EXPLANATORY NOTE
| Item 1.01 | Entry into a Material Definitive Agreement |
As previously disclosed by ADTRAN Holdings, Inc. (the “Company”), on October 18, 2022, the Board of Directors of the Company and the management board of ADVA Optical Networking SE, a company organized and existing under the laws of Germany (“ADVA”), agreed on a final draft of a domination and profit and loss transfer agreement (the “ DPLTA”) between the Company, as the controlling company, and ADVA, as the controlled company. On December 1, 2022, the Company and ADVA signed the DPLTA after the approval of the DPLTA by ADVA’s shareholders at an extraordinary meeting of shareholders held on November 30, 2022. The Company held approximately 65.34% of ADVA’s outstanding shares as of November 30, 2022.
The effectiveness of the DPLTA remains subject to the registration of the DPLTA with the commercial register (Handelsregister) of the local court (Amtsgericht) at the registered seat of ADVA, with effectiveness to occur no earlier than January 1, 2023. While the Company plans to apply for registration of the DPLTA without undue delay, registration may be delayed considerably pending potential shareholder litigation, if any, in Germany.
Under the DPLTA, when effective and subject to certain limitations pursuant to applicable law, (i) the Company will be entitled to issue binding instructions to the management board of ADVA, (ii) ADVA will transfer all of its annual profits to the Company, subject to, among other things, the creation or dissolution of certain reserves, and (iii) the Company will generally absorb all annual losses incurred by ADVA. Additionally, under the DPLTA, the Company will offer, at the election of each shareholder of ADVA (other than the Company), (i) to acquire the shares of such shareholder for a compensation of EUR 17.21 per share pursuant to Section 305 of the German Stock Corporation Act (Aktiengesetz, “AktG”) (“Exit Compensation”), or (ii) to pay such shareholder a fixed annually recurring compensation payment pursuant to Section 304 of the AktG in an amount of EUR 0.59 per share (EUR 0.52 net under the current taxation regime) (the “Annual Recurring Compensation”). The amount of the Annual Recurring Compensation payment of EUR 0.59 per share (EUR 0.52 net) was determined on the basis of a rounded annuity interest rate of 3.00%. This corresponds to the amount as previously agreed between ADVA and the Company in the final draft of the DPLTA on October 18, 2022. An adjustment of the amount of the Annual Recurring Compensation payment due to certain changes in borrowing costs and the annuity interest rate was not required. The adequacy of both forms of compensation may be challenged by minority shareholders of ADVA via court-led appraisal proceedings under German law, and it is possible that the courts in such appraisal proceedings may adjudicate a higher Exit Compensation or Annual Recurring Compensation (in each case, including interest thereon) than agreed upon in the DPLTA. Such court-led appraisal proceedings will not delay the registration of the DPLTA with the relevant commercial register (i.e., the effectiveness of the DPLTA).
The foregoing description of the DPLTA does not purport to be complete and is qualified in its entirety by reference to the DPLTA, a non-binding English translation of which is attached as Exhibit 10.1 to this Current Report on Form 8-K.
| Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits. The following exhibits are filed with this report:
CAUTIONARY STATEMENT ABOUT FORWARD LOOKING STATEMENTS
Certain statements contained in this document regarding matters that are not historical facts are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). They are generally identified by the use of words such as “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” “may,” “could” and similar expressions, which forward-looking statements reflect management’s best judgment based on factors currently known. However, these statements involve risks and uncertainties, including: (i) risks and uncertainties related to the continued impact of the SARS-CoV-2 coronavirus/COVID-19 global pandemic (including variants of the SARS-CoV-2 coronavirus), including with respect to continued manufacturing and supply chain constraints; (ii) risks and uncertainties related to the completed business combination between the Company, ADTRAN, Inc. (“ADTRAN”) and ADVA, and, if the DPLTA becomes effective, the impact of the DPLTA on the Company; the ability to successfully integrate ADTRAN’s and ADVA’s businesses; risks related to disruption of management time from ongoing business operations due to integration efforts following the business
