<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 17, 2000
REGISTRATION NO. 333-45300
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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)
<TABLE>
<S> <C> <C>
DELAWARE 3674 94-2579683
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
JDS UNIPHASE CORPORATION
210 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)
------------------------
MICHAEL C. PHILLIPS, ESQ.
SENIOR VICE PRESIDENT, BUSINESS DEVELOPMENT AND
GENERAL COUNSEL
JDS UNIPHASE CORPORATION
210 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:
<TABLE>
<S> <C>
JOHN W. CAMPBELL, III, ESQ. ALISON S. RESSLER, ESQ.
P. RUPERT RUSSELL, ESQ. SULLIVAN & CROMWELL
MORRISON & FOERSTER LLP 1888 CENTURY PARK EAST
425 MARKET STREET LOS ANGELES, CALIFORNIA 90067-1725
SAN FRANCISCO, CALIFORNIA 94105-2482 (310) 712-6600
(415) 268-7000
</TABLE>
------------------------
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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
Common Stock $0.001 par value... 342,022,800 (2) (2) $9,102,247(2)
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Based upon the maximum number of shares of common stock, $0.001 par value per
share, of JDS Uniphase Corporation, that may be issued pursuant to the
merger, calculated as the product of (a) 90,006,000, the aggregate number of
shares of SDL, Inc.'s common stock, $0.001 par value per share, outstanding
on October 31, 2000 and issuable pursuant to outstanding options prior to the
date the merger is expected to be consummated and (b) an exchange ratio of
3.8 shares of JDS Uniphase common stock for each share of SDL's common stock.
(2)Estimated solely for purposes of calculating an additional registration fee
of $1,927 required by the Securities Act of 1933, as amended, for an
additional 125,400 shares of JDS Uniphase common stock, and computed pursuant
to Rules 457(f) and (c) under the Securities Act based on $221.13, the
average of the high and low per share prices of common stock of SDL on The
Nasdaq National Market on November 13, 2000. On or about September 7, 2000,
the Registrant paid a registration fee equal to $9,100,320 for the original
341,897,400 shares of common stock registered on the Registration Statement
on S-4 filed on September 7, 2000 (Registration No. 333-45300).
------------------------
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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
[JDS UNIPHASE LOGO]
[SDL LOGO]
MERGER PROPOSAL -- YOUR VOTE IS VERY IMPORTANT
On July 9, 2000, each of the board of directors of JDS Uniphase Corporation
and SDL, Inc. unanimously approved an agreement to merge SDL with a newly
formed, wholly owned subsidiary of JDS Uniphase as a result of which SDL would
become a wholly owned subsidiary of JDS Uniphase.
In the merger, each share of SDL common stock will be exchanged for 3.8
shares of JDS Uniphase common stock. JDS Uniphase common stock is listed on The
Nasdaq National Market under the trading symbol "JDSU," and on November 16,
2000, JDS Uniphase common stock closed at $68.25 per share.
We cannot complete the merger unless the stockholders of SDL adopt the
merger agreement and the stockholders of JDS Uniphase approve the issuance of
shares of JDS Uniphase common stock in the merger. YOUR VOTE IS VERY IMPORTANT.
WHETHER OR NOT YOU PLAN TO ATTEND YOUR STOCKHOLDERS' MEETING, PLEASE COMPLETE,
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED
STAMPED ENVELOPE. Returning the proxy does not deprive you of your right to
attend a meeting and to vote your shares in person.
AFTER CAREFUL CONSIDERATION, EACH OF THE BOARD OF DIRECTORS OF JDS UNIPHASE
AND SDL UNANIMOUSLY DETERMINED THE MERGER TO BE FAIR TO ITS STOCKHOLDERS AND IN
ITS STOCKHOLDERS' BEST INTERESTS, DECLARED THE MERGER ADVISABLE AND APPROVED THE
MERGER AGREEMENT.
This proxy statement-prospectus provides you with information concerning
JDS Uniphase, SDL 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 28 OF THIS PROXY STATEMENT-PROSPECTUS.
We appreciate your interest in and consideration of this matter.
<TABLE>
<S> <C>
/s/ JOZEF STRAUS, Ph.D. /s/ DONALD R. SCIFRES, Ph.D.
Jozef Straus, Ph.D. Donald R. Scifres, Ph.D.
Co-Chairman of the Board and Chairman of the Board,
Chief Executive Officer Chief Executive Officer and President
JDS Uniphase Corporation SDL, Inc.
</TABLE>
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 November 17, 2000 and was first
mailed to stockholders on or about November 22, 2000.
<PAGE> 3
SOURCES OF ADDITIONAL INFORMATION
This proxy statement-prospectus incorporates important business and
financial information about JDS Uniphase and SDL that is not included or
delivered with this document. You can obtain this information from JDS Uniphase
or SDL 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 DECEMBER 19, 2000 TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS.
<TABLE>
<S> <C>
REQUESTS FOR DOCUMENTS RELATING TO REQUESTS FOR DOCUMENTS RELATING TO JDS
SDL SHOULD BE DIRECTED TO: UNIPHASE SHOULD BE DIRECTED TO:
SDL, Inc. JDS Uniphase Corporation
80 Rose Orchard Way 210 Baypointe Parkway
San Jose, California 95134-1365 San Jose, California 95134
Attention: Investor Relations Attention: Investor Relations
(408) 943-4343 (408) 434-1800
</TABLE>
Also see "Where you can find more information" on page 101 of this proxy
statement-prospectus.
<PAGE> 4
[SDL LOGO]
SDL, INC.
80 ROSE ORCHARD WAY
SAN JOSE, CALIFORNIA 95134-1365
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Date: December 27, 2000
Time: 10:00 a.m., Pacific Standard Time
Place: Wyndham Garden Hotel
1300 Chesapeake Terrace
Sunnyvale, California 94089
To the stockholders of SDL, Inc.:
At the special meeting of stockholders of SDL, Inc., you will be asked:
1. To consider and vote upon a proposal to adopt the Agreement and
Plan of Merger, dated as of July 9, 2000, by and among JDS Uniphase
Corporation, K2 Acquisition, Inc., a wholly owned subsidiary of JDS
Uniphase Corporation, and SDL, Inc. Under the merger agreement, K2
Acquisition, Inc. will merge with and into SDL, Inc. and SDL, Inc. will
survive the merger as a wholly owned subsidiary of JDS Uniphase
Corporation. In the merger, holders of outstanding shares of common stock
of SDL, Inc. will receive 3.8 shares of common stock of JDS Uniphase
Corporation for each share of SDL, Inc. common stock they hold. 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 SDL, Inc.
common stock at the close of business on November 16, 2000, the record date, are
entitled to vote on the matters listed in this notice of special meeting. Any
action may be taken on any of the foregoing proposals at the special meeting on
the date specified above or on any date to which the special meeting may
properly be postponed or adjourned. You may vote in person at the SDL, Inc.
special meeting even if you have returned a proxy.
By Order of the Board of Directors
of SDL, Inc.
/s/ MICHAEL L. FOSTER
Michael L. Foster
Secretary
November 17, 2000
San Jose, California
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.
<PAGE> 5
[JDS UNIPHASE LOGO]
JDS UNIPHASE CORPORATION
210 BAYPOINTE PARKWAY
SAN JOSE, CALIFORNIA 95134
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Date: December 27, 2000
Time: 10:00 a.m., Pacific Standard Time
Place: 210 Baypointe Parkway
San Jose, California 95134
To the stockholders of JDS Uniphase Corporation:
At the special meeting of stockholders of JDS Uniphase Corporation, you
will be asked:
1. To consider and vote upon a proposal to approve the issuance of
shares of JDS Uniphase Corporation common stock under the Agreement and
Plan of Merger, dated as of July 9, 2000, by and among JDS Uniphase
Corporation, K2 Acquisition, Inc., a wholly owned subsidiary of JDS
Uniphase Corporation, and SDL, Inc. Under the merger agreement, K2
Acquisition, Inc. will merge with and into SDL, Inc. and SDL, Inc. will
survive the merger as a wholly owned subsidiary of JDS Uniphase
Corporation. In the merger, holders of outstanding shares of common stock
of SDL, Inc. will receive 3.8 shares of common stock of JDS Uniphase
Corporation for each share of SDL, Inc. common stock they hold.
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 stockholders of record of JDS
Uniphase Corporation at the close of business on November 16, 2000, the record
date, are entitled to vote on the matters listed in this notice of special
meeting. Any action may be taken on any of the foregoing proposals at the
special meeting on the date specified above or on any date to which the special
meeting may properly be postponed or adjourned. You may vote in person at the
JDS Uniphase Corporation special meeting even if you have returned a proxy.
By Order of the Board of Directors
of JDS Uniphase Corporation
/s/ ANTHONY R. MULLER
Anthony R. Muller
Secretary
November 17, 2000
San Jose, California
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.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY OF THE PROXY STATEMENT-PROSPECTUS................... 3
SUMMARY OF THE TRANSACTION.................................. 4
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SDL...... 9
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF JDS
UNIPHASE.................................................. 10
COMPARATIVE PER SHARE DATA.................................. 11
COMPARATIVE PER SHARE MARKET PRICE DATA..................... 13
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS OF JDS UNIPHASE AND SDL.............. 15
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS OF JDS UNIPHASE AND SDL.............. 19
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS OF JDS UNIPHASE...................... 24
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS OF JDS UNIPHASE...................... 26
RISK FACTORS................................................ 28
THE SPECIAL MEETING OF SDL STOCKHOLDERS..................... 43
Purpose of the Special Meeting............................ 43
Date, Time and Place; Stockholder Record Date for the
Special Meeting........................................ 43
Vote of SDL Stockholders Required for Adoption of the
Merger Agreement....................................... 43
Proxies................................................... 43
Solicitation of Proxies................................... 44
THE SPECIAL MEETING OF JDS UNIPHASE STOCKHOLDERS............ 45
Purpose of the Special Meeting............................ 45
Date, Time and Place; Stockholder Record Date for the
Special Meeting........................................ 45
Vote of JDS Uniphase Stockholders Required to Approve the
Issuance of JDS Uniphase Common Stock to Stockholders
of SDL................................................. 45
Proxies................................................... 45
Solicitation of Proxies................................... 46
THE MERGER.................................................. 47
Background of the Merger.................................. 47
Reasons for the Transaction............................... 51
Recommendation of SDL's Board of Directors................ 53
Recommendation of JDS Uniphase's Board of Directors....... 54
Opinion of SDL's Financial Advisor........................ 56
Opinions of JDS Uniphase's Financial Advisors............. 61
Interests of Management and Directors of SDL in the
Merger................................................. 69
Completion and Effectiveness of the Merger................ 75
Structure of the Merger and Conversion of SDL Common
Stock.................................................. 75
Exchange of SDL Stock Certificates for JDS Uniphase Stock
Certificates........................................... 75
Material United States Federal Income Tax Considerations
of the Merger.......................................... 76
Accounting Treatment of the Merger........................ 78
Regulatory Filings and Approvals Required to Complete the
Merger................................................. 78
Restrictions on Sales of Shares by Affiliates of SDL and
JDS Uniphase........................................... 79
Listing on the Nasdaq National Market of JDS Uniphase
Common Stock to be Issued in the Merger................ 79
No Appraisal Rights....................................... 79
Dividend Policy........................................... 79
The Merger Agreement...................................... 79
Conditions to Completion of the Merger.................... 85
</TABLE>
i
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Termination of the Merger Agreement....................... 86
Expenses; Payment of Termination Fee...................... 87
Extension, Waiver and Amendment of the Merger Agreement... 88
Affiliate Agreements...................................... 88
Operations after the Merger............................... 88
COMPARISON OF RIGHTS OF HOLDERS OF SDL COMMON STOCK AND JDS
UNIPHASE COMMON STOCK..................................... 90
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS, MANAGEMENT AND
DIRECTORS OF SDL.......................................... 95
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS, MANAGEMENT AND
DIRECTORS OF JDS UNIPHASE................................. 97
LEGAL MATTERS............................................... 99
EXPERTS..................................................... 99
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING OF SDL
STOCKHOLDERS IF THE MERGER IS NOT COMPLETED............... 99
STOCKHOLDER PROPOSALS FOR THE 2000 AND 2001 ANNUAL MEETINGS
OF JDS UNIPHASE STOCKHOLDERS.............................. 100
WHERE YOU CAN FIND MORE INFORMATION......................... 101
ANNEX A -- AGREEMENT AND PLAN OF MERGER..................... A-1
ANNEX B -- OPINION OF THOMAS WEISEL PARTNERS LLC............ B-1
ANNEX C -- OPINION OF CIBC WORLD MARKETS CORP............... C-1
ANNEX D -- OPINION OF BANC OF AMERICA SECURITIES LLC........ D-1
</TABLE>
ii
<PAGE> 8
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHO IS JDS UNIPHASE?
A: JDS Uniphase is a high-technology company that designs, develops,
manufactures and distributes a comprehensive range of products for the
growing fiber optic communications industry. These products are deployed by
systems manufacturers worldwide to develop advanced optical networks for the
telecommunications and cable television industries. JDS Uniphase is traded on
The Nasdaq National Market under the symbol "JDSU" and the exchangeable
shares of JDS Uniphase Canada Ltd. are traded on The Toronto Stock Exchange
under the symbol "JDU."
Q: WHY ARE JDS UNIPHASE AND SDL PROPOSING THE MERGER?
A: JDS Uniphase and SDL are proposing the merger in response to unprecedented
growth in the telecommunications industry and demand for the fiber optic
networks that are enabling such growth. Specifically, JDS Uniphase and SDL
are proposing the merger for the following reasons, as well as others
described in this proxy statement-prospectus:
- The merger will enable the combined company to meet the growing demands of
its customers for integrated modules and more quickly bring new innovations
to the market.
- The merger will result in increased manufacturing capacity, expanded output
and reduced manufacturing costs.
- The merger will result in a high quality, multi-dimensional engineering
team which will allow the combined company to provide greater support to
new optical systems suppliers.
Q: WHAT WILL SDL STOCKHOLDERS RECEIVE FOR THEIR SDL SHARES?
A: SDL stockholders will receive 3.8 shares of JDS Uniphase common stock in
exchange for each of their shares of SDL common stock. JDS Uniphase will not
issue fractional shares in the merger. Instead of a fraction of a share, each
SDL stockholder will receive cash, without interest, equal to the product of
the fraction that the SDL stockholder would have otherwise received and the
average closing prices for a share of JDS Uniphase common stock for the five
trading days before the completion of the merger.
Q: WHY DOES JDS UNIPHASE NEED THE APPROVAL OF ITS STOCKHOLDERS?
A: Under the rules of The Nasdaq National Market, JDS Uniphase is required to
seek stockholder approval for any issuance of shares of its common stock in
connection with the acquisition of another company if its common stock to be
issued in the transaction exceeds 20% of the issued and outstanding shares of
its common stock and of its outstanding voting power. The shares of JDS
Uniphase common stock to be issued to SDL stockholders in the merger are
equal to, in the aggregate, approximately 35.5% of the currently issued and
outstanding shares of JDS Uniphase common stock and of its outstanding voting
power as of November 16, 2000. Therefore, JDS Uniphase is seeking stockholder
approval of the issuance of shares of its common stock in the merger.
Q: WHEN WILL THE MERGER OCCUR?
A: The merger will occur after approval of the SDL and JDS Uniphase stockholders
is obtained and the other conditions to the merger, including regulatory
approvals, are satisfied or waived. JDS Uniphase and SDL are working towards
completing the merger as quickly as possible.
Q: HOW WILL SDL FIT INTO JDS UNIPHASE AFTER THE MERGER?
A: Following the merger, SDL will operate as a wholly owned subsidiary of JDS
Uniphase. Dr. Donald R. Scifres, currently Chairman of the Board, Chief
Executive Officer and President of SDL, will become Co-Chairman of the Board
of and will hold a senior management position with JDS Uniphase.
1
<PAGE> 9
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 as soon as possible so that your
shares can be voted at the special meeting of SDL or JDS Uniphase
stockholders, as appropriate.
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, your SDL shares will be voted FOR adoption of the merger agreement and
your JDS Uniphase shares will be voted FOR approval of the issuance of JDS
Uniphase common stock in the merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
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 four ways. First, you can send a
written notice to SDL or JDS Uniphase, as appropriate, 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.
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 have instructed a broker to vote your shares, you must
follow directions received from your broker to change those instructions.
Q: IF I AM AN SDL STOCKHOLDER, SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, JDS Uniphase will send SDL stockholders
written instructions for exchanging SDL stock certificates for JDS Uniphase
stock certificates.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: You can write or call SDL's Investor Relations at 80 Rose Orchard Way, San
Jose, California 95134, telephone (408) 943-4343 or JDS Uniphase's Investor
Relations at 210 Baypointe Parkway, San Jose, California 95134, telephone
(408) 434-1800 with any questions about the merger and your special meeting.
2
<PAGE> 10
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, including the merger agreement and other documents attached as
annexes to this proxy statement-prospectus, for a more complete understanding of
the merger. In addition, we incorporate by reference important business and
financial information about JDS Uniphase and SDL 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
page 101 of this proxy statement-prospectus.
THE COMPANIES
SDL, INC.
80 ROSE ORCHARD WAY
SAN JOSE, CALIFORNIA 95134-1365
ATTN: INVESTOR RELATIONS
(408) 943-4343
SDL designs, manufactures and markets semiconductor lasers and fiber optic
related products. Since 1996, SDL's strategy has strongly focused on providing
solutions for optical communications. SDL's optical communications products
power the transmission of data, voice and Internet information over fiber optic
networks to meet the needs of telecommunications, dense wavelength division
multiplexing (DWDM), cable television and metro communications applications. The
demand for DWDM solutions has been accelerating significantly due to the
technology's unique ability to expand network bandwidth and provide much faster
transmission of data, voice and video signals.
SDL was incorporated in California on March 29, 1983 and reincorporated in
Delaware on November 16, 1992. SDL was known as Spectra Diode Laboratories, Inc.
until it changed its name to SDL, Inc. in April 1993. SDL's headquarters are
located at 80 Rose Orchard Way, San Jose, California, 95134-1365, and its
telephone number is (408) 943-9411.
JDS UNIPHASE CORPORATION
210 BAYPOINTE PARKWAY
SAN JOSE, CALIFORNIA 95134
ATTN: INVESTOR RELATIONS
(408) 434-1800
JDS Uniphase is a leading provider of advanced fiber optic components and
modules. These products are sold to the world's leading telecommunications and
cable television system and subsystem providers, which are commonly referred to
as OEMs and include Alcatel, Ciena, Cisco, Corning, Lucent, Marconi, Motorola,
Nortel, Scientific Atlanta, Siemens and Tyco, along with emerging system
providers, such as Corvis, ONI Systems, Juniper Networks and Sycamore. These
telecommunication system and subsystem providers use these components and
modules as the building blocks for the systems that they ultimately supply to
telecommunications carriers such as AT&T, WorldCom, Qwest and Sprint.
JDS Uniphase's products are basic building blocks for fiber optic networks
and perform both optical-only, commonly referred to as "passive" functions, and
optoelectronic, commonly referred to as "active" functions, within fiber optic
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 OEM applications, optical display and projection products used in
computer displays and other similar applications and light interference pigments
used in security products and decorative surface treatments.
JDS Uniphase was incorporated in Delaware in October 1993. JDS Uniphase 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
included or incorporated by reference in this proxy statement-prospectus that is
specific to Uniphase Corporation or JDS FITEL Inc. is specifically described as
"Uniphase" or "JDS FITEL" information, respectively. References to "JDS
Uniphase" are to the combined entity resulting from the merger of Uniphase and
JDS FITEL. JDS Uniphase's corporate headquarters in the United States are at 210
Baypointe Parkway, San Jose, California 95134, where the telephone number is
(408) 434-1800. Its corporate headquarters in Canada are at 570 West Hunt Club
Road, Nepean, Ontario, and the telephone number at this location is (613)
727-1304.
3
<PAGE> 11
SUMMARY OF THE TRANSACTION
STRUCTURE OF THE TRANSACTION
SDL will merge with K2 Acquisition, Inc., a wholly owned subsidiary of JDS
Uniphase, and become a wholly owned subsidiary of JDS Uniphase. Following the
merger, SDL's current stockholders will own common stock in SDL's parent
company, JDS Uniphase.
STOCKHOLDER APPROVAL
To approve the merger, the holders of a majority of the outstanding shares
of SDL common stock must adopt the merger agreement and the holders of a
majority of the shares of JDS Uniphase common stock voting at the JDS Uniphase
special meeting must approve the issuance of JDS Uniphase common stock in the
merger.
The directors, officers and affiliates of SDL collectively beneficially
owned approximately 3.0% of the outstanding SDL common stock as of November 16,
2000. The directors, officers and affiliates of JDS Uniphase collectively
beneficially owned approximately 11.2% of the outstanding JDS Uniphase common
stock and of its outstanding voting power as of November 16, 2000.
SDL stockholders are entitled to cast one vote for each share of SDL common
stock they owned as of November 16, 2000, the record date for the special
meeting of stockholders of SDL, and JDS Uniphase stockholders are entitled to
cast one vote for each share of JDS Uniphase common stock they owned as of
November 16, 2000, the record date for the special meeting of stockholders of
JDS Uniphase.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF SDL AND JDS UNIPHASE (SEE PAGES 53
AND 54)
After careful consideration, each of the boards of directors of SDL and JDS
Uniphase unanimously determined that the merger is fair to the stockholders of
its corporation and in their best interests, declared the merger advisable and
approved the merger agreement.
The SDL board of directors unanimously recommends a vote in favor of the
adoption of the merger agreement. See page 84 for a description of the
circumstances under which the SDL board of directors could alter its
recommendation.
The JDS Uniphase board of directors unanimously recommends a vote in favor
of the approval of the issuance of common stock of JDS Uniphase in the merger.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGES 56 AND 61)
Thomas Weisel Partners LLC has delivered its written opinion to the board
of directors of SDL that, as of July 9, 2000, the exchange ratio pursuant to the
merger agreement was fair from a financial point of view to the holders of SDL
common stock. We have attached the full text of the written opinion of Thomas
Weisel Partners as Annex B to this proxy statement-prospectus. We encourage you
to read this opinion carefully in its entirety for descriptions of the
assumptions made, matters considered and limitations on the review undertaken by
Thomas Weisel Partners. THE OPINION OF THOMAS WEISEL PARTNERS IS ADDRESSED TO
THE SDL BOARD OF DIRECTORS AND RELATES ONLY TO THE FAIRNESS, FROM A FINANCIAL
POINT OF VIEW, OF THE EXCHANGE RATIO TO THE HOLDERS OF SDL COMMON STOCK. THE
OPINION DOES NOT ADDRESS ANY OTHER ASPECTS OF THE PROPOSED MERGER AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO ANY MATTER RELATING TO THE
PROPOSED MERGER.
In connection with the merger, the JDS Uniphase board of directors received
separate opinions from CIBC World Markets Corp. and Banc of America Securities
LLC as to the fairness, from a financial point of view, to JDS Uniphase of the
exchange ratio provided for in the merger. We have attached the full text of the
written opinions of CIBC World Markets and Banc of America Securities, each
dated July 9, 2000, as Annex C and Annex D to this proxy statement-prospectus.
We encourage you to read these opinions carefully in their entirety for
descriptions of the assumptions made, matters considered and limitations on
4
<PAGE> 12
the review undertaken by each of CIBC World Markets and Banc of America
Securities. THE OPINIONS OF CIBC WORLD MARKETS AND BANC OF AMERICA SECURITIES
ARE ADDRESSED TO THE JDS UNIPHASE BOARD OF DIRECTORS AND RELATE ONLY TO THE
FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE EXCHANGE RATIO TO JDS UNIPHASE.
THE OPINIONS DO NOT ADDRESS ANY OTHER ASPECTS OF THE PROPOSED MERGER AND DO NOT
CONSTITUTE RECOMMENDATIONS TO ANY STOCKHOLDER AS TO ANY MATTER RELATING TO THE
PROPOSED MERGER.
PROCEDURE FOR EXCHANGING YOUR SDL STOCK CERTIFICATES (SEE PAGE 75)
After the merger is completed, JDS Uniphase will send SDL stockholders
written instructions for exchanging SDL stock certificates for JDS Uniphase
stock certificates. Do not send your SDL stock certificates now.
COMPLETION AND EFFECTIVENESS OF THE MERGER
JDS Uniphase and SDL 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.
JDS Uniphase and SDL are working toward completing the merger as quickly as
possible.
CONDITIONS TO COMPLETION OF THE MERGER (SEE PAGE 85)
JDS Uniphase's and SDL's obligations to complete the merger are subject to
certain 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, no stop order
may be issued and no proceedings for suspension of its effectiveness may
be initiated by the SEC;
- the merger agreement must be adopted by the affirmative vote of the
holders of a majority of the outstanding shares of SDL common stock;
- the issuance of shares of JDS Uniphase common stock in the merger must be
approved by a majority of the holders of JDS Uniphase common stock
casting votes;
- no law, rule, regulation, judgment, decree, injunction, executive order
or award may have been enacted or issued or be effective which has the
effect of making the merger illegal or otherwise prohibiting completion
of the merger;
- the waiting period, and any extensions, applicable to the completion of
the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
or under any other foreign antitrust or combination law and any material
filing, consent, approval or authorization legally required must either
have expired, been terminated or obtained; and
- the JDS Uniphase common shares to be issued in the merger must be
authorized for quotation on The Nasdaq National Market.
SDL'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,
except where it would not have a material adverse effect on JDS Uniphase;
- JDS Uniphase must have performed or complied in all material respects
with all of its agreements and covenants to be performed or complied with
by JDS Uniphase at or before completion of the merger; and
- SDL must receive an opinion of tax counsel that the merger will qualify
as a tax-free reorganization.
5
<PAGE> 13
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:
- SDL's representations and warranties must be true and correct, except
where it would not have a material adverse effect on SDL;
- SDL must have performed or complied in all material respects with all of
its agreements and covenants to be performed or complied with by SDL at
or before completion of the merger; and
- JDS Uniphase must receive an opinion of tax counsel that the merger will
qualify as a tax-free reorganization.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 86)
The merger agreement may be terminated by either JDS Uniphase or SDL:
- by mutual written consent of JDS Uniphase and SDL;
- if the merger is not completed before January 31, 2001, which date may be
extended, under specified circumstances, at SDL's option to March 31,
2001;
- if there is a court order or other government decree or ruling which is
final and not appealable preventing completion of the merger;
- if SDL's stockholders do not adopt the merger agreement at the SDL
special meeting;
- if JDS Uniphase's stockholders do not approve the issuance of shares
pursuant to the terms of the merger agreement at the JDS Uniphase special
meeting; or
- upon a material breach of any representation, warranty, covenant or
agreement on the part of the other party in the merger agreement, or if
any of the other party's representations or warranties are or become
untrue so that the corresponding condition to completion of the merger
would not be met, and the breach cannot be cured or is not cured within
30 days.
Furthermore, JDS Uniphase may terminate the merger agreement if SDL or the
SDL board of directors takes or fails to take specified actions with respect to
a competing transaction involving SDL.
Finally, SDL may terminate the merger agreement if the board of directors
of SDL authorizes SDL to enter into a binding written agreement concerning a
transaction that constitutes a superior proposal.
PAYMENT OF TERMINATION FEE (SEE PAGE 87)
If the merger agreement is terminated under circumstances involving an
acquisition proposal and within 12 months of that termination there is
consummated the acquisition, directly or indirectly, of a majority of the voting
power of the outstanding securities of SDL or all or substantially all of the
assets of SDL or there has been consummated a merger, consolidation or similar
business combination between SDL and an acquiring person, SDL may be required to
pay JDS Uniphase a termination fee of $1 billion.
INTERESTS OF DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER (SEE PAGE 69)
When considering the recommendation of SDL's board of directors, you should
be aware that some SDL directors and executive officers have interests in the
merger that are different from, or are in addition to, the interests of the SDL
stockholders generally. In particular, five senior officers of SDL, one of whom
is also a director, entered into transition agreements with JDS Uniphase in
connection with the merger and the directors and officers of SDL have continuing
indemnification against liabilities that provide them with interests in the
merger that are different from, or are in addition to, your interests. These
transition agreements will become effective upon the closing of the merger. In
addition, each non-employee director of SDL has 3,500 unvested options to
purchase SDL common stock that will accelerate and become immediately
exercisable upon SDL stockholder approval of the merger agreement. The members
of the SDL board of directors knew about these additional interests, and
considered them, when they approved the merger agreement.
6
<PAGE> 14
As a result of these interests, these directors and officers may be more
likely to vote to adopt the merger agreement than if they did not hold these
interests. SDL's stockholders should consider whether these interests may have
influenced these directors and officers to support or recommend the merger.
U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE MERGER (SEE PAGE 76)
The merger is structured so that, in general, JDS Uniphase, SDL and SDL'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
SDL stockholders instead of fractional shares. It is a condition to the merger
that JDS Uniphase and SDL receive legal opinions stating that the merger will
qualify as a tax-free reorganization.
ACCOUNTING TREATMENT OF THE MERGER (SEE PAGE 78)
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 78)
The merger is subject to approval under antitrust laws. JDS Uniphase and
SDL have made the required filings with the Department of Justice and the
Federal Trade Commission, but the appropriate waiting periods have not expired
as of the date of this proxy statement-prospectus. JDS Uniphase and SDL are not
permitted to complete the merger until the applicable waiting periods have
expired or terminated. On August 24, 2000, JDS Uniphase and SDL received
requests for additional information and other documentary material, commonly
called a second request, from the Antitrust Division of the U.S. Department of
Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. This
request extends the waiting period for this transaction until 20 days after the
parties' substantial compliance with the request, unless the parties and the
Department of Justice agree on a different time period.
JDS Uniphase and SDL are also required to make pre-merger notification
filings with the Canadian Competition Bureau and the German Federal Cartel
Office and to await the expiration or earlier termination of the prescribed
waiting periods under the laws of those countries prior to completing the
merger. JDS Uniphase and SDL intend to comply with all requests for additional
information from these foreign agencies. JDS Uniphase and SDL have made or will
make filings in other jurisdictions if filings in those jurisdictions are
required. In Canada, the Commissioner of Competition may challenge the merger at
any time prior to or within three years following its completion. By letter
dated November 7, 2000, the German Federal Cartel Office informed JDS Uniphase
and SDL that the merger was not prohibited under German law, and therefore may
be completed. At the request of the United Kingdom Office of Fair Trading, or
the OFT, JDS Uniphase has supplied information in order to allow the OFT to
decide whether to refer the merger to the United Kingdom Competition Commission
for a formal investigation. The OFT has not yet decided that question.
The Department of Justice or the Federal Trade Commission, as well as a
foreign regulatory agency or government, state or private person, may have the
right to challenge the merger at any time before or after its completion. JDS
Uniphase and SDL intend to comply with all requests for information from the
antitrust regulators reviewing the transaction.
RESTRICTIONS ON THE ABILITY TO SELL JDS UNIPHASE STOCK (SEE PAGE 79)
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 SDL under the federal securities laws. 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.
7
<PAGE> 15
APPRAISAL RIGHTS (SEE PAGE 79)
Neither SDL nor JDS Uniphase stockholders are entitled under Delaware law
to appraisal rights with respect to the merger.
EXPENSES (SEE PAGE 87)
Subject to the following sentence, each party has agreed to pay all
expenses it incurs in connection with the merger, whether or not the merger is
completed. If the merger agreement is terminated because the JDS Uniphase
stockholders fail to approve the issuance of shares of JDS common stock in the
merger, JDS Uniphase may be required to pay SDL $10 million for SDL's
out-of-pocket expenses. In addition, if the merger agreement is terminated
because SDL's stockholders fail to adopt the merger agreement, the SDL board
amends or modifies or takes other prohibited actions with respect to its
recommendation or SDL takes or fails to take specified actions with respect to
an acquisition proposal, SDL may be required to pay JDS Uniphase $10 million for
JDS Uniphase's out-of-pocket expenses.
8
<PAGE> 16
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF SDL
Set forth below is a summary of certain consolidated financial information
with respect to SDL as of the dates and for the periods indicated. The
consolidated statement of operations and other data set forth below for the
years ended December 31, 1999, 1998 and 1997 and the consolidated balance sheet
data as of December 31, 1999 and 1998 have been derived from SDL's consolidated
financial statements which have been audited by Ernst & Young LLP, independent
auditors, and are incorporated by reference in this proxy statement-prospectus.
The report of Ernst & Young LLP, independent auditors, on SDL's consolidated
financial statements as of December 31, 1998 and for the years ended December
31, 1998 and 1997, was based in part on the report on IOC of Arthur Andersen,
chartered accountants. The consolidated statement of operations data and other
data set forth below for the fiscal year ended December 31, 1996 and the
consolidated balance sheet data as of December 31, 1997 and 1996 have been
derived from SDL's consolidated financial statements which have been audited by
Ernst & Young LLP and are not incorporated in this proxy statement-prospectus by
reference. The report of Ernst & Young LLP, independent auditors, on SDL's
consolidated financial statements as of December 31, 1997 and 1996 and for the
year ended December 31, 1996, was based in part on the reports on IOC of Arthur
Andersen, chartered accountants. The consolidated financial data as of and for
the year ended December 31, 1995, was derived from the unaudited combination of
the separate financial statements of SDL as of and for the year ended December
31, 1995 and IOC as of and for the year ended September 30, 1995, and are not
incorporated in this proxy statement-prospectus by reference. The selected
historical financial data of SDL as of and for the nine months ended September
30, 2000 and 1999, has been derived from SDL's unaudited financial statements
which are incorporated in this proxy statement-prospectus by reference and
include, in the opinion of SDL's management, all adjustments, consisting of
normal recurring adjustments, which SDL considers necessary to present fairly
the results of operations and financial position of such periods.
<TABLE>
<CAPTION>
AS OF AND FOR
THE NINE MONTHS
ENDED
SEPTEMBER 30, AS OF AND FOR THE YEARS ENDED DECEMBER 31,
--------------------- -----------------------------------------------------
2000 1999 1999 1998 1997(2) 1996 1995
---------- -------- --------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales....................................... $ 329,234 $128,344 $ 187,021 $112,792 $102,119 $ 88,224 $ 56,429
Amortization of purchased intangibles........... $ 224,698 $ 599 $ 809 $ 777 $ 671 $ 645 $ 54
Acquired in-process research and development.... $ 27,400 $ 1,495 $ 1,495 $ -- $ 753 $ -- $ 10,010
Merger costs(1)................................. $ 3,168 $ 2,677 $ 2,677 $ -- $ -- $ -- $ --
Income (loss) from operations................... $ (154,535) $ 16,951 $ 29,064 $ 7,702 $(25,544) $ 9,499 $ (882)
Net income (loss)............................... $ (172,320) $ 13,218 $ 25,213 $ 7,903 $(24,353) $ 8,139 $ (2,685)
Earnings (loss) per share:
Basic......................................... $ (2.17) $ 0.21 $ 0.39 $ 0.14 $ (0.44) $ 0.16 $ (0.07)
Dilutive...................................... $ (2.17) $ 0.20 $ 0.37 $ 0.13 $ (0.44) $ 0.15 $ (0.07)
Shares used in per share calculation:
Basic......................................... 79,292 62,086 64,320 57,436 55,776 49,512 37,568
Dilutive...................................... 79,292 66,170 68,470 60,724 55,776 54,476 37,568
CONSOLIDATED BALANCE SHEET DATA:
Working capital................................. $ 455,089 $338,725 $ 355,262 $ 63,705 $ 44,173 $ 74,272 $ 25,113
Total assets.................................... $3,433,889 $430,788 $ 460,953 $132,060 $112,431 $129,429 $ 60,570
Long-term obligations........................... $ 5,012 $ 4,710 $ 965 $ 2,028 $ 2,380 $ 247 $ 1,526
Total stockholders' equity...................... $3,353,496 $395,815 $ 420,148 $108,206 $ 89,282 $111,220 $ 42,162
Book value per common share..................... $ 38.67 $ 5.65 $ 5.88 $ 1.82 $ 1.58 $ 2.02 $ 0.99
OTHER DATA:
Net cash provided by (used in):
Operating activities.......................... $ 112,012 $ 8,100 $ 34,634 $ 10,357 $(22,087) $ 12,421 $ 7,328
Investment activities......................... $ (15,735) $(92,208) $(174,233) $ (8,627) $ 18,999 $(64,918) $(29,634)
Financing activities.......................... $ 17,267 $274,304 $ 276,755 $ 9,123 $ 1,081 $ 55,731 $ 26,395
Increase (decrease) in cash and cash
equivalents................................... $ 113,544 $190,196 $ 137,156 $ 10,853 $ (2,007) $ 3,234 $ 4,089
</TABLE>
-------------------------
(1) Results of operations include $3,168,000 of costs and expenses attributable
to the pending merger with JDS Uniphase in 2000 and $2,677,000 of costs and
expenses attributable to the pooling of interests transaction with IOC
International in 1999.
(2) The results of operations for the year ended December 31, 1997 include a
charge totaling $27.5 million related to costs associated with the
litigation settlement and related legal costs of the Spectra-Physics legal
dispute.
9
<PAGE> 17
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, 2000, 1999 and 1998 and the consolidated balance
sheet data as of June 30, 2000 and 1999 have been derived from JDS Uniphase's
consolidated financial statements which have been audited by Ernst & Young LLP
and are incorporated in this proxy statement-prospectus by reference. The
consolidated statement of operations data and other data set forth below for the
fiscal years ended June 30, 1997 and 1996 and the consolidated balance sheet
data as of June 30, 1998 and 1997 have been derived from JDS Uniphase's
consolidated financial statements which have been audited by Ernst & Young LLP
and are not incorporated in this proxy statement-prospectus by reference. The
consolidated balance sheet data as of June 30, 1996 is unaudited. The selected
historical financial data of JDS Uniphase as of and for the three months ended
September 30, 2000 and 1999 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 interim periods.
<TABLE>
<CAPTION>
AS OF AND FOR THE
THREE MONTHS ENDED
SEPTEMBER 30, AS OF AND FOR THE YEARS ENDED JUNE 30,
------------------------ ---------------------------------------------------------
2000 1999 2000(2)(3) 1999(4) 1998 1997 1996
----------- ---------- ----------- ---------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales................................ $ 786,486 $ 230,059 $ 1,430,361 $ 282,828 $185,215 $113,214 $ 73,701
Amortization of purchased intangibles.... $ 1,107,444 $ 172,884 $ 896,929 $ 15,730 $ 5,577 $ 1,844 $ 169
Acquired in-process research and
development............................ $ 8,900 $ -- $ 360,646 $ 210,400 $ 40,268 $ 33,314 $ 4,480
Merger and other costs(1)................ $ -- $ -- $ -- $ 6,759 $ -- $ -- $ --
Income (loss) from operations............ $ (945,126) $ (113,144) $ (865,124) $ (153,222) $(11,521) $(15,785) $ 5,849
Net income (loss)........................ $(1,016,615) $ (113,920) $ (904,725) $ (171,057) $(19,630) $(17,787) $ 3,212
Earnings (loss) per share:
Basic.................................. $ (1.07) $ (0.17) $ (1.27) $ (0.54) $ (0.07) $ (0.07) $ 0.02
Dilutive............................... $ (1.07) $ (0.17) $ (1.27) $ (0.54) $ (0.07) $ (0.07) $ 0.01
Shares used in per share calculation:
Basic.................................. 946,570 673,860 710,887 318,248 283,608 269,528 204,464
Dilutive............................... 946,570 673,860 710,887 318,248 283,608 269,528 223,296
CONSOLIDATED BALANCE SHEET DATA:
Working capital.......................... $ 1,562,511 $1,069,929 $ 1,325,716 $ 314,760 $121,428 $110,197 $132,239
Total assets............................. $25,668,007 $4,745,456 $26,389,127 $4,096,097 $332,871 $180,653 $175,692
Long-term obligations.................... $ 51,618 $ 8,295 $ 61,278 $ 9,847 $ 5,666 $ 2,478 $ 7,049
Total stockholders' equity............... $24,085,168 $4,284,365 $24,778,617 $3,619,247 $280,038 $152,033 $154,824
Book value per common share.............. $ 25.10 $ 6.17 $ 26.47 $ 5.62 $ 0.90 $ 0.55 $ 0.59
OTHER DATA:
Net cash provided by (used in):
Operating activities................... $ 21,952 $ 39,380 $ 280,970 $ 66,946 $ 51,025 $ 21,935 $ 8,031
Investment activities.................. $ (355,274) $ (361,476) $ (819,503) $ (40,298) $(45,712) $(48,851) $(83,626)
Financing and other activities......... $ 227,644 $ 742,291 $ 782,121 $ 15,445 $ (1,715) $ 3,790 $125,090
Increase (decrease) in cash and cash
equivalents............................ $ (105,678) $ 420,195 $ 243,588 $ 42,093 $ 3,598 $(23,126) $ 49,495
</TABLE>
-------------------------
(1) Results of operations include $5,877,000 of costs and expenses attributable
to the pooling of interests transaction with Uniphase Broadband Products,
and $882,000 loss on sale of the Ultrapointe Systems assets in fiscal 1999.
(2) JDS Uniphase merged with Optical Coating Laboratory, Inc. (OCLI) on February
4, 2000 in a transaction accounted for as a purchase. The consolidated
statement of operations and other data for the year ended June 30, 2000
includes the results of operations of OCLI subsequent to February 4, 2000
and the consolidated balance sheet data as of June 30, 2000 includes the
financial position of OCLI.
(3) JDS Uniphase merged with E-TEK Dynamics, Inc. (E-TEK) on June 30, 2000 in a
transaction accounted for as a purchase. The consolidated balance sheet data
as of June 30, 2000 includes the financial position of E-TEK.
(4) 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 year ended June 30, 2000 and the consolidated balance
sheet data as of June 30, 2000 and 1999 include the results of operations
and financial position, respectively, of JDS FITEL.
10
<PAGE> 18
COMPARATIVE PER SHARE DATA
The following table presents certain historical per share data of SDL and
JDS Uniphase and certain unaudited pro forma per share data that reflect the
combination of SDL and JDS Uniphase using the purchase method of accounting.
This data should be read in conjunction with the SDL Audited Financial
Statements, the SDL Unaudited Financial Statements, the SDL Unaudited Pro Forma
Financial Statements, the JDS Uniphase Unaudited Financial Statements and the
JDS Uniphase Audited Financial Statements that are incorporated by reference,
and the JDS Uniphase Unaudited Pro Forma Condensed Combined Consolidated
Financial Statements and the SDL and JDS Uniphase Unaudited Pro Forma Condensed
Combined Consolidated Financial Statements included elsewhere in this document.
The SDL 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 SDL 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, 2000
-------------------------------------------------------
PRO FORMA
-----------------------------
JDS UNIPHASE SDL
JDS UNIPHASE SDL(1) AND SDL(2) EQUIVALENT(3)
------------ ------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net loss per share:
Basic................................. $(1.07) $(1.34) $ (2.39) $ (9.08)
Diluted(4)............................ $(1.07) $(1.34) $ (2.39) $ (9.08)
Book value per common share at period
end................................... $25.10 $38.67 $ 48.80 $185.43
</TABLE>
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED JUNE 30, 2000
-------------------------------------------------------
PRO FORMA
-------------------------------------------------------
JDS UNIPHASE SDL
JDS UNIPHASE SDL(1) AND SDL(2) EQUIVALENT(3)
------------ ------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Pro forma net loss per share:
Basic................................. $(4.70) $(6.00) $(10.39) $(39.48)
Diluted(5)............................ $(4.70) $(6.00) $(10.39) $(39.48)
Book value per common share at period
end................................... $26.47 $39.89 $ 49.88 $189.54
</TABLE>
<TABLE>
<CAPTION>
AS OF AND FOR THE
AS OF AND FOR THE AS OF AND FOR THE AS OF AND FOR THE NINE MONTHS
YEAR ENDED TWELVE MONTHS TWELVE MONTHS ENDED
JUNE 30, 2000 ENDED JUNE 30, ENDED DECEMBER 31, SEPTEMBER 30,
FOR JDS UNIPHASE 2000 FOR SDL 1999 FOR SDL 2000 FOR SDL
----------------- ----------------- ------------------ -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
GAAP basis net income
(loss) per share:
Basic.................. $(1.27) $(0.52) $0.39 $(2.17)
Diluted(5)............. $(1.27) $(0.52) $0.37 $(2.17)
Book value per common
share at period end.... $26.47 $39.89 $5.88 $38.67
</TABLE>
-------------------------
(1) Because of different year ends, pro forma financial information relating to
SDL's twelve months ended June 30, 2000 has been combined with pro forma
financial information for JDS Uniphase for the fiscal year ended June 30,
2000.
(2) The Unaudited Pro Forma Comparative Per Share Data for the year ended June
30, 2000 is based on the Unaudited Pro Forma Condensed Combined Consolidated
Statement of Operations of JDS Uniphase (combining JDS Uniphase, OCLI and
E-TEK) included on page 24 of this proxy statement-prospectus and the
unaudited pro forma financial statements of SDL included in SDL's Form 8-K/A
filed August 14, 2000 (combining SDL, Photonic Integrated Research, Inc.,
Veritech Microwave, Inc. and Queensgate Instruments, Ltd.) for the
comparable twelve months after giving effect to the merger with SDL as
described in the footnotes accompanying the pro forma financial statements
of JDS Uniphase and SDL. For purposes of computing pro forma book value per
share as of June 30,
11
<PAGE> 19
2000 the pro forma book value of $63.1 billion was divided by pro forma
common shares of 1.264 billion.
(3) The SDL pro forma equivalent per share amounts are computed by multiplying
the SDL and JDS Uniphase pro forma combined per share amounts by the
exchange ratio of 3.8 shares of JDS Uniphase common stock for each share of
SDL common stock.
(4)GAAP basis diluted net income (loss) per share excludes the effect of
securities totaling 64.8 million and 4.2 million equivalent shares for JDS
Uniphase and SDL, respectively, for the three months ended September 30, 2000
as they are antidilutive. Pro forma diluted loss per share excludes the
effect of pro forma securities totaling 80.8 million equivalent shares for
the three months ended September 30, 2000 as they are antidilutive.
(5) GAAP basis diluted net income (loss) per share excludes the effect of
securities totaling 64.4 million and 4.3 million equivalent shares for JDS
Uniphase and SDL, respectively, for the twelve months ended June 30, 2000 as
they are antidilutive. Pro forma diluted loss per share excludes the effect
of pro forma securities totaling 95.2 million equivalent shares for the
twelve months ended June 30, 2000 as they are antidilutive.
12
<PAGE> 20
COMPARATIVE PER SHARE MARKET PRICE DATA
JDS Uniphase 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 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 and splits 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, 1999
First Quarter......................................... $ 7.87 $ 4.70
Second Quarter........................................ $ 8.67 $ 4.29
Third Quarter......................................... $ 14.39 $ 7.94
Fourth Quarter........................................ $ 20.90 $12.81
Year Ended June 30, 2000
First Quarter......................................... $ 30.37 $19.31
Second Quarter........................................ $ 88.75 $28.00
Third Quarter......................................... $153.42 $74.50
Fourth Quarter........................................ $128.94 $79.00
Year Ending June 30, 2001
First Quarter......................................... $135.94 $94.69
Second Quarter through November 16, 2000.............. $102.38 $68.00
</TABLE>
SDL common stock is traded on The Nasdaq National Market under the symbol
"SDLI." The following table shows the high and low sale prices of SDL common
stock as reported by The Nasdaq National Market for the periods indicated
(including intraday variations). The prices in the following table have been
adjusted to reflect all previous stock dividends and splits through the date of
this proxy statement-prospectus. SDL has never paid a cash dividend since its
inception and does not anticipate paying any cash dividends in the foreseeable
future.
<TABLE>
<CAPTION>
SDL
SALE PRICE
------------------
HIGH LOW
------- -------
<S> <C> <C>
Year Ended December 31, 1998
First Quarter........................................ $ 6.34 $ 3.59
Second Quarter....................................... $ 6.94 $ 4.59
Third Quarter........................................ $ 7.50 $ 2.97
Fourth Quarter....................................... $ 11.03 $ 2.03
Year Ended December 31, 1999
First Quarter........................................ $ 22.88 $ 9.56
Second Quarter....................................... $ 31.75 $ 19.39
Third Quarter........................................ $ 46.38 $ 25.55
Fourth Quarter....................................... $125.00 $ 37.56
Year Ending December 31, 2000
First Quarter........................................ $244.75 $ 85.81
Second Quarter....................................... $315.13 $117.63
Third Quarter........................................ $460.50 $257.00
Fourth Quarter through November 16, 2000............. $344.69 $190.31
</TABLE>
On July 7, 2000, 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 $120.06 and $114.00. The
high and low sale prices for SDL common stock on that day, as reported on The
Nasdaq National Market, were $303.00 and $279.25.
13
<PAGE> 21
The following table sets forth the closing sale price of JDS Uniphase
common stock and SDL common stock, as reported on The Nasdaq National Market, on
July 7, 2000, the last full trading day prior to the public announcement of the
proposed merger, and November 16, 2000, the latest practicable trading day prior
to the printing of this proxy statement-prospectus. The table also presents
implied equivalent per share value for SDL common stock by multiplying the price
per share of JDS Uniphase common stock on the dates indicated by the exchange
ratio of 3.8.
<TABLE>
<CAPTION>
CLOSING SALES PRICE
-------------------------------------
SDL
EQUIVALENT
(3.8 X JDS
JDS UNIPHASE SDL UNIPHASE)
------------ ------- ----------
<S> <C> <C> <C>
Price per share:
July 7, 2000................................. $116.19 $295.31 $441.52
November 16, 2000............................ $ 68.25 $228.38 $259.35
------- ------- -------
</TABLE>
You are advised to obtain current market quotations for JDS Uniphase and
SDL 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 SDL will receive in the proposed merger and the value of the SDL
stock they surrender may increase or decrease.
14
<PAGE> 22
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
OF JDS UNIPHASE AND SDL
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.
The following Unaudited Pro Forma Condensed Combined Consolidated Statement
of Operations for the three months ended September 30, 2000 and the Unaudited
Pro Forma Condensed Combined Consolidated Balance Sheet of JDS Uniphase and SDL
as of September 30, 2000 are based on the historical financial statements of JDS
Uniphase and SDL, after giving effect to the merger with SDL 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 of JDS Uniphase and SDL.
The following Unaudited Pro Forma Condensed Combined Consolidated Statement
of Operations of JDS Uniphase and SDL for the fiscal year ended June 30, 2000 is
based on the Unaudited Pro Forma Combined Consolidated Statement of Operations
of SDL included in Form 8-K/A filed August 14, 2000 (combining SDL, PIRI,
Veritech and Queensgate), and the Unaudited Pro Forma Condensed Combined
Consolidated Statement of Operations of JDS Uniphase included on page 24 of this
proxy statement-prospectus after giving effect to the merger with SDL 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 of JDS Uniphase and SDL.
The Unaudited Pro Forma Condensed Combined Consolidated Financial
Statements of JDS Uniphase and SDL should be read in conjunction with the
historical financial statements of JDS Uniphase and SDL, the Unaudited Pro Forma
Condensed Combined Consolidated Financial Statements of JDS Uniphase, OCLI and
E-TEK included on page 24 of this proxy statement-prospectus, and the Unaudited
Pro Forma Combined Consolidated Financial Statements of SDL included in Form
8-K/A filed August 14, 2000 (combining SDL with PIRI, Veritech and Queensgate).
The Unaudited Pro Forma Condensed Combined Consolidated Statements of
Operations of JDS Uniphase and SDL are presented as if the combination had taken
place on July 1, 1999. The Unaudited Pro Forma Condensed Combined Consolidated
Statement of Operations for the year ended June 30, 2000 combines the year ended
June 30, 2000 for Pro Forma JDS Uniphase (combining JDS Uniphase, OCLI and
E-TEK) and the twelve months ended June 30, 2000 for Pro Forma SDL (combining
SDL with PIRI, Veritech and Queensgate). 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, 2000 and combines the balance sheets
of JDS Uniphase and SDL as of that date. The pro forma information does not
purport to be indicative of the results that would have been reported if the
above transactions had been in effect for the period presented or which may
result in the future.
From August 1999 through October 2000, JDS Uniphase acquired AFC
Technologies, EPITAXX, Inc., SIFAM Limited, Oprel Technologies, Inc., the
remaining 49% interest of IOT of Germany, Cronos Integrated Microsystems, Inc.,
Fujian Casix Laser, Inc., Epion Corporation and Iridian Corporation. The
Unaudited Pro Forma Condensed Combined Consolidated Financial Statements of JDS
Uniphase and SDL do not include on a pro forma basis these acquisitions since
collectively they are not significant to JDS Uniphase.
15
<PAGE> 23
UNAUDITED PRO FORMA CONDENSED COMBINED
CONSOLIDATED STATEMENT OF OPERATIONS
OF JDS UNIPHASE AND SDL
THREE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
JDS UNIPHASE
PRO FORMA AND SDL
JDS UNIPHASE SDL ADJUSTMENTS COMBINED
------------ --------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales.............................. $ 786,486 $ 146,516 $ (16,736) $ 916,266
Cost of sales.......................... 436,638 70,058 (6,192) 500,504
----------- --------- ----------- -----------
Gross profit......................... 349,848 76,458 (10,544) 415,762
Operating expenses:
Research and development............. 62,412 12,214 -- 74,626
Selling, general and
administrative.................... 116,218 18,127 1,383 135,728
Amortization of purchased intangibles
and (151,327)
deferred compensation............. 1,107,444 151,327 2,055,351 3,162,795
Acquired in-process research and
development....................... 8,900 -- -- 8,900
Other operating expenses............. -- 3,168 (3,168) --
----------- --------- ----------- -----------
Total operating expenses..... 1,294,974 184,836 1,902,239 3,382,049
----------- --------- ----------- -----------
Loss from operations................... (945,126) (108,378) (1,912,783) (2,966,287)
Interest and other income, net......... (27,597) 5,949 -- (21,648)
----------- --------- ----------- -----------
Loss before income taxes............... (972,723) (102,429) (1,912,783) (2,987,935)
Income tax expense..................... 43,892 13,404 -- 57,296
----------- --------- ----------- -----------
Net loss............................... $(1,016,615) $(115,833) $(1,912,783) $(3,045,231)
=========== ========= =========== ===========
Basic earnings (loss) per share........ $ (1.07) $ (1.34) $ (2.39)
=========== ========= ===========
Dilutive earnings (loss) per share..... $ (1.07) $ (1.34) $ (2.39)
=========== ========= ===========
Average number of shares outstanding... 946,570 86,608 1,275,680
=========== ========= ===========
Average number of shares outstanding
assuming dilution.................... 946,570 86,608 1,275,680
=========== ========= ===========
</TABLE>
See accompanying notes to JDS Uniphase and SDL unaudited pro forma condensed
combined consolidated financial statements.
16
<PAGE> 24
UNAUDITED PRO FORMA CONDENSED COMBINED
CONSOLIDATED STATEMENT OF OPERATIONS
OF JDS UNIPHASE AND SDL
YEAR ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA SDL
JDS UNIPHASE (SDL, PIRI, PRO FORMA
(JDS UNIPHASE, VERITECH AND JDS UNIPHASE
OCLI AND E-TEK QUEENSGATE PRO FORMA AND SDL
COMBINED) COMBINED) ADJUSTMENTS COMBINED
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales........................... $ 1,900,734 $ 373,778 $ (37,075) $ 2,237,437
Cost of sales....................... 972,297 186,005 (16,311) 1,141,991
----------- --------- ----------- ------------
Gross profit...................... 928,437 187,773 (20,764) 1,095,446
Operating expenses:
Research and development.......... 162,680 27,421 -- 190,101
Selling, general and
administrative................. 238,329 49,063 5,532 292,924
Amortization of purchased
intangibles (603,456)
and deferred compensation...... 4,484,427 603,456 8,221,403 12,705,830
Acquired in-process research and
development.................... 27,611 -- -- 27,611
Other operating expenses.......... (307) -- -- (307)
----------- --------- ----------- ------------
Total operating
expenses................ 4,912,740 679,940 7,623,479 13,216,159
----------- --------- ----------- ------------
Loss from operations................ (3,984,303) (492,167) (7,644,243) (12,120,713)
Interest and other income, net...... 85,599 15,363 -- 100,962
----------- --------- ----------- ------------
Loss before income taxes............ (3,898,704) (476,804) (7,644,243) (12,019,751)
Income tax expense.................. 131,640 17,269 -- 148,909
----------- --------- ----------- ------------
Net loss............................ $(4,030,344) $(494,073) $(7,644,243) $(12,168,660)
=========== ========= =========== ============
Basic earnings (loss) per share..... $ (4.70) $ (6.00) $ (10.39)
=========== ========= ============
Dilutive earnings (loss) per
share............................. $ (4.70) $ (6.00) $ (10.39)
=========== ========= ============
Average number of shares
outstanding....................... 858,287 82,393 1,171,380
=========== ========= ============
Average number of shares outstanding
assuming dilution................. 858,287 82,393 1,171,380
=========== ========= ============
</TABLE>
See accompanying notes to JDS Uniphase and SDL unaudited pro forma condensed
combined consolidated financial statements.
17
<PAGE> 25
UNAUDITED PRO FORMA CONDENSED COMBINED
CONSOLIDATED BALANCE SHEET
OF JDS UNIPHASE AND SDL
SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
JDS UNIPHASE
PRO FORMA AND SDL
JDS UNIPHASE SDL ADJUSTMENTS COMBINED
------------ ---------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents................. $ 213,329 $ 266,560 $ (410,000) $ 69,889
Short-term investments.................... 931,566 117,669 -- 1,049,235
Accounts receivable....................... 493,755 82,787 (8,531) 568,011
Inventories............................... 394,495 55,761 (266) 449,990
Other current assets...................... 105,229 7,693 -- 112,922
----------- ---------- ----------- -----------
Total current assets.................... 2,138,374 530,470 (418,797) 2,250,047
Property, plant and equipment, net........ 770,556 104,051 34,825 909,432
(2,791,297)
Intangible assets, including goodwill..... 21,081,969 2,791,297 38,859,907 59,941,876
Other assets.............................. 1,677,108 8,071 -- 1,685,179
----------- ---------- ----------- -----------
Total assets............................ $25,668,007 $3,433,889 $35,684,638 $64,786,534
=========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable.......................... $ 161,176 $ 28,629 $ (8,531) $ 181,274
Other accrued expenses.................... 414,687 46,752 (266) 461,173
----------- ---------- ----------- -----------
Total current liabilities............... 575,863 75,381 (8,797) 642,447
Long-term obligations..................... 31,301 5,012 -- 36,313
Other non-current liabilities............. 20,317 -- -- 20,317
Deferred tax liabilities.................. 955,358 -- -- 955,358
(3,353,496)
40,295,077
(230,000)
Stockholders' equity...................... 24,085,168 3,353,496 (1,018,146) 63,132,099
----------- ---------- ----------- -----------
Total liabilities and stockholders'
equity............................... $25,668,007 $3,433,889 $35,684,638 $64,786,534
=========== ========== =========== ===========
</TABLE>
See accompanying notes to JDS Uniphase and SDL unaudited pro forma condensed
combined consolidated financial statements.
18
<PAGE> 26
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS OF JDS UNIPHASE AND SDL
1. BASIS OF PRO FORMA PRESENTATION
On July 10, 2000, SDL agreed to merge with JDS Uniphase, in a transaction
accounted for as a purchase. The total purchase price of $40.7 billion includes
consideration of 332.2 million shares of JDS Uniphase common stock, the issuance
of 33.5 million stock options valued at $3.4 billion in exchange for SDL options
and estimated direct transaction costs of $410 million.
The JDS Uniphase Pro Forma Condensed Combined Consolidated Financial
Statements provide for the exchange of 3.8 shares of JDS Uniphase common stock
for each outstanding share of SDL common stock. The actual number of shares of
JDS Uniphase common stock to be issued will depend on the actual number of
shares of SDL common stock outstanding on the date the merger closes. The
average market price per share of JDS Uniphase common stock of $111.13 is based
on the average closing price for a range of trading days (June 30, 2000 through
July 14, 2000) around the announcement date (July 10, 2000) of the merger. Based
on the total number of SDL options outstanding at June 30, 2000, JDS Uniphase
would issue options to purchase 33.5 million shares of JDS Uniphase common stock
at a weighted average exercise price of $21.54. The actual number of options
granted depends on the actual number of SDL options outstanding on the date the
merger closes. The estimated fair value of the options, as well as estimated
direct transaction expenses of $410 million, have been included as a part of the
total estimated purchase cost.
The estimated total purchase cost of the SDL merger is as follows (in
thousands):
<TABLE>
<S> <C>
Value of securities issued.................................. $36,918,587
Assumption of SDL options................................... 3,376,489
-----------
40,295,076
Estimated transaction costs and expenses.................... 410,000
-----------
Total purchase cost....................................... $40,705,076
===========
</TABLE>
The purchase price allocation, which is preliminary and therefore subject
to change based on JDS Uniphase's final analysis at the time the merger closes,
is as follows (in thousands):
<TABLE>
<CAPTION>
ANNUAL USEFUL
AMOUNT AMORTIZATION LIVES
----------- ------------ ---------
<S> <C> <C> <C>
Purchase Price Allocation:
Tangible net assets.......................... $ 597,024 n/a n/a
Intangible assets acquired:
Existing technology....................... 428,521 $ 85,704 5 years
Core technology........................... 215,900 43,180 5 years
Trademarks and tradename.................. 45,540 9,108 5 years
Assembled workforce....................... 44,000 11,000 4 years
Deferred compensation..................... 1,018,146 447,222 0-4 years
Goodwill..................................... 38,125,945 7,625,189 5 years
In-process research and development.......... 230,000 n/a n/a
----------- ----------
Total estimated purchase price
allocation........................... $40,705,076 $8,221,403
=========== ==========
</TABLE>
An independent valuation specialist performed an allocation of the total
purchase price of SDL to its individual assets. Of the total purchase price,
$230 million has been allocated to in-process research and development and will
be charged to expense in the period the transaction closes. Due to their non-
recurring nature, the in-process research and development attributed to the SDL
transaction and the transaction costs incurred by SDL estimated at $40 million
have been excluded in the pro forma statements of operations. The remaining
purchase price has been allocated to specifically identifiable assets
19
<PAGE> 27
acquired, including an adjustment to write-up property and equipment of SDL to
fair value by $34.8 million.
In addition to the value assigned to the in-process research and
development projects, SDL's tangible assets and specific intangible assets were
identified and valued. The related amortization of the identifiable tangible and
intangible assets is reflected as a pro forma adjustment to the Unaudited Pro
Forma Condensed Combined Statement of Operations. The identifiable intangible
assets include existing technology, core technology, trademarks and tradename,
and assembled workforce.
The acquired existing technology, which is comprised of products that are
already technologically feasible, includes products in most of SDL's product
lines. The main business segments, in which these product lines fall, are
communication products and industrial products. JDS Uniphase expects to amortize
the acquired existing technology of approximately $428.5 million on a
straight-line basis over an average estimated remaining useful life of 5 years.
The acquired core technology represents SDL trade secrets and patents
developed through years of experience in design, package and manufacture of
laser components and modules for fiber optic telecommunication networks. SDL's
products are designed for long-haul applications, as well as emerging short-haul
applications, such as metropolitan area networks. This proprietary know-how can
be leveraged by SDL to develop new and improved products and manufacturing
processes. JDS Uniphase expects to amortize the acquired core technology of
approximately $215.9 million on a straight-line basis over an average estimated
remaining useful life of 5 years.
The trademarks and trade names include the SDL trademark and trade name.
JDS Uniphase expects to amortize the trademarks and trade names of approximately
$45.5 million on a straight-line basis over an estimated remaining useful life
of 5 years.
The acquired assembled workforce is comprised of over 2,159 skilled
employees across SDL's Executive, Research and Development, Manufacturing,
Supervisor/Manager, and Sales and Marketing groups. JDS Uniphase expects to
amortize the value assigned to the assembled workforce of approximately $44.0
million on a straight-line basis over an estimated remaining useful life of 4
years.
Deferred compensation represents a portion of the estimated intrinsic value
of unvested SDL stock options assumed by JDSU in the merger agreement to the
extent that service is required after the closing date of the merger in order to
vest. In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions involving Stock
Compensation, an Interpretation of APB No. 25. The Interpretation, which is
effective as of July 1, 2000, results in compensation charges over the remaining
term of the option's vesting period, whereas options assumed from mergers and
acquisitions prior to July 2000 resulted in no compensation charges but were
included in JDS Uniphase's allocation of purchase price consideration as a
component of goodwill. JDS Uniphase expects to amortize the value assigned to
deferred compensation of approximately $1.0 billion over the remaining vesting
period of up to four 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 5 years.
SDL is currently developing new products that qualify as in-process
research and development in multiple product areas. For the purposes of
determining which projects qualified as in-process research and development,
technological feasibility is defined as being equivalent to completion of design
verification testing, when the design is finalized and ready for pilot
manufacturing.
The following is a general description of in-process research and
development efforts as of the date of this proxy statement-prospectus:
Current engineering efforts are focused on developing new products,
integrating new technologies, improving manufacturing efficiencies, improving
product performance and integrating multiple functions into single components
and multiple components into modules. The principal products to which research
20
<PAGE> 28
and development efforts are directed are as follows: pump laser chips, pump
laser modules, Raman chips and amplifiers, external modulators and drivers and
industrial products. There is a risk that these developments and enhancements
will not be competitive with other products using alternative technologies that
offer comparable functionality.
Pump Laser Chips. SDL supplies high power 980nm pump laser chips to provide
power to optical amplifiers used in fiber optic systems. SDL's pump laser chip
development efforts support future generation optical amplifiers. SDL expects
the development cycle for the current research and development project with
respect to these products to continue for another 3 months, with expected
completion dates in the fourth quarter of calendar year 2000 and the first
quarter of the calendar year 2001. Development costs incurred to date are
approximately $1.9 million with estimated cost to complete of approximately $0.6
million, which SDL expects to incur ratably over the remainder of the
development cycle.
Pump Laser Modules. SDL supplies 980nm pump laser modules that lead the
industry in output power and performance. SDL expects the development cycle for
the current research and development project with respect to these pump laser
modules to continue for another 12 months, with expected completion dates in the
third quarter of calendar year 2001. Development costs incurred to date are
approximately $2.1 million with estimated cost to complete of approximately $2.2
million, which SDL expects to incur ratably over the remainder of the
development cycle.
Raman Chips and Amplifiers. SDL is engaged in the development of Raman
chips and amplifiers, which are an emerging technology in fiber optic
transmissions systems. Raman amplifiers differ from conventional EDFAs in that
they use installed optical fiber as the amplification medium rather than
erbium-doped fiber. SDL expects the development cycle for the current research
and development project with respect to these Raman chips and amplifiers to
continue for another 2-23 months, with expected completion dates starting in the
first quarter of the calendar year 2001 and finishing in the fourth quarter of
calendar year 2002. Development costs incurred to date are approximately $8.9
million with estimated cost to complete of approximately $9.9 million, which SDL
expects to incur ratably over the remainder of the development cycle.
External Modulators and Drivers. SDL supplies external modulators that are
utilized in very high channel count systems with very long propagation
distances. Development costs incurred to date are approximately $1.0 million
with estimated cost to complete of approximately $11.6 million, which SDL
expects to incur ratably over the remainder of the development cycle of 4-25
months.
Industrial Products. SDL supplies products for non-communications
applications. These include applications such as printing and materials
processing. SDL expects the development cycle for the current research and
development projects with respect to these industrial products to continue for
another 2-5 months, with expected completion dates in the first quarter of
calendar year 2001. Development costs incurred to date are approximately $2.1
million with estimated cost to complete of approximately $0.4 million, which SDL
expects to incur ratably over the remainder of the development cycle.
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 or relevant market sizes and growth factors,
expected trends in technology and the nature and expected timing of new product
introductions by SDL and its competitors.
The rates utilized to discount the net cash flows to their present value
are based on SDL weighted average cost of capital. Given the nature of the risks
associated with the difficulties and uncertainties in completing each project
and thereby achieving technological feasibility, anticipates market acceptance
and
21
<PAGE> 29
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 12% and 20% were deemed
appropriate for the existing and in-process technology, respectively.
The estimates used in valuing in-process research and development were
based upon assumptions believed to be reasonable but which are inherently
uncertain and unpredictable. 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 SDL'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 SDL prior to the
merger. Following are the estimated completion percentages with respect to the
current research and development efforts and technology lives:
<TABLE>
<CAPTION>
PERCENT EXPECTED
PROJECT COMPLETED TECHNOLOGY LIFE
------- --------- ---------------
<S> <C> <C>
Pump Laser Chips............................................ 61% 5 years
Pump Laser Modules.......................................... 49% 5 years
Raman Chips and Amplifiers.................................. 42% 5 years
External Modulators and Drivers............................. 21% 5 years
Industrial Products......................................... 57% 5 years
</TABLE>
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>
Pump Laser Chips............................................ $ 85.2
Pump Laser Modules.......................................... 13.7
Raman Chips and Amplifiers.................................. 68.8
External Modulators and Drivers............................. 52.6
Industrial Products......................................... 9.7
------
Total acquired in-process research and development........ $230.0
======
</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 analysis
of data provided by SDL 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 will be charged to expense
upon closing of the merger.
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 SDL 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 SDL have been eliminated
for pro forma presentations. The pro forma combined provision for income taxes
does not reflect the amounts that would have resulted had JDS Uniphase and SDL
filed consolidated income tax returns during the periods presented.
22
<PAGE> 30
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 pro forma JDS Uniphase common stock
outstanding during each period and pro forma weighted average number of SDL
shares of common stock outstanding multiplied by the exchange ratio. Dilutive
securities including the replacement SDL options are not included in the
computation of pro forma dilutive net loss per share as their effect would be
anti-dilutive.
23
<PAGE> 31
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
OF JDS UNIPHASE
The following unaudited pro forma condensed combined consolidated financial
statements give effect to JDS Uniphase's mergers with OCLI and E-TEK using the
purchase method of accounting and include the pro forma adjustments described in
the accompanying notes.
On February 4, 2000, JDS Uniphase acquired OCLI in a transaction accounted
for as a purchase. Accordingly, the historical statement of operations for JDS
Uniphase for the year ended June 30, 2000 include the results of operations for
OCLI subsequent to February 4, 2000.
Effective June 30, 2000, JDS Uniphase Corporation combined its operations
with E-TEK in a transaction accounted for as a purchase. Accordingly, the
historical balance sheet of JDS Uniphase as of June 30, 2000 includes the
financial position of E-TEK as of that date, but the historical statement of
operations for JDS Uniphase for the year ended June 30, 2000 does not include
the results of operations for E-TEK for that period.
The Unaudited Pro Forma Condensed Combined Consolidated Statement of
Operations for the year ended June 30, 2000 reflect the combinations as if they
had taken place on July 1, 1999 and combine JDS Uniphase historical results of
operations for the year ended June 30, 2000, which includes the results of
operations of OCLI subsequent to February 4, 2000, with OCLI's historical
results of operations for the nine months ended January 31, 2000, and E-TEK's
results of operations for the year ended June 30, 2000.
The Unaudited Pro Forma Condensed Combined Consolidated Financial
Statements of JDS Uniphase should be read in conjunction with the historical
financial statements of JDS Uniphase, OCLI and E-TEK, all of which are
incorporated by reference into this proxy statement-prospectus. The pro forma
information does not purport to be indicative of the results that would have
been reported if the above transactions had been in effect for the period
presented or which may result in the future.
From August 1999 through June 2000, JDS Uniphase acquired AFC Technologies,
EPITAXX, Inc., SIFAM Limited, Oprel Technologies, Inc., the remaining 49%
interest of IOT of Germany, Cronos Integrated Microsystems, Inc. and Fujian
Casix Laser, Inc. The Unaudited Pro Forma Condensed Combined Consolidated
Financial Statements of JDS Uniphase do not include on a pro forma basis these
acquisitions since collectively they are not significant to JDS Uniphase.
24
<PAGE> 32
UNAUDITED PRO FORMA CONDENSED COMBINED
CONSOLIDATED STATEMENT OF OPERATIONS
OF JDS UNIPHASE
YEAR ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
JDS UNIPHASE OCLI E-TEK ADJUSTMENTS JDS UNIPHASE
------------ ------------ -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $1,430,361 $313,675 $346,235 $ (189,537) $ 1,900,734
Cost of sales...................... 751,616 222,907 174,198 (176,424) 972,297
---------- -------- -------- ----------- -----------
Gross profit..................... 678,745 90,768 172,037 (13,113) 928,437
Operating expenses:
Research and development......... 113,374 24,291 30,983 (5,968) 162,680
Selling, general and
administrative................ 172,920 32,214 41,161 (7,966) 238,329
Amortization of purchased
intangibles................... (33,378)
and deferred compensation..... 896,929 2,163 31,215 3,587,498 4,484,427
Acquired in-process research and
development................... 360,646 -- 1,630 (334,665) 27,611
Other operating expenses......... -- (307) 35,500 (35,500) (307)
---------- -------- -------- ----------- -----------
Total operating
expenses............... 1,543,869 58,361 140,489 3,170,021 4,912,740
---------- -------- -------- ----------- -----------
Income (loss) from operations...... (865,124) 32,407 31,548 (3,183,134) (3,984,303)
Interest and other income, net..... 35,314 1,999 48,770 (484) 85,599
---------- -------- -------- ----------- -----------
Income (loss) before income
taxes............................ (829,810) 34,406 80,318 (3,183,618) (3,898,704)
Income tax expense................. 74,915 12,680 44,045 -- 131,640
---------- -------- -------- ----------- -----------
Net income (loss).................. $ (904,725) $ 21,726 $ 36,273 $(3,183,618) $(4,030,344)
========== ======== ======== =========== ===========
Basic earnings (loss) per share.... $ (1.27) $ (4.70)
========== ===========
Dilutive earnings (loss) per
share............................ $ (1.27) $ (4.70)
========== ===========
Average number of shares
outstanding...................... 710,887 858,287
========== ===========
Average number of shares
outstanding assuming dilution.... 710,887 858,287
========== ===========
</TABLE>
See accompanying notes to JDS Uniphase unaudited pro forma condensed combined
consolidated financial statements.
25
<PAGE> 33
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS OF JDS UNIPHASE
1. BASIS OF PRO FORMA PRESENTATION
On February 4, 2000, JDS Uniphase acquired Optical Coating Laboratory, Inc.
(OCLI) in a transaction accounted for as a purchase. The total purchase price of
$2.7 billion included consideration of 54.0 million shares of JDS Uniphase
common stock, the issuance of 6.4 million stock options valued at $267.2 million
in exchange for OCLI options and direct transaction costs of $8.2 million.
The total purchase cost of the OCLI merger was as follows (in millions):
<TABLE>
<S> <C>
Value of securities issued.................................. $2,432.1
Assumption of OCLI options.................................. 267.2
--------
2,699.3
Estimated transaction costs and expenses.................... 8.2
--------
Total purchase cost......................................... $2,707.5
========
</TABLE>
Allocation of the OCLI total purchase cost was as follows (in millions):
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
Purchase Price Allocation:
Tangible net assets....................................... $ 253.2
Intangible assets acquired:
Developed technology:
Telecommunications..................................... 115.1
Flex Products.......................................... 92.2
Applied Photonics...................................... 1.0
Information Industries................................. 23.9
Proprietary know-how................................... 161.9
Trademarks and tradename............................... 38.5
Assembled workforce.................................... 14.3
Goodwill.................................................. 1,927.4
In-process research and development....................... 84.1
Deferred tax liabilities.................................. (4.1)
--------
Total purchase price allocation........................ $2,707.5
========
</TABLE>
Additional disclosures related to JDS Uniphase's acquisition of OCLI are
included in JDS Uniphase's Current Report on Form 8-K filed on September 1,
2000, which is incorporated by reference into this proxy statement-prospectus.
On June 30, 2000, JDS Uniphase acquired E-TEK in a transaction accounted
for as a purchase. The total purchase price of $17.5 billion included
consideration of 150.1 million shares of JDS Uniphase common stock, the issuance
of 23.2 million stock options valued at $2.0 billion in exchange for E-TEK
options and direct transaction costs of $92.0 million.
The total purchase cost of the E-TEK merger was as follows (in millions):
<TABLE>
<S> <C>
Value of securities issued.................................. $15,369.3
Assumption of E-TEK options and stock purchase plan......... 2,050.9
---------
17,420.2
Estimated transaction costs and expenses.................... 92.0
---------
Total purchase cost......................................... $17,512.2
=========
</TABLE>
26
<PAGE> 34
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
FINANCIAL STATEMENTS OF JDS UNIPHASE (CONTINUED)
The preliminary purchase price allocation of the E-TEK total purchase cost
is as follows (in millions):
<TABLE>
<CAPTION>
AMOUNT
---------
<S> <C>
Purchase Price Allocation:
Tangible net assets....................................... $ 395.6
Marketable equity investments............................. 718.0
Intangible assets acquired:
Existing technology.................................... 248.7
Core technology........................................ 168.5
Trademarks and tradename............................... 60.4
Assembled workforce.................................... 10.7
Goodwill.................................................. 15,659.7
In-process research and development....................... 250.6
---------
Total estimated purchase price allocation............ $17,512.2
=========
</TABLE>
The purchase price allocation is preliminary and is dependent upon JDS
Uniphase's final analysis, which it expects to complete during the quarter
ending September 30, 2000.
Additional disclosures related to JDS Uniphase's acquisition of E-TEK are
included in JDS Uniphase's Current Report on Form 8-K filed on September 1,
2000, which is incorporated by reference into this proxy statement-prospectus.
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 and E-TEK 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, OCLI and E-TEK
have been eliminated for pro forma presentations. The pro forma combined
provision for income taxes does not represent the amounts that would have
resulted had JDS Uniphase, OCLI and E-TEK filed consolidated income tax returns
during the periods presented.
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 pro forma JDS Uniphase common stock
outstanding during each period and weighted average number of OCLI and E-TEK
share of common stock outstanding multiplied by the respective exchange ratios.
Dilutive securities including the replacement OCLI and E-TEK options are not
included in the computation of pro forma dilutive net loss per share as their
effect would be anti-dilutive.
27
<PAGE> 35
RISK FACTORS
By voting in favor of the merger, you will be choosing to invest in the
combined company's common stock. An investment in the combined company's 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,
including risks related to SDL incorporated by reference herein from documents
previously filed by SDL with the SEC, you should carefully consider the
following risk factors in deciding whether to vote for the merger.
RISKS RELATED TO THE MERGER
AS AN SDL STOCKHOLDER, YOU WILL RECEIVE 3.8 SHARES OF JDS UNIPHASE COMMON STOCK
FOR EACH SHARE OF SDL COMMON STOCK DESPITE CHANGES IN THE MARKET VALUE OF SDL
COMMON STOCK OR JDS UNIPHASE COMMON STOCK
Upon completion of the merger, each share of SDL common stock will be
exchanged for 3.8 shares of JDS Uniphase common stock. There will be no
adjustment for changes in the market price of either SDL common stock or JDS
Uniphase common stock. Accordingly, the specific dollar value of the JDS
Uniphase common stock that SDL stockholders 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. The merger may not be completed immediately
following the SDL and JDS Uniphase stockholder meetings, if all regulatory
approvals have not yet been obtained. We cannot assure you that the value of the
JDS Uniphase common stock you will receive in the merger will not decline prior
to or after the merger.
ALTHOUGH JDS UNIPHASE AND SDL 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 SDL
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:
- Coordinating manufacturing operations in a rapid and efficient manner;
- Combining product offerings and product lines effectively and quickly;
- Integrating sales efforts so that customers can do business easily with
the combined company;
- Bringing together the companies' marketing efforts so that the industry
receives useful information about the merger;
- Coordinating research and development activities to enhance introduction
of new products and technologies; and
- Persuading employees that JDS Uniphase's and SDL's business cultures are
compatible.
It is not certain that JDS Uniphase and SDL 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 SDL can assure
you that the growth rate of the combined company will equal the historical
growth rates experienced by JDS Uniphase and SDL. In addition, because of JDS
Uniphase's acquisition activity, it has ongoing integration concerns. See
"Difficulties JDS Uniphase may encounter managing its growth could adversely
affect its results of operations" on page 31.
CUSTOMER AND EMPLOYEE UNCERTAINTY RELATED TO THE MERGER COULD HARM THE COMBINED
COMPANY
JDS Uniphase's or SDL's customers may, in response to the announcement of
the merger, delay or defer purchasing decisions or elect to switch to internal
supply or other suppliers. Any delay, deferral or change in purchasing decisions
by JDS Uniphase's or SDL's customers could seriously harm the business of the
combined company. Similarly, JDS Uniphase and SDL employees may experience
uncertainty
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<PAGE> 36
about their future role with the combined company until or after strategies with
regard to the combined company are announced or executed. This may adversely
affect the combined company's ability to attract and retain key management,
marketing and technical personnel.
JDS UNIPHASE'S OPERATING RESULTS WILL SUFFER AS A RESULT OF PURCHASE ACCOUNTING
TREATMENT, THE IMPACT OF AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES RELATING
TO ITS PROPOSED COMBINATION WITH SDL
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 SDL common stock that become options to purchase JDS
Uniphase common stock and the amount of direct transaction costs as the cost of
acquiring the business of SDL. JDS Uniphase will 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. In-process research and
development, which is currently estimated at $230 million, will be expensed in
the quarter when the merger closes. The purchase price will also be allocated to
deferred compensation, based on the portion of the intrinsic value of the
unvested SDL stock options assumed by JDS Uniphase to the extent that service is
required after the closing date of the merger in order to vest. Intangible
assets including goodwill will be generally amortized over a five year period.
Deferred compensation will be amortized over the remaining vesting period of
SDL's unvested stock options of up to four years. As described in the unaudited
pro forma condensed combined consolidated financial statements beginning on page
15, the amount of purchase cost allocated to goodwill and other intangibles is
estimated to be approximately $38.1 billion. The amount of purchase cost
allocated to deferred compensation is currently estimated at approximately $1.0
billion. If goodwill and other intangible assets were amortized in equal
quarterly amounts over a five year period following completion of the merger and
the deferred compensation was amortized over the remaining vesting period of the
options, the accounting charge attributable to these items would be
approximately $2.1 billion per quarter and $8.2 billion per year in the year
following the closing date of the merger. As a result, purchase accounting
treatment of the merger will increase the net loss for JDS Uniphase in the
foreseeable future which could have a material and adverse effect on the market
value of JDS Uniphase common stock following completion of the merger.
JDS UNIPHASE AND SDL EXPECT TO INCUR SIGNIFICANT COSTS ASSOCIATED WITH THE
MERGER
JDS Uniphase estimates that it will incur direct transaction costs of
approximately $410 million associated with the merger, which will be included as
a part of the total purchase cost for accounting purposes. In addition, SDL
estimates that it will incur direct transaction costs of approximately $40
million which will be expensed in the quarter that the merger closes. JDS
Uniphase and SDL 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.
JDS UNIPHASE AND SDL MAY NOT BE ABLE TO OBTAIN THE REQUIRED REGULATORY APPROVALS
FOR COMPLETING THE MERGER
As a condition to the obligations of JDS Uniphase and SDL to complete the
merger, the relevant waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, the Competition Act (Canada) and the German
Competition Act must have expired or been terminated. JDS Uniphase and SDL have
made or will make the required filings with the Department of Justice or the
Federal Trade Commission, the Canadian Competition Bureau and the German Federal
Cartel Office and other jurisdictions if filings in those jurisdictions are
required. By letter dated November 7, 2000, the German Federal Cartel Office
informed JDS Uniphase and SDL that the merger was not prohibited under German
law, and therefore may be completed. At the request of the United Kingdom Office
of Fair Trading, or the
29
<PAGE> 37
OFT, JDS Uniphase has supplied further information in order to allow the OFT to
decide whether to refer the merger to the United Kingdom Competition Commission
for a formal investigation. The OFT has not yet decided that question.
On August 24, 2000, JDS Uniphase and SDL received requests for additional
information and other documentary material, commonly called a second request,
from the Antitrust Division of the U.S. Department of Justice under the
Hart-Scott-Rodino Act. This request extends the waiting period for this
transaction until 20 days after the parties' substantial compliance with the
request, unless the parties and the Department of Justice agree on a different
time period. JDS Uniphase and SDL intend to comply with all requests for
information from any government entity. The applicable legislation in these
jurisdictions including, among others, the Hart-Scott-Rodino Act, prohibit JDS
Uniphase and SDL from consummating the merger until the expiration of the
applicable waiting period. There can be no assurance that these consents and
approvals will be obtained at all or without materially adverse restrictions or
conditions that would have a material adverse effect on JDS Uniphase and SDL on
a combined basis. The combined enterprise may be required to agree to various
actions, including, without limitation, holding separate and agreeing to sell or
otherwise dispose of, assets, categories of assets or businesses of JDS Uniphase
or SDL or any of their respective subsidiaries, before or after receipt of
stockholder approval, in order to obtain the necessary authorizations and
approvals of the merger or to assure that governmental authorities do not seek
to block the merger. For example, in connection with JDS Uniphase's acquisition
of E-TEK, JDS Uniphase agreed to relinquish, over a 90-day transition period,
E-TEK's contractual rights of first refusal with respect to the output from
coating chambers used for the manufacture of thin-film filters owned by Barr
Associates, Herrmann Technology, Inc., Hoya Corporation USA and OCJ Corporation
(the "Filter Vendors"). JDS Uniphase also agreed not to reacquire, directly or
indirectly, any rights of first refusal over coating chambers currently owned by
or located on the premises of the Filter Vendors for three years from expiration
of the 90-day transition period. Even if regulatory approvals are obtained, a
federal, state, foreign governmental entity or private person may have the right
to challenge the merger at any time before or after its completion.
IF THE MERGER IS NOT COMPLETED, JDS UNIPHASE'S AND SDL'S STOCK PRICES AND FUTURE
BUSINESS AND OPERATIONS COULD BE HARMED
If the merger is not completed, JDS Uniphase and SDL may be subject to the
following material risks, among others:
- SDL may be required to pay JDS Uniphase a termination fee of $1 billion
as described on page 87;
- SDL and JDS Uniphase may be required to pay each other a fee of
$10,000,000 for out-of-pocket expenses as described on page 87;
- the prices of JDS Uniphase and SDL common stock may decline to the extent
that the current market prices of JDS Uniphase and SDL common stock
reflect an assumption that the merger will be completed; and
- JDS Uniphase's and SDL's costs related to the merger, such as legal,
accounting and some of the fees of their financial advisors, must be paid
even if the merger is not completed.
Further, with respect to SDL, if the merger is terminated and SDL'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 82 of this proxy statement-prospectus, SDL is
generally prohibited from soliciting, initiating, encouraging or otherwise
facilitating or entering into agreements concerning competing transactions, such
as a merger, sale of assets or other business combination, with any party other
than JDS Uniphase.
30
<PAGE> 38
RISKS RELATED TO JDS UNIPHASE WHICH WILL INCLUDE SDL FOLLOWING THE COMPLETION OF
THE MERGER
DIFFICULTIES JDS UNIPHASE MAY ENCOUNTER MANAGING ITS GROWTH COULD ADVERSELY
AFFECT ITS RESULTS OF OPERATIONS
JDS Uniphase has historically achieved growth through a combination of
internally developed new products and acquisitions. JDS Uniphase's growth
strategy depends on its ability to continue developing new components, modules
and other products for its customer base. However, along with internal new
product development efforts as part of this strategy, JDS Uniphase expects to
continue to pursue acquisitions of other companies, technologies and
complementary product lines. 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 NEW ACQUISITIONS COULD ADVERSELY AFFECT JDS
UNIPHASE'S BUSINESS
Critical to the success of JDS Uniphase's growth is the ordered, efficient
integration of acquired businesses into its organization and, with this end, JDS
Uniphase has in the past spent and continues to spend significant resources. If
JDS Uniphase's integration efforts are unsuccessful, its businesses will suffer.
JDS Uniphase is the product of several substantial combinations, mergers and
acquisitions, including, among others, the combination of Uniphase and JDS FITEL
on June 30, 1999, and the acquisitions of OCLI on February 4, 2000 and E-TEK on
June 30, 2000. Each combination, merger and acquisition, including the present
transaction with SDL, presents unique product, marketing, research and
development, facilities, information systems, accounting, personnel and other
integration challenges. In the case of several of JDS Uniphase's acquisitions,
including Uniphase Laser Enterprise in March 1997, Uniphase Netherlands in June
1998, and Cronos Integrated Microsystems, Inc. and Fujian Casix Laser, Inc. in
April 2000, JDS 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 its overall financial goals. This transition is in its
genesis at Cronos. It has also 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. Also, JDS Uniphase's
information systems and those of the companies it acquires are often
incompatible, requiring substantial upgrades to one or the other. Further, JDS
Uniphase's current senior management is a combination of the prior senior
management teams of the companies constituting JDS Uniphase, several of whom
have not previously worked with other members of management. JDS Uniphase's
integration efforts may not be successful, and may result in unanticipated
operations problems, expenses and liabilities and the diversion of management
attention. Consequently, JDS Uniphase's operating results would suffer.
JDS Uniphase often incurs substantial costs related to its combinations,
mergers and acquisitions. For example, JDS Uniphase has incurred direct costs
associated with the combination of Uniphase and JDS FITEL of approximately $12
million, incurred approximately $8 million associated with the acquisition of
OCLI and incurred approximately $92 million associated with the acquisition of
E-TEK. JDS Uniphase may incur additional material charges in subsequent quarters
to reflect additional costs associated with these and other combinations and
acquisitions which will be expensed as incurred.
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<PAGE> 39
IF JDS UNIPHASE FAILS TO EFFICIENTLY INTEGRATE ITS SALES AND MARKETING
FORCES, ITS SALES COULD SUFFER
JDS Uniphase's sales force is and will in the future be a combination of
its sales force and the sale forces of the businesses it acquires, which must be
effectively integrated for it to remain successful. JDS Uniphase's combinations,
mergers and acquisitions often result in sales forces differing in products
sold, marketing channels used and sales cycles and models applied. Accordingly,
JDS Uniphase may experience disruption in sales and marketing in connection with
its efforts to integrate its various sales and marketing forces, and it may be
unable to efficiently or effectively correct such disruption or achieve its
sales and marketing objectives if it fails in these efforts. 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 one company's
sales approaches and distribution channels may be ineffective in promoting
another entity's products, all of which may materially harm JDS Uniphase's
business, financial condition or operating results.
JDS UNIPHASE MAY FAIL TO COMMERCIALIZE 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. If JDS Uniphase fails, its business will suffer. 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. In connection with JDS Uniphase's recent acquisitions,
it has incurred expenses 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 this 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. Among other things, JDS Uniphase is currently unifying
its manufacturing, accounting, sales and human resource data systems using an
Oracle platform, expanding and upgrading its networks and integrating its voice
communications systems.
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 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 HAS 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
32
<PAGE> 40
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.
For example, 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. 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
must increase its manufacturing volumes to meet these needs and satisfy customer
demand. Failure to do so may materially harm JDS Uniphase's 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,
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. JDS Uniphase may
experience delays in obtaining customer qualification of its new facilities. 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 ORIGINATING FROM ACQUISITIONS
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. 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 mergers and acquisitions
with the fair value of the stock options assumed, which became options to
purchase JDS Uniphase common shares and the amount of direct transaction costs
as the cost of acquiring these entities. That cost is allocated to the
individual assets acquired and liabilities assumed, including various
identifiable intangible assets such as in-process research and development,
acquired technology, acquired trademarks and trade names and acquired workforce,
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.
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The impact of purchase accounting on JDS Uniphase's operating results is
significant. The following table reflects the impact of in-process research and
development expense (in the quarter the acquisition closed) and the prospective
quarterly/annual amortization of purchased intangibles attributable to JDS
Uniphase's significant mergers and acquisitions that have closed in the past
four quarters (in millions):
<TABLE>
<CAPTION>
QUARTERLY ANNUAL
IN-PROCESS AMORTIZATION AMORTIZATION
RESEARCH AND OF PURCHASED OF PURCHASED
ENTITY DEVELOPMENT INTANGIBLES INTANGIBLES
------ ------------ ------------ ------------
<S> <C> <C> <C>
EPITAXX, Inc. ................................. $ 16.7 $ 17.1 $ 68.2
OCLI........................................... $ 84.1 $ 79.8 $ 319.1
Cronos......................................... $ 6.3 $ 27.9 $ 111.8
E-TEK.......................................... $250.6 $850.8 $3,403.2
</TABLE>
The impact of these mergers and acquisitions as well as other acquisitions
consummated in the past five years resulted in amortization expense of $896.9
million for the fiscal year ended June 30, 2000 and is expected to result in
amortization of $4.6 billion for the fiscal year ended June 30, 2001. In
addition, we expect to account for the SDL merger using the purchase method of
accounting. In-process research and development, which is currently estimated at
$230 million, will be expensed in the quarter the merger closes. Intangible
assets including goodwill will be generally amortized over a five year period
and deferred compensation will be amortized over the remaining vesting period of
the unvested SDL stock options assumed by JDS Uniphase of up to four years. The
amount of purchase cost allocated to goodwill and other intangibles is estimated
to be approximately $38.1 billion. The amount of purchase cost allocated to
deferred compensation is currently estimated at $1.0 billion. If goodwill and
other intangible assets were amortized in equal quarterly amounts over a five
year period following completion of the SDL merger and the deferred compensation
was amortized over the remaining vesting period of the options, the accounting
charge attributable to these items would be approximately $2.1 billion per
quarter and $8.2 billion per year in the year following the closing date of the
merger.
Additionally, JDS Uniphase also incurs other purchase accounting related
costs and expenses in the period a particular transaction closes to reflect
purchase accounting adjustments adversely impacting gross profit and costs of
integrating new businesses or curtailing overlapping operations. Purchase
accounting treatment of JDS Uniphase's mergers and acquisitions will result in a
net loss for the foreseeable future, which could have a material and adverse
effect on the market value of JDS Uniphase's stock.
JDS UNIPHASE'S STOCK PRICE FLUCTUATES 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;
- the announcement and introduction of new products by JDS Uniphase; and
- expenses associated with any intellectual property or other litigation.
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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.
Finally, JDS Uniphase's net revenues and operating results in future
quarters may be below the expectations of public market securities analysts and
investors. In such event, the price of JDS Uniphase common stock and the
exchangeable shares of its subsidiary, JDS Uniphase Canada Ltd., would likely
decline, perhaps substantially.
FLUCTUATIONS IN JDS UNIPHASE'S CUSTOMERS' BUSINESS COULD CAUSE ITS BUSINESS
AND STOCK PRICE TO SUFFER
JDS Uniphase's business is dependent upon product sales to
telecommunications network system providers, who in turn are dependent for their
business upon orders for fiber optic systems from telecommunications carriers.
Business fluctuations affecting JDS Uniphase's system provider customers or
their telecommunication carrier customers have affected and will continue to
affect its business. Moreover, JDS Uniphase's sales often reflect orders shipped
in the same quarter in which they are received, which makes its sales vulnerable
to short-term fluctuations in customer demand and difficult to predict. In
general, customer orders may be cancelled, modified or rescheduled after
receipt. Consequently, the timing of these orders and any subsequent
cancellation, modification or rescheduling of these orders have affected and
will in the future affect JDS Uniphase's results of operations from quarter to
quarter. Also, as JDS Uniphase's customers typically order in large quantities,
any subsequent cancellation, modification or rescheduling of an individual order
may alone affect its results of operations. In this regard, JDS Uniphase has
experienced rescheduling of orders by customers and may experience similar
rescheduling in the future.
FACTORS OTHER THAN JDS UNIPHASE'S QUARTERLY RESULTS COULD CAUSE ITS STOCK
PRICE TO BE VOLATILE OR DECLINE
The market price of JDS Uniphase 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 their
quarterly results or technological innovations or new products;
- developments with respect to patents or proprietary rights;
- governmental regulatory action; and
- general market conditions.
Recently, the Nasdaq National Market, in general, and JDS Uniphase's stock
and the stock of its customers and competitors, in particular, has experienced
substantial price and volume fluctuations, in many cases without any direct
relationship to the affected companies' operating performance. Nevertheless, the
market prices of the stocks of companies in the optical components, modules and
systems industries continue to trade at high multiples of earnings. An outgrowth
of these multiples and market volatility is the significant vulnerability of JDS
Uniphase's stock price and the stock prices of its customers and competitors to
any actual or perceived fluctuation in the strength of the market it serves, no
matter how minor in actual or perceived consequence. Consequently, these
multiples and, hence, market prices may not be sustainable. These broad market
and industry factors have and may in the future cause the market
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price of JDS Uniphase's stock to decline, regardless of its actual operating
performance or the operating performance of its customers.
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 optical system provider customers accounted
for a substantial portion of JDS Uniphase's net sales from telecommunications
products. Three customers, Alcatel, Lucent and Nortel, each accounted for over
10% of JDS Uniphase's net sales for the quarter ended September 30, 2000. 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 industry, 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 JDS Uniphase, the
failure of those customers to be selected as the primary suppliers for an
overall system installation, could adversely affect JDS Uniphase. 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. 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 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.
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 markets in which JDS Uniphase sells its products are
highly competitive. In all aspects of JDS Uniphase's business, JDS Uniphase
faces intense competition from established competitors and the threat of future
competition from new and emerging companies. Some of these competitors have
greater financial, engineering, manufacturing, marketing, service and support
resources
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<PAGE> 44
than does JDS Uniphase and may have greater name recognition, manufacturing
expertise and capability and longer standing customer relationships than it
does. Among these competitors are JDS Uniphase's customers. These customers are
vertically integrated and either manufacture and/or are capable of manufacturing
some or all of the products JDS Uniphase sells to them. Finally, some of JDS
Uniphase's customers have implemented and/or expanded their manufacturing
capability for components they might otherwise purchase from JDS Uniphase. To
remain competitive, JDS Uniphase believes it must maintain a substantial
investment in research and development, expanding its manufacturing capability,
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 industry acceptance. In addition, technological
changes, manufacturing efficiencies 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, new and emerging fiber optic component
and module suppliers, continued pricing pressure on optical suppliers, increased
manufacturing efficiency, technological advances and greater unit volumes as
telecommunications service providers continue to deploy fiber optic networks.
JDS Uniphase has in the past and 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 technological advances, to product introductions by
competitors and by JDS Uniphase 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 addition, 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. 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.
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 and SDL's competitors and customers, including:
- Lucent Technologies, Inc./Ortel Corporation;
- Corning Incorporated/NetOptix Corporation;
- Nortel Networks Corp./Xros, Inc.;
- Nortel Networks Corp./Core Tek, Inc.;
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<PAGE> 45
- Corning Incorporated/NZ Applied Technologies Corp.;
- Corning Incorporated/Oak Industries;
- Lucent Technologies, Inc./Chromatis Networks, Inc.; and
- Corning, Inc./Optical Technologies (a division of Pirelli S.p.A.).
The effect on JDS Uniphase of these completed and pending acquisitions, as
well as future transactions, cannot be predicted with accuracy, but some of
these competitors are aligned with companies that are larger or better
established than JDS Uniphase. As a result, these competitors may have access to
greater financial, marketing and technical resources than JDS Uniphase.
Consolidation of these and other companies may also disrupt JDS Uniphase's
marketing and sales efforts.
JDS UNIPHASE FACES RISKS RELATED TO ITS INTERNATIONAL OPERATIONS AND SALES
JDS Uniphase's customers are located throughout the world. In addition, JDS
Uniphase has significant offshore operations, including manufacturing
facilities, sales personnel and customer support operations. JDS Uniphase's
operations outside of North America include facilities in Great Britain,
Switzerland, the Netherlands, Germany, Australia, the People's Republic of China
and Taiwan, ROC.
JDS Uniphase's international presence exposes it to risks not faced by
wholly-domestic companies. Specifically, JDS Uniphase faces the following risks,
among others:
International sales are subject to inherent risks, including:
- unexpected changes in regulatory requirements;
- tariffs and other trade barriers;
- political, legal and economic instability in foreign markets,
particularly in those markets in which JDS Uniphase maintains
manufacturing and research facilities;
- difficulties in staffing and management;
- language and cultural barriers;
- seasonal reductions in business activities in the summer months in Europe
and some other countries;
- integration of foreign operations;
- longer payment cycles;
- greater difficulty in accounts receivable collection;
- currency fluctuations; and
- potentially adverse tax consequences.
Net sales to customers outside of North America accounted for approximately
23%, 40% and 38% of JDS Uniphase's net sales in 2000, 1999 and 1998,
respectively. JDS Uniphase expects that sales to customers outside of North
America will continue to account for a significant portion of its net sales. JDS
Uniphase continues 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 optical system provider customers depend on international
sales and consequently further exposes it to the risks associated with such
international sales.
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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
Numerous patents in the industries in which JDS Uniphase operates are held
by others, including academic institutions and JDS Uniphase's competitors. 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 JDS Uniphase 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 BE SUBJECT TO CLAIMS THAT THEY 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 is currently a party to various claims regarding intellectual property
rights. JDS Uniphase is currently a defendant in litigation claiming damages for
infringement of an expired wafer fabrication patent and in litigation alleging
infringement of certain patents by its optical amplifier products. None of these
claims are expected to have a material adverse effect on JDS Uniphase's
business.
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 numerous 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 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.
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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 mitigates currency risks of investments denominated
in foreign currencies with forward currency contracts. If JDS Uniphase
designates such contracts as hedges and they are determined to be effective,
depending on the nature of the hedge, changes in the fair value of derivatives
will be offset against the change in fair value of assets, liabilities or firm
commitments through earnings (fair value hedges) or recognized in other
comprehensive income until the hedged item is recognized in earnings (cash flow
hedges). The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. 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 enters into foreign currency forward
contracts. The contracts 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, optical
switches 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 proceeds from the
realization of investments in other businesses 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.
JDS UNIPHASE'S CURRENTLY OUTSTANDING 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 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 common stock includes
one-eighth 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, for each share of common stock held by
the holder. 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
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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 that 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 LAWS 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
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.
FORWARD LOOKING STATEMENTS
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 SDL's financial conditions, results of
operations and businesses, 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. Some of the factors that may cause actual
results to differ materially from those contemplated by such forward-looking
statements include, but are not limited to, the following possibilities:
- Combining the businesses of JDS Uniphase and SDL may cost more than we
expect;
- The completion of the proposed merger may be materially delayed or
prohibited;
- General economic conditions or conditions in securities markets may be
less favorable than we currently anticipate;
- Expected cost savings and revenue enhancements from the merger may not be
fully realized or realized within the expected time frame;
- We may be required to make divestitures or modify business arrangements
as a condition of regulatory approval;
- Integrating the businesses of JDS Uniphase and SDL and retaining key
personnel may be more difficult than we expect;
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- Contingencies may arise of which we were not aware or of which we
underestimated the significance;
- Our revenues after the merger may be lower than we expect;
- We may lose more business or customers after the merger than we expect,
or our operating costs may be higher than we expect;
- The schedule and cost to complete JDS Uniphase's acquired in-process
research and development projects, the expected amortization of such
costs and the development cycles and timing of completion of such
projects may be materially greater or less or be longer or shorter than
those expected;
- The amount (both in absolute dollars and as a percentage of net sales) of
JDS Uniphase's expenditures for research and development, selling,
general and administrative and capital acquisitions and improvements may
be materially greater or less than those expected;
- Funds may be insufficient to meet JDS Uniphase's liquidity and capital
resources requirements through the end of the calendar year 2001; or
- Development costs, anticipated completion, introduction and projected
revenues from JDS Uniphase's new and developing products and technologies
may be materially different than anticipated.
Some of these factors and additional risks and uncertainties are further
discussed under the other factors identified in this "Risk Factors" section
beginning on page 28. Because such statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by such statements. JDS Uniphase and SDL stockholders are cautioned not
to place undue reliance on such statements, which speak only as of the date of
this proxy statement-prospectus or the date of any document incorporated by
reference.
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THE SPECIAL MEETING OF SDL STOCKHOLDERS
PURPOSE OF THE SPECIAL MEETING
The special meeting is being held so that stockholders of SDL may consider
and vote upon a proposal to adopt the merger agreement, dated as of July 9,
2000, by and among JDS Uniphase, K2 Acquisition and SDL and to transact any
other business that properly comes before the special meeting or any adjournment
of the special meeting. Additionally, SDL stockholders may be asked to vote upon
a proposal to adjourn or postpone the special meeting. Any adjournment or
postponement could be used for the purpose of allowing additional time for
soliciting additional votes to adopt the merger agreement or to satisfy other
conditions to closing that the parties elect to satisfy prior to the stockholder
vote. Adoption of the merger agreement will also constitute approval of the
merger and the other transactions contemplated by the merger agreement.
DATE, TIME AND PLACE; STOCKHOLDER RECORD DATE FOR THE SPECIAL MEETING
The special meeting of SDL stockholders will take place on December 27,
2000 at 10:00 a.m. at the Wyndham Garden Hotel, 1300 Chesapeake Terrace,
Sunnyvale, California 94089. SDL's board of directors has fixed the close of
business on November 16, 2000, as the record date for determination of SDL
stockholders entitled to notice of and to vote at the special meeting. On
November 16, 2000, there were 87,467,763 shares of SDL common stock outstanding,
held by approximately 544 holders of record. The number of record holders does
not include shares held in "street name" through brokers.
VOTE OF SDL STOCKHOLDERS REQUIRED FOR ADOPTION OF THE MERGER AGREEMENT
A majority of the outstanding shares of SDL 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 SDL 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 SDL common stock held by you on the record date on
each proposal to be presented to stockholders at the special meeting.
As described beginning on page 69, the following officers and directors of
SDL have interests in the merger that are different from, or are in addition to,
your interest: Dr. Donald R. Scifres, President, Chief Executive Officer and
Chairman of the Board of Directors; Gregory Dougherty, Chief Operating Officer;
David Welch, Vice President, Corporate Development and Chief Technology Officer;
Michael Foster, Chief Financial Officer and Vice President of Finance; and Della
Bynum, Vice President of Human Resources. The above officers and directors
together beneficially owned approximately 2,641,850 shares of SDL common stock,
which represented approximately 3.0% of all outstanding shares of SDL common
stock entitled to vote at the special meeting as of November 16, 2000.
PROXIES
All shares of SDL common stock represented by properly executed proxies
that SDL 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 SDL 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 SDL 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
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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.
Because adoption of the merger agreement requires the affirmative vote of
at least a majority of SDL 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.
SDL 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 SDL
by:
- writing to Corporate Secretary, SDL, Inc., 80 Rose Orchard Way, San Jose,
California 95131;
- granting a subsequent proxy; or
- appearing in person and voting at the special meeting.
If your broker holds your shares in street name, you must follow directions
received from your broker to change your voting instructions.
Each of JDS Uniphase and SDL will bear its own expenses incurred in
connection with the printing and mailing of this proxy statement-prospectus. SDL
and ChaseMellon Shareholder Services LLC, SDL's transfer agent, 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
SDL COMMON STOCK WILL BE MAILED TO YOU AS SOON AS PRACTICABLE AFTER COMPLETION
OF THE MERGER.
SOLICITATION OF PROXIES
SDL will initially pay the costs of soliciting proxies. In addition to
solicitation by mail, SDL's directors, officers and employees may solicit
proxies by telephone, facsimile or otherwise. The directors, officers and
employees of SDL will not receive compensation for such solicitation but may
receive reimbursement by SDL for out-of-pocket expenses incurred in connection
with such solicitation. SDL 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 SDL common stock held
of record by them, and SDL will reimburse them for their reasonable expenses
incurred in forwarding such material. SDL has retained a proxy solicitation
firm, Corporate Investor Communications, Inc., to aid it in the solicitation.
SDL anticipates that its fees plus expenses to Corporate Investor
Communications, Inc. will be approximately $8,500.
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THE SPECIAL MEETING OF JDS UNIPHASE STOCKHOLDERS
PURPOSE OF THE SPECIAL MEETING
The special meeting is being held so that stockholders of JDS Uniphase may
consider and vote upon a proposal to approve the issuance of JDS Uniphase common
stock under the merger agreement, dated as of July 9, 2000, by and among JDS
Uniphase, K2 Acquisition and SDL and to transact any other business that
properly comes before the special meeting or any adjournment of the special
meeting. Additionally, JDS Uniphase stockholders may be asked to vote upon a
proposal to adjourn or postpone the special meeting. Any adjournment or
postponement could be used for the purpose of allowing additional time for
soliciting additional votes to approve the merger or to satisfy other conditions
to closing that the parties elect to satisfy prior to the stockholder vote.
DATE, TIME AND PLACE; STOCKHOLDER RECORD DATE FOR THE SPECIAL MEETING
The special meeting of JDS Uniphase stockholders will take place on
December 27, 2000 at 10:00 a.m. at the offices of JDS Uniphase, 210 Baypointe
Parkway, San Jose, California 95134. JDS Uniphase's board of directors has fixed
the close of business on November 16, 2000, as the record date for determination
of JDS Uniphase stockholders entitled to notice of and to vote at the special
meeting. On November 16, 2000, there were 963,435,192 shares of JDS Uniphase
common stock outstanding, held by approximately 4,800 holders of record. The
number of record holders does not include shares held in "street name" through
brokers.
VOTE OF JDS UNIPHASE STOCKHOLDERS REQUIRED TO APPROVE THE ISSUANCE OF JDS
UNIPHASE COMMON STOCK TO STOCKHOLDERS OF SDL
You are entitled to one vote for each share of JDS Uniphase common stock
held by you on the record date and CIBC Mellon Trust Company, the holder of JDS
Uniphase's special voting share, is entitled to one vote for each exchangeable
share of JDS Uniphase's subsidiary, JDS Uniphase Canada Ltd., held by you on the
record date (other than exchangeable shares owned by JDS Uniphase and its
affiliates) on each proposal to be presented to stockholders at the special
meeting. Votes cast with respect to the exchangeable shares of JDS Uniphase
Canada Ltd., will be voted through JDS Uniphase's special voting share by CIBC
Mellon Trust Company, as trustee, as directed by the holders of exchangeable
shares, except votes cast with respect to exchangeable shares whose holders
request to vote directly in person as proxy for the trustee at the special
meeting. Each exchangeable share is exchangeable at any time, at the option of
its holder, for one share of JDS Uniphase common stock.
A majority of the outstanding shares of JDS Uniphase 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 at least a
majority of the votes attached to JDS Uniphase common stock and the special
voting share properly voting together as a single class at the special meeting
is required to approve the issuance of JDS Uniphase common stock to the
stockholders of SDL.
PROXIES
All shares of JDS Uniphase common stock and the special voting share
represented by properly executed proxies that JDS Uniphase 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, proxies from holders of common stock will be voted FOR
approval of the issuance of JDS Uniphase common stock in the merger. Votes with
respect to exchangeable shares represented by valid voting instructions received
by CIBC Mellon Trust will be cast by CIBC Mellon Trust in accordance with those
instructions. If a properly executed voting instruction card is not received by
CIBC Mellon Trust from a holder of exchangeable shares, the votes to which such
holder is entitled will not be exercised. You are urged to mark the applicable
box on the proxy or voting instruction card to indicate how to vote your shares.
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If a properly executed proxy is returned and the stockholder has abstained
from voting on approval of the issuance of JDS Uniphase common stock in the
merger, the JDS Uniphase 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 this proposal.
Similarly, if an executed proxy is returned by a broker holding shares of JDS
Uniphase common stock in street name which indicates that the broker does not
have discretionary authority to vote on approval of the issuance of shares of
JDS Uniphase common stock in the merger, which is called a broker non-vote, 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
approval of the issuance of JDS Uniphase common stock in the merger. 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.
Approval of the issuance of JDS Uniphase common stock in the merger
requires the affirmative vote of at least a majority of the shares of JDS
Uniphase voting at the special meeting. Abstentions and broker non-votes are
each included for purposes of determining a quorum, but only abstentions are
included in determining the number of shares present, and each is tabulated
separately. In determining whether this proposal has been approved, abstentions
are counted as votes against the proposal and broker non-votes are not counted
as votes for or against the proposal.
JDS Uniphase does not expect that any matter other than approval of the
issuance of JDS Uniphase common stock in the merger 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 JDS
Uniphase by:
- writing to Corporate Secretary, JDS Uniphase Corporation, 210 Baypointe
Parkway, San Jose, California 95134;
- granting a subsequent proxy; or
- appearing in person and voting at the special meeting.
If your broker holds your shares in street name, you must follow directions
received from your broker to change your voting instructions.
Each of JDS Uniphase and SDL will bear its own expenses incurred in
connection with the printing and mailing of this proxy statement-prospectus. JDS
Uniphase and American Stock Transfer & Trust Company, JDS Uniphase's transfer
agent, 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.
SOLICITATION OF PROXIES
JDS Uniphase will initially pay the costs of soliciting proxies. In
addition to solicitation by mail, JDS Uniphase's directors, officers and
employees may solicit proxies by telephone, facsimile or otherwise. The
directors, officers and employees of JDS Uniphase will not receive compensation
for such solicitation but may receive reimbursement by JDS Uniphase for
out-of-pocket expenses incurred in connection with such solicitation. JDS
Uniphase 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 JDS Uniphase common stock held of record by them,
and JDS Uniphase will reimburse them for their reasonable expenses incurred in
forwarding such material. JDS Uniphase has retained a proxy solicitation firm,
Corporate Investor Communications, Inc., to aid it in the solicitation. JDS
Uniphase anticipates that its fees plus expenses to Corporate Investor
Communications, Inc. will be approximately $15,000.
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THE MERGER
This section of the proxy statement-prospectus describes material aspects
of the proposed merger, including the merger agreement and the transition
agreements. While we believe that the description covers the material terms of
the merger and 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 SDL 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.
Through February 1, 2000, SDL had from time to time preliminary discussions
with other parties, including JDS Uniphase, concerning strategic transactions
with SDL. However, no definitive proposals or continuing negotiations resulted
from those discussions.
On January 15, 2000, representatives of SDL's financial advisor were
contacted by representatives of the financial advisor to another company engaged
in the opto-electronics business, referred to in this description as the First
Other Organization, to discuss a potential strategic transaction between SDL and
the First Other Organization. On January 21 and January 24, 2000, SDL management
and SDL's financial advisor met to discuss the First Other Organization's
proposal and SDL's strategic alternatives in general. Following those meetings,
SDL and the First Other Organization entered into a customary confidentiality
agreement to permit them to exchange additional information concerning their
respective businesses, organizations, financial conditions and results of
operations and, during the period from February 1 to March 11, 2000, SDL and its
financial and legal advisors and the First Other Organization and its financial
and legal advisors had a series of meetings concerning a potential transaction
between SDL and the First Other Organization. However, no agreement was reached
during that time on the terms of a transaction and SDL management did not
believe that the transaction with the First Other Organization would result in
sufficient value to SDL's stockholders to warrant continuing discussions with
the First Other Organization at that time.
On March 14, 2000, Dr. Donald Scifres, SDL's Chief Executive Officer and
Chairman of the Board, had a meeting with management of another company engaged
in the opto-electronics business, referred to in this description as the Second
Other Organization, but no continuing negotiations resulted from this meeting.
In early May 2000, a representative of Thomas Weisel Partners LLC, SDL's
financial advisor, was contacted by a representative of the financial advisor to
the Second Other Organization concerning a potential strategic combination with
SDL. This conversation was followed by discussions between representatives of
the Second Other Organization and Dr. Scifres and Greg Dougherty, David Welch
and Michael Foster, SDL's Chief Operating Officer, Chief Technology Officer and
Chief Financial Officer, respectively. Between May 15, 2000 and May 25, 2000,
SDL and the Second Other Organization and their respective legal advisors
negotiated the terms of a customary confidentiality agreement to permit them to
exchange additional information concerning their respective businesses,
organizations, financial conditions and results of operations.
On May 25, 2000, representatives of the Second Other Organization met with
Dr. Scifres, Mr. Dougherty, Dr. Welch and Mr. Foster in San Francisco,
California to further discuss the terms of the strategic combination of their
two companies, at which time the Second Other Organization proposed a merger of
SDL and the Second Other Organization with consideration consisting of a fixed
exchange ratio of the Second Other Organization's common stock that had a value
of $242.20 and that represented a 44.2% premium over the closing price of SDL
common stock on that date based on the closing prices of the SDL common stock
and the Second Other Organization's common stock on that date. Following that
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meeting, the SDL board of directors met on May 31, 2000 to review the Second
Other Organization proposal. At that meeting, the SDL board of directors
considered and discussed with SDL management and financial and legal advisors,
among other things, the strategic fit between the two companies, SDL's and the
other company's relative historical and prospective financial performance and
the need for more information from the Second Other Organization to
comprehensively understand its proposal. Thomas Weisel Partners also made a
financial presentation based on the proposed offer. At that meeting, the SDL
board of directors authorized and directed SDL management to go back to the
Second Other Organization with a higher exchange ratio, which would have
represented a 64.8% premium over the closing price of SDL common stock on that
date, and with a number of other matters regarding the proposed combination that
required clarification.
On the evening of May 31, 2000, representatives of Thomas Weisel Partners
had dinner with Jozef Straus, JDS Uniphase's Co-Chairman of the Board and Chief
Executive Officer, Anthony Muller, JDS Uniphase's Executive Vice President and
Chief Financial Officer, and Zita Cobb, JDS Uniphase's Executive Vice President,
Strategy and Integration. While the purpose of that dinner was not related to
SDL, Dr. Straus expressed his interest in discussing a combination between SDL
and JDS Uniphase.
During the first two weeks of June 2000, including at a meeting on June 1,
2000, SDL management and Second Other Organization management and their
respective financial advisors held further discussions concerning the proposed
combination of SDL and the Second Other Organization. Among other things, SDL
and the Second Other Organization discussed the strategic aspects of the
combination of their respective opto-electronics businesses, and the Second
Other Organization indicated that retaining the SDL management team after the
combination would be a key element of the combined strategy and discussed the
need for appropriate retention arrangements for the SDL management team. On June
15, 2000, a meeting was held between the Second Other Organization and its
financial advisors and SDL and its financial and legal advisors. At that time,
the Second Other Organization agreed to SDL's higher exchange ratio that
represented a value per share of SDL common stock of $399.60 and that, based on
increases in the price of SDL common stock since May 31, 2000, represented a
37.3% premium on June 15, 2000 over the closing price of SDL common stock on
that date based on the closing prices of the SDL common stock and the Second
Other Organization's common stock on that date. In addition, at that June 15
meeting, representatives of the Second Other Organization made presentations
concerning the business, operations, financial condition and results of
operations of the Second Other Organization and its plans for the combined
businesses of SDL and the Second Other Organization. On June 15, SDL and the
Second Other Organization also agreed that their respective outside lawyers
should enter into a joint defense agreement to examine any possible antitrust
issues involved in a potential combination of their two companies. After the
June 15 meeting, the Second Other Organization provided SDL and SDL's legal
advisors with a draft merger agreement to effect the combination of the two
companies. On June 22, 2000, the SDL board of directors met again and discussed
with SDL management and SDL's financial and legal advisors the Second Other
Organization proposal in light of the various discussions and meetings that had
taken place since the last board of directors meeting on May 31, 2000 and the
fact that the price of SDL common stock had increased significantly over the
preceding three weeks. After further discussions concerning the financial,
strategic and operational strengths and weaknesses of the Second Other
Organization's proposal, the SDL board of directors determined that it did not
have sufficient comfort in the merits of the strategic combination to accept the
proposal at that time.
During this time, there were rumors posted in Internet chat rooms and
reported elsewhere that SDL was in discussions with different entities
concerning a strategic combination. These rumors prompted JDS Uniphase to call
representatives of SDL to discuss the status of such discussions. In addition,
on May 29, 2000, Dr. Scifres and Dr. Straus had a meeting at which, in addition
to discussions on regular business matters between SDL and JDS Uniphase, they
discussed general parameters under which they would be willing to consider a
strategic combination between SDL and JDS Uniphase. While Dr. Straus expressed
his belief that the combination of SDL's and JDS Uniphase's businesses would be
a good strategic transaction, Dr. Straus indicated that JDS Uniphase was not
able to engage in discussions concerning such
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a combination at that time due to its pending merger with E-TEK Dynamics, Inc.
and he urged SDL not to rush into another transaction.
In addition, from early May 2000 to July 7, 2000, SDL management and SDL's
financial and legal advisors had further discussions with the First Other
Organization. On June 9, 2000, a meeting was held between SDL management and
First Other Organization management and, on June 15, 2000, the First Other
Organization made a new proposal to SDL concerning a strategic transaction
between the two parties. However, during this period of time, no proposal was
made that included financial terms that were sufficiently attractive to SDL
management to warrant continuing those discussions.
At the June 22 SDL board of directors meeting, it was agreed that a further
board meeting would be held the following Tuesday, June 27, 2000, to further
review the Second Other Organization proposal. The Second Other Organization
requested the opportunity to meet with members of the SDL board of directors in
person. Accordingly, on June 27, 2000, Second Other Organization management met
with SDL management and SDL's financial and legal advisors and with members of
the SDL board of directors and made presentations on their organization and
strategic vision, including their strategic vision for the combined photonics
business of SDL and the Second Other Organization. Following those
presentations, the SDL board of directors convened a meeting to review its
strategic alternatives and the SDL board further evaluated the proposal from the
Second Other Organization. At that meeting, SDL management reported on the
interest expressed by JDS Uniphase in a strategic combination and the fact that
JDS Uniphase was not in a position to engage in negotiations at this time. SDL
management also expressed the view that a JDS Uniphase and SDL combination
should be further explored. In addition, further discussion of the potential for
a strategic transaction between SDL and the First Other Organization was
discussed. After the June 27 meeting, SDL informed the Second Other Organization
that it was prepared to continue negotiations with respect to a potential
business combination with the Second Other Organization, but would be exploring
other alternatives as well. On June 27 and June 28, further discussions were
held by SDL management and Second Other Organization management in which the
Second Other Organization continued to emphasize the importance to the strategic
combination of the retention of the SDL management team and the terms and
conditions of the transition agreements to be entered into between the Second
Other Organization and SDL's management team. The Second Other Organization
indicated that entering into such agreements with the SDL management team
simultaneously with the definitive merger agreement would be a condition to its
willingness to enter into the merger agreement. On June 28, 2000, the Second
Other Organization provided SDL with term sheets and a draft transition
agreement.
On June 29, 2000, Dr. Scifres called Dr. Straus to indicate that SDL
expected to be contacting them shortly and that SDL would have limited time
within which to consider a potential alternative transaction with JDS Uniphase.
On June 30, 2000, Dr. Scifres contacted Dr. Straus, and SDL's financial advisor
contacted JDS Uniphase's financial advisors. Dr. Scifres and SDL's financial
advisor indicated that SDL would be willing to consider a possible combination
between SDL and JDS Uniphase provided that JDS could provide by Wednesday, July
5, 2000 a proposal on the financial and other terms of the combination as well
as comments to a merger agreement that would be delivered later that night. JDS
Uniphase indicated to SDL and its financial advisor JDS Uniphase's willingness
to accommodate SDL's schedule. In those conversations, JDS Uniphase also
indicated the importance of retaining the SDL management team and SDL determined
to provide JDS Uniphase with draft term sheets and a form of transition
agreement with terms equivalent to those being negotiated with the Second Other
Organization. On that same date, SDL's legal counsel provided JDS Uniphase with
a draft merger agreement.
In addition, on June 30, 2000, SDL's legal counsel provided the Second
Other Organization with a revised draft of the merger agreement prepared by the
Second Other Organization. On July 1, 2000, SDL's legal counsel provided the
Second Other Organization's legal counsel with comments on the transition
agreements and thereafter provided JDS Uniphase with draft term sheets and a
form of transition agreement on terms equivalent to those with the Second Other
Organization.
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On July 2, 2000, Dr. Scifres and Mr. Dougherty had a call with Second Other
Organization management relating to certain strategic issues in connection with
the proposed combination of SDL and the Second Other Organization. On July 3,
2000, SDL's legal advisors and the Second Other Organization's outside and
inside legal advisors conducted negotiations of the merger agreement. On July 4,
2000, SDL's management and SDL's financial and legal advisors had a telephonic
meeting to go over the status of the discussions with JDS Uniphase and the
Second Other Organization.
On July 5, 2000, SDL management and SDL's financial and legal advisors met
with JDS Uniphase's management and JDS Uniphase's legal and financial advisors
to discuss the respective businesses, operations, financial conditions and
results of operations of each of SDL and JDS Uniphase and to negotiate the
merger agreement and transition agreements. At the end of the meetings on July
5, 2000, JDS Uniphase proposed an exchange ratio of 3.5 shares of JDS Uniphase
common stock for each share of SDL common stock, which represented a value of
$416.50 based on JDS Uniphase's closing stock price on that date and a premium
to the SDL common stock price of 51% based on the closing prices for the SDL and
JDS Uniphase stock prices for that date. A $20.00 increase in the closing price
of SDL common stock, and a small decline in the closing price of JDS Uniphase
common stock, between July 5, 2000 and July 7, 2000 subsequently reduced this
implied premium. During the course of negotiations on the terms of the merger
agreement and the transition agreements, JDS Uniphase expressed a willingness to
increase the proposed exchange ratio. During the negotiations, SDL continued to
emphasize to JDS Uniphase its desire to achieve a 50% premium.
During this time, each of JDS Uniphase and the Second Other Organization
conducted due diligence with respect to SDL, and SDL conducted due diligence
with respect to each of JDS Uniphase and the Second Other Organization.
During the evening of July 6, 2000, SDL's legal counsel and the Second
Other Organization's outside legal counsel as well as members of its management,
including internal legal counsel, continued to negotiate the terms and
conditions of the merger agreement and the transition agreements. On July 7,
2000, SDL management together with SDL's financial and legal advisors met with
Second Other Organization management together with the Second Other
Organization's financial and outside and internal legal advisors and again
continued to negotiate the terms of the merger agreement and the transition
agreements. At that time, SDL indicated that it was seeking a 50% premium to
SDL's common stock price and that the Second Other Organization's current
proposal would only result in a 39% premium on that date based on the closing
prices of SDL and the Second Other Organization's common stock on that date.
At the end of the day on July 7, 2000, Dr. Straus met with Dr. Scifres and
indicated that JDS Uniphase would offer to SDL an exchange ratio of 3.8 shares
of JDS Uniphase common stock for each share of SDL common stock, representing a
per share value of $441.51 based on the closing price of JDS Uniphase common
stock on that date and a one-day premium of 49.5% based on the closing prices of
SDL and JDS Uniphase common stock on that date. Dr. Straus also indicated that
JDS Uniphase's offer would expire by noon on Saturday, July 8, 2000 if not
accepted.
On the morning of July 8, 2000, Dr. Scifres met with members of Second
Other Organization management. At that meeting, the Second Other Organization
indicated a potential willingness to increase its exchange ratio so that its
offer represented a value per share of SDL common stock of $423.53 based on the
closing price of the common stock of the Second Other Organization on that date,
which yielded a 43% premium based on the closing prices of SDL and the Second
Other Organization's common stock on that date. Dr. Scifres indicated that in
order for the Second Other Organization to be competitive, the Second Other
Organization would have to increase its exchange ratio so as to yield a 50%
premium. While Second Other Organization management indicated a willingness to
meet that request, they also indicated that any revised proposal would require
board approval which could not be obtained until the following day. On July 8,
2000, at approximately 1:30 p.m., Dr. Scifres met with JDS Uniphase management
and JDS Uniphase's financial advisors at which time Dr. Scifres indicated his
willingness to present and
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recommend the JDS Uniphase proposal to the SDL board of directors at its meeting
to be held on July 9, 2000.
At approximately 1:00 p.m. on July 9, 2000, the SDL board of directors held
a meeting to consider SDL's strategic alternatives. At that meeting, Dr. Straus
and Mr. Muller made presentations to the SDL board of directors concerning the
business, operations and financial performance of JDS Uniphase and their
strategic vision for the combined SDL and JDS Uniphase business. Following that
presentation, the negotiations with JDS Uniphase and the Second Other
Organization were described in detail to the SDL board of directors and the SDL
board of directors was updated on the status of the discussions with the First
Other Organization. SDL management reviewed with the SDL board the results of
the conversations conducted the prior week with respect to the businesses,
operations and financial performance of JDS Uniphase, and SDL management and
SDL's legal counsel explained in detail to the SDL board of directors the terms
of the merger agreement, including, among other things, each party's duty to
take such actions reasonably required to obtain regulatory approvals, the
termination fee and under what circumstances such fee was payable and the terms
of the transition agreements and the related cash payments and stock option
grants to be made to SDL management in connection with the merger. SDL's legal
counsel also advised the members of the SDL board of the legal standards
applicable to their consideration of the merger agreement and other
arrangements. In addition, SDL's financial advisor made a presentation to the
SDL board of directors concerning the fairness of the exchange ratio from a
financial point of view to the SDL stockholders. SDL's financial advisor's
opinion stated that, as of July 9, 2000, the exchange ratio was fair from a
financial point of view to the SDL stockholders. After lengthy discussions of
the merger agreement and the transactions contemplated by that agreement and the
other information presented to the SDL board by SDL management and SDL's legal
counsel, the SDL board of directors unanimously approved and authorized the
merger agreement and recommended that the merger agreement be submitted to the
SDL stockholders for adoption.
Following the July 9, 2000 special meeting, representatives of SDL and JDS
Uniphase signed the merger agreement on behalf of their respective companies and
SDL management and a representative of JDS Uniphase signed the transition
agreements.
REASONS FOR THE TRANSACTION
SDL and JDS Uniphase are proposing to merge in response to unprecedented
growth in the telecommunications industry and demand for the fiber optic
networks that are enabling such growth. Due to the rapid increase in demand for
applications such as Internet access, email and electronic commerce,
telecommunications service providers have rapidly accelerated the deployment and
bandwidth capacity of fiber optic systems in their networks. To meet these
aggressive deployment plans and bandwidth needs, systems manufacturers are
looking both internally and to merchant optical component and module suppliers
to significantly expand production, shorten development cycles, reduce costs,
provide new products and provide integrated products with increased
functionalities. The component and module manufacturers have not been able to
meet these demands of the systems manufacturers to date, and this imbalance is
hampering the growth of optical networking and deployment of these advanced
telecommunications networks.
SDL and JDS Uniphase believe that the merger will enable the combined
company to compete more effectively in a rapidly changing and expanding
environment. The merger will enable the combined company to satisfy its
customers' demands for increased output, lower prices, integrated modules and
the depth and breadth of engineering resources required to support new systems
designs. SDL and JDS Uniphase believe that the combined company will be better
equipped to compete with the in-house optical component and advanced module
manufacturing capabilities of the major, vertically integrated systems
suppliers, which, due to their size and resources, enjoy market advantages over
organizations such as SDL and JDS Uniphase. In addition, by being able to offer
a broader range of components and to supply integrated modules to new and
emerging systems suppliers, SDL and JDS Uniphase also believe that the combined
company will enable these suppliers to grow more rapidly, and thereby increase
the number of potential customers and the level of demand for their products.
Specifically, SDL and JDS Uniphase
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<PAGE> 59
believe that the merger would have the following benefits, although SDL and JDS
Uniphase cannot assure you that these benefits will be achieved and you are
cautioned to read carefully the information set forth under "Risk Factors"
beginning on page 28 for factors that may cause results to be different:
The merger will enable the combined company to meet the growing demands of its
customers for integrated modules and faster time-to-market for innovative new
products.
- The world is undergoing a global communications revolution and technology
innovations are rapidly changing the way information and data are
transmitted and shared.
- In order to remain competitive, SDL and JDS Uniphase need to respond with
advanced innovative technology and by investing in increased research and
development.
- Among other things, customers of optical components are increasingly
demanding modules with advanced designs and that integrate more functions
in a single device.
- The combined company will have complementary technologies and a broad
array of products, including both active and passive components, that may
be incorporated into integrated modules, enabling the combined company to
provide greater functionality on a single device.
- The combined company will be able to develop integrated modules faster
and more efficiently than either company could have separately.
- The development of integrated modules will provide the combined company's
customers with a more comprehensive, lower cost solution.
- Both with respect to integrated modules and other products, combining the
technical talent of the two organizations will enable the combined
company to shorten lead times for new product development.
The merger will enable the combined company to increase manufacturing capacity,
expand output and reduce manufacturing costs.
- The combined company can increase output by better utilizing existing
facilities.
- JDS Uniphase has pump laser module packaging capacity that can be
utilized to increase output in an area where SDL is currently
constrained.
- SDL has modulator capacity that can be utilized to increase output in an
area where JDS Uniphase is currently constrained.
- In addition, the combined company will have more resources that will
allow it to expand the scale of its operations more rapidly, giving the
combined company the ability to take advantage of increased economies of
scale that neither company could have achieved individually.
- This increased production, together with the broader resources and
operations of the combined company, will enable higher levels of
investment in automation, resulting in lower manufacturing costs and
higher yields in the combined company's manufacturing processes.
The merger will enable the combined company to provide greater support to new
and emerging systems suppliers.
- The merger will combine the companies' already extensive engineering
talents and resources and enable the combined company to deploy these
resources efficiently.
- The combined engineering team will have the breadth and depth to focus on
every important emerging technology in fiber optics while still
maintaining ongoing product development and improvement.
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<PAGE> 60
- The combined company will have the technical depth to be able better to
address each customer's custom design needs, enabling more rapid
deployment of solutions for new and emerging systems suppliers.
- The combined company will have greater financial resources to enhance
research and development efforts.
RECOMMENDATION OF SDL'S BOARD OF DIRECTORS
AT ITS MEETING ON JULY 9, 2000, THE SDL BOARD OF DIRECTORS DETERMINED THAT
THE MERGER WAS FAIR TO AND IN THE BEST INTERESTS OF SDL AND THE SDL STOCKHOLDERS
AND APPROVED THE MERGER AGREEMENT. ACCORDINGLY, THE SDL BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE MERGER AND RECOMMENDS THAT SDL STOCKHOLDERS VOTE IN
FAVOR OF ADOPTION OF THE MERGER AGREEMENT.
In determining to approve the merger and to recommend adoption of the
merger agreement by the SDL stockholders, the SDL board of directors consulted
with SDL's management and SDL's financial and legal advisors. The SDL board of
directors considered the following factors, among others, in reaching its
conclusion to approve the merger and recommend adoption of the merger agreement.
The board considered the fact that SDL is smaller and has far fewer financial
and research and development resources than virtually all of the companies with
which it principally competes. SDL is also heavily dependent on some key product
lines and customers. Given these circumstances, given the degree to which its
competitors and customers have become vertically integrated and given what SDL
believes is an industry movement toward more modular component supply, and after
considering, among other things, the factors listed below, the SDL board
determined that SDL should not remain independent.
- The historical and prospective information concerning SDL and JDS
Uniphase's respective businesses, operations and financial performance,
and their respective operations, technology and management;
- The operating environment for SDL, including, but not limited to, the
increased consolidation and competition in the technology industry in
general and in the opto-electronics industry specifically. The SDL board
considered the prospect for further changes and consolidation in these
industries and the issues that SDL would face in competing with larger
competitors, many of which have greater financial, technical and
management resources than SDL;
- The strategic vision of JDS Uniphase's management for the combined SDL
and JDS Uniphase business and the photonics industry in general which
paralleled SDL's own vision;
- The entrepreneurial culture of the JDS Uniphase organization and its
management team and the fact that such culture matched SDL's own
corporate culture;
- Current financial market conditions and historical market prices,
volatility and trading information with respect to the SDL common stock
and the JDS Uniphase common stock and with respect to technology
companies in general, and the strength of the JDS Uniphase common stock
as a currency for acquisitions and other strategic endeavors and JDS
Uniphase's general credibility with the market;
- The expectation that the combination of SDL and JDS Uniphase would have
synergistic benefits, as a result of the breadth and complimentary nature
of the technology and product lines;
- The terms of the merger agreement, including the fact that the exchange
ratio represented a 49.5% premium to the SDL common stock closing price
on July 7, 2000, which was the last trading day immediately prior to the
public announcement of the merger, and the termination fee which the SDL
board realized might discourage third parties from seeking to acquire
SDL;
- The terms of the transition agreements and the substantial cash and stock
option benefits to be received by SDL's management in connection with the
completion of the merger;
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<PAGE> 61
- The status of the negotiations with the Second Other Organization and
that company's last offer to SDL;
- Other strategic alternatives open to SDL, including further discussions
with the First Other Organization or remaining independent;
- The impact of the merger on SDL's employees and customers;
- The required regulatory approvals, including the expiration of the
applicable waiting period under the Hart-Scott-Rodino Act of 1976, and
the possible reaction of the relevant regulatory authorities and SDL's
and JDS Uniphase's competitors and customers to the proposed merger;
- The possibility that the merger might not be completed and the
anticipated effect of that failure on SDL's common stock trading price;
- The opinion of Thomas Weisel Partners to the SDL board on July 9, 2000
that the exchange ratio was fair from a financial point of view to the
SDL stockholders as of such date, as described below under "Opinion of
SDL's Financial Advisor;" and
- The expectation that the merger will generally be a tax-free transaction
to SDL and its stockholders.
The above discussion of the material factors considered by the SDL board of
directors is not intended to be exhaustive, but does set forth the principal
factors considered by the SDL board of directors. The SDL board of directors
collectively reached the unanimous conclusion to approve the merger and
recommend adoption of the merger agreement in light of the various factors
described above and other factors that each member of the SDL board of directors
felt were appropriate. In view of the wide variety of factors considered by the
SDL board in connection with its evaluation of the merger and the complexity of
these matters, the SDL board did not consider it practical, and did not attempt,
to quantify, rank or otherwise assign relative weights to the specific factors
it considered in reaching its decision. Rather, the SDL board made its
recommendation based on the totality of information presented to and the
investigation conducted by it. In considering the factors discussed above,
individual directors may have given different weights to different factors.
In considering the recommendation of SDL's board of directors with respect
to the merger agreement, you should be aware that some directors and officers of
SDL have interests in the merger that are different from, or are in addition to,
the interests of SDL stockholders generally. Please see the section entitled
"Interests of Management and Directors of SDL in the Merger" on page 69 of this
proxy statement-prospectus.
RECOMMENDATION OF JDS UNIPHASE'S BOARD OF DIRECTORS
AT ITS MEETING ON JULY 9, 2000, THE JDS UNIPHASE BOARD OF DIRECTORS
DETERMINED THAT THE MERGER WAS FAIR TO JDS UNIPHASE STOCKHOLDERS AND IN THE BEST
INTERESTS OF JDS UNIPHASE AND ITS STOCKHOLDERS AND APPROVED THE MERGER
AGREEMENT. ACCORDINGLY, THE JDS UNIPHASE BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE MERGER AND RECOMMENDS THAT JDS UNIPHASE STOCKHOLDERS VOTE FOR
APPROVAL OF THE MERGER-RELATED PROPOSAL.
In reaching its decision to approve the merger agreement, the JDS Uniphase
board of directors consulted with JDS Uniphase's (1) management, (2) legal
counsel regarding the legal terms of the transaction, and (3) financial advisors
regarding the financial aspects of the proposed transaction and the fairness,
from a financial point of view, to JDS Uniphase of the exchange ratio. The
factors that the JDS Uniphase board of directors considered in reaching its
determination include, but were not limited to, the following:
- historical information concerning JDS Uniphase's and SDL's respective
businesses, financial performance and condition, operations, technology
and management, including public reports
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<PAGE> 62
concerning results of operations during the most recent fiscal year and
fiscal quarter for each company filed with the SEC;
- JDS Uniphase's management's view of the financial condition, results of
operations and businesses of JDS Uniphase and SDL before and after giving
effect to the merger;
- current financial market conditions and historical market prices,
volatility and trading information with respect to the JDS Uniphase
common stock and the SDL common stock;
- the relationship between the market value of the JDS Uniphase common
stock and the consideration to be paid by JDS Uniphase to stockholders of
SDL in the merger, along with a comparison of comparable merger
transactions;
- the results of the due diligence investigations of SDL conducted by JDS
Uniphase's management and legal and financial advisors;
- the belief that the terms of the merger agreement are reasonable;
- the separate opinions of CIBC World Markets and Banc of America
Securities as to the fairness, from a financial point of view and as of
the date of the opinions, to JDS Uniphase of the exchange ratio provided
for in the merger, as described below under the caption "Opinions of JDS
Uniphase's Financial Advisors;" and
- the impact of the merger on JDS Uniphase's customers and employees.
In the course of its analysis, JDS Uniphase's board of directors also
considered the strategic benefits of the transaction. The board of directors
determined that:
- the combined company will likely be able to better serve its customers in
the telecommunications industry and accelerate the deployment of optical
networking technology;
- JDS Uniphase's stockholders would have the opportunity to participate in
the potential for growth of the combined company after the merger;
- increased manufacturing capacity may enhance the combined company's
ability to meet the rapidly expanding demand for its products;
- the broadening and integration of the companies' product lines may enable
the combined company to meet the needs of its customers more effectively
and efficiently;
- combined technological resources may allow the combined company to
compete more effectively by providing it with enhanced ability to develop
new products and greater functionality for existing products;
- the creation of a larger field sales organization, the expansion of the
companies' dedicated sales teams, greater marketing resources and
financial strength may present improved opportunities for marketing the
products of the combined company; and
- the structure of the transaction may provide significant advantages in
increasing the opportunity for (a) effectively utilizing the skills and
resources of the companies' respective management teams and (b) matching
the respective "corporate cultures" of the two companies while
maintaining some of the most important aspects of each culture.
The JDS Uniphase board also considered potentially negative factors
relating to the merger, including:
- the risk that the potential benefits sought in the merger might not be
fully realized;
- the possibility that the merger might not be consummated and the effect
of the public announcement of the merger on (a) JDS Uniphase's sales and
operating results, particularly the effect on key customer and supplier
relationships, (b) JDS Uniphase's ability to attract and retain key
management, marketing and technical personnel and (c) the progress of
certain development projects;
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<PAGE> 63
- the substantial charges to be incurred in connection with the merger,
including costs of integrating the businesses and transaction expenses
arising from the merger;
- the risk that despite the efforts of the combined company, key technical
and management personnel might not remain employed by the combined
company; and
- various other risks.
The JDS Uniphase board of directors concluded that these factors were
outweighed by the potential benefits to be gained by the merger agreement and
the completion of the proposed merger.
The above discussion of the material factors considered by the JDS Uniphase
board of directors is not intended to be exhaustive, but does set forth the
principal factors considered by the JDS Uniphase board of directors. The JDS
Uniphase board of directors collectively reached the unanimous conclusion to
approve the merger agreement and the merger in light of the various factors
described above and other factors that each member of the JDS Uniphase board of
directors felt were appropriate. In view of the wide variety of factors
considered by the JDS Uniphase board in connection with its evaluation of the
merger and the complexity of these matters, the JDS Uniphase board did not
consider it practical, and did not attempt, to quantify, rank or otherwise
assign relative weights to the specific factors it considered in reaching its
decision. Rather, the JDS Uniphase board made its recommendation based on the
totality of information presented to and the investigation conducted by it. In
considering the factors discussed above, individual directors may have given
different weights to different factors.
OPINION OF SDL'S FINANCIAL ADVISOR
In March 2000, SDL hired Thomas Weisel Partners LLC to act as its financial
advisor in connection with the possible business combination of SDL with certain
parties in one or series of transactions, by merger, consolidation or any other
business combination. On July 9, 2000, Thomas Weisel Partners delivered to the
SDL board of directors its oral opinion that the exchange ratio for SDL's
proposed merger with JDS Uniphase was fair from a financial point of view to SDL
stockholders (other than JDS Uniphase and its affiliates) as of that date.
Thomas Weisel Partners later delivered its written opinion dated July 9, 2000,
confirming its oral opinion.
SDL determined the consideration it would receive in the transaction
through negotiations with JDS Uniphase. SDL did not impose any limitations on
Thomas Weisel Partners with respect to the investigations made or procedures
followed in rendering its opinion.
ATTACHED AS ANNEX B TO THIS PROXY STATEMENT-PROSPECTUS IS THE FULL TEXT OF
THE WRITTEN OPINION THAT THOMAS WEISEL PARTNERS DELIVERED TO SDL. YOU SHOULD
READ THIS OPINION CAREFULLY AND IN ITS ENTIRETY. HOWEVER, THE FOLLOWING IS A
SUMMARY OF THE THOMAS WEISEL PARTNERS OPINION.
THOMAS WEISEL PARTNERS HAS DIRECTED ITS OPINION TO SDL'S BOARD OF
DIRECTORS. THE OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO YOU AS TO HOW YOU
SHOULD VOTE WITH RESPECT TO THE TRANSACTION. THE OPINION ADDRESSES ONLY THE
FINANCIAL FAIRNESS AS OF THE DATE OF SUCH OPINION OF THE EXCHANGE RATIO PURSUANT
TO THE MERGER AGREEMENT TO SDL'S STOCKHOLDERS. IT DOES NOT ADDRESS THE RELATIVE
MERITS OF THE TRANSACTION OR ANY ALTERNATIVES TO THE TRANSACTION. FURTHER, IT
DOES NOT ADDRESS SDL'S UNDERLYING DECISION TO PROCEED WITH OR EFFECT THE
TRANSACTION.
In connection with its opinion, Thomas Weisel Partners has, among other
things:
(1) reviewed certain publicly available financial and other data with
respect to SDL and JDS Uniphase, including the consolidated
financial statements for recent years and for the most recent
fiscal quarters for which published results are available and
certain other relevant financial and operating data relating to
SDL and JDS Uniphase made available to Thomas Weisel Partners from
published sources and from the internal records of SDL and JDS
Uniphase;
(2) reviewed the financial terms and conditions of the merger
agreement;
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<PAGE> 64
(3) reviewed certain publicly available information concerning the
trading of, and the trading market for, SDL common stock and JDS
Uniphase common stock;
(4) compared SDL and JDS Uniphase from a financial point of view with
certain other companies in the optical components and systems
industry or otherwise in the broadband enabling industry which
Thomas Weisel Partners deemed to be relevant;
(5) considered the financial terms, to the extent publicly available,
of selected recent business combinations of technology companies
which Thomas Weisel Partners deemed to be comparable, in whole or
in part, to the merger;
(6) reviewed and discussed with representatives of the management of
each of SDL and JDS Uniphase certain information of a business and
financial nature regarding SDL and JDS Uniphase, furnished to
Thomas Weisel Partners by them, including financial forecasts and
related assumptions of SDL and JDS Uniphase;
(7) made inquiries regarding and discussed the merger and the merger
agreement and other matters related to the merger agreement with
SDL's counsel; and
(8) performed such other analyses and examinations as Thomas Weisel
Partners has deemed appropriate.
In preparing its opinion, Thomas Weisel Partners did not assume any
responsibility to independently verify the information referred to above.
Instead, with SDL's consent, Thomas Weisel Partners relied on the information
being accurate and complete. Thomas Weisel Partners also made the following
assumptions, in each case with the consent of SDL's board of directors:
- that there have been no material changes in SDL's or JDS Uniphase's
assets, financial condition, results of operations, business or prospects
since the respective dates of their last financial statements made
available to Thomas Weisel Partners;
- that neither JDS Uniphase nor SDL is currently involved in any material
transaction other than the merger, other publicly announced transactions,
other preliminarily discussed transactions confidentially disclosed to
Thomas Weisel Partners and those activities undertaken in the ordinary
course of conducting their respective businesses; and
- that the merger will be consummated in a manner that complies in all
respects with the applicable provisions of the Securities Act of 1933,
the Securities Exchange Act of 1934 and all other applicable federal and
state statutes, rules and regulations.
In addition, for purposes of their opinion:
- Thomas Weisel Partners did not assume responsibility for making an
independent evaluation, appraisal or physical inspection of the assets or
liabilities (contingent or otherwise) of SDL or JDS Uniphase, nor was
Thomas Weisel Partners furnished with any of these appraisals.
- The Thomas Weisel Partners opinion was based on economic, monetary,
market and other conditions as in effect on, and the information made
available to Thomas Weisel Partners as of, the date of its opinion.
Accordingly, although subsequent developments may affect its opinion,
Thomas Weisel Partners has not assumed any obligation to update, revise
or reaffirm its opinion.
The following represents a brief summary of the material financial analyses
performed by Thomas Weisel Partners in connection with providing its opinion to
the SDL board of directors. Some of the summaries of financial analyses
performed by Thomas Weisel Partners include information presented in tabular
format. In order to fully understand the financial analyses performed by Thomas
Weisel Partners, you should read the tables together with the text of each
summary. The tables alone do not constitute a complete description of the
financial analyses. Considering the data set forth in the tables without
considering the full narrative description of the financial analyses, including
the methodologies and
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assumptions underlying the analyses, could create a misleading or incomplete
view of the financial analyses performed by Thomas Weisel Partners.
COMPARABLE COMPANY ANALYSIS. Based on public and other available
information, Thomas Weisel Partners calculated the implied price per share of
SDL based on multiples of aggregate value, which Thomas Weisel Partners defined
as equity value plus debt less cash and cash equivalents, to (1) 2000 estimated
revenues, (2) 2001 estimated revenues and (3) price to 2001 estimated earnings
per share (EPS) ratios for companies in the optical components and systems
industry. In each case, Thomas Weisel Partners used estimates based on public
filings, news articles, published Wall Street research analysts' reports and
forecasts and other third party sources. Thomas Weisel Partners believes that
the nine companies listed below have operations similar to some of the
operations of SDL, but noted that none of these companies have the same
management, composition, size or combination of businesses as SDL:
- Avanex Corporation;
- Bookham Technology plc;
- CIENA Corporation;
- Corning Incorporated;
- JDS Uniphase Corporation;
- New Focus Inc.;
- Nortel Networks Corporation;
- ONI Systems Corporation and
- Sycamore Networks, Inc.
The following table sets forth the implied prices indicated by this
analysis:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
RANGE OF IMPLIED PRICES MEAN MEDIAN
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
Aggregate Value to 2000
Estimated Revenues $ 45.41 - $694.81 $318.43 $264.29
------------------------------------------------------------------------------------------------------------
Aggregate Value to 2001
Estimated Revenues $ 59.07 - $900.81 $389.10 $361.29
------------------------------------------------------------------------------------------------------------
Price / 2001 Estimated EPS $118.44 - $394.25 $230.86 $238.24
------------------------------------------------------------------------------------------------------------
</TABLE>
While the comparable company analysis compared SDL to nine companies in the
optical components and systems industry, Thomas Weisel Partners did not include
every company that could be deemed to be a participant in this same industry, or
in the specific sectors of this industry.
Thomas Weisel Partners noted that the implied price per share of
consideration to be received by SDL stockholders in connection with the
transaction based on the closing sales price of JDS Uniphase on July 7, 2000 was
$441.51.
SELECTED TRANSACTIONS ANALYSIS. Based on public and other available
information, Thomas Weisel Partners calculated the implied price per share of
SDL based on multiples of aggregate value/equity value to (1) last twelve months
(LTM) revenues, (2) LTM net income, (3) next twelve months (NTM) revenues and
(4) NTM net income for the other company in the following 32 selected
transactions involving companies in the communications industry that have been
announced since April 27, 1998:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
ANNOUNCEMENT DATE NAME OF ACQUIROR NAME OF OTHER COMPANY
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
June 21, 2000 Texas Instruments Incorporated Burr-Brown Corporation
--------------------------------------------------------------------------------------------------------------------
June 6, 2000 Sycamore Networks, Inc. Sirocco Systems, Inc.
--------------------------------------------------------------------------------------------------------------------
May 10, 2000 SDL, Inc. Photonic Integration Research, Inc.
--------------------------------------------------------------------------------------------------------------------
May 5, 2000 Cisco Systems, Inc. ArrowPoint Communications, Inc.
--------------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
ANNOUNCEMENT DATE NAME OF ACQUIROR NAME OF OTHER COMPANY
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
March 21, 2000 Nortel Networks Corporation CoreTek
--------------------------------------------------------------------------------------------------------------------
March 14, 2000 Nortel Networks Corporation Xros, Inc.
--------------------------------------------------------------------------------------------------------------------
February 23, 2000 ADC Telecommunications, Inc. PairGain Technologies, Inc.
--------------------------------------------------------------------------------------------------------------------
February 14, 2000 Corning Incorporated NetOptix Corporation
--------------------------------------------------------------------------------------------------------------------
February 7, 2000 Lucent Technologies, Inc. Ortel Corporation
--------------------------------------------------------------------------------------------------------------------
January 17, 2000 JDS Uniphase Corporation E-TEK Dynamics, Inc.
--------------------------------------------------------------------------------------------------------------------
December 20, 1999 Cisco Systems, Inc. Pirelli S.p.A's Optical Systems Business
--------------------------------------------------------------------------------------------------------------------
December 15, 1999 Nortel Networks Corporation Qtera Corporation
--------------------------------------------------------------------------------------------------------------------
December 8, 1999 Corning Incorporated Siemens' Optical Fiber Division
--------------------------------------------------------------------------------------------------------------------
November 29, 1999 Redback Networks Inc. Siara Systems, Inc.
--------------------------------------------------------------------------------------------------------------------
November 14, 1999 Corning Incorporated Oak Industries Inc.
--------------------------------------------------------------------------------------------------------------------
November 4, 1999 JDS Uniphase Corporation Optical Coating Laboratory, Inc.
--------------------------------------------------------------------------------------------------------------------
October 14, 1999 Intel Corporation DSP Communications, Inc.
--------------------------------------------------------------------------------------------------------------------
September 28, 1999 Alcatel S.A. Genesys Telecommunications Labs, Inc.
--------------------------------------------------------------------------------------------------------------------
September 15, 1999 Motorola, Inc. General Instrument Corporation
--------------------------------------------------------------------------------------------------------------------
August 26, 1999 Cisco Systems, Inc. Cerent Corporation
--------------------------------------------------------------------------------------------------------------------
August 17, 1999 Lucent Technologies, Inc. Excel Switching Corporation
--------------------------------------------------------------------------------------------------------------------
April 26, 1999 General Electric Company, plc FORE Systems, Inc.
--------------------------------------------------------------------------------------------------------------------
April 13, 1999 Cisco Systems, Inc. GeoTel Communications Corp.
--------------------------------------------------------------------------------------------------------------------
March 4, 1999 Intel Corporation Level One Communications, Inc.
--------------------------------------------------------------------------------------------------------------------
March 2, 1999 Alcatel S.A. Xylan Corporation
--------------------------------------------------------------------------------------------------------------------
March 1, 1999 The General Electric Company, plc RELTEC Corporation
--------------------------------------------------------------------------------------------------------------------
January 28, 1999 Uniphase Corporation/JDS FITEL Inc. (Merger of Equals)
--------------------------------------------------------------------------------------------------------------------
January 13, 1999 Lucent Technologies, Inc. Ascend Communications, Inc.
--------------------------------------------------------------------------------------------------------------------
January 11, 1999 Lucent Technologies, Inc. Kenan Systems Corporation
--------------------------------------------------------------------------------------------------------------------
June 15, 1998 Nortel Networks Corporation Bay Networks, Inc.
--------------------------------------------------------------------------------------------------------------------
June 4, 1998 Alcatel SA DSC Communications Corporation
--------------------------------------------------------------------------------------------------------------------
April 27, 1998 Lucent Technologies, Inc. Yurie Systems, Inc.
--------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth the implied price per share of SDL based on
multiples indicated by this analysis and the multiples implied by the proposed
transaction:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
AGGREGATE/EQUITY VALUE TO: RANGE OF IMPLIED PRICES MEAN MEDIAN
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
LTM Revenues $13.29 - $387.21 $ 62.29 $33.79
------------------------------------------------------------------------------------------------------------
LTM Net Income $18.35 - $169.98 $ 56.98 $40.17
------------------------------------------------------------------------------------------------------------
NTM Revenues $17.27 - $405.77 $ 96.27 $52.03
------------------------------------------------------------------------------------------------------------
NTM Net Income $45.31 - $321.65 $110.15 $74.32
------------------------------------------------------------------------------------------------------------
</TABLE>
In each case, Thomas Weisel Partners used estimates based on public
filings, news articles, published Wall Street research analysts' reports and
forecasts and other third party sources. Thomas Weisel Partners also noted that
the implied price per share of consideration to be received by SDL stockholders
in connection with the transaction based on the closing sales price of JDS
Uniphase on July 7, 2000 was $441.51.
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<PAGE> 67
No company or transaction used in the comparable company or comparable
transactions analyses is identical to SDL or the 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 value of the companies to which SDL, JDS
Uniphase and the transaction are being compared.
PRECEDENT PREMIUM ANALYSIS. Thomas Weisel Partners reviewed the
consideration paid in 32 comparable U.S. acquisitions involving an equity value
greater than $1 billion announced since April 27, 1998. Thomas Weisel Partners
calculated the implied price per share of SDL based on premiums paid in these
transactions over the applicable stock price of the other company one day prior
to the announcement of the acquisition offer and over the applicable exchange
ratio one week and one month prior to the announcement of the acquisition offer.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
RANGE OF IMPLIED PRICES MEAN MEDIAN
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
Premium to One Day Share Price $295.72 - $531.02 $390.09 $398.07
-----------------------------------------------------------------------------------------------------------
Premium to One Week Avg. Exchange Ratio $296.87 - $546.94 $376.51 $367.34
-----------------------------------------------------------------------------------------------------------
Premium to One Month Avg. Exchange Ratio $289.44 - $527.44 $385.80 $369.12
-----------------------------------------------------------------------------------------------------------
</TABLE>
Thomas Weisel Partners again noted that the implied price per share of
consideration to be received by SDL stockholders in connection with the
transaction based on the closing sales price of JDS Uniphase on July 7, 2000 was
$441.51.
CONTRIBUTION ANALYSIS. Thomas Weisel Partners used the estimates and
financial forecasts prepared by (1) third party analysts, referred to as SDL
Street case, (2) SDL's management, referred to as SDL Management case, and (3)
SDL's management using their upside assumptions, referred to as SDL Upside case,
with respect to SDL and third party analysts with respect to JDS Uniphase. On
the basis of these estimates and financial forecasts, Thomas Weisel Partners
reviewed the estimated contribution of each of SDL and JDS Uniphase to estimated
total revenues, gross profit, earnings before interest and taxes (EBIT) and net
income, each for calendar years 2000 and 2001 for the combined company. Thomas
Weisel Partners then compared these contributions to the forecasted share
ownership of the combined company to be owned by the stockholders of SDL,
assuming consummation of the transaction as described in the agreement. This
analysis indicated implied percentage contribution reference ranges for SDL of
approximately 16.6% to 17.9% based on SDL Street case, 17.4% to 18.8% based on
SDL Management case, and 19.4% to 25.1% based on SDL Upside case, as compared to
the forecasted share ownership by the shareholders of SDL of approximately 25.4%
in the combined company based on the exchange ratio.
The foregoing description is only a summary of the analyses and
examinations that Thomas Weisel Partners deems material to its opinion. It is
not a comprehensive description of all analyses and examinations actually
conducted by Thomas Weisel Partners. The preparation of a fairness opinion
necessarily is not susceptible to partial analysis or summary description.
Thomas Weisel Partners believes that its analyses and the summary set forth
above must be considered as a whole and that selecting portions of its analyses
and of the factors considered, without considering all analyses and factors,
would create an incomplete view of the process underlying the analyses set forth
in its presentation to SDL's board of directors. In addition, Thomas Weisel
Partners may have given various analyses more or less weight than other
analyses, and may have deemed various assumptions more or less probable than
other assumptions. The fact that any specific analysis has been referred to in
the summary above is not meant to indicate that this analysis was given greater
weight than any other analysis. Accordingly, the ranges of valuations resulting
from any particular analysis described above should not be taken to be the view
of Thomas Weisel Partners with respect to the actual value of SDL.
In performing its analyses, Thomas Weisel Partners made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of SDL and
JDS Uniphase. The analyses performed by Thomas Weisel Partners are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less
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<PAGE> 68
favorable than those suggested by these analyses. These analyses were prepared
solely as part of the analysis performed by Thomas Weisel Partners with respect
to the financial fairness of the exchange ratio pursuant to the merger agreement
to SDL's stockholders pursuant to the transaction as of July 9, 2000, and were
provided to SDL's board of directors in connection with the delivery of the
Thomas Weisel Partners opinion. The analyses do not purport to be appraisals or
to reflect the prices at which a company might actually be sold or the prices at
which any securities may trade at any time in the future.
As described above, Thomas Weisel Partner's opinion and presentation were
among the many factors that SDL took into consideration in making its
determination to approve, and to recommend that its stockholders approve, the
transaction.
SDL has agreed to pay Thomas Weisel Partners a fee of $3,000,000 upon the
first delivery of its fairness opinion and $500,000 for any additional fairness
opinions, upon the delivery of each such additional fairness opinion. In
addition, SDL has agreed to pay Thomas Weisel Partners a transaction fee of
$30,000,000 less any fairness opinion fees previously paid, if any business
combination is consummated during the term of Thomas Weisel Partners' engagement
or if SDL enters into a definitive agreement during the term of its engagement
which subsequently results in a business combination. SDL was aware of this fee
structure and took it into account in considering the Thomas Weisel Partners
opinion and in approving the transaction. Further, SDL has agreed to reimburse
Thomas Weisel Partners for its reasonable out-of-pocket expenses and to
indemnify Thomas Weisel Partners, its affiliates, and their respective partners,
directors, officers, agents, consultants, employees and controlling persons
against specific liabilities, including liabilities under the federal securities
laws.
In the ordinary course of its business, Thomas Weisel Partners actively
trades the equity securities of SDL and JDS Uniphase for its own account and for
the accounts of customers and, accordingly, may at any time hold a long or short
position in these securities. Thomas Weisel Partners has also provided
investment banking services to JDS Uniphase, including acting as its financial
advisor in connection with JDS Uniphase's acquisition of E-TEK Dynamics, Inc.
OPINIONS OF JDS UNIPHASE'S FINANCIAL ADVISORS
CIBC WORLD MARKETS. CIBC World Markets has acted as JDS Uniphase's
financial advisor in connection with the merger. On July 9, 2000, at a meeting
of the JDS Uniphase board of directors held to evaluate the proposed merger,
CIBC World Markets rendered an oral opinion, which opinion was confirmed by
delivery of a written opinion dated July 9, 2000, to the effect that, as of that
date and based on and subject to the matters described in the opinion, the
exchange ratio provided for in the merger was fair, from a financial point of
view, to JDS Uniphase.
The full text of CIBC World Markets' written opinion dated July 9, 2000,
which describes the assumptions made, matters considered and limitations on the
review undertaken, is attached as Annex C and is incorporated into this document
by reference. CIBC WORLD MARKETS' OPINION IS ADDRESSED TO THE JDS UNIPHASE BOARD
OF DIRECTORS AND RELATES ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A
FINANCIAL POINT OF VIEW TO JDS UNIPHASE. THE OPINION DOES NOT ADDRESS ANY OTHER
ASPECT OF THE PROPOSED MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
STOCKHOLDER AS TO ANY MATTERS RELATING TO THE PROPOSED MERGER. THE SUMMARY OF
CIBC WORLD MARKETS' OPINION DESCRIBED BELOW IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF ITS OPINION. HOLDERS OF JDS UNIPHASE COMMON STOCK
ARE URGED TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY.
In arriving at its opinion, CIBC World Markets:
- reviewed the merger agreement;
- reviewed audited financial statements of JDS Uniphase for the fiscal
years ended June 30, 1997, June 30, 1998 and June 30, 1999, and audited
financial statements of SDL for the fiscal years ended December 31, 1997,
December 31, 1998 and December 31, 1999;
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<PAGE> 69
- reviewed unaudited financial statements of JDS Uniphase for the nine
months ended March 31, 2000 and unaudited financial statements of SDL for
the three months ended March 31, 2000;
- reviewed publicly available financial forecasts relating to JDS Uniphase
and SDL as well as certain adjustments to the publicly available
financial forecasts relating to SDL prepared by the management of JDS
Uniphase and estimates of potential synergies and strategic benefits
anticipated by the management of JDS Uniphase to result from the merger;
- reviewed historical market prices and trading volume for JDS Uniphase
common stock and SDL common stock;
- held discussions with the senior managements of JDS Uniphase and SDL with
respect to the businesses and prospects for future growth of JDS Uniphase
and SDL;
- reviewed and analyzed publicly available financial data for companies
that CIBC World Markets deemed comparable to JDS Uniphase and SDL;
- reviewed and analyzed publicly available information for transactions
that CIBC World Markets deemed comparable to the merger;
- reviewed public information concerning JDS Uniphase and SDL; and
- performed other analyses and reviewed other information as CIBC World
Markets deemed appropriate.
In rendering its opinion, CIBC World Markets relied on and assumed, without
independent verification or investigation, the accuracy and completeness of all
of the financial and other information that JDS Uniphase, SDL and each of their
employees, representatives and affiliates provided to or discussed with CIBC
World Markets. With respect to publicly available financial forecasts relating
to JDS Uniphase and SDL which CIBC World Markets reviewed and discussed with the
managements of JDS Uniphase and SDL, CIBC World Markets assumed, at the
direction of the managements of JDS Uniphase and SDL, without independent
verification or investigation, that such forecasts represented reasonable
estimates and judgments as to the future financial condition and operating
results of JDS Uniphase and SDL. With respect to the adjustments to the publicly
available financial forecasts relating to SDL and estimates as to the potential
synergies and strategic benefits anticipated to result from the merger,
including the amount, timing and achievability of those synergies and benefits,
that were provided to or discussed with CIBC World Markets by the management of
JDS Uniphase, CIBC World Markets assumed, at the direction of the management of
JDS Uniphase, without independent verification or investigation, that such
adjustments and estimates were reasonably prepared on bases reflecting the best
available information, estimates and judgments of the management of JDS
Uniphase. CIBC World Markets also assumed, with the consent of JDS Uniphase,
that the merger will be treated as a tax-free reorganization for federal income
tax purposes and that, in the course of obtaining necessary regulatory or third
party approvals for the merger, no limitations, restrictions or conditions will
be imposed that would have a material adverse effect on JDS Uniphase, SDL or the
contemplated benefits to JDS Uniphase of the merger.
CIBC World Markets did not make or obtain any independent evaluations or
appraisals of the assets or liabilities, contingent or otherwise, of JDS
Uniphase or SDL. CIBC World Markets expressed no opinion as to the underlying
valuation, future performance or long-term viability of JDS Uniphase or SDL, or
the price at which the JDS Uniphase common stock would trade upon or after
announcement or consummation of the merger. CIBC World Markets' opinion was
necessarily based on the information available to CIBC World Markets and general
economic, financial and stock market conditions and circumstances as they
existed and could be evaluated by CIBC World Markets as of the date of the
opinion. Although subsequent developments may affect CIBC World Markets'
opinion, CIBC World Markets does not have any obligation to update, revise or
reaffirm its opinion. JDS Uniphase imposed no other instructions or limitations
on CIBC World Markets with respect to the investigations made or the procedures
followed by it in rendering its opinion.
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<PAGE> 70
The summary below is not a complete description of CIBC World Markets'
opinion to the JDS Uniphase board of directors or the financial analyses
performed and factors considered by CIBC World Markets in connection with its
opinion. The preparation of a fairness opinion is a complex analytical process
involving various determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to the particular
circumstances and, therefore, a fairness opinion is not readily susceptible to
summary description. CIBC World Markets believes that its analyses and the
summary below must be considered as a whole and that selecting portions of its
analyses and factors considered or focusing on information presented in tabular
format, without considering all analyses and factors considered or the narrative
description of the analyses, could create a misleading or incomplete view of the
processes underlying CIBC World Markets' analyses and opinion.
In performing its analyses, CIBC World Markets considered industry
performance, general business, economic, market and financial conditions and
other matters existing as of the date of its opinion, many of which are beyond
the control of JDS Uniphase and SDL. No company, transaction or business used in
the analyses as a comparison is identical to JDS Uniphase, SDL or the merger,
and an evaluation of the results of those analyses is not entirely mathematical.
Rather, the analyses involve complex considerations and judgments concerning
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the companies, business segments
or transactions analyzed.
The estimates contained in CIBC World Markets' analyses and the ranges of
valuations resulting from any particular analysis are not necessarily indicative
of actual values or future results, which may be significantly more or less
favorable than those suggested by its analyses. In addition, analyses relating
to the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually may be sold.
Accordingly, CIBC World Markets' analyses and estimates are inherently subject
to substantial uncertainty.
The type and amount of consideration payable in the merger was determined
through negotiation between JDS Uniphase and SDL and the decision to enter into
the merger was solely that of the JDS Uniphase board of directors. CIBC World
Markets' opinion and financial analyses were only one of many factors considered
by the JDS Uniphase board of directors in its evaluation of the merger and
should not be viewed as determinative of the views of the JDS Uniphase board of
directors or management with respect to the merger or the exchange ratio
provided for in the merger.
JDS Uniphase selected CIBC World Markets based on CIBC World Markets'
reputation, expertise and familiarity with JDS Uniphase and its business. CIBC
World Markets is an internationally recognized investment banking firm and, as a
customary part of its investment banking business, is regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes. CIBC World Markets and its
affiliates have in the past provided services to JDS Uniphase and SDL, and
currently are providing investment banking services to certain stockholders of
SDL, unrelated to the proposed merger, for which services CIBC World Markets has
received and may receive compensation. In the ordinary course of business, CIBC
World Markets and its affiliates may actively trade the securities of JDS
Uniphase and SDL for their own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
JDS Uniphase has agreed to pay CIBC World Markets for its financial
advisory services upon completion of the merger an aggregate fee of $17.5
million. In addition, JDS Uniphase has agreed to reimburse CIBC World Markets
for its reasonable out-of-pocket expenses, including reasonable fees and
expenses of its legal counsel, and to indemnify CIBC World Markets and related
parties against liabilities, including liabilities under the federal securities
laws, relating to, or arising out of, its engagement.
BANC OF AMERICA SECURITIES. In July 2000, the JDS Uniphase board of
directors retained Banc of America Securities to act as its financial advisor in
connection with the possible acquisition of, or a possible business combination
involving, SDL. Banc of America Securities is an internationally recognized
investment banking firm and regularly engages in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and
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<PAGE> 71
unlisted securities, private placements and valuations for corporate and other
purposes. JDS Uniphase selected Banc of America Securities to act as its
financial advisor on the basis of Banc of America Securities' experience in
transactions similar to the merger and its familiarity with JDS Uniphase and its
business.
Banc of America Securities has delivered to the JDS Uniphase board of
directors its opinion, dated July 9 2000, to the effect that, as of that date
and based on and subject to the matters described in the opinion, the exchange
ratio under the terms of the merger agreement was fair, from a financial point
of view, to JDS Uniphase.
WE HAVE ATTACHED THE FULL TEXT OF BANC OF AMERICA SECURITIES' WRITTEN
OPINION TO THE JDS UNIPHASE BOARD OF DIRECTORS AS ANNEX D, WHICH IS INCORPORATED
IN ITS ENTIRETY INTO THIS PROXY STATEMENT-PROSPECTUS BY REFERENCE. YOU SHOULD
READ THIS OPINION CAREFULLY AND IN ITS ENTIRETY IN CONNECTION WITH THIS PROXY
STATEMENT-PROSPECTUS. HOWEVER, WE ALSO HAVE INCLUDED THE FOLLOWING SUMMARY OF
BANC OF AMERICA SECURITIES' OPINION, WHICH IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE OPINION.
BANC OF AMERICA SECURITIES' OPINION IS ADDRESSED TO THE JDS UNIPHASE BOARD
OF DIRECTORS. IT DOES NOT CONSTITUTE A RECOMMENDATION TO JDS UNIPHASE
STOCKHOLDERS ON HOW TO VOTE WITH RESPECT TO ANY MATTERS RELATING TO THE PROPOSED
MERGER. THE OPINION ADDRESSES ONLY THE FINANCIAL FAIRNESS OF THE EXCHANGE RATIO
PROVIDED FOR IN THE MERGER. THE OPINION DOES NOT ADDRESS THE RELATIVE MERITS OF
THE MERGER OR ANY ALTERNATIVES TO THE MERGER, THE UNDERLYING DECISION OF THE JDS
UNIPHASE BOARD OF DIRECTORS TO PROCEED WITH OR EFFECT THE MERGER OR ANY OTHER
ASPECT OF THE MERGER. IN FURNISHING ITS OPINION, BANC OF AMERICA SECURITIES DOES
NOT ADMIT THAT IT IS AN EXPERT WITHIN THE MEANING OF THE TERM "EXPERT" AS USED
IN THE SECURITIES ACT OF 1933, AS AMENDED, NOR DOES BANC OF AMERICA SECURITIES
ADMIT THAT ITS OPINION CONSTITUTES A REPORT OR VALUATION WITHIN THE MEANING OF
THE SECURITIES ACT OF 1933, AS AMENDED. STATEMENTS TO THIS EFFECT ARE INCLUDED
IN BANC OF AMERICA SECURITIES' OPINION.
Banc of America Securities:
- reviewed publicly available financial statements and other business and
financial information of JDS Uniphase and SDL;
- reviewed publicly available financial forecasts relating to JDS Uniphase
and SDL as well as adjustments to the publicly available financial
forecasts relating to SDL prepared by the management of JDS Uniphase;
- reviewed and discussed with senior executives of JDS Uniphase information
relating to strategic, financial and operational benefits anticipated
from the merger prepared by the management of JDS Uniphase;
- discussed the past and current operations, financial condition and
prospects of JDS Uniphase with senior executives of JDS Uniphase and
discussed the past and current operations, financial condition and
prospects of SDL with senior executives of SDL;
- analyzed the potential pro forma impact of the merger on JDS Uniphase's
earnings per share and other financial statistics;
- reviewed information prepared or discussed with Banc of America
Securities by members of senior managements of JDS Uniphase and SDL
relating to the relative contributions of JDS Uniphase and SDL to the
combined company;
- reviewed the reported prices and trading activity for JDS Uniphase common
stock and SDL common stock;
- compared the financial performance of JDS Uniphase and SDL and the prices
and trading activity of JDS Uniphase common stock and SDL common stock
with that of other publicly traded companies which Banc of America
Securities deemed relevant;
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<PAGE> 72
- compared financial terms of the merger to financial terms, to the extent
publicly available, of other business combination transactions which Banc
of America Securities deemed relevant;
- participated in discussions and negotiations among representatives of JDS
Uniphase and SDL and their financial and legal advisors;
- reviewed the merger agreement; and
- performed other analyses and considered other factors as Banc of America
Securities deemed appropriate.
Banc of America Securities did not assume any responsibility to
independently verify the financial and other information, including the
information listed above, that it reviewed for purposes of its opinion. Instead,
with the consent of the JDS Uniphase, Banc of America Securities relied on that
information as being accurate and complete in all material respects. Banc of
America Securities also made the following assumptions at the direction, or with
the consent, of JDS Uniphase or SDL, as the case may be, without independent
verification or investigation:
- with respect to publicly available financial forecasts relating to JDS
Uniphase and SDL which Banc of America Securities reviewed and discussed
with the management of each company, that the forecasts represented
reasonable estimates and judgments as to the future financial condition
and operating results of JDS Uniphase and SDL;
- with respect to adjustments to the publicly available financial forecasts
relating to SDL and estimates as to the potential synergies and strategic
benefits anticipated to result from the merger, including the amount,
timing and achievability of those synergies and benefits, provided to or
discussed with Banc of America Securities by the management of JDS
Uniphase, that those adjustments and estimates were reasonably prepared
on bases reflecting the best available information, estimates and
judgments of the management of JDS Uniphase;
- that in the course of obtaining the necessary regulatory or third party
approvals for the merger, no limitations, restrictions or conditions
would be imposed that would have a material adverse effect on JDS
Uniphase, SDL or the contemplated benefits to JDS Uniphase of the merger;
and
- that the merger would be treated as a tax-free reorganization or exchange
or both under the Internal Revenue Code of 1986, as amended.
In addition, for purposes of its opinion, Banc of America Securities:
- relied on advice of counsel and independent accountants to JDS Uniphase
as to all legal and financial reporting matters with respect to JDS
Uniphase, the merger and the merger agreement; and
- did not make or receive any independent valuation or appraisal of the
assets or liabilities, contingent or otherwise, of JDS Uniphase or SDL.
JDS Uniphase imposed no other instructions or limitations on Banc of
America Securities with respect to the investigations made or the procedures
followed by it in rendering its opinion. Banc of America Securities' opinion was
based on economic, market and other conditions in effect on, and the information
made available to it as of, the date of the opinion.
Banc of America Securities' opinion and related financial presentation to
the JDS Uniphase board of directors was only one of many factors taken into
consideration by the JDS Uniphase board of directors in making its determination
to approve, and to recommend that JDS Uniphase stockholders approve, the merger
and the merger agreement. Although subsequent developments may affect the
opinion of Banc of America Securities, Banc of America Securities does not have
any obligation to update, revise or reaffirm its opinion.
The following description is merely a summary of the analyses and
examinations that Banc of America Securities considered to be material to its
opinion. It is not a comprehensive description of all
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<PAGE> 73
analyses and examinations actually conducted by Banc of America Securities. The
preparation of a fairness opinion is not susceptible to partial analysis or
summary description. Banc of America Securities believes that its analyses and
the summary below must be considered as a whole. Banc of America Securities
further believes that selecting portions of its analyses and factors considered
or focusing on information presented in tabular format, without considering all
analyses and factors or the narrative description of the analyses, would create
an incomplete view of the process underlying its analyses and opinion presented
to the JDS Uniphase board of directors. Banc of America Securities did not
assign any specific weight to any of the analyses described below. The fact that
any specific analysis has been referred to in the summary below is not meant to
indicate that such analysis was given greater weight than any other analysis.
Accordingly, the ranges of valuations resulting from any particular analysis
described below should not be interpreted as Banc of America Securities' view of
the actual value of either JDS Uniphase or SDL.
In performing its analyses, Banc of America Securities considered industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of JDS Uniphase and SDL. No company or transaction
used in the analyses as a comparison is identical to JDS Uniphase, SDL or the
merger. Accordingly, an analysis of the following results is not mathematical.
Rather, it involves complex consideration and judgments concerning differences
in financial and operating characteristics of the companies and other factors
that could affect the public trading value or purchase price of the companies to
which JDS Uniphase, SDL and the merger are being compared. The analyses
performed by Banc of America Securities are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than those suggested by the analyses. The analyses were prepared
solely as part of Banc of America Securities' analysis of the financial fairness
of the exchange ratio provided for in the merger and were provided to the JDS
Uniphase board of directors in connection with the delivery of Banc of America
Securities' opinion. The analyses do not purport to be appraisals or to reflect
the prices at which a company might actually be sold or the prices at which any
securities may trade at any time in the future.
In the past, Banc of America Securities or its affiliates have provided
financial advisory and financing services for JDS Uniphase and have received
fees for the rendering of these services. Banc of America Securities and its
affiliates beneficially own approximately 2.7% of SDL common stock. In the
ordinary course of business, Banc of America Securities and its affiliates may
actively trade the debt and equity securities of JDS Uniphase and SDL for their
own account or for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
JDS Uniphase has agreed to pay Banc of America Securities for its financial
advisory services upon completion of the merger an aggregate fee of $17.5
million. JDS Uniphase also has agreed to reimburse Banc of America Securities
for its reasonable out-of-pocket expenses. In addition, JDS Uniphase has agreed
to indemnify Banc of America Securities, its affiliates, and their respective
partners, directors, officers, agents, consultants, employees and controlling
persons against liabilities, including liabilities under the federal securities
laws.
FINANCIAL ANALYSES. The following is a summary of the material financial
analyses jointly presented by CIBC World Markets and Banc of America Securities
to the JDS Uniphase board of directors on July 9, 2000 in connection with CIBC
World Markets' and Banc of America Securities' separate opinions, each dated
July 9, 2000, addressed to the JDS Uniphase board of directors. THE FINANCIAL
ANALYSES SUMMARIZED BELOW INCLUDE INFORMATION PRESENTED IN TABULAR FORMAT. IN
ORDER TO FULLY UNDERSTAND CIBC WORLD MARKETS' AND BANC OF AMERICA SECURITIES'
FINANCIAL ANALYSES, THE TABLES MUST BE READ TOGETHER WITH THE TEXT OF EACH
SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE
FINANCIAL ANALYSES. CONSIDERING THE DATA IN THE TABLES BELOW WITHOUT CONSIDERING
THE FULL NARRATIVE DESCRIPTION OF THE FINANCIAL ANALYSES, INCLUDING THE
METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE ANALYSES, COULD CREATE A MISLEADING
OR INCOMPLETE VIEW OF CIBC WORLD MARKETS' AND BANC OF AMERICA SECURITIES'
FINANCIAL ANALYSES.
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Selected Companies Analyses.
SDL. CIBC World Markets and Banc of America Securities compared financial
and stock market information for SDL and the following seven selected publicly
held companies in the optical communications industry:
- Avanex Corporation
- Bookham Technology plc
- Corning Incorporated
- Finisar Corporation
- MRV Communications, Inc.
- New Focus, Inc.
- JDS Uniphase
CIBC World Markets and Banc of America Securities reviewed enterprise
values, calculated as equity value, plus debt, minority interest and preferred
stock, less cash and cash equivalents, of SDL and the selected companies as a
multiple of calendar years 2000 and 2001 estimated revenues. CIBC World Markets
and Banc of America Securities also reviewed equity values as a multiple of
calendar years 2000 and 2001 net income. All multiples were based on closing
stock prices on July 7, 2000. Estimated financial data for the selected
companies were based on publicly available research analysts' estimates.
Estimated financial data for SDL were based on publicly available research
analysts' estimates, referred to as the street case, and adjustments to the
street case prepared by the management of JDS Uniphase, referred to as the
adjusted street case.
CIBC World Markets and Banc of America Securities then applied a range of
selected multiples of calendar years 2000 and 2001 estimated revenues and net
income derived from the selected companies to corresponding financial data of
SDL, both before and after taking into account potential synergies anticipated
by the management of JDS Uniphase to result from the merger. This analysis
indicated the following implied per share equity reference ranges for SDL, as
compared to the equity value for SDL implied by the exchange ratio based on the
closing price of JDS Uniphase common stock on July 7, 2000:
<TABLE>
<CAPTION>
LOW HIGH
------- ---------
<S> <C> <C>
IMPLIED SDL EQUITY REFERENCE RANGE PER SHARE BASED ON STREET
CASE:
Without Synergies......................................... $213.53 $ 637.82
With Potential Synergies.................................. $241.83 $ 979.60
IMPLIED SDL EQUITY REFERENCE RANGE PER SHARE BASED ON
ADJUSTED STREET CASE:
Without Synergies......................................... $275.31 $ 824.34
With Potential Synergies.................................. $303.61 $1,166.12
IMPLIED SDL EQUITY VALUE PER SHARE BASED ON THE EXCHANGE
RATIO AND CLOSING PRICE OF JDS UNIPHASE COMMON STOCK ON
JULY 7, 2000.............................................. $441.51
</TABLE>
JDS Uniphase. CIBC World Markets and Banc of America Securities also
compared financial and stock market information for JDS Uniphase and the
selected companies listed above, excluding JDS Uniphase and including SDL. CIBC
World Markets and Banc of America Securities then applied a range of selected
multiples of calendar years 2000 and 2001 estimated revenues and net income
derived from the selected companies, excluding JDS Uniphase and including SDL,
to corresponding financial data of JDS Uniphase. All multiples were based on
closing stock prices on July 7, 2000. Estimated financial data for the selected
companies and JDS Uniphase were based on publicly available research analysts'
estimates.
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<PAGE> 75
This analysis indicated the following implied per share equity reference range
for JDS Uniphase, as compared to the closing price of JDS Uniphase common stock
on July 7, 2000:
<TABLE>
<CAPTION>
IMPLIED PER SHARE PER SHARE CLOSING PRICE OF JDS UNIPHASE
EQUITY REFERENCE RANGE FOR JDS UNIPHASE COMMON STOCK ON JULY 7, 2000
--------------------------------------- ---------------------------------------
<S> <C>
$91.79 to $275.09 $116.19
</TABLE>
Selected Transactions Analysis.
CIBC World Markets and Banc of America Securities reviewed the purchase
prices and implied transaction multiples in the following 18 selected
transactions in the optical communications industry:
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C>
- Sycamore Networks, Inc. Sirocco Systems, Inc.
- Lucent Technologies Inc. Chromatis Networks Inc.
- SDL Photonic Integration Research, Inc.
- Cisco Systems, Inc. ArrowPoint Communications, Inc.
- Nortel Networks Corporation CoreTek, Inc.
- Nortel Networks Corporation Xros, Inc.
- Corning Incorporated NetOptix Corporation
- Lucent Technologies Inc. Ortel Corporation
- JDS Uniphase E-TEK Dynamics, Inc.
- Cisco Systems, Inc. Pirelli S.p.A.'s Optical Systems Division
- Nortel Networks Corporation Qtera Corporation
- Corning Incorporated Siemens AG's Optical Cable and Hardware Businesses
- Redback Networks Inc. Siara Systems, Inc.
- Corning Incorporated Oak Industries, Inc.
- JDS Uniphase Optical Coating Laboratory, Inc.
- Cisco Systems, Inc. Cerent Corporation
- Lucent Technologies Inc. Excel Switching Corporation
- Uniphase Corporation JDS FITEL Inc.
</TABLE>
CIBC World Markets and Banc of America Securities reviewed enterprise
values in the selected transactions as a multiple of latest 12 months revenue,
and also reviewed equity values as a multiple of latest 12 months net income.
All multiples were based on publicly available information at the time of
announcement of the relevant transaction. CIBC World Markets and Banc of America
Securities then applied a range of selected multiples of latest 12 months
revenue and net income derived from the selected transactions to corresponding
financial data of SDL. This analysis indicated the following implied per share
equity reference range for SDL, as compared to the equity value for SDL implied
by the exchange ratio based on the closing price of JDS Uniphase common stock on
July 7, 2000:
<TABLE>
<CAPTION>
PER SHARE EQUITY VALUE FOR SDL IMPLIED BY
IMPLIED PER SHARE EQUITY EXCHANGE RATIO BASED ON CLOSING PRICE OF
REFERENCE RANGE FOR SDL JDS UNIPHASE COMMON STOCK ON JULY 7, 2000
------------------------ -----------------------------------------
<S> <C>
$14.64 to $637.25 $441.51
</TABLE>
Premiums Paid Analysis.
CIBC World Markets and Banc of America Securities reviewed the purchase
prices and implied premiums payable in 95 selected transactions in the
technology industry announced between January 13, 1999 and June 29, 2000. For
each of the selected transactions, CIBC World Markets and Banc of America
Securities reviewed, among other things, the premium implied in each transaction
based on the target company's average stock price for the one day, one-week and
four-week periods prior to public announcement of the transaction. CIBC World
Markets and Banc of America Securities then applied a range of selected premiums
derived from the selected transactions to the average stock prices of SDL
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<PAGE> 76
common stock for corresponding periods prior to July 7, 2000, which is the last
trading day prior to public announcement of the merger. This analysis indicated
the following implied per share equity reference range for SDL, as compared to
the equity value for SDL implied by the exchange ratio based on the closing
price of JDS Uniphase common stock on July 7, 2000:
<TABLE>
<CAPTION>
PER SHARE EQUITY VALUE FOR SDL IMPLIED BY
IMPLIED PER SHARE EQUITY EXCHANGE RATIO BASED ON CLOSING PRICE OF
REFERENCE RANGE FOR SDL JDS UNIPHASE COMMON STOCK ON JULY 7, 2000
------------------------ -----------------------------------------
<S> <C>
$265.25 to $669.50 $441.51
</TABLE>
Pro Forma Merger Analysis.
CIBC World Markets and Banc of America Securities analyzed the potential
pro forma effect of the merger on JDS Uniphase's estimated earnings per share,
commonly referred to as EPS, on both a calendar year and a fiscal year basis for
2001, after taking into account the potential synergies anticipated by the
management of JDS Uniphase to result from the merger. Estimated financial data
for JDS Uniphase were based on publicly available research analysts' estimates.
Estimated financial data for SDL were based on the street case and the adjusted
street case. This analysis indicated that the merger would be dilutive to JDS
Uniphase's estimated EPS based on the street case for SDL, and accretive to JDS
Uniphase's estimated EPS based on the adjusted street case for SDL, in calendar
and fiscal years 2001.
Contribution Analysis.
CIBC World Markets and Banc of America Securities performed a contribution
analysis, based on publicly available research analysts' estimates for JDS
Uniphase and the street case and the adjusted street case for SDL, comparing the
relative contributions of JDS Uniphase and SDL to the calendar years 2000 and
2001 estimated revenues, earnings before interest and taxes, commonly referred
to as EBIT, and net income of the combined company. Based on the exchange ratio,
this analysis indicated implied percentage contribution reference ranges of
approximately 82.3% to 83.1% for JDS Uniphase and approximately 16.9% to 17.7%
for SDL based on the street case for SDL, and implied percentage contribution
reference ranges of approximately 78.9% to 79.2% for JDS Uniphase and
approximately 20.8% to 21.1% for SDL based on the adjusted street case for SDL,
as compared to the pro forma equity ownership of JDS Uniphase's stockholders of
approximately 74.6% and of SDL's stockholders of approximately 25.4% in the
combined company immediately upon consummation of the merger.
Other Factors.
In rendering their opinions, CIBC World Markets and Banc of America
Securities also reviewed and considered other factors, including:
- selected research analysts' reports for JDS Uniphase and SDL, including
stock price and EPS estimates of these analysts;
- historical market prices and trading volumes for JDS Uniphase and SDL
common stock;
- the relationship between movements in JDS Uniphase common stock, SDL
common stock, movements in the common stock of the selected optical
communications companies and movements in the Nasdaq Composite Index; and
- historical exchange ratios for JDS common stock and SDL common stock
based on the daily closing prices of JDS Uniphase common stock and SDL
common stock for the three months, six months, nine months and 12 months
preceding July 7, 2000.
INTERESTS OF MANAGEMENT AND DIRECTORS OF SDL IN THE MERGER
In considering the recommendation of the SDL board of directors, SDL
stockholders should be aware that specific members of SDL's management and of
the SDL board of directors have interests in the
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merger that are different from, or in addition to, the interests of the SDL
stockholders generally. The members of the SDL board of directors knew about
these additional interests, and considered them, when they approved the merger
agreement.
INDEMNIFICATION AND DIRECTORS' AND OFFICERS' INSURANCE. The merger
agreement provides that JDS Uniphase will, following the merger, indemnify each
current and former director and officer of SDL or any of its subsidiaries to the
extent provided in SDL's current by-laws.
The merger agreement further provides that, for a period of six years
following the merger, JDS Uniphase will cause to be maintained in effect the
current officers and directors insurance policies, provided that JDS Uniphase
will not be required to spend more than 200% of SDL's current annual premiums
for that insurance. This insurance will provide coverage no less than those of
the policies in effect on the date of the merger agreement or the greatest
coverage purchasable for an amount equal to 200% of SDL's current annual
premiums.
DIRECTOR SEAT. JDS Uniphase has agreed to cause Dr. Donald Scifres, SDL's
current Chief Executive Officer and Chairman of the Board, to be appointed to
JDS Uniphase's board of directors as Co-Chairman of the Board.
NON-EMPLOYEE DIRECTORS' STOCK OPTIONS. Pursuant to the terms of SDL's 1995
stock option plan, approximately 14,000 unvested options to purchase SDL common
stock held by the four non-employee directors of SDL (3,500 unvested options per
director) will become fully vested and immediately exercisable upon SDL
stockholder approval of the merger agreement and all options held by
non-employee directors will remain exercisable for the remainder of their terms.
TRANSITION AGREEMENTS; EMPLOYMENT ARRANGEMENTS. In connection with the
signing of the merger agreement, JDS Uniphase entered into transition agreements
with the following SDL executives: Dr. Scifres; Gregory P. Dougherty, current
Chief Operating Officer; David F. Welch, current Vice President, Corporate
Development and Chief Technology Officer; Michael L. Foster, current Chief
Financial Officer and Vice President of Finance; and Della Bynum, current Vice
President of Human Resources. These transition agreements amended the
executives' existing employment agreements and change of control agreements and
are effective upon the completion of the merger.
Donald R. Scifres, Ph.D. Pursuant to the transition agreement between Dr.
Scifres and JDS Uniphase, promptly after the completion of the merger Dr.
Scifres will receive an initial cash payment in the amount of $75 million. This
payment represents the combination of (1) a signing bonus and (2) consideration
for Dr. Scifres' agreement (a) to amend his change of control agreement to
forego his right to cause his options to acquire SDL common stock to accelerate
upon the change of control effected by the merger with JDS Uniphase and (b) to
enter into non-compete and non-solicitation covenants with JDS Uniphase. These
non-compete and non-solicitation covenants prohibit Dr. Scifres from competing
with JDS Uniphase or soliciting employees of JDS Uniphase for one year after the
completion of the merger. Also, under the transition agreement JDS Uniphase has
agreed to the appointment of Dr. Scifres as Co-Chairman of the Board of JDS
Uniphase and that Dr. Scifres will hold a senior management position with JDS
Uniphase.
Dr. Scifres' compensation package following the merger will consist of
three elements. First, he will receive an annual base salary of $300,000, to be
reviewed annually. Second, he will receive an annual cash bonus in an amount
equal to 0% to 200% of his target bonus. His target bonus is 60% of his base
salary. Finally, JDS Uniphase will grant Dr. Scifres 200,000 JDS Uniphase stock
options at an exercise price equal to the fair market value on the date of
grant. Each option will be exercisable for 10 years. The initial grant of JDS
Uniphase options will vest 50% after the first year from grant and 100% after
the second year from grant. Future grants of JDS options must be consistent with
SDL past practices, or if more favorable, with grants to similarly-situated
executives of JDS.
Pursuant to Dr. Scifres' employment agreement and change of control
agreement, as amended by the transition agreement, if, within four years after a
change of control, Dr. Scifres is terminated without cause
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<PAGE> 78
or for good reason, as those terms are defined in the change of control
agreement, Dr. Scifres will be entitled to the following benefits:
- a payment of all accrued compensation, which is an amount including all
amounts earned or accrued through the termination date but not paid as of
the termination date, including (1) base salary, (2) reimbursement for
reasonable and necessary expenses incurred on behalf of the company
during the period ending on the termination date, (3) vacation pay and
(4) bonuses and incentive compensation;
- a payment, as severance pay, of an amount equal to two times the sum of
(1) Dr. Scifres' annual base salary at the rate in effect on the
termination date, including all deferred compensation, and (2) the
greater of (a) the annual bonus paid or payable to Dr. Scifres during the
two fiscal years ended prior to termination and (b) 12 times 5% of his
then current base salary; a payment of all accrued compensation, which is
an amount including all amounts earned or accrued through the termination
date but not paid as of the termination date, including (1) base salary,
(2) reimbursement for reasonable and necessary expenses incurred on
behalf of SDL during the period ending on the termination date, (3)
vacation pay and (4) bonuses and incentive compensation;
- a payment, under the employment agreement, of an amount equal to Dr.
Scifres' annual base salary at the rate in effect on the termination
date; and twelve monthly payments equal to 4.1666% of his annual base
salary at the rate in effect on the termination date, subject to
reduction upon Dr. Scifres' commencing employment which permits him to
obtain comparable group health, disability and life insurance benefits;
- 24 months of medical, disability, and life-insurance coverage; and
- the lapse of all restrictions on any outstanding equity incentive awards,
including stock options and restricted stock, which awards will become
100% vested, and in the case of stock options, immediately exercisable.
In the event that any payments under the transition agreement or otherwise
result in Dr. Scifres being subject to the golden parachute excise tax under
Section 4999 of the Internal Revenue Code, JDS Uniphase will make an additional
cash payment so that Dr. Scifres will be in the same after-tax position as if no
excise tax had been imposed. The total amount of such payments is estimated to
be $44 million. In addition, in the event of any dispute over Dr. Scifres'
employment arrangements, not brought in bad faith, JDS Uniphase will reimburse
Dr. Scifres for attorneys' fees and expenses.
Dr. Scifres' transition agreement provides for changes in the definition of
"Good Reason" in Dr. Scifres' existing change of control agreement. The
definition in the change of control agreement has been modified by the addition
of the following provisions:
- the initial changes in Dr. Scifres' role, title and/or duties to be
effected by JDS Uniphase immediately following completion of the merger
do not constitute good reason;
- a change of control of JDS Uniphase or a subsequent change of control of
SDL constitutes good reason;
- a material breach by JDS Uniphase of the transition agreement constitutes
good reason;
- a failure by JDS Uniphase to re-appoint Dr. Scifres to positions on the
boards of either JDS Uniphase or SDL constitutes good reason;
- a change in Dr. Scifres' reporting structure constitutes good reason.
In addition to these modifications, Dr. Scifres' existing change of control
agreement provided that the following events or conditions constitute "Good
Reason":
- a change in Dr. Scifres' status, title, position or responsibilities
which represents a material and adverse change from Dr. Scifres' status,
title, position or responsibilities as in effect immediately prior to
such change; the assignment to Dr. Scifres of any duties or
responsibilities which are substantially inconsistent with Dr. Scifres'
status, title, position or responsibilities prior to such assignment; or
any removal of Dr. Scifres from or failure to reappoint or reelect Dr.
Scifres to any
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<PAGE> 79
of those offices or positions, except in connection with the termination
of Dr. Scifres' employment for disability, cause, as a result of Dr.
Scifres' death or by Dr. Scifres other than for good reason (each of
those terms is defined in the change of control agreement);
- a reduction in Dr. Scifres' base salary;
- the requirement by SDL that Dr. Scifres be based at any place which
results in Dr. Scifres having to commute more than 25 miles from his
residence, except for reasonably required travel on Dr. Scifres' business
which is not materially greater than such travel requirements prior to
the change in control;
- a material reduction by SDL in the kind or level of employee benefits,
other than salary, to which Dr. Scifres is entitled at any time within 90
days preceding the date of a change of control, or at any time after a
change of control, other than any such reduction which is part of, and
generally consistent with, a general reduction applicable to officers of
SDL;
- any material breach by SDL of any provision of the change of control
agreement or any employment agreement between SDL and Dr. Scifres; and
- the failure of SDL to obtain an agreement from any successors and assigns
to assume and agree to perform the change of control agreement.
In the event of Dr. Scifres' termination, the transition agreement provides
for certain changes to his existing stock options. If Dr. Scifres is terminated
without cause or if he terminates with good reason, each as defined in the
change of control agreement and as modified by the transition agreement, or in
the event of his death, disability or retirement at or after the age 55, then
all unvested stock options will become fully exercisable. If Dr. Scifres is
terminated for any reason or for no reason, all vested stock options remain
exercisable for their normal remaining life.
Other Executives. Pursuant to the transition agreements between each of Mr.
Dougherty, Dr. Welch, Mr. Foster and Ms. Bynum and JDS Uniphase, promptly after
the completion of the merger, these executives will receive an initial cash
payment in the amounts set forth below. This payment represents the combination
of (1) a signing bonus and (2) consideration for the executives' agreement (a)
to amend their change of control agreements to forego their right to cause their
options to acquire SDL common stock to accelerate upon the change of control
effected by the merger with JDS Uniphase, and (b) to enter into non-compete and
non-solicitation covenants. These non-compete and non-solicitation covenants
prohibit the executive from competing with JDS Uniphase or soliciting employees
of JDS Uniphase for one year after the completion of the merger. The transition
agreements provide that Mr. Dougherty will be Executive Vice President of JDS
Uniphase, that Dr. Welch will be Senior Vice President of JDS Uniphase,
Technology Integration and Business Development, that Mr. Foster will be Vice
President of Finance of JDS Uniphase and that Ms. Bynum will be Vice President
of Human Resources of SDL.
The terms of the executives' compensation packages are similar to that
described above as awarded to Dr. Scifres. However, the amount of payments to
the executives are as follows:
<TABLE>
<CAPTION>
ADDITIONAL CASH TARGET BONUS JDS UNIPHASE
BASE SALARY PAYMENT (% OF BASE SALARY) INITIAL OPTIONS
----------- --------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Dougherty.................. $300,000 $75 million 50% of Base 135,000
Welch...................... $220,000 $40 million 50% of Base 80,000
Foster..................... $200,000 $20 million 40% of Base 60,000
Bynum...................... $175,000 $ 5 million 40% of Base 20,000
</TABLE>
Pursuant to the executives' employment agreements and change of control
agreements, as amended by their transition agreements, if, within 12 months
after a change of control for Dr. Welch, Mr. Foster and Ms. Bynum, and within 18
months after a change of control for Mr. Dougherty, any of these executives is
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<PAGE> 80
terminated without cause or for good reason as those terms are defined in the
change of control agreement, that executive will be entitled to the following:
- a payment of all accrued compensation, which is an amount including all
amounts earned or accrued through the termination date but not paid as of
the termination date, including (1) base salary, (2) reimbursement for
reasonable and necessary expenses incurred on behalf of the company
during the period ending on the termination date, (3) vacation pay and
(4) bonuses and incentive compensation;
- for Mr. Dougherty only, a payment, as severance pay, of an amount equal
to the sum of (1) Mr. Dougherty's annual base salary at the rate in
effect on the termination date, including all deferred compensation and
(2) the greater of (a) the average annual bonus paid or payable to Mr.
Dougherty during the two fiscal years ended prior to termination, and (b)
12 times 4.1667% of his then current base salary;
- for Dr. Welch only, a payment, as severance pay, of an amount equal to
the sum of (1) Dr. Welch's annual base salary at the rate in effect on
the termination date, including all deferred compensation and (2) the
greater of (a) the average annual bonus paid or payable to Dr. Welch
during the two fiscal years ended prior to termination and (b) 12 times
2.0833% of his then current base salary;
- for Mr. Foster and Ms. Bynum only, a payment, as severance pay, of an
amount equal to the sum of (1) the executive's annual base salary at the
rate in effect on the termination date, including all deferred
compensation, and (2) the average annual bonus paid or payable to the
executive during the two fiscal years ended prior to termination;
- 12 months of medical, disability, and life-insurance coverage;
- the lapse of all restrictions on any outstanding equity incentive awards,
including stock options and restricted stock, which awards will become
100% vested, and in the case of stock options, immediately exercisable;
and
- for Mr. Dougherty only, if termination occurs prior to the fifth
anniversary of his employment, a forgiveness of $200,000 of his housing
assistance loan from SDL, in which case SDL will purchase his residence
within one year of the termination at the higher of either (1) the
original purchase price paid by Mr. Dougherty and (2) the appraised value
of the residence at the date of termination.
In the event that any payments under the transition agreement or otherwise
results in the executive being subject to the parachute excise tax under Section
4999 of the Internal Revenue Code, JDS Uniphase will make an additional cash
payment so that the executive will be in the same after-tax position as if no
excise tax had been imposed. The total amount of such payments is estimated to
be $89 million. In the event of any dispute over the executive's employment
arrangements, not brought in bad faith, JDS Uniphase will reimburse the
executive for attorneys' fees and expenses.
The executives' transition agreements also provided for changes in the
definition of "Good Reason." The definitions in the change of control agreements
have been modified by the addition of the following provisions:
- the initial changes in the executive's role, title and/or duties to be
effected by JDS Uniphase immediately following completion of the merger
do not constitute good reason;
- a change of control of JDS Uniphase or a subsequent change of control of
SDL constitutes good reason;
- a material breach by JDS Uniphase of the transition agreement constitutes
good reason; and
- a change in reporting structure.
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<PAGE> 81
In addition to these modifications, the executives' existing change of
control agreements provided that the following events or conditions constitute
"Good Reason":
- for each of Dr. Welch, Mr. Foster and Ms. Bynum, a change, without the
executive's express written consent, in the executive's status, title,
position or responsibilities which represents a material and adverse
change from the executive's status, title, position or responsibilities
as in effect immediately prior to such change; the assignment to the
executive, without his or her express written consent, of any duties or
responsibilities which are substantially inconsistent with the
executive's status, title, position or responsibilities prior to such
assignment; or any removal of the executive from or failure to reappoint
or reelect the executive to any of those offices or positions, except in
connection with the termination of the executive's employment for
disability, cause, as a result of the executive's death or by the
executive other than for good reason (each of those terms is defined in
the change of control agreements);
- for Mr. Dougherty, a change in his status, title, position or
responsibilities which represents a material and adverse change from his
status, title, position or responsibilities as in effect immediately
prior to such change; the assignment to Mr. Dougherty of any duties or
responsibilities which are substantially inconsistent with Mr.
Dougherty's status, title, position or responsibilities prior to such
assignment; or any removal of Mr. Dougherty from or failure to reappoint
or reelect Mr. Dougherty to any of those offices or positions, except in
connection with the termination of Mr. Dougherty's employment for
disability, cause, as a result of Mr. Dougherty's death or by Mr.
Dougherty other than for good reason (each of those terms is defined in
his change of control agreement);
- a material reduction in the executive's base salary, other than any such
reduction which is part of, and generally consistent with, a general
reduction of officer salaries;
- the requirement by SDL that the executive be based at any place outside
(1) a 60-mile radius from San Jose, California, for Dr. Welch, Mr. Foster
and Ms. Bynum, and (2) a 30-mile radius from San Jose, California, for
Mr. Dougherty, except for reasonably required travel on SDL's business
which is not materially greater than such travel requirements prior to
the change of control;
- a material reduction by SDL in the kind or level of employee benefits,
other than salary, to which the executive is entitled at any time within
90 days preceding the date of a change of control or at any time
thereafter, other than any such reduction which is part of, and generally
consistent with, a general reduction applicable to officers of SDL;
- any material breach by SDL of any provision of the change of control
agreement or the employment agreement between SDL and the executive; and
- the failure of SDL to obtain an agreement from any successors and assigns
to assume and agree to perform the change of control agreement.
In the event of the executive's termination, the transition agreement sets
forth subsequent changes to his or her existing SDL stock options. If the
executive is terminated without cause or if he or she terminates for good
reason, each as defined in the change in control agreement and as modified by
the transition agreement, or in the event of the executive's death, disability
or retirement at or after the age 55, then all unvested stock options become
fully exercisable. If the executive is terminated for any reason or for no
reason, all vested stock options remain exercisable for their normal remaining
life.
STOCK OPTION GRANTS TO SDL EXECUTIVES AND OTHER EMPLOYEES. The merger
agreement permits SDL to issue additional options to its employees prior to the
closing of the merger to purchase up to that number of shares of SDL common
stock as was authorized for issuance under the SDL stock option plans in effect
on the date of the merger agreement. On October 31, 2000, the compensation
committee of the board of directors of SDL granted additional stock options to
some eligible SDL employees under the 1995 stock option plan. According to SDL's
ordinary past practice, these stock option grants would have been made in
January or April of 2001. In the aggregate, options to purchase a total of
2,093,891 were
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<PAGE> 82
awarded in October, which includes the following options to the five senior
officers described above: 200,000 to Dr. Scifres, 80,000 to Dr. Welch, 60,000 to
Mr. Foster, 135,000 to Mr. Dougherty and 20,000 to Ms. Bynum. The exercise price
for each of these options is $259.25, which represents the fair market value of
the underlying shares of SDL common stock on the date of grant. As with other
options granted under the 1995 stock option plan, these options will vest 25%
per year over four years. For a description of the effects of the merger on
SDL's outstanding stock options, see "-- The Merger Agreement -- Treatment of
SDL Stock Options."
COMPLETION AND EFFECTIVENESS OF THE MERGER
JDS Uniphase and SDL 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 SDL and approval of the issuance of JDS
Uniphase common stock in the merger by the stockholders of JDS Uniphase. The
merger will become effective on the filing of a certificate of merger with the
State of Delaware.
JDS Uniphase and SDL are working towards completing the merger as quickly
as possible.
STRUCTURE OF THE MERGER AND CONVERSION OF SDL COMMON STOCK
In accordance with the merger agreement and Delaware law, K2 Acquisition
will merge with and into SDL. As a result of the merger, the separate corporate
existence of K2 Acquisition will cease and SDL will survive the merger as a
wholly owned subsidiary of JDS Uniphase.
Upon completion of the merger, each outstanding share of SDL common stock,
other than shares held by JDS Uniphase and its subsidiaries, will be converted
into the right to receive 3.8 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,
reverse stock split, stock dividend, recapitalization, redenomination of share
capital or other similar transactions with respect to SDL 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 prices for a share of JDS Uniphase common stock
for the five trading days before the effective time of the merger.
EXCHANGE OF SDL STOCK CERTIFICATES FOR JDS UNIPHASE STOCK CERTIFICATES
When the merger is completed, JDS Uniphase's exchange agent will mail you a
letter of transmittal and instructions for surrendering your SDL stock
certificates in exchange for JDS Uniphase stock certificates. When you deliver
your SDL stock certificates to the exchange agent along with a properly executed
letter of transmittal and any other required documents, your SDL 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.
SDL STOCKHOLDERS SHOULD NOT SUBMIT SDL STOCK CERTIFICATES FOR EXCHANGE
UNLESS AND UNTIL SDL STOCKHOLDERS RECEIVE THE TRANSMITTAL INSTRUCTIONS AND A
FORM OF LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
SDL stockholders are not entitled to receive any dividends or other
distributions on JDS Uniphase common stock until the merger is completed and SDL
stockholders have surrendered SDL stock certificates in exchange for JDS
Uniphase stock certificates.
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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 SDL 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 SDL 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 SDL 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 Sullivan & Cromwell, the
following are the material United States federal income tax considerations of
the merger generally applicable to SDL stockholders, JDS Uniphase, SDL and K2
Acquisition, Inc. These opinions and the following discussion are based on and
subject to the Internal Revenue Code of 1986, as amended (the "Code"), the
regulations promulgated under the Code, existing administrative interpretations
and court decisions, all of which are subject to change, possibly with
retroactive effect. Any such change could affect the continuing validity of the
discussion. 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 United States persons;
- financial institutions;
- tax-exempt organizations;
- insurance companies;
- dealers in securities;
- traders in securities that elect to use a mark-to-market method of
accounting;
- stockholders who acquired their shares of SDL common stock pursuant to
the exercise of options or similar derivative securities, through a
tax-qualified retirement plan or otherwise as compensation; and
- stockholders who hold their shares of SDL 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 SDL common stock as capital
assets within the meaning of Section 1221 of the Code.
It is intended that the merger will be treated as a reorganization within
the meaning of Section 368(a) of the Code and that for federal income tax
purposes no gain or loss will be recognized by JDS Uniphase, SDL or K2
Acquisition, Inc. solely as a result of the merger. JDS Uniphase's and SDL's
obligations to complete the merger are conditioned on, among other things, JDS
Uniphase's receipt of an opinion from Morrison & Foerster LLP and SDL's receipt
of an opinion from Sullivan & Cromwell, in each case to the effect that the
merger will be treated for federal income tax purposes as a reorganization under
Section 368(a) of the Code and that each of JDS Uniphase, SDL and K2
Acquisition, Inc. will be a "party to a reorganization" within the meaning of
Section 368(b) of the Code, which opinions shall not have been withdrawn or
modified in any material respect as of the effective time of the merger. The
opinions of counsel will be based on then-existing law, will assume the absence
of changes in existing facts and will rely on customary assumptions and
representations contained in certificates executed by officers of JDS Uniphase
and SDL dated on or before the completion of the merger, which shall not have
been
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withdrawn or modified in any material respect as of the effective time of the
merger. The opinions neither bind the Internal Revenue Service (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 SDL intends to obtain a ruling from the
IRS with respect to the tax consequences of the merger.
In the opinion of Morrison & Foerster LLP and the opinion of Sullivan &
Cromwell, assuming that the merger is consummated in accordance with the terms
of the merger agreement and as described in this proxy statement-prospectus and
that the assumptions and representations described in the preceding paragraph
are true and complete as of the effective time of the merger, the merger will be
treated as a "reorganization" within the meaning of Section 368(a) of the Code
and JDS Uniphase, SDL and K2 Acquisition, Inc. will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code. The following
discussion assumes that the merger will be treated accordingly.
Tax Implications to SDL Stockholders. If you are a holder of SDL common
stock, your exchange of SDL common stock for JDS Uniphase common stock in the
merger will have the following tax consequences to you:
- Except as discussed below with respect to fractional shares, you will not
recognize gain or loss for United States federal income tax purposes when
you exchange your SDL 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
SDL common stock you surrender in exchange for the JDS Uniphase common
stock, reduced by any amount of such tax basis that is allocable to a
fractional share interest in SDL common stock for which you receive cash
instead of a fractional share 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 holding period of the SDL common
stock you exchange in the merger.
- If you receive cash in the merger instead of a fractional share interest
in JDS Uniphase common stock, you will be treated as having received the
cash in redemption of the fractional share interest. Assuming that,
immediately after the merger, you hold a minimal interest in JDS
Uniphase, you exercise no control over JDS Uniphase and, as a result of
the deemed redemption and after giving effect to certain constructive
ownership rules, you experience an actual reduction in your interest in
JDS Uniphase, you will recognize capital gain or loss on the deemed
redemption in an amount equal to the difference between the amount of
cash received and your adjusted tax basis allocable to such fractional
share. Otherwise, the cash payment may be taxable to you as a dividend.
Any capital gain or loss will be long-term capital gain or loss if you
have held your shares of SDL common stock for more than one year at the
time the merger is completed. Long-term capital gain of a non-corporate
U.S. shareholder is generally subject to a maximum tax rate of 20%.
Tax Implications to JDS Uniphase, SDL and K2 Acquisition, Inc. None of JDS
Uniphase, SDL or K2 Acquisition, Inc. will recognize gain or loss for United
States federal income tax purposes solely as a result of the merger.
THE FOREGOING DISCUSSION IS NOT INTENDED TO BE A COMPLETE ANALYSIS OR
DESCRIPTION OF ALL POTENTIAL UNITED STATES FEDERAL INCOME TAX 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.
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ACCOUNTING TREATMENT OF THE MERGER
JDS Uniphase intends to account for the merger with SDL as the accounting
acquirer in a purchase business combination for financial reporting and
accounting purposes, under generally accepted accounting principles. After the
merger, the results of operations of SDL 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 reportable transactions from
being completed until statutory waiting periods expire or are terminated. During
such waiting periods, the Antitrust Division of the Department of Justice or the
Federal Trade Commission may request the parties to provide, voluntarily or
otherwise, certain information relevant to their review. JDS Uniphase and SDL
have made the required filings with the Department of Justice and the Federal
Trade Commission and the applicable waiting periods have not yet expired. On
August 24, 2000, JDS Uniphase and SDL received requests for additional
information and other documentary material, commonly referred to as a second
request, from the Antitrust Division of the U.S. Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. This request extends the
waiting period for this transaction until 20 days after the parties' substantial
compliance with the request, unless the parties and the Department of Justice
agree on a different time period. JDS Uniphase and SDL intend to comply with all
requests for information from any government entity.
The merger is also subject to review under the Competition Act (Canada) and
the German Competition Act which require JDS Uniphase and SDL to make pre-merger
notification filings and to await the expiration or earlier termination of
statutory waiting periods prior to completing the merger. By letter dated
November 7, 2000, the German Federal Cartel Office informed JDS Uniphase and SDL
that the merger was not prohibited under German law, and therefore may be
completed. At the request of the United Kingdom Office of Fair Trading, or the
OFT, JDS Uniphase has supplied information in order to allow the OFT to decide
whether to refer the merger to the United Kingdom Competition Commission for a
formal investigation. The OFT has not yet decided that question. JDS Uniphase
and SDL have made or will make filings in other jurisdictions if filings in
those jurisdictions are required. These foreign agencies may also request the
parties to provide, voluntarily or otherwise, certain information relevant to
their review. JDS Uniphase and SDL intend to make the required filings with
these foreign agencies and intend to comply with all requests for such
additional information.
During or after the statutory waiting periods, and even after completion of
the merger, either the Antitrust Division of the Department of Justice or the
Federal Trade Commission and the OFT could challenge or seek to block the merger
under the antitrust laws, as it deems necessary or desirable in the public
interest. In Canada, the Commissioner of Competition appointed under the
Competition Act (Canada), may challenge the merger at any time prior to or
within three years of completion if the merger prevents or lessens, or is likely
to prevent or lessen, competition substantially. Other foreign competition
agencies with jurisdiction over the merger could also initiate action to
challenge or block the merger. In the UK, unless a merger reference is made, the
proposed merger may proceed. If the merger is closed and a merger reference to
the UK Competition Commission is later made, the UK Secretary of State may, upon
the advice of the UK Competition Commission as to whether the merger is in the
public interest, require the merger to be unwound or require divestments or
other remedies. If a merger reference is made before the merger is closed, it is
unlawful for JDS Uniphase or its group or associated companies to acquire an
interest in shares of SDL or its group or associated companies unless and until
the UK Secretary of State determines that the transaction is compatible with UK
competition law. In addition, in some jurisdictions a competitor, customer or
other third party could initiate a private action under the antitrust laws
challenging or seeking to enjoin the merger, before or after it is completed.
JDS Uniphase and SDL cannot be sure that a challenge to the merger will not be
made or that, if a challenge is made, JDS Uniphase and SDL will prevail.
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RESTRICTIONS ON SALES OF SHARES BY AFFILIATES OF SDL 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 SDL at the time of the SDL 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 SDL and may
include some of their officers and directors, as well as their principal
stockholders. Some affiliates of SDL will enter into affiliate agreements in
connection with the merger. See "Affiliate Agreements" on page 88. 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.
NO APPRAISAL RIGHTS
Under Delaware corporate law, holders of SDL common stock are not entitled
to appraisal rights in connection with the merger because, on the record date,
SDL 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.
Holders of JDS Uniphase common stock are also not entitled to appraisal rights
in connection with the merger.
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. SDL 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.
THE MERGER AGREEMENT
The following describes certain aspects of the proposed merger, including
material provisions of the merger agreement. The following description of the
merger agreement does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the merger agreement, which is
attached as Appendix A to this proxy statement-prospectus and is incorporated in
this proxy statement-prospectus by reference. All JDS Uniphase stockholders and
SDL stockholders are urged to read the merger agreement carefully and in its
entirety.
THE MERGER. At the closing of the merger, K2 Acquisition, Inc., a wholly
owned subsidiary of JDS Uniphase, will merge with and into SDL. As a result of
the merger, SDL will become a wholly owned subsidiary of JDS Uniphase. The
merger is expected to be accounted for on a purchase basis for accounting and
financial reporting purposes and is intended to qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
for federal income tax purposes.
CLOSING AND EFFECTIVE TIME OF THE MERGER. The merger agreement provides
that the closing will take place as soon as practicable but at least within
three business days after the satisfaction or waiver of the
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conditions to the merger contained in the merger agreement, other than those
conditions that by their nature are to be fulfilled at the closing, but subject
to the fulfillment or waiver of those conditions, unless some other time or date
is agreed to by JDS Uniphase and SDL. As soon as practicable on the closing
date, the parties will file a certificate of merger executed in accordance with
the relevant provisions of Delaware law.
CONVERSION OF SECURITIES. Each share of SDL common stock issued and
outstanding immediately before the effective time of the merger will
automatically convert into the right to receive 3.8 shares of JDS Uniphase
common stock. JDS Uniphase will not issue any fractional shares. Instead of
receiving a fractional share, SDL stockholders will receive with respect to any
fractional share cash in an amount equal to the fractional share interest
multiplied by the closing price on the Nasdaq National Market of the JDS
Uniphase common stock averaged over the five trading days prior to the closing.
REPRESENTATIONS AND WARRANTIES. JDS Uniphase and SDL 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 JDS Uniphase and SDL cover the following
topics, among others, as they relate to each party and its subsidiaries:
- corporate organization and its qualification to do business;
- certificate of incorporation and bylaws;
- capitalization;
- authorization of the merger agreement;
- that the transactions contemplated by the merger will not result in a
violation of SDL's and JDS Uniphase's organizational documents, laws or
contracts;
- consents and regulatory approvals necessary to complete the merger;
- permits and compliance with law;
- filings and reports with the SEC and financial statements;
- undisclosed liabilities;
- the absence of material changes, events or effects;
- litigation;
- employee benefit plans and employment agreements;
- material contracts;
- environmental matters and applicable laws;
- title to properties and absence of liens;
- intellectual property;
- taxes;
- board actions approving the merger agreement and recommendation of
approval by stockholders;
- insurance coverage;
- labor matters;
- the opinions of each company's financial advisor or advisors; and
- brokers.
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SDL also made a representation and warranty regarding the absence of
antitakeover statutes and conflicting shareholder rights plans. The
representations and warranties given by JDS Uniphase concerning K2 Acquisition
relate to K2 Acquisition's corporate organization, organizational documents,
capitalization, authorization and corporate status.
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."
SDL'S CONDUCT OF BUSINESS BEFORE COMPLETION OF THE MERGER. SDL 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, SDL and its
subsidiaries will operate their businesses in the ordinary course and use
commercially reasonable efforts to preserve substantially intact their business
organization and, to the extent reasonably determined desirable by SDL
management, keep available the services of its current officers and employees
and preserve its relationships with customers, suppliers, licensors, licensees
and others having significant business relations with SDL and its subsidiaries.
SDL 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, SDL and its subsidiaries would conduct their businesses in compliance
with specific restrictions relating to, among other things, the following:
- the modification of their organizational documents;
- the issuance, sale or other disposition of securities, except for the
issuance of shares of common stock upon exercise of outstanding stock
options, the granting of options up to the number authorized for issuance
under stock option plans on the date of the merger agreement and the
issuance of common stock and options to acquire common stock in
connection with a permitted acquisition as described below;
- the disposition or sale of any business unit or any material portion of
the assets of SDL or any of its subsidiaries;
- the disclosure of intellectual property in the absence of a
confidentiality agreement, except with respect to trademarks in the
ordinary course of business;
- the payment or authorization of dividends or other distributions;
- the modification of its capital stock structure through
reclassifications, splits, combinations or redemptions;
- the acquisition of other entities or interests in other entities or
assets other than acquisitions in the ordinary course and not connected
to the acquisition of all or substantially all of a business and other
than acquisitions involving consideration with a fair market value not in
excess of specified individual or aggregate limits;
- the incurrence of indebtedness or the making of loans except for certain
categories of indebtedness and loans, in each case in the ordinary course
of business;
- any modification in the vesting period or other rights of options granted
under SDL's stock option plans or any repricing or authorization of cash
payments in exchange for options;
- except in the ordinary course consistent with past practice, any increase
in the compensation payable to SDL's officers or employees, any grant of
severance or termination pay, any entering into employment or severance
agreements or any amendment of existing employment arrangements or
entering into new employment arrangements;
- any material changes in accounting principles and procedures;
- any agreement in writing to do any of the above things; and
- any actions which would make SDL's representations and warranties
materially untrue.
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The agreements related to the conduct of SDL'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 Businesses Pending
the Merger."
JDS UNIPHASE'S CONDUCT OF BUSINESS BEFORE COMPLETION OF THE MERGER. JDS
Uniphase agreed that until the earlier of the completion of the merger or the
termination of the merger agreement or unless SDL consents in writing, JDS
Uniphase and its subsidiaries would conduct their businesses in compliance with
specific restrictions relating to, among other things, the following:
- the issuance or authorization of dividends or other distributions;
- material changes in accounting principles and procedures;
- any actions inconsistent with appointing Dr. Donald Scifres as
Co-Chairman of the JDS Uniphase board of directors as of the closing of
the merger;
- the acquisition of other entities or interests in other entities or
assets other than acquisitions in the ordinary course and not connected
to the acquisition of all or substantially all of a business and other
than acquisitions involving consideration with a fair market value not in
excess of specified individual or aggregate limits;
- the issuance, sale or other disposition of securities, except for the
issuance of shares of common stock upon exercise of outstanding stock
options, the granting of options up to the number authorized for issuance
under stock option plans on the date of the merger agreement, the
issuance of common stock and options to acquire common stock in
connection with a permitted acquisition as described above and the
issuance of shares with net cash proceeds not in excess of $1 billion in
the aggregate;
- any agreement in writing to do any of the above things; and
- any actions which would make JDS Uniphase's representations and
warranties materially untrue.
The agreements related to the conduct of JDS Uniphase'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
Businesses Pending the Merger."
NO OTHER NEGOTIATIONS INVOLVING SDL. Until the merger is completed or the
merger agreement is terminated, SDL has agreed that neither it nor any of its
subsidiaries will, directly or indirectly, through any representatives or
otherwise:
- initiate, solicit, encourage or otherwise facilitate any inquiries or the
making of a proposal relating to any "competing transaction," as defined
below;
- enter into, maintain or continue any discussions or negotiations
regarding any competing transaction; or
- agree to or endorse a competing transaction.
However, SDL may furnish information regarding SDL to, or enter into and
engage in discussions with, any person or group in response to an unsolicited
bona fide proposal by the person or group relating to a competing transaction
if:
- SDL's board of directors determines in good faith, after consultation
with its outside legal counsel, that the action is required for SDL's
directors to comply with their fiduciary obligations under applicable
law; and
- SDL's board of directors determines in good faith, after consultation
with its financial advisors and outside legal counsel, that the proposal
relating to the competing transaction can reasonably be expected to
result in a "superior proposal," as defined below.
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Further, SDL may withdraw or modify or fail to make its recommendation of
the merger following the making of a superior proposal, and may recommend such a
superior proposal, if SDL's board of directors determines in good faith, after
consultation with its outside legal counsel, that such action is required for
SDL's directors to comply with their fiduciary obligations under applicable law.
In addition, SDL is permitted to comply with Rule 14e-2 of the Securities
Exchange Act of 1934 with regard to a competing transaction.
SDL has agreed to provide JDS Uniphase with at least 48 hours prior written
notice, or such lesser prior written notice as provided to the members of the
SDL's board of directors, but in no event less than eight hours, of any meeting
of the SDL's board of directors at which the SDL's board of directors is
reasonably expected to consider a superior proposal, and to provide JDS Uniphase
with at least two business days prior written notice, or such lesser prior
notice as provided to the members of the SDL's board of directors, but in no
event less than eight hours, of a meeting of the SDL's board of directors at
which the SDL's board of directors is reasonably expected to recommend a
superior proposal to its stockholders.
SDL has agreed to advise JDS Uniphase as promptly as reasonably practicable
of any of the following:
- any request for information that SDL reasonably believes would lead to a
competing transaction;
- any competing transaction;
- any inquiry received by SDL with respect to or which SDL reasonably
should believe would lead to any competing transaction;
- the material terms and conditions of such request, competing transaction
or inquiry; and
- the identity of the person or group making any such request, competing
transaction or inquiry.
SDL has further agreed to promptly update JDS Uniphase as to any material
changes with respect to any request, competing transaction or inquiry.
A "competing transaction" means:
- any of the following transactions involving SDL, which would result in a
third party or its shareholders or affiliates acquiring more than 15% of
the voting securities of SDL then outstanding or more than 15% of the
assets of SDL and its subsidiaries, taken as a whole:
- any merger, consolidation, share exchange, business combination,
issuance or purchase of securities or other similar transaction;
- any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of the assets of SDL in a single transaction or series of
related transactions; or
- any tender offer or exchange offer for SDL's securities or the filing of
a registration statement under the Securities Act in connection with any
such exchange offer.
- any solicitation in opposition to adoption by SDL's stockholders of the
merger agreement; or
- any public announcement of an agreement, proposal, plan or intention to
do any of the foregoing.
A "superior proposal" means any proposal made by a third party which would
result in that party or its stockholders acquiring, directly or indirectly, for
consideration which the board of directors of SDL determines in its reasonable
good faith judgment to be more favorable to SDL's stockholders than the merger:
- more than 50% of the voting power of the voting securities of SDL then
outstanding; or
- all or substantially all the assets of SDL and its subsidiaries, taken as
a whole.
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RECOMMENDATIONS OF THE BOARDS OF DIRECTORS. JDS Uniphase and SDL have each
agreed to include in this proxy statement-prospectus the recommendations of
their boards of directors to their respective stockholders concerning the
adoption of the merger agreement or approval of the issuance of stock pursuant
to the merger agreement, as the case may be. Notwithstanding this, the parties
have agreed that nothing in the merger agreement will prevent the board of
directors of SDL from withholding, withdrawing, amending or modifying the
recommendation, in the absence of a competing transaction as described on pages
82 and 83 above, if the board of directors of SDL determines in good faith,
after consultation with independent legal counsel, that such action is required
in order for the directors to comply with their fiduciary duties to SDL's
stockholders.
DIRECTORS OF JDS UNIPHASE FOLLOWING THE CLOSING. JDS Uniphase has agreed
that, effective as of the closing, JDS Uniphase will cause Dr. Donald Scifres to
be elected or appointed to the board of directors of JDS Uniphase as
co-chairman.
SDL'S EMPLOYEE BENEFIT PLANS. Individuals who are employed by SDL at the
time the merger is completed will continue to be employees of SDL as the
surviving corporation in the merger. JDS Uniphase has agreed to provide benefits
to employees of the surviving corporation of the merger that, in the aggregate,
are no less favorable to the benefits under the employee benefit plans of SDL in
effect immediately prior to the closing of merger, and to satisfy all severance
obligations arising in connection with the transactions contemplated by the
merger and the merger agreement pursuant to any SDL benefit plans.
TREATMENT OF SDL STOCK OPTIONS. JDS Uniphase will assume options granted
under SDL's 1992 and 1995 stock option plans, and SDL's stock options plans for
its subsidiary SDL Queensgate Ltd., in the merger. Upon completion of the
merger, each outstanding award will be assumed by JDS Uniphase, and will be
exercisable on the same terms and conditions as under SDL's stock option plans,
with adjustments described below. Each outstanding option to purchase SDL common
stock will be converted, in accordance with its terms, into an option to
purchase that whole number of shares of JDS Uniphase common stock, rounded to
whole shares, equal to 3.8 times the number of shares of SDL common stock
subject to the outstanding option. The exercise price will equal the exercise
price per share of SDL common stock subject to the option before conversion
divided by 3.8, rounded to the whole cent.
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 SDL
stock option and stock purchase plans and will use its reasonable efforts to
maintain the effectiveness of that registration statement for as long as any of
the options remain outstanding.
INDEMNIFICATION AND DIRECTORS AND OFFICERS INSURANCE. JDS Uniphase has
agreed that SDL's by-laws following the merger will continue to contain the
indemnification provisions contained in SDL's current by-laws. JDS Uniphase has
also agreed to indemnify SDL's current and former directors and officers to the
extent of the indemnification provisions included in SDL's current by-laws.
In addition, JDS Uniphase has agreed to maintain SDL's directors' and
officers' liability insurance for six years from the completion of the merger.
However, JDS Uniphase is not required to pay more than 200% of the current
premium paid by SDL for that insurance and if such insurance would exceed more
than 200% of the current premium paid by SDL, JDS Uniphase is required to
purchase the maximum coverage possible for such amount.
CONSENTS AND ANTITRUST FILINGS. Each of JDS Uniphase and SDL have agreed to
use its commercially reasonable efforts to:
- take all appropriate action and do all things necessary, proper or
advisable under applicable law or otherwise to complete the merger;
- obtain from governmental entities any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or
made in connection with the merger agreement and the merger; and
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- make all necessary filings and submissions required under applicable
federal or state securities laws, the Hart-Scott-Rodino Act and any other
antitrust regulations and any other applicable law.
In addition, JDS Uniphase and SDL have agreed to take or omit to take such
action as the other party reasonably requests to cause the parties to obtain any
material governmental approvals and/or the expiration of applicable waiting
periods, including holding separate and agreeing to sell or otherwise dispose of
assets, categories of assets or businesses of JDS Uniphase or its subsidiaries,
and to enter into agreements with the relevant governmental antitrust entity
giving effect to those dispositions. However, neither party is obligated to take
or to omit to take:
- any action that is to be effective prior to the closing of the merger; or
- that would or could reasonably be expected to have, in the good faith
opinion of the party affected, a material adverse effect on JDS Uniphase
and its subsidiaries (including SDL) taken as a whole after the closing
of the merger.
CONDITIONS TO COMPLETION OF THE MERGER
CONDITIONS TO COMPLETION OF THE MERGER. The obligations of JDS Uniphase and
SDL to complete the merger are subject to the satisfaction or waiver of each of
the following conditions before completion of the merger:
- the S-4 must have been declared effective, no stop order suspending its
effectiveness may be issued and no proceedings for suspension of its
effectiveness may be initiated by the SEC;
- the merger agreement must be adopted by the affirmative vote of the
holders of a majority of the outstanding shares of SDL common stock;
- the issuance of shares of JDS Uniphase common stock pursuant to the terms
of the merger agreement must be approved by a majority of the holders of
JDS Uniphase common stock casting votes (where the total vote cast
represents more than fifty percent in interest of all capital stock of
JDS Uniphase entitled to vote);
- no law, rule, regulation, judgment, decree, injunction executive order or
award may have been enacted or issued or be effective which has the
effect of making the merger illegal or otherwise prohibiting completion
of the merger;
- the waiting period, and any extension thereof, applicable to the
completion of the merger under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 or under any other foreign antitrust or
combination law and any material filing, consent, approval or
authorization legally required must have expired, been terminated or
obtained, as applicable; and
- the JDS Uniphase common shares to be issued in the merger must have been
authorized for quotation on NASDAQ.
SDL'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 as
of the date the merger is completed as if made at and as of such time
except that those representations and warranties that address matters
only as of a particular date must be true and correct as of that date,
and except to the extent that the failure of the representations and
warranties to be so true and correct could not reasonably be expected,
individually or in the aggregate, to have a material adverse effect on
JDS Uniphase and its subsidiaries;
- JDS Uniphase must have performed or complied 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; and
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- SDL must have received the opinion of its legal counsel that:
- the merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of section 368(a) of the
Internal Revenue Code; and
- that each of the parties will be a party to the reorganization within the
meaning of section 368(b) of the Internal Revenue Code.
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:
- SDL's representations and warranties must be true and correct as of the
date the merger is completed as if made at and as of such time except
that those representations and warranties that address matters only as of
a particular date must be true and correct as of that date, and except to
the extent that the failure of the representations and warranties to be
so true and correct could not reasonably be expected, individually or in
the aggregate, to have a material adverse effect on SDL and its
subsidiaries;
- SDL must have performed or complied in all material respects with all of
its agreements and covenants required by the merger agreement to be
performed or complied with by SDL at or before completion of the merger;
and
- JDS Uniphase must have received the opinion of its legal counsel that:
- the merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of section 368(a) of the
Internal Revenue Code; and
- that each of the parties will be a party to the reorganization within the
meaning of section 368(b) of the Internal Revenue Code.
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:
- by mutual written consent of JDS Uniphase and SDL;
- by JDS Uniphase or SDL, if the merger is not completed before January 31,
2001, unless the delay:
- is the result of the failure of any condition to closing to be satisfied
or waived prior to January 31, 2001, in which case SDL may extend that
date to March 31, 2001; or
- is caused by the party relying on this provision;
- by JDS Uniphase or SDL, if there is any order, decree or ruling of a
court or governmental authority which is final and nonappealable
preventing the consummation of the merger, except that this right to
terminate the merger agreement is not available to any party whose
failure to fulfill its obligations under the merger agreement was the
cause of such an order;
- by JDS Uniphase or SDL, if the merger agreement has failed to receive the
requisite vote for adoption at SDL's stockholders' meeting, provided that
this right to terminate is not available to SDL where the failure to
obtain the requisite vote was caused by or related to SDL's breach of the
merger agreement;
- by JDS Uniphase or SDL, if the approval of the issuance of JDS Uniphase
common shares pursuant to the terms of the merger has failed to receive
the requisite vote at the JDS Uniphase stockholders' meeting; provided
that this right to terminate the merger agreement is not available to JDS
Uniphase where the failure to obtain such requisite vote shall have been
caused by or related to JDS Uniphase's breach of the merger agreement; or
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- by JDS Uniphase or SDL, upon a material breach of any representation,
warranty, covenant or agreement on the part of the other party in the
merger agreement, or if any of the other party's representations or
warranties are or become untrue so that the corresponding condition to
completion of the merger would not be met, and the breach cannot be cured
or is not cured within 30 days.
Furthermore, JDS Uniphase may terminate the merger agreement if any of the
following shall have occurred:
- SDL's board of directors withholds, withdraws, modifies or changes its
recommendation in a manner adverse to JDS Uniphase or resolves to do so;
- SDL fails to include in this proxy statement-prospectus its
recommendation of the merger;
- SDL's board of directors fails to reaffirm its recommendation to its
stockholders within five business days after JDS Uniphase requests in
writing that such recommendation be reaffirmed;
- SDL breaches its obligations concerning competing transactions; or
- a tender offer or exchange offer for 15% or more of the outstanding
shares of stock of SDL has commenced, and the board of directors of SDL
has not recommended rejection of the tender offer or exchange offer by
its stockholders within ten business days of its commencement.
Furthermore, SDL may terminate the merger agreement if SDL is not in
material breach of its obligations under the merger agreement with respect to a
competing transaction, and the board of directors of SDL authorizes SDL to enter
into a binding written agreement concerning a transaction that constitutes a
superior proposal.
EXPENSES; PAYMENT OF TERMINATION FEE
EXPENSES. Except as described below, each party has agreed to pay all
expenses it incurs in connection with the merger, whether or not the transaction
is completed.
Notwithstanding the foregoing, SDL is required to pay JDS Uniphase $10
million, which the parties have agreed is a reasonable estimate of JDS
Uniphase's out-of-pocket expenses in connection with the merger transaction,
within one business day after termination of the merger agreement if JDS
Uniphase terminates the merger agreement because:
- SDL's board of directors withholds, withdraws, modifies or changes its
recommendation in a manner adverse to JDS Uniphase or shall have resolved
to do so;
- SDL fails to include in the proxy statement its recommendation of the
merger;
- SDL's board of directors fails to reaffirm its recommendation to its
stockholders in favor of the adoption of the merger agreement within five
business days after JDS Uniphase requests in writing that such
recommendation be reaffirmed;
- SDL breaches its obligations concerning competing transactions; or
- a tender offer or exchange offer for 15% or more of the outstanding
shares of stock of SDL has commenced, and the board of directors of SDL
has not recommended rejection of the tender offer or exchange offer by
its stockholders within ten business days of the commencement thereof.
SDL is also required to pay JDS Uniphase $10 million, which the parties
have agreed is a reasonable estimate of JDS Uniphase's out-of-pocket expenses in
connection with the merger transaction, in the event of termination of the
merger agreement by either party because the merger agreement has failed to
receive the requisite vote for adoption at SDL's stockholders' meeting; the $10
million is required to be paid within one business day after termination.
JDS Uniphase is required to pay SDL an amount equal $10 million, which the
parties have agreed is a reasonable estimate of SDL's out-of-pocket expenses in
connection with the merger transaction, within
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one business day after termination of the merger agreement by either party
because the issuance of JDS Uniphase common shares pursuant to the terms of the
merger agreement has failed to receive the requisite vote for approval at the
JDS Uniphase stockholders' meeting.
TERMINATION FEE. Upon the acquisition of SDL by an entity besides JDS
Uniphase and its subsidiaries, SDL is required to pay JDS Uniphase a termination
fee of $1 billion if:
- an acquisition proposal has been made to SDL or its stockholders or any
person has publicly announced an intention to make an acquisition
proposal with respect to SDL; and
- thereafter the merger agreement is terminated by JDS Uniphase based on
its right to terminate the merger agreement as described under the second
paragraph under "-- Termination of the Merger Agreement" above; and
- an acquiring party has acquired, directly or indirectly, within 12 months
of such termination, a majority of the voting power of the outstanding
securities of SDL or all or substantially all of the assets of SDL or
there has been consummated a merger, consolidation or similar business
combination between SDL and an acquiring person.
SDL is also required, upon the acquisition of SDL by an entity besides JDS
Uniphase and its subsidiaries, to pay JDS Uniphase a termination fee of $1
billion if:
- the merger agreement has been terminated by SDL in order to enter into a
binding written agreement concerning a transaction that constitutes a
superior proposal; and
- an acquiring party has acquired, directly or indirectly, within 12 months
of such termination, a majority of the voting power of the outstanding
securities of SDL or all or substantially all of the assets of SDL or
there has been consummated a merger, consolidation or similar business
combination between SDL and an acquiring person.
An "acquisition proposal" means an offer or proposal with respect to a
competing transaction. For a description of what constitutes a superior proposal
and a competing transaction, see the section entitled "-- No Other Negotiations
Involving SDL" above.
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
SDL and JDS Uniphase may amend the merger agreement at any time prior to
the closing of the merger. However, after the adoption of the merger agreement
by the SDL stockholders, SDL and JDS Uniphase may not amend the merger agreement
if the amendment would reduce the amount or change the type of consideration
into which the shares of SDL common stock are to be converted in the merger.
At any time prior to the closing of the merger, SDL or JDS Uniphase may
extend the time for performance of any obligation or other act of the other
party, waive any inaccuracy in the representations and warranties in the merger
agreement or waive compliance by the other party with any agreement or condition
contained in the merger agreement.
AFFILIATE AGREEMENTS
Some members of SDL's board of directors and officers of SDL will execute
affiliate agreements prior to closing. 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.
Further, these persons have also acknowledged the resale restrictions imposed by
Rule 145 under the Securities Act of 1933 on shares of JDS Uniphase common stock
to be received by them in the merger.
OPERATIONS AFTER THE MERGER
Following the merger, SDL 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 change as a result of the
merger. Donald R. Scifres, Ph.D., SDL's current chairman of the
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board of directors, president and chief executive officer, will join JDS
Uniphase's board of directors as Co-Chairman. The current directors of K2
Acquisition will be the directors of SDL after the completion of the merger. In
addition, some officers of JDS Uniphase may also serve as officers of SDL. The
executives of SDL will assume the roles and positions with JDS Uniphase
described under "Interests of Management and Directors of SDL in the Merger"
beginning on page 69. The stockholders of SDL 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
SDL Common Stock and JDS Uniphase Common Stock" below.
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COMPARISON OF RIGHTS OF HOLDERS OF SDL COMMON STOCK AND
JDS UNIPHASE COMMON STOCK
This section of the proxy statement-prospectus describes the material
differences between the rights of holders of SDL common stock and holders of JDS
Uniphase common stock. While JDS Uniphase and SDL 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 SDL and being a
stockholder of JDS Uniphase.
JDS Uniphase and SDL are each 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 SDL will become stockholders of JDS Uniphase and the
rights of stockholders of SDL will be governed by Delaware law, the JDS Uniphase
certificate of incorporation and the JDS Uniphase bylaws. The following
summarizes differences in the charter documents and other instruments of SDL and
JDS Uniphase that could materially affect the rights of stockholders of SDL
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 SDL consist of (1)
280,000,000 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, of which 271,628 shares
are denominated as Series A, and 300,000 shares are denominated as Series B and
the remainder of which is undesignated. At the close of business on November 16,
2000, there were 87,467,763 shares of SDL common stock outstanding and no shares
of preferred stock outstanding.
The SDL 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 total authorized shares of capital stock of JDS Uniphase consist of (1)
3,000,000,000 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, one of which is designated as special
voting stock and the remainder of which is undesignated. At the close of
business on November 16, 2000, there were 963,435,192 shares of JDS Uniphase
common stock outstanding (including 173,271,831 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, which share of special voting stock
grants the holders of exchangeable shares the right to vote on the same basis as
the holders of the common stock. In addition, on that date, there were
173,271,831 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 SDL board to issue preferred stock. The JDS Uniphase
board of directors, without stockholder approval, can issue JDS Uniphase
preferred stock with dividend, voting, conversion or other rights that could
adversely affect the voting power and other rights of the holders of JDS
Uniphase stock. JDS Uniphase preferred stock could thus be issued quickly with
terms calculated to delay or prevent a change in control of JDS Uniphase or make
removal of management more difficult. Additionally, issuing JDS Uniphase
preferred stock may cause the market price of JDS Uniphase common stock to
decrease.
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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. Contingent upon the effectiveness of the merger, JDS Uniphase will
amend its bylaws to fix the authorized number of directors at eleven.
SDL's bylaws fix the authorized number of directors at five. SDL's board of
directors or stockholders may change such number by amending the bylaws.
VOTING RIGHTS
Each holder of JDS Uniphase and SDL 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 certificate of incorporation does not provide for
cumulative voting. SDL's certificate of incorporation provides for cumulative
voting rights in all elections of directors for the holders of common stock and
holders of preferred stock entitled to vote. Cumulative voting permits SDL
stockholders to cast for any candidate for director a number of votes equal to
the number of directors to be elected. Under certain circumstances, cumulative
voting gives minority stockholders the ability to elect a director when they
would not otherwise be able to.
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 and SDL each has a classified board
under which one-third of its directors are elected each year for a term of three
years. Having a classified board of directors makes it more difficult for
stockholders to change management.
DIRECTOR VOTING
JDS Uniphase's bylaws and SDL'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 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.
JDS Uniphase's bylaws and SDL'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, subject in SDL's case, to
the Delaware law regarding removal of directors under a cumulative voting
system, described in the paragraph above.
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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 SDL'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 SDL'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 SDL in compliance with the time and
content requirements in JDS Uniphase's and SDL'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. SDL's bylaws provide that special meetings may be
called by the board of directors, its chairman, the president or upon written
request by stockholders holding in the aggregate 20% of the voting power.
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 JDS Uniphase's and SDL'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 SDL approved the merger prior to the
execution of the merger agreement, the business combination that will result
from the merger is not subject to Section 203.
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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 class in a way that affects
them adversely. JDS Uniphase's certificate can be amended, altered or repealed
or rescinded in any manner now or hereafter prescribed by Delaware law. SDL's
certificate can be amended, altered or repealed or rescinded in any manner now
or hereafter prescribed by Delaware law. 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. SDL's
bylaws may be altered, amended, repealed or rescinded by an affirmative vote of
a majority of the stockholders or a majority of the board of directors at a
meeting at which a quorum is present, or by the unanimous written consent of the
board of directors.
INDEMNIFICATION
JDS Uniphase's and SDL'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.
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.
SDL's bylaws authorize it to provide insurance for its directors, officers
or agents against any expense, liability or loss, whether or not SDL would have
the power to indemnify such a person against such expense, liability or loss
under Delaware law. The merger agreement provides that for a period of six years
JDS Uniphase will maintain in effect the directors' and officers' liability
policies maintained by SDL.
RESTRICTION ON SALES OF STOCK
JDS Uniphase and SDL 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 SDL'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.
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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.
RIGHTS PLANS
JDS Uniphase Rights Plan. Each outstanding share of JDS Uniphase common
stock includes one-eighth 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 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.
SDL Rights Plan. Each outstanding share of SDL common stock includes one
right. Each right entitles the registered holder, subject to the terms of the
rights agreement, to purchase from SDL one-hundredth of a share of Series B
Preferred Stock at a price of $55, subject to adjustment. The rights are
attached to all certificates representing outstanding shares of SDL common
stock, and no separate rights certificates have been distributed. The
description and terms of the rights are set forth in a rights agreement between
SDL and ChaseMellon Shareholder Services, L.L.C., as rights agent, dated as of
February 11, 1999, as amended from time to time. The rights plan has been
amended to provide that the rights will terminate upon completion of the merger.
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SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS,
MANAGEMENT AND DIRECTORS OF SDL
The following table sets forth information concerning the beneficial
ownership of common stock of SDL as of October 31, 2000 for the following:
- each person or entity who is known by SDL to own beneficially more than
five percent of the outstanding shares of SDL common stock;
- each of SDL's current directors;
- the chief executive officer and other four most highly compensated
officers of SDL (the "Named Executive Officers"); and
- all directors and executive officers of SDL 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 October 31, 2000 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.
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------
NUMBER OF
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
OWNED SHARES
------------ -----------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS(1):
Janus Capital Corp.(2)...................................... 6,346,770 7.3%
Putman Investments, Inc.(3)................................. 6,240,418 7.1%
FMR Corp.(4)................................................ 5,224,540 6.0%
NAMED EXECUTIVE OFFICERS AND DIRECTORS(1):
Donald R. Scifres, Ph.D.(5)................................. 2,994,157 3.4%
David F. Welch(6)........................................... 348,678 *
Gregory P. Dougherty(7)..................................... 21,896 *
Michael L. Foster(8)........................................ 57,035 *
Anthony B. Holbrook(9)...................................... 30,999 *
Keith B. Geeslin(10)........................................ 27,839 *
Mark B. Myers(11)........................................... 24,999 *
Frederic N. Schwettmann(12)................................. 12,999 *
All directors and executive officers as a group (8
persons)(13).............................................. 3,518,602 4.0%
</TABLE>
-------------------------
* Less than 1%
(1) Except as otherwise noted, the address of each person listed in the table
is c/o SDL, Inc. 80 Rose Orchard Way, San Jose, California 95134.
(2) Janus Capital Corp.'s address is 100 Fillmore Street, Suite 300, Denver,
Colorado 80206. Such information is based on a Schedule 13G filed by such
stockholder with the Securities and Exchange Commission and reflects stock
held as of December 31, 1999, including 6,346,770 shares as to which Janus
Capital Corp. has shared voting and investment power.
(3) Putman Investments, Inc.'s address is One Post Office Square, Boston,
Massachusetts. Such information is based on a Schedule 13G filed by such
stockholder with the Securities and Exchange Commission and reflects stock
held as of December 31, 1999, including 39,700 shares as to which
95
<PAGE> 103
Putman Investments, Inc. has shared voting power and 6,240,418 shares of
which Putman Investments, Inc. has shared investment power.
(4)FMR Corp, 82 Devonshire Street, Boston, Massachusetts 02109. Such
information is based on a Schedule 13G filed by such stockholder with the
Securities and Exchange Commission and reflects stock held as of September
30, 2000, including 435,290 shares as to which FMR Corp. has sole voting
power and 5,225,540 shares of which FMR Corp. has sole dispositive power.
(5)Includes (i) 1,974,178 shares held by The Donald R. and Carol D. Scifres
Revocable Living Trust, (ii) 46,600 shares held by the Scifres Family 1999
Charitable Unitrust UAD 12/22/99, (iii) 136,400 shares held by Dr. Scifres'
two dependent children and (iv) 601,424 options exercisable during the
sixty-day period following October 31, 2000.
(6)Includes 144,492 options exercisable during the sixty-day period following
October 31, 2000.
(7)Includes 20,000 options exercisable during the sixty-day period following
October 31, 2000.
(8)Includes 25,000 options exercisable during the sixty-day period following
October 31, 2000.
(9)Includes 30,999 options exercisable during the sixty-day period following
October 31, 2000.
(10)Includes 12,999 options exercisable during the sixty-day period following
October 31, 2000.
(11)Includes 24,999 options exercisable during the sixty-day period following
October 31, 2000.
(12)Includes 12,999 options exercisable during the sixty-day period following
October 31, 2000.
(13)Includes 872,912 options exercisable during the sixty-day period following
October 31, 2000.
96
<PAGE> 104
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS,
MANAGEMENT AND DIRECTORS OF JDS UNIPHASE
The following table sets forth information concerning the beneficial
ownership of common stock of JDS Uniphase as of October 16, 2000 for the
following:
- each person or entity who is known by JDS Uniphase to own beneficially
more than five percent of the outstanding shares of JDS Uniphase common
stock;
- each of JDS Uniphase's current directors;
- the chief executive officer and other four most highly compensated
officers of JDS Uniphase (the "Named Executive Officers"); and
- all directors and executive officers of JDS Uniphase 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 October 16, 2000 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.
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------
NUMBER OF
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
OWNED SHARES
------------ -----------
<S> <C> <C>
PRINCIPAL STOCKHOLDERS(1):
FEJ Holding Inc.(2)
c/o The Furukawa Electric Co., Ltd.
6-1 Marunouchi 2-Chome
Chiyoda-Ku, Tokyo 100-8322
Japan..................................................... 106,528,080 11.1%
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Kevin N. Kalkhoven(3)....................................... 5,193,864 *
115 Sheridan Way
Woodside, CA 94062
William J. Sinclair(4)...................................... 3,621,682 *
Jozef Straus, Ph.D.(5)...................................... 2,268,109 *
Anthony R. Muller(6)........................................ 1,476,265 *
M. Zita Cobb(7)............................................. 1,112,523 *
Dan E. Pettit(8)............................................ 960,693 *
Michael C. Phillips(9)...................................... 487,792 *
Bruce D. Day(10)............................................ 402,543 *
Casimir S. Skrzypczak(11)................................... 344,666 *
Robert E. Enos(12).......................................... 343,015 *
Martin A. Kaplan(13)........................................ 309,403 *
Wilson Sibbett, Ph.D.(14)................................... 236,666 *
Peter A. Guglielmi(15)...................................... 209,110 *
John A. MacNaughton(16)..................................... 136,111 *
Donald J. Listwin(17)....................................... 110,000 *
All directors and executive officers as a group (19
persons)(18).............................................. 20,119,631 2.1%
</TABLE>
97
<PAGE> 105
-------------------------
* Less than 1%
(1) Except as otherwise noted, the address of each person listed in the table
is c/o JDS Uniphase Corporation, 210 Baypointe Parkway, San Jose,
California 95131.
(2) Includes 106,407,080 shares issuable upon exchange of the exchangeable
shares of JDS Uniphase Canada Ltd.
(3)Mr. Kalkhoven resigned as Chief Executive Officer of JDS Uniphase on May 17,
2000. Includes 4,527,836 shares subject to stock options currently
exercisable or exercisable within 60 days of October 16, 2000.
(4)Includes 262,135 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000, 3,287,499 shares issuable
upon exchange of the exchangeable shares of JDS Uniphase Canada Ltd., and
122,048 shares issuable upon exchange of the exchangeable shares of JDS
Uniphase Canada Ltd. which are held by the Joyce Sinclair Spousal Trust.
(5)Includes 2,267,922 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000.
(6)Includes 758,004 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000.
(7)Includes 1,111,518 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000.
(8)Includes 805,739 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000 and 75,920 shares held by
Kelly A. Pettit, Mr. Pettit's spouse.
(9)Includes 480,000 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000.
(10)Includes 390,343 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000 and 12,200 shares issuable
upon exchange of the exchangeable shares of JDS Uniphase Canada Ltd.
(11)Includes 8,000 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000.
(12)Includes 330,815 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000 and 12,200 shares issuable
upon exchange of the exchangeable shares of JDS Uniphase Canada Ltd.
(13)Includes 309,403 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000.
(14)Includes 236,666 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000.
(15)Includes 193,110 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000.
(16)Includes 106,111 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000 and 16,272 shares issuable
upon exchange of the exchangeable shares of JDS Uniphase Canada Ltd.
(17)Includes 110,000 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000.
(18)Includes 14,924,740 shares subject to stock options currently exercisable or
exercisable within 60 days of October 16, 2000 and 3,450,219 shares issuable
upon exchange of the exchangeable shares of JDS Uniphase Canada Ltd.
98
<PAGE> 106
LEGAL MATTERS
The validity of the shares of JDS Uniphase common stock offered by this
proxy statement-prospectus will be passed upon for JDS Uniphase by Morrison &
Foerster LLP, San Francisco, California.
EXPERTS
The consolidated financial statements of JDS Uniphase Corporation
incorporated by reference in JDS Uniphase Corporation's Annual Report on Form
10-K for the year ended June 30, 2000 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon incorporated by
reference 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 consolidated financial statements of E-TEK Dynamics, Inc. as of June
30, 1998 and 1999, and for each of the three years in the period ended June 30,
1999, incorporated by reference herein have been incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on their
authority as experts in auditing and accounting.
The financial statements of Optical Coating Laboratory, Inc. (OCLI) and its
consolidated subsidiaries as of October 31, 1999 and 1998 and for each of the
three years in the period ended October 31, 1999, except for Flex Products,
Inc., a consolidated subsidiary for the year ended October 31, 1997, have been
audited by Deloitte & Touche LLP, independent auditors. The financial statements
of Flex Products, Inc., for the year ended November 2, 1997, have been audited
by KPMG LLP, as stated in their report. The financial statements of OCLI and its
consolidated subsidiaries as of October 31, 1999 and 1998 and for each of the
three years in the period ended October 31, 1999 is incorporated by reference
from JDS Uniphase's Current Report on Amendment No. 3 to Form 8-K/A dated May
31, 2000. Such consolidated financial statements are incorporated by reference
herein in reliance upon the reports of Deloitte & Touche LLP and KPMG LLP, given
upon their authority as experts in accounting and auditing.
The consolidated financial statements of SDL, Inc. included in SDL, Inc.'s
Annual Report (Form 10-K) for the year ended December 31, 1999, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. The report of
Ernst & Young LLP, independent auditors, as of December 31, 1998 and for the
years ended December 31, 1998 and 1997, was based in part on the report on IOC
of Arthur Andersen, chartered accountants. Such consolidated financial
statements are incorporated herein by reference in reliance upon such reports
given on the authority of such firms as experts in accounting and auditing.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING OF
SDL STOCKHOLDERS IF THE MERGER IS NOT COMPLETED
SDL will hold a 2001 annual meeting of SDL stockholders only if the merger
is not completed before the previously scheduled date of the annual meeting.
Requirements for Stockholder Proposals to be Brought Before the 2001 Annual
Meeting if the Merger is not Completed.
For stockholder proposals to be considered properly brought before the 2001
annual meeting by a stockholder, the stockholder must have given timely notice
therefor in writing to the Secretary of SDL. To be timely, a stockholder's
notice must be delivered to or mailed and received by the Secretary of SDL at
the principal executive offices of SDL, between January 26, 2001 and February
25, 2001. A stockholder's
99
<PAGE> 107
notice to the Secretary must set forth as to each matter the stockholder
proposes to bring before the 2001 annual meeting:
- a brief description of the business desired to be brought before the 2001
annual meeting and the reasons for conducting such business at the annual
meeting;
- the name and record address of the stockholder proposing such business;
- the class and number of shares of SDL which are beneficially owned by the
stockholder; and
- any material interest of the stockholder in such business.
Requirements for Stockholder Proposals to be Considered for Inclusion in SDL's
Proxy Materials for the 2001 Annual Meeting if the Merger is not Completed.
If the merger is not completed, SDL stockholders may present proper
proposals for consideration at the next annual meeting of SDL stockholders by
submitting their proposal in writing to the Secretary of SDL in a timely manner.
However, in order for such stockholder proposals to be eligible to be brought
before SDL's stockholders at the next annual meeting of SDL'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 SDL. Stockholder proposals submitted pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934 and intended to be presented at SDL's 2001
Annual Meeting of Stockholders must be received by SDL not later than December
12, 2000 in order to be considered for inclusion in the SDL's proxy materials
for that meeting. Stockholder nominations of directors are not stockholder
proposals within the meaning of Rule 14a-8 and are not eligible for inclusion in
SDL's proxy statement.
STOCKHOLDER PROPOSALS FOR THE
2000 AND 2001 ANNUAL MEETINGS OF JDS UNIPHASE STOCKHOLDERS
Requirements for Stockholder Proposals to be Brought Before the 2000 and 2001
Annual Meetings.
For stockholder proposals to be considered properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
therefor in writing to the Secretary of JDS Uniphase. The deadline for
submission of stockholder proposals for inclusion in JDS Uniphase's proxy
materials for the 2000 annual meeting of JDS Uniphase stockholders has passed.
To be timely for the 2001 annual meeting, a stockholder's notice must be
delivered to or mailed and received by the Secretary of JDS Uniphase at the
principal executive offices of JDS Uniphase not less than 30 days nor more than
60 days prior to the meeting; provided however that in the event less than 40
days notice or prior public disclosure of the date of the meeting is made or
given to the stockholders, notice by the stockholder to be on time must be
received not later than the close of business on the tenth day following the day
on which such notice of the meeting was mailed or such public disclosure was
made. A stockholder's notice to the Secretary must set forth as to each matter
the stockholder proposes to bring before the annual meeting:
- a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting;
- the name and record address of the stockholder proposing such business;
- the class and number of shares of JDS Uniphase which are beneficially
owned by the stockholder; and
- any material interest of the stockholder in such business.
100
<PAGE> 108
Requirements for Stockholder Proposals to be Considered for Inclusion in JDS
Uniphase's 2001 Proxy Materials.
Stockholder proposals submitted pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934 and intended to be presented at JDS Uniphase's 2001 annual
meeting of stockholders must be received by JDS Uniphase not later than July 15,
2001 in order to be considered for inclusion in JDS Uniphase's proxy materials
for that meeting. Stockholder nominations of directors are not stockholder
proposals within the meaning of Rule 14a-8 and are not eligible for inclusion in
JDS Uniphase'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 SDL AND ITS
SUBSIDIARIES WAS PROVIDED BY SDL AND THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT-PROSPECTUS WITH RESPECT TO JDS UNIPHASE AND ITS PREDECESSORS WAS
PROVIDED BY JDS UNIPHASE.
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 SDL 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 and SDL are also incorporating by reference any additional
documents that each 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
each of the special meetings of SDL and JDS Uniphase stockholders.
The following documents, which were filed by SDL with the SEC, are
incorporated by reference into this proxy statement-prospectus:
- SDL's Annual Report on Form 10-K for the fiscal year ended December 31,
1999;
- SDL's Quarterly Report on Form 10-Q for the quarter ended September 30,
2000;
- SDL's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000;
- SDL's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
- SDL's Current Report on Form 8-K/A filed on August 14, 2000;
- SDL's Current Report on Form 8-K filed on July 11, 2000;
- SDL's Current Report on Form 8-K/A filed on June 16, 2000;
- SDL's Current Report on Form 8-K filed on June 14, 2000;
- SDL's Current Report on Form 8-K/A filed on May 22, 2000;
- SDL's Current Report on Form 8-K filed on April 11, 2000;
- SDL's Current Report on Form 8-K filed on March 21, 2000; and
- the description of SDL common stock contained in SDL's Registration
Statement on Form 8-A filed on November 7, 1997, and any amendment or
report filed for the purpose of updating such description.
101
<PAGE> 109
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 for the fiscal year ended June
30, 2000;
- JDS Uniphase's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000;
- JDS Uniphase's Current Report on Form 8-K filed on September 1, 2000;
- JDS Uniphase's Current Report on Form 8-K filed on July 3, 2000;
- JDS Uniphase's Amendment No. 3 to the Current Report on Form 8-K/A filed
on May 31, 2000;
- JDS Uniphase's Current Report on Form 8-K filed on January 18, 2000; and
- the description of JDS Uniphase 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 SDL HAVE REFERRED YOU. NEITHER JDS UNIPHASE NOR SDL HAS
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
We each 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:
<TABLE>
<S> <C> <C>
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
Washington, D.C. 20549 Chicago, Illinois 60661 10048
</TABLE>
Reports, proxy statements and other information concerning SDL 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 SDL at http://www.sec.gov.
JDS Uniphase has filed a registration statement on Form S-4 under the
Securities Act of 1933 with the SEC with respect to JDS Uniphase common stock to
be issued to SDL 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 SDL's Investor
Relations at (408) 943-4343. You may also call JDS Uniphase's Investor Relations
at (408) 434-1800.
102
<PAGE> 110
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
JDS UNIPHASE CORPORATION,
K2 ACQUISITION, INC.
AND
SDL, INC.
DATED AS OF JULY 9, 2000
<PAGE> 111
AGREEMENT AND PLAN OF MERGER dated as of July 9, 2000 (this "Agreement")
among JDS UNIPHASE CORPORATION, a Delaware corporation ("Parent"), K2
ACQUISITION, INC., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and SDL, INC., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company deem it advisable and in the best interests of each corporation and its
respective stockholders to combine their respective businesses;
WHEREAS, in furtherance of such combination, the respective Boards of
Directors of Parent, Merger Sub and the Company have each adopted resolutions
approving this Agreement and declaring its advisability and approving the merger
(the "Merger") of Merger Sub with and into the Company in accordance with the
Delaware General Corporation Law, as amended (the "DGCL"), upon the terms and
subject to the conditions set forth herein; and
WHEREAS, for United States federal income tax purposes, the Merger is
intended to qualify as a reorganization under the provisions of section 368(a)
of the United States Internal Revenue Code of 1986, as amended (the "Code");
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. Upon the terms of this Agreement and subject to
the conditions set forth in Article VII, and in accordance with the DGCL, at the
Effective Time (as defined below), Merger Sub shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of Merger
Sub shall cease and the Company shall continue as the surviving corporation of
the Merger (the "Surviving Corporation").
SECTION 1.02 Closing; Effective Time. (a) The closing of the Merger (the
"Closing") shall take place (i) at 10:00 a.m. (Los Angeles time) at the offices
of Sullivan & Cromwell, 1888 Century Park East, Los Angeles, California as soon
as practicable, but in any event within three business days after the day on
which the last to be fulfilled or waived of the conditions set forth in Article
VII (other than those conditions that by their nature are to be fulfilled at the
Closing, but subject to the fulfillment or waiver of such conditions) shall be
fulfilled or waived in accordance with this Agreement or (ii) at such other
place and time or on such other date as Parent and the Company may agree in
writing (the "Closing Date").
(b) At the Closing, the Company and Merger Sub shall cause a certificate of
merger (the "Certificate of Merger") to be executed and filed with the Secretary
of State of the State of Delaware and make all other filings or recordings
required by applicable Law (as defined in Section 3.05(a)) in connection with
the Merger. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware or at
such later time as is specified in the Certificate of Merger in accordance with
the DGCL (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 Certificate of Merger 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 franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.04 Certificate of Incorporation; By-Laws. (a) At the Effective
Time, the Restated Certificate of Incorporation, as amended (the "Company
Certificate of Incorporation"), of the Company
A-1
<PAGE> 112
shall be amended to be identical to that of Merger Sub, as in effect immediately
prior to the Effective Time, except that Article I shall state that the name of
the Surviving Corporation is "SDL, Inc." The Company Certificate of
Incorporation, as so amended, shall be the Certificate of Incorporation of the
Surviving Corporation, until thereafter amended subject to Section 6.05(e), in
accordance with the terms thereof and of the DGCL.
(b) At the Effective Time, the By-Laws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation until thereafter amended, subject to Section 6.05(a), in accordance
with the terms thereof, and of the Certificate of Incorporation of the Surviving
Corporation and of the DGCL.
SECTION 1.05 Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be elected as the directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be elected as the officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01 Conversion of Securities. (a) At the Effective Time, by
virtue of the Merger and without any action on the part of Parent, Merger Sub,
the Company or the holders of any of the following securities:
(i) each share of common stock, par value $0.001 per share, of the
Company and all rights in respect thereof ("Company Common Stock"; shares
of Company Common Stock being referred to herein collectively as the
"Company Common Shares") issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock to be
canceled pursuant to Section 2.01(a)(ii)) shall be canceled and
automatically converted, subject to Section 2.02(e), into the right to
receive 3.8 (the "Exchange Ratio") shares of common stock, $0.001 par value
per share, of Parent ("Parent Common Stock"; shares of Parent Common Stock
being referred to herein collectively as the "Parent Common Shares")
(which, together with any cash in lieu of fractional shares of Company
Common Stock as specified in Section 2.02(e), shall be referred to herein
as the "Merger Consideration");
(ii) each Company Common Share owned by Parent or any direct or
indirect wholly owned subsidiary of Parent or held in treasury by the
Company or any Subsidiary of the Company immediately prior to the Effective
Time shall be canceled and extinguished without any conversion thereof and
no payment or distribution shall be made with respect thereto; and
(iii) each share of common stock, $0.001 par value per share, of
Merger Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of common stock, $0.001 par value per share, of the
Surviving Corporation.
(b) If at any time during the period between the date of this Agreement and
the Effective Time, the Company changes the number of Company Common Shares, or
Parent changes the number of Parent Common Shares, issued and outstanding as a
result of a stock split, reverse stock split, stock dividend, recapitalization,
redenomination of share capital or other similar transactions, the Exchange
Ratio and any other items dependent thereon shall be appropriately adjusted.
SECTION 2.02 Exchange of Certificates. (a) Exchange Agent. At or prior to
the Effective Time, Parent shall deposit, or shall cause to be deposited, with
Parent's transfer agent for Parent Common Stock or such other bank or trust
company that may be designated by Parent and is reasonably satisfactory to the
Company (the "Exchange Agent"), for the benefit of the holders of Company Common
Shares, for
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exchange in accordance with this Article II through the Exchange Agent,
certificates representing Parent Common Shares issuable pursuant to Section 2.01
and cash as required to make payments in lieu of any fractional shares pursuant
to Section 2.02(e) (such cash and certificates for Parent Common Shares,
together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the Parent Common Shares
contemplated to be issued pursuant to Section 2.01, out of the Exchange Fund.
Except as contemplated by Section 2.02(f) hereof, the Exchange Fund shall not be
used for any other purpose.
(b) Exchange Procedures. As promptly as practicable after the Effective
Time (but in any event within five business days after the Effective Time),
Parent shall cause the Exchange Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Company Common Shares (the "Certificates") (i) a letter
of transmittal (which shall be in customary form and 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 (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing Parent Common Shares and cash in lieu of any
fractional shares. Upon surrender to the Exchange Agent of a Certificate for
cancellation, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other documents
as may be reasonably required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole Parent Common Shares that such holder has the
right to receive in respect of the Company Common Shares formerly represented by
such Certificate (after taking into account all Company Common Shares then held
by such holder), cash in lieu of any fractional Parent Common Shares to which
such holder is entitled pursuant to Section 2.02(e) and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.02(c), and
the Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Shares that is not registered in the
transfer records of the Company, a certificate representing the proper number of
Parent Common Shares, cash in lieu of any fractional Parent Common Shares to
which such holder is entitled pursuant to Section 2.02(e) and any dividends or
other distributions to which such holder is entitled pursuant to Section
2.02(c), may be issued to a transferee if the Certificate representing such
Company Common Shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence
satisfactory to the Surviving Corporation that any applicable share transfer
taxes have been paid. Until surrendered as contemplated by this Section 2.02,
each Certificate shall be deemed at all times after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing Parent Common Shares, cash in lieu of any fractional Parent Common
Shares to which such holder is entitled pursuant to Section 2.02(e) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.02(c).
(c) Distributions with Respect to Unexchanged Parent Common Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to the 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 represented thereby, and no cash payment in lieu of any
fractional shares shall be paid to any such holder pursuant to Section 2.02(e),
until the holder of such Certificate shall surrender such Certificate as
provided in Section 2.02(b). Subject to the effect of escheat, tax or other
applicable Laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole Parent Common Shares
issued in exchange therefor, without interest, (i) promptly (but in any event
within five business days after such surrender), the amount of any cash payable
with respect to a fractional Parent Common Share to which such holder is
entitled pursuant to Section 2.02(e) and the amount of dividends or other
distributions with a record date after the Effective Time and theretofore
payable with respect to such whole Parent Common Shares, and (ii) at the
appropriate payment date, the amount of dividends or other distributions, with a
record date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole Parent Common
Shares.
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(d) No Further Rights in Company Common Stock. All Parent Common Shares
issued upon conversion of the Company Common Shares in accordance with the terms
hereof (including any cash paid pursuant to Section 2.02(c) or (e)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
Company Common Shares.
(e) No Fractional Shares. No certificates or scrip representing fractional
Parent Common Shares shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution with respect to Parent Common Shares
shall be payable on or with respect to any fractional share and such fractional
share interests will not entitle the owner thereof to any rights of a
stockholder of Parent; instead, Parent shall pay to the Exchange Agent an amount
in cash sufficient for the Exchange Agent to pay each holder of Company Common
Stock an amount in cash equal to the product obtained by multiplying (x) the
fractional share interest to which such holder would otherwise be entitled
(after taking into account all shares of Company Common Stock held at the
Effective Time by such holder) by (y) the average closing prices for a Parent
Common Share on the Nasdaq National Market ("NASDAQ") for the five trading days
immediately preceding the Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Company Common Shares for twelve months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of Company Common Shares who have not theretofore complied with this
Article II shall thereafter look only to Parent for the Parent Common Shares,
any cash in lieu of fractional Parent Common Shares to which they are entitled
pursuant to Section 2.02(e) and any dividends or other distributions with
respect to the Parent Common Shares to which they are entitled pursuant to
Section 2.02(c). Any portion of the Exchange Fund remaining unclaimed by holders
of Company Common Shares as of a date which is immediately prior to such time as
such amounts would otherwise escheat to or become property of any government
entity shall, to the extent permitted by applicable Law, become the property of
Parent free and clear of any claims or interest of any person previously
entitled thereto.
(g) No Liability. Neither Parent nor the Surviving Corporation shall be
liable to any holder of Company Common Shares for any such Company Common Shares
(or dividends or distributions with respect thereto) or cash delivered to a
public official pursuant to any abandoned property, escheat or similar Law.
(h) Withholding Rights. Each of the Surviving Corporation, Parent and the
Exchange Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Company Common
Shares such amounts as it 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 the Surviving
Corporation, Parent or the Exchange Agent, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the Company Common Shares in respect of which such deduction
and withholding was made by the Surviving Corporation, Parent or the Exchange
Agent, as the case may be.
(i) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond, in such reasonable
amount as the Surviving Corporation may direct, as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate, the
Parent Common Shares, any cash in lieu of fractional Parent Common Shares to
which the holders thereof are entitled pursuant to Section 2.02(e) and any
dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.02(c).
SECTION 2.03 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Company Common Shares thereafter on the records of
the Company. From and after the Effective Time, the holders of Certificates
representing Company Common Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Company
Common Shares, except as otherwise
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provided in this Agreement or by Law. On or after the Effective Time, any
Certificates presented to the Exchange Agent or Parent for any reason shall be
converted into Parent Common Shares pursuant to the terms set forth in this
Article II, any cash in lieu of fractional Parent Common Shares to which the
holders thereof are entitled pursuant to Section 2.02(e) and any dividends or
other distributions to which the holders thereof are entitled pursuant to
Section 2.02(c).
SECTION 2.04 Company Stock Options. (a) All options (the "Company Stock
Options") outstanding, whether or not exercisable and whether or not vested, at
the Effective Time under the Company's 1992 Stock Option Plan or the Company's
1995 Stock Option Plan or under the prior plans of the Company's subsidiary SDL
Queensgate Ltd. (collectively, the "Company Stock Option Plans"), shall remain
outstanding following the Effective Time. At the Effective Time, the Company
Stock Options shall, by virtue of the Merger and without any further action on
the part of the Company or the holder thereof, be assumed by Parent in such
manner that Parent (i) is a corporation "assuming a stock option in a
transaction to which section 424(a) applies" within the meaning of section 424
of the Code and the regulations thereunder or (ii) to the extent that section
424 of the Code does not apply to any such Company Stock Options, would be such
a corporation were section 424 of the Code applicable to such Company Stock
Options. From and after the Effective Time, all references to the Company in the
Company Stock Option Plans and the applicable stock option agreements issued
thereunder shall be deemed to refer to Parent, which shall have assumed the
Company Stock Option Plans as of the Effective Time by virtue of this Agreement
and without any further action. Each Company Stock Option assumed by Parent
(each, a "Substitute Option") shall be exercisable upon the same terms and
conditions as under the Company Stock Option Plans, the applicable option
agreement issued thereunder and any applicable agreement it is subject to,
except that (A) each such Substitute Option shall be exercisable for, and
represent the right to acquire, that whole number of Parent Common Shares
(rounded to the nearest whole share or, in the case of Company Stock Options
intended to qualify as incentive stock options under Section 422 of the Code
("ISOs"), rounding down to the nearest whole share) equal to the number of
Company Common Shares subject to such Company Stock Option multiplied by the
Exchange Ratio; and (B) the option price per Parent Common Share shall be an
amount equal to the option price per Company Common Shares subject to such
Company Stock Option in effect immediately prior to the Effective Time divided
by the Exchange Ratio (the option price per share, as so determined, being
rounded to the nearest full cent or, in the case of ISOs, rounded up to the
nearest full cent). Such Substitute Option shall otherwise be subject to the
same terms and conditions as such Company Stock Option as in effect as of the
Effective Time pursuant to the applicable Company Stock Option Plan.
(b) As soon as practicable after the Effective Time, Parent shall deliver
to each holder of an outstanding Company Stock Option an appropriate notice
setting forth such holder's rights pursuant thereto, and such Company Stock
Option shall continue in effect on the same terms and conditions (including any
antidilution provisions, and subject to the adjustments required by this Section
2.04 after giving effect to the Merger). Parent shall comply with the terms of
all such Company Stock Options and ensure, to the extent required by, and
subject to the provisions of, the Company Stock Option Plans, that Company Stock
Options which qualified as ISOs prior to the Effective Time continue to qualify
as ISOs after the Effective Time. Parent shall take all corporate action
necessary to reserve for issuance a sufficient number of Parent Common Shares
for delivery upon exercise of Substitute Options pursuant to the terms set forth
in this Section 2.04. As soon as practicable (but in any event, within five
business days) after the Effective Time, the Parent Common Shares subject to
Company Stock Options will be covered by an effective registration statement on
Form S-8 (or any successor form) or another appropriate form, and Parent shall
use its reasonable efforts to maintain the effectiveness of such registration
statement or registration statements for as long as Substitute Options remain
outstanding. In addition, Parent shall use all reasonable efforts to cause the
Parent Common Shares subject to Company Stock Options to be authorized for
quotation on NASDAQ and such exchanges as Parent shall determine.
(c) Prior to the Effective Time, the Board of Directors of Parent and the
Company, or an appropriate committee of non-employee directors thereof, shall
adopt a resolution consistent with the interpretative guidance of the Securities
and Exchange Commission so that the acquisition of Substitute Options
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pursuant to this Agreement shall be an exempt transaction for purposes of
Section 16 of the Securities Exchange Act of 1934 by any officer or director of
the Company who may become a covered person of Parent for purposes of Section
16.
SECTION 2.05 Restricted Stock. At the Effective Time, any unvested shares
of restricted stock, whether granted pursuant to the Company Stock Option Plans
or otherwise, shall be converted into restricted stock of Parent pursuant to
Section 2.01, and shall continue to be subject to the same restrictions and
terms and conditions as under the Company Stock Option Plans and the applicable
agreements issued thereunder and the Company Severance Plan or Severance
Agreement between any holder of restricted stock and the Company. The Company
will take whatever action is necessary to be taken by the Company to effect the
foregoing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that:
SECTION 3.01 Organization and Qualification; Subsidiaries. (a) Each of the
Company and each significant subsidiary (as such term is defined in Rule 1-02(w)
of Regulation S-X promulgated by the United States Securities and Exchange
Commission ("SEC") under the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the "Exchange
Act")) of the Company (collectively, the "Company Significant Subsidiaries") is
a corporation or other legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation
and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing, in good standing or to have such
power, authority or governmental approvals has not had, and could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
(as defined below). Each of the Company and the Company Significant Subsidiaries
is duly qualified or licensed as a foreign corporation or organization to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that have not had, and could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
(b) Except as updated by Section 3.01(b) of the disclosure schedule
delivered by the Company to the Parent concurrently with the execution of the
Agreement (the "Company Disclosure Schedule"), Exhibit 21.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999 ("Company
10-K"), is a list of all the subsidiaries of the Company that as of the date of
this Agreement are Significant Subsidiaries.
SECTION 3.02 Company Certificate of Incorporation and By-Laws. The Company
has heretofore made available to Parent a complete and correct copy of the
Company Certificate of Incorporation and the Amended and Restated By-Laws of the
Company (the "Company By-Laws"). The Company Certificate of Incorporation and
the Company By-Laws are in full force and effect. The Company is not in
violation of any of the provisions of the Company Certificate of Incorporation
or the Company By-Laws.
SECTION 3.03 Capitalization. The authorized capital stock of the Company
consists of (a) 281,000,000 shares of Company Common Stock and (b) 1,000,000
shares of preferred stock, $0.001 par value, of the Company (the "Company
Preferred Stock"). As of June 30, 2000, (a) 86,356,814 shares of Company Common
Stock and (b) no shares of Company Preferred Stock were issued and outstanding.
All of the issued and outstanding Company Common Shares are validly issued,
fully paid and nonassessable. No Company Common Shares, and no shares of Company
Preferred Stock, are held in the treasury of the Company or by any subsidiary of
the Company (collectively, the "Company Subsidiaries") and 13,708,412 shares of
Company Common Stock have been duly reserved for future issuance pursuant to the
Company Stock Option Plans. There are no issued or outstanding bonds,
debentures, notes,
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convertible notes or other indebtedness of the Company having the right to vote
on any matters on which stockholders of the Company may vote. Except for the
Company Stock Options granted pursuant to the Company Stock Option Plans and
except for the rights issued pursuant to the First Amended and Restated Rights
Agreement dated February 11, 1999 between the Company and ChaseMellon
Shareholder Services, L.L.C. (the "Company Rights Agreement"), there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued stock of the Company or any
Company Subsidiary, or conditionally or absolutely obligating the Company or any
Company Subsidiary, to issue or sell any shares of stock of, or other equity
interests in, the Company or any Company Subsidiary. Section 3.03 of the Company
Disclosure Schedule sets forth, except as set forth in such Section 3.03 of the
Company Disclosure Schedule, the total number of outstanding Company Stock
Options, the weighted average exercise price thereof, the relevant vesting times
and exercise periods as of June 30, 2000. 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, will be duly
authorized, validly issued, fully paid and nonassessable. There are no
outstanding obligations (whether conditional or absolute) of the Company or any
Company Subsidiary to repurchase, redeem or otherwise acquire any shares or
other equity interests of Company Common Stock or any shares or other equity
interests of any Company Subsidiary. Each outstanding share of stock or other
equity interest of each Company Significant Subsidiary is duly authorized,
validly issued, fully paid and nonassessable and each such share or other equity
interest owned by the Company or another Company Subsidiary is free and clear of
all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on the Company's or such other Company
Subsidiary's voting rights, charges and other encumbrances of any nature
whatsoever, except where failure to own such shares free and clear has not had,
and could not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.
SECTION 3.04 Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
and, subject to obtaining the approval of the Company's stockholders described
in the next sentence, to perform its obligations hereunder and to consummate the
Merger and the other transactions contemplated by this Agreement. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the Merger and the other transactions contemplated by this Agreement
have 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 Merger and the other transactions
contemplated by this Agreement (other than, with respect to the Merger, the
adoption of this Agreement by the affirmative vote of a majority of the voting
power of the then outstanding Company Common Shares entitled to vote on the
matter (the "Company Stockholders' Vote"), and the filing of the Certificate of
Merger with the Secretary of State of Delaware as required by the DGCL). 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,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
SECTION 3.05 No Conflict; Required Filings and Consents. The execution,
delivery and performance of this Agreement by the Company will not (i) conflict
with or violate the Company Certificate of Incorporation or the Company By-Laws
or any equivalent organizational documents of any Company Subsidiary, (ii)
assuming that all consents, approvals, authorizations and other actions
described in Section 3.05(b) have been obtained and all filings and obligations
described in Section 3.05(b) have been made, conflict with or violate any
federal, national, state, provincial, municipal or local law, statute,
ordinance, rule, regulation, order, injunction, judgment or decree, whether of
the U.S., or another jurisdiction ("Law"), applicable to the Company or any
Company Subsidiary or by which any property or asset of the Company or any
Company Subsidiary is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in
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the creation of a lien or other encumbrance on any property or asset of the
Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except, with respect to clauses (ii) and (iii) for any
such conflicts, violations, breaches, defaults or other occurrences that have
not had, and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, or otherwise prevent or materially delay
the consummation of the transactions contemplated by this Agreement.
(b) The execution, delivery and performance of this Agreement by the
Company will not require any consent, approval, authorization or permit of, or
filing with or notification to, any federal, national, state, provincial,
municipal or local government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing, importing
or any other governmental or quasi-governmental authority, whether of the U.S.,
or another jurisdiction (a "Governmental Entity"), except (i) for the applicable
requirements of (A) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and comparable filings, if any, in foreign
jurisdictions, (B) state securities or "blue sky" laws (the "Blue Sky Laws"),
the Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act") or the Exchange Act, (C) the DGCL
with respect to the filing of the Delaware Certificate of Merger, and (D) the
rules and regulations of NASDAQ (the foregoing clauses (i)(A) through (D) being
referred to collectively as the "Required Applicable Regulations") and (ii)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications has not had, and could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect, or otherwise prevent or materially delay the consummation of the
transactions contemplated by this Agreement.
SECTION 3.06 Permits; Compliance. (a) To the knowledge of the Company,
each of the Company and the Company Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any Governmental
Entity necessary for the Company or any Company Subsidiary to own, lease and
operate its properties or to carry on its business as it is now being conducted
(the "Company Permits"), except where the failure to have, or the suspension or
cancellation of, any of the Company Permits has not had, and could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, and, to the knowledge of the Company, no suspension or
cancellation of any of the Company Permits is pending or threatened, except
where the failure to have, or the suspension or cancellation of, any of the
Company Permits could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(b) To the knowledge of the Company, neither the Company nor any Company
Subsidiary is in conflict with, or in default or violation of, (i) any Law
applicable to the Company or any Company Subsidiary or by which any property or
asset of the Company or any Company Subsidiary is bound or affected, (ii) any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary or any
property or asset of the Company or any Company Subsidiary is bound or affected
or (iii) any Company Permits, except in each case for any such conflicts,
defaults or violations that have not had, and could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.07 SEC Filings; Financial Statements. (a) The Company has filed
all forms, reports and documents required to be filed by it with the SEC since
December 31, 1997 (collectively, including all exhibits thereto and any
registration statement filed since such date, the "Company SEC Reports"). As of
the respective dates they were filed, (i) the Company SEC Reports complied in
all material respects with the requirements of the Securities Act, or the
Exchange Act, as the case may be, and (ii) none of the Company SEC Reports
contained, nor will any forms, reports and documents filed after the date of
this Agreement and prior to the Effective Time 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 made therein, in the light of the
circumstances under which they were made, not misleading. No Company Subsidiary
is required to file any form, report or other document with the SEC.
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(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Company SEC Reports and in any form, report
or document filed after the date of this Agreement and prior to the Effective
Time was, or will be, as the case may be, prepared in accordance with the United
States generally accepted accounting principles ("U.S. GAAP") applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto or, in the case of unaudited statements, as permitted by Form
10-Q under the Exchange Act) and each presented or will present fairly, in all
material respects, the consolidated financial position, results of operations
and cash flows of the Company and the consolidated Company Subsidiaries as at
the respective dates thereof and for the respective periods indicated therein,
except as otherwise noted therein (subject, in the case of unaudited statements,
to normal and recurring year-end adjustments which were not and are not
expected, individually or in the aggregate, to have a Material Adverse Effect).
The balance sheet of the Company contained in the Company SEC Reports as of
December 31, 1999 is hereinafter referred to as the "Company Balance Sheet".
SECTION 3.08 Undisclosed Liabilities. Except for those liabilities that
are fully reflected or reserved against on the Company Balance Sheet (or in the
notes thereto) or as set forth in Section 3.08 of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary has outstanding any
liability of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether due or to become due), except for (a) liabilities and
obligations under contracts and agreements (other than those liabilities and
obligations under contracts and agreements required to be reflected or reserved
against on the Company Balance Sheet), (b) liabilities and obligations not
required to be reflected or reserved against on the Company Balance Sheet under
U.S. GAAP, consistently applied, and (c) liabilities and obligations which have
been incurred since the date of the Company Balance Sheet in the ordinary course
of business, in each of case (b) and (c) which have not had, and could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 3.09 Absence of Certain Changes or Events. From the date of the
Company Balance Sheet, except as set forth in Section 3.09 of the Company
Disclosure Schedule, (a) each of the Company and the Company Subsidiaries has
conducted its business only in the ordinary course and (b) since such date,
there has not been any circumstance, event, occurrence, change or effect that
has had, and could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 3.10 Absence of Litigation. Except as specifically disclosed in
the Company SEC Reports filed prior to the date of this Agreement, there is no
litigation, suit, claim, action or proceeding (an "Action") pending or, to the
knowledge of the Company, threatened against the Company or any Company
Subsidiary, or any property or asset of the Company or any Company Subsidiary,
before any court, arbitrator or Governmental Entity, domestic or foreign, except
for such Actions which have not had, and could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.11 Employee Benefit Matters. (a) Plans and Material
Documents. Section 3.11(a) of the Company Disclosure Schedule lists, with
respect to employees in the United States of the Company and, to the knowledge
of the Company, the Company Subsidiaries, all employee benefit plans (as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) and all bonus, stock option, stock purchase, restricted
stock, long term incentive, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance or other benefit plans, programs
or arrangements, and all employment, change in control, and severance
agreements, to which the Company or any Company Subsidiary is a party, with
respect to which the Company or any Company Subsidiary has any obligation or
which are maintained, contributed to or sponsored by the Company or any Company
Subsidiary for the benefit of any current or former employee, officer or
director of the Company or any Company Subsidiary, (collectively, the "Company
Benefit Plans"), other than plans, programs, arrangements or agreements that are
not material. Copies or summaries of each material Company Benefit Plan have
been made available to Parent. Except as set forth in Section 3.11(a) of the
Company Disclosure Schedule, neither the Company nor any Company Subsidiary has
any written commitment to create, adopt or amend any material employee benefit
plan, program, arrangement or agreement, other than any immaterial modification
or any modification or change required by applicable Law.
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(b) Absence of Certain Types of Plans. None of the Company Benefit Plans is
a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of
ERISA) (a "Multiemployer Plan") or a single employer pension plan (within the
meaning of Section 4001(a)(15) of ERISA) for which the Company or any Company
Subsidiary could incur liability under Section 4063 or 4064 of ERISA (a
"Multiple Employer Plan").
(c) Compliance. Each Company Benefit Plan is now in all respects in
compliance with its terms and with the requirements of all applicable laws and
regulations, including, without limitation, ERISA and the Code, except where any
non-compliance would not reasonably be likely, individually or in the aggregate,
to have a Material Adverse Effect. To the knowledge of the Company, no action,
claim or proceeding is pending or threatened with respect to any Company Benefit
Plan, other than claims for benefits in the ordinary course and other than such
actions, claims or proceedings that could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(d) Qualification of Certain Plans. Each Company Benefit Plan that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service (the "IRS")
that the Company Benefit Plan is so qualified and, to the knowledge of the
Company, no fact or event has occurred since the date of such determination
letter or letters from the IRS to adversely affect the qualified status of any
such Company Benefit Plan or the exempt status of any such trust.
(e) Absence of Certain Liabilities. Neither the Company nor any Company
Subsidiary has incurred any material liability to the Pension Benefit Guaranty
Corporation (the "PBGC") under Title IV of ERISA (other than liability for
premiums to the PBGC arising in the ordinary course), and, to the knowledge of
the Company, no fact or event exists that could reasonably be expected to result
in any material liability to the PBGC under Title IV of ERISA.
(f) Plan Contributions and Funding. All contributions, premiums or payments
required to be made with respect to any Company Benefit Plan have been made on
or before their due dates, and all contributions to the Company Benefit Plans
intended to be qualified pursuant to Section 401(a) of the Code have been or
will be fully deductible, except where failure to do so would not have a
Material Adverse Effect.
(g) Severance Payments and Accelerated Vesting. Except as disclosed in
Section 3.11(g) of the Company Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement will not, either alone or in
combination with another event, (i) entitle any current or former employee,
officer or director of the Company or any Company Subsidiary to severance in an
amount material to the Company and its Subsidiaries, taken as a whole, or any
other material payment from the Company or any Company Subsidiary, except as
expressly provided in this Agreement, (ii) materially increase the amount of
base compensation due any such employee, officer or director or (iii) accelerate
benefits under any Company Stock Option Plan or accelerate vesting of unvested
shares of restricted stock, whether granted pursuant to the Company Stock Option
Plans or otherwise.
(h) Non-U.S. Benefit Plans. To the knowledge of the Company, with respect
to material employee benefit plans mandated by a government other than the
United States or subject to laws other than United States law (collectively, the
"Non-U.S. Benefit Plans") and except as set forth in Section 3.11(h) of the
Company Disclosure Schedule and except as would not, individually or in the
aggregate, have a Material Adverse Effect: (i) each Non-U.S. Benefit Plan and
the manner in which it has been administered satisfies all applicable Laws and
regulations; (ii) each Non-U.S. Benefit Plan required to be registered has been
registered; (iii) as of the date of this Agreement, all contributions to each
Non-U.S. Benefit Plan required have been made by the Company or a Company
Subsidiary or, if applicable, accrued in accordance with country-specific
accounting practices; and (iv) each Non-U.S. Benefit Plan that is funded is
either fully funded or fully insured, based upon generally accepted local
accounting and actuarial practice and procedure, to an extent sufficient to
provide for the accrued benefit obligations, as of the date hereof, of all
employees and former employees participating in such Non-U.S. Benefit Plans.
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SECTION 3.12 Material Contracts. (a) Subsections (i) through (iv) of
Section 3.12(a) of the Company Disclosure Schedule contain a list of the
following types of contracts, agreements and arrangements (including all
amendments thereto) to which the Company or a Company Subsidiary is a party,
other than those contracts, agreements and arrangements listed as exhibits in
the Company's Form 10-K for the fiscal year ended December 31, 1999 (such
contracts, agreements and arrangements as are required to be set forth in
Section 3.12(a) of the Company Disclosure Schedule, together with all Company
Benefit Plans and all contracts, agreements and arrangements listed or required
to be listed as exhibits in the Company's Form 10-K for the fiscal year ended
December 31, 1999, being the "Company Material Contracts"):
(i) each contract and agreement which (A) is likely to involve
consideration of more than $25,000,000 in the aggregate, during the fiscal
years ending December 31, 2000 or December 31, 2001 or (B) is likely to
involve consideration of more than $25,000,000 in the aggregate, over the
remaining term of such contract, and which, in either case, cannot be
canceled by the Company or any Company Subsidiary without penalty or
further payment and without more than 60 days' notice;
(ii) all joint venture or joint development agreements which involve
consideration of more than $5,000,000 or which are otherwise material to
the Company and the Company Subsidiaries, taken as a whole;
(iii) all employment agreements which involve salary and bonus
(excluding the value of any stock options) in excess of $250,000 annually;
(iv) all contracts with consultants which involve consideration of
more than $5,000,000;
(v) all contracts and agreements evidencing indebtedness of more than
$5,000,000 to unaffiliated third parties; and
(vi) all contracts and agreements that limit the ability of the
Company or any Company Subsidiary to compete in any line of business or
with any person or entity or in any geographic area or during any period of
time, in each case, (A) with respect to any business currently conducted by
the Company or any Company Subsidiary and (B) other than distributor
agreements entered into in the ordinary course of business.
(b) Each Company Material Contract is a legal, valid and binding agreement
in full force and effect in accordance with its terms and neither the Company
nor any Company Subsidiary is in default in any material respect, or has
received notice that is in default in any material respect, under any Company
Material Contract and no other party is in default in any material respect under
any Company Material Contract, except where the failure of any such Company
Material Contract to be legal, valid and binding or in full force and effect and
for such defaults as have not had and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 3.13 Environmental Matters. Except as set forth in Section 3.13 of
the Company Disclosure Schedule or as to the extent that it has not had, and
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect: (a) the Company and the Company Subsidiaries are not in
violation of any Environmental Law applicable to them; (b) none of the
properties currently or formerly owned, leased or operated by the Company and
the Company Subsidiaries (including, without limitation, soils and surfaces and
ground waters) are contaminated with any Hazardous Substance; (c) the Company
and the Company Subsidiaries are not liable for any off-site contamination by
Hazardous Substances; (d) the Company and the Company Subsidiaries are not
liable for any violation under any Environmental Law (including, without
limitation, pending or threatened liens); (e) the Company and the Company
Subsidiaries have all material permits, licenses and other authorizations
required under any Environmental Law ("Environmental Permits"); and (f) neither
the execution of this Agreement nor the consummation of the transactions
contemplated herein will require any investigation, remediation or other action
with respect to Hazardous Substances, or any notice to or consent of
Governmental Entities or third parties, pursuant to any applicable Environmental
Law or Environmental Permit. During the two years preceding the date of this
Agreement, none of the Company or the Company
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Subsidiaries has received notice of a violation of any Environmental Law
(whether with respect to properties presently or previously owned or used)
except as to the extent that it has not had, and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.14 Title to Properties; Absence of Liens and Encumbrances. Each
of the Company and the Company Significant Subsidiaries has good and valid title
to, or, in the case of leased properties and assets, valid leasehold interests
in, all of its material tangible properties and assets, real, personal and
mixed, used or held for use in its business, free and clear of any liens,
pledges, charges, claims, security interests or other encumbrances of any sort
("Liens") except (i) as reflected in the financial statements contained in the
Company SEC Reports and (ii) for such Liens, if any, which have not had, and
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
SECTION 3.15 Intellectual Property. Except as set forth in Section 3.15 of
the Company Disclosure Schedule, the Company and the Company Significant
Subsidiaries own, or possess adequate, valid, binding licenses or other valid
and binding rights to use, all Intellectual Property used or held for use in the
business of the Company and the Company Significant Subsidiaries and necessary
for the conduct of the business of the Company and the Company Significant
Subsidiaries in all material respects as currently conducted.
(b) Neither the Company nor any of the Company Subsidiaries has received
any written notice that, and to the knowledge of the Company no claim has been
made or asserted that, any process currently used or product currently sold,
imported or offered for sale by the Company and the Company Subsidiaries
infringes on or otherwise violates the Intellectual Property rights of any
person, and such uses, sales, importations and offers to sell are and have been
in accordance with all applicable licenses, in each case, other than as to the
extent that it has not had, and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(c) To the knowledge of the Company, no Intellectual Property material to
the business of the Company and the Company Subsidiaries owned or licensed by
the Company or the Company Subsidiaries is being used or enforced in a manner
that would result in the abandonment, cancellation or unenforceability of such
Intellectual Property.
(d)(i) There has been no misappropriation or infringement of any trade
secrets, know-how or other Intellectual Property of the Company or any Company
Subsidiary by any person, (ii) no employee, independent contractor or agent of
the Company or any Company Subsidiary has misappropriated any material trade
secrets of any other person in the course of such performance as an employee,
independent contractor or agent and (iii) no employee, independent contractor or
agent of Company or any Company Subsidiary is in material default or breach of
any term of any employment agreement, non-disclosure agreement, assignment of
invention agreement or similar agreement or contract relating in any way to the
protection, ownership, development, use or transfer of Intellectual Property, in
each case, other than as to the extent that it has not had, and could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 3.16 Taxes. (a) Except as set forth in Section 3.16 of the Company
Disclosure Schedule, (i) the Company and each of the Company Subsidiaries have
timely filed or will timely file all material U.S. federal, state, local and
Non-U.S. returns and reports required to be filed by any of them with any taxing
authority with respect to Taxes for any period ending on or before the Effective
Time, taking into account any extension of time to file granted to or obtained
on behalf of the Company and the Company Subsidiaries and all such returns and
reports are accurate and complete in all material respects, (ii) all Taxes that
are shown as due on the Company's Tax returns prior to the Effective Time have
been paid or will be paid or have been shown as accrued liabilities on the
financial statements of the Company in accordance with U.S. GAAP, (iii) no
outstanding or pending deficiency for any material amount of Tax has been
proposed, asserted or assessed by a taxing authority against the Company or any
of the Company Subsidiaries, (iv) the Company and each of the Company
Subsidiaries have provided adequate reserves in their financial statements in
accordance with U.S. GAAP for any Taxes that have not been paid, whether or not
shown as being due on any Tax returns and (v) neither the Company nor any of the
Company
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Subsidiaries has a material amount of income reportable for a taxable period
ending after the Effective Time that is attributable to an activity or a
transaction occurring in or a change in accounting method made for a period
ending on or prior to the Effective Time, including, without limitation, any
adjustment pursuant to Section 481 of the Code.
(b) Except as set forth in Section 3.16 of the Company Disclosure Schedule,
there are not outstanding agreements or waivers extending the statutory period
of limitation for assessment or collection of Tax applicable to any material Tax
returns required to be filed with respect to the Company or any Company
Subsidiary. The Company has made available to Parent correct and complete copies
of all material federal and state income and franchise Tax returns of the
Company and the Company Subsidiaries for 1997 and thereafter and IRS Revenue
Agent Reports and similar state reports issued for such returns, and statements
of material Tax deficiencies assessed against or agreed to by the Company and
any Company Subsidiary since January 1, 1997. The U.S. federal consolidated
income Tax return for the Company Subsidiaries has been examined by the IRS for
all taxable years through the year ended December 31, 1994.
(c) Except as set forth in Section 3.16 of the Company Disclosure Schedule,
neither the Company nor any of the Company Subsidiaries is a party to or is
bound by any tax sharing agreement, tax allocation agreement, tax indemnity
obligation or similar written or unwritten agreement, understanding or practice
with respect to Taxes (including any advance pricing agreement, closing
agreement or other agreement relating to Taxes with any taxing authority),
except for customary arrangements relating to property taxes and sales taxes in
leases and other agreements entered into in the ordinary course of business.
(d) Except as set forth in Section 3.16 of the Company Disclosure Schedule,
(i) neither the Company nor any of the Company Subsidiaries has ever been a
member of an affiliated group filing a consolidated federal income Tax return,
other than the group of which it currently is a member, and (ii) neither the
Company nor any of the Company Subsidiaries is liable for the taxes of any other
person as a successor or transferee, or pursuant to any provision of federal,
state, local or Non-U.S. law.
(e) Except as set forth in Section 3.16 of the Company Disclosure Schedule,
neither the Company nor any of the Company Subsidiaries is a party to any
contract, agreement, plan or arrangement covering any employee or former
employee of the Company or any of the Company Subsidiaries that, individually or
collectively, could reasonably be expected to give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G or 162(m) of the
Code. Except as set forth in Section 3.16 of the Company Disclosure Schedule,
there is no contract, agreement, plan or arrangement to which Company or any of
the Company Subsidiaries is a party or by which it is bound to compensate any
individual for excise taxes paid pursuant to Section 4999 of the Code.
(f) As used in this Agreement, "Taxes" shall mean any and all taxes, fees,
levies, duties, tariffs, imports and other charges of any kind (together with
any and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
stock, payroll, employment, social security, workers' compensation, unemployment
compensation or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added or gains taxes; license,
registration and documentation fees; and customers' duties, tariffs and similar
charges.
SECTION 3.17 Board Approval; Vote Required. (a) On or prior to the date of
this Agreement, the Board of Directors of the Company, by resolutions duly
adopted by unanimous vote of those voting at a meeting duly called and held and
not subsequently rescinded or modified in any way, has duly (i) determined that
this Agreement and the Merger are fair to and in the best interests of the
Company and its stockholders, (ii) approved this Agreement and the Merger, and
determined that the execution, delivery and performance of the Merger Agreement
is advisable and (iii) recommended that the stockholders of the Company adopt
this Agreement (the "Company Recommendation") and directed that this Agreement
and the transactions contemplated hereby be submitted for consideration by the
Company's stockholders at the Company Stockholders' Meeting, as defined in
Section 6.01(a).
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(b) The only vote of the holders of any class or series of stock of the
Company necessary to approve the Merger, this Agreement and the other
transactions contemplated by this Agreement is the Company Stockholders' Vote.
SECTION 3.18 Insurance. The Company and the Company Significant
Subsidiaries maintain insurance coverage with reputable insurers in such amounts
and covering such risks as are in accordance with normal industry practice for
companies engaged in businesses similar to that of the Company and the Company
Significant Subsidiaries.
SECTION 3.19 State Takeover Statutes; Stockholder Rights Plan. No "fair
price", "moratorium", "control share acquisition" or other similar anti-takeover
statute or regulation is applicable, by reason of the Company's being a party to
the Merger, this Agreement or the transactions contemplated hereby. Except for
the Company Rights Agreement, neither the Company nor any of the Company
Subsidiaries is a party to any "stockholder rights" plan or any similar
anti-takeover plan or device.
(a) Prior to the time this Agreement was executed, the Board of Directors
of the Company has taken all action necessary, if any, to exempt under or make
not subject to Section 203 of the DGCL and to ensure no stockholder of the
Company will have any rights under the Company Rights Agreement as a result of,
(i) the execution of this Agreement, (ii) the Merger and (iii) the other
transactions contemplated hereby.
SECTION 3.20 Labor Matters. The Company and each Company Subsidiary is in
compliance with all applicable laws and regulations governing labor and
employment, except where the failure to be in such compliance would not
reasonably be likely, individually or in the aggregate, to have a Material
Adverse Effect. Except as set forth in Section 3.20 of the Company Disclosure
Schedule, neither the Company nor any of the Company Subsidiaries is a party to
or bound by any collective bargaining agreement, and there are no labor unions
representing any employees of the Company or any of the Company Subsidiaries.
Except as set forth in Section 3.20 of the Company Disclosure Schedule, there
are no labor disputes currently subject to any grievance procedure, arbitration
or litigation with respect to any employee of the Company or any Company
Subsidiary, except for such disputes that have not had, and could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.
SECTION 3.21 Opinion of Financial Advisor. The Company has received the
written opinion of Thomas Weisel Partners LLC ("Thomas Weisel") dated the date
of this Agreement to the effect that, as of the date of this Agreement, the
Exchange Ratio is fair to the Company's stockholders from a financial point of
view, a copy of which opinion will be delivered to Parent promptly after the
date of this Agreement.
SECTION 3.22 Brokers. No broker, finder or investment banker (other than
Thomas Weisel) is entitled to any brokerage, finder's or other fee or commission
in connection with the Merger or the other transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. The
Company has heretofore made available to Parent a complete and correct copy of
all agreements between the Company and Thomas Weisel pursuant to which such firm
would be entitled to any payment relating to the Merger or any other
transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant to
the Company that:
SECTION 4.01 Organization and Qualification; Subsidiaries. (a) Each of
Parent and each significant subsidiary (as such term is defined in Rule 1-02(w)
of Regulation S-X promulgated by the SEC under the Exchange Act) of Parent
(collectively, the "Parent Significant Subsidiaries") is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation and has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted, except where the failure to be so
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organized, existing, in good standing or to have such power, authority or
governmental approvals has not had, and could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. Each of the
Parent and the Parent Significant Subsidiaries is duly qualified or licensed as
a foreign corporation or organization to do business, and is in good standing,
in each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that have not had, and could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
(b) Except as updated by Section 4.01(b) of the disclosure schedule
delivered by the Parent to the Company concurrently with the execution of the
Agreement (the "Parent Disclosure Schedule", Exhibit 21.1 to the Parent's Annual
Report on Form 10-K for the fiscal year ended June 30, 1999, is a list of all
the subsidiaries of the Parent that as of the date of this Agreement are
Significant Subsidiaries.
SECTION 4.02 Certificate of Incorporation and By-Laws. Parent has
heretofore made available to the Company a complete and correct copy of the
Certificate of Incorporation and By-Laws, each as amended to date, of Parent and
the Certificate of Incorporation and By-Laws of Merger Sub, each as amended to
date. Such respective organizational documents are in full force and effect and
neither Parent nor Merger Sub is in violation of any of the provisions of its
respective organizational documents.
SECTION 4.03 Capitalization. The authorized capital stock of Parent
consists of (i) 3,000,000,000 Parent Common Shares and (ii) 1,000,000 preferred
shares of Parent, $0.001 value per share, issuable in series (the "Parent
Preferred Stock"). As of June 30, 2000, (i) 1,053,811,083 Parent Common Shares
(including exchangeable shares ("Exchangeable Shares") of Parent's subsidiary,
JDS Uniphase Canada Ltd) and (ii) 100,000 shares of Parent Series A Preferred
Stock and one share of Parent Series B Preferred Stock were issued and
outstanding. All of the issued and outstanding shares of Parent Common Stock and
Exchangeable Shares and all of the issued and outstanding shares of Parent
Preferred Stock are validly issued, fully paid and nonassessable. 116,505,582
shares of Parent Common Stock (including Exchangeable Shares) and no shares of
Parent Preferred Stock are held in the treasury of Parent or by any subsidiary
of Parent (collectively, the "Parent Subsidiaries") and 4,799,869 Parent Common
Shares have been duly reserved for future issuance pursuant to Parent's 1993
Flexible Stock Incentive Plan. There are no issued or outstanding bonds,
debentures, notes, convertible notes or other indebtedness of Parent having the
right to vote on any matters on which stockholders of Parent may vote. Except as
set forth on Section 4.03 of the Parent Disclosure Schedule, and except for (i)
the 140,172,550 options (the "Parent Stock Options") granted pursuant to
Parent's stock option plans, (ii) shares issuable pursuant to this Agreement and
(iii) the shares of Parent Common Stock reserved for issuance upon conversion of
the outstanding shares of Parent Preferred Stock, there are no options, warrants
or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued stock of Parent or any Parent Subsidiary, or
conditionally or absolutely obligating Parent or any Parent Subsidiary to issue
or sell any shares of stock of, or other equity interests in, Parent or any
Parent Subsidiary. All Parent Common Shares subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable. There are no outstanding obligations (whether conditional or
absolute) of Parent or any Parent Subsidiary to repurchase, redeem or otherwise
acquire any shares or other equity interest of Parent or any shares or other
equity interests of any Parent Subsidiary. Each outstanding share of stock or
other equity interest of each Parent Subsidiary is duly authorized, validly
issued, fully paid and nonassessable, and each such share or other equity
interest owned by Parent or another Parent Subsidiary is free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on Parent's or such other Parent Subsidiary's voting
rights, charges and other encumbrances of any nature whatsoever, except where
failure to own such shares free and clear has not had, and could not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect.
(b) The authorized stock of Merger Sub consists of 1,000 shares of common
stock, no par value, all of which are duly authorized, validly issued, fully
paid and nonassessable and free of any preemptive rights in respect thereof, and
all of which are owned by Parent. The Parent Common Shares to be issued
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pursuant to the Merger in accordance with Section 2.01 (i) will be duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive or similar rights created by statute, the Certificate of
Incorporation or By-Laws of Parent or any agreement to which the Parent is a
party or is bound and (ii) will, when issued, be registered under the Securities
Act and the Exchange Act and registered or exempt from registration under
applicable Blue Sky Laws.
SECTION 4.04 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 the approval of Parent's
stockholders described in the next sentence, and to perform its obligations
hereunder and to consummate the Merger and the other transactions contemplated
by this Agreement. The execution and delivery of this Agreement by each of
Parent and Merger Sub and the consummation by each of Parent and Merger Sub of
the Merger and the other transactions contemplated by this Agreement have been
duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate the Merger and the other transactions
contemplated by this Agreement (other than, with respect to the Merger, the
approval of the issuance of Parent Common Stock pursuant to the terms of the
Merger by the affirmative vote of a majority of the holders casting votes
(provided that the total vote cast represents more than fifty percent in
interest of all capital stock of Parent entitled to vote) (the "Parent
Stockholders' Vote") and the filing of the Certificate of Merger with the
Secretary of State of Delaware as required by the DGCL). This Agreement has been
duly and validly executed and delivered by each of Parent and Merger Sub and,
assuming the due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of each of Parent and Merger
Sub, enforceable against each of Parent and Merger Sub in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
SECTION 4.05 No Conflict; Required Filings and Consents. (a) The
execution, delivery and performance of this Agreement by each of Parent and
Merger Sub will not (i) conflict with or violate the Certificate of
Incorporation or By-Laws of Parent, the Certificate of Incorporation or By-Laws
of Merger Sub or any equivalent organizational documents of any Parent
Significant Subsidiary, (ii) assuming that all consents, approvals,
authorizations and other actions described in Section 4.05(b) have been obtained
and all filings and obligations described in Section 4.05(b) have been made,
conflict with or violate any Law applicable to Parent or any Parent Subsidiary
or by which any property or asset of Parent or any Parent Subsidiary is bound or
affected or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property or
asset of Parent or any Parent Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except, with respect to clauses (ii) and (iii) for any
such conflicts, violations, breaches, defaults or other occurrences that have
not had, and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, or otherwise prevent or materially delay
the consummation of the transactions contemplated by this Agreement.
(b) The execution, delivery and performance of this Agreement by each of
Parent and Merger Sub will not require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity, except
(i) for the Required Applicable Regulations and (ii) where the failure to obtain
such consents, approvals, authorizations or permits, or to make such filings or
notifications has not had, and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, or otherwise
prevent or materially delay the consummation of the transactions contemplated by
this Agreement.
SECTION 4.06 Permits; Compliance. (a) To the knowledge of Parent, each of
Parent and the Parent Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for
Parent or any Parent Subsidiary to own, lease and operate its properties or to
carry on its business as it is
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now being conducted (the "Parent Permits"), except where the failure to have, or
the suspension or cancellation of, any of the Parent Permits has not had, and
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, and, to the knowledge of Parent, no suspension or
cancellation of any of the Parent Permits is pending or threatened, except where
the failure to have, or the suspension or cancellation of, any of the Parent
Permits could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(b) To the knowledge of Parent, neither Parent nor any Parent Subsidiary is
in conflict with, or in default or violation of, (i) any Law applicable to
Parent or any Parent Subsidiary or by which any property or asset of Parent or
any Parent Subsidiary is bound or affected, (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or any Parent Subsidiary is a party or
by which Parent or any Parent Subsidiary or any property or asset of Parent or
any Parent Subsidiary is bound or affected or (iii) any Parent Permits, except
in each case for any such conflicts, defaults or violations that have not had,
and could not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.
SECTION 4.07 SEC Filings; Financial Statements. (a) Parent has filed all
forms, reports and documents required to be filed by it with the SEC since June
30, 1997 (collectively, including all exhibits thereto and any registration
statement filed since such date, the "Parent SEC Reports"). As of the respective
dates they were filed, (i) the Parent SEC Reports complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and (ii) none of the Parent SEC Reports contained, nor will any
forms, reports and documents filed after the date of this Agreement and prior to
the Effective Time 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 made therein, in the light of the circumstances under which
they were made, not misleading. No Parent Subsidiary is required to file any
form, report or other document with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Parent SEC Reports and in any form, report
or document filed after the date of this Agreement and prior to the Effective
Time was, or will be, as the case may be, prepared in accordance with U.S. GAAP
applied on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q under the Exchange Act) and each presented or will
present fairly, in all material respects, the consolidated financial position,
results of operations and cash flows of Parent and the consolidated Parent
Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments which were
not and are not expected, individually or in the aggregate, to have a Material
Adverse Effect). The balance sheet of Parent contained in the Parent SEC Reports
as of June 30, 1999 is hereinafter referred to as the "Parent Balance Sheet".
SECTION 4.08 Undisclosed Liabilities. Except for those liabilities that
are fully reflected or reserved against on the Parent Balance Sheet (or in the
notes thereto) or as set forth in Section 4.08 of the Parent Disclosure
Schedule, neither Parent nor any Parent Subsidiary has outstanding any liability
of any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due), except for (a) liabilities and obligations under
contracts and agreements (other than those liabilities and obligations under
contracts and agreements required to be reflected or reserved against on the
Parent Balance Sheet), (b) liabilities and obligations not required to be
reflected or reserved against on the Parent Balance Sheet under U.S. GAAP,
consistently applied, and (c) liabilities and obligations which have been
incurred since the date of the Parent Balance Sheet in the ordinary course of
business, in each of case (b) and (c) which have not had, and could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 4.09 Absence of Certain Changes or Events. From the date of the
Parent Balance Sheet, except as set forth in Section 4.09 of the Parent
Disclosure Schedule, (a) each of Parent and the Parent Subsidiaries has
conducted its business only in the ordinary course and, (b) since such date,
there has not
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been any circumstance, event, occurrence, change or effect that has had, and
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
SECTION 4.10 Absence of Litigation. Except as specifically disclosed in
the Parent SEC Reports filed prior to the date of this Agreement, there is no
Action pending or, to the knowledge of Parent, threatened against Parent or any
Parent Subsidiary, or any property or asset of Parent or any Parent Subsidiary,
before any court, arbitrator or Governmental Entity, domestic or foreign, except
for such Actions which have not had, and could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
SECTION 4.11 Employee Benefit Matters. (a) Plans and Material Documents.
Section 4.11(a) of the Parent Disclosure Schedule lists, with respect to
employees in the United States of Parent and, to the knowledge of Parent, Parent
Subsidiaries, all employee benefit plans (as defined in Section 3(3) of ERISA)
and all bonus, stock option, stock purchase, restricted stock, long term
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, change in control, and severance agreements,
to which Parent or any Parent Subsidiary is a party, with respect to which
Parent or any Parent Subsidiary has any obligation or which are maintained,
contributed to or sponsored by Parent or any Parent Subsidiary for the benefit
of any current or former employee, officer or director of Parent or any Parent
Subsidiary (collectively, the "Parent Benefit Plans"), other than plans,
programs, arrangements or agreements that are not material. Copies or summaries
of each material Parent Benefit Plan have been made available to the Company.
Except as set forth in Section 4.11(a) of the Parent Disclosure Schedule,
neither Parent nor any Parent Subsidiary has any written commitment to create,
adopt or amend any material employee benefit plan, program, arrangement or
agreement, other than any immaterial modification or any modification or change
required by applicable Law.
(b) Absence of Certain Types of Plans. None of the Parent Benefit Plans is
a Multiemployer Plan or a Multiple Employer Plan.
(c) Compliance. Each Parent Benefit Plan is now in all respects in
compliance with its terms and with the requirements of all applicable laws and
regulations, including, without limitation, ERISA and the Code, except where any
non-compliance would not reasonably be likely, individually or in the aggregate,
to have a Material Adverse Effect. To the knowledge of Parent, no action, claim
or proceeding is pending or threatened with respect to any Parent Benefit Plan,
other than claims for benefits in the ordinary course and other than such
actions, claims or proceedings that could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(d) Qualification of Certain Plans. Each Parent Benefit Plan that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS that the Parent Benefit Plan is so
qualified and, to the knowledge of Parent, no fact or event has occurred since
the date of such determination letter or letters from the IRS to adversely
affect the qualified status of any such Parent Benefit Plan or the exempt status
of any such trust.
(e) Absence of Certain Liabilities. Neither Parent nor any Parent
Subsidiary has incurred any material liability to the PBGC under Title IV of
ERISA (other than liability for premiums to the PBGC arising in the ordinary
course), and, to the knowledge of Parent, no fact or event exists that could
reasonably be expected to result in any material liability to the PBGC under
Title IV of ERISA.
(f) Plan Contributions and Funding. All contributions, premiums or payments
required to be made with respect to any Parent Benefit Plan have been made on or
before their due dates, and all contributions to the Parent Benefit Plans
intended to be qualified pursuant to Section 401(a) of the Code have been or
will be fully deductible, except where failure to do so would not have a
Material Adverse Effect.
(g) Severance Payments and Accelerated Vesting. Except as disclosed in
Section 4.11(g) of the Parent Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement will not, either alone or in
combination with another event, (i) entitle any current or former employee,
officer or director of Parent or any Parent Subsidiary to severance in an amount
material to the Company and its
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Subsidiaries, taken as a whole, or any other material payment from Parent or any
Parent Subsidiary, except as expressly provided in this Agreement, (ii)
materially increase the amount of base compensation due any such employee,
officer or director or (iii) accelerate benefits under any Parent Stock Option
Plan or accelerate vesting of unvested shares of restricted stock, whether
granted pursuant to any Parent Stock Option Plan or otherwise.
(h) Non-U.S. Benefit Plans. To the knowledge of Parent with respect to
material employee benefit plans mandated by a government other than the United
States or subject to laws other than United States law (collectively, the
"Non-U.S. Benefit Plans") and except as set forth in Section 4.11(h) of the
Parent Disclosure Schedule and except as would not, individually or in the
aggregate, have a Material Adverse Effect: (i) each Non-U.S. Benefit Plan and
the manner in which it has been administered satisfies all applicable Laws and
regulations; (ii) each Non-U.S. Benefit Plan required to be registered has been
registered; (iii) as of the date of this Agreement, all contributions to each
Non-U.S. Benefit Plan required have been made by Parent or a Parent Subsidiary
or, if applicable, accrued in accordance with country-specific accounting
practices; and (iv) each Non-U.S. Benefit Plan that is funded is either fully
funded or fully insured, based upon generally accepted local accounting and
actuarial practice and procedure, to an extent sufficient to provide for the
accrued benefit obligations, as of the date hereof, of all employees and former
employees participating in such Non-U.S. Benefit Plan.
SECTION 4.12 Material Contracts. Subsections (i) through (iv) of Section
4.12(a) of the Parent Disclosure Schedule contain a list of the following types
of contracts, agreements and arrangements (including all amendments thereto) to
which Parent or a Parent Subsidiary is a party, other than those contracts,
agreements and arrangements listed as exhibits in the Parent's Form 10-K for the
fiscal year ended June 30, 1999 (such contracts, agreements and arrangements as
are required to be set forth in Section 4.12(a) of the Parent Disclosure
Schedule, together with all Parent Benefit Plans and all contracts, agreements
and arrangements listed or required to be listed as exhibits in the Parent's
Form 10-K for the fiscal year ended June 30, 1999, being the "Parent Material
Contracts"):
(i) each contract and agreement which (A) is likely to involve
consideration of more than $25,000,000 in the aggregate, during the fiscal
year ending June 30, 2001 or (B) is likely to involve consideration of more
than $50,000,000 in the aggregate, over the remaining term of such
contract, and which, in either case, cannot be canceled by Parent or any
Parent Subsidiary without penalty or further payment and without more than
60 days' notice;
(ii) all contracts with consultants which involve consideration of
more than $25,000,000;
(iii) all contracts and agreements evidencing indebtedness of more
than $25,000,000 to unaffiliated third parties; and
(iv) all contracts and agreements that limit the ability of Parent or
any Parent Subsidiary to compete in any line of business or with any person
or entity or in any geographic area or during any period of time, in each
case, (A) with respect to any business currently conducted by Parent or any
Parent Subsidiary and (B) other than distributor agreements entered into in
the ordinary course of business.
(b) Each Parent Material Contract is a legal, valid and binding agreement
in full force and effect in accordance with its terms and neither Parent nor any
Parent Subsidiary is in default in any material respect, or has received notice
that is in default in any material respect, under any Parent Material Contract
and no other party is in default in any material respect under any Parent
Material Contract, except where the failure of any such Parent Material Contract
to be legal, valid and binding or in full force and effect and for such defaults
as have not had and could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.
SECTION 4.13 Environmental Matters. Except as to the extent that it has
not had, and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect: (a) Parent and the Parent Subsidiaries are
not in violation of any Environmental Law applicable to them; (b) none of the
properties currently or formerly owned, leased or operated by Parent and the
Parent Subsidiaries
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(including, without limitation, soils and surfaces and ground waters) are
contaminated with any Hazardous Substance; (c) Parent and the Parent
Subsidiaries are not liable for any off-site contamination by Hazardous
Substances; (d) Parent and the Parent Subsidiaries are not liable for any
violation under any Environmental Law (including, without limitation, pending or
threatened liens); (e) Parent and the Parent Subsidiaries have all Environmental
Permits; and (f) neither the execution of this Agreement nor the consummation of
the transactions contemplated herein will require any investigation, remediation
or other action with respect to Hazardous Substances, or any notice to or
consent of Governmental Entities or third parties, pursuant to any applicable
Environmental Law or Environmental Permit. During the two years preceding the
date of this Agreement, none of Parent or the Parent Subsidiaries has received
notice of a violation of any Environmental Law (whether with respect to
properties presently or previously owned or used) except as to the extent that
it has not had, and could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.
SECTION 4.14 Title to Properties; Absence of Liens and Encumbrances. Each
of Parent and the Parent Significant Subsidiaries has good and valid title to,
or, in the case of leased properties and assets, valid leasehold interests in,
all of its material tangible properties and assets, real, personal and mixed,
used or held for use in its business, free and clear of Liens except (i) as
reflected in the financial statements contained in the Parent SEC Reports and
(ii) for such Liens, if any, which have not had, and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 4.15 Intellectual Property. (a) Parent and the Parent Significant
Subsidiaries own, or possess adequate, valid, binding licenses or other valid
and binding rights to use, all Intellectual Property used or held for use in the
business of Parent and the Parent Significant Subsidiaries and necessary for the
conduct of the business of Parent and the Parent Significant Subsidiaries in all
material respects as currently conducted.
(b) Neither Parent nor any of the Parent Subsidiaries has received any
written notice that, and to Parent's knowledge no claim has been made or
asserted that, any process currently used or product currently sold, imported or
offered for sale by Parent and the Parent Subsidiaries infringes on or otherwise
violates the Intellectual Property rights of any person, and such uses, sales,
importations and offers to sell are and have been in accordance with all
applicable licenses, in each case, other than as to the extent that it has not
had, and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(c) To the knowledge of Parent, no Intellectual Property material to the
business of Parent and the Parent Subsidiaries owned or licensed by Parent or
the Parent Subsidiaries is being used or enforced in a manner that would result
in the abandonment, cancellation or unenforceability of such Intellectual
Property.
(d)(i) There has been no misappropriation or infringement of any trade
secrets, know-how or other Intellectual Property of Parent or any Parent
Subsidiary by any person, (ii) no employee, independent contractor or agent of
Parent or any Parent Subsidiary has misappropriated any material trade secrets
of any other person in the course of such performance as an employee,
independent contractor or agent and (iii) no employee, independent contractor or
agent of Parent or any Parent Subsidiary is in material default or breach of any
term of any employment agreement, non-disclosure agreement, assignment of
invention agreement or similar agreement or contract relating in any way to the
protection, ownership, development, use or transfer of Intellectual Property, in
each case, other than as to the extent that it has not had, and could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 4.16 Taxes. (a) Except as set forth in Section 4.16(a) of the
Parent Disclosure Schedule, (i) Parent and each of the Parent Subsidiaries have
timely filed or will timely file all material U.S. federal, state, local and
non-U.S. returns and reports required to be filed by any of them with any taxing
authority with respect to Taxes for any period ending on or before the Effective
Time, taking into account any extension of time to file granted to or obtained
on behalf of Parent and the Parent Subsidiaries and all such returns and reports
are accurate and complete in all material respects, (ii) all
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Taxes that are shown as due on Parent's Tax returns prior to the Effective Time
have been paid or will be paid or have been shown as accrued liabilities on the
financial statements of Parent in accordance with U.S. GAAP, (iii) no
outstanding or pending deficiency for any material amount of Tax has been
proposed, asserted or assessed by a taxing authority against Parent or any of
the Parent Subsidiaries, (iv) Parent and each of the Parent Subsidiaries have
provided adequate reserves in their financial statements in accordance with U.S.
GAAP for any Taxes that have not been paid, whether or not shown as being due on
any Tax returns and (v) neither Parent nor any of the Parent Subsidiaries has a
material amount of income reportable for a taxable period ending after the
Effective Time that is attributable to an activity or a transaction occurring in
or a change in accounting method made for a period ending on or prior to the
Effective Time, including without limitation, any adjustment pursuant to Section
481 of the Code.
(b) Except as set forth in Section 4.16(b) of the Parent Disclosure
Schedule, there are not outstanding agreements or waivers extending the
statutory period of limitation for assessment or collection of Tax applicable to
any material Tax returns required to be filed with respect to Parent or any
Parent Subsidiary. Parent has made available to the Company correct and complete
copies of all material federal and state income and franchise Tax returns of the
Parent and the Parent Subsidiaries for 1995 and thereafter and IRS Revenue Agent
Reports and similar state reports issued for such returns, and statements of
material Tax deficiencies assessed against or agreed to by Parent and any Parent
Subsidiary since January 1, 1995. The currently open U.S. federal consolidated
income Tax returns for Parent and the U.S. Parent Subsidiaries have not been
examined by the IRS for all taxable years through the year ended June 30, 1999.
(c) Except as set forth in Section 4.16 of the Parent Disclosure Schedule,
neither Parent nor any of the Parent Subsidiaries is a party to or is bound by
any tax sharing agreement, tax allocation agreement, tax indemnity obligation or
similar written or unwritten agreement, understanding or practice with respect
to Taxes (including any advance pricing agreement, closing agreement or other
agreement relating to Taxes with any taxing authority), except for customary
arrangements relating to property taxes and sales taxes in leases and other
agreements entered into in the ordinary course of business.
(d) Except as set forth in Section 4.16 of the Parent Disclosure Schedule,
(i) neither Parent nor any of the Parent Subsidiaries has ever been a member of
an affiliated group filing a consolidated federal income Tax return, other than
the group of which it currently is a member, and (ii) neither Parent nor any of
the Parent Subsidiaries is liable for the taxes of any other person as a
successor or transferee, or pursuant to any provision of federal, state, local
or Non-U.S. law.
(e) Except as set forth in Section 4.16 of the Parent Disclosure Schedule,
neither Parent nor any of the Parent Subsidiaries is a party to any contract,
agreement, plan or arrangement covering any employee or former employee of
Parent or any of the Parent Subsidiaries that, individually or collectively,
could reasonably be expected to give rise to the payment of any amount that
would not be deductible pursuant to Sections 280G or 162(m) of the Code. Except
as set forth in Section 4.16 of the Parent Disclosure Schedule, there is no
contract, agreement, plan or arrangement to which Parent or any of the Parent
Subsidiaries is a party or by which it is bound to compensate any individual for
excise taxes paid pursuant to Section 4999 of the Code.
SECTION 4.17 Board Approval; Vote Required. (a) On or prior to the date of
this Agreement, the Board of Directors of Parent, by resolutions duly adopted by
unanimous vote of those voting at a meeting duly called and held and not
subsequently rescinded or modified in any way, has duly (i) determined that this
Agreement and the Merger are fair to and in the best interests of Parent and its
stockholders, (ii) approved this Agreement and the Merger, and determined that
the execution, delivery and performance of the Merger Agreement is advisable and
(iii) recommended that the stockholders of Parent approve the issuance of Parent
Common Stock pursuant to this Agreement (the "Company Recommendation") and
directed that the issuance of such shares be submitted for consideration by
Parent's stockholders at the Parent Stockholders' Meeting, as defined in Section
6.01(a).
(b) The only vote of the holders of any class or series of stock of Parent
necessary in connection with the transactions contemplated by this Agreement is
the Parent Stockholders' Vote.
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SECTION 4.18 Operations of Merger Sub. Merger Sub is a direct, wholly
owned subsidiary of Parent, was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement, has engaged in no other business
activities and has conducted its operations only as contemplated by this
Agreement.
SECTION 4.19 Insurance. Parent and the Parent Significant Subsidiaries
maintain insurance coverage with reputable insurers in such amounts and covering
such risks as are in accordance with normal industry practice for companies
engaged in businesses similar to that of Parent and the Parent Significant
Subsidiaries.
SECTION 4.20 Labor Matters. Parent and each Parent Subsidiary is in
compliance with all applicable laws and regulations governing labor and
employment, except where the failure to be in such compliance would not
reasonably be likely, individually or in the aggregate, to have a Material
Adverse Effect. Except as set forth in Section 4.20 of the Parent Disclosure
Schedule, neither Parent nor any of the Parent Subsidiaries is a party to or
bound by any collective bargaining agreement, and there are no labor unions
representing any employees of Parent or any of the Parent Subsidiaries. Except
as set forth in Section 4.20 of the Parent Disclosure Schedule, there are no
labor disputes currently subject to any grievance procedure, arbitration or
litigation with respect to any employee of Parent or any Parent Subsidiary,
except for such disputes that have not had, and could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 4.21 Opinion of Financial Advisor. The Board of Directors of
Parent has received the opinions of CIBC World Markets Corp. and Banc of America
Securities LLC dated the date of this Agreement to the effect that, as of the
date of this Agreement, the Exchange Ratio is fair to the Parent from a
financial point of view, a copy of the written versions of which will be
delivered to the Company solely for information purposes promptly after the
receipt thereof by the Company.
SECTION 4.22 Brokers. No broker, finder or investment banker (other than
CIBC World Markets Corp. and Banc of America Securities LLC) is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
the other transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent. Parent has heretofore made available to the
Company a complete and correct copy of all agreements between Parent and CIBC
World Markets Corp. and Banc of America Securities LLC pursuant to which either
such firm would be entitled to any payment relating to the Merger or any other
transactions.
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER
SECTION 5.01 Conduct of Business by the Company Pending the Merger. The
Company agrees that, between the date of this Agreement and the Effective Time,
the businesses of the Company and the Company Subsidiaries shall be conducted
only in, and the Company and the Company Subsidiaries shall not take any action
except in, the ordinary course of business and the Company shall use its
commercially reasonable efforts to preserve substantially intact its business
organization, and, to the extent reasonably determined desirable by management
of the Company, to keep available the services of the current officers and
employees of the Company and the Company Subsidiaries and to preserve the
current relationships of the Company and the Company Subsidiaries with
customers, suppliers, licensors, licensees and other persons with which the
Company or any Company Subsidiary has significant business relations. By way of
amplification of the foregoing and not limitation, except (i) as contemplated by
this Agreement, (ii) for transfers of cash among the Company and the Company
Subsidiaries pursuant to the Company's ordinary course cash management policies
or (iii) subject to Sections 6.08 and 6.10, as set forth in Section 5.01 of the
Company Disclosure Schedule, neither the Company nor any Company Subsidiary
shall, between the
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date of this Agreement and the Effective Time, directly or indirectly, do any of
the following without the prior written consent of Parent (which consent shall
not be unreasonably withheld):
(a) amend or change its certificate of incorporation or by-laws or
equivalent organizational documents;
(b) issue, sell or otherwise dispose of (whether to a third party or
to a related party) (i) any shares of its stock of any class, or any
options, warrants, convertible securities or other rights of any kind to
acquire any shares of such stock, or any other ownership interest
(including, without limitation, any phantom interest), of the Company or
any Company Subsidiary (except for (w) the issuance of shares of Company
Common Stock pursuant to Company Stock Options outstanding on the date of
this Agreement, (x) the issuance of Company Stock Options to purchase up to
that number of shares of Company Common Stock currently authorized for
issuance under the Company Stock Option Plans in effect on the date of this
Agreement and the shares of Company Common Stock issuable pursuant to such
Company Stock Options, (y) the issuance of Company Stock Options in
connection with transactions permitted under paragraph (f) below and the
shares of Company Common Stock issuable pursuant to such Company Stock
Options or (z) the issuance of shares of Company Common Stock in connection
with transactions permitted under paragraph (f) below) or (ii) any business
unit of the Company or any Company Subsidiary or any material portion of
the assets of the Company or any Company Subsidiary);
(c) except with respect to trademarks in the ordinary course of
business and consistent with past practice, disclose any confidential
Intellectual Property of the Company or any Company Subsidiary unless such
Intellectual Property is subject to a confidentiality agreement protecting
against any further disclosure;
(d) authorize, declare or set aside any dividend payment or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its stock;
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its stock;
(f) acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets) any interest in any corporation,
partnership, other business organization or any division thereof or any
assets, other than acquisitions of assets in the ordinary course of
business consistent with past practice and that are not in connection with
the acquisition of all, or substantially all of a business, and other than
any acquisitions involving consideration with a fair market value not in
excess of $2 billion individually or $4 billion in the aggregate;
(g) incur any additional indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse the obligations of any
person, or make any loans or advances, except for (i) loans or advances for
employees of the Company in the ordinary course of business, (ii) letters
of credit obtained by the Company or any Company Subsidiary in the ordinary
course of business, (iii) trade payables incurred in the ordinary course of
business, (iv) indebtedness assumed in connection with transactions
permitted under paragraph (f) above, (v) intercompany indebtedness, (vi)
indebtedness under the Company's or any Company Subsidiary's existing
credit facilities incurred in the ordinary course of business and (vii)
other indebtedness with a maturity of not more than one year in a principal
amount not, in the aggregate, in excess of $5,000,000;
(h) except as disclosed in Schedule 5.01(h) of the Company Disclosure
Schedule waive any stock repurchase or acceleration rights, amend or change
the terms of any options or restricted stock, or reprice options granted
under any Company Stock Option Plan or authorize cash payments in exchange
for any options granted under any such plans;
(i) except as disclosed in Section 5.01(i) of the Company Disclosure
Schedule or except in the ordinary course of business consistent with past
practice, increase the compensation payable or to become payable to its
officers or employees or grant any rights to severance or termination pay
to, or
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enter into any employment or severance agreement with, any director,
officer or other employee of the Company or any Company Subsidiary (except,
in the case of employees who are not officers or directors, as consistent
with existing policies of the Company or past practices), 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 any director, officer or employee;
(j) make any material change, other than as required by U.S. GAAP or
by the SEC, to its accounting principles or procedures;
(k) agree in writing or otherwise to take any of the actions described
in clauses (a) through (j) above; or
(l) take any action that would cause any of the Company's
representations and warranties set forth in Article III to be untrue in any
material respect, as of any date, as if such representations and warranties
were made as of such date.
SECTION 5.02 Conduct of Business by Parent Pending the Merger. Parent
agrees that, except as contemplated by any other provision of this Agreement,
Parent shall not, between the date of this Agreement and the Effective Time,
directly or indirectly, do any of the following without the prior written
consent of the Company:
(a) authorize, declare or set aside any dividend payments or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, other than any regular quarterly dividends
declared and paid in accordance with past practice;
(b) make any material change, other than as required by U.S. GAAP or
by the SEC, to its accounting principles or procedures;
(c) take any actions inconsistent with the covenants of Parent set
forth in Section 6.15;
(d) except as set forth in Section 5.02(d) of the Parent Disclosure
Schedule, acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets) any interest in any corporation,
partnership, other business organization or any division thereof or any
assets, other than acquisitions of assets in the ordinary course of
business consistent with past practice and that are not in connection with
the acquisition of all, or substantially all of a business, and other than
any acquisitions involving consideration with a fair market value not in
excess of $4 billion individually or $8 billion in the aggregate; or
(e) issue, sell or otherwise dispose of (whether to a third party or
to a related party) any shares of its stock of any class, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such stock, or any other ownership interest (including, without
limitation, any phantom interest), of Parent or any Parent Subsidiary
(except for (v) the issuance of shares of Parent Common Stock pursuant to
Parent Stock Options outstanding on the date of this Agreement, (w) the
issuance of Parent Stock Options to purchase up to that number of Parent
Common Shares currently authorized for issuance under the Parent Stock
Option Plans in effect on the date of this Agreement and the shares of
Parent Common Stock issuable pursuant to such Parent Stock Options, (x) the
issuance of Parent Stock Options in connection with transactions permitted
under paragraph (d) above and the shares of Parent Common Stock issuable
pursuant to such Parent Stock Options, (y) the issuance of shares of Parent
Common Stock in connection with transactions permitted under paragraph (d)
above or (z) the issuance of shares of Parent Common Stock with cash
proceeds (net of underwriters' commissions) of up to one billion dollars
($1,000,000,000) in the aggregate);
(f) agree in writing or otherwise to take any actions described in
clauses (a) through (e) above; or
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(g) take any action that would cause any of the Parent's
representations and warranties set forth in Article IV to be untrue in any
material respect, as of any date, as if such representations and warranties
were made as of such date.
SECTION 5.03 Notification of Certain Matters. Parent shall give prompt
notice to the Company, and the Company shall give prompt notice to Parent, of
(i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which would be likely to cause (A) any representation or warranty contained
in this Agreement to be untrue or inaccurate in any material respect or (B) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied in any material respect and (ii) any failure of Parent or the
Company, as the case may be, to 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 5.03 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 Registration Statement; Joint Proxy Statement. (a) As
promptly as practicable after the execution of this Agreement, (i) Parent and
the Company shall prepare and file with the SEC a joint proxy statement
(together with any amendments thereof or supplements thereto, the "Proxy
Statement") relating to the meetings of the Company's stockholders (the "Company
Stockholders' Meeting") and Parent's stockholders (the "Parent Stockholders'
Meeting" and, together with the Company Stockholders' Meeting, the
"Stockholders' Meetings") to be held to consider adoption of this Agreement and
the issuance of Parent Common Shares pursuant to the terms of the Merger, as the
case may be, and (ii) Parent shall prepare and file with the SEC a registration
statement on Form S-4 (together with all amendments thereto, the "Registration
Statement") in which the Proxy Statement shall be included as a prospectus, in
connection with the registration under the Securities Act of the Parent Common
Shares to be issued to the stockholders of the Company pursuant to the Merger.
Each of Parent and the Company shall use its reasonable best efforts to cause
the Registration Statement to become effective as promptly as practicable, and
prior to the effective date of the Registration Statement, Parent shall take all
or any action required under any applicable federal or state securities laws in
connection with the issuance of Parent Common Shares pursuant to the Merger. The
Company shall furnish all information concerning the Company as Parent may
reasonably request in connection with such actions and the preparation of the
Registration Statement. As promptly as practicable after the Registration
Statement shall have become effective, the Company shall mail the Proxy
Statement to its stockholders and Parent shall mail the Proxy Statement to its
stockholders.
(b) Subject to paragraph (c) of this Section 6.01, the Proxy Statement
shall include the Company Recommendation and the Parent Recommendation.
(c) Nothing in this Agreement shall prevent the Company's Board of
Directors from withholding, withdrawing, amending or modifying the Company
Recommendation if the Board of Directors of the Company determines in good faith
(after consultation with independent legal counsel) that such action is required
in order for the directors to comply with their respective fiduciary duties to
the Company's stockholders under applicable Law; provided, however, that Section
6.04 shall govern the withholding, withdrawing, amending or modifying of the
Company Recommendation in the circumstances described therein.
(d) Subject to the obligations of Parent and the Company under applicable
Law, no amendment or supplement to the Proxy Statement or the Registration
Statement will be made by Parent or the Company without the approval of the
other party (such approval not to be unreasonably withheld or delayed). Parent
will advise the Company promptly after it receives notice thereof, of the time
at which the Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order, of the suspension
of the qualification of the Parent Common Shares issuable in
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connection with the Merger for offering or sale in any jurisdiction, or of any
request by the SEC for amendment of the Registration Statement or comments
thereon and responses thereto or requests by the SEC for additional information
and each of Parent and the Company, as applicable, will advise the other,
promptly after it receives notice thereof, of any request by the SEC for
amendment of the Proxy Statement or comments thereon and responses thereto or
requests by the SEC for additional information.
(e) The information supplied by Parent for inclusion in the Registration
Statement and the Proxy Statement shall not, at (i) the time the Registration
Statement is declared effective, (ii) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the stockholders of
the Company or the stockholders of Parent, (iii) the time of each of the
Stockholders' Meetings and (iv) the Effective Time, contain any untrue statement
of a material fact or fail to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If, at any time prior
to the Effective Time, any event or circumstance relating to Parent or any
Parent Subsidiary, or their respective officers or directors, that should be set
forth in an amendment or a supplement to the Registration Statement or Proxy
Statement is discovered by Parent, Parent shall promptly inform the Company
thereof. All documents that Parent is responsible for filing with the SEC in
connection with the Merger or the other transactions contemplated by this
Agreement will comply as to form and substance in all material respects with the
applicable requirements of the Securities Act and the rules and regulations
thereunder and the Exchange Act and the rules and regulations thereunder.
(f) The information supplied by the Company for inclusion in the
Registration Statement and the Proxy Statement shall not, at (i) the time the
Registration Statement is declared effective, (ii) the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to the
stockholders of the Company or the stockholders of Parent, (iii) the time of
each of the Stockholders' Meetings and (iv) the Effective Time, contain any
untrue statement of a material fact or fail to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. If, at
any time prior to the Effective Time, any event or circumstance relating to the
Company or any Company Subsidiary, or their respective officers or directors,
that should be set forth in an amendment or a supplement to the Registration
Statement or Proxy Statement is discovered by the Company, the Company shall
promptly inform Parent. All documents that the Company is responsible for filing
with the SEC in connection with the Merger or the other transactions
contemplated by this Agreement will comply as to form and substance in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
SECTION 6.02 Stockholders' Meetings. Notwithstanding anything in Section
6.01(c) to the contrary, the Company will take, in accordance with applicable
Law and the Company Certificate of Incorporation and the Company By-Laws, all
action necessary to convene the Company Stockholders' Meeting, and Parent will
take, in accordance with applicable Law and the Certificate of Incorporation and
By-Laws of Parent, all action necessary to convene the Parent Stockholders'
Meeting, in each case as promptly as practicable for the purpose of voting upon
the adoption of this Agreement and the issuance of Parent Common Shares pursuant
to the terms of the Merger, as the case may be, and Parent and the Company shall
use their reasonable best efforts to hold the Stockholders' Meetings on the same
day and as soon as practicable after the date on which the Registration
Statement becomes effective, it being understood that for purposes of
determining what is "as promptly as practicable" for the purposes of this
sentence the parties shall take into account the status of regulatory approvals
and related waiting periods. Except with respect to the Company in the event
that the Board of Directors of the Company shall have withheld or withdrawn its
stockholder recommendation or modified or amended its stockholder recommendation
in a manner adverse to the other party pursuant to Section 6.01(c), each party
shall (a) use its commercial best efforts to solicit from its stockholders
proxies in favor of the adoption of this Agreement and the issuance of Parent
Common Shares pursuant to the terms of the Merger, as the case may be, and (b)
shall take all other action necessary or advisable to secure the vote or consent
of stockholders, required by the rules of NASDAQ to obtain such approvals.
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SECTION 6.03 Access to Information; Confidentiality. Except as required
pursuant to any confidentiality agreement or similar agreement or arrangement to
which the Company or any Company Subsidiary, on the one hand, or Parent or any
Parent Subsidiary, on the other hand, is a party or pursuant to applicable Law,
from the date of this Agreement to the Effective Time, each party shall (and
shall cause such party's subsidiaries to): (i) provide to the other party (and
its officers, directors, employees, accountants, investment bankers,
consultants, legal counsel, agents and other representatives, collectively,
"Representatives") access at reasonable times during normal business hours upon
prior notice to the officers, employees, agents, properties, offices and other
facilities of the Company or Parent, as the case may be, and the Company
Significant Subsidiaries or Parent Significant Subsidiaries, as the case may be,
and to the books and records thereof; and (ii) furnish promptly such information
concerning the business, properties, contracts, assets, liabilities, personnel
and other aspects of the other party and its subsidiaries as the other party or
its Representatives may reasonably request; provided, however, that the parties
shall use commercially reasonable efforts to limit such access as provided in
clauses (i) and (ii) in such a way as to minimize disruption to the operations
of the business of the Company and the Company Subsidiaries, on the one hand,
and Parent and the Parent Subsidiaries, on the other hand. Each party shall, and
shall cause its respective Representatives to, keep such information
confidential in accordance with the terms of the Confidentiality Agreement dated
July 6, 2000, between Parent and the Company (the "Confidentiality Agreement").
SECTION 6.04 No Solicitation of Transactions. (a) The Company shall not,
directly or indirectly, through any Representative or otherwise, initiate,
solicit or encourage (including by way of furnishing information), or 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 Competing Transaction
(as defined below), or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain a Competing Transaction, or agree to or endorse any Competing
Transaction, or authorize or permit any of the Representatives or any Company
Subsidiary, to take any such action, provided, however, that prior to the
adoption of this Agreement by the stockholders of the Company, and, provided
further, that the Company is otherwise in full compliance with this Section
6.04, nothing contained in this Section 6.04 shall prohibit the Board of
Directors of the Company from (i) furnishing information to, or entering into
and engaging in discussions or negotiations with, any person that makes a bona
fide unsolicited written proposal for a Competing Transaction that the Board of
Directors of the Company determines in good faith, after consultation with the
Company's financial advisors and independent legal counsel, can be reasonably
expected to result in a Company Superior Proposal (as defined below), (ii)
complying with Rule 14e-2 promulgated under the Exchange Act with regard to a
tender or exchange offer or making any disclosure required under applicable Law
or (iii) failing to make or withdrawing or modifying its recommendation referred
to in Section 6.01 following the making of a Company Superior Proposal or
recommending such a Company Superior Proposal to the stockholders of the Company
if, solely in the case of clause (i) above and this clause (iii), the Board of
Directors of the Company, after consultation with independent legal counsel,
determines in good faith that such action is required in order for the directors
to comply with their respective fiduciary duties under applicable Law. The
Company and the Company Subsidiaries will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Competing Transaction. In addition to the foregoing, the
Company shall provide Parent with at least forty-eight (48) hours prior written
notice (or such lesser prior written notice as provided to the members of the
Company's Board of Directors but in no event less than eight hours) of any
meeting of the Company's Board of Directors at which the Company's Board of
Directors is reasonably expected to consider a Company Superior Proposal and
provide Parent with at least two (2) business days prior written notice (or such
lesser prior notice as provided to the members of the Company's Board of
Directors but in no event less than eight (8) hours) of a meeting of the
Company's Board of Directors at which the Company's Board of Directors is
reasonably expected to recommend a Company Superior Proposal to its
stockholders.
(b) For purposes of this Agreement, "Competing Transaction" shall mean any
of the following involving the Company (other than the Merger and the other
transactions contemplated in this Agreement): (i) any merger, consolidation,
share exchange, business combination, issuance or purchase of
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securities or other similar transaction , (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of the assets of the Company in
a single transaction or series of related transactions; (iii) any tender offer
or exchange offer for the Company's securities or the filing of a registration
statement under the Securities Act in connection with any such exchange offer;
in the case of clause (i), (ii) or (iii) above, which transaction would result
in a third party (or its shareholders) or affiliates acquiring, individually or
in the aggregate, more than 15% of the voting securities of the Company then
outstanding or more than 15% of the assets of the Company and its subsidiaries,
taken as a whole; (iv) any solicitation in opposition to adoption by the
Company's stockholders of this Agreement; or (v) any public announcement of an
agreement, proposal, plan or intention to do any of the foregoing, either during
the effectiveness of this Agreement or at any time thereafter.
(c) For purposes of this Agreement, a "Company Superior Proposal" means any
proposal made by a third party which would result in such party (or in the case
of a parent-to-parent merger, its stockholders) acquiring, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, share exchange, business combination, share purchase, asset
purchase, recapitalization, liquidation, dissolution, joint venture or similar
transaction, more than 50% of the voting power of the voting securities of the
Company then outstanding or all or substantially all the assets of the Company
and its subsidiaries, taken as a whole, for consideration which the Board of
Directors of the Company determines in its reasonable good faith judgment to be
more favorable to the Company's stockholders than the Merger.
(d) In addition to the obligations of the Company set forth in paragraph
(a) of this Section 6.04, the Company as promptly as reasonably practicable
shall advise Parent orally and in writing of any request received by the Company
for non-public information which the Company reasonably believes would lead to a
Competing Transaction or of any Competing Transaction, or any inquiry received
by the Company with respect to or which the Company reasonably should believe
would lead to any Competing Transaction, the material terms and conditions of
such request, Competing Transaction or inquiry, and the identity of the person
or group making any such request, Competing Transaction or inquiry. The Company
will promptly update Parent as to any material changes with respect to such
request, Competing Transaction or inquiry.
SECTION 6.05 Directors' and Officers' Indemnification and
Insurance. (a) The By-Laws of the Surviving Corporation shall contain the
respective provisions that are set forth, as of the date of this Agreement, in
Article IX of the By-Laws of the Company, which provisions shall not be amended,
repealed or otherwise modified for a period of six years from the Effective Time
in any manner that would affect adversely the rights thereunder of individuals
who at or at any time prior to the Effective Time were directors, officers,
employees, fiduciaries or agents of the Company.
(b) After the Effective Time, Parent and the Surviving Corporation shall,
to the extent set forth under Article IX of the Company By-laws, indemnify and
hold harmless, each current and former director or officer of the Company and
each Subsidiary of the Company and each such person who served at the request of
the Company or any Subsidiary of the Company as a director, officer, trustee,
partner, fiduciary, employee or agent of another corporation, partnership, joint
venture, trust, pension or other employee benefit plan or enterprise
(collectively, the "Indemnified Parties") against all costs and expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection with any claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), whether civil, administrative, criminal or investigative,
arising out of or pertaining to any action or omission in their capacities as
officers or directors, in each case occurring before the Effective Time
(including the transactions contemplated by this Agreement. Without limiting the
foregoing, in the event of any such claim, action, suit, proceeding or
investigation, (i) the Company or Parent and the Surviving Corporation, as the
case may be, shall pay the reasonable fees and expenses of one counsel selected
by any Indemnified Party, which counsel shall be reasonably satisfactory to the
Company or to Parent and the Surviving Corporation, as the case may be, promptly
after statements therefor are received (unless the Surviving Corporation shall
elect to defend such action) and (ii) the Company and Parent and the Surviving
Corporation shall reasonably cooperate in the defense of any such matter;
provided, however, that none of the Company, Parent or the Surviving Corporation
shall be liable
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for any settlement effected without its written consent (which consent shall not
be unreasonably withheld or delayed). In the event that any claim or claims for
indemnification are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until the
disposition of any and all such claims.
(c) For a period of six years after the Effective Time, Parent shall cause
to be maintained in effect the current directors and officers liability
insurance policies maintained by the Company (provided that coverage limits in
the aggregate for the entire six year period are not less than the current
annual limits, and provided further that Parent may substitute policies
reasonably satisfactory to the Indemnified Parties of at least the same coverage
with other terms and conditions that are no less advantageous to the Indemnified
Parties) with respect to claims arising from facts or events that occurred prior
to the Effective Time; provided, however, that in no event shall parent be
required to expend, pursuant to this Section 6.05(c), more than an amount per
year equal to 200% of current annual premiums paid by the Company for such
insurance; provided further, however, that if the premiums for such coverage
exceed such amount, Parent or the Surviving Corporation shall purchase a policy
with the greatest coverage available for such 200% of the current annual
premiums spent by the Company for its fiscal year ending December 31, 1999.
(d) In the event Parent or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity in
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each case, proper provision
shall be made so that the successors and assigns of Parent or the Surviving
Corporation, as the case may be, honor the indemnification obligations set forth
in this Section 6.05.
SECTION 6.06 Obligations of Merger Sub. Parent shall take all action
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and subject to the conditions set
forth in this Agreement.
SECTION 6.07 Affiliates. The Company represents to Parent that no later
than 30 days after the date of this Agreement, the Company shall deliver to
Parent a list of names and addresses of those persons who were, in the Company's
reasonable judgment, on such date, affiliates (within the meaning of Rule 145 of
the rules and regulations promulgated under the Securities Act (each such person
being an "Affiliate")) of the Company. The Company shall provide Parent with
such information and documents as Parent shall reasonably request for purposes
of reviewing such list. The Company shall use its commercially reasonable
efforts to deliver or cause to be delivered to Parent, no later than at least 30
days prior to the Effective Time, an affiliate letter in the form attached
hereto as Exhibit 6.07, executed by each of the Affiliates of the Company
identified in the foregoing list and any person who shall, to the knowledge of
the Company, have become an Affiliate of the Company subsequent to the delivery
of such list.
SECTION 6.08 Further Action; Consents; Filings. Upon the terms and subject
to the conditions hereof, each of the parties hereto shall use its commercially
reasonable efforts to (i) take, or cause to be taken, all appropriate action and
do, or cause to be done, all things necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the Merger and the
other transactions contemplated by this Agreement, (ii) obtain from Governmental
Entities any consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by Parent or the Company or any of their
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement and (iii) make all necessary filings, and
thereafter make any other required submissions, with respect to this Agreement,
the Merger and the other transactions contemplated by this Agreement that are
required under (A) the Exchange Act and the Securities Act and the rules and
regulations thereunder and any other applicable federal or state securities
laws, (B) the HSR Act, and any other antitrust regulations and (C) any other
applicable Law. The parties hereto shall cooperate with each other in connection
with the making of all such filings, including by providing copies of all such
documents to the nonfiling party and its advisors prior to filing and, if
requested, by accepting all reasonable additions, deletions or changes
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suggested in connection therewith. Without limiting the generality of the
foregoing, each party shall take or omit to take such action as the other party
shall reasonably request to cause the parties to obtain any material
governmental approvals and/or the expiration of applicable waiting periods,
including, without limitation, holding separate and agreeing to sell or
otherwise dispose of, assets, categories of assets or businesses of Parent or
any of the Parent Subsidiaries (and to enter into agreements with the relevant
governmental antitrust entity giving effect thereto), provided that the
foregoing shall not obligate either party to take or to omit to take any action
(including, without limitation, the expenditure of funds or any such holding
separate and agreeing to sell or otherwise dispose of assets, categories of
assets or businesses) that is to be effective prior to the Closing or that would
or could reasonably be expected to have, in the good faith opinion of such
party, a Material Adverse Effect on Parent and the Parent Subsidiaries
(including the Company), taken as a whole, after the Closing.
(b) Parent and the Company shall file as soon as practicable after the date
of this Agreement notifications under the HSR Act and shall respond as promptly
as practicable to all inquiries or requests that may be made pursuant to the HSR
Act for additional information or documentation and shall respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other Governmental Entity in connection with antitrust matters. The
parties shall cooperate with each other in connection with the making of all
such filings or responses, including providing copies of all such documents to
the other party and its advisors prior to filing or responding.
SECTION 6.09 Plan of Reorganization. (a) This Agreement is intended to
constitute a "plan of reorganization" within the meaning of section 1.368-2(g)
of the income tax regulations promulgated under the Code. From and after the
date of this Agreement and until the Effective Time, each party hereto shall use
its commercially reasonable efforts to cause the Merger to qualify, and will not
knowingly take any action which could reasonably be expected to prevent the
Merger from qualifying as a reorganization under the provisions of section
368(a) of the Code. Following the Effective Time, none of the Surviving
Corporation, Parent or any of their affiliates shall knowingly take any action,
cause any action to be taken, fail to take any action or cause any action to
fail to be taken, which action or failure to act could cause the Merger to fail
to qualify as a reorganization under section 368(a) of the Code.
(b) As of the date of this Agreement, the Company does not know of any
reason (i) for which it would not be able to deliver to Morrison & Foerster LLP
and Sullivan & Cromwell, at the date of the legal opinions referred to below,
certificates substantially in compliance with IRS published advance ruling
guidelines, with customary exceptions and modifications thereto, to enable such
firms to deliver the legal opinions for the Registration Statement and as
contemplated by Sections 7.02(f) and 7.03(c), and the Company hereby agrees to
deliver such certificates effective as of the date of such opinions so long as
the statements therein are true as of such time or (ii) for which Morrison &
Foerster LLP and Sullivan & Cromwell would not be able to deliver the opinions
required by Sections 7.02(f) and 7.03(c).
(c) As of the date of this Agreement, Parent does not know of any reason
(i) for which it would not be able to deliver to Sullivan & Cromwell and
Morrison & Foerster LLP, at the date of the legal opinions referred to below,
certificates substantially in compliance with published IRS advance ruling
guidelines, with customary exceptions and modifications thereto, to enable such
firms to deliver the legal opinions for the Registration Statement and as
contemplated by Sections 7.02(f) and 7.03(c), and Parent hereby agrees to
deliver such certificates effective as of the date of such opinions so long as
the statements therein are true as of such time or (ii) for which Morrison &
Foerster LLP and Sullivan & Cromwell would not be able to deliver the opinions
required by Sections 7.02(f) and 7.03(c).
SECTION 6.10 Public Announcements. The initial press release relating to
this Agreement shall be a joint press release the text of which has been agreed
to by each of Parent and the Company. Thereafter, unless otherwise required by
applicable Law or the requirements of NASDAQ, each of Parent and the Company
shall reasonably approve each other's press releases or any public statements
with respect to this Agreement, the Merger or any of the other transactions
contemplated by this Agreement.
SECTION 6.11 Letters of Accountants. (a) Parent shall use its commercially
reasonable efforts to cause to be delivered to the Company "comfort" letters of
Ernst & Young LLP, Parent's independent
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accountants, dated and delivered the date on which the Registration Statement
shall become effective and as of the Effective Time, and addressed to the
Company, in form and substance reasonably satisfactory to the Company and
reasonably customary in scope and substance for letters delivered by independent
public accountants in connection with transactions such as those contemplated by
this Agreement.
(b) The Company shall use its commercially reasonable efforts to cause to
be delivered to Parent "comfort" letters of Ernst & Young, LLP, the Company's
independent auditors, dated and delivered the date on which the Registration
Statement shall become effective and as of the Effective Time, and addressed to
Parent, in form and substance reasonably satisfactory to Parent and reasonably
customary in scope and substance for letters delivered by independent public
accountants in connection with transactions such as those contemplated by this
Agreement.
SECTION 6.12 NASDAQ. Parent shall promptly prepare and submit to NASDAQ a
supplemental notice with respect to the Parent Common Shares to be issued in the
Merger and pursuant to Substitute Options, and shall use its reasonable efforts
to obtain, prior to the Effective Time, approval for the quotation of such
Parent Common Shares.
SECTION 6.13 Further Assurances. Subject to the terms and conditions
hereof, each party hereto, at the reasonable request of another party hereto,
shall execute and deliver such other instruments and do and perform such other
acts and things as may be necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby.
SECTION 6.14 Certain Employee Benefits Matters. For a period of three
years following the Effective Time and effective upon the Merger, Parent shall,
or shall cause the Surviving Corporation to, provide medical, 401(k), life and
disability benefits, cash compensation and other benefits, including employee
benefit plans, programs, contracts or arrangements providing for stock options,
stock purchase rights, restricted stock or other stock-based compensation, to
employees of the Surviving Corporation and its subsidiaries that, in the
aggregate, are no less favorable to the medical, 401(k), life and disability
benefits, cash compensation and other benefits that were provided to such
Surviving Corporation employees under the employee benefit plans, programs,
contracts and arrangements of the Company and each of its subsidiaries as in
effect immediately prior to the Effective Time and that have been disclosed or
made available to Parent. Parent covenants and agrees that it shall cause the
Surviving Corporation to satisfy all severance obligations arising in connection
with the transactions contemplated by the Merger and this Agreement pursuant to
any Company Benefit Plan and any similar plan covering employees of the
Company's Subsidiaries and employees of the Company and the Company's
Subsidiaries not in the United States.
SECTION 6.15 Board Appointment. Parent agrees to cause Donald Scifres to
be elected or appointed to the Parent Board of Directors as Co-Chairman of the
Parent Board of Directors as of the Effective Time.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01 Conditions to the Obligations of Each Party. The obligations
of the Company, Parent and Merger Sub to consummate the Merger are subject to
the satisfaction or waiver (where permissible) of the following conditions:
(a) Registration Statement Effective. The Registration Statement shall
have been declared effective by the SEC under the Securities Act and no
stop order suspending the effectiveness of the Registration Statement shall
have been issued by the SEC and no proceeding for that purpose shall have
been initiated by the SEC.
(b) Stockholder Approvals. This Agreement and the issuance of shares
of Parent Common Stock pursuant to the terms of the Merger, as the case may
be, contemplated hereby shall have been approved and adopted by the
requisite affirmative vote of (i) the stockholders of the Company in
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accordance with the DGCL and the Company Certificate of Incorporation and
(ii) the stockholders of Parent in accordance with the rules of NASDAQ, the
DGCL and Parent's Certificate of Incorporation;
(c) No Order. No Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any law, rule, regulation, judgment, decree, injunction, executive order or
award (an "Order") that is then in effect or pending and has, or would
have, the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(d) Antitrust Waiting Periods; Approvals. Any waiting period (and any
extension thereof) and/or approvals applicable to the consummation of the
Merger under the HSR Act or any foreign antitrust or combination Law and/or
material filings, consents, approvals and authorizations legally required
to be obtained to consummate the Merger shall have expired, been terminated
or obtained, as applicable.
(e) NASDAQ. The Parent Common Shares to be issued in the Merger shall
have been authorized for quotation on NASDAQ.
SECTION 7.02 Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be true and
correct as of the Effective Time, as though made at and as of the Effective
Time, except that those representations and warranties that address matters
only as of a particular date shall remain true and correct as of such date,
except to the extent that the failure of the representations and warranties
to be so true and correct could not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect, and Parent shall have
received a certificate of the Chief Executive Officer or Chief Financial
Officer of the Company to that effect.
(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 with by it on or
prior to the Effective Time, and Parent shall have received a certificate
of the Chief Executive Officer or Chief Financial Officer of the Company to
that effect.
(c) Tax Opinions. Parent shall have received the opinion of Morrison &
Foerster LLP, counsel to Parent, based upon customary assumptions set forth
or referred to in such opinion, 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, which opinion shall not have been
withdrawn or modified in any material respect. In rendering such opinion,
Morrison & Foerster LLP may rely upon and require such certificates of the
Company, Parent and Merger Sub and/or their officers or principal
stockholders as are customary for such opinions. Each such certificate
shall be dated on or before the date of such opinion and shall not have
been withdrawn or modified in any material respect as of the Effective
Time.
SECTION 7.03 Conditions to the Obligations of the Company. The obligations
of the Company to consummate the Merger are subject to the satisfaction or
waiver (where permissible) of the following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Merger Sub contained in this Agreement shall be
true and correct as of the Effective Time, as though made on and as of the
Effective Time, except that those representations and warranties that
address matters only as of a particular date shall remain true and correct
as of such date, except to be extent that the failure of the
representations and warranties to be so true and correct could not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect and the Company shall
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have received a certificate of the Chief Executive Officer or Chief
Financial Officer of Parent to that effect.
(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 it
on or prior to the Effective Time and the Company shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer of
Parent to that effect.
(c) Tax Opinion. The Company shall have received the opinion of
Sullivan & Cromwell, counsel to the Company, based upon customary
assumptions set forth or referred to in such opinion, 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, which
opinion shall not have been withdrawn or modified in any material respect.
In rendering such opinion, Sullivan & Cromwell may rely upon and require
such certificates of the Company, Parent and Merger Sub and/or their
officers or principal stockholders as are customary for such opinions. Each
such certificate shall be dated on or before the date of such opinion and
shall not have been withdrawn or modified in any material respect as of the
Effective Time.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and the Merger
and the other transactions contemplated by this Agreement may be abandoned at
any time prior to the Effective Time, notwithstanding any requisite approval and
adoption of this Agreement and the transactions contemplated by this Agreement,
as follows:
(a) by mutual written consent duly authorized by the Boards of
Directors of each of Parent and the Company;
(b) by either Parent or the Company, if the Effective Time shall not
have occurred on or before January 31, 2001; provided, however, that, in
the event the failure of the Merger to occur on or before January 31, 2001
is the result of the failure of any of the conditions set forth in Article
VII to be satisfied or waived prior to January 31, 2001, the Company may
extend such date to March 31, 2001; provided further that the provisions of
this Section 8.01(b) shall not be available to any party whose failure to
fulfill its obligations hereunder shall have been the cause of, or shall
have resulted in, the failure of the Merger to be consummated by the
applicable date;
(c) by either Parent or the Company, if there shall be any Order of a
Governmental Authority which is final and nonappealable preventing the
consummation of the Merger; provided that the provisions of this Section
8.01(c) shall not be available to any party whose failure to fulfill its
obligations hereunder shall have been the cause of, or shall have resulted
in, such Order;
(d) by Parent if (i) the Board of Directors of the Company withholds,
withdraws, modifies or changes the Company Recommendation in a manner
adverse to Parent or shall have resolved to do so, (ii) the Company shall
have failed to include in the Proxy Statement the Company Recommendation,
(iii) the Company's Board of Directors fails to reaffirm its recommendation
to its stockholders, in favor of the adoption of this Agreement within five
business days after Parent requests in writing that such recommendation be
reaffirmed, (iv) the Company shall have breached its obligations under
Section 6.04 or (v) a tender offer or exchange offer for 15% or more of the
outstanding shares of stock of the Company has commenced, and the Board of
Directors of the Company has not recommended rejection of such tender offer
or exchange offer by its stockholders within ten (10) business days of the
commencement thereof;
(e) by either Parent or the Company if this Agreement shall fail to
receive the requisite vote for adoption at the Company Stockholders'
Meeting, provided that the right to terminate this Agreement
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under this Section 8.01(e) shall not be available to the Company where the
failure to obtain such requisite vote shall have been caused by or related
to the Company's breach of this Agreement;
(f) by either Parent or the Company if the approval of the issuance of
Parent Common Shares pursuant to the terms of the Merger shall fail to
receive the requisite vote at the Parent Stockholders' Meeting; provided
that the right to terminate this Agreement under this Section 8.01(f) shall
not be available to Parent where the failure to obtain such requisite vote
shall have been caused by or related to Parent's breach of this Agreement;
(g) by Parent upon a breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if
any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth either in Section 7.02(a) or
(b) would not be satisfied; provided, however, that if such breach is
curable within thirty (30) days by the Company through the exercise of its
best efforts and as long as the Company so cures such breach, Parent may
not terminate this Agreement under this Section 8.01(g);
(h) by the Company upon a breach of any representation, warranty,
covenant or agreement on the part of Parent and Merger Sub set forth in
this Agreement, or if any representation or warranty of Parent and Merger
Sub shall have become untrue, in either case such that the conditions set
forth either in Section 7.03(a) or (b) would not be satisfied; provided,
however, that if such breach is curable within thirty (30) days by Parent
and Merger Sub through the exercise of their respective best efforts and as
long as Parent and Merger Sub so cure such breach, the Company may not
terminate this Agreement under this Section 8.01(h); or
(i) by the Company, if the Company is not in material breach of its
obligations under Section 6.04 hereof and the Board of Directors of the
Company authorizes the Company to enter into a binding written agreement
concerning a transaction that constitutes a Company Superior Proposal.
SECTION 8.02 Effect of Termination. Except as provided in Section 9.01, in
the event of termination of this Agreement pursuant to Section 8.01, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of Parent, Merger Sub or the Company or any of their
respective officers or directors, and all rights and obligations of each party
hereto shall cease, subject to the remedies of the parties set forth in Section
8.05; provided, however, that nothing herein shall relieve any party from
liability for the willful breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
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 the
approval of the Merger and this Agreement by the stockholders of the Company, no
amendment may be made that would reduce the amount or change the type of
consideration into which each Company Common Share shall be converted upon
consummation of the Merger. 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 (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto,
and (c) waive compliance with any agreement or condition 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 Expenses. Subject to paragraphs (e) and (f) of this Section
8.05, all Expenses (as defined below) incurred in connection with this Agreement
and the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses, whether or not the Merger or any other transaction is
consummated. "Expenses" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this
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Agreement, the preparation, printing, filing and mailing of the Registration
Statement and the Proxy Statement, the solicitation of stockholder approvals,
the filing of any required notices under the HSR Act or other similar
regulations and all other matters related to the closing of the Merger and the
other transactions contemplated by this Agreement.
(b) The Company agrees that (i) if an Acquisition Proposal shall have been
made to the Company or its stockholders or any Person shall have publicly
announced an intention to make an Acquisition Proposal with respect to the
Company and thereafter this Agreement is terminated by Parent pursuant to
Section 8.01(d) or (ii) this Agreement is terminated by the Company pursuant to
Section 8.01(i), then the Company shall pay to Parent an amount equal to one
billion dollars ($1,000,000,000); provided, however, that no amount shall be
payable to Parent pursuant to clause (i) or (ii) of this paragraph (b) unless
and until (y) any Person (other than Parent) (together with any affiliates of
such Person, an "Acquiring Party") has acquired, directly or indirectly, by
purchase, merger, consolidation, sale, assignment, lease, transfer or otherwise,
in one transaction or any related series of transactions within twelve (12)
months of such termination, a majority of the voting power of the outstanding
securities of the Company or all or substantially all of the assets of the
Company or (z) there has been consummated a merger, consolidation or similar
business combination between the Company and an Acquiring Person.
(c) Parent agrees that the payment provided for in Section 8.05(b) shall be
the sole and exclusive remedy of Parent upon a termination of this Agreement
pursuant to Section 8.01(d) where such fee has been paid and pursuant to Section
8.01(i), and such remedies shall be limited to the sum stipulated in Section
8.05(b), regardless of the circumstances giving rise to such termination;
provided, however, that nothing herein shall relieve the Company from liability
for the willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
(d) Any payment required to be made pursuant to Section 8.05(b) shall be
made to Parent by wire transfer of immediately available funds to an account
designated by Parent in writing.
(e) Upon the termination of this Agreement by Parent or the Company
pursuant to Section 8.01(e) or by Parent pursuant to Section 8.01(d), on the
first business day following such termination, the Company shall pay Parent an
amount equal to ten million dollars ($10,000,000) (the "Expenses"), which the
parties agree represents the reasonable estimate of the out-of-pocket expenses
that Parent will incur in connection with the transactions contemplated by this
Agreement and which amount shall represent the entire amount that Parent is
entitled to receive with respect to such expenses, including, but not limited
to, fees and expense of Parent's counsel, accountants and financial advisors
upon the termination by Parent or the Company in such circumstances.
(f) Upon the termination of this Agreement by Parent or the Company
pursuant to Section 8.01(f), on the first business day following such
termination, Parent shall pay the Company an amount equal to the Expenses, which
the parties agree represents the reasonable estimate of the out-of-pocket
expenses that the Company will incur in connection with the transactions
contemplated by this Agreement and which amount shall represent the entire
amount that the Company is entitled to receive with respect to such expenses,
including, but not limited to, fees and expenses of the Company's counsel,
accountants and financial advisors upon the termination by Parent or the Company
pursuant to Section 8.01(f).
(g) "Acquisition Proposal" means an offer or proposal with respect to a
Competing Transaction.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01 Non Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement and
in any certificate delivered pursuant hereto shall terminate at the Effective
Time or upon the termination of this Agreement pursuant to Section 8.01, as the
case may be, except that the agreements set forth in Articles I, II and IX and
Sections 6.05 and 6.09
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shall survive the Effective Time and those set forth in Sections 6.03 (with
respect to confidentiality), 8.02 and 8.05 and this Article IX shall survive
termination.
SECTION 9.02 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by facsimile
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 9.02):
<TABLE>
<S> <C>
if to Parent or Merger Sub:
JDS Uniphase Corporation
210 Baypointe Parkway
San Jose, California 95134
Facsimile No.: (408) 954-0540
Attention: Michael Phillips
with a copy to:
Morrison & Foerster LLP
425 Market Street
San Francisco, California 94105
Facsimile No.: (415) 268-6590
Attention: John Campbell, Esq.
if to the Company:
SDL, Inc.
80 Rose Orchard Way
San Jose, California 95134
Facsimile No.: (408) 943-1258
Attention: Donald Scifres
with a copy to:
Sullivan & Cromwell
1888 Century Park East
Los Angeles, CA 90067
Facsimile No.: (310) 712-8800
Attention: Alison S. Ressler, Esq.
</TABLE>
SECTION 9.03 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with such specified person;
(b) "business day" means any day on which both the principal offices
of the SEC in Washington, D.C. are open to accept filings, or, in the case
of determining a date when any payment is due, any day (other than a
Saturday or a Sunday) on which banks are not required or authorized to
close in California;
(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 and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(d) "Environmental Laws" means any federal, state, local or foreign
laws and any enforceable judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to (A) releases or threatened releases of Hazardous Substances or
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materials containing Hazardous Substances; (B) the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Substances or
materials containing Hazardous Substances; or (C) otherwise relating to
pollution or protection of the environment, health, safety or natural
resources;
(e) "Hazardous Substances" means (i) those substances defined in or
regulated under the following federal statutes and their state counterparts
and all regulations thereunder: the Hazardous Materials Transportation Act,
the Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act, the Safe
Drinking Water Act, the Atomic Energy Act, the Federal Insecticide,
Fungicide, and Rodenticide Act and the Clean Air Act; (ii) petroleum and
petroleum products, including crude oil and any fractions thereof; (iii)
natural gas, synthetic gas, and any mixtures thereof; (iv) polychlorinated
biphenyls, asbestos and radon; (v) any other contaminant; and (vi) any
substance, material or waste regulated by any federal, state, local or
foreign Governmental Entity pursuant to any Environmental Law;
(f) "Intellectual Property" means all trademarks, trademark rights,
trade name, trade name rights, trade dress and other indications of origin,
brand names, certification rights, service marks, applications for
trademarks and for service marks, proprietary know-how and other
proprietary rights and information; inventions and discoveries, whether
patentable or not, in any jurisdiction; patents, patent rights and trade
secrets; writings and other works, whether copyrightable or not, in any
jurisdiction; and any similar intellectual property or proprietary rights;
(g) "knowledge" means, with respect to the Company, the actual
knowledge of any executive officer (determined in accordance with Rule
16a-1(f) under the Exchange Act) of the Company and with respect to Parent
or Merger Sub, the actual knowledge of any executive officer (determined in
accordance with Rule 16a-1(f) under the Exchange Act) of Parent or Merger
Sub, as the case may be;
(h) "Material Adverse Effect" means any circumstance, event,
occurrence, change or effect that materially and adversely affects the
business, operations, condition (financial or otherwise), assets (tangible
or intangible) or results of operations of the Company and the Company
Subsidiaries taken as a whole, or the Parent and the Parent Subsidiaries
taken as a whole, as the case may be (other than any adverse effects due to
or resulting from the public announcement of the transactions contemplated
hereby, the pendency of this Agreement or the consummation of the
transactions contemplated hereby (including, without limitation, loss of
customers, orders, suppliers or employees resulting therefrom) or general
market or industry conditions (including, without limitation, any change in
trading prices, in and of itself and without the occurrence of any other
Material Adverse Effect, of either Parent's or the Company's outstanding
publicly traded equities));
(i) "person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in section 13(d)(3) of the
Exchange Act), trust, association or entity or government, political
subdivision, agency or instrumentality of a government; and
(j) "subsidiary" or "subsidiaries" of any person means any
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary)
owns, directly or indirectly, more than 50% 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 9.04 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 as long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially 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
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original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated by this Agreement be
consummated as originally contemplated to the fullest extent possible.
SECTION 9.05 Assignment; Binding Effect; Benefit. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
SECTION 9.06 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 9.07 Governing Law. Except to the extent that Delaware law is
mandatorily applicable this Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware applicable to contracts
executed in and to be performed in that state and without regard to any
applicable conflicts of law principles.
SECTION 9.08 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.09 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 9.10 Entire Agreement. This Agreement (including the Exhibits, the
Company Disclosure Schedule and the Parent Disclosure Schedule) and the
Confidentiality Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
JDS UNIPHASE CORPORATION
By: /s/ JOZEF STRAUS
------------------------------------
Name: Jozef Straus
Title: Co-Chairman of the Board
and Chief Executive Officer
K2 ACQUISITION, INC.
By: /s/ CHRISTOPHER DEWEES
------------------------------------
Name: Christopher Dewees
Title: President
SDL, INC.
By: /s/ DONALD R. SCIFRES
------------------------------------
Name: Donald R. Scifres
Title: Chairman of the Board
and Chief Executive Officer
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<PAGE> 150
EXHIBIT 6.07
FORM OF AFFILIATE LETTER FOR
AFFILIATES OF THE COMPANY
[ ] [ ], 2000
JDS UNIPHASE CORPORATION
210 Baypointe Parkway
San Jose, California 95134
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of SDL, Inc., a Delaware corporation (the "Company"), as the
term "affiliate" is defined for purposes of paragraphs (c) and (d) of Rule 145
of the rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"). Pursuant to the terms of the Agreement and Plan of Merger
dated as of July 9, 2000 (the "Merger Agreement") among JDS Uniphase
Corporation, a Delaware corporation ("Parent"), K2 Acquisition, Inc., a Delaware
corporation ("Merger Sub"), and the Company, Merger Sub will be merged with and
into the Company (the "Merger"). Capitalized terms used in this letter agreement
without definition shall have the meanings assigned to them in the Merger
Agreement.
As a result of the Merger, I may receive common shares, par value $0.001
per share, of Parent (the "Parent Shares"). I would receive such Parent Shares
in exchange for shares owned by me of common stock, par value $0.001 per share,
of the Company (the "Company Shares").
1. I represent, warrant and covenant to Parent that in the event that I
receive any Parent Shares as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Parent Shares in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed, to the extent I felt necessary, with my counsel or counsel for
the Company the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
Parent Shares.
C. I have been advised that the issuance to me of the Parent Shares
pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, because at the time the Merger is submitted for a vote of the
stockholders of the Company, (a) I may be deemed to be an affiliate of the
Company and (b) the distribution by me of the Parent Shares has not been
registered under the Act, I may not sell, transfer or otherwise dispose of
the Parent Shares issued to me in the Merger unless (i) such sale, transfer
or other disposition is made in conformity with the volume and other
limitations of Rule 145 promulgated by the Commission under the Act, (ii)
such sale, transfer or other disposition has been registered under the Act
or (iii) in the opinion of counsel reasonably acceptable to Parent, such
sale, transfer or other disposition is otherwise exempt from registration
under the Act.
D. I understand that Parent is under no obligation to register the
sale, transfer or other disposition of the Parent Shares by me or on my
behalf under the Act or, except as provided in paragraph 2(A) below, to
take any other action necessary in order to make compliance with an
exemption from such registration available.
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E. I understand that there will be placed on the certificates for the
Parent Shares issued to me, or any substitutions therefor, a legend stating
in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF A LETTER AGREEMENT DATED
[ ] [ ], 2000 BETWEEN THE REGISTERED HOLDER HEREOF AND BUYER, A
COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF BUYER.
F. I understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE ACT APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE
HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE ACT AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE ACT.
G. Execution of this letter should not be considered an admission on
my part that I am an "affiliate" of the Company as described in the first
paragraph of this letter, or as a waiver of any rights that I may have to
object to any claim that I am such an affiliate on or after the date of
this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
Parent Shares pursuant to Rule 145 and, to the extent applicable, Rule 144
under the Act, Parent shall (a) use its reasonable efforts to (i) file, on
a timely basis, all reports and data required to be filed with the
Commission by it pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and (ii) furnish to me upon request a
written statement as to whether or not Parent has complied with such
reporting requirements during the 12 months preceding any proposed sale of
the Parent Shares by me pursuant to Rule 145, and (b) otherwise use its
reasonable efforts to permit such sales pursuant to Rule 145 and Rule 144.
Parent hereby represents to me that it has filed all reports required to be
filed with the Commission under Section 13 of the 1934 Act during the
preceding 12 months.
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B. It is understood and agreed that certificates with the legends
set forth in paragraphs 1(E) and 1(F) above will be substituted by
delivery of certificates without such legends if (i) one year shall have
elapsed from the date the undersigned acquired the Parent Shares
received in the Merger and the provisions of Rule 145(d)(2) are then
available to the undersigned, (ii) two years shall have elapsed from the
date the undersigned acquired the Parent Shares received in the Merger
and the provisions of Rule 145(d)(3) are then applicable to the
undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to Parent, or
a "no action" letter obtained by the undersigned from the staff of the
Commission, to the effect that the restrictions imposed by Rule 145
under the Act no longer apply to the undersigned.
Very truly yours,
Name:
Agreed and accepted this [ ] day
of [ ] [ ], 2000, by
JDS Uniphase Corporation
By:
Name:
Title:
A-42
<PAGE> 153
ANNEX B
OPINION OF THOMAS WEISEL PARTNERS LLC
DATED JULY 9, 2000
<PAGE> 154
THOMAS WEISEL PARTNERS
MERCHANT BANKING
July 9, 2000
Board of Directors
SDL, Inc.
80 Rose Orchard Way
San Jose, California 95134
Ladies and Gentlemen:
We understand that SDL, Inc., a Delaware corporation ("Company"), JDS
Uniphase Corporation, a Delaware corporation ("Parent"), and K2 Acquisition,
Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger
Sub"), propose to enter into an Agreement and Plan of Merger (the "Merger
Agreement"), pursuant to which Merger Sub will be merged with and into Company,
which will be the surviving entity (the "Merger"). Pursuant to the Merger, as
more fully described in the Merger Agreement, we understand that each
outstanding share of the common stock, par value $0.001 per share ("Company
Common Stock"), of Company will be converted into the right to receive 3.8 (the
"Exchange Ratio") shares of the common stock, par value $0.001 per share, of
Parent ("Parent Common Stock"). The Merger is intended to qualify as a
reorganization within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended, and to be recorded as a purchase
under generally accepted accounting principles. The terms and conditions of the
Merger are set forth in more detail in the Merger Agreement. You have requested
our opinion as to whether the Exchange Ratio is fair from a financial point of
view to the stockholders of Company (other than Parent and its affiliates) as of
the date hereof.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to Company and
Parent, including the consolidated financial statements for recent years and for
the most recent fiscal quarters for which published results are available and
certain other relevant financial and operating data relating to Company and
Parent made available to us from published sources and from the internal records
of Company and Parent; (ii) reviewed the financial terms and conditions of the
Merger Agreement dated as of July 9, 2000 (the "Merger Agreement"); (iii)
reviewed certain publicly available information concerning the trading of, and
the trading market for, Company Common Stock and Parent Common Stock; (iv)
compared Company and Parent from a financial point of view with certain other
companies in the optical components and systems industry or otherwise in the
broadband enabling industry which we deemed to be relevant; (v) considered the
financial terms, to the extent publicly available, of selected recent business
combinations of technology companies which we deemed to be comparable, in whole
or in part, to the Merger; (vi) reviewed and discussed with representatives of
the management of each of Company and Parent certain information of a business
and financial nature regarding Company and Parent, furnished to us by them,
including financial forecasts and related assumptions of Company and Parent;
(vii) made inquiries regarding and discussed the Merger and the Merger Agreement
and other matters related thereto with Company's counsel; and (viii) performed
such other analyses and examinations as we have deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. We have also assumed that there
have been no material changes in Company's or Parent's assets, financial
condition, results of operations, business or prospects since the respective
dates of their last financial statements made available to us and that neither
Parent nor Company is currently involved in any material transaction other than
the Merger, other publicly announced transactions, other preliminarily discussed
transactions confidentially disclosed to us and those activities undertaken in
the ordinary course of conducting their respective businesses. We have assumed
that the Merger will be consummated in a
B-1
<PAGE> 155
Board of Directors
SDL, Inc.
July 9, 2000
Page 2
manner that complies in all respects with the applicable provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended, and all other applicable federal and state
statutes, rules and regulations. In addition, we have not assumed responsibility
for making an independent evaluation, appraisal or physical inspection of any of
the assets or liabilities (contingent or otherwise) of Company or Parent, nor
have we been furnished with any such appraisals. Finally, our opinion is based
on economic, monetary and market and other conditions as in effect on, and the
information made available to us as of, the date hereof. Accordingly, although
subsequent developments may affect this opinion, we have not assumed any
obligation to update, revise or reaffirm this opinion.
As you are aware, we were not retained to nor did we advise Company with
respect to Company's underlying decision to proceed with or effect the Merger.
We have acted as financial advisor to Company in connection with the Merger
and will receive a fee for our services, including rendering this opinion. We
previously have provided investment banking services to Parent, including acting
as its financial advisor in connection with its acquisition of E-Tek Dynamics.
In the ordinary course of our business, we may actively trade the equity
securities of Company and Parent for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Exchange Ratio is fair from a financial point of
view to the stockholders of Company (other than Parent and its affiliates) as of
the date hereof.
We are not expressing an opinion regarding the price at which the shares of
Parent Common Stock may trade at any future time. The Exchange Ratio is a fixed
exchange ratio and, accordingly, the market value of the shares of Parent Common
Stock to be received by the stockholders of Company may vary significantly.
This opinion is directed to the Board of Directors of Company in its
consideration of the Merger and is not a recommendation to any stockholder as to
how such stockholder should vote with respect to the Merger. Further, this
opinion addresses only the financial fairness of the Exchange Ratio to the
stockholders and does not address the relative merits of the Merger and any
alternatives to the Merger, Company's underlying decision to proceed with or
effect the Merger, or any other aspect of the Merger. This opinion may not be
used or referred to by Company, or quoted or disclosed to any person in any
manner, without our prior written consent, which consent is hereby given to the
inclusion of this opinion in the Joint Proxy Statement/Prospectus to be filed
with the Securities and Exchange Commission in connection with the Merger. In
furnishing this opinion, we do not admit that we are experts within the meaning
of the term "experts" as used in the Securities Act and the rules and
regulations promulgated thereunder, nor do we admit that this opinion
constitutes a report or valuation within the meaning of Section 11 of the
Securities Act.
Very truly yours,
/s/ Thomas Weisel Partners LLC
THOMAS WEISEL PARTNERS LLC
B-2
<PAGE> 156
ANNEX C
OPINION OF CIBC WORLD MARKETS CORP.
DATED JULY 9, 2000
<PAGE> 157
[LETTERHEAD OF CIBC WORLD MARKETS CORP.]
July 9, 2000
The Board of Directors
JDS Uniphase Corporation
210 Baypointe Parkway
San Jose, California 95134
Members of the Board:
You have asked CIBC World Markets Corp. ("CIBC World Markets") to render a
written opinion ("Opinion") to the Board of Directors as to the fairness, from a
financial point of view, to JDS Uniphase Corporation ("JDS") of the Exchange
Ratio (defined below) provided for in the Agreement and Plan of Merger, dated as
of July 9, 2000 (the "Merger Agreement"), among JDS, K2 Acquisition, Inc., a
wholly owned subsidiary of JDS ("Sub"), and SDL, Inc. ("SDL"). The Merger
Agreement provides for, among other things, the merger of Sub with and into SDL
(the "Merger") pursuant to which each outstanding share of the common stock, par
value $0.001 per share, of SDL ("SDL Common Stock") will be converted into the
right to receive 3.8 shares (the "Exchange Ratio") of the common stock, par
value $0.001 per share, of JDS ("JDS Common Stock").
In arriving at our Opinion, we:
(a) reviewed the Merger Agreement;
(b) reviewed audited financial statements of JDS for the fiscal years ended June
30, 1997, June 30, 1998 and June 30, 1999, and audited financial statements
of SDL for the fiscal years ended December 31, 1997, December 31, 1998 and
December 31, 1999;
(c) reviewed unaudited financial statements of JDS for the nine months ended
March 31, 2000 and unaudited financial statements of SDL for the
three months ended March 31, 2000;
(d) reviewed publicly available financial forecasts relating to JDS and SDL as
well as certain adjustments to the publicly available financial forecasts
relating to SDL prepared by the management of JDS and estimates of certain
potential synergies and strategic benefits anticipated by the management of
JDS to result from the Merger;
(e) reviewed historical market prices and trading volume for JDS Common Stock
and SDL Common Stock;
(f) held discussions with the senior managements of JDS and SDL with respect to
the businesses and prospects for future growth of JDS and SDL;
(g) reviewed and analyzed certain publicly available financial data for certain
companies we deemed comparable to JDS and SDL;
(h) reviewed and analyzed certain publicly available information for
transactions that we deemed comparable to the Merger;
(i) reviewed public information concerning JDS and SDL; and
(j) performed such other analyses and reviewed such other information as we
deemed appropriate.
In rendering our Opinion, we relied upon and assumed, without independent
verification or investigation, the accuracy and completeness of all of the
financial and other information provided to or discussed with us by JDS, SDL and
their respective employees, representatives and affiliates. With respect to
publicly available financial forecasts relating to JDS and SDL which we have
reviewed and discussed with the managements of JDS and SDL, we assumed, at the
direction of the managements of JDS and SDL, without independent verification or
investigation, that such forecasts represent reasonable estimates and judgments
as to the future financial condition and operating results of JDS and SDL. With
respect to certain adjustments to the publicly
C-1
<PAGE> 158
The Board of Directors
JDS Uniphase Corporation
July 9, 2000
Page 2
available financial forecasts relating to SDL and estimates as to the potential
synergies and strategic benefits (including the amount, timing and achievability
thereof) anticipated to result from the Merger provided to or discussed with us
by the management of JDS, we assumed, at the direction of the management of JDS,
without independent verification or investigation, that such adjustments and
estimates were reasonably prepared on bases reflecting the best available
information, estimates and judgments of the management of JDS. We also have
assumed, with the consent of JDS, that the Merger will be treated as a tax-free
reorganization for federal income tax purposes and that, in the course of
obtaining the necessary regulatory or third party approvals for the Merger, no
limitations, restrictions or conditions will be imposed that would have a
material adverse effect on JDS, SDL or the contemplated benefits to JDS of the
Merger. We have neither made nor obtained any independent evaluations or
appraisals of the assets or liabilities, contingent or otherwise, of JDS or SDL.
We are not expressing any opinion as to the underlying valuation, future
performance or long-term viability of JDS or SDL, or the price at which the JDS
Common Stock will trade upon or subsequent to announcement or consummation of
the Merger. Our Opinion is necessarily based on the information available to us
and general economic, financial and stock market conditions and circumstances as
they exist and can be evaluated by us on the date hereof. It should be
understood that, although subsequent developments may affect this Opinion, we do
not have any obligation to update, revise or reaffirm the Opinion.
As part of our investment banking business, we are regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
We have acted as financial advisor to JDS with respect to the Merger and to the
Board of Directors with respect to this Opinion and will receive a fee for our
services, a significant portion of which is contingent upon consummation of the
Merger. CIBC World Markets and its affiliates have in the past provided services
to JDS and SDL, and currently are providing investment banking services to
certain stockholders of SDL, unrelated to the proposed Merger, for which
services we and our affiliates have received and may receive compensation. In
the ordinary course of business, CIBC World Markets and its affiliates may
actively trade securities of JDS and SDL for their own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
Based upon and subject to the foregoing, and such other factors as we deemed
relevant, it is our opinion that, as of the date hereof, the Exchange Ratio is
fair to JDS from a financial point of view. This Opinion is for the use of the
Board of Directors of JDS in its evaluation of the Merger and does not
constitute a recommendation as to how any stockholder should vote with respect
to any matters relating to the Merger.
Very truly yours,
/s/ CIBC WORLD MARKETS CORP.
CIBC WORLD MARKETS CORP.
C-2
<PAGE> 159
ANNEX D
OPINION OF BANC OF AMERICA SECURITIES LLC
DATED JULY 9, 2000
<PAGE> 160
[LETTERHEAD OF BANC OF AMERICA SECURITIES LLC]
July 9, 2000
The Board of Directors
JDS Uniphase Corporation
210 Baypointe Parkway
San Jose, California 95134
Members of the Board:
You have requested our opinion as to the fairness from a financial point of
view to JDS Uniphase Corporation, a Delaware corporation ("JDS"), of the
Exchange Ratio (defined below) provided for in connection with the proposed
merger (the "Merger") of a wholly owned subsidiary of JDS with and into SDL,
Inc., a Delaware corporation ("SDL"). Pursuant to the terms of the Agreement and
Plan of Merger, dated as of July 9, 2000 (the "Agreement"), among JDS, SDL and
K2 Acquisition, Inc., a Delaware corporation and wholly owned subsidiary of JDS,
SDL will become a wholly owned subsidiary of JDS, and stockholders of SDL will
receive for each share of the common stock, par value $0.001 per share, of SDL
("SDL Common Stock") held by them, other than shares held in treasury or held by
JDS or any subsidiary of JDS or SDL, 3.8 shares (the "Exchange Ratio") of the
common stock, par value $0.001 per share, of JDS ("JDS Common Stock"). The terms
and conditions of the Merger are more fully set out in the Agreement.
You have informed us, and we have assumed, that the Merger will be treated
as a tax-free reorganization and/or exchange pursuant to the Internal Revenue
Code of 1986, as amended.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
business and financial information of JDS and SDL, respectively;
(ii) reviewed publicly available financial forecasts relating to JDS and
SDL as well as certain adjustments to the publicly available financial forecasts
relating to SDL prepared by the management of JDS;
(iii) reviewed and discussed with senior executives of JDS information
relating to strategic, financial and operational benefits anticipated from the
Merger prepared by the management of JDS;
(iv) discussed the past and current operations, financial condition and
prospects of JDS with senior executives of JDS and discussed the past and
current operations, financial condition and prospects of SDL with senior
executives of SDL;
(v) analyzed the potential pro forma impact of the Merger on JDS's earnings
per share and certain other financial statistics;
(vi) reviewed information prepared or discussed with us by members of
senior managements of JDS and SDL relating to the relative contributions of JDS
and SDL to the combined company;
(vii) reviewed the reported prices and trading activity for JDS Common
Stock and SDL Common Stock;
(viii) compared the financial performance of JDS and SDL and the prices and
trading activity of JDS Common Stock and SDL Common Stock with that of other
publicly traded companies we deemed relevant;
(ix) compared financial terms of the Merger to financial terms, to the
extent publicly available, of other business combination transactions we deemed
relevant;
(x) participated in discussions and negotiations among representatives of
JDS and SDL and their financial and legal advisors;
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<PAGE> 161
The Board of Directors
JDS Uniphase Corporation
July 9, 2000
Page 2
(xi) reviewed the Agreement; and
(xii) performed other analyses and considered other factors as we have
deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the financial and other information reviewed by us
for the purposes of this opinion. With respect to publicly available financial
forecasts relating to JDS and SDL which we have reviewed and discussed with the
managements of JDS and SDL, we assumed, at the direction of the managements of
JDS and SDL, without independent verification or investigation, that such
forecasts represent reasonable estimates and judgments as to the future
financial condition and operating results of JDS and SDL. With respect to
certain adjustments to the publicly available financial forecasts relating to
SDL and estimates as to the potential synergies and strategic benefits
(including the amount, timing and achievability thereof) anticipated to result
from the Merger provided to or discussed with us by the management of JDS, we
assumed, at the direction of the management of JDS, without independent
verification or investigation, that such adjustments and estimates were
reasonably prepared on bases reflecting the best available information,
estimates and judgments of the management of JDS. We also assumed with the
consent of JDS that, in the course of obtaining the necessary regulatory or
third party approvals for the Merger, no limitations, restrictions or conditions
will be imposed that would have a material adverse effect on JDS, SDL or the
contemplated benefits to JDS of the Merger. We have not made any independent
valuation or appraisal of the assets or liabilities, contingent or otherwise, of
JDS or SDL, nor have we been furnished with any such appraisals.
We have acted as financial advisor to JDS in connection with the Merger and
will receive a fee for our services, a portion of which is contingent upon the
consummation of the Merger. In the past, Banc of America Securities LLC or its
affiliates have provided financial advisory and financing services for JDS and
have received fees for the rendering of these services. In the ordinary course
of our businesses, we and our affiliates may actively trade the debt and equity
securities of JDS and SDL for our own account or for the accounts of customers,
and, accordingly, we or our affiliates may at any time hold long or short
positions in such securities.
It is understood that this letter is for the benefit and use of the Board
of Directors of JDS in connection with and for the purposes of its evaluation of
the Merger. In furnishing this opinion, we do not admit that we are experts
within the meaning of the term "experts" as used in the Securities Act of 1933,
as amended (the "Securities Act") and the rules and regulations promulgated
thereunder, nor do we admit that this opinion constitutes a report or valuation
within the meaning of Section 11 of the Securities Act. Our opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to us as of, the date hereof. It should be
understood that subsequent developments may affect this opinion and we do not
have any obligation to update, revise or reaffirm this opinion. This opinion
does not in any manner address the prices at which JDS Common Stock will trade
upon or following the announcement or consummation of the Merger. In addition,
we express no opinion or recommendation as to how the stockholders of JDS and
SDL should vote at the stockholders' meetings held in connection with the
Merger.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio provided for in the proposed Merger is fair from
a financial point of view to JDS.
Very truly yours,
BANC OF AMERICA SECURITIES LLC
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<PAGE> 162
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.
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.
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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.
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
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<PAGE> 164
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.
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.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See Exhibit Index.
(b) Not Applicable.
(c) Opinions of Thomas Weisel Partners LLC, CIBC World Markets Corp., and
Banc of America Securities LLC attached as Annexes B, C and D, respectively, 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;
(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.
II-4
<PAGE> 166
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 November 17, 2000.
JDS Uniphase Corporation
By: /s/ JOZEF STRAUS, PH.D.
------------------------------------
Jozef Straus, Ph.D.
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 November 17, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ JOZEF STRAUS, PH.D. Chief Executive Officer and
----------------------------------------------------- Co-Chairman of the Board of
Jozef Straus, Ph.D. Directors
(Principal Executive Officer)
* Co-Chairman of the Board of
----------------------------------------------------- Directors
Martin A. Kaplan
/s/ ANTHONY R. MULLER Executive Vice President,
----------------------------------------------------- Chief Financial Officer and
Anthony R. Muller Secretary
(Principal Financial and Accounting
Officer)
* Director
-----------------------------------------------------
Bruce D. Day
* Director
-----------------------------------------------------
Peter A. Guglielmi
* Director
-----------------------------------------------------
Robert E. Enos
* Director
-----------------------------------------------------
John A. MacNaughton
* Director
-----------------------------------------------------
Wilson Sibbett, Ph.D.
* Director
-----------------------------------------------------
Casimir S. Skrzypczak
</TABLE>
II-5
<PAGE> 167
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Director
-----------------------------------------------------
William J. Sinclair
* Director
-----------------------------------------------------
Donald J. Listwin
*By: /s/ ANTHONY R. MULLER
-------------------------------------------------
Anthony R. Muller
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 168
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of July 9, 2000, by
and among the Registrant, K2 Acquisition, Inc. and SDL, Inc.
(included as Annex A to the proxy statement-prospectus filed
as 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 Sullivan & Cromwell, together with consent.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Ernst & Young LLP, independent auditors.
23.3 Consent of Arthur Andersen, independent auditors.
23.4 Consent of Arthur Andersen, independent auditors.
23.5 Consent of Deloitte & Touche LLP, independent auditors.
23.6 Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.7 Consent of KPMG LLP, independent auditors.
23.8 Consent of Deloitte & Touche LLP, independent auditors.
23.9 Consent of Grant Thornton LLP, independent certified public
accountants.
23.10 Consent of Morrison & Foerster LLP (included as part of its
opinions filed as
Exhibits 5.1 and 8.1).
23.11 Consent of Sullivan & Cromwell (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 September 7, 2000).
99.1* Form of Proxy of SDL, Inc.
99.2* Form of Proxy of JDS Uniphase Corporation.
99.3* Consent of Donald R. Scifres, Ph.D.
99.4* Consent of Thomas Weisel Partners LLC (included as part of
its opinion included as Annex B to the proxy-statement
prospectus).
99.5* Consent of CIBC World Markets Corp.
99.6* Consent of Banc of America Securities LLC.
</TABLE>
-------------------------
* Previously filed.
