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Form S-4
Delaware | 3577 | 77-0409517 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Nancy H. Wojtas Cooley Godward Kronish LLP Five Palo Alto Square 3000 El Camino Real Palo Alto, CA94306-2155 (650) 843-5000 | Cliff Moore, Esq. Vice President and General Counsel Foundry Networks, Inc. 4980 Great America Parkway Santa Clara, CA 95054 (408) 207-1700 | Steven J. Tonsfeldt Heller Ehrman LLP 275 Middlefield Road Menlo Park, CA 94025 (650) 324-7000 |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
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THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. BROCADE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROXY STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. |
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FOUNDRY NETWORKS, INC. | BROCADE COMMUNICATIONS SYSTEMS, INC. | |
4980 Great America Parkway | 1745 Technology Drive | |
Santa Clara, CA 95054 | San Jose, CA 95110 | |
Attention: Investor Relations | Attention: Investor Relations | |
Telephone:(408) 207-1399 | Telephone: (408) 333-6758 |
• | through the Internet by visiting a website established for that purpose at www.investorvote.com/FDRY and following the instructions; or | |
• | by telephone by calling the toll-free number 1-800-652-8683 in the United States, Puerto Rico or Canada on a touch-tone phone and following the recorded instructions. |
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Santa Clara, CA 95054
(408) 207-1700
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EXHIBIT 99.2 |
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Q: | Why am I receiving this proxy statement/prospectus? | |
A: | Brocade has agreed to acquire Foundry under the terms of an Agreement and Plan of Merger, dated as of July 21, 2008, among Foundry Networks, Inc., Brocade Communications Systems, Inc. and Falcon Acquisition Sub, Inc., a wholly-owned subsidiary of Brocade. We refer to the Agreement and Plan of Merger as the merger agreement in this proxy statement/prospectus. Please see “Agreements Related to the Merger — The Merger Agreement” beginning on page 95 of this proxy statement/prospectus for a description of the material terms of the merger agreement. A copy of the merger agreement is attached to this proxy statement/prospectus as Annex A. | |
To complete the merger, Foundry stockholders must adopt the merger agreement, and all other conditions to the completion of the merger must be satisfied or waived. Foundry will hold a special meeting of its stockholders to seek the adoption of the merger agreement. | ||
This proxy statement/prospectus contains or incorporates by reference important information about both Brocade and Foundry, the merger, the merger agreement and the special meeting of the stockholders of Foundry. You should read this proxy statement/prospectus carefully. | ||
If you are a stockholder of Foundry, your vote is very important. We encourage you to vote as soon as possible. The enclosed voting materials allow you to vote your Foundry shares without attending the Foundry special meeting. For more specific information on how to vote, please see the questions and answers below and the section entitled “The Special Meeting of Foundry Stockholders — How You Can Vote” beginning on page 62 of this proxy statement/prospectus. | ||
Q: | What will happen in the merger? | |
A: | Pursuant to the terms of the merger agreement, Falcon Acquisition Sub, Inc., a wholly-owned subsidiary of Brocade, will merge with and into Foundry, and Foundry will survive the merger and continue as a wholly-owned subsidiary of Brocade. | |
At the effective time of the merger, each outstanding share of Foundry common stock will be converted into the right to receive a combination of $18.50 in cash, without interest, and 0.0907 of a share of Brocade common stock, par value $0.001 per share, subject to adjustment for stock splits, stock dividends and similar events. In lieu of any fractional share of Brocade common stock resulting from the exchange, each Foundry stockholder will be entitled to receive an amount of cash equal to the value of the fractional share remaining after aggregating all of the shares of Brocade common stock issuable to such stockholder pursuant to the merger. | ||
Certain outstanding Foundry stock options and restricted stock units to be identified by Brocade prior to the effective time of the merger will vest in full and be cashed out at the effective time of the merger based on the cash equivalent of the per-share merger consideration derived from a formula set forth in the merger agreement. All other outstanding Foundry stock options and restricted stock units will, at the effective time of the merger and subject to applicable withholding requirements, be assumed by Brocade or replaced with reasonably equivalent Brocade equity awards based on an exchange ratio derived from the per-share merger consideration as more fully set forth in the merger agreement. | ||
Q: | What stockholder approval is required to complete the merger? | |
A: | To adopt the merger agreement and complete the merger, a majority of the outstanding shares of Foundry common stock entitled to vote at the special meeting must vote “FOR” adoption of the merger agreement. |
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Q: | When do you expect the merger to be completed? | |
A: | Brocade and Foundry are working to complete the merger in the fourth quarter of calendar year 2008. However, it is possible that factors outside of the control of Brocade and Foundry could require them to complete the merger at a later time or not complete it at all. | |
Q: | Where can I find more information about Brocade and Foundry? | |
A: | You can find more information about Brocade and Foundry from reading this proxy statement/prospectus and the various sources described in this proxy statement/prospectus under the section entitled “Where You Can Find More Information” beginning on page 143 of this proxy statement/prospectus. | |
Q: | What percentage of Brocade capital stock will former stockholders of Foundry own after the merger? |
A: | Following the merger, the former stockholders of Foundry will own approximately 3.51% of the shares of outstanding capital stock of Brocade. The foregoing calculation is based on 371,859,224 shares of Brocade common stock outstanding as of September 18, 2008 and 149,286,926 shares of Foundry common stock outstanding as of September 18, 2008 and does not include the effect of outstanding options, restricted stock units or other stock-based awards to purchase Brocade or Foundry common stock. |
Q: | Will Brocade stockholders be required to vote regarding the merger? | |
A: | No. A vote by Brocade stockholders is not required to complete the merger, and the approval of Brocade stockholders is not being solicited. Therefore, a copy of this proxy statement/prospectus is not being delivered to Brocade stockholders. | |
Q: | Will Brocade stockholders receive any shares as a result of the merger? | |
A: | No. Brocade stockholders will continue to hold the Brocade shares they currently own. | |
Q: | Who can help answer my questions about the merger? | |
A: | If you have questions about the merger, you should contact: |
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FOUNDRY STOCKHOLDERS
Q: | What do I need to do now? | |
A: | If you are a Foundry stockholder, after you carefully read this proxy statement/prospectus, mail your signed proxy card in the enclosed return envelope, or submit your proxy by telephone or on the Internet in accordance with the instructions on the proxy card. In order to assure that your vote is recorded, please vote your proxy as soon as possible even if you currently plan to attend the meeting in person. If you own your shares in “street name” through a broker, bank or other nominee, you must instruct your broker, bank or other nominee how to vote your shares using the enclosed voting instruction card. Internet and telephone voting is available in accordance with the instructions on the voting instruction card. | |
Q: | Why is my vote important? | |
A: | If you do not return your proxy card or submit your proxy by telephone or through the Internet or vote in person at the special meeting, your failure to vote will have the same effect as a vote against adoption of the merger agreement. | |
Q: | How do I instruct my broker, bank or other nominee to vote in connection with the adoption of the merger agreement? | |
A: | If your shares are held by a broker, bank or other nominee, you must follow the instructions on the form you receive from your broker, bank or other nominee in order for your shares to be voted. Please follow their instructions carefully. Also, please note that if the holder of record of your shares is a broker, bank or other nominee and you wish to vote at the special meeting, you must request a legal proxy from the bank, broker or other nominee that holds your shares and present that proxy and proof of identification at the special meeting to vote your shares. Based on the instructions provided by the broker, bank or other nominee, “street name” stockholders may generally vote by mail, by methods listed on the voting instruction card or in person with a proxy from the record holder. | |
Q: | If my shares are held in “street name,” will my broker, bank or other nominee vote my shares for me? | |
A: | If you do not provide your broker, bank or other nominee with instructions on how to vote your “street name” shares, your broker, bank or other nominee will not be permitted to vote them for the adoption of the merger agreement. | |
Q: | If my shares are held in “street name,” what if I fail to instruct my broker, bank or other nominee? | |
A: | If you fail to instruct your broker, bank or other nominee to vote your shares and the broker, bank or other nominee submits an unvoted proxy, the resulting “broker non-votes” will be counted toward a quorum at the respective special meeting, but they will not be voted and they will have the consequences set forth above under “Why is my vote important?” | |
Q: | Can I change my vote after I have mailed my proxy card? | |
A: | You can change your vote at any time before your proxy card is voted at the Foundry special meeting. You can do this in one of four ways: | |
• delivering a valid, later-dated proxy by mail, or a later-dated proxy by telephone or Internet; | ||
• delivering a signed written notice to Foundry’s Secretary before the meeting that you have revoked your proxy; | ||
• voting at a later date by telephone or by using the Internet; or | ||
• voting by ballot at the Foundry special meeting. | ||
Your attendance at the special meeting alone will not revoke your proxy. | ||
If you have instructed a broker, bank or other nominee to vote your shares by executing a voting instruction card or by using the telephone or Internet, you must follow directions from your broker, bank or other nominee to change those instructions. |
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Q: | Should I send in my stock certificates now? | |
A: | No. If Foundry stockholders approve adoption of the merger agreement, after the merger is completed, Brocade’s exchange agent will send Foundry stockholders written instructions for exchanging their stock certificates. | |
Q: | Who is paying for this proxy solicitation? | |
A: | Brocade and Foundry will share equally the expenses incurred in connection with the filing, printing and mailing of this proxy statement/prospectus. Foundry will be responsible for any fees incurred in connection with the solicitation of proxies for the Foundry special meeting. Foundry may also reimburse brokerage houses and other custodians, nominees and fiduciaries for their costs of forwarding proxy and solicitation materials to beneficial owners. | |
Q: | What will I receive upon completion of the merger? | |
A: | If the merger is completed, you will be entitled to receive a combination of $18.50 in cash, without interest, and 0.0907 of a share of Brocade common stock for each share of Foundry common stock that you hold, subject to adjustment for stock splits, stock dividends and similar events. In lieu of any fractional share of Brocade common stock resulting from the exchange, each Foundry stockholder will also be entitled to receive an amount of cash equal to the value of the fractional share remaining after aggregating all of the shares of Brocade common stock issuable to such stockholder pursuant to the merger. | |
Q: | What will happen to my stock options and restricted stock units? | |
A: | Certain outstanding Foundry stock options and restricted stock units to be identified by Brocade prior to the effective time of the merger will vest in full and be cashed out at the effective time of the merger based on the cash equivalent of the per-share merger consideration derived from a formula set forth in the merger agreement, and subject to applicable withholding requirements. All other outstanding Foundry stock options and restricted stock units will, at the effective time of the merger, be assumed by Brocade or replaced with reasonably equivalent Brocade equity awards based on an exchange ratio derived from the per-share merger consideration as more fully set forth in the merger agreement. | |
Q: | How will the merger affect my participation in the Foundry employee stock purchase plan? | |
A: | Prior to the effective time of the merger, Brocade will elect to either convert rights to purchase Foundry common stock under the Foundry employee stock purchase plan, or Foundry ESPP, into rights to purchase shares of Brocade common stock or else cause the Foundry ESPP to be terminated prior to the effective time of the merger. Brocade may make different elections regarding the Foundry ESPP as it applies to participants in the United States and in foreign jurisdictions. | |
If Brocade elects to convert the Foundry ESPP rights into rights to purchase Brocade common stock, the Foundry ESPP rights will be assumed by Brocade or replaced with reasonably equivalent rights to purchase Brocade common stock based on an exchange ratio derived from the per-share merger consideration set forth in the merger agreement. | ||
If Brocade elects to cause the Foundry ESPP to be terminated prior to the effective time of the merger, Foundry will apply the funds credited under the Foundry ESPP within each participant’s payroll withholding account to the purchase of Foundry common stock in accordance with the terms of the Foundry ESPP and such shares of Foundry common stock will be exchanged in the merger for the same per-share merger consideration as other shares of Foundry common stock. | ||
Q: | What will happen to my restricted stock? | |
A: | Each share of Foundry restricted common stock that is outstanding at the effective time of the merger and is unvested or subject to a risk of forfeiture, a repurchase option or other condition pursuant to an applicable restricted stock purchase agreement or other agreement with Foundry will be exchanged into the right to receive a combination of $18.50 in cash, without interest, and 0.0907 of a share of Brocade common stock, subject to adjustment for stock splits, stock dividends and similar events. However, unless otherwise provided under an applicable stock purchase agreement or other agreement with Foundry, the cash and shares of Brocade common stock to be received in exchange for such shares of Foundry restricted common stock will remain unvested and continue to be subject to the same repurchase option, risk of forfeiture or other conditions. Such cash and shares |
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of Brocade common stock will be held by Brocade until the repurchase option, risk of forfeiture or other condition lapses or otherwise terminates. | ||
Q: | What are the material federal income tax consequences of the merger to Foundry stockholders? | |
A: | We expect that the merger will be a fully taxable transaction for U.S. federal income tax purposes. Accordingly, each Foundry stockholder will generally recognize gain or loss as a result of the merger equal to the difference between the amount of cash and the fair market value of Brocade common stock received by the stockholder in the merger and the stockholders’ adjusted tax basis in the Foundry common stock surrendered in the merger. Generally, if a stockholder has held the shares for more than one year, any gain will be characterized as long-term capital gain. The deductibility of capital losses is subject to limitations. | |
For more information concerning the U.S. federal income tax consequences of the merger, please see the section entitled “Proposal No. 1 — The Merger — Material United States Federal Income Tax Consequences of the Merger” beginning on page 91 of this proxy statement/prospectus. | ||
Tax matters are very complicated and the consequences of the merger to any particular Foundry stockholder will depend on that stockholder’s particular facts and circumstances. Foundry stockholders are strongly urged to consult their own tax advisors to determine their own tax consequences from the merger. | ||
Q: | Am I entitled to appraisal rights? | |
A: | Under Delaware law, Foundry stockholders who timely submit a written demand for appraisal of their shares and who perfect their appraisal rights by complying with the other applicable statutory procedures will be entitled to be paid the fair value of their shares of Foundry common stock in connection with the merger in accordance with Delaware law. Please see the section entitled “Proposal No. 1 — The Merger — Appraisal Rights” beginning on page 88 of this proxy statement/prospectus. | |
Q: | When and where is the Foundry special meeting? |
A: | The special meeting of Foundry stockholders will begin promptly at 10:00 a.m., local time, on October 24, 2008, at the Hilton Santa Clara Hotel, located at 4949 Great America Parkway, Santa Clara, California 95054. Check-in will begin at 9:00 a.m. Please allow ample time for the check-in procedures. |
Q: | Where will my shares of Brocade common stock be listed? | |
A: | Brocade will apply to have the shares of Brocade common stock that will be issued to the Foundry stockholders pursuant to the merger approved for listing on the NASDAQ Global Select Market. Brocade common stock currently trades on the NASDAQ Global Select Market under the symbol “BRCD.” | |
Q: | Can I attend the Foundry special meeting? |
A: | You are entitled to attend the special meeting only if you were a Foundry stockholder as of the close of business on September 18, 2008, the record date for the Foundry special meeting, or you hold a valid proxy for the special meeting. You should be prepared to present valid government-issued photo identification for admittance. In addition, if you are a record holder, your name will be verified against the list of record holders on the record date prior to being admitted to the meeting. If you are not a record holder but hold shares through a broker, bank or other nominee (i.e., in “street name”), you should provide proof of beneficial ownership on the record date, such as your most recent account statement prior to September 18, 2008, or other similar evidence of ownership. If you do not provide valid government-issued photo identification or comply with the other procedures outlined above upon request, you may not be admitted to the special meeting. |
Q: | How does the Foundry board of directors recommend that I vote? | |
A: | After careful consideration, the Foundry board of directors unanimously recommends that Foundry stockholders vote “FOR” adoption of the merger agreement and “FOR” adjournment of the Foundry special meeting, if necessary. For a description of the reasons underlying the recommendation of the Foundry board of directors, see the section entitled “Proposal No. 1 — The Merger — Consideration of the Merger by the Foundry Board of Directors” beginning on page 72 of this proxy statement/prospectus. | |
Q: | What is the vote of Foundry stockholders required to adopt the merger agreement? | |
A: | The affirmative vote of a majority of the outstanding shares of Foundry common stock entitled to vote at the special meeting is required to adopt the merger agreement. Pursuant to voting agreements entered into in |
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connection with the merger, the directors of Foundry have agreed to vote their shares of Foundry common stock in favor of adoption of the merger agreement. As of the record date for the Foundry special meeting, the directors of Foundry collectively owned an aggregate of 11,019,223 million shares of Foundry common stock entitled to vote at the special meeting, or approximately 7.4% of the total outstanding shares of Foundry common stock entitled to vote at the special meeting. In addition to the shares of Foundry common stock that are subject to the voting agreements, as of the record date for the special meeting, Brocade owned and was entitled to vote an aggregate of 5,929,938 shares of Foundry common stock, or approximately 3.97% of the total outstanding shares of Foundry common stock as of the record date. Brocade acquired its shares of Foundry common stock in the open market following the announcement of the merger and intends to vote them “FOR” adoption of the merger agreement and “FOR” adjournment of the Foundry special meeting, if necessary. |
Q: | How can I vote? | |
A: | Registered stockholders of Foundry as of the record date may vote in person at the special meeting or by one of the following methods: | |
• complete, sign and date the enclosed proxy card and return it in the prepaid envelope provided; | ||
• call the toll-free telephone number on the proxy card and follow the recorded instructions; or | ||
• visit an Internet website established for that purpose at www.investorvote.com/FDRY and following the instructions. | ||
Stockholders who hold shares of Foundry common stock in “street name” may vote by following the instructions provided by their broker, bank or other nominee, including by one of the following methods: | ||
• complete, sign, date and return your voting instruction card in the enclosed pre-addressed envelope; | ||
• other methods listed on your voting instruction card or other information forwarded by your bank, broker or other nominee regarding whether you may vote by telephone or electronically on the Internet; or | ||
• in person at the special meeting with a legal proxy from your bank, broker or other nominee. Please consult the voting instruction card sent to you by your bank, broker or other nominee to determine how to obtain a legal proxy in order to vote in person at the special meeting. | ||
For a more detailed explanation of the voting procedures, please see the section entitled “The Special Meeting of Foundry Stockholders — How You Can Vote” beginning on page 62 of this proxy statement/prospectus. | ||
Q: | What happens if I do not indicate how to vote on my proxy card? | |
A: | If you sign and send in your proxy card and do not indicate how you want to vote, your proxy will be counted as a vote “FOR” adoption of the merger agreement and “FOR” adjournment of the Foundry special meeting, if necessary. | |
Q: | Who can help answer my questions? | |
A: | If you would like additional copies of this proxy statement/prospectus, or if you have questions about the merger, including the procedures for voting your shares, you should contact by letter, phone or email: |
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• | solicit, initiate, knowingly encourage, induce or knowingly facilitate the making, submission or announcement of any acquisition proposal or acquisition inquiry, each as defined in the merger agreement; | |
• | furnish any nonpublic information regarding Foundry or any of its subsidiaries to any person in connection with or in response to an acquisition proposal or acquisition inquiry; | |
• | engage in discussions or negotiations with any person with respect to any acquisition proposal or acquisition inquiry, except as provided in the merger agreement; | |
• | approve, endorse or recommend any acquisition proposal or acquisition inquiry; or | |
• | enter into any letter of intent or similar document or any contract contemplating or otherwise relating to any acquisition transaction, as defined in the merger agreement. |
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• | with respect to certain executive officers of Foundry (other than Bobby R. Johnson, Jr., its chief executive officer): |
• | the eligibility to receive certain severance payments in the event the executive officer’s employment is terminated by Foundry without “cause” or is terminated by the executive officer for “good reason” (as such terms are defined in the applicable agreement) during the period commencing three months prior to the completion date of the merger and ending on the first anniversary of the merger | |
• | partial acceleration of vesting of restricted stock units granted to the executive officer on July 31, 2008 in the event his or her employment is terminated by Foundry or Brocade in connection with the merger prior to July 31, 2009, and | |
• | full acceleration of vesting of all other Foundry stock-based awards held by the executive officer in the event the executive officer’s employment is terminated by Foundry without “cause” or is terminated by the executive officer for “good reason” during the period commencing three months prior to the completion date of the merger and ending on the first anniversary of the merger; |
• | the continued indemnification of the directors and officers of Foundry under existing indemnification agreements and Foundry’s charter documents and their continued coverage by directors’ and officers’ liability insurance after the merger; |
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• | the retention of some of the executive officers of Foundry as officers, employees or consultants of Brocade or its subsidiaries following the merger; and | |
• | with respect to the directors of Foundry, full acceleration of vesting of Foundry stock-based awards granted to them in their capacities as directors of Foundry. |
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Nine Months Ended | Fiscal Year Ended | |||||||||||||||||||||||||||
July 26, | July 28, | October 27, | October 28, | October 29, | October 30, | October 25, | ||||||||||||||||||||||
2008(1) | 2007 | 2007(2) | 2006(3) | 2005(4) | 2004(5) | 2003(6) | ||||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||
Net revenues | $ | 1,068,440 | $ | 896,879 | $ | 1,236,863 | $ | 750,592 | $ | 574,120 | $ | 596,265 | $ | 525,277 | ||||||||||||||
Cost of revenues | 453,204 | 418,877 | 575,451 | 305,184 | 251,161 | 268,974 | 241,163 | |||||||||||||||||||||
Gross margin | 615,236 | 478,002 | 661,412 | 445,408 | 322,959 | 327,291 | 284,114 | |||||||||||||||||||||
Operating expenses (benefits): | ||||||||||||||||||||||||||||
Research and development | 184,704 | 154,780 | 213,311 | 164,843 | 132,448 | 142,535 | 146,545 | |||||||||||||||||||||
Sales and marketing | 203,200 | 155,150 | 211,168 | 139,434 | 101,202 | 102,445 | 115,075 | |||||||||||||||||||||
General and administrative | 43,260 | 33,511 | 46,980 | 31,089 | 25,189 | 24,593 | 21,306 | |||||||||||||||||||||
Legal fees associated with indemnification obligations, SEC investigation, and other related costs, net | 22,399 | 38,446 | 46,257 | 13,654 | 14,027 | — | — | |||||||||||||||||||||
Provision for class action lawsuit | 160,000 | — | — | — | — | — | — | |||||||||||||||||||||
Provision for SEC settlement | — | — | — | 7,000 | — | — | — | |||||||||||||||||||||
Amortization of intangible assets | 23,664 | 16,810 | 24,719 | 2,294 | — | — | — | |||||||||||||||||||||
Acquisition and integration costs | — | 19,051 | 19,354 | 9,646 | — | — | — | |||||||||||||||||||||
Restructuring and facilities lease losses (benefits), net | (477 | ) | — | — | 3,775 | (670 | ) | 84,557 | 20,828 | |||||||||||||||||||
Settlement of an acquisition-related claim | — | — | — | — | — | 6,943 | — | |||||||||||||||||||||
In-process research and development | — | — | — | — | 7,784 | — | 134,898 | |||||||||||||||||||||
Total operating expenses | 636,750 | 417,748 | 561,789 | 371,735 | 279,980 | 361,073 | 438,652 | |||||||||||||||||||||
Income (loss) from operations | (21,514 | ) | 60,254 | 99,623 | 73,673 | 42,979 | (33,782 | ) | (154,538 | ) | ||||||||||||||||||
Interest and other income, net | 27,663 | 29,157 | 38,501 | 29,098 | 22,656 | 18,786 | 18,424 | |||||||||||||||||||||
Interest expense | (4,384 | ) | (4,741 | ) | (6,414 | ) | (7,082 | ) | (7,693 | ) | (10,677 | ) | (13,339 | ) | ||||||||||||||
Gain on repurchases of convertible subordinated debt | — | — | — | — | 2,318 | 5,613 | 11,118 | |||||||||||||||||||||
Gain (loss) on investments, net | (6,985 | ) | 1,240 | 13,205 | 2,663 | (5,062 | ) | 436 | 3,638 | |||||||||||||||||||
Income (loss) before provision for income taxes | (5,220 | ) | 85,910 | 144,915 | 98,352 | 55,198 | (19,624 | ) | (134,697 | ) | ||||||||||||||||||
Income tax provision (benefit) | (136,709 | ) | 41,058 | 68,043 | 30,723 | 12,077 | 14,070 | 11,852 | ||||||||||||||||||||
Net income (loss) | $ | 131,489 | $ | 44,852 | $ | 76,872 | $ | 67,629 | $ | 43,121 | $ | (33,694 | ) | $ | (146,549 | ) | ||||||||||||
Net income (loss) per share — basic | $ | 0.35 | $ | 0.13 | $ | 0.21 | $ | 0.25 | $ | 0.16 | $ | (0.13 | ) | $ | (0.58 | ) | ||||||||||||
Net income (loss) per share — diluted | $ | 0.34 | $ | 0.12 | $ | 0.21 | $ | 0.25 | $ | 0.16 | $ | (0.13 | ) | $ | (0.58 | ) | ||||||||||||
Shares used in per share calculation — basic | 376,455 | 353,627 | 362,070 | 269,602 | 268,176 | 260,446 | 250,610 | |||||||||||||||||||||
Shares used in per share calculation — diluted | 396,445 | 368,080 | 377,558 | 274,142 | 270,260 | 260,446 | 250,610 | |||||||||||||||||||||
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As of | As of | |||||||||||||||||||||||||||
July 26, | July 28, | October 27, | October 28, | October 29, | October 30, | October 25, | ||||||||||||||||||||||
2008(1) | 2007 | 2007(2) | 2006(3) | 2005(4) | 2004(5) | 2003(6) | ||||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||
Cash, cash equivalents, investments and restricted short-term investments | $ | 764,227 | $ | 806,175 | $ | 793,330 | $ | 582,554 | $ | 764,402 | $ | 736,908 | $ | 835,565 | ||||||||||||||
Working capital(7) | 498,598 | 447,019 | 502,499 | 428,233 | 317,819 | 434,162 | 355,644 | |||||||||||||||||||||
Total assets | 2,138,299 | 1,988,317 | 1,930,100 | 900,718 | 981,730 | 987,382 | 1,063,174 | |||||||||||||||||||||
Non-current liabilities associated with facilities lease losses | 16,929 | 21,802 | 25,742 | 11,105 | 12,481 | 16,799 | 16,518 | |||||||||||||||||||||
Convertible subordinated debt | 169,119 | 166,957 | 167,498 | — | 278,883 | 352,279 | 442,950 | |||||||||||||||||||||
Total stockholders’ equity | 1,306,694 | 1,286,555 | 1,266,658 | 616,230 | 508,847 | 445,652 | 447,868 |
Note: | Brocade reports its fiscal year on a 52/53-week period ending on the last Saturday in October of each year. Accordingly, the fiscal year end for fiscal years 2007, 2006 and 2005 were October 27, 28, and 29, respectively. As is customary for companies that use the 52/53-week convention, every fifth year contains a 53-week fiscal year. Fiscal years 2007, 2006 and 2005 were all 52-week fiscal years. |
(1) | The nine months ended July 26, 2008 include the release of the valuation allowance of deferred tax assets of $185.2 million. In addition, the nine months ended July 26, 2008 includes the provision for a class action lawsuit settlement of $160.0 million. | |
(2) | The fiscal year ended October 27, 2007 includes the impact of the acquisition of McDATA Corporation, which was completed in the second quarter of fiscal year 2007 (see Note 3, “Acquisitions,” of the Notes to Consolidated Financial Statements in Brocade’s Annual Report onForm 10-K for fiscal year ended October 27, 2007, which is incorporated by reference into this proxy statement/prospectus). In addition, in the fiscal year ended October 27, 2007, Brocade recorded a $13.2 million gain on investments on the disposition of portfolio investments primarily associated with the disposition of marketable strategic investments at amounts above the carrying value (see Note 16, “Gain (Loss) on Investments, net,” of the Notes to Consolidated Financial Statements in Brocade’s Annual Report onForm 10-K for fiscal year ended October 27, 2007, which is incorporated by reference into this proxy statement/prospectus). The fiscal year ended October 27, 2007 also includes net legal fees associated with applicable indemnification obligations, SEC investigation and other related costs of $46.3 million. Further, during the first quarter of fiscal year 2006, Brocade began active settlement discussions with the SEC’s Division of Enforcement regarding its financial restatements related to stock option accounting. As a result of these discussions, Brocade recorded a provision of $7.0 million for an estimated settlement expense in the fiscal year ended October 28, 2006. On May 31, 2007, the offer of settlement was approved by the SEC’s Commissioners. On August 27, 2007, final judgment approving the settlement was entered by the United States District Court for the Northern District of California and the $7.0 million settlement amount was released to the SEC. | |
(3) | The fiscal year ended October 28, 2006 includes the impact of the acquisition of NuView, Inc., which was completed in the second quarter of fiscal year 2006 (see Note 3, “Acquisitions,” of the Notes to Consolidated Financial Statements in Brocade’s Annual Report on Form10-K for fiscal year ended October 27, 2007, which is incorporated by reference into this proxy statement/prospectus). In addition, in the fiscal year ended October 28, 2006, Brocade recorded a $2.7 million gain on investments on the disposition of portfolio investments primarily associated with non-marketable private strategic investments (see Note 16, “Gain (Loss) on Investments, net,” of the Notes to Consolidated Financial Statements in Brocade’s Annual Report onForm 10-K for fiscal year ended October 27, 2007, which is incorporated by reference into this proxy statement/prospectus). The fiscal year ended October 28, 2006 also includes net legal fees associated with applicable indemnification obligations, SEC investigation and other related costs of $13.7 million. Further, during the first |
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fiscal quarter, Brocade began active settlement discussions with the SEC’s Division of Enforcement regarding its financial restatements related to stock option accounting. As a result of these discussions, Brocade recorded a provision of $7.0 million for an estimated settlement expense (see Note 9, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements in Brocade’s Annual Report onForm 10-K for fiscal year ended October 27, 2007, which is incorporated by reference into this proxy statement/prospectus). During the second fiscal quarter, Brocade recorded a charge of $3.8 million related to estimated facilities lease losses, net of expected sublease income (see Note 5, “Liabilities Associated with Facilities Lease Losses,” of the Notes to Consolidated Financial Statements in Brocade’s Annual Report on Form10-K for fiscal year ended October 27, 2007, which is incorporated by reference into this proxy statement/prospectus). Moreover, during the fourth fiscal quarter, Brocade recorded acquisition and integration costs for a total of $9.6 million related to prior acquisitions and the pending acquisition of McDATA. | ||
(4) | The fiscal year ended October 29, 2005 includes the impact of the acquisition of Therion Software Corporation, which was completed in the third quarter of fiscal year 2005. In connection with its acquisition of Therion, Brocade recorded in-process research and development expense of $7.8 million (see Note 3, “Acquisitions,” of the Notes to Consolidated Financial Statements in Brocade’s Annual Report onForm 10-K for fiscal year ended October 27, 2007, which is incorporated by reference into this proxy statement/prospectus). The fiscal year ended October 29, 2005 also includes Audit Committee internal review and net SEC investigation costs of $14.0 million. In January 2005, Brocade announced that its Audit Committee completed an internal review regarding historical stock option granting practices. Following the January 2005 Audit Committee internal review, on May 16, 2005, Brocade announced that additional information came to its attention that indicated that certain guidelines regarding stock option granting practices were not followed and Brocade’s Audit Committee had commenced an internal review of its stock option accounting focusing on leaves of absence and transition and advisory roles. Brocade’s Audit Committee review was completed in November 2005. In addition, in the fiscal year ended October 29, 2005, Brocade recorded a $5.1 million net loss on investments on the disposition of portfolio investments primarily associated with the defeasance of the indenture agreement relating to its 2% Convertible Notes (see Note 8, “Convertible Subordinated Debt,” of the Notes to Consolidated Financial Statements in Brocade’s Annual Report onForm 10-K for fiscal year ended October 27, 2007, which is incorporated by reference into this proxy statement/prospectus) and recorded a total gain of $2.3 million on repurchases of convertible subordinated debt. | |
(5) | The fiscal year ended October 30, 2004 includes the impact of restructuring costs of $9.0 million related to a restructuring plan implemented during the three months ended May 1, 2004. The fiscal year ended October 30, 2004 also includes a net lease termination charge of $75.6 million. During the three months ended January 24, 2004, Brocade purchased a previously leased building located near its San Jose headquarters for $106.8 million in cash. The $106.8 million consisted of $30.0 million for the purchase of land and a building and $76.8 million for a lease termination fee. In addition, in the fiscal year ended October 30, 2004, Brocade recorded a $6.9 million charge in settlement of a claim relating to its acquisition of Rhapsody Networks, or Rhapsody, and recorded a total of $5.6 million gain on repurchases of convertible subordinated debt. | |
(6) | The fiscal year ended October 25, 2003 includes the impact of the acquisition of Rhapsody, which was completed in the second quarter of fiscal year 2003. In connection with Brocade’s acquisition of Rhapsody, Brocade recorded in-process research and development expense of $134.9 million. The fiscal year ended October 25, 2003 also includes restructuring costs of $20.8 million, gain on repurchases of convertible subordinated debt of $11.1 million, and net gains on the disposition of non-marketable private strategic investments of $3.6 million. | |
(7) | The calculation of working capital for the fiscal year ended October 29, 2005 also includes the balance of convertible subordinated debt of $278.9 million. |
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Six Months Ended | Fiscal Year Ended | |||||||||||||||||||||||||||
June 30, | June 30, | December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
2008(1) | 2007(2) | 2007(3) | 2006(4) | 2005(5) | 2004(6) | 2003(7) | ||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||
Statement of Income Data: | ||||||||||||||||||||||||||||
Net revenues | $ | 310,734 | $ | 279,053 | $ | 607,205 | $ | 473,280 | $ | 403,856 | $ | 409,104 | $ | 399,628 | ||||||||||||||
Cost of revenues | 115,785 | 113,742 | 236,418 | 188,453 | 155,335 | 143,218 | 146,389 | |||||||||||||||||||||
Gross margin | 194,949 | 165,311 | 370,787 | 284,827 | 248,521 | 265,886 | 253,239 | |||||||||||||||||||||
Operating expenses | 159,224 | 145,967 | 287,921 | 256,304 | 186,507 | 186,560 | 215,325 | |||||||||||||||||||||
Income from operations | 35,725 | 19,344 | 82,866 | 28,523 | 62,014 | 79,326 | 37,914 | |||||||||||||||||||||
Interest and other income, net | 15,728 | 20,897 | 43,536 | 34,407 | 18,078 | 9,846 | 5,168 | |||||||||||||||||||||
Income before provision for income taxes and cumulative effect of change in accounting principle | 51,453 | 40,241 | 126,402 | 62,930 | 80,092 | 89,172 | 43,082 | |||||||||||||||||||||
Provision for income taxes | 19,221 | 15,518 | 45,259 | 24,671 | 26,530 | 31,380 | 12,066 | |||||||||||||||||||||
Income before cumulative effect of change in accounting principle | 32,232 | 24,723 | 81,143 | 38,259 | 53,562 | 57,792 | 31,016 | |||||||||||||||||||||
Cumulative effect of change in accounting principle, net of taxes | — | — | — | 439 | — | — | — | |||||||||||||||||||||
Net income | $ | 32,232 | $ | 24,723 | $ | 81,143 | $ | 38,698 | $ | 53,562 | $ | 57,792 | $ | 31,016 | ||||||||||||||
Net income per share — basic | $ | 0.22 | $ | 0.17 | $ | 0.55 | $ | 0.27 | $ | 0.38 | $ | 0.43 | $ | 0.25 | ||||||||||||||
Net income per share — diluted | $ | 0.21 | $ | 0.16 | $ | 0.52 | $ | 0.26 | $ | 0.37 | $ | 0.40 | $ | 0.23 | ||||||||||||||
Shares used in computing basic net income per share | 146,163 | 147,194 | 148,143 | 145,167 | 139,176 | 135,442 | 125,681 | |||||||||||||||||||||
Shares used in computing diluted net income per share | 150,219 | 153,668 | 155,520 | 150,509 | 143,974 | 143,363 | 137,476 |
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As of | As of | |||||||||||||||||||||||||||
June 30, | June 30, | December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
2008 | 2007 | 2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||
Cash, cash equivalents and investments | $ | 950,119 | $ | 920,855 | $ | 965,668 | $ | 886,433 | $ | 746,367 | $ | 617,441 | $ | 505,684 | ||||||||||||||
Working capital | 934,118 | 813,660 | 990,809 | 736,129 | 617,659 | 536,304 | 443,199 | |||||||||||||||||||||
Total assets | 1,224,731 | 1,160,704 | 1,238,831 | 1,097,637 | 940,965 | 830,516 | 691,682 | |||||||||||||||||||||
Long-term liabilities | 41,739 | 35,634 | 40,121 | 24,671 | 21,827 | 17,613 | 7,707 | |||||||||||||||||||||
Total stockholders’ equity | 1,046,249 | 1,004,928 | 1,058,649 | 958,095 | 811,930 | 722,663 | 622,020 |
(1) | Includes pre-tax stock-based compensation expense of $25.2 million. | |
(2) | Includes pre-tax stock-based compensation expense of $19.5 million and pre-tax stock option investigation costs of $5.6 million. | |
(3) | Includes pre-tax stock-based compensation expense of $46.0 million and pre-tax stock option investigation costs of $5.7 million. | |
(4) | Includes pre-tax stock-based compensation expense of $50.8 million, pre-tax stock option investigation costs of $7.4 million, and pre-tax operating expense of $5.5 million relating to Foundry’s litigation settlement with Alcatel-Lucent. | |
(5) | Includes pre-tax stock-based compensation expense of $4.6 million. | |
(6) | Includes pre-tax stock-based compensation benefit of $17.6 million and pre-tax operating expense of $30.2 million relating to Foundry’s litigation settlement with Nortel Networks Corporation. | |
(7) | Includes pre-tax stock-based compensation expense of $74.5 million. |
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CONDENSED COMBINED FINANCIAL DATA
Unaudited Pro Forma Condensed Combined Financial Data(1)
Nine Months | Fiscal Year | |||||||
Ended | Ended | |||||||
July 26, 2008 | October 27, 2007 | |||||||
(In thousands, except per share data) | ||||||||
Unaudited Pro Forma Condensed Combined Statement of Operations Data: | ||||||||
Net revenues | $ | 1,547,829 | $ | 2,000,157 | ||||
Income (loss) from operations | (28,689 | ) | 51,559 | |||||
Net income (loss) | 71,890 | (35,961 | ) | |||||
Net income (loss) per share: | ||||||||
Basic | $ | 0.18 | $ | (0.09 | ) | |||
Diluted | $ | 0.18 | $ | (0.09 | ) | |||
Weighted average number of common shares: | ||||||||
Basic | 390,062 | 404,672 | ||||||
Diluted | 410,052 | 404,672 |
As of July 26, | ||||
2008 | ||||
Unaudited Pro Forma Condensed Combined Balance Sheet Data: | ||||
Cash and cash equivalents, and investments | $ | 638,621 | ||
Working capital | 425,233 | |||
Total assets | 4,283,476 | |||
Long-term liabilities | 1,955,958 | |||
Total stockholders’ equity | 1,689,094 |
(1) | See the section entitled “Unaudited Pro Forma Financial Statements” beginning on page 120 of this prospectus/proxy statement. |
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Year Ended | Year Ended | Three Months Ended | Pro Forma | |||||||||||||||||
October 27, 2007 | December 31, 2007 | October 31, 2006 | Brocade & | Foundry | ||||||||||||||||
Brocade | Foundry | McDATA | Foundry | Equivalent(1) | ||||||||||||||||
Income (loss) per common share: | ||||||||||||||||||||
Basic | $ | 0.21 | $ | 0.55 | $ | (0.17 | ) | $ | (0.09 | ) | $ | (0.01 | ) | |||||||
Diluted | $ | 0.21 | $ | 0.52 | $ | (0.17 | ) | $ | (0.09 | ) | $ | (0.01 | ) |
Nine Months Ended | Nine Months Ended | Pro Forma | ||||||||||||||
July 26, 2008 | June 30, 2008 | Brocade & | Foundry | |||||||||||||
Brocade | Foundry | Foundry | Equivalent(1) | |||||||||||||
Income per common share: | ||||||||||||||||
Basic | $ | 0.35 | $ | 0.42 | $ | 0.18 | $ | 0.02 | ||||||||
Diluted | $ | 0.34 | $ | 0.41 | $ | 0.18 | $ | 0.02 | ||||||||
Book value per common share at period end | $ | 3.51 | $ | 7.22 | $ | 4.39 | $ | 0.40 | ||||||||
Shares used to compute book value per share (in thousands) | 371,827 | 144,870 | 384,967 | — |
(1) | The Foundry equivalent pro forma combined per share amounts are calculated by multiplying Brocade and Foundry combined pro forma share amounts by the exchange ratio in the merger of 0.0907 of a share of Brocade common stock for each share of Foundry common stock. |
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Equivalent Price | ||||||||||||||||||||||||
per Share of | ||||||||||||||||||||||||
Foundry Common | Brocade | Foundry Common | ||||||||||||||||||||||
Stock | Common Stock | Stock(1) | ||||||||||||||||||||||
High | Low | High | Low | High | Low | |||||||||||||||||||
July 21, 2008 | 13.69 | 13.26 | 8.42 | 8.19 | 19.26 | 19.24 | ||||||||||||||||||
September 22, 2008 | 18.28 | 17.85 | 6.78 | 6.24 | 19.11 | 19.07 |
(1) | The equivalent price per share amounts are calculated by adding (a) the cash portion of the merger consideration, or $18.50, to (b) the product of the price per share of Brocade common stock as of the relevant reference date multiplied by the exchange ratio in the merger agreement of 0.0907. |
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Brocade Common Stock | ||||||||
High | Low | |||||||
($) | ($) | |||||||
Year Ending October 25, 2008 | ||||||||
Fourth Fiscal Quarter (through September 22, 2008) | 7.58 | 6.30 | ||||||
Third Fiscal Quarter | 9.09 | 6.47 | ||||||
Second Fiscal Quarter | 8.17 | 6.31 | ||||||
First Fiscal Quarter | 9.54 | 6.15 | ||||||
Year Ending October 27, 2007 | ||||||||
Fourth Fiscal Quarter | 9.25 | 6.19 | ||||||
Third Fiscal Quarter | 9.77 | 7.37 | ||||||
Second Fiscal Quarter | 10.52 | 8.23 | ||||||
First Fiscal Quarter | 9.41 | 7.56 | ||||||
Year Ending October 28, 2006 | ||||||||
Fourth Fiscal Quarter | 8.92 | 5.01 | ||||||
Third Fiscal Quarter | 6.69 | 5.52 | ||||||
Second Fiscal Quarter | 6.97 | 4.56 | ||||||
First Fiscal Quarter | 4.63 | 3.44 |
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• | failure of customers to accept new products or to continue as customers of the combined company; | |
• | failure to successfully manage relationships with original equipment manufacturers, or OEMs, end-users, distributors and suppliers; | |
• | the loss of key employees; | |
• | failure to effectively coordinate sales and marketing efforts to communicate the capabilities of the combined company; | |
• | failure to combine product offerings and product lines quickly and effectively; | |
• | failure to successfully develop interoperability between the products of Brocade and Foundry; | |
• | failure to successfully develop new products and services on a timely basis that address the market opportunities of the combined company; | |
• | failure to compete effectively against companies already serving the broader market opportunities expected to be available to the combined company; | |
• | unexpected revenue attrition; | |
• | failure to qualify the combined company’s products with OEM customers on a timely basis or at all; | |
• | failure to successfully integrate and harmonize financial reporting and information technology systems of Brocade and Foundry; and | |
• | failure to effectively coordinate sales and marketing efforts to communicate the capabilities of the combined company. |
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• | Foundry may be required to pay Brocade a termination fee of $85 million if the merger is terminated under certain circumstances, or Brocade may be required to pay Foundry a termination fee of $85 million if the merger is terminated under certain other circumstances, all as described in the merger agreement; | |
• | Foundry will be required to reimburse expenses incurred by Brocade in connection with the merger and the other transactions contemplated by the merger agreement, up to a maximum of $10 million, if Foundry’s stockholders do not adopt the merger agreement by the requisite stockholder vote. | |
• | Brocade and Foundry will be required to pay certain costs relating to the merger, whether or not the merger is completed; | |
• | matters relating to the merger (including integration planning) may require substantial commitments of time and resources by Brocade and Foundry management, which could otherwise have been devoted to other opportunities that may have been beneficial to Brocade and Foundry, as the case may be. |
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• | with respect to certain executive officers of Foundry (other than its chief executive officer): |
• | the eligibility to receive certain severance payments in the event the executive officer’s employment is terminated by Foundry without “cause” or is terminated by the executive officer for “good reason” (as such terms are defined in the applicable agreement) during the period commencing three months prior to the completion date of the merger and ending on the first anniversary of the merger, | |
• | partial acceleration of vesting of restricted stock units granted to the executive officer on July 31, 2008 in the event his or her employment is terminated by Foundry or Brocade in connection with the merger prior to July 31, 2009, and |
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• | full acceleration of vesting of all other Foundry stock-based awards held by the executive officer in the event the executive officer’s employment is terminated by Foundry without “cause” or is terminated by the executive officer for “good reason” during the period commencing three months prior to the completion date of the merger and ending on the first anniversary of the merger; |
• | the continued indemnification of the directors and officers of Foundry under existing indemnification agreements and Foundry’s charter documents and their continued coverage by directors’ and officers’ liability insurance after the merger; | |
• | the retention of some of the executive officers of Foundry as officers, employees or consultants of Brocade or its subsidiaries following the merger; and | |
• | with respect to the directors of Foundry, full acceleration of vesting of Foundry stock-based awards granted to them in their capacities as directors of Foundry. |
• | Foundry would not realize the benefits it expects from becoming a part of a combined company with Brocade, including the potentially enhanced financial and competitive position; |
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• | activities relating to the merger and related uncertainties may divert Foundry’s management’s attention from its day-to-day business and cause disruptions among its employees and to its relationships with customers and business partners, thus detracting from Foundry’s ability to grow revenue and minimize costs and possibly leading to a loss of revenue and market position that it may not be able to regain if the merger does not occur; | |
• | the market price of Foundry’s common stock could decline following an announcement that the merger has been abandoned, to the extent that the current market price reflects a market assumption that the merger will be completed; | |
• | Foundry could be required to pay Brocade a termination fee and provide reimbursement to Brocade for certain costs incurred; | |
• | Foundry would remain liable for its costs related to the merger, such as legal and accounting fees and a portion of the investment banking fees; | |
• | Foundry may not be able to continue its present level of operations and therefore would have to scale back its present level of business and consider additional reductions in force; and | |
• | Foundry may not be able to take advantage of alternative business opportunities or effectively respond to competitive pressures. |
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• | Foundry’s reseller agreements generally do not require substantial minimum purchases; | |
• | Foundry’s customers can stop purchasing and its resellers can stop marketing its products at any time; and | |
• | Foundry’s reseller agreements generally are not exclusive and are for one-year terms, with no obligation of the resellers to renew the agreements. |
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• | seasonal reductions in business activity; | |
• | potential recessions in economies outside the United States; | |
• | adverse fluctuations in currency exchange rates; | |
• | difficulties in managing operations across disparate geographic areas; | |
• | export restrictions; | |
• | unexpected changes in regulatory requirements; | |
• | higher costs of doing business in foreign countries; | |
• | longer accounts receivable collection cycles; | |
• | potential adverse tax consequences; | |
• | difficulties associated with enforcing agreements through foreign legal systems; | |
• | infringement claims on foreign patents, copyrights, or trademark rights; | |
• | natural disasters and widespread medical epidemics; | |
• | military conflict and terrorist activities; and | |
• | political instability. |
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• | difficulties in the assimilation of products, operations, personnel and technologies of the acquired companies; | |
• | diversion of management’s attention from other business concerns; | |
• | disruptions to Foundry’s operations, including potential difficulties in completing ongoing projects in a timely manner; |
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• | risks of entering geographic and business markets in which Foundry has no or limited prior experience; | |
• | exposure to third party intellectual property infringement claims; and | |
• | potential loss of key employees of acquired organizations. |
• | negative customer reactions; | |
• | product liability claims; | |
• | negative publicity regarding Foundry and its products; |
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• | delays in or loss of market acceptance of Foundry’s products; | |
• | product returns; | |
• | lost sales; and | |
• | unexpected expenses to remedy defects or errors. |
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• | properly define the new products and services; | |
• | timely develop and introduce the new products and services; | |
• | differentiate Brocade’s new products and services from its competitors’ technology and product offerings; | |
• | address the complexities of interoperability of Brocade’s products with its installed base, OEM partners’ server and storage products and its competitors’ products; and | |
• | maintain high levels of product quality and reliability. |
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• | developing customer relationships both with new and existing customers; |
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• | expanding Brocade’s relationships with its existing OEM partners and end-users; | |
• | managing different sales cycles; | |
• | hiring qualified personnel with appropriate skill sets on a timely basis; and | |
• | establishing alternative routes to market and distribution channels. |
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• | difficulties in successfully integrating the acquired businesses; | |
• | revenue attrition in excess of anticipated levels if existing customers alter or reduce their historical buying patterns; | |
• | unanticipated costs, litigation and other contingent liabilities; | |
• | diversion of management’s attention from Brocade’s daily operations and business; | |
• | adverse effects on existing business relationships with suppliers and customers; | |
• | risks associated with entering into markets in which Brocade has limited, or no prior, experience; | |
• | potential loss of key employees; | |
• | inability to retain key customers, distributors, vendors and other business partners of the acquired business; | |
• | failure to successfully manage additional remote locations, including the additional infrastructure and resources necessary to support and integrate such locations; |
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• | assumption or incurrence of debt and contingent liabilities and related obligations to service such liabilities and Brocade’s ability to satisfy financial and other negative operating covenants; | |
• | additional costs such as increased costs of manufacturing and service costs; costs associated with excess or obsolete inventory; costs of employee redeployment; relocation and retention, including salary increases or bonuses; accelerated amortization of deferred equity compensation and severance payments; reorganization or closure of facilities; and taxes; advisor and professional fees and termination of contracts that provide redundant or conflicting services; | |
• | incurrence of significant exit charges if products acquired in business combinations are unsuccessful; | |
• | incurrence of acquisition-related costs or amortization costs for acquired intangible assets that could impact Brocade’s operating results; | |
• | potential write-down of goodwilland/or acquired intangible assets, which are subject to impairment testing on a regular basis, and could significantly impact Brocade’s operating results; and | |
• | dilution of the percentage of Brocade’s stockholders to the extent equity is used as consideration or option plans are assumed. |
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• | announcements of pending or completed acquisitions or other strategic transactions by Brocade or its competitors; | |
• | announcements, introductions and transitions of new products by Brocade and its competitors or its OEM partners; | |
• | the timing of customer orders, product qualifications and product introductions of Brocade’s OEM partners; | |
• | seasonal fluctuations; | |
• | long and complex sales cycles; | |
• | changes, disruptions or downturns in general economic conditions, particularly in the information technology industry; | |
• | declines in average selling prices for Brocade’s products as a result of competitive pricing pressures or new product introductions by Brocade or its competitors; | |
• | the emergence of new competitors and new technologies in the storage network and data management markets; | |
• | deferrals of customer orders in anticipation of new products, services, or product enhancements introduced by Brocade or its competitors; | |
• | Brocade’s ability to timely produce products that comply with new environmental restrictions or related requirements of its OEM customers; | |
• | Brocade’s ability to obtain sufficient supplies of sole- or limited-sourced components, including ASICs, microprocessors, certain connectors, certain logic chips and programmable logic devices; | |
• | increases in prices of components used in the manufacture of Brocade’s products; | |
• | Brocade’s ability to attain and maintain production volumes and quality levels; | |
• | variations in the mix of Brocade’s products sold and the mix of distribution channels and geographies through which they are sold; | |
• | pending or threatened litigation; | |
• | stock-based compensation expense that is affected by Brocade’s stock price; | |
• | new legislation and regulatory developments; and | |
• | other risk factors detailed in this section. |
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• | supporting multiple languages; | |
• | recruiting sales and technical support personnel with the skills to design, manufacture, sell and support Brocade’s products; | |
• | increased complexity and costs of managing international operations; | |
• | increased exposure to foreign currency exchange rate fluctuations; | |
• | commercial laws and business practices that favor local competition; | |
• | multiple, potentially conflicting and changing governmental laws, regulations and practices, including differing export, import, tax, labor, anti-bribery and employment laws; | |
• | longer sales cycles and manufacturing lead times; | |
• | difficulties in collecting accounts receivable; | |
• | reduced or limited protection of intellectual property rights; | |
• | managing a development team in geographically disparate locations, including China and India; and | |
• | more complicated logistics and distribution arrangements. |
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• | stop selling, incorporating or using products or services that use the challenged intellectual property; | |
• | obtain from the owner of the infringed intellectual property a license to the relevant intellectual property, which may require Brocade to pay royalty or license fees, or to license Brocade’s intellectual property to such owner and which may not be available on commercially reasonable terms or at all; and | |
• | redesign those products or services that use technology that is the subject of an infringement claim. |
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• | authorizing the issuance of preferred stock without stockholder approval; | |
• | providing for a classified board of directors with staggered, three-year terms; | |
• | prohibiting cumulative voting in the election of directors; | |
• | limiting the persons who may call special meetings of stockholders; | |
• | prohibiting stockholder actions by written consent; and | |
• | requiring super-majority voting to effect amendments to the foregoing provisions of Brocade’s certificate of incorporation and bylaws. |
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• | The Data Center Infrastructure operating unit encompasses the Brocade family of Storage Area Network, or SAN, business which includes infrastructure products and solutions including directors, switches, routers, fabric-based software applications, distance/extension products, as well as management applications and utilities to centralize data management. | |
• | The Server Edge and Storage operating unit includes Brocade’s new HBAs and Intelligent Server Adapter initiatives, as well as its SAN switch modules for bladed servers and embedded switches for blade servers. | |
• | The Services, Support and Solutions operating unit includes services that assist customers with consulting and support in designing, implementing, deploying and managing data center enterprise solutions as well as post-contract customer support. | |
• | The Files operating unit includes the Brocade family of File Area Network solutions which includes both software and hardware offerings for more effectively managing file data and storage resources. |
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• | the Internet, as described on the proxy card; | |
• | telephone, as described on the proxy card; or | |
• | mail, by completing and returning the enclosed proxy card. |
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• | send a written, dated notice to the Secretary of Foundry at Foundry��s principal executive offices stating that you would like to revoke your proxy; | |
• | complete, date and submit a new later-dated proxy card; | |
• | vote at a later date by telephone or by using the Internet; or | |
• | vote in person at the special meeting. Your attendance alone will not revoke your proxy. |
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• | the aggregate merger consideration represents a meaningful premium to the historical equity value and enterprise value of Foundry, consisting of a 44.1% and 92.9% premium over Foundry’s equity value and enterprise value, respectively, as of July 18, 2008, and a 53.8% and 121.1% premium over Foundry’s average equity value and enterprise value, respectively, for the thirty trading day trailing average from June 6, 2008; | |
• | the fact that the value of the aggregate merger consideration will not fluctuate substantially, given that, based on the closing price of Brocade’s common stock on July 21, 2008, approximately 96% of such consideration is in the form of cash; | |
• | the relationship between the market value of the common stock of Foundry and the consideration to be paid to stockholders of Foundry pursuant to the merger agreement and a review of comparable merger transactions; |
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• | Foundry’s rights under the merger agreement to consider unsolicited alternative acquisition proposals under certain circumstances and to change its recommendation to Foundry stockholders to adopt the merger agreement should Foundry receive a superior proposal; | |
• | the financial analyses reviewed with the Foundry board of directors by Merrill Lynch and the oral opinion of Merrill Lynch rendered to the Foundry board of directors on July 21, 2008, subsequently confirmed in writing, to the effect that, as of July 21, 2008, and based upon and subject to the factors and assumptions set forth in its opinion, the merger consideration was fair, from a financial point of view, to the holders of Foundry common stock other than Brocade and its affiliates (see the section entitled “Proposal No. 1 — The Merger — Opinion of Foundry’s Financial Advisor” beginning on page 75 of this proxy statement/prospectus); | |
• | the alternatives available to Foundry if it were not to engage in the business combination with Brocade, including independent pursuit of Foundry’s business strategy and growth through acquisitions, all of which involve meaningful risks and uncertainties and none of which, in the view of the Foundry board of directors, were as favorable to Foundry and its stockholders as, or more favorable to Foundry and its stockholders than, the business combination with Brocade; | |
• | the fact that Foundry held discussions with several other potential acquirers, but none of those potential acquirers submitted written acquisition proposals; | |
• | the support of Bobby R. Johnson, Jr., Chief Executive Officer and President and a director of Foundry, for the merger, including the terms of the voting agreement entered into between Mr. Johnson and Brocade, pursuant to which Mr. Johnson has agreed to vote his shares of Foundry common stock, which represent approximately 7.5% of the outstanding shares of Foundry as of August 1, 2008, in favor of the adoption of the merger agreement, so long as the merger agreement has not been terminated and the voting agreement has not otherwise been terminated in accordance with its terms; | |
• | the terms of the merger agreement, including the conditions to completion of the merger and the parties’ rights to terminate the merger agreement in certain circumstances; |
• | the limited conditions to completion of the merger agreement, including the lack of any financing condition to Brocade’s obligation to complete the merger, which should reduce the risk that the merger would not be completed, as well as the fact that Brocade would be obligated to pay Foundry a reverse termination fee under certain circumstances in connection with Brocade’s failure to obtain the necessary financing to complete the merger; |
• | the likelihood that regulatory approvals can be achieved without difficulty or extended delay; | |
• | the fact that the merger agreement provides sufficient operating flexibility for Foundry to conduct its business in the ordinary course between the signing of the merger agreement and the completion of the merger; | |
• | information concerning Foundry’s and Brocade’s respective businesses, prospects, financial performance and condition, operations, technology, management and competitive position, including, with respect to Brocade, public reports concerning results of operations during the most recent fiscal year and fiscal quarters filed with the SEC; | |
• | Foundry’s management’s view of the current and historical financial conditions, results of operations and businesses of Foundry and Brocade before the merger, as well as the anticipated benefits and synergies in the operations of the business of Foundry and Brocade after giving effect to the merger; | |
• | the current and historical financial market conditions and market prices, volatility and trading information with respect to the common stock of Foundry and the common stock of Brocade; | |
• | the financial condition, results of operation, business and strategic objectives of Foundry and Brocade after giving effect to the merger and the merger’s potential effect on stockholder value; and |
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• | the strategic benefits of the merger, including creating a more diversified company with a larger addressable market opportunity and broader geographic footprint; and | |
• | the expectation that the combined company can leverage its presence in key enterprise and carrier networks while capitalizing on the growing adoption of Ethernet in data center environments. |
• | the volatility of the trading prices of common stock of both Foundry and Brocade, including the fact that the exchange ratio related to the stock component of the merger consideration is fixed and will not increase in the event of a decline in the trading price of Brocade common stock; | |
• | the possibility that the market price of Brocade common stock to be received in the merger by holders of Foundry common stock could decrease sharply if the merger was not viewed favorably by Brocade stockholders, financial analysts and the press, generally; | |
• | the fact that Foundry stockholders will have relatively little continuing equity interest in Brocade following completion of the merger and would therefore receive little benefit from any future growth or increased earnings of Brocade after the merger; | |
• | the risk that the potential benefits and synergies sought in the merger might not be fully realized if the combined company fails to meet the challenges involved in integrating the operations of Foundry and Brocade; | |
• | uncertainty regarding the availability of debt financing with respect to the cash consideration to be paid to Foundry stockholders pursuant to the merger, including the risk that, despite the limitations on the conditions to financing set forth in the financing commitment letter, Brocade may not be able to obtain the financing described in this letter; | |
• | the merger agreement precludes Foundry from actively soliciting alternative acquisition proposals and limits Foundry’s ability to engage in negotiations with parties that make alternative acquisition proposals; | |
• | the termination fee payable by Foundry to Brocade under certain circumstances; | |
• | the possibility that the merger might not be completed, even if approved by the stockholders of Foundry, and the effects on Foundry if the merger is not completed; | |
• | the effect of the public announcement and pendency of the merger on Foundry’s sales, operating results, stock price, customers, suppliers, employees, partners and other constituencies; | |
• | the effect of the public announcement of the merger on Foundry’s ability to attract and retain key management, marketing and technical personnel; | |
• | the expectation that the merger consideration will be taxable to Foundry stockholders; | |
• | the interests that Foundry’s executive officers and directors may have with respect to the merger in addition to their interests as Foundry stockholders (see the section entitled “Proposal No. 1 — The Merger — Interests of Foundry Directors and Executive Officers in the Merger” beginning on page 81 of this proxy statement/prospectus for a more complete discussion of these interests); and | |
• | various other risks associated with the combined company and the merger, including those described under the section entitled “Risk Factors — Risks Related to the Merger and the Combined Company” beginning on page 24 of this proxy statement/prospectus. |
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• | Reviewed certain publicly available business and financial information relating to Foundry and Brocade that Merrill Lynch deemed to be relevant; | |
• | Reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets, liabilities and prospects of Foundry and Brocade, furnished to Merrill Lynch by Foundry and Brocade, respectively; | |
• | Conducted discussions with members of senior management of Foundry and Brocade concerning the matters described in the two bullet points above, as well as the respective businesses and prospects of Foundry and Brocade before and after giving effect to the merger; | |
• | Reviewed the market prices and valuation multiples for the shares of Foundry and Brocade and compared them with those of certain publicly traded companies that Merrill Lynch deemed to be relevant; | |
• | Reviewed the results of operations of Foundry and Brocade and compared them with those of certain publicly traded companies that Merrill Lynch deemed to be relevant; | |
• | Compared the proposed financial terms of the merger with the financial terms of certain other transactions that Merrill Lynch deemed to be relevant; | |
• | Participated in certain discussions and negotiations among representatives of Foundry and Brocade and their respective financial and legal advisors; | |
• | Reviewed the potential pro forma impact of the merger; | |
• | Reviewed a draft dated July 20, 2008 of the merger agreement; and | |
• | Reviewed such other financial studies and analyses and took into account such other matters as Merrill Lynch deemed necessary, including an assessment of general economic, market and monetary conditions. |
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• | Cisco Systems, Inc. | |
• | Juniper Networks, Inc. | |
• | Brocade Communications Systems, Inc. | |
• | F5 Networks, Inc. | |
• | Riverbed Technology, Inc. | |
• | Blue Coat Systems, Inc. | |
• | SonicWALL, Inc. | |
• | Aruba Networks, Inc. | |
• | Extreme Networks, Inc. |
• | The ratio of enterprise value to the estimated earnings before interest, taxes, depreciation and amortization, or EBITDA, for calendar year 2009; and | |
• | The ratio of share price to the estimated cash earnings per share, or cash EPS, for calendar year 2009. |
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Comparable Company | ||||
Relevant Multiple | Implied Share | |||
Range | Price of Foundry | |||
Research Estimates: | ||||
CY2009 Enterprise Value/EBITDA | 7.0x - 9.0x | $13.83 - $15.97 | ||
CY2009 Share Price/Cash EPS | 15.0x - 18.0x | $11.64 - $13.97 | ||
Management Estimates: | ||||
CY2009 Share Price/Cash EPS | 15.0x - 18.0x | $14.07 - $16.89 |
Acquiror | Target | |
Blue Coat Systems, Inc. | Packeteer, Inc. | |
Arris Group, Inc. | CCOR, Inc. | |
CommScope, Inc. | Andrew Corporation | |
Mitel Networks Corp./Francisco Partners | Inter-Tel, Inc. | |
Cisco Systems, Inc. | IronPort Systems, Inc. | |
LM Ericsson AB | Redback Networks, Inc. | |
Motorola, Inc. | Netopia, Inc. | |
International Business Machine Corp. | Internet Security Systems, Inc. | |
Gores Group LLC & Tennenbaum Capital Partners LLC | Enterasys Networks, Inc. | |
Juniper Networks, Inc. | Peribit Networks, Inc. |
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Implied Share | ||||||||
Price of Foundry | ||||||||
Multiple | (Research | |||||||
Range | Estimates) | |||||||
Enterprise Value/NTM EBITDA | 10.0x - 14.0 | x | $ | 16.18 - $20.12 |
Implied Share | ||||||||
Premium Range | Price of Foundry | |||||||
July 18, 2008 closing share price | 25.0% - 50.0% | $ | 16.70 - $20.04 |
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Low | High | |||||||
Implied equity value per Foundry share (Research Estimates) | $ | 13.93 | $ | 17.06 | ||||
Implied equity value per Foundry share (Management Estimates) | $ | 17.31 | $ | 21.91 |
• | above the range of implied equity values derived by the discounted cash flow analysis based on research analyst estimates for 2009 and subsequently on management’s guidance; and | |
• | within the range of implied equity values derived by the discounted cash flow analysis based solely on internal management projections and guidance. |
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• | the combined company may be better able to address new technology and customer requirements that may emerge in the coming years, including the anticipated movement towards a unified fabric in the “next generation” data center, by taking advantage of Brocade’s strengths in data storage networking and Foundry’s strengths in high performance enterprise data networks; | |
• | the combined company may be better positioned to provide a high-performance alternative solution for end-to-end networking on both sides of the server; | |
• | the broadening and integration of Brocade’s and Foundry’s product lines may enable the combined company to meet the needs of its customers more effectively and efficiently, provide more complete solutions to its existing customers, and attract new customers; | |
• | combined technological resources and complementary technology may allow the combined company to compete more effectively by providing it with an enhanced ability to develop new products and greater functionality for existing products; | |
• | the creation of larger sales and services organizations, greater marketing resources and financial strength may present improved opportunities for marketing the products of the combined company; | |
• | the combined experience, financial resources, size and breadth of product offerings of the combined company may allow the combined company to respond more quickly and effectively to customer needs, technological change, increased competition and shifting market demand; and | |
• | the merger may provide the combined company with an improved platform for future growth. |
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• | not soliciting employees and certain customers of Foundry and any successor for a period of one year following termination of employment; | |
• | not knowingly and materially disparaging Foundry, its successor or their respective directors, officers or employees for a period of one year following termination of employment; | |
• | continuing to abide by any existing confidentiality agreement requiring such executive officer not to disclose confidential information of Foundry and any successor; and | |
• | providing and not subsequently revoking a full release of all claims. |
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Aggregate | ||||||||||||||||||||||||||||||||||
Number of | ||||||||||||||||||||||||||||||||||
Restricted | Aggregate | |||||||||||||||||||||||||||||||||
Aggregate | Stock | Number of | ||||||||||||||||||||||||||||||||
Common | Awards all | Restricted | ||||||||||||||||||||||||||||||||
Shares | of which | Stock Units | ||||||||||||||||||||||||||||||||
Subject to | are Subject to | Subject to | Estimated | |||||||||||||||||||||||||||||||
Aggregate | Aggregate | Accelerated | Accelerated | Accelerated | Cash | |||||||||||||||||||||||||||||
Common | Common | Vesting | Weighted | Vesting | Aggregate | Vesting | Severance | |||||||||||||||||||||||||||
Shares | Shares | Upon or | Average | Upon or | Number of | Upon or | Payment | |||||||||||||||||||||||||||
Subject to | Subject | Following the | Price of | Following the | Restricted | Following the | per | |||||||||||||||||||||||||||
Relationship to | Outstanding | to Vested | Occurrence | Outstanding | Occurrence | Stock | Occurrence | Severance | ||||||||||||||||||||||||||
Name | Foundry | Options | Options | of the Merger(1) | Options | of the Merger(2) | Units(3) | of the Merger(4) | Agreement(5) | |||||||||||||||||||||||||
Bobby R. Johnson, Jr. | President, CEO and Director | 1,300,000 | 1,300,000 | — | $ | 13.05 | — | — | — | $ | — | |||||||||||||||||||||||
Daniel W. Fairfax | Vice President, Finance & Administration and Chief Financial Officer | 85,000 | 46,041 | 38,959 | $ | 12.86 | 40,000 | 100,000 | 33,333 | $ | 568,125 | |||||||||||||||||||||||
Laurence L. Akin | Senior Vice President, Worldwide Sales | 855,000 | 855,000 | — | $ | 13.50 | 40,000 | 60,000 | 20,000 | $ | 425,000 | |||||||||||||||||||||||
Richard W. Bridges | Vice President, Operations | 320,000 | 320,000 | — | $ | 11.25 | 33,333 | 60,000 | 20,000 | $ | 505,000 | |||||||||||||||||||||||
Ken K. Cheng | Vice President and GM, High End Service Provider Systems Business Unit | 913,646 | 779,646 | 134,000 | $ | 16.57 | 40,000 | 60,000 | 20,000 | $ | 505,000 | |||||||||||||||||||||||
Michael R. Iburg | Vice President and Treasurer | 286,000 | 261,312 | 24,688 | $ | 38.01 | 23,333 | 40,000 | 13,333 | $ | 397,687 | |||||||||||||||||||||||
Cliff G. Moore | Vice President, General Counsel and Corporate Secretary | 152,834 | 152,834 | — | $ | 13.22 | 13,333 | 30,000 | 10,000 | $ | 397,687 | |||||||||||||||||||||||
Robert W. Schiff | Vice President and GM, Enterprise Business Unit | 391,250 | 301,666 | 89,584 | $ | 13.66 | 40,000 | 60,000 | 20,000 | $ | 473,437 | |||||||||||||||||||||||
Alfred J. Amoroso | Chairman | 640,000 | 539,166 | 100,834 | $ | 31.34 | — | — | — | $ | — | |||||||||||||||||||||||
C. Nicholas Keating, Jr. | Director | 440,000 | 339,166 | 100,834 | $ | 41.24 | — | — | — | $ | — | |||||||||||||||||||||||
J. Steven Young | Director | 721,250 | 620,416 | 100,834 | $ | 29.87 | — | — | — | $ | — | |||||||||||||||||||||||
Alan L. Earhart | Director | 389,000 | 288,166 | 100,834 | $ | 15.98 | — | — | — | $ | — | |||||||||||||||||||||||
Celeste Volz Ford | Director | 140,000 | 32,916 | 107,084 | $ | 14.26 | — | — | — | $ | — |
(1) | Pursuant to severance agreements with Foundry’s executive officers, not including its chief executive officer, vesting will accelerate in full upon termination of the executive officer’s employment by Foundry without “cause” or by the executive officer for “good reason” during the period commencing three months prior to a change of control of Foundry and ending on the first anniversary of the change of control of Foundry. The numbers in this column assume that the executive officer is terminated by Foundry immediately following the completion of the merger. Pursuant to Foundry’s 1999 Director’s Stock Option Plan, vesting of Foundry’s directors’ stock options will accelerate in full upon the merger. | |
(2) | Pursuant to severance agreements with Foundry’s executive officers, not including its chief executive officer, vesting will accelerate in full upon termination of the executive officer’s employment by Foundry without “cause” or by the executive officer for “good reason” during the period commencing three months prior to a change of control of Foundry and ending on the first anniversary of the change of control of Foundry. The numbers in this column assume that the relevant executive officer is terminated by Foundry immediately following the merger. | |
(3) | All of the restricted stock units set forth in this column are July 2008 RSUs. | |
(4) | Pursuant to the terms of the July 2008 RSUs, if an executive officer’s employment is terminated by Foundry or Brocade in connection with the merger prior to July 31, 2009, and such executive officer is a party to a severance agreement or any other agreement with Foundry providing for acceleration of vesting in connection with the merger, then, upon any such termination of employment, the vesting of a certain number of July 2008 RSUs held by such executive officer will be accelerated, which number will be determined by multiplying (1) the total number of days elapsed from July 21, 2008 (the date of the merger agreement) through the date of |
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such termination of employment, divided by 365, by (2) one-third of the July 2008 RSUs granted to such executive officer, representing the number of July 2008 RSUs that would have vested on July 31, 2009. The numbers in this column assume that the relevant executive officer’s employment is terminated by Foundry in connection with the merger on July 20, 2009. | ||
(5) | The amount of cash severance benefits identified for each executive officer, not including its chief executive officer, (i) assumes that the executive officer’s employment is terminated by Foundry without “cause” or is terminated by such executive officer for “good reason” immediately following the merger and (ii) is based upon current base salaries and bonus opportunities. |
• | All rights to exculpation, indemnification and advancement of expenses existing as of the date of the merger agreement in favor of the current or former directors or officers of Foundry or its subsidiaries as provided in their respective charter documents or in any indemnification agreement between any such person and Foundry or any of its subsidiaries will survive the merger and continue in full force and effect, but only to the extent such rights to exculpation, indemnification and advancement of expenses are available under and are consistent with Delaware law. | |
• | For a period of six years from the effective time of the merger, Brocade will cause Foundry to maintain in effect the exculpation, indemnification and advancement of expenses provisions contained in Foundry’s charter documents as in effect as of the date of the merger agreement or in any indemnification agreement with any current or former director or officer of Foundry or any of its subsidiaries, and will not amend, repeal or otherwise modify them in any manner that would adversely affect the rights of any such persons thereunder. | |
• | Brocade will cause Foundry, to the fullest extent permitted by law, to indemnify and hold harmless each current or former director or officer of Foundry or any of its subsidiaries against any costs or expenses (including the advancement of attorneys’ fees and expenses), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any actual or threatened claim or action arising out of, relating to or in connection with any action or omission of any such person occurring or alleged to have occurred prior to the effective time of the merger in connection with such person serving as officer or director of Foundry or any of its subsidiaries. However, such indemnification will only be provided if and to the same extent such persons are entitled as of the date of the merger agreement to be indemnified by (or have the right to advancement of expenses from) Foundry or any of its subsidiaries pursuant to its respective charter documents or under existing indemnification agreements between such persons and Foundry or any of its subsidiaries. | |
• | Prior to the effective time of the merger, Foundry will purchase a six-year “tail” policy to extend Foundry’s existing director and officer insurance for an amount not to exceed 300% of the annual premium paid by Foundry in 2007 for such existing insurance coverage (or, if such “tail” policy is not available for less than such amount, Foundry will purchase as much coverage as is available for such amount). Brocade has agreed to cause the “tail” policy to be maintained in full force and effect for its full term, and to cause Foundry to honor all obligations thereunder. In the event that any of the carriers issuing or reinsuring the “tail” policy becomes unable to satisfy its financial obligations during the six-year period, Brocade has agreed to replace the “tail” policy with another prepaid “tail” policy providing substantially equivalent benefits and coverage levels as the original “tail” policy, with a term extending for the remainder of such six-year period. However, Brocade will not be obligated to pay any amount that, when added to the premium paid by Foundry for the original “tail” policy and any premiums paid by Brocade for any other new “tail” policies, exceeds 300% of the annual premium paid by Foundry in 2007 for its existing insurance coverage. | |
• | Brocade will guaranty and stand surety for, and will cause Foundry and its subsidiaries to honor each of the above covenants and will pay all expenses incurred by any current or former director or officer of Foundry or any of its subsidiaries to enforce the above covenants. |
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• | Stockholders electing to exercise appraisal rights must not vote “FOR” adoption of the merger agreement. Also, because a submitted proxy not marked “against” or “abstain” will be voted “FOR” the proposal to adopt the merger agreement, the submission of a proxy not marked “against” or “abstain” will result in the waiver of appraisal rights. | |
• | A written demand for appraisal of shares must be filed with Foundry before the taking of the vote on the merger agreement at the Foundry special meeting. The written demand for appraisal should specify the stockholder’s name and mailing address, and that the stockholder is thereby demanding appraisal of his or her Foundry common stock. The written demand for appraisal of shares is in addition to and separate from a vote against the adoption of the merger agreement or an abstention from such vote. | |
• | A demand for appraisal should be executed by or for the stockholder of record, fully and correctly, as such stockholder’s name appears on the share certificate. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, this demand must be executed by or for the fiduciary. If the shares are owned by or for more than one person, as in a joint tenancy or tenancy in common, such demand should be executed by or for all joint owners. An authorized agent, including an agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record. However, the agent must identify the |
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record owner and expressly disclose the fact that, in exercising the demand, he is acting as agent for the record owner. A person having a beneficial interest in Foundry common stock held of record in the name of another person, such as a broker or nominee, must act promptly to cause the record holder to follow the steps summarized below in a timely manner to perfect whatever appraisal rights the beneficial owners may have. |
• | A stockholder who elects to exercise appraisal rights should mail or deliver his, her or its written demand to Foundry at 4980 Great America Parkway, Santa Clara, CA, 95054, Attention: Corporate Secretary. |
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• | a senior secured credit facility, or the secured facility, of up to $1.125 billion; and | |
• | a senior unsecured facility, or the unsecured facility, of up to $500.0 million in the event that Brocade does not issue such amount of senior unsecured notesand/or convertible notes in a public offering or Rule 144A private placement of equity or convertible debt securities at or prior to the time the merger is completed. The secured facility and unsecured facility are referred to in this proxy statement/prospectus as the credit facilities. |
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• | there will be a “willful breach” by Brocade of a covenant or obligation of Brocade only if: |
• | such covenant or obligation is material to Foundry, | |
• | Brocade has materially and willfully breached such covenant or obligation, | |
• | the breach of such covenant or obligation has not been cured in all material respects and has a material adverse effect on the ability of Brocade to complete the merger; and | |
• | Brocade’s chief financial officer or treasurer had actual knowledge, at the time of Brocade’s breach of such covenant or obligation, that Brocade was breaching such covenant or obligation and of the consequences of such breach under the merger agreement; and |
• | there will be a “willful breach” by Brocade of a representation or warranty made by Brocade only if: |
• | such representation or warranty is material to Foundry and was materially inaccurate when made by Brocade, |
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• | the material inaccuracy in such representation or warranty has not been cured in all material respects and has a material adverse effect on the ability of Brocade to complete the merger, and | |
• | when such representation or warranty was made by Brocade, Brocade’s chief financial officer or treasurer had actual knowledge that such representation or warranty was materially inaccurate and specifically intended to defraud Foundry. |
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• | cause any outstanding offering period under the Foundry ESPP to be terminated as of a date not later than the last business day prior to the date the merger is completed; | |
• | make any pro-rata adjustments that may be necessary to reflect the shortened offering period (but the offering period will otherwise be treated as a fully effective and completed offering period for all purposes under the Foundry ESPP); | |
• | cause the exercise of each outstanding option under the Foundry ESPP as of the last business day prior to the date on which the merger becomes effective; and | |
• | provide that no further offering period or purchase period will commence under the plan. |
• | the amount of cash and a certificate representing the number of whole shares of Brocade common stock to which such holder is entitled pursuant to the merger agreement; and | |
• | cash in lieu of any fractional share of Brocade common stock; |
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• | corporate organization, qualifications to do business, corporate standing and corporate power; | |
• | ownership of subsidiary capital stock and the absence of certain obligations with respect to the capital stock of any subsidiary; | |
• | absence of any violation of the charter documents of Foundry or its subsidiaries; | |
• | capitalization; | |
• | documents filed with the SEC; | |
• | disclosure controls and procedures and internal controls over financial reporting; | |
• | financial statements and off-balance sheet arrangements; | |
• | compliance with the rules and regulations of NASDAQ and certain Sarbanes-Oxley requirements with respect to Foundry’s auditors; |
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• | absence of certain changes and events since March 31, 2008; | |
• | title to assets and leasehold interests; | |
• | accounts receivable, customers, inventories and cash; | |
• | real and personal property; | |
• | intellectual property; | |
• | material contracts; | |
• | the effect on material contracts of entering into and completing the transactions contemplated by the merger agreement and other matters relating to material contracts and government contracts; | |
• | absence of certain liabilities; | |
• | compliance with applicable laws, including export control laws and the Foreign Corrupt Practices Act; | |
• | possession of and compliance with material permits and other governmental authorizations required for the operation of Foundry’s business; | |
• | taxes; | |
• | employee benefit plans and labor relations; | |
• | environmental matters; | |
• | insurance; | |
• | transactions with affiliates; | |
• | litigation; | |
• | corporate authorization to enter into and complete the transactions contemplated by the merger agreement and the enforceability of the merger agreement against Foundry; | |
• | approvals by the Foundry board of directors and the inapplicability of the Delaware state anti-takeover statute to the merger; | |
• | stockholder vote needed to approve the transactions contemplated by the merger agreement; | |
• | absence of any violation of any applicable legal requirements or the charter documents of Foundry and its subsidiaries, or certain other effects, as a result of entering into and completing the transactions contemplated by the merger agreement; | |
• | governmental and regulatory approvals required to complete the merger; | |
• | brokerage, finder’s or other fees or commissions payable by or on behalf of Foundry or its subsidiaries to brokers, finders or financial advisors in connection with the merger; | |
• | arrangements with a financial advisor and receipt of a fairness opinion; and | |
• | the information supplied by Foundry in this proxy statement/prospectus and the related registration statement filed by Brocade with the SEC not containing any untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. |
• | corporate organization; | |
• | corporate authorization to enter into and complete the transactions contemplated by the merger agreement and the enforceability of the merger agreement against Brocade; | |
• | the absence of any vote required on the part of Brocade’s stockholders in connection with the merger; | |
• | absence of any violation of any applicable legal requirements or the charter documents of Brocade as a result of entering into and completing the transactions contemplated by the merger agreement; | |
• | valid issuance of the shares of Brocade common stock to be issued in the merger; |
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• | the financing of the transactions contemplated by the merger agreement; | |
• | the solvency of Brocade following the merger; and | |
• | the information supplied by Brocade in this proxy statement/prospectus and the related registration statement filed by Brocade with the SEC not containing any untrue statement of a material fact or omitting to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. |
• | provide Brocade and its representatives with reasonable access to its personnel, assets, books, records, tax returns, work papers and other documents; | |
• | conduct its business and operations in the ordinary course and in accordance with past practices and in compliance with all applicable legal requirements and the requirements of material contracts, and use its reasonable best efforts to: |
• | preserve intact its current business organization; | |
• | keep available the services of its current officers and employees; and | |
• | maintain its relations and goodwill with all suppliers, customers, landlords, creditors, licensors, licensees, employees and others with which it has business relationships; |
• | promptly notify Brocade of any written notice alleging that the consent of any person or entity is required in connection with the transactions contemplated by the merger agreement, or of any legal proceeding commenced or threatened against it that relates to any of the transactions contemplated by the merger agreement; | |
• | unless otherwise requested by Brocade, take all actions necessary or appropriate to terminate the Foundry 401(k) plan no less than one day prior to the completion of the merger, and to terminate the Foundry bonus vacation program as of the effective time of the merger; | |
• | give Brocade the opportunity to participate in the defense or settlement of any stockholder litigation against Foundry or its directors or officers relating to the transactions contemplated by the merger agreement; and | |
• | use its reasonable best efforts to obtain the resignation of each officer and director of Foundry and its subsidiaries prior to the completion of the merger. |
• | declare, set aside or pay dividends or make any other distributions; | |
• | split, combine or reclassify its capital stock; | |
• | subject to limited exceptions, purchase, redeem or acquire its capital stock or the capital stock of its subsidiaries; | |
• | subject to limited exceptions, sell, issue, grant or authorize the sale, issuance or grant of any capital stock or other security, any option, call, warrant or right to acquire any capital stock or other security, or any instrument convertible into or exchangeable for any capital stock or other security; | |
• | amend or waive any of its rights under, or accelerate the vesting under, any provision of Foundry’s equity award plans or any provision of any contract evidencing any outstanding stock option or stock-based award, or otherwise modify any of the terms of any outstanding option, warrant or other security or any related |
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contract, other than any acceleration of vesting that occurs in accordance with contracts existing as of the date of the merger agreement; |
• | amend or permit the adoption of any amendment to its charter documents; | |
• | effect or become a party to any merger, consolidation, share exchange, business combination, amalgamation, recapitalization, reclassification of shares or similar transaction; | |
• | form any subsidiary or acquire any equity interest or other interest in any other entity; | |
• | make any capital expenditure that, when added to all other capital expenditures during a particular quarter, exceeds the total amount provided for in Foundry’s capital expense budget for such fiscal quarter; | |
• | other than in the ordinary course of business and consistent with past practices, enter into or become bound by any material contract, as defined in the merger agreement, or amend or terminate, or waive or exercise any material right or remedy under, any material contract; | |
• | grant any exclusive license or right with respect to any intellectual property; | |
• | other than in the ordinary course of business, enter into, renew or become bound by, or permit any of the assets owned or used by it to become bound by, any contract the effect of which would be to grant to any person or entity following the merger any actual or potential right or license to any intellectual property right belonging to it or to Brocade; | |
• | enter into, renew or become bound by, or permit any of the assets owned or used by it to become bound by, any contract containing, or otherwise subjecting it to, any non-competition, exclusivity or other material restriction on the operation of its business or Brocade’s business; | |
• | other than in the ordinary course of business consistent with past practices, enter into, renew or become bound by, or permit any of the assets owned or used by it to become bound by, any contract providing for future purchases of components, supplies or finished goods from any person or entity providing contract manufacturing or other component manufacturing or aggregation services; | |
• | subject to limited exceptions, acquire, lease or license any right or other asset from any other person or entity or sell or otherwise dispose of, or lease or license, any right or other asset to any other person or entity; | |
• | subject to limited exceptions, waive or relinquish any material right; | |
• | other than in the ordinary course of business consistent with past practices, write off as uncollectible, or establish any extraordinary reserve with respect to, any receivable or other indebtedness; | |
• | subject to limited exceptions, make any pledge of any of its material assets or permit any of its material assets to become subject to any encumbrances; | |
• | permit any of its cash, cash equivalents or short-term investments to become subject to any encumbrance; | |
• | subject to limited exceptions, lend money to any person or entity, incur or guarantee any indebtedness or obtain or enter into any bond or letter of credit or related contract; | |
• | subject to limited exceptions, establish, adopt, enter into or amend any employee plan or employee agreement, pay any bonus or make any profit-sharing or similar payment to, or increase the amount of the wages, salary, commissions, fringe benefits or other compensation or remuneration payable to, any of its directors or any of its officers or other employees; | |
• | hire any employee (i) at the level of director with compensation that is inconsistent with Foundry’s compensation guidelines or its past practices, or (ii) at the level of vice president or above; | |
• | subject to limited exceptions, promote any employee; | |
• | other than in the ordinary course of business consistent with past practices, materially change any of its pricing policies, product return policies, product maintenance polices, service policies, product modification or upgrade policies, personnel policies or other business policies; | |
• | other than as required by generally accepted accounting principles, materially change any of its methods of accounting or accounting practices in any respect; |
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• | establish, adopt or amend any of its investment policies, make any investment that is inconsistent with any of its investment policies or make any investment in mortgage-backed securities; | |
• | other than as required under applicable law, make any material tax election, amend or file a claim for refund with respect to certain tax returns, compromise or settle any legal proceeding with respect to any tax or tax-related matter, enter into or obtain any tax ruling or take any action that would reasonably be expected to have a material and adverse impact on its tax liability; | |
• | subject to limited exceptions, commence any legal proceeding; or | |
• | subject to limited exceptions, settle any claim or legal proceeding. |
• | use its reasonable best efforts to cause the shares of Brocade common stock being issued in the merger to be approved for listing on the NASDAQ Global Select Market; | |
• | cause Falcon Acquisition Sub, Inc. to comply with all of its obligations under the merger agreement and not engage in any business that is not related to the merger; | |
• | take all steps as may be required to cause any dispositions of Foundry common stock resulting from the transactions contemplated by the merger agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Foundry and the acquisition of Brocade common stock by each individual who is or will be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Brocade, to be exempt underRule 16b-3 under the Exchange Act; and | |
• | subject to certain exceptions, use its reasonable best efforts to obtain the debt financing on the terms and subject to the conditions described in the financing commitment letter, or if the debt financing becomes unavailable on the terms and conditions contemplated by the financing commitment letter, use its reasonable best efforts to obtain alternative financing on terms not materially less favorable to Brocade than the terms of the financing commitment letter. |
• | expand in any material respect, or amend in a manner materially adverse to Brocade, the conditions to the debt financing set forth in the financing commitment letter; | |
• | prevent or materially impair or delay the completion of the merger; | |
• | subject to limited exceptions, reduce the aggregate amount of financing set forth in the financing commitment letter to an amount below the amount needed by Brocade to complete the merger; or | |
• | materially and adversely impact the ability of Brocade to enforce its rights against the other parties to the financing commitment letter. |
• | Brocade and Foundry agreed to promptly prepare and file this proxy statement/prospectus included as part of the registration statement, and Brocade agreed to promptly prepare and file the registration statement following the execution of the merger agreement. Both parties also agreed to use their reasonable best efforts to have the registration statement declared effective by the SEC as promptly as practicable, and Brocade agreed to use its reasonable best efforts to obtain all regulatory approvals required by applicable state securities laws in connection with the issuance of Brocade common stock pursuant to the merger. | |
• | Subject to certain exceptions, Brocade and Foundry have agreed to consult with one another before issuing, and to use their reasonable best efforts to agree upon, any press release or otherwise making any other public statements about the merger or related transactions. |
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• | Brocade and Foundry have each agreed to give prompt notice to the other of any material inaccuracy in any of their respective representations or warranties in the merger agreement, of any material breach of any of their respective covenants or obligations in the merger agreement, or of any event or circumstance that would make the timely satisfaction of any of the conditions to be satisfied under the merger agreement impossible or unlikely. Foundry has also agreed to give Brocade prompt notice of any event or circumstance that has had or would reasonably be expected to have or result in a material adverse effect on Foundry and its subsidiaries, and of any legal proceeding or material claim threatened, commenced or asserted against Foundry or any of its subsidiaries. |
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• | the notification and report forms required under the HSR Act as well as any notification or other document required to be filed in connection with the merger under any other applicable foreign legal requirement relating to antitrust or competition matters; and | |
• | any notification or report required by the National Industrial Security Program Operating Manual for facility and personnel security clearances, and any related Department of Energy regulations. |
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• | obtain each consent, approval, ratification, permission, waiver or authorization required to be obtained in connection with the merger, whether pursuant to applicable legal requirements, contracts or otherwise; and | |
• | lift any restraint, injunction or other legal bar to the merger or any of the other transactions contemplated by the merger agreement. |
• | dispose of or transfer or cause any of its subsidiaries to dispose of or transfer any assets, or commit to cause Foundry or any of its subsidiaries to dispose of or transfer any assets; | |
• | discontinue or cause any of its subsidiaries to discontinue offering any product or service, or commit to cause Foundry or any of its subsidiaries to discontinue offering any product or service; | |
• | license or cause any of its subsidiaries to license to any person or entity any intellectual property or intellectual property right, or commit to cause Foundry or any of its subsidiaries to license to any person or entity any intellectual property or intellectual property right; | |
• | hold separate or cause any of its subsidiaries to hold separate any assets or operations (either before or after the completion of the merger), or commit to cause Foundry or any of its subsidiaries to hold separate any assets or operations; | |
• | make or cause any of its subsidiaries to make any commitment, or commit to cause Foundry or any of its subsidiaries to make any commitment, regarding its future operations or the future operations of Foundry or any of its subsidiaries; or | |
• | contest any legal proceeding or any order, writ, injunction or decree relating to the merger or any of the other transactions contemplated by the merger agreement. |
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• | effects resulting from: |
• | changes since the date of the merger agreement in general economic or political conditions or the securities, credit or financial markets worldwide, which changes do not have a materially disproportionate impact on Foundry and its subsidiaries, taken as a whole, relative to other companies in the industry in which Foundry and its subsidiaries operate, | |
• | changes since the date of the merger agreement in conditions generally affecting the industry in which Foundry and its subsidiaries operate, which changes do not have a materially disproportionate impact on Foundry and its subsidiaries, taken as a whole, relative to other companies in the industry in which Foundry and its subsidiaries operate, | |
• | changes since the date of the merger agreement in generally accepted accounting principles or the interpretation thereof, which changes do not have a materially disproportionate impact on Foundry and its subsidiaries, taken as a whole, relative to other companies in the industry in which Foundry and its subsidiaries operate, | |
• | changes since the date of the merger agreement in legal requirements, which changes do not have a materially disproportionate impact on Foundry and its subsidiaries, taken as a whole, relative to other companies in the industry in which Foundry and its subsidiaries operate, | |
• | any acts of terrorism or war since the date of the merger agreement, which acts do not have a materially disproportionate impact on Foundry and its subsidiaries, taken as a whole, relative to other companies in the industry in which Foundry and its subsidiaries operate, | |
• | any stockholder class action or derivative litigation commenced against Foundry after the date of the merger agreement and arising from allegations of breach of fiduciary duty by Foundry’s directors or from allegations of false or misleading public disclosure with respect to the merger agreement, provided that any effect, change, claim, event or circumstance underlying, causing or contributing to any such class action or derivative litigation may constitute, and shall be taken into account in determining whether there has been or would be, a material adverse effect, or | |
• | the termination since the date of the merger agreement of certain specified agreements of Foundry pursuant to their terms; |
• | any adverse impact on Foundry’s relationships with its employees, customers and suppliers that Foundry conclusively demonstrates is directly and exclusively attributable to the announcement and pendency of the merger; or | |
• | any failure after the date of the merger agreement to meet internal projections or forecasts for any period, provided that any effect, change, claim, event or circumstance underlying, causing or contributing to any such failure may constitute, and shall be taken into account in determining whether there has been or would be, a material adverse effect. |
• | the accuracy in all material respects, as of the date of the merger agreement and as of the effective date of the merger, of certain specified representations and warranties made by Foundry in the merger agreement, including certain representations and warranties relating to capitalization and those relating to authorization to enter into the merger agreement, inapplicability of state anti-takeover statutes, the binding nature of the merger agreement and the stockholder vote required to approve the merger; | |
• | the accuracy, as of the date of the merger agreement and as of the effective date of the merger, of the remaining representations and warranties made by Foundry in the merger agreement (or, in the case of any representation and warranty made as of a specific date, as of such specific date), disregarding all materiality |
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qualifications limiting the scope of such representations and warranties and all inaccuracies in such representations and warranties if the circumstances giving rise to all such inaccuracies (considered collectively) do not constitute, and would not reasonably be expected to have or result in, a material adverse effect on Foundry and its subsidiaries; |
• | Foundry shall have in all material respects performed or complied with all covenants and obligations required by the merger agreement to be performed or complied with by it at or prior to the completion of the merger; | |
• | the SEC shall have declared Brocade’s registration statement, of which this proxy statement/prospectus is a part, effective, and no stop order suspending its effectiveness shall have been issued that remains in effect and no proceeding seeking a stop order with respect to the registration statement’s effectiveness shall have been initiated by the SEC that remains pending and Brocade shall not have received any written communication from the SEC that remains outstanding in which the SEC indicates a material likelihood that it will initiate a proceeding seeking a stop order with respect to the registration statement; | |
• | the merger agreement shall have been adopted by a majority of the outstanding shares of Foundry common stock, and holders of less than 20% in the aggregate of the outstanding shares of Foundry common stock shall have perfected, or shall otherwise continue to have, appraisal rights under applicable law; | |
• | the noncompetition and non-solicitation agreement entered into on July 21, 2008 between Mr. Johnson and Brocade shall be in full force and effect; | |
• | Foundry’s chief executive officer and chief financial officer shall have delivered to Brocade a certificate confirming that certain conditions have been duly satisfied; | |
• | there shall not have been any material adverse effect on Foundry and its subsidiaries since the date of the merger agreement; | |
• | the waiting period under the HSR Act with respect to the merger shall have expired or shall have been terminated and there shall not be in effect any voluntary agreement between Brocade or Foundry and the FTC or the DOJ pursuant to which Brocade or Foundry has agreed not to complete the merger for any period of time; | |
• | any waiting period applicable to the completion of the merger under any applicable foreign antitrust or competition law or regulation or under any other foreign legal requirement shall have expired or been terminated, except where the failure of any particular waiting period to have expired or to have been terminated prior to the effective time of the merger would not reasonably be expected to materially affect the business of Brocade, Foundry or any of Foundry’s subsidiaries in any adverse way; | |
• | any governmental authorization or other consent or approval required to be obtained under any applicable antitrust or competition law or regulation or under any other legal requirement shall have been obtained and shall remain in full force and effect (except where the failure to have obtained a particular consent or approval prior to the effective time of the merger would not reasonably be expected to materially affect the business of Brocade, Foundry or any of Foundry’s subsidiaries in any adverse way), and no such governmental authorization or other consent or approval shall require, contain or contemplate any term, limitation, condition or restriction that Brocade determines in good faith to be materially burdensome; | |
• | the shares of Brocade common stock to be issued pursuant to the merger shall have been approved for listing on the NASDAQ Global Select Market, subject to notice of issuance; | |
• | no temporary restraining order, preliminary or permanent injunction or other order preventing the completion of the merger shall have been issued by any court of competent jurisdiction or other governmental body and remain in effect and no legal requirement shall have been enacted or deemed applicable to the merger that makes the completion of the merger illegal; | |
• | there shall not be pending any legal proceeding in which a governmental body is a party, and neither Brocade nor Foundry shall have received any written communication from any governmental body in which such |
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governmental body indicates a material likelihood of commencing any legal proceeding or taking any other action: |
• | challenging or seeking to restrain or prohibit the completion of the merger or any of the other transactions contemplated by the merger agreement, | |
• | relating to the merger or any of the other transactions contemplated by the merger agreement and seeking damages or other relief that may be material to Brocade or to Foundry and its subsidiaries, | |
• | seeking to prohibit or limit in any material respect Brocade’s ability to vote or otherwise exercise ownership rights with respect to the stock of Foundry, | |
• | that could materially and adversely affect Brocade’s rights to own any material assets or operate the business of Foundry or any of its subsidiaries, | |
• | seeking to compel Brocade, Foundry or any of their respective subsidiaries to dispose of or hold separate any material assets as a result of the merger, or | |
• | seeking to impose (or that could result in the imposition of) any criminal sanctions or liability on Foundry or any of its subsidiaries; |
• | Foundry shall have filed all statements, reports, schedules, forms and other documents required to be filed with the SEC since the date of the merger agreement; | |
• | since the date of the merger agreement: |
• | neither Foundry nor its board of directors or any committee of its board of directors shall have determined or shall have otherwise concluded that any financial statements of Foundry included or required to be included in any report or other document filed with the SEC should no longer be relied upon because of an error in such financial statements; | |
• | Foundry’s independent accountant shall not have withdrawn or stated its intention to withdraw its opinion with respect to any financial statements of Foundry; and | |
• | there shall have been no restatement or proposed restatement of any financial statements of Foundry (except for any restatement that has been completed, publicly announced and fully and properly reflected in reports and other documents filed with the SEC with the express consent of Foundry’s independent accountant); and |
• | the sum of the aggregate amount of unrestricted cash held by Foundry in the United States and the liquidation value of the immediately liquid cash equivalents held by Foundry in the United States shall exceed the lesser of (i) of $800 million, and (ii) the dollar amount necessary to enable the combined company to have at least $250 million in unrestricted cash and cash equivalents following completion of the merger, or $200 million if Brocade’s existing stock option litigation has been settled prior to the effective time of the merger in a manner reasonably satisfactory to the lead arrangers of the debt financing. |
• | the accuracy in all material respects, as of the date of the merger agreement and as of the effective date of the merger, of the representations and warranties made by Brocade and Falcon Acquisition Sub, Inc. in the merger agreement, except where the failure of such representations and warranties to be accurate in all material respects would not reasonably be expected to have a material adverse effect on the ability of Foundry to complete the merger, disregarding all materiality qualifications limiting the scope of such representations and warranties; | |
• | Brocade and Falcon Acquisition Sub, Inc. have in all material respects performed or complied with all covenants and obligations required by the merger agreement to be performed or complied with by them at or prior to the completion of the merger, except where the failure to comply with or perform such covenants and obligations in all material respects would not reasonably be expected to have a material adverse effect on the ability of Brocade to complete the merger; |
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• | the SEC shall have declared Brocade’s registration statement, of which this proxy statement/prospectus is a part, effective, and no stop order suspending its effectiveness shall have been issued that remains in effect and no proceeding seeking a stop order with respect to the registration statement’s effectiveness shall have been initiated by the SEC that remains pending and Brocade shall not have received any written communication from the SEC that remains outstanding in which the SEC indicates a material likelihood that it will initiate a proceeding seeking a stop order with respect to the registration statement; | |
• | the merger agreement shall have been adopted by holders of a majority of the outstanding shares of Foundry common stock; | |
• | Foundry shall have received a certificate from Brocade confirming that certain conditions have been duly satisfied; | |
• | the shares of Brocade common stock to be issued pursuant to the merger shall have been authorized for listing on the NASDAQ Global Select Market, subject to notice of issuance; | |
• | the waiting period under the HSR Act with respect to the merger shall have expired or shall have been terminated and there shall not be in effect any voluntary agreement between Brocade and the FTC or the DOJ pursuant to which Brocade has agreed not to complete the merger for any period of time; and | |
• | no temporary restraining order, preliminary or permanent injunction or other order preventing the completion of the merger shall have been issued by any United States court of competent jurisdiction or other United States governmental body and remain in effect and no United States legal requirement shall have been enacted or deemed applicable to the merger that makes the completion of the merger illegal. |
• | solicit, initiate, knowingly encourage, induce or knowingly facilitate the making, submission or announcement of any acquisition proposal or acquisition inquiry, each as defined in the merger agreement; | |
• | furnish any nonpublic information regarding Foundry or any of its subsidiaries to any person or entity in connection with or in response to an acquisition proposal or acquisition inquiry; | |
• | engage in discussions or negotiations with any person or entity with respect to any acquisition proposal or acquisition inquiry, except to disclose the existence and terms of the applicable provisions of the merger agreement; | |
• | approve, endorse or recommend any acquisition proposal or acquisition inquiry; or | |
• | enter into any letter of intent or similar document or any contract contemplating or otherwise relating to any acquisition transaction, as defined in the merger agreement. |
• | any merger, consolidation, amalgamation, share exchange, business combination, issuance of securities, acquisition of securities, reorganization, recapitalization, tender offer, exchange offer or other similar transaction in which Foundry or any of its subsidiaries is a constituent corporation, in which a person or entity or “group” (as defined in the Exchange Act and the rules thereunder) of persons or entities directly or indirectly acquires beneficial or record ownership of securities representing more than 15% of the outstanding securities of any class of voting securities of Foundry or any of its subsidiaries, or in which Foundry or any of its subsidiaries issues securities representing more than 15% of the outstanding securities of any class of voting securities of Foundry or any of its subsidiaries; |
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• | any sale, lease, exchange, transfer, license, acquisition or disposition of any business or businesses or assets that constitute or account for 15% or more of the consolidated net revenues, consolidated net income or consolidated assets of Foundry and its subsidiaries; or | |
• | any liquidation or dissolution of Foundry or any of its subsidiaries. |
• | furnish nonpublic information to the person or entity making such acquisition proposal, provided that prior to furnishing such information, Foundry gives Brocade written notice that it is doing so and Foundry enters into a confidentiality agreement with such person or entity containing customary limitations and with terms at least as restrictive as the confidentiality agreement in place between Brocade and Foundry, and contemporaneously with furnishing such information to such person, Foundry furnishes it to Brocade (to the extent not previously furnished to Brocade); and | |
• | engage in negotiations with the person or entity making such acquisition proposal with respect thereto, provided that Foundry gives Brocade prior written notice of its intention to engage in negotiations with such person or entity; |
• | none of Foundry, any of its subsidiaries or any their respective representatives has breached or taken any action inconsistent with any of the obligations described in the section entitled “Agreements Related to the Merger — The Merger Agreement — Limitation on the Solicitation, Negotiation and Discussion by Foundry of Other Acquisition Proposals” in connection with such acquisition proposal; | |
• | the Foundry board of directors has in good faith concluded, following receipt of advice from its outside legal counsel and its financial advisor, that such acquisition proposal is, or is reasonably likely to lead to, a superior offer, as defined in the merger agreement; and | |
• | Foundry’s board of directors has concluded in good faith, following receipt of advice from its outside legal counsel and its financial advisor, that failure to take such action would be reasonably likely to constitute a breach of its fiduciary obligations under applicable legal requirements. |
• | is made by a third party to acquire, pursuant to a tender offer, exchange offer, merger, consolidation or other business combination, either all or substantially all of the assets of Foundry and its subsidiaries, taken as a whole, or all or substantially all of the outstanding voting securities of Foundry; | |
• | if accepted and if the transaction contemplated by such offer were completed, would result in the stockholders of Foundry immediately preceding such transaction holding less than 50% of the equity interests in the surviving or resulting entity of such transaction or any direct or indirect parent thereof; | |
• | was not obtained or made as a direct or indirect result of a breach by Foundry of the merger agreement, the confidentiality agreement between Foundry and Brocade or any “standstill” or similar agreement under which Foundry or any of its subsidiaries has or had any rights or obligations; | |
• | is on terms and conditions that the board of directors of Foundry has in good faith concluded (following the receipt of advice of its outside legal counsel and its financial advisor), taking into account all legal, financial, regulatory and other aspects of such offer (including the timing and likelihood of completion of the transaction contemplated by such offer) and the person or entity making such offer, to be more favorable, from a financial point of view, to Foundry’s stockholders (in their capacities as stockholders) than the terms of the merger; and | |
• | contemplates a transaction that is reasonably capable of being completed. |
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• | if an unsolicited, bona fide, written offer to purchase all of the outstanding shares of Foundry common stock is made to Foundry and is not withdrawn and: |
• | such offer was not obtained or made as a direct or indirect result of a material breach by Foundry or any of its subsidiaries of (or any action inconsistent with) the merger agreement, the confidentiality agreement in place between Foundry and Brocade or any “standstill” or similar agreement under which Foundry or any of its subsidiaries has any rights or obligations; | |
• | Foundry satisfies certain notice requirements and delivers certain information to Brocade; | |
• | the Foundry board of directors determines in good faith, after obtaining and taking into account the advice of its financial advisor, that such offer constitutes a superior offer; | |
• | the Foundry board of directors determines in good faith, after obtaining and taking into account the advice of Foundry’s outside legal counsel, that, in light of such superior offer, the failure to so withdraw or modify the Foundry board recommendation would be reasonably likely to constitute a breach of its fiduciary obligations to Foundry’s stockholders under applicable legal requirements; | |
• | the Foundry board of directors does not withdraw the Foundry board recommendation or modify the Foundry board recommendation in a manner adverse to Brocade within five business days after Brocade receives notice from Foundry confirming that the Foundry board of directors has determined that such |
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offer constitutes a superior offer and that the failure to so withdraw or modify the Foundry board recommendation would be reasonably likely to constitute a breach of its fiduciary obligations to Foundry’s stockholders under applicable legal requirements; |
• | during such five business day period, if requested by Brocade, Foundry engages in good faith negotiations with Brocade to amend the merger agreement in such a manner that no withdrawal or modification to the Foundry board recommendation is legally required as a result of such offer; and | |
• | at the end of such five business day period, such offer has not been withdrawn and continues to constitute a superior offer and the failure to withdraw the Foundry board recommendation or modify the Foundry board recommendation in a manner adverse to Brocade would continue to be reasonably likely to constitute a breach of the fiduciary obligations of the Foundry board of directors to Foundry’s stockholders under applicable legal requirements in light of such superior offer (taking into account any changes to the terms of the merger agreement proposed by Brocade as a result of the negotiations described above); or |
• | if a material development or material change in circumstances occurs or arises after the date of the merger agreement that relates to Foundry and its subsidiaries but does not relate to any acquisition proposal, such development or change in circumstances being referred to as an intervening event, and: |
• | none of Foundry, any subsidiary of Foundry or any of their respective representatives had knowledge, as of the date of the merger agreement, that such intervening event was reasonably likely to occur or arise after the date of the merger agreement; | |
• | Foundry satisfies certain notice requirements and delivers certain information to Brocade; | |
• | the Foundry board of directors determines in good faith, after obtaining and taking into account the advice of its outside legal counsel, that, in light of such intervening event, the failure to so withdraw or modify the Foundry board recommendation would be reasonably likely to constitute a breach of its fiduciary obligations to Foundry’s stockholders under applicable legal requirements; | |
• | the Foundry board of directors does not withdraw the Foundry board recommendation or modify the Foundry board recommendation in a manner adverse to Brocade within five business days after Brocade receives notice from Foundry confirming that the Foundry board of directors has determined that the failure to so withdraw or modify the Foundry board recommendation would be reasonably likely to constitute a breach of its fiduciary obligations to Foundry’s stockholders under applicable legal requirements; | |
• | during such five business day period, if requested by Brocade, Foundry engages in good faith negotiations with Brocade to amend the merger agreement in such a manner that no withdrawal or modification to the Foundry board recommendation is legally required as a result of such intervening event; and | |
• | at the end of such five business day period, the failure to withdraw or modify the Foundry board recommendation would still be reasonably likely to constitute a breach of the fiduciary obligations of the Foundry board of directors to Foundry’s stockholders under applicable legal requirements in light of such intervening event (taking into account any changes to the terms of the merger agreement proposed by Brocade as a result of the negotiations described above). |
• | by mutual written consent of Brocade and Foundry; | |
• | by either Brocade or Foundry in the event the merger is not completed by December 31, 2008, except that a party will not be permitted to terminate the merger agreement pursuant to this provision if the failure to |
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complete the merger by such date results from a failure on the part of such party to perform in any material respect any covenant or obligation of such party contained in the merger agreement and required to be performed prior to the effective time of the merger, provided however that, if the merger is not completed by December 31, 2008 as a result of a financing failure, as defined in the merger agreement, then, notwithstanding the foregoing, Brocade may terminate the merger agreement pursuant to this provision (this termination provision being referred to as the end date termination provision); |
• | by either Brocade or Foundry in the event a United States court of competent jurisdiction or other United States governmental body has issued a final and nonappealable order, or has taken any other action, having the effect of permanently restraining, enjoining or prohibiting the merger; | |
• | by either Brocade or Foundry in the event that the proposal for the adoption of the merger agreement fails to receive the requisite affirmative vote at the special meeting of Foundry’s stockholders or at any adjournment or postponement of such meeting, except that a party will not be permitted to terminate the merger agreement pursuant to this provision where the failure to obtain the required stockholder approval results from a failure on the part of such party to perform in any material respect any covenant or obligation in the merger agreement that is required to be performed by such party prior to the effective time of the merger (this termination provision being referred to as the stockholder vote termination provision); | |
• | by Brocade, at any time prior to the adoption of the merger agreement by Foundry’s stockholders by the required stockholder vote, if any of the following events has occurred (which events are referred to as triggering events) (this termination provision being referred to as the triggering event termination provision): |
• | the Foundry board of directors shall have failed to recommend the adoption of the merger agreement to Foundry’s stockholders, or shall have withdrawn the Foundry board recommendation or modified the Foundry board recommendation in a manner adverse to Brocade; | |
• | Foundry shall have failed to include in this proxy statement/prospectus, or shall have amended this proxy statement/prospectus to exclude, the Foundry board recommendation; | |
• | the Foundry board of directors fails to reaffirm the Foundry board recommendation (publicly if requested by Brocade) within 10 business days after Brocade requests a reaffirmation in writing under certain circumstances; | |
• | the Foundry board of directors shall have approved, endorsed or recommended any acquisition proposal; | |
• | Foundry shall have entered into any letter of intent or similar document or contract relating to any acquisition proposal; | |
• | a tender or exchange offer relating to securities of Foundry shall have been commenced and Foundry shall not have sent to its securityholders, within 10 business days, a statement disclosing that Foundry recommends rejection of the tender or exchange offer; or | |
• | Foundry, any subsidiary of Foundry or any of their respective representatives shall have breached in any material respect or taken any action inconsistent in any material respect with any of the provisions described in the section entitled “Agreements Related to the Merger — The Merger Agreement — Limitation on the Solicitation, Negotiation and Discussion by Foundry of Other Acquisition Proposals” beginning on page 110 of this proxy statement/prospectus; |
• | by Foundry in the event that: (i) any representation or warranty of Brocade is inaccurate as of the date of the merger agreement, or becomes inaccurate as of a date subsequent to the date of the merger agreement, in either case such that the applicable condition to completion of the merger regarding the accuracy of Brocade’s representations and warranties would not be satisfied (it being understood that, for purposes of determining the accuracy of such representations and warranties as of the date of the merger agreement or as of any subsequent date, all materiality qualifications limiting the scope of such representations and warranties will be disregarded), or (ii) Brocade breaches any of its covenants or obligations set forth in the merger agreement such that the applicable condition to completion of the merger agreement regarding the performance of Brocade’s covenants would not be satisfied, provided that: |
• | if the breach or inaccuracy is curable by Brocade by December 31, 2008 and Brocade continues to use its reasonable best efforts to cure the breach or inaccuracy, then Foundry may not terminate the merger |
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agreement pursuant to this provision on account of such breach or inaccuracy unless such breach or inaccuracy remains uncured for 30 days after Foundry notifies Brocade of the breach or inaccuracy, and |
• | except in the case of a willful breach by Brocade, as defined in the merger agreement, Foundry will not have the right to terminate the merger agreement pursuant to this provision by reason of any inaccuracy in any representation or warranty of Brocade relating to the debt financing or any breach of any covenant or obligation of Brocade relating to the debt financing (this termination referred to as the Brocade breach termination provision); |
• | by Brocade in the event that: (i) any representation or warranty of Foundry is inaccurate as of the date of the merger agreement, or becomes inaccurate as of a date subsequent to the date of the merger agreement, in either case such that the applicable condition to completion of the merger regarding the accuracy of Foundry’s representations and warranties would not be satisfied (it being understood that, for purposes of determining the accuracy of such representations and warranties as of the date of the merger agreement or as of any subsequent date: (A) all company material adverse effect, as defined in the merger agreement, and other materiality qualifications limiting the scope of such representations and warranties will be disregarded; and (B) any update of or modification to Foundry’s disclosure schedule made or purported to have been made on or after the date of the merger agreement will be disregarded), (ii) Foundry breaches any of its covenants or obligations set forth in the merger agreement such that the applicable condition to completion of the merger agreement regarding the performance of Foundry’s covenants would not be satisfied, or (iii) there has been a material adverse effect on Foundry and its subsidiaries since the date of the merger agreement, provided that, for purposes of clauses (i) and (ii) above, if the inaccuracy or breach is curable by Foundry by December 31, 2008 and Foundry continues to exercise its reasonable best efforts to cure the breach or inaccuracy, then Brocade may not terminate the merger agreement pursuant to this provision on account of such breach or inaccuracy unless such breach or inaccuracy remains uncured for 30 days after Brocade notifies Foundry of the breach or inaccuracy; or | |
• | by Foundry after the designated completion date, as defined in the merger agreement, if the merger shall not have been completed by the designated completion date, at the time of the termination of the merger agreement each of the conditions to completion of the merger set forth in the merger agreement shall be satisfied or shall have been waived (other than certain conditions that by their nature are to be satisfied on the completion date), and at the time of the termination of the merger agreement there exists an uncured financing failure that resulted in the completion of the merger not occurring on the designated completion date (this termination provision being referred to as the financing failure termination provision). |
• | Foundry must pay Brocade a termination fee of $85 million (less any amount paid by Foundry in reimbursement of Brocade’s fees and expenses described above) if (i) the merger agreement is terminated by Foundry or Brocade pursuant to the stockholder vote termination provision, (ii) prior to the adoption of the merger agreement by the Foundry stockholders an acquisition proposal shall have been publicly disclosed or publicly made and is not publicly withdrawn on or before the fifth business day prior to the date of the Foundry special meeting, and (iii) on or prior to the first anniversary of the termination of the merger agreement, Foundry either completes a specified acquisition transaction, as defined in the merger |
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agreement, or enters into a definitive agreement providing for a specified acquisition transaction that is subsequently completed (or any other specified acquisition transaction is subsequently completed among the parties to such definitive agreement or any of such parties’ affiliates); |
• | Foundry must pay Brocade a termination fee of $85 million if (i) the merger agreement is terminated by either Foundry or Brocade under the end date termination provision, (ii) the conditions relating to the expiration or termination of the waiting period under the HSR Act were satisfied as of the date of termination, (iii) an acquisition proposal shall have been disclosed or made prior to the date of termination, (iv) a final vote on the adoption of the merger agreement by Foundry’s stockholders shall not have taken place, and (v) on or prior to the first anniversary of the termination of the merger agreement, Foundry either completes a specified acquisition transaction or enters into a definitive agreement relating to a specified acquisition transaction that is subsequently completed (or any specified acquisition transaction is subsequently completed among the parties to such definitive agreement or any of such parties’ affiliates); and | |
• | Foundry must pay Brocade a termination fee of $85 million if the merger agreement is terminated by Brocade under the triggering event termination provision or the merger agreement is otherwise terminated following the occurrence of a triggering event. |
• | there is an uncured financing failure; | |
• | the merger agreement is terminated by Brocade or Foundry under the end date termination provision or by Foundry under the Brocade breach termination provision; | |
• | each of the conditions to completion of the merger set forth in the merger agreement (other than certain conditions that by their nature are satisfied on the completion date) has been satisfied or waived, and | |
• | Foundry is ready, willing and able to complete the merger. |
• | there is an uncured financing failure; and | |
• | the merger agreement is terminated by Foundry under the financing failure termination provision. |
• | Brocade will have no liability for any inaccuracy in any representation or warranty relating to the debt financing or any breach of any of its covenants or obligations relating to the debt financing, unless such breach or inaccuracy constitutes a willful breach by Brocade, as defined in the merger agreement; and |
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• | in the event of any financing failure, as defined in the merger agreement, Brocade shall have no liability of any nature to Foundry, its subsidiaries or any of their respective affiliates or stockholders. |
• | in favor of the adoption of the merger agreement, in favor of the merger and in favor of any other action reasonably necessary to facilitate the merger; and | |
• | against the following actions (other than the merger and the transactions contemplated by the merger agreement): |
• | any reorganization, recapitalization, dissolution or liquidation of Foundry or any of its subsidiaries, and | |
• | any acquisition proposal (including any superior offer) and any other action that is intended, or that would reasonably be expected, to impede, interfere with, discourage, frustrate, delay, postpone, prevent or adversely affect the merger or any of the other transactions contemplated by the merger agreement. |
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Nature and | ||||||||
Amount of | ||||||||
Beneficial | Percent of | |||||||
Name and Address of Beneficial Owner | Ownership | Common Stock(1) | ||||||
Five Percent Stockholders | ||||||||
Royce & Associates, LLC(2) 1414 Avenue of the Americas New York, NY 10019 | 16,109,600 | 10.94 | % | |||||
Barclays Global(3) 45 Fremont Street San Francisco, CA 94105 | 7,583,165 | 5.15 | % | |||||
Executive Officers and Directors | ||||||||
Bobby R. Johnson, Jr.(4) | 12,318,223 | 8.29 | % | |||||
Laurence L. Akin(5) | 935,186 | 0.63 | % | |||||
Richard W. Bridges(6) | 443,998 | 0.30 | % | |||||
Ken K. Cheng(7) | 1,149,153 | 0.78 | % | |||||
Daniel W. Fairfax(8) | 119,497 | 0.08 | % | |||||
Michael R. Iburg(9) | 307,517 | 0.21 | % | |||||
Cliff G. Moore(10) | 186,286 | 0.13 | % | |||||
Robert W. Schiff(11) | 366,335 | 0.25 | % | |||||
Alfred J. Amoroso(12) | 551,833 | 0.37 | % | |||||
Alan L. Earhart(13) | 299,833 | 0.20 | % | |||||
C. Nicholas Keating, Jr.(14) | 350,833 | 0.24 | % | |||||
Celeste V. Ford(15) | 40,416 | 0.03 | % | |||||
J. Steven Young(16) | 632,083 | 0.43 | % | |||||
All Executive Officers and Directors as a Group(13 persons) | 17,701,193 | 11.56 | % |
(1) | For each person and group included in the table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group as described above by the sum of 147,247,806 shares of common stock outstanding as of August 1, 2008 and the number of shares of common stock that such person or |
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group had the right to acquire on or within 60 days of that date, including, but not limited to, the exercise of options. | ||
(2) | Beneficial and percentage ownership information is based on information contained in Schedule 13G filed with the SEC April 8, 2008 by Royce & Associates, LLC. The Schedule 13G indicates that Royce & Associates, LLC owns beneficially 16,109,600 shares. | |
(3) | Beneficial and percentage ownership information is based on information contained in Schedule 13G filed with the SEC on January 10, 2008 by Barclays Global Investors, LTD. The Schedule 13G indicates that Barclays Global Investors, LTD owns beneficially 7,583,165 shares. | |
(4) | Includes 1,300,000 shares issuable upon the exercise of options which are exercisable within sixty days of August 1, 2008. | |
(5) | Includes 855,000 shares issuable upon the exercise of options which are exercisable within sixty days of August 1, 2008. | |
(6) | Includes 320,000 shares issuable upon the exercise of options which are exercisable within sixty days of August 1, 2008. | |
(7) | Includes 787,646 shares issuable upon the exercise of options which are exercisable within sixty days of August 1, 2008. | |
(8) | Includes 49,583 shares issuable upon the exercise of options which are exercisable within sixty days of August 1, 2008. | |
(9) | Includes 261,937 shares issuable upon the exercise of options which are exercisable within sixty days of August 1, 2008. | |
(10) | Includes 152,834 shares issuable upon the exercise of options which are exercisable within sixty days of August 1, 2008. | |
(11) | Includes 305,833 shares issuable upon the exercise of options which are exercisable within sixty days of August 1, 2008. | |
(12) | Includes 550,833 shares issuable upon the exercise of options which are exercisable within sixty days of August 1, 2008. Also includes 1,000 shares held by the Amoroso Family Trust dated 4/2/00, for which Mr. Amoroso serves as co-trustee with his wife. | |
(13) | Includes 299,833 shares issuable upon the exercise of options which are exercisable within sixty days of August 1, 2008. | |
(14) | Includes 350,833 shares issuable upon the exercise of options which are exercisable within sixty days of August 1, 2008. | |
(15) | Includes 40,416 shares issuable upon the exercise of options which are exercisable within sixty days of August 1, 2008. | |
(16) | Includes 632,083 shares issuable upon the exercise of options which are exercisable within sixty days of August 1, 2008. |
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Historical | ||||||||||||||||
Brocade | Foundry | |||||||||||||||
As of | As of | |||||||||||||||
July 26, | June 30, | Pro Forma | Pro Forma | |||||||||||||
2008 | 2008 | Adjustments(1) | Combined | |||||||||||||
(In thousands) | ||||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 459,399 | $ | 257,940 | $ | (2,080,100 | )(k) | $ | 241,614 | |||||||
1,625,000 | (g) | |||||||||||||||
(20,625 | )(m) | |||||||||||||||
Short-term investments | 244,922 | 590,906 | (600,000 | )(k) | 235,828 | |||||||||||
Accounts receivable, net | 174,103 | 112,362 | 10,612 | (j) | 297,077 | |||||||||||
Inventories | 14,369 | 49,531 | 17,969 | (i) | 81,869 | |||||||||||
Deferred tax assets | 73,100 | 45,828 | — | 118,928 | ||||||||||||
Prepaid expenses and other current assets | 75,091 | 14,294 | (1,044 | )(b) | 88,341 | |||||||||||
Total current assets | 1,040,984 | 1,070,861 | (1,048,188 | ) | 1,063,657 | |||||||||||
Long-term investments | 59,906 | 101,273 | — | 161,179 | ||||||||||||
Property and equipment, net | 300,116 | 7,616 | — | 307,732 | ||||||||||||
Goodwill | 280,347 | — | 1,462,088 | (h) | 1,943,639 | |||||||||||
201,204 | (l) | |||||||||||||||
Intangible assets, net | 237,167 | — | 496,800 | (e) | 731,167 | |||||||||||
(2,800 | )(x) | |||||||||||||||
Deferred tax assets | 200,715 | 39,284 | (201,204 | )(l) | 38,795 | |||||||||||
Other assets | 19,064 | 5,697 | (3,374 | )(f) | 37,307 | |||||||||||
20,625 | (m) | |||||||||||||||
(4,705 | )(b) | |||||||||||||||
Total assets | $ | 2,138,299 | $ | 1,224,731 | $ | 920,446 | $ | 4,283,476 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 109,886 | $ | 21,627 | $ | — | $ | 131,513 | ||||||||
Accrued employee compensation | 72,762 | 40,753 | — | 113,515 | ||||||||||||
Deferred revenue | 110,698 | 61,922 | (50,268 | )(n) | 122,352 | |||||||||||
Current liabilities associated with facilities lease losses | 13,930 | — | — | 13,930 | ||||||||||||
Liability associated with class action lawsuit | 160,000 | — | — | 160,000 | ||||||||||||
Other accrued liabilities | 75,110 | 12,441 | 9,563 | (f) | 97,114 | |||||||||||
Total current liabilities | 542,386 | 136,743 | (40,705 | ) | 638,424 | |||||||||||
Long term debt | 169,119 | — | 1,625,000 | (g) | 1,794,119 | |||||||||||
Non-current liabilities associated with facilities lease losses | 16,929 | — | — | 16,929 | ||||||||||||
Non-current deferred revenue | 37,850 | 28,446 | — | 66,296 | ||||||||||||
Non-current income tax liability | 55,971 | 12,833 | — | 68,804 | ||||||||||||
Other non-current liabilities | 9,350 | 460 | — | 9,810 | ||||||||||||
Total liabilities | 831,605 | 178,482 | 1,584,295 | 2,594,382 | ||||||||||||
Stockholders’ equity | ||||||||||||||||
Common stock | 372 | 14 | (14 | )(a) | 385 | |||||||||||
13 | (c) | |||||||||||||||
Additional paid-in capital | 1,369,959 | 867,049 | (867,049 | )(a) | 1,755,146 | |||||||||||
99,487 | (c) | |||||||||||||||
285,700 | (d) | |||||||||||||||
Accumulated other comprehensive loss | (2,874 | ) | (6,981 | ) | 6,981 | (a) | (2,874 | ) | ||||||||
Retained earnings (accumulated deficit) | (60,763 | ) | 186,167 | (186,167 | )(a) | (63,563 | ) | |||||||||
(2,800 | )(x) | |||||||||||||||
Total stockholders’ equity | 1,306,694 | 1,046,249 | (663,849 | ) | 1,689,094 | |||||||||||
Total liabilities and stockholders’ equity | $ | 2,138,299 | $ | 1,224,731 | $ | 920,446 | $ | 4,283,476 | ||||||||
(1) | The letters refer to a description of the adjustments in Note 2, “Pro Forma Adjustments,” of the Notes to Unaudited Pro Forma Condensed Combined Financial Statements. |
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Historical | ||||||||||||||||||||
Brocade | Foundry | McDATA | ||||||||||||||||||
Twelve Months | Twelve Months | Three Months | ||||||||||||||||||
Ended | Ended | Ended | ||||||||||||||||||
October 27, | December 31, | October 31, | Pro Forma | Pro Forma | ||||||||||||||||
2007 | 2007 | 2006 | Adjustments(1) | Combined | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Net revenues | $ | 1,236,863 | $ | 607,205 | $ | 156,089 | $ | $ | 2,000,157 | |||||||||||
Cost of revenues | 575,451 | 236,418 | 92,949 | 7,339 | (p) | 954,469 | ||||||||||||||
(2,397 | )(r) | |||||||||||||||||||
44,709 | (t) | |||||||||||||||||||
Gross margin | 661,412 | 370,787 | 63,140 | (49,651 | ) | 1,045,688 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||
Research and development | 213,311 | 77,052 | 30,522 | — | 320,885 | |||||||||||||||
Sales and marketing | 211,168 | 160,220 | 36,541 | — | 407,929 | |||||||||||||||
General and administrative | 46,980 | 44,935 | 8,716 | (196 | )(s) | 100,435 | ||||||||||||||
Legal fees associated with indemnification obligations, SEC investigation and other related costs, net | 46,257 | — | — | — | 46,257 | |||||||||||||||
Amortization of intangible assets | 24,719 | — | 6,939 | (6,939 | )(o) | 87,066 | ||||||||||||||
6,907 | (q) | |||||||||||||||||||
55,440 | (u) | |||||||||||||||||||
Acquisition and integration costs | 19,354 | — | 6,096 | 25,450 | ||||||||||||||||
Restructuring costs and impairment charges | — | — | 393 | — | 393 | |||||||||||||||
Other charges, net | — | 5,714 | — | — | 5,714 | |||||||||||||||
Total operating expenses | 561,789 | 287,921 | 89,207 | 55,212 | 994,129 | |||||||||||||||
Income (loss) from operations | 99,623 | 82,866 | (26,067 | ) | (104,863 | ) | 51,559 | |||||||||||||
Interest and other income, net | 38,501 | 43,536 | 5,152 | — | 87,189 | |||||||||||||||
Interest expense | (6,414 | ) | — | (4,963 | ) | (103,929 | )(v) | (115,306 | ) | |||||||||||
Gain on investments, net | 13,205 | — | — | — | 13,205 | |||||||||||||||
Income (loss) before provision for income taxes | 144,915 | 126,402 | (25,878 | ) | (208,792 | ) | 36,647 | |||||||||||||
Income tax provision | 68,043 | 45,259 | 469 | (41,163 | )(w) | 72,608 | ||||||||||||||
Net income (loss) | $ | 76,872 | $ | 81,143 | $ | (26,347 | ) | $ | (167,629 | ) | $ | (35,961 | ) | |||||||
Net income (loss) per share — basic | $ | 0.21 | $ | 0.55 | $ | (0.17 | ) | $ | (0.09 | ) | ||||||||||
Net income (loss) per share — diluted | $ | 0.21 | $ | 0.52 | $ | (0.17 | ) | $ | (0.09 | ) | ||||||||||
Shares used in per share calculation — basic | 362,070 | 148,143 | 154,637 | 404,672 | ||||||||||||||||
Shares used in per share calculation — diluted | 377,558 | 155,520 | 154,637 | 404,672 | ||||||||||||||||
(1) | The letters refer to a description of the adjustments in Note 2, “Pro Forma Adjustments,” of the Notes to Unaudited Pro Forma Condensed Combined Financial Statements. |
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�� | Historical | |||||||||||||||
Brocade | Foundry | |||||||||||||||
Nine Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
July 26, | June 30, | Pro Forma | Pro Forma | |||||||||||||
2008 | 2008 | Adjustments(1) | Combined | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Net revenues | $ | 1,068,440 | $ | 479,389 | $ | — | $ | 1,547,829 | ||||||||
Cost of revenues | 453,204 | 179,034 | (1,813 | )(r) | 663,957 | |||||||||||
33,532 | (t) | |||||||||||||||
Gross margin | 615,236 | 300,355 | (31,719 | ) | 883,872 | |||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 184,704 | 63,177 | — | 247,881 | ||||||||||||
Sales and marketing | 203,200 | 136,762 | — | 339,962 | ||||||||||||
General and administrative | 43,260 | 34,058 | (345 | )(s) | 76,973 | |||||||||||
Legal fees associated with indemnification obligations and other related costs | 22,399 | — | 22,399 | |||||||||||||
Provision for class action lawsuit | 160,000 | — | — | 160,000 | ||||||||||||
Amortization of intangible assets | 23,664 | — | 42,159 | (u) | 65,823 | |||||||||||
Facilities lease benefits | (477 | ) | — | — | (477 | ) | ||||||||||
Total operating expenses | 636,750 | 233,997 | 41,814 | 912,561 | ||||||||||||
Income (loss) from operations | (21,514 | ) | 66,358 | (73,533 | ) | (28,689 | ) | |||||||||
Interest and other income, net | 27,663 | 26,927 | — | 54,590 | ||||||||||||
Interest expense | (4,384 | ) | — | (77,946 | )(v) | (82,330 | ) | |||||||||
Loss on investments, net | (6,985 | ) | — | — | (6,985 | ) | ||||||||||
Income (loss) before provision for income taxes | (5,220 | ) | 93,285 | (151,479 | ) | (63,414 | ) | |||||||||
Income tax provision (benefit) | (136,709 | ) | 32,201 | (30,796 | )(w) | (135,304 | ) | |||||||||
Net income | $ | 131,489 | $ | 61,084 | $ | (120,683 | ) | $ | 71,890 | |||||||
Net income per share — basic | $ | 0.35 | $ | 0.42 | $ | 0.18 | ||||||||||
Net income per share — diluted | $ | 0.34 | $ | 0.41 | $ | 0.18 | ||||||||||
Shares used in per share calculation — basic | 376,455 | 146,163 | 390,062 | |||||||||||||
Shares used in per share calculation — diluted | 396,445 | 150,219 | 410,052 | |||||||||||||
(1) | The letters refer to a description of the adjustments in Note 2, “Pro Forma Adjustments,” of the Notes to Unaudited Pro Forma Condensed Combined Financial Statements. |
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1. | Basis of Presentation |
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Cash | $ | 2,680,100 | ||
Value of Brocade common stock issued | 99,500 | |||
Estimated fair value of options assumed and restricted common stock and units exchanged | 285,700 | |||
Direct transaction costs | 13,400 | |||
Total preliminary estimated purchase price | $ | 3,078,700 | ||
First Year | Estimated | |||||||||
Amount | Amortization | Useful Life | ||||||||
Net tangible assets | $ | 918,608 | $ | — | N/A | |||||
Identifiable intangible assets: | ||||||||||
Developed products technology | 245,900 | 44,709 | 5 - 6 years | |||||||
Customer contracts and relationships | 237,700 | 47,540 | 5 years | |||||||
In-process research and development | 2,800 | — | N/A | |||||||
Order backlog | 5,400 | 5,400 | 3 - 12 months | |||||||
Operating lease contracts | 5,000 | 2,500 | 2 years | |||||||
Goodwill | 1,663,292 | — | N/A | |||||||
Total preliminary estimated purchase price | $ | 3,078,700 | $ | 100,149 | ||||||
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2. | Pro Forma Adjustments |
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3. | Pro Forma Net Income (Loss) Per Share |
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Foundry Stockholder Rights | Brocade Stockholder Rights | |||
Authorized Capital Stock | • Foundry’s authorized capital stock consists of 305,000,000 shares of capital stock, consisting of: | • Brocade’s authorized capital stock consists of 805,000,000 shares of capital stock, consisting of | ||
• 300,000,000 shares of common stock, par value $.0001 per share, and | • 800,000,000 shares of common stock, par value $0.001 per share, and | |||
• 5,000,000 shares of preferred stock, par value $.0001 per share, | • 5,000,000 shares of preferred stock, par value $0.001 per share. | |||
Stock Listing | Foundry’s common stock is listed on the NASDAQ Global Select Market. | Brocade’s common stock is listed on the NASDAQ Global Select Market. | ||
Voting Rights | Each share of Foundry’s common stock entitles its holder to one vote on all matters on which common stockholders are entitled to vote. | Each share of Brocade’s common stock entitles its holder to one vote on all matters on which common stockholders are entitled to vote. | ||
Cumulative Voting | Foundry’s certificate of incorporation does not provide for cumulative voting. Accordingly, holders of Foundry common stock have no cumulative voting rights in connection with the election of directors. | Brocade’s certificate of incorporation does not provide for cumulative voting. Accordingly, holders of Brocade common stock have no cumulative voting rights in connection with the election of directors. |
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Foundry Stockholder Rights | Brocade Stockholder Rights | |||
Conversion Rights | Foundry common stock is not subject to any conversion rights. | Brocade common stock is not subject to any conversion rights. | ||
Preemptive Rights | Foundry’s certificate of incorporation does not grant any preemptive rights. | Brocade’s certificate of incorporation does not grant any preemptive rights. | ||
Dividends | Foundry’s bylaws provide that its board of directors, subject to any restrictions contained in the General Corporation Law of Delaware, or its certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of Foundry’s capital stock. | Brocade’s bylaws provide that its board of directors, subject to any restrictions contained in the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock pursuant to the General Corporation Law of the State of Delaware. Dividends may be paid in cash, in property, or in shares of Brocade’s capital stock. | ||
Foundry’s board of directors may set apart out of any of Foundry’s funds available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of Foundry, and meeting contingencies. | Brocade’s board of directors may set apart out of any of Brocade’s funds available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of Brocade, and meeting contingencies. | |||
Stockholder Proposals | Pursuant to Foundry’s bylaws, for business to be properly brought before an annual meeting by a stockholder, the stockholder must give timely written notice to Foundry’s Secretary delivered to or mailed and received at Foundry’s principal executive offices not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days prior to or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. A stockholder’s notice must set forth: | Brocade’s bylaws provide that any stockholder who intends to bring a matter before a stockholders’ meeting must deliver written notice of his or her intent to do so to Brocade’s Secretary. For nominations or other business to be properly brought before an annual or special meeting, the Secretary must receive the notice at the principal executive offices of the Corporation not later than the close of business on the 45th day and not earlier than the close of business on the 75th day prior to the anniversary of the mailing of the Corporation’s proxy statement with respect to the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so received not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of (i) the 60th day prior to such annual meeting or (ii) the 10th day following the day on which public announcement of the date of such |
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solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended; | meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. | |||
• as to any other business that the stockholder proposes to bring before the meeting, a brief description of such business, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the nomination or proposal is made; and • as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, the name and address of such stockholder, as they appear on Foundry’s books, and of such beneficial owner, and the class and number of shares of Foundry which are owned beneficially and of record by such stockholder and such beneficial owner. The chairman of the meeting may refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance with the foregoing procedure. | • any material interest of the stockholder in such business, including, in the case of a director nominee, a description of all arrangements or understandings between the stockholder and such nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; and | |||
• any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, or the 1934 Act, in the stockholder’s capacity as a proponent of a stockholder proposal or, in the case of any person the stockholder intends to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A (including such person’s written consent to being named in the proxy |
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statement as a nominee and to serving as a director if elected). | ||||
The chairman of the meeting may refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance with the foregoing procedure. | ||||
Advance Notice of Stockholder Meetings | Foundry’s bylaws provide that written notice of any stockholders’ meeting must be sent or otherwise given to each stockholder entitled to vote not less than 10, nor more than 60, days before the date of the meeting. | Brocade’s bylaws provide that written notice of any stockholders’ meeting must be given to each stockholder entitled to vote not less than 10, nor more than 60, days before the date of the meeting. The notice shall specify the place, date and hour of the meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called. | ||
Calling Special Meetings of Stockholders | Foundry’s bylaws provide that special meetings of the stockholders may be called at any time by: | Brocade’s bylaws provide that special meetings of the stockholders may be called, for any purpose or purposes, by: | ||
• the board of directors | • the board of directors; | |||
• the Chairman of the board of directors; or | • the Chairman of the board of directors; | |||
• the President. | • the President, or | |||
• the Chief Executive Officer. | ||||
If a special meeting is called by any person other than the board of directors, the request shall be in writing, specifying the place, date and hour of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the Chairman of the board of directors, the President, any Vice President, or the Secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. | ||||
Stockholder Quorum | Foundry’s bylaws provide that the presence of holders of a majority of the stock issued and outstanding and entitled to vote thereat, in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by its certificate of incorporation. | Brocade’s bylaws provide that the holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by its certificate of incorporation. |
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The vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provisions of the statutes, the certificate of incorporation, these bylaws or applicable stock exchange or 1934 Act rules, a different vote is required, in which case such express provision shall govern and control the decision of the question. | ||||
Board Quorum | Foundry’s bylaws provide that at all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as otherwise specifically provided by statute or by its certificate of incorporation. | Brocade’s bylaws provide that at all meetings of the board of directors, a majority of the total number of directors then in office (but not less than 1/3 of the total authorized number of directors) shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. | ||
Number of Directors | Foundry’s certificate of incorporation provides that the number of directors which constitute the whole board of directors shall be fixed from time to time by a bylaw or amendment thereof duly adopted by the board of directors. | Brocade’s certificate of incorporation provides that the number of directors which constitute the whole board of directors shall be designated in Brocade’s bylaws. | ||
Classification of Board of Directors | Foundry’s certificate of incorporation and bylaws do not classify its board of directors into any separate classes. | Brocade’s certificate of incorporation and bylaws classify its board of directors into three separate classes with staggered three-year terms. The directors shall be assigned to each class in accordance with a resolution or resolutions adopted by Brocade’s board of directors. | ||
Removal of Directors | Foundry’s bylaws provide that, unless otherwise restricted by statute, by its certificate of incorporation or by its bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a | Brocade’s certificate of incorporation provides that any director or the entire board of directors may be removed from office at any time: |
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majority of the shares then entitled to vote at an election of directors; provided, however, that if the stockholders of Foundry are entitled to cumulative voting, if less than the entire board of directors is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire board of directors. | voting power of all of the then- outstanding shares of the voting stock of Brocade, or | |||
Filling of Board Vacancies | Foundry’s bylaws provide that any vacancy on its board of directors shall be filled as follows: | Brocade’s certificate of incorporation and bylaws provide that any vacancy on its board shall be filled by either: | ||
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as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. | ||||
Stockholder Action by Written Consent | Foundry’s bylaws do not permit Foundry’s stockholders to take action by written consent without a meeting and require stockholders to take any such actions only at a duly called annual or special meeting. | Brocade’s bylaws provide that the stockholders of Brocade may not take action by written consent without a meeting but must take any such actions at a duly called annual or special meeting. | ||
Amendment of Certificate of Incorporation | Foundry has reserved the right to amend, alter, change or repeal any provision contained in its certificate of incorporation in the manner now or hereafter prescribed in its certificate of incorporation, its bylaws or the General Corporation Law of the State of Delaware, and all rights conferred upon stockholders are granted subject to such reservation. | Brocade has reserved the right to amend, alter, change or repeal any provision contained in its certificate of incorporation in the manner now or hereafter prescribed by statute, except at provided in Article VIII of the certificate, and all rights conferred upon the stockholders are granted subject to this right. | ||
Amendment of Bylaws | Foundry’s bylaws provide that Foundry’s bylaws may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that Foundry may, in its certificate of incorporation, confer the power to adopt, amend, or repeal bylaws upon the directors. The | Brocade’s bylaws provide that the original or other bylaws of Brocade may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that Brocade may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws |
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fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws. | upon the board of directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws. | |||
Appraisal Rights | Under Delaware law, if Foundry is a party to a merger, under certain circumstances, a Foundry stockholder may be entitled to appraisal rights pursuant to which such stockholder may receive cash in the amount of the fair value of his or her shares in lieu of the consideration he or she would otherwise receive in the transaction. No appraisal rights are available to holders of shares of any class of stock which is either: (i) listed on a national securities exchange or (ii) held by more than 2,000 stockholders of record, with respect to a merger or consolidation if the terms of the merger or consolidation do not require the stockholders to receive consideration other than shares of the surviving corporation or shares of any other corporation that are either listed on a national securities exchange or held of record by more than 2,000 holders, plus cash in lieu of fractional shares. See the section entitled “Proposal No. 1 — The Merger — Appraisal Rights.” | Under Delaware law, if Brocade is a party to a merger, under certain circumstances, a Brocade stockholder may be entitled to appraisal rights pursuant to which such stockholder may receive cash in the amount of the fair value of his or her shares in lieu of the consideration he or she would otherwise receive in the transaction. No appraisal rights are available to holders of shares of any class of stock which is either: (i) listed on a national securities exchange or (ii) held by more than 2,000 stockholders of record, with respect to a merger or consolidation if the terms of the merger or consolidation do not require the stockholders to receive consideration other than shares of the surviving corporation or shares of any other corporation that are either listed on a national securities exchange or held of record by more than 2,000 holders, plus cash in lieu of fractional shares. | ||
Limitation of Personal Liability of Directors; Indemnification | Foundry’s certificate of incorporation provides that a director will not be personally liable to Foundry or Foundry’s stockholders for monetary damages for breach of fiduciary duty as a director to the fullest extent permitted by the General Corporation Law of the State of Delaware. See also the section entitled “Indemnification of Officers and Directors” below. | Brocade’s certificate of incorporation and bylaws provide that a director of Brocade shall be indemnified by Brocade or its stockholders to the fullest extent permitted by Delaware General Corporation Law for monetary damages for breach of fiduciary duty as a director. See also the section entitled “Indemnification of Officers and Directors” below. |
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• | Brocade’s Annual Report onForm 10-K filed December 21, 2007; | |
• | Brocade’s Current Report onForm 8-K filed on February 22, 2008; | |
• | Brocade’s Quarterly Report onForm 10-Q filed on February 29, 2008; | |
• | Brocade’s Current Report onForm 8-K filed on April 15, 2008; | |
• | Brocade’s Current Report onForm 8-K filed on May 23, 2008; | |
• | Brocade’s Current Report onForm 8-K filed on May 27, 2008; | |
• | Brocade’s Current Report onForm 8-K filed on June 2, 2008; | |
• | Brocade’s Quarterly Report onForm 10-Q filed on June 4, 2008; | |
• | Brocade’s Current Report onForm 8-K filed on July 24, 2008; | |
• | Brocade’s Current Report onForm 8-K filed on August 14, 2008; | |
• | Brocade’s Quarterly Report onForm 10-Q filed on August 22, 2008; and | |
• | the description of Brocade’s common stock contained in its Registration Statement onForm 8-A as filed on March 19, 1999 pursuant to Section 12(g) of the Exchange Act, including any amendment or report filed for the purpose of updating such descriptions. |
• | Foundry’s Annual Report onForm 10-K filed February 26, 2008; | |
• | Foundry’s Quarterly Report onForm 10-Q filed on May 9, 2008; | |
• | Foundry’s Current Report onForm 8-K filed on June 11, 2008; | |
• | Foundry’s Current Report onForm 8-K filed on July 22, 2008; | |
• | Foundry’s Current Report onForm 8-K filed on July 23, 2008; | |
• | Foundry’s Current Report onForm 8-K filed on July 28, 2008; | |
• | Foundry’s Quarterly Report onForm 10-Q filed on August 5, 2008; and | |
• | Foundry’s Current Report onForm 8-K filed on August 6, 2008. |
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Washington, D.C. 20549
Requests for documents relating to Brocade should be directed to: | Requests for documents relating to Foundry should be directed to: | |
Brocade Communications Systems, Inc. Investor Relations 1745 Technology Drive San Jose, California 95110 (408) 333-5767 investor-relations@brocade.com | Foundry Networks, Inc. Investor Relations 4980 Great America Parkway Santa Clara, CA 95054 (408) 207-1399 ir@foundrynet.com |
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among:
Brocade Communications Systems, Inc.,
a Delaware corporation;
Falcon Acquisition Sub, Inc.,
a Delaware corporation; and
Foundry Networks, Inc.,
a Delaware corporation
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Section 1. Description of Transaction | A-5 | |||||
1.1 | Merger of Merger Sub into the Company | A-5 | ||||
1.2 | Effects of the Merger | A-5 | ||||
1.3 | Closing; Effective Time | A-5 | ||||
1.4 | Certificate of Incorporation and Bylaws; Directors and Officers | A-6 | ||||
1.5 | Conversion of Shares | A-6 | ||||
1.6 | Closing of the Company’s Transfer Books | A-7 | ||||
1.7 | Exchange of Certificates | A-7 | ||||
1.8 | Dissenting Shares | A-8 | ||||
1.9 | Further Action | A-9 | ||||
Section 2. Representations and Warranties of the Company | A-9 | |||||
2.1 | Due Organization; Subsidiaries; Etc | A-9 | ||||
2.2 | Charter Documents | A-9 | ||||
2.3 | Capitalization, Etc | A-10 | ||||
2.4 | SEC Filings; Internal Controls and Procedures; Financial Statements | A-11 | ||||
2.5 | Absence of Changes | A-12 | ||||
2.6 | Title to Assets | A-14 | ||||
2.7 | Receivables; Customers; Inventories; Cash | A-14 | ||||
2.8 | Real Property; Equipment; Leasehold | A-14 | ||||
2.9 | Intellectual Property | A-15 | ||||
2.10 | Contracts | A-18 | ||||
2.11 | Liabilities | A-21 | ||||
2.12 | Compliance with Legal Requirements | A-21 | ||||
2.13 | Certain Business Practices; Export Compliance | A-21 | ||||
2.14 | Governmental Authorizations | A-22 | ||||
2.15 | Tax Matters | A-22 | ||||
2.16 | Employee and Labor Matters; Benefit Plans | A-23 | ||||
2.17 | Environmental Matters | A-24 | ||||
2.18 | Insurance | A-25 | ||||
2.19 | Transactions with Affiliates | A-25 | ||||
2.20 | Legal Proceedings; Orders | A-26 | ||||
2.21 | Authority; Inapplicability of Anti-takeover Statutes; Binding Nature of Agreement | A-26 | ||||
2.22 | Vote Required | A-26 | ||||
2.23 | Non-Contravention; Consents | A-26 | ||||
2.24 | Fairness Opinion | A-27 | ||||
2.25 | Financial Advisor | A-27 | ||||
2.26 | Full Disclosure | A-27 |
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Section 3. Representations and Warranties of Parent and Merger Sub | A-27 | |||||
3.1 | Due Organization | A-27 | ||||
3.2 | Authority; Binding Nature of Agreement | A-28 | ||||
3.3 | No Vote Required | A-28 | ||||
3.4 | Non-Contravention; Consents | A-28 | ||||
3.5 | Valid Issuance | A-28 | ||||
3.6 | Financing | A-28 | ||||
3.7 | Solvency | A-29 | ||||
3.8 | Disclosure | A-29 | ||||
Section 4. Certain Covenants of the Company | A-29 | |||||
4.1 | Access and Investigation | A-29 | ||||
4.2 | Operation of the Company’s Business | A-30 | ||||
4.3 | No Solicitation | A-33 | ||||
Section 5. Additional Covenants of the Parties | A-34 | |||||
5.1 | Registration Statement; Prospectus/Proxy Statement | A-34 | ||||
5.2 | Company Stockholders’ Meeting | A-35 | ||||
5.3 | Stock Options, RSUs and ESPP | A-37 | ||||
5.4 | Employee Benefits | A-40 | ||||
5.5 | Indemnification of Officers and Directors | A-41 | ||||
5.6 | Regulatory Approvals and Related Matters | A-43 | ||||
5.7 | Notification of Certain Matters | A-44 | ||||
5.8 | Disclosure | A-44 | ||||
5.9 | Merger Sub Compliance | A-45 | ||||
5.10 | Listing | A-45 | ||||
5.11 | Resignation of Officers and Directors | A-45 | ||||
5.12 | Financing | A-45 | ||||
5.13 | Stockholder Litigation | A-47 | ||||
5.14 | Section 16 Matters | A-47 | ||||
Section 6. Conditions Precedent to Obligations of Parent and Merger Sub | A-47 | |||||
6.1 | Accuracy of Representations | A-47 | ||||
6.2 | Performance of Covenants | A-47 | ||||
6.3 | Effectiveness of Registration Statement | A-47 | ||||
6.4 | Stockholder Approval | A-48 | ||||
6.5 | Consents | A-48 | ||||
6.6 | Agreements and Documents | A-48 | ||||
6.7 | No Material Adverse Effect | A-48 | ||||
6.8 | Regulatory Matters | A-48 | ||||
6.9 | Listing | A-48 | ||||
6.10 | No Restraints | A-48 | ||||
6.11 | No Governmental Litigation | A-48 | ||||
6.12 | Current SEC Reports | A-49 | ||||
6.13 | No Restatement | A-49 | ||||
6.14 | Minimum Cash Balance | A-49 |
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Section 7. Conditions Precedent to Obligation of the Company | A-49 | |||||
7.1 | Accuracy of Representations | A-49 | ||||
7.2 | Performance of Covenants | A-49 | ||||
7.3 | Effectiveness of Registration Statement | A-49 | ||||
7.4 | Stockholder Approval | A-50 | ||||
7.5 | Closing Certificate | A-50 | ||||
7.6 | Listing | A-50 | ||||
7.7 | HSR Waiting Period | A-50 | ||||
7.8 | No Restraints | A-50 | ||||
Section 8. Termination | A-50 | |||||
8.1 | Termination | A-50 | ||||
8.2 | Effect of Termination | A-51 | ||||
8.3 | Expenses; Termination Fees | A-51 | ||||
Section 9. Miscellaneous Provisions | A-54 | |||||
9.1 | Amendment | A-54 | ||||
9.2 | Waiver | A-54 | ||||
9.3 | No Survival of Representations and Warranties | A-54 | ||||
9.4 | Entire Agreement; Counterparts; Exchanges by Facsimile or Electronic Delivery | A-54 | ||||
9.5 | Applicable Law; Jurisdiction | A-54 | ||||
9.6 | Disclosure Schedule | A-54 | ||||
9.7 | Attorneys’ Fees | A-54 | ||||
9.8 | Assignability; Third Party Beneficiaries | A-54 | ||||
9.9 | Notices | A-55 | ||||
9.10 | Cooperation | A-55 | ||||
9.11 | Severability | A-56 | ||||
9.12 | Enforcement | A-56 | ||||
9.13 | Construction | A-57 |
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By: | /s/ Michael Klayto |
Name: | Michael Klayto | |
Title: | CEO |
By: | /s/ Tyler Wall |
Name: | Tyler Wall | |
Title: | Secretary |
By: | /s/ Daniel W. Fairfax |
Name: | Daniel W. Fairfax |
Title: CFO |
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Title |
Address: |
Facsimile: |
Additional Securities | ||||
Shares Held of Record | Options and Other Rights | Beneficially Owned | ||
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Form Of Irrevocable Proxy
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the Company owned of record as of
the date of this proxy:
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INCORPORATED
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Item 20. | Indemnification of Officers and Directors |
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Item 21. | Exhibits and Financial Statement Schedules |
(a) | Exhibits |
Exhibit | ||||
Number | Description | |||
2 | .1 | Agreement and Plan of Merger, dated as of July 21, 2008, among Brocade Communications Systems, Inc., Falcon Acquisition Sub, Inc. and Foundry Networks, Inc. (included as Annex A to the proxy statement/prospectus) | ||
3 | .1 | Amended and Restated Certificate of Incorporation of Brocade Communications Systems, Inc. (incorporated by reference to Exhibit 3.1 from Brocade’s Quarterly Report onForm 10-Q for the fiscal quarter ended July 28, 2007) | ||
3 | .2 | Amended and Restated Bylaws of Brocade Communications Systems, Inc. (incorporated by reference to Exhibit 3.1 from Brocade’s Current Report onForm 8-K as filed on February 22, 2008) | ||
4 | .1 | Form of Registrant’s Common Stock certificate (incorporated by reference to Exhibit 4.1 from Brocade’s Registration Statement onForm S-1 (Reg.No. 333-74711), as amended) | ||
4 | .2 | Form of Convertible Senior Debt Indenture† | ||
4 | .3 | Form of Convertible Subordinated Debt Indenture† | ||
5 | .1 | Opinion of Cooley Godward Kronish LLP as to the issuance of shares of Brocade common stock in connection with the merger | ||
9 | .1 | Form of Voting Agreement (included as Annex B to the proxy statement/prospectus) | ||
10 | .1 | Commitment Letter with Bank of America, N.A., Banc of America Securities LLC, Banc of America Bridge LLC and Morgan Stanley Senior Funding, Inc., dated as of July 21, 2008 (incorporated by reference to Exhibit 99.1 from Brocade’s Current Report onForm 8-K as filed on August 14, 2008) | ||
21 | .1 | Subsidiaries (incorporated by reference to Exhibit 21.1 from Brocade’s Annual Report onForm 10-K for the fiscal year ended October 27, 2007) | ||
23 | .1 | Consent of KPMG LLP, independent registered public accounting firm, with respect to Brocade Communications Systems, Inc. | ||
23 | .2 | Consent of Ernst & Young LLP, independent registered public accounting firm, with respect to Foundry Networks, Inc. | ||
23 | .3 | Consent of Cooley Godward Kronish LLP (set forth in Exhibit 5.1) | ||
24 | .1 | Power of Attorney† | ||
99 | .1 | Form of Foundry Proxy Card | ||
99 | .2 | Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated |
† | previously filed |
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Item 22. | Undertakings |
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By: | /s/ Michael Klayko |
Signature | Title | Date | ||||
/s/ Michael Klayko Michael Klayko | Chief Executive Officer (Principal Executive Officer and Director) | September 22, 2008 | ||||
/s/ Richard Deranleau Richard Deranleau | Chief Financial Officer and Vice President, Finance (Principal Financial and Accounting Officer) | September 22, 2008 | ||||
* David L. House | Chairman of the Board of Directors | September 22, 2008 | ||||
* L. William Krause | Director | September 22, 2008 | ||||
* Glenn Jones | Director | September 22, 2008 | ||||
Michael J. Rose | Director | |||||
* Sanjay Vaswani | Director | September 22, 2008 | ||||
* Renato DiPentima | Director | September 22, 2008 | ||||
* John Gerdelman | Director | September 22, 2008 |
*By: | /s/ Richard Deranteau |
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Exhibit | ||||
Number | Description | |||
2 | .1 | Agreement and Plan of Merger, dated as of July 21, 2008, among Brocade Communications Systems, Inc., Falcon Acquisition Sub, Inc. and Foundry Networks, Inc. (included as Annex A to the proxy statement/prospectus) | ||
3 | .1 | Amended and Restated Certificate of Incorporation of Brocade Communications Systems, Inc. (incorporated by reference to Exhibit 3.1 from Brocade’s Quarterly Report onForm 10-Q for the fiscal quarter ended July 28, 2007) | ||
3 | .2 | Amended and Restated Bylaws of Brocade Communications Systems, Inc. (incorporated by reference to Exhibit 3.1 from Brocade’s Current Report onForm 8-K as filed on February 22, 2008) | ||
4 | .1 | Form of Registrant’s Common Stock certificate (incorporated by reference to Exhibit 4.1 from Brocade’s Registration Statement onForm S-1 (Reg.No. 333-74711), as amended) | ||
4 | .2 | Form of Convertible Senior Debt Indenture† | ||
4 | .3 | Form of Convertible Subordinated Debt Indenture† | ||
5 | .1 | Opinion of Cooley Godward Kronish LLP as to the issuance of shares of Brocade common stock in connection with the merger | ||
9 | .1 | Form of Voting Agreement (included as Annex B to the proxy statement/prospectus) | ||
10 | .1 | Commitment Letter with Bank of America, N.A., Banc of America Securities LLC, Banc of America Bridge LLC and Morgan Stanley Senior Funding, Inc., dated as of July 21, 2008 (incorporated by reference to Exhibit 99.1 from Brocade’s Current Report onForm 8-K as filed on August 14, 2008) | ||
21 | .1 | Subsidiaries (incorporated by reference to Exhibit 21.1 from Brocade’s Annual Report onForm 10-K for the fiscal year ended October 27, 2007) | ||
23 | .1 | Consent of KPMG LLP, independent registered public accounting firm, with respect to Brocade Communications Systems, Inc. | ||
23 | .2 | Consent of Ernst & Young LLP, independent registered public accounting firm, with respect to Foundry Networks, Inc. | ||
23 | .3 | Consent of Cooley Godward Kronish LLP (set forth in Exhibit 5.1) | ||
24 | .1 | Power of Attorney† | ||
99 | .1 | Form of Foundry Proxy Card | ||
99 | .2 | Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated |
† | previously filed |