminate any employee benefit
plan except in the ordinary course of business consistent with past practice (other than employment agreement or offer letters for employees at the vice president level or below) or (ii) increase in any manner the compensation or fringe
benefits of any director, officer, employee, consultant or independent contractor or pay any special bonus or special remuneration to any director, officer, employee, consultant or independent contractor;
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forgive any loans to any employees, officers or directors of Oclaro or any of its subsidiaries, or any of their respective affiliates;
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make any deposits or contributions of cash or other property to or take any other action to fund or in any other way secure the payment of compensation or benefits under the employee plans of Oclaro or agreements
subject to the employee plans of Oclaro or any other contract of the Oclaro or any of its subsidiaries other than deposits and contributions that are required pursuant to the terms of the employee plans of Oclaro or any agreements subject to the
employee plans of Oclaro in effect as of the date hereof;
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enter into, amend, or extend any collective bargaining agreement;
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hire, terminate, demote or promote, or offer to hire, or promote any employee or potential employee with a title of vice president or above, or encourage any employees with a title of vice president or above to resign
from or terminate his relationship with Oclaro or any of its subsidiaries, in each case, other than as expressly contemplated by the Merger Agreement;
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acquire, sell, lease, license or dispose of any property or assets material to Oclaro and its subsidiaries, taken
as a whole, in any single transaction or series of related transactions or acquire (by merger, consolidation or acquisition of stock or assets) any other person or any equity interest therein, except in each case for (i) acquisitions from
wholly-owned subsidiaries of Oclaro, (ii) investments in equity and debt instruments that constitute cash, cash equivalents or debt investments with a maturity date of less than 365 days consistent with Oclaros past cash management
programs, (iii) the purchase of
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equipment, supplies and inventory in the ordinary course of business, (iv) inbound licenses of intellectual property rights in the ordinary course of business and
(v) non-exclusive
licenses granted in the ordinary course of business consistent with past practice;
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except as may be required as a result of a change in applicable law or in U.S. GAAP or SEC rules and regulations, make any material change in any of the accounting principles or practices used by Oclaro;
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(i) make (other than in the ordinary course of preparing and filing tax returns) or change any material tax election, (ii) amend any material tax return, (iii) settle or compromise any material liability
for taxes, (iv) adopt or change any tax accounting method or (v) consent to any extension or waiver of any limitation period with respect to any material claim or assessment for taxes;
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(i) enter into any lease or sublease of real property (whether as a lessor, sublessor, lessee or sublessee) or (ii) modify, amend or exercise any right to renew any lease or sublease of real property or waive
or violate any term or condition thereof or grant any consents thereunder or (iii) purchase any interest in real property (or enter any agreement to do so);
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abandon, cancel or allow to lapse or fail to maintain or protect any Oclaro intellectual property rights, except pursuant to the exercise of good faith business judgment by Oclaro following notice to Lumentum;
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other than in the ordinary course of business consistent with past practice, enter into, renew, amend or grant any release or relinquishment of any rights under any material contract;
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other than as contemplated in the Oclaro Disclosure Letter, incur any new capital expenditure(s) that, individually or in the aggregate, would create obligations to Oclaro or any of its subsidiaries in excess of the
amount set forth in the Oclaro Disclosure Letter;
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settle or compromise any pending or threatened legal proceeding or pay, discharge or satisfy or agree to pay, discharge or satisfy any claim, liability or obligation (absolute or accrued, asserted or unasserted,
contingent or otherwise), other than the settlement or compromise of a legal proceeding (i) reflected or reserved against in full in the Company Balance Sheet (as defined in the Merger Agreement) or (ii) that does not include any
obligation (other than the payment of money of an aggregate of $500,000 or less in excess of available insurance coverage (including deductibles and retentions) maintained by Oclaro or its subsidiaries relating to the payment of such amounts) to be
performed by Oclaro or its subsidiaries following the Effective Time that is or would reasonably be expected to be material to Oclaro and its subsidiaries, taken as a whole;
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except as required by applicable law or U.S. GAAP, revalue in any material respect any of its properties or assets including
writing-off
notes or accounts receivable other than in
the ordinary course of business consistent with past practice;
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grant or otherwise create or consent to the creation of any easement, covenant, restriction, assessment, lien or charge affecting any real property or any part thereof, other than as permitted by the Merger Agreement;
convey any interest in any real property;
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sell, lease, license or transfer to any person or entity any rights to any Oclaro intellectual property except for
non-exclusive
licenses granted in the ordinary course of
business consistent with past practice; and
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enter into a contract to do any of the foregoing.
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These restrictions, which are subject to
various exceptions and qualifications agreed by Lumentum and Oclaro, are described in more detail in the Merger Agreement.
Restrictions on Lumentums Business Pending the Closing
Under the Merger Agreement, Lumentum has agreed, subject to certain
exceptions set forth in the Merger Agreement, on behalf of itself and its subsidiaries that it will use commercially reasonable efforts to (i) conduct
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its business in the ordinary course of business consistent in all material respects with past practice and applicable law and (ii) maintain and preserve intact its current business
organization.
In particular, Lumentum has agreed on behalf of itself and its subsidiaries to certain restrictions on its and their
ability to, from the date of the Merger Agreement until the earlier of the Effective Time or the termination of the Merger Agreement, among other things:
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amend its certificate of incorporation or bylaws or comparable organizational documents or otherwise take any action to exempt any person from any provision of Lumentums or any of its subsidiaries respective
certificates of incorporation, bylaws or comparable organizational documents, in each case in any manner that would be adverse in any material respect to holders of Oclaro common stock;
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acquire or redeem, directly or indirectly, or amend any Lumentum securities or Lumentum Inc. preferred stock, other than pursuant to existing awards or the redemption of Lumentum Inc. preferred stock;
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split, combine, subdivide, amend the terms of or reclassify any shares of Lumentums capital stock or Lumentum Inc.s preferred stock, declare, set aside or pay any dividend or other distribution (whether in
cash, shares or property or any combination thereof) in respect of any shares of Lumentums capital stock or Lumentum Inc.s preferred stock, or make any other actual, constructive or deemed distribution in respect of the shares of
Lumentums capital stock or Lumentum Inc.s preferred stock;
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adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of Lumentum (other than (i) the transactions contemplated by the Merger Agreement, including the
Merger, and (ii) transactions between Lumentum and any direct or indirect wholly owned subsidiary of Lumentum or between direct or indirect wholly owned subsidiaries of Lumentum);
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(A) acquire (whether by merger or consolidation, acquisition of stock or assets or by formation of a joint venture or otherwise) any other person or business or any assets, deposits or properties of any other person, or
(B) make any material investment in any business either by purchase of stock or securities, contributions of capital, property transfers or purchase of property or assets of any person other than a wholly owned Subsidiary of Lumentum, except in
the case of clause (A) and (B) (x) as would not be reasonably expected to prevent or materially impair or delay the Closing conditions and (y) where the consideration payable in such transactions by Lumentum is less than $100,000,000
in the aggregate;
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convene a meeting of Lumentum stockholders for the purpose of revoking or varying the authority of the Lumentum board to allot Lumentum common stock;
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(i) incur or assume any long-term or short-term debt or issue any debt securities or (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether direct, contingently or otherwise) for the
obligations of any other person, except with respect to obligations of direct or indirect wholly owned subsidiaries of Lumentum, except for (A) short-term debt incurred to fund operations of the business in the ordinary course of business
consistent with past practice and (B) loans or advances to or from Lumentum subsidiaries, and (C) the Debt Financing or any Alternate Debt Financing; and
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authorize, commit or enter into a contract to do any of the foregoing actions.
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These
restrictions, which are subject to various exceptions and qualifications agreed by Lumentum and Oclaro, are described in more detail in the Merger Agreement.
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Oclaros Agreement Not to Solicit Other Offers
Oclaro has agreed that it will not, directly or indirectly:
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solicit, initiate, or knowingly encourage, knowingly facilitate or knowingly induce the making, submission or announcement of an Acquisition Proposal or the making of any inquiry, offer or proposal that would reasonably
be expected to lead to an Acquisition Proposal;
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furnish to any third party any
non-public
information relating to Oclaro or any of its subsidiaries, or afford access to the business, properties, assets, books or records of
Oclaro or any of its subsidiaries to any third party, or take any other action, in each case, intended to assist or facilitate the making of an Acquisition Proposal or any inquiry, offer or proposal that would reasonably be expected to lead to an
Acquisition Proposal;
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participate or engage in discussions or negotiations with respect to an Acquisition Proposal with any third party that is seeking to make or has made an Acquisition Proposal (other than, in the case of two prior
clauses, in response to an unsolicited inquiry or submitted Acquisition Proposal, to refer the inquiring or submitting person pursuant to the Merger Agreement, and provided, that Oclaro and its representatives communicate in writing with a person
who had made an unsolicited bona fide written Acquisition Proposal (and its representatives) solely to clarify (and not negotiate) the existing terms of, and ascertain additional facts regarding, such Acquisition Proposal for the purpose of the
Oclaro Board informing itself about such Acquisition Proposal and the person making it);
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approve, endorse or recommend an Acquisition Proposal; or
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execute or enter into any letter of intent, memorandum of understanding or contract contemplating or otherwise relating to an acquisition of Lumentum.
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Oclaro has agreed to immediately cease and cause to be terminated any and all existing activities, discussions or negotiations with any third
party concerning any Acquisition Proposal.
However, until receipt of the Oclaro Stockholder Approval, if Oclaro receives a bona fide
Acquisition Proposal from any person that did not result from a material breach of its
non-solicitation
obligations that the Oclaro Board concludes in good faith would reasonably be expected to lead to a
Superior Proposal, Oclaro may, directly or indirectly:
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engage or participate in discussions or negotiations with such third party and its representatives and its potential sources of financing; and/or
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furnish to such third party, its representatives and its potential financing sources any information (including
non-public
information) relating to Oclaro or any of its
subsidiaries, and provide access to Oclaros and its subsidiaries assets, properties and business facilities pursuant to a confidentiality agreement with terms of which are no less favorable to Oclaro than those contained in the confidentially
agreement between Oclaro and Lumentum (
provided
that such confidentiality agreement need not contain any standstill or similar provision that would prohibit such third party from making any Acquisition Proposal).
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Any action taken pursuant to the foregoing may be taken only if (1) the Oclaro Board determines in good faith that the
failure to take such action would reasonably be likely to be inconsistent with its fiduciary duties to shareholders of Oclaro under Delaware law; (2) solely with respect to initial contact with respect to any third party, Oclaro shall provide
Lumentum written notice within 36 hours of Oclaro engaging or participating in discussions or negotiations with or furnishing
non-public
information to such third party; and (3) promptly following
furnishing any
non-public
information to such person, Oclaro furnishes such
non-public
information to Lumentum (to the extent such information has not been previously
furnished or made available by Oclaro to Lumentum or any of its representatives).
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Oclaro shall promptly, and in all cases within 36 hours after, to the knowledge of Oclaro,
its receipt, advise Lumentum in writing of its receipt of any Acquisition Proposal or any request for information or inquiry with respect to, or that could reasonably be expected to lead to, an Acquisition Proposal.
Oclaro shall keep Lumentum reasonably informed of the status and material terms and conditions (including all material amendments or proposed
material amendments) of any such Acquisition Proposal and, promptly (and in no event later than 36 hours thereafter) upon, to the knowledge of Oclaro, receipt of any written material amendment or written proposed material amendment of any such
Acquisition Proposal, Oclaro shall give Lumentum a copy thereof
The Merger Agreement provides that the term Acquisition
Proposal means any offer or proposal from any third party relating to any Acquisition Transaction. The Merger Agreement provides that the term Acquisition Transaction means any transaction or series of related transactions (other
than the transactions contemplated by the Merger Agreement) involving: (a) any acquisition or purchase by any third party, directly or indirectly, of 15% or more of the outstanding Oclaro common stock, or any tender offer or exchange offer
that, if consummated, would result in any third party beneficially owning 15% or more of the voting power of Oclaro; (b) any merger, consolidation, share exchange, business combination, joint venture or other similar transaction involving
Oclaro pursuant to which the shareholders of Oclaro immediately preceding such transaction hold less than 85% of the equity interests in the surviving or resulting entity of such transaction; (c) any sale, lease (other than in the ordinary
course of business), exchange, transfer, license (other than in the ordinary course of business), acquisition or disposition of 15% or more of the assets of Oclaro and its subsidiaries on a consolidated basis, including any equity interests in
Oclaros subsidiaries (measured by the fair market value thereof as of the last day of Oclaros most recently completed calendar month); (d) any liquidation, dissolution, recapitalization or other significant corporate reorganization
of Oclaro or (e) any combination of the foregoing.
The Merger Agreement provides that the term Superior Proposal means
any bona fide, written Acquisition Proposal (except that, for purposes of this definition, each reference in the definition of Acquisition Transaction to 15% or 85% shall be 50%) that did not result
from a breach of the Merger Agreement and that the Oclaro Board has determined in good faith (after consultation with its financial advisor and its outside legal counsel, and after taking into account the financial, legal, regulatory and other
aspects of such Acquisition Proposal and all of the terms and conditions of such Acquisition Proposal as the Oclaro Board determines to be appropriate (including any termination or
break-up
fees, and expense
reimbursement provisions), as well as any counter-offer or proposal made by Lumentum that is capable of acceptance by Oclaro pursuant to the terms of the Merger Agreement (i) would be more favorable, from a financial point of view, to the
holders of Oclaro common stock in their capacities as such than the transactions contemplated by the Merger Agreement and (ii) is reasonably capable of consummation on a timely basis.
In addition, Oclaro has the ability to terminate the Merger Agreement in certain other circumstances, as described below.
Oclaros Agreement Not to Change the Oclaro Board Recommendation
In addition, Oclaro has agreed that the Oclaro Board will not:
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withdraw, amend or modify (or publicly propose to withhold, withdraw, amend or modify) in a manner adverse to Lumentum, Merger Sub or Merger Sub LLC, the Oclaro Board Recommendation;
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approve, endorse, adopt or recommend, or publicly propose to approve, endorse, adopt or recommend, any Acquisition Proposal or Superior Proposal;
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fail to recommend against acceptance by Oclaros shareholders of any tender offer or exchange offer for Oclaro common stock that constitutes an Acquisition Proposal within 10 business days after the commencement of
such offer; or
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resolve or publicly propose to take any of the foregoing actions.
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Any of the actions in the first three bullets above is referred to as an Oclaro Change
of Recommendation.
Notwithstanding anything to the contrary set forth in the Merger Agreement, the Oclaro Board may make an Oclaro
Change of Recommendation at any time prior to obtaining the Oclaro Stockholder Approval, if and only if:
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(1) Oclaro has received a bona fide written Acquisition Proposal that did not result from a material breach (or deemed material breach) of the Merger Agreement that the Oclaro Board has determined in good faith (after
consultation with its financial advisor and its outside legal counsel) that such Acquisition Proposal constitutes a Superior Proposal; (2) the Oclaro Board determines in good faith (after consultation with outside legal counsel) that the
failure to effect such Oclaro Change of Recommendation would reasonably be likely to be inconsistent with its fiduciary duties to the shareholders of Oclaro under Delaware law; (3) prior to effecting such Oclaro Change of Recommendation, Oclaro
shall have (A) given Lumentum at least four business days notice of its intention to take such action (which notice shall include the most current version of the proposed definitive agreement and, to the extent not included therein, all
material terms and conditions of such Superior Proposal and the identity of the person making such Superior Proposal) and (B) if requested by Lumentum, during the Notice Period, negotiate with Lumentum in good faith any modifications to the
terms and conditions of the Merger Agreement proposed by Lumentum, in its discretion; and (4) Lumentum shall not have made, within the Notice Period, a written counteroffer or proposal capable of acceptance by Oclaro that the Oclaro Board
determines in good faith, after consultation with its financial advisor and its outside legal counsel, is at least as favorable, from a financial point of view, to shareholders of Oclaro, in their capacity as such, as such Superior Proposal (it
being understood that any material revision to the material terms of a Superior Proposal, including any revision in the per share financial consideration, shall require a new notice (for each material revision) pursuant to the paragraph above
(except that the four (4) business day Notice Period referred above shall instead be three business days); or
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(1) An Intervening Event shall have occurred and be continuing at the time of the determination, (2) the Oclaro Board determines in good faith (after consultation with outside legal counsel) that the failure to
effect such Oclaro Change of Recommendation would be reasonably likely to be inconsistent with its fiduciary duties to shareholders of Oclaro under Delaware law, (3) prior to effecting such Oclaro Change of Recommendation, Oclaro shall have
(A) given Lumentum at least four business days prior written notice of its intention to take such action (which notice shall include a written explanation of the Oclaro Boards basis and rationale for proposing to effect such Oclaro
Change of Recommendation) and (B) if requested by Lumentum, negotiated with Lumentum in good faith during such four business day Notice Period any modifications to the terms of the Merger Agreement proposed by Lumentum, in its discretion, and
(4) Lumentum shall not have made, within the four business day Notice Period, a written offer or proposal capable of acceptance by Oclaro that the Oclaro Board determines in good faith, after consultation with its financial advisor and its
outside legal counsel, that the failure to effect such Oclaro Change of Recommendation would be reasonably likely to be inconsistent with its fiduciary duties to shareholders of Oclaro under Delaware law.
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The Merger Agreement provides that the term Intervening Event means any material fact, event, change, development or combination
thereof that occurs or exists after the date of the Merger Agreement with respect to the business, operations, financial condition or results of operations of Oclaro or any of its subsidiaries (and not relating in any way to (x) an Acquisition
Proposal or (y) any fluctuation in the market price or trading volume of Oclaro common stock or Lumentum common stock, in and of itself; it being understood, however, that any underlying cause thereof may be taken into account for purposes of
determining whether an Intervening Event has occurred) and that was not known (or the consequences of which were not known) to the Oclaro Board nor reasonably foreseeable by the Oclaro Board as of or prior to the date of the Merger Agreement.
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Preparation of the Form
S-4
and the Proxy Statement/Prospectus; Oclaro Special Meeting
As promptly as practicable
after the execution and delivery of the Merger Agreement, Lumentum and Oclaro have agreed to jointly prepare and file with the SEC this proxy statement/prospectus (as part of the Form
S-4)
that includes
(1) a prospectus for the issuance of shares of Lumentum common stock in the Merger and (2) a proxy statement of Oclaro for use in connection with the solicitation of proxies for the matters to be considered at the Oclaro special meeting.
As soon as reasonably practicable following the date the Form
S-4
is declared effective by the
SEC (and in no event later than 45 days after the commencement of the mailing of this proxy statement/prospectus to the Oclaro shareholders), Oclaro has agreed to establish a record date for, call, give notice of, convene and hold a meeting of the
shareholders of Oclaro for the purpose of voting upon the adoption of the Merger Agreement in accordance with Delaware law.
Regulatory Matters
Oclaro has agreed to use reasonable best efforts to solicit proxies from its stockholders in favor of the
Merger.
Subject to the terms and conditions set forth in the Merger Agreement, each of Lumentum, Merger Sub, Merger Sub LLC and Oclaro
will use their reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other party in doing all things reasonably necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions contemplated by the Merger Agreement (including the Merger) including using reasonable best efforts to:
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cause the conditions to the Merger to be satisfied or fulfilled;
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obtain all necessary actions, or
non-actions,
waivers, consents, approvals, orders and authorizations from governmental entities, obtain the expiration or termination of any
applicable waiting periods, make all necessary registrations, declarations and filings (including registrations, declarations and filings with governmental entities, if any), and take all steps as may be necessary to obtain any actions or
non-actions,
waivers, consents, approvals, orders and authorizations from, and to avoid an action or proceeding by, any governmental entity and any impediment to the consummation of the Merger under any applicable
Laws (including antitrust laws);
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defend against any lawsuits or other legal proceedings, whether judicial or administrative, challenging the consummation of the Merger; and
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execute and deliver any additional instruments necessary to consummate the Merger.
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Subject to
the terms and conditions set forth in the Merger Agreement, Lumentum and Oclaro will promptly, using their respective reasonable best efforts, file with the FTC and DOJ a Notification and Report Form relating to the Merger as required by the HSR Act
(and in any event no later than twelve business days, following the execution of the Merger Agreement) as well as comparable
pre-merger
notification filings, forms and submissions with any foreign governmental
entity that may be required by the antitrust laws of any applicable foreign jurisdiction (including under the antitrust and competition laws of the Peoples Republic of China) (and in any event no later than twenty-three business days,
following the execution of the Merger Agreement). The parties will use reasonable best efforts to promptly (i) cooperate and coordinate with the other in the making of such filings, (ii) supply the other with any information that may be
required in order to effectuate such filings, and (iii) supply any additional information that reasonably may be required or requested by the FTC, the DOJ or the competition or merger control authorities of any other applicable jurisdiction.
Lumentum and Oclaro will promptly inform the other party of any communication from any governmental entity regarding the Merger. If either Lumentum or Oclaro receives a request for additional information or documentary
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material from any governmental entity with respect to the Merger, then it will use reasonable best efforts to provide, or cause to be provided, as soon as reasonably practicable and after
consultation with the other party, any additional information that reasonably may be required or requested by such governmental entity and otherwise make an appropriate response in compliance with such request. Subject to applicable law, no filing
of, or amendment or supplement to, or written correspondence with any governmental entity or its staff with respect to such antitrust laws shall be made by Lumentum or Oclaro without providing the other party a reasonable opportunity to review and
comment thereon and consider in good faith the comments of the other party. Lumentum and Oclaro also agree to (i) give each other reasonable advance notice of all substantive discussions or meetings with any governmental entity relating to the
Merger, (ii) give each other an opportunity to participate in each of such substantive discussions or meetings where permitted by applicable law and the relevant governmental entity, (iii) keep the other party reasonably apprised with
respect to any substantive communications with any governmental entity regarding the Merger, (iv) cooperate in the filing of any analyses, presentations, memoranda, briefs, arguments, opinions or other written communications explaining or
defending the Merger, articulating any regulatory or competitive argument and/or responding to requests or objections made by any governmental entity, (v) provide each other (or counsel of each party, as appropriate) with copies of all written
communications to or from any governmental entity relating to the Merger or any other transactions contemplated hereby, and (vi) cooperate and provide each other with a reasonable opportunity to participate in, and consider in good faith the
views of the other with respect to, all material deliberations with any governmental entity with respect to all efforts to satisfy the antitrust closing conditions.
Lumentum is required to take all actions with respect to a Divestible Product Line (as defined below) to, as promptly as practicable,
eliminate any concerns on the part of, or to satisfy any conditions imposed by, any governmental entity with jurisdiction over the enforcement of any antitrust law, regarding the Merger, including by (i) proposing, negotiating, offering to
commit and effecting (and if such offer is accepted, committing to and effecting), by consent decree, hold separate order or otherwise, the license, sale, divestiture or disposition of such assets (including intellectual property rights and any
assets used in multiple product lines, operations or businesses of Lumentum, Oclaro or any of their respective subsidiaries (Mixed Use Assets)), businesses and product lines of Lumentum, Oclaro or any of their respective subsidiaries and
affiliates, now owned or hereafter sought to be acquired, (such license, sale, divestiture or disposition, a Divestiture), (ii) otherwise offering or offering to commit to operational restrictions, whether or not such restrictions
limit or modify Lumentums rights of ownership in, or ability to conduct its businesses, product lines or operation of its or its subsidiaries assets (including intellectual property rights and Mixed Use Assets), including, after the
Closing, the businesses, product lines or operation of the assets (including intellectual property rights and Mixed Use Assets) of the Oclaro or its subsidiaries, in each case as determined necessary or advisable in order to obtain all consents
necessary to satisfy the antitrust-related conditions to the Merger prior to the Termination Date and/or to avoid the entry of, or to effect the dissolution of, any order that would have the effect of preventing or materially delaying the
consummation of the Merger and the other transactions contemplated by the Merger Agreement, and (iii) proposing, negotiating, offering to commit and effecting (and if such offer is accepted, committing to and effecting) supply and other
commercial arrangements. However, Lumentum shall not be required to (i) sell, divest, exclusively license, hold separate, or otherwise dispose of, or (ii) grant any
non-exclusive
license, accept any
operational restrictions or take or commit to take any actions (including supply and other commercial arrangements) which restrictions or actions would limit Lumentums or any of its subsidiaries freedom of action with respect to, assets,
licenses, product lines, operations or businesses of Lumentum, Oclaro or any of their respective subsidiaries that, individually or in the aggregate, generated total collective revenues in excess of $66,000,000 in Lumentums or Oclaros
fiscal year 2017, as applicable (the Revenue Cap), provided, for purposes of calculating the Revenue Cap, with respect to Mixed Use Assets, only the revenue generated by the Divestible Product Line shall be counted towards the Revenue
Cap, except that, in the case of clause (ii) above, the revenues of the asset, license, product line, operation or business impacted by such
non-exclusive
license, operational restriction or action,
respectively, shall be considered in determining whether the Revenue Cap has been achieved only if: (A) such restrictions or actions would limit Lumentums or its affiliates freedom of action after the Effective Time with respect to
such impacted asset, product line, operation or business, respectively, of Lumentum, Oclaro or any of their respective subsidiaries in a respect that is material to such impacted asset,
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product line, operation or business, respectively, of Lumentum, Oclaro or any of their respective subsidiaries (it being understood that an obligation to continue selling or supporting a product
in any jurisdiction shall not, in and of itself, be construed to be a material limitation), or (B) in the case of a
non-exclusive
license, the adverse effect of such
non-exclusive
license is material with respect to the impacted asset, license, product line, operation or business, respectively of Lumentum, Oclaro or any of their respective subsidiaries. Notwithstanding the
foregoing, in no event shall Lumentum be required to (i) sell, divest, license, hold separate, or otherwise dispose of any wafer fabrication facility or wafer fabrication equipment of Lumentum, Oclaro or any of their respective subsidiaries if
such wafer fabrication facility or wafer fabrication equipment is used in the production of multiple product lines that, in the aggregate, generated revenue in excess of the Revenue Cap in fiscal year 2017, (ii) license intellectual property
rights of Lumentum, Oclaro or any of their respective subsidiaries, to a third party, if Lumentum, Oclaro or such subsidiaries (as applicable) are not permitted by the governmental entity (with jurisdiction over the enforcement of any antitrust law
that is seeking such antitrust remedy) to contractually prohibit such Third Party from using such licensed intellectual property rights to sell, manufacture or distribute any
Non-Divestible
Product Line (as
defined below), or (iii) sell or divest intellectual property rights of Lumentum, Oclaro or any of their respective subsidiaries, to a third party, if Lumentum, Oclaro or such subsidiaries (as applicable) are not permitted by the governmental
entity (with jurisdiction over the enforcement of any antitrust law that is seeking such antitrust remedy) to (A) contractually require such third party to license such intellectual property rights to any of Lumentum, Oclaro or any of their
respective subsidiaries to the extent such intellectual property rights is necessary to sell, manufacture or distribute any
Non-Divestible
Product Line and (B) contractually prohibit such third party from
using such intellectual property rights to sell, manufacture or distribute any
Non-Divestible
Product Line. A Divestible Product Line means any product lines, operations or businesses of Lumentum,
Oclaro or any of their respective subsidiaries that, individually or in the aggregate, generated total collective revenues up to and including the Revenue Cap, for which any governmental entity with jurisdiction over the enforcement of any antitrust
law seeks an antitrust remedy, including a Divestiture. A
Non-Divestible
Product Line shall mean any product lines, operations or businesses of Lumentum, Oclaro or any of their respective
subsidiaries that are not a Divestible Product Line.
Employee Matters
From the Effective Time until the first anniversary of the Closing Date (the Transition Period), Lumentum will cause the
compensation and benefits package provided to each employee of Oclaro or its subsidiaries who is employed by Lumentum or any of its subsidiaries immediately after the Effective Time (each, a Continuing Employee) to be no less favorable,
in the aggregate, than the compensation and benefits package, in the aggregate, provided to such Continuing Employee immediately before the Effective Time. During the Transition Period, each Continuing Employee will be eligible to receive
(i) base wages or salary, as applicable, that is not less than the base wages or salary, as applicable, provided to such Continuing Employee immediately before the Effective Time and (ii) severance benefits not less favorable in amount or
eligibility requirements than those provided to such Continuing Employee immediately before the Effective Time.
As of the Effective Time,
with respect to Continuing Employees, Lumentum will cause the service of each such Continuing Employee with Oclaro and its subsidiaries before the Effective Time to be recognized for purposes of eligibility to participate, levels of benefits and
vesting (but not for purposes of benefit accrual) under each severance, vacation, fringe or other welfare benefit plan, program or arrangement of Lumentum or the Surviving Company (as defined in the Merger Agreement), as applicable, but in which any
Continuing Employee is or becomes eligible to participate, but solely to the extent permitted by applicable law and to the extent such credit would not result in a duplication of benefits. From and after the Effective Time, Lumentum will, if
permitted by applicable law and the terms of the applicable plans, (i) cause any
pre-existing
conditions or limitations and eligibility waiting periods under any U.S. group health plans of Lumentum or its
subsidiaries to be waived with respect to the Continuing Employees and their eligible dependents and (ii) give each of the Continuing Employee in the U.S. credit for the plan year in which the Effective Time occurs toward applicable deductibles
and annual out of pocket limits for expenses incurred before the Effective Time for which payment has been made.
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Lumentum will, and will cause the Surviving Company, its subsidiaries and their permitted
successors and assigns, to honor and perform the individual severance arrangements and any plans, programs or arrangements required to be maintained by Oclaro or one of its subsidiaries by applicable law.
The Merger Agreement provides that the employee covenants described above are for the sole benefit of Lumentum and Oclaro, and that no third
party (including any Continuing Employee) will have any third-party beneficiary rights or remedies under the Merger Agreement, including in relation to continued employment or service with Lumentum or the continuation of any employee benefit plans
or arrangements by Lumentum or Oclaro.
Unless Lumentum provides written notice otherwise at least 10 business days before the Closing
Date, effective as of the day immediately preceding the Closing, Oclaro will terminate any and all 401(k) plans maintained by Oclaro or any of its subsidiaries, and as soon as practicable following the Closing, Lumentum will permit all Continuing
Employees who were eligible to participate in any 401(k) plan maintained by Oclaro or any of its subsidiaries immediately before the Closing to participate in Lumentums 401(k) plan, and will permit each such Continuing Employee to elect to
transfer his or her account balance when distributed from any terminated 401(k) plan maintained by Oclaro or any of its subsidiaries, including any outstanding participant loans from such 401(k) plans, to Lumentums 401(k) plan, except if
accepting such transfers would adversely affect the
tax-qualified
status of Lumentums 401(k) plan, or as may be prohibited by Lumentums 401(k) plan.
Indemnification and Insurance
Lumentum has agreed, for a period of six years following the Effective Time, to cause the surviving company to honor and fulfill in all
respects the obligations of Oclaro under its certificate of incorporation and bylaws and its subsidiaries under their respective certificates of incorporation and bylaws (and other similar organizational documents) and all agreements for
indemnification, exculpation of liability or advancement of expenses, in effect as of the date hereof between Oclaro or any of its subsidiaries and any of their respective current or former directors or officers or any person who becomes a director
or officer prior to the Effective Time (the Indemnified Parties), all of which will continue in full force and effect in accordance with their terms and will not be amended, repealed or otherwise modified in any manner that would
adversely affect the rights thereunder of such Indemnified Parties. The foregoing notwithstanding, if any claim, action, suit, proceeding or investigation (whether arising before, at or after the Effective Time) is made against any Indemnified Party
with respect to matters subject to indemnification hereunder on or prior to the sixth anniversary of the Effective Time, the rights to indemnification and exculpation from liabilities and advancement of expenses referenced in the preceding sentence
will continue in effect until the final disposition of such claim, action, suit, proceeding or investigation.
Lumentum has additionally
agreed, for a period of six years after the Effective Time, to maintain in effect Oclaros current directors and officers liability insurance (D&O Insurance) in respect of facts, events, acts or omissions occurring
at or prior to the Effective Time, covering each person covered by the D&O Insurance immediately prior to the Effective Time, on terms with respect to the coverage and amounts no less favorable to such insured persons than those of the D&O
Insurance in effect on the date of the Merger Agreement;
provided
,
however
, that the surviving company may, at its option, substitute therefor policies of Lumentum, the surviving company or any of their respective subsidiaries
containing terms with respect to coverage and amounts no less favorable to such insured persons than the D&O Insurance,
provided further
,
however
, that in satisfying its obligations, Lumentum and the surviving company is not
obligated to pay annual premiums in excess of 235% of the amount paid by Oclaro for such insurance coverage for its last full fiscal year (such 235% amount, the Maximum Annual Premium),
provided further
that if the annual premiums
of such insurance coverage exceed such amount, Lumentum and the surviving company are obligated to obtain a policy with the greatest coverage available for a cost not exceeding the Maximum Annual Premium. Prior to the Effective Time, notwithstanding
anything to the contrary set forth in the Merger Agreement, Oclaro may purchase a
six-year
tail prepaid policy (the Tail Policy) on the D&O Insurance on terms and conditions no less
favorable to the insured persons, in the
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aggregate, than the D&O Insurance and for an amount not to exceed 235% of the amount paid by Oclaro coverage for its last full fiscal year. In the event that Oclaro does not purchase the Tail
Policy, Lumentum may purchase a Tail Policy on the D&O Insurance on terms and conditions no less favorable to the insured persons, in the aggregate, than the D&O Insurance. In the event that either Oclaro or Lumentum purchases such a Tail
Policy prior to the Effective Time, Lumentum the surviving company will maintain such Tail Policy in full force and effect and continue to honor their respective obligations thereunder, in lieu of all other obligations of Lumentum and the surviving
company described in this paragraph for so long as such Tail Policy is maintained in full force and effect.
Each of the Indemnified
Parties or other persons who are beneficiaries under the D&O Insurance, the indemnification rights referred to in the first paragraph of this section or the Tail Policy referred to in the previous paragraph (and their heirs and representatives)
are third party beneficiaries of such section, with full rights of enforcement as if a party to the agreements described therein.
In the
event Lumentum or the surviving company (i) consolidates with or merges into any other person and shall not be the continuing or surviving entity of such consolidation or merger or (ii) transfers all or substantially all of its properties
and assets to any person, then the surviving entity or transferee of such assets will assume the obligations described in this section. The rights of the Indemnified Parties (and other persons who are beneficiaries under the D&O Insurance, the
indemnification rights referred to in the first paragraph of this section or the Tail Policy referred to in the second paragraph of this section(and their heirs and representatives)) described in this section are in addition to, and not in
substitution for, any other rights that such persons may have under the certificate of incorporation, bylaws or other equivalent organizational documents and any and all indemnification agreements of or entered into by Oclaro or any of its
subsidiaries, or applicable law (whether at law or in equity).
Stock Exchange Listing
The Merger Agreement provides that Lumentum will use its reasonable best efforts to cause the shares of Lumentum common stock to be issued in
the Merger to be approved for listing on NASDAQ, subject to official notice of issuance, prior to the Effective Time.
Financing Obligations
Lumentum has agreed to use reasonable best efforts to take or cause to be taken all actions and to do, or
cause to be done, all things reasonably necessary, proper or advisable to arrange and obtain the proceeds of the Debt Financing at or prior to the Closing. Lumentum will pay all fees arising under the Debt Commitment Letters as they become due.
Lumentum has agreed to not permit any amendment or modification to be made to the Debt Commitment Letters (other than pursuant to
flex provisions contained in the Debt Commitment Letters) without the consent of Oclaro if such amendment or modification would (i) reduce the aggregate amount of the Debt Financing (unless Lumentum has a sufficient amount of
available cash on hand from other sources to pay the Cash Consideration at Closing), (ii) impose new or additional conditions or other terms to the Debt Financing in a manner that would reasonably be expected to delay, prevent or materially
impede the consummation of the Merger or make the timely funding of the Debt Financing less likely to occur in any material respect or (iii) adversely impact the ability of Lumentum to enforce its rights against the other parties to the Debt
Commitment Letters or the definitive agreements with respect thereto. Lumentum may amend, amend and restate or replace the existing Debt Commitment Letters to add lenders, lead arrangers, bookrunners, syndication agents or similar entities who had
not executed the Debt Commitment Letters. Lumentum has agreed to provide Oclaro with information regarding any such changes.
If any
portion of the Debt Financing becomes unavailable on the terms and conditions set forth in the Debt Commitment Letters (after giving effect to all applicable flex provisions), Lumentum has agreed to use its
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reasonable best efforts to, as promptly as practicable following the occurrence of such event, (i) obtain alternative financing from alternative sources on terms and conditions not
materially less favorable in the aggregate to Lumentum than those set forth in the Debt Commitment Letters (the Alternate Debt Financing), and (ii) obtain one or more new financing commitment letters with respect to such Alternate
Debt Financing (the New Debt Commitment Letters), which New Debt Commitment Letters will replace the existing Debt Commitment Letters in whole or in part.
Lumentum has agreed to keep Oclaro fully informed on a reasonably current basis regarding the status of arranging the Debt Financing, and has
agreed to promptly provide any information reasonably requested by Oclaro relating to arranging the Debt Financing.
Lumentum has
expressly agreed that the receipt of the Debt Financing is not a condition to Closing.
Financing Cooperation
Prior to the Effective Time, Oclaro has agreed to, and to cause its subsidiaries to, and to use its reasonable best efforts to cause
its and their representatives to, provide Lumentum with all cooperation reasonably requested by Lumentum to assist it in causing the conditions in the Commitment Letter to be satisfied or as is otherwise reasonably requested by Lumentum in
connection with the Debt Financing, including:
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causing Oclaros management team, with appropriate seniority and expertise, including its senior executive officers, to assist in preparation for and to participate in a reasonable and limited number of meetings,
presentations, road shows, due diligence sessions, drafting sessions and sessions with rating agencies;
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assisting Lumentum with the timely preparation of customary rating agency presentations, bank information memoranda, road show materials and high-yield offering prospectuses, memoranda or other customary marketing
materials required in connection with the Debt Financing;
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assisting Lumentum in connection with the preparation and registration of (but not executing) any pledge and security documents, supplemental indentures, currency or interest hedging arrangements and other definitive
financing documents as may be requested by Lumentum or its financing sources (including using reasonable best efforts to obtain consents of accountants for use of their reports in any materials relating to the Debt Financing and accountants
comfort letters, in each case as requested by Lumentum), and otherwise reasonably facilitating the pledging of collateral and the granting of security interests in respect of the Debt Financing, provided that such documents will not take effect
until the Effective Time;
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to the extent required in connection with the Debt Financing, furnishing Lumentum and its financing sources, as promptly as practicable, with (1) audited consolidated balance sheets and related statements of income
and cash flows of Oclaro and its subsidiaries for the three most recently completed fiscal years ended at least 90 days before the Closing Date, (2) unaudited consolidated balance sheets and related unaudited statements of income and cash flows
of Oclaro and its subsidiaries, for each subsequent fiscal quarter (other than the fourth fiscal quarter) ended at least 45 days before the Closing Date, (3) financial information regarding Oclaro and its subsidiaries necessary for Lumentum to
prepare any pro forma financial statements for historical periods required by the Commitment Letter, and (4) such other financial information and other pertinent information customarily required in connection with a confidential information
memorandum or bank presentation in respect of the Debt Financing, in each case customarily used for the syndication of the Debt Financing;
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reasonably facilitating the pledging of collateral on the Closing Date as may be reasonably necessary to permit
the consummation of the Debt Financing, delivering notices of prepayment and notices of redemption within the time periods required by the relevant agreements governing indebtedness and obtaining customary payoff letters, lien terminations and
instruments of discharge to be delivered on
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the Closing Date, and giving any other necessary notices, to allow for the payoff, discharge and termination in full on the Closing Date of all indebtedness of Oclaro or its subsidiaries required
by the Commitment Letter to be paid on or prior to the Closing Date;
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so long as requested at least 10 days prior to the Closing Date, furnishing Lumentum or any of its subsidiaries and their financing sources with all documentation and other information required by regulatory authorities
pursuant to applicable know your customer and anti-money laundering rules and regulations at least three business days prior to the Closing Date;
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delivery of customary authorization letters that authorize the distribution of the confidential information memorandum to prospective lenders, which letters shall contain customary representations by Oclaro with respect
to Oclaro and its subsidiaries, including (a) a customary
10b-5
representation and (b) a customary representation that the public-side version does not include material
non-public
information about Oclaro and its subsidiaries or their securities; and
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taking all corporate and other actions, subject to the occurrence of the Closing Date, reasonably requested by Lumentum to permit the consummation of the Debt Financing.
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Notwithstanding the provisions described in this section or any other provision of the Merger Agreement, nothing in the Merger Agreement will
require Oclaro or any of its subsidiaries to (1) waive or amend any terms of the Merger 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 Lumentum or any of its subsidiaries, (2) enter into any definitive agreement the effectiveness of which is not conditioned on the Effective Time (other than, for the avoidance of doubt, the customary
authorization letters described above) that is effective prior to the Effective Time, (3) give any indemnities that are effective prior to the Effective Time, (4) take any action that, in the good faith determination of Oclaro, would
unreasonably interfere with the conduct of the business of Oclaro and its subsidiaries or create an unreasonable risk of damage or destruction to any property or assets of Oclaro or any of its subsidiaries, (5) provide any information the
disclosure of which is prohibited or restricted under applicable law or is legally privileged, or (6) take any action that will conflict with or violate its organizational documents or any applicable laws or would result in a violation or
breach of, or default under, any agreement to which Oclaro or any of its subsidiaries is a party. In addition, no action, liability or obligation of Oclaro, any of its subsidiaries or any of their respective representatives pursuant to any
certificate, agreement, arrangement, document or instrument (other than any authorization letters referred to above) relating to the Debt Financing will be effective until the Effective Time, and neither Oclaro 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. No officer or representative of Oclaro or any of its subsidiaries will be required to deliver any certificate or opinion or take any other action pursuant the Merger Agreement that
could reasonably be expected to result in personal liability to such officer or representative and the members of the Oclaro Board as of immediately prior to the Effective Time will not be required to approve any Debt Financing or contracts related
thereto.
All
non-public
or other confidential information provided by Oclaro or any of its
representatives pursuant to the Merger Agreement will be kept confidential in accordance with the confidentiality agreement between Lumentum and Oclaro, except that Lumentum will be permitted to disclose such information to any of its financing
sources or prospective financing sources, ratings agencies and other financial institutions and investors that are or may become parties to the Debt Financing and to any underwriters, initial purchasers or placement agents in connection with the
Debt Financing (and, in each case, to their respective counsel and auditors) so long as such persons (1) agree to be bound by the terms of the confidentiality Agreement as if parties thereto and (2) are subject to other confidentiality
undertakings customary for financings of the same type as the Debt Financing.
Lumentum has agreed to (1) indemnify, defend and hold
harmless Oclaro, its subsidiaries and their respective representatives from and against any loss, damages, claim, cost, liability, obligation or expense
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(including legal fees and expenses) suffered or incurred in connection with providing the cooperation and support described in this section and any information provided in connection therewith
except (A) information furnished in writing by or on behalf of Oclaro and its subsidiaries for use therein and (B) to the extent arising from the willful misconduct, gross negligence, fraud or intentional misrepresentation of Oclaro or its
subsidiaries and (2) promptly, upon request of Oclaro, reimburse Oclaro and its subsidiaries for all reasonable
out-of-pocket
costs incurred by Oclaro or its
subsidiaries in connection with providing the cooperation and support described in this section.
Litigation
Related to the Transaction
Oclaro shall promptly advise Lumentum in writing after becoming aware of any Legal Proceeding commenced
after the date hereof against Oclaro or any of its directors by any shareholder of Oclaro (on their own behalf or on behalf of Oclaro) relating to the Merger Agreement or the transactions contemplated thereby (including the Merger) and shall keep
Lumentum reasonably informed regarding any such Legal Proceeding. Oclaro shall give Lumentum the opportunity to consult with Oclaro regarding the defense or settlement of any such shareholder litigation and shall consider Lumentums views with
respect to such shareholder litigation and shall not settle any such shareholder litigation without the prior written consent of Lumentum (which consent shall not be unreasonably withheld, delayed or conditioned).
The Merger Agreement provides that the term Legal Proceeding means any action, claim, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate proceeding, public or private), hearing, audit, examination or investigation by or before any governmental entity.
Other Agreements
The Merger Agreement also contains other covenants, including with respect to access to information of the other company, public announcements
with respect to the transactions contemplated by the Merger Agreement, and obtaining third party consents under Lumentums or Oclaros business contracts.
Conditions to Closing
Under the Merger Agreement, each partys obligation to effect the Merger is subject to satisfaction or, to the extent permitted where
permissible under applicable law, mutual waiver at the Effective Time of each of the following conditions:
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the Oclaro Stockholder Approval shall have been obtained from Oclaros stockholders;
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any waiting period (and any extension thereof) applicable to the consummation of the transactions contemplated under the Merger Agreement (including the Merger) under the HSR Act shall have expired or been terminated
and all other antitrust, competition or merger control consents or clearances required to consummate the transactions contemplated by the Merger Agreement under the antitrust laws of the Peoples Republic of China shall have been obtained (or
been deemed to have been obtained by virtue of the expiration or termination of any applicable waiting period);
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no governmental entity having competent jurisdiction in any jurisdiction that is material to the business or operations of Oclaro and its subsidiaries, taken as a whole, or Lumentum and its subsidiaries, taken as a
whole, shall have (1) enacted, issued, promulgated, entered, enforced or deemed applicable to the Merger any applicable law that is in effect and has the effect of making the Merger illegal in any such jurisdiction or which has the effect of
prohibiting or otherwise preventing the consummation of the Merger in any such jurisdiction or (2) issued or granted any order (whether temporary, preliminary or permanent) that is in effect and has the effect of making the Merger illegal in
any such jurisdiction or which has the effect of prohibiting or otherwise preventing the consummation of the Merger in any such jurisdiction;
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the Form
S-4
shall have been declared effective by the SEC and no stop order suspending the effectiveness of the Form
S-4
shall be in
effect and no proceedings for such purpose shall be pending before or threatened by the SEC; and
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the shares of Lumentum common stock to be issued in the Merger as contemplated by the Merger Agreement shall have been approved for listing on NASDAQ, subject to official notice of issuance.
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Lumentums, Merger Subs and Merger Sub LLCs obligation to effect the Merger is further subject to the satisfaction or waiver
of the following conditions:
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Each of the representations and warranties of Oclaro set forth in the Merger (other than certain provisions of the representations and warranties of Oclaro related to capitalization and the representations set forth in
the immediately following bullet point) shall be true and correct in all respects on and as of the Closing Date with the same force and effect as if made on and as of such date, except for any failure to be so true and correct that, individually or
in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect (except for those representations and warranties which address matters only as of a particular date the accuracy of which shall be determined as of
such particular date and (A) all Material Adverse Effect and materiality qualifications and other qualifications based on the word material or similar phrases contained in such representations and warranties shall be disregarded (it
being understood and hereby agreed that (x) the phrase similar phrases as used in this proviso shall not be deemed to include any dollar thresholds contained in any such representations and warranties and (y) such
qualifications shall not be disregarded pursuant to the certain provisions of a representation and warranty related to the Oclaro balance sheet) and (B) any update of or modification to the Oclaro Disclosure Letter made or purported to have
been made after the date of the Merger Agreement shall be disregarded));
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Each of the representations and warranties set forth in the Merger Agreement relating to organization and standing (first four sentences thereof only), authorization, brokers; fees and expenses and state anti-takeover
statutes shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as if made on and as of such date (except for those representations and warranties which address matters only as of a particular
date the accuracy of which shall be determined as of such particular date);
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Each of the representations and warranties set forth in the Merger Agreement relating to capitalization (the first sentence only in subsections (b) and (c) thereof) shall be true and correct in all respects as
of the Closing Date with the same force and effect as if made on and as of such date, except for any
de minimis
inaccuracies (except for those representations and warranties which address matters only as of a particular date the accuracy of
which shall be determined as of such particular date);
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Oclaro shall have performed in all material respects its covenants required to be performed by it under the Merger Agreement at or prior to the Closing Date;
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Since March 11, 2018, a Material Adverse Effect with respect to Oclaro shall not have occurred; and
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Lumentum shall have received a certificate signed on behalf of Oclaro by its chief executive officer and its chief financial officer to the effect that the conditions related to Oclaros representations, warranties
and covenants described above have been satisfied, and that no Material Adverse Effect with respect to Oclaro has occurred since March 11, 2018.
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Oclaros obligation to effect the Merger is further subject to the satisfaction or waiver of the following conditions:
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Each of the representations and warranties of Lumentum, Merger Sub and Merger Sub LLC set forth in the Merger
Agreement (other than the representations in the bullet point immediately following and certain provisions of the representations and warranties of Lumentum related to capitalization) shall be true and correct in all respects on and as of the
Closing Date with the same force and effect as if made
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on and as of such date, except for any failure to be so true and correct that, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect
(except for those representations and warranties which address matters only as of a particular date the accuracy of which shall be determined as of such particular date and (A) all Material Adverse Effect and materiality qualifications and
other qualifications based on the word material or similar phrases contained in such representations and warranties shall be disregarded (it being understood and hereby agreed that (x) the phrase similar phrases as used
in this proviso shall not be deemed to include any dollar thresholds contained in any such representations and warranties and (y) such qualifications shall not be disregarded pursuant to the certain provisions of a representation and warranty
related to the Lumentum balance sheet (as defined in the Merger Agreement)) and (B) any update of or modification to the Lumentum Disclosure Letter made or purported to have been made after the date of the Merger Agreement shall be
disregarded));
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Each of the representations and warranties set forth in the Merger Agreement relating to Organization and Standing (the first four sentences thereof only), Authorization, Brokers; Fees and Expenses and State
Anti-Takeover Statutes shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as if made on and as of such date (except for those representations and warranties which address matters only as
of a particular date the accuracy of which shall be determined as of such particular date);
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Each of the representations and warranties set forth in the Merger Agreement relating to capitalization (the first sentence only in subsections (a) and (c) thereof and the first and third sentences only in
subsection (b) thereof) shall be true and correct in all respects as of the Closing Date with the same force and effect as if made on and as of such date, except for any
de minimis
inaccuracies (except for those representations and
warranties which address matters only as of a particular date the accuracy of which shall be determined as of such particular date) and in no event shall Lumentum have fewer than 62,286,763 shares of outstanding common stock;
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Lumentum shall have performed in all material respects its covenants required to be performed by it under the Merger Agreement at or prior to the Closing Date;
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since March 11, 2018, a Material Adverse Effect with respect to Lumentum shall not have occurred; and
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Oclaro shall have received a certificate signed on behalf of Lumentum, Merger Sub and Merger Sub LLC by a duly authorized officer of Lumentum, Merger Sub and Merger Sub LLC to the effect that the conditions related to
Lumentums representations, warranties and covenants described above have been satisfied, and that no Material Adverse Effect with respect to Lumentum has occurred since March 11, 2018.
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The Merger Agreement provides that neither party may rely on the failure of any condition to Closing to be satisfied if such failure was
caused by that partys failure to comply with its obligations under the Merger Agreement.
Any or all of the conditions described
above may be waived, in whole or in part, by Lumentum or Oclaro, to the extent permitted by applicable law.
Termination of the Merger Agreement
The Merger Agreement may be terminated at any time prior to the Effective Time by mutual written agreement of Lumentum and Oclaro, and either
party may terminate the Merger Agreement in the following circumstances:
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if the special meeting shall have been held and the Oclaro Stockholder Approval shall not have been obtained thereat or at any adjournment or postponement thereof, in each case at which a vote on such approval was
taken;
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if any governmental entity of competent jurisdiction, and which jurisdiction is material to the business or operations of Oclaro and its subsidiaries, taken as a whole, or Lumentum and its subsidiaries, taken as a
whole, shall have (1) enacted, issued, promulgated, entered, enforced or deemed applicable to any of the transactions contemplated hereby (including the Merger) any applicable law that is in effect and has the effect of permanently making the
consummation of the Merger illegal in any such jurisdiction or which has the effect of permanently prohibiting or otherwise permanently preventing the consummation of the Merger in any such jurisdiction or (2) issued or granted any order that
is in effect and has the effect of permanently making the Merger illegal in any such jurisdiction or which has the effect of permanently prohibiting or otherwise permanently preventing the consummation of the Merger and such order shall have become
final and nonappealable;
provided
, that the right to terminate the Merger Agreement described in this section shall not be available to any party hereto whose action or failure to fulfill any obligation under the Merger Agreement has been the
principal cause of or resulted in such order (or such order becoming final and nonappealable); or
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if the Effective Time shall not have occurred on or before 5:00 p.m. Pacific Time on December 11, 2018 (the Termination Date);
provided, however,
that if on the Termination Date all of the
conditions to the Closing set forth in the Merger Agreement other than (i) those conditions that by their terms are to be satisfied at the Closing, which conditions shall be capable of being satisfied at such time, and (ii) any or all of
the conditions set forth in the Merger Agreement (but solely to the extent the matter giving rise to the failure of such condition is related to Antitrust Laws), have been satisfied or waived, then the Termination Date will automatically be extended
to March 11, 2019 (the Antitrust Termination Date); and
provided, further
, that the right to terminate the Merger Agreement pursuant to this paragraph shall not be available to any party hereto whose action or failure to
fulfill any obligation under the Merger Agreement has been the principal cause of or resulted in the failure of the Effective Time to have occurred on or before the Termination Date or the Antitrust Termination Date, as applicable.
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Oclaro may also terminate the Merger Agreement at any time prior to the Effective Time as follows:
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in the event of a breach of any representation, warranty, covenant or agreement on the part of Lumentum, Merger Sub or Merger Sub LLC set forth in the Merger Agreement such that the obligations of Oclaro set forth as
conditions to Closing would not be satisfied as of the time of such breach, subject to customary cure periods; or
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prior to obtaining the Oclaro Stockholder Approval, in order to enter into a definitive agreement with respect to a Superior Proposal after an Oclaro Change of Recommendation, provided that (1) Oclaro has complied
in all material respects with the terms of the Merger Agreement governing the circumstances under which an Oclaro Change of Recommendation may be effected, (2) concurrently with the termination of the Merger Agreement, Oclaro enters into a
definitive agreement to effect such Superior Proposal and (3) concurrently with the termination of the Merger Agreement, Oclaro pays to Lumentum the termination fee amount payable pursuant to and in accordance with the Merger Agreement.
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Lumentum may also terminate the Merger Agreement at any time prior to the Effective Time as follows:
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in the event of a breach of any representation, warranty, covenant or agreement on the part of Oclaro set forth in the Merger Agreement or such that the conditions required to be performed by Oclaro as conditions to the
Closing would not be satisfied as of the time of such breach, subject to customary cure periods; or
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in the event that a Triggering Event shall have occurred prior to receipt of the Oclaro Stockholder Approval. For
all purposes of and under the Merger Agreement, a Triggering Event shall be deemed to have occurred if, prior to the Effective Time, any of the following shall have occurred: (1) Oclaro shall have willfully breached the provisions
of the Merger Agreement governing its solicitation of an
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149
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Acquisition Proposal (or be deemed, pursuant to the terms thereof, to have breached, provided that such breach is willful) in any material respect (without regard to whether such breach results
in an Acquisition Proposal); (2) the Oclaro Board or any committee thereof shall have for any reason effected an Oclaro Change of Recommendation; or (3) Oclaro shall have failed to include the Oclaro Board Recommendation in this proxy
statement/prospectus.
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Termination Fees
Oclaro will be required to pay to Lumentum a termination fee of $63.0 million in cash if the Merger Agreement is terminated as follows:
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by Oclaro, prior to obtaining the Oclaro Stockholder Approval, in order for Oclaro to enter into a definitive agreement with respect to a Superior Proposal after an Oclaro Change of Recommendation, provided that Oclaro
has complied in all material respects with the applicable terms of the Merger Agreement regarding an Oclaro Change of Recommendation;
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by Lumentum in the event that a Triggering Event shall have occurred prior to receipt of the Oclaro Stockholder Approval;
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(1) by either Lumentum or Oclaro because the special meeting is held and the Oclaro Stockholder Approval is not obtained thereat or at any adjournment or postponement thereof, in each case at which a vote on such
approval was taken, (2) prior to the special meeting an Acquisition Proposal had been publicly announced or become publicly known, and not publicly withdrawn, and (3) within 12 months following the termination of the Merger Agreement,
either an Acquisition Transaction is consummated or Oclaro enters into a definitive agreement providing for an Acquisition Transaction and such Acquisition Transaction is ultimately consummated (with all references to 15% and
85% in the definition of Acquisition Transaction being deemed references to 50%);
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(1) by either Lumentum or Oclaro because the Merger has not been consummated on or before the Termination Date or the Antitrust Termination Date, as applicable, (2) prior to such termination an Acquisition Proposal
had been publicly announced or become publicly known, and not publicly withdrawn, or had been communicated to Oclaro and not withdrawn, and (3) within 12 months following the termination of the Merger Agreement, either an Acquisition
Transaction is consummated or Oclaro enters into a definitive agreement providing for an Acquisition Transaction and such Acquisition Transaction is ultimately consummated (with all references to 15% and 85% in the definition
of Acquisition Transaction being deemed references to 50%); or
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(1) by Lumentum in the event of a willful and material breach of any covenant or agreement on the part of Oclaro set forth in the Merger Agreement such that the conditions required to be performed by Oclaro as
conditions to the Closing would not be satisfied as of the time of such breach, subject to customary cure periods, (2) prior to the breach or inaccuracy that formed the basis for such termination, an Acquisition Proposal had been publicly
announced or become publicly known, and not publicly withdrawn, or had been communicated to Oclaro and not withdrawn, and (3) within 12 months following the termination of the Merger Agreement, either an Acquisition Transaction is consummated
or Oclaro enters into a definitive agreement providing for an Acquisition Transaction and such Acquisition Transaction is ultimately consummated (with all references to 15% and 85% in the definition of Acquisition Transaction
being deemed references to 50%).
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Lumentum will be required to pay to Oclaro (or its designee) a termination fee
of $80 million in cash if the Merger Agreement is or had been terminated as follows:
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by either Lumentum or Oclaro due to a court or other governmental entity in a jurisdiction that is material to the business or operations of Lumentum or Oclaro issuing a final and
non-appealable
order or enacting an antitrust law that either permanently prohibits or prevents the consummation of the Merger; or
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150
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by either Lumentum or Oclaro due to the Effective Time not occurring prior to the Termination Date, or, if applicable, the Antitrust Termination Date and as of the time of such termination, the only conditions to
Closing that have not been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the Closing, each of which shall be capable of being satisfied if the Closing Date were the date the notice of termination
is delivered) were the condition related to illegality or injunction arising under the antitrust laws or the condition related to regulatory approvals.
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Effect of Termination
Upon the termination of the Merger Agreement pursuant to its terms, the Merger Agreement will become of no further force or effect without
liability of any party or parties thereto, as applicable except for certain sections of the Merger Agreement, including provisions regarding confidentiality, public disclosure, repatriation of cash, notice of termination, effect of termination, fees
and expenses and certain general provisions. Such termination will not relieve any party to the Merger Agreement of any liability for any willful and material breach of, or fraud in connection with, the Merger Agreement.
Expenses
Other than as described above under the section titled The Merger AgreementTermination Fees beginning on page 150 of this
proxy statement/prospectus, all fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement (including the Merger) will be paid by the party or parties, as applicable, incurring such
expenses whether or not the Merger is consummated. Expenses incurred in connection with the preparation, printing and mailing of this proxy statement/prospectus and the Form
S-4
any other filings with the SEC
and filing fees, if any, related thereto or under the HSR Act or any comparable
pre-merger
notification filings, forms and submissions with any foreign governmental entity that may be required by the antitrust
laws of any applicable foreign jurisdiction shall be paid by Lumentum.
Amendment
The Merger Agreement may be amended by Lumentum, Merger Sub, Merger Sub LLC and Oclaro at any time before or after the approval by the Oclaro
stockholders of the Merger Proposal at the special meeting, but after such approval, any amendment that requires the further approval of Oclaro stockholders by law may not be made without such further approval.
Governing Law
The Merger Agreement shall be governed by and construed in accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof. Notwithstanding the foregoing, any action, cause of action or other claim against the Financing Sources in any way relating to the Merger Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, without giving effect to any choice of law or conflict of laws provision or rule that would cause the application of the laws of any jurisdiction other than the State of New York
except as expressly specified in the debt commitment letters, the commitment relating to any alternative financing or in any definitive document related to such financing.
Specific Performance
The parties to the Merger Agreement have agreed that irreparable damage would occur in the event that any of the provisions of the Merger
Agreement were not performed in accordance with their specific terms or were otherwise breached. The parties have accordingly agreed that the parties shall be entitled to seek equitable relief without the requirement of posting a bond or other
security, including to an injunction or injunctions to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions thereof in any court of the United States or any state having jurisdiction, this being in addition
to any other remedy to which they are entitled at law or in equity.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The discussion below under the Material U.S. Federal Income Tax Consequences sets forth the material U.S. federal income tax
consequences of the Merger to U.S. Holders (as defined below). This discussion is based on the Code, Treasury regulations promulgated thereunder, rulings, administrative interpretations and court decisions, all as in effect as of the date of this
proxy statement/prospectus, and all of which may change, possibly with retroactive effect. Any such change could materially and adversely affect the tax consequences described below. No assurance can be given that the IRS would not assert, or that a
court would not sustain, a position contrary to the tax consequences described below.
This discussion addresses only the consequences of
the exchange of shares of Oclaro common stock held as capital assets (generally, property held for investment). It does not address all aspects of U.S. federal income taxation that may be important to a stockholder in light of that
stockholders particular circumstances, or to a stockholder subject to special rules, such as:
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a financial institution or insurance company, a regulated investment company, or a real estate investment trust;
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a
tax-exempt
organization;
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a controlled foreign corporation, passive foreign investment company, or corporation that accumulates earnings to avoid U.S. federal income tax;
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partnerships or other pass-through entities and investors therein;
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a dealer or broker in securities or currencies or a trader in securities who elects the
mark-to-market
method of accounting for their
securities;
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a stockholder who is not a U.S. Holder;
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a stockholder that has a functional currency other than the U.S. dollar;
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a stockholder who holds Oclaro common stock as part of a hedge, appreciated financial position, straddle, or conversion or integrated transaction;
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a person that will own immediately after the execution of the Merger (directly, indirectly or constructively) 10% or more by vote or value of the Lumentum equity interests;
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an individual retirement or other
tax-deferred
account;
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a stockholder who acquired Oclaro common stock pursuant to the exercise of compensatory options or stock purchase plans or otherwise as compensation; or
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a stockholder that does not vote in favor or the Merger and properly demands appraisal of its shares of Oclaro common stock under applicable law.
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If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of Oclaro
common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. A partner of a partnership holding shares of Oclaro common stock should consult its tax advisors.
For purposes of this discussion, a U.S. Holder is a beneficial owner of shares of Oclaro common stock that is for U.S. federal
income tax purposes:
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an individual who is a citizen or resident of the United States;
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a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any state therein or the District of Columbia;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust (i) that is subject to the primary supervision of a court within the United States and all the substantial decisions of which are controlled by one or more U.S. persons or (ii) that has a valid
election in effect under applicable Treasury regulations to be treated as a U.S. person.
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A
Non-U.S.
Holder is a beneficial owner of shares that is not a partnership for U.S. federal income tax purposes and is not a U.S. Holder.
This discussion of material U.S. federal income tax consequences is not a complete analysis or description of all potential U.S. federal
income tax consequences of the Merger. This discussion does not address tax consequences that may vary with, or are contingent on, individual circumstances. In addition, it does not address any alternative minimum tax,
non-income
tax or
non-U.S.,
state or local tax consequences of the Merger, or the potential application of the Medicare contribution tax on net investment income.
Accordingly, we strongly urge each Oclaro stockholder to consult its own tax advisor to determine the particular U.S. federal, state or local or
non-U.S.
income or other tax consequences to the stockholder
as a result of the Merger
.
Qualification of the Merger as a Reorganization under Section 368(a) of the Code
The Merger is intended to constitute a reorganization under Section 368(a) of the Code for U.S. federal income tax purposes.
One of the requirements that must be satisfied in order for the Merger to qualify as a reorganization is the continuity of interest test, which requires that a sufficient amount of the proprietary interests in Oclaro are preserved by
being exchanged in the Merger for Lumentum common stock. The continuity of interest test generally would be met if the Stock Consideration received in the Merger represented at least 40% of the value of the total Merger Consideration, determined
based on the value of the Lumentum common stock on the Closing Date. If the continuity of interest test is not satisfied, the Merger will not qualify as a reorganization under Section 368(a) of the Code and the Merger will be a fully taxable
transaction.
No assurances can be given that the continuity of interest requirement will be met. Stockholder votes will not be
resolicited in the event that the Merger does not qualify as a reorganization under Section 368(a) of the Code. On the Closing Date, Lumentum and Oclaro will make a determination, in consultation with tax counsel, as to whether or not the
Merger qualifies as reorganization for U.S. federal income tax purposes, and Lumentum will inform the Oclaro stockholders of such determination as soon as practicable after the Closing. The determination will be based on the then-existing law, will
assume the absence of changes in existing facts, will rely on assumptions and will rely on representations contained in certificates executed by officers of Lumentum and Oclaro. The determination will neither bind the IRS nor preclude the IRS from
adopting a contrary position, and no assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to such determination. Neither Lumentum nor Oclaro intends to seek a ruling from the IRS with respect
to the tax consequences of the Merger or an opinion of counsel with respect to such tax consequences in connection with the Closing of the Merger.
U.S. Federal Income Tax Consequences to Oclaro Stockholders If the Merger Qualifies as a Reorganization under Section 368(a) of the Code
If the Merger qualifies as a reorganization within the meaning of Section 368(a) of the Code, a U.S. Holder of Oclaro common stock
receiving the Merger Consideration in exchange for such Oclaro common stock in the Merger generally will recognize gain equal to the lesser of (i) the amount of cash received by the U.S. Holder (excluding any cash received in lieu of fractional
shares of Lumentum common stock) and (ii) the excess of the amount realized by the U.S. Holder over the U.S. Holders tax basis in the Oclaro common stock (generally the purchase price paid by the U.S. Holder to acquire such
stock). The amount realized by the U.S. Holder will
153
equal the sum of the fair market value of the Lumentum common stock and the amount of cash (including any cash received in lieu of fractional shares of Lumentum common stock) received by the U.S.
Holder. Losses will not be permitted to be recognized by U.S. Holders of Oclaro common stock in the Merger, except in connection with the receipt of cash in lieu of fractional shares of Lumentum common stock, as discussed below. Any gain recognized
by a U.S. Holder of Oclaro common stock generally will be long-term capital gain if the U.S. Holders holding period for the Oclaro common stock is more than one year, and short-term capital gain if the U.S. Holders holding period is one
year or less, at the time of the First Step Merger. Long-term capital gains of individuals are eligible for reduced rates of taxation.
For a U.S. Holder who acquired different blocks of Oclaro common stock at different times and at different prices, realized gain or loss
generally must be calculated separately for each identifiable block of shares exchanged in the Merger, and a loss realized on the exchange of one block of shares cannot be used to offset a gain recognized on the exchange of another block of shares.
If a U.S. Holder has differing bases or holding periods in respect of shares of Oclaro common stock, the U.S. Holder should consult its tax advisor prior to the exchange with regard to identifying the bases or holding periods of the particular
shares of Lumentum common stock received in the Merger.
The aggregate tax basis of the Lumentum common stock received (including
fractional shares deemed received and redeemed as described below) will be equal to the aggregate tax basis of the Oclaro common stock surrendered, reduced by the amount of cash the U.S. Holder of Oclaro common stock received (excluding any cash
received in lieu of fractional shares of Lumentum common stock), and increased by the amount of gain that the U.S. Holder of Oclaro common stock recognizes, but excluding any gain or loss from the deemed receipt and redemption of fractional shares
described below. The holding period of Lumentum common stock received by a U.S. Holder of Oclaro common stock in the Merger will include the holding period of the U.S. Holders Oclaro common stock.
Cash received by a U.S. Holder of Oclaro common stock in lieu of fractional shares of Lumentum common stock generally will be treated as if
the U.S. Holder received the fractional shares in the Merger and then received the cash in redemption of the fractional shares. The U.S. Holder generally should recognize capital gain or loss equal to the difference between the amount of the cash
received in lieu of fractional shares and the portion of the U.S. Holders tax basis allocable to the fractional shares.
U.S.
Holders of shares of Oclaro common stock receiving Lumentum common stock and cash in the Merger will be required to retain records pertaining to the Merger. U.S. Holders who owned at least 5% (by vote or value) of the total outstanding Oclaro common
stock before the First Step Merger or whose tax basis in Oclaro securities immediately before the First Step Merger equals or exceeds $1 million are subject to certain reporting requirements with respect to the Merger are subject to certain
reporting requirements with respect to the Merger. U.S. Holders are urged to consult with their tax advisors with respect to these and other reporting requirements applicable to the Merger.
U.S. Federal Income Tax Consequences to Oclaro Stockholders if the Merger Does Not Qualify as a Reorganization Under Section 368(a) of the Code.
If the Merger does not qualify as a reorganization within the meaning of Section 368(a) of the Code, a U.S. Holders
exchange of Oclaro common stock for Merger Consideration in the First Step Merger will be a fully taxable transaction in which such holder generally will recognize gain or loss equal to the difference between the amount realized (as
defined above) and the U.S. Holders tax basis in the Oclaro common stock surrendered in the Merger. Gain or loss must be calculated separately for each identifiable block of shares (i.e., shares acquired at different times and prices)
exchanged in the First Step Merger. Any gain or loss recognized by a U.S. Holder of Oclaro common stock generally will be long-term capital gain or loss if the U.S. Holders holding period of the Oclaro common stock is more than one year, and
short-term capital gain or loss if the U.S. Holders holding period is one year or less, at the time of the First Step Merger. Long-term capital gains of individuals are eligible
154
for reduced rates of taxation. The deductibility of capital losses is subject to limitations. The aggregate tax basis of an Oclaro stockholder in the Lumentum common stock received in the First
Step Merger will equal its fair market value at the Effective Time, and the holding period for the Lumentum common stock will begin the day after the Effective Time.
Information Reporting and Backup Withholding
Cash payments received in the First Step Merger by a U.S. Holder may, under certain circumstances, be subject to information reporting and
backup withholding, currently at a rate of 24% of the cash payable to the U.S. Holder, unless the U.S. Holder furnishes its taxpayer identification number (in the case of individuals, their social security number) or provides proof of an applicable
exemption, and otherwise complies with all applicable requirements of the backup withholding rules. Any amounts withheld from payments to a U.S. Holder under the backup withholding rules are not additional tax and will be allowed as a refund or
credit against the U.S. Holders U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
The foregoing discussion of U.S. federal income tax consequences is not intended to constitute a complete description of all tax
consequences relating to the Merger. The tax consequences of the Merger to a holder of Oclaro common stock will depend upon the facts of a holders particular situation. Because individual circumstances may differ, holders of Oclaro common
stock are urged to consult with their own tax advisor regarding the applicability of the rules discussed above and the particular tax effects of the Merger, including the application of state, local and
non-U.S.
tax laws, and, in the case of
Non-U.S.
Holders, possible eligibility for benefits under applicable income tax treaties.
ACCOUNTING TREATMENT
Each of Lumentum and Oclaro prepares its financial statements in accordance with U.S. GAAP. The Merger will be accounted for using the
acquisition method of accounting with Lumentum treated as the acquiror of Oclaro for accounting purposes. This means that the assets, liabilities and commitments of Oclaro, the accounting acquiree, are adjusted to their estimated fair value at the
acquisition date. Under the acquisition method of accounting, intangible assets are amortized over their remaining useful lives and tested for impairment at least annually.
155
OCLARO SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information with respect to beneficial ownership of Oclaro common stock as of
May 1, 2018 by (1) each person known by Oclaro to be a beneficial owner of more than 5% of Oclaros outstanding common stock, (2) each of Oclaros named executive officers, (3) each director and nominee for director,
and (4) all directors, nominees for director and executive officers of Oclaro as a group. The information on beneficial ownership in the table and the footnotes hereto is based upon Oclaros records and the most recent Schedule 13D or
13G, or amendments thereto, filed by each such person or entity and information supplied to Oclaro by such person or entity. Except as otherwise indicated (or except as contained in a referenced filing), each person has sole voting and investment
power with respect to all shares shown as beneficially owned, subject to community property laws where applicable, and can be reached by contacting Oclaros principal executive offices.
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Beneficial Owner (1)
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Common
Stock
Beneficially
Owned (2)
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Approximate
Percent
Beneficially
Owned (2)
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5% Stockholders
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BlackRock, Inc. (3)
55 East 52 Street
New York, NY 10055
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20,857,498
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12.3
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%
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LeRoy C. Kopp (4)
8400 Normandale Lake Boulevard, Suite 1450
Bloomington, MN 55437
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10,615,293
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6.2
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%
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The Vanguard Group (5)
100 Vanguard Blvd.
Malvern, PA 19355
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9,373,992
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5.5
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%
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Executive Officers and Directors
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Greg Dougherty (6)
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853,196
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*
|
Edward Collins (7)
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309,064
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*
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Marissa Peterson (8)
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292,133
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*
|
Adam Carter (9)
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237,187
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*
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Joel A. Smith, III (10)
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228,330
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*
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William L. Smith (11)
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248,736
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*
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Kendall Cowan (12)
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243,315
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*
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David Teichmann (13)
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163,046
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*
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Pete Mangan (14)
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260,418
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*
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Yves LeMaitre (15)
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107,981
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*
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Denise Haylor (16)
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38,785
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*
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Ian Small (17)
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42,153
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*
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Lisa Paul (18)
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103,680
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*
|
Thomas Gordon Beck Mason (19)
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39,182
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*
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Craig Cocchi (20)
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32,500
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*
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Walter Jankovic
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*
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All current directors and executive officers as a group (16 persons)
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3,199,706
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1.9
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%
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*
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Less than one percent of the outstanding common stock
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(1)
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Unless otherwise indicated, the address of each beneficial owner is c/o Oclaro, Inc., 225 Charcot Avenue, San Jose, California 95131.
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(2)
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Based on 170,213,690 shares outstanding on May 1, 2018. Beneficial ownership is determined in accordance
with SEC rules and generally includes voting or investment power with respect to the securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of Oclaro common stock subject to
options and restricted stock units held by that person that
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156
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will be exercisable/vested within 60 days after May 1, 2018, are deemed outstanding. Such shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of
any other person. Assumes that the Merger will not be completed on or before June 30, 2018.
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(3)
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The following information is based solely on a Schedule 13G filed with the Commission on January 23, 2018 by BlackRock, Inc. (BlackRock). BlackRock is the beneficial owner of and has sole dispositive power with
respect to 20,857,498 shares of Oclaro common stock, and sole voting power with respect to 20,495,393 shares of Oclaro common stock.
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(4)
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The following information is based solely on a Schedule 13G filed with the Commission on January 12, 2018 by Kopp Family Office, LLC (KFO), Kopp Holding Company, LLC (Holdco), which is the parent of KFO, and LeRoy
C. Kopp, who is the control person of Holdco. KFO is the beneficial owner of 9,718,293 shares of Oclaro common stock. KFO has shared voting power and shared dispositive power with respect to these shares of Oclaro common stock. These shares are
owned by clients of KFO and are held in discretionary accounts managed by KFO. HoldCo beneficially owns and has shared voting power with respect to 10,573,443 shares of Oclaro common stock and has shared dispositive power with respect to 7,566,953
shares of Oclaro common stock. Mr. Kopp beneficially owns 10,615,293 shares of Oclaro common stock, has shared voting power with respect to 10,573,443 shares of Oclaro common stock, has sole dispositive power with respect to 3,048,340 shares of
Oclaro common stock and has shared dispositive power with respect to 7,566,953 shares of Oclaro common stock.
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(5)
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The following information is based solely on a Schedule 13G filed with the Commission on February 9, 2018 by The Vanguard
Group23-1945930
(Vanguard). Vanguard is the
beneficial owner of 9,373,992 shares of Oclaro common stock, has sole dispositive power with respect to 9,070,394 shares of Oclaro common stock, has shared dispositive power with respect to 303,598 shares of Oclaro common stock, has sole voting
power with respect to 306,995 shares of Oclaro common stock, and has shared voting power with respect to 10,200 shares of Oclaro common stock.
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(6)
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Represents 796,458 shares beneficially owned by Mr. Dougherty and 56,738 shares issuable pursuant to restricted stock units vesting within 60 days of May 1, 2018.
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(7)
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Represents 309,064 shares beneficially owned by Mr. Collins, 77,731 held in trust, and 70,000 shares owned by his spouse.
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(8)
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Represents 292,133 shares beneficially owned by Ms. Peterson.
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(9)
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Represents 206,366 shares beneficially owned by Mr. Carter, 4,167 shares issuable pursuant to options exercisable within 60 days of May 1, 2018, and 26,654 shares issuable pursuant to restricted stock units
vesting within 60 days of May 1, 2018.
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(10)
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Represents 228,330 shares beneficially owned by Mr. J. Smith.
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(11)
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Represents 248,736 shares beneficially owned by Mr. W. Smith.
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(12)
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Represents 243,315 shares beneficially owned by Mr. Cowan.
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(13)
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Represents 137,228 shares beneficially owned by Mr. Teichmann 521 shares issuable pursuant to options exercisable within 60 days of May 1, 2018, and 25,297 shares issuable pursuant to restricted stock units
vesting within 60 days of May 1, 2018.
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(14)
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Represents 234,184 shares beneficially owned by Mr. Mangan and 26,234 shares issuable pursuant to restricted stock units vesting within 60 days of May 1, 2018.
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(15)
|
Represents 81,747 shares beneficially owned by Mr. LeMaitre and 26,234 shares issuable pursuant to restricted stock units vesting within 60 days of May 1, 2018.
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(16)
|
Represents 38,785 shares beneficially owned by Ms. Haylor.
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(17)
|
Represents 42,153 shares beneficially owned by Mr. Small
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(18)
|
Represents 79,526 shares beneficially owned by Ms. Paul, 2,500 shares issuable pursuant to options exercisable within 60 days of May 1, 2018, and 21,654 shares issuable pursuant to restricted stock units
vesting within 60 days of May 1, 2018.
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(19)
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Represents 17,108 shares beneficially owned by Mr. Mason and 22,074 shares issuable pursuant to restricted stock units vesting within 60 days of May 1, 2018.
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(20)
|
Represents 32,500 shares issuable to Mr. Cocchi pursuant to restricted stock units vesting within 60 days of May 1, 2018.
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157
DESCRIPTION OF LUMENTUM CAPITAL STOCK
The following describes the material terms of the capital stock of Lumentum. This description is qualified in its entirety by reference to the
Lumentum Charter and the Lumentum Bylaws, which are incorporated herein by reference into this proxy statement/prospectus. See Where You Can Find More Information for more information about the documents incorporated by reference into
this proxy statement/prospectus.
General
Lumentums authorized capital stock consists of 990,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of
preferred stock, par value $0.001 per share, all of which shares of preferred stock are undesignated. The Lumentum Board may establish the rights and preferences of the preferred stock from time to time. As of May 29, 2018, Lumentum had outstanding
62,902,475 shares of common stock and no outstanding shares of preferred stock.
Common Stock
Each holder of Lumentum common stock is entitled to one vote for each share on all matters to be voted upon by the common stockholders. Subject
to any preferential rights of any outstanding preferred stock, holders of Lumentum common stock are entitled to receive ratably the dividends, if any, as may be declared from time to time by Lumentums Board out of funds legally available for
that purpose. If there is a liquidation, dissolution or winding up of Lumentum, holders of Lumentum common stock would be entitled to ratable distribution of its assets remaining after the payment in full of liabilities and any preferential rights
of any then-outstanding preferred stock.
Holders of Lumentum common stock have no preemptive or conversion rights or other subscription
rights, and there are no redemption or sinking fund provisions applicable to Lumentums common stock. The rights, preferences and privileges of the holders of Lumentum common stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any series of preferred stock that Lumentum may designate and issue in the future.
Preferred Stock
Under the terms of Lumentums amended and restated certificate of incorporation, Lumentums Board is authorized, subject to
limitations prescribed by the DGCL and by Lumentums amended and restated certificate of incorporation, to issue up to 10,000,000 shares of preferred stock in one or more series without further action by the holders of its common stock.
Lumentums Board has the discretion, subject to limitations prescribed by the DGCL and by Lumentums amended and restated certificate of incorporation, to determine the designation, powers, preferences and rights, including voting rights,
dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of Lumentum and
may adversely affect the market price of Lumentum common stock, and the voting and other rights of the holders of Lumentum common stock. Lumentum has no current plans to issue any shares of preferred stock.
158
COMPARISON OF STOCKHOLDERS RIGHTS
Lumentum and Oclaro are both incorporated under Delaware law. Differences, therefore, between the rights of Lumentum stockholders and the
rights of Oclaro stockholders result from differences in the companies respective certificates of incorporation and bylaws. Upon completion of the Merger, the rights of Oclaro stockholders who exchange their shares of Oclaro common stock for
shares of Lumentum common stock in the Merger will be governed by Delaware law, the Lumentum Charter and the Lumentum Bylaws.
The
following is a summary of the material differences between the rights of holders of Lumentum common stock and the rights of holders of Oclaro common stock, but does not purport to be a complete description of those differences, or a complete
description of the specific provisions referred to in this summary. The identification of specific differences is not intended to indicate that other equally significant or more significant differences do not exist. The Lumentum Charter, the
Lumentum Bylaws, the Oclaro Charter and the Oclaro Bylaws are subject to amendment in accordance with their terms. Copies of these governing corporate instruments as currently in effect are available, without charge, to any person, including any
beneficial owner to whom this proxy statement/prospectus is delivered, by following the instructions listed under Where You Can Find More Information beginning on page 169 of this proxy statement/prospectus.
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Oclaro
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Lumentum
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Authorized Shares
. The aggregate number of shares which Oclaro is authorized to issue is 276,000,000, consisting of (i) 275,000,000 shares of common stock, par value $0.01 per share, and (ii) 1,000,000 shares of
preferred stock, par value $0.01 per share.
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Authorized Shares
. The aggregate number of shares which Lumentum is authorized to issue is 1,000,000,000, consisting of (i) 990,000,000 shares of common stock, par value $0.001 per share, and (ii) 10,000,000 shares
of preferred stock, par value $0.001 per share.
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Common Stock.
As of May 29, 2018, Oclaro had issued and outstanding 170,660,203 shares of common stock, none of which were held in treasury.
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Common Stock.
As of May 29, 2018, Lumentum had issued and outstanding 62,902,475 shares of common stock, of which no shares were held in treasury.
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Preferred Stock
. The Oclaro Charter authorizes the Oclaro Board to issue preferred stock in one or more series, to be established from
time to time. The Oclaro Board may fix by resolution(s) the number of shares to be included in each such series, the rights, preferences and privileges of each wholly unissued series, and any qualifications, limitations, or restrictions thereon and
may increase or decrease the number of shares of any such series.
As of
March 9, 2018, there were no shares of Oclaro preferred stock issued and outstanding. Pursuant to the terms of the Merger Agreement, Oclaro will not issue any shares of preferred stock
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Preferred Stock
. The Lumentum Charter authorizes the Lumentum Board to provide for the issuance of preferred stock in one or more
series, to establish from time to time the number of shares to be included in each such series, to fix the designation, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereon. The
rights of preferred stockholders may supersede the rights of common stockholders.
As
of March 9, 2018, there were no shares of Lumentum preferred stock issued and outstanding. Lumentum has no current plans to issue any shares of preferred stock.
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159
VOTING RIGHTS
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Oclaro
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Lumentum
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Under the Oclaro Charter and the Oclaro Bylaws, each stockholder is entitled to one vote for each share of capital stock held by such stockholder. The Oclaro Bylaws provide that, unless Delaware law, the Oclaro Charter or the
Oclaro Bylaws require a different vote, the vote of the holders of a majority of the voting power of the stock issued and outstanding present in person or represented by proxy and voting on such matter shall decide any question brought before a
meeting at which a quorum is present. Under the Oclaro Bylaws, directors are elected by the vote of the majority of the votes cast by stockholders at a meeting at which a quorum is present; except that if, as of the tenth day preceding of the date
Oclaro first mails its notice of such meeting, the number of nominees exceeds the number of directors to be elected, the directors shall be elected by the plurality of the shares represented in person or by proxy at any such meeting.
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Under the Lumentum Charter, each holder of Lumentum common stock is entitled to one vote for each share of common stock they hold on all matters to be voted on by Lumentums stockholders. Except as otherwise required by law,
all matters shall be determined by a majority of the voting power of the shares present in person or represented by proxy and entitled to vote on the matter, provided that a quorum is present; except that a nominee for director shall be elected to
the Lumentum Board if the votes cast for such nominees election exceed the votes cast against such nominees election. For this purpose, votes cast shall exclude abstentions, withheld votes or broker
non-votes
with respect to that directors election. Notwithstanding the immediately preceding sentence, in the event of a contested election of directors, directors shall be elected by the vote of a
plurality of the votes cast.
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The Oclaro Charter does not allow cumulative voting in the election of directors.
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The Lumentum Charter does not allow cumulative voting in the election of directors.
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AMENDMENTS TO THE CHARTER
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Oclaro
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Lumentum
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Under the DGCL, a charter amendment requires a board resolution setting forth the amendment proposed and declaring its advisability and approval by a majority of the outstanding stock entitled to vote thereon, and, if applicable, a
majority of the outstanding stock of each class entitled to vote thereon, unless the charter requires a greater proportion for approval. The Oclaro Charter does not require a greater proportion for approval; except that the Oclaro Charter requires
the affirmative vote of holders of 75% of the votes which all the stockholders would be entitled to cast in any election of directors for the amendment of provisions of the Oclaro Charter regarding amendments of the Oclaro Bylaws, management of the
business and affairs of Oclaro, authority of stockholders to take action by written consent in lieu of a meeting and authority to call special meetings of the stockholders.
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Under the DGCL, a charter amendment requires a board resolution setting forth the amendment proposed and declaring its advisability and approval by a majority of the outstanding stock entitled to vote thereon, and, if applicable, a
majority of the outstanding stock of each class entitled to vote thereon, unless the charter requires a greater proportion for approval. The Lumentum Charter does not require a greater proportion for approval.
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160
AMENDMENT TO THE BYLAWS
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Oclaro
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Lumentum
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Under the Oclaro Charter, the Oclaro Bylaws may be adopted, amended or repealed by the affirmative vote of holders of 75% of the votes which all the stockholders would be entitled to cast in any election of directors. The Oclaro
Charter authorizes the Oclaro Board to adopt, alter, amend or repeal the Oclaro Bylaws, by the affirmative vote of a majority of the directors present at any meeting of the Oclaro Board at which a quorum is present, without any action on the part of
the stockholders.
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Under the Lumentum Bylaws, the Lumentum Bylaws may be adopted, amended, altered or repealed by the affirmative vote of the stockholders holding a majority of the stock entitled to vote. The Lumentum Charter authorizes the
Lumentum Board to adopt, amend, alter or repeal any Lumentum Bylaws without the approval of Lumentum stockholders. Under the Lumentum Bylaws, the Lumentum Bylaws may be adopted, amended, altered, or repealed by the affirmative vote of a majority of
the Lumentum Board, provided that the Lumentum Board may not make or alter any Bylaws fixing the qualifications, classifications or term of office of directors.
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SPECIAL MEETINGS OF STOCKHOLDERS
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Oclaro
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Lumentum
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The Oclaro Bylaws provide that a special meeting of the stockholders may be called at any time by the Oclaro Board by a majority of the directors present at a meeting of the Oclaro Board at which a quorum is present, by the chairman
of the Oclaro Board, by the chief executive officer or by the president of Oclaro. A special meeting may not be called by any other person or persons.
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The Lumentum Bylaws provide that a special meeting of stockholders may be called at any time by the Lumentum Board, by the chairman of the Lumentum Board, or the chief executive officer of Lumentum. Stockholders are not permitted to
call a special meeting or to require the Lumentum Board to call a special meeting of stockholders.
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Only such business shall be considered at a special meeting of stockholders as shall have been stated in the notice for such meeting.
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Business transacted at any special meeting of stockholders shall be confined to the purpose or purposes stated in the notice of meeting.
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Under the Oclaro Bylaws, notice of the time and place of every meeting of stockholders must be given in writing not less than 10 but no more than 60 days before the date of the meeting.
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Notice of the place, if any, time and purpose or purposes of every meeting of stockholders, and the means of remote communication, if any, must be given in writing not less than 10 days nor more than 60 days prior to the meeting,
except that where the matter to be acted on is a merger or consolidation of Lumentum or a sale, lease or exchange of all or substantially all of the assets of Lumentum, such notice must be given not less than 20 days nor more than 60 days prior to
the meeting.
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STOCKHOLDER PROPOSALS AND NOMINATIONS
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Oclaro
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Lumentum
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Under the Oclaro Bylaws, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of Oclaro, and such notice should be in
proper form.
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Under the Lumentum Bylaws, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice in writing to the secretary of Lumentum, and such notice should be in proper
form.
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161
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Oclaro
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Lumentum
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To be timely, a stockholders notice must be delivered to or mailed and received at the principal executive offices of Oclaro not less than 90 days nor more than 120 calendar days before the one year anniversary of the previous
years annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting has been advanced by more than 20 days, or delayed by more than 60 days, from the first anniversary of the previous years
annual meeting of stockholders, notice by the stockholder, to be timely, must be so received not earlier than 120 calendar days in advance of such annual meeting, and not later than the close of business on the later of the 90
th
day prior to such annual meeting and the tenth day following the date on which public announcement of the date of the meeting is first made.
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To be timely, a stockholders notice must be delivered to or mailed and received at the principal executive offices of Lumentum not less than 60 days nor more than 90 days before the first anniversary of the date of the
previous years annual meeting of stockholders as first specified in Lumentums notice of meeting (without regard to any postponements or adjournments of such meeting after such notice was first sent); provided, however, that in the event
that no annual meeting was held in the previous year or the date of the annual meeting has been advanced by more than 30 days or delayed (other than as a result of adjournment) by more than 60 days from the first anniversary of the prior years
annual meeting, notice by the stockholder to be timely must be so received not later than the close of business on the later of 90 days in advance of such annual meeting or 10 days following the date on which public announcement of the date of the
meeting is first made.
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To be in proper written form, the stockholders notice to the secretary of Oclaro must comply with certain requirements further described in Section 1.11(b) of the Oclaro Bylaws.
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To be in proper written form, the stockholders notice to the secretary of Lumentum must comply with certain requirements further described in Section 10 and Section 11 of the Lumentum Bylaws.
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No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures described in full in Section 1.11 of the Oclaro Bylaws. The chairman of
the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting in accordance with the foregoing procedures, and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not be transacted.
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No business shall be conducted at an annual meeting except in accordance with the procedures set forth in Section 10 and Section 11 of the Lumentum Bylaws. The chairman of the annual meeting shall, if the facts warrant,
determine and declare at the meeting that business was not properly brought before the meeting and in accordance with Section 1 and Section 10 (and with respect to nominations of persons for election to the Lumentum Board, Section 11)
of the Lumentum Bylaws, and, if he or she should so determine, he or she shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.
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Nominations for the Oclaro Board are also subject to the timing and delivery provisions described above with respect to an annual meeting. Nominations for the Oclaro Board, in the case of a special meeting of stockholders, must be
received by the secretary of Oclaro not earlier than the 120
th
day before such special meeting and not later than the close of business on the later of the 90
th
day before such special meeting and the tenth day following the day on which notice of the date of such special meeting was mailed or public disclosure was made. The stockholders notice to the
secretary of Oclaro must comply with certain requirements further described in Section 1.10(b) of the Oclaro Bylaws.
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Nominations for the Lumentum Board are also subject to the timing and delivery provisions described above. The stockholders notice to the secretary of Lumentum must comply with certain requirements further described in
Section 11 of the Lumentum Bylaws.
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162
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Oclaro
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Lumentum
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Stockholder action by written consent is prohibited by the Oclaro Charter and such action must be taken at a duly called annual or special meeting.
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Stockholder action by written consent is prohibited by the Lumentum Bylaws and such action must be taken at a duly called annual or special meeting.
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BOARD OF DIRECTORS
Number of Directors
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Oclaro
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Lumentum
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The Oclaro Bylaws provide that the number of directors will be established by the Oclaro Board.
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The Lumentum Bylaws provide that the number of directors will initially be six members. The Lumentum Charter and Lumentum Bylaws provide further that the number of directors will be fixed from time to time exclusively by the
Lumentum Board pursuant to a resolution adopted by a majority of the total number of authorized directors.
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The Oclaro Board currently consists of eight members.
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The Lumentum Board currently consists of seven directors.
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Classification
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Oclaro
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Lumentum
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The Oclaro Board is divided into three classes. Under the Oclaro Charter and the Oclaro Bylaws, each director is elected for a term ending on the date of the third annual meeting of stockholders following the annual meeting at which
such director was elected; and until a successor has been duly elected and qualified.
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The Lumentum Board is not divided into classes. Under the Lumentum Bylaws, each director is elected to hold office until the expiration of the term for which the director is elected and until his or her successor is duly elected and
qualified, except in the case of the death, resignation or removal of any director.
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Removal
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Oclaro
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Lumentum
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Under the Oclaro Charter and the Oclaro Bylaws, any director may be removed only for cause and only by the affirmative vote of the holders of at least 75% of the shares then entitled to vote at an election of directors.
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Under the Lumentum Charter, any director or the entire Lumentum Board may be removed at any time by the holders of a majority of shares then entitled to vote at an election of directors, unless otherwise restricted by statute. Under
the Lumentum Bylaws, at a duly held special meeting of stockholders, any director or the entire Lumentum Board may be removed from office, with or without cause, and a new director or directors elected by a vote of stockholders holding a majority of
the outstanding shares entitled to vote at an election of directors.
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163
Vacancies
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Oclaro
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Lumentum
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The Oclaro Charter and the Oclaro Bylaws provide that vacancies in the Oclaro Board, including vacancies from newly created directorships resulting from any increase in the authorized number of directors, shall be filled only by a
majority of the remaining directors, even if less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall hold office until the next election of the class for which such director shall have been chosen.
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Under the Lumentum Bylaws, vacancies (including as a result of the death, removal or resignation of any director, or the failure at any meeting of stockholders at which directors are to be elected to elect the number of directors
constituting the whole Lumentum Board) and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining
director.
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Director Liability and Indemnification
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Oclaro
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Lumentum
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Under the Oclaro Charter, to the fullest extent permitted by the DGCL, no director of Oclaro will be personally liable to Oclaro or its stockholders for monetary damages for breach of fiduciary duty as a director.
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Under the Lumentum Charter, no director will be personally liable to Lumentum or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the directors
duty of loyalty, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under DGCL Section 174 (concerning unlawful distributions to stockholders) or (iv) for any
transaction from which the director derived an improper personal benefit.
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The Oclaro Charter provides that Oclaro will indemnify any person against expenses (including attorneys fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred in connection with any
threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative (collectively, Proceeding) in which such person was or is a party, or is threatened to be made a party, by reason of
the fact that such person, or a person for whom such person is the legal representative, is or was a director or officer of Oclaro. Oclaro shall be required to indemnify and hold harmless a director or officer in connection with a Proceeding (or
part thereof) initiated by such director or officer only if the initiation of such Proceeding (or part thereof) by the director or officer was authorized by the Oclaro Board.
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Lumentums Bylaws provide that Lumentum will indemnify and hold harmless, to the maximum extent and in the manner permitted by the DGCL, any person against expenses, liability and loss (including attorneys fees,
judgments, fines, and amounts paid in settlements) reasonably incurred in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (collectively, a
Proceeding) by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a director, officer, employee or agent of Lumentum, or is or was serving at the request of Lumentum as a director,
officer, employee or agent of another corporation or other enterprise. Lumentum shall be required to indemnify and hold harmless any such person in connection with a Proceeding (or part thereof) brought by such person only if the Proceeding (or part
thereof) was authorized by the Lumentum Board.
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164
STOCKHOLDER RIGHTS PLAN
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Oclaro
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Lumentum
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Oclaro does not have a stockholder rights plan currently in effect, but under Delaware law, the Oclaro Board could adopt such a plan without stockholder approval.
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Lumentum does not have a stockholder rights plan currently in effect, but under Delaware law, the Lumentum Board could adopt such a plan without stockholder approval.
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BUSINESS COMBINATIONS
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Oclaro
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Lumentum
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The Oclaro Charter does not require a supermajority vote of stockholders for any action of stockholders related to business combinations.
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The Lumentum Charter does not require a supermajority vote of stockholders for any action of stockholders related to business combinations.
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The DGCL prohibits a Delaware corporation from engaging in a business combination with an interested stockholder (
i.e
., a stockholder owning 15% or more of the corporations voting stock) for
three years following the time that the interested stockholder becomes such, subject to certain exceptions. Oclaro elected in the Oclaro Charter not to be governed by Section 203 of the DGCL.
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The DGCL prohibits a Delaware corporation from engaging in a business combination with an interested stockholder (
i.e
., a stockholder owning 15% or more of the corporations voting stock) for
three years following the time that the interested stockholder becomes such, subject to certain exceptions. Lumentum has not opted out of Section 203 in the Lumentum Charter and is therefore governed by the terms of this provision
of the DGCL.
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165
LEGAL MATTERS
The validity of the shares of Lumentum common stock offered by this document will be passed upon by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, counsel to Lumentum.
EXPERTS
Lumentum
The
consolidated financial statements, and the related financial statement schedule, incorporated in this Form
S-4
by reference from Amendment No. 1 on Form
10-K/A
of
Lumentum Holdings Inc. for the year ended July 1, 2017, and the effectiveness of Lumentum Holdings Inc. and subsidiaries internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their reports, which are incorporated herein by reference. Such financial statements and financial statement schedule have been so incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
The financial statements as of July 2, 2016 and for each of the two years in the
period ended July 2, 2016 incorporated in this Form
S-4
by reference to the Annual Report on Form
10-K/A
for the year ended July 1, 2017, have been so incorporated
in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
Oclaro
The
audited consolidated financial statements, schedule, and managements assessment of the effectiveness of internal control over financial reporting of Oclaro incorporated by reference in this prospectus and elsewhere in the registration
statement have been so incorporated by reference in reliance upon the reports of Grant Thornton LLP, independent registered public accountants, upon authority of said firm as experts in accounting and auditing.
FUTURE STOCKHOLDER PROPOSALS
Lumentum
Stockholder
Proposals
Lumentum stockholders may present proper proposals for inclusion in Lumentums proxy statement and for consideration at
the next annual meeting of stockholders by submitting their proposals in writing to Lumentums secretary in a timely manner. For a stockholder proposal to be considered for inclusion in Lumentums proxy statement for its 2018 annual
meeting of stockholders, Lumentums secretary must receive the written proposal at Lumentums principal executive offices not later than May 22, 2018. In addition, stockholder proposals must comply with the requirements of
Rule 14a-8
regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Stockholder proposals should be addressed to:
Lumentum Holdings Inc.
Attention:
Secretary 400 North McCarthy Blvd.
Milpitas, California 95035
The Lumentum Bylaws also establish an advance notice procedure for stockholders who wish to present a proposal before an annual meeting of
stockholders but do not intend for the proposal to be included in Lumentums proxy statement. The Lumentum Bylaws provide that the only business that may be conducted at an annual meeting is business that is (i) specified in
Lumentums proxy materials with respect to such meeting, (ii) otherwise properly brought before the annual meeting by or at the direction of the Lumentum Board, or (iii) properly brought before the annual meeting by a stockholder
of record entitled to vote at the annual meeting
166
who has delivered timely written notice to Lumentums secretary, which notice must contain the information specified in the Lumentum Bylaws. To be timely for Lumentums 2018 annual
meeting of stockholders, Lumentums secretary must receive the written notice at its principal executive offices:
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not earlier than August 4, 2018; and
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not later than the close of business on September 3, 2018.
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In the event that Lumentum
holds its 2018 annual meeting of stockholders more than 30 days before or more than 60 days after the
one-year
anniversary of Lumentums 2017 annual meeting of stockholders, then notice of a stockholder
proposal that is not intended to be included in Lumentums proxy statement must be received no later than the close of business on the later of the following two dates:
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the 90
th
day prior to such annual meeting; or
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the 10
th
day following the day on which public announcement of the date of such annual meeting is first made.
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If a stockholder who has notified Lumentum of his, her or its intention to present a proposal at an annual meeting does not appear to present
his, her or its proposal at such annual meeting, Lumentum is not required to present the proposal for a vote at such annual meeting.
Nomination of
Director Candidates
Lumentum stockholders may propose director candidates for consideration by Lumentums governance committee.
Any such recommendations should include the nominees name and qualifications for membership on the Lumentum Board and should be directed to Lumentums secretary at the address set forth above.
In addition, the Lumentum Bylaws permit Lumentum stockholders to nominate directors for election at an annual meeting of stockholders. To
nominate a director, the stockholder must provide the information required by the Lumentum Bylaws. In addition, the stockholder must give timely notice to Lumentums secretary in accordance with the Lumentum Bylaws, which, in general, require
that the notice be received by Lumentums secretary within the time period described above under Stockholder Proposals for stockholder proposals that are not intended to be included in a proxy statement.
Availability of Bylaws
A copy of the
Lumentum Bylaws may be obtained by accessing Lumentums public filings on the SECs website at www.sec.gov. You may also contact Lumentums secretary at Lumentums principal executive offices for a copy of the relevant bylaw
provisions regarding the requirements for making stockholder proposals and nominating director candidates.
Oclaro
Oclaro held its 2017 annual meeting of stockholders (the Oclaro 2017 Annual Meeting) on November 17, 2017. It is not expected
that Oclaro will hold an annual meeting of stockholders for 2018 unless the Merger is not completed by the expected date of its 2018 annual meeting of stockholders. If the Merger is not completed and Oclaro holds an annual meeting of stockholders
for 2018, then proposals of stockholders of Oclaro must be submitted as follows:
Requirements for Stockholder Proposals to Be
Considered for Inclusion in Oclaros Proxy Materials
. If an Oclaro stockholder intends to submit a proposal for inclusion in the proxy statement and proxy card for Oclaros 2018 annual meeting of stockholders, the stockholder must
follow the procedures outlined in
Rule 14a-8
under the Exchange Act. Oclaro must receive any proposals intended for inclusion in the proxy statement at its principal executive offices, Oclaro, Inc., 225
Charcot Avenue, San Jose, California 95131, Attention: Corporate
167
Secretary, no later than May 30, 2018. While the Oclaro Board will consider stockholder proposals, Oclaro reserves the right to omit from its proxy statement stockholder proposals that
Oclaro is not required to include under the Exchange Act, including
Rule 14a-8.
Requirements for Stockholder Business or Nominations to Be Brought Before Oclaros Annual Meetings
. If an Oclaro stockholder
wishes to present a proposal at the 2018 annual meeting of stockholders, but does not wish to have the proposal considered for inclusion in Oclaros proxy statement and proxy card, the stockholder must also give written notice to Oclaro at the
address noted above. The Oclaro Bylaws specify the information that must be included in any such notice, including (1) a brief description of the business desired to be brought before the annual meeting, the text relating to the business
(including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Oclaro Bylaws, the language of the proposed amendment), and the reasons for conducting such business at the annual
meeting, (2) the name and address, as they appear on Oclaros books, of the stockholder proposing such business, and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (3) the class and number
of shares of stock which are owned, of record and beneficially, by the stockholder and beneficial owner, if any, (4) a description of all arrangements or understandings between such stockholder or such beneficial owner, if any, and any other
person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of the stockholder or such beneficial owner, if any, in such business, (5) a representation that such
stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting, and (6) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends
(x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of Oclaros outstanding capital stock required to approve or adopt the proposal and/or (y) otherwise to solicit proxies from stockholders in
support of such proposal. Generally, Oclaro must receive this notice at least 90 days, but not more than 120 days, prior to the first anniversary of the preceding years annual meeting. As a result, the notice period for the 2018 annual
meeting of stockholders will begin on July 20, 2018 and end on August 19, 2018. However, if the 2018 annual meeting is scheduled to be held more than 20 days before or more than 60 days after the first anniversary of the preceding
years annual meeting, the notice must be received no earlier than the 120th day prior to the 2018 annual meeting of stockholders and no later than the close of business on the later of (1) the 90
th
day prior to the 2018 annual meeting of stockholders and (2) the 10
th
day following the date on which notice of the date of the
meeting is mailed or public disclosure of the date of such meeting is made, whichever occurs first. The adjournment or postponement of an annual meeting (or the public announcement thereof) will not commence a new time period (or extend any time
period) for the giving of a stockholders notice. If the stockholder fails to provide timely notice of a proposal to be presented at the 2018 annual meeting of stockholders, the proposal will be untimely, the chairman of the meeting may exclude
the proposal from being brought before the meeting and the proxies designated by the Oclaro Board will have discretionary authority to vote on such proposal should it be allowed to come before the meeting. Stockholders also have the right under the
Oclaro Bylaws to directly nominate director candidates, without any action or recommendation on the part of the nominating and corporate governance committee or the Oclaro Board, by following the procedures set forth in this paragraph.
168
HOUSEHOLDING OF PROXY STATEMENT/PROSPECTUS
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and
annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement or annual report, as applicable, addressed to those stockholders. As permitted by the Exchange Act, only one copy of this proxy
statement/prospectus is being delivered to stockholders residing at the same address, unless stockholders of Oclaro have notified Oclaro of their desire to receive multiple copies of the proxy statement/prospectus. This process, which is commonly
referred to as householding, potentially provides extra convenience for stockholders and cost savings for companies.
If, at
any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement/prospectus, or if you are receiving multiple copies of this proxy statement/prospectus and wish to receive only one, please contact
Oclaro at the address identified below. Oclaro will promptly deliver, upon oral or written request, a separate copy of this proxy statement/prospectus to any shareholder residing at an address to which only one copy was mailed. Requests for
additional copies should be directed to: Oclaro, Inc., 225 Charcot Avenue, San Jose, California 95131, Attention: Corporate Secretary.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the Oclaro Board knows of no other matters that will be presented for consideration at the
special meeting other than as described in this proxy statement/prospectus. If any other matters come before the special meeting or any adjournment or postponement thereof and will be voted upon, the proposed proxy will be deemed to confer authority
to the individuals named therein as authorized to vote the shares represented by the proxy as to any matters that may properly come before the meeting. It is intended that the persons named in the enclosed proxy and acting thereunder will vote in
accordance with their best judgment on such matters.
WHERE YOU CAN FIND MORE INFORMATION
Lumentum and Oclaro each file annual, quarterly and current reports, proxy statements and other information with the SEC under the Exchange
Act. You may read and copy any of this information at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1 (800)
SEC-0330
for further information on the
Public Reference Room. The SEC also maintains an internet website that contains reports, proxy and information statements, and other information regarding issuers, including Lumentum and Oclaro, who file electronically with the SEC. The address of
that website is www.sec.gov.
Investors may also consult the Lumentum and Oclaro websites for more information about Lumentum and Oclaro,
respectively. Lumentums website is www.lumentum.com and Oclaros website is www.oclaro.com. Information included on these websites is not incorporated by reference into this proxy statement/prospectus.
Lumentum has filed with the SEC a registration statement of which this proxy statement/prospectus forms a part. The registration statement
registers the shares of Lumentum common stock to be issued to Oclaro stockholders pursuant to the Merger. The registration statement, including the attached exhibits, contains additional relevant information about Lumentum and Lumentums common
stock. The rules and regulations of the SEC allow Lumentum and Oclaro to omit certain information included in the registration statement from this proxy statement/prospectus.
In addition, the SEC allows Lumentum and Oclaro to disclose important information to you by referring you to other documents filed separately
with the SEC. This information is considered to be a part of this proxy statement/prospectus.
169
This proxy statement/prospectus incorporates by reference the documents listed below that
Lumentum has previously filed with the SEC (other than information furnished pursuant to Item 2.02 or Item 7.01 of a Current Report on Form
8-K).
These documents contain important information about Lumentum,
its financial condition or other matters.
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Amendment No. 1 to Annual Report on Form
10-K/A
for the fiscal year ended July 1, 2017.
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Quarterly Reports on Form
10-Q
for the quarterly periods ended September 30, 2017, December 30, 2017 and March 31, 2018.
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Lumentums Current Reports on Form
8-K
filed with the SEC on August 9, 2017, November 1, 2017, November 7, 2017, November 8, 2017, February 6, 2018,
March 12, 2018 and May 2, 2018 (other than the portions of such documents not deemed to be filed).
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The description of Lumentum common stock contained in Lumentums Registration Statement on Form 10 initially filed with the SEC on February 26, 2015, as amended, and any amendment or report filed for the
purpose of updating such description.
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In addition, Lumentum incorporates by reference any future filings it makes with the
SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement/prospectus and prior to the date of the Oclaro special meeting (other than information furnished pursuant to Item 2.02 or Item 7.01 of any
Current Report on Form
8-K,
unless expressly stated otherwise therein). Such documents are considered to be a part of this proxy statement/prospectus, effective as of the date such documents are filed.
You can obtain any of these documents from the SEC through the SECs website at the address described above, or Lumentum will provide you
with copies of these documents, without charge, upon written or oral request to: Lumentum Holdings Inc., Attention: Secretary, 400 North McCarthy Boulevard, Milpitas, California 95035, or by telephone at (408)
546-5483.
This proxy statement/prospectus also incorporates by reference the documents listed
below that Oclaro has previously filed with the SEC (other than information furnished pursuant to Item 2.02 or Item 7.01 of a Current Report on Form
8-K).
These documents contain important information about
Oclaro, its financial condition or other matters.
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Annual Report on Form
10-K
for the fiscal year ended July 1, 2017.
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Quarterly Reports on Form
10-Q
for the quarterly periods ended September 30, 2017, December 30, 2017 and March 31, 2018.
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Oclaros Current Reports on Form
8-K
filed with the SEC August 2, 2017, November 1, 2017, November 17, 2017, February 5, 2018, February 12, 2018,
March 12, 2018, April 5, 2018 and May 8, 2018 (other than the portions of such documents not deemed to be filed).
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In addition, Oclaro incorporates by reference any future filings it makes with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this proxy statement/prospectus and prior to the date of the special meeting (other than information furnished pursuant to Item 2.02 or Item 7.01 of any Current Report on Form
8-K,
unless expressly stated otherwise therein). Such documents are considered to be a part of this proxy statement/prospectus, effective as of the date such documents are filed.
You can obtain any of these documents from the SEC through the SECs website at the address described above, or Oclaro will provide you
with copies of these documents, without charge, upon written or oral request to:
Oclaro, Inc.
225 Charcot Avenue
San Jose,
California 95131
Telephone: ( 408)
383-1400
Attn: Investor Relations
170
In the event of conflicting information in this proxy statement/prospectus in comparison to
any document incorporated by reference into this proxy statement/prospectus, or among documents incorporated by reference, the information in the latest filed document controls.
You should rely only on the information contained in or incorporated by reference into this proxy statement/prospectus. No one has been
authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated May 31, 2018. You should not assume that the
information contained in this proxy statement/prospectus is accurate as of any date other than that date. You should not assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of any date other than
the date of such incorporated document. Neither our mailing of this proxy statement/prospectus to Oclaro stockholders nor the issuance by Lumentum of shares of Lumentum common stock pursuant to the Merger will create any implication to the contrary.
171
Annex A
AGREEMENT AND PLAN OF MERGER
by and among
LUMENTUM
HOLDINGS INC.
PROTA MERGER SUB, INC.,
PROTA MERGER, LLC
and
OCLARO, INC.
Dated as of March 11, 2018
TABLE OF CONTENTS
A-i
TABLE OF CONTENTS
(Continued)
A-ii
TABLE OF CONTENTS
(Continued)
A-iii
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this
Agreement
) is made and entered into as of March 11, 2018, by and among
Lumentum Holdings Inc., a Delaware corporation (
Parent
), Prota Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (
Merger Sub
), Prota Merger, LLC, a Delaware limited liability
company and a wholly owned subsidiary of Parent (
Merger Sub LLC
) and Oclaro, Inc., a Delaware corporation (the
Company
). All capitalized terms used in this Agreement shall have the respective meanings ascribed
thereto in
Article I
.
W I T N E S S E T H:
WHEREAS, it is proposed that Merger Sub will merge with and into the Company (the
First Step Merger
), and each share of
common stock, par value $0.01 per share, of the Company (the
Company Common Stock
) that is then outstanding will thereupon be cancelled and converted into the right to receive the Merger Consideration, all upon the terms and
subject to the conditions set forth herein.
WHEREAS, as soon as practicable following the First Step Merger, and as the second step in a
single integrated transaction with the First Step Merger, Parent will cause the Company to merge with and into Merger Sub LLC (the
Second Step Merger
and, taken together with the First Step Merger, the
Merger
)
in accordance with the applicable provisions of the DGCL and Delaware Law, with Merger Sub LLC as the surviving company.
WHEREAS, for
U.S. federal income tax purposes, the Merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code and this Agreement is intended to be, and is hereby, adopted as a plan of reorganization within
the meaning of Treasury Regulations
Section 1.368-2(g).
WHEREAS, the Board of Directors of
the Company (the
Company Board
) unanimously has (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable, (ii) determined that this Agreement and the transactions
contemplated hereby, including the Merger, are fair to and in the best interests of the Company and its shareholders, (iii) approved this Agreement and the transactions contemplated hereby, including the Merger, and (iv) resolved to
recommend that the Company shareholders adopt this Agreement, all upon the terms and subject to the conditions set forth herein.
WHEREAS,
the Boards of Directors of Parent (
Parent Board
), Merger Sub and Merger Sub LLC unanimously have (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable, and
(ii) approved this Agreement and the transactions contemplated hereby, including the Merger, all upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises 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 accepted, and intending to be legally bound hereby, Parent, Merger Sub, Merger Sub LLC and the Company hereby agree as follows:
ARTICLE I.
DEFINITIONS & INTERPRETATIONS
Section 1.1
Certain Definitions
. For all purposes of and under this Agreement, the following
capitalized terms shall have the following respective meanings:
Acquisition Proposal
means any offer or proposal from
any Third Party relating to any Acquisition Transaction.
Acquisition Transaction
means any transaction or series of related
transactions (other than the transactions contemplated by this Agreement) involving: (a) any acquisition or purchase by any Third Party, directly or indirectly, of fifteen percent (15%) or more of the outstanding Company Common Stock, or any
tender offer or exchange offer that, if consummated, would result in any Third Party beneficially owning fifteen percent (15%) or more of the voting power of the Company; (b) any merger, consolidation, share exchange, business combination,
joint venture or other similar transaction involving the Company pursuant to which the shareholders of the Company immediately preceding such transaction hold less than eighty-five percent (85%) of the equity interests in the surviving or resulting
entity of such transaction; (c) any sale, lease (other than in the ordinary course of business), exchange, transfer, license (other than in the ordinary course of business), acquisition or disposition of fifteen percent (15%) or more of the
assets of the Company and its Subsidiaries on a consolidated basis, including any equity interests in the Companys Subsidiaries (measured by the fair market value thereof as of the last day of the Companys most recently completed
calendar month); (d) any liquidation, dissolution, recapitalization or other significant corporate reorganization of the Company or (e) any combination of the foregoing.
Affiliate
means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is
under common control with such Person. For purposes of the immediately preceding sentence, the term control (including, with correlative meanings, the terms controlling, controlled by and under common
control with), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by
contract or otherwise.
Antitrust Laws
means applicable federal, state, local or foreign antitrust, competition,
premerger notification or trade regulation laws, regulations or Orders.
Applicable Law
means, with respect to any
Person, any international, national, federal, state, local, municipal or other law (statutory, common or otherwise), constitution, treaty, convention, resolution, ordinance, directive, code, edict, decree, rule, regulation, ruling or other similar
requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.
Business Day
means any day, other than a Saturday, Sunday or any day that is a legal holiday under the Laws of the State of
California or Delaware or is a day on which banking institutions located in such States are authorized or required by Applicable Law or other action by a Governmental Entity to close.
Business Facility
means any real property including the land, improvements, soil, soil gas, indoor air, groundwater, and
surface water that is owned, operated, or leased by the Company, its Subsidiaries or any of their predecessors in connection with the operation of their respective business as of the date of this Agreement.
Cash Equivalent Consideration
means the sum of (1) the Cash Consideration plus (2) the product obtained by
multiplying (A) the Exchange Ratio by (B) the Parent Average Closing Price.
Code
means the Internal Revenue
Code of 1986, as amended, or any successor statute thereto.
Company Balance Sheet
means the consolidated balance sheet
of the Company and its Subsidiaries as of December 31, 2017 that is set forth in the Quarterly Report on
Form 10-Q
of the Company for the quarterly period ended December 30, 2017 filed with the
SEC.
Company Capital Stock
means the Company Common Stock, the Company Preferred Stock and any other shares of capital
stock of the Company.
Company Compensatory Awards
means Company Options, Company SARs, Company Restricted Stock, and
Company RSUs.
A-2
Company IP
means all of the Intellectual Property Rights owned by, purported
to be owned by, filed by, or held in the name of the Company or any of its Subsidiaries.
Company Material Adverse
Effect
means any fact, event, occurrence, circumstance, change or effect (any such item, an
Effect
) that, individually or when taken together with all other Effects that exist at the date of determination of the
occurrence of the Company Material Adverse Effect, is or is reasonably likely to have a material adverse effect on the business, operations, financial condition or results of operations of the Company and its Subsidiaries taken as a whole;
provided
,
however
, that in no event shall any Effect resulting from or arising out of any of the following, either alone or in combination, be taken into account (including the impact thereof) when determining whether a Company
Material Adverse Effect has occurred or may, would or could occur: (a) general economic conditions in the United States or any other country or region in the world, general conditions in the financial markets in the United States or any other
country or region in the world or general political conditions in the United States or any other country or region in the world; (b) general conditions in the industries in which the Company or any of its Subsidiaries conduct business;
(c) changes in Applicable Laws, Orders or GAAP (or the interpretation thereof); (d) acts of war, terrorism or sabotage in the United States or any other country or region in the world (or any escalation with respect thereto);
(e) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions and other similar events in the United States or any other country or region in the world (in the case of each of
clauses (a), (b), (c), (d) and (e),
provided
that such Effects may be taken into account when determining whether a Company Material Adverse Effect has occurred to the extent such Effects have a disproportionate adverse impact on the
business, operations, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, relative to other participants in the industries in which the Company and its Subsidiaries conduct business, in which case only
the incremental disproportionate impact may be taken into account in determining whether there has been a Company Material Adverse Effect); (f) any failure by the Company to meet published analysts estimates, internal or external
projections or forecasts of revenues, earnings or other financial or business metrics for any period, in and of itself (it being understood that the underlying cause(s) of any such failure may be taken into account unless otherwise excluded by this
definition); (g) any decline in the market price or change in the trading volume of, or the suspension of trading in, the Company Common Stock, in and of itself (it being understood that the underlying cause(s) of any such decline, change or
suspension may be taken into account unless otherwise excluded by this definition); (h) any actions or omissions required of the Company under this Agreement or taken at the request of Parent or any of its Affiliates; (i) any claims, actions or
Legal Proceeding arising from allegations of breach of fiduciary duty or otherwise relating to this Agreement, the Merger or any transaction contemplated by this Agreement; or (j) the public announcement, pendency or consummation of this
Agreement or the transactions contemplated hereby, including the identity of, or the effect of any fact or circumstance relating to, Parent or any of its Affiliates (including any impact on the relationship of the Company or any of the
Companys Subsidiaries, contractual or otherwise, with its customers, suppliers, distributors, vendors, licensors, licensees, lenders, employees or partners).
Company Options
means any options to purchase shares of Company Common Stock (whether granted under any of the Company
Stock Plans, assumed by the Company in connection with any merger, acquisition or similar transaction or otherwise issued or granted).
Company Stock Plans
means the Companys Fifth Amended and Restated 2001 Long-Term Stock Incentive Plan, Amended and
Restated 2004 Stock Incentive Plan, Opnext, Inc. 2001 Long-Term Stock Incentive Plan, Avanex 1998 Stock Plan, as amended and restated, Avanex 1999 Director Option Plan, and any other plan or arrangement under which Company Compensatory Awards have
been issued, including any
sub-plans
for
non-U.S.
employees and consultants.
Company Preferred Stock
means shares of the preferred stock, par value $0.01 per share, of the Company.
Company Products
means any and all products and services developed, manufactured, marketed, sold, licensed, made available,
provided or distributed by the Company or its Subsidiaries.
A-3
Company Restricted Stock
means a share of Company Common Stock subject to
vesting or other lapse restrictions (whether granted by the Company pursuant to the Company Stock Plans, assumed by the Company in connection with any merger, acquisition or similar transaction or otherwise issued or granted).
Company RSU
means any unit or award granted (whether granted by the Company pursuant to the Company Stock Plans, assumed by
the Company in connection with any merger, acquisition or similar transaction or otherwise issued or granted) (i) denominated in units, and (ii) pursuant to which the holder thereof is or may become entitled to acquire one or more shares
of Company Common Stock or the cash equivalent thereof upon such holders continued service with or employment by the Company or any Subsidiary of the Company and/or upon the satisfaction or attainment of one or more performance milestones.
Company SAR
means any stock appreciation right related to Company Common Stock (whether such right will be settled in
shares, cash or otherwise), whether granted by the Company pursuant to Company Stock Plans, assumed by the Company in connection with any merger, acquisition or similar transaction, or otherwise issued or granted.
Compliant
means, with respect to the Required Financial Information, that (a) the Companys independent auditors
shall not have withdrawn any audit opinion with respect to any audited financial statements contained in the Required Financial Information (unless a new unqualified audit opinion has been received in respect thereof from such auditors or another
nationally recognized independent registered accounting firm of national standing); (b) in connection with any Debt Financing involving the offering of debt securities, to the extent customary and necessary, the Companys independent registered
public accounting firm has consented to or otherwise authorized the use in the Debt Financing of its audit opinions with respect to any audited financial statements contained in the Required Financial Information audited by such firm; (c) the
Company shall not have been informed by its independent auditors that it is required to restate, has not announced an intention to restate, and has not restated any audited or unaudited financial statements contained in the Required Financial
Information;
provided
that if any such restatement occurs, the Required Financial Information shall be deemed to be Compliant if and when such restatement has been completed and the relevant financial statements have been amended; and
(d) the financial statements included in the Required Financial Information are compliant in all material respects with all requirements of Regulation
S-K
and Regulation
S-X
under the Securities Act (excluding information required by Regulation
S-X
Rule
3-10
and Regulation
S-X
Rule
3-16)
for offerings of debt securities on a registration statement on Form
S-1
or sufficient to permit such a registration
statement on Form
S-1
to be declared effective by the SEC.
Continuing Employee
means an employee of the Company or its Subsidiaries who is employed by Parent or any Subsidiary of Parent immediately after the Effective Time.
Contract
means any written or binding oral contract, subcontract, agreement, commitment, note, bond, mortgage, indenture,
lease, license, sublicense, permit, franchise or other instrument, obligation or binding arrangement or understanding of any kind or character.
Delaware Law
means the DGCL and any other Applicable Law of the State of Delaware.
DGCL
means General Corporation Law of the State of Delaware, as amended.
DOJ
means the United States Department of Justice, or any successor thereto.
Employee Plans
means (i) all employee benefit plans (as defined in Section 3(3) of ERISA), whether or
not subject to ERISA and (ii) all other employment, consulting and independent contractor agreements, bonus, stock option, stock purchase or other equity-based, incentive compensation, profit sharing, savings, retirement (including early
retirement and supplemental retirement), disability, holiday, vacation, deferred compensation (including
non-qualified
plans of deferred compensation), savings, cafeteria, medical, dental, vision,
A-4
hospitalization, life insurance, accidental death and dismemberment, medical expense reimbursement, dependent care assistance, tuition reimbursement, disability, sick pay, supplemental retirement
(including termination indemnities and seniority payments), severance, termination, retention, change of control and other similar fringe, welfare or other employee benefit plans, programs, agreements, contracts, policies, payroll practices or
arrangements (whether or not in writing) maintained or contributed to for the benefit of any current or former employee, consultant, independent contractor or director of the Company, any of its Subsidiaries or any ERISA Affiliate, or with respect
to which the Company or any of its Subsidiaries has or is reasonably expected to have any Liability.
Environmental Law
means any Applicable Law that relates to pollution, protection of human health or safety, the environment, natural resources, or that prohibits, regulates or controls any Hazardous Material or any Hazardous Material Activity, including, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Resource Recovery and Conservation Act of 1976, the Federal Water Pollution Control Act, the Clean Air Act, the Hazardous Materials Transportation Act, the Clean
Water Act, the Occupational Safety and Health Act, the European Union (
EU
) Directive 2012/19/EU on waste electrical and electronic equipment, the EU Directive 2011/65/EU on the restriction on the use of certain hazardous
substances in electrical and electronic equipment, the Measures for the Administration of the Restricted Use of the Hazardous Substances Contained in Electrical and Electronic Products and the
European Commission Regulation 1907/2006 on the
registration, evaluation, authorization and restriction of chemicals, or any successor statutes, rules and regulations thereto.
Environmental Permit
means any approval, permit, registration, certification, license, clearance or consent required by
Environmental Law to be obtained from any Governmental Entity.
Equity Award Exchange Ratio
means the sum of
(i) the Exchange Ratio, plus (ii) the quotient obtained by dividing (A) the Cash Consideration by (B) the Parent Average Closing Price.
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 any Person under common
control with the Company or that, together with the Company or any of its Subsidiaries, would be treated as a single employer with the Company or any of its Subsidiaries under Section 4001(b)(1) of ERISA or Section 414 of the Code and the
regulations promulgated thereunder.
Exchange Act
means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder, or any successor statute, rules and regulations thereto.
Exchange Ratio
means
0.0636.
Financing Sources
means the agents, arrangers, lenders and other entities that have committed to provide or
arrange all or any part of the Debt Financing, including the parties to any joinder agreements with respect to the Debt Commitment Letters or indentures, credit agreements or other definitive agreements entered pursuant to the Debt Financing (but
excluding Parent and any of its Subsidiaries), together with their respective Affiliates, and their respective Affiliates officers, directors, employees, agents and representatives and their respective successors and assigns.
FTC
means the United States Federal Trade Commission, or any successor thereto.
GAAP
means generally accepted accounting principles, as applied in the United States.
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Governmental Entity
means any government, any governmental or regulatory
entity or body, department, commission, board, agency or instrumentality, and any court, tribunal or judicial body, in each case whether federal, state, county, provincial, and whether local or foreign, including any arbitrator or arbitration panel.
Hazardous Material
means any material, chemical, emission, substance or waste for which liability or standards of
conduct may be imposed or that has been designated by any Environmental Law to be radioactive, toxic, hazardous, a pollutant, or words of similar meaning or import.
Hazardous Materials Activity
means the transportation, transfer, recycling, collection, labeling, packaging, storage, use,
treatment, manufacture, removal, disposal, remediation, release, exposure of others to, sale, labelling, or distribution of any Hazardous Material or any product or waste containing a Hazardous Material, or product manufactured with ozone depleting
substances, including any requirement pursuant to Environmental Law for labeling of Hazardous Materials, payment of waste fees or charges (including
so-called
e-waste
fees), recycling, product take-back, or product content.
HSR Act
means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder, or any successor statute, rules and regulations thereto.
Intellectual Property Rights
means all statutory and/or common law rights throughout the world in, arising out of, or
associated with any of the following: (i) all United States and foreign patents and utility models, including utility patents and design patents, and all registrations and applications therefor (including provisional applications) and all
reissues, divisions, renewals, extensions,
re-examinations,
provisionals, continuations and continuations in part thereof, and equivalent or similar rights anywhere in the world in or to inventions (whether or
not patentable, reduced to practice or made the subject of a pending patent application), ideas, invention disclosures and improvements (collectively,
Patents
); (ii) all trade secrets,
know-how,
and confidential or proprietary information (collectively,
Trade Secrets
); (iii) all works of authorship, copyrights (registered or otherwise, including in Software), mask
works, copyright and mask work registrations and applications and all other rights corresponding thereto throughout the world, and all rights therein provided by international treaties or conventions (collectively,
Copyrights
);
(iv) all industrial designs and any registrations and applications therefore; (v) all trade names, trade dress, logos, or other corporate designations, trademarks and service marks, and other indicia of commercial source or origin (whether
registered, common law, statutory or otherwise), all registrations and applications to register the foregoing anywhere in the world and all goodwill associated therewith (collectively,
Trademarks
); (vi) all rights in
databases and data collections (including knowledge management databases, customer lists and customer databases); (viii) all rights to Uniform Resource Locators, Web site addresses and Internet domain names and applications and registrations
therefore (collectively,
Domain Names
); and (ix) any similar, corresponding or equivalent rights to any of the foregoing anywhere in the world.
International Employee Plan
means any Employee Plan that is maintained in a jurisdiction outside of the United States for
the benefit of employees, independent contractors, consultants and/or directors located in such jurisdiction.
Intervening
Event
means a material fact, event, change, development or combination thereof that occurs or exists after the date of this Agreement with respect to the business, operations, financial condition or results of operations of the Company or
any of its Subsidiaries (and not relating in any way to (x) an Acquisition Proposal or (y) any fluctuation in the market price or trading volume of the Company Common Stock or Parent Common Stock, in and of itself; it being understood,
however, that any underlying cause thereof may be taken into account for purposes of determining whether an Intervening Event has occurred) and that was not known (or the consequences of which were not known) to the Company Board nor reasonably
foreseeable by the Company Board as of or prior to the date of this Agreement.
IRS
means the United States
Internal Revenue Service, or any successor thereto.
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Knowledge of the Company
means the actual knowledge of the individuals
identified in
Section
1.1(a)
of the Company Disclosure Letter.
Knowledge of Parent
means the
actual knowledge of the individuals identified in
Section
1.1(a)
of the Parent Disclosure Letter.
Legal Proceeding
means any action, claim, suit, litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding, public or private), hearing, audit, examination or investigation by or before any Governmental Entity.
Liabilities
means any liability, indebtedness, obligation or commitment of any kind (whether accrued, absolute, contingent,
matured, unmatured or otherwise and whether or not required to be recorded or reflected on a balance sheet under GAAP).
Lien
means any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, option, right of first
refusal, preemptive right, community property interest, restriction on the voting of any security, restriction on the transfer of any security or other asset, or restriction on the possession, exercise or transfer of any other attribute of ownership
of any asset.
Marketing Period
means that certain period ending on the date that is one (1) Business Day prior to
the date of the Company Shareholder Meeting,
provided
that (i) Parent has received the Required Financial Information from the Company for a period of fifteen (15) consecutive Business Days after the date of this Agreement and prior
to the date that is one (1) Business Day prior to the date of the Company Shareholder Meeting, and (ii) such Required Financial Information remains Compliant during such fifteen (15) consecutive Business Days, and
provided
,
further
, that if the conditions (i) and (ii) in the preceding proviso fail to be satisfied, then the Marketing Period shall be the period ending on the first date thereafter during which the two conditions are satisfied.
Nasdaq
means the Nasdaq Global Select Market.
Net Option Share
means, with respect to a Cancelled Option, the quotient obtained by dividing (1) the product of
(A) the excess, if any, of the Cash Equivalent Consideration over the per share exercise price of such Cancelled Option, multiplied by (B) the number of shares of Company Common Stock subject to such Cancelled Option, by (2) the Cash
Equivalent Consideration.
Object Code
means computer software, substantially or entirely in binary form, which is
intended to be directly executable by a computer after suitable processing and linking but without the intervening steps of compilation or assembly.
Order
means, with respect to any Person, any order, judgment, decision, decree, injunction, ruling, writ, assessment or
other similar requirement issued, enacted, adopted, promulgated or applied by any Governmental Entity that is binding on or applicable to such Person or its property.
Parent Average Closing Price
means the average closing sale price for a share of Parent Common Stock, rounded to the
nearest one tenth of a cent, as reported on Nasdaq for the ten most recent trading days ending on the third trading day immediately prior to the Effective Time.
Parent Balance Sheet
means the consolidated balance sheet of Parent and its Subsidiaries as of December 31, 2017 that
is set forth in the Quarterly Report on Form
10-Q
of Parent for the quarterly period ended December 30, 2017 filed with the SEC.
Parent Common Stock
means shares of common stock, par value $0.001 per share, of Parent.
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Parent Compensatory Awards
means Parent Restricted Stock Units.
Parent IP
means all of the Intellectual Property Rights owned by, filed by, or held in the name of Parent or any of its
Subsidiaries.
Parent Material Adverse Effect
means any Effect that, individually or when taken together with all other
Effects that exist at the date of determination of the occurrence of the Parent Material Adverse Effect, is or is reasonably likely to have a material adverse effect on the business, operations, financial condition or results of operations of Parent
and its Subsidiaries taken as a whole;
provided
,
however
, that in no event shall any Effect resulting from or arising out of any of the following, either alone or in combination, be taken into account (including the impact thereof)
when determining whether a Parent Material Adverse Effect has occurred or may, would or could occur: (a) general economic conditions in the United States or any other country or region in the world, general conditions in the financial markets
in the United States or any other country or region in the world or general political conditions in the United States or any other country or region in the world; (b) general conditions in the industries in which Parent or any of its
Subsidiaries conduct business; (c) changes in Applicable Laws, Orders or GAAP (or the interpretation thereof); (d) acts of war, terrorism or sabotage in the United States or any other country or region in the world (or any escalation with
respect thereto); (e) earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, weather conditions and other similar events in the United States or any other country or region in the world (in the
case of each of clauses (a), (b), (c), (d) and (e),
provided
that such Effects may be taken into account when determining whether a Parent Material Adverse Effect has occurred to the extent such Effects have a disproportionate adverse impact
on business, operations, financial condition or results of operations of Parent and its Subsidiaries, taken as a whole, relative to other participants in the industries in which Parent and its Subsidiaries conduct business, in which case only the
incremental disproportionate impact may be taken into account in determining whether there has been a Parent Material Adverse Effect); (f) any failure by Parent to meet published analysts estimates, internal or external projections or
forecasts of revenues, earnings or other financial or business metrics for any period, in and of itself (it being understood that the underlying cause(s) of any such failure may be taken into account unless otherwise excluded by this definition);
(g) any decline in the market price or change in the trading volume of, or the suspension of trading in, the Parent Common Stock, in and of itself (it being understood that the underlying cause(s) of any such decline, change or suspension may
be taken into account unless otherwise excluded by this definition); (h) any actions or omissions required of Parent, Merger Sub or Merger Sub LLC under this Agreement or taken at the request of the Company or any of its Affiliates; (j) any
claims, actions or Legal Proceeding arising from allegations of breach of fiduciary duty or otherwise relating to this Agreement, the Merger or any transaction contemplated by this Agreement or (k) the public announcement, pendency or
consummation of this Agreement or the transactions contemplated hereby, including the identity of, or the effect of any fact or circumstance relating to, the Company or any of its Affiliates (including any impact on the relationship of Parent or any
of Parents Subsidiaries, contractual or otherwise, with its customers, suppliers, distributors, vendors, licensors, licensees, lenders, employees or partners.
Parent Plans
means the Parents 2015 Equity Incentive Plan.
Parent Preferred Stock
means shares of preferred stock, par value $0.001 per share, of Parent.
Parent Products
means any and all products and services developed, manufactured, marketed, sold, licensed, made available,
provided or distributed by Parent or its Subsidiaries.
Parent RSUs
means any unit or award granted (whether granted by
Parent pursuant to the Parent Stock Plan, assumed by Parent in connection with any merger, acquisition,
spin-off,
or similar transaction or otherwise issued or granted) (i) denominated in units, and
(ii) pursuant to which the holder thereof is or may become entitled to acquire one or more shares of Parent Common Stock or the cash equivalent thereof upon such holders continued service with or employment by Parent or any Subsidiary of
Parent and/or upon the satisfaction or attainment of one or more performance milestones.
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Permitted Liens
means (a) Liens for Taxes not yet due and payable or
Taxes being contested in good faith through appropriate proceedings and for which adequate reserves have been established in accordance with GAAP on the Company Balance Sheet or Parent Balance Sheet, as applicable, (b) mechanics,
carriers, workmens, repairmens, landlords or other like Liens or other similar Liens arising or incurred in the ordinary course of business for amounts not in default, (c) pledges and deposits to secure the performance
of bids, trade contracts, leases, surety and appeal bonds, performance bonds and other obligations of a similar nature, (d) defects, imperfections or irregularities in title, easements, covenants and rights of way and other similar
restrictions, and zoning, building and other similar codes or restrictions, in each case that do not adversely affect in any material respect the current use of the applicable real property owned, leased, used or held for use by the Company or any
of its Subsidiaries or the Parent or any of the Parents Subsidiaries, (e) with respect to Intellectual Property Rights,
non-exclusive
licenses granted to customers on the Companys standard
forms of agreement in the ordinary course of business and consistent with past practice, (f) pledges or deposits in connection with workers compensation, unemployment insurance and other social security legislation, (g) Liens
relating to intercompany borrowings among a Person and its wholly owned Subsidiaries, (h) Liens disclosed in the financial statements of the Company and its Subsidiaries filed in or furnished with the Company SEC Reports or in the financial
statements of Parent and its Subsidiaries filed in or furnished with the Parent SEC Reports, as applicable, or (i) Liens which would not reasonably be expected to materially impair the continued use of the applicable property for the purposes
of which the property is currently being used.
Person
means any individual, corporation (including any
non-profit
corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other
enterprise, association, organization, entity or Governmental Entity.
Registered IP
means all United States,
international and foreign Intellectual Property Rights that are the subject of an application certificate, filing, registration or other document issued, filed with, or recorded by any state, government or other public legal authority, including
Patents, registered Trademarks, registered Copyrights, and Domain Names.
Representatives
means, with respect to any
Person, the directors, officers, employees, financial advisors, attorneys, accountants, consultants, agents and other authorized representatives of such Person, acting in such capacity.
Sarbanes-Oxley Act
means the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder,
or any successor statute, rules and regulations thereto.
SEC
means the United States Securities and Exchange
Commission.
Securities Act
means the Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder, or any successor statute, rules and regulations thereto.
Software
means any and all (i) computer
programs, including any and all software implementations of algorithms, models and methodologies, whether in Source Code or Object Code and (ii) computerized databases and compilations.
Source Code
means computer software and code in human readable form, including related programmers comments and
annotations, help text, instructions and other code that is stored or otherwise accessible in human readable form.
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.
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Superior Proposal
means any
bona fide
, written Acquisition Proposal
(except that, for purposes of this definition, each reference in the definition of Acquisition Transaction to 15% or 85% shall be 50%) that did not result from a breach of
Section
6.1(a)
and
Section
6.1(b)
and that the Company Board has determined in good faith (after consultation with its financial advisor and its outside legal counsel, and after taking into account
the financial, legal, regulatory and other aspects of such Acquisition Proposal and all of the terms and conditions of such Acquisition Proposal as the Company Board determines to be appropriate (including any termination or
break-up
fees, and expense reimbursement provisions), as well as any counter-offer or proposal made by Parent that is capable of acceptance by the Company pursuant to
Section
6.2(c)(i)
) (i)
would be more favorable, from a financial point of view, to the holders of Company Common Stock in their capacities as such than the transactions contemplated by this Agreement and (ii) is reasonably capable of consummation on a timely basis.
Tax
means (i) any and all U.S. federal, state, local and
non-U.S.
taxes,
assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, goods and services, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, escheat, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts, (ii) any Liability for the payment of any amounts of the type
described in clause (i) as a result of being or having been a member of an affiliated, consolidated, combined or unitary group for any period (including any Liability under Treasury Regulation
Section 1.1502-6
or any comparable provision of Applicable Law (including any arrangement for group or consortium relief or similar arrangement)) and (iii) any Liability for the payment of any
amounts of the type described in clause (i) or (ii) as a result of any express or implied obligation to indemnify any other Person or as a result of any obligations under any agreements or arrangements with any other Person with respect to
such amounts and including any Liability for taxes of a predecessor or transferor or otherwise by operation of law.
Tax
Returns
means all returns, declarations, estimates, reports, statements and other documents filed or required to be filed in respect of any Taxes, including any attachments thereto or amendments thereof.
Third Party
means any Person or group (as defined under Section 13(d) of the Exchange Act) of Persons,
other than Parent or any of its Affiliates or Representatives.
WARN
shall mean the Worker Adjustment and Retraining
Notification Act, as amended.
Section 1.2
Additional Definitions
. The following capitalized
terms shall have the respective meanings ascribed thereto in the respective sections of this Agreement set forth opposite each of the capitalized terms below:
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|
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Term
|
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Section Reference
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401(k) Termination Date
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Section 6.12(a)
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Agreement
|
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Preamble
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Alternate Debt Financing
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Section 6.16(c)
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Anti-Bribery Laws
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Section 3.25
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Antitrust Termination Date
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Section 8.1(d)
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Assets
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Section 3.21
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Assumed Option
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Section 6.11(c)(i)
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Assumed RSU
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Section 6.11(a)
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Cancelled Option
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Section 6.11(c)(ii)
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Capitalization Reference Date
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Section 3.4(a)
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Cash Consideration
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Section 2.7(a)(i)
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Certificate of Merger
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Section 2.2(a)
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Certificates
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Section 2.8(a)
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Clarification Request
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Section 6.1(b)
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Closing
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Section 2.3(a)
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Term
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Section Reference
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Closing Date
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Section 2.3(a)
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Collective Bargaining Agreements
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Section 3.19(a)
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Company
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Preamble
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Company Board
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Recitals
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Company Board Recommendation
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Section 6.2(a)
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Company Board Recommendation Change
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Section 6.2(b)
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Company Capitalization Representation
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Section 7.2(a)(iii)
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Company Common Stock
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Recitals
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Company Disclosure Letter
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Article III
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Company Inbound License
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Section 3.22(e)
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Company IP Agreements
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Section 3.22(e)
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Company Leased Real Property
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Section 3.20(b)
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Company Outbound License
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Section 3.22(e)
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Company Real Property Leases
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Section 3.20(b)
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Company Registered IP
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Section 3.22(a)
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Company Related Party
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Section 9.5
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Company SEC Reports
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Section 3.6
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Company Securities
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Section 3.4(c)
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Company Shareholders Meeting
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Section 6.3
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Company Specified Representations
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Section 7.2(a)(ii)
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Company Termination Fee Amount
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Section 8.3(b)(i)
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Confidentiality Agreement
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Section 6.9
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Consent
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Section 3.5(b)
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Copyrights
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Section 1.1
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D&O Insurance
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Section 6.13(b)
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Debt Commitment Letters
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Section 4.16(a)
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Debt Financing
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Section 4.16(a)
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Delaware Secretary of State
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Section 2.2(a)
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Dissenting Shares
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Section 2.7(d)(i)
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Dollars or $
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Section 1.3(d)
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Domain Names
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Section 1.1
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Effect
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Section 1.1
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Effective Time
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Section 2.2(a)
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Enforceability Limitations
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Section 3.3(a)
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EU
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Section 1.1
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Exchange Agent
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Section 2.8(a)
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Exchange Fund
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Section 2.8(b)
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Export and Import Approvals
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Section 3.23
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Export Controls
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Section 3.23
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First Step Merger
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Recitals
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Form S-4
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Section 6.4(a)
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Fractional Share Cash Amount
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Section 2.7(c)
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Import Restrictions
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Section 3.23
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Indemnified Parties
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Section 6.13(a)
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Interim Surviving Corporation
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Section 2.1(a)
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Jones Day
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Section 6.4(e)
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Labor Organization
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Section 3.19(a)
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Material Contract
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Section 3.11(a)
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Maximum Annual Premium
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Section 6.13(b)
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Merger
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Recitals
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Merger Consideration
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Section 2.7(a)(i)
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Term
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Section Reference
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Merger Sub
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Preamble
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Merger Sub LLC
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Preamble
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New Debt Commitment Letters
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Section 6.16(c)
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Notice Period
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Section 6.2(c)(i)
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Option Consideration
|
|
Section 6.11(c)(ii)
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Parent
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Preamble
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Parent Board
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Recitals
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Parent Capitalization Date
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Section 4.7(a)
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Parent Capitalization Representation
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Section 7.3(a)(iii)
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Parent Disclosure Letter
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Article IV
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Parent SEC Reports
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Section 4.8(a)
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Parent Securities
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Section 4.7(c)
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Parent Specified Representations
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Section 7.3(a)(ii)
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Parent Subsidiary Preferred Stock
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Section 5.4(b)
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Parent Subsidiary Securities
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Section 4.2(c)
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Parent Termination Fee
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Section 8.3(c)
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Patents
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Section 1.1
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Proxy Statement/Prospectus
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Section 6.4(a)
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Regulation M-A
Filing
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Section 6.4(d)
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Required Financial Information
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Section 6.17(a)(iv)
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Requisite Shareholder Approval
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Section 3.3(c)
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Revenue Cap
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Section 6.5(e)
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SAR Consideration
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Section 6.11(d)
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Second Step Merger
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Recitals
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Significant Customer
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Section 3.15(a)
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Significant Supplier
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Section 3.15(b)
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Specified Jurisdictions
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Section 7.1(b)
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Stock Consideration
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Section 2.7(a)(i)
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Subsidiary Securities
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Section 3.2(d)
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Surviving Company
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Section 2.1(b)
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Tail Policy
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Section 6.13(b)
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Takeover Law
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Section 3.29(b)
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Tax Incentive
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Section 3.16(l)
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Termination Date
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Section 8.1(d)
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Trademarks
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Section 1.1
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Trade Secrets
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Section 1.1
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Transition Period
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Section 6.12(b)
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Triggering Event
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Section 8.1(f)(ii)
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Uncertificated Shares
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Section 2.8(a)
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WSGR
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Section 6.4(e)
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Section 1.3
Certain Interpretations
.
(a) Unless otherwise indicated, all references herein to Sections, Articles, Annexes, Exhibits or Schedules, shall be deemed to refer to
Sections, Articles, Annexes, Exhibits or Schedules of or to this Agreement, as applicable.
(b) Unless otherwise indicated, the words
include, includes and including, when used herein, shall be deemed in each case to be followed by the words without limitation.
A-12
(c) The table of contents and headings set forth in this Agreement are for convenience of
reference purposes only and shall not affect or be deemed to affect in any way the meaning or interpretation of this Agreement or any term or provision hereof.
(d) Unless otherwise specifically provided, all references in this Agreement to
Dollars
or
$
means
United States Dollars.
(e) As used in this Agreement, the singular or plural number shall be deemed to include the other whenever the
context so requires. Article, Section, clause and Schedule references contained in this Agreement are references to Articles, Sections, clauses and Schedules in or to this Agreement, unless otherwise specified.
(f) As used in this Agreement, the word extent and the phrase to the extent shall mean the degree to which a subject
or other thing extends, and such word or phrase shall not mean simply if.
(g) Unless otherwise specifically provided for
herein, the term or shall not be deemed to be exclusive.
(h) Whenever any reference is made in this Agreement to the Company
having made available any document or information, such phrase shall include having made such document or information available on or prior to the date of this Agreement in the electronic data room utilized in connection with the
transactions contemplated by this Agreement.
(i) The parties hereto agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the application of any Applicable Law or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement
or document.
ARTICLE II.
THE MERGER
Section 2.1
The Merger
.
(a) Upon the terms and subject to the conditions set forth in this Agreement and the applicable
provisions of Delaware Law, at the Effective Time, Merger Sub shall be merged with and into the Company in the First Step Merger, the separate corporate existence of Merger Sub shall thereupon cease and the Company shall continue as the surviving
entity. The Company, as the surviving entity of the First Step Merger, is sometimes hereinafter referred to as the
Interim Surviving Corporation
.
(b) As part of a single integrated plan, as soon as practicable following the Effective Time, upon the terms and subject to the conditions set
forth in this Agreement and the applicable provisions of the Delaware Law, the Interim Surviving Corporation shall be merged with and into Merger Sub LLC in the Second Step Merger, the separate corporate existence of the Interim Surviving
Corporation shall thereupon cease and Merger Sub LLC shall continue as the surviving entity of the Second Step Merger and as a wholly owned Subsidiary of Parent. Merger Sub LLC, as the surviving entity of the Second Step Merger, is referred to
herein as the
Surviving Company
.
Section 2.2
The Effective Time
of First
Step Merger and Second Step Merger
.
(a) Upon the terms and subject to the conditions set forth in this Agreement, on the Closing Date,
Parent, Merger Sub and the Company shall cause the First Step Merger to be consummated under Delaware Law by filing a certificate of merger in customary form and substance (the
Certificate of Merger
) with the Secretary
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of State of the State of Delaware (the
Delaware Secretary of State
) in accordance with the applicable provisions of Delaware Law (the time of such filing and acceptance by the
Delaware Secretary of State, or such later time as may be agreed in writing by Parent, Merger Sub and the Company and specified in the Certificate of Merger, being referred to herein as the
Effective Time
).
(b) As soon as practicable after the Effective Time, Parent shall cause the Second Step Merger to be consummated under Delaware Law by filing
a certificate of merger in customary form and substance with the Delaware Secretary of State in accordance with the applicable provisions of Delaware Law and the Second Step Merger shall be effective at the time of such filing and acceptance by the
Delaware Secretary of State.
Section 2.3
The Closing
.
(a) The consummation of the Merger shall take place at a closing (the
Closing
) to occur at the offices of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, One Market Street, Spear Tower, San Francisco, California, 94105, on a date and at a time to be agreed upon by Parent, Merger Sub and the Company, which date shall be no later than the second (2
nd
) Business Day after the satisfaction or waiver (to the extent permitted hereunder) of the last to be satisfied or waived of the conditions set forth in
Article VII
(other than those
conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver (to the extent permitted hereunder), of such conditions) or at such other location, date and time as Parent, Merger Sub and the Company
shall mutually agree upon in writing. The date upon which the Closing shall actually occur pursuant hereto is referred to herein as the
Closing Date
.
(b) Notwithstanding
Section
2.3(a)
, if the Marketing Period has not ended at the time when the Closing would
otherwise be required to occur pursuant to
Section
2.3(a)
, the Closing will occur on the earlier of (i) a Business Day before or during the Marketing Period specified by Parent on two (2) Business Days prior
written notice to the Company and (ii) the first Business Day after the expiration of the Marketing Period (subject, in each case, to the satisfaction or waiver (to the extent permitted hereunder) of all the conditions set forth in
Section
7.1
and
Section
7.2
, other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver (to the extent permitted hereunder) of
such conditions at the Closing), or at such other date and time as Parent and the Company shall mutually agree upon in writing.
Section 2.4
Effect of the First Step Merger and Second Step Merger
.
(a) At the Effective Time, the effect of the First
Step Merger shall be as provided in this Agreement and the applicable provisions of Delaware Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all of the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Interim Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Interim Surviving Corporation.
(b) At the effective time of the Second Step Merger, the effect of the Second Step Merger shall be as provided in this Agreement and the
applicable provisions of Delaware Law. Without limiting the generality of the foregoing and subject thereto, at the effective time of the Second Step Merger, all of the property, rights, privileges, powers and franchises of the Interim Surviving
Corporation shall vest in Merger Sub LLC as the Surviving Company in the Second Step Merger, and all debts, liabilities and duties of the Interim Surviving Corporation shall become the debts, liabilities and duties of Merger Sub LLC as the Surviving
Company in the Second Step Merger.
Section 2.5
Certificate of Incorporation and Bylaws
.
(a)
Certificate of Incorporation
. At the Effective Time, subject to the provisions of
Section
6.13
, the
certificate of incorporation of the Company shall be amended and restated in its entirety to read identically to the certificate of incorporation of Merger Sub, as in effect immediately prior to the Effective Time, and such
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amended and restated certificate of incorporation shall become the certificate of incorporation of the Interim Surviving Corporation until thereafter amended in accordance with the applicable
provisions of Delaware Law and such certificate of incorporation.
(b)
Bylaws
. At the Effective Time, subject to the provisions of
Section
6.13
, the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall become the bylaws of the Interim Surviving Corporation until thereafter amended in accordance with the applicable
provisions of Delaware Law, the certificate of incorporation of the Interim Surviving Corporation and such bylaws.
(c)
Surviving
Company
. Unless otherwise determined by Parent prior to the effective time of the Second Step Merger, the certificate of formation and the limited liability company agreement of Merger Sub LLC as in effect immediately prior to the effective time
of the Second Step Merger shall be the certificate of formation and the limited liability company agreement of the Surviving Company in the Second Step Merger until thereafter amended in accordance with the applicable provisions of Delaware Law and
such limited liability company agreement;
provided
,
however
, that at the effective time of the Second Step Merger, the limited liability company agreement of the Surviving Company shall be amended so that the name of the Surviving
Company shall be Oclaro, LLC.
Section 2.6
Directors and Officers
.
(a)
Directors of the Interim Surviving Corporation
. At the Effective Time, the initial directors of the Interim Surviving Corporation
shall be the directors of Merger Sub immediately prior to the Effective Time, each to hold office in accordance with the certificate of incorporation and bylaws of the Interim Surviving Corporation until their respective successors are duly elected
or appointed and qualified.
(b)
Officers of the Interim Surviving Corporation
. At the Effective Time, the initial officers of the
Interim Surviving Corporation shall be the officers of Merger Sub immediately prior to the Effective Time, each to hold office in accordance with the certificate of incorporation and bylaws of the Interim Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
(c)
Directors and Officers of the Surviving Company
. At the effective time
of the Second Step Merger, the initial directors (or comparable positions) and officers of the Surviving Company shall be the directors and officers, respectively of the Interim Surviving Corporation immediately prior to such effective time, each to
hold the office in accordance with the limited liability company agreement of the Surviving Company until their respective successors are duly elected or appointed and qualified.
Section 2.7
Effect on Capital Stock
.
(a) Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Parent, Merger Sub, the Company, or the holders of any of the following securities, the following shall occur:
(i)
Company Common Stock
. Each share of Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than (x) shares of Company Common Stock owned by Parent, the Company or any direct or indirect wholly owned Subsidiary of Parent or the Company, in each case immediately prior to the Effective Time, and (y) Dissenting Shares)
shall be canceled and extinguished and automatically converted into the right to receive the following consideration (collectively, the
Merger Consideration
), without interest thereon, (A) $5.60 in cash (as may be adjusted
pursuant to
Section
2.7(e)
) (the
Cash Consideration
) and (B) a number of validly issued, fully paid an nonassessable shares of Parent Common Stock equal to the Exchange Ratio (as may be adjusted
pursuant to
Section
2.7(e)
) (the
Stock Consideration
).
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(ii)
Owned Company Common Stock
. Each share of Company Common Stock owned
by Parent, the Company, or any direct or indirect wholly owned Subsidiary of Parent or the Company, in each case immediately prior to the Effective Time, shall be cancelled and extinguished without any conversion thereof or consideration paid
therefor.
(iii)
Capital Stock of Merger Sub
. Each share of common stock, par value $0.01 per share, of Merger Sub
that is issued and outstanding immediately prior to the Effective Time shall be converted into one (1) validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Interim Surviving Corporation, and
shall constitute the only outstanding shares of capital stock of the Interim Surviving Corporation. Each certificate evidencing ownership of such shares of common stock of Merger Sub shall thereafter evidence ownership of shares of common stock of
the Interim Surviving Corporation.
(b)
Adjustment to Merger Consideration
. If, during the period between the date of this
Agreement and the Effective Time, any change in the outstanding shares of Company Capital Stock or Parent Common Stock shall occur as a result of any reclassification, recapitalization, stock split (including reverse stock split) or combination,
exchange or readjustment of shares, or any stock dividend or any similar event, or any record date for any such purpose shall be established, the Merger Consideration and any other amounts payable pursuant to this Agreement shall be appropriately
adjusted.
(c)
Fractional Shares
. In lieu of any fractional share of Parent Common Stock that otherwise would be issuable pursuant
to the Merger, each holder of shares of Company Common Stock who otherwise would be entitled to receive a fraction of a share of Parent Common Stock pursuant to the Merger (after aggregating all shares represented by the Certificates and
Uncertificated Shares of such holder) will be paid an amount in cash (without interest) equal to (i) the fraction of a share (after aggregating all shares represented by the Certificates and Uncertificated Shares of such holder) of Parent
Common Stock to which such holder would otherwise be entitled multiplied by (ii) the Parent Average Closing Price (the
Fractional Share Cash Amount
).
(d)
Statutory Rights of Appraisal
.
(i) Notwithstanding anything to the contrary set forth in this Agreement, shares of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time (other than shares of Company Common Stock canceled in accordance with
Section
2.7(a)(ii)
) and held by a holder who has not voted in favor of adoption of this Agreement or
consented thereto in writing and who has properly exercised appraisal rights of such shares in accordance with Section 262 of the DGCL (such shares being referred to collectively as the
Dissenting Shares
until such time as
such holder fails to perfect, withdraws or otherwise loses such holders appraisal rights under Delaware Law with respect to such shares) shall not be converted into, or represent the right to receive, the Merger Consideration but instead shall
be entitled to payment of the appraised value of such shares in accordance with Section 262 of the DGCL (it being understood and acknowledged that at the Effective Time, such Dissenting Shares shall no longer be outstanding, shall automatically
be cancelled and shall cease to exist, and such holder shall cease to have any rights with respect thereto other than the right to receive the fair market value of such Dissenting Shares to the extent afforded by Section 262 of the DGCL);
provided
that if, after the Effective Time, such holder fails to perfect, withdraws or loses such holders right to appraisal, pursuant to Section 262 of the DGCL or if a court of competent jurisdiction shall determine that such
holder is not entitled to the relief provided by Section 262 of the DGCL, such shares of Company Common Stock shall be treated as if they had been converted into, and to have become exchangeable for, as of the Effective Time, the right to
receive the Merger Consideration in accordance with
Section
2.7(a)(i)
, without any interest thereon, upon surrender of the certificate or certificates that formerly evidenced such share in the manner provided in
Section
2.8
.
(ii) The Company shall provide Parent prompt written notice of any demands
received by the Company for appraisal of shares of Company Common Stock, any withdrawal of any such demand and any other demand, notice or instrument delivered to the Company prior to the Effective Time pursuant to
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Delaware Law that relates to such demand, and Parent shall have the opportunity, at Parents expense, and right to participate in and direct all negotiations and proceedings with respect to
such demands. Except with the prior written consent of Parent, the Company shall not make any payment with respect to, or offer to settle or settle, any such demands.
(e)
Stock Adjustment
. If the aggregate number of shares of Parent Common Stock to be issued in connection with the Merger (including
all shares of Parent Common Stock which may be issued after the Effective Time pursuant to Company Compensatory Awards) would exceed nineteen and nine tenths percent (19.9%) of the issued and outstanding shares of Parent Common Stock immediately
prior to the Effective Time (the
Stock Threshold
), (A) the Exchange Ratio shall be reduced to the minimum extent necessary (rounded down to the nearest one thousandth) such that the aggregate number of shares of Parent
Common Stock to be issued in connection with the Merger (including all shares of Parent Common Stock which may be issued after the Effective Time pursuant to Company Compensatory Awards) does not exceed the Stock Threshold and (B) the Cash
Consideration for all purposes under this Agreement will be increased on a per share basis by an amount equal to $68.975 (the closing price of Parent Common Stock on March 9, 2018), multiplied by the difference between the initial Exchange
Ratio and the Exchange Ratio as determined in accordance with this Section
2.7(e)
(rounded down to the nearest
one-hundredth
of a cent).
(f)
Company Compensatory Awards
. At the Effective Time, each Company Compensatory Award then outstanding under any of the Company Stock
Plans shall be treated in accordance with the provisions of
Section
6.11
.
Section 2.8
Exchange of Certificates
.
(a)
Exchange Agent
. Prior to the Effective Time, Parent shall select a bank or trust company reasonably acceptable to the Company to
act as the payment agent for the Merger (the
Exchange Agent
). The Exchange Agent shall also act as the agent for the Companys shareholders for the purpose of receiving and holding certificates representing shares of Company
Common Stock (the
Certificates
) and uncertificated shares of Company Common Stock (the
Uncertificated Shares
) and shall obtain no rights or interests in the shares of Company Common Stock represented thereby.
(b)
Exchange Fund
. At or prior to the Effective Time, Parent shall deposit (or cause to be deposited) with the Exchange Agent, for
payment to the holders of shares of Company Common Stock pursuant to the provisions of this
Article II
, (i) evidence of Parent Common Stock issuable pursuant to
Section
2.7(a)
in book-entry form sufficient to
issue the aggregate Stock Consideration, (ii) by transfer of immediately available funds, an amount of cash sufficient to pay the aggregate Cash Consideration and (iii) by transfer of immediately available funds, an amount of cash
sufficient to pay the aggregate Fractional Share Cash Amounts (such amount referenced in clauses (ii) and (iii) together with the evidence of book-entry shares of Parent Common Stock, the
Exchange Fund
). In the event that the
Exchange Fund shall be insufficient to pay the aggregate amount of all Cash Consideration and Fractional Share Cash Amounts, Parent shall promptly deposit additional funds with the Exchange Agent in an amount that is equal to the deficiency in the
amount required to make such payment. Parent shall cause the Exchange Agent to make, and the Exchange Agent shall make, delivery of the Cash Consideration and Fractional Share cash Amount in accordance with this Agreement. The Exchange Fund shall
not be used for any purpose that is not expressly provided for in this Agreement. The Exchange Agent shall invest any cash included in the Exchange Fund as reasonably directed by Parent;
provided, however
, that (A) any investment of such
cash shall in all events be limited to direct short-term obligations of, or short-term obligations fully guaranteed as to principal and interest by, the U.S. government, in commercial paper rated
P-1
or
A-1
or better by Moodys Investors Service, Inc. or Standard & Poors Corporation, respectively, or in certificates of deposit, bank repurchase agreements or bankers acceptances of
commercial banks with capital exceeding $10 billion (based on the most recent financial statements of such bank that are then publicly available), and (B) no such investment or loss thereon shall affect the amounts payable to holders of
Certificates or Uncertificated Shares pursuant to this
Article II
. Any interest and other income resulting from such investments shall be paid to Parent upon demand.
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(c)
Payment Procedures
. As promptly as practicable following the Effective Time, Parent
and Merger Sub shall instruct the Exchange Agent to mail within three (3) Business Days after the Effective Time to each holder of record (as of immediately prior to the Effective Time) of shares of Company Common Stock (i) a letter of
transmittal in customary form and containing customary provisions (which shall specify that delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificates (or affidavits of loss in lieu thereof) or
transfer of the Uncertificated Shares to the Exchange Agent) and (ii) instructions for use in effecting the surrender of the Certificates or transfer of the Uncertificated Shares in exchange for the Merger Consideration payable in respect
thereof pursuant to the provisions of this
Article II
. Each holder of shares of Company Common Stock that have been converted into the right to receive the Merger Consideration shall be entitled to receive the Merger Consideration (including
the Fractional Share Cash Amount) in respect of the shares of Company Common Stock represented by a Certificate or Uncertificated Share, upon (x) surrender to the Exchange Agent of a Certificate (or affidavits of loss in lieu thereof), together
with a duly completed and validly executed letter of transmittal and such other documents as may reasonably be requested by the Exchange Agent, or (y) receipt of an agents message by the Exchange Agent (or such other evidence,
if any, of transfer as the Exchange Agent may reasonably request) in the case of a book-entry transfer of Uncertificated Shares. Until so surrendered or transferred, as the case may be, each such Certificate or Uncertificated Share shall represent
after the Effective Time for all purposes only the right to receive the Merger Consideration (including the Fractional Share Cash Amount) payable in respect thereof pursuant to the provisions of this
Article II
. Parent shall instruct the
Exchange Agent to pay such Merger Consideration and Fractional Share Cash Amount within five (5) Business Days following the later to occur of (x) the Effective Time or (y) the Exchange Agents receipt of such Certificate (or
affidavit of loss in lieu thereof) or agents message, and the Certificate (or affidavit of loss in lieu thereof) or Uncertificated Share so surrendered shall be forthwith cancelled. No interest shall be paid or accrued on the cash
payable upon the surrender or transfer of such Certificate or Uncertificated Share.
(d)
Transfers of Ownership
. If any portion of
the Merger Consideration is to be paid to a Person other than the Person in whose name the surrendered Certificate or the transferred Uncertificated Share is registered, it shall be a condition to such payment that (i) either such Certificate
shall be properly endorsed or shall otherwise be in proper form for transfer or such Uncertificated Share shall be properly transferred and (ii) the Person requesting such payment shall pay to the Exchange Agent any transfer or other similar
Tax required as a result of such payment to a Person other than the registered holder of such Certificate or Uncertificated Share or establish to the reasonable satisfaction of the Exchange Agent that such Tax has been paid or is not payable.
(e)
Treatment of Unexchanged Shares
. No dividends or other distributions, if any, with a record date after the Effective Time with
respect to Parent Common Stock, shall be paid to the holder of any unsurrendered share of Company Common Stock to be converted into shares of Parent Common Stock pursuant to
Section
2.7(a)(i)
until such holder shall
surrender such share in accordance with this
Section
2.8
. After the surrender in accordance with this
Section
2.8
of a share of Company Common Stock to be converted into Parent Common Stock
pursuant to
Section
2.7(a)(i)
, Parent shall cause the holder thereof to be paid, without interest, (i) the amount of dividends or other distributions with a record date after the Effective Time and theretofore paid
with respect to such shares of Parent Common Stock to which such holder is entitled pursuant to this Agreement and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time
but prior to such surrender and with a payment date subsequent to such surrender payable with respect to such shares of Parent Common Stock.
(f)
Required Withholding
. Each of the Exchange Agent, Parent and the Surviving Company shall be entitled to deduct and withhold from
any amounts payable pursuant to this Agreement such amounts as may be required to be deducted or withheld therefrom under applicable Tax laws. To the extent that such amounts are so deducted or withheld, such amounts (i) shall be remitted by
Parent, Merger Sub, the Surviving Company or the Exchange Agent, as the case may be, to the applicable Governmental Entity and (ii) shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts
would otherwise have been paid.
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(g)
Termination of Exchange Fund
. Any portion of the Exchange Fund (including any interest
or other amounts received with respect thereto) that remains unclaimed by, or otherwise undistributed to, the holders of Certificates and Uncertificated Shares for one year after the Effective Time shall be delivered to Parent upon Parents
demand, and any holder of Certificates or Uncertificated Shares who has not theretofore complied with this
Article II
shall thereafter look only to Parent or the Surviving Company (subject to abandoned property, escheat or other similar
Laws), as general creditors thereof, for satisfaction of its claim for Merger Consideration.
(h)
No Liability
. Notwithstanding
anything to the contrary set forth in this Agreement, none of the Exchange Agent, Parent, the Surviving Company or any other party hereto shall be liable to a holder of shares of Company Common Stock for any amount properly paid to a public official
if required by any abandoned property, escheat or similar Applicable Law. Any other provision of this Agreement notwithstanding, any portion of the Merger Consideration or the cash to be paid in accordance with this
Article II
that remains
undistributed to the holders of Certificates and Uncertificated Shares immediately prior to the date on which the Merger Consideration or such cash would otherwise escheat to or become the property of any Governmental Entity, shall, to the extent
permitted by applicable Law, become the property of the Surviving Company, free and clear of all claims or interest of any person previously entitled thereto.
Section 2.9
No Further Ownership Rights in Company Common Stock
. From and after the Effective
Time, all shares of Company Common Stock shall no longer be outstanding and shall automatically be cancelled, retired and cease to exist, and each holder of a Certificate or Uncertificated Share theretofore representing any shares of Company Common
Stock (other than Dissenting Shares) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration (including the Fractional Share Cash Amount) payable therefor upon the surrender thereof in accordance
with the provisions of
Section
2.8
. The Merger Consideration paid in accordance with the terms of this
Article II
shall be deemed to have been paid in full satisfaction of all rights pertaining to such shares of
Company Common Stock. From and after the Effective Time, there shall be no further registration of transfers on the records of the Surviving Company of shares of Company Common Stock that were issued and outstanding immediately prior to the
Effective Time, other than transfers to reflect, in accordance with customary settlement procedures, trades effected prior to the Effective Time. If, after the Effective Time, Certificates or Uncertificated Shares are presented to the Surviving
Company, Parent or the Exchange Agent for any reason, they shall be canceled and exchanged for the Merger Consideration as provided for, and in accordance with the procedures set forth, in this
Article II
.
Section 2.10
Lost, Stolen or Destroyed Certificates
. In the event that any Certificates shall
have been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof, the Merger Consideration payable in respect thereof
pursuant to
Section
2.7
;
provided
,
however
, as a condition precedent to the payment of such Merger Consideration, if required by Parent or the Exchange Agent, the Exchange Agent may require the owners of such
lost, stolen or destroyed Certificates to furnish a bond in form satisfactory to the Exchange Agent and as indemnity against any claim that may be made against Parent, the Surviving Company or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed. The value of the bond of indemnity shall be reasonably calculated by the Exchange Agent, based on the value of lost, stolen or destroyed Certificates.
Section 2.11
Taking of Necessary Action; Further Action
. If, at any time after the Effective
Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Company with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company
and Merger Sub, the directors and officers of the Surviving Company shall take all such lawful and necessary action on behalf of the Company and Merger Sub.
Section 2.12
Tax Treatment
. The Merger is intended to constitute a reorganization
within the meaning of Section 368(a) of the Code. The parties hereto intend the First Step Merger and the Second Step Merger to constitute integrated steps in a single plan of reorganization within the meaning of Treasury
Regulations
Sections 1.368-2(g)
and
1.368-3,
which plan of reorganization the parties adopt by executing this
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Agreement. Except as specifically set forth in this Agreement or as otherwise required by Applicable Law, no party hereto shall take any action that would cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except, with respect to any Section of this
Article III,
as set forth in the section of the disclosure letter delivered by the Company
to Parent on the date of this Agreement (the
Company Disclosure Letter
) that relates to such Section or in another section of the Company Disclosure Letter to the extent it is reasonably apparent from the text of such disclosure
that such disclosure is applicable to such Section, and except as disclosed in the Annual Report
10-K
of the Company for the fiscal year ended July 1, 2017, the Quarterly Report on Form
10-Q
of the Company for the quarterly period ended September 30, 2017, the Quarterly Report on Form
10-Q
of Company for the quarterly period ended December 30, 2017,
the Current Report on Form
8-K
of Company filed on February 12, 2018, the Current Report on Form
8-K
of Company filed on February 6, 2018, the Current Report
on Form
8-K
of Company filed on February 5 2018, the Current Report on Form
8-K
of Company filed on November 17, 2017, the Current Report on Form
8-K
of the Company filed on November 1, 2017 and the Schedule 14A of the Company for the annual stockholders meeting held on November 17, 2017 and prior to the date of this Agreement (other than
disclosures in the Risk Factors or Forward-Looking Statements sections of such reports, other disclosures that are similarly
non-specific
or are predictive or forward-looking in nature
(and excluding any exhibits incorporated by reference in such reports), in each case, other than any specific factual information contained therein), the Company hereby represents and warrants to Parent, Merger Sub and Merger Sub LLC as follows:
Section 3.1
Organization and Standing
. The Company (i) is a corporation duly
organized, validly existing and in good standing under Delaware Law, (ii) has the requisite corporate power and authority to carry on its business as it is presently being conducted and to own, lease or operate its respective material
properties and material assets and (iii) is duly qualified or licensed to do business and is in good standing in each jurisdiction where the character of its properties owned or leased or the nature of its activities make such qualification
necessary (to the extent the good standing concept is applicable in the case of any jurisdiction outside the United States), except in the case of the foregoing clause (iii) where the failure of the Company to be so qualified or to
be in good standing as a foreign corporation would not reasonably be expected to be, individually or in the aggregate, a Company Material Adverse Effect. The Company has delivered or made available to Parent complete and correct copies of its
certificate of incorporation and bylaws, as amended to date. The Company is not in violation of its certificate of incorporation or bylaws. The Company has delivered or made available to Parent complete and correct copies of the minutes of all
meetings of the shareholders, the Company Board and each committee of the Company Board held since January 1, 2015 until the date hereof, other than any such minutes relating to this Agreement or the transactions contemplated hereby, any
alternatives to this Merger considered by the Company Board or containing competitively sensitive information and minutes portions of which have been redacted.
Section 3.2
Subsidiaries
.
(a) As of the date hereof,
Section
3.2(a)
of the Company Disclosure Letter sets forth a complete and accurate list
of the name of each Subsidiary of the Company, and with respect to each Subsidiary (a) its jurisdiction; (b) its authorized shares or other equity interests (if applicable), and (c) the number of issued and outstanding shares or other
equity interest and the record holders and beneficial owners thereof. Except for the Companys Subsidiaries, the Company does not own, directly or indirectly, any capital stock of, or other equity or voting interest in any Person (other than
passive equity or debt securities that constitute cash, cash equivalents or debt investments with a maturity date of less than 365 days purchased in connection with the Companys cash management programs).
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(b) Each of the Companys Subsidiaries (i) is duly organized, validly existing and in
good standing under the Applicable Laws of the jurisdiction of its respective organization (to the extent the good standing concept is applicable in the case of any jurisdiction outside the United States), (ii) has the requisite
power and authority to carry on its respective business as it is presently being conducted and to own, lease or operate its respective properties and assets and (iii) is in compliance with its respective certificate of incorporation, bylaws or other
applicable constituent documents, except for any deviation from any of the foregoing clauses (i), (ii) or (iii) that would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. Each of the
Companys Subsidiaries is duly qualified to do business and is in good standing in each jurisdiction where the character of its properties owned or leased or the nature of its activities make such qualification necessary (to the extent the
good standing concept is applicable in the case of any jurisdiction outside the United States), except for any deviations that would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. The
Company has delivered or made available to Parent complete and correct copies of the certificates of incorporation and bylaws or other constituent documents, as amended to date, of each of the Companys Subsidiaries.
(c) All of the outstanding capital stock of, or other equity or voting interest in, each Subsidiary of the Company (i) have been duly
authorized, validly issued and are fully paid and nonassessable and (ii) as of the date hereof, are owned, directly or indirectly, by the Company, free and clear of all Liens (other than Permitted Liens or restrictions on transfer imposed by
Applicable Law) and free of any other restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity or voting interest) that would prevent the operation by the Surviving Company of such
Subsidiarys business as presently conducted.
(d) As of the date hereof, there are no outstanding (i) securities of the Company
or any of its Subsidiaries convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, any Subsidiary of the Company, (ii) options, stock appreciation rights, warrants, restricted stock units,
subscriptions, convertible securities, rights or other commitments or agreements to acquire from the Company or any of its Subsidiaries, or that obligate the Company or any of its Subsidiaries to issue, any capital stock of, or other equity or
voting interest in, or any securities convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, any Subsidiary of the Company, (iii) obligations of the Company to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment (whether payable in equity, cash or otherwise) relating to any capital stock of, or other equity or voting interest (including any voting
debt) in, any Subsidiary of the Company (the items in clauses (i), (ii) and (iii), together with the capital stock of the Subsidiaries of the Company, being referred to collectively as
Subsidiary Securities
) or (iv) other
obligations by the Company or any of its Subsidiaries to make any payments based on the price or value of any Subsidiary Securities. As of the date hereof, there are no Contracts of any kind which obligate the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding Subsidiary Securities. As of the date hereof, there are no outstanding contractual obligations of the Company or its Subsidiaries to make any material investment (in the form of a loan, capital
contribution or otherwise) in, any other Person.
Section 3.3
Authorization
.
(a) The Company has all requisite corporate power and authority to execute and deliver this Agreement and, subject in the case of the Merger
to obtaining the Requisite Shareholder Approval, to consummate the transactions contemplated hereby and to perform its obligations hereunder. Assuming that the representations of Parent, Merger Sub and Merger Sub LLC set forth in
Section
4.15
are accurate, and other than as set forth in
Section
3.5(b)
, the execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby (including the Merger) have been duly authorized by all necessary corporate action on the part of the Company and no additional corporate proceedings on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (including the Merger), other than in the case of the Merger obtaining the Requisite Shareholder Approval. This Agreement has been duly executed and delivered by the Company and, assuming the due
authorization,
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execution and delivery by Parent, Merger Sub and Merger Sub LLC, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms,
except that such enforceability (i) may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Applicable Law affecting or relating to creditors rights generally and (ii) is subject to general
principles of equity (the
Enforceability Limitations
).
(b) At a meeting duly called and held prior to the execution of
this Agreement, the Company Board unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable, (ii) determined that this Agreement and the transactions contemplated hereby,
including the Merger, are fair to and in the best interests of the Company and its shareholders, (iii) approved this Agreement and the transactions contemplated hereby, including the Merger, (iv) directed that the adoption of this
Agreement be submitted to a vote of the shareholders of the Company at the Company Shareholder Meeting and (v) subject to
Section
6.2
, resolved to recommend that the holders of shares of Company Common Stock adopt
this Agreement in accordance with the applicable provisions of Delaware Law.
(c) Assuming that the representations of Parent, Merger Sub
and Merger Sub LLC set forth in
Section
4.17
are accurate, the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock voting to adopt this Agreement (the
Requisite
Shareholder Approval
) is the only vote of the holders of any class or series of Company Capital Stock necessary (under Applicable Law or the Companys certificate of incorporation or bylaws) to consummate the Merger and the other
transactions contemplated by this Agreement.
Section 3.4
Capitalization
.
(a) The authorized capital stock of the Company consists of (i) 275,000,000 shares of Company Common Stock and (ii) 1,000,000 shares
of Company Preferred Stock. As of the close of business on March 9, 2018 (the
Capitalization Reference Date
), (A) 169,931,835 shares of Company Common Stock were issued and outstanding, (B) no shares of Company
Preferred Stock were issued and outstanding or held by the Company as treasury shares and (C) no shares of Company Common Stock were held by the Company as treasury shares. All outstanding shares of Company Common Stock were validly issued,
fully paid, nonassessable and free of any preemptive rights. Since the Capitalization Reference Date through (and including) the date of this Agreement, the Company has not issued any shares of Company Capital Stock other than pursuant to Company
Restricted Stock Units or the exercise of Company Options or Company Stock Appreciation Rights or pursuant to any 401(k) plans maintained by the Company or any of its Subsidiaries, other than as would not have constituted a violation of
Section
5.2
had this Agreement been in effect.
(b)
Section 3.4(b)
of the Company Disclosure Letter sets
forth, as of the Capitalization Reference Date, (i) the aggregate number of shares of Company Common Stock that are subject to Company Options, (ii) the aggregate number of shares of Company Common Stock that are subject to Company SARs,
(iii) the aggregate number of shares of Company Restricted Stock and (iv) the aggregate number of shares of Company Common Stock that are subject to Company RSUs (assuming maximum levels of achievement). Since the Capitalization Reference
Date through (and including) the date of this Agreement, the Company has not granted any Company Compensatory Awards, other than as would not have constituted a violation of
Section
5.2
had this Agreement been in effect. As
of the Capitalization Reference Date, 10,421,011 shares of Company Common Stock were reserved for future issuance pursuant to stock awards not yet granted under the Company Stock Plans. All Company Compensatory Awards have been, in all material
respects, validly issued and properly approved by the Company Board (or a duly authorized committee or subcommittee thereof) in accordance with all Applicable Law, and the Company Stock Plans and all Company Compensatory Awards have been, in all
material respects, properly accounted for in accordance with GAAP on the consolidated audited financial statements of the Company and its Subsidiaries filed in or furnished with the SEC Reports.
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(c) Except as set forth in this
Section
3.4
and except for changes
resulting from the exercise, settlement or vesting of Company Compensatory Awards in accordance with their respective terms, in each case issued on or after the Capitalization Reference Date as permitted under this Agreement and Company Securities
granted or issued in compliance with
Section
5.2
, there are (i) no outstanding shares of capital stock of, or other equity or voting interest in, the Company, (ii) no outstanding securities of the Company
convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, the Company, (iii) no outstanding options, stock appreciation rights, warrants, restricted stock units, rights or other commitments or
agreements to acquire from the Company, or that obligates the Company to issue, any capital stock of, or other equity or voting interest in, or any securities convertible into or exchangeable for shares of capital stock of, or other equity or voting
interest in, the Company, (iv) no obligations of the Company to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment (whether payable in equity, cash or
otherwise) relating to any capital stock of, or other equity or voting interest (including any voting debt) in, the Company (the items in clauses (i), (ii), (iii) and (iv), together with the capital stock of the Company, being referred to
collectively as
Company Securities
) and (v) no other obligations by the Company or any of its Subsidiaries to make any payments based on the price or value of the Company Securities. Except as set forth in this
Section
3.4
, there are no outstanding Contracts of any kind which obligate the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities.
(d) Other than the Companys certificate of incorporation, the Companys bylaws and this Agreement, neither the Company nor any of
its Subsidiaries is a party to any Contracts restricting the transfer of, relating to the voting of, requiring registration of, or granting any preemptive rights, anti-dilutive rights or rights of first refusal or similar rights with respect to any
securities of the Company.
Section 3.5
Non-contravention;
Required Consents
.
(a) Assuming the Requisite Shareholder Approval is obtained, the execution, delivery or performance by the Company
of this Agreement, the consummation by the Company of the transactions contemplated hereby (including the Merger) and the compliance by the Company with any of the provisions hereof do not and will not (i) violate or conflict with any provision
of the certificate of incorporation or bylaws or other constituent documents of the Company or any of its Subsidiaries, (ii) subject to obtaining the Consents set forth in
Section
3.5(a)(ii)
of the Company Disclosure
Letter, result in the breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the loss of any material benefit or the imposition of any additional payment or other material Liability under, any Material Contract, (iii) assuming compliance with the matters referred to in
Section
3.5(b)
and, in the case of the consummation of the Merger, subject to obtaining the Requisite Shareholder Approval, violate or conflict with any Applicable Law or Order or (iv) result in the creation of any
Lien (other than Permitted Liens) upon any of the properties or assets of the Company or any of its Subsidiaries, except in the case of each of clauses (ii), (iii) and (iv) above, for such violations, breaches, conflicts, defaults,
terminations, losses, payments, Liabilities, accelerations or Liens which would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or would prevent the consummation of the Merger.
(b) No consent, approval, Order or authorization of, or filing or registration with, or notification to (any of the foregoing being a
Consent
), any Governmental Entity is required on the part of the Company or any of its Subsidiaries in connection with the execution, delivery and performance by the Company of this Agreement and the consummation by the Company of
the transactions contemplated hereby (including the Merger), except (i) the filing and recordation of the Certificate of Merger with the Delaware Secretary of State as required by the DGCL, (ii) such filings and approvals as may be
required by Nasdaq or any federal or state securities or Takeover Laws, including compliance with any applicable requirements of the Securities Act or the Exchange Act (including the filing with the SEC of the Proxy Statement/Prospectus and the
filing of the Form
S-4
and the declaration of effectiveness of the Form
S-4),
(iii) compliance with any applicable requirements of the HSR Act and any other
Antitrust Laws, (iv) the Requisite Shareholder Approval, (v) the approvals set forth in
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Section
3.5(b)
of the Company Disclosure Letter and (vi) such other Consents, the failure of which to obtain, which would not reasonably be expected to be,
individually or in the aggregate, material to the Company and its Subsidiaries, taken as a whole, and would not reasonably have, individually or in the aggregate, a Company Material Adverse Effect or would prevent the consummation of the Merger.
Section 3.6
SEC Reports
.
(a) Since January 1, 2015, the Company has filed or furnished (as applicable) all forms, reports, schedules, statements and documents
with the SEC that have been required to be so filed or furnished (as applicable) by it under Applicable Law at or prior to the time so required (all such forms, reports, schedules, statements and documents, together with any other forms, reports,
schedules, statements or other documents filed or furnished (as applicable) by the Company with the SEC after January 1, 2015 and at or prior to the Effective Time that are not required to be so filed or furnished, the
Company SEC
Reports
).
(b) Each Company SEC Report complied, or will comply, as the case may be, as of its filing date (or, if amended or
superseded by a filing, on the date of such amended or superseded filing), as to form in all material respects with the applicable requirements of the Securities Act or the Exchange Act, as the case may be, and with all applicable provisions of the
Sarbanes-Oxley Act, each as in effect on the date such Company SEC Report was, or will be, filed.
(c) As of its filing date (or, if
amended or superseded by a filing prior to the date of this Agreement, on the date of such amended or superseded filing), each Company SEC Report did not, or will not, as the case may be, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.
(d) As of the date of this Agreement, (i) there are no outstanding or unresolved comments in any comment letters of the staff of the SEC
received by the Company relating to the Company SEC Reports or any registration statement filed by the Company with the SEC and (ii) no Company SEC Report nor any registration statement filed by the Company with the SEC is, to the Knowledge of
the Company, the subject of ongoing SEC review.
(e) No Subsidiary of the Company is subject to the reporting requirements of
Section 13(a) or Section 15(d) of the Exchange Act.
(f) Since January 1, 2015, no executive officer of the Company has
failed to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act with respect to any Company SEC Report, except as disclosed in certifications filed with the Company SEC Reports, and at the time of
filing or submission of each such certification, such certification was true and accurate and complied with the Sarbanes-Oxley Act. Since January 1, 2015, neither the Company nor any of its executive officers has received any written notice
from any Governmental Entity challenging or questioning the accuracy, completeness, form or manner of filing of such certifications.
Section 3.7
Financial Statements
.
(a) The consolidated financial statements of the Company and its Subsidiaries filed in
or furnished with the Company SEC Reports have been or will be, as the case may be, prepared in accordance with GAAP consistently applied by the Company during the periods and at the dates involved (except as may be indicated in the notes thereto
and, in the case of unaudited interim financial statements as may be permitted by the SEC for Quarterly Reports on
Form 10-Q),
and fairly present in all material respects, or will fairly present in all
material respects, as the case may be, the consolidated financial position of the Company and its Subsidiaries as of the dates thereof and the consolidated results of operations and cash flows for the periods then ended (subject to normal
year-end
adjustments in the case of any unaudited interim financial statements).
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(b) The Companys system of internal controls over financial reporting (as defined in Rules
13a-15(f)
and
15d-15(f)
under the Exchange Act) is sufficient to provide reasonable assurance (i) that transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP, (ii) that receipts and expenditures are executed in accordance with the authorization of management, and (iii) that any unauthorized use, acquisition or disposition of the Companys assets
that would materially affect the Companys financial statements would be detected or prevented in a timely manner.
(c) The
Companys disclosure controls and procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Exchange Act) are reasonably designed to ensure
that (i) all information (both financial and
non-financial)
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 to the individuals responsible for preparing such reports within the time periods specified in the rules and forms of the SEC, and (ii) all such information is accumulated and communicated to the Companys management as
appropriate to allow timely decisions regarding required disclosure and to make the certifications of the principal executive officer and principal financial officer of the Company required under the Exchange Act with respect to such reports.
(d) The Companys management has completed an assessment of the effectiveness of the Companys system of internal control over
financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act for the fiscal year ended July 1, 2017, and based on such evaluation management of the Company has disclosed to the Companys auditors
and the audit committee of the Company Board of Directors and made available to Parent a description of (i) any significant deficiency or material weakness in the system of internal accounting controls utilized by the Company and its
Subsidiaries, (ii) any fraud, whether or not material, that involves the Companys management or other employees who have a role in the preparation of financial statements or the internal accounting controls utilized by the Company and its
Subsidiaries or (iii) any claim or allegation regarding any of the foregoing.
(e) Neither the Company nor any of its Subsidiaries is
a party to, or has any commitment to become a party to, any joint venture, partnership agreement or any similar Contract (including any Contract relating to any transaction, arrangement or relationship between or among the Company or any of its
Subsidiaries, on the one hand, and any unconsolidated affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand (such as any arrangement described in Section 303(a)(4) of
Regulation S-K
of the SEC)) where the purpose or effect of such arrangement is to avoid disclosure of any material transaction involving the Company or any its Subsidiaries in the Companys consolidated
financial statements.
(f) Since January 1, 2015, to the Knowledge of the Company, neither the Company nor any of its Subsidiaries
nor any director or officer of the Company or any of its Subsidiaries has received or otherwise had or obtained knowledge of any substantive complaint, allegation, assertion or claim, whether written or oral, that the Company or any of its
Subsidiaries has engaged in questionable accounting or auditing practices. Since January 1, 2015, no current or former attorney representing the Company or any of its Subsidiaries has reported evidence of a material violation of securities
Laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Company Board or any committee thereof or to any director or executive officer of the Company.
(g) Since January 1, 2015, to the Knowledge of the Company, no employee of the Company or any of its Subsidiaries has provided or is
providing information to any law enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any Applicable Law of the type described in Section 806 of the Sarbanes-Oxley Act by the
Company or any of its Subsidiaries. Since January 1, 2015, neither the Company nor, to the Knowledge of the Company, any Subsidiary, director, officer, employee, contractor, subcontractor or agent of the Company or any Subsidiary of the Company
has discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against an employee of the Company or any of its Subsidiaries in the terms and conditions of employment because of any lawful act of such employee
described in Section 806 of the Sarbanes-Oxley Act.
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Section 3.8
Proxy Statement
/Prospectus
. The
information supplied or to be supplied by the Company or its officers, directors, Representatives, affiliates, agents or employees in writing for inclusion in the Proxy Statement/Prospectus, when filed with the SEC and at the time the Form
S-4
is declared effective by the SEC, on the date first mailed to shareholders of the Company and at the time of the Company Shareholders Meeting, will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading;
provided
,
however
, that notwithstanding the foregoing, no representation or
warranty is made by the Company with respect to information supplied by Parent, Merger Sub or Merger Sub LLC or any of their officers, directors, representatives, agents or employees in writing specifically for inclusion or incorporation by
reference in the Proxy Statement/Prospectus.
Section 3.9
No Undisclosed
Liabilities
. Neither the Company nor any of its Subsidiaries has any Liabilities other than (a) Liabilities reflected or otherwise reserved against in the Company Balance Sheet (or disclosed in the notes thereto), (b) Liabilities
under this Agreement or in connection with the transactions contemplated hereby, including the Merger, or otherwise disclosed in the Company Disclosure Letter, (c) fees and expenses payable to any accountant, outside legal counsel or financial
advisor which are incurred in connection with the negotiation of this Agreement or the consummation of the transactions contemplated by this Agreement (including the Merger), (d) executory obligations under any Contract, other than any such
obligations that arose as a result of an existing breach or default (with or without notice or lapse of time or both) thereunder, (e) Liabilities incurred in the ordinary course of business consistent with past practice since the date of the
Company Balance Sheet and (f) Liabilities that would not, individually or in the aggregate, reasonably be expected to constitute or result in a Company Material Adverse Effect.
Section 3.10
Absence of Certain Changes
.
(a) Except for actions expressly contemplated by this Agreement, since the date of the Company Balance Sheet through the date of this
Agreement, (i) the business of the Company and its Subsidiaries has been conducted, in all material respects, in the ordinary course consistent with past practice and (ii) the Company has not taken any action that, if taken after the date
of this Agreement without the prior written consent of Parent, would constitute a breach of
Sections 5.2(d)
,
(e)
,
(f)
,
(l)
,
(m)
or
(t)
, solely if related to any of the prior subsections;
provided
,
however
, that within thirty (30) Business Days of this Agreement, the Company shall make available to Parent a list of any items that would constitute a breach of
Section
5.2(g)
and
(k)
if taken
after the date of this Agreement;
(b) Since the date of the Company Balance Sheet, there has not been or occurred any damage, destruction
or other casualty loss (whether or not covered by insurance) with respect to any Owned Real Property or Assets that, individually or in the aggregate, would reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole.
(c) Since the date of the Company Balance Sheet through the date of this Agreement, there has not been or occurred or there does not
exist any Company Material Adverse Effect.
Section 3.11
Material Contracts
.
(a) For purposes of this Agreement, a
Material Contract
means each of the following Contracts in existence as of the date
of this Agreement to which the Company or any of its Subsidiaries is a party or by which any of their respective properties or assets are bound, excluding any purchase order issued in the ordinary course of business and any Employee Plan:
(i) any material contract (as such term is defined in Item 601(b)(10) of
Regulation S-K
of the SEC;
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(ii) any Contract with any employee,
non-employee
director, individual consultant or independent contractor that is not immediately terminable by the Company or any of its Subsidiaries upon notice of thirty (30) days or less and without cost
or Liabilities, including any Contract requiring the Company to make a payment to any employee or
non-employee
director on account of the transactions contemplated by this Agreement (including the Merger) or
any Contract that is entered into in connection with this Agreement;
(iii) any Collective Bargaining Agreement or other
similar Contract with a Labor Organization;
(iv) any Contract with any Significant Customer (only for the top five
(5) such Significant Customers) or any Significant Supplier (only for the top five (5) such Significant Suppliers), other than
non-disclosure
agreements or purchase orders issued by such Significant
Customers or to such Significant Suppliers in the ordinary course of business consistent with past practices;
(v) any
Contract providing for material indemnification or any material guaranty (in each case, under which the Company has continuing obligations as of the date hereof), other than any guaranty by the Company of any of its Subsidiarys obligations or
any Contract providing for indemnification in the ordinary course of business;
(vi) any Contract that is material to the
Company and its Subsidiaries, taken as a whole, containing any covenant, commitment or other obligation (A) limiting the right of the Company or any of its Subsidiaries to engage in any line of business or to compete with any Person in any line
of business, or to make use of any Intellectual Property Rights, (B) granting any exclusive rights to any third party, (C) containing a most favored nation or similar provision, (D) including any take or pay or
requirements obligation, (E) prohibiting the Company or any of its Subsidiaries (or, after the Effective Time, Parent) from engaging in business with any Person or levying a fine, charge or other payment for doing so (other than any
prohibition pertaining to the
non-solicitation
of employees) or (F) otherwise prohibiting or limiting the right of the Company or its Subsidiaries to sell, distribute or manufacture any products or
services or to purchase or otherwise obtain any software, components, parts or subassemblies, in each case other than any such Contracts that may be cancelled without liability to the Company or its Subsidiaries and upon notice of thirty
(30) days or less;
(vii) any Contract (A) relating to the license, disposition or acquisition by the Company or
any of its Subsidiaries after the date of this Agreement of a material amount of assets other than in the ordinary course of business, (B) pursuant to which the Company or any of its Subsidiaries will acquire any material ownership interest in
any other Person or other business enterprise other than the Companys Subsidiaries or (C) relating to the formation, control or operation of any joint venture;
(viii) any Company IP Agreements;
(ix) any Contract containing an obligation (contingent or otherwise) to provide source code for any Company Product to any
third party, including to put such source code in escrow with a third party;
(x) any Contract (A) containing any
material financial penalty for the failure by the Company or any of its Subsidiaries to comply with any support or maintenance obligation except for such Contracts on the Companys standard form of customer agreement or (B) containing any
obligation to provide material support or maintenance for the Company Products during any period that is after five (5) years from the date hereof, in each case other than any such Contracts that may be cancelled without liability to the
Company or its Subsidiaries and upon notice of thirty (30) days or less;
(xi) any Contract for the acquisition or
disposition of any business containing any continuing (A) profit sharing arrangements or
earn-out
arrangements or (B) indemnification or similar contingent payment obligations;
(xii) any joint venture or development agreements, or any outsourcing Contracts (including Contracts to assemble, manufacture
and package any Company Product) that is material to the Company and its Subsidiaries, taken as a whole;
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(xiii) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other Contracts relating to the borrowing of money by, or extension of credit to, the Company or any of its Subsidiaries, other than (A) accounts receivables and payables in the ordinary course of business consistent with
past practice, (B) loans among the Company and any of its direct or indirect wholly-owned Subsidiaries, (C) extended payment terms for customers in the ordinary course of business, (D) prepayment of Taxes and (E) capital leases
less than $5,000,000;
(xiv) any mortgage, lease, loan or other material Contract relating to any sale leaseback
transaction of any real property previously owned by the Company or any of its Subsidiaries;
(xv) any Company Real
Property Lease;
(xvi) any Contract entered into since January 1, 2017 to settle a Legal Proceeding other than
(A) releases immaterial in nature and amount entered into with former employees or independent contractors of the Company in the ordinary course of business or (B) settlement agreements for cash only (which has been paid) and does not
exceed $500,000 as to such settlement; and
(xvii) any material Contract with any Governmental Entity.
(b)
Section 3.11(b)
of the Company Disclosure Letter contains a list that is complete and accurate as of the date hereof of all
Material Contracts (other than Material Contracts that are Employee Plans) to which the Company or any of its Subsidiaries is a party or which bind or effect their respective properties or assets, and identifies each subsection of
Section
3.11(a)
that describes such Material Contract. The Company has delivered or made available to Parent complete and correct copies of each such Material Contract, except to the extent readily available to Parent from
the SEC.
(c) Each Material Contract is valid and binding on the Company (and/or each such Subsidiary of the Company, as the case may be)
subject to the Enforceability Limitations and is in full force and effect, and neither the Company nor any of its Subsidiaries, nor, to the Knowledge of the Company, any other party thereto, is in breach of, or default under any such Material
Contract, and no event has occurred that with notice or lapse of time or both would constitute such a breach or default thereunder by the Company or any of its Subsidiaries, or, to the Knowledge of the Company, any other party thereto, except as
would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. Neither the Company nor any of its Subsidiaries has received any written notice regarding any actual or possible violation or breach of or default
under, or intention to cancel or modify, any Material Contract prior to its stated expiration date, in each case, except as would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole.
Section 3.12
Compliance with Law
. The Company and each of its Subsidiaries are and since
January 1, 2015 have been in compliance with all Applicable Laws and Orders, except as would not reasonably be expected to material to the Company and its Subsidiaries, taken as a whole. Since January 1, 2015, neither the Company nor any
of its Subsidiaries (a) has received any written notice of any administrative, civil or criminal investigation or audit by any Governmental Entity relating to the Company or any of its Subsidiaries, (b) has received any written notice from
any Governmental Entity alleging any violation by the Company or any of its Subsidiaries of any Applicable Law or Order nor (c) has provided any written notice to any Governmental Entity regarding any violation by the Company or any of its
Subsidiaries of any Applicable Law or Order, and no such notice referred to in clauses (a), (b) or (c) of this
Section
3.12
remains outstanding or unresolved as of the date of this Agreement, except in each case
as is not and would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole.
Section 3.13
Permits
. The Company and its Subsidiaries are, and since January 1, 2015 have been, in compliance with the terms of all permits, licenses, authorizations, consents, approvals and franchises from Governmental
Entities required to occupy and operate each Real Property and to conduct their businesses as currently conducted (Permits), and no suspension or cancellation of any such Permits is pending or, to the Knowledge of the Company,
threatened, except for such noncompliance, suspensions or cancellations that,
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individually or in the aggregate, are not and would not reasonably be expected to result in a material Liability to the Company and its Subsidiaries, taken as a whole, or to prevent, materially
delay or materially impair the ability of the Company to consummate the transaction contemplated by this Agreement in accordance with the terms hereof and Applicable Law. Since January 1, 2015, neither the Company nor any of its Subsidiaries
has received any written notice from any Governmental Entity regarding (a) any violation by the Company or any of its Subsidiaries of any Permits or the failure to have any required Permits, or (b) any revocation, cancellation or
termination of any Permits held by the Company or any of its Subsidiaries, and no such notice in either case remains outstanding or unresolved as of the date of this Agreement, except in each case as, individually or in the aggregate, is not and
would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, or to prevent, materially delay or materially impair the ability of the Company to consummate the transaction contemplated by this Agreement in
accordance with the terms hereof and Applicable Law.
Section 3.14
Litigation
. There are no
Legal Proceedings pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries, or against any current or former director or officer of the Company or any of its Subsidiaries (in their capacity as such)
whether or not naming the Company or any of its Subsidiaries, or by the Company or any of its Subsidiaries against any third party that (i) involves an amount in controversy in excess of $500,000 or (ii) seeks injunctive relief that, if
granted, would be material to the Company and its Subsidiaries, taken as a whole. As of the date hereof, neither the Company nor any of its Subsidiaries is subject to any outstanding Order that would, individually or in the aggregate, reasonably be
expected to be material to the Company and its Subsidiaries, taken as a whole, or that would materially delay or materially impair the ability of the Company to consummate the transaction contemplated by this Agreement in accordance with the terms
hereof and Applicable Law.
Section 3.15
Customers and Suppliers
.
(a) As of the date of this Agreement, neither the Company nor any of its Subsidiaries has any outstanding material disputes concerning any
Company Products with any customer who in any of the three fiscal years ended June 30, 2017 was one of the ten (10) largest customers of Company Products based on amounts paid or payable to the Company or its Subsidiaries by such customers
(each, a
Significant Customer
). Except as would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, as of the date of this Agreement, neither the Company nor any of its Subsidiaries has
received any written or bona fide oral notice from any Significant Customer that such Significant Customer shall not continue as a customer of the Company or any of its Subsidiaries or that such Significant Customer intends to terminate or
materially modify any existing Contracts with the Company or any of its Subsidiaries.
(b) As of the date of this Agreement, neither the
Company nor any of its Subsidiaries has any outstanding material dispute concerning products and/or services provided by any supplier who in any of the three fiscal years ended June 30, 2017 was one of the ten (10) largest suppliers of
products and/or services to the Company and its Subsidiaries, in each case, based on amounts paid or payable by the Company and its Subsidiaries to such supplier (each, a
Significant Supplier
). Except as would not reasonably be
expected to have a material to the Company and its Subsidiaries, taken as a whole, as of the date of this Agreement, neither the Company nor any of its Subsidiaries has received any written or bona fide oral notice from any Significant Supplier that
such Significant Supplier shall not continue as a supplier to the Company or any of its Subsidiaries or that such Significant Supplier intends to terminate or materially modify existing Contracts with the Company or any of its Subsidiaries.
Section 3.16
Taxes
.
(a) Each of the Company and its Subsidiaries has prepared and timely filed (taking into account all applicable extensions) all material
income, franchise and other U.S. federal, state, local and
non-U.S.
Tax Returns required to be filed relating to any and all Taxes concerning or attributable to the Company, any of its Subsidiaries or their
respective operations, and such Tax Returns in all material respects are true and correct and have been completed in accordance with Applicable Law.
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(b) Each of the Company and its Subsidiaries has (i) timely paid all material Taxes it is
required to pay (whether or not shown on a Tax Return), and (ii) timely paid or withheld (and timely paid over any withheld amounts to the appropriate Taxing authority) all material federal and state income Taxes, Federal Insurance Contribution
Act and Federal Unemployment Tax Act amounts, and other Taxes (including all Taxes required to be reported and withheld on any U.S or
non-U.S.
Company Compensatory Awards) required to be paid or withheld.
(c) Neither the Company nor any of its Subsidiaries had any Liabilities for material unpaid Taxes as of the date of the Company Balance Sheet
that had not been accrued or reserved on the Company Balance Sheet in accordance with GAAP, and neither the Company nor any of its Subsidiaries has incurred any Liability for Taxes since the date of the Company Balance Sheet other than in the
ordinary course of business consistent with past practice.
(d) Neither the Company nor any of its Subsidiaries has executed any
outstanding waiver of any statute of limitations on or extension of the period for the assessment or collection of any Tax.
(e) No audit
or other examination of any Tax Return of the Company or any of its Subsidiaries is presently in progress, nor has the Company or any of its Subsidiaries been notified in writing of any request for such an audit or other examination. No material
adjustment relating to any Tax Return filed by the Company or any of its Subsidiaries has been proposed in writing by any Governmental Entity. No written claim has ever been made by any Governmental Entity that the Company or any of its Subsidiaries
is or may be subject to taxation in a jurisdiction in which it does not file Tax Returns.
(f) There are (and immediately following the
Effective Time there will be) no Liens on the assets of the Company or any of its Subsidiaries relating or attributable to Taxes, other than Permitted Liens.
(g) Neither the Company nor any of its Subsidiaries has (i) in the six calendar years prior to the date of this Agreement ever been a
member of an affiliated group (within the meaning of Code §1504(a)) filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company), (ii) other than an agreement that is not principally
regarding Taxes, ever been a party to any Tax sharing, indemnification or allocation agreement, nor does the Company or any of its Subsidiaries owe any amount under any such agreement, (iii) any Liability for the Taxes of any person other than
the Company and its Subsidiaries under Treas. Reg.
§ 1.1502-6
(or any similar provision of Applicable Law, including any arrangement for group or consortium relief or similar arrangement), as a
transferee or successor, by contract, by operation of law or otherwise (other than pursuant to commercial Contracts with customary terms entered into in the ordinary course of business the principal purposes of which is unrelated to Taxes) or
(iv) been a party to any joint venture, partnership (other than intragroup partnerships) or other agreement that could be treated as a partnership for Tax purposes.
(h) Neither the Company nor any of its Subsidiaries will be required to include any material income or gain or exclude any material deduction
or loss from Taxable income for any period or portion thereof after the Effective Time as a result of any (i) change in method of accounting made prior to the Effective Time, (ii) closing agreement under Section 7121 of the Code
entered into prior to the Effective Time (or under any similar provision of Applicable Law), (iii) deferred intercompany gain or excess loss account under Section 1502 of the Code attributable to transactions occurring prior to the
Effective Time (or under any similar provision of Applicable Law), (iv) installment sale or open transaction disposition made prior to the Effective Time, to the extent not reflected in the Company Balance Sheet, (v) prepaid amount
received outside the ordinary course of business prior to the Effective Time, (vi) any income under Section 965(a) of the Code, including as a result of any election under Section 965(h) of the Code with respect thereto, or
(vii) election made under Section 108(i) of the Code (or under any similar provision of Applicable Law) prior to the Effective Time.
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(i) Neither the Company nor any of its Subsidiaries has constituted either a distributing
corporation or a controlled corporation in a distribution of stock intended to qualify for
tax-free
treatment under Section 355 of the Code within the two calendar years prior to the
date of this Agreement.
(j) Neither the Company nor any of its Subsidiaries has engaged in any transaction that is the same as or
substantially similar to one of the types of transactions that the Internal Revenue Service has determined to be a tax avoidance transaction and identified by notice, regulation, or other form of published guidance as a listed transaction, as set
forth in Treas. Reg.
§ 1.6011-4(b)(2).
(k) The Company is not, and has not been at any
time, a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.
(l) The
Company and each of its Subsidiaries is in compliance in all material respects with all terms and conditions of any Tax exemption, Tax holiday or other Tax reduction agreement or order (each, a
Tax Incentive
) and to the Knowledge
of the Company, the Merger will not have any adverse effect on the continued validity and effectiveness of any such Tax Incentive. Neither the Company nor any of its Subsidiaries is subject to Tax in any country other than its country of
incorporation or formation by virtue of having a permanent establishment or other place of business in that country.
(m) Each of the
Company and its Subsidiaries is in compliance in all material respects with all applicable transfer pricing laws and regulations, including, where applicable, the execution and maintenance of contemporaneous documentation substantiating its transfer
pricing practices and methodology. The prices for any property or services (or for the use of any property) provided by or to the Company or any of its Subsidiaries are arms length prices for purposes of the relevant transfer pricing
Applicable Laws, including Treasury Regulations promulgated under Section 482 of the Code.
(n) The Company has made available to
Parent or its legal counsel or accountants copies of all income, franchise and other material Tax Returns and all ASC
740-10
work papers of the Company and each of its Subsidiaries for all periods from and
including January 1, 2016.
(o) To the Knowledge of the Company, except as expressly contemplated by this Agreement, there exists no
facts, and neither the Company nor any of its Subsidiaries has taken or agreed to take any action that would reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of
the Code.
Section 3.17
Environmental Matters
.
(a) The Company and its Subsidiaries and since January 1, 2015 have been are in compliance in all material respects with all applicable
Environmental Laws.
(b) Except as would not reasonably be expected to result, individually or in the aggregate, in a Liability that is
material to the Company and its Subsidiaries, taken as a whole, (i) the Company and its Subsidiaries hold and maintain all of the Environmental Permits necessary for the continued conduct of the operations of the Company or any Subsidiary as
such activities are currently being conducted; (ii) all such Environmental Permits are valid and in full force and effect; and (iii) the Company and its Subsidiaries are in compliance in all respects with all covenants and conditions of
all such Environmental Permits.
(c) Except as would not reasonably be expected to result, individually or in the aggregate, in a
Liability that is material to the Company and its Subsidiaries, taken as a whole, (i) no Legal Proceeding is pending, or to the Knowledge of the Company, threatened, concerning or relating to any Environmental Law, Environmental Permit, or any
Hazardous Materials Activity of the Company or any Subsidiary and neither the Company nor any Subsidiary has received any written information request from any Governmental Entity pursuant to
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Environmental Law, and (ii) neither the Company nor any of its Subsidiaries has engaged in any Hazardous Materials Activity that is reasonably likely to result in a Legal Proceeding under
Environmental Law or a requirement for investigation or remedial action under applicable Environmental Law.
(d) Except as would not
reasonably be expected to result, individually or in the aggregate, in a Liability that is material to the Company and its Subsidiaries, taken as a whole, (i) no Hazardous Materials are present on any Business Facility currently owned,
operated, or leased by the Company or any Subsidiary or were present on any other Business Facility at the time it ceased to be owned, operated, or leased by the Company, any Subsidiary, or, to the Knowledge of the Company, any of their
predecessors, (ii) there are no underground storage tanks, asbestos which is friable or likely to become friable or polychlorinated biphenyls present on any Business Facility currently owned, operated, or leased by the Company or any of its
Subsidiaries and (iii) no lien imposed pursuant to Environmental Law is present on any Owned Real Property.
(e) Except as would not
reasonably be expected to result, individually or in the aggregate, in a Liability that is material to the Company and its Subsidiaries, taken as a whole, neither the Company nor any of its Subsidiaries has entered into any Contract that requires it
to guarantee, reimburse, pledge, defend, hold harmless or indemnify any other party with respect to liabilities arising under Environmental Laws.
(f) The Company has delivered or made available to Parent all material environmental, health and safety records in the Companys and its
Subsidiaries possession concerning the Hazardous Materials Activities of the Company and its Subsidiaries, including all notices of
non-compliance
or violation of Environmental Laws and all Environmental
Permits, environmental audits and environmental assessments of any Business Facility.
Section 3.18
Employee Benefit Plans
.
(a)
Section 3.18(a)
of the Company Disclosure Letter sets forth a complete and accurate list of all
material Employee Plans as of the date of this Agreement. With respect to each Employee Plan, to the extent applicable, the Company has made or will make available to Parent no later than thirty (30) Business Days following the date of this
Agreement complete and accurate copies of (i) the most recent annual report on Form 5500 required to have been filed with the IRS for each Employee Plan, including all schedules thereto; (ii) the most recent determination letter, if
any, from the IRS for any Employee Plan that is intended to qualify under Section 401(a) of the Code; (iii) the plan documents and summary plan descriptions, if any, including any amendments or statements of material modifications thereto,
or a written description of the terms of any Employee Plan that is not in writing; (iv) any related trust agreements, insurance contracts, insurance policies or other documents of any funding arrangements; (v) any notices to or from the
IRS or any office or representative of the DOL or any similar Governmental Entity since January 1, 2015, relating to any compliance issues in respect of any such Employee Plan; (vi) with respect to each International Employee Plan, to the
extent applicable, the Company has made available to Parent complete and accurate copies of (A) the most recent annual report or similar compliance documents required to be filed with any Governmental Entity with respect to such plan, if any,
and (B) any document comparable to the determination letter referenced under clause (ii) above issued by a Governmental Entity, if any; and (vii) all other material Contracts directly relating to each Employee Plan, including
administrative service agreements.
(b) Each Employee Plan has been maintained, operated and administered in compliance with its terms and
with all Applicable Law, including the applicable provisions of ERISA and the Code, except where such
non-compliance
would not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(c) Each Employee Plan that is intended to be qualified under Section 401 of the Code may rely
on an unrevoked favorable prototype opinion letter or has received a favorable determination letter from the IRS with respect to such Employee Plans
tax-qualified
status under the Code and, to the
Knowledge of the Company, nothing has occurred or exists since the date of such determination or opinion letter that would reasonably be expected to affect the qualified status of any such Employee Plan.
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(d) Except as would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect, all contributions, premiums and other payments required to be made with respect to any Employee Plan have been timely made, accrued or reserved for. Except as required by Applicable Law or the terms of an Employee
Plan, neither the Company nor any of its Subsidiaries has any plan or commitment to establish any new material Employee Plan in the United States or amend in any material respect an existing Employee Plan in the United States.
(e) There are no Legal Proceedings pending or, to the Knowledge of the Company, threatened on behalf of or against any Employee Plan, the
assets of any trust under any Employee Plan, or the plan sponsor, plan administrator or any fiduciary or any Employee Plan with respect to the administration or operation of such plans involving an amount in controversy in excess of $500,000, other
than routine claims for benefits that have been or are being handled through an administrative claims procedure.
(f) None of the Company,
any of its Subsidiaries, or, to the Knowledge of the Company, any of their respective directors, officers, employees or agents has, with respect to any Employee Plan, engaged in or been a party to any
non-exempt
prohibited transaction
,
as such term is defined in Section 4975 of the Code or Section 406 of ERISA, which could reasonably be expected to result in the imposition of a
material penalty assessed pursuant to Section 502(i) of ERISA or a material tax imposed by Section 4975 of the Code.
(g)
Neither the Company, any of its Subsidiaries nor any of their respective ERISA Affiliates has in the six (6) years prior to the date hereof maintained, participated in or contributed to (or been obligated to contribute to) (i) an Employee
Plan subject to Section 412 of the Code or Title IV of ERISA, (ii) a multiemployer plan (as defined in Section 3(37) of ERISA), (iii) a multiple employer plan as defined in Section 210 of ERISA
or Section 413(c) of the Code, (iv) a funded welfare plan within the meaning of Section 419 of the Code or (v) a voluntary employees beneficiary association under Section 501(c)(9) of the Code.
(h) Except as required by Applicable Law, no Employee Plan in the United States provides post-termination or retiree life insurance, health or
other welfare benefits to any person, other than pursuant to Section 4980B of the Code or any similar Applicable Law.
(i) Each
Employee Plan, and any award thereunder, that is or forms part of a nonqualified deferred compensation plan subject to Section 409A of the Code has been maintained, operated and administered in compliance in all material respects
with the applicable requirements of Section 409A of the Code.
(j) Neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated by this Agreement (including the Merger) will, either alone or in conjunction with any other event, (i) result in any payment or benefit becoming due or payable, or required to be provided, to any
director, employee, consultant or independent contractor of the Company or any of its Subsidiaries, (ii) increase the amount or value of any benefit or compensation otherwise payable or required to be provided to any such director, employee,
consultant or independent contractor, (iii) result in the acceleration of the time of payment, vesting or funding of any such benefit or compensation or (iv) result in the payment of any amount that would not be deductible by reason of
Section 280G of the Code. There is no contract, agreement, plan or arrangement to which the Company or any of its Subsidiaries is a party or by which it is bound to compensate any current or former service provider for excise taxes which may be
required pursuant to Section 4999 of the Code or any Taxes required by Section 409A of the Code.
Section 3.19
Labor Matters
.
(a) Neither the Company nor any of its Subsidiaries is a party to any material Contract or arrangement between or applying to, one or more
employees or other service providers in the United States and a union, trade union, works council, group of employees or any other employee representative body or labor-relations organization or entity (
Labor Organization
), for
collective bargaining or other negotiating or consultation
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purposes or reflecting the outcome of such collective bargaining or negotiation or consultation with respect to their respective employees with any labor organization, union, group, association,
works council or other employee representative body, or is bound by any equivalent national or sectoral agreement (
Collective Bargaining
Agreements
). To the Knowledge of the Company, there are no pending, threatened or
reasonably anticipated material activities or proceedings anticipated by any Labor Organization to organize any such employees or other service providers. There are no lockouts, strikes, slowdowns, work stoppages or, to the Knowledge of the Company,
threats thereof by or with respect to any employees or other service providers of the Company or any of its Subsidiaries nor have there been any such lockouts, strikes, slowdowns or work stoppages or threats thereof with respect to any employees or
other service providers of the Company or any of its Subsidiaries, except in each case as would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole. Except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, neither the Company nor any of its Subsidiaries, nor to the Knowledge of the Company any of their respective representatives or employees, has committed any unfair labor practice
in connection with the operation of their respective businesses of the Company or any of its Subsidiaries, and, there is no charge, complaint or other action against the Company or any of its Subsidiaries by the National Labor Relations Board or any
comparable Governmental Entity pending or to the Knowledge of the Company threatened.
(b) The Company and its Subsidiaries have complied
in all material respects with all Applicable Laws and Orders relating to employment, employment practices, terms and conditions of employment, worker classification (including the proper classification of workers as independent contractors and
consultants and as exempt or
non-exempt
for overtime purposes), leased and seconded employees, tax withholding, prohibited discrimination, equal employment, fair employment practices, meal and rest periods,
immigration status, employee safety and health, wages (including overtime wages), compensation, and hours of work, other than instances of
non-compliance
that would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any material conciliation agreement, settlement agreement, consent decree or other employment-related agreement or
order with any Governmental Entity.
(c) Except as would not reasonably be expected to be material to the Company, each of the Company and
its Subsidiaries is in compliance in all material respects with WARN or any related state laws.
Section 3.20
Real Property
.
(a) As of the date of this Agreement, neither the Company nor any of its Subsidiaries owns any real property. Since January 1, 2010,
neither the Company nor any of its Subsidiaries has owned any real property except as set forth on
Section
3.20(a)
of the Company Disclosure Letter.
(b) Either the Company or a Subsidiary of the Company has a good and valid leasehold interest in each lease, sublease and other agreement
under which the Company or any of its Subsidiaries uses or occupies or has the right to use or occupy any real property (such property subject to a lease, sublease or other agreement, the
Company Leased Real Property
and such
leases, subleases and other agreements are, collectively, the
Company Real Property Leases
), in each case, free and clear of all Liens other than any Permitted Liens, except as would not reasonably expected to be material to the
Company and its Subsidiaries, taken as a whole. Each Company Real Property Lease (a) is a valid and binding obligation of the Company or the Subsidiary of the Company that is party thereto (except in each case as enforcement may be subject to
the Enforceability Limitations), and, to the Knowledge of the Company, of each other party thereto, and is in full force and effect and (b) no uncured default on the part of the Company or, if applicable, its Subsidiary or, to the Knowledge of
the Company, the landlord thereunder, exists under any such Company Real Property Lease, and (c) no event has occurred or circumstance exists which, with the giving of notice, the passage of time, or both, would constitute a breach or default
under any such Company Real Property Lease, except as would not reasonably expected to be material to the Company and its Subsidiaries, taken as a whole. Neither the Company nor any of its Subsidiaries
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is currently subleasing, licensing or otherwise granting any person any right to use or occupy a Company Leased Real Property. Neither the Company nor any of its Subsidiaries has since
January 1, 2017 received written notice of the existence of any outstanding Order or of any pending proceeding, and, to the Knowledge of the Company, there is no such Order or proceeding threatened, relating to the ownership, lease, use,
occupancy or operation by any the Company or its Subsidiaries of the Company Owned Real Property or the Company Leased Real Property, except as would not reasonably expected to be material to the Company and its Subsidiaries, taken as a whole. Each
Company Leased Real Property and all of its material operating systems are in good operating condition and repair and free from material structural, physical, mechanical, electrical, plumbing, roof or other defects, and is suitable for the conduct
of the business of the Company and its Subsidiaries, other than as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
Section 3.21
Assets; Personal Property
. The machinery, equipment, furniture, fixtures and other
tangible personal property and assets owned, leased or used by the Company or any of its Subsidiaries (the
Assets
) are in good operating condition and repair in all material respects (ordinary wear and tear and ongoing maintenance
excepted), except as would not be material to the Company or its Subsidiaries, taken as a whole. Except as would not reasonably be expected to be material to the Company or its Subsidiaries, taken as a whole, the Company and its Subsidiaries are in
possession of and have good title to, or valid leasehold interests in or valid rights under contract, all of the properties and assets owned or leased by them, in each case, free and clear of all Liens other than Permitted Liens.
Section 3.22
Intellectual Property
.
(a)
Section 3.22(a)
of the Company Disclosure Letter contains a complete and accurate list as of the date of this Agreement of all
Registered IP that constitutes Company IP (
Company Registered IP
) and material unregistered Trademarks.
Section
3.22(a)
of the Company Disclosure Letter identified, for each item of Company Registered IP,
as applicable, (i) the name of the current owner, (ii) the jurisdiction where the application/registration is located, (iii) the application or registration number, (iv) the filing date, and issuance/registration/grant date, and
(v) the prosecution status thereof.
(b) To the Knowledge of the Company, the Company Registered IP is valid, sustaining and
enforceable.
(c) To the Knowledge of the Company, with respect to each item of Company Registered IP, all necessary registration,
maintenance and renewal fees have been paid, and all necessary documents and certificates have been filed, in each case to or with the relevant patent, copyright, trademark, domain registrars or other authorities in the United States or foreign
jurisdictions, as may be required for the purposes of registering and/or maintaining such Company Registered IP. To the Knowledge of the Company, there are no materials, facts or circumstances, including any information, materials, facts or
circumstances that would render any Company Registered IP invalid or unenforceable, or would materially affect any pending application for any Company Registered IP. The Company has not claimed small entity status, or misrepresented, or
knowingly failed to disclose, any facts or circumstances in any application or proceedings for any Company Registered IP that would constitute fraud or a misrepresentation with respect to such application or that would otherwise affect the
enforceability of any Company Registered IP.
(d) In each case in which the Company or any of its Subsidiaries have acquired ownership of
any Company Registered IP, the Company or one of its Subsidiaries has recorded each such acquisition with the U.S. Patent and Trademark Office, the U.S. Copyright Office, or their respective equivalents in the applicable jurisdiction, in each case
in accordance with Applicable Laws.
(e)
Section 3.22(e)
of the Company Disclosure Letter contains a complete and accurate list of
all Contracts (i) under which any third party has granted the Company or any of its Subsidiaries any license,
non-assert,
covenant not to sue, or other immunity from or under any Intellectual Property
Rights, the loss of
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which would have a material adverse impact on the operation of the Companys and its Subsidiaries business (each, an
Company Inbound License
) or (ii) under
which the Company or any of its Subsidiaries has granted any third party a license under any Company IP, other than
non-exclusive
licenses granted incidental to the purchase of Company Products in the ordinary
course and consistent with past practice (each, an
Company Outbound License
, and together with the Company Inbound Licenses, the
Company IP Agreements
). The Company has made available to Parent complete and
correct copies of each such Company IP Agreement.
(f) To the Knowledge of the Company, neither the operation of the business of the
Company nor the use, provision, support, reproduction, making, distribution, marketing, sale, license or display of the Company Products by Company or its Subsidiaries (i) infringes, misappropriates or otherwise violates the Intellectual
Property Rights of any Person, (ii) violates any right of any Person (including the right to privacy or publicity) or (iii) constitutes unfair competition or trade practices under the laws of any jurisdiction (nor to the Knowledge of the
Company is there any reasonable basis therefor).
(g) The Company or its Subsidiaries exclusively own all right, title and interest in the
Company IP, free and clear of all Liens other than Permitted Liens. All Company IP is fully transferable, alienable or licensable without restriction and without payment of any kind to any other Person. The Company and its Subsidiaries have and,
following the Closing, Surviving Company will have, the exclusive right to bring actions against any Person that is infringing any Company IP and to retain for themselves any damages recovered in any such action.
(h) The Company and each of its Subsidiaries have taken reasonable steps to protect the confidentiality of the Trade Secrets that comprise any
part of the Company IP, and to the Knowledge of the Company, there is no unauthorized use, disclosure or misappropriation of any such Trade Secrets by any Person. To the Knowledge of the Company, all use and disclosure by the Company or any of its
Subsidiaries of Trade Secrets owned by another Person have been pursuant to the terms of a written agreement with such Person or such use and disclosure by the Company or any of its Subsidiaries was otherwise lawful. Without limiting the foregoing,
the Company and its Subsidiaries have a policy requiring employees, consultants and contractors to execute a confidentiality and assignment agreement substantially in the Companys standard form previously provided to Parent which
(i) assigns to the Company or one of its Subsidiaries all right, title and interest in any Intellectual Property Rights created by such persons within the scope of their involvement with the Company or applicable Subsidiary and
(ii) provides reasonable protection for Trade Secrets of the Company and its Subsidiaries. All current or former employees, consultants and contractors of the Company or any Subsidiary that have created any material Company IP have executed
such agreements.
(i) To the Knowledge of the Company, no Person is infringing upon or otherwise violating any Company IP. Neither the
Company nor any of its Subsidiaries have, in the three years prior to the date hereof, asserted or threatened any claim against any Person alleging that such Person is infringing or misappropriating any Company IP.
(j) There is no and has not been in the prior six (6) years any Legal Proceeding brought by a third party against the Company or any of
its Subsidiaries (or to the Knowledge of the Company against another Person who has sought indemnification from the Company or any of its Subsidiaries in connection with such Legal Proceeding) with respect to (i) any alleged infringement or
other violation by the Company or any of its Subsidiaries or any of its or their current products or services or other operation of the Companys or any of its Subsidiaries business of the Intellectual Property Rights of such third party
or (ii) any challenge to the validity or enforceability of, or contesting the Companys or any of its Subsidiaries rights with respect to, any Company IP. The Company and its Subsidiaries are not subject to any Order of any
Governmental Entity that restricts or impairs the use, transfer or licensing of any Company IP or other Intellectual Property Rights.
(k)
To the Knowledge of the Company, the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (including the Merger) will not result in any of the following events that, but for the consummation of the
transactions contemplated hereby, would not have
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occurred: (i) the Company or its Subsidiaries granting to any third party any rights or licenses to any Company IP, (ii) the vesting of any right of termination or cancellation of the
counterparty under any Company IP Agreement, (iii) any payment of fees, penalties or royalties under any Company IP Agreement that would not have been payable absent this Agreement and the consummation of the transactions contemplated hereby,
(iv) a change in the scope or nature of any Intellectual Property Rights granted to, or by, the Company or its Subsidiaries that is, in either case, material to the operation of the Companys and its Subsidiaries business, or
(v) the imposition of any Lien on any Company IP. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (including the Merger) will not result in (except pursuant to Contracts to which Parent
or any of its Subsidiaries or Affiliates are a party) Parent or any of its Subsidiaries or Affiliates being (A) required to grant any third party any rights or licenses to any of Parents or any of its Subsidiaries or
Affiliates Intellectual Property Rights, (B) bound by, or subject to, any
non-competition,
non-solicitation,
exclusivity or other material restriction on the
operation or scope of their respective business, or (C) obligated to pay any incremental royalties or other material amounts, offer any incremental discounts or being bound by any most favored pricing terms to any third party.
(l) Neither the Company nor any of its Subsidiaries have published or disclosed any Source Code for any Company Product or, to the Knowledge
of the Company, any other Source Code that constitutes Company IP, except to their employees, customers or advisers pursuant to
non-disclosure
agreements, commercial agreements or license agreements subject to
confidentiality obligations. The consummation of the transactions contemplated hereby (including the Merger) will not constitute a condition sufficient to (i) entitle the beneficiary under any Source Code escrow arrangement under which the
Company or any of its Subsidiaries have deposited any Source Code for any Company Product to require release of such Source Code or (ii) otherwise entitle any third party to have rights or access to Source Code for any Company Product.
(m) All data which has been collected, stored, maintained or otherwise used by the Company and its Subsidiaries has been collected, stored,
maintained and used in accordance with all Applicable Laws, Contracts, and Company policies and industry standards. Neither the Company nor its Subsidiaries has received a notice of noncompliance with Applicable Laws, Contracts or Company policies
related to data protection or personally identifiable information.
(n) To the Knowledge of the Company, there are no material defects or
errors in the Company Products or any back door, time bomb, Trojan horse, worm, drop dead device, virus or other software routines or hardware components that permit
unauthorized access or the unauthorized disruption, impairment, disablement or erasure of such Company Product or data or other software of users of the Company Products, in each case which (i) have led or would reasonably be expected to lead
to any recall of the Company Products, (ii) affect the safety, functionality or use of the Company Products for their intended purposes or (iii) would breach any Contract entered into by the Company or its Subsidiaries with respect to the
Company Products.
(o) The Company and its Subsidiaries have taken reasonable steps and implemented reasonable procedures to prevent
viruses and other disabling codes from entering Company Products and to otherwise safeguard the information technology systems, and personally identifiable information contained therein, of the Company and its Subsidiaries. To the Knowledge of the
Company, in the twelve months prior to the date of this Agreement, there have been no unauthorized intrusions or breaches of the security of information technology systems of the Company and its Subsidiaries. The Company and its Subsidiaries have
reasonable disaster recovery plans procedures and facilities for the business.
(p) To the Knowledge of the Company,
Section
3.22(p)
of the Company Disclosure Letter sets forth a true and complete list of all industry standards bodies or similar organizations in which the Company and/or any of its Subsidiaries has participated or is a
member. To the Knowledge of the Company, there is no obligation to license any Company IP, and no Company IP is currently licensed, to any third party as a result of participation or membership in or utilization of any work of any standards body or
similar organization. Neither the Company nor any of its Subsidiaries has at any time notified any standards body or similar organization any Company IP is
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necessary to or would be infringed by the use or implementation of the standards published or promulgated by such standards body or similar organization. To the Knowledge of the Company, the
Company and its Subsidiaries are in material compliance with their obligations with respect to membership in such organizations.
(q) No
rights have been granted to any Governmental Entity with respect to any Company Product or Company IP other than substantially the same standard commercial rights as are granted by the Company to commercial end users of the Company Products in the
ordinary course of business consistent with past practices.
Section 3.23
Export Control and Import
Laws
. Since March 1, 2013 and except as would not reasonably be expected to be material to the Company or its Subsidiaries, taken as a whole, (i) the Company and each of its Subsidiaries have been in compliance with all Applicable
Laws regarding export and reexport control (
Export Controls
), including the Export Administration Regulations maintained by the U.S. Department of Commerce, trade and economic sanctions maintained by the Treasury Departments
Office of Foreign Assets Control and the International Traffic in Arms Regulations maintained by the Department of State and any applicable anti-boycott compliance regulations, (ii) the Company and its Subsidiaries have been in compliance with
all Applicable Laws regarding import (
Import Restrictions
), including Title 19 of the U.S. Code and Title 19 of the Code of Federal Regulations, (iii) each of the Company and its Subsidiaries have obtained and is in
compliance with the terms of all applicable export licenses, license exceptions, consents, notices, waivers, approvals, orders, authorizations, registrations, declarations and filings, from or with any Governmental Entity, that are required for
compliance with Export Controls or Import Restrictions
Export and Import Approvals
), (iv) there are no pending or, to the Knowledge of the Company, threatened claims, charges, investigations, violations, settlements, civil or
criminal enforcement actions, lawsuits, or other court actions against the Company or any of its Subsidiaries with respect to such Export and Import Approvals and (v) no approval from a Governmental Entity for the transfer by the Company or any
of its Subsidiaries of Export and Import Approvals to Parent after the Effective Time is required or cannot be obtained expeditiously without material cost.
Section
3.23
of the Disclosure Schedule sets forth the true,
correct and complete export control classifications applicable to the Companys and its Subsidiaries products, services, software and technologies.
Section 3.24
Insurance
. The Company and its Subsidiaries have all material policies of
insurance covering the Company and its Subsidiaries or any of their respective employees, properties or assets against such risks and in a form and amount which the Company believes is adequate for the operation of its business. As of the date of
this Agreement, except as would not reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, (a) all such insurance policies are in full force and effect, (b) no notice of cancellation has been received
in connection with such policies, (c) there is no existing default or event which, with the giving of notice or lapse of time or both, would constitute a default, by any insured thereunder, (d) there is no claim pending under any of such
policies as to which coverage has been questioned, denied or disputed by the underwriters of such policies and (e) there has been, to the Knowledge of the Company, no threatened termination of, or premium increase with respect to, any such
policies.
Section 3.25
Anti-Bribery Laws
. Since January 1, 2013, neither the Company
or any of its Subsidiaries, nor any of their respective officers, directors, employees nor to the Knowledge of the Company, agents or other Person associated with or acting on their behalf, has, directly or indirectly, (a) taken any action
which would cause it to be in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any rules or regulations thereunder, the U.K. Bribery Act of 2010, as amended, or any other comparable domestic or foreign law or statute
(collectively
Anti-Bribery Laws
) (b) used any corporate funds for unlawful contributions, loans, gifts, entertainment or other unlawful expenses relating to political activity; (c) made, offered or authorized any unlawful
payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns; or (d) made or taken any action in furtherance of any unlawful bribe, rebate, payoff, influence payment, kickback or
other similar unlawful payment, except as would not reasonably be expected to be material to the Company or its Subsidiaries, taken as a whole. There currently are no pending or, to the Knowledge of the Company, allegations or threatened claims,
charges, investigations, violations, settlements, civil or criminal enforcement actions, lawsuits, or other court actions against the Company or its Subsidiaries
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with respect to the Anti-Bribery Laws. The Company has established policies and procedures related to compliance with the Anti-Bribery Laws.
Section 3.26
Related Party Transactions
. Except as set forth in the Company SEC Reports or
compensation or other employment arrangements in the ordinary course of business, there are no transactions, agreements, arrangements or understandings currently in effect that would be required to be disclosed under Item 404 of
Regulation S-K
promulgated under the Securities Act.
Section 3.27
Brokers; Fees and Expenses
. Except for Jefferies LLC, there is no investment
banker, broker, finder, agent or other Person that has been retained by or is authorized to act on behalf of the Company or any of its Subsidiaries who is entitled to any financial advisors, brokerage, finders or other fee or commission
in connection with the transactions contemplated hereby (including the Merger).
Section 3.28
Opinion of Financial Advisors
. The Company Board has received the written opinion (or an oral opinion to be confirmed in writing) of Jefferies LLC to the effect that, as of the date of this Agreement, and based upon and subject to the
limitations and assumptions set forth therein and other matters considered in the preparation thereof, the Merger Consideration is fair to the holders of Company Common Stock from a financial point of view, and, as of the date of this Agreement,
such opinion has not been withdrawn, revoked or modified.
Section 3.29
State Anti-Takeover
Statutes; No Rights Plan
.
(a) Neither the Company nor any of its Subsidiaries is, nor at any time during the last three years has it
been, an interested stockholder of Parent within the meaning of Section 203 of the DGCL.
(b) Assuming the accuracy of
Parents, Merger Subs and Merger Sub LLCs representations in
Section
4.17
, the Company and the Company Board has taken all action necessary to exempt the Merger, this Agreement and the other transactions
contemplated hereby or thereby from the restrictions on business combinations and voting requirements contained in Section 203 of the DGCL. No other control share acquisition, fair price, moratorium or other
antitakeover Applicable Law (such Applicable Law a
Takeover Law
) applies to the Merger, this Agreement or any of the other transactions contemplated hereby or thereby.
(c) The Company has no rights plan, poison-pill or other comparable agreement or arrangement designed to have the effect of
delaying, deterring or discouraging any Person from acquiring control of the Company. To the Knowledge of the Company, no Contract entered into by the Company prohibits any Person from making any Acquisition Proposal following the execution and
announcement of this Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT, MERGER SUB
AND MERGER SUB LLC
Except, with respect to any Section of this
Article IV
, as set forth in the section of the disclosure letter delivered by Parent to the
Company on the date of this Agreement (the
Parent Disclosure Letter
) that relates to such Section or in another section of such disclosure letter to the extent it is reasonably apparent from the text of such disclosure that such
disclosure is applicable to such Section, and except as disclosed in the Annual Report
10-K
of Parent for the fiscal year ended July 1, 2017, the Quarterly Report on Form
10-Q
of Parent for the quarterly period ended September 30, 2017, the Quarterly Report on Form
10-Q
of Parent for the quarterly period ended December 30, 2017,
the Current Report on Form
8-K
of Parent filed on February 6, 2018, the Current Report on Form
8-K
of Parent filed on November 8, 2017, the Current Report on
Form
8-K
of Parent filed on November 7, 2017, the Current Report on Form
8-K
of Parent filed on November 1, 2017 and the Schedule 14A of Parent for the annual
stockholders meeting held on November 2, 2017 (other than disclosures in the Risk
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Factors or Forward-Looking Statements sections of such reports, other disclosures that are similarly
non-specific
or are predictive or
forward-looking in nature (and excluding any exhibits incorporated by reference in such reports), in each case, other than any specific factual information contained therein), Parent, Merger Sub and Merger Sub LLC hereby represent and warrant to the
Company as follows:
Section 4.1
Organization and Standing
. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to conduct its business as it is presently being conducted and to own, lease or operate its properties and
assets. Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to conduct its business as it is presently being conducted and to
own, lease or operate its properties and assets. Merger Sub LLC is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite limited liability company power and
authority to conduct its business as it is presently being conducted and to own, lease or operate its properties and assets. Each of Parent, Merger Sub and Merger Sub LLC is duly qualified to do business and is in good standing in each jurisdiction
where the character of its properties owned or leased or the nature of its activities make such qualification necessary, except where the failure to be so qualified or in good standing would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect. Parent has delivered or made available to the Company complete and correct copies of its certificate of incorporation and bylaws, the certificate of incorporation and bylaws of Merger Sub and the
certificate of formation, operating or other applicable constituent documents of Merger Sub LLC, each as amended to date. Each of Parent, Merger Sub and Merger Sub LLC is not in violation of its respective certificate of incorporation, bylaws or
other applicable constituent documents.
Section 4.2
Parent Subsidiaries
.
(a) Each of Parents Subsidiaries (i) is duly organized, validly existing and in good standing under the Applicable Laws of the
jurisdiction of its respective organization (to the extent the good standing concept is applicable in the case of any jurisdiction outside the United States), (ii) has the requisite power and authority to carry on its respective
business as it is presently being conducted and to own, lease or operate its respective properties and assets, (iii) is in compliance with its respective certificate of incorporation, bylaws or other applicable constituent documents, and
(iv) is duly qualified to do business and is in good standing in each jurisdiction where the character of its properties owned or leased or the nature of its activities make such qualification necessary (to the extent the good
standing concept is applicable in the case of any jurisdiction outside the United States), except for any deviations from any of the foregoing clauses (i), (ii), (iii) or (iv) that would not reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse Effect.
(b) All of the outstanding capital stock of, or other equity or voting interest in,
each Subsidiary of Parent (i) have been duly authorized, validly issued and are fully paid and nonassessable and (ii) as of the date hereof, are owned, directly or indirectly, by Parent, free and clear of all Liens (other than Permitted
Liens or restrictions on transfer imposed by Applicable Law) and free of any other restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity or voting interest) that would prevent
the operation by Parent of such Subsidiarys business as presently conducted.
(c) As of the date hereof, there are no outstanding
(i) securities of Parent or any of its Subsidiaries convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, any Subsidiary of Parent, (ii) options, stock appreciation rights, warrants,
restricted stock units, subscriptions, convertible securities, rights or other commitments or agreements to acquire from Parent or any of its Subsidiaries, or that obligate Parent or any of its Subsidiaries to issue, any capital stock of, or other
equity or voting interest in, or any securities convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, any Subsidiary of Parent, (iii) obligations of Parent to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment (whether payable in equity, cash or otherwise) relating to any capital stock of, or other equity or voting interest
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(including any voting debt) in, any Subsidiary of Parent (the items in clauses (i), (ii) and (iii), together with the capital stock of the Subsidiaries of Parent, being referred to collectively
as
Parent Subsidiary Securities
) or (iv) other obligations by Parent or any of its Subsidiaries to make any payments based on the price or value of any Parent Subsidiary Securities. As of the date hereof, there are no
Contracts of any kind which obligate Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire any outstanding Parent Subsidiary Securities. As of the date hereof, there are no outstanding contractual obligations of Parent or its
Subsidiaries to make any material investment (in the form of a loan, capital contribution or otherwise) in, any other Person.
Section 4.3
Authorization
. Each of Parent, Merger Sub and Merger Sub LLC has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby and to perform
its obligations hereunder. The execution and delivery of this Agreement by Parent, Merger Sub and Merger Sub LLC and the consummation by Parent, Merger Sub and Merger Sub LLC of the transactions contemplated hereby (including the Merger) have been
duly authorized by all necessary corporate action on the part of Parent, Merger Sub and Merger Sub LLC, and no additional corporate proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (including the Merger). This Agreement has been duly executed and delivered by each of Parent, Merger Sub and Merger Sub LLC and, assuming the due authorization, execution and delivery by the Company, constitutes a
legal, valid and binding obligation of each of Parent, Merger Sub and Merger Sub LLC, subject to the Enforceability Limitations.
Section 4.4
Non-contravention;
Required Consents
.
(a) The execution, delivery or
performance by Parent, Merger Sub and Merger Sub LLC of this Agreement, the consummation by Parent, Merger Sub and Merger Sub LLC of the transactions contemplated hereby (including the Merger) and the compliance by Parent, Merger Sub and Merger Sub
LLC with any of the provisions hereof do not and will not (i) violate or conflict with any provision of the certificates of incorporation or bylaws or other constituent documents of Parent, Merger Sub or Merger Sub LLC, (ii) result in the
breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or result in the termination of, or materially accelerate the performance required by, or result in a right of termination or
material acceleration under, or result in the loss of any material benefit or the imposition of any additional material payment or other material Liability under, any Contract to which Parent, Merger Sub or Merger Sub LLC is a party or by which
Parent, Merger Sub or Merger Sub LLC or any of their respective properties or assets may be bound as of the date hereof, (iii) assuming compliance with the matters referred to in
Section
4.4(b)
, violate or conflict
with any Applicable Law or Order or (iv) result in the creation of any Lien (other than Permitted Liens) upon any of the properties or assets of Parent, Merger Sub or Merger Sub LLC, except in the case of each of clauses (ii), (iii) and
(iv) above, for such violations, breaches, conflicts, defaults, terminations, losses, payments, Liabilities, accelerations or Liens which, individually or in the aggregate, have not had and would not reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect or would prevent the consummation of the Merger.
(b) No Consent of any Governmental
Entity is required on the part of Parent, Merger Sub, Merger Sub LLC or any of their Subsidiaries in connection with the execution, delivery and performance by Parent, Merger Sub and Merger Sub LLC of this Agreement and the consummation by Parent,
Merger Sub and Merger Sub LLC of the transactions contemplated hereby (including the Merger), except (i) the filing and recordation of the Certificate of Merger with the Delaware Secretary of State as required by the DGCL, (ii) such
filings and approvals as may be required by the Nasdaq or any federal or state securities or Takeover Laws, including compliance with any applicable requirements of the Securities Act or the Exchange Act (including the filing with the SEC the Proxy
Statement/Prospectus and the filing of the Form
S-4
and the declaration of effectives of the
Form S-4),
(iii) compliance with any applicable requirements of
the HSR Act and any other Antitrust Laws and (iv) such other Consents, the failure of which to obtain, individually or in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect or would prevent the consummation
of the Merger.
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Section 4.5
Litigation
. There are no Legal
Proceedings pending or, to the Knowledge of Parent, threatened against Parent, Merger Sub or Merger Sub LLC or any of their Affiliates that would, whether or not naming the Parent, Merger Sub or Merger Sub LLC, or by the Parent, Merger Sub or Merger
Sub LLC against any third party that (i) involves an amount in controversy in excess of $1,000,000 or (ii) seeks injunctive relief that, if granted, would be material to Parent and its Subsidiaries, taken as a whole. As of the date hereof,
neither Parent nor Merger Sub nor Merger Sub LLC nor any of their Affiliates is subject to any outstanding Order that would, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
Section 4.6
Proxy Statement/Prospectus
. The information supplied or to be supplied by Parent,
Merger Sub, Merger Sub LLC or their respective officers, directors, representatives, affiliates, agents or employees in writing for inclusion in the Proxy Statement/Prospectus, when filed with the SEC, at the time the Form
S-4
is declared effective by the SEC, on the date the Proxy Statement/Prospectus is first sent to shareholders of the Company and at the time of the Company Shareholders Meeting, will not 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;
provided, however
,
that notwithstanding the foregoing, no representation or warranty is made by Parent, Merger Sub or Merger Sub LLC with respect to information supplied by the Company or any of its officers, directors, representatives, agents or employees in writing
specifically for inclusion or incorporation by reference in the Proxy Statement/Prospectus.
Section 4.7
Capitalization
.
(a) The authorized capital stock of Parent consists of 990,000,000 shares of Parent Common Stock and 10,000,000 shares of Parent Preferred
Stock. As of the close of business on March 9, 2018 (the
Parent Capitalization Date
), (i) 62,586,763 shares of Parent Common Stock were issued and outstanding and no shares of Parent Common Stock were held by Parent as
treasury shares and (ii) no shares of Parent Preferred Stock were issued and outstanding and no shares of Parent Preferred Stock were held by Parent as treasury shares. All of the outstanding shares of Parent Common Stock have been duly
authorized and validly issued, and are fully paid and
non-assessable.
(b)
Section 4.7(b)
of the Parent Disclosure Letter sets forth, as of the Parent Capitalization Date, the aggregate number of shares of Parent Common Stock that are subject to outstanding Parent Compensatory Awards. Each outstanding Parent Compensatory Award was
granted subject to the terms of a Parent Plan. As of the Parent Capitalization Date, 5,676,440 shares of Parent Common Stock were reserved for future issuance pursuant to stock awards not yet granted under the Parent Plans. All Parent Compensatory
Awards have been, in all material respects, validly issued and properly approved by the Parent Board in accordance with all Applicable Law, and the Parent Plans and all Parent Compensatory Awards have been, in all material respects, properly
accounted for in accordance with GAAP on the consolidated audited financial statements of Parent and its Subsidiaries filed in or furnished with the Parent SEC Reports.
(c) Except as set forth in this
Section
4.7
, as of the Parent Capitalization Date there are (i) no outstanding
shares of capital stock of, or other equity or voting interest in, Parent, (ii) no outstanding securities of Parent or its Subsidiaries convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in,
Parent, (iii) no outstanding options, stock appreciation rights, warrants, restricted stock units, rights or other commitments or agreements to acquire from Parent, or that obligates Parent to issue, any capital stock of, or other equity or
voting interest in, or any securities convertible into or exchangeable for shares of capital stock of, or other equity or voting interest in, Parent, in all cases, other than commitments or promises to issue restricted stock units to new hire
employees or to existing employees in connection with promotions or merit increases, all in the ordinary course of business and consistent with past practice, and (iv) no obligations of Parent to grant, extend or enter into any subscription,
warrant, right, convertible or exchangeable security or other similar agreement or commitment (whether payable in equity, cash or otherwise) relating to any capital stock of, or other equity or voting interest (including any voting debt) in, Parent
(the items in clauses (i), (ii),
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(iii) and (iv), together with the capital stock of Parent, being referred to collectively as
Parent Securities
) and (v) no other obligations by Parent or any of its
Subsidiaries to make any payments based on the price or value of the Parent Securities. Except as set forth in this
Section
4.7
, there are no outstanding Contracts of any kind which obligate Parent or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any Parent Securities.
(d) Other than Parents certificate of incorporation
and bylaws, neither Parent nor any of its Subsidiaries is a party to any Contracts restricting the transfer of, relating to the voting of, requiring registration of, or granting any preemptive rights, anti-dilutive rights or rights of first refusal
or similar rights with respect to any securities of Parent.
Section 4.8
Parent SEC Reports
.
(a) Since January 1, 2015, Parent has filed or furnished (as applicable) all forms, reports, schedules, statements and documents with the
SEC that have been required to be so filed or furnished (as applicable) by it under Applicable Law at or prior to the time so required (all such forms, reports, schedules, statements and documents, together with any other forms, reports, schedules,
statements or other documents filed or furnished (as applicable) by Parent with the SEC after January 1, 2015 and at or prior to the Effective Time that are not required to be so filed or furnished, the
Parent SEC Reports
).
(b) Each Parent SEC Report complied, or will comply, as the case may be, as of its filing date (or, if amended or superseded by a filing,
on the date of such amended or superseded filing), as to form in all material respects with the applicable requirements of the Securities Act or the Exchange Act, as the case may be, and with all applicable provisions of the Sarbanes-Oxley Act, each
as in effect on the date such Parent SEC Report was, or will be, filed.
(c) As of its filing date (or, if amended or superseded by a
filing, on the date of such amended or superseded filing), each Parent SEC Report did not, or will not, as the case may be, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not misleading.
(d) As of the date of this Agreement,
(i) there are no outstanding or unresolved comments in any comment letters of the staff of the SEC received by Parent relating to the Parent SEC Reports or any registration statement filed by Parent with the SEC and (ii) no Parent SEC
Report nor any registration statement filed by Parent with the SEC is, to the Knowledge of Parent, the subject of ongoing SEC review.
(e)
Since January 1, 2015, no executive officer of Parent has failed to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act with respect to any Parent SEC Report, except as disclosed in
certifications filed with the Parent SEC Reports. Since August 1, 2015, neither Parent nor any of its executive officers has received any written notice from any Governmental Entity challenging or questioning the accuracy, completeness, form or
manner of filing of such certifications.
Section 4.9
Financial Statements
.
(a) The consolidated financial statements of Parent and its Subsidiaries filed in or furnished with the Parent SEC Reports have been or will
be, as the case may be, prepared in accordance with GAAP consistently applied by Parent during the periods and at the dates involved (except as may be indicated in the notes thereto and, in the case of unaudited interim financial statements as may
be permitted by the SEC for Quarterly Reports on
Form 10-Q),
and fairly present in all material respects, or will fairly present in, as the case may be, in all material respects the consolidated financial
position of Parent and its Subsidiaries as of the dates thereof and the consolidated results of operations and cash flows for the periods then ended (subject to normal
year-end
adjustments in the case of any
unaudited interim financial statements).
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(b) Parents system of internal controls over financial reporting (as defined in Rules
13a-15(f)
and
15d-15(f)
under the Exchange Act) is sufficient to provide reasonable assurance (i) that transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP, (ii) that receipts and expenditures are executed in accordance with the authorization of management, and (iii) that any unauthorized use, acquisition or disposition of Parents assets that
would materially affect Parents financial statements would be detected or prevented in a timely manner.
(c) Parents
disclosure controls and procedures (as defined in Rules 13a 15(e) and 15d 15(e) under the Exchange Act) are reasonably designed to ensure that (i) all information (both financial and
non-financial)
required to be disclosed by Parent in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported to the individuals responsible for preparing
such reports within the time periods specified in the rules and forms of the SEC, and (ii) all such information is accumulated and communicated to Parents management as appropriate to allow timely decisions regarding required disclosure
and to make the certifications of the principal executive officer and principal financial officer of Parent required under the Exchange Act with respect to such reports.
(d) Parents management has completed an assessment of the effectiveness of the Parents system of internal control over financial
reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act for the fiscal year ended July 1, 2017, and based on such evaluation management of Parent has disclosed to the Parents auditors and the audit
committee of the Parent Board (i) any significant deficiency or material weakness in the system of internal accounting controls utilized by Parent and its Subsidiaries, (ii) any fraud, whether or not material, that involves Parents
management or other employees who have a role in the preparation of financial statements or the internal accounting controls utilized by Parent and its Subsidiaries or (iii) any claim or allegation regarding any of the foregoing.
(e) Neither Parent nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, partnership
agreement or any similar Contract (including any Contract relating to any transaction, arrangement or relationship between or among Parent or any of its Subsidiaries, on the one hand, and any unconsolidated affiliate, including any structured
finance, special purpose or limited purpose entity or Person, on the other hand (such as any arrangement described in Section 303(a)(4) of
Regulation S-K
of the SEC)) where the purpose or effect of
such arrangement is to avoid disclosure of any material transaction involving Parent or any its Subsidiaries in Parents consolidated financial statements.
(f) Since January 1, 2015, to the Knowledge of Parent, neither Parent nor any of its Subsidiaries nor any director or officer of Parent
or any of its Subsidiaries has received or otherwise had or obtained knowledge of any substantive complaint, allegation, assertion or claim, whether written or oral, that Parent or any of its Subsidiaries has engaged in questionable accounting or
auditing practices. Since January 1, 2015, no current or former attorney representing Parent or any of its Subsidiaries has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation by Parent or
any of its officers, directors, employees or agents to the Parent Board or any committee thereof or to any director or executive officer of Parent.
(g) Since January 1, 2015, to the Knowledge of Parent, no employee of Parent or any of its Subsidiaries has provided or is providing
information to any law enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any Applicable Law of the type described in Section 806 of the Sarbanes-Oxley Act by Parent or any
of its Subsidiaries. Since January 1, 2015, neither Parent nor, to the Knowledge of Parent, any Subsidiary, director, officer, employee, contractor, subcontractor or agent of Parent or any Subsidiary of Parent has discharged, demoted,
suspended, threatened, harassed or in any other manner discriminated against an employee of Parent or any of its Subsidiaries in the terms and conditions of employment because of any lawful act of such employee described in Section 806 of the
Sarbanes-Oxley Act.
Section 4.10
No Undisclosed Liabilities
. Neither Parent nor any of its
Subsidiaries has any Liabilities other than (a) Liabilities reflected or otherwise reserved against in the Parent Balance Sheet (or disclosed in the notes thereto), (b) Liabilities under this Agreement or in connection with the
transactions
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contemplated hereby, including the Merger, or otherwise disclosed in the Parent Disclosure Letter, (c) fees and expenses payable to any accountant, outside legal counsel or financial advisor
which are incurred in connection with the negotiation of this Agreement or the consummation of the transactions contemplated by this Agreement (including the Merger), (d) executory obligations under any Contract, other than any such obligations
that arose as a result of an existing breach or default (with or without notice or lapse of time or both) thereunder, (e) Liabilities incurred in the ordinary course of business consistent with past practice since the date of the Parent Balance
Sheet and (f) Liabilities that would not, individually or in the aggregate, reasonably be expected to constitute or result in a Parent Material Adverse Effect.
Section 4.11
Absence of Certain Changes
.
(a) Except for actions expressly contemplated by this Agreement, since the date of the Parent Balance Sheet through the date of this
Agreement, (i) the business of Parent and its Subsidiaries has been conducted, in all material respects, in the ordinary course consistent with past practice and (ii) Parent has not taken any action that, if taken after the date of this
Agreement without the prior written consent of the Company, would constitute a breach of
Section
5.4(c)
,
(d)
or
(e)
.
(b) Since the date of the Parent Balance Sheet, there has not been or occurred any damage, destruction or other casualty loss (whether or not
covered by insurance) with respect to any real property or assets of Parent and its Subsidiaries that, individually or in the aggregate, would reasonably be expected to constitute or result in a Parent Material Adverse Effect.
(c) Since the date of the Parent Balance Sheet, there has not been or occurred or there does not exist any Parent Material Adverse Effect.
Section 4.12
Compliance with Law
. Parent and each of its Subsidiaries are and since
January 1, 2015 have been in compliance with all Applicable Laws and Orders, except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. Since January 1, 2015, neither Parent nor
any of its Subsidiaries (a) has received any written notice of any administrative, civil or criminal investigation or audit by any Governmental Entity relating to Parent or any of its Subsidiaries, (b) has received any written notice from
any Governmental Entity alleging any violation by Parent or any of its Subsidiaries of any Applicable Law or Order nor (c) has provided any written notice to any Governmental Entity regarding any violation by Parent or any of its Subsidiaries
of any Applicable Law or Order, and no such notice referred to in clauses (a), (b) or (c) of this
Section
4.12
remains outstanding or unresolved as of the date of this Agreement, except in each case as is not and would
not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 4.13
Permits
. Parent and its Subsidiaries are, and since January 1, 2015 have been, in
compliance with the terms of all Permits, and no suspension or cancellation of any such Permits is pending or, to the Knowledge of Parent, threatened, except for such noncompliance, suspensions or cancellations that, individually or in the
aggregate, would not reasonably be expected to have a Parent Material Adverse Effect or to prevent, materially delay or materially impair the ability of the Parent, Merger Sub or Merger Sub LLC to perform their respective obligations under this
Agreement or to consummate the Merger. Since January 1, 2015 until the date of this Agreement, neither Parent nor any of its Subsidiaries has received any written notice from any Governmental Entity regarding (a) any violation by Parent or
any of its Subsidiaries of any Permits or the failure to have any required Permits, or (b) any revocation, cancellation or termination of any Permits held by Parent or any of its Subsidiaries, and no such notice in either case remains
outstanding or unresolved as of the date of this Agreement, except in each case as, individually or in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect or to prevent, materially delay or materially impair the
ability of Parent Merger Sub or Merger Sub LLC to perform their respective obligations under this Agreement or to consummate the Merger.
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Section 4.14
Brokers; Fees and Expenses
. Except for
Deutsche Bank Securities Inc., there is no investment banker, broker, finder, agent or other Person that has been retained by or is authorized to act on behalf of Parent or any of its Subsidiaries who is entitled to any financial advisors,
brokerage, finders or other fee or commission in connection with the transactions contemplated hereby (including the Merger).
Section 4.15
Operations of Merger Sub
And Merger Sub LLC
. Merger Sub has engaged in no other business activities other than those related to the transactions contemplated by this Agreement. Merger Sub is a direct
wholly-owned Subsidiary of Parent. Merger Sub LLC has engaged in no other business activities other than those related to the transactions contemplated by this Agreement. Merger Sub LLC is a direct wholly-owned Subsidiary of Parent.
Section 4.16
Financing
.
(a) As of the date of this Agreement, Parent has delivered to the Company true, correct and complete copies of the fully executed debt
financing commitment letter from the Financing Sources identified therein, together with any executed fee letters related thereto (of which only the fee amounts, price caps and economic flex terms have been redacted;
provided
,
that, in accordance with customary practice, such redacted terms do not affect the conditionality or the amount of cash proceeds available to Parent from the Debt Financing), and any related exhibits and schedules thereto (collectively, the
Debt Commitment Letters
) pursuant to which such Financing Sources have committed to provide, subject to the terms and conditions therein, debt financing in the amounts set forth therein for the purposes of financing the
transactions contemplated by this Agreement (the
Debt Financing
).
(b) The net proceeds (after applicable fees,
expenses, original issue discount and similar premiums and charges and after giving effect to the maximum amount of flex (including original issue discount flex) provided under the Debt Commitment Letters) contemplated by the Debt
Financing, together with the Companys cash on hand and cash on hand at Parent, will, in the aggregate be sufficient for Parent to consummate the transactions contemplated hereby, including the payment of the aggregate cash amounts payable
pursuant to
Article II
and the payment of all fees, costs and expenses to be paid by Parent related to the transactions contemplated by this Agreement. Any reference in this Agreement to (i) Debt Commitment Letters will
include such documents as amended or modified in compliance with the provisions of
Section
6.17
, and (ii) the Debt Financing will include the financing contemplated by the Debt Commitment Letters as amended
or modified in compliance with the provisions of
Section
6.17
.
(c) As of the date of this Agreement, the Debt
Commitment Letters have not been amended or modified in any respect, no such amendment or modification is contemplated (except for amendments to add additional Financing Sources thereto, and any amendments or modifications to effectuate any
market flex terms), and, to the Knowledge of Parent, the respective commitments contained in the Debt Commitment Letters have not been withdrawn, terminated or rescinded in any respect, and no such withdrawal, termination or rescission
is contemplated. As of the date of this Agreement, there are no side letters, contracts, arrangements or other agreements or understandings to which Parent, Merger Sub, Merger Sub LLC or any of their Affiliates is a party relating to the funding or
investing, as applicable, of the Debt Financing other than the Debt Commitment Letters. As of the date hereof, Parent has paid, or caused to be paid, in full, any and all fees (including commitment fees and other fees) required to be paid under the
Debt Commitment Letters that are payable on or prior to the date of this Agreement. The Debt Financing is not subject to any conditions precedent, arrangements or other contingencies to obtaining any amount of the Debt Financing other than as
expressly set forth in the Debt Commitment Letters and, as of the date of this Agreement, (x) the Debt Commitment Letters are in full force and effect, (y) no breach of any term of, or default under, the Debt Commitment Letters exists on
the part of Parent or its Affiliates and, to the Knowledge of Parent, any of the other parties thereto and (z) the Debt Commitment Letters constitute the legal, valid, binding and enforceable obligation of Parent and, to the Knowledge of
Parent, each of the other parties thereto, subject to the Enforceability Limitations. As of the date of this Agreement, assuming the accuracy of all the representations and warranties made by the Company herein and the Companys
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compliance with this Agreement, Parent has no reason to believe that (i) Parent will be unable to satisfy on a timely basis any of the conditions that are required to be satisfied by it as a
condition to the obligations under the Debt Commitment Letters prior to the expiration thereof or (ii) any portion of the Debt Financing will not be made available to Parent at the Closing.
(d) Parent and Merger Sub expressly acknowledge and agree that, notwithstanding anything in this Agreement to the contrary, their obligations
hereunder, including their obligations to consummate the Closing, are not subject to, or conditioned on, receipt of the Debt Financing or any alternative financing.
Section 4.17
No Ownership of Company Capital Stock
. Neither Parent nor any of its Subsidiaries
is, nor at any time during the last three years has it been, an interested stockholder of the Company within the meaning of Section 203 of the DGCL.
Secti
on 4.18
State Takeover Statutes
. Assuming the accuracy of the Companys representations in
Section
3.29(a)
, Parent and the Parent Board of Directors has taken all action necessary to exempt the Merger, this Agreement and the other transactions contemplated hereby or thereby from the restrictions on business
combinations and voting requirements contained in Section 203 of the DGCL. No other Takeover Law applies to the Merger, this Agreement or any of the other transactions contemplated hereby or thereby.
Section
4.19
Environmental Matters
. Except as would not reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect, Parent and its Subsidiaries are in compliance in all respects with all applicable Environmental Laws.
Section 4.20
Taxes.
(a) Each of Parent and its Subsidiaries has prepared and timely filed (taking into account all applicable extensions) all material income,
franchise and other U.S. federal, state, local and
non-U.S.
Tax Returns required to be filed relating to any and all Taxes concerning or attributable to Parent, any of its Subsidiaries or their respective
operations, and such Tax Returns in all material respects are true and correct and have been completed in accordance with Applicable Law.
(b) Each of Parent and its Subsidiaries has (i) timely paid all material Taxes it is required to pay (whether or not shown on a Tax
Return), and (ii) timely paid or withheld (and timely paid over any withheld amounts to the appropriate Taxing authority) all material federal and state income Taxes, Federal Insurance Contribution Act and Federal Unemployment Tax Act amounts,
and other Taxes required to be paid or withheld.
(c) There are (and immediately following the Effective Time there will be) no Liens on
the assets of Parent or any of its Subsidiaries relating or attributable to Taxes, other than Permitted Liens.
(d) Neither Parent nor any
of its Subsidiaries has constituted either a distributing corporation or a controlled corporation in a distribution of stock intended to qualify for
tax-free
treatment under
Section 355 of the Code within the two calendar years prior to the date of this Agreement.
(e) Neither Parent nor any of its
Subsidiaries has engaged in any transaction that is the same as or substantially similar to one of the types of transactions that the Internal Revenue Service has determined to be a tax avoidance transaction and identified by notice, regulation, or
other form of published guidance as a listed transaction, as set forth in Treas. Reg.
§ 1.6011-4(b)(2).
(f) To the Knowledge of Parent, except as otherwise expressly contemplated by this Agreement, there exists no facts, and neither Parent nor
any of its Subsidiaries has taken or agreed to take any action that would reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
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Section 4.
21
Intellectual Property
.
(a) Parent has made available a complete and accurate list as of the date of this Agreement of Intellectual Property Rights owned by Parent
that are Registered IP (
Parent Registered IP
).
(b) To the Knowledge of Parent, the Parent Registered IP is valid,
sustaining and enforceable.
(c) To the Knowledge of Parent, neither the operation of the business of Parent nor the use, provision,
support, reproduction, making, distribution, marketing, sale, license or display of the Parent Products by Parent or its Subsidiaries (i) infringes, misappropriates or otherwise violates the Intellectual Property Rights of any Person,
(ii) violates any right of any Person (including the right to privacy or publicity) or (iii) constitutes unfair competition or trade practices under the laws of any jurisdiction (nor to the Knowledge of Parent is there any reasonable basis
therefor).
ART
ICLE V.
INTERIM CONDUCT OF BUSINESS
Section 5.1
Affirmative Obligations of the Company
. Except as (a) as may be required by
Applicable Law, (b) expressly required or permitted by this Agreement, (c) set forth in
Section
5.1
or
Section
5.2
of the Company Disclosure Letter or (d) approved in advance by
Parent in writing, not to be unreasonably withheld, conditioned or delayed, at all times during the period commencing with the execution and delivery of this Agreement and continuing until the earlier to occur of the termination of this Agreement
pursuant to
Article VIII
and the Effective Time, the Company and each of its Subsidiaries shall use commercially reasonable efforts to (i) carry on its business in the usual, regular and ordinary course in substantially the same manner
as heretofore conducted and in compliance with all Applicable Laws, (iii) maintain and preserve intact its business organization, (iv) pay its debts and Taxes when due, in each case subject to good faith disputes over such debts and Taxes
for which adequate reserves have been established in accordance with GAAP on the appropriate financial statements, (v) keep available the services of key employees and (vi) maintain relationships with customers, suppliers, distributors,
licensors, licensees and others with which it has significant business dealings.
Section 5.2
Negative Obligations of the Company
. Except as (1) may be required by Applicable Law, (2) expressly required or permitted by this Agreement, (3) set forth in
Section
5.1
or
Section
5.2
of the Company Disclosure Letter or (4) approved in advance by Parent in writing, not to be unreasonably withheld, conditioned or delayed, at all times during the period commencing with the execution and
delivery of this Agreement and continuing until the earlier to occur of the termination of this Agreement pursuant to
Article VIII
and the Effective Time, the Company shall not do any of the following and shall not permit its Subsidiaries to
do any of the following:
(a) amend its certificate of incorporation or bylaws or comparable organizational documents;
(b) issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any Company Securities or any Subsidiary Securities, other than (i) grants of Company Compensatory Awards to employees subject to the terms as set forth on
Section
5.2(b)
of the Company Disclosure Letter and
(ii) the issuance and sale of shares of Company Common Stock pursuant to the exercise of Company Options or the vesting or settlement of other Company Compensatory Awards, in all cases in the ordinary course of business and consistent with past
practice;
(c) acquire or redeem, directly or indirectly, or amend any Company Securities or Subsidiary Securities other than (i) in
full or partial payment of the exercise price and any applicable Taxes pursuant to any exercise, vesting or settlement of Company Compensatory Awards or (ii) pursuant to the forfeiture of any Company Compensatory Awards;
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(d) other than dividends or distributions made by any direct or indirect wholly-owned Subsidiary
of the Company to the Company or one of its Subsidiaries, split, combine, subdivide, amend the terms of or reclassify any shares of capital stock, declare, set aside or pay any dividend or other distribution (whether in cash, shares or property or
any combination thereof) in respect of any shares of capital stock, or make any other actual, constructive or deemed distribution in respect of the shares of capital stock;
(e) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries (other than (i) the transactions contemplated hereby, including the Merger, and (ii) transactions between the Company and any direct or indirect wholly owned Company Subsidiary or between
direct or indirect wholly owned Company Subsidiaries);
(f) (i) incur or assume any long-term or short-term debt or issue any debt
securities, except for (A) short-term debt incurred to fund operations of the business in the ordinary course of business consistent with past practice and (B) loans or advances to or from direct or indirect wholly-owned Subsidiaries,
(ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person except with respect to obligations of direct or indirect wholly-owned Subsidiaries
of the Company, (iii) make any loans, advances or capital contributions to or investments in any other Person except for travel advances in the ordinary course of business consistent with past practice to employees or members of the Company
Board of the Company or any of its Subsidiaries or (iv) mortgage or pledge any of its or its Subsidiaries assets, tangible or intangible, or create or suffer to exist any Lien thereupon (other than Permitted Liens), and (C) purchase
money financings and capital leases entered into in the ordinary course of business with a value of $1,000,000 individually and $5,000,000 in the aggregate;
(g) except (A) as may be required by Applicable Law, the terms of this Agreement, or the terms of any Employee Plan or (B) as set
forth on
Section
5.2(g)
of the Company Disclosure Letter, (i) enter into, adopt, amend (including acceleration of vesting), modify or terminate any Employee Plan except in the ordinary course of business consistent
with past practice (other than employment agreement or offer letters for employees at the vice president level or below) or (ii) increase in any manner the compensation or fringe benefits of any director, officer, employee, consultant or
independent contractor or pay any special bonus or special remuneration to any director, officer, employee, consultant or independent contractor;
(h) forgive any loans to any employees, officers or directors of the Company or any of its Subsidiaries, or any of their respective
Affiliates;
(i) make any deposits or contributions of cash or other property to or take any other action to fund or in any other way
secure the payment of compensation or benefits under the Employee Plans or agreements subject to the Employee Plans or any other Contract of the Company or any of its Subsidiaries other than deposits and contributions that are required pursuant to
the terms of the Employee Plans or any agreements subject to the Employee Plans in effect as of the date hereof;
(j) enter into, amend,
or extend any Collective Bargaining Agreement;
(k) hire, terminate, demote or promote or offer to hire, or promote any employee or
potential employee with a title of vice president or above, or encourage any employees with a title of vice president or above to resign from or terminate his relationship with the Company or any of its Subsidiaries, in each case, other than as
expressly contemplated by this Agreement;
(l) acquire, sell, lease, license or dispose of any property or assets material to the Company
and its Subsidiaries, taken as a whole, in any single transaction or series of related transactions or acquire (by merger, consolidation or acquisition of stock or assets) any other Person or any equity interest therein, except in each case for
(i) acquisitions from wholly-owned Company Subsidiaries, (ii) investments in equity and debt instruments that constitute cash, cash equivalents or debt investments with a maturity date of less than 365 days consistent
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with the Companys past cash management programs, (iii) the purchase of equipment, supplies and inventory in the ordinary course of business, (iv) inbound licenses of Intellectual
Property Rights in the ordinary course of business and
(v) non-exclusive
licenses granted in the ordinary course of business consistent with past practice;
(m) except as may be required as a result of a change in Applicable Law or in GAAP or SEC rules and regulations, make any material change in
any of the accounting principles or practices used by it;
(n) (i) make (other than in the ordinary course of preparing and filing
Tax Returns) or change any material Tax election, (ii) amend any material Tax Return, (iii) settle or compromise any material Liability for Taxes, (iv) adopt or change any Tax accounting method or (v) consent to any extension or
waiver of any limitation period with respect to any material claim or assessment for Taxes;
(o) (i) enter into any lease or sublease
of real property (whether as a lessor, sublessor, lessee or sublessee) or (ii) modify, amend or exercise any right to renew any lease or sublease of real property or waive or violate any term or condition thereof or grant any consents
thereunder or (iii) purchase any interest in real property (or enter any agreement to do so);
(p) abandon, cancel or allow to lapse
or fail to maintain or protect any Company Intellectual Property Rights, except pursuant to the exercise of good faith business judgment by the Company following notice to Parent;
(q) other than in the ordinary course of business consistent with past practice, enter into, renew, amend or grant any release or
relinquishment of any rights under any Material Contract;
(r) other than capital expenditures contemplated by the Companys capital
expenditures set forth in
Section
5.2(r)
of the Company Disclosure Letter, incur any new capital expenditure(s) that, individually or in the aggregate, would create obligations to the Company or any of its Subsidiaries in
excess of the amount set forth in
Section
5.2(r)
of the Company Disclosure Letter;
(s) settle or compromise any
pending or threatened Legal Proceeding or pay, discharge or satisfy or agree to pay, discharge or satisfy any claim, Liability or obligation (absolute or accrued, asserted or unasserted, contingent or otherwise), other than the settlement or
compromise of a Legal Proceeding (i) reflected or reserved against in full in the Company Balance Sheet or (ii) that does not include any obligation (other than the payment of money of an aggregate of $500,000 or less in excess of
available insurance coverage (including deductibles and retentions) maintained by the Company or its Subsidiaries relating to the payment of such amounts) to be performed by the Company or its Subsidiaries following the Effective Time that is or
would reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole;
(t) except as required by Applicable
Law or GAAP, revalue in any material respect any of its properties or assets including
writing-off
notes or accounts receivable other than in the ordinary course of business consistent with past practice;
(u) grant or otherwise create or consent to the creation of any easement, covenant, restriction, assessment, Lien or charge affecting any real
property or any part thereof, other than Permitted Liens; convey any interest in any Real Property;
(v) sell, lease, license or transfer
to any person or entity any rights to any Company IP except for
non-exclusive
licenses granted in the ordinary course of business consistent with past practice; and
(w) authorize, commit or enter into a Contract to do any of the foregoing actions that are prohibited pursuant to this
Section
5.2
.
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S
ection 5.3
Affirmative Obligations of Parent
. Except
as (a) as may be required by Applicable Law, (b) expressly required or permitted by this Agreement, (c) set forth in
Section
5.3
or
Section
5.4
of the Parent Disclosure Letter or
(d) approved in advance by the Company in writing, not to be unreasonably withheld, conditioned or delayed, at all times during the period commencing with the execution and delivery of this Agreement and continuing until the earlier to occur of
the termination of this Agreement pursuant to
Article VIII
and the Effective Time, Parent and each of its Subsidiaries shall use commercially reasonable efforts to (i) carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and in compliance with all Applicable Laws and (ii) maintain and preserve intact its business organization.
Secti
on 5.4
Negative Obligations of Parent
. Except as (1) may be required by Applicable Law,
(2) expressly required or permitted by this Agreement, (3) set forth in
Section
5.3
or
Section
5.4
of the Parent Disclosure Letter or (4) approved in advance by the Company in
writing, not to be unreasonably withheld, conditioned or delayed, at all times during the period commencing with the execution and delivery of this Agreement and continuing until the earlier to occur of the termination of this Agreement pursuant to
Article VIII
and the Effective Time, Parent shall not do any of the following and shall not permit its Subsidiaries to do any of the following:
(a) amend its certificate of incorporation or bylaws or comparable organizational documents, or otherwise take any action to exempt any Person
from any provision of Parents or any of its Subsidiaries respective certificates of incorporation, bylaws or comparable organizational documents, in each case in any manner that would be adverse in any material respect to holders of
Company Common Stock;
(b) acquire or redeem, directly or indirectly, or amend any Parent Securities or the preferred stock of Lumentum
Inc. (the
Parent Subsidiary Preferred Stock
) other than (i) in full or partial payment of the exercise price and any applicable Taxes pursuant to any exercise, vesting or settlement of Parent Compensatory Awards,
(ii) pursuant to the forfeiture of any Parent Compensatory Awards or (iii) redemptions of the Parent Subsidiary Preferred Stock;
(c) split, combine, subdivide, amend the terms of or reclassify any shares of capital stock of Parent or the Parent Subsidiary Preferred
Stock, declare, set aside or pay any dividend or other distribution (whether in cash, shares or property or any combination thereof) in respect of any shares of capital stock of Parent or the Parent Subsidiary Preferred Stock, or make any other
actual, constructive or deemed distribution in respect of the shares of capital stock of Parent or the Parent Subsidiary Preferred Stock;
(d) adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of Parent (other
than (i) the transactions contemplated hereby, including the Merger, and (ii) transactions between Parent and any direct or indirect wholly owned Parent Subsidiary or between direct or indirect wholly owned Parent Subsidiaries);
(e) (A) acquire (whether by merger or consolidation, acquisition of stock or assets or by formation of a joint venture or otherwise) any other
person or business or any assets, deposits or properties of any other person, or (B) make any material investment in any other Person either by purchase of stock or securities, contributions to capital, property transfers or purchase of
property or assets of any person other than a wholly owned Subsidiary of Parent, except in the case of clause (A) and (B) (x) as would not be reasonably expected to prevent or materially impair or delay the satisfaction of the conditions
set forth in
Section
7.1(b)
and
Section
7.1(c)
and (y) where the consideration payable in such transactions by Parent is less than $100,000,000 in the aggregate;
(f) convene any meeting of the holders of Parent Common Stock for the purpose of revoking or varying the authority of the directors of Parent
to allot Parent Common Stock;
(g) (i) incur or assume any long-term or short-term debt or issue any debt securities or (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person, except with respect to obligations of direct or indirect wholly owned
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Subsidiaries of Parent, except for (A) short-term debt incurred to fund operations of the business in the ordinary course of business consistent with past practice and (B) loans or
advances to or from direct or indirect wholly-owned Subsidiaries, and (C) the Debt Financing or the Alternative Debt Financing; and
(h) authorize, commit or enter into a Contract to do any of the foregoing actions that are prohibited pursuant to this
Section
5.4
.
Section 5.5
Consent
.
(a) The Company shall be permitted to request Parents consent or approval for the Company or any of its Subsidiaries to take any matter
or action prohibited by
Sections 5.1
or
5.2
, by delivering written notice (including by electronic mail) thereof to any of the individuals specified on
Section
5.5(a)
of the Parent Disclosure Letter. For
purposes of this
Article V
, Parent shall respond to such request in writing (including by return email) as promptly as practicable, and if Parent does not respond in writing (including by return email) to any request within five Business Days
after the Company delivers such written request to Parent (including at the email addresses set forth on
Section
5.5(a)
of the Parent Disclosure Letter or such other email addresses as Parent shall specify in a notice
delivered in accordance with
Section
9.2
), Parent shall be deemed to have provided its prior written consent to the taking of such matter or action upon and under the circumstances described in such request and only as to
the specific instances subject to such request (it being understood and agreed that in no event shall the failure to so respond within such five Business Day period be deemed consent until the end of such five Business Day period).
(b) Parent shall be permitted to request the Companys consent or approval for Parent or any of its Subsidiaries to take any matter or
action prohibited by
Sections 5.3
or
5.4
by delivering written notice (including by electronic mail) thereof to any of the individuals specified on
Section
5.5(b)
of the Company Disclosure Letter. For purposes
of this
Article V
, the Company shall respond to such request in writing (including by return email) as promptly as practicable, and if the Company does not respond in writing (including by return email) to any request within five Business
Days after Parent delivers such written request to the Company (including at the email addresses set forth on
Section
5.5(b)
of the Company Disclosure Letter or such other email addresses as the Company shall specify in a
notice delivered in accordance with
Section
9.2
), the Company shall be deemed to have provided its prior written consent to the taking of such matter or action upon and under the circumstances described in such request and
only as to the specific instances subject to such request (it being understood and agreed that in no event shall the failure to so respond within such five Business Day period be deemed consent until the end of such five Business Day period).
ARTICLE VI.
ADDITIONAL AGREEMENTS
Section 6.1
No Solicitation
.
(a) The Company and its Subsidiaries shall immediately cease and cause to be terminated, and
shall not authorize or knowingly permit any of the Companys or its Subsidiaries Representatives to continue, any and all existing activities, discussions or negotiations with any Third Party conducted heretofore with respect to any
Acquisition Proposal. The Company shall promptly (and in any event within five (5) Business Days following the date hereof) request in writing that each Third Party that has executed a confidentiality agreement since the date which is one year
prior to the date of this Agreement in connection with its consideration of a possible Acquisition Proposal return or destroy all confidential information heretofore furnished to such Third Party by or on behalf of the Company and the Company shall
use commercially reasonable efforts (which for purposes of this
Section
6.1
shall not include any obligation to commence litigation against any Person) to have such information returned or destroyed (to the extent
destruction of such information is permitted by such confidentiality agreement).
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(b) Except as expressly permitted by this
Section
6.1
or
Section
6.2
, at all times during the period commencing with the execution and delivery of this Agreement and continuing until the earlier to occur of the termination of this Agreement pursuant to
Article VIII
and the
Effective Time, the Company and its Subsidiaries shall not (and shall not authorize or knowingly permit any of their Representatives to), directly or indirectly, (i) solicit, initiate, or knowingly encourage, knowingly facilitate or knowingly
induce the making, submission or announcement of an Acquisition Proposal or the making of any inquiry, offer or proposal that would reasonably be expected to lead to an Acquisition Proposal, (ii) furnish to any Third Party any
non-public
information relating to the Company or any of its Subsidiaries, or afford access to the business, properties, assets, books or records of the Company or any of its Subsidiaries to any Third Party, or take
any other action, in each case, intended to assist or facilitate the making of an Acquisition Proposal or any inquiry, offer or proposal that would reasonably be expected to lead to an Acquisition Proposal, (iii) participate or engage in
discussions or negotiations with respect to an Acquisition Proposal with any Third Party that is seeking to make or has made an Acquisition Proposal (other than, in the case of both clauses (ii) and (iii) of this
Section
6.1(b)
, in response to an unsolicited inquiry or submitted Acquisition Proposal, to refer the inquiring or submitting person to this
Section
6.1
, and
provided
, that the Company and
its Representatives may communicate in writing with a person who had made an unsolicited
bona fide
written Acquisition Proposal (and its Representatives) solely to clarify (and not negotiate) the existing terms of, and ascertain additional
facts regarding, such Acquisition Proposal for the purpose of the Company Board informing itself about such Acquisition Proposal and the person making it (any such communication, a
Clarification Request
)), (iv) approve, endorse or
recommend an Acquisition Proposal, or (v) execute or enter into any letter of intent, memorandum of understanding or Contract contemplating or otherwise relating to an Acquisition Transaction (other than a confidentiality agreement pursuant to
this
Section
6.1(b)
);
provided
,
however
, that notwithstanding the foregoing, prior to obtaining the Requisite Shareholder Approval, the Company Board may, directly or indirectly through any Representative,
with respect to any Third Party that has made (and not withdrawn) a
bona fide
written Acquisition Proposal after the date of this Agreement that did not result from a material breach (or deemed material breach) of
Section
6.1(a)
or
Section
6.1(b)
that the Company Board concludes in good faith (after consultation with its financial advisor and its outside legal counsel) constitutes or would reasonably be
expected to lead to a Superior Proposal, (A) engage or participate in discussions or negotiations with such Third Party and its Representatives and its potential sources of financing and/or (B) furnish to such Third Party, its
Representatives and its potential financing sources any information (including
non-public
information) relating to the Company or any of its Subsidiaries, and provide access to the Companys and its
Subsidiaries assets, properties and Business Facilities pursuant to a confidentiality agreement the terms of which are no less favorable to the Company than those contained in the Confidentiality Agreement (
provided
that such confidentiality
agreement need not contain any standstill or similar provision that would prohibit such Third Party from making any Acquisition Proposal) and containing additional provisions that expressly permit the Company to comply with the terms of
this
Section
6.1
(which confidentiality agreement shall be provided to Parent for informational purposes promptly following the execution and delivery thereof),
provided
that in the case of any action taken pursuant
to the foregoing clauses (A) or (B), (1) the Company Board determines in good faith (after consultation with outside legal counsel) that the failure to take such action would reasonably be likely to be inconsistent with its fiduciary
duties to shareholders of the Company under Delaware Law, (2) solely with respect to the initial contact with respect to any Third Party, the Company shall provide Parent written notice within
thirty-six
(36) hours of the Company engaging or participating in discussions or negotiations with, or furnishing
non-public
information to, such Third Party and (3) promptly following furnishing any
non-public
information to such Person, the Company furnishes such
non-public
information to Parent (to the extent such information has not been previously furnished or made
available by the Company to Parent or any of its Representatives). The Company agrees not to grant any waiver or release under any standstill or similar agreement with respect to any class of equity securities of the Company or any of its
Subsidiaries, and shall use reasonable best efforts to enforce each such agreement.
(c) Without limiting the generality of the foregoing,
Parent, Merger Sub, Merger Sub LLC and the Company acknowledge and hereby agree that any action taken by any Representative of the Company or any of its Subsidiaries that would be a breach of the restrictions set forth in
Section
6.1(a)
or
Section
6.1(b)
if taken by the Company shall be deemed to be a breach of such Section by the Company for all purposes of and under this Agreement.
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(d) The Company shall promptly, and in all cases within
thirty-six
(36) hours after, to the Knowledge of the Company, its receipt, advise Parent in writing of its receipt of any Acquisition Proposal or any request for information or inquiry with respect to, or
that could reasonably be expected to lead to, an Acquisition Proposal, including the materials terms and conditions of, and identity of the Person or group making, such Acquisition Proposal, request or inquiry. The Company shall provide Parent a
copy of any Clarification Requests actually delivered within
thirty-six
(36) hours after such delivery.
(e) The Company shall keep Parent reasonably informed of the status and material terms and conditions (including all material amendments or
proposed material amendments) of any such Acquisition Proposal and, promptly (and in no event later than
thirty-six
(36) hours thereafter) upon, to the Knowledge of the Company, receipt of any written
material amendment or written proposed material amendment of any such Acquisition Proposal, the Company shall give Parent a copy thereof.
Sec
tion 6.2
Company Board Recommendation; Intervening Events
.
(a) Subject to the terms of this
Section
6.2
, the Company Board shall (i) unanimously recommend that the
Companys shareholders adopt this Agreement in accordance with the applicable provisions of Delaware Law (the
Company Board Recommendation
) and (ii) include the Company Board Recommendation in the Proxy
Statement/Prospectus.
(b) Subject to the terms of this
Section
6.2
, at all times during the period commencing
with the execution and delivery of this Agreement and continuing until the earlier to occur of the termination of this Agreement pursuant to
Article VIII
and the Effective Time, neither the Company Board nor any committee thereof shall
(i) withdraw, amend or modify (or publicly propose to withhold, withdraw, amend or modify) in a manner adverse to Parent, Merger Sub or Merger Sub LLC, the Company Board Recommendation, (ii) approve, endorse, adopt or recommend, or
publicly propose to approve, endorse, adopt or recommend, any Acquisition Proposal or Superior Proposal, (iii) fail to recommend against acceptance by the Companys shareholders of any tender offer or exchange offer for the Company Common
Stock that constitutes an Acquisition Proposal within ten (10) Business Days after the commencement of such offer, or (iv) resolve or publicly propose to take any of the foregoing actions (any of the foregoing, a
Company Board
Recommendation Change
;
provided
that, for the avoidance of doubt, the Companys making of any determination contemplated by, or the authorizing and delivering to Parent any notice contemplated by,
Section
6.2(c)
shall not be deemed to be a Company Board Recommendation Change or a breach of
Section
6.1
or this
Section
6.2
).
(c) Notwithstanding anything to the contrary set forth in this Agreement, the Company Board may effect a Company Board Recommendation Change
at any time prior to obtaining the Requisite Shareholder Approval, if and only if:
(i) (A) the Company has received a
bona fide written Acquisition Proposal that did not result from a material breach (or deemed material breach) of
Section
6.1(a)
or
Section
6.1(b)
that the Company Board has determined in good faith
(after consultation with its financial advisor and its outside legal counsel) that such Acquisition Proposal constitutes a Superior Proposal, (B) the Company Board determines in good faith (after consultation with outside legal counsel) that
the failure to effect such Company Board Recommendation Change would reasonably be likely to be inconsistent with its fiduciary duties to the shareholders of the Company under Delaware Law, (C) prior to effecting such Company Board
Recommendation Change, the Company shall have (1) given Parent at least four (4) Business Days notice (the
Notice Period
) of its intention to take such action (which notice shall include the most current version of
the proposed definitive agreement and, to the extent not included therein, all material terms and conditions of such Superior Proposal and the identity of the Person making such Superior Proposal) and (2) if requested by Parent, during the
Notice Period, negotiate with Parent in good faith any modifications to the terms and conditions of this Agreement proposed by Parent, in its discretion, and (D) Parent shall not have made, within the Notice Period, a written counteroffer or
proposal capable of acceptance by the
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Company that the Company Board determines in good faith, after consultation with its financial advisor and its outside legal counsel, is at least as favorable, from a financial point of view, to
shareholders of the Company, in their capacity as such, as such Superior Proposal (it being understood that any material revision to the material terms of a Superior Proposal, including any revision in the per share financial consideration, shall
require a new notice (for each material revision) pursuant to clause (C) above (except that the four (4) Business Day Notice Period referred to in clause (C) above shall instead be three (3) Business Days); or
(ii) (A) An Intervening Event shall have occurred and be continuing at the time of the determination, (B) the
Company Board determines in good faith (after consultation with outside legal counsel) that the failure to effect such Company Board Recommendation Change would be reasonably likely to be inconsistent with its fiduciary duties to shareholders of the
Company under Delaware Law, (C) prior to effecting such Company Board Recommendation Change, the Company shall have (1) given Parent at least four (4) Business Days prior written notice of its intention to take such action
(which notice shall include a written explanation of the Company Boards basis and rationale for proposing to effect such Company Board Recommendation Change) and (2) if requested by Parent, negotiated with Parent in good faith during such
four (4) Business Day notice period any modifications to the terms of this Agreement proposed by Parent, in its discretion, and (D) Parent shall not have made, within the four (4) Business Day notice period, a written offer or
proposal capable of acceptance by the Company that the Company Board determines in good faith, after consultation with its financial advisor and its outside legal counsel, that the failure to effect such Company Board Recommendation Change would be
reasonably likely to be inconsistent with its fiduciary duties to shareholders of the Company under Delaware Law.
(d) For the avoidance
of doubt, notwithstanding any Company Board Recommendation Change, until the termination of this Agreement in accordance with its terms (x) in no event may the Company enter into any agreement in principle, letter of intent, term sheet, merger
agreement, acquisition agreement, option agreement or other agreement or other similar instrument relating to an Acquisition Proposal, and (y) the Company shall otherwise remain subject to all of its obligations under this Agreement. The
Company shall ensure that any Company Board Recommendation Change (A) does not change the approval of this Agreement by the Company Board and (B) does not have the effect of causing any Takeover Law to be applicable to this Agreement, the
Merger or any of the other transactions contemplated hereby.
(e) Nothing in this Agreement shall prohibit the Company Board from
(i) taking and disclosing to shareholders of the Company a position contemplated by
Rule 14e-2(a)
under the Exchange Act or complying with the provisions of
Rule 14d-9
under the Exchange Act (including by issuing a stop, look and listen statement), (ii) making any disclosure to its shareholders if the Company Board has determined in good faith
after consultation with the Companys outside legal counsel that the failure to do so would be reasonably likely to be inconsistent with its fiduciary duties under Delaware Law, or (iii) directing any person (or the representative of that
person) that makes an Acquisition Proposal to the provisions of
Section
6.1
or this
Section
6.2
;
provided
that any statement(s) made by the Company Board pursuant to
Rule 14e-2(a)
under the Exchange Act or
Rule 14d-9
under the Exchange Act (other than a stop, look and listen communication of the type contemplated by
Section 14d-9(f)
of the Exchange Act) or any similar communication to shareholders of the Company shall be deemed to be a Company Board Recommendation Change (including any disclosures made under clause (e)(i)
above) unless the Company Board expressly publicly reaffirms, or expressly provides that the Company Board is not changing, the Company Board Recommendation in such communication.
(f) The Company shall not take any action to (i) exempt any Person (other than Parent, Merger Sub, Merger Sub LLC and their respective
Affiliates) from the provisions on business combinations contained in any Takeover Law or (ii) otherwise cause such restrictions not to apply, in each case unless such actions are taken simultaneously with a termination of this
Agreement by the Company in accordance with the terms hereof.
Section 6.3
Company
Shareholders
Meeting
. Subject to Applicable Law, the rules and regulations of the Nasdaq and the Companys certificate of incorporation and bylaws, the Company shall establish a record
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date for, call, give notice of, convene and hold a meeting of the shareholders of the Company (the
Company Shareholders
Meeting
) as soon as reasonably
practicable following the date the Form
S-4
is declared effective by the SEC (and in no event later than forty five (45) days after the commencement of the mailing of the Proxy Statement/Prospectus to the
Companys shareholders) for the purpose of voting upon the adoption of this Agreement in accordance with Delaware Law. Notwithstanding the foregoing, (a) if, on the day immediately preceding the date for which the Company
Shareholders Meeting is scheduled, (1) there are insufficient shares of the Company Common Stock necessary to conduct business at the Company Shareholders Meeting, or (2) the Company has not received proxies representing a
sufficient number of shares of Company Common Stock to obtain the Requisite Shareholder Approval, the Company may extend the date of the Company Shareholders Meeting to the extent (and only to the extent) the Company determines in good faith
that such delay is reasonably necessary in order to conduct business at the Company Shareholders Meeting or obtain proxies representing a sufficient number of shares of Company Common Stock to obtain the Requisite Shareholder Approval, as
applicable, (b) the Company may delay the Company Shareholders Meeting to the extent (and only to the extent) the Company determines in good faith that such delay is required by Applicable Law, including to comply with comments made by
the SEC with respect to the Proxy Statement/Prospectus or the Form
S-4,
(c) the Company may delay the Company Shareholders Meeting to ensure that any supplement or amendment to the Proxy
Statement/Prospectus required under Applicable Law is timely provided to the shareholders of the Company within a reasonable amount of time, in the good faith judgment of the Company (after consultation with its outside counsel), in advance of the
Company Shareholders Meeting, and/or (d) the Company may delay the Company Shareholders Meeting to the extent (and only to the extent) Parent provides its prior written consent or Parent requests such an extension. Subject to
Section
6.1
and
Section
6.2
, the Company shall solicit from shareholders of the Company proxies in favor of the adoption of this Agreement in accordance with Delaware Law and shall use its
reasonable best efforts to secure the Requisite Shareholder Approval at the Company Shareholders Meeting. Unless this Agreement is earlier terminated pursuant to
Article VIII
, the Company shall establish a record date for, call, give
notice of, convene and hold the Company Shareholders Meeting in accordance with this
Section
6.3
, whether or not (i) the Company Board at any time subsequent to the date hereof shall have effected a Company Board
Recommendation Change or otherwise shall determine that this Agreement is no longer advisable or recommends that shareholders of the Company reject it or (ii) there occurs the commencement, disclosure, announcement or submission to the Company
of any Acquisition Proposal. The Company agrees that it shall not submit to the vote of the shareholders of the Company any Acquisition Proposal (whether or not a Superior Proposal) prior to the vote of the Companys shareholders with respect
to the adoption of this Agreement at the Company Shareholders Meeting. The notice of such Company Shareholders Meeting shall state that a resolution to adopt this Agreement, a
non-binding,
advisory
resolution to approve the compensation that may become payable to the Companys named executive officers in connection with the Merger, and a resolution to adjourn the Company Shareholders Meeting will be considered at the Company
Shareholders Meeting.
Section 6.4
Form
S-4
and Proxy
Statement
/Prospectus
.
(a) As promptly as practicable after the execution and delivery of this Agreement, Parent and the Company
shall prepare, and Parent shall file with the SEC, a registration statement on Form
S-4
in connection with the issuance of shares of Parent Common Stock in the Merger pursuant to the terms of this Agreement
(as may be amended or supplemented from time to time, the
Form
S-4
). The
Form S-4
shall include (i) a prospectus for the
issuance of shares of Parent Common Stock in the Merger and (ii) a proxy statement of the Company for use in connection with the solicitation of proxies for the matters to be considered at the Company Shareholders Meeting (as may be
amended or supplemented from time to time, the
Proxy Statement/Prospectus
). Each of Parent and the Company shall use its reasonable best efforts to have the Form
S-4
declared effective by
the SEC under the Securities Act as promptly as practicable after such filing with the SEC. Without limiting the generality of the foregoing, each of the Company and Parent shall, and shall instruct their respective Representatives to, reasonably
cooperate with the other party hereto and its respective Representatives in the preparation of the
Form S-4
and the Proxy Statement/Prospectus, and shall furnish the other party hereto with all
information concerning it and its Affiliates as the other party hereto may deem reasonably necessary or advisable
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in connection with the preparation of the
Form S-4
and the Proxy Statement/Prospectus, and any amendment or supplement thereto, and each of Parent and
the Company shall provide the other party hereto with a reasonable opportunity to review and comment thereon. As promptly as practicable after the
Form S-4
is declared effective by the SEC, the Company
shall cause the Proxy Statement/Prospectus to be mailed to its shareholders.
(b) Unless the Company Board shall have effected a Company
Board Recommendation Change in accordance with the terms of
Section
6.2
, the Proxy Statement/Prospectus shall include the Company Board Recommendation.
(c) Except as otherwise set forth in this Agreement, no amendment or supplement (including by incorporation by reference) to the Form
S-4
or the Proxy Statement/Prospectus shall be made without the approval of Parent and the Company (which approval shall not be unreasonably withheld, conditioned or delayed), except to the extent any disclosure
contained therein relates to an Acquisition Proposal.
(d) Each of Parent and the Company shall cause the Form
S-4
and the Proxy Statement/Prospectus, as applicable, to comply in all material respects as to form and substance with the requirements of the Securities Act and the Exchange Act. Without limiting the generality of
the foregoing, the information supplied or to be supplied by either party hereto for inclusion or incorporation by reference in the Form
S-4
shall not, at the time the Form
S-4
is filed with the SEC or declared effective by the SEC or at the Effective Time, 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 the light of the circumstances under which they were made, not misleading;
provided, that
, neither party makes any such covenant with respect to information supplied by the other party.
The information supplied or to be supplied by either party hereto for inclusion or incorporation by reference in the Proxy Statement/Prospectus shall not, on the date the Proxy Statement/Prospectus (or any amendment thereof or supplement thereto) is
first mailed to shareholders or at the time of the Company Shareholders Meeting, 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 the light of the circumstances under which they were made, not misleading;
provided, that
, neither party makes any such covenant with respect to information supplied by the other party. In addition, the information supplied or to
be supplied by or on behalf of either party hereto for inclusion in any filing pursuant to Rule 165 and Rule 425 under the Securities Act or
Rule 14a-12
under the Exchange Act (each, a
Regulation
M
-A
Filing
) shall not, at the time any such
Regulation M-A
Filing is filed with the SEC, 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 the light of the circumstances under which they were made, not misleading;
provided, that
,
neither party makes any such covenant with respect to information supplied by the other party.
(e) The Company shall use commercially
reasonable efforts to cause Jones Day (
Jones Day
) to deliver to the Company, and Parent shall use commercially reasonable efforts to cause Wilson Sonsini Goodrich & Rosati, Professional Corporation
(
WSGR
) to deliver to Parent any opinions relating to the Tax treatment of the Merger that are required in connection with the Form
S-4.
In connection with such opinions, upon the request of
Jones Day and/or WSGR, officers of each of the Company and Parent shall use commercially reasonable efforts to deliver to Jones Day and WSGR, as applicable, certificates, dated as of the necessary date for the Form
S-4,
signed by such officer of the Company or Parent, as applicable, containing customary representations in connection with such opinions.
(f) Without limiting the generality of the foregoing, prior to the Effective Time (i) the Company and Parent shall notify each other as
promptly as practicable upon becoming aware of any event or circumstance which should be described in an amendment of, or supplement to, the Form
S-4,
Proxy Statement/Prospectus or any Regulation
M-A
Filing so that any such document would not include any misstatement of material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they
are made, not misleading, and as promptly as practicable thereafter, an appropriate amendment or supplement describing such information shall be filed promptly with the SEC and, to the extent required by
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Applicable Law or the SEC, disseminated to the shareholders of the Company. The Company and Parent shall each notify the other as promptly as practicable after the receipt by such party of any
written or oral comments of the SEC or its staff on, or of any written or oral request by the SEC or its staff for amendments or supplements to, the
Form S-4,
the Proxy Statement/Prospectus or any
Regulation
M-A
Filing, and shall promptly supply the other with copies of all correspondence between it or any of its representatives and the SEC or its staff with respect to any of the foregoing filings.
(g) Each of the Company and Parent shall make any other necessary filings with respect to the Merger under the Securities Act and the Exchange
Act and the rules and regulations thereunder and shall use reasonable best efforts to ensure that such filings after the date of this Agreement and prior to the Closing Date (and, if amended or superseded by a filing prior to the Closing Date, then
on the date of such filing) will not contain any untrue statement of a material fact or omit (or will have 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, not misleading;
provided, that
, neither party makes any such covenant with respect to information supplied by the other party. In addition, Parent shall use reasonable best efforts to take all actions
required under any applicable federal or state securities or Blue Sky Laws in connection with the issuance of shares of Parent Common Stock in the Merger.
Section 6.5
Reasonable Best Efforts to Complete
.
(a) Upon the terms and subject to the conditions set forth in this Agreement, each of Parent, Merger Sub, Merger Sub LLC and the Company shall
use their reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other party or parties hereto in doing, all things reasonably necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement (including the Merger), including using reasonable best efforts to: (i) cause the conditions to the Merger set forth in
Article VII
hereof to be satisfied or fulfilled, (ii) obtain all necessary actions or
non-actions,
waivers, consents, approvals, Orders and authorizations from Governmental Entities, obtain the
expiration or termination of any applicable waiting periods, make all necessary registrations, declarations and filings (including registrations, declarations and filings with Governmental Entities, if any), and take all steps as may be necessary to
obtain any actions or
non-actions,
waivers, consents, approvals, Orders and authorizations from, and to avoid an action or proceeding by, any Governmental Entity and any impediment to the consummation of the
Merger under any applicable Laws (including Antitrust Laws), (iii) defend against any Legal Proceeding challenging this Agreement or the consummation of the Merger or the other transactions contemplated by this Agreement, and (iv) execute or
deliver any additional instruments reasonably necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. Notwithstanding anything to the contrary herein, if the counterparty to any Contract or
the lessor or licensor under any Lease, conditions its grant of a consent upon, or otherwise requires in response to a notice or consent request regarding this Agreement, the payment of any fee or other financial consideration, the Company shall not
make such payments without Parents consent (which consent shall not be unreasonably withheld, conditioned or delayed).
(b) Without
limiting the generality of the foregoing provisions of
Section
6.5(a)
, as soon as may be reasonably practicable following the execution and delivery of this Agreement, each of Parent and the Company shall file with the FTC
and the Antitrust Division of the DOJ a Notification and Report Form relating to this Agreement and the transactions contemplated hereby (including the Merger) as required by the HSR Act (and each of Parent and the Company shall use reasonable best
efforts to file such Form as promptly as practicable, and in any event no later than twelve (12) Business Days, following the execution and delivery of this Agreement), as well as comparable
pre-merger
notification filings, forms and submissions with any foreign Governmental Entity that may be required by the Antitrust Laws of any applicable foreign jurisdiction (including the Specified Jurisdictions) (and each of Parent and the Company shall use
reasonable best efforts to file such filings, forms and submissions as promptly as practicable, and in any event no later than twenty-three (23) Business Days, following the execution and delivery of this Agreement). Each of Parent and the
Company
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shall use reasonable best efforts to promptly (i) cooperate and coordinate with the other in the making of such filings, (ii) supply the other with any information that may be required
in order to effectuate such filings, and (iii) supply any additional information that reasonably may be required or requested by the FTC, the DOJ or the competition or merger control authorities of any other applicable jurisdiction. Each party
hereto shall promptly inform the other party or parties hereto, as the case may be, of any communication from any Governmental Entity regarding any of the transactions contemplated by this Agreement (including the Merger). If any party hereto or
Affiliate thereof receives a request for additional information or documentary material from any such Governmental Entity with respect to the transactions contemplated by this Agreement (including the Merger), then such party shall use reasonable
best efforts to provide, or cause to be provided, as soon as reasonably practicable and after consultation with the other party, any additional information that reasonably may be required or requested by such Governmental Entity and otherwise make
an appropriate response in compliance with such request. Subject to Applicable Law, no filing of, or amendment or supplement to, or written correspondence with any Governmental Entity or its staff with respect to such Antitrust Laws shall be made by
the Company or Parent without providing the other party a reasonable opportunity to review and comment thereon and consider in good faith the comments of the party with respect thereto.
(c) In connection with and without limiting the foregoing, to the extent reasonably practicable and unless prohibited by Applicable Law or by
the applicable Governmental Entity, the parties hereto agree to:
(i) give each other reasonable advance notice of all
substantive discussions or meetings with any Governmental Entity relating to the Merger or any other transactions contemplated hereby;
(ii) give each other an opportunity to participate in each of such substantive discussions or meetings where permitted by
Applicable Law and the relevant Governmental Entity;
(iii) keep the other party reasonably apprised with respect to any
substantive communications with any Governmental Entity regarding the Merger or any other transactions contemplated hereby;
(iv) cooperate in the filing of any analyses, presentations, memoranda, briefs, arguments, opinions or other written
communications explaining or defending the Merger or any other transactions contemplated hereby, articulating any regulatory or competitive argument and/or responding to requests or objections made by any Governmental Entity;
(v) provide each other (or counsel of each party, as appropriate) with copies of all written communications to or from any
Governmental Entity relating to the Merger or any other transactions contemplated hereby; and
(vi) cooperate and provide
each other with a reasonable opportunity to participate in, and consider in good faith the views of the other with respect to, all material deliberations with any Governmental Entity with respect to all efforts to satisfy the conditions set forth in
Section
7.1(b)
and
Section
7.1(c)
.
Any such disclosures, rights to participate or
provisions of information by one party to the other under this
Section
6.5
may be made on an outside counsel-only basis to the extent required under applicable Law or as appropriate to protect confidential business
information, and may be withheld or redacted as necessary to comply with contractual arrangements, to preserve attorney-client, attorney work product or other legal privilege, or the extent required under applicable Law.
(d) Without limiting the generality of the foregoing provisions of
Section
6.5(a)
, in the event that any Takeover
Law is or becomes applicable to this Agreement or any of the transactions contemplated by this Agreement (including the Merger), the Company, at the direction of the Company Board, shall use reasonable best efforts to ensure that the transactions
contemplated by this Agreement (including the Merger) may be consummated as promptly as practicable on the terms and subject to the conditions set forth in this Agreement, and otherwise to minimize the effect of such statute or regulation on this
Agreement and the transactions contemplated hereby (including the Merger).
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(e) Parent shall take all actions with respect to a Divestible Product Line (as defined below)
to, as promptly as practicable, eliminate any concerns on the part of, or to satisfy any conditions imposed by, any Governmental Entity with jurisdiction over the enforcement of any Antitrust Law, regarding the Merger, including by
(i) proposing, negotiating, offering to commit and effecting (and if such offer is accepted, committing to and effecting), by consent decree, hold separate order or otherwise, the license, sale, divestiture or disposition of such assets
(including Intellectual Property Rights and any assets used in multiple product lines, operations or businesses of Parent, the Company or any of their respective Subsidiaries (
Mixed Use Assets
)), businesses and product lines of
Parent, the Company and their respective Subsidiaries and Affiliates, now owned or hereafter sought to be acquired, (such license, sale, divestiture or disposition, a Divestiture), (ii) otherwise offering or offering to commit to
operational restrictions, whether or not such restrictions limit or modify Parents rights of ownership in, or ability to conduct its businesses, product lines or operation of its or its Subsidiaries assets (including Intellectual
Property Rights and Mixed Use Assets), including, after the Closing, the businesses, product lines or operation of the assets (including Intellectual Property Rights and Mixed Use Assets) of the Company or its Subsidiaries, in each case as
determined necessary or advisable in order to obtain all consents necessary to satisfy the conditions set forth in Section 7.1(b) and Section 7.1(c) prior to the Termination Date and/or to avoid the entry of, or to effect the dissolution
of, any Order that would have the effect of preventing or materially delaying the consummation of the Merger and the other transactions contemplated by this Agreement, and (iii) proposing, negotiating, offering to commit and effecting (and if
such offer is accepted, committing to and effecting) supply and other commercial arrangements;
provided
,
however
, notwithstanding anything to the contrary set forth in this Agreement, Parent shall not be required to (i) sell,
divest, exclusively license, hold separate, or otherwise dispose of, or (ii) grant any
non-exclusive
license, accept any operational restrictions or take or commit to take any actions (including supply
and other commercial arrangements) which restrictions or actions would limit Parents or any of its Subsidiaries freedom of action with respect to, assets, licenses, product lines, operations or businesses of Parent, the Company or any of
their respective Subsidiaries that, individually or in the aggregate, generated total collective revenues in excess of $66,000,000 in Parents or the Companys fiscal year 2017, as applicable (the
Revenue Cap
), provided,
for purposes of calculating the Revenue Cap, with respect to Mixed Use Assets, only the revenue generated by the Divestible Product Line shall be counted towards the Revenue Cap, except that, in the case of clause (ii), the revenues of the asset,
license, product line, operation or business impacted by such
non-exclusive
license, operational restriction or action, respectively, shall be considered in determining whether the Revenue Cap has been
achieved only if: (A) such restrictions or actions would limit Parents or its Affiliates freedom of action after the Effective Time with respect to such impacted asset, product line, operation or business, respectively, of Parent,
the Company or any of their respective Subsidiaries in a respect that is material to such impacted asset, product line, operation or business, respectively, of Parent, the Company or any of their respective Subsidiaries (it being understood that an
obligation to continue selling or supporting a product in any jurisdiction shall not, in and of itself, be construed to be a material limitation), or (B) in the case of a
non-exclusive
license, the
adverse effect of such
non-exclusive
license is material with respect to the impacted asset, license, product line, operation or business, respectively of Parent, the Company or any of their respective
Subsidiaries. Notwithstanding the foregoing, in no event shall Parent be required to (i) sell, divest, license, hold separate, or otherwise dispose of any wafer fabrication facility or wafer fabrication equipment of Parent, the Company or any
of their respective Subsidiaries if such wafer fabrication facility or wafer fabrication equipment is used in the production of multiple product lines that, in the aggregate, generated revenue in excess of the Revenue Cap in fiscal year 2017, (ii)
license Intellectual Property Rights of Parent, the Company or their respective Subsidiaries, to a Third Party, if Parent, the Company or such Subsidiaries (as applicable) are not permitted by the Governmental Entity (with jurisdiction over the
enforcement of any Antitrust Law that is seeking such antitrust remedy) to contractually prohibit such Third Party from using such licensed Intellectual Property Rights to sell, manufacture or distribute any
Non-Divestible
Product Line, or (iii) sell or divest Intellectual Property Rights of Parent, the Company or their respective Subsidiaries, to a Third Party, if Parent, the Company or such Subsidiaries (as
applicable) are not permitted by the Governmental Entity (with jurisdiction over the enforcement of any Antitrust Law that is seeking such antitrust remedy) to (A) contractually require such Third Party to license such Intellectual Property
Rights to any of Parent, the Company or their respective Subsidiaries (to the extent such Intellectual Property Rights is necessary to sell, manufacture or distribute any
Non-Divestible
Product Line and
(B) contractually prohibit such Third Party from
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using such Intellectual Property Rights to sell, manufacture or distribute any
Non-Divestible
Product Line. For the purposes of this
Section
6.5(e)
, (x) a
Divestible Product Line
shall mean any product lines, operations or businesses of Parent, the Company or any of their respective Subsidiaries that, individually or in the aggregate,
generated total collective revenues up to and including the Revenue Cap, for which any Governmental Entity with jurisdiction over the enforcement of any Antitrust Law seeks an antitrust remedy, including a Divestiture, and (y) a
Non-Divestible
Product Line
shall mean any product lines, operations or businesses of Parent, the Company or any of their respective Subsidiaries that are not a Divestible Product Line.
Section 6.6
Access
. During the period commencing with the execution and delivery of this
Agreement and continuing until the earlier to occur of the termination of this Agreement pursuant to
Article VIII
and the Effective Time, each of the Company and Parent shall afford the other party and its respective Representatives
reasonable access during normal business hours and in a manner that does not unreasonably disrupt or interfere with business operations, upon reasonable notice, to its properties, books and records, Contracts, Permits, and personnel, as such party
may reasonably request;
provided
,
however
, that no information or knowledge obtained by Parent or the Company in any investigation conducted pursuant to this
Section
6.6
shall affect or be deemed to modify any
representation or warranty of the Company, Parent, Merger Sub or Merger Sub LLC set forth herein or the conditions to the obligations of Parent, Merger Sub, Merger Sub LLC or the Company to consummate the transactions contemplated hereby, including
the Merger, or the remedies available to the parties hereunder; and
provided further
, that the terms and conditions of the Confidentiality Agreement (as amended pursuant to
Section
6.9
) shall apply to any information
provided to Parent or the Company pursuant to this
Section
6.6
; and
provided further
, that neither the Company nor Parent shall be required to, nor shall they be required to cause their respective Subsidiaries to,
afford access or disclose any information that would (a) in the reasonable judgment of the Company or Parent, as applicable, violate any Applicable Law or Order, (b) result in a violation of a confidentiality agreement with a third party
entered into prior to the date of this Agreement or entered into after the date of this Agreement in the ordinary course of business consistent with past practice or (c) jeopardize the attorney-client, attorney work product or other legal
privilege of a party or any of its Subsidiaries. In the event that the Company or Parent does not provide access to or disclose information to the other party in reliance on the final proviso of the preceding sentence, the disclosing party shall use
reasonable best efforts to communicate such information in a manner that does not result in the violation of any such obligation, Law or Order or the jeopardy of such protections. Notwithstanding the foregoing, neither Parent nor the Company nor any
of their respective Subsidiaries or Representatives shall conduct or cause to be conducted any sampling, testing or other invasive investigation of the air, soil, soil gas, surface water, groundwater, building materials or other environmental media.
Section 6.7
Notification
.
(a) At all times during the period commencing with the execution and delivery of this Agreement and continuing until the earlier to occur of
the termination of this Agreement pursuant to
Article VIII
and the Effective Time, the Company shall give prompt notice to Parent upon becoming aware (i) that any representation or warranty made by the Company in this Agreement has
become untrue or inaccurate such that the condition set forth in
Section
7.2(a)
would not be satisfied, (ii) of any failure of the Company to comply with any covenant or agreement to be complied with or satisfied by it
under this Agreement such that the condition set forth in
Section
7.2(b)
would not be satisfied or (iii) of any Legal Proceeding pending or, to the Knowledge of the Company, threatened, or any Order that relates to the
transactions contemplated by this Agreement (including the Merger);
provided
,
however
, that no such notification shall affect or be deemed to modify any representation or warranty of the Company set forth herein or the conditions to
the obligations of Parent, Merger Sub and Merger Sub LLC to consummate the transactions contemplated hereby, including the Merger, or the remedies available to the parties hereunder; and
provided further
, that the terms and conditions of the
Confidentiality Agreement (as amended pursuant to
Section
6.9
) shall apply to any information provided pursuant to this
Section
6.7(a)
.
(b) At all times during the period commencing with the execution and delivery of this Agreement and continuing until the earlier to occur of
the termination of this Agreement pursuant to
Article VIII
and the
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Effective Time, each party shall give prompt notice to the other party of any notice or other communication received by it or any of its Subsidiaries from any third party, subsequent to the date
of this Agreement and prior to the Effective Time, alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement (including the Merger);
provided
,
however
, that
no such notification shall affect or be deemed to modify any representation or warranty set forth herein or the conditions to the obligations of any party to consummate the transactions contemplated hereby, including the Merger, or the remedies
available to the parties hereunder; and
provided further
, that the terms and conditions of the Confidentiality Agreement (as amended pursuant to
Section
6.9
) shall apply to any information provided pursuant to this
Section
6.7(b)
.
(c) At all times during the period commencing with the execution and delivery of this Agreement
and continuing until the earlier to occur of the termination of this Agreement pursuant to
Article VIII
and the Effective Time, Parent shall give prompt notice to the Company upon becoming aware that (i) any representation or warranty
made by it, Merger Sub or Merger Sub LLC in this Agreement has become untrue or inaccurate such that the condition set forth in
Section
7.3(a)
would not be satisfied, (ii) of any failure of Parent, Merger Sub or Merger
Sub LLC to comply with any covenant or agreement to be complied with or satisfied by it under this Agreement in such that the condition set forth in
Section
7.3(b)
would not be satisfied, or (iii) of any Legal
Proceeding pending or, to the Knowledge of Parent, threatened, or any Order, that relates to the transactions contemplated by this Agreement (including the Merger);
provided
,
however
, that no such notification shall affect or be deemed
to modify any representation or warranty of Parent set forth herein or the conditions to the obligations of the Company to consummate the transactions contemplated hereby, including the Merger, or the remedies available to the parties hereunder and
provided further
, that the terms and conditions of the Confidentiality Agreement (as amended pursuant to
Section
6.9
) shall apply to any information provided pursuant to this
Section
6.7(c)
.
Section 6.8
Certain Litigation
. The Company shall promptly advise Parent in writing after
becoming aware of any Legal Proceeding commenced after the date hereof against the Company or any of its directors by any shareholder of the Company (on their own behalf or on behalf of the Company) relating to this Agreement or the transactions
contemplated hereby (including the Merger) and shall keep Parent reasonably informed regarding any such Legal Proceeding. The Company shall give Parent the opportunity to consult with the Company regarding the defense or settlement of any such
shareholder litigation and shall consider Parents views with respect to such shareholder litigation and shall not settle any such shareholder litigation without the prior written consent of Parent (which consent shall not be unreasonably
withheld, delayed or conditioned).
Section 6.9
Confidentiality
. Parent, Merger Sub, Merger
Sub LLC and the Company hereby acknowledge that Parent and the Company have previously executed a Confidentiality Agreement, dated December 9, 2017 (as amended, the
Confidentiality Agreement
), which shall continue in full
force and effect in accordance with its terms;
provided
,
however
, that notwithstanding the foregoing, effective as of the execution and delivery hereof, the Confidentiality Agreement shall be deemed to be amended so as to permit Parent
to take any action contemplated by this Agreement, including the making of any counteroffer or proposal contemplated by
Section
6.2(c)
or
Section
8.1(e)(ii)
(which deemed amendment shall survive
any termination of this Agreement in accordance with its terms or otherwise).
Section 6.10
Public
Disclosure
. Each of the Company and Parent shall consult with one another prior to issuing, and provide each other with the opportunity to review and comment upon, and receive the consent of the other for, any public announcement, statement
or other disclosure with respect to this Agreement or the Merger and shall not issue any such public announcement or statement prior to such consultation, except as may be required by Applicable Law or by the rules and regulations of the Nasdaq (in
which event such party shall endeavor, on a basis reasonable under the circumstances, to provide a meaningful opportunity to the other party to review and comment upon such public announcement or statement in advance and shall give due consideration
to all reasonable additions, deletions or changes suggested thereto);
provided that
, each of the Company and Parent may make press releases, public announcements or public statements concerning this
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Agreement or the Merger that consist solely of information previously disclosed in all material respects in previous press releases, public announcements or public statements made by Parent
and/or the Company in compliance with this
Section
6.10
. Notwithstanding anything else to the contrary set forth in this Agreement, the Company shall not be required to provide Parent with an opportunity to review, comment
or approve any statement, release or disclosure in response to or in connection with the receipt and existence of an Acquisition Proposal, its consideration of making or its making of a Company Board Recommendation Change or any matters related
thereto. The Company and Parent agree to issue the previously agreed upon form of joint press release announcing the execution and delivery of this Agreement promptly following the execution of this Agreement.
Section 6.11
Company Compensatory Awards
.
(a)
Company RSUs
. At the Effective Time, each Company RSU (or portion thereof) that is outstanding and unvested immediately prior to
the Effective Time (and does not vest as a result of the consummation of the transactions contemplated hereby) shall, by virtue of the Merger, be assumed by Parent (each, an
Assumed RSU
). Each such Assumed RSU shall be subject to
substantially the same terms and conditions as applied to the related Company RSU immediately prior to the Effective Time, including the vesting schedule applicable thereto, except that the number of shares of Parent Common Stock subject to each
Assumed RSU shall be equal to the product of (i) the number of shares of Company Common Stock underlying such unvested Company RSU award as of immediately prior to the Effective Time (with any performance milestones deemed achieved based on
maximum level of performance) multiplied by (ii) the Equity Award Exchange Ratio (with the resulting number, rounded down to the nearest whole share). Any Company RSU that is vested immediately prior to the Effective Time (taking into account
any acceleration of vesting as a result of the consummation of the transactions contemplated hereby) but as to which the underlying share of Company Common Stock has not been issued by the Effective Time, will be issued as of immediately prior to
the Effective Time and will be treated as outstanding Company Common Stock for purposes of Section 2.7, and shall receive the Merger Consideration, subject to applicable tax withholding. The applicable taxes required to be withheld from the
Merger Consideration shall reduce first the Cash Consideration portion of the Merger Consideration with any remaining amount reducing the Stock Consideration portion of Merger Consideration, with the value of the stock portion for purposes of such
deduction determined based on the Parent Average Closing Price.
(b)
Company Restricted Stock
. At the Effective Time, each award of
Company Restricted Stock (or portion thereof) that is outstanding and unvested immediately prior to the Effective Time shall become fully vested at the Effective Time by virtue of the Merger and be treated as a share of Company Common Stock
that shall be canceled and extinguished and automatically converted into the right to receive an amount in cash and stock equal to the Merger Consideration pursuant to
Section
2.7
. The payment of Merger Consideration
pursuant to this
Section
6.11(b)
shall be reduced by any applicable tax withholding required under the Code or any Applicable Law. The applicable taxes required to be withheld from the Merger Consideration shall reduce
first the Cash Consideration portion of such amounts with any remaining amount reducing the Stock Consideration portion of such amounts, with the value of the stock portion for purposes of such deduction determined based on the Parent Average
Closing Price.
(c)
Company Options
.
(i) At the Effective Time and except as set forth in
Section
6.11(c)(ii)
, each Company Option (or
portion thereof) that is outstanding, whether vested or unvested, as of immediately prior to the Effective Time shall be assumed by Parent (each, an
Assumed Option
). Each such Assumed Option shall be subject to substantially the
same terms and conditions as applied to the related Company Option immediately prior to the Effective Time, including the vesting schedule applicable thereto, except that (A) the number of shares of Parent Common Stock subject to each Assumed
Option shall be equal to the product of (x) the number of shares of Company Common Stock underlying such unvested Assumed Option as of immediately prior to the Effective Time multiplied by (y) the Equity Award Exchange Ratio (with the
resulting number
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rounded down to the nearest whole share), and (B) the per share exercise price of each Assumed Option shall be equal to the quotient determined by dividing (x) the exercise price per
share at which such Assumed Option was exercisable immediately prior to the Effective Time by (y) the Equity Award Exchange Ratio (with the resulting price per share rounded up to the nearest whole cent). Each Assumed Option that qualified as
an incentive stock option prior to the Effective Time shall continue to qualify as an incentive stock option as defined in Section 422 of the Code following the Effective Time to the extent permitted under Section 422 of the Code The
assumption of Assumed Options pursuant to this Section shall be effected in a manner that satisfies the requirements of Sections 409A and 424(a) of the Code and the Treasury Regulations promulgated thereunder, and this
Section
6.11(c)
will be construed consistent with this intent.
(ii) At the Effective Time, each
Company Option (or portion thereof) that is outstanding and vested as of immediately prior to the Effective Time (or vests as a result of the consummation of the transactions contemplated hereby) and held by a holder who is not an employee of the
Company or its Subsidiaries as of immediately prior to the Effective Time (each, a
Cancelled Option
) shall, by virtue of the Merger and at the direction of Parent (which is hereby given pursuant to this Agreement), be cancelled
and terminated and converted into the right to receive the Merger Consideration in respect of each Net Option Share covered by such Cancelled Option;
provided
that, in lieu of the Merger Consideration, any fractional Net Option Share (after
aggregating all shares represented by all Cancelled Options held by such individual) shall be settled in cash based on the Cash Equivalent Consideration (such consideration for each Net Option Share being hereinafter referred to as the
Option Consideration
). The holder of each Cancelled Option shall receive at the Effective Time from the Company, or as soon as practicable thereafter (but in no even later than the Companys first full payroll after the
Effective Time) from the Surviving Company, the Option Consideration. If the exercise price per share of any such Cancelled Option is equal to or greater than the Merger Consideration, such Company Option shall, by direction of Parent (which is
hereby given pursuant to this Agreement), be cancelled without any payment being made in respect thereof. The payment of Option Consideration to the holder of a Cancelled Option shall be reduced by any applicable tax withholding required under the
Code, any Applicable Law, or as otherwise agreed by the parties at the time the Company Option was granted. The applicable taxes required to be withheld from the Option Consideration shall reduce first the Cash Consideration portion of the Option
Consideration with any remaining amount reducing the Stock Consideration portion of the Option Consideration, with the value of the stock portion for purposes of such deduction determined based on the Parent Average Closing Price.
(d)
Company
SARs
. At the Effective Time, each Company SAR (or portion thereof) that is outstanding, whether vested or unvested,
shall, by virtue of the Merger and at the direction of Parent (which is hereby given pursuant to this Agreement), be cancelled and terminated and converted into the right to receive, a cash amount equal to the product of (i) the number of
shares of Company Common Stock issuable upon exercise of the Company SAR, multiplied by (ii) the excess, if any of (A) the Cash Equivalent Consideration over (B) the strike price of such Company SAR (the
SAR
Consideration
). The holder of each Company SAR shall receive at the Effective Time from the Company, or as soon as practicable thereafter (but in no event later than the Companys first regular payroll date following the Effective
Time) from the Surviving Company, the SAR Consideration, subject to applicable tax withholding required under the Code or any Applicable Law.
(e)
Termination of
Non-U.S.
Company Compensatory Awards
. Notwithstanding the provisions
above, Parent may, prior to the Effective Time, determine reasonably and in good faith, subject to the consent of the Company, which shall not be unreasonably withheld (it being understood that withholding consent in reliance on advice of Company
counsel shall not be deemed unreasonable) that any Company Compensatory Award that is subject to the Applicable Laws of a
non-U.S.
jurisdiction may be treated in a manner other than prescribed by
Sections
6.11(a)
through
6.11(d)
, as applicable, to the extent that (i) Parent reasonably and in good faith determines that (A) the manner in which such Company Compensatory Award would otherwise be treated
pursuant to
Sections
6.11(a)
through
6.11(d)
, as applicable, would result in a violation of Applicable Laws or a materially adverse tax consequence to the individual holding such Company Compensatory Award in the
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applicable
non-U.S.
jurisdiction and (B) such different treatment is necessary to comply with such Applicable Laws and (ii) such different
treatment is no less favorable to the awardholder than as set forth in with
Sections
6.11(a)
through
6.11(d)
, as applicable.
(f)
Necessary Actions; Form
S-8
. The Company shall, at Parents
direction (which is hereby given pursuant to this Agreement), take all actions reasonably necessary to effect the transactions contemplated by this
Section
6.11
under all Company Stock Plans and Company Compensatory Awards
or any other plan or arrangement of the Company, including delivering all required notices, obtaining all necessary consents, and making any determinations and/or resolutions of the Company Board or a committee thereof. Promptly after the Effective
Time, but in no event later than 10 Business Days following the Effective Time, Parent shall prepare and file with the SEC a registration statement on Form
S-8
(or other appropriate form) relating to the
shares of Parent Common Stock issuable with respect to assumed or converted Company Compensatory Awards under this
Section
6.11
;
provided, however
, that Parent shall not be deemed to have breached its obligations
hereunder if Parent shall fail to fulfill its obligations under this
Section
6.11(f)
at a time when trading of the Parent Common Stock has been suspended globally under Parents then-effective registration statements
(it being understood and agreed that if Parent is unable to file such registration statement on Form
S-8
due to a global trading suspension under Parents then-effective registration statements, then
Parent shall file such registration statement as soon as practicable after trading has been restored).
Se
ction 6.12
Employee Matters
.
(a) The Company shall terminate, effective as of the day immediately preceding the date the Company becomes a member of the same Controlled
Group of Corporations (as defined in Section 414(b) of the Code) as Parent (the
401(k) Termination Date
), any and all 401(k) plans maintained by the Company or any of its Subsidiaries, unless Parent provides written notice to
the Company that such 401(k) plan(s) shall not be terminated at least ten (10) Business Days prior to the Closing Date. The Company shall provide Parent evidence that the 401(k) plan(s) of the Company and its Subsidiaries have been terminated
pursuant to resolutions of the Company Board or the board of directors of its Subsidiaries, as applicable. The form and substance of such resolutions shall be subject to the reasonable review and approval of Parent, which shall not be unreasonably
withheld or delayed. As soon as practicable following the 401(k) Termination Date, Parent shall permit all Continuing Employees who were eligible to participate in any 401(k) plan maintained by the Company or any of its Subsidiaries immediately
prior to the 401(k) Termination Date to participate in Parents 401(k) plan, and shall permit each such Continuing Employee to elect to transfer his or her account balance when distributed from any terminated 401(k) plan maintained by the
Company or any of its Subsidiaries, including any outstanding participant loans from such 401(k) plans, to Parents 401(k) plan, except to the extent accepting such transfers would adversely affect the
tax-qualified
status of the Parent 401(k) plan, or as may be prohibited by Parents 401(k) plan.
(b) From the Effective Time until the first anniversary of the Closing Date (the
Transition Period
), Parent shall cause the
compensation and benefits package provided to each Continuing Employee to be no less favorable, in the aggregate, than the compensation and benefits package, in the aggregate, provided to such Continuing Employee immediately prior to the Effective
Time. During the Transition Period, each Continuing Employee will be eligible to receive (i) base wages or salary, as applicable, that is not less than the base wages or salary, as applicable, provided to such Continuing Employee immediately
prior to the Effective Time and (ii) severance benefits not less favorable in amount or with regard to terms and conditions to receive such severance benefits than those provided to such Continuing Employee immediately prior to the Effective
Time.
(c) As of the Effective Time, with respect to Continuing Employees, Parent shall cause the service of each such Continuing Employee
with the Company and its Subsidiaries prior to the Effective Time to be recognized for purposes of eligibility to participate, levels of benefits and vesting (but not for purposes of benefit accrual) under each severance, vacation, fringe or other
welfare benefit plan, program or arrangement of the Parent or the Surviving Company, as applicable, but in which any Continuing Employee is or becomes eligible to
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participate, but solely to the extent permitted by Applicable Law and to the extent such credit would not result in a duplication of benefits. From and after the Effective Time, Parent shall, to
the extent permitted by Applicable Law and the terms of the applicable plans, (i) cause any
pre-existing
conditions or limitations and eligibility waiting periods under any U.S. group health plans of
Parent or its Subsidiaries to be waived with respect to the Continuing Employees and their eligible dependents and (ii) give each of the Continuing Employee in the U.S. credit for the plan year in which the Effective Time occurs toward
applicable deductibles and annual out of pocket limits for expenses incurred prior to the Effective Time for which payment has been made.
(d) Parent will, and will cause the Surviving Company, its Subsidiaries and their permitted successors and assigns, to honor and perform the
individual severance arrangements and any plans, programs or arrangements required to be maintained by the Company or one of its Subsidiaries by Applicable Law, as disclosed on
Section
6.12(d)
of the Company Disclosure
Letter.
(e) Nothing contained herein shall be construed as requiring Parent, the Company or any of their Affiliates to continue any
specific benefit plan or program, or to continue the employment of any specific person. No provision of this Agreement shall be construed to create any right to any compensation or benefits on the part of any Continuing Employee or other future,
present or former employee of Parent, the Company or their respective Affiliates.
Section
6.11
and
Section
6.12
are intended to be for the sole benefit of the parties to this Agreement, and nothing
in
Section
6.11
and
Section
6.12
or elsewhere in this Agreement shall be deemed to confer upon any other person any rights or remedies hereunder or make any employee or other service provider of
the parties or their respective Subsidiaries a third party beneficiary of this Agreement. No provision of this Agreement shall operate as an amendment to any benefit plan maintained by the Company or Parent or their respective Affiliates. Further,
Parent, the Company and their respective Affiliates retain the right to amend or terminate their benefit plans at any time and from time to time, subject to the provisions of this Agreement and the terms of such plans.
Section 6.13
Directors
and Officers
Indemnification and
Insurance
.
(a) For six (6) years after the Effective Time, Parent shall cause the Surviving Company and its Subsidiaries to honor
and fulfill in all respects the obligations of the Company under its certificate of incorporation and bylaws and its Subsidiaries under their respective certificates of incorporation and bylaws (and other similar organizational documents) and all
agreements for indemnification, exculpation of liability or advancement of expenses, in effect as of the date hereof between the Company or any of its Subsidiaries and any of their respective current or former directors or officers or any person who
becomes a director or officer prior to the Effective Time (the
Indemnified Parties
), all of which shall continue in full force and effect in accordance with their terms and shall not be amended, repealed or otherwise modified in
any manner that would adversely affect the rights thereunder of such Indemnified Parties. The foregoing notwithstanding, if any claim, action, suit, proceeding or investigation (whether arising before, at or after the Effective Time) is made against
any Indemnified Party with respect to matters subject to indemnification hereunder on or prior to the sixth anniversary of the Effective Time, the rights to indemnification and exculpation from liabilities and advancement of expenses referenced in
the preceding sentence shall continue in effect until the final disposition of such claim, action, suit, proceeding or investigation.
(b)
For a period of six (6) years after the Effective Time, Parent and the Surviving Company shall maintain in effect the Companys current directors and officers liability insurance (
D&O Insurance
) in
respect of facts, events, acts or omissions occurring at or prior to the Effective Time, covering each person covered by the D&O Insurance immediately prior to the Effective Time, on terms with respect to the coverage and amounts no less
favorable to such insured persons than those of the D&O Insurance in effect on the date of this Agreement;
provided
,
however
, that the Surviving Company may, at its option, substitute therefor policies of Parent, the Surviving
Company or any of their respective Subsidiaries containing terms with respect to coverage and amounts no less favorable to such insured persons than the D&O Insurance,
provided further
,
however
, that in satisfying its obligations
under this
Section
6.13(b)
, Parent and the Surviving Company shall not be obligated
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to pay annual premiums in excess of two hundred thirty-five percent (235%) of the amount paid by the Company for such insurance coverage for its last full fiscal year (such two hundred
thirty-five percent (235%) amount, the
Maximum Annual Premium
) (which premiums the Company represents and warrants to be as set forth in
Section
6.13
of the Company Disclosure Letter),
provided further
that if the annual premiums of such insurance coverage exceed such amount, Parent and the Surviving Company shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding the Maximum Annual Premium. Prior to
the Effective Time, notwithstanding anything to the contrary set forth in this Agreement, the Company may purchase a
six-year
tail prepaid policy (the
Tail Policy
) on the D&O
Insurance on terms and conditions no less favorable to the insured Persons, in the aggregate, than the D&O Insurance and for an amount not to exceed two hundred thirty-five percent (235%) of the amount paid by the Company coverage for its last
full fiscal year. In the event that the Company does not purchase the Tail Policy, Parent may purchase a Tail Policy on the D&O Insurance on terms and conditions no less favorable to the insured Persons, in the aggregate, than the D&O
Insurance. In the event that either the Company or Parent shall purchase such a Tail Policy prior to the Effective Time, Parent and the Surviving Company shall maintain such Tail Policy in full force and effect and continue to honor their respective
obligations thereunder, in lieu of all other obligations of Parent and the Surviving Company under the first sentence of this
Section
6.13(b)
for so long as such Tail Policy shall be maintained in full force and effect.
(c) Each of the Indemnified Parties or other persons who are beneficiaries under the D&O Insurance, the indemnification rights
referred to in
Section
6.13(a)
or the Tail Policy referred to in
Section
6.13(b)
(and their heirs and representatives) are intended to be third party beneficiaries of this
Section
6.13
, with full rights of enforcement as if a party thereto.
(d) In the event Parent or the Surviving
Company (i) consolidates with or merges into any other Person and shall not be the continuing or surviving entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then
proper provision shall be made so that such continuing or surviving entity or transferee of such assets, as the case may be, shall assume the obligations set forth in this
Section
6.13
. The rights of the Indemnified Parties
(and other persons who are beneficiaries under the D&O Insurance, the indemnification rights referred to in
Section
6.13(a)
or the Tail Policy referred to in Section
6.13(b)
(and their heirs and
representatives)) under this
Section
6.13
shall be in addition to, and not in substitution for, any other rights that such persons may have under the certificate of incorporation, bylaws or other equivalent organizational
documents and any and all indemnification agreements of or entered into by the Company or any of its Subsidiaries, or Applicable Law (whether at law or in equity).
Section 6.14
Obligations of Merger Sub and Merger Sub LLC
. Parent shall take all action
necessary to cause Merger Sub, Merger Sub LLC and the Surviving Company to perform their respective obligations under this Agreement and to consummate the transactions contemplated by this Agreement, including the Merger and payment of any amounts
payable hereunder, upon the terms and subject to the conditions set forth in this Agreement.
Section 6.15
Director and Officer Resignations
. Prior to the Closing Date, unless Parent
instructs the Company otherwise, the Company shall obtain the resignation of each individual serving as a director or officer of (or comparable position with) the Company and its Subsidiaries as of immediately following the Effective Time from his
or her position as a director or officer of (or comparable position with) the Company and its Subsidiaries (and not as an employee, if applicable, of the Company or any of its Subsidiaries), which resignations shall be effective immediately
following the Effective Time. For the avoidance of doubt, such resignation shall not (i) prejudice in any manner any contractual rights such officer or director may have with the Company or any of its Subsidiaries, (ii) cause such officer
or director to cease to become entitled to any benefit under any Employee Plan to which he/she would otherwise be entitled in his or her position as an employee of the Company or its Subsidiaries, as applicable or (iii) terminate or modify the
terms of any officers employment relationship with the Company or its Subsidiaries.
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Section 6.16
Debt Financing
.
(a) Parent shall use its reasonable best efforts to take or cause to be taken all actions and to do, or cause to be done, all things
reasonably necessary, proper or advisable to arrange and obtain the proceeds of the Debt Financing (including, to the extent required, complying with the full exercise of the flex provisions) at or prior to the Closing, including using
its reasonable best efforts to: (i) maintain in effect the Debt Commitment Letters in accordance with the terms and subject to the conditions (including the flex provisions) thereof, (ii) comply with its obligations under the
Debt Commitment Letters, (iii) negotiate and enter into definitive agreements with respect thereto on the terms and conditions (including the flex provisions) contained in the Debt Commitment Letters as promptly as practicable after
the date hereof, but in no event later than the Closing, or on such other terms and conditions no less favorable in the aggregate to Parent and Merger Sub than the terms and conditions contained in the Debt Commitment Letters (
provided
that
such other terms would not reasonably be expected to materially delay or hinder the Closing), (iv) satisfy on a timely basis (or obtain the waiver of) all conditions to funding that are within the control of Parent and Merger Sub in the Debt
Commitment Letters (or definitive agreements entered into with respect to the Debt Commitment Letter), (v) unless it has obtained alternative financing pursuant to Section 6.16(c) hereof, enforce its rights pursuant to the Debt Commitment
Letters, and (vi) in the event that all conditions in the Debt Commitment Letters have been satisfied, cause the Financing Sources to fund the Debt Financing at the Closing. Parent will pay, or will cause to be paid, all fees arising under the
Debt Commitment Letters as they become due.
(b) Subject to the terms and conditions of this Agreement, Parent will not permit any
amendment or modification to be made to, or any waiver of any provision or remedy pursuant to, the Debt Commitment Letters (other than pursuant to flex provisions contained in the Debt Commitment Letters) without the consent of the
Company if such amendment, modification or waiver would (i) reduce the aggregate amount of the Debt Financing to be funded on the Closing Date (unless Parent has a sufficient amount of available cash on hand from other sources to make the
representation set forth in
Section
4.16
as though made at the time of the effectuation of such amendment or modification), (ii) impose new or additional conditions or other terms to the Debt Financing or otherwise expand,
amend or modify any of the conditions to the receipt of the Debt Financing, in a manner that would reasonably be expected to: (A) delay, prevent or materially impede the consummation of the Merger, or (B) make the timely funding of the
Debt Financing, or the satisfaction of the conditions to obtaining the Debt Financing, less likely to occur in any material respect, or (iii) adversely impact the ability of Parent or Merger Sub to enforce its rights against the other parties
to the Debt Commitment Letters or the definitive agreements with respect thereto;
provided
, that for the avoidance of doubt, Parent may amend, amend and restate or replace the existing Debt Commitment Letters to add lenders, lead arrangers,
bookrunners, syndication agents or similar entities who had not executed the Debt Commitment Letters as of the date hereof. Parent shall promptly (i) furnish the Company complete, correct and executed copies of any amendments, restatements,
supplements, amendments and restatements, modifications, waivers or replacements to the Debt Commitment Letters and (ii) give the Company prompt notice of any breach (or threatened breach asserted in writing) by any party of the Debt Commitment
Letters of which Parent becomes aware or any termination thereof;
provided
that in no event shall Parent be under any obligation to disclose any information pursuant to clauses (i) or (ii) that would waive the protection of
attorney-client or similar privilege if such party shall have used reasonable best efforts to disclose such information in a way that would not waive such privilege. In addition to the foregoing, Parent shall not, and shall cause its Subsidiaries
not to, release or consent to the termination of the Debt Commitment Letters or of any individual lender under the Debt Commitment Letters, except (x) for assignments and replacements of an individual lender under the terms of, and only in
connection with, the syndication of the Debt Financing under the Debt Commitment Letters, (y) for replacements of the Debt Commitment Letters with alternative financing commitments pursuant to
Section
6.17(c)
, and
(z) in connection with a reduction of the aggregate amount of the Debt Financing otherwise permitted pursuant to this
Section
6.16
.
(c) In the event that any portion of the Debt Financing becomes unavailable on the terms and conditions set forth in the Debt Commitment
Letters (after giving effect to all applicable flex provisions), Parent shall use its reasonable best efforts to, as promptly as practicable following the occurrence of such event, (i) to
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obtain alternative financing from alternative sources on terms and conditions not materially less favorable in the aggregate to Parent than those set forth in the Debt Commitment Letters and in
an amount at least equal to the amount (taking into account cash on hand and other sources of funds available to the Parent) sufficient to make the representation set forth in
Section
4.16
as though made at the time of the
effectuation of such alternative financing (the
Alternate Debt Financing
), and (ii) obtain one or more new financing commitment letters with respect to such Alternate Debt Financing (the
New Debt Commitment
Letters
), which New Debt Commitment Letters will replace the existing Debt Commitment Letters in whole or in part. Parent shall promptly provide the Company with a copy of any New Debt Commitment Letters (and any fee letter in connection
therewith, which such fee letter may be redacted as provided in
Section
4.16(a)
). In the event that any New Debt Commitment Letters are obtained, (A) any reference in this Agreement to the Debt Commitment
Letters will be deemed to include the Debt Commitment Letters to the extent not superseded by the New Debt Commitment Letters at the time in question and any New Debt Commitment Letters to the extent then in effect, and (B) any reference
in this Agreement to the Debt Financing means the debt financing contemplated by the Debt Commitment Letters as modified pursuant to the foregoing.
(d) Parent shall (i) keep the Company fully informed on a reasonably current basis of the status of its efforts to arrange the Debt
Financing, and (ii) provide the Company with copies of all executed definitive agreements related to the Debt Financing. Without limiting the generality of the foregoing, Parent and Merger Sub shall promptly (A) furnish the Company
complete, correct and executed copies of any amendments, restatements, supplements, amendments and restatements, modifications, waivers or replacements to the Debt Commitment Letters, (B) notify the Company of any breach (or threatened breach
asserted in writing) or default (or any event or circumstance that, with notice or lapse of time or both, could reasonably be expected to give rise to any breach or default) by any party to the Debt Commitment Letters or definitive agreements
related to the Debt Financing, (C) notify the Company of the receipt by Parent or Merger Sub of any oral or written notice or communication from any Debt Financing Source with respect to any breach (or threatened breach asserted in writing),
default, termination or repudiation by any party to a Debt Financing Commitment Letter or any definitive agreements related to the Debt Financing of any provisions of the Debt Commitment Letters or such definitive agreements, and (D) if for any
reason Parent or Merger Sub at any time believes that it will not be able to obtain all or any portion of the Debt Financing on the terms, in the manner or from the sources contemplated by the Debt Commitment Letters or any definitive agreements
related to the Debt Financing. Parent shall promptly provide any information reasonably requested by the Company relating to any of the circumstances referred to in the previous sentence.
(e) Parent and Merger Sub expressly acknowledge and agree that, notwithstanding anything in this Agreement to the contrary, their obligations
hereunder, including their obligations to consummate the Closing are not subject to, or conditioned on receipt of the Debt Financing or any alternative financing.
Section 6.17
Financing Cooperation
.
(a) Prior to the Effective Time, the Company shall, and shall cause its Subsidiaries to, and shall use reasonable best efforts to cause its
Representatives to, provide Parent with all cooperation reasonably requested by Parent to assist it in causing the conditions in the Debt Commitment Letters to be satisfied or as is otherwise reasonably requested by Parent in connection with the
Debt Financing, including;
(i) causing its management team, with appropriate seniority and expertise, including its
senior executive officers, to assist in preparation for and to participate in a reasonable and limited number of meetings, presentations, road shows, due diligence sessions, drafting sessions and sessions with rating agencies;
(ii) assisting with the timely preparation of customary rating agency presentations, bank information memoranda, road show
materials and high-yield offering prospectuses, memoranda or other customary marketing materials required in connection with the Debt Financing;
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(iii) assisting Parent in connection with the preparation and registration of
(but not executing) any pledge and security documents, supplemental indentures, currency or interest hedging arrangements and other definitive financing documents as may be requested by Parent or the Financing Sources (including using reasonable
best efforts to obtain consents of accountants for use of their reports in any materials relating to the Debt Financing and accountants comfort letters, in each case as requested by Parent), and otherwise reasonably facilitating the pledging
of collateral and the granting of security interests in respect of the Debt Financing, it being understood that such documents will not take effect until the Effective Time;
(iv) to the extent required in connection with the Debt Financing, furnishing Parent and the Financing Sources, as promptly as
practicable, with (1) audited consolidated balance sheets and related statements of income and cash flows of the Company and its Subsidiaries for the three most recently completed fiscal years ended at least ninety (90) days before the
Closing Date, (2) unaudited consolidated balance sheets and related unaudited statements of income and cash flows of the Company and its Subsidiaries, for each subsequent fiscal quarter (other than the fourth fiscal quarter) ended at least
forty-five (45) days before the Closing Date, (3) the financial information regarding the Company and its Subsidiaries necessary for Parent to prepare any pro forma financial statements for historical periods required by Section 7 of
Exhibit C of the Debt Commitment Letters (
provided
that it is understood that the pro forma adjustments and any assumptions underlying the pro forma adjustments to be made are the responsibility of Parent), and (4) such other financial
information and other pertinent information customarily required in connection with a confidential information memorandum or bank presentation in respect of the Debt Financing, in each case customarily used for the syndication of the Debt Financing
(all such information and documents in this
Section
6.17(a)(iv)
, the
Required Financial Information
). If the Company in good faith reasonably believes that it has provided the Required Financial
Information, it may deliver to Parent a written notice stating when it believes that it completed such delivery, in which case the Company will be deemed to have complied with this
Section
6.17(a)(iv)
and the Marketing
Period shall be deemed to have commenced as of such date unless Parent or the Financing Source in good faith reasonably believe that the Company has not completed delivery of the Required Financial Information and, within three (3) Business
Days after the delivery of such notice by the Company, deliver a written notice to the Company to that effect, stating in good faith the specific items of Required Financial Information the Company has not delivered, in which case such Required
Financial Information shall be deemed to have been delivered and the Marketing Period to have commenced when such specific items have been delivered by the Company;
(v) reasonably facilitating the pledging of collateral on the Closing Date as may be reasonably necessary to permit the
consummation of the Debt Financing, delivering notices of prepayment and notices of redemption within the time periods required by the relevant agreements governing indebtedness and obtaining customary payoff letters, Lien terminations and
instruments of discharge to be delivered at the Closing, and giving any other necessary notices, to allow for the payoff, discharge and termination in full at the Closing of all indebtedness of the Company or its Subsidiaries required by the Debt
Commitment Letters to be paid;
(vi) so long as requested at least ten days prior to the Closing Date, furnishing Parent
or any of its Subsidiaries and the Financing Sources with all documentation and other information required by regulatory authorities pursuant to applicable know your customer and anti-money laundering rules and regulations at least three
Business Days prior to the Closing Date;
(vii) delivery of customary authorization letters that authorize the
distribution of the confidential information memorandum to prospective lenders, which letters shall contain customary representations by the Company with respect to the Company and its Subsidiaries, including (a) a customary
10b-5
representation and (b) a customary representation that the public-side version does not include material
non-public
information about the Company and
its Subsidiaries or their securities; and
(viii) taking all corporate and other actions, subject to the occurrence of the
Closing, reasonably requested by Parent to permit the consummation of the Debt Financing.
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(b) Notwithstanding the provisions of
Section
6.17(a)
or any other
provision of this Agreement, nothing in this Agreement will require the Company or any of its Subsidiaries to (A) 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 or any of its Subsidiaries, (B) enter into any definitive agreement the effectiveness of which is not conditioned on the Effective Time
(other than, for the avoidance of doubt, the customary authorization letters described in
Section
6.17(a)(vii))
that is effective prior to the Effective Time, (C) give any indemnities that are effective prior to the
Effective Time, (D) take any action that, in the good faith determination of the Company, would unreasonably interfere with the conduct of the business of the Company and its Subsidiaries or create an unreasonable risk of damage or destruction
to any property or assets of the Company or any of its Subsidiaries, (E) provide any information the disclosure of which is prohibited or restricted under Applicable Law or is legally privileged, or (F) take any action that will conflict
with or violate its organizational documents or any Applicable Laws or would result in a violation or breach of, or default under, any agreement to which the Company or any of its Subsidiaries is a party. 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 (other than any authorization letters referred to above) 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
Section
6.17
will require
(1) 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
6.17
or any other provision of this Agreement that could
reasonably be expected to result in personal liability to such officer or Representative, or (2) the members of the Company Board as of immediately prior to the Effective Time to approve any financing or Contracts related thereto.
(c) The Company consents to the use of all of its and its Subsidiaries logos in connection with the Debt Financing;
provided
that
such logos are used solely (i) in a manner that is not intended to, and is not likely to harm or disparage the Company or any of its Subsidiaries or the reputation or goodwill of the Company, its Subsidiaries and its or their respective marks,
products, services, offerings or intellectual property rights and (ii) in connection with a description of the Company, its businesses and products or the transactions contemplated by this Agreement.
(d) All
non-public
or other confidential information provided by the Company or any of its
Representatives pursuant to this Agreement will be kept confidential in accordance with the Confidentiality Agreement, except that Parent will be permitted to disclose such information to any Financing Sources or prospective financing sources,
ratings agencies and other financial institutions and investors that are or may become parties to the Debt Financing and to any underwriters, initial purchasers or placement agents in connection with the Debt Financing (and, in each case, to their
respective counsel and auditors) so long as such Persons (i) agree to be bound by the Confidentiality Agreement as if parties thereto and (ii) are subject to other confidentiality undertakings customary for financings of the same type as
the Debt Financing.
(e) Parent agrees to (i) indemnify, defend and hold harmless the Company, its Subsidiaries and their respective
Representatives from and against any loss, damages, claim, cost, liability, obligation or expense (including legal fees and expenses) suffered or incurred in connection with providing the cooperation and support contemplated by
Section
6.17(a)
and any information provided in connection therewith except (A) information furnished in writing by or on behalf of the Company and its Subsidiaries for use therein and (B) to the extent arising
from the willful misconduct, gross negligence, fraud or intentional misrepresentation of the Company or its Subsidiaries and (ii) promptly, upon request of the Company, reimburse the Company and its Subsidiaries for all reasonable
out-of-pocket
costs incurred by the Company or its Subsidiaries in connection with providing the cooperation and support contemplated by
Section
6.17(a)
. The provisions of this
Section
6.17(e)
shall survive termination of this Agreement.
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S
ection 6.18
Control of Operations
. Without in any way
limiting any partys rights or obligations under this Agreement, the parties understand and agree that (a) nothing contained in this Agreement shall give Parent or the Company, directly or indirectly, the right to control or direct the
other partys operations prior to the Effective Time and (b) prior to the Effective Time, each of the Company and Parent shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its
operations.
Section 6.19
Section 16 Matters
. Prior to the Effective Time, Parent and the
Company shall take all such steps as may be required to cause any dispositions of Company Common Stock (including derivative securities with respect to Company Common Stock) or acquisitions of shares of Parent Common Stock (including derivative
securities with respect to Parent Common Stock) resulting from the Merger by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company or will become subject to such reporting
requirements with respect to Parent, to be exempt under Rule
16b-3
promulgated under the Exchange Act, to the extent permitted by Applicable Law.
Section 6.20
Nasdaq Matters
.
(a) Parent shall file a notification of listing of additional shares (or such other form as may be required) with Nasdaq with respect to the
shares of Parent Common Stock to be issued in the Merger and such other shares of Parent Common Stock to be reserved for issuance in connection with the Merger, and shall use reasonable best efforts to cause the shares of Parent Common Stock to be
issued in the Merger and such other shares of Parent Common Stock to be reserved for issuance in connection with the Merger to be approved for listing on the Nasdaq, subject to official notice of issuance, prior to the Effective Time.
(b) Parent and the Company agree to cooperate in taking, or causing to be taken, all actions necessary to delist the Company Common Stock from
the Nasdaq and terminate its registration under the Exchange Act, in each case, as promptly as practicable after the Effective Time,
provided
that such delisting and termination shall not be effective until after the Effective Time.
Section 6.21
Parent Board Representation
. Prior to the Effective Time, Parent shall appoint one
member of the Company Board to serve as a member of the Parent Board effective as of immediately after the Effective Time to serve until the next annual meeting of Parents shareholders in accordance with Parents certificate of
incorporation and bylaws. As soon as reasonably practicable after the date hereof, Parent and the Company shall cooperate to identify such individual (or any substitute).
Section 6.22
Rep
atriation of Cash
. Parent may periodically request from the Company, and the
Company will promptly provide (but not more often than once per calendar month), its good faith estimate of the amount of cash held by the
non-U.S.
Subsidiaries of the Company. If requested by Parent by one or
more written notices to the Company, delivered no earlier than fifteen (15) Business Days prior to, and no later than ten (10) Business Days prior, to the anticipated Closing Date, provided that the parties mutually agree that such date is
the anticipated Closing Date (each, a
Repatriation Notice
), the Company and its Subsidiaries will use their respective commercially reasonable efforts to (i) distribute or transfer or cause to be distributed or transferred to
the Company before the Closing in the manner reasonably requested by Parent (including pursuant to the repayment of outstanding intercompany obligations) any cash held by the
non-U.S.
Subsidiaries of the
Company designated in the Repatriation Notices to the extent of the applicable amounts set forth in the Repatriation Notices (the Repatriation Distributions), and (ii) lend or cause to be loaned to the Company prior to the Closing
pursuant to loan documentation reasonably acceptable to Parent and the Company any cash held by the
non-U.S.
Subsidiaries of the Company designated in the Repatriation Notices to the extent of the applicable
amounts set forth in the Repatriation Notices (the Repatriation Loans), such that it is intended for the amounts set forth in the Repatriation Notices to be available in the bank accounts of the Company no later than the day immediately
preceding the Closing Date. The prior sentence shall not require the
non-U.S.
Subsidiaries of the Company to distribute, transfer, lend, or cause to distribute, transfer, or be loaned, (i) amounts to the
Company which, in the Companys reasonable determination, would interfere with such
non-U.S.
Subsidiaries operating cash needs arising in the ordinary course of business, or (ii) amounts which
would violate Applicable Law. The
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Company agrees to treat any Repatriation Loans as debt for U.S. federal income Tax purposes to the fullest extent permitted by applicable Law. If this Agreement is terminated after any such
Repatriation Loans have been made, then the Company and its Subsidiaries shall repay or cause to be repaid any such Repatriation Loans as soon as possible following such termination. Subject to the Companys compliance with its obligations
under this
Section
6.22
, Parent shall promptly (and, in any event, with five (5) Business Days of the Company request therefor) indemnify and reimburse the Company and its Subsidiaries for any Taxes required to be
paid, and any losses and reasonable related costs
,
and expenses incurred, by the Company or any of its Subsidiaries with respect to the Repatriation Distributions or the Repatriation Loans (including with respect to the repayment
thereof pursuant to the immediately preceding sentence).
Section 6.23
Stockholder Notice
. On
the Closing Date, Parent and the Company shall make a determination as to whether or not the Merger constitutes a reorganization within the meaning of Section 368(a) of the Code, which determination shall be made reasonably and in
good faith after consultation with tax counsel, but shall not constitute a representation, warranty, covenant, obligation or guarantee of any kind whatsoever to the Company, its stockholders or any other Person with respect thereto. In making such
determination, Parent and the Company shall be entitled to rely on certain customary assumptions and representations reasonably acceptable to Parent and the Company after consultation with tax counsel, including representations set forth in
certificates of officers of Parent and the Company, which Parent and the Company shall use commercially reasonable efforts to cause to be promptly provided to each other. As soon as practicable after the Closing, Parent shall inform the stockholders
in writing of the determination made pursuant to this
Section
6.23
.
ARTICLE
VII.
CONDITIONS TO THE MERGER
Section 7.1
Conditions to the Obligations of Each Party to Effect the Merger
. The respective
obligations of Parent, Merger Sub, Merger Sub LLC and the Company to consummate the Merger shall be subject to the satisfaction or waiver (where permissible under Applicable Law) prior to the Effective Time, of each of the following conditions:
(a)
Requisite Shareholder Approval
. The Requisite Shareholder Approval shall have been obtained.
(b)
Antitrust and Other Governmental Approvals
. All waiting periods (and extensions thereof) applicable to the transactions
contemplated by this Agreement (including the Merger) under the HSR Act shall have expired or been terminated and all other antitrust, competition or merger control consents or clearances set forth on
Section
7.1(b)
of the
Company Disclosure Letter (the
Specified Jurisdictions
) shall have been obtained (or been deemed to have been obtained by virtue of the expiration or termination of any applicable waiting period).
(c)
No Legal Prohibition
. No Governmental Entity of competent jurisdiction in any jurisdiction that is material to the business or
operations of the Company and its Subsidiaries, taken as a whole, or Parent and its Subsidiaries, taken as a whole, shall have (i) enacted, issued, promulgated, entered, enforced or deemed applicable to the Merger any Applicable Law that is in
effect and has the effect of making the Merger illegal in any such jurisdiction or which has the effect of prohibiting or otherwise preventing the consummation of the Merger in any such jurisdiction or (ii) issued or granted any Order (whether
temporary, preliminary or permanent) that is in effect and has the effect of making the Merger illegal in any such jurisdiction or which has the effect of prohibiting or otherwise preventing the consummation of the Merger in any such jurisdiction.
(d)
Form
S-4
Effectiveness
. The Form
S-4
shall
have been declared effective by the SEC and no stop order suspending the effectiveness of the Form
S-4
shall be in effect and no proceedings for such purpose shall be pending before or threatened by the SEC.
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(e)
Listing
. The shares of Parent Common Stock to be issued in the Merger shall have been
approved for listing on Nasdaq, subject to official notice of issuance.
Section 7.2
Additional
Conditions to the Obligations of Parent, Merger Sub and Merger Sub LLC to Effect the Merger
. The obligations of Parent, Merger Sub and Merger Sub LLC to consummate the Merger shall be further subject to the satisfaction or waiver (where
permissible under Applicable Law) prior to the Effective Time, of each of the following conditions, any of which may be waived (in writing) exclusively by Parent, Merger Sub and Merger Sub LLC:
(a)
Representations and Warranties
.
(i) Each of the representations and warranties of the Company set forth in this Agreement (other than the Company
Capitalization Representation and the Company Specified Representations) shall be true and correct in all respects on and as of the Closing Date with the same force and effect as if made on and as of such date, except for any failure to be so true
and correct that, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect.
(ii) Each of the representations and warranties set forth in
Section
3.1
(other than the last
sentence) (Organization and Standing),
Section
3.3
(Authorization),
Section
3.27
(Brokers; Fees and Expenses),
Section
3.28
(Opinion of Financial Advisor) and
Section
3.29
(State Anti-Takeover Statutes) (collectively, the
Company Specified Representations
) shall be true and correct in all material respects on and as of the Closing Date with the same force and
effect as if made on and as of such date, and
(iii) the representations and warranties set forth in
Section
3.4(a)
,
Section
3.4(b)
(the first sentence only) and
Section
3.4(c)
(the first sentence only) (Capitalization) (the
Company Capitalization
Representation
) shall be true and correct in all respects as of the Closing Date with the same force and effect as if made on and as of such date, except for any
de minimis
inaccuracies;
except in the case of each of the foregoing clauses (i)-(iii) inclusive, for those representations and warranties which address matters only as of a
particular date (the accuracy of which shall be determined as of such particular date); and
provided
that, for purposes of determining the accuracy of the representations and warranties of the Company set forth in this Agreement for purposes
of
Section
7.2(a)(i)
, (A) all Company Material Adverse Effect and materiality qualifications and other qualifications based on the word material or similar phrases contained in such
representations and warranties shall be disregarded (it being understood and hereby agreed that (x) the phrase similar phrases as used in this proviso shall not be deemed to include any dollar thresholds contained in any such
representations and warranties and (y) such qualifications shall not be disregarded pursuant to the terms of this proviso in the representation and warranty set forth in
Section
3.10(c)
) and (B) any update of or
modification to the Company Disclosure Letter made or purported to have been made after the date of this Agreement shall be disregarded).
(b)
Covenants and Agreements
. The Company shall have performed in all material respects all covenants under this Agreement required to
be performed at or prior to the Closing Date.
(c)
Company Material Adverse Effect
. No Company Material Adverse Effect shall have
occurred or exist following the execution and delivery of this Agreement that is continuing.
(d)
Closing Certificate
. Parent shall
have received a certificate signed by the chief executive officer and chief financial officer of the Company certifying as to the satisfaction of the matters set forth in paragraphs (a), (b) and (c) of this
Section
7.2
.
Section 7.3
Additional Conditions to the Obligations of the
Company to Effect the Merger
. The obligations of the Company to consummate the Merger shall be further subject to the satisfaction or waiver (where permissible under Applicable Law) prior to the Effective Time, of each of the following
conditions, any of which may be waived (in writing) exclusively by the Company:
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(a)
Representations and Warranties
.
(i) Each of the representations and warranties of Parent, Merger Sub and Merger Sub LLC set forth in this Agreement (other
than the Parent Specified Representations and the Parent Capitalization Representation) shall be true and correct in all respects on and as of the Closing Date with the same force and effect as if made on and as of such date, except for any failure
to be so true and correct that, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect;
(ii) Each of the representations and warranties set forth in
Section
4.1
(first four sentences only)
(Organization and Standing),
Section
4.3
(Authorization),
Section
4.14
(Brokers; Fees and Expenses) and
Section
4.18
(State Takeover Statutes) (collectively, the
Parent Specified Representations
) shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as if made on and as of such date, and
(iii) the representations and warranties set forth in
Section
4.7(a)
(first sentence only),
Section
4.7(b)
(first and third sentence only) and
Section
4.7(c)
(first sentence only) (Capitalization) (the
Parent Capitalization Representation
) shall be true and correct in all
respects as of the Closing Date with the same force and effect as if made on and as of such date, except (A) for any
de minimis
inaccuracies and (B) that in no event shall Parent have less than 62,286,763 outstanding shares of
Parent Common Stock; and
except in the case of each of the foregoing clauses (i)-(iii) inclusive, for those representations and warranties which
address matters only as of a particular date (the accuracy of which shall be determined as of such particular date); and
provided
that, for purposes of determining the accuracy of the representations and warranties of Parent, Merger Sub and
Merger Sub LLC set forth in this Agreement for purposes of
Section
7.3(a)(i)
, (A) all Parent Material Adverse Effect and materiality qualifications and other qualifications based on the word
material or similar phrases contained in such representations and warranties shall be disregarded (it being understood and hereby agreed that (x) the phrase similar phrases as used in this proviso shall not be deemed to
include any dollar thresholds contained in any such representations and warranties and (y) such qualifications shall not be disregarded pursuant to the terms of this proviso in the representation and warranty set forth in
Section
4.11(c)
) and (B) any update of or modification to the Parent Disclosure Letter made or purported to have been made after the date of this Agreement shall be disregarded).
(b)
Covenants and Agreements
. Each of Parent, Merger Sub and Merger Sub LLC shall have performed in all material respects all covenants
under this Agreement required to be performed at or prior to the Closing Date.
(c)
Parent Material Adverse Effect
. No Parent
Material Adverse Effect shall have occurred or exist following the execution and delivery of this Agreement that is continuing.
(d)
Closing Certificate
. The Company shall have received a certificate signed on behalf of Parent, Merger Sub and Merger Sub LLC by a duly authorized officer of each of Parent, Merger Sub and Merger Sub LLC as to the satisfaction of the matters
set forth in paragraphs (a), (b) and (c) of this
Section
7.3
.
ARTICLE
VIII.
TERMINATION, AMENDMENT AND WAIVER
Section 8.1
Termination
. This Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, whether before or after receipt of the Requisite Shareholder Approval (except as provided below),
provided
that the party desiring to terminate this Agreement pursuant to this
Section
8.1
(other than pursuant to
Section
8.1(a)
) shall give notice of such termination to the other party or parties hereto, only as follows:
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(a) by mutual written agreement of Parent and the Company;
(b) by either Parent or the Company, if the Company Shareholders Meeting shall have been held and the Requisite Shareholder Approval
shall not have been obtained thereat or at any adjournment or postponement thereof, in each case at which a vote on such approval was taken;
(c) by either Parent or the Company if any Governmental Entity of competent jurisdiction, and which jurisdiction is material to the business
or operations of the Company and its Subsidiaries, taken as a whole, or Parent and its Subsidiaries, taken as a whole, shall have (i) enacted, issued, promulgated, entered, enforced or deemed applicable to any of the transactions contemplated
hereby (including the Merger) any Applicable Law that is in effect and has the effect of permanently making the consummation of the Merger illegal in any such jurisdiction or which has the effect of permanently prohibiting or otherwise permanently
preventing the consummation of the Merger in any such jurisdiction or (ii) issued or granted any Order that is in effect and has the effect of permanently making the Merger illegal in any such jurisdiction or which has the effect of permanently
prohibiting or otherwise permanently preventing the consummation of the Merger and such Order shall have become final and nonappealable;
provided
, that the right to terminate this Agreement pursuant to this
Section
8.1(c)
shall not be available to any party hereto whose action or failure to fulfill any obligation under this Agreement has been the principal cause of or resulted in such Order (or such Order becoming final and
nonappealable); or
(d) by either Parent or the Company, if the Effective Time shall not have occurred on or before 5:00 p.m. Pacific Time
on December 11, 2018 (the
Termination Date
);
provided, however,
that if on the Termination Date all of the conditions to the Closing set forth in
Article VII
other than (i) those conditions that by their
terms are to be satisfied at the Closing, which conditions shall be capable of being satisfied at such time, and (ii) any or all of the conditions set forth in
Section
7.1(b)
or
Section
7.1(c)
(but solely to the extent the matter giving rise to the failure of such condition is related to Antitrust Laws), have been satisfied or waived, then the Termination Date will automatically be extended to March 11, 2019 (the
Antitrust
Termination Date
); and
provided, further
, that the right to terminate this Agreement pursuant to this
Section
8.1(d)
shall not be available to any party hereto whose action or failure to fulfill any
obligation under this Agreement has been the principal cause of or resulted in the failure of the Effective Time to have occurred on or before the Termination Date or the Antitrust Termination Date, as applicable; or
(e) by the Company:
(i) in the event of a breach of any representation, warranty, covenant or agreement on the part of Parent, Merger Sub or
Merger Sub LLC set forth in this Agreement such that the conditions set forth in
Section
7.3(a)
or
Section
7.3(b)
would not be satisfied as of the time of such breach;
provided
,
however
, that notwithstanding the foregoing, (x) in the event that such breach by Parent, Merger Sub or Merger Sub LLC are curable by Parent, Merger Sub or Merger Sub LLC through the exercise of commercially reasonable efforts, then the
Company shall not be permitted to terminate this Agreement pursuant to this
Section
8.1(e)(i)
until forty-five (45) calendar days after delivery of written notice from the Company to Parent of such breach or inaccuracy
(it being understood that the Company may not terminate this Agreement pursuant to this
Section
8.1(e)(i)
if such breach by Parent, Merger Sub or Merger Sub LLC is cured within such forty-five (45) calendar day period)
and (y) the right of termination under this
Section
8.1(e)(i)
shall not be available if the Company is then in material breach of any representation, warranty or covenant under this Agreement; or
(ii) prior to obtaining the Requisite Shareholder Approval, in order to enter into a definitive agreement with respect to a
Superior Proposal after a Company Board Recommendation Change,
provided
that (A) the Company has complied in all material respects with the terms of
Section
6.2(c)(i)
, (B) concurrently with the termination
of this Agreement, the Company enters into a definitive agreement to effect such Superior Proposal and (C) concurrently with the termination of this Agreement, the Company pays to Parent the Termination Fee Amount payable pursuant to and in
accordance with
Section
8.3(b)(ii)
.
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(f) by Parent:
(i) in the event of a breach of any representation, warranty, covenant or agreement on the part of the Company set forth in
this Agreement or such that such that the conditions set forth in
Section
7.2(a)
or
Section
7.2(b)
would not be satisfied as of the time of such breach;
provided
,
however
, that
notwithstanding the foregoing, (x) in the event that such breach by the Company are curable by the Company through the exercise of commercially reasonable efforts, then Parent shall not be permitted to terminate this Agreement pursuant to this
Section
8.1(f)(i)
until forty-five (45) calendar days after delivery of written notice from Parent to the Company of such breach, as applicable (it being understood that Parent may not terminate this Agreement pursuant
to this
Section
8.1(f)(i)
if such breach by the Company is cured within such forty-five (45) calendar day period) and (y) the right of termination under this
Section
8.1(f)(i)
shall not
be available if the Company is then in material breach of any representation, warranty or covenant under this Agreement; or
(ii) in the event that a Triggering Event shall have occurred prior to receipt of the Requisite Shareholder Approval. For all
purposes of and under this Agreement, a
Triggering Event
shall be deemed to have occurred if, prior to the Effective Time, any of the following shall have occurred: (A) the Company shall have willfully breached the provisions
of
Section
6.1(a)
,
Section
6.1(b)
or Section
6.2(c)
(or be deemed, pursuant to the terms thereof, to have breached, provided that such breach is willful) in any material respect
(without regard to whether such breach results in an Acquisition Proposal); (B) the Company Board or any committee thereof shall have for any reason effected a Company Board Recommendation Change; or (C) the Company shall have failed to
include the Company Board Recommendation in the Proxy Statement/Prospectus.
Section 8.2
Notice of
Termination; Effect of Termination
. Any proper termination of this Agreement pursuant to
Section
8.1
hereof shall be effective immediately upon the delivery of written notice of the terminating party to the other
party or parties hereto, as applicable. In the event of the termination of this Agreement pursuant to
Section
8.1
, this Agreement shall be of no further force or effect without Liability of any party or parties hereto, as
applicable (or any shareholder, director, officer, employee, agent, consultant or representative of such party or parties) to the other party or parties hereto, as applicable, except (a) for the terms of
Section
6.9
,
Section
6.10
,
Section
6.22
, this
Section
8.2
, and
Section
8.3
and
Article IX
, each of which shall survive the termination of this
Agreement and (b) that nothing herein shall relieve any party or parties hereto, as applicable, from Liability for any willful and material breach of, or fraud in connection with, this Agreement. In addition to the foregoing, no termination of
this Agreement shall affect the obligations of the parties hereto set forth in the Confidentiality Agreement (as amended pursuant to
Section
6.9
), all of which obligations shall survive termination of this Agreement in
accordance with their terms.
Section 8.3
Fees and Expenses
.
(a)
General
. Except as set forth in
Section
8.3(b)
, all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including the Merger) shall be paid by the party or parties, as applicable, incurring such expenses whether or not the Merger is consummated. Expenses incurred in connection with the preparation,
printing and mailing of the Proxy Statement/Prospectus and the
Form S-4
any other filings with the SEC and filing fees, if any, related thereto or under the HSR Act or any comparable
pre-merger
notification filings, forms and submissions with any foreign Governmental Entity that may be required by the Antitrust Laws of any applicable foreign jurisdiction shall be paid by Parent.
(b)
Company Payments
.
(i) In the event that this Agreement is terminated pursuant to
Section
8.1(f)(ii)
, within two
(2) Business Days after demand by Parent, the Company shall pay to Parent a fee equal to $63,000,000 (the
Company Termination Fee Amount
) by wire transfer of immediately available funds to an account or accounts designated in
writing by Parent.
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(ii) In the event that this Agreement is terminated pursuant to
Section
8.1(e)(ii)
, prior to and as a condition to the effectiveness of such termination, the Company shall pay to Parent a fee equal to the Company Termination Fee Amount by wire transfer of immediately available funds to
an account or accounts designated in writing by Parent.
(iii) The Company shall pay to Parent a fee equal to the Company
Termination Fee Amount by wire transfer of immediately available funds to an account or accounts designated in writing by Parent, within three (3) Business Days after demand by Parent, in the event that (A) (1) this Agreement is
terminated pursuant to
Section
8.1(b)
, (2) this Agreement is terminated pursuant to
Section
8.1(d)
or (3) this Agreement is terminated pursuant to
Section
8.1(f)(i)
solely due to a willful and material breach of the covenants and agreements by the Company in this Agreement, (B) following the execution and delivery of this Agreement and prior to the Company
Shareholders Meeting (in the case of any termination referred to in clause (A)(1) above) or prior to the termination of his Agreement (in the case of any termination referred to in clause (A)(2) above) or prior to the breach or
inaccuracy that forms the basis for the termination of this Agreement (in the case of any termination referred to in clause (A)(3) above), an Acquisition Proposal shall have been publicly announced or shall have become publicly known, and not
publicly withdrawn, or (in the case of any termination of this Agreement pursuant to Section
8.1(d)
or
Section
8.1(f)(i)
only) shall have been communicated to the Company and not withdrawn, and
(C) within twelve (12) months following the termination of this Agreement, either an Acquisition Transaction (whether or not the Acquisition Transaction referenced in the preceding clause (B)) is consummated or the Company enters into
a definitive agreement providing for an Acquisition Transaction and such Acquisition Transaction is ultimately consummated (whether or not consummated during the foregoing 12 month period, and whether or not the Acquisition Transaction referenced in
the preceding clause (B)). For purposes of this
Section
8.3(b)(iii)
, all references to 15% and 85% in the definition of Acquisition Transaction shall be deemed to be references to
50%.
(c)
Parent Payments
. Parent shall pay to the Company a fee equal to $80,000,000 (the
Parent Termination
Fee
) by wire transfer of immediately available funds to an account or accounts designated in writing by the Company, if this Agreement is terminated as follows:
(i) by Parent or the Company pursuant to
Section
8.1(c)
, if the Applicable Law is an Antitrust Law
or the Order is pursuant to Antitrust Laws, such payment to be made concurrently with such termination, in the case of a termination by Parent, or within two Business Days following such termination, in the case of a termination by the Company; or
(ii) by Parent or the Company pursuant to
Section
8.1(d)
, if, as of the time of such
termination, the only conditions to Closing set forth in
Article VII
that have not been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the Closing, each of which shall be capable of being
satisfied if the Closing Date were the date the notice of termination is delivered) are those set forth in
Section
7.1(b)
or
Section
7.1(c)
(solely due to an Order arising under, or an Applicable
Law that is, an Antitrust Law), such payment to be made concurrently with such termination, in the case of a termination by Parent, or within two Business Days following such termination, in the case of a termination by the Company.
(d)
Enforcement
. Each of the Company and Parent acknowledges and hereby agrees that the provisions of
Section
8.3(b)
and
Section
8.3(c)
, respectively, are an integral part of the transactions contemplated by this Agreement (including the Merger), and that, without such provisions, the other party
would not have entered into this Agreement. Accordingly, if either the Company or Parent shall fail to pay in a timely manner the amounts due pursuant to
Section
8.3(b)
or
Section
8.3(c)
,
respectively, and, in order to obtain such payment, Parent or the Company, respectively, makes a claim that results in a judgment against the Company or Parent, respectively, for payment of the Company Termination Fee Amount or the Parent
Termination Fee Amount, respectively, then the Company or Parent, respectively, shall pay to the other party its reasonable costs and expenses (including its reasonable attorneys fees and expenses) incurred in connection with such suit,
together with interest on the
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amounts set forth in
Section
8.3(b)
or
Section
8.3(c)
, respectively, at the prime rate of Citibank N.A. in effect on the date such payment was
required to be made.
(e)
Limitation of Company Liability
. Anything to the contrary in this Agreement notwithstanding, if the
Company Termination Fee Amount shall become due and payable in accordance with
Section
8.3(b)
, from and after such termination and payment of the Company Termination Fee Amount in full pursuant to and in accordance with
Section
8.3(b)
, the Company and its Affiliates and Representatives shall have no further liability of any kind for any reason in connection with this Agreement or the termination contemplated hereby. In no event shall
Parent be entitled to more than one payment of the Company Termination Fee Amount in connection with a termination of this Agreement pursuant to which such Company Termination Fee Amount is payable. For the avoidance of doubt, while Parent and
Merger Sub may pursue both a grant of specific performance in accordance with
Section
9.9
and the payment of the Termination Fee Amount under this
Section
8.3
, under no circumstances, shall Parent
and Merger Sub be permitted or entitled to receive both a grant of specific performance and the Company Termination Fee (if entitled under this
Section
8.3
).
(f)
Limitation of Parent Liability
. Anything to the contrary in this Agreement notwithstanding, if the Parent Termination Fee Amount
shall become due and payable in accordance with
Section
8.3(c)
, from and after such termination and payment of the Parent Termination Fee Amount in full pursuant to and in accordance with
Section
8.3(c)
, Parent and its Affiliates and Representatives shall have no further liability of any kind for any reason in connection with this Agreement or the termination contemplated hereby, other than
Section
6.22
. In no event shall the Company be entitled to more than one payment of the Parent Termination Fee Amount in connection with a termination of this Agreement pursuant to which such Parent Termination Fee Amount
is payable. For the avoidance of doubt, while the Company may pursue both a grant of specific performance in accordance with
Section
9.9
and the payment of the Parent Termination Fee Amount under this
Section
8.3
, under no circumstances, shall the Company be permitted or entitled to receive both a grant of specific performance and the Parent Termination Fee (if entitled under this
Section
8.3
).
Section 8.4
Amendment
. Subject to Applicable Law and subject to the other provisions of
this Agreement, this Agreement may be amended by the parties hereto at any time by execution of an instrument in writing signed on behalf of each of Parent, Merger Sub, Merger Sub LLC and the Company;
provided
,
however
, that in the
event that this Agreement has been approved by shareholders of the Company in accordance with Delaware Law, no amendment shall be made to this Agreement that requires the approval of such shareholders of the Company without such approval.
Notwithstanding anything to the contrary contained herein,
Section
9.5
,
Section
9.6
,
Section
9.10
,
Section
9.11
,
Section
9.12
and this
Section
8.4
(and any provision (including any defined term therein) of this Agreement to the extent a modification, waiver or termination of such provision would modify the
substance of any of the foregoing provisions) may not be modified, waived or terminated in a manner that impacts or is adverse in any material respect to a Financing Source without the prior written consent of such Financing Source.
Section 8.5
Extension; Waiver
. At any time and from time to time prior to the Effective Time,
any party or parties hereto may, to the extent legally allowed and except as otherwise set forth herein, (a) extend the time for the performance of any of the obligations or other acts of the other party or parties hereto, as applicable,
(b) waive any inaccuracies in the representations and warranties made to such party or parties hereto contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions for the
benefit of such party or parties hereto contained herein. Any agreement on the part of a party or parties hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party or parties,
as applicable. Any delay in exercising any right under this Agreement shall not constitute a waiver of such right.
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ARTICLE IX.
GENERAL PROVISIONS
Section 9.1
Survival of Representations, Warranties and Covenants
. The representations, warranties and covenants of the Company, Parent, Merger Sub and Merger Sub LLC contained in this Agreement shall terminate at the Effective
Time, and only the covenants that by their terms survive the Effective Time shall so survive the Effective Time in accordance with their respective terms.
Section 9.2
Notices
. All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service, or sent via telecopy (receipt confirmed) or
e-mail
transmission to the parties at the following addresses or fax numbers (or at
such other address or fax numbers for a party as shall be specified by like notice):
|
(a)
|
if to Parent, Merger Sub or Merger Sub LLC, to:
|
Lumentum Holdings Inc.
400 North McCarthy Boulevard
Milpitas, CA 95035
Attention:
Judy Hamel
E-mail:
lumentumlegal@lumentum.com
with copies (which shall not constitute notice) to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
One
Market Street
Spear Tower, Suite 3300
San Francisco, CA 94105
Attention: Robert T. Ishii and Derek Liu
Fax No.: (415)
947-2099
E-mail:
rishii@wsgr.com; dliu@wsgr.com
|
(b)
|
if to the Company, to:
|
Oclaro, Inc.
225 Charcot Avenue
San Jose,
CA 95131
Attention: David L. Teichmann
Fax No.: (408)
904-4913
E-mail:
oclaro-legal@oclaro.com
with copies (which shall not constitute notice) to:
Jones Day
1755 Embarcadero
Road
Palo Alto, California 94303
Attention: Daniel R. Mitz and Kevin B. Espinola
Fax No.: (650)
739-3900
Email: drmitz@jonesday.com; kbespinola@jonesday.com
Section 9.3
Assignment
. No party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of the other parties. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
Section 9.4
Entire Agreement
. This Agreement and the documents and
instruments and other agreements among the parties hereto as contemplated by or referred to herein, including the Company Disclosure
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Letter, the Parent Disclosure Letter and the Exhibits and Schedules hereto, constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties and their Affiliates with respect to the subject matter hereof;
provided
,
however
, the Confidentiality Agreement (as amended pursuant to
Section
6.9
) shall not be superseded, shall survive any termination of this Agreement and shall continue in full force and effect until the earlier to occur of (a) the Effective Time and (b) the date on which the
Confidentiality Agreement is terminated in accordance with its terms.
Section 9.5
Financing Source
Liability
. No Financing Source shall have any liability for any obligations or Liabilities of the parties hereto or for any claim (whether in tort, contract or otherwise), based on, in respect of, or by reason of, the transactions contemplated
hereby or in respect of any oral representations made or alleged to be made in connection herewith. Notwithstanding any provision of this Agreement, in no event shall the Company or any of its shareholders, partners, members, Affiliates, directors,
officers, employees, controlling persons and other Representatives (each, a
Company Related Party
), and the Company agrees not to and to cause its Company Related Parties not to, (i) seek to enforce this Agreement against,
make any claims for breach of this Agreement against, or seek to recover monetary damages from, any Financing Source or (ii) seek to enforce the commitment against, make any claims for breach of the Debt Financing Commitment against, or seek to
recover monetary damages from, or otherwise sue, the Financing Sources for any reason, including in connection with the Debt Financing Commitment or the obligations of the Financing Sources thereunder. Nothing in this
Section
9.5
shall in any way limit or qualify the obligations and liabilities of the parties to the Debt Commitment Letters to each other or in connection therewith.
Section 9.6
Third Party Beneficiaries
. Except (a) as set forth in or contemplated by the
provisions of
Section
6.13
, (b) from and after the Effective Time, the rights of the holders of Company Common Stock to receive the Merger Consideration in accordance with
Article II
, (c) the rights of the
holders of Company Compensatory Awards to receive such amounts as provided for in
Section
6.11
, and (iii) the Financing Sources, solely with respect to
Section
8.4
,
Section
9.5
,
Section
9.10
,
Section
9.11
,
Section
9.12
and this
Section
9.6
, this Agreement is not intended to confer
upon any other Person any rights or remedies hereunder.
Section 9.7
Severability
. In the
event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the
application of such provision to other Persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.
Section 9.8
Other Remedies
. Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other
remedy.
Section 9.9
Specific Performance
. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek equitable relief
without the requirement of posting a bond or other security, including to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.
Section 9.10
Governing Law
. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable
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principles of conflicts of law thereof. Notwithstanding the foregoing, without limiting anything set forth in
Section
9.5
, each party hereto agrees that any action,
cause of action, claim, cross-claim or third-party claim of any kind or description, whether in law or in equity, whether in contract or in tort or otherwise, against the Financing Sources in any way relating to this Agreement, the Debt Financing or
any of the transactions contemplated hereby or thereby, including but not limited to any dispute arising out of or relating in any way to the Debt Commitment Letters or the performance thereof, shall be governed by, and construed in accordance with,
the laws of the State of New York, without giving effect to any choice of law or conflict of laws provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other
than the State of New York (except as expressly specified in the Debt Commitment Letter, the commitment relating to any alternative financing or in any definitive document related to such financing).
Section 9.11
Consent to Jurisdiction
. Each of the parties hereto (a) irrevocably consents
to the service of the summons and complaint and any other process in any action or proceeding relating to the transactions contemplated by this Agreement, for and on behalf of itself or any of its properties or assets, in accordance with
Section
9.2
or in such other manner as may be permitted by Applicable Law, and nothing in this
Section
9.11
shall affect the right of any party to serve legal process in any other manner permitted
by Applicable Law; (b) irrevocably and unconditionally consents and submits itself and its properties and assets in any action or proceeding to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (or, only if the Court
of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any federal court within the State of Delaware) in the event any dispute or controversy arises out of this Agreement or the transactions contemplated
hereby (including the Merger), or for recognition and enforcement of any judgment in respect thereof; (c) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court;
(d) agrees that any actions or proceedings arising in connection with this Agreement or the transactions contemplated hereby (including the Merger) shall be brought, tried and determined only in the Court of Chancery of the State of Delaware
(or, only if the Court of Chancery of the State of Delaware declines to accept jurisdiction over a particular matter, any federal court within the State of Delaware); (e) waives any objection that it may now or hereafter have to the venue of any
such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; and (f) agrees that it will not bring any action relating to this Agreement or the
transactions contemplated hereby (including the Merger) in any court other than the aforesaid courts. Notwithstanding the foregoing or anything herein to the contrary, without limiting anything set forth in
Section
9.5
,
each of the parties hereto agrees (a) that any action of any kind or nature, whether at law or equity, in contract, in tort or otherwise, against a Financing Source in connection with this Agreement, the Debt Financing or the transactions
contemplated hereby or thereby shall be subject to the exclusive jurisdiction of any state or federal court sitting in the Borough of Manhattan, New York, New York and any appellate court thereof and each party hereto submits for itself and its
property with respect to any such action to the exclusive jurisdiction of such courts, (b) not to bring or permit any of its affiliates or representatives to bring or support anyone else in bringing any such action in any other court,
(c) that a final judgment in any such action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law, (d) that the laws described in the last sentence of
Section
9.10
shall govern any such action and (e) to waive and hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of, and the
defense of an inconvenient forum to the maintenance of, any such action in any such court. Each of Parent, Merger Sub, Merger Sub LLC and the Company agrees that a final judgment in any action or proceeding in such courts as provided above shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Applicable Law.
Section 9.12
WAIVER OF JURY TRIAL
. EACH OF PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY,
INCLUDING ANY LITIGATION AGAINST ANY FINANCING SOURCES ARISING OUT OF THIS AGREEMENT OR THE DEBT COMMITMENT LETTER.
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Section 9.13
Counterparts
. This Agreement may be
executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood
that all parties need not sign the same counterpart. Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf) form, or by any other electronic means intended to
preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signature.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by their respective
duly authorized officers to be effective as of the date first above written.
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LUMENTUM HOLDINGS INC.
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By:
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/s/ Alan Lowe
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Name: Alan Lowe
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Title: President and Chief Executive Officer
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PROTA MERGER SUB, INC.
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By:
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/s/ Judy Hamel
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Name: Judy Hamel
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Title: Secretary
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PROTA MERGER, LLC
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By:
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/s/ Judy Hamel
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Name: Judy Hamel
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Title: Manager
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OCLARO, INC.
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By:
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/s/ Greg Dougherty
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Name: Greg Dougherty
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Title: Chief Executive Officer
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[S
IGNATURE
P
AGE
TO
M
ERGER
A
GREEMENT
]
Annex B
Jefferies LLC
520 Madison Avenue
New York, NY 10022
www.jefferies.com
March 11, 2018
The Board of Directors
Oclaro, Inc.
225 Charcot Ave.
San Jose, CA 95131
Members of the Board:
We understand that
Oclaro, Inc. (Oclaro), Lumentum Holdings Inc. (Lumentum), Prota Merger Sub, Inc., a wholly-owned subsidiary of Lumentum (Merger Sub), and Prota Merger, LLC, a wholly-owned subsidiary of Lumentum (Merger Sub
LLC), propose to enter into an Agreement and Plan of Merger (the Merger Agreement), pursuant to which Merger Sub will merge with and into Oclaro, with Oclaro as the surviving entity and, as soon as practicable thereafter, Oclaro
will merge with and into Merger Sub LLC, with Merger Sub LLC as the surviving entity (collectively, the Merger), in a transaction in which each outstanding share of common stock, par value $0.01 per share, of Oclaro (the Common
Stock), other than shares of Common Stock owned by Oclaro, Lumentum or any direct or indirect wholly-owned subsidiary of Oclaro or Lumentum, all of which shares will be canceled, or as to which dissenters rights have been properly exercised,
will be converted into the right to receive (i) 0.0636 shares of common stock, par value $0.001 per share, of Lumentum (such stock, the Lumentum Common Stock and such consideration, the Stock Consideration), and (ii) $5.60 in
cash (the Cash Consideration and, together with the Stock Consideration, the Merger Consideration). The terms and conditions of the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Merger Consideration to be received by the holders of shares of Common Stock pursuant to the
Merger Agreement is fair, from a financial point of view, to such holders.
In arriving at our opinion, we have, among other things:
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(i)
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reviewed a draft dated March 11, 2018 of the Merger Agreement (the Draft Merger Agreement);
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(ii)
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reviewed certain publicly available financial and other information about Oclaro and Lumentum;
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(iii)
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reviewed certain information furnished to us by Oclaros management, including financial forecasts and analyses, relating to the business, operations and prospects of Oclaro (the Oclaro Forecasts);
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(iv)
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reviewed certain information furnished to us by Lumentums management, including financial forecasts and analyses, relating to the business, operations and prospects of Lumentum (the Lumentum Forecasts
and, together with Oclaro Forecasts, the Forecasts);
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(v)
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held discussions with members of senior management of Oclaro concerning the matters described in clauses (ii), (iii) and (iv) above and held discussions with members of senior management of Lumentum concerning the
Lumentum Forecasts;
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(vi)
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reviewed the share trading price history and valuation multiples for the Common Stock and compared them with those of certain publicly traded companies that we deemed relevant;
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(vii)
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compared the proposed financial terms of the Merger with the financial terms of certain other transactions that we deemed relevant; and
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(viii)
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conducted such other financial studies, analyses and investigations as we deemed appropriate.
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In our review and analysis and in rendering this opinion, we have assumed and relied upon, but have not assumed any responsibility to
independently investigate or verify, the accuracy and completeness of all financial and other information that was supplied or otherwise made available by Oclaro or Lumentum or that was publicly available to us (including, without limitation, the
information described above), or that was otherwise reviewed by us. We have relied on assurances of the managements of Oclaro (with respect to information concerning Oclaro) and Lumentum (with respect to information concerning Lumentum) that they
are not aware of any facts or circumstances that would make such information inaccurate or misleading. In our review, we did not obtain any independent evaluation or appraisal of any of the assets or liabilities of, nor did we conduct a physical
inspection of any of the properties or facilities of, Oclaro or Lumentum, nor have we been furnished with any such evaluations or appraisals of such physical inspections, nor do we assume any responsibility to obtain any such evaluations or
appraisals.
With respect to the Forecasts provided to and examined by us, we note that projecting future results of any company is
inherently subject to uncertainty. With respect to Oclaro Forecasts, we have been advised by Oclaro that such Oclaro Forecasts were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the
management of Oclaro as to the future financial performance of Oclaro. With respect to the Lumentum Forecasts, we have been advised by Lumentum that such Lumentum Forecasts were reasonably prepared on bases reflecting the best currently available
estimates and good faith judgments of the management of Lumentum as to the future financial performance of Lumentum. We express no opinion as to the Forecasts or the assumptions on which they are made and we have assumed that the Forecasts will be
realized in the amounts and at the times projected.
Our opinion is based on economic, monetary, regulatory, market and other conditions
existing and which can be evaluated as of the date hereof. We expressly disclaim any undertaking or obligation to advise any person of any change in any fact or matter affecting our opinion of which we become aware after the date hereof.
We have made no independent investigation of, and we express no view or opinion as to, any legal, regulatory, accounting or tax matters
affecting Oclaro, Lumentum or the Merger, and we have assumed the correctness in all respects material to our analysis of all legal, regulatory, accounting and tax advice given to Oclaro and its Board of Directors (the Board), including,
without limitation, with respect to changes in, or the impact of, tax laws, regulations and governmental and legislative policies on Oclaro and Lumentum and advice as to the legal, regulatory, accounting and tax consequences of the terms of, and
transactions contemplated by, the Merger Agreement to Oclaro and its stockholders. In addition, in preparing this opinion, we have not taken into account any tax consequences of the transaction to any holder of Common Stock. We have assumed that the
final form of the Merger Agreement will be substantially similar to Draft Merger Agreement. We have also assumed that the Merger will be consummated in accordance with the terms of the Merger Agreement, without waiver, modification or amendment of
any term, condition or agreement and in compliance with all applicable laws, documents and other requirements and that in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the Merger, no delay,
limitation, restriction or condition will be imposed that would have an adverse effect on Oclaro, Lumentum or the contemplated benefits of the Merger.
It is understood that our opinion is for the use and benefit of the Board (in its capacity as such) in its consideration of the Merger, and
our opinion does not address the relative merits of the transactions contemplated by the Merger Agreement as compared to any alternative transaction or opportunity that might be available to Oclaro, nor does it address the underlying business
decision by Oclaro to engage in the Merger or the terms of the Merger Agreement or the documents referred to therein. Our opinion does not constitute a recommendation as to how any holder of shares of Common Stock should vote on the Merger or any
matter
B-2
related thereto. In addition, you have not asked us to address, and this opinion does not address, the fairness to, or any other consideration of, the holders of any class of securities,
creditors or other constituencies of Oclaro, other than the holders of shares of Common Stock. We express no opinion as to as to what the value of the Lumentum Common Stock will be when issued or the price at which shares of Common Stock or Lumentum
Common Stock will trade at any time. Furthermore, we do not express any view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be received by any of Oclaros officers, directors
or employees, or any class of such persons, in connection with the Merger relative to the Merger Consideration to be received by holders of shares of Common Stock. Our opinion has been authorized by the Fairness Committee of Jefferies LLC.
We have been engaged by Oclaro to act as financial advisor to Oclaro in connection with the Merger and will receive a fee for our services, a
portion of which is payable upon delivery of this opinion and a significant portion of which is payable contingent upon consummation of the Merger. We also will be reimbursed for expenses incurred. Oclaro has agreed to indemnify us against
liabilities arising out of or in connection with the services rendered and to be rendered by us under such engagement. We have, in the past, provided financing services to Oclaro and may continue to do so and have received, and may receive, fees for
the rendering of such services. We maintain a market in the securities of Oclaro, and in the ordinary course of our business, we and our affiliates may trade or hold securities of Oclaro or Lumentum and/or their respective affiliates for our own
account and for the accounts of our customers and, accordingly, may at any time hold long or short positions in those securities. In addition, we may seek to, in the future, provide financial advisory and financing services to Oclaro, Lumentum or
entities that are affiliated with Oclaro or Lumentum, for which we would expect to receive compensation. Except as otherwise expressly provided in our engagement letter with Oclaro, our opinion may not be used or referred to by Oclaro, or quoted or
disclosed to any person in any manner, without our prior written consent.
Based upon and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Merger Consideration to be received by the holders of shares of Common Stock pursuant to the Merger Agreement is fair, from a financial point of view, to such holders.
Very truly yours,
/s/ JEFFERIES LLC
JEFFERIES LLC
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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
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practicable, with the word amendment substituted for the words merger or consolidation, and the word 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
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stockholder who is entitled to appraisal rights and who has demanded appraisal of such holders shares in 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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Exhibit 99.2
OCLARO, INC.
Attn: Stockholder Administration 225 Charcot Avenue SAN JOSE, CA 95131
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Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before
the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
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by Oclaro, Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above
to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
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Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date.
Have your proxy card in hand when you call and then follow the instructions
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS
PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY
The Board of Directors recommends you
vote FOR proposals 1, 2 and 3.
For Against Abstain
1. To adopt the Agreement
and Plan of Merger, dated as of March 11, 2018, among Lumentum Holdings Inc. ("Lumentum"), Oclaro, Inc. ("Oclaro"), Prota Merger Sub, Inc. ("Merger Sub"), and Prota Merger,
LLC("Merger Sub LLC"), as it may be amended from time to time (the "Merger Agreement"), which provides for the acquisition of Oclaro through (1) a merger of Merger Sub with and
into Oclaro (the "First Step Merger") with Oclaro surviving the First Step Merger, and (2), as soon as reasonably practicable following the First Step Merger, a merger of Oclaro with and into Merger Sub LLC (the "Second Step Merger", and,together
with the First Step Merger, the "Merger"), with Merger Sub LLC surviving as a direct wholly owned subsidiary of Lumentum.
2. To approve, on a non-binding, advisory
basis, the compensation payments that will or may be made to Oclaro's named executive officers in connection with the Merger.
3. To approve the adjournment of the
special meeting, from time to time, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to approve Proposal 1.
NOTE: Such other business as may properly come before the meeting or any adjournment thereof.
For address change/comments, mark here. (see reverse for instructions)
Yes No
Please indicate if you plan to attend this meeting
Please sign exactly as
your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in
full corporate or partnership name by authorized officer.
Signature [PLEASE SIGN WITHIN BOX] Date
Signature (Joint Owners) Date
0000383638_1 R1.0.1.17
Important Notice Regarding the Availability of Proxy
Materials for the Special Meeting: The Notice & Proxy Statement is/are available at www.proxyvote.com
OCLARO, INC.
Special Meeting of Stockholders
July 12, 2018 8:00 a.m., local time
This proxy is solicited by the Board of Directors of Oclaro, Inc. (the Company)
This proxy is solicited by the Board of Directors for the Special Meeting of Stockholders to be held on July 12, 2018. The undersigned revokes all previous
proxies, acknowledges receipt of the Notice of the Special Meeting of Stockholders to be held July 12, 2018, and the Proxy Statement and hereby appoints Greg Dougherty, David Teichmann and Pete Mangan and each of them, each with the power to appoint
his or her substitute and hereby authorizes them, as attorneys-in-fact and proxies of the undersigned, to represent and to vote as designated on the reverse side, all shares of common stock of Oclaro, Inc. held of record by the undersigned on May
15, 2018, at the Special Meeting of Stockholders to be held at Oclaros headquarters at 225 Charcot Avenue, San Jose, California 95131, on July 12, 2018, at 8:00 a.m. Pacific time, and at any and all postponements, continuations and
adjournments thereof, with all powers that the undersigned would possess if personally present, upon and in respect of the following matters and in accordance with the following instructions, with discretionary authority as to any and all other
matters that may properly come before the meeting. UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR PROPOSAL 1, FOR PROPOSAL 2, AND, IF NECESSARY FOR PROPOSAL 3, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF
SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH
Address change/comments:
(If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side
0000383638_2 R1.0.1.17
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