<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 1999
REGISTRATION NO. 333-92351
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
JDS UNIPHASE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 3674 94-2579683
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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JDS UNIPHASE CORPORATION
163 BAYPOINTE PARKWAY
SAN JOSE, CALIFORNIA 95134
(408) 434-1800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
KEVIN N. KALKHOVEN
CO-CHAIRMAN OF THE BOARD OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER
JDS UNIPHASE CORPORATION
163 BAYPOINTE PARKWAY
SAN JOSE, CALIFORNIA 95134
(408) 434-1800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:
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JOHN W. CAMPBELL, III, ESQ. JOHN V. ERICKSON, ESQ.
MORRISON & FOERSTER LLP COLLETTE & ERICKSON LLP
425 MARKET STREET 555 CALIFORNIA STREET, SUITE 4350
SAN FRANCISCO, CALIFORNIA 94105-2482 SAN FRANCISCO, CALIFORNIA 94104
(415) 268-7000 (415) 788-4646
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
Upon consummation of the merger described herein.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement number for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
OPTICAL COATING LABORATORY LOGO
TO THE STOCKHOLDERS OF OPTICAL COATING LABORATORY, INC.
A Merger Proposal -- Your Vote is Very Important
On November 3, 1999, Optical Coating Laboratory, Inc.'s board of directors
approved a merger agreement between JDS Uniphase Corporation and Optical Coating
Laboratory, Inc. The agreement provides for the merger of OCLI with a newly
formed, wholly owned subsidiary of JDS Uniphase.
In the merger, each share of your OCLI common stock will be exchanged for
1.856 shares of JDS Uniphase common stock. JDS Uniphase common stock is listed
on the Nasdaq National Market under the trading symbol "JDSU," and on December
17, 1999, JDS Uniphase common stock closed at $120.47 per share. Based on the
number of shares of common stock of OCLI and JDS Uniphase outstanding on
December 15, 1999, the former stockholders of OCLI will own approximately 6.9%
of JDS Uniphase's common stock after the merger. The information described above
gives effect to the stock dividend of one share of JDS Uniphase common stock for
each outstanding share of JDS Uniphase common stock effective December 22, 1999.
The merger cannot be completed unless the holders of a majority of OCLI common
stock outstanding and entitled to vote at the special meeting adopt the merger
agreement.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS UNANIMOUSLY DETERMINED
THE MERGER TO BE FAIR TO YOU AND IN YOUR BEST INTERESTS AND DECLARED THE MERGER
ADVISABLE. OCLI'S BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND RECOMMENDS ITS ADOPTION BY YOU.
This proxy statement-prospectus provides you with information concerning
JDS Uniphase and the merger. Please give all of the information contained in the
proxy statement-prospectus your careful attention. IN PARTICULAR, YOU SHOULD
CAREFULLY CONSIDER THE DISCUSSION IN THE SECTION ENTITLED "RISK FACTORS" ON PAGE
26 OF THIS PROXY STATEMENT-PROSPECTUS.
Please use this opportunity to take part in the affairs of OCLI by voting
on the merger agreement. Whether or not you plan to attend the meeting, please
complete, sign, date and return the accompanying proxy in the enclosed
self-addressed stamped envelope or follow the telephone voting instructions at
the bottom of the proxy card. Returning the proxy or voting by telephone does
NOT deprive you of your right to attend the meeting and to vote your shares in
person. YOUR VOTE IS VERY IMPORTANT.
We appreciate your interest in OCLI and consideration of this matter.
SIG.
Charles J. Abbe
President and Chief Executive Officer
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THE SHARES OF JDS UNIPHASE COMMON STOCK TO BE ISSUED IN
CONNECTION WITH THE MERGER OR DETERMINED WHETHER THIS PROXY STATEMENT-PROSPECTUS
IS ADEQUATE OR ACCURATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This proxy statement-prospectus is dated December 22, 1999 and was first
mailed to stockholders on or about December 22, 1999.
Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, California 95407
Telephone: (707) 547-6335
Facsimile: (707) 525-6840
<PAGE> 3
OPTICAL COATING LABORATORY LOGO
OPTICAL COATING LABORATORY, INC.
2789 NORTHPOINT PARKWAY
SANTA ROSA, CALIFORNIA 95407
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Date: January 25, 2000
Time: 11:00 a.m., PST
Place: Hilton Hotel
3555 Round Barn Boulevard
Santa Rosa, California 95403
At the meeting you will be asked:
1. To consider and vote upon a proposal to adopt the Agreement and
Plan of Reorganization and Merger, dated as of November 3, 1999, by and
among JDS Uniphase Corporation, Vintage Acquisition, Inc., a wholly owned
subsidiary of JDS Uniphase, and Optical Coating Laboratory, Inc., under
which Vintage Acquisition will merge with and into OCLI and OCLI will
survive the merger as a wholly owned subsidiary of JDS Uniphase. In the
merger, holders of outstanding shares of common stock of OCLI will receive
1.856 shares of common stock of JDS Uniphase for each share of OCLI common
stock they hold. The exchange ratio of 1.856 gives effect to the stock
dividend of one share of JDS Uniphase common stock for each outstanding
share of JDS Uniphase common stock effective December 22, 1999. Adoption of
the merger agreement will also constitute approval of the merger and the
other transactions contemplated by the merger agreement.
2. To transact such other business as may properly come before the
special meeting or any adjournment of the special meeting.
The attached proxy statement-prospectus contains a more complete
description of these items of business. Only holders of record of OCLI common
stock at the close of business on December 15, 1999, the record date, are
entitled to vote on the matters listed in this notice of special meeting. You
may vote in person at the OCLI special meeting even if you have returned a proxy
or voted by telephone.
By Order of the Board of Directors
of Optical Coating Laboratory, Inc.
SIG.
Joseph C. Zils
Vice President and Corporate Secretary
Santa Rosa, California
December 22, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY
IN THE ENCLOSED SELF-ADDRESSED STAMPED ENVELOPE OR FOLLOW THE
TELEPHONE VOTING INSTRUCTIONS AT THE BOTTOM OF THE PROXY CARD.
<PAGE> 4
WHERE YOU CAN FIND MORE INFORMATION
This proxy statement-prospectus includes information that has not been
delivered or presented to you but is "incorporated by reference," which means
that JDS Uniphase and OCLI disclose information to you by referring you to
another document filed separately with the SEC. The information incorporated by
reference is considered a part of this proxy statement-prospectus, except for
any information superseded by information provided in this proxy
statement-prospectus. This proxy statement-prospectus incorporates by reference
the documents listed below, which contain important information.
JDS Uniphase is also incorporating by reference any additional documents
that it files with the SEC as required by the Securities Exchange Act of 1934
between the date of this proxy statement-prospectus and the date of the special
meeting of stockholders.
The following documents, which were filed by OCLI with the SEC, are
incorporated by reference into this proxy statement-prospectus:
- OCLI's Annual Report on Form 10-K for the fiscal year ended October 31,
1998;
- OCLI's Quarterly Report on Form 10-Q for the quarter ended July 31, 1999;
- OCLI's Quarterly Report on Form 10-Q for the quarter ended April 30,
1999;
- OCLI's Quarterly Report on Form 10-Q for the quarter ended January 31,
1999;
- OCLI's Current Report on Form 8-K filed on May 19, 1999;
- OCLI's Current Report on Form 8-K filed on December 23, 1998; and
- OCLI's Current Report on Form 8-K filed on November 24, 1998.
The following documents, which have been filed by JDS Uniphase with the
SEC, are incorporated by reference into this proxy statement-prospectus:
- JDS Uniphase's Annual Report on Form 10-K/A for the fiscal year ended
June 30, 1999;
- JDS Uniphase's Annual Report on Form 10-K for the fiscal year ended June
30, 1999;
- JDS Uniphase's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999;
- JDS Uniphase's Current Report on Form 8-K/A filed on November 30, 1999;
- JDS Uniphase's Current Report on Form 8-K filed on November 5, 1999;
- JDS Uniphase's Current Report on Form 8-K/A filed on November 3, 1999;
- JDS Uniphase's Current Report on Form 8-K filed on October 4, 1999;
- JDS Uniphase's Current Report on Form 8-K filed on July 12, 1999; and
- the description of JDS Uniphase's common stock contained in JDS
Uniphase's Registration Statement on Form 8-A filed on November 15, 1993,
and any amendment or report filed for the purpose of updating such
description.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH JDS UNIPHASE OR OCLI HAVE REFERRED YOU. NEITHER JDS UNIPHASE NOR OCLI HAS
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
<PAGE> 5
You can obtain copies of the documents and information incorporated by
reference into this proxy statement-prospectus from JDS Uniphase or OCLI upon
request, without charge, not including exhibits to documents, unless those
exhibits are specifically incorporated by reference into this proxy
statement-prospectus. Any person can make a request for information orally or in
writing. ANY REQUEST FOR DOCUMENTS SHOULD BE MADE BY JANUARY 18, 2000 TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS.
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Requests for documents relating to OCLI Requests for documents relating to
should be directed to: JDS Uniphase should be directed to:
Optical Coating Laboratory, Inc. JDS Uniphase Corporation
2789 Northpoint Parkway 163 Baypointe Parkway
Santa Rosa, California 95407 San Jose, California 95134
Attention: Investor Relations Attention: Investor Relations
(707) 547-6335 (408) 434-1800
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We file reports, proxy statements and other information with the SEC.
Copies of our reports, proxy statements and other information may be inspected
and copied at the public reference facilities maintained by the SEC at:
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Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
</TABLE>
Reports, proxy statements and other information concerning OCLI and JDS
Uniphase may also be inspected at:
The National Association of Securities Dealers, Inc.
1735 K Street, N.W.
Washington, D.C. 20006
You can also obtain copies of these materials by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at (800) SEC-0330. The SEC
maintains a website that contains reports, proxy statements and other
information regarding JDS Uniphase and OCLI at http://www.sec.gov.
JDS Uniphase has filed a registration statement on Form S-4 under the
Securities Act with the SEC with respect to JDS Uniphase's common stock to be
issued to OCLI stockholders in the merger. This proxy statement-prospectus
constitutes the prospectus of JDS Uniphase filed as part of the registration
statement. This proxy statement-prospectus does not contain all of the
information set forth in the registration statement because parts of the
registration statement are omitted in accordance with the rules and regulations
of the SEC. The registration statement and its exhibits are available for
inspection and copying as described above.
If you have any questions about the merger, please call OCLI Investor
Relations at (707) 547-6335. You may also call JDS Uniphase Investor Relations
at (408) 434-1800.
<PAGE> 6
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY OF THE PROXY STATEMENT-PROSPECTUS................... 2
The Companies............................................. 2
Summary of the Transaction................................ 4
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF OCLI..... 9
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF JDS
UNIPHASE.................................................. 11
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS...................................... 13
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS OF JDS UNIPHASE AND OCLI............. 17
COMPARATIVE PER SHARE DATA.................................. 22
COMPARATIVE PER SHARE MARKET PRICE DATA..................... 24
RISK FACTORS................................................ 26
RISKS RELATED TO THE MERGER................................. 26
You will receive 1.856 shares of JDS Uniphase common stock
for each share of OCLI common stock despite changes in
market value of OCLI common stock or JDS Uniphase
common stock........................................... 26
Although JDS Uniphase and OCLI expect that the merger will
result in benefits, those benefits may not be
realized............................................... 26
OCLI officers and directors have conflicts of interest
that may influence them to support and approve the
merger................................................. 27
If the merger is not completed, OCLI's stock price and
future business and operations could be harmed......... 27
Customer and employee uncertainty related to the merger
could harm the
combined company....................................... 27
JDS Uniphase's operating results may suffer as a result of
purchase accounting treatment, the impact of
amortization of goodwill and other intangibles relating
to its proposed combination with OCLI.................. 28
JDS Uniphase and OCLI expect to incur significant costs
associated with the merger............................. 28
The price of JDS Uniphase common stock may be affected by
factors different from those affecting the price of
OCLI common stock...................................... 28
RISKS RELATED TO JDS UNIPHASE............................... 28
Difficulties JDS Uniphase may encounter managing its
growth could adversely affect its results of
operations............................................. 28
Difficulties in integrating Uniphase and JDS FITEL could
adversely affect JDS Uniphase's business............... 29
If JDS Uniphase fails to efficiently combine Uniphase's
and JDS FITEL's sales and marketing forces, its sales
could suffer........................................... 29
Integration costs and expenses associated with Uniphase's
combination with JDS FITEL have been substantial and
JDS Uniphase may incur additional related expenses in
the future............................................. 29
Difficulties in integrating other acquisitions could
adversely affect JDS Uniphase's business............... 30
Difficulties in commercializing new product lines......... 30
Any failure of JDS Uniphase's information technology
infrastructure could materially harm its results of
operations............................................. 30
JDS Uniphase is subject to manufacturing difficulties..... 31
If JDS Uniphase does not achieve acceptable manufacturing
volumes, yields or sufficient product reliability, its
operating results could suffer......................... 31
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If JDS Uniphase's customers do not qualify its manufacturing
lines for volume shipments, its operating results could
suffer...................................................... 31
JDS Uniphase's operating results suffer as a result of
purchase accounting treatment, primarily due to the
impact of amortization of goodwill and other
intangibles relating to its combination with JDS
FITEL.................................................. 32
JDS Uniphase's stock price could fluctuate
substantially.......................................... 32
The unpredictability of JDS Uniphase's quarterly operating
results could cause its stock price to be volatile or
decline................................................ 32
Factors other than JDS Uniphase's quarterly results could
cause its stock price to be volatile or decline........ 33
JDS Uniphase's sales would suffer if one or more of its
key customers substantially reduced orders for its
products............................................... 34
Interruptions affecting JDS Uniphase's key suppliers could
disrupt production, compromise its product quality and
adversely affect its sales............................. 34
JDS Uniphase may become subject to collective bargaining
agreements............................................. 34
Any failure to remain competitive in JDS Uniphase's
industry would impair its operating results............ 35
If JDS Uniphase's business operations are insufficient to
remain competitive in its industry, its operating
results could suffer................................... 35
Fiber optic component average selling prices are
declining.............................................. 35
If JDS Uniphase fails to attract and retain key personnel,
its business could suffer.............................. 35
Market consolidation has created and continues to create
companies that are larger and have greater resources
than JDS Uniphase...................................... 36
JDS Uniphase's participation in international markets
creates risks to its business not faced by companies
that sell their products in the United States.......... 36
The year 2000 problem may disrupt JDS Uniphase's and its
customers' and suppliers' businesses................... 37
If JDS Uniphase has insufficient proprietary rights or if
it fails to protect those it has, its business would be
materially impaired.................................... 38
JDS Uniphase may not obtain the intellectual property
rights it requires..................................... 38
JDS Uniphase's products may infringe the intellectual
property rights of others.............................. 38
JDS Uniphase's intellectual property rights may not be
adequately protected................................... 38
If JDS Uniphase fails to successfully manage its exposure
to the worldwide financial markets, its operating
results could suffer................................... 39
If JDS Uniphase fails to obtain additional capital at the
times, in the amounts and upon the terms required, its
business could suffer.................................. 39
JDS Uniphase's currently authorized preferred stock and
its ability to issue additional preferred stock could
impair the rights of its common stockholders........... 40
Some anti-takeover provisions contained in JDS Uniphase's
charter and under Delaware law could impair a takeover
attempt................................................ 40
THE SPECIAL MEETING OF OCLI STOCKHOLDERS.................... 41
Purpose of the Special Meeting............................ 41
Stockholder Record Date for the Special Meeting........... 41
Vote of OCLI Stockholders Required for Adoption of the
Merger Agreement....................................... 41
Proxies................................................... 41
Availability of Accountants............................... 42
Solicitation of Proxies................................... 42
THE MERGER.................................................. 43
Background of the Merger.................................. 43
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Reasons for the Transaction................................. 46
Recommendation of OCLI's Board of Directors............... 48
Opinion of OCLI's Financial Advisor....................... 49
Interests of Directors and Officers in the Merger......... 54
Completion and Effectiveness of the Merger................ 55
Structure of the Merger and Conversion of OCLI Common
Stock.................................................. 55
Exchange of OCLI Stock Certificates for JDS Uniphase Stock
Certificates........................................... 55
Material United States Federal Income Tax Considerations
of the Merger.......................................... 56
Accounting Treatment of the Merger........................ 57
Regulatory Filings and Approvals Required to Complete the
Merger................................................. 57
Restrictions on Sales of Shares by Affiliates of OCLI and
JDS Uniphase........................................... 58
Listing on the Nasdaq National Market of JDS Uniphase
Common Stock to be Issued in the Merger................ 58
No Appraisal Rights....................................... 58
Delisting and Deregistration of OCLI common stock after
the Merger............................................. 59
Dividend Policy........................................... 59
The Merger Agreement...................................... 59
Conditions to Completion of the Merger.................... 64
Termination of the Merger Agreement....................... 65
Payment of Termination Fee................................ 66
Extension, Waiver and Amendment of the Merger Agreement... 66
The Stock Option Agreement................................ 66
Affiliate Agreements...................................... 68
Noncompetition Commitments................................ 68
Operations After the Merger............................... 68
COMPARISON OF RIGHTS OF HOLDERS OF OCLI COMMON STOCK AND JDS
UNIPHASE COMMON STOCK..................................... 69
Capitalization............................................ 69
Number of Directors....................................... 70
Voting Rights............................................. 70
Classified Board of Directors............................. 70
Director Voting........................................... 70
Removal of Directors...................................... 70
Filling Vacancies on the Board of Directors............... 71
Advance Notice of Stockholder Proposals................... 71
Power to Call Special Meetings of Stockholders............ 71
Business Combination Following a Change of Control........ 72
Amendment of Charter Documents............................ 72
Indemnification........................................... 72
Restriction on Sales of Stock............................. 73
Inspection of Stockholders List........................... 73
Appraisal Rights.......................................... 73
Rights Plans.............................................. 73
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS, MANAGEMENT AND
DIRECTORS OF OCLI......................................... 75
LEGAL MATTERS............................................... 77
EXPERTS..................................................... 77
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STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING OF OCLI
STOCKHOLDERS IF THE MERGER IS NOT COMPLETED................. 78
Annex A -- Agreement and Plan of Reorganization and
Merger................................................. A-1
Annex B -- Company Stock Option Agreement................. B-1
Annex C -- Fairness Opinion of Hambrecht & Quist LLC...... C-1
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT DO I NEED TO DO NOW?
A: Following your review of this proxy statement-prospectus, mail your signed
proxy card in the enclosed return envelope or vote by telephone as soon as
possible so that your shares can be voted at the special meeting of OCLI
stockholders.
Q: WHAT HAPPENS IF I RETURN MY PROXY CARD BUT DON'T INDICATE HOW TO VOTE?
A: If you sign your proxy properly but do not include instructions on how to
vote and don't vote by telephone, your shares will be voted FOR adoption of
the merger agreement and approval of the merger.
Q: WHAT HAPPENS IF I DON'T RETURN A PROXY CARD?
A: Unless you vote FOR adoption of the merger agreement by telephone, not
returning your proxy card will have the same effect as voting against the
merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD OR VOTED BY
TELEPHONE?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send a
written notice to OCLI stating that you would like to revoke your proxy.
Second, you can complete and submit a new proxy card. Third, you can attend
the special meeting and vote in person. Fourth, if you vote by telephone, you
can change your vote at any time by following the telephone voting
instructions on your proxy card.
Q: IF MY BROKER HOLDS MY SHARES IN STREET NAME, WILL MY BROKER VOTE MY SHARES
FOR ME?
A: No. Your broker will not be able to vote your shares without instructions
from you. If you do not provide your broker with voting instructions, your
shares will be considered present at the special meeting for purposes of
determining a quorum but will not be considered to have been voted in favor
of adoption of the merger agreement. If you have instructed a broker to vote
your shares, you must follow directions received from your broker to change
those instructions.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, JDS Uniphase will send you written
instructions for exchanging your OCLI stock certificates for JDS Uniphase
stock certificates.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: You can write or call OCLI's Investor Relations at 2789 Northpoint Parkway,
Santa Rosa, California 95407, telephone (707) 547-6335 with any questions
about the merger.
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<PAGE> 11
SUMMARY OF THE PROXY STATEMENT-PROSPECTUS
This summary may not contain all of the information that is important to
you. You should carefully read this entire document and the other documents to
which we refer for a more complete understanding of the merger. In particular,
you should read the documents attached to this proxy statement-prospectus,
including the merger agreement, the stock option agreement and the fairness
opinion of Hambrecht & Quist LLC, which are attached as Annexes A, B and C,
respectively. In addition, we incorporate by reference important business and
financial information about JDS Uniphase and OCLI into this proxy
statement-prospectus. You may obtain the information incorporated by reference
into this proxy statement-prospectus without charge by following the
instructions in the section entitled "Where You Can Find More Information" on
the inside front cover of this proxy statement-prospectus. Unless otherwise
indicated or unless the context otherwise requires, all information in this
proxy statement-prospectus gives effect to the stock dividend of one share of
JDS Uniphase common stock for each outstanding share of JDS Uniphase common
stock, effected as to JDS Uniphase's stockholders of record as of December 22,
1999, and the concurrent two-for-one stock split of the exchangeable shares of
JDS Uniphase's subsidiary, JDS Uniphase Canada Ltd. All references to the JDS
Uniphase common stock dividend in this proxy statement-prospectus also include
the concurrent stock split of JDS Uniphase's Canadian subsidiary.
THE COMPANIES
OPTICAL COATING LABORATORY, INC.
2789 NORTHPOINT PARKWAY
SANTA ROSA, CALIFORNIA 95407
ATTN: INVESTOR RELATIONS
(707) 547-6335
OCLI is a worldwide leader in optical thin film coating technologies with
over 50 years of experience developing thin film coating processes for
government and industry. OCLI has built a portfolio of products that incorporate
high performance optical thin films used to manage light.
OCLI's products control, enhance and modify the behavior of light by
utilizing its reflection, absorption and transmission properties to achieve
commercially important effects such as high reflectivity, anti-glare, spectral
filtering and color shifting. By integrating superior process capabilities with
advanced product design, OCLI provides complete optical solutions that address a
range of end-market applications.
Fiber Optics. OCLI manufactures and sells optical components for fiber
optic communications systems utilizing wavelength division multiplexing (WDM)
technology. WDM increases the number of information-carrying channels an optical
fiber can simultaneously transmit by combining light sources of different
wavelengths, or colors, onto the same fiber optic cable. OCLI is also providing
next generation fiber optic components for the metropolitan telecommunications
market such as optical add/drop modules and distributed amplification.
Light Interference Pigments. Through its Flex Products, Inc. subsidiary,
OCLI manufactures and sells optically variable pigments used to prevent
counterfeiting of the world's currencies and other value documents. These
pigments are also used to create color-shifting effects in paints for
automobiles and other consumer products.
Display. OCLI manufactures and sells optical components used in projection
display products such as large-screen projection televisions and business
projection systems, cathode ray tube (CRT) displays and flat panel displays.
2
<PAGE> 12
Aerospace and Instrumentation. OCLI manufactures and sells optical
components, including precision polymer optics, used in defense and aerospace
products, as well as medical, scientific and analytical instruments. OCLI also
sells optical components used on satellites for solar power generation, thermal
control and other functions.
Office Automation. OCLI manufactures and sells optical components,
including precision polymer optics, for scanners, automated data collection
products, printers and other office products.
Since 1997, JDS Uniphase and OCLI have operated a successful strategic
alliance under which OCLI contributed its expertise in optical thin film
technology and products for some WDM applications and JDS Uniphase contributed
its expertise in the design, manufacture and marketing of these products. JDS
Uniphase was OCLI's largest customer for the twelve months ended October 31,
1998, and accounted for approximately 21% of revenues in fiscal 1998 and for
approximately 37% of revenues for the nine months ended July 31, 1999.
OCLI's principal offices and manufacturing facilities are at 2789
Northpoint Parkway, Santa Rosa, California 95407, where the telephone number is:
(707) 545-6440. OCLI also has manufacturing facilities and distribution
subsidiaries in Europe and Asia.
OCLI maintains a site on the Internet at www.ocli.com. Information found at
OCLI's website is not a part of this proxy statement-prospectus. OCLI was
incorporated in Delaware in 1948, reincorporated in California in 1963 and, in
1987, again reincorporated in Delaware.
JDS UNIPHASE CORPORATION
163 BAYPOINTE PARKWAY
SAN JOSE, CALIFORNIA 95134
ATTN: INVESTOR RELATIONS
(408) 434-1800
JDS Uniphase Corporation is the result of a merger between Uniphase
Corporation and JDS FITEL Inc., pursuant to which they combined their operations
on June 30, 1999. Historic information described in this proxy
statement-prospectus, not pertaining to OCLI, pertains only to either Uniphase
Corporation or JDS FITEL Inc. In such instances, historic information that is
specific to Uniphase Corporation or JDS FITEL Inc. is specifically described as
"Uniphase" or "JDS FITEL" information, respectively. References to "JDS
Uniphase" refer to the combined entity resulting from the merger of Uniphase and
JDS FITEL.
JDS Uniphase is a leading provider of advanced fiber optic components and
modules. These products are sold to leading telecommunications and cable
television system providers worldwide, which are commonly referred to as OEMs
and include Alcatel, Ciena, General Instruments, Lucent, Nortel, Pirelli,
Scientific Atlanta, Siemens and Tyco. JDS Uniphase's components and modules are
basic building blocks for fiber optic networks and perform both optical-only
(passive) and optoelectronic (active) functions within these networks. JDS
Uniphase's products include semiconductor lasers, high-speed external
modulators, transmitters, amplifiers, couplers, multiplexers, circulators,
tunable filters, optical switches and isolators for fiber optic applications.
JDS Uniphase also supplies its OEM customers with test instruments for both
system production applications and network installation. In addition, JDS
Uniphase designs, manufactures and markets laser subsystems for a broad range of
commercial applications, which include biotechnology, industrial process control
and measurement, graphics and printing and semiconductor equipment manufactured
by its customers.
JDS Uniphase's corporate headquarters in the United States is at 163
Baypointe Parkway, San Jose, California 95134, where the telephone number is
(408) 434-1800. Its corporate headquarters in
3
<PAGE> 13
Canada is at 570 West Hunt Club Road, Nepean, Ontario, and the telephone number
at this location is (613) 727-1304.
JDS Uniphase maintains a site on the Internet at www.jdsunph.com.
Information found at JDS Uniphase's website is not part of this proxy
statement-prospectus. JDS Uniphase was incorporated in Delaware in October 1993.
SUMMARY OF THE TRANSACTION
STRUCTURE OF THE TRANSACTION
OCLI will merge with Vintage Acquisition, Inc., a wholly owned subsidiary
of JDS Uniphase, and become a wholly owned subsidiary of JDS Uniphase. Following
the merger, as a stockholder of JDS Uniphase, you will have an equity stake in
OCLI's parent company JDS Uniphase.
STOCKHOLDER APPROVAL
The holders of a majority of the outstanding shares of OCLI common stock
must adopt the merger agreement. JDS Uniphase stockholders are not required to
adopt the merger agreement and will not vote on the merger.
You are entitled to cast one vote for each share of OCLI common stock you
owned as of December 15, 1999, the record date.
RECOMMENDATION OF OCLI'S BOARD OF DIRECTORS (SEE PAGE 48)
After careful consideration, OCLI's board of directors unanimously
determined that the merger is fair to you and in your best interests and
declared the merger advisable. OCLI's board of directors unanimously approved
the merger agreement and recommends its adoption by you.
OPINION OF OCLI'S FINANCIAL ADVISOR (SEE PAGE 49)
Hambrecht & Quist LLC, OCLI's financial advisor, delivered an opinion to
OCLI's board of directors that, subject to the considerations described in its
opinion, the exchange ratio in the merger agreement is fair from a financial
point of view to holders of shares of OCLI common stock. The complete opinion of
Hambrecht & Quist is attached as Annex C and you are urged to read it in its
entirety.
PROCEDURE FOR EXCHANGING YOUR STOCK CERTIFICATES (SEE PAGE 55)
After the merger is completed, JDS Uniphase will send you written
instructions for exchanging your OCLI stock certificates for JDS Uniphase stock
certificates. Do not send your OCLI stock certificates now.
COMPLETION AND EFFECTIVENESS OF THE MERGER
JDS Uniphase and OCLI will complete the merger when all of the conditions
to completion of the merger are satisfied or waived. The merger will become
effective when we file a certificate of merger with the State of Delaware.
4
<PAGE> 14
JDS Uniphase and OCLI are working toward completing the merger as quickly
as possible and hope to complete the merger in the first calendar quarter of
2000.
CONDITIONS TO COMPLETION OF THE MERGER (SEE PAGE 64)
JDS Uniphase's and OCLI's obligations to complete the merger are subject to
the prior satisfaction or waiver of conditions. The conditions that must be
satisfied or waived before the completion of the merger include the following:
- the registration statement on Form S-4, of which this proxy
statement-prospectus forms a part, must become effective under the
Securities Act and must not be the subject of any stop order or
proceedings seeking a stop order;
- no injunction, order or prohibition preventing the completion of the
merger may be in effect, and no action shall have been taken or any law
be applicable to the merger which makes the merger illegal;
- JDS Uniphase and OCLI must each receive an opinion of tax counsel that
the merger will qualify as a tax-free reorganization; and
- OCLI's stockholders must vote a majority of the outstanding shares of
OCLI common stock for approval of the merger.
OCLI's obligations to complete the merger are subject to the satisfaction
or waiver of each of the following additional conditions before completion of
the merger:
- JDS Uniphase's representations and warranties must be true and correct;
- JDS Uniphase must perform or comply in all material respects with all of
its agreements and covenants required by the merger agreement to be
performed or complied with by JDS Uniphase at or before completion of the
merger;
- JDS Uniphase has received all material consents necessary to complete the
merger; and
- a material adverse change relating to JDS Uniphase has not occurred.
JDS Uniphase's obligations to complete the merger are subject to the
satisfaction or waiver of each of the following additional conditions before
completion of the merger:
- OCLI's representations and warranties must be true and correct;
- OCLI must perform or comply in all material respects with all of its
agreements and covenants required by the merger agreement to be performed
or complied with by OCLI at or before completion of the merger;
- OCLI's stockholders must vote a majority of the outstanding shares of
OCLI common stock for approval of the merger;
- OCLI has received all material consents necessary to complete the merger;
- a material adverse change relating to OCLI has not occurred;
- OCLI's affiliates have entered into affiliate agreements, and each of the
agreements will be in full force and effect as of the date of the merger;
and
5
<PAGE> 15
- Some of OCLI's officers will remain employed with OCLI and remain bound
by employment agreements regarding protection of trade secrets,
assignment of inventions and noncompetition with OCLI.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 65)
JDS Uniphase or OCLI may terminate the merger agreement by mutual written
consent, duly authorized by JDS Uniphase's and OCLI's boards of directors.
Either JDS Uniphase or OCLI may also terminate the merger agreement if the
conditions to completion of the merger would not be satisfied because of a
material breach of the merger agreement by the other party or a representation,
warranty, covenant or agreement of the other party in the merger agreement
becomes materially untrue, and the breach or untruth cannot be cured through
reasonable efforts.
In addition, either JDS Uniphase or OCLI may terminate the merger agreement
under any of the following circumstances:
- if the merger is not completed by June 30, 2000;
- if a final court order or other government decree or ruling prohibiting
the merger is issued and is not appealable; or
- if OCLI's stockholders do not approve and adopt the merger agreement at
the special meeting.
Furthermore, JDS Uniphase may terminate the merger agreement if:
- OCLI's board of directors withdraws or changes in a manner adverse to JDS
Uniphase its recommendation in favor of the merger;
- OCLI's board of directors approves or recommends any offer or proposal
from a party other than JDS Uniphase relating to an extraordinary
transaction, such as a merger or a sale of significant assets; or
- a person unaffiliated with JDS Uniphase starts a tender or exchange offer
for 15% or more of the outstanding shares of OCLI, and OCLI's board of
directors recommends that its stockholders tender their shares.
PAYMENT OF TERMINATION FEE (SEE PAGE 66)
If the merger agreement terminates, OCLI may be required to pay JDS
Uniphase a termination fee of $85 million.
NO OTHER NEGOTIATIONS INVOLVING OCLI (SEE PAGE 62)
OCLI has agreed, subject to some limited exceptions, not to initiate or
engage in discussions with another party about a business combination with the
other party while the merger is pending.
STOCK OPTION AGREEMENT (SEE PAGE 66)
OCLI entered into a stock option agreement with JDS Uniphase that grants
JDS Uniphase the option to acquire shares of OCLI common stock that represent
approximately 19.9% of the issued and outstanding shares of OCLI common stock.
The exercise price of the option is $177.65 per share.
6
<PAGE> 16
JDS Uniphase also has the right under some circumstances to require OCLI to
purchase the option or shares acquired by JDS Uniphase.
JDS Uniphase required OCLI to grant the option as a prerequisite to
entering into the merger agreement. The option may discourage third parties who
are interested in acquiring a significant stake in OCLI. JDS Uniphase intends
the option to increase the likelihood that the merger will be completed.
The option is not currently exercisable, and JDS Uniphase may exercise the
option only if the merger agreement is terminated in circumstances similar to
those in which the termination fee is payable.
You are urged to read the stock option agreement, which is attached as
Annex B, in its entirety.
NONCOMPETITION COMMITMENTS (SEE PAGE 68)
Some officers of OCLI have entered into change-in-control agreements which
include noncompetition provisions. Under the change-in-control agreements, these
officers agreed that in the event of an officer's termination, they would not
for a period of two years after such termination solicit OCLI's employees,
solicit or enter into any business relationship with OCLI's customers, or
compete with OCLI in any business similar to that conducted by OCLI as of the
date of termination.
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER (SEE PAGE 54)
When considering the recommendation of OCLI's board of directors, you
should be aware that some of OCLI's directors and officers have interests in the
merger that are different from yours.
Some of the directors and officers of OCLI participate in arrangements and
have continuing indemnification against liabilities that provide them with
interests in the merger that are different from, or are in addition to, your
interests. In particular, as a result of the completion of the merger, unvested
options held by some officers will immediately vest, and these officers, if
terminated, will also be entitled to severance payments. As a result, these
directors and officers are more likely to vote to approve the merger agreement
than if they did not hold these interests. OCLI stockholders should consider
whether these interests may have influenced these directors and officers to
support or recommend the merger.
As of the record date, directors and executive officers of OCLI and their
affiliates held approximately 7.8% of the outstanding shares of OCLI common
stock. Also, employees of OCLI held approximately 8.4% of the outstanding shares
of OCLI common stock through OCLI's 401(k) Plan on that date. To complete the
merger, the holders of a majority of the outstanding shares of OCLI common stock
must adopt the merger agreement.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS OF THE MERGER (SEE PAGE 56)
The merger is structured so that, in general, JDS Uniphase, OCLI and OCLI's
stockholders will not recognize gain or loss for United States federal income
tax purposes in the merger, except for taxes payable because of cash received by
OCLI stockholders instead of fractional shares. It is a condition to the merger
that JDS Uniphase and OCLI receive legal opinions stating that the merger will
be a tax-free reorganization.
7
<PAGE> 17
ACCOUNTING TREATMENT OF THE MERGER (SEE PAGE 57)
The merger will be accounted for under the purchase method of accounting in
accordance with generally accepted accounting principles.
ANTITRUST APPROVAL REQUIRED TO COMPLETE THE MERGER (SEE PAGE 57)
The merger is subject to approval under the antitrust laws. JDS Uniphase
and OCLI have made the required filings with the Department of Justice and the
Federal Trade Commission, and the appropriate waiting periods have expired as of
the date of this proxy statement-prospectus. JDS Uniphase and OCLI intend to
comply with all requests for information from the Department of Justice or the
Federal Trade Commission. The Department of Justice or the Federal Trade
Commission, as well as a foreign regulatory agency or government, state or
private person, may challenge the merger at any time before or after its
completion.
RESTRICTIONS ON THE ABILITY TO SELL JDS UNIPHASE STOCK (SEE PAGE 58)
All shares of JDS Uniphase common stock received by you in connection with
the merger will be freely transferable unless you are considered an affiliate of
either JDS Uniphase or OCLI under the Securities Act of 1933. Shares of JDS
Uniphase common stock held by affiliates may only be sold pursuant to a
registration statement or exemption under the Securities Act, or as permitted
under the rules of the Securities Act.
APPRAISAL RIGHTS (SEE PAGE 58)
Neither OCLI nor JDS Uniphase stockholders are entitled under Delaware law
to appraisal rights with respect to the merger.
EXPENSES
If the merger is completed, OCLI will bear all expenses incurred in
connection with the merger, except that JDS Uniphase and OCLI will share equally
the costs of filing with the SEC the registration statement of which this proxy
statement-prospectus is a part and printing and mailing this proxy
statement-prospectus. If the merger is not completed, each party shall pay all
expenses it incurs in connection with the merger.
8
<PAGE> 18
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF OCLI
Set forth below is a summary of certain consolidated financial information
with respect to OCLI as of the dates and for the periods indicated. The
Consolidated Statement of Income and Other Data set forth below for the fiscal
years ended October 31, 1998, 1997 and 1996 and the balance sheet data as of
October 31, 1998 and 1997 have been derived from OCLI's audited consolidated
financial statements and are incorporated herein by reference. The Consolidated
Statement of Income Data and Other Data set forth below for the fiscal years
ended October 31, 1995 and 1994 and the balance sheet data as of October 31,
1996, 1995 and 1994 have been derived from OCLI's audited consolidated financial
statements and are not incorporated herein by reference. The selected historical
financial data of OCLI as of and for the nine months ended July 31, 1999 and
1998 has been derived from OCLI's unaudited financial statements and includes,
in the opinion of OCLI's management, all adjustments, consisting only of normal
recurring adjustments, which OCLI considers necessary to present fairly the
results of operations and financial position of such periods. The selected
historical financial data should be read in conjunction with OCLI's Consolidated
Financial Statements and Notes thereto incorporated by reference. The historical
results are not necessarily indicative of results to be expected for any future
periods. OCLI uses a 52/53-week fiscal year ending on the Sunday nearest October
31. However, for purposes of presentation, fiscal periods are indicated at
calendar month-ends. Fiscal years 1998, 1997, 1995 and 1994 were 52-week years
and fiscal year 1996 was a 53-week year.
<TABLE>
<CAPTION>
AS OF AND FOR
THE NINE MONTHS
ENDED JULY 31, AS OF AND FOR THE YEARS ENDED OCTOBER 31,
-------------------- --------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME
DATA:
Revenues............................ $243,709 $185,111 $255,624 $217,829 $189,195 $169,417 $131,780
Amortization of intangibles....... $ 1,523 $ 598 $ 805 $ 936 $ 1,146 $ 975 $ 648
Loss on asset disposal(1)......... $ 934 $ -- $ -- $ -- $ -- $ -- $ --
Legal settlement, net(2).......... $ (2,960) $ -- $ -- $ -- $ -- $ -- $ --
In-process research and
development(3).................. $ 2,906 $ -- $ -- $ -- $ -- $ -- $ --
Impairment loss(4)................ $ -- $ -- $ 8,628 $ -- $ -- $ -- $ --
Restructuring expenses(5)......... $ -- $ -- $ 586 $ -- $ -- $ -- $ --
Income from operations............ $ 23,865 $ 16,473 $ 14,872 $ 15,947 $ 12,402 $ 16,570 $ 10,561
Net income........................ $ 13,020 $ 8,066 $ 7,339 $ 7,125 $ 5,196 $ 7,391 $ 4,604
Net income applicable to common
stock........................... $ 13,020 $ 7,816 $ 7,089 $ 6,432 $ 4,236 $ 6,929 $ 4,604
Net income per share:
Basic........................... $ 1.02 $ 0.70 $ 0.62 $ 0.63 $ 0.44 $ 0.76 $ 0.51
Diluted......................... $ 0.93 $ 0.66 $ 0.59 $ 0.60 $ 0.41 $ 0.73 $ 0.51
Weighted average number of common
shares used to compute earnings
per share:
Basic........................... 12,743 11,169 11,388 10,191 9,629 9,144 8,975
Diluted......................... 14,020 11,822 11,999 10,673 10,301 9,510 9,023
CONSOLIDATED BALANCE SHEET DATA:
Working capital................... $154,132 $ 43,304 $ 75,130 $ 42,618 $ 38,087 $ 28,015 $ 28,692
Total assets...................... $321,944 $190,828 $213,586 $183,493 $172,771 $169,834 $118,879
Long term debt.................... $ 54,935 $ 28,912 $ 52,373 $ 40,975 $ 45,788 $ 47,267 $ 35,441
Total stockholders' equity........ $218,439 $100,961 $102,223 $ 86,963 $ 79,559 $ 73,894 $ 52,037
OTHER DATA:
Net cash provided by (used in):
Operating activities............ $ 41,939 $ 10,859 $ 25,366 $ 20,136 $ 20,208 $ 13,051 $ 16,552
Investment activities........... $(44,512) $(11,423) $(17,079) $(17,231) $(11,590) $(47,573) $ (8,821)
Financing activities............ $ 81,723 $ (1,358) $ 17,298 $ (3,570) $ 772 $ 21,387 $ 9,502
Increase (decrease) in cash and
cash equivalents................ $ 79,138 $ (1,968) $ 25,663 $ (810) $ 9,425 $(13,061) $ 17,379
</TABLE>
- -------------------------
(1) In the fourth quarter of fiscal 1998, due to excess capacity, OCLI removed
from service and began negotiations for the sale of a large continuous
coating machine. As sales price estimates at that time and for subsequent
quarters exceeded the carrying amount of the equipment, losses were
previously not recorded. In the second quarter of fiscal 1999, due to the
need for
9
<PAGE> 19
manufacturing space, OCLI made the decision to accelerate the sale of the
machine and to sell the machine for less than book value, if necessary.
Consequently, the machine, with a carrying value of $1.4 million, was sold
for $460,000 net of removal and shipping costs, and OCLI recognized a loss
of $934,000 in the second quarter of fiscal 1999 on the sale of the machine.
(2) On January 15, 1999, OCLI settled a lawsuit with Optical Corporation of
America and certain of its stockholders regarding a failed merger in fiscal
1996. In connection with the settlement, OCLI received cash, net of related
legal expenses of $3.0 million, which was recorded as a benefit in the first
quarter of fiscal 1999.
(3) In December 1998, OCLI acquired the 40.0% minority interest in Flex
Products, Inc. held by SICPA Holding S.A. for $30.0 million bringing its
ownership in Flex to 100%. OCLI recorded the transaction as a purchase in
the first quarter of fiscal 1999. As a result of this transaction, OCLI
recorded a charge for in-process research and development of $2.9 million.
(4) In the fourth quarter of fiscal 1998, OCLI recorded an impairment loss of
$8.6 million in connection with the sale of the operating assets of its
manufacturing subsidiary in Germany.
(5) In the fourth quarter of fiscal 1998, OCLI's management and board of
directors approved a plan of restructuring for its administrative and sales
offices in Europe. Pursuant to this plan, OCLI recorded restructuring
charges of $586,000 in the fourth quarter of fiscal 1998.
10
<PAGE> 20
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF JDS UNIPHASE
Set forth below is a summary of certain consolidated financial information
with respect to JDS Uniphase as of the dates and for the periods indicated. The
Consolidated Statement of Operations and Other Data set forth below for the
fiscal years ended June 30, 1999, 1998 and 1997 and the balance sheet data as of
June 30, 1999 and 1998 have been derived from JDS Uniphase's consolidated
financial statements which have been audited by Ernst & Young LLP and are
incorporated herein by reference. The Consolidated Statement of Operations Data
and Other Data set forth below for the fiscal years ended June 30, 1996 and 1995
and the balance sheet data as of June 30, 1997, 1996 and 1995 have been derived
from JDS Uniphase's consolidated financial statements which have been audited by
Ernst & Young LLP and are not incorporated herein by reference. The selected
historical financial data of JDS Uniphase as of and for the three months ended
September 30, 1999 and 1998 has been derived from JDS Uniphase's unaudited
financial statements and includes, in the opinion of JDS Uniphase's management,
all adjustments, consisting of normal recurring adjustments, which JDS Uniphase
considers necessary to present fairly the results of operations and financial
position of such periods.
<TABLE>
<CAPTION>
AS OF AND FOR
THE THREE MONTHS ENDED
SEPTEMBER 30, AS OF AND FOR THE YEARS ENDED JUNE 30,
---------------------- ---------------------------------------------------------
1999(3) 1998 1999(3) 1998 1997 1996 1995
---------- -------- ---------- -------- -------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales......................... $ 230,059 $ 57,420 $ 282,828 $185,215 $113,214 $ 73,701 $46,523
Amortization of purchased
intangibles................... $ 172,884 $ 3,884 $ 15,730 $ 5,577 $ 1,844 $ 169 $ 229
Acquired in-process research and
development................... $ -- $ -- $ 210,400 $ 40,268 $ 33,314 4,480 $ 4,460
Merger and other costs (1)...... $ -- $ -- $ 6,759 $ -- $ -- $ -- $ --
Income (loss) from operations... $ (113,144) $ 11,904 $ (153,222) $(11,521) $(15,785) $ 5,849 $ 1,285
Net income (loss)............... $ (113,920) $ 8,148 $ (171,057) $(19,630) $(17,787) $ 3,212 $ 1,439
Earnings (loss) per share(2):
Basic......................... $ (0.34) $ 0.05 $ (1.07) $ (0.14) $ (0.13) $ 0.03 $ 0.02
Dilutive...................... $ (0.34) $ 0.05 $ (1.07) $ (0.14) $ (0.13) $ 0.03 $ 0.02
Shares used in per share
calculation(2):
Basic......................... 336,930 156,448 159,124 141,804 134,764 102,232 75,768
Dilutive...................... 336,930 169,072 159,124 141,804 134,764 111,648 83,588
CONSOLIDATED BALANCE SHEET DATA:
Working capital................. $1,069,929 $137,190 $ 314,760 $121,428 $110,197 $132,239 $18,404
Total assets.................... $4,745,456 $352,949 $4,096,097 $332,871 $180,653 $175,692 $33,611
Long-term obligations........... $ 8,295 $ 6,505 $ 9,847 $ 5,666 $ 2,478 $ 7,049 $ 244
Total stockholders' equity...... $4,284,365 $304,250 $3,619,247 $280,038 $152,033 $154,824 $26,196
OTHER DATA:
Net cash provided by (used in):
Operating activities.......... $ 39,380 $ 15,389 $ 66,946 $ 51,025 $ 21,935 $ 8,031 $ 4,008
Investment activities......... $ (361,476) $(29,314) $ (40,298) $(45,712) $(48,851) $(83,626) $(4,417)
Financing activities.......... $ 742,291 $ 4,879 $ 15,445 $ (1,715) $ 3,790 $125,090 $ 495
Increase (decrease) in cash and
cash equivalents.............. $ 420,195 $ (9,046) $ 42,093 $ 3,598 $(23,126) $ 49,495 $ 86
</TABLE>
- -------------------------
(1) Results of operations for fiscal 1999 include $5,877,000 of costs and
expenses attributable to the pooling of interests transaction with Uniphase
Broadband Products, Inc. and $882,000 of operating expenses to reflect the
loss on sale of the Ultrapointe Systems assets.
(2) Share and per share amounts have been restated to give effect to a stock
dividend of one share of JDS Uniphase common stock for each outstanding
share of JDS Uniphase common stock
11
<PAGE> 21
effective as of December 22, 1999. On December 16, 1999, JDS Uniphase
stockholders approved an increase in authorized shares of common stock from
300,000,000 to 600,000,000.
(3) Uniphase merged with JDS FITEL effective June 30, 1999 in a transaction
accounted for as a purchase. The Consolidated Statement of Operations and
Other Data for the three months ended September 30, 1999 and the
Consolidated Balance Sheet Data as of September 30, 1999 and June 30, 1999
include the results of operations and financial position, respectively of
JDS FITEL.
12
<PAGE> 22
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined consolidated financial
statements give effect to the merger using the purchase method of accounting and
include the pro forma adjustments described in the accompanying notes.
Effective June 30, 1999, Uniphase Corporation combined its operations with
JDS FITEL Inc. to form JDS Uniphase Corporation in a transaction accounted for
as a purchase. Accordingly, the historical balance sheet of JDS Uniphase as of
June 30, 1999 includes the financial position of JDS FITEL Inc. as of that date,
but the historical statement of operations for JDS Uniphase for the year ended
June 30, 1999 does not include the results of operations for JDS FITEL Inc. for
that period. The Unaudited Pro Forma Condensed Combined Consolidated Statement
of Operations for the fiscal year ended June 30, 1999 is based on the Unaudited
Pro Forma Condensed Combined Consolidated Statement of Operations of JDS
Uniphase included in Form 8-K/A filed November 3, 1999 (combining Uniphase and
JDS FITEL Inc.) after giving effect to the merger with OCLI under the purchase
method of accounting and the assumptions and adjustments described in the
accompanying Notes to the Unaudited Pro Forma Condensed Combined Consolidated
Financial Statements.
The Unaudited Pro Forma Condensed Combined Consolidated Statement of
Operations for the three months ended September 30, 1999 and the Unaudited Pro
Forma Condensed Combined Consolidated Balance Sheets as of September 30, 1999
are based on the historical financial statements of JDS Uniphase and OCLI, after
giving effect to the merger with OCLI under the purchase method of accounting
and the assumptions and adjustments described in the accompanying Notes to the
Unaudited Pro Forma Condensed Combined Consolidated Financial Statements.
The Unaudited Pro Forma Condensed Combined Consolidated Financial
Statements should be read in conjunction with the historical financial
statements of JDS Uniphase and OCLI and the Unaudited Pro Forma Condensed
Combined Consolidated Statement of Operations of JDS Uniphase included in Form
8-K/A filed November 3, 1999 (combining Uniphase Corporation and JDS FITEL
Inc.). The pro forma information does not purport to be indicative of the
results that would have been reported if the above transaction had been in
effect for the period presented or which may result in the future.
The Unaudited Pro Forma Condensed Combined Consolidated Statements of
Operations are presented as if the combination had taken place on July 1, 1998.
The Unaudited Pro Forma Condensed Combined Consolidated Statement of Operations
for the three month ended September 30, 1999 combines the three months ended
September 30, 1999 for JDS Uniphase and the three months ended July 31, 1999 for
OCLI. The Unaudited Pro Forma Condensed Combined Consolidated Statement of
Operations for the year ended June 30, 1999 combines the year ended June 30,
1999 for pro forma JDS Uniphase and the historical twelve months ended April 30,
1999 for OCLI. The Unaudited Pro Forma Condensed Combined Consolidated Balance
Sheet is presented to give effect to the proposed merger as if it occurred on
September 30, 1999 and combines the balance sheet for JDS Uniphase as of
September 30, 1999 with the balance sheet of OCLI as of July 31, 1999.
13
<PAGE> 23
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
OF JDS UNIPHASE AND OCLI
THREE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
JDS UNIPHASE
PRO FORMA AND OCLI
JDS UNIPHASE OCLI ADJUSTMENTS COMBINED
------------ ------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales................................. $ 230,059 $89,864 $(37,476) $ 282,447
Cost of sales............................. 125,214 63,191 (37,476) 150,929
--------- ------- -------- ---------
Gross profit............................ 104,845 26,673 -- 131,518
Operating expenses:
Research and development................ 17,248 7,423 -- 24,671
Selling, general and administrative..... 27,857 9,053 625 37,535
Amortization of purchased intangibles... 172,884 726 86,359 259,969
--------- ------- -------- ---------
Total operating expenses.................. 217,989 17,202 86,984 322,175
--------- ------- -------- ---------
Income (loss) from operations............. (113,144) 9,471 (86,984) (190,657)
Interest and other income, net............ 5,488 246 -- 5,734
--------- ------- -------- ---------
Income (loss) before income taxes......... (107,656) 9,717 (86,984) (184,923)
Income tax expense (benefit).............. 6,264 3,498 (5,265) 4,497
--------- ------- -------- ---------
Net income (loss)......................... $(113,920) $ 6,219 $(81,719) $(189,420)
========= ======= ======== =========
Basic earnings (loss) per share........... $ (0.34) $ 0.46 $ (0.53)
========= ======= =========
Dilutive earnings (loss) per share........ $ (0.34) $ 0.41 $ (0.53)
========= ======= =========
Average number of shares outstanding...... 336,930 13,643 362,251
========= ======= =========
Average number of shares outstanding
assuming dilution....................... 336,930 15,319 362,251
========= ======= =========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined consolidated
financial statements
14
<PAGE> 24
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
OF JDS UNIPHASE AND OCLI
YEAR ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JDS UNIPHASE
(PRO FORMA PRO FORMA
UNIPHASE AND JDS UNIPHASE
JDS FITEL PRO FORMA AND OCLI
COMBINED) OCLI ADJUSTMENTS COMBINED
------------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales............................... $ 587,889 $291,751 $ (85,278) $ 794,362
Cost of sales........................... 284,358 197,233 (85,278) 396,313
---------- -------- --------- -----------
Gross profit.......................... 303,531 94,518 -- 398,049
Operating expenses:
Research and development.............. 52,544 19,384 -- 71,928
Selling, general and administrative... 71,488 44,665 2,500 118,653
Amortization of purchased
intangibles........................ 687,502 1,204 345,438 1,034,144
Acquired in-process research and
development........................ 210,400 2,906 -- 213,306
Other operating expenses................ 6,759 7,188 -- 13,947
---------- -------- --------- -----------
Total operating expenses................ 1,028,693 75,347 347,938 1,451,978
---------- -------- --------- -----------
Income (loss) from operations........... (725,162) 19,171 (347,938) (1,053,929)
Interest and other income, net.......... 10,395 (2,641) -- 7,754
---------- -------- --------- -----------
Income (loss) before income taxes....... (714,767) 16,530 (347,938) (1,046,175)
Income tax expense (benefit)............ (2,511) 5,748 (21,060) (17,823)
Minority interest....................... -- 1,287 -- 1,287
---------- -------- --------- -----------
Net income (loss)....................... $ (712,256) $ 9,495 $(326,878) $(1,029,639)
========== ======== ========= ===========
Basic earnings (loss) per share......... $ (2.24) $ 0.78 $ (3.03)
========== ======== ===========
Dilutive earnings (loss) per share...... $ (2.24) $ 0.73 $ (3.03)
========== ======== ===========
Average number of shares outstanding.... 317,776 12,153 340,332
========== ======== ===========
Average number of shares outstanding
assuming dilution..................... 317,776 12,947 340,332
========== ======== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined consolidated
financial statements
15
<PAGE> 25
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET
OF JDS UNIPHASE AND OCLI
SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
JDS UNIPHASE
JDS PRO FORMA AND OCLI
UNIPHASE OCLI ADJUSTMENTS COMBINED
---------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Assets:
Cash & cash equivalents.............. $ 495,613 $120,018 $ (8,000) $ 607,631
Short-term investments............... 463,631 -- -- 463,631
Accounts receivable.................. 140,175 37,651 (2,980) 174,846
Inventories.......................... 98,034 23,454 (4,510) 116,978
Other current assets................. 21,260 9,195 -- 30,455
---------- -------- ---------- ----------
Total current assets................. 1,218,713 190,318 (15,490) 1,393,541
Property, plant and equipment, net... 209,222 101,243 25,000 335,465
Intangible assets, including
goodwill........................... 3,311,309 28,784 2,528,645 5,868,738
Other assets......................... 6,212 1,599 -- 7,811
---------- -------- ---------- ----------
Total assets....................... $4,745,456 $321,944 $2,538,155 $7,605,555
========== ======== ========== ==========
Liabilities and Stockholders' Equity:
Current maturities on long-term
debt............................... $ -- $ 4,790 $ -- $ 4,790
Accounts payable..................... 51,671 9,125 (2,980) 57,816
Other accrued expenses............... 97,113 22,271 (4,510) 114,874
---------- -------- ---------- ----------
Total current liabilities............ 148,784 36,186 (7,490) 177,480
Long-term debt....................... -- 54,935 -- 54,935
Other non-current liabilities........ 8,295 3,056 -- 11,351
Deferred tax liabilities............. 304,012 9,328 188,808 502,148
Stockholders' equity................. 4,284,365 218,439 (218,439) 6,859,641
(84,065)
2,659,341
---------- -------- ---------- ----------
Total liabilities and stockholders'
equity..................... $4,745,456 $321,944 $2,538,155 $7,605,555
========== ======== ========== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined consolidated
financial statements
16
<PAGE> 26
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS OF JDS UNIPHASE AND OCLI
1. BASIS OF PRO FORMA PRESENTATION
The JDS Uniphase Pro Forma Condensed Combined Consolidated Financial
Statements provide for the exchange of 1.856 shares of JDS Uniphase common stock
for each outstanding share of OCLI common stock. In addition, JDS Uniphase will
issue options in exchange for outstanding OCLI options with the number of shares
and the exercise price appropriately adjusted by the exchange ratio.
The Unaudited Pro Forma Condensed Combined Consolidated Financial
Statements reflect the issuance of 26,154,752 shares of JDS Uniphase common
stock for all the outstanding shares of OCLI common stock as of July 31, 1999,
the exchange ratio of 1.856 for each share of OCLI common stock and an average
market price for JDS Uniphase common stock of $90.18 per share. The average
market price per share of JDS Uniphase common stock is based on the average
closing price for a range of trading days (October 28 through November 10, 1999)
around the announcement date (November 4, 1999) of the merger. The actual number
of shares of JDS Uniphase common stock to be issued will depend on the actual
number of shares of OCLI common stock outstanding on the date the merger closes.
Based on the total number of OCLI options outstanding at July 31, 1999, JDS
Uniphase would issue options to purchase 3,924,000 shares of JDS Uniphase common
stock at a weighted average exercise price of $8.83. The actual number of
options granted depends on the actual number of OCLI options outstanding on the
date the merger closes. The estimated fair value of the options, as well as
estimated direct transaction expenses of $8.0 million, have been included as a
part of the total estimated purchase cost.
The total estimated purchase cost of the OCLI merger is as follows (in
thousands):
<TABLE>
<S> <C>
Value of securities issued.................................. $2,358,675
Assumption of OCLI options.................................. 300,666
----------
2,659,341
Estimated transaction costs and expenses.................... 8,000
----------
Total estimated purchase cost............................. $2,667,341
==========
</TABLE>
17
<PAGE> 27
The preliminary purchase price allocation is as follows:
<TABLE>
<CAPTION>
ANNUAL
AMOUNT AMORTIZATION USEFUL LIVES
---------- ------------ -------------
<S> <C> <C> <C>
Purchase Price Allocation:
Tangible net assets............................. $ 214,655 n/a n/a
Intangible assets acquired:
Developed technology:
Telecommunications....................... 115,123 $ 19,187 6 years
Flex Products............................ 92,210 6,479 10 - 15 years
Applied Photonics........................ 1,009 202 5 years
Information Industries................... 23,921 2,392 10 years
Proprietary know-how....................... 161,865 15,640 6 - 15 years
Trademark and tradename.................... 38,523 3,852 10 years
Assembled workforce........................ 14,368 2,395 6 years
In-process research and development........ 84,065 n/a n/a
Goodwill................................... 2,110,410 295,291 7.2 years
Deferred tax liabilities................... (188,808) n/a n/a
---------- --------
Total estimated purchase price
allocation......................... $2,667,341 $345,438
========== ========
</TABLE>
PricewaterhouseCoopers LLP ("PwC") performed an allocation of the total
purchase price of OCLI to its individual assets. The purchase price allocation
is preliminary and, therefore, subject to change based on further analysis. Of
the total purchase price, $84.1 million has been allocated to in-process
research and development and will be charged to expense in the period the
transaction closes (expected to be the quarter ending March 31, 2000). Due to
their non-recurring nature, the in-process research and development attributed
to the OCLI transaction and the transaction costs incurred by OCLI estimated at
$9.0 million have been excluded in the pro forma statements of operations. The
remaining purchase price has been allocated to specifically identifiable assets
acquired, including an adjustment to write up property and equipment of OCLI to
fair value by $25.0 million.
After allocating value to the in-process research and development projects
and OCLI's tangible assets, specific intangible assets were then identified and
valued. The related amortization of the identifiable intangible assets is
reflected as a pro forma adjustment to the Unaudited Pro Forma Condensed
Combined Consolidated Statement of Operations. The identifiable assets include
existing technology, proprietary know-how, trademarks and tradenames, and
assembled workforce.
The acquired existing technology, which is comprised of products that are
already technologically feasible, includes products that are manufactured and
marketed by OCLI's Telecommunications, Flex Products, Applied Photonics, and
Information Industries groups. JDS Uniphase expects to amortize the acquired
existing technology of approximately $232.3 million on a straight-line basis
over an average estimated remaining useful life of 8.2 years.
The acquired proprietary know-how represents OCLI trade secrets and patents
developed through years of experience designing and manufacturing thin film
products. This know-how enables OCLI to develop new and improve existing thin
film products, processes and manufacturing equipment, thereby providing OCLI
with a distinct advantage over its competitors and a reputation for
technological superiority in the industry. JDS Uniphase expects to amortize the
proprietary know-how of approximately $161.9 million on a straight-line basis
over an average estimated remaining useful life of 10.4 years.
18
<PAGE> 28
The trademarks and trade names include the OCLI trademark and trade name as
well as all branded OCLI products such as GlareGuard(R) and processes such as
MetaMode(R). JDS Uniphase expects to amortize the trademark and trade names of
approximately $38.5 million on a straight-line basis over an estimated remaining
useful life of 10 years.
The acquired assembled workforce is comprised of over 1,400 skilled
employees across OCLI's General and Administration, Science and Technology,
Sales and Marketing, and Manufacturing groups. JDS Uniphase expects to amortize
the value assigned to the assembled workforce of approximately $14.4 million on
a straight-line basis over an estimated remaining useful life of 6 years.
Goodwill, which represents the excess of the purchase price of an
investment in an acquired business over the fair value of the underlying net
identifiable assets, is amortized on a straight-line basis over its estimated
remaining useful life of 7.2 years.
Due to its non-recurring nature, the in-process research and development
attributed to the OCLI transaction has been excluded in the pro forma statements
of operations. OCLI's Telecommunications, Flex Products, Information Industries,
and Applied Photonics divisions are currently developing new products and
processes that qualify as in-process research and development.
The in-process research and development relates to sophisticated optical
components, filters and materials that manage light propagation in today's most
advanced telecommunications systems, projection display engines and state of the
art optically variable security devices. The in-process research and development
is comprised of three main categories: (1) thin film filters and switches, (2)
optical display and projection products, and (3) light interference pigments.
The following is a brief description of each acquired in-process research
and development project as of the date of the merger:
Thin film filters and switches. The main application for these products is
to control the reflection, refraction, transmission and absorption of lightwave
signals that are transmitted through fiber optic cables. OCLI's current
development efforts are directed toward improved spectral precision and enhanced
wavelength division capability of the filters and switches. Products in-process
include switches, filter lock lasers, add-drop multiplexers and dispersion
compensators which are in the exploratory through the prototype stages of the
development cycle. OCLI expects the development cycle to range between 3 and 25
months with expected completion dates from the second quarter of calendar year
2000 through the first quarter of calendar year 2002. Development costs incurred
on those products to date are approximately $7.6 million with estimated cost to
complete of approximately $22.0 million which OCLI expects to incur ratably for
the remainder of the development cycle. OCLI believes the associated risks of
developing these products to commercial viability include potential difficulties
meeting customer and market performance specifications and competition from
products using competing technologies that offer comparable functionality.
Optical display and projection products. The main application for this
product is to control the brightness, contrast and resolution of next generation
display products including computer displays, digital image projectors, flat
panel displays, scanners and personal digital assistants (commonly known as
PDAs). The performance of these products is highly dependent upon optical
components utilizing thin film filter technology coupled with increasingly
smaller size and weight requirements. OCLI is currently in the prototype stage
of the development cycle for this product family and expects the development
cycle to continue for approximately 9 months with completion expected in the
third quarter of calendar year 2000. Development costs incurred to date are
approximately $6.0 million with estimated cost to complete of approximately $3.0
million which OCLI expects to incur ratably for the remainder of the development
cycle. OCLI believes the associated risks of developing these products to
commercial viability include potential difficulties meeting customer and market
19
<PAGE> 29
performance specifications and competition from products using competing
technologies that offer comparable functionality.
Light interference pigments. The main application for this product is to
achieve unique color shifting characteristics in security products and
decorative surface treatments. Security related products include bank notes,
passports, credit cards, tax stamps and brand protection labels. Decorative
surface treatments include automotive paint, cosmetics, electronic cases and
apparel. OCLI is currently in the prototype stage of the development cycle for
this product family and expects the development cycle to continue for
approximately 12 months with completion expected in the first quarter of
calendar year 2001. Development costs incurred to date are approximately $8.2
million with estimated cost to complete of approximately $11.3 million which
OCLI expects to incur ratably for the remainder of the development cycle. OCLI
believes the associated risks of developing these products to commercial
viability include meeting customer and market performance specifications,
meeting customer and market volume requirements and competition from products
using competing technologies that offer comparable functionality.
VALUE ASSIGNED TO IN-PROCESS RESEARCH AND DEVELOPMENT
The value assigned to in-process research and development was determined by
considering the importance of each project to the overall development plan,
estimating costs to develop the purchased in-process research and development
into commercially viable products, estimating the resulting net cash flows from
the projects when completed and discounting the net cash flows to their present
value. The revenue estimates used to value the purchased in-process research and
development were based on estimates of relevant market sizes and growth factors,
expected trends in technology and the nature and expected timing of new product
introductions by OCLI and its competitors.
The rates utilized to discount the net cash flows to their present value
are based on OCLI weighted average cost of capital and the weighted average
return on assets. Given the nature of the risks associated with the difficulties
and uncertainties in completing each project and thereby achieving technological
feasibility, anticipated market acceptance and penetration, market growth rates
and risks related to the impact of potential changes in future target markets,
the weighted average cost of capital was adjusted. Based on these factors,
discount rates of 18 to 25%, 25% and 18% were deemed appropriate for thin film
filters, optical display and projection products and light interference
pigments, respectively.
The estimates used in valuing in-process research and development were
based upon assumptions PwC believes to be reasonable but which are inherently
uncertain and unpredictable. PwC's assumptions may be incomplete or inaccurate,
and no assurance can be given that unanticipated events and circumstances will
not occur. Accordingly, actual results may vary from the projected results. Any
such variance may result in a material adverse effect on OCLI's financial
condition and results of operations.
With respect to the acquired in-process technologies, the calculations of
value were adjusted to reflect the value creation efforts of OCLI prior to the
merger. Following are the estimated completion percentages and technology lives:
<TABLE>
<CAPTION>
PERCENT EXPECTED
PROJECT COMPLETED TECHNOLOGY LIFE
------- --------- ---------------
<S> <C> <C>
Thin film filters..................................... 26% 6 - 10 years
Optical display and projection products............... 67% 10 years
Light interference pigments........................... 42% 14 - 20 years
</TABLE>
20
<PAGE> 30
The value assigned to each acquired in-process research and development
project as of the date of this proxy statement-prospectus were as follows (in
millions):
<TABLE>
<S> <C>
Thin film filters........................................... $56.9
Optical display and projection products..................... 14.4
Light interference pigments................................. 12.8
-----
Total acquired in-process research and development........ $84.1
=====
</TABLE>
A portion of the purchase price has been allocated to developed technology
and acquired in-process research and development. Developed technology and
in-process research and development were identified and valued through extensive
interviews, analysis of data provided by OCLI concerning developmental products,
their stage of development, the time and resources needed to complete them, if
applicable, their expected income generating ability, target markets and
associated risks. The Income Approach, which includes an analysis of the
markets, cash flows and risks associated with achieving such cash flows, was the
primary technique utilized in valuing the developed technology and in-process
research and development.
Where developmental projects had reached technological feasibility, they
were classified as developed technology, and the value assigned to developed
technology was capitalized. Where the developmental projects had not reached
technological feasibility and had no future alternative uses, they were
classified as in-process research and development and charged to expense upon
closing of the merger. OCLI estimates that a total investment of $36.3 million
in research and development over the next 25 months will be required to complete
the in-process research and development. The nature of the efforts required to
develop the purchased in-process research and development into commercially
viable products principally relate to the completion of all planning, designing,
prototyping, verification and testing activities that are necessary to establish
that the products can be produced to meet their design specifications, including
functions, features and technical performance requirements.
JDS Uniphase acquired AFC Technologies in August 1999 and in November 1999
acquired EPITAXX, Inc. In December 1999, JDS Uniphase acquired SIFAM Limited and
Oprel Technologies, Inc. The Unaudited Pro Forma Condensed Combined Consolidated
Financial Statements of JDS Uniphase and OCLI do not include on a pro forma
basis these acquisitions since collectively, they are not significant to JDS
Uniphase.
2. PRO FORMA ADJUSTMENTS
The JDS Uniphase Unaudited Pro Forma Condensed Combined Consolidated
Financial Statements give effect to the allocation of the total purchase cost to
the assets and liabilities of OCLI based on their respective fair values and to
amortization over the respective useful lives of amounts allocated to intangible
assets. Intercompany balances between JDS Uniphase and OCLI have been eliminated
for pro forma presentations. The pro forma combined provision for income taxes
do not represent the amounts that would have resulted had JDS Uniphase and OCLI
filed consolidated income tax returns during the periods presented. The
provision for income tax includes the amortization of deferred tax liabilities
originating from the transaction.
3. PRO FORMA NET LOSS PER SHARE
The pro forma basic and dilutive net loss per share are based on the
weighted average number of shares of JDS Uniphase common stock outstanding
during each period and weighted average number of OCLI shares of common stock
outstanding multiplied by the exchange ratio. Dilutive securities including the
replacement OCLI options are not included in the computation of pro forma
dilutive net loss per share as their effect would be anti-dilutive.
21
<PAGE> 31
COMPARATIVE PER SHARE DATA
The following table presents certain historical per share data of OCLI and
JDS Uniphase and certain unaudited pro forma per share data that reflect the
combination of OCLI and JDS Uniphase using the purchase method of accounting.
This data should be read in conjunction with the OCLI Audited Financial
Statements, the OCLI Unaudited Financial Statements, the JDS Uniphase Audited
Financial Statements and the JDS Uniphase Unaudited Financial Statements that
are incorporated by reference, and the OCLI and JDS Uniphase Unaudited Pro Forma
Condensed Combined Consolidated Financial Statements included elsewhere in this
document. The OCLI and JDS Uniphase pro forma combined per share data do not
necessarily indicate the operating results that would have been achieved had the
combination of OCLI and JDS Uniphase actually occurred at the beginning of the
periods presented nor do they indicate future results of operations or financial
position.
<TABLE>
<CAPTION>
AS OF AND FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999
----------------------------------------------------
PRO FORMA
-----------------------------
JDS JDS UNIPHASE OCLI
OCLI(1) UNIPHASE AND OCLI EQUIVALENT(4)
------- -------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Pro Forma net income (loss) per share:
Basic.................................. $ 0.46 $(0.34) $(0.53) $ (0.97)
Diluted.............................. $ 0.41 $(0.34) $(0.53) $ (0.97)
Pro Forma book value per common share
at period end(2)(3).................. $15.50 $12.34 $18.37 $ 34.10
</TABLE>
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED
JUNE 30, 1999
------------------------------------------------
PRO FORMA
-------------------------
JDS
UNIPHASE
JDS AND OCLI
OCLI(1) UNIPHASE OCLI EQUIVALENT(4)
------- -------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Pro Forma net income (loss) per share:
Basic...................................... $0.78 $(2.24) $(3.03) $(5.62)
Diluted.................................. $0.73 $(2.24) $(3.03) $(5.62)
Pro Forma book value per common share at
period end(2)(3)......................... $9.52 $11.25 $17.80 $33.04
</TABLE>
- -------------------------
(1) Because of different year ends, consolidated financial information relating
to OCLI's twelve months ended April 30, 1999 and three months ended July 31,
1999 has been combined with financial information for JDS Uniphase for the
fiscal year ended June 30, 1999 and three months ended September 30, 1999,
respectively.
(2) The historical book value per share is computed by dividing total
stockholders' equity as of the end of each period for which such computation
is made by the number of common shares outstanding as of the end of each
period.
(3) The pro forma book value per share is computed by dividing pro forma
stockholders' equity by the pro forma number of shares outstanding at the
end of each period for which such computation is made. For purposes of
computing pro forma book value per share as of June 30,
22
<PAGE> 32
1999 the pro forma book value of $6.2 billion was divided by pro forma
common shares outstanding of 348.0 million.
(4) The OCLI pro forma equivalent per share amounts are computed by multiplying
the OCLI and JDS Uniphase pro forma combined per share amounts by the
exchange ratio of 1.856 shares of JDS Uniphase common stock for each share
of OCLI common stock. Pro forma diluted earnings per share excludes the
effect of dilutive securities totaling 25.1 million and 19.7 million
equivalent shares for the three months ended September 30, 1999 and the year
ended June 30, 1999, respectively, as they are antidilutive.
23
<PAGE> 33
COMPARATIVE PER SHARE MARKET PRICE DATA
JDS Uniphase's common stock is traded on the Nasdaq National Market under
the symbol "JDSU," and prior to July 6, 1999, Uniphase's common stock traded
under the symbol "UNPH." The following table shows the high and low sale prices
of JDS Uniphase's common stock as reported by the Nasdaq National Market for the
periods indicated. The prices in the following table have been adjusted to
reflect all previous stock dividends through the date of this proxy
statement-prospectus. JDS Uniphase has never paid a cash dividend since its
inception and does not anticipate paying any cash dividends in the foreseeable
future.
<TABLE>
<CAPTION>
JDS UNIPHASE
SALE PRICE
-----------------
HIGH LOW
------- ------
<S> <C> <C>
Year Ended June 30, 1998
First Quarter............................................... $ 10.05 $ 7.23
Second Quarter............................................ $ 11.63 $ 7.13
Third Quarter............................................. $ 11.04 $ 8.30
Fourth Quarter............................................ $ 15.25 $10.16
Year Ended June 30, 1999
First Quarter............................................. $ 15.75 $ 9.41
Second Quarter............................................ $ 17.34 $ 8.59
Third Quarter............................................. $ 28.78 $15.88
Fourth Quarter............................................ $ 41.80 $25.63
Year Ending June 30, 2000
First Quarter............................................. $ 60.75 $38.63
Second Quarter through December 17, 1999.................. $136.81 $56.00
</TABLE>
OCLI's common stock is traded on the Nasdaq National Market under the
symbol "OCLI." The following table shows the high and low sale prices of OCLI
common stock as reported by the Nasdaq National Market for the periods
indicated. Since June 1991, OCLI has paid a semiannual cash dividend of $0.06
per share of its common stock.
<TABLE>
<CAPTION>
OCLI
SALE PRICE
------------------
HIGH LOW
------- -------
<S> <C> <C>
Year Ended October 31, 1998
First Quarter............................................... $ 16.13 $ 12.38
Second Quarter............................................ $ 15.69 $ 12.00
Third Quarter............................................. $ 19.75 $ 14.38
Fourth Quarter............................................ $ 18.75 $ 14.38
Year Ended October 31, 1999
First Quarter............................................. $ 32.50 $ 16.69
Second Quarter............................................ $ 65.25 $ 23.75
Third Quarter............................................. $ 88.38 $ 54.00
Fourth Quarter............................................ $111.38 $ 53.50
Year Ending October 31, 2000
First Quarter through December 17, 1999................... $235.88 $106.50
</TABLE>
24
<PAGE> 34
On November 3, 1999, the last full trading day before the public
announcement of the proposed merger, the high and low sale prices for JDS
Uniphase common stock, as reported on the Nasdaq National Market, were $95.81
and $87.06, respectively. The high and low sale prices for OCLI common stock on
that day, as reported on the Nasdaq National Market, were $123.50 and $117.25,
respectively.
The following table sets forth the closing sale price of JDS Uniphase
common stock, as reported on the Nasdaq National Market, OCLI common stock, as
reported on the Nasdaq National Market, and the equivalent per share price of
OCLI, giving effect to the proposed merger, on November 3, 1999, the last full
trading day prior to the public announcement of the proposed merger, and
December 17, 1999, the latest practicable trading day prior to the printing of
this proxy statement-prospectus.
<TABLE>
<CAPTION>
CLOSING SALES PRICE
---------------------
OCLI
JDS UNIPHASE OCLI EQUIVALENT
------------ ------- ----------
<S> <C> <C> <C>
Price per share:
November 3, 1999............................ $ 95.72 $119.25 $177.65
December 17, 1999........................... $120.47 $212.00 $223.59
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You are advised to obtain current market quotations for JDS Uniphase and
OCLI common stock. The market price of the common stock of both companies is
subject to fluctuation. The value of the shares of JDS Uniphase common stock
that holders of OCLI will receive in the proposed merger and the value of the
OCLI stock they surrender may increase or decrease.
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RISK FACTORS
This proxy statement-prospectus and the documents incorporated by reference
into this proxy statement-prospectus contain forward-looking statements within
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 with respect to JDS Uniphase's and OCLI's financial condition, results of
operations and business, and on the expected impact of the merger on JDS
Uniphase's financial performance. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions
identify forward-looking statements. These forward-looking statements are not
guarantees of future performance and are subject to risks and uncertainties that
could cause actual results to differ materially from the results contemplated by
the forward-looking statements. In evaluating the merger, you should carefully
consider the discussion of risks and uncertainties below.
By voting in favor of the merger, you will be choosing to invest in JDS
Uniphase common stock. An investment in JDS Uniphase common stock involves a
high degree of risk. In addition to the other information contained in or
incorporated by reference into this proxy statement-prospectus, you should
carefully consider the following risk factors in deciding whether to vote for
the merger.
RISKS RELATED TO THE MERGER
YOU WILL RECEIVE 1.856 SHARES OF JDS UNIPHASE COMMON STOCK FOR EACH SHARE OF
OCLI COMMON STOCK DESPITE CHANGES IN MARKET VALUE OF OCLI COMMON STOCK OR JDS
UNIPHASE COMMON STOCK
Upon completion of the merger, each share of OCLI common stock will be
exchanged for 1.856 shares of JDS Uniphase common stock. There will be no
adjustment for changes in the market price of either OCLI common stock or JDS
Uniphase common stock, and OCLI is not permitted to withdraw from the merger or
resolicit the vote of its stockholders solely because of changes in the market
price of JDS Uniphase or OCLI common stock. Accordingly, the specific dollar
value of JDS Uniphase common stock you will receive upon completion of the
merger will depend on the market value of JDS Uniphase common stock at the time
of completion of the merger.
ALTHOUGH JDS UNIPHASE AND OCLI EXPECT THAT THE MERGER WILL RESULT IN BENEFITS,
THOSE BENEFITS MAY NOT BE REALIZED
Achieving the benefits of the merger may depend in part on the integration
of technology, operations and personnel. The integration of JDS Uniphase and
OCLI will be a complex, time consuming and expensive process and may disrupt JDS
Uniphase's business if not completed in a timely and efficient manner. The
challenges involved in this integration include the following:
- demonstrating to customers, suppliers and employees of OCLI that the
merger will not result in adverse changes in customer service standards
or business focus;
- persuading employees that JDS Uniphase's and OCLI's business cultures are
compatible; and
- addressing any adverse changes in business focus including in the
non-telecommunications business units of OCLI for which the management of
JDS Uniphase has had no previous experience.
It is not certain that JDS Uniphase and OCLI can be successfully integrated
in a timely manner or at all or that any of the anticipated benefits will be
realized. Failure to do so could materially harm the business and operating
results of the combined company. Also, neither JDS Uniphase nor OCLI can assure
you that the growth rate of the combined company will equal the historical
growth rate experienced by JDS Uniphase and OCLI.
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OCLI OFFICERS AND DIRECTORS HAVE CONFLICTS OF INTEREST THAT MAY INFLUENCE THEM
TO SUPPORT AND APPROVE THE MERGER
Some of the directors and officers of OCLI participate in arrangements and
have continuing indemnification against liabilities that provide them with
interests in the merger that are different from, or are in addition to, your
interests. In particular, as a result of the completion of the merger, unvested
options held by some officers will immediately vest, and these officers, if
terminated, will also be entitled to severance payments. As a result, these
directors and officers are more likely to vote to approve the merger agreement
than if they did not hold these interests. OCLI stockholders should consider
whether these interests may have influenced these directors and officers to
support or recommend the merger.
IF THE MERGER IS NOT COMPLETED, OCLI'S STOCK PRICE AND FUTURE BUSINESS AND
OPERATIONS COULD BE HARMED
If the merger is not completed, OCLI may be subject to the following
material risks, among others:
- OCLI may be required to pay JDS Uniphase a termination fee of $85 million
as described on page 66;
- the option granted to JDS Uniphase by OCLI may become exercisable and if
exercised may make another business combination more difficult;
- JDS Uniphase could require OCLI to purchase the option or shares of OCLI
common stock it acquired under the option, resulting in additional costs
to OCLI;
- the price of OCLI common stock may decline to the extent that the current
market price of OCLI common stock reflects a market assumption that the
merger will be completed; and
- OCLI's costs related to the merger, such as legal, accounting and some of
the fees of its financial advisor, must be paid even if the merger is not
completed.
Further, if the merger is terminated and OCLI's board of directors
determines to seek another merger or business combination, it is not certain
that it will be able to find a partner willing to pay an equivalent or more
attractive price than that which would be paid in the merger. In addition, while
the merger agreement is in effect and subject to limited exceptions described on
page 62 of this proxy statement-prospectus, OCLI is generally prohibited from
soliciting, initiating or knowingly encouraging or entering into extraordinary
transactions, such as a merger, sale of assets or other business combination,
with any party other than JDS Uniphase.
CUSTOMER AND EMPLOYEE UNCERTAINTY RELATED TO THE MERGER COULD HARM THE COMBINED
COMPANY
JDS Uniphase's or OCLI's customers may, in response to the announcement of
the merger, delay or defer purchasing decisions. Any delay or deferral in
purchasing decisions by JDS Uniphase's or OCLI's customers could seriously harm
the business of the combined company. In addition, existing and future strategic
alliances that may be beneficial to the success of the non-telecommunications
businesses of OCLI may be adversely affected as a result of OCLI becoming a
wholly owned subsidiary of JDS Uniphase. Similarly, JDS Uniphase and OCLI
employees may experience uncertainty about their future role with the combined
company until or after strategies with regard to OCLI are announced or executed.
This may adversely affect the combined company's ability to attract and retain
key management, marketing and technical personnel.
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JDS UNIPHASE'S OPERATING RESULTS MAY SUFFER AS A RESULT OF PURCHASE ACCOUNTING
TREATMENT, THE IMPACT OF AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES RELATING
TO ITS PROPOSED COMBINATION WITH OCLI
Under U.S. generally accepted accounting principles that apply to JDS
Uniphase, JDS Uniphase will account for the merger using the purchase method of
accounting. Under purchase accounting, JDS Uniphase will record the market value
of its common stock issued in connection with the merger, the fair value of the
options to purchase OCLI common stock which became options to purchase its
common stock and the amount of direct transaction costs as the cost of acquiring
the business of OCLI. JDS Uniphase intends to allocate that cost to the
individual assets acquired and liabilities assumed, including various
identifiable intangible assets such as acquired technology, acquired trademarks
and trade names and acquired workforce, and to in-process research and
development based on their respective fair values. JDS Uniphase intends to
allocate the excess of the purchase cost over the fair value of the net assets
to goodwill. As a result of the amortization in future periods of amounts
allocated to identifiable intangible assets and goodwill and additionally
amortization related to previous acquisitions, JDS Uniphase will incur net
losses in the foreseeable future, which could materially harm the market value
of its stock.
JDS UNIPHASE AND OCLI EXPECT TO INCUR SIGNIFICANT COSTS ASSOCIATED WITH THE
MERGER
JDS Uniphase estimates that it will incur direct transaction costs of
approximately $8.0 million associated with the merger, which will be included as
a part of the total purchase cost for accounting purposes. In addition, OCLI
estimates that it will incur direct transaction costs of approximately $9.0
million which will be expensed in its quarter ending January 31, 2000. JDS
Uniphase and OCLI believe the combined entity may incur charges to operations,
which are not currently reasonably estimable, in the quarter in which the merger
is completed or the following quarters, to reflect costs associated with
integrating the two companies. There can be no assurance that the combined
company will not incur additional material charges in subsequent quarters to
reflect additional costs associated with the merger.
THE PRICE OF JDS UNIPHASE COMMON STOCK MAY BE AFFECTED BY FACTORS DIFFERENT FROM
THOSE AFFECTING THE PRICE OF OCLI COMMON STOCK
When the merger is completed, holders of OCLI common stock will become
holders of JDS Uniphase common stock. JDS Uniphase's business differs from that
of OCLI, and JDS Uniphase's results of operations, as well as the price of JDS
Uniphase's common stock, may be affected by factors different from those
affecting OCLI's results of operations and the price of OCLI common stock.
RISKS RELATED TO JDS UNIPHASE
DIFFICULTIES JDS UNIPHASE MAY ENCOUNTER MANAGING ITS GROWTH COULD ADVERSELY
AFFECT ITS RESULTS OF OPERATIONS
JDS Uniphase has historically achieved its growth through a combination of
internally developed new products and acquisitions. As part of JDS Uniphase's
strategy to sustain growth, it expects to continue to pursue acquisitions of
other companies, technologies and complementary product lines. JDS Uniphase also
expects to continue developing new components, modules and other products for
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its customer base, seeking to further penetrate these markets. The success of
each acquisition will depend upon:
- JDS Uniphase's ability to manufacture and sell the products of the
businesses acquired;
- continued demand for these acquired products by JDS Uniphase's customers;
- JDS Uniphase's ability to integrate the acquired business' operations,
products and personnel;
- JDS Uniphase's ability to retain key personnel of the acquired
businesses; and
- JDS Uniphase's ability to expand its financial and management controls
and reporting systems and procedures.
DIFFICULTIES IN INTEGRATING UNIPHASE AND JDS FITEL COULD ADVERSELY AFFECT
JDS UNIPHASE'S BUSINESS
JDS Uniphase is the result of the combination on June 30, 1999 of Uniphase
Corporation and JDS FITEL. If JDS Uniphase fails to successfully integrate the
businesses of JDS FITEL and Uniphase, the combined business will suffer.
Uniphase and JDS FITEL have complementary business operations located
principally in the United States, Canada and Europe. JDS Uniphase's success
depends in large part on the successful integration of these geographically
diverse operations and the technologies and personnel of the two companies. As
part of this integration, JDS Uniphase needs to combine and improve its computer
systems to centralize and better automate processing of its financial, sales and
manufacturing data. JDS Uniphase's management came from the prior management
teams of both companies and many members of management did not previously work
with other members of management. The integration of the two businesses may
result in unanticipated operational problems, expenses and liabilities and the
diversion of management attention. The integration may not be successful, and,
if so, JDS Uniphase's operating results would suffer as a result.
IF JDS UNIPHASE FAILS TO EFFICIENTLY COMBINE UNIPHASE'S AND JDS FITEL'S
SALES AND MARKETING FORCES, ITS SALES COULD SUFFER
JDS Uniphase may experience disruption in sales and marketing in connection
with its efforts to integrate Uniphase's and JDS FITEL's sales channels, and it
may be unable to efficiently or effectively correct such disruption or achieve
its sales and marketing objectives after integration. In addition, sales cycles
and sales models for Uniphase's and JDS FITEL's various products may vary
significantly from product to product. JDS Uniphase sales personnel not
accustomed to the different sales cycles and approaches required for products
newly added to their portfolio may experience delays and difficulties in selling
these newly added products. Furthermore, it may be difficult to retain key sales
personnel. As a result, JDS Uniphase may fail to take full advantage of the
combined sales forces' efforts, and Uniphase's and JDS FITEL's respective sales
approaches and distribution channels may be ineffective in promoting the other
entity's products, which may materially harm JDS Uniphase's business, financial
condition or operating results.
INTEGRATION COSTS AND EXPENSES ASSOCIATED WITH UNIPHASE'S COMBINATION WITH
JDS FITEL HAVE BEEN SUBSTANTIAL AND JDS UNIPHASE MAY INCUR ADDITIONAL
RELATED EXPENSES IN THE FUTURE
JDS Uniphase has incurred direct transaction costs associated with the
combination of approximately $8.0 million, which were included as a part of the
total purchase cost for accounting
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purposes. JDS Uniphase may incur additional material charges in subsequent
quarters to reflect transition costs associated with the combination which will
be expensed as incurred.
DIFFICULTIES IN INTEGRATING OTHER ACQUISITIONS COULD ADVERSELY AFFECT JDS
UNIPHASE'S BUSINESS
In March 1997, Uniphase acquired Uniphase Laser Enterprise, which produces
JDS Uniphase's 980-nanometer pump laser products. In June 1998, Uniphase
acquired Uniphase Netherlands. In the case of both acquisitions, Uniphase
acquired businesses that had previously been engaged primarily in research and
development and that needed to make the transition from a research activity to a
commercial business with sales and profit levels that are consistent with JDS
Uniphase's overall financial goals. This transition has not yet been completed
at Uniphase Netherlands, which continues to operate at higher expense levels and
lower gross margins than those required to meet JDS Uniphase's profitability
goals. In addition, in November 1998, Uniphase acquired Uniphase Broadband,
which manufactures test instruments, transmitter cards and transceivers for
telecommunications applications, and in August 1999, JDS Uniphase acquired AFC
Technologies, which produces amplifiers for telecommunications applications.
Also, in November 1999, JDS Uniphase acquired EPITAXX, Inc., which supplies
optical detectors and receivers for fiber optic telecommunications and cable
television networks. In December 1999, JDS Uniphase acquired SIFAM Limited, a
leading supplier of fused components for fiber optic telecommunications networks
which is based in the United Kingdom, and Oprel Technologies Inc., a developer
of optical amplifiers, test equipment and optoelectronic packaging. JDS Uniphase
may not successfully manufacture and sell its products or successfully manage
its growth, and failure to do so could materially harm JDS Uniphase's business,
financial condition and operating results.
DIFFICULTIES IN COMMERCIALIZING NEW PRODUCT LINES
JDS Uniphase intends to continue to develop new product lines to address
its customers' diverse needs and the several market segments in which it
participates. As JDS Uniphase targets new product lines and markets, it will
further increase its sales and marketing, customer support and administrative
functions to support anticipated increased levels of operations from these new
products and markets as well as growth from its existing products. JDS Uniphase
may not be successful in creating this infrastructure nor may it realize any
increase in the level of its sales and operations to offset the additional
expenses resulting from this increased infrastructure. Uniphase commenced
operations at Uniphase Telecommunications Products in 1996 to penetrate the
cable television markets and at Uniphase Network Components in 1998 to develop
and market a line of complementary optical components for its telecommunications
customers. In each case, Uniphase hired development, manufacturing and other
staff in anticipation of developing and selling new products. JDS Uniphase
operations may not achieve levels sufficient to justify the increased expense
levels associated with these new businesses.
ANY FAILURE OF JDS UNIPHASE'S INFORMATION TECHNOLOGY INFRASTRUCTURE COULD
MATERIALLY HARM ITS RESULTS OF OPERATIONS
JDS Uniphase's success depends, among other things, upon the capacity,
reliability and security of its information technology hardware and software
infrastructure. Any failure relating to JDS Uniphase's information technology
infrastructure could significantly and adversely impact the results of JDS
Uniphase's operations. In connection with JDS Uniphase's growth, it has
identified the need to update its current information technology infrastructure
and expects to incur significant costs relating to this upgrade. JDS Uniphase
must continue to expand and adapt its system infrastructure to keep pace with
its growth. Demands on infrastructure that exceed JDS Uniphase's current
forecasts could result in technical difficulties. Upgrading the network
infrastructure will require
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substantial financial, operational and management resources, the expenditure of
which could affect the results of JDS Uniphase's operations. JDS Uniphase may
not successfully and in a timely manner upgrade and maintain its information
technology infrastructure, and a failure to do so could materially harm JDS
Uniphase's business, results of operations and financial condition.
JDS UNIPHASE IS SUBJECT TO MANUFACTURING DIFFICULTIES
IF JDS UNIPHASE DOES NOT ACHIEVE ACCEPTABLE MANUFACTURING VOLUMES, YIELDS
OR SUFFICIENT PRODUCT RELIABILITY, ITS OPERATING RESULTS COULD SUFFER
The manufacture of JDS Uniphase's products involves highly complex and
precise processes, requiring production in highly controlled and clean
environments. Changes in JDS Uniphase's manufacturing processes or those of its
suppliers, or their inadvertent use of defective or contaminated materials,
could significantly reduce its manufacturing yields and product reliability.
Because the majority of JDS Uniphase's manufacturing costs are relatively fixed,
manufacturing yields are critical to its results of operations. Some of JDS
Uniphase's divisions have in the past experienced lower than expected production
yields, which could delay product shipments and impair gross margins. These
divisions or any of JDS Uniphase's other manufacturing facilities may not
maintain acceptable yields in the future.
JDS Uniphase's existing Uniphase Netherlands facility has not achieved
acceptable manufacturing yields since the June 1998 acquisition, and there is
continuing risk attendant to this facility and its manufacturing yields and
costs. In addition, JDS Uniphase recently completed construction of a new laser
fabrication facility at Uniphase Netherlands, and this facility has not yet
reached targeted yields, volumes or cost levels. Uniphase Netherlands may not
successfully manufacture laser products in the future at volumes, yields or cost
levels necessary to meet JDS Uniphase's customers' needs. In addition, Uniphase
Fiber Components is establishing a production facility in Sydney, Australia for
fiber Bragg grating products. This facility may not manufacture grating products
to customers' specifications at the volume, cost and yield levels required. To
the extent JDS Uniphase does not achieve acceptable manufacturing yields or
experience product shipment delays, JDS Uniphase's business, operating results
and financial condition would be materially and adversely affected.
As JDS Uniphase customers' needs for its products increase, JDS Uniphase's
efforts to increase its manufacturing volumes to meet these needs and satisfy
customer demand may materially harm its business, operating results and
financial condition. In some cases, existing manufacturing techniques, which
involve substantial manual labor, may be insufficient to achieve the volume or
cost targets of its customers. As such, JDS Uniphase will need to develop new
manufacturing processes and techniques, which are anticipated to involve higher
levels of automation, to achieve the targeted volume and cost levels. In
addition, it is frequently difficult at a number of JDS Uniphase manufacturing
facilities to hire qualified manufacturing personnel in a timely fashion, if at
all, when customer demands increase over shortened time periods. While JDS
Uniphase continues to devote research and development efforts to improvement of
its manufacturing techniques and processes, it may not achieve manufacturing
volumes and cost levels in its manufacturing activities that will fully satisfy
customer demands.
IF JDS UNIPHASE'S CUSTOMERS DO NOT QUALIFY ITS MANUFACTURING LINES FOR
VOLUME SHIPMENTS, ITS OPERATING RESULTS COULD SUFFER
Customers will not purchase any of JDS Uniphase's products (other than
limited numbers of evaluation units) prior to qualification of the manufacturing
line for the product. Each new manufacturing line must go through varying levels
of qualification with JDS Uniphase's customers. This qualification process
determines whether the manufacturing line achieves the customers' quality,
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performance and reliability standards. Delays in qualification can cause a
product to be dropped from a long term supply program and result in significant
lost revenue opportunity over the term of that program. As noted above, JDS
Uniphase is currently completing a new manufacturing facility in Australia. JDS
Uniphase may experience delays in obtaining customer qualification of this
facility and its new facility at Uniphase Netherlands. If JDS Uniphase fails in
the timely qualification of these or other new manufacturing lines, its
operating results and customer relationships would be adversely affected.
JDS UNIPHASE'S OPERATING RESULTS SUFFER AS A RESULT OF PURCHASE ACCOUNTING
TREATMENT, PRIMARILY DUE TO THE IMPACT OF AMORTIZATION OF GOODWILL AND OTHER
INTANGIBLES RELATING TO ITS COMBINATION WITH JDS FITEL
Under U.S. generally accepted accounting principles that apply to JDS
Uniphase, it accounted for a number of business combinations using the purchase
method of accounting, the most significant being the combination of Uniphase and
JDS FITEL. Under purchase accounting, JDS Uniphase recorded the market value of
its common shares and the exchangeable shares of its subsidiary, JDS Uniphase
Canada Ltd., issued in connection with Uniphase's combination with JDS FITEL,
the fair value of the options to purchase JDS FITEL common shares which became
options to purchase JDS Uniphase common shares and the amount of direct
transaction costs as the cost of acquiring the business of JDS FITEL. That cost
was allocated to the individual assets acquired and liabilities assumed,
including various identifiable intangible assets such as acquired technology,
acquired trademarks and trade names, acquired workforce and in-process research
and development, based on their respective fair values. JDS Uniphase allocated
the excess of the purchase cost over the fair value of the net assets to
goodwill. JDS Uniphase expensed in-process research and development of $210.4
million as of June 30, 1999. Goodwill and other intangible assets are being
amortized over a five-year period. The amount of purchase cost allocated to
goodwill and other intangibles was $3.4 billion, including the related deferred
tax effect. The amortization of goodwill and other intangible assets in equal
quarterly amounts over a five-year period is resulting in an accounting charge
attributable to these items of $168 million per quarter and $672 million per
year. Additionally, in the first quarter of 2000 JDS Uniphase's gross profit was
adversely impacted by $11.4 million due to purchase accounting adjustments to
products acquired in the transaction and sold in the period. As a result,
purchase accounting treatment of Uniphase's combination with JDS FITEL will
result in a net loss for JDS Uniphase in the foreseeable future, which could
materially harm the market value of its stock.
JDS UNIPHASE'S STOCK PRICE COULD FLUCTUATE SUBSTANTIALLY
THE UNPREDICTABILITY OF JDS UNIPHASE'S QUARTERLY OPERATING RESULTS COULD
CAUSE ITS STOCK PRICE TO BE VOLATILE OR DECLINE
JDS Uniphase expects to continue to experience fluctuations in its
quarterly results, which in the future may be significant and cause substantial
fluctuations in the market price of its stock. All of the concerns JDS Uniphase
discusses under "Risk Factors" could affect its operating results, including,
among others:
- the timing of the receipt of product orders from a limited number of
major customers;
- the loss of one or more of JDS Uniphase's major suppliers or customers;
- competitive pricing pressures;
- the costs associated with the acquisition or disposition of businesses;
- JDS Uniphase's ability to design, manufacture and ship technologically
advanced products with satisfactory yields on a timely and cost-effective
basis;
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- the announcement and introduction of new products by JDS Uniphase; and
- expenses associated with any intellectual property or other litigation.
In addition to concerns potentially affecting JDS Uniphase's operating
results addressed elsewhere under Risk Factors, the following factors may also
influence its operating results:
- JDS Uniphase's product mix;
- the relative proportion of JDS Uniphase's domestic and international
sales;
- the timing differences between when JDS Uniphase incurs expenses to
increase its marketing and sales capabilities and when it realizes
benefits, if any, from such expenditures; and
- fluctuations in the foreign currencies of JDS Uniphase's foreign
operations.
Furthermore, JDS Uniphase's sales often reflect orders shipped in the same
quarter that they are received, which makes its sales vulnerable to short-term
fluctuations in customer demand and difficult to predict. Also, customers may
cancel or reschedule shipments, and production difficulties could delay
shipments. In addition, JDS Uniphase sells its telecommunications equipment
products to OEMs who typically order in large quantities, and therefore, the
timing of their purchases may significantly affect JDS Uniphase's quarterly
results. An OEM supplies system-level network products to telecommunications
carriers and others and incorporates JDS Uniphase's components in these
system-level products. The timing of such OEM sales can be affected by factors
beyond JDS Uniphase's control, such as demand for the OEMs' products and
manufacturing risks experienced by OEMs. In this regard, JDS Uniphase has
experienced rescheduling of orders by customers in each of its markets and may
experience similar rescheduling in the future. As a result of all of these
factors, JDS Uniphase's results from operations may vary significantly from
quarter to quarter.
In addition to the effect of ongoing operations on quarterly results,
acquisitions or dispositions of businesses, JDS Uniphase's products or
technologies have in the past resulted in, and may in the future, result in
reorganization of its operations, substantial charges or other expenses, which
have caused, and may in the future, cause fluctuations in its quarterly
operating results and cash flows.
Finally, JDS Uniphase's net revenues and operating results in future
quarters may be below the expectations of public market securities analysts and
investors. If that happens, the price of JDS Uniphase's common stock and the
exchangeable shares of its subsidiary, JDS Uniphase Canada Ltd., would likely
decline, perhaps substantially.
FACTORS OTHER THAN JDS UNIPHASE'S QUARTERLY RESULTS COULD CAUSE ITS STOCK
PRICE TO BE VOLATILE OR DECLINE
The market price of JDS Uniphase's common stock has been and, is likely to
continue to be, highly volatile because of causes other than its historical
quarterly results, such as:
- announcements by JDS Uniphase's competitors and customers of
technological innovations or new products;
- developments with respect to patents or proprietary rights;
- governmental regulatory action; and
- general market conditions.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of
particular companies, which may cause the price of JDS Uniphase's stock to
decline.
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JDS UNIPHASE'S SALES WOULD SUFFER IF ONE OR MORE OF ITS KEY CUSTOMERS
SUBSTANTIALLY REDUCED ORDERS FOR ITS PRODUCTS
JDS Uniphase's customer base is highly concentrated. Historically, orders
from a relatively limited number of OEM customers accounted for a substantial
portion of Uniphase's and JDS FITEL's net sales from telecommunications
products. Two customers, Lucent and Nortel, each accounted for over 10% of JDS
Uniphase's net sales for the quarter ended September 30, 1999. JDS Uniphase
expects that, for the foreseeable future, sales to a limited number of customers
will continue to account for a high percentage of its net sales. Sales to any
single customer may vary significantly from quarter to quarter. If current
customers do not continue to place orders, JDS Uniphase may not be able to
replace these orders with new orders from new customers. In the
telecommunications markets, JDS Uniphase's customers evaluate its products and
competitive products for deployment in their telecommunications systems. JDS
Uniphase's failure to be selected by a customer for particular system projects
can significantly impact its business, operating results and financial
condition. Similarly, even if JDS Uniphase's customers select it, if its
customers are not selected as the primary supplier for an overall system
installation, JDS Uniphase can be similarly adversely affected. Such
fluctuations could materially harm JDS Uniphase's business, financial condition
and operating results.
INTERRUPTIONS AFFECTING JDS UNIPHASE'S KEY SUPPLIERS COULD DISRUPT PRODUCTION,
COMPROMISE ITS PRODUCT QUALITY AND ADVERSELY AFFECT ITS SALES
JDS Uniphase currently obtains various components included in the
manufacture of its products from single or limited source suppliers. A
disruption or loss of supplies from these companies or a price increase for
these components would materially harm JDS Uniphase's results of operations,
product quality and customer relationships. JDS Uniphase has a sole source
supply agreement for a critical material used in the manufacture of its passive
products. This agreement may be terminated by either party on six months prior
notice. It is JDS Uniphase's objective to maintain strategic inventory of the
key raw material provided by this supplier. JDS Uniphase has also been dependent
on OCLI as its sole source for filters for its WDM products, and following the
merger JDS Uniphase will continue to be dependent on this source for filters. In
addition, JDS Uniphase currently utilizes a sole source for the crystal
semiconductor chip sets incorporated in its solid state microlaser products and
acquires its pump diodes for use in its solid state laser products from Opto
Power Corporation and GEC. JDS Uniphase obtains lithium niobate wafers, gallium
arsenide wafers, specialized fiber components and some lasers used in its
telecommunications products primarily from Crystal Technology, Inc., Fujikura,
Ltd., Philips Key Modules and Sumitomo, respectively. JDS Uniphase does not have
long-term or volume purchase agreements with any of these suppliers (other than
for its passive products supplier described in this paragraph), and these
components may not in the future be available in the quantities required by JDS
Uniphase, if at all.
JDS UNIPHASE MAY BECOME SUBJECT TO COLLECTIVE BARGAINING AGREEMENTS
JDS Uniphase's employees who are employed at manufacturing facilities
located in North America are not bound by or party to any collective bargaining
agreements with it. These employees may become bound by or party to one or more
collective bargaining agreements with JDS Uniphase in the future. Some of JDS
Uniphase's employees outside of North America, particularly in The Netherlands
and Germany, are subject to collective bargaining agreements. If, in the future,
any such employees become bound by or party to any collective bargaining
agreements, then JDS Uniphase's related costs and its flexibility with respect
to managing its business operations involving such employees may be materially
adversely affected.
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ANY FAILURE TO REMAIN COMPETITIVE IN JDS UNIPHASE'S INDUSTRY WOULD IMPAIR ITS
OPERATING RESULTS
IF JDS UNIPHASE'S BUSINESS OPERATIONS ARE INSUFFICIENT TO REMAIN
COMPETITIVE IN ITS INDUSTRY, ITS OPERATING RESULTS COULD SUFFER
The telecommunications and laser subsystems markets in which JDS Uniphase
sells its products are highly competitive. In each of the markets JDS Uniphase
serves, it faces intense competition from established competitors. Many of these
competitors have substantially greater financial, engineering, manufacturing,
marketing, service and support resources than does JDS Uniphase and may have
substantially greater name recognition, manufacturing expertise and capability
and longer standing customer relationships than it does. To remain competitive,
JDS Uniphase believes it must maintain a substantial investment in research and
development, marketing, and customer service and support. JDS Uniphase may not
compete successfully in all or some of its markets in the future, and it may not
have sufficient resources to continue to make such investments, or it may not
make the technological advances necessary to maintain its competitive position
so that its products will receive market acceptance. In addition, technological
changes or development efforts by JDS Uniphase's competitors may render its
products or technologies obsolete or uncompetitive.
FIBER OPTIC COMPONENT AVERAGE SELLING PRICES ARE DECLINING
Prices for telecommunications fiber optic components are generally
declining because of, among other things, increased competition and greater unit
volumes as telecommunications service providers continue to deploy fiber optic
networks. Uniphase and JDS FITEL have in the past and JDS Uniphase may in the
future experience substantial period to period fluctuations in average selling
prices. JDS Uniphase anticipates that average selling prices will decrease in
the future in response to product introductions by competitors and it or to
other factors, including price pressures from significant customers. Therefore,
JDS Uniphase must continue to (1) timely develop and introduce new products that
incorporate features that can be sold at higher selling prices and (2) reduce
its manufacturing costs. Failure to achieve any or all of the foregoing could
cause JDS Uniphase's net sales and gross margins to decline, which may have a
material adverse effect on its business, financial condition and operating
results.
IF JDS UNIPHASE FAILS TO ATTRACT AND RETAIN KEY PERSONNEL, ITS BUSINESS
COULD SUFFER
JDS Uniphase's future depends, in part, on its ability to attract and
retain key personnel. In particular, JDS Uniphase's research and development
efforts depend on hiring and retaining qualified engineers. Competition for
highly skilled engineers is extremely intense, and JDS Uniphase is currently
experiencing difficulty in identifying and hiring qualified engineers in many
areas of its business. JDS Uniphase may not be able to hire and retain such
personnel at compensation levels consistent with its existing compensation and
salary structure. JDS Uniphase's future also depends on the continued
contributions of its executive officers and other key management and technical
personnel, each of whom would be difficult to replace. Uncertainty resulting
from the Uniphase/JDS FITEL merger could further adversely affect JDS Uniphase's
ability to retain key employees. JDS Uniphase does not maintain a key person
life insurance policy on its chief executive officer, its chief operating
officer or any other officer. The loss of the services of one or more of JDS
Uniphase's executive officers or key personnel or the inability to continue to
attract qualified personnel could delay product development cycles or otherwise
materially harm its business, financial condition and operating results.
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MARKET CONSOLIDATION HAS CREATED AND CONTINUES TO CREATE COMPANIES THAT ARE
LARGER AND HAVE GREATER RESOURCES THAN JDS UNIPHASE
In the recent past, there have been a number of significant acquisitions
announced among JDS Uniphase's competitors and customers, including:
- Motorola, Inc./General Instruments Corporation;
- Cisco Systems, Inc./Cerent Corporation; and
- Corning Incorporated/Oak Industries, Inc.
The effect of these completed and pending acquisitions on JDS Uniphase
cannot be predicted with accuracy, but some of these competitors are aligned
with companies that are larger or more well established than JDS Uniphase. As a
result, these competitors may have access to greater financial, marketing and
technical resources than JDS Uniphase. Also, consolidation of these and other
companies may disrupt JDS Uniphase's marketing and sales efforts.
JDS UNIPHASE'S PARTICIPATION IN INTERNATIONAL MARKETS CREATES RISKS TO ITS
BUSINESS NOT FACED BY COMPANIES THAT SELL THEIR PRODUCTS IN THE UNITED STATES
International sales are subject to inherent risks, including:
- unexpected changes in regulatory requirements;
- tariffs and other trade barriers;
- political and economic instability in foreign markets;
- difficulties in staffing and management;
- integration of foreign operations;
- longer payment cycles;
- greater difficulty in accounts receivable collection;
- currency fluctuations; and
- potentially adverse tax consequences.
International sales accounted for approximately 40%, 38% and 32% of
Uniphase's net sales in 1999, 1998 and 1997, respectively. International sales
(excluding sales to the U.S.) accounted for approximately 21%, 25% and 20% of
JDS FITEL's net sales in 1999, 1998 and 1997, respectively. JDS Uniphase expects
that international sales will continue to account for a significant portion of
its net sales. JDS Uniphase may continue to expand its operations outside of the
United States and to enter additional international markets, both of which will
require significant management attention and financial resources.
Since a significant portion of JDS Uniphase's foreign sales are denominated
in U.S. dollars, its products may also become less price competitive in
countries in which local currencies decline in value relative to the U.S.
dollar. JDS Uniphase's business and operating results may also be materially and
adversely affected by lower sales levels that typically occur during the summer
months in Europe and some other overseas markets. Furthermore, the sales of many
of JDS Uniphase's OEM customers depend on international sales and consequently
further exposes it to the risks associated with such international sales.
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THE YEAR 2000 PROBLEM MAY DISRUPT JDS UNIPHASE'S AND ITS CUSTOMERS' AND
SUPPLIERS' BUSINESSES
JDS Uniphase is aware of the risks associated with the operation of
information technology and non-information technology systems as the Year 2000
approaches. The problem is pervasive and complex and may affect many information
technology and non-information technology systems. The Year 2000 problem results
from the rollover of the two digit year value from "99" to "00." Systems that do
not properly recognize such date-sensitive information could generate erroneous
data or fail. In addition to JDS Uniphase's own systems, it relies on external
systems of its customers, suppliers, creditors, financial organizations,
utilities providers and government entities, both domestic and international
(which this joint proxy statement-prospectus collectively refers to as "third
parties"). Consequently, JDS Uniphase could be affected by disruptions in the
operations of third parties with which it interacts. Furthermore, as customers
expend resources to correct their own systems, they may reduce their purchasing
frequency and volume of JDS Uniphase products.
JDS Uniphase is using both internal and external resources to assess:
- JDS Uniphase's state of readiness (including the readiness of third
parties with which it interacts) concerning the Year 2000 problem;
- JDS Uniphase's costs to correct material Year 2000 problems related to
its internal information technology and non-information technology
systems;
- the known risks related to any failure to correct any Year 2000 problems
JDS Uniphase identifies; and
- the contingency plan, if any, that JDS Uniphase should adopt should any
identified Year 2000 problems not be corrected.
To date, JDS Uniphase has incurred costs not exceeding $2.0 million to
upgrade its information technology and non-information technology systems, among
other things, to make such systems Year 2000 ready. JDS Uniphase continues to
evaluate the estimated costs associated with the efforts to prepare for Year
2000 based on actual experience. While the efforts will involve additional
costs, JDS Uniphase believes, based on (1) available information, (2) amounts
spent to date and (3) the fact that JDS Uniphase's information technology and
non-information technology systems depend on third-party software which, it
believes, has been or is being updated to address the Year 2000 problem, that
JDS Uniphase will manage its total Year 2000 transition without any material
harm to its business operations, financial condition, products or financial
prospects. The actual outcomes and results could be affected by future factors
including, but not limited to:
- the continued availability of skilled personnel;
- cost control;
- the ability to locate and remediate software code problems;
- critical suppliers and subcontractors meeting their Year 2000 compliance
commitments; and
- timely actions by customers.
JDS Uniphase anticipates that all systems will be corrected for the Year
2000 problem prior to December 31, 1999. JDS Uniphase is working with third
parties to identify any Year 2000 problems affecting such third parties that
could materially harm its business, financial condition or results of
operations. However, it would be impracticable for JDS Uniphase to attempt to
address all potential Year 2000 problems of third parties that have been or may
in the future be identified. Specifically, Year 2000 problems have arisen or may
arise regarding the information technology and non-
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information technology systems of third parties having widespread national and
international interactions with persons and entities generally (for example,
some information technology and non-information technology systems of
governmental agencies, utilities and information and financial networks) that,
if uncorrected, could materially impact JDS Uniphase's business, financial
condition or results of operations. JDS Uniphase is still assessing the effect
the Year 2000 problem will have on its suppliers and, at this time, cannot
determine such impact. However, JDS Uniphase has identified alternative
suppliers and, in the event that any significant supplier suffers unresolved
material Year 2000 problems, it believes that it would only experience
short-term disruptions in supply, not exceeding 90 days, while the supplier is
replaced.
IF JDS UNIPHASE HAS INSUFFICIENT PROPRIETARY RIGHTS OR IF IT FAILS TO PROTECT
THOSE IT HAS, ITS BUSINESS WOULD BE MATERIALLY IMPAIRED
JDS UNIPHASE MAY NOT OBTAIN THE INTELLECTUAL PROPERTY RIGHTS IT REQUIRES
The telecommunications and laser markets in which JDS Uniphase sells its
products experience frequent litigation regarding patent and other intellectual
property rights. Numerous patents in these industries are held by others,
including academic institutions and JDS Uniphase's competitors. In the past,
Uniphase and JDS FITEL have acquired and in the future JDS Uniphase may seek to
acquire license rights to these or other patents or other intellectual property
to the extent necessary for its business. Unless JDS Uniphase is able to obtain
such licenses on commercially reasonable terms, patents or other intellectual
property held by others could inhibit its development of new products for its
markets. While in the past licenses generally have been available to Uniphase
and JDS FITEL where third-party technology was necessary or useful for the
development or production of their products, in the future licenses to
third-party technology may not be available on commercially reasonable terms, if
at all. Generally, a license, if granted, includes payments by JDS Uniphase of
up-front fees, ongoing royalties or a combination thereof. Such royalty or other
terms could have a significant adverse impact on JDS Uniphase's operating
results. JDS Uniphase is a licensee of a number of third party technologies and
intellectual property rights and is required to pay royalties to these third
party licensors on some of its telecommunications products and laser subsystems.
JDS UNIPHASE'S PRODUCTS MAY INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF
OTHERS
The industry in which JDS Uniphase operates experiences periodic claims of
patent infringement or other intellectual property rights. JDS Uniphase has in
the past and may from time to time in the future receive notices from third
parties claiming that its products infringe upon third party proprietary rights.
Any litigation to determine the validity of any third-party claims, regardless
of the merit of these claims, could result in significant expense to JDS
Uniphase and divert the efforts of its technical and management personnel,
whether or not JDS Uniphase is successful in such litigation. If JDS Uniphase is
unsuccessful in any such litigation, it could be required to expend significant
resources to develop non-infringing technology or to obtain licenses to the
technology that is the subject of the litigation. JDS Uniphase may not be
successful in such development or such licenses may not be available on terms
acceptable to JDS Uniphase, if at all. Without such a license, JDS Uniphase
could be enjoined from future sales of the infringing product or products.
JDS UNIPHASE'S INTELLECTUAL PROPERTY RIGHTS MAY NOT BE ADEQUATELY PROTECTED
JDS Uniphase's future depends in part upon its intellectual property,
including trade secrets, know-how and continuing technological innovation. JDS
Uniphase currently holds approximately 150 U.S. patents on products or processes
and corresponding foreign patents and has applications for some patents
currently pending. The steps taken by JDS Uniphase to protect its intellectual
property may
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not adequately prevent misappropriation or ensure that others will not develop
competitive technologies or products. Other companies may be investigating or
developing other technologies that are similar to JDS Uniphase's. It is possible
that patents may not be issued from any application pending or filed by JDS
Uniphase and, if patents do issue, the claims allowed may not be sufficiently
broad to deter or prohibit others from marketing similar products. Any patents
issued to JDS Uniphase may be challenged, invalidated or circumvented. Further,
the rights under JDS Uniphase's patents may not provide a competitive advantage
to it. In addition, the laws of some territories in which JDS Uniphase's
products are or may be developed, manufactured or sold, including Asia, Europe
or Latin America, may not protect its products and intellectual property rights
to the same extent as the laws of the United States.
IF JDS UNIPHASE FAILS TO SUCCESSFULLY MANAGE ITS EXPOSURE TO THE WORLDWIDE
FINANCIAL MARKETS, ITS OPERATING RESULTS COULD SUFFER
JDS Uniphase is exposed to financial market risks, including changes in
interest rates, foreign currency exchange rates and marketable equity security
prices. JDS Uniphase utilizes derivative financial instruments to mitigate these
risks. JDS Uniphase does not use derivative financial instruments for
speculative or trading purposes. The primary objective of JDS Uniphase's
investment activities is to preserve principal while at the same time maximizing
yields without significantly increasing risk. To achieve this objective, a
majority of JDS Uniphase's marketable investments are floating rate and
municipal bonds, auction instruments and money market instruments denominated in
U.S. dollars. JDS Uniphase hedges currency risks of investments denominated in
foreign currencies with forward currency contracts. Gains and losses on these
foreign currency investments are generally offset by corresponding gains and
losses on the related hedging instruments, resulting in negligible net exposure
to JDS Uniphase. A substantial portion of JDS Uniphase's revenue, expense and
capital purchasing activities are transacted in U.S. dollars. However, JDS
Uniphase does enter into these transactions in other currencies, primarily
Canadian and European currencies. To protect against reductions in value and the
volatility of future cash flows caused by changes in foreign exchange rates, JDS
Uniphase has established hedging programs. Currency forward contracts are
utilized in these hedging programs. JDS Uniphase's hedging programs reduce, but
do not always entirely eliminate, the impact of foreign currency exchange rate
movements. Actual results on JDS Uniphase's financial position may differ
materially.
IF JDS UNIPHASE FAILS TO OBTAIN ADDITIONAL CAPITAL AT THE TIMES, IN THE AMOUNTS
AND UPON THE TERMS REQUIRED, ITS BUSINESS COULD SUFFER
JDS Uniphase is devoting substantial resources for new facilities and
equipment to the production of source lasers, fiber Bragg gratings and modules
used in telecommunications and for the development of new solid state lasers.
Although JDS Uniphase believes existing cash balances, cash flow from
operations, available lines of credit and the proceeds from the recently
completed public offering of its common stock and the private placement in
Canada of exchangeable shares of its subsidiary, JDS Uniphase Canada, Ltd., will
be sufficient to meet its capital requirements at least for the next 12 months,
JDS Uniphase may be required to seek additional equity or debt financing to
compete effectively in these markets. JDS Uniphase cannot precisely determine
the timing and amount of such capital requirements and will depend on several
factors, including its acquisitions and the demand for its products and products
under development. Such additional financing may not be available when needed,
or, if available, may not be on terms satisfactory to JDS Uniphase.
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JDS UNIPHASE'S CURRENTLY AUTHORIZED PREFERRED STOCK AND ITS ABILITY TO ISSUE
ADDITIONAL PREFERRED STOCK COULD IMPAIR THE RIGHTS OF ITS COMMON STOCKHOLDERS
JDS Uniphase's board of directors has the authority to issue up to 799,999
shares of undesignated preferred stock and to determine the powers, preferences
and rights and the qualifications, limitations or restrictions granted to or
imposed upon any wholly unissued shares of undesignated preferred stock and to
fix the number of shares constituting any series and the designation of such
series, without the consent of JDS Uniphase's stockholders. The preferred stock
could be issued with voting, liquidation, dividend and other rights superior to
those of the holders of common stock. The issuance of preferred stock under some
circumstances could have the effect of delaying, deferring or preventing a
change in control. Each outstanding share of JDS Uniphase's common stock
includes one-quarter of a right. Each right entitles the registered holder,
subject to the terms of the rights agreement, to purchase from JDS Uniphase one
unit, equal to one one-thousandth of a share of series B preferred stock, at a
purchase price of $600 per unit, subject to adjustment. The rights are attached
to all certificates representing outstanding shares of JDS Uniphase common
stock, and no separate rights certificates have been distributed. The purchase
price is payable in cash or by certified or bank check or money order payable to
JDS Uniphase's order. The description and terms of the rights are set forth in a
rights agreement between JDS Uniphase and American Stock Transfer & Trust
Company, as rights agent, dated as of June 22, 1998, as amended from time to
time.
Some provisions contained in the rights plan, and in the equivalent rights
plan of JDS Uniphase's subsidiary, JDS Uniphase Canada Ltd., has adopted with
respect to its exchangeable shares, may have the effect of discouraging a third
party from making an acquisition proposal for JDS Uniphase and may thereby
inhibit a change in control. For example, such provisions may deter tender
offers for shares of common stock or exchangeable shares which offers may be
attractive to the stockholders, or deter purchases of large blocks of common
stock or exchangeable shares, thereby limiting the opportunity for stockholders
to receive a premium for their shares of common stock or exchangeable shares
over the then-prevailing market prices.
SOME ANTI-TAKEOVER PROVISIONS CONTAINED IN JDS UNIPHASE'S CHARTER AND UNDER
DELAWARE LAW COULD IMPAIR A TAKEOVER ATTEMPT
JDS Uniphase is subject to the provisions of Section 203 of the Delaware
General Corporation Law prohibiting, under some circumstances, publicly-held
Delaware corporations from engaging in business combinations with some
stockholders for a specified period of time without the approval of the holders
of substantially all of its outstanding voting stock. Such provisions could
delay or impede the removal of incumbent directors and could make more difficult
a merger, tender offer or proxy contest involving JDS Uniphase, even if such
events could be beneficial, in the short term, to the interests of the
stockholders. In addition, such provisions could limit the price that some
investors might be willing to pay in the future for shares of JDS Uniphase's
common stock. JDS Uniphase's certificate of incorporation and bylaws contain
provisions relating to the limitations of liability and indemnification of its
directors and officers, dividing its board of directors into three classes of
directors serving three-year terms and providing that its stockholders can take
action only at a duly called annual or special meeting of stockholders. These
provisions also may have the effect of deterring hostile takeovers or delaying
changes in control or management of JDS Uniphase.
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THE SPECIAL MEETING OF OCLI STOCKHOLDERS
PURPOSE OF THE SPECIAL MEETING
The special meeting is being held so that stockholders of OCLI may consider
and vote upon a proposal to adopt the merger agreement, dated as of November 3,
1999, by and among JDS Uniphase, Vintage Acquisition, and OCLI and to transact
any other business that properly comes before the special meeting or any
adjournment of the special meeting. Adoption of the merger agreement will also
constitute approval of the merger and the other transactions contemplated by the
merger agreement.
STOCKHOLDER RECORD DATE FOR THE SPECIAL MEETING
OCLI's board of directors has fixed the close of business on December 15,
1999, as the record date for determination of OCLI stockholders entitled to
notice of and entitled to vote at the special meeting. On the record date, there
were 14,288,076 shares of OCLI common stock outstanding, held by approximately
669 holders of record.
VOTE OF OCLI STOCKHOLDERS REQUIRED FOR ADOPTION OF THE MERGER AGREEMENT
A majority of the outstanding shares of OCLI common stock entitled to vote
at the special meeting must be represented, either in person or by proxy, to
constitute a quorum at the special meeting. The affirmative vote of the holders
of at least a majority of OCLI's common stock outstanding and entitled to vote
at the special meeting is required to adopt the merger agreement. You are
entitled to one vote for each share of OCLI common stock held by you on the
record date on each proposal to be presented to stockholders at the special
meeting.
As of the record date for the special meeting, directors and executive
officers of OCLI and their affiliates held approximately 1,176,470 shares of
OCLI common stock, which represented approximately 7.8% of all outstanding
shares of OCLI common stock entitled to vote at the special meeting. Also,
employees of OCLI held approximately 8.4% of the outstanding shares of OCLI
common stock through OCLI's 401(k) plan on that date.
PROXIES
All shares of OCLI common stock represented by properly executed proxies
that OCLI receives before or at the special meeting will, unless the proxies are
revoked, be voted in accordance with the instructions indicated thereon. If no
instructions are indicated on a properly executed proxy, the shares will be
voted FOR adoption of the merger agreement. You are urged to mark the applicable
box on the proxy to indicate how to vote your shares.
If a properly executed proxy is returned and the stockholder has abstained
from voting on adoption of the merger agreement, the OCLI common stock
represented by the proxy will be considered present at the special meeting for
purposes of determining a quorum, but will not be considered to have been voted
in favor of adoption of the merger agreement. Similarly, if an executed proxy is
returned by a broker holding shares of OCLI common stock in street name which
indicates that the broker does not have discretionary authority to vote on
adoption of the merger agreement, the shares will be considered present at the
meeting for purposes of determining the presence of a quorum, but will not be
considered to have been voted in favor of adoption of the merger agreement. Your
broker will vote your shares only if you provide instructions on how to vote by
following the information provided to you by your broker.
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You may also vote by telephone by following the telephone voting
instructions on the bottom of the proxy card.
Because adoption of the merger agreement requires the affirmative vote of
at least a majority of OCLI's common stock outstanding as of the record date,
abstentions, failures to vote and broker non-votes will have the same effect as
a vote against adoption of the merger agreement.
OCLI does not expect that any matter other than adoption of the merger
agreement will be brought before the special meeting. If, however, other matters
are properly presented, the persons named as proxies will vote in accordance
with their judgment with respect to those matters, unless authority to do so is
withheld in the proxy.
You may revoke your proxy at any time before it is voted by:
- notifying OCLI by writing to Corporate Secretary, Optical Coating
Laboratory, Inc., 2789 Northpoint Parkway, Santa Rosa, California 95407;
- granting a subsequent proxy; or
- appearing in person and voting at the special meeting; or
- if your broker holds your shares in street name, you must follow
directions received from your broker to change your voting instructions;
or
- if you voted by telephone, you can change your vote at any time by
following the telephone voting instructions on the bottom of the proxy
card.
JDS Uniphase and OCLI will equally share the expenses incurred in connection
with the printing and mailing of this proxy statement-prospectus. OCLI and
ChaseMellon Shareholder Services, L.L.C. will request banks, brokers and other
intermediaries holding shares beneficially owned by others to send this proxy
statement-prospectus to and obtain proxies from the beneficial owners and will
reimburse the holders for their reasonable expenses in so doing.
YOU SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXIES. A
TRANSMITTAL FORM WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK CERTIFICATES FOR
OCLI COMMON STOCK WILL BE MAILED TO YOU AS SOON AS PRACTICABLE AFTER COMPLETION
OF THE MERGER.
AVAILABILITY OF ACCOUNTANTS
Deloitte & Touche LLP has acted as OCLI's independent accountants since
1968. Representatives of Deloitte & Touche LLP, expected to be present at the
special meeting, will be available to respond to appropriate questions.
SOLICITATION OF PROXIES
OCLI will initially pay the costs of soliciting proxies. In addition to
solicitation by mail, OCLI's directors, officers and employees may solicit
proxies by telephone, facsimile or otherwise. The directors, officers and
employees of OCLI will not receive compensation for such solicitation but may
receive reimbursement by OCLI for out-of-pocket expenses incurred in connection
with such solicitation. OCLI will request that brokerage firms, fiduciaries and
other custodians forward copies of the proxies and this proxy
statement-prospectus to the beneficial owners of shares of OCLI common stock
held of record by them, and OCLI will reimburse them for their reasonable
expenses incurred in forwarding such material. OCLI has retained a proxy
solicitation firm, ChaseMellon Shareholder
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Services, L.L.C., to aid it in the solicitation. OCLI anticipates that its fees
plus expenses will be approximately $7,500.
THE MERGER
This section of the proxy statement-prospectus describes material aspects
of the proposed merger, including the merger agreement, the stock option
agreement, the affiliate agreements, noncompetition commitments and employee
agreements. While we believe that the description covers the material terms of
the merger and the related transactions, this summary may not contain all of the
information that is important to you. You should read this entire document and
the other documents we refer to carefully for a more complete understanding of
the merger.
BACKGROUND OF THE MERGER
The provisions of the merger agreement are the result of arm's length
negotiations conducted among representatives of JDS Uniphase and OCLI and their
respective legal and financial advisors. The following is a summary of the
meetings, negotiations and discussions between the parties that preceded
execution of the merger agreement.
In February 1997, OCLI and JDS FITEL entered into a strategic alliance
covering the design, manufacture and distribution of specified passive WDM
products. The strategic alliance combined OCLI's expertise in wavelength
discrimination technologies, primarily optical thin film filters, with JDS
FITEL's expertise in the design, packaging and marketing of those products. The
strategic alliance did not provide for the sharing of technologies nor did it
cover active telecommunications products or all types of passive WDM products
for which OCLI's filter technologies could be applicable. Also, the strategic
alliance was of relatively short duration.
As a result, during 1997, discussions soon began between the parties aimed
at either expanding the strategic alliance, combining OCLI's filter technologies
with JDS FITEL or merging the two companies. In January 1998, OCLI and JDS FITEL
entered into a non-disclosure agreement which included an agreement limiting JDS
FITEL's ability to make an unsolicited offer for OCLI. At this time, OCLI
retained Hambrecht & Quist to serve as its financial advisor.
On March 31, 1998, OCLI's management briefed its board of directors, in
executive session at a regularly scheduled meeting, on the discussions being
held between OCLI and JDS FITEL regarding strategic alternatives for the
Telecommunications Division and the retention of Hambrecht & Quist.
On May 27, 1998, representatives of senior management of OCLI and JDS FITEL
met in Toronto to present their respective business plans. After due
deliberation, although OCLI's management felt that a merger would be the best
long-term strategic outcome for OCLI, not enough value could be realized in a
merger transaction given what JDS FITEL was able to offer at the time.
Therefore, the merger was abandoned in favor of expanding the scope of the
strategic alliance. OCLI's common stock was trading in the range of $14.38 to
$19.75 during the period May 1, 1998 to July 31, 1998.
On January 28, 1999, the merger between JDS FITEL and Uniphase Corporation
was announced, and on April 15, 1999, JDS FITEL and OCLI expanded the scope and
extended the duration of the strategic alliance to 2015.
On May 20, 1999, OCLI completed a public offering at $70 per share, and on
June 30, 1999, the merger of JDS FITEL and Uniphase was completed to form JDS
Uniphase Corporation.
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On July 27, 1999, Charles J. Abbe, president and chief executive officer of
OCLI, met with Kevin N. Kalkhoven, chief executive officer of JDS Uniphase, and
Dr. Jozef Straus, chief operating officer of JDS Uniphase, at JDS Uniphase's
headquarters in San Jose to discuss further expansion of the strategic alliance
in light of the closing of the merger. One of the conclusions reached was that
the parties could work together better if there were no barriers to the sharing
of technology and product information as was the case with the strategic
alliance. Discussions included JDS Uniphase making an investment in OCLI and
providing OCLI with JDS Uniphase packaging and assembly technology.
On August 6, 1999, Mr. Kalkhoven met with Mr. Abbe at OCLI's headquarters
in Santa Rosa to continue discussions toward expanding the relationship between
the parties either through the strategic alliance or otherwise, including by
merger.
On September 2, 1999, Mr. Abbe and Mr. Kalkhoven met in the San Francisco
offices of OCLI's counsel, Collette & Erickson, to discuss the possible
acquisition of OCLI by JDS Uniphase.
On September 16, 1999, Mr. Abbe briefed OCLI's board of directors in
executive session on the discussions being held with JDS Uniphase. Mr. Abbe
advised the board that it was his opinion that OCLI could implement its fiber
optic telecommunications strategy more quickly and efficiently in a merger with
JDS Uniphase than alone, working with other companies around specific products
and technologies or in a merger with any other possible strategic partner. The
existence of the strategic alliance with JDS Uniphase, as well as Mr. Abbe's
belief that JDS Uniphase would emerge as one of the dominant participants in the
fiber optic telecommunications field, combined to make JDS Uniphase the logical
choice to be a merger partner for OCLI and provide OCLI with the resources
necessary to implement the strategy of moving into the design, development,
manufacturing and marketing of fiber optic telecommunications components and
products. Also, a strategy based on the acquisition of significant participants
in the fiber optic products market would likely find OCLI competing
unsuccessfully for these acquisitions with JDS Uniphase and other companies with
far greater resources. The board concurred in this view and authorized Mr. Abbe
to continue to pursue merger negotiations with JDS Uniphase and to retain
Hambrecht & Quist as financial advisor to assist in the negotiations.
On September 17, 1999, Mr. Kalkhoven met with Mr. Abbe at Mr. Abbe's
Healdsburg home and discussed JDS Uniphase's and OCLI's requirements regarding
an acquisition. That afternoon, Craig B. Collins, OCLI's chief financial
officer, met with Mr. Abbe to discuss Mr. Kalkhoven's proposal. Together, they
called Hambrecht & Quist and retained the firm to act as OCLI's financial
advisor in the negotiations with JDS Uniphase.
On September 20, 1999, Mr. Abbe and Mr. Collins met with representatives of
Hambrecht & Quist in San Francisco to discuss Mr. Kalkhoven's proposal and to
review financial models designed to establish a value for OCLI in an acquisition
by JDS Uniphase that would satisfy JDS Uniphase's and OCLI's requirements.
On September 24, 1999, Mr. Abbe and Mr. Collins met with representatives of
Hambrecht & Quist in San Francisco and later the same day Mr. Abbe met with Mr.
Kalkhoven and representatives of Banc of America Securities, JDS Uniphase's
financial advisor, in the offices of Collette & Erickson.
On September 28, 1999, Mr. Abbe met with Mr. Kalkhoven, Zita Cobb, senior
vice president of JDS Uniphase, and representatives of Banc of America
Securities at the San Francisco Airport to discuss further the various financial
valuation models. The parties agreed to meet next on October 11, 1999.
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<PAGE> 54
On October 8, 1999, Mr. Abbe and Mr. Collins met with Hambrecht & Quist in
San Francisco to review revised financial models of the acquisition.
On October 11, 1999, Mr. Abbe, Mr. Collins and representatives of Hambrecht
& Quist met with Mr. Kalkhoven, Ms. Cobb and representatives of Banc of America
Securities at JDS Uniphase's headquarters in San Jose. After considerable
discussion regarding the extent to which the acquisition would meet JDS
Uniphase's accretion requirement and OCLI's premium requirement, Mr. Kalkhoven
and Mr. Abbe reached a preliminary understanding regarding an acquisition on a
stock-for-stock basis based on current market conditions and subject to
completion of due diligence, negotiation of definitive agreements, delivery of
fairness opinions and approval of the respective boards of directors. Michael C.
Phillips, JDS Uniphase's general counsel, joined the meeting for a discussion of
the terms and timing of the proposed merger. The parties discussed additional
terms for the acquisition including a "break" fee equal to 3% of the value of
the acquisition and an option for 20% of OCLI's outstanding shares of common
stock exercisable by JDS Uniphase under some conditions. The closing price of
JDS Uniphase's common stock on October 11, 1999 was $131.563 and the closing
price of OCLI's common stock was $94.75.
On October 17, 1999, a telephonic board meeting was held by the OCLI board
of directors during which Mr. Abbe informed the board of the status of
discussions with JDS Uniphase. A representative of Hambrecht & Quist described
the process by which the exchange ratio would be determined. A first draft of
the merger agreement was available and a representative from Collette & Erickson
reported on the status of negotiations.
On October 19, 1999, a due diligence meeting was held at the offices of
Collette & Erickson attended by Mr. Collins, Joseph C. Zils, vice president,
legal counsel and corporate secretary of OCLI, and representatives of Hambrecht
& Quist and Deloitte & Touche, OCLI's independent public accountants, on behalf
of OCLI and, on behalf of JDS Uniphase, by financial, legal and technical
personnel of JDS Uniphase and representatives of Banc of America Securities and
Ernst & Young, JDS Uniphase's independent public accountants
On October 24, 1999, representatives of senior management of both JDS
Uniphase and OCLI met in San Francisco to discuss how the two companies'
operations could be coordinated if a transaction was consummated.
On October 28, 1999, Mr. Collins and Mr. Zils held a meeting at the offices
of Collette & Erickson with representatives of Hambrecht & Quist, Collette &
Erickson and Deloitte & Touche to review the results of financial and legal due
diligence.
On October 29, 1999, Mr. Abbe, Mr. Collins, Mr. Zils, Glenn K. Yamamoto,
vice president and general manager of OCLI's Telecommunications Division,
Michael J. Cumbo, OCLI's vice president and chief technical officer, and Gary
Hochman, OCLI's director of human resources, met at JDS Uniphase's San Jose
headquarters with Mr. Kalkhoven, Ms. Cobb, Mr. Phillips, Frederick L.
Leonberger, senior vice president and chief technical officer, and Anthony R.
Muller, senior vice president and chief financial officer of JDS Uniphase, and,
by video conference from JDS Uniphase's Nepean, Canada location, Dr. Straus and
Leo Lefebvre, vice president, operations finance, and Joseph Ip, senior vice
president, product strategy. Representatives of Hambrecht & Quist and Banc of
America Securities were also present. At this meeting, the two companies
presented their respective business plans and responded to questions regarding
the plans.
On October 30, 1999, OCLI held a meeting of its board of directors in San
Francisco attended by all of OCLI's directors. Also present at this meeting were
Mr. Collins, Mr. Zils and representatives of Hambrecht & Quist and Collette &
Erickson. Hambrecht & Quist presented the bases for its fairness opinion,
although the final fairness opinion was not delivered at the meeting. The
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<PAGE> 55
status of the negotiations of the merger agreement was also discussed and the
most recent draft was made available to all the directors. A further telephonic
meeting was scheduled for November 3, 1999, after the close of the market at
which time it was anticipated final approval of the merger would be considered
and the Hambrecht & Quist fairness opinion delivered.
On November 3, 1999, at 12:00 p.m. PST, the JDS Uniphase board convened a
special meeting to discuss the OCLI acquisition. Mr. Kalkhoven reported that the
volatility in the JDS Uniphase stock price had prevented the parties from coming
to an agreement on the exchange ratio.
At 2:00 p.m. PST after the market closed, OCLI held a telephonic board of
directors meeting. All directors participated along with Mr. Collins, Mr. Zils
and representatives of Hambrecht & Quist and Collette & Erickson. Mr. Abbe
reported that at the time, in light of the movement in the price of JDS
Uniphase's stock, there was no agreement on an exchange ratio. JDS Uniphase's
stock price that day had risen $21.4375 to $191.4375, a 45.5% increase over its
price on October 11, 1999, the date of the preliminary understanding. OCLI's
closing price of $119.25 represented a 25.9% increase over its price on October
11, 1999. After considerable discussion, the board voted unanimously to
authorize Mr. Abbe to attempt to negotiate for an exchange ratio of 0.95 or a
premium for OCLI's stock of just under 50% based on the next day's close.
Mr. Abbe called Mr. Kalkhoven and informed him of the OCLI board's
decision. Mr. Kalkhoven proposed an exchange ratio of 0.928 which, based on the
November 3 closing prices of the two companies' stock, represented a premium of
49%. Mr. Abbe felt that this would be acceptable and said he would take the
proposal to the OCLI board.
At 4:30 p.m. PST, the OCLI board of directors convened another telephonic
meeting with all those persons who participated in the earlier meeting present
except for one director. Mr. Abbe presented the proposal of a 0.928 exchange
ratio. After further discussions and the delivery orally of the fairness opinion
of Hambrecht & Quist, the OCLI board of directors approved the transaction. The
transaction was later approved unanimously by all members of the OCLI board of
directors.
At 9:00 p.m. PST, the JDS Uniphase board reconvened to consider the merger
at an exchange ratio of 0.928. Representatives of JDS Uniphase's financial
advisor, Banc of America Securities, orally delivered to the JDS Uniphase board
a fairness opinion with respect to the transaction. The merger was then
unanimously approved by the JDS Uniphase board members present at this special
meeting.
Later on November 3, 1999 and following approvals from both boards of
directors, the merger agreement was executed and the transaction announced.
Because of the proposed stock dividend of one share of JDS Uniphase common stock
for each outstanding share of JDS Uniphase common stock, to be effective
December 22, 1999, the exchange ratio of 0.928 of a share of JDS Uniphase common
stock has been treated as adjusted to 1.856 shares of JDS Uniphase common stock
to reflect the proposed stock dividend and to maintain the economic terms of the
original transaction.
REASONS FOR THE TRANSACTION
In February 1997, JDS Uniphase, through JDS FITEL, and OCLI entered into a
strategic alliance pursuant to which OCLI contributed its expertise in optical
thin film technology and products for some WDM applications and JDS FITEL
contributed its expertise in the design, manufacture and marketing of these
products. JDS Uniphase assumed this relationship upon completion of the
combination of Uniphase and JDS FITEL. Since its inception, the strategic
alliance has been a success for both companies. OCLI and JDS Uniphase believe
that the merger allows the parties to expand upon the success of the strategic
alliance by combining complementary products and technologies enabling the
combined company to expand its broad based leadership
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position in the rapidly growing market for fiber optic components and modules
for the telecommunications networking marketplace.
The current demand for increased capacity in fiber optic telecommunications
networks, which is largely the result of increased requirements for information
transfer due to Internet usage, has caused the complexity and performance
requirements of fiber optic network systems to substantially increase and the
product life cycles for these network systems to decrease. OEM system suppliers
are under pressure from their customers to provide higher capacity and more
complex systems in shorter time periods. These same pressures apply at all
levels of their system, including the component and module levels. Given these
factors, OCLI and JDS Uniphase believe there is increasing demand for products
designed, manufactured and distributed by merchant suppliers.
In this market environment, OCLI and JDS Uniphase believe that both
companies will be able to serve their respective customers more effectively with
OCLI as part of the JDS Uniphase family of companies than as a separate company
operating through the strategic alliance. The primary reasons for this belief
are:
The existence of the strategic alliance makes JDS Uniphase the logical strategic
partner for OCLI in the fiber optic telecommunications field.
Under the strategic alliance, OCLI and JDS Uniphase agreed to work
exclusively with each other through 2015 in the design, development,
manufacturing and marketing of some WDM products. As it became increasingly
apparent to OCLI that, in order to compete effectively in this market as a
supplier of complete components and products, a strategic partner with
manufacturing, assembly and distribution resources would be required, JDS
Uniphase emerged as the logical choice to fill this role.
Combines OCLI's Technical Expertise in Optics With All of JDS Uniphase's Product
Offerings.
Under the strategic alliance, OCLI's expertise in optical thin film filters
was combined with JDS FITEL's position as a leading merchant supplier of
"passive" optical filter based WDM products. Uniphase Corporation, prior to the
merger with JDS FITEL, was a leading merchant supplier of "active"
optoelectronic components. "Active" devices incorporate both optical and
electronic technology and perform different functions in fiber optic network
than "passive" devices, which operate only in the optical domain of the network.
A major reason for the merger that created JDS Uniphase was to combine the
leading position of both JDS FITEL and Uniphase Corporation in passive and
active components. By combining OCLI with JDS Uniphase, OCLI's thin film filter
technology is seamlessly available for products in both the passive and active
components business currently served by JDS Uniphase.
Brings JDS Uniphase's Product Design, Assembly and Qualification Expertise to
OCLI's New Product Development Activities.
OCLI has recently introduced telecommunications products outside of the
strategic alliance which incorporate OCLI's thin film filters as well as
complementary technology. It is part of OCLI's strategic plan in the
telecommunications market, as well as other markets that it serves, to move from
a supplier of optical thin film filters and related products to complete high
performance optical components for the telecommunications market. In order to
achieve this, OCLI needs to develop expertise in the area of design, assembly
and qualification of these products. By joining JDS Uniphase, OCLI will have
access to the considerable expertise of JDS Uniphase in these areas.
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Allows JDS Uniphase and OCLI to More Efficiently Manufacture Products Than Was
Possible Through the Strategic Alliance.
Under the strategic alliance, because of the lack of sharing of
intellectual property, selected manufacturing activities that may be more
efficiently performed in OCLI's facility in Santa Rosa, California, have been
performed at JDS Uniphase's existing facilities. By combining with JDS Uniphase,
OCLI may be in a position to take on some manufacturing tasks in Santa Rosa
without the concern for the protection of intellectual property that existed
under the strategic alliance. The allocation of manufacturing tasks would
facilitate increased manufacturing capacity expansion at JDS Uniphase's other
facilities, including Canada. In addition, OCLI has a large manufacturing
infrastructure with room for substantial expansion in and around its facility in
Santa Rosa. Because of the high growth rate anticipated for JDS Uniphase's
products, additional manufacturing space will be required, and having access to
OCLI's manufacturing infrastructure and expansion capabilities in Santa Rosa can
facilitate this growth.
Provides the Opportunity to Work More Closely With Customers and Speed the
Introduction of New Products that Meet Customers' Requirements.
OCLI and JDS Uniphase believe that by combining their operations, the
resulting breadth of technologies and product lines will enable the combined
organization to respond more quickly to its customers' specifications and to
reduce product design times.
Allows Broader Cooperation on Research and Development Projects.
Because of the difficulties under the strategic alliance to share
intellectual property, there was little opportunity for joint research and
development projects which could enhance existing product lines and create new
products. By combining OCLI with JDS Uniphase, joint research and development
projects can be more easily undertaken.
Allows OCLI to Speed Up Implementation of Its High Performance Optical Products
Strategy Outside of the Telecommunications Product Area.
A strategic goal for OCLI is to implement a program of introducing high
performance optical products in the other markets that it currently serves. By
gaining access to JDS Uniphase's expertise in product manufacturing, OCLI hopes
to be able to speed up the implementation of this strategy as well.
RECOMMENDATION OF OCLI'S BOARD OF DIRECTORS
THE OCLI BOARD OF DIRECTORS BELIEVES THAT THE TRANSACTION IS FAIR TO OCLI
STOCKHOLDERS AND IN THE BEST INTERESTS OF OCLI AND ITS STOCKHOLDERS.
ACCORDINGLY, THE OCLI BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE
TRANSACTION AND RECOMMENDS THAT OCLI STOCKHOLDERS VOTE FOR APPROVAL OF THE
MERGER PROPOSAL.
Each of the directors of OCLI has advised OCLI that he will vote the OCLI
common stock held by him in favor of the merger.
In making its recommendation, the OCLI board of directors considered a
number of factors, including:
- the board's belief that the merger was necessary for OCLI's continued
success in the telecommunications market;
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- the success of the strategic alliance with JDS Uniphase made JDS Uniphase
the logical merger partner for OCLI;
- the Hambrecht & Quist fairness opinion to the effect that, as of the date
of such opinion, the consideration to be paid by JDS Uniphase to the OCLI
stockholders was fair, from a financial point of view, to the OCLI
stockholders;
- the trading prices of the OCLI common stock and the JDS Uniphase common
stock prior to November 3, 1999;
- the opportunity afforded by the merger for OCLI to combine its operations
with those of JDS Uniphase; and
- the terms and conditions of the merger agreement generally, including the
circumstances in which the break fee is payable to JDS Uniphase, and the
fact that the terms of the merger agreement and the stock option
agreement, while perhaps discouraging competing offers, do not prevent a
third party from making a competing offer or proposing a competing
transaction or the OCLI directors from considering such offers and
transactions if required to do so in the exercise of their fiduciary
duties.
In considering the transaction, the OCLI board of directors recognized that
there were some risks associated with the transaction, including the risk that
the potential benefits set forth above may not be realized or that there may be
higher than anticipated costs associated with realizing such benefits and the
facts as set forth in this proxy statement-prospectus under the heading "Risk
Factors."
In view of the variety of factors considered in connection with its
evaluation of the transaction, the OCLI board of directors did not consider it
practicable to and did not quantify or otherwise assign relative weights to the
specific factors considered in reaching its determination.
In considering the recommendation of OCLI's board of directors with respect
to the merger agreement, you should be aware that some directors and officers of
OCLI have interests in the merger that are different from, or are in addition
to, the interests of OCLI stockholders generally. Please see the section
entitled "Interests of Directors and Officers in the Merger" on page 54 of this
proxy statement-prospectus.
OPINION OF OCLI'S FINANCIAL ADVISOR
OCLI engaged Hambrecht & Quist to act as its exclusive financial advisor in
connection with the proposed transaction and to render an opinion to the OCLI
board as to the fairness, from a financial point of view, to the holders of
shares of common stock of OCLI of the consideration to be received by them in
the merger. The OCLI board selected Hambrecht & Quist based on its
qualifications, experience and reputation, as well as Hambrecht & Quist's
historic investment banking relationship and familiarity with OCLI. Hambrecht &
Quist rendered its oral opinion to the OCLI board (as confirmed in writing) on
November 3, 1999 that, as of that date, the consideration to be received in the
merger by holders of OCLI common stock was fair to them, from a financial point
of view. The amount of the consideration was determined through negotiations
between JDS Uniphase and OCLI and not as a result of recommendations by
Hambrecht & Quist.
THE FULL TEXT OF THE OPINION DELIVERED BY HAMBRECHT & QUIST TO THE OCLI
BOARD DATED NOVEMBER 3, 1999, WHICH SETS FORTH THE ASSUMPTIONS MADE, GENERAL
PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF REVIEW
UNDERTAKEN BY HAMBRECHT & QUIST IN RENDERING ITS OPINION, IS ATTACHED TO THIS
PROXY STATEMENT-PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE.
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HAMBRECHT & QUIST'S OPINION IS DIRECTED TO THE OCLI BOARD AND ADDRESSES ONLY THE
FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY
THE HOLDERS OF COMMON STOCK OF OCLI. HAMBRECHT & QUIST'S OPINION DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY OCLI STOCKHOLDER AS TO HOW SUCH STOCKHOLDER
SHOULD VOTE WITH RESPECT TO THE PROPOSED TRANSACTION. IN FURNISHING ITS OPINION,
HAMBRECHT & QUIST DID NOT ADMIT THAT IT IS AN EXPERT WITHIN THE MEANING OF THE
TERM "EXPERT" AS USED IN THE SECURITIES ACT, NOR DID IT ADMIT THAT ITS OPINION
CONSTITUTES A REPORT OR VALUATION WITHIN THE MEANING OF THE SECURITIES ACT. THE
SUMMARY OF HAMBRECHT & QUIST'S OPINION SET FORTH BELOW IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF ITS OPINION. OCLI STOCKHOLDERS ARE
URGED TO READ THE OPINION CAREFULLY IN ITS ENTIRETY.
In arriving at its opinion, Hambrecht & Quist, among other things:
- reviewed the publicly available consolidated financial statements of JDS
Uniphase for recent years and interim periods to date and certain other
relevant financial and operating data of JDS Uniphase (including its
capital structure) made available to Hambrecht & Quist from published
sources and from the internal records of JDS Uniphase;
- reviewed certain internal financial and operating information relating to
JDS Uniphase prepared by the management of JDS Uniphase;
- discussed the business, financial condition and prospects of JDS Uniphase
with selected members of senior management;
- reviewed the publicly available consolidated financial statements of OCLI
for recent years and interim periods to date and certain other relevant
financial and operating data of OCLI made available to Hambrecht & Quist
from published sources and from the internal records of OCLI;
- reviewed certain financial and operating information relating to OCLI
prepared by the senior management of OCLI;
- discussed the business, financial condition and prospects of OCLI with
selected members of senior management;
- reviewed the recent reported prices and trading activity for the common
stocks of JDS Uniphase and OCLI and compared this information and
selected financial information for JDS Uniphase and OCLI with similar
information for selected other companies engaged in businesses Hambrecht
& Quist considers comparable;
- reviewed the financial terms, to the extent publicly available, of
selected comparable merger and acquisition transactions;
- reviewed a draft of the merger agreement dated November 3, 1999;
- discussed the tax and accounting treatment of the proposed transaction
with JDS Uniphase and JDS Uniphase's lawyers and accountants; and
- performed such other analyses and examinations and considered such other
information, financial studies, analyses and investigations and
financial, economic and market data as it deemed relevant.
Hambrecht & Quist did not independently verify any of the information
concerning OCLI or JDS Uniphase in connection with its review of the proposed
transaction and, for purposes of its opinion, Hambrecht & Quist assumed and
relied on the accuracy and completeness of all the information supplied to it by
the parties. In connection with its opinion, Hambrecht & Quist did not
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prepare or obtain any independent valuation or appraisal of any of the assets or
liabilities of OCLI or JDS Uniphase, nor did it conduct a physical inspection of
the properties and facilities of OCLI or JDS Uniphase. With respect to the
financial projections used in its analysis, Hambrecht & Quist assumed that they
reflected the best currently available public estimates and judgments of the
expected future financial performance of JDS Uniphase and OCLI, and that they
provided a reasonable basis on which Hambrecht & Quist could form its opinion.
Hambrecht & Quist assumed that as of the date of the opinion neither OCLI nor
JDS Uniphase was a party to any material pending transactions, including
external financings, recapitalizations or mergers. Hambrecht & Quist assumed
that the proposed transaction would qualify as a tax-free reorganization under
the Internal Revenue Code of 1986, as amended, and that the proposed transaction
would be accounted for as a purchase. Hambrecht & Quist further assumed that the
proposed transaction would be consummated substantially on the terms specified
in the merger agreement, without any waiver of any material terms or conditions
by any party thereto.
Hambrecht & Quist's opinion is necessarily based on market, economic,
financial and other conditions as they existed and could be evaluated as of the
date of the opinion. Any subsequent change in such conditions would require a
reevaluation of such opinion. Hambrecht & Quist expresses no opinion as to the
price at which JDS Uniphase common stock will trade at any time, before or after
the completion of the merger. In rendering its opinion, Hambrecht & Quist was
not requested to solicit indications of interest from any other parties in
connection with a possible acquisition of OCLI or business combination with
OCLI, and made no such solicitation.
The preparation of a fairness opinion is a complex process and involves
various judgments and determinations as to the most appropriate and relevant
assumptions and financial analyses and the application of these methods to the
particular circumstances involved. Such an opinion is therefore not necessarily
susceptible to partial analysis or summary description. Accordingly, Hambrecht &
Quist believes that its analyses and the summary set forth below must be
considered as a whole. It believes that selecting portions of its analyses
without considering all analyses, or considering the following summary without
considering all factors and analyses, could create an incomplete and misleading
view of the processes underlying the analyses performed by Hambrecht & Quist in
connection with its opinion. In arriving at its opinion, Hambrecht & Quist did
not attribute any particular weight to any analyses or factors considered by it,
but rather made qualitative judgments as to the significance and relevance of
each analysis and factor. Hambrecht & Quist did not form an opinion as to
whether any individual analysis or factor (positive or negative), considered in
isolation, supported or failed to support the Hambrecht & Quist opinion. In
performing its analyses, Hambrecht & Quist made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of OCLI and JDS Uniphase.
The analyses performed by Hambrecht & Quist do not necessarily indicate actual
values or actual future results, which may be significantly more or less
favorable than suggested by the analyses. Such analyses were prepared solely as
part of the Hambrecht & Quist analysis of the fairness to OCLI stockholders,
from a financial point of view, of the consideration in the proposed
transaction. Additionally, analyses relating to the values of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be acquired.
The following is a brief summary of the material financial analyses
performed by Hambrecht & Quist in connection with providing its opinion to the
OCLI board on November 3, 1999. Some of the summaries of the financial analyses
include information presented in tabular format. To fully understand the
financial analyses, you should read the tables together with the text of each
summary. Considering the data set forth in the tables without considering the
narrative description of the financial analyses, including the methodologies and
assumptions underlying the analyses, could create a misleading or incomplete
view of the financial analyses.
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Pro Forma Merger Analysis. Hambrecht & Quist analyzed the pro forma impact
of the merger on the projected financial results of JDS Uniphase, for calendar
year 2000. Projections for JDS Uniphase and OCLI were based on published Wall
Street research estimates. Hambrecht & Quist observed that the pro forma impact
of the merger on JDS Uniphase's calendar year 2000 earnings per share was
accretive assuming no synergies and ignoring goodwill and other purchase
accounting adjustments. Hambrecht & Quist also observed that OCLI's contribution
to the combined company's pro forma revenues, operating income and pretax income
for calendar year 2000 was 14.9%, 13.0% and 11.8%, respectively. This compared
to the OCLI stockholders' pro forma ownership percentage of 7.3% of the combined
company on a fully diluted basis.
Analysis of Selected Public Companies. Using published Wall Street
estimates, Hambrecht & Quist compared, among other things, selected trading,
operating and valuation statistics for OCLI to corresponding measures for four
publicly traded optical components companies. The companies that Hambrecht &
Quist reviewed in connection with this analysis were Corning, E-Tek Dynamics,
SDL Inc. and Ortel Corporation.
Hambrecht & Quist derived trading multiples of trailing twelve months
revenues, projected calendar 1999 and 2000 revenues and projected calendar 1999
and 2000 earnings per share for these public companies. The results of such
analysis are indicated in the table below:
OPTICAL COMPONENTS COMPANIES
<TABLE>
<CAPTION>
OCLI PROPOSED
AVERAGE HIGH LOW TRANSACTION
------- ------ ----- -------------
<S> <C> <C> <C> <C>
Last twelve months revenues...................... 21.9x 60.4x 5.6x 9.0x
Calendar year 1999 estimated revenues............ 16.8x 41.2x 5.0x 7.9x
Calendar year 1999 estimated earnings............ 128.5x 186.3x 41.3x 109.2x
Calendar year 2000 estimated revenues............ 11.6x 27.2x 4.1x 6.4x
Calendar year 2000 estimated earnings............ 80.4x 125.4x 33.1x 83.2x
</TABLE>
Applying the average projected calendar 1999 and 2000 earnings multiples
indicated by such analysis, to projected calendar 1999 and 2000 earnings of
OCLI, implied an equity value per share of OCLI of $209.45 and $172.06,
respectively. Applying the average calendar year 1999 and 2000 revenue multiples
indicated by such analysis, to the projected calendar 1999 and 2000 revenues of
OCLI, implied an equity value per share of $377.56 and $325.06, respectively.
These values compared to an equity value per share of OCLI in the proposed
transaction of $177.65 as of November 3, 1999. Hambrecht & Quist noted that none
of the selected companies were identical to OCLI and that any analysis of the
selected companies necessarily involved complex considerations and judgments
concerning differences in financial and operating characteristics and other
factors that would necessarily affect the relative trading values. In addition,
Hambrecht & Quist noted that a significant portion of OCLI's revenues and
earnings comes from slower growth non-optics products.
Analysis of Selected Transactions. Hambrecht & Quist compared the proposed
transaction with selected merger and acquisition transactions. Hambrecht & Quist
derived the multiples of the trailing twelve months' revenues for 17
transactions since 1997 involving companies in the optical components markets
for which relevant information was available, as well as 10 communications
equipment company transactions since 1998. Hambrecht & Quist also determined the
one trading-day and twenty trading-day premiums for 25 public-to-public
technology merger and acquisition transactions
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announced since January 1, 1999 with a value over $1 billion. The results of
this analysis are indicated in the table below:
<TABLE>
<CAPTION>
COMMUNICATIONS OPTICAL TECHNOLOGY DEALS OCLI
EQUIPMENT COMPONENTS OVER $1 BILLION PROPOSED
(AVERAGE) (AVERAGE) (AVERAGE) TRANSACTION
-------------- ---------- ---------------- -----------
<S> <C> <C> <C> <C>
Last twelve months revenues...... 4.5x 8.1x Not meaningful 9.0x
Last twelve months net income.... 59.1x 102.2x Not meaningful 138.9x
One-day trading premium.......... 50.8% 43.5% 48.3% 49.6%
Twenty-day trading premium....... 53.9% 90.0% 65.6% 88.7%
</TABLE>
Applying the average trailing twelve months' revenue multiple of the selected
communications equipment and optical components transactions indicated by this
analysis, to the trailing twelve months' revenues of OCLI, implied equity values
per share of OCLI of $88.86 and $159.96. Hambrecht & Quist applied the average
one and twenty trading day premiums for the selected communications equipment
transactions ($179.83 and $146.40), Optical Components transactions ($171.12 and
$180.74), and technology transactions over $1 billion for the year 1999 to date
($176.85 and $157.53) indicated by this analysis, to OCLI's historical share
prices implying a range of equity value per share based on precedent
transactions. These values compared to an implied equity value per share of OCLI
in the transaction of $177.65 as of November 3, 1999.
No company or transaction used in the above analyses is identical to OCLI
and no transaction used in the above analyses is identical to the proposed
transaction. Accordingly, an analysis of the results of the foregoing is not
mathematical; rather it involves complex considerations and judgments concerning
differences in financial and operating characteristics of the companies and
other factors that could affect the public trading values of the companies or
company to which they are compared.
Exchange Ratio Analysis. Hambrecht & Quist observed the natural exchange
ratio implied by the trading prices of JDS Uniphase and OCLI for various periods
over the last twelve months and compared these ratios to the proposed exchange
ratio of 0.928 JDS Uniphase shares for each OCLI share, prior to giving effect
to the stock dividend of one share of JDS Uniphase common stock for each
outstanding share of JDS Uniphase common stock effected on December 22, 1999.
Hambrecht & Quist also compared the premium implied by the proposed exchange
ratio to the natural exchange ratios over different periods. Based on trailing
average stock prices for OCLI and JDS Uniphase, the natural exchange ratios and
implied premiums were:
<TABLE>
<CAPTION>
PERIOD NATURAL EXCHANGE RATIO IMPLIED PREMIUM
------ ---------------------- ---------------
<S> <C> <C>
Closing price on 11/3/99............................. 0.623 49.0%
1-week average....................................... 0.661 40.4%
1-month average...................................... 0.714 30.0%
3-month average...................................... 0.722 28.5%
6-month average...................................... 0.810 14.6%
Last twelve months average........................... 0.801 15.9%
</TABLE>
Fee Arrangements
Hambrecht & Quist, as part of its investment banking services, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, strategic transactions, corporate restructurings,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
Hambrecht & Quist has acted as a financial advisor to the board of directors of
OCLI in connection with the proposed merger.
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In the past, Hambrecht & Quist has provided investment banking and other
financial advisory services to OCLI and has received fees for rendering these
services. Hambrecht & Quist was the lead manager in OCLI's follow-on offering of
common stock completed in May 1999. In the ordinary course of business,
Hambrecht & Quist acts as a market maker and broker in the publicly traded
securities of JDS Uniphase and OCLI and receives customary compensation in
connection therewith, and also provides research coverage for JDS Uniphase and
OCLI. In the ordinary course of business, Hambrecht & Quist actively trades in
the equity and derivative securities of JDS Uniphase and OCLI for its own
account and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities. Hambrecht & Quist may in the
future provide additional investment banking or other financial advisory
services to JDS Uniphase and OCLI.
Under an engagement letter, OCLI has agreed to pay Hambrecht & Quist a fee
of $500,000 in connection with the delivery of the fairness opinion rendered on
November 3, 1999. Upon consummation of the proposed transaction, OCLI has agreed
to pay Hambrecht & Quist a fee of $8,000,000, less any fees previously paid,
including the fee paid in connection with the delivery of the fairness opinion.
OCLI has also agreed to reimburse Hambrecht & Quist for its reasonable out-of-
pocket expenses and to indemnify Hambrecht & Quist against some liabilities,
including liabilities under the federal securities laws or relating to or
arising out of Hambrecht & Quist's engagement as financial advisor.
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER
When considering the recommendation of OCLI's board of directors, you
should be aware that OCLI's directors and officers have interests in the merger
that are different from, or are in addition to, your interests. In particular,
some of the directors and officers of OCLI participate in arrangements and have
continuing indemnification against liabilities that provide them with interests
in the merger that are different from, or are in addition to, your interests.
Effective October 30, 1999, OCLI entered into change-in-control agreements
with some of its officers and other select employees. Similar agreements have
been in effect since November 1987. The agreements have a term through November
20, 2001. The agreements covering some of OCLI's officers provide that if OCLI
terminates the officer within two years of a change in control, including this
merger, the officer will receive an amount equal to 24 months' salary at the
highest rate paid in the previous twelve months, unless OCLI has terminated the
officer for cause or the officer left voluntarily. These officers will also
receive payment of two years' salary if there is a "constructive dismissal" by
OCLI, as defined in the agreements, within the same two-year period. The
agreements provide that no amount shall be paid which would be classified as an
"excess parachute payment" within the meaning of Section 280G(b)(1) of the
Internal Revenue Code. The agreements also provide that all unvested options
held by these officers will immediately vest upon a change of control, including
this merger. As a result, on the completion of the merger, up to 688,569 shares
of OCLI common stock underlying options held by these officers may vest. In
connection with the merger, noncompetition provisions were included in these
agreements.
Under the merger agreement, JDS Uniphase has agreed to honor OCLI's
obligations under indemnification agreements between OCLI and its directors and
officers in effect before the completion of the merger and any indemnification
provisions of OCLI's certificate of incorporation and bylaws. JDS Uniphase has
also agreed to provide for indemnification provisions in the certificate of
incorporation and bylaws of the surviving corporation of the merger that are at
least as favorable as OCLI's provisions.
In addition, JDS Uniphase has agreed to maintain OCLI's directors' and
officers' liability insurance for three years from the completion of the merger,
provided that JDS Uniphase is not
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required to pay more than 125% of the amount of the premium OCLI paid for
insurance at the completion of the merger.
As a result of these interests, these directors and officers of OCLI are
more likely to vote to approve the merger agreement than if they did not hold
these interests. OCLI's stockholders should consider whether these interests may
have influenced these directors and officers to support or recommend the merger.
COMPLETION AND EFFECTIVENESS OF THE MERGER
JDS Uniphase and OCLI will complete the merger when all of the conditions
to completion of the merger are satisfied or waived, including adoption of the
merger agreement by the stockholders of OCLI. The merger will become effective
on the filing of a certificate of merger with the State of Delaware.
JDS Uniphase and OCLI are working towards completing the merger as quickly
as possible and hope to complete it in the first calendar quarter of 2000.
STRUCTURE OF THE MERGER AND CONVERSION OF OCLI COMMON STOCK
In accordance with the merger agreement and Delaware law, Vintage
Acquisition will merge with and into OCLI. As a result of the merger, the
separate corporate existence of Vintage Acquisition will cease and OCLI will
survive the merger as a wholly owned subsidiary of JDS Uniphase.
Upon completion of the merger, each outstanding share of OCLI common stock,
other than shares held by JDS Uniphase and its subsidiaries, will be converted
into the right to receive 1.856 fully paid and nonassessable shares of JDS
Uniphase common stock. The number of shares of JDS Uniphase common stock
issuable in the merger will be proportionately adjusted for any stock split,
stock dividend or similar event with respect to OCLI common stock or JDS
Uniphase common stock that takes place between the date of the merger agreement
and the completion of the merger.
No certificate or scrip representing fractional shares of JDS Uniphase
common stock will be issued in connection with the merger. Instead of a fraction
of a share you will receive cash, without interest, equal to the product of the
fraction and the average closing price of one share of JDS Uniphase common stock
on the last trading day before the effective time of the merger.
EXCHANGE OF OCLI STOCK CERTIFICATES FOR JDS UNIPHASE STOCK CERTIFICATES
When the merger is completed, the exchange agent will mail you a letter of
transmittal and instructions for surrendering your OCLI stock certificates in
exchange for JDS Uniphase stock certificates. When you deliver your OCLI stock
certificates to the exchange agent along with a properly executed letter of
transmittal and any other required documents, your OCLI stock certificates will
be canceled and you will receive JDS Uniphase stock certificates representing
the number of full shares of JDS Uniphase common stock to which you are entitled
under the merger agreement. You will receive payment in cash, without interest,
instead of any fractional shares of JDS Uniphase common stock which you would
otherwise have received.
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YOU SHOULD NOT SUBMIT YOUR OCLI STOCK CERTIFICATES FOR EXCHANGE UNLESS AND
UNTIL YOU RECEIVE THE TRANSMITTAL INSTRUCTIONS AND A FORM OF LETTER OF
TRANSMITTAL FROM THE EXCHANGE AGENT.
You are not entitled to receive any dividends or other distributions on JDS
Uniphase common stock until the merger is completed and you have surrendered
your OCLI stock certificates in exchange for JDS Uniphase stock certificates.
If there is any dividend or other distribution on JDS Uniphase common stock
with a record date after the merger and a payment date prior to the date you
surrender your OCLI stock certificates in exchange for JDS Uniphase stock
certificates, promptly after your shares of JDS Uniphase common stock are issued
you will receive the distribution or dividend on those shares. If there is any
dividend or other distribution on JDS Uniphase common stock with a record date
after the merger and a payment date after the date you surrender your OCLI stock
certificates in exchange for JDS Uniphase stock certificates, you will receive
the distribution or dividend on your shares promptly after the payment date.
JDS Uniphase will only issue a JDS Uniphase stock certificate or a check in
lieu of a fractional share in a different name than the name in which a
surrendered OCLI stock certificate is registered if you present the exchange
agent with all documents required to show and effect the unrecorded transfer of
ownership and show that you paid any applicable stock transfer taxes.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS OF THE MERGER
In the opinion of Morrison & Foerster LLP and Collette & Erickson LLP, the
following are the material United States federal income tax considerations of
the merger assuming that the merger is effected as described in this proxy
statement-prospectus. These opinions and the following discussion are based on
and subject to the Internal Revenue Code of 1986, as amended, the regulations
promulgated under the Internal Revenue Code, existing administrative
interpretations and court decisions, all of which are subject to change,
possibly with retroactive effect, and assumptions, limitations, representations
and covenants, including those contained in certificates of officers of JDS
Uniphase and OCLI expected to be executed as of the completion of the merger.
This discussion does not address all aspects of United States federal income
taxation that may be important to you in light of your particular circumstances
or if you are subject to special rules, such as rules relating to:
- stockholders who are not citizens or residents of the United States;
- stockholders subject to the alternative minimum tax provisions of the tax
code;
- financial institutions;
- tax-exempt organizations;
- insurance companies;
- dealers in securities;
- stockholders who acquired their shares of OCLI common stock pursuant to
the exercise of options or similar derivative securities or otherwise as
compensation; and
- stockholders who hold their shares of OCLI common stock as part of a
hedge, straddle or other risk reduction, constructive sale or conversion
transaction.
This discussion assumes you hold your shares of OCLI common stock as capital
assets within the meaning of Section 1221 of the Internal Revenue Code.
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JDS Uniphase's and OCLI's obligations to complete the merger are
conditioned on, among other things, their receipt of opinions dated as of the
completion of the merger from Collette & Erickson LLP and Morrison & Foerster
LLP, in each case stating that the merger will constitute a tax-free
reorganization under Section 368(a) of the Internal Revenue Code. The opinions
of counsel to be provided at the completion of the merger will assume the
absence of changes in existing facts and will rely on assumptions,
representations and covenants including those contained in certificates executed
by officers of JDS Uniphase, OCLI and Vintage Acquisition and dated as of the
completion of the merger. The opinions neither bind the IRS nor preclude the IRS
from adopting a contrary position, and it is possible that the IRS may
successfully assert a contrary position in litigation or other proceedings.
Neither JDS Uniphase nor OCLI intends to obtain a ruling from the IRS with
respect to the tax consequences of the merger.
Tax Implications to OCLI Stockholders. Except as discussed below, you will
not recognize gain or loss for United States federal income tax purposes when
you exchange your OCLI common stock for JDS Uniphase common stock pursuant to
the merger. The aggregate tax basis of the JDS Uniphase common stock you receive
as a result of the merger will be the same as your aggregate tax basis in the
OCLI common stock you surrender in exchange for the JDS Uniphase common stock,
reduced by the tax basis of any shares of OCLI common stock for which you
receive cash instead of fractional shares of JDS Uniphase common stock. The
holding period of the JDS Uniphase common stock you receive as a result of the
exchange will include the period during which you held the OCLI common stock you
exchange in the merger.
You will recognize gain or loss for United States federal income tax
purposes with respect to the cash you receive instead of a fractional share
interest in JDS Uniphase common stock. Your gain or loss will be measured by the
difference between the amount of cash you receive and the portion of the tax
basis of your shares of OCLI common stock allocable to the shares of OCLI common
stock exchanged for the fractional share interest. This gain or loss will be
capital gain or loss and will be a long-term capital gain or loss if you have
held your shares of OCLI common stock for more than one year at the time the
merger is completed.
THE FOREGOING DISCUSSION IS NOT INTENDED TO BE A COMPLETE ANALYSIS OR
DESCRIPTION OF ALL POTENTIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OR
ANY OTHER CONSEQUENCES OF THE MERGER. IN ADDITION, THE DISCUSSION DOES NOT
ADDRESS TAX CONSEQUENCES WHICH MAY VARY WITH, OR ARE CONTINGENT ON, YOUR
INDIVIDUAL CIRCUMSTANCES. MOREOVER, THE DISCUSSION DOES NOT ADDRESS ANY
NON-INCOME TAX OR ANY FOREIGN, STATE OR LOCAL TAX CONSEQUENCES OF THE MERGER.
ACCORDINGLY, YOU ARE STRONGLY URGED TO CONSULT WITH YOUR TAX ADVISOR TO
DETERMINE THE PARTICULAR UNITED STATES FEDERAL, STATE, LOCAL OR FOREIGN INCOME
OR OTHER TAX CONSEQUENCES TO YOU OF THE MERGER.
ACCOUNTING TREATMENT OF THE MERGER
JDS Uniphase intends to account for the merger with OCLI as the accounting
acquiror in a purchase business combination for financial reporting and
accounting purposes, under generally accepted accounting principles. After the
merger, the results of operations of OCLI will be included in the consolidated
financial statement of JDS Uniphase.
REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE MERGER
The merger is subject to the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, which prevents some transactions from being
completed until required information and materials are furnished to the
Antitrust Division of the Department of Justice and the Federal Trade Commission
and related waiting periods end or expire. JDS Uniphase and OCLI have made the
required filings with the Department of Justice or the Federal Trade Commission
and the applicable
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waiting periods have expired. JDS Uniphase and OCLI intend to comply with all
requests for information from any government entity. The requirements of
Hart-Scott-Rodino will be satisfied if the merger is completed within one year
from the termination of the waiting period.
However, the Antitrust Division of the Department of Justice or the Federal
Trade Commission may challenge the merger on antitrust grounds either before or
after expiration of the waiting period. Accordingly, at any time before or after
the completion of the merger, either the Antitrust Division of the Department of
Justice or the Federal Trade Commission could take action under the antitrust
laws as it deems necessary or desirable in the public interest, or another
person could take action under the antitrust laws, including seeking to enjoin
the merger. Additionally, at any time before or after the completion of the
merger, notwithstanding that the applicable waiting period expired or ended, any
state could take action under the antitrust laws as it deems necessary or
desirable in the public interest. JDS Uniphase and OCLI cannot be sure that a
challenge to the merger will not be made or that, if a challenge is made, JDS
Uniphase and OCLI will prevail.
RESTRICTIONS ON SALES OF SHARES BY AFFILIATES OF OCLI AND JDS UNIPHASE
The shares of JDS Uniphase common stock to be issued in connection with the
merger will be registered under the Securities Act of 1933 and will be freely
transferable under the Securities Act, except for shares of JDS Uniphase common
stock issued to any person who is deemed to be an affiliate of either JDS
Uniphase or OCLI at the time of the special meeting. Persons who may be deemed
to be affiliates include individuals or entities that control, are controlled
by, or are under common control of either JDS Uniphase or OCLI and may include
some of their officers and directors, as well as their principal stockholders.
Some affiliates of OCLI entered into affiliate agreements in connection with the
merger. See "Affiliate Agreements" on page 68. Affiliates may not sell their
shares of JDS Uniphase common stock acquired in connection with the merger
except under:
- an effective registration statement under the Securities Act covering the
resale of those shares;
- an exemption under paragraph (d) of Rule 145 under the Securities Act; or
- any other applicable exemption under the Securities Act.
JDS Uniphase's registration statement on Form S-4, of which this proxy
statement-prospectus forms a part, does not cover the resale of shares of JDS
Uniphase common stock to be received by affiliates in the merger.
LISTING ON THE NASDAQ NATIONAL MARKET OF JDS UNIPHASE COMMON STOCK TO BE ISSUED
IN THE MERGER
Under the merger agreement, JDS Uniphase shall cause the shares of JDS
Uniphase common stock to be issued in the merger to be approved for listing on
the Nasdaq National Market, subject to official notice of issuance.
NO APPRAISAL RIGHTS
Under Delaware corporate law, holders of OCLI common stock are not entitled
to appraisal rights in connection with the merger because, on the record date,
OCLI common stock was designated and quoted for trading on the Nasdaq National
Market and will be converted into shares of JDS Uniphase common stock, which at
the effective time of the merger will be listed on the Nasdaq National Market.
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DELISTING AND DEREGISTRATION OF OCLI COMMON STOCK AFTER THE MERGER
If the merger is completed, OCLI common stock will be delisted from the
Nasdaq National Market and will be deregistered under the Securities Exchange
Act of 1934.
DIVIDEND POLICY
JDS Uniphase has never paid a cash dividend on its common stock since its
inception and does not anticipate paying any cash dividends in the foreseeable
future. Since 1991, OCLI has paid a semiannual cash dividend of $0.06 per share
on its common stock.
THE MERGER AGREEMENT
Representations and Warranties. JDS Uniphase and OCLI each made a number of
customary representations and warranties in the merger agreement regarding
aspects of their respective businesses, financial condition, structure and other
facts pertinent to the merger.
The representations given by OCLI cover the following topics, among others,
as they relate to OCLI and its subsidiaries:
- OCLI's corporate organization and its qualification to do business;
- OCLI's certificate of incorporation and bylaws;
- OCLI's capitalization;
- OCLI's authorization of the merger agreement and stock option agreement;
- OCLI's filings and reports with the SEC;
- OCLI's financial statements;
- the absence of material changes or events in OCLI's business since July
31, 1999;
- OCLI's liabilities;
- OCLI's material contracts;
- litigation affecting OCLI's ability to complete the merger;
- OCLI's employee benefit plans and employment agreements;
- OCLI's labor matters;
- information supplied by OCLI in this proxy statement-prospectus and the
related registration statement filed by JDS Uniphase;
- OCLI's taxes and tax returns;
- environmental laws that apply to OCLI;
- OCLI's brokers;
- OCLI's full disclosure;
- OCLI's financial advisors;
- intellectual property owned or used by OCLI;
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- OCLI's change in control payments;
- antitakeover statutes;
- OCLI's title to the properties it owns and leases;
- OCLI's Year 2000 matters;
- OCLI's shareholder rights plan; and
- OCLI's accounts receivable.
The representations given by JDS Uniphase cover the following topics, among
others, as they relate to JDS Uniphase and its subsidiaries:
- JDS Uniphase's corporate organization and its qualification to do
business;
- JDS Uniphase's certificate of incorporation and bylaws;
- JDS Uniphase's and Vintage Acquisition's capitalization;
- JDS Uniphase's authorization of the merger agreement and stock option
agreement;
- JDS Uniphase's filings and reports with the SEC;
- JDS Uniphase's financial statements;
- the absence of material changes or events in JDS Uniphase's business
since June 30, 1999;
- JDS Uniphase's liabilities;
- litigation affecting JDS Uniphase's ability to complete the merger;
- JDS Uniphase's labor matters;
- information supplied by JDS Uniphase in this proxy statement-prospectus
and the related registration statement filed by JDS Uniphase;
- JDS Uniphase's taxes and tax returns;
- environmental laws that apply to JDS Uniphase;
- JDS Uniphase's brokers;
- JDS Uniphase's full disclosure;
- JDS Uniphase's financial advisors;
- intellectual property owned or used by JDS Uniphase;
- JDS Uniphase's title to properties it owns and leases; and
- JDS Uniphase's year 2000 matters.
The representations and warranties in the merger agreement are complicated
and not easily summarized. You are urged to carefully read the articles of the
merger agreement entitled "Representations and Warranties of Company" and
"Representations and Warranties of Parent and Merger Sub."
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OCLI's Conduct of Business before Completion of the Merger. OCLI agreed
that until the earlier of the completion of the merger or the termination of the
merger agreement or unless JDS Uniphase consents in writing, OCLI and its
subsidiaries will operate its businesses in the usual, regular and ordinary
course and use commercially reasonable efforts to:
- preserve intact its assets and current business organizations;
- keep available the services of its current officers, employees and
consultants; and
- maintain its material contracts and preserving its relationships with:
- customers;
- suppliers; and
- others having business dealings with OCLI and its subsidiaries.
OCLI also agreed that until the earlier of the completion of the merger or
the termination of the merger agreement or unless JDS Uniphase consents in
writing, OCLI and its subsidiaries would conduct their business in compliance
with specific restrictions relating to, among other things, the following:
- modification of OCLI's certificate of incorporation and bylaws;
- the issuance and redemption of securities, except under existing employee
stock option and purchase plans;
- the disposition of OCLI's assets;
- any modification in the vesting period of options granted under OCLI's
stock option plans;
- the issuance of dividends or other distributions, except OCLI's regularly
scheduled semi-annual dividend of $0.06 per share in December 1999;
- the liquidation or restructuring of OCLI, or a merger involving OCLI;
- an increase in the compensation payable to OCLI's officers or employees,
except regular annual salary adjustments made in the ordinary course of
business;
- changes in accounting policies and procedures;
- the incurrence of indebtedness;
- the acquisition of assets or other entities;
- capital expenditures;
- the entrance into contracts, or their termination or modification;
- employees and employee benefits;
- liens;
- settlement of litigation and claims;
- tax elections and liabilities; and
- the transfer or license of intellectual property.
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The agreements related to the conduct of OCLI's business in the merger
agreement are complicated and not easily summarized. You are urged to carefully
read the article of the merger agreement entitled "Conduct of Business Pending
the Merger."
No Other Negotiations Involving OCLI. Until the merger is completed or the
merger agreement is terminated, OCLI has agreed, subject to limited exceptions,
that neither it nor any of its subsidiaries will, directly or indirectly:
- solicit, initiate, encourage or induce the making, submission or
announcement of any "alternative transaction," as defined below;
- participate in any discussions or negotiations regarding any alternative
transaction;
- furnish to any person any nonpublic information with respect to any
alternative transaction;
- take any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to any
alternative transaction;
- engage in discussions with any person with respect to any alternative
transaction, except as to the existence of the alternative transaction
provisions in the merger agreement;
- approve, endorse or recommend any alternative transaction; and
- enter into any letter of intent or similar document or enter into any
contract, agreement or commitment contemplating or otherwise relating to
any alternative transaction, as defined below.
If any officer or director of OCLI or any of its subsidiaries or any
investment banker, attorney or other advisor or representative of OCLI or any of
its subsidiaries violates any of the restrictions in the immediately preceding
paragraph, OCLI will be deemed to have breached the relevant restriction.
Between the date of the merger agreement and the earlier of the completion
of the merger or the termination of the merger agreement, OCLI may furnish
information regarding OCLI to, or enter into discussions with, any person or
group in response to an unsolicited bona fide proposal by the person or group,
and not withdrawn, relating to an alternative transaction, if, and only to the
extent that:
- OCLI's board of directors concludes in good faith, after consultation
with its outside legal counsel, that the action is required for OCLI's
board of directors to comply with its fiduciary obligations to OCLI's
stockholders under applicable law;
- prior to furnishing any such information to, or entering into discussions
or negotiations with, the person or group, OCLI gives JDS Uniphase
written notice of the identity of such person or group and of OCLI's
intention to furnish information to, or enter into discussions or
negotiations with, such person or group; and
- OCLI complies with Rule 14e-2 of the Securities Exchange Act of 1934 with
regard to an alternative transaction.
OCLI has agreed to promptly inform JDS Uniphase of any of the following:
- a request for nonpublic information that OCLI reasonably believes would
lead to an alternative transaction;
- any alternative transaction or any inquiry that OCLI believes or
reasonably should believe would lead to any alternative transaction;
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- the material terms and conditions of such request, alternative
transaction or inquiry; and
- the identity of the person or group making any such request, alternative
transaction or inquiry.
OCLI further agreed to keep JDS Uniphase informed in all material respects of
the status and details, including material amendments or proposed amendments of
any such request, alternative transaction or inquiry.
An "alternative transaction" is any inquiry, proposal or offer, other than
an inquiry, proposal or offer by JDS Uniphase, except an acquisition of
securities by a broker-dealer in connection with a public offering, relating to:
- any acquisition or purchase from OCLI, or any tender offer or exchange
offer, by any person or group of more than a 15% interest in the total
outstanding voting securities of OCLI;
- any merger, consolidation, business combination or similar transaction
involving OCLI in which any third party acquires more than 15% of the
total outstanding voting securities of OCLI or any entity resulting from
such transaction;
- any transaction by which a third party acquires control of OCLI's assets;
- any liquidation or dissolution of OCLI; or
- any repurchase by OCLI of at least 15% of its total outstanding voting
securities.
OCLI's Employee Benefit Plans. Individuals who are employed by OCLI at the
time the merger is completed will continue to be employees of OCLI as the
surviving corporation in the merger. JDS Uniphase has agreed to continue OCLI's
employee benefit plans through October 31, 2000.
Treatment of OCLI Stock Options. Upon completion of the merger, each
outstanding option to purchase OCLI common stock will be converted, in
accordance with its terms, into an option to purchase the number of shares of
JDS Uniphase common stock equal to 1.856 times the number of shares of OCLI
common stock which could have been obtained before the merger upon the exercise
of each option, rounded down to the nearest whole share. The exercise price will
equal the exercise price per share of OCLI common stock subject to the option
before conversion divided by 1.856, rounded up to the nearest whole cent. All
unvested options held by the executive officers will immediately vest on the
completion of the merger.
The other terms for each option and for the OCLI option plans referred to
above under which the options were issued will continue to apply, including any
provisions providing for acceleration. In addition, executive officers of OCLI
have entered into change-in-control agreements which provide for the
acceleration of unvested options on the completion of the merger. Upon
completion of the merger, each outstanding award, including restricted stock,
stock equivalents and stock units, under any employee incentive or benefit
plans, programs or arrangements maintained by OCLI that provide for grants of
equity-based awards, will be amended or converted into a similar instrument of
JDS Uniphase, with adjustments to preserve their value. The other terms of each
OCLI award, and the plans or agreements under which they were issued, will
continue to apply, including any provisions providing for acceleration.
JDS Uniphase will file a registration statement on Form S-8 for the shares
of JDS Uniphase common stock issuable with respect to options under the OCLI
stock option plans and will use its commercially reasonable efforts to maintain
the effectiveness of that registration statement for as long as any of the
options remain outstanding, to the same extent that JDS Uniphase maintains the
effectiveness of its existing Forms S-8.
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OCLI 1999 Director Stock Plan. Under the merger agreement, all options
under OCLI's Director Stock Plan will be converted into the right to receive JDS
Uniphase common stock on the same basis as the other OCLI stock options are
being converted.
Indemnification. JDS Uniphase has agreed to honor OCLI's obligations under
indemnification agreements between OCLI and its directors and officers in effect
before the completion of the merger and any indemnification provisions of OCLI's
certificate of incorporation and bylaws. JDS Uniphase has also agreed to provide
for indemnification provisions in the certificate of incorporation and bylaws of
the surviving corporation of the merger that are at least as favorable as OCLI's
provisions.
In addition, JDS Uniphase has agreed to maintain OCLI's directors' and
officers' liability insurance for three years from the completion of the merger,
provided that JDS Uniphase is not required to pay more than 125% of the premium
for OCLI's insurance.
CONDITIONS TO COMPLETION OF THE MERGER
The obligations of JDS Uniphase and OCLI to complete the merger and the
other transactions contemplated by the merger agreement are subject to the
satisfaction or waiver of each of the following conditions before completion of
the merger:
- the merger agreement must be approved and adopted and the merger must be
approved by the holders of a majority of outstanding shares of OCLI
common stock entitled to vote;
- JDS Uniphase's registration statement must be effective, no stop order
suspending its effectiveness will be in effect and no proceedings for
suspension of its effectiveness will be pending before or threatened by
the SEC;
- no law, regulation, injunction or other order may be enacted or issued
which has the effect of making the merger illegal or otherwise
prohibiting completion of the merger substantially on the terms
contemplated by the merger agreement; and
- JDS Uniphase and OCLI must each receive from their respective tax
counsel, an opinion to the effect that the merger will constitute a
tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code and such opinions must not have been withdrawn.
OCLI's obligations to complete the merger and the other transactions
contemplated by the merger agreement are subject to the satisfaction or waiver
of each of the following additional conditions before completion of the merger:
- JDS Uniphase's representations and warranties must be true and correct as
of the date the merger is to be completed as if made at and as of such
time except for the following:
- to the extent JDS Uniphase's representations and warranties address
matters only as of a particular date, they must be true and correct as
of that date;
- if any of these representations and warranties are not true and correct
but the effect in each case, or in the aggregate, of the inaccuracies of
these representations and breaches of these warranties does not have a
material adverse effect on JDS Uniphase, then this condition will be
deemed satisfied; and
- changes contemplated by the merger agreement may occur;
- JDS Uniphase must perform or comply in all material respects with all of
its agreements and covenants required by the merger agreement to be
performed or complied with by JDS Uniphase at or before completion of the
merger;
- JDS Uniphase has received all consents necessary to complete the merger;
and
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- a material adverse change relating to JDS Uniphase has not occurred.
JDS Uniphase's obligations to complete the merger and the other
transactions contemplated by the merger agreement are subject to the
satisfaction or waiver of each of the following additional conditions before
completion of the merger:
- OCLI's representations and warranties must be true and correct as of the
date the merger is to be completed as if made at and as of such time
except for the following:
- to the extent OCLI's representations and warranties address matters only
as of a particular date, they must be true and correct as of that date;
- if any of these representations and warranties are not true and correct
but the effect in each case, or in the aggregate, of the inaccuracies of
these representations and breaches of these warranties does not have a
material adverse effect on OCLI, then this condition will be deemed
satisfied; and
- changes contemplated by the merger agreement may occur;
- OCLI must perform or comply in all material respects with all of its
agreements and covenants required by the merger agreement to be performed
or complied with by OCLI at or before completion of the merger;
- the merger agreement must be approved and adopted and the merger must be
approved by the holders of a majority of outstanding shares of OCLI
common stock entitled to vote;
- OCLI has received all consents necessary to complete the merger;
- a material adverse change relating to OCLI has not occurred;
- each of OCLI's affiliates have entered into an affiliate agreement and
each of the agreements are in full force and effect as of the date of the
merger; and
- OCLI's executive officers will remain employed with OCLI and remain bound
by employment agreements regarding protection of trade secrets,
assignment of inventions and noncompetition with OCLI.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to completion of
the merger, whether before or after the approval and adoption of the merger
agreement and approval of the merger by the OCLI stockholders:
- by mutual written consent of JDS Uniphase and OCLI;
- by JDS Uniphase or OCLI, if the merger is not completed before June 30,
2000, except that this right to terminate the merger agreement is not
available to any party whose failure to fulfill any obligation under the
merger agreement has been a cause of or resulted in the failure of the
merger to occur on or before June 30, 2000;
- by JDS Uniphase or OCLI, if there is any order, decree or ruling of a
court or governmental authority having the effect of permanently
restraining, enjoining or prohibiting the completion of the merger which
is final and non-appealable, except that this right to terminate the
merger agreement is not available to any party who has failed to comply
with its respective obligation to obtain any consents, approvals and
other appropriate authorizations required by the merger agreement;
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- by JDS Uniphase or OCLI, if the requisite vote of the OCLI stockholders
necessary for the approval and adoption of the merger agreement fails to
be obtained at the OCLI special meeting or at any adjournment of that
meeting;
- by OCLI, upon a material breach of any representation, warranty, covenant
or agreement on the part of JDS Uniphase in the merger agreement, or if
any of JDS Uniphase's representations or warranties are or become untrue
so that the corresponding condition to completion of the merger would not
be met;
- by JDS Uniphase, upon a material breach of any representation, warranty,
covenant or agreement on the part of OCLI set forth in the merger
agreement, or if any of OCLI's representations or warranties are or
become untrue so that the corresponding condition to completion of the
merger would not be met; or
- by JDS Uniphase, if any of the following shall have occurred, in which
case OCLI will also pay to JDS Uniphase a termination fee of $85 million
within one business day of the termination of the merger agreement:
(a) OCLI's board of directors withdraws or amends or modifies in a manner
adverse to JDS Uniphase its recommendation in favor of the adoption
and approval of the merger agreement;
(b) OCLI's board of directors recommends to OCLI's stockholders an
"alternative transaction" as described above; or
(c) a tender offer or exchange offer for 15% or more of the outstanding
shares of OCLI common stock is commenced and OCLI's board of directors
recommends to OCLI's stockholders to tender or exchange their shares.
We refer to each of (a), (b) and (c) above as a "termination fee event" in
this proxy statement-prospectus.
PAYMENT OF TERMINATION FEE
If the merger agreement is terminated by JDS Uniphase because of the
occurrence of a termination fee event, OCLI will pay JDS Uniphase a termination
fee of $85 million within one business day upon demand by JDS Uniphase.
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
Subject to applicable law, JDS Uniphase and OCLI may amend the merger
agreement before completion of the merger by mutual written consent.
Either JDS Uniphase or OCLI may extend the other's time for the performance
of any of the obligations or other acts under the merger agreement, waive any
inaccuracies in the other's representations and warranties and waive compliance
by the other with any of the agreements or conditions contained in the merger
agreement.
THE STOCK OPTION AGREEMENT
The stock option agreement grants JDS Uniphase the option to acquire up to
2,838,060 shares of OCLI common stock, which represent 19.9% of the issued and
outstanding OCLI common stock as of October 31, 1999. The exercise price of the
option is $177.65 per share of OCLI common stock,
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payable in cash. The number of shares issuable upon exercise of the option and
the exercise price of the option are subject to adjustment to prevent dilution.
JDS Uniphase required OCLI to enter into the stock option agreement as a
condition to entering into the merger agreement.
The option is intended to increase the likelihood that the merger will be
completed. Some of the aspects of the stock option agreement may have the effect
of discouraging persons who might be interested in acquiring all or a
significant interest in OCLI or its assets before completion of the merger.
The full text of the stock option agreement is attached as Annex B to this
proxy statement-prospectus, and you are urged to read the entire stock option
agreement in its entirety.
Exercise Events. JDS may exercise the option, in whole or part, from time
to time, upon any inquiry, proposal or offer relating to an alternative
transaction where the alternative transaction is made publicly known or is
publicly announced prior to the expiration of the option and before termination
of the merger agreement or the time of the OCLI stockholder meeting.
Termination. The option will terminate and cease to be exercisable upon the
earliest to occur of any of the following:
- completion of the merger;
- termination of the merger agreement by OCLI, other than upon or during an
exercise event, due to:
- mutual written consent of JDS Uniphase and OCLI;
- a failure of the merger to be completed before June 30, 2000 where the
failure has not resulted from OCLI's failure to fulfill any obligation
under the merger agreement;
- the issuance of a final and unappealable order, decree or ruling of a
court or governmental authority having the effect of permanently
restraining, enjoining or prohibiting the completion of the merger,
except where OCLI has failed to comply with its respective obligation to
obtain any consents, approvals and other appropriate authorizations
required under the merger agreement;
- a failure to obtain the requisite vote of the OCLI stockholders
necessary for the approval and adoption of the merger agreement at the
OCLI special meeting or at any adjournment of that meeting;
- a material breach of any representation, warranty, covenant or agreement
on the part of JDS Uniphase in the merger agreement, or if any of JDS
Uniphase's representations or warranties are or become untrue so that
the corresponding condition to completion of the merger would not be
met;
- 12 months after the termination of the merger agreement by OCLI where
the termination occurs upon or during an exercise event; or
- if the option becomes exercisable but cannot be exercised by JDS
Uniphase because an order, decree or ruling of a court or governmental
authority has the effect of permanently restraining, enjoining or
prohibiting the exercise of the option, ten business days after the
prohibition to exercise has been removed or has become final and not
subject to any appeal.
Repurchase at the Option of JDS Uniphase. During the period when the option
is exercisable, JDS Uniphase may require OCLI to repurchase from JDS Uniphase
the unexercised portion of the
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option and all the shares of OCLI common stock purchased by JDS Uniphase under
the option that JDS Uniphase then owns.
Economic Benefit to JDS Uniphase is Limited. The stock option agreement
limits the cash payment, including the amount, if any, paid to JDS Uniphase as a
termination fee under the merger agreement, which may be received by JDS
Uniphase on exercise of its put right, to $127 million.
Registration Rights. The stock option agreement grants registration rights
to JDS Uniphase with respect to the shares of OCLI common stock represented by
the option, including the right to demand that OCLI register all or part of such
shares with the SEC, provided that JDS Uniphase will only be able to make two
such demands and the right to register all or part of such shares may be reduced
if OCLI, at the time of such a demand, is in registration with respect to an
underwritten public offering of its shares.
AFFILIATE AGREEMENTS
As a condition to JDS Uniphase's obligation to close the merger agreement,
each member of OCLI's board of directors and some officers of OCLI will have
executed affiliate agreements. Under the affiliate agreements, JDS Uniphase will
be entitled to place appropriate legends on the certificates evidencing any JDS
Uniphase common stock to be received by these persons and to issue stop transfer
instructions to the transfer agent for the JDS Uniphase common stock. Further,
these persons have also acknowledged the resale restrictions imposed by Rule 145
under the Securities Act on shares of JDS Uniphase common stock to be received
by them in the merger.
NONCOMPETITION COMMITMENTS
Some officers of OCLI have entered into change-in-control agreements. In
connection with the merger, noncompetition provisions were included in these
agreements. These noncompetition provisions provide that, in the event of an
officer's termination, the officer will not for a period of two years after such
termination:
- carry on or engage in any business similar to that conducted by OCLI as
of the date of the officer's termination, except where the officer's
aggregate ownership in any such business is less than 5% of that
business's outstanding equity;
- solicit the employees, officers, directors or consultants of OCLI, its
subsidiaries or affiliates for employment in any business similar to that
conducted by OCLI as of the date of the officer's termination or cause
any such person to terminate his or her relationship with OCLI, its
subsidiaries or affiliates; or
- solicit or enter into any business relationship with OCLI's customers,
without OCLI's prior written consent, on behalf of any business similar
to that conducted by OCLI as of the date of the officer's termination.
OPERATIONS AFTER THE MERGER
Following the merger, OCLI will continue its operations as a wholly owned
subsidiary of JDS Uniphase for a period of time determined by JDS Uniphase. The
membership of JDS Uniphase's board of directors will remain unchanged as a
result of the merger. Anthony R. Muller, senior vice president and chief
financial officer of JDS Uniphase, Michael C. Phillips, senior vice president
and general counsel of JDS Uniphase, and Charles J. Abbe, OCLI's current chief
executive officer, will be the directors of OCLI after the completion of the
merger. The current officers of OCLI will
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continue to be officers of OCLI after the completion of the merger. In addition,
some officers of JDS Uniphase may also serve as officers of OCLI. The
stockholders of OCLI will become stockholders of JDS Uniphase, and their rights
as stockholders will be governed by the JDS Uniphase certificate of
incorporation, as currently in effect, the JDS Uniphase bylaws and the laws of
the State of Delaware. See "Comparison of Rights of Holders of OCLI Common Stock
and JDS Uniphase Common Stock" below.
COMPARISON OF RIGHTS OF HOLDERS OF OCLI COMMON STOCK AND
JDS UNIPHASE COMMON STOCK
This section of the proxy statement-prospectus describes the material
differences between the rights of holders of OCLI common stock and holders of
JDS Uniphase common stock. While JDS Uniphase and OCLI believe that the
description covers the material differences between the two, this summary may
not contain all of the information that is important to you. You should
carefully read this entire document and the other documents we refer to for a
more complete understanding of the differences between being a stockholder of
OCLI and being a stockholder of JDS Uniphase.
JDS Uniphase and OCLI are incorporated under the laws of the State of
Delaware. The rights of their stockholders are governed by Delaware law and by
their respective certificates of incorporation and bylaws. If the merger is
completed, stockholders of OCLI will become stockholders of JDS Uniphase and the
rights of stockholders of OCLI will be governed by Delaware law, the JDS
Uniphase certificate and JDS Uniphase bylaws. The following summarizes
differences in the charter documents of OCLI and JDS Uniphase that could
materially affect the rights of stockholders of OCLI after completion of the
merger. A number of the provisions of JDS Uniphase's charter documents may have
the effect of delaying, deferring or preventing a change in control of JDS
Uniphase.
CAPITALIZATION
The total authorized shares of capital stock of OCLI consist of (1)
30,000,000 shares of common stock, $0.01 par value per share, and (2) 100,000
shares of preferred stock, $0.01 par value per share, 20,000 of which are
designated as series A preferred stock and 6,650 of which are designated as
series B cummulative convertible preferred stock. At the close of business on
December 15, 1999, there were 14,288,076 shares of OCLI common stock outstanding
and no shares of OCLI preferred stock outstanding.
The OCLI board of directors is authorized to issue preferred stock from
time to time in one or more series and to determine and fix voting powers,
designations, preferences and rights granted to or imposed upon any unissued
series of preferred shares, including the rights and terms of dividends,
redemption, conversion and liquidation preference of the shares of any such
series. The OCLI board of directors, without stockholder approval, can issue
OCLI preferred stock with dividend, voting, conversion or other rights that
could adversely affect the voting power and other rights of the holders of OCLI
common stock. OCLI preferred stock could thus be issued quickly with terms
calculated to delay or prevent a change in control of OCLI or make removal of
management more difficult. Additionally, issuing OCLI preferred stock may cause
the market price of OCLI common stock to decrease.
The total authorized shares of capital stock of JDS Uniphase consist of (1)
600,000,000 shares of common stock $0.001 par value per share, and (2) 1,000,000
shares of preferred stock, $0.001 par value per share, 100,000 of which are
designated as series A preferred stock, 100,000 of which are designated as
series B preferred stock and one of which is designated as special voting stock.
At the
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close of business on December 15, 1999, there were 355,829,476 shares of JDS
Uniphase common stock outstanding (including 113,925,292 shares of common stock
issuable upon exchange of the outstanding exchangeable shares of JDS Uniphase's
subsidiary, JDS Uniphase Canada, Ltd.), 100,000 shares of series A preferred
stock outstanding, no shares of series B preferred stock outstanding and one
share of special voting stock outstanding. In addition, on that date, there were
113,925,292 exchangeable shares of JDS Uniphase's subsidiary, JDS Uniphase
Canada, Ltd., outstanding. Holders of the exchangeable shares of JDS Uniphase
Canada, Ltd., may tender their holdings for JDS Uniphase common stock on a
one-for-one basis at any time.
The JDS Uniphase board of directors' right to issue preferred stock is
similar to the right of the OCLI board to issue preferred stock.
NUMBER OF DIRECTORS
JDS Uniphase's bylaws fix the authorized number of directors at ten. JDS
Uniphase's board of directors or stockholders may change such number by amending
the bylaws.
OCLI's bylaws fix the authorized number of directors at seven. OCLI's board
of directors or stockholders may change such number by amending the bylaws.
VOTING RIGHTS
Each holder of JDS Uniphase and OCLI common stock is entitled to one vote
for each share held of record. Elections of directors are determined by a
plurality of the votes cast by the stockholders entitled to vote at the
election.
Under Delaware law, unless the corporation's certificate of incorporation
provides otherwise, there can be no cumulative voting for the election of
directors. JDS Uniphase's and OCLI's certificates do not provide for cumulative
voting.
CLASSIFIED BOARD OF DIRECTORS
A classified board is one to which some, but not all, of the directors are
elected on a rotating basis each year. Delaware law permits, but does not
require, a classified board of directors with staggered terms under which
one-half or one-third of the directors are elected for terms of two or three
years, respectively. Currently, JDS Uniphase has a classified board under which
one-third of its directors are elected each year for a term of three years. OCLI
does not have a classified board. Having a classified board of directors makes
it more difficult for stockholders to change management.
DIRECTOR VOTING
JDS Uniphase's bylaws and OCLI's bylaws provide that the number of
directors constituting a quorum shall be a majority of the number of authorized
directors.
REMOVAL OF DIRECTORS
Under Delaware law, unless otherwise restricted by the certificate of
incorporation or by the corporation's bylaws, any director or the entire board
of directors may be removed with or without cause by the holders of a majority
of the shares then entitled to vote at an election of directors; provided,
however, that so long as stockholders of the corporation are entitled to
cumulative voting, no individual director may be removed without cause, unless
the entire board is removed, if the number of votes cast against such removal
would be sufficient to elect the director if then
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cumulatively voted at an election of the class of directors of which the
director is a part. Whenever the holders of any class or series are entitled to
elect one or more directors by the certificate of incorporation, the director or
directors may be removed without cause only if there are sufficient votes by the
holders of the outstanding shares of that class or series. A vacancy created by
the removal of a director may be filled only by the approval of the
stockholders.
OCLI's certificate and bylaws provides that any director may be removed
with cause by the holders of at least 80% of the combined voting power of the
shares then entitled to vote at an election of directors and may be removed
without cause by a vote of 90%.
JDS Uniphase's bylaws provide that the board of directors or any director
may be removed with or without cause at a special meeting of stockholders by a
vote of stockholders holding a majority of the outstanding shares entitled to
vote at an election of directors.
Under Delaware law, no reduction of the authorized number of directors
shall have the effect of removing any director prior to the expiration of the
director's term of office.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Under Delaware law, vacancies and newly created directorships may be filled
by a majority of the directors then in office, even though less than a quorum,
unless otherwise provided in the certificate of incorporation or bylaws and
unless the certificate of incorporation directs that a particular class is to
elect the director, in which case any other directors elected by such class, or
a sole remaining director, shall fill such vacancy. JDS Uniphase's and OCLI's
bylaws allow a majority of the directors then in office to fill any vacancy on
the board even if they make up less than a quorum.
ADVANCE NOTICE OF STOCKHOLDER PROPOSALS
JDS Uniphase's and OCLI's bylaws provide that no matter proposed by their
respective stockholders will be considered at an annual meeting or special
stockholder meeting unless:
- it is specified in the notice of meeting;
- it is brought by or at the direction of the board of directors; or
- it is brought by a stockholder of the corporation who was a stockholder
of record on the record date and has provided written notice of the
matter to either JDS Uniphase or OCLI in compliance with the time and
content requirements in JDS Uniphase's and OCLI's bylaws, as applicable.
POWER TO CALL SPECIAL MEETINGS OF STOCKHOLDERS
Under Delaware law, a special meeting of stockholders may be called by the
board of directors or by any other person authorized to do so in the certificate
of incorporation or the bylaws. Pursuant to JDS Uniphase's bylaws, special
meetings may be called by the chairman of the board, the board of directors or
the chief executive officer. OCLI's bylaws provide that special meetings may be
called by the chairman of the board, the president or any officer at the written
request of a majority of the board.
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BUSINESS COMBINATION FOLLOWING A CHANGE OF CONTROL
In the last several years, a number of states have adopted special laws
designed to make some kinds of "unfriendly" corporate takeovers, or other
transactions involving a corporation and one or more of its significant
stockholders, more difficult. Under Section 203 of the Delaware General
Corporation Law, some business combinations by Delaware corporations with
interested stockholders are subject to a three-year moratorium unless specified
conditions are met. Section 203 prohibits a Delaware corporation from engaging
in a business combination with an interested stockholder for three years
following the date that such person becomes an interested stockholder. With some
exceptions, an interested stockholder is generally a person or group who or
which owns 15% or more of the corporation's outstanding voting stock, including
any rights to acquire stock pursuant to an option, warrant, agreement,
arrangement or understanding, or upon the exercise of conversion or exchange
rights, and stock with respect to which the person has voting rights only, or is
an affiliate or associate of the corporation and was the owner of 15% or more of
such voting stock at any time within the previous three years.
Because OCLI's and JDS Uniphase's certificates of incorporation and bylaws
do not contain a provision expressly electing not to be governed by Section 203
of the Delaware General Corporation Law, they are subject to Section 203.
However, because the board of directors of OCLI approved the merger prior to the
execution of the merger agreement, the business combination that will result
from the merger is not prohibited by Section 203.
AMENDMENT OF CHARTER DOCUMENTS
Generally, under Delaware law, an amendment to a corporation's certificate
of incorporation requires the approval of the board of directors and the
approval of holders of a majority of the outstanding stock entitled to vote on
the amendment. The holders of the outstanding shares of a class are entitled to
vote as a separate class on a proposed amendment that would increase or decrease
the aggregate number of authorized shares of their class, increase or decrease
the par value of the shares of their class, or alter or change the powers,
preferences or special rights of the shares of their in a way that affects them
adversely. JDS Uniphase's and OCLI's certificates can be amended, altered or
repealed or rescinded in any manner now or hereafter prescribed by Delaware law.
OCLI's bylaws may be altered, amended, repealed or rescinded by the board of
directors or by the affirmative vote of 80% or more of the voting stock. JDS
Uniphase's bylaws may be altered, amended, repealed or rescinded by unanimous
written consent of the board of directors or by the affirmative vote of a
majority of the stockholders.
INDEMNIFICATION
JDS Uniphase's and OCLI's certificates of incorporation indemnify directors
and officers to the fullest extent permissible under Delaware law, as such law
exists currently or as it may be amended in the future. Under Delaware law, a
corporation may not indemnify directors' or officers' liability for the
following:
- breaches of a director's or officer's duty of loyalty to the corporation
or its stockholders;
- acts or omissions not in good faith or involving intentional misconduct
or knowing violations of law;
- the payment of unlawful dividends or unlawful stock repurchases or
redemptions; or
- transactions in which the director or officer received an improper
personal benefit.
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JDS Uniphase's bylaws authorize it to provide insurance for its directors,
officers or agents against any expense, liability or loss, whether or not JDS
Uniphase would have the power to indemnify such a person against such expense,
liability or loss under Delaware law.
OCLI's bylaws authorize it to provide insurance for directors, officers,
employees or agents. The merger agreement provides that JDS Uniphase will use
its best efforts for a period of three years to maintain in effect the
directors' and officers' liability policies maintained by OCLI.
RESTRICTION ON SALES OF STOCK
JDS Uniphase and OCLI are public companies, each of which lists its shares
of common stock for trading on the Nasdaq National Market. As a result, JDS
Uniphase's and OCLI's certificates and bylaws do not provide for any
restrictions on the transfer of outstanding shares, other than those imposed by
federal or other securities laws for shares offered under exempt transactions.
INSPECTION OF STOCKHOLDERS LIST
Delaware law permits any stockholder by making a written demand under oath
stating the purpose at the inspection, to inspect a corporation's stock ledger,
a list of its stockholders and its other books and records, and to make copies
of extracts from the books and records for any proper purpose. If the
corporation refuses such a request, or fails to respond within five business
days after the demand has been made, the stockholder may petition the court for
an order to compel such an inspection. The court may prescribe limitations or
conditions upon the inspection, or award any other or further relief the court
deems just and proper.
APPRAISAL RIGHTS
Under Delaware law, a stockholder of a corporation participating in some
major corporate transactions may, under varying circumstances, be entitled to
appraisal rights under which the stockholder may receive cash in the amount of
the fair market value of his or her shares instead of the consideration he or
she would otherwise receive in the transaction.
Under Delaware law, appraisal rights are not available:
- in a merger or consolidation by a corporation the shares of which are
either listed on a national securities exchange designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or are held of record by more
than 2,000 holders; or
- to stockholders of a corporation surviving a merger if no vote of the
stockholders of the surviving corporation is required to approve the
merger because the merger agreement does not amend the existing
certificate of incorporation, if each share of the surviving corporation
outstanding prior to the merger is an identical outstanding or treasury
share after the merger, and the number of shares to be issued in the
merger does not exceed 20% of the shares of the surviving corporation
outstanding immediately prior to the merger and if other conditions are
met.
Because JDS Uniphase and OCLI are listed on the Nasdaq National Market, JDS
Uniphase's and OCLI's stockholders are not entitled to appraisal rights under
Delaware Law.
RIGHTS PLANS
JDS Uniphase's Rights Plans. Each outstanding share of JDS Uniphase common
stock includes one-quarter of a right. Each right entitles the registered
holder, subject to the terms of the rights
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agreement, to purchase from JDS Uniphase one unit, equal to one one-thousandth
of a share of JDS Uniphase series B preferred stock, at a purchase price of $600
per unit, subject to adjustment. The rights are attached to all certificates
representing outstanding shares of JDS Uniphase common stock, and no separate
rights certificates have been distributed. The purchase price is payable in cash
or by certified or bank check or money order payable to the order of JDS
Uniphase. The description and terms of the rights are set forth in a rights
agreement between JDS Uniphase and American Stock Transfer & Trust Company, as
rights agent, dated as of June 22, 1998, as amended from time to time. JDS
Uniphase's subsidiary, JDS Uniphase Canada Ltd., has adopted an equivalent
rights plan with respect to its exchangeable shares.
OCLI's Rights Plan. Each outstanding share of OCLI common stock includes
one right. Each right entitles the registered holder, subject to the terms of
the rights agreement, to purchase from OCLI one unit, equal to one
one-thousandth of a share of OCLI series A preferred stock, at a purchase price
of $600 per unit, subject to adjustment, for each share of common stock held by
the holder. The rights are attached to all certificates representing outstanding
shares of OCLI common stock, and no separate rights certificates have been
distributed. The purchase price is payable in cash, by certified bank check or
bank draft payable to the order of OCLI. The description and terms of the rights
are set forth in a rights agreement between OCLI and ChaseMellon Shareholder
Services, L.L.C., as rights agent, dated as of December 17, 1999, as amended
from time to time.
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<PAGE> 84
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS,
MANAGEMENT AND DIRECTORS OF OCLI
The following table sets forth information concerning the beneficial
ownership of common stock of OCLI as of December 15, 1999 for the following:
- each person or entity who is known by OCLI to own beneficially more than
five percent of the outstanding shares of OCLI common stock;
- each of OCLI's current directors;
- the chief executive officer and other four most highly compensated
officers of OCLI (the "Named Executive Officers"); and
- all directors and executive officers of OCLI as a group.
The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act and the information is
not necessarily indicative of beneficial ownership for any other purpose. Under
that rule, beneficial ownership includes any shares as to which the individual
or entity has voting power or investment power and any shares that the
individual has the right to acquire within 60 days of December 15, 1999 through
the exercise of any stock option or other right. Unless otherwise indicated in
the footnotes or table, each person or entity has sole voting and investment
power, or shares such powers with his or her spouse, with respect to the shares
shown as beneficially owned and has an address of c/o Optical Coating
Laboratory, Inc., 2789 Northpoint Parkway, Santa Rosa, California 95407.
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS
<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------------
NUMBER OF SHARES PERCENT OF
BENEFICIALLY OWNED OUTSTANDING SHARES
------------------ ------------------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS:
OCLI 401(k) Plan(1).................................. 1,201,656 8.4%
c/o Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, California 95407
I.G. Investment Management, Ltd.(2).................. 1,126,500 7.9%
One Canada Centre
447 Portage Avenue
Winnipeg, Manitoba
Canada R3C 3B6
DIRECTORS (OTHER THAN THOSE INCLUDED IN THE
NAMED EXECUTIVE OFFICERS GROUP):
Douglas C. Chance(3)................................. 24,200 *
Herbert M. Dwight, Jr.(4)............................ 333,543 2.3%
Shoei Kataoka(5)..................................... 5,000 *
John McCullough(6)................................... 10,106 *
Julian Schroeder(7).................................. 32,000 *
Renn Zaphiropoulos(8)................................ 13,000 *
</TABLE>
75
<PAGE> 85
<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------------
NUMBER OF SHARES PERCENT OF
BENEFICIALLY OWNED OUTSTANDING SHARES
------------------ ------------------
<S> <C> <C>
NAMED EXECUTIVE OFFICERS:
Charles J. Abbe(9)................................... 331,172 2.3%
Joseph C. Zils(10)................................... 84,775 *
Kenneth D. Pietrelli(11)............................. 72,006 *
Glenn K. Yamamoto(12)................................ 58,744 *
Craig B. Collins(13)................................. 51,249 *
All directors and executive officers as a group (16
persons)(14)....................................... 1,176,470 7.8%
</TABLE>
- -------------------------
* Less than 1%
(1) Under the terms of the Trust Agreement between the OCLI 401(k) Plan (the
"Plan") and T. Rowe Price, Trustee for the Plan (the "Trustee"), the
Trustee votes the shares held in the Plan upon instructions given by
individual participants as to their vested shares, and in the discretion of
the Trustee otherwise.
(2) These securities are owned by various individual and institutional
investors which I.G. Investment Management, Ltd. serves as investment
adviser with power to direct investments and/or sole power to vote the
securities. For purposes of the reporting requirements of the Securities
Exchange Act of 1934, I.G. Investment Management, Ltd. is deemed to be a
beneficial owner of such securities as of June 30, 1999; however, I.G.
Investment Management, Ltd. disclaims that it is, in fact, the beneficial
owner of such securities.
(3) Includes 3,000 shares under options exercisable within 60 days of the
record date.
(4) Includes 32,334 shares under options exercisable within 60 days of the
record date and 10,080 shares held for the benefit of Mr. Dwight by the
OCLI 401(k) Plan.
(5) Includes 3,000 shares under options exercisable within 60 days of the
record date.
(6) Includes 3,000 shares under options exercisable within 60 days of the
record date and 106 shares held for the benefit of Mr. McCullough by the
OCLI 401(k) Plan.
(7) Includes 3,000 shares under options exercisable within 60 days of the
record date.
(8) Includes 3,000 shares under options exercisable within 60 days of the
record date.
(9) Includes 318,472 shares under options exercisable within 60 days of the
record date and 200 shares held for the benefit of Mr. Abbe by the OCLI
401(k) Plan.
(10) Includes 79,781 shares under options exercisable within 60 days of the
record date.
(11) Includes 44,423 shares under options exercisable within 60 days of the
record date and 10,638 shares held for the benefit of Mr. Pietrelli by the
OCLI 401(k) Plan.
(12) Includes 48,402 shares under options exercisable within 60 days of the
record date and 9,342 shares held for the benefit of Mr. Yamamoto by the
OCLI 401(k) Plan.
(13) Includes 51,249 shares under options exercisable within 60 days of the
record date.
(14) Includes 735,903 shares under options exercisable within 60 days of the
record date and 38,786 shares held for the benefit of all officers and
directors by the OCLI 401(k) Plan.
76
<PAGE> 86
LEGAL MATTERS
The validity of the shares of JDS Uniphase common stock offered by this
proxy statement-prospectus and certain legal matters with respect to the federal
income tax consequences of the merger will be passed upon for JDS Uniphase by
Morrison & Foerster LLP, San Francisco, California. Some legal matters with
respect to federal income tax consequences of the merger will be passed upon for
OCLI by Collette & Erickson LLP, San Francisco, California. A partner of
Collette & Erickson owns 18,883 shares of common stock of OCLI.
EXPERTS
The consolidated financial statements of JDS Uniphase Corporation appearing
in JDS Uniphase Corporation's Annual Report (Form 10-K/A) for the year ended
June 30, 1999, have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The financial statements of JDS FITEL, Inc., for the three year period
ended May 31, 1999 contained in JDS Uniphase's Current Report on Form 8-K/A
dated November 3, 1999, have been audited by PricewaterhouseCoopers LLP,
independent auditors, as set forth in their reports therein or incorporated by
references therein and incorporated by reference herein. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Optical Coating Laboratory, Inc. (OCLI) and its
consolidated subsidiaries as of October 31, 1998 and 1997 and for each of the
three years in the period ended October 31, 1998, except for Flex Products,
Inc., a consolidated subsidiary, as of October 31, 1997 and for each of the two
years in the period ended October 31, 1997, incorporated by reference in this
proxy statement-prospectus have been audited by Deloitte & Touche LLP, as stated
in their report, which is incorporated by reference herein.
The financial statements of Flex Products, Inc., not included herein, as of
November 2, 1997, and for each of the two years in the period ended November 2,
1997, have been audited by KPMG LLP, as stated in their report, such report
being incorporated by reference herein. The financial statements of OCLI and its
consolidated subsidiaries have been incorporated in reliance upon the reports of
Deloitte & Touche LLP and KMPG LLP given upon their authority as experts in
accounting and auditing. Both of the foregoing firms are independent auditors.
With respect to the unaudited interim financial information included in
Optical Coating Laboratory, Inc.'s Quarterly Reports on Form 10-Q for the
quarters ended January 31, 1999, April 30, 1999 and July 31, 1999 which is
incorporated by reference from the Current Report on Form 8-K/A of JDS Uniphase
Corporation filed November 30, 1999, Deloitte & Touche LLP have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their reports included in those Quarterly
Reports on Form 10-Q and incorporated by reference herein, they did not audit
and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche LLP is not subject to the liability provisions of Section 11
of the Securities Act for their report on the unaudited interim financial
information because such report is not a "report" or a "part" of the
77
<PAGE> 87
registration statement prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Securities Act.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING OF
OCLI STOCKHOLDERS IF THE MERGER IS NOT COMPLETED
OCLI will hold a 2000 annual meeting of OCLI stockholders only if the
merger is not completed before the previously scheduled date of the annual
meeting. The deadline for submission of stockholder proposals for inclusion in
OCLI's proxy materials for the 2000 annual meeting of OCLI stockholders has
passed.
If the merger is not completed, OCLI stockholders may present proper
proposals for consideration at the next annual meeting of OCLI stockholders by
submitting their proposal in writing to the Secretary of OCLI in a timely
manner. However, in order for such stockholder proposals to be eligible to be
brought before OCLI's stockholders at the next annual meeting of OCLI's
stockholders, the stockholder submitting the proposal must also comply with the
procedures, including the deadlines, required by the certificate of
incorporation and bylaws of OCLI. Stockholder nominations of directors are not
stockholder proposals within the meaning of Rule 14a-8 and are not eligible for
inclusion in OCLI's proxy statement.
THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROXY
STATEMENT-PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR
FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER,
SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES
PURSUANT TO THIS PROXY STATEMENT-PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET
FORTH OR INCORPORATED INTO THIS PROXY STATEMENT-PROSPECTUS BY REFERENCE OR IN
OUR AFFAIRS SINCE THE DATE OF THIS PROXY STATEMENT-PROSPECTUS. THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS WITH RESPECT TO OCLI AND ITS
SUBSIDIARIES WAS PROVIDED BY OCLI AND THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT-PROSPECTUS WITH RESPECT TO JDS UNIPHASE WAS PROVIDED BY JDS UNIPHASE.
78
<PAGE> 88
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
AMONG
JDS UNIPHASE CORPORATION,
VINTAGE ACQUISITION, INC.
AND
OPTICAL COATING LABORATORY, INC.,
DATED AS OF NOVEMBER 3, 1999
<PAGE> 89
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
This AGREEMENT AND PLAN OF REORGANIZATION AND MERGER, dated as of November
3, 1999 (this "AGREEMENT"), among JDS UNIPHASE CORPORATION, a Delaware
corporation ("PARENT"), VINTAGE ACQUISITION, INC., a Delaware corporation and a
wholly owned subsidiary of Parent ("MERGER SUB"), and OPTICAL COATING
LABORATORY, INC., a Delaware corporation (the "COMPANY").
WITNESSETH:
WHEREAS, the boards of directors of Parent, Merger Sub and the Company have
each determined that it is advisable and in the best interests of their
respective stockholders for Parent to enter into a strategic business
combination with the Company upon the terms and subject to the conditions set
forth herein;
WHEREAS, in furtherance of such combination, the boards of directors of
Parent, Merger Sub and the Company have each approved the merger (the "MERGER")
of Merger Sub with and into the Company in accordance with the applicable
provisions of the Delaware General Corporation Law (the "DGCL"), and upon the
terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Parent's willingness to enter into this
Agreement, the Company has entered into a Stock Option Agreement dated as of the
date hereof in the form of Exhibit A (the "STOCK OPTION AGREEMENT"), pursuant to
which the Company has granted to Parent an option to purchase validly issued,
fully paid and nonassessable shares of the common stock of the Company, par
value $0.01 per share (the "COMPANY COMMON STOCK"), in an aggregate amount equal
to 19.9% of the outstanding shares of Company Common Stock as of the date
specified therein;
WHEREAS, Parent, Merger Sub and the Company intend that the Merger qualify
as a reorganization under Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "CODE"), and that, by approving resolutions authorizing this
Agreement, this Agreement be adopted as a plan of reorganization under Section
368(a) of the Code; and
WHEREAS, pursuant to the Merger, each outstanding share of Company Common
Stock (a "SHARE") shall be exchanged for the right to receive the Merger
Consideration (as defined in Section 1.07(b)), upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.
(a) At the Effective Time (as defined in Section 1.02 hereof), and subject
to and upon the terms and conditions of this Agreement and in accordance with
the DGCL, Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease upon the filing of a certificate
of merger with the Secretary of State of the State of Delaware pursuant to
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<PAGE> 90
the DGCL, and the Company shall continue as the surviving company being the
successor to all the property, rights, powers, privileges, liabilities and
obligations of both Merger Sub and the Company. The Company as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"SURVIVING COMPANY."
(b) The closing of the Merger (the "CLOSING") shall take place at a time
and on a date to be specified by the parties, which shall be no later than the
second business day after satisfaction or waiver of the conditions set forth in
Article VI, unless another time or date is agreed to in writing by the parties
hereto. The Closing will be held at the offices of Morrison & Foerster LLP, 425
Market Street, San Francisco, California 94105, unless another place is agreed
to in writing by the parties hereto.
SECTION 1.02. Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, but in no
event later than three days thereafter, the parties hereto shall cause the
Merger to be consummated by filing all necessary documentation (the "MERGER
DOCUMENTS"), together with any required related certificates, with the Secretary
of State of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the DGCL (the time of such filing
being the "EFFECTIVE TIME").
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Merger Documents and the
applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and privileges of the Company and Merger Sub shall vest in
the Surviving Company, and all liabilities and obligations of the Company and
Merger Sub shall become the liabilities and obligations of the Surviving
Company.
SECTION 1.04. Certificate of Incorporation and Bylaws. Unless otherwise
determined by Parent prior to the Effective Time, at the Effective Time the
certificate of incorporation and bylaws of the Company shall be amended to read
in their entireties as the certificate of incorporation and bylaws of Merger
Sub, as in effect immediately prior to the Effective Time; provided, however,
that Article I of the Certificate of Incorporation shall be amended to read as
follows: "The name of the company is Optical Coating Laboratory, Inc. and as so
amended, shall be the certificate of incorporation and bylaws of the Surviving
Company (the "CERTIFICATE OF INCORPORATION" and "BYLAWS") until thereafter
changed or amended as provided therein or by the DGCL.
SECTION 1.05. Directors and Officers. The directors of the Merger Sub
immediately prior to the Effective Time, together with the Company's current
chief executive officer, shall be the initial directors of the Surviving
Company, each to hold office in accordance with the Certificate of Incorporation
and Bylaws, and the officers of the Merger Sub immediately prior to the
Effective Time, together with the Company's current chief executive officer, who
shall be chief executive officer of the Surviving Company, shall be the officers
of the Surviving Company, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 1.06. Merger Consideration; Conversion and Cancellation of
Securities. 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 Shares:
(a) Conversion of Securities. Each Share issued and outstanding immediately
prior to the Effective Time (excluding any Shares to be canceled pursuant to
Section 1.06(b) and any Dissenting Shares as defined in Section 1.09) shall be
converted, subject to Section 1.06(f), into the right to receive 0.928 shares
(the "EXCHANGE RATIO") of validly issued, fully paid and nonassessable shares of
Parent Common Stock, $0.001 par value per share ("PARENT COMMON SHARES").
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<PAGE> 91
(b) Cancellation. Each Share owned by the Company, Parent, Merger Sub or
any direct or indirect wholly owned subsidiary of the Company or Parent
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be canceled and retired
without payment of any consideration therefor and cease to exist.
(c) Assumption of Stock Options.
(i) At the Effective Time, each outstanding option to purchase Company
Common Stock (a "STOCK OPTION") granted under the Company's 1993, 1995,
1996, 1998 and 1999 Incentive Compensation Plans and the 1999 Director
Stock Plan (collectively, the "COMPANY STOCK OPTION PLANS"), whether vested
or unvested, and each right to purchase Company Common Stock under the
Company's 1999 Employee Stock Purchase Plan ("STOCK PURCHASE RIGHT") shall
be deemed assumed by Parent and deemed to constitute an option or stock
purchase right to acquire, on the same terms and conditions as were
applicable under such Stock Option or Stock Purchase Right prior to the
Effective Time, and in the case of a Stock Option, the number (rounded down
to the nearest whole number) of Parent Common Shares as the holder of such
Stock Option would have been entitled to receive pursuant to the Merger had
such holder exercised such option in full immediately prior to the
Effective Time (not taking into account whether or not such option was in
fact exercisable), at a price per share rounded up to the nearest whole
cent equal to (x) the aggregate exercise price for Company Common Stock
otherwise purchasable pursuant to such Stock Option divided by (y) the
number of Parent Common Shares deemed purchasable pursuant to such Stock
Option; provided, however, that the vesting schedule of the assumed options
shall continue to be determined by reference to the applicable Company
Stock Option Plan.
(ii) As soon as practicable after the Effective Time, Parent shall
deliver to each holder of an outstanding Stock Option or Stock Purchase
Right an appropriate notice setting forth such holder's rights pursuant
thereto and such Stock Option or Stock Purchase Right shall continue in
effect on the same terms and conditions (including any applicable
anti-dilution provisions, and subject to the adjustments required by this
Section 1.06(c) after giving effect to the Merger). Parent shall comply
with the terms of all such Stock Options and Stock Purchase Rights and
ensure, to the extent required by, and subject to the provisions of, the
applicable Company Stock Option Plan or the 1999 Employee Stock Purchase
Plan that any Stock Options or Stock Purchase Rights which qualified for
special tax treatment prior to the Effective Time continue to so qualify
after the Effective Time. Parent shall take all corporate action necessary
to reserve for issuance a sufficient number of Parent Common Shares for
delivery pursuant to the terms set forth in this Section 1.06(c).
(iii) As soon as practicable, but in no event later than thirty (30)
days after the Effective Time, Parent shall file with the SEC an amendment
to its existing registration statement on Form S-8 or file a new
registration statement on Form S-8 covering the shares of Parent Common
Stock issuable pursuant to the exercise of Stock Options assumed by Parent
and the Stock Purchase Rights under the Company's 1999 Employee Stock
Purchase Plan.
(d) Common Stock of Merger Sub. Each share of the common stock of Merger
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for a validly issued, fully paid and nonassessable
share of common stock of the Surviving Company. Each share certificate of Merger
Sub evidencing ownership of any such shares shall evidence, from and after the
Effective Time, ownership of such shares of the Surviving Company.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted to
reflect fully the effect of any share split, reverse split, share dividend
(including any dividend or distribution of
A-3
<PAGE> 92
securities convertible into Parent Common Shares or Company Common Stock),
reorganization, recapitalization or other like change with respect to Parent
Common Shares or Company Common Stock occurring after the date hereof and prior
to the Effective Time.
(f) Fractional Shares. No fraction of a Parent Common Share will be issued,
but in lieu thereof each holder of Company Common Stock who would otherwise be
entitled to a fraction of a Parent Common Share (after aggregating all
fractional Parent Common Shares to be received by such holder) shall receive
from Parent an amount of cash (rounded up to the nearest whole cent), without
interest, equal to the product of (i) such fraction, multiplied by (ii) the
closing price of a Parent Common Share on the Nasdaq National Market on the last
trading day immediately prior to the Effective Time (as reported in the Wall
Street Journal or, if not reported therein, any other authoritative source).
SECTION 1.07. Exchange of Certificates.
(a) Exchange Agent. Parent shall supply, or shall cause to be supplied, to
or for the account of a bank or trust company designated by Parent (the
"EXCHANGE AGENT"), in trust for the benefit of the holders of Company Common
Stock (other than Dissenting Shares), for exchange in accordance with this
Section 1.07, through the Exchange Agent, certificates evidencing the Parent
Common Shares issuable pursuant to Section 1.06 in exchange for outstanding
Shares. Parent shall make available to the Exchange Agent from time to time as
needed, cash sufficient to pay cash in lieu of fractional shares.
(b) Exchange Procedures. On or prior to the tenth (10) Business Day after
the Effective Time, Parent will instruct the Exchange Agent to mail to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding Shares (other than Dissenting Shares) (the
"CERTIFICATES") (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions to effect the surrender of the Certificates in exchange
for the certificates evidencing Parent Common Shares and, in lieu of any
fractional shares thereof, cash. Upon surrender of a Certificate to the Exchange
Agent for cancellation together with such letter of transmittal, duly executed,
and such other customary documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor (A) certificates evidencing that number of whole Parent Common
Shares which such holder has the right to receive in accordance with the
Exchange Ratio in respect of the Shares formerly evidenced by such Certificate,
(B) any dividends or other distributions with respect to Shares to which such
holder was entitled to receive prior to the Effective Time, and (C) cash in lieu
of fractional Parent Common Shares to which such holder is entitled pursuant to
Section 1.06(f) (the Parent Common Shares, dividends, distributions and cash
described in clauses (A)-(C) delivered for each Share being, collectively, the
"MERGER CONSIDERATION"), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Company as of the Effective Time,
Parent Common Shares and cash may be issued and paid in accordance with this
Article I to a transferee if the Certificate evidencing such Shares is presented
to the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer pursuant to this Section 1.07(b) and by evidence that any
applicable stock/share transfer taxes have been paid. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented Shares
will be deemed from and after the Effective Time, for all corporate purposes,
other than the payment of dividends, to evidence the ownership of the number of
full Parent Common Shares into which such Shares shall have been so converted
and the right to receive an amount in cash in lieu of the issuance of any
fractional shares in accordance with Section 1.06.
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<PAGE> 93
(c) Distributions With Respect to Unexchanged Parent Common Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Shares with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to the
Parent Common Shares they are entitled to receive until the holder of such
Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Parent Common Shares
issued in exchange therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Shares and cash in lieu of any fractional Parent Common Share pursuant to
Section 1.06(f) above.
(d) Transfers of Ownership. If any certificate for Parent Common Shares is
to be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance thereof
that the Certificate so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange will have
paid to Parent or any agent designated by it any transfer or other taxes
required by reason of the issuance of a certificate for Parent Common Shares in
any name other than that of the registered holder of the Certificate
surrendered, or established to the satisfaction of Parent or any agent
designated by it that such tax has been paid or is not payable.
(e) No Liability. Neither Parent, Merger Sub nor the Company shall be
liable to any holder of Shares for any Merger Consideration (or dividends or
distributions with respect thereto) delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(f) Withholding Rights. Parent or the Exchange Agent shall be entitled to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Agreement to any holder of Shares such amounts as Parent or the Exchange
Agent is required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Shares in respect of which such deduction and
withholding was made by Parent or the Exchange Agent.
SECTION 1.08. Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed, the Merger Consideration
delivered upon the surrender for exchange of Shares in accordance with the terms
hereof shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Shares, and there shall be no further registration of
transfers on the records of the Surviving Company of Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Company for any reason, they
shall be canceled and exchanged as provided in this Article I.
SECTION 1.09. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary, any
shares of capital stock of the Company held by a holder who has exercised
appraisal rights for such shares in accordance with the DGCL and who, as of the
Effective Time, has not effectively withdrawn or lost such appraisal rights
("DISSENTING SHARES"), shall not be converted into or represent a right to
receive Merger Consideration pursuant to Section 1.06, but the holder thereof
shall only be entitled to such rights as are granted under the DGCL.
(b) Notwithstanding the provisions of subsection (a), if any holder of
Dissenting Shares shall effectively withdraw or lose (through failure to perfect
or otherwise) such holder's appraisal rights, then, as of the later of the
Effective Time or the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
Merger Consideration,
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without interest thereon, upon surrender of the certificate or certificates
representing such Dissenting Shares.
(c) The Company shall give Parent (i) prompt notice of any written demands
received by the Company to require the Company to purchase shares of capital
stock of the Company pursuant to the DGCL, withdrawals of such demands, and any
other instruments served pursuant to the DGCL and received by the Company and
(ii) the opportunity to participate in all negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior written
consent of Parent, voluntarily make any payment with respect to any such demands
or offer to settle or settle any such demands.
SECTION 1.10. Lost, Stolen or Destroyed Certificate. In the event 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, such Parent Common
Shares and cash as may be required pursuant to Section 1.06; provided, however,
that Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
SECTION 1.11. Tax and Accounting Consequences. It is intended by the
parties here to that the Merger shall constitute a reorganization within the
meaning of Section 368(a) of the Code. The parties hereto hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Section 368 of the
Code.
SECTION 1.12. Material Adverse Effect. When used in connection with the
Company or any of its subsidiaries, or Parent or any of its respective
subsidiaries, as the case may be, the term "MATERIAL ADVERSE EFFECT" means any
change or effect that, individually or in the aggregate, is or is reasonably
likely to be materially adverse to the business, prospects, assets (including
intangible assets), financial condition or results of operations of the Company
and its subsidiaries (a "COMPANY MATERIAL ADVERSE EFFECT") or Parent and its
respective subsidiaries (a "PARENT MATERIAL ADVERSE EFFECT"), respectively, in
each case taken as a whole, but other than those adverse effects occurring as a
result of the execution of this Agreement, the consummation of the transactions
contemplated hereby or general market or industry conditions.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that,
except as set forth in the written disclosure schedule previously delivered by
the Company to Parent, the paragraphs of which are numbered to correspond to the
Sections of this Agreement (the "COMPANY DISCLOSURE SCHEDULE"):
SECTION 2.01. Organization and Qualification; Subsidiaries.
The Company and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority and is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("APPROVALS") necessary
to own, lease and operate the properties it purports to own, operate or lease
and to carry on its business as it is now being conducted, except where the
failure to have such power, authority and Approvals would not, individually or
in the aggregate, have a Company Material Adverse Effect. The Company and each
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subsidiary is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary, except for such failures to be
so duly qualified or licensed and in good standing that would not, either
individually or in the aggregate, have a Company Material Adverse Effect. The
Company's subsidiaries are the only entities in which the Company has any equity
interest.
SECTION 2.02. Charter Documents. The Company has heretofore furnished to
Parent a complete and correct copy of the charter documents (including the
articles or certificate of incorporation and bylaws, if any), as most recently
amended to date of the Company and each of its subsidiaries. Each such charter
document is in full force and effect. Neither the Company nor any subsidiary is
in violation of any of the provisions of its respective charter documents.
SECTION 2.03. Capitalization. The authorized capital stock of the Company
consists of shares of Company Common Stock and shares of Preferred Stock. As of
October 31, 1999, (i) 14,261,607 shares of Company Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable, (ii)
no shares of Company Common Stock were held in the Company's treasury or by any
subsidiary, (iii) no shares of Company Preferred Stock were issued and
outstanding, (iv) 1,963,441 shares of Company Common Stock were reserved for
future issuance pursuant to outstanding employee stock options granted pursuant
to the Company's Stock Option Plans and (v) 400,000 shares of Company Common
Stock were reserved for issuance pursuant to the Company's Employee Stock
Purchase Plan. No shares of Company Common Stock have been issued between
October 31, 1999 and the date hereof, other than pursuant to the Company's Stock
Option Plans. Except as set forth in Sections 2.03, 2.08 or 2.10 of the Company
Disclosure Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
shares (or other equity interests) of the Company or of any subsidiary or
obligating the Company or any subsidiary to issue or sell any shares of, or
other equity interests in, the Company or any subsidiary. All shares of Company
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be duly authorized, validly issued, fully paid and nonassessable. There
are no obligations, contingent or otherwise, of the Company or of any subsidiary
to repurchase, redeem or otherwise acquire any shares of Company Common Stock or
the shares of any subsidiary or to provide funds to or make any investment (in
the form of a loan, capital contribution or otherwise) in any subsidiary or any
other entity other than guarantees of bank obligations of a subsidiary entered
into in the ordinary course of business. None of the options, warrants, rights,
agreements, arrangements or commitments identified in Section 2.03 or 2.10 of
the Company Disclosure Schedule provide that, absent action by the board of
directors of the Company or a committee thereof, upon exercise or conversion the
holder thereof shall receive cash, and no such action of the board of directors
or a committee thereof has been taken. Except as set forth in Section 2.03 of
the Company Disclosure Schedule, all of the outstanding shares of each
subsidiary (and all shares to be issued prior to the Effective Time) are or will
be duly authorized, validly issued, fully paid and nonassessable, and all such
shares are or will be owned by the Company free and clear of all security
interests, liens, claims, pledges, agreements, limitations in voting rights,
charges, encumbrances or rights or interests of others of any nature whatsoever
(collectively, "LIENS"), other than Liens for taxes not yet due and payable.
SECTION 2.04. Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and subject to obtaining any necessary stockholder approval of this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
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been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than the
approval and adoption of the Merger by at least a majority of the holders of the
outstanding Shares entitled to vote in accordance with the DGCL and the
Company's certificate of incorporation and bylaws). This Agreement has been duly
and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Merger Sub, as applicable,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. The board of directors of the
Company has determined that it is advisable and in the best interest of the
Company's stockholders for the Company to enter into a strategic business
combination with Parent upon the terms and subject to the conditions of this
Agreement, and has recommended that the Company's stockholders approve and adopt
this Agreement and the transactions contemplated hereby.
SECTION 2.05. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports, exhibits and other documents
required to be filed with the Securities and Exchange Commission (the "SEC")
since July 31, 1999 and has made available to Parent (i) its Quarterly Report on
Form 10-Q for the period ended July 31, 1999 and its Annual Reports on Form 10-K
for the period ended October 31, 1997 and October 31, 1998, respectively, (ii)
all proxy statements relating to the Company's meetings of stockholders (whether
annual or special) held since October 31, 1997, (iii) all other reports or
registration statements (other than reports on Forms 3, 4 or 5 filed on behalf
of affiliates of the Company) filed by the Company with the SEC since October
31, 1998, (iv) all amendments and supplements to all such reports and
registration statements filed by the Company with the SEC (collectively, the
"COMPANY SEC REPORTS") and (v) documents which the Company will be required to
file. The Company SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act of 1933, as amended (the "Securities Act") or
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
SEC's rules thereunder (collectively, the "Federal Securities Laws"), as the
case may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No subsidiary is required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports was prepared in
accordance with U.S. generally accepted accounting principles ("GAAP") applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto) and each fairly presents the consolidated
financial position of the Company and its subsidiaries as at the respective
dates thereof and the consolidated results of its operations and cash flows and
stockholder equity for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
(c) The Company has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by the Company with the SEC pursuant
to the Securities Act or the Exchange Act.
SECTION 2.06. Absence of Certain Changes or Events. Except as set forth in
Section 2.06 of the Company Disclosure Schedule or the Company SEC Reports,
since July 31, 1999, the Company has conducted its business in the ordinary
course and there has not occurred: (i) any Company Material Adverse Effect; (ii)
any amendments or changes in the certificate of incorporation or bylaws
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of the Company; (iii) any damage to, destruction or loss of any asset of the
Company, (whether or not covered by insurance) that could have a Company
Material Adverse Effect; (iv) any change by the Company in its accounting
methods, principles or practices; (v) any revaluation of any of the Company's or
any subsidiary's assets, including, without limitation, writing down the value
of inventory or writing off notes or accounts receivable other than in the
ordinary course of business; (vi) any sale, pledge, disposition of or
encumbrance upon a material amount of property of the Company or of any
subsidiary, except in the ordinary course of business and consistent with past
practice; (vii) any material Tax (as defined below) election inconsistent with
past practices or the settlement or compromise of any material Tax liability;
(viii) any declaration, issuance or payment of any dividend or other
distribution (whether in cash, stock or property or any combination thereof); or
(ix) the creation of any indebtedness for borrowed money or the issuance of any
debt securities or the assumption, guarantee (other than guarantees of bank debt
of a subsidiary entered into in the ordinary course of business) or endorsement
or other accommodation whereby the Company became responsible for, the
obligations of any person, or the making of any loans or advances, except in the
ordinary course of business consistent with past practice.
SECTION 2.07. No Undisclosed Liabilities. Except as is disclosed in Section
2.07 of the Company Disclosure Schedule and in the Company SEC Reports, neither
the Company nor any subsidiary has any liabilities (absolute, accrued,
contingent or otherwise) which are, in the aggregate, material to the business,
operations or financial condition of the Company and its subsidiaries taken as a
whole, except liabilities (a) adequately provided for in the Company's audited
balance sheet (including any related notes thereto) for the fiscal year ended
October 31, 1998, (b) incurred in the ordinary course of business and not
required under U.S. GAAP to be reflected on such balance sheet; or (c) incurred
since July 31, 1999 in the ordinary course of business and consistent with past
practice, and liabilities incurred in connection with this Agreement.
SECTION 2.08. Material Contracts; No Violation. (a) Section 2.08(a) of the
Company Disclosure Schedule includes a list of (i) all joint venture, technology
sharing and noncompetition agreements to which the Company or any of its
subsidiaries is a party or has any obligation; (ii) all material intellectual
property licensing agreements other than commercial shrinkwrap licenses; (iii)
all material agreements between the Company and any consultant, employee,
officer or director; (iv) all material distribution agreements; and (v) all
agreements, contracts or other instruments (including all amendments thereto)
which, as of the date hereof, will be required to be filed by the Company with
the SEC pursuant to the requirements of the Exchange Act as "material contracts"
and have not been filed ((i) through (v) collectively with all agreements,
contracts and other instruments (including amendments thereto) which have been
filed by the Company with the SEC, being, collectively, the "Material
Contracts") of the Company and its subsidiaries. The Company has made available
to Parent prior to the date hereof, true, correct and complete copies in all
material respects of each such Material Contract.
(b) Except as set forth in Section 2.08(b) of the Company Disclosure
Schedule, (i) neither the Company nor any subsidiary has breached, is in default
under, or has received written notice of any breach of or default under, any
Material Contract, (ii) to the best knowledge of the Company, no other party to
any of the Material Contracts has breached or is in default of any of its
obligations thereunder, and (iii) each of the Material Contracts is in full
force and effect, except in any such case for breaches, defaults or failures to
be in full force that in the aggregate do not constitute a Company Material
Adverse Effect.
(c) Except as set forth in Section 2.08 of the Company Disclosure Schedule,
the execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement by the Company will not, and the consummation by
the Company of the transactions contemplated hereby will not, (i) conflict with
or violate the certificate of incorporation or bylaws of the Company,
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(ii) conflict with or violate any federal, foreign, state or provincial law,
rule, regulation, order, judgment or decree (collectively, "LAWS") applicable to
the Company or any subsidiary or by which any of their respective properties are
bound or affected, or (iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or impair the Company's or any subsidiary's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any contract, or result
in the creation of a Lien on any of the properties or assets of the Company or
any subsidiary pursuant to, any Material Contract or other note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any subsidiary is a party or by
which the Company or any subsidiary or any of their respective properties are
bound or affected, except in the case of clauses (ii) and (iii) for any such
conflicts, violations, breaches, defaults or other occurrences that would not,
individually or in the aggregate, have a Company Material Adverse Effect.
SECTION 2.09. Absence of Litigation. Except as set forth in Section 2.09 of
the Company Disclosure Schedule or the Company SEC Reports, (i) there are no
claims, actions, suits, proceedings or investigations pending or, to the
knowledge of the Company, threatened against the Company or against any
subsidiary and (ii) there is no judgment, decree, injunction, rule or order
outstanding against the Company or its subsidiaries other than, in each case,
those that the outcome of which, individually or in the aggregate, would not
have a Company Material Adverse Effect or a material adverse effect on the
Company's ability to consummate the Merger.
SECTION 2.10. Employee Benefit Plans; Employment Agreements.
(a) For purposes of this Section 2.10: "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended; "COMPANY ERISA AFFILIATE"
means any trade or business (whether or not incorporated) which is a member of a
controlled group including the Company or which is under common control with the
Company or any subsidiary of the Company; and "COMPANY EMPLOYEE PLANS" means all
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other fringe or employee benefit plans,
programs or arrangements, and any current or former employment or executive
compensation or severance agreements, written or otherwise, for the benefit of,
or relating to, any employee of the Company, as well as each such plan with
respect to which the Company or a Company ERISA Affiliate could incur liability
under applicable law (if such plan has been or were terminated), and excluding
agreements with former employees under which the Company has no remaining
monetary obligations.
(b) None of the Company Employee Plans promises or provides retiree medical
or other retiree welfare benefits to any person other than coverage mandated by
applicable law or benefits, the full cost of which is borne by the retiree.
(c) Except as would not have a Company Material Adverse Effect: (i) the
Company and its subsidiaries have complied with ERISA, the Code and all laws and
regulations applicable to the Company Employee Plans and each Company Employee
Plan has been maintained and administered in compliance with its terms; and (ii)
each Company Employee Plan intended to qualify under Section 401(a) of the Code
and each trust intended to qualify under Section 501(a) of the Code is the
subject of a favorable determination letter from the Internal Revenue Service
(the "IRS"), and nothing has occurred which may reasonably be expected to impair
such determination.
(d) Neither the Company nor its subsidiaries have incurred any liability
under Title IV of ERISA (other than liability for premiums to the Pension
Benefit Guaranty Corporation arising in the ordinary course). No Company
Employee Plan has incurred an "accumulated funding deficiency" (within the
meaning of Section 302 of ERISA or Section 412 of the Code), whether or not
waived.
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To the knowledge of the Company, there are not any facts or circumstances that
would materially change the funded status of any Company Employee Plan that is a
"defined benefit" plan (as defined in Section 3(35) of ERISA) since the date of
the most recent actuarial report for such plan. No Company Employee Plan is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA.
(e) With respect to each of the Company Employee Plans that is subject to
Title IV of ERISA, the present value of accrued benefits under each such plan
did not, as of its latest valuation date, exceed the then current value of the
aggregate assets of such plans allocable to the payment of such benefits.
SECTION 2.11. Labor Matters. Except as set forth in Section 2.11 of the
Company Disclosure Schedule, (i) there are no controversies pending or, to the
knowledge of the Company or any of its subsidiaries, threatened, between the
Company or any of its subsidiaries and any of their respective employees, which
controversies have or may reasonably be expected to have a Company Material
Adverse Effect; (ii) neither the Company nor any of its subsidiaries is a party
to any collective bargaining agreement or other labor union contract applicable
to persons employed by the Company or by any of its subsidiaries nor does the
Company or any of its subsidiaries know of any activities or proceedings of any
labor union to organize any such employees, and (iii) neither the Company nor
any of its subsidiaries has any knowledge of any strikes, slowdowns, work
stoppages, lockouts, or threats thereof, by or with respect to any employees of
the Company or of any of its subsidiaries.
SECTION 2.12. Disclosure Documents. The proxy statement of the Company to
be filed with the SEC in connection with the Merger (the "COMPANY PROXY
STATEMENT") and any amendments or supplements thereto will, when filed, comply
as to form in all material respects with the applicable requirements of the
Exchange Act. At the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company and at the
time such stockholders vote on the approval and adoption of this Agreement, the
Company Proxy Statement, as supplemented or amended, if applicable, will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading. The foregoing
representations and warranties will not apply to statements or omissions
included in the Company Proxy Statement or any amendment or supplement thereto
based upon information furnished to the Company by Parent for use therein. None
of the information furnished to Parent for use in (or incorporation by reference
in) the Registration Statement (as defined in Section 3.11) or any amendment or
supplement thereto will contain, at the time the Registration Statement or any
amendment or supplement thereto becomes effective or at the Effective Time, 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 contained
therein not misleading.
SECTION 2.13. Taxes.
(a) For purposes of this Agreement, "TAX" or "TAXES" shall mean taxes,
fees, levies, duties, tariffs, imposts and governmental impositions or charges
of any kind in the nature of (or similar to) taxes, payable to any federal,
state, local or foreign taxing authority, including (without limitation) (i)
income, franchise, profits, gross receipts, ad valorem, net worth, goods and
services, fringe benefits, withholding, sales, use, service, real or personal
property, special assessments, Common Stock, license, payroll, withholding,
employment, social security, accident compensation, unemployment compensation,
utility, severance, production, excise, stamp, occupation, premiums, windfall
profits, transfer and gains taxes and (ii) interest, penalties, additional taxes
and additions to tax imposed with respect thereto; and "TAX RETURNS" shall mean
returns, reports and information
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statements with respect to Taxes required to be filed with the IRS or any other
taxing authority, domestic or foreign, including, without limitation,
consolidated, combined and unitary tax returns.
(b) The Company has furnished all Tax Returns filed by the Company and its
subsidiaries for all periods ending on or after October 31, 1995. Except as
disclosed on Schedule 2.13(b) of the Company Disclosure Schedule, the Company
and each subsidiary have filed all United States federal income Tax Returns and
all other material Tax Returns required to be filed by them, and have duly paid
or made adequate provision on their books for the payment of all Taxes which
have been incurred or are due and payable. Except as disclosed on Schedule
2.13(b) of the Company Disclosure Schedule (i) there are no pending audits,
examinations or proposed audits or examinations of any tax returns filed by the
Company or by any subsidiary, (ii) there are no other Taxes that would be due if
asserted by a taxing authority, except with respect to which the Company or
applicable subsidiary is maintaining reserves to the extent currently required
unless the failure to do so does not have a Material Adverse Effect, and (iii)
neither the Company nor any subsidiary has given or been requested to give
waivers or extensions of any statute of limitations relating to the payment of
Taxes for which the Company or any subsidiary may be liable. Except as set forth
on Schedule 2.13(b) of the Company Disclosure Schedule, as of the date of this
Agreement the consolidated Tax Returns of the Company and its subsidiaries have
been audited by the IRS (or the appropriate statute of limitations has expired)
for all fiscal years through October 31, 1998.
(c) Except as set forth on Schedule 2.13(c) of the Company Disclosure
Schedule, neither the Company nor any subsidiary: (i) is a party to any
agreement providing for the allocation, payment or sharing of taxes among the
Company, its subsidiaries, or any third parties; or (ii) has an application
pending with respect to any Tax requesting permission for a change in accounting
method.
SECTION 2.14. Environmental Matters. Each of the Company and its
subsidiaries has obtained all licenses, permits, authorizations, approvals and
consents from Governmental or Regulatory Authorities which are required under
any applicable Environmental Law (as defined below) in respect of its business
or operations ("ENVIRONMENTAL PERMITS"), except for such failures to have
Environmental Permits which, individually or in the aggregate, are not
reasonably expected to have a Company Material Adverse Effect. Each of such
Environmental Permits is in full force and effect and each of the Company and
its subsidiaries is in compliance with the terms and conditions of all such
Environmental Permits and with any applicable Environmental Law, except for such
failures to be in compliance which, individually or in the aggregate, are not
reasonably expected to have a Company Material Adverse Effect.
(b) There is no Environmental Claim (as defined below) pending or to the
knowledge of the Company threatened against the Company or any of its
subsidiaries or to the knowledge of the Company, pending or threatened against
any person or entity whose liability for any Environmental Claim the Company or
any of its subsidiaries has or may have retained or assumed either contractually
or by operation of law that is reasonably expected to have a Company Material
Adverse Effect.
(c) To the knowledge of the Company, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, the release, threatened release or presence of any Hazardous
Material (as defined below) which could form the basis of any Environmental
Claim against the Company or any of its subsidiaries, or to the knowledge of the
Company, against any person or entity whose liability for any Environmental
Claim the Company or any of its subsidiaries has or may have retained or assumed
either contractually or by operation of law, except for such liabilities which,
individually or in the aggregate, are not reasonably expected to have a Company
Material Adverse Effect.
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(d) To the knowledge of the Company, no site or facility now or previously
owned, operated or leased by the Company or any of its subsidiaries is listed or
proposed for listing on the National Priorities List promulgated pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, and the rules and regulations thereunder ("CERCLA").
(e) No Liens have arisen under or pursuant to any Environmental Law on any
site or facility owned, operated or leased by the Company or any of its
subsidiaries, other than any such Liens which would not, individually or in the
aggregate, have a Company Material Adverse Effect, and no action of any
Governmental or Regulatory Authority (as defined below) has been taken or, to
the knowledge of the Company, is in process which could subject any of such
properties to such Liens.
(f) To the best of the Company's knowledge, the Company has delivered or
otherwise made available for inspection to the Parent true, complete and correct
copies and results of any material reports, studies, analyses, tests or
monitoring possessed or initiated by the Company or any of its subsidiaries
pertaining to Hazardous Materials in, on, beneath or adjacent to any property
currently or formerly owned, operated or leased by the Company or any of its
subsidiaries, or regarding the Company's or any of its subsidiaries' compliance
with applicable Environmental Laws.
(g) As used herein: (i) "GOVERNMENTAL OR REGULATORY AUTHORITY" means any
court, tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision; (ii) "ENVIRONMENTAL
CLAIM" means any claim, action, cause of action, investigation or notice
(written or oral) by any person or entity alleging potential liability
(including, without limitation, potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or resulting
from (A) the presence, or release or threatened release, of any Hazardous
Materials at any location, whether or not owned or operated by the Company or
any of its subsidiaries, or (B) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law; (iii) "ENVIRONMENTAL
LAW" means any law or order of any Governmental or Regulatory Authority relating
to the regulation or protection of human health, safety or the environment or to
emissions, discharges, releases or threatened releases of Hazardous Material,
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes into the environment; and (iv) "HAZARDOUS MATERIAL" means (A) any
petroleum or petroleum products, flammable materials, radioactive materials,
friable asbestos, urea formaldehyde foam insulation and transformers or other
equipment that contain dielectric fluid containing regulated levels of
polychlorinated biphenyls (PCBs); (B) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import under any Environmental Law; and
(C) any other chemical or other material or substance, exposure to which is now
or hereafter prohibited, limited or regulated by any Governmental or Regulatory
Authority under any Environmental Law.
SECTION 2.15. Brokers. No broker, finder or investment banker (other than
Hambrecht & Quist, LLC ("H&Q")) is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. The
Company has heretofore furnished to Parent a complete and correct copy of all
agreements between the Company and H&Q pursuant to which such firm would be
entitled to any payment relating to the transactions contemplated hereunder.
SECTION 2.16. Full Disclosure. No statement contained in any representation
or warranty contained herein or any statement contained in any certificate or
schedule furnished or to be furnished by the Company or by any subsidiary to
Parent or Merger Sub in, or pursuant to the
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provisions of, this Agreement contains or shall contain any untrue statement of
a material fact or omits or will omit to state any material fact necessary, in
the light of the circumstances under which it was made, in order to make the
statements herein or therein not misleading.
SECTION 2.17. Opinion of Financial Advisor. The Company has been advised by
its financial advisor, H&Q, that, in its opinion, as of the date of this
Agreement, the Exchange Ratio is fair from a financial point of view to the
Company's stockholders and has delivered a written copy of such opinion dated
the date hereof to Parent.
SECTION 2.18. Intellectual Property.
(a) The Company, directly or indirectly, owns, or is licensed or otherwise
possesses legally enforceable rights to use, all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, technology,
know-how and tangible or intangible proprietary information, inventions, trade
secrets, processes or material that are required for the conduct of the business
of the Company and its subsidiaries as currently conducted (the "COMPANY
INTELLECTUAL PROPERTY RIGHTS"). Section 2.19 of the Company Disclosure Schedule
contains a list of all registered Company Intellectual Property Rights and the
jurisdictions where such registrations have been made.
Either the Company or a subsidiary is the sole and exclusive owner of, or
the exclusive or non-exclusive licensee of, with all right, title and interest
in and to (free and clear of any Liens), the Company Intellectual Property
Rights, and, in the case of Company Intellectual Property Rights owned by the
Company or a subsidiary, has sole and exclusive rights (and is not contractually
obligated to pay any compensation to any third party in respect thereof) to the
use thereof or the material covered thereby in connection with the services or
products in respect of which the Company Intellectual Property Rights are being
used. To the knowledge of the Company, there is no unauthorized use,
infringement or misappropriation by the Company or any of its subsidiaries of
any patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, technology, know-how and tangible or intangible
proprietary information, inventions, trade secrets or processes of any third
party. All registered patents, trademarks, service marks and copyrights held by
the Company are valid and subsisting. To the knowledge of the Company, there is
no unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights by any third party, including any employee or
former employee of the Company or any subsidiary. No Company Intellectual
Property Right or product of the Company or any subsidiary is subject to any
outstanding decree, order, judgment, or stipulation restricting in any manner
the licensing thereof by the Company or any subsidiary, except to the extent any
such restriction does not constitute a Company Material Adverse Effect. Neither
the Company nor any subsidiary has entered into any agreement under which the
Company or any subsidiary is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any segment of the market, except to the
extent any such restriction does not constitute a Company Material Adverse
Effect. Each of the Company and its subsidiaries has used all commercially
reasonable efforts to (i) assert and enforce (and in connection with patent,
copyright and trademark rights, register) all patent, copyright, trademark and
trade secret rights of the Company and its subsidiaries (ii) protect through
nondisclosure agreements or other appropriate means all trade secrets and
confidential information of the Company and its subsidiaries, and (iii)
otherwise to secure and protect for the Company's benefit all Company
Intellectual Property Rights of the Company. Each employee, officer and
consultant of the Company and each of its subsidiaries has executed a
proprietary information and inventions agreement substantially in the form
provided by the Company to Parent. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not impair or
invalidate in any way any of the Company Intellectual Property Rights.
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SECTION 2.19. Change in Control Payments. Neither the Company nor any of
its subsidiaries have any plans, programs or agreements to which they are
parties, or to which they are subject, pursuant to which payments (or
acceleration of benefits) may be required upon, or may become payable directly
or indirectly as a result of, a change of control of the Company. The Board of
Directors of the Company has determined in connection with the authorization of
the execution of this Agreement that such execution does not constitute a change
in control transaction within the meaning of its Stockholder Rights Plan.
SECTION 2.20. Antitakeover Statutes. The board of directors of the Company
has approved this Agreement and the transactions contemplated hereby and neither
Section 203 of the DGCL nor any other antitakeover or similar statute or
regulation applies or purports to apply to the transactions contemplated hereby.
SECTION 2.21. Title to Property. The Company and its subsidiaries own or
lease no material real property other than as set forth in Section 2.21 of the
Company Disclosure Schedule or the Company SEC Reports. Except as reflected in
the Company's financial statements included in the Company SEC Reports, each of
the Company and its subsidiaries has good and defensible title to all of its
respective properties and assets, free and clear of all Liens except Liens for
taxes not yet due and payable; and, to the knowledge of the Company, all leases
pursuant to which the Company or any subsidiary leases from others material
amounts of real or personal property are in good standing, valid and effective
in accordance with their respective terms, and there is not, to the knowledge of
the Company, under any of such leases, any existing material default or event of
default (or event which with notice or lapse of time, or both, would constitute
a material default and in respect of which the Company or any of its
subsidiaries, as applicable, has not taken adequate steps to prevent such a
default from occurring).
SECTION 2.22. Year 2000 Matters. Any reprogramming required to permit the
proper functioning in and following the year 2000 of computer systems and other
equipment containing embedded microchips, in either case owned or operated by
the Company or any of its subsidiaries or used or relied upon in the conduct of
their respective businesses (including any systems and other equipment supplied
by others or with which the computer systems of the Company or any of its
subsidiaries interface) has been completed. The testing of all such systems and
other equipment as so reprogrammed has been completed. The costs to the Company
and its subsidiaries for such reprogramming and testing and for other
foreseeable consequences to them of any improper functioning of other computer
systems and equipment containing embedded microchips due to the occurrence of
the year 2000 will not have a Company Material Adverse Effect.
SECTION 2.23. Company Rights Plan. Under the Shareholder Rights Plan, the
transactions contemplated by this Agreement will not cause a distribution date
(as defined therein) to occur or cause the rights issued pursuant to the
Shareholder Rights Plan to become exercisable, and as a result of the terms of
the Shareholder Rights Plan such rights will be cancelled and cease to exist
immediately prior to the Effective Time.
SECTION 2.24. Accounts Receivable. Section 2.24 of the Company Disclosure
Schedule provides an accurate and complete breakdown and aging of all accounts
receivable of the Company as of November 2, 1999. All existing accounts
receivable of the Company represent valid obligations of customers of the
Company arising from bona fide transactions entered into in the ordinary course
of business and are current and where known collection problems exist, such
problems have been disclosed in Section 2.24 of the Company Disclosure Schedule.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company that,
except as set forth in the written disclosure schedule previously delivered by
Parent to the Company, the paragraphs of which are numbered to correspond to the
Sections of this Agreement (the "PARENT DISCLOSURE SCHEDULE"):
SECTION 3.01. Organization and Qualification; Subsidiaries.
Parent and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority and is in
possession of all Approvals necessary to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to have such power, authority and
Approvals would not, individually or in the aggregate, have a Parent Material
Adverse Effect. Parent and each of its subsidiaries is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that would not, either individually or in the
aggregate, have a Parent Material Adverse Effect.
SECTION 3.02. Certificate of Incorporation and Bylaws. Parent has
heretofore furnished to the Company a complete and correct copy of the
Certificate of Incorporation and Bylaws, as amended to date, of Parent and the
Certificate of Incorporation and Bylaws, as amended to date, of Merger Sub. Such
Certificates of Incorporation and Bylaws of Parent and Merger Sub are in full
force and effect. Neither Parent nor Merger Sub is in violation of any of the
provisions of its Certificate of Incorporation or Bylaws.
SECTION 3.03. Capitalization.
(a) The authorized capital stock of Parent consists of (i) shares of Parent
Common Stock and (ii) shares of Preferred Stock, $0.001 par value ("PARENT
PREFERRED STOCK") were authorized, of which (x) shares of Series A Preferred
Stock were authorized, and (y) shares of Series B Preferred Stock were
authorized. As of October 15, 1999, (1) 186,018,815 shares of Parent Common
Stock were issued and outstanding (including 73,230,302 exchangable shares of
JDS Uniphase Canada, Ltd.), (2) 100,000 shares of Series A Preferred Stock were
issued and outstanding, (3) one share of Series B Preferred Stock was issued and
outstanding, (4) no shares of capital stock were held in its treasury, and (5)
29,434,223 shares of Parent Common Stock were reserved for issuance pursuant to
outstanding options under Parent's stock option plans("PARENT'S STOCK OPTION
PLANS"). No shares of Parent Common Stock have been issued between October 15,
1999 and the date hereof, except for shares issued upon exercise of options
outstanding under Parent's Stock Option Plans. The authorized common stock of
Merger Sub consists of 100 shares of common stock, all of which, as of the date
hereof, are issued and outstanding. All of the outstanding shares of Parent's
and Merger Sub's respective common stock have been duly authorized and validly
issued and are fully paid and nonassessable. Except for options outstanding
under Parent's Stock Option Plans and as set forth in Section 3.03 of the Parent
Disclosure Schedule and as described in the Parent SEC Reports, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued common stock of Parent or any
of its subsidiaries or obligating Parent or any of its subsidiaries to issue or
sell any shares of common stock of, or other equity interests in, Parent or any
of its subsidiaries. There are no obligations, contingent or otherwise, of
Parent or any of its subsidiaries to repurchase, redeem or otherwise acquire any
Parent Common
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Shares or the common stock of any subsidiary. Except as set forth in Section
3.03(a) of the Parent Disclosure Schedule or as will not have a Material Adverse
Effect, all of the outstanding shares of common stock (or other equity
interests) of each of Parent's subsidiaries is duly authorized, validly issued,
fully paid and nonassessable and all such shares are owned by Parent or another
subsidiary free and clear of all Liens, other than Liens for taxes not yet due
and payable.
(b) The Parent Common Shares to be issued pursuant to the Merger will be
duly authorized, validly issued, fully paid and nonassessable and shall be
available for trading on the Nasdaq National Market.
SECTION 3.04. Authority Relative to this Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and subject to obtaining any necessary stockholder
approval of this Agreement by Merger Sub, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of Parent and
Merger Sub, and no other corporate proceedings on the part of Parent or Merger
Sub are necessary to authorize this Agreement or to consummate the transactions
so contemplated (other than the approval by Parent as sole stockholder of Merger
Sub). This Agreement has been duly and validly executed and delivered by Parent
and Merger Sub and, assuming the due authorization, execution and delivery by
the Company, constitutes a legal, valid and binding obligation of Parent and
Merger Sub, enforceable against each in accordance with its terms. The board of
directors of Parent has determined that it is advisable and in the best interest
of Parent's stockholders for Parent to enter into a strategic business
combination with the Company upon the terms and subject to the conditions of
this Agreement.
SECTION 3.05. SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports, exhibits and other documents
required to be filed with the SEC since June 30, 1999 and has heretofore
delivered to the Company, in the form filed with the SEC, (i) its Annual Reports
on Form 10-K for the fiscal year ended June 30, 1999 and June 30, 1998,
respectively, (ii) all proxy statements relating to Parent's meetings of
stockholders (whether annual or special) held since June 30, 1998, (iii) all
other reports or registration statements (other than Reports on Form 3, 4 or 5
filed on behalf of affiliates of the Parent) filed by Parent with the SEC since
June 30, 1998 (iv) all amendments and supplements to all such reports and
registration statements filed by Parent with the SEC (collectively, the "PARENT
SEC REPORTS") and (v) documents which Parent will be required to file. The
Parent SEC Reports (i) were prepared in accordance with the requirements of the
Federal Securities Laws, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of Parent's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports has been prepared
in accordance with U.S. GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto) and each
fairly presents the consolidated financial position of Parent and its
subsidiaries as of the respective dates thereof and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount.
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(c) Parent has heretofore furnished to the Company a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Parent with the SEC pursuant to
the Securities Act or the Exchange Act.
SECTION 3.06. Absence of Certain Changes or Events. Except as set forth in
Section 3.06 of the Parent Disclosure Schedule or the Parent SEC Reports, since
June 30, 1999, Parent has conducted its business in the ordinary course and
there has not occurred: (i) any Parent Material Adverse Effect; (ii) any
amendments or changes in the certificate of incorporation or bylaws of Parent;
(iii) any damage to, destruction or loss of any asset of Parent, (whether or not
covered by insurance) that could have a Parent Material Adverse Effect; (iv) any
change by Parent in its accounting methods, principles or practices; (v) any
revaluation of any of Parent's or any subsidiary's assets, including, without
limitation, writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; (vi) any sale, pledge,
disposition of or encumbrance upon a material amount of property of Parent or of
any subsidiary, except in the ordinary course of business and consistent with
past practice; (vii) any material Tax (as defined below) election inconsistent
with past practices or the settlement or compromise of any material Tax
liability.
SECTION 3.07. No Undisclosed Liabilities. Except as is set forth in the
Parent SEC Reports, neither the Parent nor any of its subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) which are, in the
aggregate, material to the business, operations or financial condition of the
Parent and its subsidiaries taken as a whole, except liabilities (a) adequately
provided for in the Parent's balance sheet (including any related notes thereto)
as of June 30, 1999, (b) incurred in the ordinary course of business and not
required under U.S. GAAP to be reflected on such balance sheet, or (c) incurred
since June 30, 1999 in the ordinary course of business and consistent with past
practice, and liabilities incurred in connection with this Agreement.
SECTION 3.08. Absence of Litigation. Except as set forth in the Parent SEC
Reports, (i) there are no claims, actions, suits, proceedings or investigations
pending or, to the knowledge of the Parent, threatened against Parent or against
any subsidiary and (ii) there is no judgment, decree, injunction, rule or order
outstanding against Parent or its subsidiaries, other than, in each case those
that the outcome of which, individually or in the aggregate, would not have a
Parent Material Adverse Effect or a material adverse effect on Parent's ability
to consummate the Merger.
SECTION 3.09. Labor Matters. Except as set forth in Section 3.09 of the
Parent Disclosure Schedule, (i) there are no controversies pending or, to the
knowledge of Parent or any of its subsidiaries, threatened between Parent or any
of its subsidiaries and any of their respective employees, which controversies
have or may reasonably be expected to have a Parent Material Adverse Effect;
(ii) neither Parent nor any of its subsidiaries is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by Parent or its subsidiaries nor does Parent or any of its
subsidiaries know of any activities or proceedings of any labor union to
organize any such employees, and (iii) neither Parent nor any of its
subsidiaries has any knowledge of any strikes, slowdowns, work stoppages,
lockouts or threats thereof, by or with respect to any employees of Parent or
any of its subsidiaries.
SECTION 3.10. Disclosure Documents. The registration statement of Parent to
be filed with the SEC with respect to the offering of Parent Common Shares in
connection with the Merger (the "REGISTRATION STATEMENT") and any amendments or
supplements thereto will, when filed, comply as to form in all material respects
with the applicable requirements of the Securities Act. At the time the
Registration Statement or any amendment or supplement thereto becomes effective
and at the Effective Time, the Registration Statement, as amended or
supplemented, if applicable, shall not
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contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
contained therein not misleading. The foregoing representations and warranties
will not apply to statements or omissions included in the Registration Statement
or any amendment or supplement thereto based upon information furnished to
Parent or Merger Sub by the Company for use therein. None of the information
furnished to the Company for use in (or incorporation by reference in) the
Company Proxy Statement or any amendment or supplement thereto will contain, at
the time the Company Proxy Statement or any amendment or supplement thereto is
first mailed to stockholders of the Company or at any time the stockholders vote
on the approval and adoption of this Agreement, any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
SECTION 3.11. Taxes. Except as disclosed on Schedule 3.11(b) of the Parent
Disclosure Schedule, Parent and its subsidiaries have filed all United States
federal income Tax Returns and all other material Tax Returns required to be
filed by them, and have duly paid or made adequate provision on their books for
the payment of all taxes which have been incurred or are due and payable.
SECTION 3.12. Environmental Matters.
(a) Each of the Parent and its subsidiaries has obtained all Environmental
Permits, except for such failures to have Environmental Permits which,
individually or in the aggregate, are not reasonably expected to have a Parent
Material Adverse Effect. Each of such Environmental Permits is in full force and
effect and each of the Parent and its subsidiaries is in compliance with the
terms and conditions of all such Environmental Permits and with any applicable
Environmental Law, except for such failures to be in compliance which,
individually or in the aggregate, are not reasonably expected to have a Parent
Material Adverse Effect.
(b) Except as described in the Parent SEC Reports, there is no
Environmental Claim pending or to the knowledge of the Parent threatened against
the Parent or any of its subsidiaries or to the knowledge of the Parent, against
any person or entity whose liability for any Environmental Claim the Parent or
any of its subsidiaries has or may have retained or assumed either contractually
or by operation of law that is reasonably expected to have a Parent Material
Adverse Effect.
(c) Except as described in the Parent SEC Reports, to the knowledge of
Parent, there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
threatened release or presence of any Hazardous Material which could form the
basis of any Environmental Claim against Parent or any of its subsidiaries, or
to the knowledge of Parent, against any person or entity whose liability for any
Environmental Claim Parent or any of its subsidiaries has or may have retained
or assumed either contractually or by operation of law, except for such
liabilities which, individually or in the aggregate, are not reasonably expected
to have a Parent Material Adverse Effect.
(d) To the knowledge of Parent, no site or facility now or previously
owned, operated or leased by Parent or any of its subsidiaries is listed or
proposed for listing on the National Priorities List promulgated pursuant to
CERCLA.
(e) No Liens have arisen under or pursuant to any Environmental Law on any
site or facility owned, operated or leased by Parent or any of its subsidiaries,
other than any such Liens which would, individually or in the aggregate, have a
Parent Material Adverse Effect, and no action of any Governmental or Regulatory
Authority has been taken or, to the knowledge of Parent, is in process which
could subject any of such properties to such Liens.
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SECTION 3.13. Brokers. No broker, finder or investment banker (other than
Banc of America Securities LLC ("BAS") is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent or Merger Sub.
Parent has heretofore furnished to the Company a complete and correct copy of
all agreements between Parent and BAS pursuant to which such firm would be
entitled to any payment relating to the transaction contemplated hereunder.
SECTION 3.14. Full Disclosure. No statement contained in any representation
or warranty contained herein or any statement contained in any certificate or
schedule furnished or to be furnished by Parent or Merger Sub to the Company in,
or pursuant to the provisions of, this Agreement contains or will contain any
untrue statement of a material fact or omits or shall omit to state any material
fact necessary, in light of the circumstances under which it was made, in order
to make the statements herein or therein not misleading.
SECTION 3.15. Opinion of Financial Advisor. Parent has been advised by its
financial advisor, BAS, that, in its opinion, as of the date of this Agreement,
the Exchange Ratio is fair from a financial point of view to Parent and has
delivered a written copy of such opinion dated the date hereof to the Company.
SECTION 3.16. Intellectual Property.
(a) Parent, directly or indirectly, owns, or is licensed or otherwise
possesses legally enforceable rights to use, all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, technology,
know-how and tangible or intangible proprietary information, inventions, trade
secrets, processes or material that are required for the conduct of the business
of Parent and its subsidiaries as currently conducted (the "PARENT INTELLECTUAL
PROPERTY RIGHTS"). Section 3.17 of the Parent Disclosure Schedule contains a
list of all registered Parent Intellectual Property Rights and the jurisdictions
where such registrations have been made.
Either Parent or a subsidiary is the sole and exclusive owner of, or the
exclusive or non-exclusive licensee of, with all right, title and interest in
and to (free and clear of any Liens), the Parent Intellectual Property Rights,
and, in the case of Parent Intellectual Property Rights owned by Parent or a
subsidiary, has sole and exclusive rights (and is not contractually obligated to
pay any compensation to any third party in respect thereof) to the use thereof
or the material covered thereby in connection with the services or products in
respect of which the Parent Intellectual Property Rights are being used. To the
knowledge of Parent, there is no unauthorized use, infringement or
misappropriation by Parent or any of its subsidiaries of any patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, technology, know-how and tangible or intangible proprietary
information, inventions, trade secrets or processes of any third party. All
registered patents, trademarks, service marks and copyrights held by Parent are
valid and subsisting. To the knowledge of Parent, there is no unauthorized use,
infringement or misappropriation of any of the Parent Intellectual Property
Rights by any third party, including any employee or former employee of Parent
or any subsidiary. No Parent Intellectual Property Right or product of Parent or
any subsidiary is subject to any outstanding decree, order, judgment, or
stipulation restricting in any manner the licensing thereof by Parent or any
subsidiary, except to the extent any such restriction does not constitute a
Parent Material Adverse Effect. Neither Parent nor any subsidiary has entered
into any agreement under which Parent or any subsidiary is restricted from
selling, licensing or otherwise distributing any of its products to any class of
customers, in any geographic area, during any period of time or in any segment
of the market, except to the extent any such restriction does not constitute a
Parent Material Adverse Effect. Each of Parent and its subsidiaries has used all
commercially reasonable efforts to (i) assert and enforce (and in connection
with patent, copyright and trademark rights, register) all patent, copyright,
trademark and trade secret rights of Parent and
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its subsidiaries (ii) protect through nondisclosure agreements or other
appropriate means all trade secrets and confidential information of Parent and
its subsidiaries, and (iii) otherwise to secure and protect for Parent's benefit
all Parent Intellectual Property Rights of Parent. Each employee, officer and
consultant of Parent and each of its subsidiaries has executed a proprietary
information and inventions agreement substantially in the form provided by
Parent to the Company. The execution of this Agreement and the consummation of
the transactions contemplated hereby will not impair or invalidate in any way
any of the Parent Intellectual Property Rights.
SECTION 3.17. Title to Property. Parent and its subsidiaries own or lease
no material real property other than as set forth in Section 3.18 of the Parent
Disclosure Schedule or the Parent SEC Reports. Except as reflected in Parent's
financial statements included in the Parent SEC Reports, each of Parent and its
subsidiaries has good and defensible title to all of its respective properties
and assets, free and clear of all Liens except Liens for taxes not yet due and
payable; and, to the knowledge of Parent, all leases pursuant to which Parent or
any subsidiary leases from others material amounts of real or personal property
are in good standing, valid and effective in accordance with their respective
terms, and there is not, to the knowledge of Parent, under any of such leases,
any existing material default or event of default (or event which with notice or
lapse of time, or both, would constitute a material default and in respect of
which Parent or any of its subsidiaries, as applicable, has not taken adequate
steps to prevent such a default from occurring).
SECTION 3.18. Year 2000 Matters. Any reprogramming required to permit the
proper functioning in and following the year 2000 of computer systems and other
equipment containing embedded microchips, in either case owned or operated by
Parent or any of its subsidiaries or used or relied upon in the conduct of their
respective businesses (including any systems and other equipment supplied by
others or with which the computer systems of Parent or any of its subsidiaries
interface) has been completed. The testing of all such systems and other
equipment as so reprogrammed has been completed. The costs to Parent and its
subsidiaries for such reprogramming and testing and for other foreseeable
consequences to them of any improper functioning of other computer systems and
equipment containing embedded microchips due to the occurrence of the year 2000
will not have a Parent Material Adverse Effect.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. Conduct of Business by the Company Pending the Merger. During
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, the Company covenants
and agrees that, unless Parent shall otherwise agree in writing or as required
under this Agreement, the Company shall conduct its business and shall cause the
business of its subsidiaries to be conducted only in, and the Company and its
subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; and the Company shall
use reasonable commercial efforts to preserve substantially intact the business
organization of the Company and its subsidiaries, to keep available the services
of the present officers, employees and consultants of the Company and its
subsidiaries and to preserve the present relationships of the Company and its
subsidiaries with customers, suppliers and other persons with which the Company
or any subsidiary has significant business relations. Parent has read and
approved the Company's fiscal year 2000 operating plan (the "AOP"), and the
Company covenants and agrees that it shall, and shall cause its subsidiaries to,
operate its and their businesses substantially in accordance with the AOP. In
addition, and without limitation, the Company agrees that it shall not, and that
it shall not permit any subsidiary, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective
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Time, directly or indirectly do, or propose to do, any of the following without
the prior written consent of Parent:
(a) amend or otherwise change the Company's certificate of incorporation or
bylaws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the issuance,
sale, pledge, disposition or encumbrance of, any shares of Company capital stock
of any class, or any options, warrants, convertible securities or other rights
of any kind to acquire any shares of Company capital stock, or any other
ownership interest (including, without limitation, any phantom interest) of the
Company, any subsidiary or any of its affiliates (except for the issuance of
shares of Company Common Stock issuable pursuant to employee stock options under
the Company Stock Option Plans which options are outstanding on the date hereof
and the issuance of shares of Company Common Stock under the Company's 1999
Employee Stock Purchase Plan with respect to enrollment allowed under such plan
commencing on November 8, 1999 and for the issuance of shares of Company Common
Stock under such plan for the existing period ending December 31, 1999);
(c) sell, pledge, dispose of or encumber any assets or inventory of the
Company or of any subsidiary (except for (i) sales of assets in the ordinary
course of business and in a manner consistent with past practice and (ii)
dispositions of obsolete or worthless assets);
(d) except as is contemplated by this Agreement, accelerate, amend or
change the period (or permit any acceleration, amendment or change) of
exercisability of options or restricted stock granted under the Employee Plans
(including the Company Stock Option Plans) or authorize cash payments in
exchange for any options granted under any of such plans;
(e) (i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its common stock, except that a subsidiary may declare and pay a dividend
to the Company, (ii) split, combine or reclassify any of its common stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its common stock or (iii) amend
the terms of, repurchase, redeem or otherwise acquire, or permit any subsidiary
to repurchase, redeem or otherwise acquire, any of its securities or any
securities of a subsidiary, or propose to do any of the foregoing;
(f) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any company, corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee (other than guarantees of bank debt of a
subsidiary entered into in the ordinary course of business) or endorse or
otherwise as an accommodation become responsible for, the obligations of any
person, or make any loans or advances, except in the ordinary course of business
consistent with past practice; (iii) enter into or amend any contract or
agreement other than in the ordinary course of business including without
limitation any licensing or technology transfer agreement; (iv) authorize any
capital expenditures or purchase of fixed assets which are, in the aggregate, in
excess of 110% of the amount provided for any particular period set forth in the
AOP ; or (v) enter into or amend any contract, agreement, commitment or
arrangement to effect any of the matters prohibited by this Section 4.01(f);
(g) increase the compensation payable or to become payable to its officers
or employees, except for increases in salary or wages of employees of the
Company or of any subsidiary who are not officers of the Company in accordance
with past practices, or grant any severance or termination pay to, or enter into
any employment or severance agreement with any director, officer (except for
officers who are terminated on an involuntary basis) or other employee of the
Company or of any subsidiary, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of
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any current or former directors, officers or employees, except, in each case, as
may be required by law;
(h) take any action to change accounting policies or procedures (including,
without limitation, procedures with respect to revenue recognition, payments of
accounts payable and collection of accounts receivable);
(i) make any material tax election inconsistent with past practices or
settle or compromise any material federal, state, local or foreign tax liability
or agree to an extension of a statute of limitations except to the extent the
amount of any such settlement has been reserved for on the most recent Company
SEC Report;
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
the financial statements of the Company or incurred in the ordinary course of
business and consistent with past practice; or
(k) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.01(a) through (j) above, or any action which would make
any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect or prevent the Company from performing or cause
the Company not to perform its covenants hereunder.
SECTION 4.02. No Solicitation.
(a) The Company shall not, and shall use its best efforts to cause the
Company's subsidiaries, its and their officers, directors, employees,
affiliates, agents or other representatives (including without limitation any
investment banker, financial advisor, attorney or accountant retained by it or
any of its subsidiaries) to not, initiate, solicit or encourage (including by
way of furnishing information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal relating to, or that may
reasonably be expected to lead to, any Alternative Transaction (as defined in
Section 7.03(c)), or enter into discussions or negotiate with any person or
entity in furtherance of such inquiries or to obtain an Alternative Transaction,
or agree to, or endorse, any Alternative Transaction, or authorize or permit any
of the officers, directors, employees or agents of the Company or of any
subsidiary or any investment banker, financial advisor, attorney, accountant or
other representative retained by the Company or any subsidiary to take any such
action and the Company shall promptly notify Parent of all relevant terms of any
such inquiries or proposals received by the Company or by any subsidiary or by
any such officer, director, employee, agent, investment banker, financial
advisor, attorney, accountant or other representative relating to any of such
matters and if such inquiry or proposal is in writing, the Company shall
promptly deliver or cause to be delivered to Parent a copy of such inquiry or
proposal; provided, however, that nothing contained in this subsection (a) shall
prohibit the board of directors of the Company from (i) furnishing information
to, or entering into discussions or negotiations with, any persons or entity in
connection with an unsolicited bona fide proposal in writing by such person or
entity relating to an Alternative Transaction if, and only to the extent that
(A) such unsolicited bona fide proposal is a bona fide written proposal made by
a third party relating to an Alternative Transaction on terms that the board of
directors of the Company determines , based on the written advice of the
Company's independent outside counsel, that the fiduciary duties of the board of
directors under Delaware law require acceptance of the Alternative Transaction
(except with respect to furnishing information) and for which financing, to the
extent required, is then committed, (B) the board of directors of the Company,
after duly considering the written advice of the Company's independent outside
counsel, determines in good faith that such action is required for the board of
directors of the Company to
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comply with its fiduciary duties to stockholders imposed by Delaware law and (C)
prior to furnishing such information to, or entering into discussions or
negotiations with, such person or entity the Company provides written notice to
Parent to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person or entity; or (ii) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to an Alternative
Transaction.
(b) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any parties (other than Parent and
Merger Sub) conducted heretofore with respect to any of the foregoing. The
Company agrees not to release any third party from any confidentiality or
standstill agreement to which the Company is a party.
(c) The Company shall ensure that the officers, directors and employees of
the Company and of each subsidiary and any investment banker or other advisor or
representative retained by the Company are aware of the restrictions described
in this Section.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Proxy Statement.
In connection with the meeting of the Company's stockholders to approve the
Agreement and the transactions contemplated hereby (the "COMPANY STOCKHOLDERS'
MEETING"), the Company will prepare and file with the SEC on or before December
15, 1999, use its reasonable best efforts to have cleared with the SEC and
thereafter mail to its stockholders as promptly as practicable the Company Proxy
Statement and all other proxy materials for such meeting, with the Company Proxy
Statement and all other proxy materials subject to the review and reasonable
approval of Parent.
SECTION 5.02. Company Stockholders' Meeting. The Company shall call and
hold the Company Stockholders' Meeting as promptly as practicable for the
purpose of voting upon the approval of the Merger, and the Company shall use its
reasonable best efforts to hold the Company Stockholders' Meeting on the same
day (and at the same time of such day) and as soon as practicable after the date
on which the Registration Statement becomes effective. The Company shall use its
best efforts to hold the Company Stockholders' Meeting not later than January
31, 2000. The Company shall use its best efforts to solicit from its
stockholders proxies in favor of the approval of the Merger, and shall take all
other action necessary or advisable to secure the vote or consent of
stockholders required by the DGCL and the certificate of incorporation and
bylaws of the Company to obtain such approvals.
SECTION 5.03. Access to Information; Confidentiality. Upon reasonable
notice and subject to restrictions contained in confidentiality agreements to
which such party is subject, the Company and Parent shall each (and shall cause
each of their subsidiaries to) afford to the officers, employees, accountants,
counsel and other representatives of the other, reasonable access, during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period. The Company and Parent each
shall (and shall cause each of their subsidiaries to) furnish promptly to the
other all information concerning its business, properties and personnel as such
other party may reasonably request, and each shall make available to the other
the appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the other's business, properties and personnel
as either party may reasonably request. Each party shall keep such information
confidential in accordance with the terms of the letter agreement, entered into
on October 11, 1999 (the "CONFIDENTIALITY AGREEMENT") between Parent and the
Company. The Company and Parent shall file all reports required to be filed by
each of them with the SEC between
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the date of this Agreement and the Effective Time and shall deliver to the other
party copies of such reports promptly after the same are filed.
SECTION 5.04. Consents; Approvals. The Company and Parent shall each use
their reasonable best efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all governmental and
regulatory rulings and approvals), and the Company and Parent shall make all
filings (including, without limitation, the pre-merger notification filings
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and all other filings with governmental or regulatory agencies)
required in connection with the authorization, execution and delivery of this
Agreement by the Company and Parent and the consummation by them of the
transactions contemplated hereby. The Company and Parent shall furnish all
information required to be included in the Company Proxy Statement and the
Registration Statement, or for any application or other filing to be made
pursuant to the rules and regulations of any governmental body in connection
with the transactions contemplated by this Agreement. Except where prohibited by
applicable statutes and regulations, and subject to the Confidentiality
Agreement, each party shall promptly provide the other (or its counsel) with
copies of all filings made by such party with any state or federal government
entity in connection with this Agreement or the transactions contemplated
hereby.
SECTION 5.05. Agreements of Affiliates. The Company shall deliver to
Parent, prior to the date the Registration Statement becomes effective under the
Securities Act, a letter (the "AFFILIATE LETTER") identifying all persons who
are, or may be deemed to be, at the time of the Company Stockholders' Meeting,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its best efforts to cause each person who is identified as
an "affiliate" in the Affiliate Letter to deliver to Parent, prior to the
Effective Time, a written agreement (an "AFFILIATE AGREEMENT") in a form
mutually agreeable to the Company and Parent.
SECTION 5.06. Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be materially untrue or inaccurate and (ii) any
failure of the Company, Parent or Merger Sub, as the case may be, to materially
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice and further provided that
failure to give such notice shall not be treated as a breach of covenant for the
purposes of Section 6.02(b) or 6.03(b) unless the failure to give such notice
results in material prejudice to the other party.
SECTION 5.07. Further Assurances; Tax Treatment.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement, to obtain in a timely manner
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings, and to otherwise satisfy or cause to be satisfied all
conditions precedent to its obligations under this Agreement. The foregoing
covenant shall not include any obligation by Parent to agree to divest, abandon,
license or take similar action with respect to any assets (tangible or
intangible) of Parent or the Company.
(b) Each of Parent, Merger Sub and the Company shall use its best efforts
to cause the Merger to qualify, and will not (both before and after consummation
of the Merger) take any actions which
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could prevent the Merger from qualifying, as a reorganization under the
provisions of Section 368 of the Code.
(c) Each of Parent, Merger Sub and the Company shall cooperate with each
other in obtaining the opinions of Morrison & Foerster LLP and Collette &
Erickson LLP described in Section 6.01(c). In connection therewith, each of
Parent and the Company shall deliver to such counsel customary representation
letters substantially in the form of Exhibits 5.07(c) hereto.
SECTION 5.08. Public Announcements. Parent and the Company shall consult
with each other before issuing any press release with respect to the Merger or
this Agreement and shall not issue any such press release or make any such
public statement without the prior consent of the other party, which shall not
be unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party, issue such press release or make such public
statement as may upon the advice of counsel be required by law or the Nasdaq
National Market if it has used all reasonable efforts to consult with the other
party.
SECTION 5.09. Listing of Parent Common Shares. Parent shall use its
commercially reasonable best efforts to cause the shares of Parent Common Shares
to be issued in the Merger to be approved for quotation on the Nasdaq National
Market prior to the Effective Time.
SECTION 5.10. Conveyance Taxes. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time.
SECTION 5.11. Director and Officer Liability. After the Effective Time,
Parent will cause the Surviving Company to indemnify and hold harmless the
present and former officers and directors of the Company in respect of acts or
omissions occurring prior to the Effective Time to the extent provided under the
Company's certificate of incorporation and bylaws in effect on the date hereof.
For a period of three years after the Effective Time, Parent and/or the
Surviving Company shall cause to be maintained in effect the policies of
directors' and officers' liability insurance maintained by the Company for the
benefit of those persons who are covered by such policies at the Effective Time
(or Parent and/or the Surviving Company may substitute therefor policies of at
least the same coverage with respect to matters occurring prior to the Effective
Time); provided, however, that in no event shall Parent and/or the Surviving
Company be required to expend in excess of 125 percent of the annual premium
currently paid by the Company for such coverage, and provided further, that if
the premium for such coverage exceeds such amount, Parent and/or the Surviving
Company shall purchase a policy with the greatest coverage available for such
125 percent of the annual premium; and provided further, that Parent shall cause
director's and officer's liability insurance to be available to cover the
directors and officers of the Surviving Company after the Effective Time to the
same extent it provides such insurance to the directors and officers of its
other subsidiaries.
SECTION 5.12. Employee Benefit Plans.
The Company Employee Plans, including without limitation the Management
Incentive Plan, the Company's 401(k) Plan, and the Shared Targets and Reward
Program, will continue in effect without material reduction of benefits to plan
participants through October 31, 2000; provided that, with respect to the
Management Incentive Plan, Parent may modify the performance criteria set forth
in such plan for the calculation of bonuses thereunder (solely with respect to
the participants in such plan for whom bonuses are paid based, solely or in
part, on the performance of the Company's fiber optic group) to the extent
reasonably required by Parent to facilitate the integration of the operations
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of such group with the operations of Parent and its subsidiaries. The employees
of the Company will be entitled to participate in Parent's employee stock option
plans and similar stock based compensation plans on a basis comparable to
Parent's employees having similar positions, responsibilities and compensation
as those of the Company.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Effectiveness of the Registration Statement. The Registration Statement
shall have been declared effective by the SEC under the Securities Act. No stop
order suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose and no similar proceeding
in respect of the Company Proxy Statement shall have been initiated or
threatened by the SEC;
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; and there shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger, which makes the consummation of the Merger
illegal;
(c) Tax Opinions. Parent and the Company shall have received opinions of
Morrison & Foerster LLP and Collette & Erickson in form and substance reasonably
satisfactory to Parent, on the basis of certain facts, representations and
assumptions set forth in such opinion, dated the Effective Time, to the effect
that the Merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of Section 368(a) of the Code and
that each of Parent, Merger Sub and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code; and
(d) HSR Act. The waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated.
SECTION 6.02. Additional Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company contained in this Agreement shall be true and correct on and as of
the Effective Time, except (i) for changes contemplated by this Agreement, (ii)
those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), and (iii)
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein) would not have a Company Material
Adverse Effect, with the same force and effect as if made on and as of the
Effective Time, and Parent and Merger Sub shall have received a certificate to
such effect signed by the President and Chief Financial Officer of the Company;
(b) Agreements and Covenants. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied
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with by it on or prior to the Effective Time, and Parent and Merger Sub shall
have received a certificate to such effect signed by the President and Chief
Financial Officer of the Company;
(c) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the Company;
(d) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made ("MATERIAL CONSENTS"), by the Company for the authorization, execution and
delivery of this Agreement and the consummation by it of the transactions
contemplated hereby shall have been obtained and made by the Company, except
where the failure to receive such Material Consents would not have a Material
Adverse Effect on the Company or Parent;
(e) Material Adverse Effect. Since the date of this Agreement, there shall
not have occurred a Company Material Adverse Effect;
(f) Affiliate Agreements. Parent shall have received from each person who
is identified in the Affiliate Letter as an "affiliate" of the Company, an
Affiliate Agreement, and such Affiliate Agreement shall be in full force and
effect;
(g) Noncompetition Agreements. The Company employees listed on Schedule
6.02(g) shall have entered into noncompetition agreements with Parent in form
and substance satisfactory to Parent; and
(h) Agreements with Employees. The Company employees listed in Section
6.02(h) of the Parent Disclosure Schedule shall remain employed with the Company
and shall remain bound by agreements between such employees and the Company with
respect to proprietary inventions at the Effective Time, and no such agreement
shall contain a provision allowing for the termination or expiration of such
agreement upon the Effective Time.
SECTION 6.03. Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall be true and correct on
and as of the Effective Time, except (i) for changes contemplated by this
Agreement, (ii) those representations and warranties which address matters only
as of a particular date (which shall remain true and correct as of such date),
and (iii) where the failure of such representations and warranties to be so true
and correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein) would not have, individually or in
the aggregate, a Parent Material Adverse Effect, with the same force and effect
as if made on and as of the Effective Time, and the Company shall have received
a certificate to such effect signed by the President and Chief Financial Officer
of Parent;
(b) Agreements and Covenants. Parent and Merger Sub shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them on or prior to the
Effective Time, and the Company shall have received a certificate to such effect
signed by the President and Chief Financial Officer of Parent;
(c) Consents Obtained. All Material Consents required to be obtained or
made by Parent and Merger Sub for the authorization, execution and delivery of
this Agreement and the consummation by them of the transactions contemplated
hereby shall have been obtained and made by Parent and Merger Sub, except where
the failure to receive such Material Consents would not have a Material Adverse
Effect on the Company or Parent; and
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(d) Material Adverse Effect. Since the date of this Agreement, there shall
not have been a Parent Material Adverse Effect.
ARTICLE VII
TERMINATION
SECTION 7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company:
(a) by mutual written consent duly authorized by the boards of directors of
Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not have been
consummated by June 30, 2000 (provided that the right to terminate this
Agreement under this Section 7.01(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date); or
(c) by either Parent or the Company if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued a non-appealable final order, decree or ruling or taken any other action,
in each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger, except if the party relying on such order,
decree or ruling or other action has not complied with its obligations under
Sections 5.04 and 5.07; or
(d) by Parent or the Company if, at the Company Stockholders' Meeting
(including any adjournment or postponement thereof), the requisite vote of the
stockholders of the Company shall not have been obtained; or
(e) by Parent, if (i) the board of directors of the Company shall withdraw,
modify or change its recommendation of this Agreement or the Merger in a manner
adverse to Parent or shall have resolved to do any of the foregoing; (ii) the
board of directors of the Company shall have recommended to the stockholders of
the Company an Alternative Transaction (as defined in Section 7.03(c)); or (iii)
a tender offer or exchange offer for 15% or more of the outstanding shares of
Company Common Stock is commenced (other than by Parent or an affiliate of
Parent), and the board of directors of the Company recommends that the
stockholders of the Company tender their shares in such tender or exchange
offer; or
(f) by Parent or the Company, upon a material breach of any representation,
warranty, covenant or agreement on the part of the Company or Parent,
respectively, set forth in this Agreement such that the conditions set forth in
Section 6.02(a) or 6.02(b), or Section 6.03(a) or 6.03(b), would not be
satisfied (a "TERMINATING BREACH").
SECTION 7.02. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.01, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers or stockholders except (i) as set forth in
Sections 7.03 and 8.01 hereof, and (ii) nothing herein shall relieve any party
from liability for any willful breach hereof.
SECTION 7.03. Fees and Expenses.
(a) Except as set forth in this Section 7.03, (i) all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, if the Merger is not
consummated, or (ii) if the Merger is consummated, then the Surviving Company
shall pay all such fees and expenses; provided, however, that Parent and the
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Company shall share equally all documented fees and expenses, other than
attorneys' fees, incurred in relation to the printing and filing of the Company
Proxy Statement (including any preliminary materials related thereto) and the
Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
(b) The Company shall pay Parent a fee of $85,000,000 in cash (the "FEE"),
plus reasonable, documented out-of-pocket expenses of Parent relating to the
transactions contemplated by this Agreement (including, but not limited to, fees
and expenses of Parent's counsel, accountants and financial advisers, but
excluding any discretionary fees paid to such financial advisors) (such
expenses, collectively, "Expenses"), upon the termination of this Agreement by
Parent pursuant to Section 7.01(e).
(c) As used herein, "ALTERNATIVE TRANSACTION" means any inquiry, proposal
or offer from any person relating to (i) a transaction pursuant to which any
person (or group of persons) other than Parent or its affiliates (a "THIRD
PARTY") seeks to acquire, directly or indirectly, more than 15 percent of the
outstanding Shares, whether from the Company or pursuant to a tender offer or
exchange offer or otherwise, (ii) a merger or other business combination
involving the Company pursuant to which any Third Party acquires more than 15
percent of the outstanding equity securities of the Company or the entity
surviving such merger or business combination, (iii) any other transaction
pursuant to which any Third Party acquires control of the assets of the Company
(including for this purpose the outstanding equity securities of any
subsidiary), (iv) the adoption by the Company of a plan of liquidation, the
declaration or payment by the Company of an extraordinary dividend on any of its
shares of capital stock or the effectuation by the Company of a recapitalization
or other type of transaction that would involve either a change in the Company's
outstanding capital stock or a distribution of assets of any kind to the holders
of such capital stock or (v) the repurchase by the Company or any of its
subsidiaries of shares of the Company's capital stock representing at least 15
percent or more of the aggregate voting power of all voting securities of the
Company; provided, however, that the term Alternative Transaction shall not
include any acquisition of securities by a broker dealer in connection with a
bona fide public offering of such securities.
(d) The Fee payable pursuant to Section 7.03(b) shall be paid within one
business day after the first to occur of the events described in Section
7.03(b).
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Effectiveness of Representations, Warranties and Agreements;
Knowledge, Etc.
(a) Except as otherwise provided in this Section 8.01, the representations,
warranties and agreements of each party hereto shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.01(a) through (e), as the case may be, except that the
agreements set forth in Article I and Section 5.11 shall survive the Effective
Time indefinitely and the agreements and liabilities set forth or otherwise
described in Section 7.03 shall survive termination indefinitely. The
Confidentiality Agreement shall survive termination of this Agreement as
provided therein.
(b) Any disclosure made with reference to one or more Sections of the
Company Disclosure Schedule or the Parent Disclosure Schedule shall be deemed
disclosed with respect to each other
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section therein as to which such disclosure is relevant provided that such
relevance is reasonably apparent.
SECTION 8.02. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like changes of address which shall be effective upon
receipt) or sent by electronic transmission, with confirmation received, to the
telefacsimile number specified below:
(a) If to Parent or Merger Sub:
JDS Uniphase Corporation
163 Baypointe Parkway
San Jose, CA 95134
Attention: Michael C. Phillips
With copies to:
Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105
Fax: (415) 268-7522
Attention: John W. Campbell
(b) If to the Company:
Optical Coating Laboratory Inc.
2789 Northpoint Parkway
Santa Rosa, CA 95407
Attention: Charles J. Abbe
With copies to:
Collette & Erickson LLP
555 California Street, Suite 4350
San Francisco, CA 94104
Fax: (415) 788-6929
Attention: John V. Erickson
Certain Definitions. For purposes of this Agreement, the term:
(a) "AFFILIATES" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person;
(b) "BUSINESS DAY" means any day other than a day on which banks in San
Francisco are required or authorized to be closed;
(c) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "KNOWLEDGE" means (i) with respect to Chardonnay, the actual knowledge
of Chardonnay's officers and directors after reasonable inquiry and (ii) with
respect to Merlot, the actual knowledge of Merlot's executive officers after
reasonable inquiry.
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(e) "PERSON" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in Section
13(d)(3) of the Exchange Act); and
(f) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, the Surviving Company,
Parent or any other person means any corporation, partnership, joint venture or
other legal entity of which the Company, the Surviving Company, Parent or such
other person, as the case may be, (either alone or through or together with any
other subsidiary) owns, directly or indirectly, any of the stock or other equity
interests, the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity.
SECTION 8.03. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective boards of directors
at any time prior to the Effective Time; provided, however, that, after approval
of the Merger by the stockholders of the Company, no amendment may be made which
by law requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
SECTION 8.05. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.07. Entire Agreement. This Agreement, the Company Disclosure
Schedule and the Parent Disclosure Schedule constitute the entire agreement and
supersede all prior agreements and undertakings (other than the Stock Option
Agreement and the Confidentiality Agreement), both written and oral, among the
parties, or any of them, with respect to the subject matter hereof and, except
as otherwise expressly provided herein, are not intended to confer upon any
other person any rights or remedies hereunder.
SECTION 8.08. Assignment, Merger Sub. This Agreement shall not be assigned
by operation of law or otherwise, except that Parent and Merger Sub may assign
all or any of their rights hereunder to any affiliate provided that no such
assignment shall relieve the assigning party of its obligations hereunder.
SECTION 8.09. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
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SECTION 8.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware
applicable to contracts executed and fully performed within the State of
Delaware, without regard to the conflicts of laws provisions thereof.
SECTION 8.11. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 8.12. WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB AND THE
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement and Plan of Reorganization and Merger to be executed as of the date
first written above by their respective officers thereunto duly authorized.
JDS UNIPHASE CORPORATION
By /s/ MICHAEL C. PHILLIPS
------------------------------------
Name Michael C. Phillips
----------------------------------
Title Senior Vice President,
Business Development,
General Counsel
-------------------------------
VINTAGE ACQUISITION, INC.
By /s/ MICHAEL C. PHILLIPS
------------------------------------
Name Michael C. Phillips
----------------------------------
Title Vice President and
Secretary
-----------------------------------
OPTICAL COATING LABORATORY, INC.
By /s/ CHARLES J. ABBE
------------------------------------
Name Charles J. Abbe
----------------------------------
Title President and
Chief Executive Officer
-----------------------------------
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ANNEX B
COMPANY STOCK OPTION AGREEMENT
BY AND BETWEEN
JDS UNIPHASE CORPORATION,
AND
OPTICAL COATING LABORATORY, INC.,
DATED AS OF NOVEMBER 3, 1999
<PAGE> 124
ANNEX B
COMPANY STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "STOCK OPTION AGREEMENT"), dated as of
November 3, 1999, is by and between JDS UNIPHASE CORPORATION, a Delaware
corporation ("GRANTEE"), and OPTICAL COATING LABORATORY, INC., a Delaware
corporation ("ISSUER").
RECITALS
A. Grantee and Issuer propose to enter into an Agreement and Plan of
Reorganization and Merger, dated as of the date hereof (the "MERGER AGREEMENT"),
which has been executed in connection with this Agreement (each capitalized term
used herein without definition shall have the meaning specified in the Merger
Agreement).
B. As a condition to Grantee's entering into the Merger Agreement and in
consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. GRANT OF OPTION. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "OPTION") to purchase, subject to the terms hereof, up
to 19.9% of the outstanding shares of common stock of the Issuer, par value
$0.01 per share (the "COMMON STOCK"), fully paid and nonassessable, at a
purchase price of $177.65 per share, as adjusted in accordance with the
provisions of Section 5 of this Agreement (such price, as adjusted if
applicable, the "OPTION PRICE").
2. EXERCISE OF OPTION.
(a) Exercise. Grantee may exercise the Option, in whole or part, and from
time to time, if, but only if, a Triggering Event (as hereinafter defined) shall
have occurred prior to the occurrence of an Option Termination Event (as
hereinafter defined).
(b) Option Termination Events. The term "OPTION TERMINATION EVENT" shall
mean any of the following events: (i) immediately prior to the Effective Time of
the Merger; (ii) termination of the Merger Agreement by Issuer pursuant to
Section 7.01 of the Merger Agreement (other than upon or during the continuance
of a Triggering Event); or (iii) one year following any termination of the
Merger Agreement upon or during the continuance of a Triggering Event (or if, at
the expiration of such one year period the Option cannot be exercised by reason
of any applicable judgment, decree, order, law or regulation, 10 business days
after such impediment to exercise shall have been removed or shall have become
final and not subject to appeal). Notwithstanding the foregoing, the Option may
not be exercised if there has not been a Triggering Event and Grantee is in
material breach of its representation or warranties, or in material breach of
any of its covenants or agreements contained in this Agreement or the Merger
Agreement.
(c) Triggering Events. The term "TRIGGERING EVENT" shall mean an
Alternative Transaction shall have been publicly announced or shall have become
publicly known prior to the time the Merger Agreement is terminated or the time
of the Company Stockholder Meeting.
(d) Notice of Triggering Event. Issuer shall notify Grantee promptly in
writing of the occurrence of any Triggering Event, it being understood that the
giving of such notice by Issuer shall
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not be a condition to the right of Grantee to exercise the Option or for a
Triggering Event to have occurred.
(e) Notice of Exercise; Closing. In the event Grantee is entitled to and
wishes to exercise the Option, it shall send to Issuer a written notice (the
date of which being herein referred to as the "NOTICE DATE") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 10 business
days (or, in the event approval under the HSR Act is required, 60 calendar days)
from the Notice Date for the closing of such purchase (the "CLOSING DATE");
provided, that if the closing of the purchase and sale pursuant to the Option
(the "CLOSING") cannot be consummated, in the reasonable opinion of Grantee, by
reason of any applicable judgment, decree, order, law or regulation, the period
of time that otherwise would run pursuant to this sentence shall run instead
from the date on which the restriction on consummation has expired or been
terminated; and provided further, without limiting the foregoing, that if, in
the reasonable opinion of Grantee, prior notification to or approval of any
regulatory agency is required in connection with such purchase, Grantee shall
promptly file the required notice or application for approval and shall
expeditiously process the same, and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which any required
notification periods have expired or been terminated or such approvals have been
obtained and any requisite waiting period or periods shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto. Notwithstanding this subsection (e), in no event shall any Closing Date
be more than three years after the related Notice Date, and if the Closing Date
shall not have occurred within three years after the related Notice Date due to
the failure to obtain any such required approval, the exercise of the Option
effected on the Notice Date shall be deemed to have expired.
(f) Purchase Price. At the Closing referred to in subsection (e) above,
Grantee shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude Grantee from exercising the Option.
(g) Issuance of Common Stock. At the Closing, simultaneously with the
delivery of immediately available funds as provided in subsection (f) of this
Section 2, Issuer shall deliver to Grantee a certificate or certificates
representing the number of shares of Common Stock purchased by the Grantee and,
if the Option is exercised in part only, a new Option evidencing the rights of
Grantee thereof to purchase the balance of the shares purchasable hereunder, and
the Grantee shall deliver to Issuer a copy of this Agreement and a letter
agreeing that Grantee will not offer to sell or otherwise dispose of such shares
in violation of applicable law or the provisions of this Agreement.
(h) Legend. Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate are subject to
certain provisions of an agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the Securities Act of 1933, as
amended. A copy of such agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without charge upon receipt by Issuer
of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if Grantee shall
have delivered to Issuer a copy of a letter from the staff of the SEC, or an
opinion of counsel, in form and substance reasonably satisfactory to Issuer, to
the effect that such legend is not
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required for purposes of the Securities Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Record Grantee; Expenses. Upon the giving by Grantee to Issuer of the
written notice of exercise of the Option provided for under subsection (e) of
this Section 2 and the tender of the applicable purchase price in immediately
available funds, Grantee shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates,
representing such shares of Common Stock shall not then be actually delivered to
Grantee or the Issuer shall have failed or refused to designate the bank account
described in subsection (f) of this Section 2. Issuer shall pay all expenses and
any and all United States federal, state and local taxes and other charges that
may be payable in connection with the preparation, issuance and delivery of
stock certificates under this Section 2 in the name of Grantee or its assignee,
transferee or designee.
3. RESERVATION OF SHARES. Issuer agrees: (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock (and other securities issuable pursuant to
Section 5(a)) so that the Option may be exercised without additional
authorization of Common Stock (or such other securities) after giving effect to
all other options, warrants, convertible securities and other rights to purchase
Common Stock (or such other securities); (ii) that it will not, by charter
amendment or through reorganization, consolidation, merger, dissolution or sale
of assets, or by any other voluntary act, avoid or seek to avoid the observance
or performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer; (iii) promptly to take all action as
may from time to time be required (including without limitation complying with
all premerger notification, reporting and waiting periods under the HSR Act) in
order to permit Grantee to exercise the Option and Issuer duly and effectively
to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of Grantee against dilution.
4. DIVISION OF OPTION; LOST OPTIONS. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Grantee, upon
presentation and surrender of this Agreement at the principal office of Issuer,
for other agreements providing for Options of different denominations entitling
the holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "AGREEMENT" and "OPTION" as
used herein include any Stock Option Agreements and related Options for which
this Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement
of like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
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5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. The number of shares of
Common Stock purchasable upon the exercise of the Option shall be subject to
adjustment from time to time as provided in this Section 5.
(a) In the event that any additional shares of Common Stock, or any rights,
options, warrants, subscriptions, calls, convertible securities or other
agreements or commitments obligating Issuer to issue any shares of Common Stock,
are issued or otherwise become outstanding after the date hereof (an
"INCREASE"), the number of shares of Common Stock subject to the Option shall be
increased so that the number of shares issuable upon exercise of the Option
shall be equal to the product of (A) the percentage of the outstanding Common
Stock for which the Option was exercisable immediately prior to the Increase and
(B) the number of shares of Common Stock outstanding immediately after the
Increase; provided that the number of shares of Common Stock subject to the
Option shall in no event exceed 19.9% of the issued and outstanding shares of
Common Stock immediately prior to exercise.
(b) In the event of any change in Common Stock by reason of stock
dividends, splits, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares or other similar transactions and no adjustment
is required pursuant to the terms of Section 5(a), then the type and number of
shares of Common Stock purchasable upon exercise hereof shall be appropriately
adjusted so that Grantee shall receive upon exercise of the Option and payment
of the aggregate Option Price hereunder the number and class of shares or other
securities or property that Grantee would have received in respect of Common
Stock if the Option had been exercised in full immediately prior to such event,
or the record date therefor, as applicable.
(c) Whenever the number of shares of Common Stock subject to this Agreement
on a fully diluted basis changes after the date hereof, the Option Price shall
be adjusted by multiplying the Option Price by a fraction, the numerator of
which shall be equal to the aggregate number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be equal
to the aggregate number of shares of Common Stock purchasable immediately after
the adjustment.
6. REGISTRATION RIGHTS. Upon the occurrence of a Triggering Event that
occurs prior to an Option Termination Event (or as otherwise provided in the
last sentence of Section 2(e)), Issuer shall, at the request of Grantee, deliver
at any time on or prior to the Option Termination Date (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the Securities Act
covering any shares issued and issuable pursuant to this Option and shall use
its best efforts to cause such registration statement to become effective and
remain current in order to permit the sale or other disposition of any shares of
Common Stock issued upon total or partial exercise of this Option ("OPTION
SHARES") in accordance with any plan of disposition requested by Grantee. Issuer
will use its best efforts to cause such registration statement first to become
effective and then to remain effective for such period not in excess of 180 days
from the day such registration statement first becomes effective or such shorter
time as may be reasonably necessary to effect such sales or other dispositions.
Grantee for a period of three years following such first request shall have the
right to demand a second such registration if reasonably necessary to effect
such sales or dispositions. The foregoing notwithstanding, if, at the time of
any request by Grantee for registration of Option Shares as provided above,
Issuer is in registration with respect to an underwritten public offering of
shares of Common Stock, and if in the good faith judgment of the managing
underwriter or managing underwriters, or, if none, the sole underwriter or
underwriters, of such offering the inclusion of the Grantee's Option or Option
Shares would interfere with the successful marketing of the shares of Common
Stock offered by Issuer, the number of Option Shares otherwise to be covered in
the registration statement contemplated hereby may be reduced; provided,
however, that after any such required reduction the number of Option Shares to
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be included in such offering for the account of Grantee shall constitute at
least 25% of the total number of shares to be sold by Issuer in the aggregate;
and provided further, that if such reduction occurs, then the Issuer shall file
a registration statement for the balance as promptly as practicable and no
reduction shall thereafter occur (and such registration shall not be charged
against Grantee). Grantee shall provide all information reasonably requested by
Issuer for inclusion in any registration statement to be filed hereunder. If
requested by any Grantee in connection with such registration, Issuer shall
become a party to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements for the Issuer. Upon receiving any
request under this Section 6 from Grantee, Issuer agrees to send a copy thereof
to any other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
7. REPURCHASE OF OPTION AND OPTION SHARES.
(a) Within ten business days following the occurrence of a Repurchase Event
(as defined below), Issuer shall (i) deliver an offer (a "REPURCHASE OFFER") to
repurchase the Option from Grantee at a price (the "OPTION REPURCHASE PRICE")
equal to the amount by which (A) the Alternative Transaction Price (as deemed
below) exceeds (B) the Option Price, multiplied by the number of shares for
which the Option may then be exercised, and (ii) deliver an offer (also, a
"REPURCHASE OFFER") to repurchase the Option Shares from each owner of Option
Shares (excluding such Option Shares as have been publicly distributed) from
time to time (each, an "OWNER") at a price (the "OPTION SHARE REPURCHASE PRICE")
equal to the Alternative Transaction Price multiplied by the number of Option
Shares then held by such Owner, provided, however, that the aggregate Option
Share Repurchase Price shall not be greater than $127,000,000 minus the amount
of the Fee, if any, that has been paid by Issuer to Grantee. The term
"ALTERNATIVE TRANSACTION PRICE" shall mean, as of any date for the determination
thereof, the price per share of Common Stock paid pursuant to the Alternative
Transaction or, in the event of a sale of assets of Issuer, the last per-share
sale price of Common Stock on the fourth trading day following the announcement
of such sale. If the consideration paid or received in the Alternative
Transaction shall be other than in cash, the value of such consideration shall
be determined by a nationally recognized investment banking firm selected by
Grantee, which determination shall be conclusive for all purposes of this
Agreement.
(b) Upon the occurrence of a Repurchase Event and whether or not Issuer
shall have made a Repurchase Offer under Section 7(a), (i) at the request (the
date of such request being the "OPTION REPURCHASE REQUEST DATE") of Grantee
delivered prior to the Option Termination Date, Issuer shall repurchase the
Option from Grantee at the Option Repurchase Price, and (ii) at the request (the
date of such request being the "OPTION SHARE REPURCHASE REQUEST DATE") of any
Owner delivered prior to the Option Termination Date, Issuer shall repurchase
such number of the Option Shares from the Owner as the Owner shall designate at
the Option Share Repurchase Price.
(c) Grantee and/or the Owner, as the case may be, may accept Issuer's
Repurchase Offer under Section 7(a) or may exercise its right to require Issuer
to repurchase the Option and/or any Option Shares pursuant to Section 7(b) by a
written notice or notices stating that Grantee or the Owner, as the case may be,
elects to accept such offer or to require Issuer to repurchase the Option and/or
the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within five business days following
receipt of a notice under this Section 7(c) and the surrender to Issuer of this
Agreement and/or Certificates for Option Shares, as applicable, and the
occurrence of a Repurchase Event, Issuer shall deliver or cause to be delivered
to Grantee the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price and/or the portion thereof that Issuer is not then prohibited
from so delivering under applicable law.
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(d) Issuer hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to accomplish any repurchase contemplated by this Section
7. Nonetheless, to the extent that Issuer is prohibited under applicable law,
from repurchasing the Option and/or any Option Shares in full, Issuer shall
immediately so notify Grantee and/or the Owner and thereafter deliver or cause
to be delivered, from time to time, to Grantee and/or the Owner, as appropriate,
the portion of the Option Repurchase Price and the Option Share Repurchase
Price, respectively, that it is no longer prohibited from delivering, in every
case within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to Section 7(c) is prohibited under applicable
law, from delivering to Grantee and/or the Owner, as appropriate, the Option
Repurchase Price or the Option Share Repurchase Price, respectively, in full,
Grantee or the Owner, as appropriate, may revoke its notice of repurchase of the
Option or the Option Shares either in whole or in part whereupon, in the case of
a revocation in part, Issuer shall promptly (i) deliver to Grantee and/or the
Owner, as appropriate, that portion of the Option Repurchase Price or the Option
Share Repurchase Price that Issuer is not prohibited from delivering after
taking into account any such revocation and (ii) deliver, as appropriate, either
(A) to Grantee, a new Agreement evidencing the right of Grantee to purchase that
number of shares of Common Stock equal to the number of shares of Common Stock
purchasable immediately prior to the delivery of the notice of repurchase less
the number of shares of Common Stock covered by the portion of the Option
repurchased or (B) to the Owner, a certificate for the number of Option Shares
covered by the revocation. If an Option Termination Event shall have occurred
prior to the date of the notice by Issuer described in the first sentence of
this subsection (d), or shall be scheduled to occur at any time before the
expiration of a period ending on the thirtieth day after such date, Grantee
shall nonetheless have the right to exercise the Option until the expiration of
such 30-day period.
(e) The term "REPURCHASE EVENT" shall mean the occurrence of a Triggering
Event prior to the occurrence of an Option Termination Event followed by the
occurrence of an Alternative Transaction within twelve months after such
Triggering Event.]
8. SUBSTITUTE OPTION IN THE EVENT OF CORPORATE CHANGE. (a) In the event
that prior to an Option Termination Event, Issuer shall enter into an agreement
(i) to consolidate with or merge into any person, other than Grantee or one of
its subsidiaries, and shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than Grantee or
one of its subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the
then-outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other person or cash or any other property or
the then outstanding shares of Common Stock shall after such merger represent
less than 50% of the outstanding shares and share equivalents of the merged
company, or (iii) to sell or otherwise transfer all or substantially all of its
assets to any person, other than Grantee or one of its subsidiaries, then, and
in each such case, the agreement governing such transaction shall make proper
provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option (the "SUBSTITUTE OPTION"), at the election of
Grantee, of Substitute Common Stock (as hereinafter defined) of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "ACQUIRING CORPORATION" shall mean any of (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving
person, or (iii) the transferee of all or substantially all of Issuer's assets.
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(2) "SUBSTITUTE COMMON STOCK" shall mean the common stock issued by the
issuer of the Substitute Option upon exercise of the Substitute Option.
(3) "ASSIGNED VALUE" shall mean the Alternative Transaction Price, as
defined in Section 7.
(4) "AVERAGE PRICE" shall mean the average closing price of a share of the
Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided, that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect to a share
of common stock issued by the person merging into Issuer or by any company which
controls or is controlled by such person, as Grantee may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Grantee. The issuer of the Substitute Option shall
also enter into an agreement with Grantee in substantially the same form as this
Agreement, which agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of the Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option shall make a cash payment to
Grantee equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (e). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by Grantee.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. EXTENSION OF TIME FOR REGULATORY APPROVALS. The three year period for
exercise of certain rights under Sections 2, 6, 7, 11 and 12 shall be extended:
(i) to the extent necessary to obtain all regulatory approvals for the exercise
of such rights, and for the expiration of all statutory waiting periods; and
(ii) to the extent necessary to avoid liability under Section 10(b) of the
Exchange Act by reason of such exercise.
10. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. Issuer hereby represents
and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are
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necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Issuer. This Agreement is the valid and legally binding obligation of Issuer,
enforceable against Issuer in accordance with its terms.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests, and not subject to any preemptive rights.
(c) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation pursuant to any provisions of the Certificate of
Incorporation or Bylaws of Issuer or the incorporation documents of any of its
subsidiaries (as that term is defined in the Merger Agreement), subject to
obtaining any approvals or consents contemplated hereby, result in any violation
of any loan or credit agreement, note, mortgage, indenture, lease, plan, or
other agreement, obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Issuer or its subsidiaries or their respective properties or assets which
violation would have, individually or in the aggregate, a Material Adverse
Effect on the Issuer.
(d) The Board of Directors of Issuer has taken all necessary action to
approve this Agreement and the consummation of the transactions contemplated
hereby and the provisions of Section 243 of the Delaware General Corporation Law
will not apply to this Agreement or the purchase of shares of Issuer Common
Stock pursuant to this Agreement.
11. APPLICATION FOR REGULATORY APPROVAL. Each of Grantee and Issuer will
use its best efforts to make all filings with, and to obtain consents of, all
third parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement, including without limitation making
application to list the shares of Common Stock issuable hereunder on the New
York Stock Exchange upon official notice of issuance.
12. SPECIFIC PERFORMANCE. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Agreement by either party hereto
and that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief.
13. SEPARABILITY OF PROVISIONS. If any term, provision, covenant, or
restriction, contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, and covenants and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired or invalidated.
14. NOTICES. All notices, claims, demands and other communications
hereunder shall be deemed to have been duly given or made when delivered in
person, by registered or certified mail (postage prepaid, return receipt
requested), by overnight courier, or by facsimile at the respective addresses of
the parties set forth in the Merger Agreement.
15. 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 principles of conflicts of laws thereof.
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16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed to be an original, but all of which
shall constitute one and the same agreement.
17. EXPENSES. Except as otherwise expressly provided herein or in the
Merger Agreement, each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
18. ENTIRE AGREEMENT. Except as otherwise expressly provided herein or in
the Merger Agreement and the Confidentiality Agreement, this Agreement contains
the entire agreement between the parties with respect to the transactions
contemplated hereunder and supersedes all prior arrangements or understandings
with respect thereof, written or oral. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein. Any provision of this Agreement
may be waived only in writing at any time by the party that is entitled to the
benefits of such provision. This Agreement may not be modified, amended,
altered, or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
19. FURTHER ASSURANCES. In the event of any exercise of the Option by
Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise. Nothing contained
in this Agreement shall be deemed to authorize Issuer or Grantee to breach any
provision of the Merger Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers hereunto duly authorized, all as of the date
first written above.
OPTICAL COATING LABORATORY, INC.
By: /s/ CHARLES J. ABBE
------------------------------------
Name: Charles J. Abbe
Title: President and Chief Executive
Officer
JDS UNIPHASE CORPORATION
By: /s/ MICHAEL C. PHILLIPS
------------------------------------
Name: Michael C. Phillips
Title: Senior Vice President,
Business Development,
General Counsel
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ANNEX C
FAIRNESS OPINION OF HAMBRECHT & QUIST LLC
DATED NOVEMBER 3, 1999
<PAGE> 134
ANNEX C
November 3, 1999
CONFIDENTIAL
The Board of Directors
Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, CA 95407
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock (the "Common
Stock") of Optical Coating Laboratory, Inc. ("OCLI" or the "Company") of the
consideration to be received by such shareholders in connection with the
proposed merger of OCLI into Vintage Acquisition, Inc. ("Merger Sub"), a wholly
owned subsidiary of JDS Uniphase Corporation ("Acquirer"), with and into OCLI
(the "Proposed Transaction") pursuant to the Agreement and Plan of Merger to be
dated as of November 4, 1999, among JDS Uniphase Corporation, Merger Sub, and
Optical Coating Laboratory, Inc. (the "Agreement").
We understand that the terms of the Agreement provide, among other things,
that each issued and outstanding share of Common Stock shall be converted into
the right to receive .928 shares of common stock of the Acquirer, as more fully
set forth in the Agreement. For purposes of this opinion, we have assumed that
the Proposed Transaction will qualify as a tax-free reorganization under the
United States Internal Revenue Code for the shareholders of the Company and that
the Proposed Transaction will be accounted for as a purchase.
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment
banking services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, strategic transactions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. We have acted as a financial advisor to the Board of
Directors of the Company in connection with the Proposed Transaction, and we
will receive a fee for our services, which include the rendering of this
opinion.
In the past, we have provided investment banking and other financial
advisory services to the Company and have received fees for rendering these
services. Hambrecht & Quist was the lead manager in the Company's follow-on
equity offering completed in May 1999. In the ordinary course of business,
Hambrecht & Quist acts as a market maker and broker in the publicly traded
securities of Acquirer and the Company and receives customary compensation in
connection therewith, and also provides research coverage for Acquirer and the
Company. In the ordinary course of business, Hambrecht & Quist actively trades
in the equity and derivative securities of Acquirer and the Company for its own
account and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities. Hambrecht & Quist may in the
future provide additional investment banking or other financial advisory
services to Acquirer and the Company.
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In connection with our review of the Proposed Transaction, and in arriving
at our opinion, we have, among other things:
(i) reviewed the publicly available consolidated financial statements
of Acquirer for recent years and interim periods to date and certain other
relevant financial and operating data of the Acquirer (including its
capital structure) made available to us from published sources and from the
internal records of Acquirer;
(ii) reviewed certain internal financial and operating information
relating to Acquirer prepared by the management of Acquirer;
(iii) discussed the business, financial condition and prospects of
Acquirer with certain members of senior management;
(iv) reviewed the publicly available consolidated financial statements
of the Company for recent years and interim periods to date and certain
other relevant financial and operating data of the Company made available
to us from published sources and from the internal records of the Company;
(v) reviewed certain financial and operating information relating to
the Company prepared by the senior management of the Company;
(vi) discussed the business, financial condition and prospects of the
Company with certain members of senior management;
(vii) reviewed the recent reported prices and trading activity for the
common stocks of Acquirer and the Company and compared such information and
certain financial information for the Acquirer and the Company with similar
information for certain other companies engaged in businesses we consider
comparable;
(viii) reviewed the financial terms, to the extent publicly available,
of certain comparable merger and acquisition transactions;
(ix) reviewed a draft of the Agreement dated November 3, 1999;
(x) discussed the tax and accounting treatment of the Proposed
Transaction with Acquirer and Acquirer's lawyers and accountants; and
(xi) performed such other analyses and examinations and considered
such other information, financial studies, analyses and investigations and
financial, economic and market data as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning Acquirer or the Company
considered in connection with our review of the Proposed Transaction, and we
have not assumed any responsibility for independent verification of such
information. We have not prepared any independent valuation or appraisal of any
of the assets or liabilities of Acquirer or the Company, nor have we conducted a
physical inspection of the properties and facilities of either company. With
respect to the financial forecasts and projections made available to us and used
in our analysis, we have assumed that they reflect the best currently available
estimates and judgments of the expected future financial performance of Acquirer
and the Company. For purposes of this opinion, we have assumed that neither
Acquirer nor the Company is a party to any pending transactions, including
external financings, recapitalizations or material merger discussions, other
than the Proposed Transaction and those activities undertaken in the ordinary
course of conducting their respective businesses. Our opinion is necessarily
based upon market, economic, financial and other conditions as they exist and
can be evaluated as of the date of this
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letter and any change in such conditions would require a reevaluation of this
opinion. We express no opinion as to the price at which the Acquirer common
stock will trade subsequent to the Effective Time (as defined in the Agreement).
In rendering this opinion, we have assumed that the proposed merger will be
consummated substantially on the terms discussed in the Agreement, without any
waiver of any material terms or conditions by any party thereto. We were not
requested to, and did not, solicit indications of interest from any other
parties in connection with a possible acquisition of, or business combination
with, the Company.
It is understood that this letter is for the information of the Board of
Directors only and may not be used for any other purpose without our prior
written consent; provided, however, that this letter may be reproduced in full
in the Proxy Statement. This letter does not constitute a recommendation to any
stockholder as to how such stockholder should vote on the Proposed Transaction.
Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof
the consideration to be received by the holders of the Common Stock in the
Proposed Transaction is fair to such holders from a financial point of view. We
express no opinion, however, as to the adequacy of any consideration received in
the Proposed Transaction by Acquirer or any of its affiliates.
Very truly yours,
HAMBRECHT & QUIST LLC
By /s/ MARK J. ZANOLI
------------------------------------
Mark J. Zanoli
Managing Director
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware
("Delaware Corporation Law") provides, in general, that a corporation shall have
the power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), because the person is or was a director
or officer of the corporation. Such indemnity may be against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with such action, suit or
proceeding, if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation and if, with respect to any criminal action or proceeding, the
person did not have reasonable cause to believe the person's conduct was
unlawful.
Section 145(b) of the Delaware Corporation Law provides, in general, that a
corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor because the person is or was a director or officer of the corporation,
against any expenses (including attorneys' fees) actually and reasonably
incurred by the person in connection with the defense or settlement of such
action or suit if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation.
Section 145(g) of the Delaware Corporation Law provides, in general, that a
corporation shall have the power to purchase and maintain insurance on behalf of
any person who is or was a director or officer of the corporation against any
liability asserted against the person in any such capacity, or arising out of
the person's status as such, whether or not the corporation would have the power
to indemnify the person against such liability under the provisions of the law.
Article 8 of the Registrant's Amended and Restated Certificate of
Incorporation (incorporated by reference herein) provides for indemnification of
directors, officers and other persons as follows:
8.1 Limitation of Directors' Liability. A director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (a) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (b) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the General Corporation Law of the State of
Delaware, or (d) for any transaction from which the director derived any
improper personal benefit.
8.2 Indemnification of Corporate Agents. To the fullest extent
permitted by applicable law, the Corporation is also authorized to provide
indemnification of (and advancement of expenses to) such agents (and any
other persons to which Delaware law permits this corporation to provide
indemnification) through Bylaw provisions, agreements with such agents or
other persons, vote of stockholders or disinterested directors or
otherwise, in excess of the indemnification and advancement otherwise
permitted by Section 145 of the General Corporation Law of the State of
Delaware, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to
the Corporation, its stockholders, and others.
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8.3 Repeal or Modification. Any repeal or modification of the
foregoing provisions of this Article 8 shall not adversely affect any right
of indemnification or limitation of liability of an agent of the
Corporation relating to the acts or omissions occurring prior to such
repeal or modification.
Article IX of the Registrant's By-Laws (incorporated by reference
herein) provides that:
Section 1. Right to Indemnification.
Each person who was or is a party or is threatened to be made a
party to or is involved (as a party, witness, or otherwise), in any
threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (hereinafter a
"Proceeding"), by reason of the fact that he, or a person of whom he is
the legal representative, is or was a director, officer, employee, or
agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another
corporation or of a partnership, joint venture, trust, or other
enterprise, including service with respect to employee benefit plans,
whether the basis of the Proceeding is alleged action in an official
capacity as a director, officer, employee, or agent or in any other
capacity while serving as a director, officer, employee, or agent
(hereafter an "Agent"), shall be indemnified and held harmless by the
corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended or
interpreted (but, in the case of any such amendment or interpretation,
only to the extent that such amendment or interpretation permits the
corporation to provide broader indemnification rights than were
permitted prior thereto) against all expenses, liability, and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties, and amounts paid or to be paid in settlement, and any
interest, assessments, or other charges imposed thereon, and any
federal, state, local, or foreign taxes imposed on any Agent as a result
of the actual or deemed receipt of any payments under this Article)
reasonably incurred or suffered by such person in connection with
investigating, defending, being a witness in, or participating in
(including on appeal), or preparing for any of the foregoing in, any
Proceeding (hereinafter "Expenses"); provided, however, that except as
to actions to enforce indemnification rights pursuant to Section 3 of
this Article, the corporation shall indemnify any Agent seeking
indemnification in connection with a Proceeding (or part thereof)
initiated by such person only if the Proceeding (or part thereof) was
authorized by the Board of Directors of the corporation. The right to
indemnification conferred in this Article shall be a contract right.
Section 2. Authority to Advance Expenses.
Expenses incurred by an officer or director (acting in his capacity
as such) in defending a Proceeding shall be paid by the corporation in
advance of the final disposition of such Proceeding, provided, however,
that if required by the Delaware General Corporation Law, as amended,
such Expenses shall be advanced only upon delivery to the corporation of
an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to
be indemnified by the corporation as authorized in this Article or
otherwise. Expenses incurred by other Agents of the corporation (or by
the directors or officers not acting in their capacity as such,
including service with respect to employee benefit plans) may be
advanced upon such terms and conditions as the Board of Directors deems
appropriate. Any obligation to reimburse the corporation for Expense
advances shall be unsecured and no interest shall be charged thereon.
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Section 3. Right of Claimant to Bring Suit.
If a claim under Section 1 or 2 of this Article is not paid in full
by the corporation within 120 days after a written claim has been
received by the corporation, the claimant may at any time thereafter
bring suit against the corporation to recover the unpaid amount of the
claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense (including attorneys' fees) of
prosecuting such claim. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in
defending a Proceeding in advance of its final disposition where the
required undertaking has been tendered to the corporation) that the
claimant has not met the standards of conduct that make it permissible
under the Delaware General Corporation Law for the corporation to
indemnify the claimant for the amount claimed. Neither the failure of
the corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is
proper under the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law,
nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the
claimant had not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that claimant has not met
the applicable standard of conduct.
Section 4. Provisions Nonexclusive.
The rights conferred on any person by this Article shall not be
exclusive of any other rights that such person may have or hereafter
acquire under any statute, provision of the Certificate of
Incorporation, agreement, vote of stockholders or disinterested
directors, or otherwise, both as to action in an official capacity and
as to action in another capacity while holding such office. To the
extent that any provision of the Certificate, agreement, or vote of the
stockholders or disinterested directors is inconsistent with these
bylaws, the provision, agreement, or vote shall take precedence.
Section 5. Authority to Insure.
The corporation may purchase and maintain insurance to protect
itself and any Agent against any Expense, whether or not the corporation
would have the power to indemnify the Agent against such Expense under
applicable law or the provisions of this Article.
Section 6. Survival of Rights.
The rights provided by this Article shall continue as to a person
who has ceased to be an Agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
Section 7. Settlement of Claims.
The corporation shall not be liable to indemnify any Agent under
this Article (a) for any amounts paid in settlement of any action or
claim effected without the corporation's written consent, which consent
shall not be unreasonably withheld; or (b) for any judicial award if the
corporation was not given a reasonable and timely opportunity, at its
expense, to participate in the defense of such action.
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Section 8. Effect of Amendment.
Any amendment, repeal, or modification of this Article shall not
adversely affect any right or protection of any Agent existing at the
time of such amendment, repeal, or modification.
Section 9. Subrogation.
In the event of payment under this Article, the corporation shall
be subrogated to the extent of such payment to all of the rights of
recovery of the Agent, who shall execute all papers required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the corporation
effectively to bring suit to enforce such rights.
Section 10. No Duplication of Payments.
The corporation shall not be liable under this Article to make any
payment in connection with any claim made against the Agent to the
extent the Agent has otherwise actually received payment (under any
insurance policy, agreement, vote, or otherwise) of the amounts
otherwise indemnifiable hereunder.
The directors and officers of the Registrant are covered by a
policy of liability insurance indemnifying them against certain
liabilities, including liabilities arising under the Securities Act,
which might be incurred by them in their capacities as directors and
officers.
See also the undertakings set out in item 22 herein.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See Exhibit Index.
(b) Not Applicable.
(c) Opinion of Hambrecht & Quist LLC, attached as Annex C to the proxy
statement-prospectus which is part of this registration statement.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof;
(2) that before any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form;
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(3) that every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(4) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Form S-4 under the Securities Act of 1933, within one business day of
receipt of any such request, and to send the incorporated documents by
first class mail or other equally prompt means, including information
contained in documents filed after the effective date of the registration
statement through the date of responding to such request; and
(5) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
Insofar as indemnification for liabilities under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described in Item 20 above, or otherwise, the
registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is therefore
unenforceable. If a claim of indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in a successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 1 to Registration Statement on Form S-4 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of San
Jose, California on December 22, 1999.
JDS Uniphase Corporation
By: /s/ KEVIN N. KALKHOVEN
------------------------------------
Kevin N. Kalkhoven
Chief Executive Officer and
Co-Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement on Form S-4 has been signed by
the following persons in the capacities indicated on December 22, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ KEVIN N. KALKHOVEN Chief Executive Officer and Co-Chairman of
- ----------------------------------------------------- the Board of Directors (Principal Executive
Kevin N. Kalkhoven Officer)
* President, Chief Operating Officer and
- ----------------------------------------------------- Co-Chairman of the Board of Directors
Jozef Straus, Ph.D.
* Senior Vice President, Chief Financial
- ----------------------------------------------------- Officer and Secretary (Principal Financial
Anthony R. Muller and Accounting Officer)
* Director
- -----------------------------------------------------
Bruce Day
* Director
- -----------------------------------------------------
Peter Guglielmi
* Director
- -----------------------------------------------------
Robert E. Enos
* Director
- -----------------------------------------------------
Martin Kaplan
* Director
- -----------------------------------------------------
John A. MacNaughton
* Director
- -----------------------------------------------------
Wilson Sibbett, Ph.D.
* Director
- -----------------------------------------------------
Casimir S. Skrzypczak
</TABLE>
II-6
<PAGE> 143
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Director
- -----------------------------------------------------
William J. Sinclair
*By:/s/ KEVIN N. KALKHOVEN
------------------------------------------------
Kevin N. Kalkhoven
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 144
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
- -------
<S> <C>
2.1 Agreement and Plan of Reorganization and Merger, dated as of
November 3, 1999, by and among the Registrant, Vintage
Acquisition, Inc. and Optical Coating Laboratory, Inc.
(included as Annex A to the proxy statement-prospectus filed
as part of this Registration Statement).
2.2 Company Stock Option Agreement, dated as of November 3,
1999, by and between Optical Coating Laboratory, as issuer,
and the Registrant, as grantee (included as Annex B to the
proxy statement-prospectus which is a part of this
Registration Statement).
5.1 Opinion of Morrison & Foerster LLP, together with consent.
8.1 Tax Opinion of Morrison & Foerster LLP, together with
consent.
8.2 Tax Opinion of Collette & Erickson LLP, together with
consent.
15.1* Awareness Letter of Deloitte & Touche LLP.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Deloitte & Touche LLP, independent public
accountants.
23.3 Consent of PricewaterhouseCoopers LLP, independent public
accountants
23.4 Consent of KPMG LLP, independent public accountants
23.5 Consent of Hambrecht & Quist LLC (included as part of its
opinion filed as Exhibit 99.2 and incorporated herein by
reference).
23.6 Consent of Morrison & Foerster LLP (included as part of its
opinions filed as Exhibits 5.1 and 8.1).
23.7 Consent of Collette & Erickson LLP (included as part of its
opinion filed as Exhibit 8.2).
24.1* Power of Attorney (See Page II-5 of Registration Statement
on Form S-4 filed on December 8, 1999).
99.1* Form of Proxy of Optical Coating Laboratory, Inc.
99.2 Opinion of Hambrecht & Quist LLC (included as Annex C to the
proxy statement-prospectus filed as a part of this
Registration Statement and incorporated herein by
reference).
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 5.1
[MORRISON & FOERSTER LLP LETTERHEAD]
December 22, 1999
JDS Uniphase Corporation
163 Baypointe Parkway
San Jose, California 95134
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-4,
including the proxy statement-prospectus forming a part thereof, filed by you
with the Securities and Exchange Commission on December 8, 1999 and subsequently
to be amended (the "Registration Statement"), in connection with the
registration under the Securities Act of 1933, as amended, of 28,688,144 shares
of your common stock, $.001 par value par share (the "Stock"). The Stock will be
issued to the former stockholders of Optical Coating Laboratory, Inc. ("OCLI"),
a Delaware corporation, pursuant to the terms of that certain Agreement and Plan
of Reorganization and Merger, dated as of November 3, 1999, by and among you,
Vintage Acquisition, Inc., a Delaware corporation and your wholly-owned
subsidiary, and OCLI (the "Merger Agreement"). As counsel to the Company and in
connection with this opinion, we have examined all proceedings taken by you in
connection with the registration of the Stock.
It is our opinion that the Stock, which is being issued by you in exchange
for the shares of common stock of OCLI pursuant to the Merger Agreement, when
issued in the manner described in the Registration Statement will be legally and
validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement and any amendments thereto. In giving this consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
<PAGE> 1
EXHIBIT 8.1
[MORRISON & FOERSTER LLP LETTERHEAD]
December 22, 1999
JDS Uniphase Corporation
163 Baypointe Parkway
San Jose, CA 95134
Ladies and Gentlemen:
We have acted as counsel to the JDS Uniphase Corporation ("JDS
Uniphase"), a Delaware corporation, in connection with the proposed merger (the
"Merger") of Vintage Acquisition, Inc. ("Merger Sub"), a Delaware corporation
and a direct wholly-owned subsidiary of JDS Uniphase, with and into Optical
Coating Laboratory, Inc., a Delaware corporation ("Optical Coating Laboratory"),
pursuant to an Agreement and Plan of Reorganization and Merger dated as of
November 3, 1999 (the "Merger Agreement") by and among JDS Uniphase, Merger Sub
and Optical Coating Laboratory. The Merger is described in the Registration
Statement of JDS Uniphase on Form S-4, as amended (the "Registration Statement")
filed on December 22, 1999, with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), which includes the proxy statement and prospectus of Optical Coating
Laboratory and JDS Uniphase (the "Proxy Statement/Prospectus").
In that connection, we have reviewed the Merger Agreement, the
Proxy Statement/Prospectus and such other materials as we have deemed necessary
or appropriate for purposes of our opinion. In addition, we have assumed (i)
that the Merger will be consummated in accordance with the provisions of the
Merger Agreement and as contemplated by the Proxy Statement/Prospectus and (ii)
the truth and accuracy, on the date of the Merger Agreement and on the date
hereof, of the representations and warranties made by JDS Uniphase, Merger Sub
and Optical Coating Laboratory in the Merger Agreement.
Based upon and subject to the foregoing, it is our opinion that
the discussion contained in the Registration Statement under the caption "THE
MERGER-Material United States Federal Income Tax Considerations of the Merger",
subject to the limitations and qualifications described therein, sets forth the
material federal income tax consequences generally applicable to the
stockholders of Optical Coating
<PAGE> 2
JDS UNIPHASE CORPORATION
December 22, 1999
Page 2
Laboratory as a result of the Merger. Because this opinion is being delivered
prior to the effective time of the Merger, it must be considered prospective and
dependent upon future events. There can be no assurance that changes in the law
will not take place which could affect the Federal income tax consequences of
the Merger or that contrary positions may not be asserted by the Internal
Revenue Service.
This opinion is being furnished in connection with the
Registration Statement. You may rely upon and refer to the foregoing opinion in
the Proxy Statement/Prospectus. Any variation or difference in any fact from
those set forth or assumed either herein or in the Proxy Statement/Prospectus
may affect the conclusions stated herein.
We hereby consent to the use of our name under the caption "THE
MERGER-Material United States Federal Income Tax Considerations of the Merger"
in the Proxy Statement/Prospectus and to the filing of this opinion as an
Exhibit to the Registration Statement. In giving this consent, we do not admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act or the rules and regulations of the Commission
thereunder.
Very truly yours,
/s/ Morrison & Foerster LLP
<PAGE> 1
EXHIBIT 8.2
[COLLETTE & ERICKSON LLP LETTERHEAD]
December 22, 1999
Optical Coating Laboratory, Inc.
2789 Northpoint Parkway
Santa Rosa, California 95407-7397
Ladies and Gentlemen:
We have acted as counsel to Optical Coating Laboratory, Inc. ("OCLI"), a
Delaware corporation, in connection with the proposed merger (the "Merger") of
Vintage Acquisition, Inc. ("Merger Sub"), a Delaware corporation and a direct
wholly-owned subsidiary of JDS Uniphase Corporation ("JDS Uniphase"), with and
into OCLI, pursuant to an Agreement and Plan of Reorganization and Merger dated
as of November 3, 1999 (the "Merger Agreement") by and among JDS Uniphase,
Merger Sub and OCLI. The Merger is described in the Registration Statement of
JDS Uniphase on Form S-4, as amended (the "Registration Statement") filed on
December 22, 1999, with the Securities and Exchange Commission ("the
Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), which includes the proxy statement and prospectus of OCLI and JDS
Uniphase (the "Proxy Statement/Prospectus").
In that connection, we have reviewed the Merger Agreement, the Proxy
Statement/Prospectus and such other materials as we have deemed necessary or
appropriate for purposes of our opinion. In addition, we have assumed (i) that
the Merger will be consummated in accordance with the provisions of the Merger
Agreement and as contemplated by OCLI, the Proxy Statement/Prospectus and (ii)
the truth and accuracy, on the date of the Merger Agreement and on the date
hereof, of the representations and warranties made by OCLI, JDS Uniphase and
Merger Sub in the Merger Agreement.
Based upon and subject to the foregoing, it is our opinion that the
discussion contained in the Registration Statement under the caption "THE
MERGER-Material United
<PAGE> 2
Optical Coating Laboratory, Inc.
December 22, 1999
Page 2
States Federal Income Tax Considerations of the Merger," subject to the
limitations and qualifications described therein, set forth the material federal
income tax consequences generally applicable to the stockholders of OCLI as a
result of the Merger. Because this opinion is being delivered prior to the
effective time of the Merger, it must be considered prospective and dependent
upon future events. There can be no assurance that changes in the law will not
take place which could affect the Federal income tax consequences of the Merger
or that contrary positions may not be asserted by the Internal Revenue Service.
This opinion is being furnished in connection with the Registration
Statement. You may rely upon and refer to the foregoing opinion in the Proxy
Statement/Prospectus. Any variation or difference in any fact from those set
forth or assumed either herein or in the Proxy Statement/Prospectus may affect
the conclusions stated herein.
We hereby consent to the use of our name under the caption "THE
MERGER-Material United States Federal Income Tax Considerations of the Merger"
in the Proxy Statement/Prospectus and to the filing of this opinion as an
Exhibit to the Registration Statement. In giving this consent, we do not admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act or the rules and regulations of the Commission
thereunder.
Very truly yours,
Collette & Erickson LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected Historical
Consolidated Financial Data" and "Experts" included in the Proxy Statement of
Optical Coating Laboratory, Inc. that is made a part of Amendment No. 1 to the
Registration Statement (Form S-4 No. 333-92351) and Prospectus of JDS Uniphase
Corporation for the registration of 28,688,144 shares of its common stock and to
the incorporation by reference therein of our report dated July 23, 1999 (except
for Note 13, as to which the date is August 25, 1999), with respect to the
consolidated financial statements and schedule of JDS Uniphase Corporation
included in its Annual Report (Form 10-K/A) for the year ended June 30, 1999,
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
December 22, 1999
<PAGE> 1
Exhibit 23.2
[DELOITTE & TOUCHE LETTERHEAD]
CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement of
JDS Uniphase Corporation on Amendment No. 1 to Form S-4 of our report dated
December 22, 1998 (January 8, 1999 as to paragraph 8 of Note 6, May 26, 1999 as
to Note 15 and November 3, 1999 as to Note 16) on the consolidated financial
statements of Optical Coating Laboratory, Inc. and subsidiaries appearing in the
Current Report on Form 8-K/A of JDS Uniphase Corporation filed on November 30,
1999 and in the 1998 Annual Report on Form 10-K of Optical Coating Laboratory,
Inc. and subsidiaries.
We also consent to the reference to us under the heading "Experts" in the Proxy
Statement-Prospectus, which is a part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
December 22, 1999
<PAGE> 1
EXHIBIT 23.3
[PRICEWATERHOUSECOOPERS LETTERHEAD]
Securities and Exchange Commission
Washington, D.C.
United States of America
20549
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We hereby consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-4) and related Prospectus of JDS Uniphase
Corporation for the registration of 28,688,144 shares of its common stock and to
the incorporation by reference therein of our report dated July 5, 1999 with
respect to the consolidated financial statements of JDS FITEL Inc. contained in
JDS Uniphase's Report on Form 8-K/A dated November 4, 1999 for the year ended
May 31, 1999, filed with the Securities and Exchange Commission.
/s/ PricewaterhouseCoopers LLP
Chartered Accountants
Ottawa, Ontario
December 21, 1999
<PAGE> 1
EXHIBIT 23.4
CONSENT OF KPMG LLP, INDEPENDENT AUDITORS
The Board of Directors
Flex Products, Inc.
We consent to the incorporation by reference in Amendment No. 1 to the
registration statement (No. 333-92351) on Form S-4 of JDS Uniphase Corporation
of our report dated November 26, 1997, with respect to the balance sheet of Flex
Products, Inc. as of November 2, 1997, and the related statements of operations,
stockholders' equity, and cash flows for the years ended November 2, 1997 and
November 3, 1996, which report appears in the Current Report on Form 8-K/A of
JDS Uniphase Corporation filed on November 30, 1999 and in the October 31, 1998
Form 10-K of Optical Coating Laboratory, Inc., and to the reference to us under
the heading "Experts" in the Proxy Statement-Prospectus.
/s/ KPMG LLP
San Francisco, California
December 21, 1999
