Form S-4/A
Table of Contents

As filed with the Securities and Exchange Commission on June 26, 2015

Registration No. 333-204732

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CIENA CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   3661   23-2725311
(State of Incorporation)  

(Primary Standard Industrial

Classification Code Number)

 

(IRS Employer

Identification No.)

7035 Ridge Road

Hanover, Maryland 21076

Telephone: (410) 694-5700

(Address, including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)

 

 

David M. Rothenstein

Senior Vice President, General Counsel and Secretary

Ciena Corporation

7035 Ridge Road

Hanover, Maryland 21076

(410) 694-5700

(Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service)

 

 

With a copy to:

 

Michael J. Silver

William Intner

Hogan Lovells US LLP

875 Third Avenue

New York, New York 10022

(212) 918-3000

 

Kenneth M. Siegel

Vice President and General Counsel

Cyan, Inc.

1383 N. McDowell Blvd., Suite 300

Petaluma, California 94954

(707) 735-2300

 

Mike Ringler

Brian Keyes

Wilson Sonsini Goodrich &

Rosati Professional Corporation

One Market Plaza

Spear Tower, Suite 3300

San Francisco, California 94105

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement is declared effective.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box.  ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   x       Accelerated filer   ¨
Non-accelerated filer   ¨    (Do not check if a smaller reporting company)    Smaller reporting company   ¨

 

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of

securities to be registered

Amount

to be

registered

Proposed

maximum

offering price

per unit

Proposed

maximum

aggregate

offering price

Amount of

registration fee

Common stock, par value $0.01 per share

  20,404,554 shares   N/A   $471,434,470(1)   $54,781(2)

 

 

 

(1) Calculated in accordance with Rules 457(c), 457(f)(1) and 457(f)(3) promulgated under the Securities Act. The proposed maximum aggregate offering price is solely for the purpose of calculating the registration fee.
(2) Previously paid in connection with the initial filing of this registration statement on June 4, 2015.

 

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the SEC, acting pursuant to said section 8(a), may determine.

 

 

 


Table of Contents

The information in this proxy statement/prospectus is not complete and may be changed. Ciena Corporation may not sell the securities offered by this proxy statement/prospectus until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities and Ciena Corporation is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY—SUBJECT TO COMPLETION, DATED JUNE 26, 2015

 

 

LOGO

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

 

 

[—], 2015

Dear Fellow Stockholder:

We cordially invite you to attend the postponed annual meeting of stockholders of Cyan, Inc., a Delaware corporation, which we refer to as Cyan, to be held on July 31, 2015, at 8:00 a.m., local time. As previously announced, Cyan and Ciena Corporation, a Delaware corporation, which we refer to as Ciena, have entered into an Agreement and Plan of Merger, dated as of May 3, 2015, as amended on June 2, 2015, which we refer to as the merger agreement. Pursuant to the terms of the merger agreement, a subsidiary of Ciena will merge with and into Cyan, with Cyan surviving the merger as a wholly owned subsidiary of Ciena, and thereafter Cyan will merge with and into Ciena.

If the merger contemplated by the merger agreement is completed, holders of Cyan common stock will be entitled to receive, for each share of Cyan common stock that they own, merger consideration having a value at closing of 0.224 shares of Ciena common stock, which we refer to as the aggregate exchange ratio, consisting of: (i) 0.19936 (89% of the aggregate exchange ratio) shares of Ciena common stock (plus cash in lieu of any fractional shares resulting therefrom equal to the product of (A) the fractional share interest to which a stockholder would otherwise be entitled and (B) the volume weighted average price per share of Ciena common stock on the NYSE on the last trading day prior to closing, rounded to the nearest cent), and (ii) an amount of cash, without interest, equal to the product of (A) 0.02464 (11% of the aggregate exchange ratio) multiplied by (B) the volume weighted average price per share of Ciena common stock on the New York Stock Exchange, which we refer to as the NYSE, on the last trading day prior to closing. Based on the closing price of $21.29 of Ciena common stock on the NYSE on May 1, 2015, the last business day before public announcement of the merger agreement, the total value of the cash and stock consideration to be paid in the merger represented approximately $4.77 per share of Cyan common stock. As of such date, this represented a premium of approximately 31% to the closing price of Cyan common stock of $3.65 on the NYSE on May 1, 2015.

Based on the closing price of $25.04 of Ciena common stock on the NYSE on June 24, 2015, the latest practicable date before the date of this proxy statement/prospectus, the total value of the merger consideration represented approximately $5.61 per share of Cyan common stock. However, the value of the merger consideration will fluctuate with the market price of Ciena common stock and will not be known at the time the Cyan stockholders vote on the merger. Ciena common stock is listed on the NYSE under the trading symbol “CIEN,” and we encourage you to obtain quotes for the Ciena common stock.

Under the General Corporation Law of the State of Delaware, the approval of Cyan stockholders must be obtained before effecting the merger and the other transactions contemplated by the merger agreement. Based on the estimated number of shares of Cyan and Ciena common stock that will be outstanding immediately prior to the closing of the merger, we currently estimate that, upon closing, existing Ciena stockholders will own approximately 91.8% of the outstanding shares of Ciena common stock and former Cyan stockholders will own approximately 8.2% of the outstanding shares of Ciena common stock.

At the postponed annual meeting of Cyan stockholders, Cyan stockholders will be asked to vote on (i) a proposal to adopt the merger agreement, (ii) the election of three nominees for Class II directors to the Cyan board, (iii) a proposal to approve certain issuances of Cyan common stock in excess of 20% of Cyan’s outstanding shares upon conversion of its 8.0% convertible senior secured notes due 2019 and exercise of related warrants issued in December 2014, (iv) a proposal to approve certain issuances of Cyan common stock to certain


Table of Contents

affiliated holders upon conversion of its 8.0% convertible senior secured notes due 2019 and exercise of related warrants issued in December 2014, (v) a proposal to ratify the selection by the audit committee of the Cyan board of Ernst & Young LLP as Cyan’s independent registered public accounting firm for its fiscal year ending December 31, 2015 and (vi) a proposal to approve the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the proposals described in the preceding clauses (iii) and (iv), which we refer to as the NYSE share issuance proposals, or adoption of the merger agreement.

The merger cannot be completed unless the holders of at least a majority of the outstanding shares of Cyan common stock entitled to vote on the matter at the postponed annual meeting vote to adopt the merger agreement. In addition, Ciena’s obligation to consummate the merger is subject to the holders of at least a majority of the shares present or represented by proxy at the meeting and entitled to vote on the NYSE share issuance proposals at the meeting voting to approve the proposals (which is the equivalent of the NYSE stockholder approval policy requirement that a majority of votes cast must vote in favor). A failure to vote, a broker non-vote or an abstention will have the same effect as a vote “AGAINST” the adoption of the merger agreement, and an abstention will have the same effect as a vote “AGAINST” the NYSE share issuance proposals while a failure to vote or a broker non-vote will have no effect on the outcome of the NYSE share issuance proposals.

Certain Cyan officers and directors and affiliated stockholders, including investment funds affiliated with certain directors, who collectively control approximately 40% of the voting power of the outstanding shares of Cyan common stock entitled to be cast at the postponed annual meeting, have entered into voting agreements with Ciena that obligate them to vote in favor of the proposals to adopt the merger agreement and approve the NYSE share issuance proposals, subject to certain exceptions and limitations described in the accompanying proxy statement/prospectus under “The Voting Agreements—Voting”.

Your vote is very important, regardless of the number of shares you own. Whether or not you expect to attend the postponed annual meeting in person, please submit a proxy to vote your shares as promptly as possible so that your shares may be represented and voted at the postponed annual meeting.

The Cyan board of directors has unanimously approved the merger agreement, the merger and all of the other transactions contemplated by the merger agreement, declared that it is in the best interests of Cyan and its stockholders to enter into the merger agreement and to consummate the merger and all of the other transactions contemplated by the merger agreement, directed that the adoption of the merger agreement be submitted to a vote at a meeting of the Cyan stockholders, and recommended that the Cyan stockholders vote to adopt the merger agreement. The Cyan board of directors has also unanimously approved and recommended that Cyan stockholders vote to adopt the NYSE share issuance proposals. ACCORDINGLY, THE CYAN BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CYAN STOCKHOLDERS VOTE “FOR” THE PROPOSAL TO ADOPT THE MERGER AGREEMENT, “FOR” THE NYSE SHARE ISSUANCE PROPOSALS AND “FOR” EACH OTHER PROPOSAL PRESENTED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS. In considering the recommendations of the Cyan board of directors, you should be aware that certain directors and executive officers of Cyan will have interests in the merger and the NYSE share issuance proposals that may be different from, or in addition to, the interests of Cyan stockholders generally. See the section entitled “Interests of Cyan’s Directors and Executive Officers in the Merger” beginning on page 141 of the accompanying proxy statement/prospectus.

 

 

We urge you to read the proxy statement/prospectus and the Annexes and the documents incorporated by reference carefully and in their entirety. In particular, we urge you to read carefully the section entitled “Risk Factors” beginning on page 47 of this proxy statement/prospectus. If you have any questions regarding this proxy statement/prospectus, you may contact Okapi Partners LLC, Cyan’s proxy solicitor, by calling toll-free at (855) 305-0855.


Table of Contents

On behalf of the board of directors of Cyan, thank you for your consideration and continued support. We look forward to the successful completion of the merger.

Sincerely,

 

LOGO

Mark A. Floyd

Chairman and Chief Executive Officer

Cyan, Inc.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this proxy statement/prospectus or determined if this proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated [—], 2015 and is first being mailed to Cyan stockholders on or about [—], 2015.


Table of Contents

LOGO

CYAN, INC.

1383 N. McDowell Blvd., Suite 300

Petaluma, California 94954

NOTICE OF POSTPONED ANNUAL MEETING OF STOCKHOLDERS

To Be Held at 8:00 a.m., Local Time on July 31, 2015

Dear Fellow Stockholder:

You are cordially invited to attend the postponed annual meeting of stockholders of Cyan, Inc., which we refer to as Cyan, on July 31, 2015, at 8:00 a.m., local time, at Cyan’s headquarters, 1383 N. McDowell Blvd., Suite 300, Petaluma, California 94954, to vote on the following matters:

 

  1. a proposal to adopt the Agreement and Plan of Merger, dated as of May 3, 2015, as amended by Amendment No. 1 thereto on June 2, 2015, and as may be further amended from time to time, which we refer to as the merger agreement, among Ciena Corporation, which we refer to as Ciena, Neptune Acquisition Subsidiary, Inc., a subsidiary of Ciena, and Cyan, a copy of which is included as Annex A to the proxy statement/prospectus of which this notice forms a part;

 

  2. election of three nominees for Class II directors to the Cyan board;

 

  3. a proposal to approve certain issuances of Cyan common stock in excess of 20% of Cyan’s outstanding shares upon conversion of its 8.0% convertible senior secured notes due 2019, which we refer to as the convertible notes, and exercise of related warrants issued in December 2014;

 

  4. a proposal to approve certain issuances of Cyan common stock to certain affiliated holders upon conversion of the convertible notes and exercise of related warrants issued in December 2014;

 

  5. a proposal to ratify the selection by the audit committee of the Cyan board of Ernst & Young LLP as Cyan’s independent registered public accounting firm for its fiscal year ending December 31, 2015;

 

  6. a proposal to approve the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement or proposals 3 and 4, which we refer to as the NYSE share issuance proposals; and

 

  7. such other business as may properly come before the meeting or any adjournments or postponements thereof.

Your proxy is being solicited by the Cyan board of directors. The Cyan board of directors has unanimously approved the merger agreement, the merger and all of the other transactions contemplated by the merger agreement, declared that it is in the best interests of Cyan and its stockholders to enter into the merger agreement and consummate the merger and all of the other transactions contemplated by the merger agreement, directed that the adoption of the merger agreement be submitted to a vote at a meeting of the Cyan stockholders, and recommended that the Cyan stockholders vote to adopt the merger agreement.

The Cyan board of directors unanimously recommends that Cyan stockholders vote:

 

    “FOR” the proposal to adopt the merger agreement;

 

    “FOR” the election of the three nominees as Class II directors of the Cyan board;

 

    “FOR” approval of certain issuances of Cyan common stock in excess of 20% of Cyan’s outstanding shares upon conversion of the convertible notes and exercise of related warrants;

 

    “FOR” approval of certain issuances of Cyan common stock to certain affiliated holders upon conversion of the convertible notes and exercise of related warrants;


Table of Contents
    “FOR” the proposal to ratify Ernst & Young LLP as Cyan’s independent registered public accounting firm for its fiscal year ending December 31, 2015; and

 

    “FOR” the proposal to approve the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement or the NYSE share issuance proposals.

The Cyan board of directors has fixed the close of business on June 25, 2015 as the record date for determination of Cyan stockholders entitled to receive notice of, and to vote at, the Cyan stockholders’ postponed annual meeting or any adjournments or postponements thereof. Only holders of record of Cyan common stock at the close of business on the record date are entitled to receive notice of, and to vote at, the Cyan stockholders’ postponed annual meeting. The merger cannot be completed unless the holders of at least a majority of the outstanding shares of Cyan common stock entitled to vote on the matter at the postponed annual meeting vote to adopt the merger agreement, and Ciena’s obligation to consummate the merger is subject to the holders of at least a majority of the shares present or represented by proxy at the meeting and entitled to vote on the NYSE share issuance proposals at the meeting voting to approve such proposals (which is the equivalent of the NYSE stockholder approval policy requirement that a majority of votes cast must vote in favor). A failure to vote, a broker non-vote or an abstention will have the same effect as a vote “AGAINST” the adoption of the merger agreement. For the NYSE share issuance proposals and the proposal regarding adjournment of the meeting, an abstention will have the same effect as a vote “AGAINST” the adoption of the proposals, while a failure to vote and a broker non-vote will have no effect on the outcome of the proposals.

It is important that your shares be represented at the postponed annual meeting, regardless of the number of shares that you hold. You are, therefore, urged to submit your proxy by telephone or by using the Internet as instructed on the enclosed proxy card or execute and return, at your earliest convenience, the enclosed proxy card in the envelope that has also been provided. Registered stockholders may submit a proxy (i) through the Internet by logging onto the website indicated on the enclosed proxy card and following the prompts using the control number located on the proxy card; (ii) by telephone (from the United States, Puerto Rico and Canada) using the toll-free telephone number listed on the enclosed proxy card; or (iii) by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If your shares are held in the name of a bank, broker or other nominee, follow the instructions you receive from your nominee on how to vote your shares. Registered stockholders who attend the meeting may vote their shares personally even if they previously have submitted a proxy.

All stockholders are cordially invited to attend the meeting in person. You will find a map with directions to the postponed annual meeting on the final page of the proxy statement/prospectus. However, to ensure your representation at the meeting, you are urged to mark, sign and return the enclosed proxy as promptly as possible in the postage-prepaid envelope for that purpose. Any stockholder attending the meeting may vote in person even if he or she has returned a proxy. However, if your shares are held in the name of a bank, broker, or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the postponed annual meeting. Stockholders may have a choice of submitting a proxy over the Internet or by telephone, in which case instructions are printed on the proxy card sent to you.

We appreciate your continued support of Cyan, Inc. and look forward to your attendance at the postponed annual meeting or receiving your proxy.

By order of the Board of Directors,

 

LOGO

Kenneth M. Siegel, Secretary

Petaluma, California

[—], 2015


Table of Contents

REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial information about Cyan, Inc., which we refer to as Cyan, and Ciena Corporation, which we refer to as Ciena, from other documents that Cyan and Ciena have filed with the U.S. Securities and Exchange Commission, which we refer to as the SEC, and that are contained in or incorporated by reference into this proxy statement/prospectus. For a listing of documents incorporated by reference into this proxy statement/prospectus, please see the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus. This information is available for you to review at the SEC’s public reference room located at 100 F Street, N.E., Room 1580, Washington, DC 20549, and through the SEC’s website at www.sec.gov.

Any person may request copies of this proxy statement/prospectus and any of the documents incorporated by reference into this proxy statement/prospectus or other information concerning Cyan, without charge, by written or telephonic request directed to Cyan, Inc., Attention: Corporate Secretary, 1383 N. McDowell Blvd., Suite 300, Petaluma, California 94954, Telephone (707) 735-2300; or Okapi Partners LLC, which we refer to as Okapi, Cyan’s proxy solicitor, by calling toll-free at (855) 305-0855. Banks, brokerage firms, and other nominees may call Okapi collect at (212) 297-0720.

You may also request a copy of this proxy statement/prospectus and any of the documents incorporated by reference into this proxy statement/prospectus or other information concerning Ciena, without charge, by written or telephonic request directed to Ciena Corporation, 7035 Ridge Road, Hanover, Maryland 21076, Attention: Corporate Secretary, Telephone (410) 694-5700; or from the SEC through the SEC website at the address provided above.

In order for you to receive timely delivery of the documents in advance of the postponed annual meeting of Cyan stockholders to be held on July 31, 2015, you must request the information no later than five business days prior to the date of the postponed annual meeting, or July 24, 2015.

We are not incorporating the contents of the websites of the SEC, Cyan, Ciena or any other entity into this proxy statement/prospectus. We are providing the information about how you can obtain certain documents that are incorporated by reference into this proxy statement/prospectus at these websites only for your convenience.

ABOUT THIS PROXY STATEMENT/PROSPECTUS

This document, which forms part of a registration statement on Form S-4 filed with the SEC by Ciena (File No. 333-204732), constitutes a prospectus of Ciena under Section 5 of the Securities Act of 1933, as amended, which we refer to as the Securities Act, with respect to the shares of common stock of Ciena to be issued to Cyan stockholders pursuant to the Agreement and Plan of Merger, dated as of May 3, 2015, by and among Cyan, Ciena and Neptune Acquisition Subsidiary, Inc., which we refer to as Merger Sub, as amended by Amendment No. 1 thereto, dated June 2, 2015, and as it may be further amended from time to time, which we refer to as the merger agreement. This document also constitutes a proxy statement of Cyan under Section 14(a) of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. It also constitutes a notice of meeting with respect to the postponed annual meeting, at which Cyan stockholders will be asked to vote on: (i) a proposal to adopt the merger agreement; (ii) the election of three nominees for Class II directors to the Cyan board of directors, which we refer to as the Cyan board; (iii) a proposal to approve certain issuances of Cyan common stock in excess of 20% of Cyan’s outstanding shares upon conversion of its convertible notes and exercise of related warrants; (iv) a proposal to approve certain issuances of Cyan common stock to certain affiliated holders upon conversion of convertible notes and exercise of related warrants; (v) a proposal to ratify the selection by the audit committee of the Cyan board of Ernst & Young LLP as Cyan’s independent registered public accounting firm for its fiscal year ending December 31, 2015; and (vi) a proposal to approve the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement or the proposals described in clauses (iii) and (iv) above.


Table of Contents

Ciena has supplied all information contained or incorporated by reference into this proxy statement/prospectus relating to Ciena, and Cyan has supplied all such information relating to Cyan.

Ciena and Cyan have not authorized anyone to provide you with information that is different from that contained in or incorporated by reference into this proxy statement/prospectus, and neither Ciena nor Cyan takes any responsibility for any other information that others may give you. This proxy statement/prospectus is dated [—], 2015, and you should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than such date unless otherwise specifically provided herein. Further, you should not assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of any date other than the date of the incorporated document. Neither the mailing of this proxy statement/prospectus to Cyan stockholders nor the issuance by Ciena of shares of its common stock pursuant to the merger agreement will create any implication to the contrary.


Table of Contents

TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE POSTPONED ANNUAL MEETING

     1   

SUMMARY

     13   

The Merger and the Merger Agreement

     13   

Per Share Merger Consideration

     13   

Financing of the Merger

     13   

Recommendation of the Cyan Board; Cyan’s Reasons for the Merger

     13   

Opinions of Cyan’s Financial Advisors

     14   

Information About the Postponed Annual Meeting

     15   

Voting by Cyan’s Directors and Executive Officers

     16   

Interests of Cyan’s Directors and Executive Officers in the Merger

     16   

Regulatory Approvals

     17   

Appraisal Rights of Cyan Stockholders

     17   

Conditions to Completion of the Merger

     18   

No Solicitation or Negotiation of Takeover Proposals

     19   

No Change in Recommendations

     20   

Termination of the Merger Agreement

     21   

Termination Fees and Expenses

     22   

Treatment of Cyan Warrants and Convertible Notes

     23   

The Voting Agreements

     24   

Accounting Treatment

     24   

Material U.S. Federal Income Tax Consequences of the Merger

     25   

Comparison of Stockholders’ Rights

     25   

Parties to the Merger

     25   

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CYAN

     27   

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CIENA

     30   

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     32   

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     42   

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

     43   

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     45   

RISK FACTORS

     47   

Risks Relating to the Merger

     47   

Risks Relating to the Combined Company Upon Completion of the Merger

     53   

Risks Relating to Ciena’s Business

     55   

Risks Relating to Cyan’s Business

     55   

INFORMATION ABOUT THE POSTPONED ANNUAL MEETING

     56   

General

     56   

Date, Time and Place

     56   

Purpose of the Postponed Annual Meeting

     56   

Recommendations of the Cyan Board

     56   

Record Date; Stockholders Entitled to Vote

     57   

Voting by Cyan’s Directors and Executive Officers

     57   

Quorum

     57   

Required Vote

     57   

Failure to Vote, Broker Non-Votes and Abstentions

     58   

How to Submit Your Proxy

     59   

Voting in Person

     59   

Voting of Proxies

     59   

Revocation of Proxies

     59   

 

i


Table of Contents
     Page  

Solicitation of Proxies

     60   

Adjournments

     60   

Proposal No. 1—Adoption of the Merger Agreement

     60   

Proposal No. 2—Election of Class II Directors

     61   

Proposal No. 3—Approval of Certain Issuances of Cyan Common Stock upon Conversion of Cyan’s Convertible Notes and Exercise of the Related Warrants

     61   

Proposal No. 4—Approval of Certain Issuances of Cyan Common Stock to Affiliates upon Conversion of Cyan’s Convertible Notes and Exercise of the Related Warrants

     61   

Proposal No. 5—Ratification of Appointment of Independent Registered Public Accounting Firm

     62   

Proposal No. 6—Adjournment

     62   

THE PARTIES TO THE MERGER

     63   

PROPOSAL No. 1—PROPOSAL TO ADOPT THE MERGER AGREEMENT

     65   

THE MERGER

     65   

Per Share Merger Consideration

     65   

Background of the Merger

     65   

Recommendations of the Cyan Board; Cyan’s Reasons for the Merger

     88   

Opinions of Cyan’s Financial Advisors

     92   

Other Factors

     106   

Cyan Management Projections

     108   

Ciena’s Reasons for the Merger

     110   

Financing of the Merger

     112   

Closing and Effective Time

     112   

Regulatory Approvals

     113   

Federal Securities Law Consequences

     113   

Accounting Treatment

     114   

NYSE Listing

     114   

Delisting and Deregistration of Cyan Common Stock

     114   

Litigation Related to the Merger

     114   

THE MERGER AGREEMENT

     115   

Explanatory Note Regarding the Merger Agreement

     115   

Effects of the Merger; Merger Consideration

     115   

Adjustments to Prevent Dilution

     116   

Potential Adjustment to Merger Consideration

     116   

Treatment of Cyan Stock Options and Other Stock-Based Awards

     116   

Exchange and Payment Procedures

     117   

Distributions and Dividends after the Effective Time

     118   

No Transfers Following the Effective Time

     118   

Fractional Shares

     118   

Withholding Taxes

     118   

Appraisal Rights

     118   

Representations and Warranties

     119   

Conduct of Business Prior to Effective Time

     122   

No Solicitation or Negotiation of Takeover Proposals

     125   

No Change in Recommendations

     127   

Limits on Release of Standstill and Confidentiality

     128   

Certain Permitted Disclosure

     128   

Cyan Stockholder Meeting

     128   

Efforts to Complete the Merger; Regulatory Approvals

     129   

Employee Benefits

     130   

Financing of the Merger

     130   

Treatment of Cyan Warrants and Convertible Notes

     130   

 

ii


Table of Contents
     Page  

Indemnification and Insurance

     131   

Other Covenants and Agreements

     132   

Conditions to Completion of the Merger

     132   

Termination of the Merger Agreement

     134   

Termination Fees and Expenses

     135   

Expenses

     136   

Amendments, Extensions and Waivers

     136   

Remedies

     136   

No Third Party Beneficiaries

     137   

THE VOTING AGREEMENTS

     138   

Explanatory Note Regarding the Voting Agreements

     138   

Voting

     138   

Prohibition on Transfers

     139   

Irrevocable Proxy

     139   

No Solicitation

     139   

Waiver of Appraisal Rights

     140   

Termination

     140   

INTERESTS OF CYAN’S DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER

     141   

PROPOSAL NO. 2—ELECTION OF DIRECTORS

     151   

General

     151   

Nominees for Class II Directors

     151   

Information Regarding the Board of Directors and Director Nominees

     152   

Nominees for Director

     152   

Continuing Directors

     153   

Vote Required

     154   

PROPOSAL NO. 3—APPROVAL OF CERTAIN ISSUANCES OF CYAN COMMON STOCK IN EXCESS OF 20% OF CYAN’S OUTSTANDING SHARES UPON CONVERSION OF CYAN’S OUTSTANDING CONVERTIBLE NOTES AND EXERCISE OF RELATED WARRANTS ISSUED DECEMBER 2014

     155   

Background with Respect to the Offering and this Proposal

     155   

Reason for the Offering

     156   

Summary of Terms of the Convertible Notes and Warrants

     157   

NYSE Stockholder Approval Requirements and Consequences of No Approval

     160   

Vote Required

     161   

PROPOSAL NO. 4—APPROVAL OF CERTAIN ISSUANCES OF CYAN’S COMMON STOCK TO CERTAIN AFFILIATED HOLDERS UPON CONVERSION OF CYAN’S OUTSTANDING CONVERTIBLE NOTES AND EXERCISE OF RELATED WARRANTS ISSUED DECEMBER 2014

     162   

Background with Respect to the Offering and this Proposal

     162   

NYSE Stockholder Approval Requirements and Consequences of No Approval

     162   

Vote Required

     163   

PROPOSAL NO. 5—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     164   

General

     164   

Fees Paid to the Independent Registered Public Accounting Firm

     164   

Auditor Independence

     164   

Audit Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

     165   

Vote Required

     165   

PROPOSAL NO. 6—ADJOURNMENT OF THE POSTPONED ANNUAL MEETING

     166   

 

iii


Table of Contents
     Page  

CORPORATE GOVERNANCE

     167   

Corporate Governance Guidelines and Code of Business Conduct & Ethics

     167   

Director Independence

     167   

Leadership Structure

     168   

Board Meetings and Committees

     168   

Considerations in Evaluating Director Nominees

     170   

Stockholder Recommendations for Nominations to the Board of Directors

     170   

Risk Management

     171   

Information on Compensation Risk Assessment

     172   

Non-Employee Director Compensation

     172   

Contacting the Board of Directors

     173   

REPORT OF THE AUDIT COMMITTEE

     174   

EXECUTIVE OFFICERS

     175   

EXECUTIVE COMPENSATION

     177   

Executive Employment Arrangements

     177   

2014 Outstanding Equity Awards at Fiscal Year-End Table

     182   

Limitation of Liability and Indemnification of Officers and Directors

     183   

Compensation Committee Report

     184   

CERTAIN BENEFICIAL OWNERS OF CYAN COMMON STOCK

     185   

RELATED PARTY TRANSACTIONS

     188   

Convertible Notes and Related Warrants

     188   

Facility Lease

     188   

Investment Management & Lease Transactions

     189   

Policies and Procedures for Related Party Transactions

     189   

OTHER MATTERS

     190   

Section 16(a) Beneficial Ownership Reporting Compliance

     190   

2014 Annual Report and SEC Filings

     190   

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

     191   

Tax Opinions

     192   

General Tax Consequences of the Merger

     192   

Taxation of Capital Gain

     193   

Additional Considerations—Recharacterization of Gain as a Dividend

     193   

Backup Withholding and Information Reporting

     193   

COMPARISON OF STOCKHOLDERS’ RIGHTS

     195   

General

     195   

Comparison of Stockholders’ Rights

     195   

APPRAISAL RIGHTS OF CYAN STOCKHOLDERS

     204   

LEGAL MATTERS

     208   

EXPERTS

     208   

HOUSEHOLDING OF PROXY MATERIALS

     209   

STOCKHOLDER PROPOSALS

     209   

WHERE YOU CAN FIND MORE INFORMATION

     211   

 

Annex A

   Agreement and Plan of Merger, dated as of May 3, 2015, by and among Ciena Corporation, Neptune Acquisition Subsidiary, Inc. and Cyan, Inc., and Amendment No. 1 thereto, dated June 2, 2015      A-1   

Annex B

   Form of Voting Agreement      B-1   

Annex C

   Opinion of Jefferies LLC      C-1   

Annex D

   Opinion of Houlihan Lokey Capital, Inc.      D-1   

Annex E

   Delaware General Corporation Law, Section 262      E-1   

 

iv


Table of Contents

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE POSTPONED ANNUAL MEETING

The following questions and answers are intended to provide brief answers to some commonly asked questions regarding the merger, the merger agreement, the voting agreements dated May 3, 2015 between Ciena and certain Cyan officers and directors and affiliated stockholders, which we refer to as the voting agreements, and the postponed annual meeting. These questions and answers may not address all questions that may be important to you as a Cyan stockholder. Please refer to the section entitled “Summary” beginning on page 13 of this proxy statement/prospectus and the more detailed information contained elsewhere in this proxy statement/prospectus, the annexes to this proxy statement/prospectus and the documents referred to in this proxy statement/prospectus, which you should read carefully in their entirety. You may obtain the information incorporated by reference into this proxy statement/prospectus without charge by following the instructions under the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus.

 

Q: Why am I receiving this proxy statement/prospectus and proxy card?

 

A: You are receiving this document because you were a stockholder of record of Cyan on the record date for the postponed annual meeting, which we refer to as the record date. The annual meeting was postponed from its original date, and a new record date was established, because since the time the original meeting was called Ciena agreed to acquire Cyan under the terms of the merger agreement, which are described in this proxy statement/prospectus. The Cyan board of directors determined to postpone the previously scheduled annual meeting and combine the matters to be voted on at that meeting with the vote to adopt the merger agreement at a single meeting. If the proposal to adopt the merger agreement is approved by Cyan stockholders and the other conditions to closing under the merger agreement are satisfied or waived, Merger Sub will be merged with and into Cyan, with Cyan surviving the merger as a wholly owned subsidiary of Ciena, which we refer to as the merger, and Cyan will then be merged into Ciena, which we refer to as the second step merger. As a result of the merger, Cyan will no longer be a public company. Following the merger, the common stock of Cyan will be delisted from the New York Stock Exchange, which we refer to as the NYSE, and deregistered under the Exchange Act, and Cyan will no longer be required to file periodic reports with the SEC in respect of Cyan common stock.

This proxy statement/prospectus serves as the proxy statement through which Cyan is soliciting proxies to obtain the necessary stockholder approval for the merger and other matters before the postponed annual meeting. It also serves as the prospectus by which Ciena will issue shares of Ciena common stock to pay the stock portion of the merger consideration, and to issue shares of Ciena common stock upon the exercise or conversion of Cyan’s outstanding 8.0% convertible senior secured notes, Cyan’s outstanding warrants and Cyan’s equity awards, each to the extent exercised or converted.

Cyan is holding the postponed annual meeting to ask its stockholders to vote on a proposal to adopt the merger agreement. Cyan stockholders are also being asked to vote on a proposal to approve the election of three nominees to the Cyan board, the NYSE share issuance proposals and the other matters described in this proxy statement/prospectus.

This proxy statement/prospectus includes important information about the merger, the merger agreement, a copy of which is attached as Annex A to this proxy statement/prospectus, the voting agreements, a form of which is attached as Annex B, and the postponed annual meeting. Cyan stockholders should read this information carefully and in its entirety. The enclosed proxy materials allow Cyan stockholders to submit their proxy without attending the postponed annual meeting in person.

 

Q: What am I being asked to vote on at the postponed annual meeting?

 

A: You are being asked to vote upon:

 

    a proposal to adopt the merger agreement;

 

    the election of three nominees for Class II directors to hold office until the 2018 annual meeting of stockholders or until their successors are duly elected and qualified, subject to earlier resignation or removal;


Table of Contents
    the approval, as required by NYSE Listed Company Rule 312.03(c), of certain issuances of Cyan common stock in excess of 20% of Cyan’s outstanding shares upon conversion of Cyan’s 8.0% convertible senior secured notes due 2019, which we refer to as the convertible notes, and exercise of related warrants, which we refer to as the warrants, issued in December 2014;

 

    the approval, as required by NYSE Listed Company Rule 312.03(b), of certain issuances of Cyan common stock to certain affiliated holders upon conversion of the convertible notes and exercise of related warrants issued in December 2014 which, together with the immediately preceding proposal we refer to as the NYSE share issuance proposals;

 

    the ratification of the selection by the audit committee of the Cyan board of Ernst & Young LLP as Cyan’s independent registered public accounting firm for Cyan’s fiscal year ending December 31, 2015;

 

    a proposal to approve the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement or the NYSE share issuance proposals; and

 

    any other business that may properly come before the meeting.

 

Q: Does my vote matter?

 

A: Yes, your vote is very important. You are encouraged to vote as soon as possible.

The merger cannot be completed unless the holders of at least a majority of the outstanding shares of Cyan common stock entitled to vote on the matter at the postponed annual meeting vote to adopt the merger agreement. For Cyan stockholders, if you fail to submit a proxy or vote in person at the postponed annual meeting, or vote to abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will have the same effect as a vote “AGAINST” the adoption of the merger agreement. Further, Ciena’s obligation to consummate the merger is conditioned on both of the NYSE share issuance proposals being approved. Approval of the NYSE share issuance proposals requires that the holders of at least a majority of the shares of Cyan common stock present or represented by proxy at the meeting and entitled to vote on the proposals vote “FOR” such proposals (which is the equivalent of the NYSE stockholder approval policy requirement that a majority of votes cast must vote in favor). If you vote to abstain, this will also have the same effect as a vote “AGAINST” the NYSE share issuance proposals (while a failure to vote or a broker non-vote will have no effect on the outcome of these proposals).

 

Q: What is the vote required to approve each proposal at the postponed annual meeting?

 

A: Proposal No. 1: The approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Cyan common stock entitled to vote on the matter at the postponed annual meeting. Because the affirmative vote required to approve the proposal to adopt the merger agreement is based upon the total number of outstanding shares of Cyan common stock entitled to vote on the matter at the postponed annual meeting, if you fail to submit a proxy or vote in person at the postponed annual meeting, if you abstain, or if you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. Stockholders may vote “FOR”, “AGAINST” or “ABSTAIN” on the approval of the proposal to adopt the merger agreement

Proposal No. 2: The election of directors requires a plurality vote of the shares of common stock voted at the meeting. “Plurality” means that the individuals who receive the largest number of votes cast “FOR” are elected as directors. As a result, any shares not voted “FOR” a particular nominee (whether as a result of stockholder withholding or a broker non-vote) will not be counted in such nominee’s favor and will have no effect on the outcome of the election. Stockholders may vote “FOR” or “WITHHOLD” on each of the nominees for election as a director.

 

2


Table of Contents

Proposal No. 3: Under the Cyan bylaws, the approval of certain issuances of Cyan common stock in excess of 20% of Cyan’s outstanding shares upon conversion of the convertible notes and exercise of related warrants issued in December 2014 must receive the affirmative vote of a majority of the shares present or represented by proxy at the meeting and entitled to vote on the proposal at the meeting. Abstentions will be treated as present at the meeting for purposes of establishing a quorum. Under the applicable NYSE stockholder approval policy, approval of this proposal requires the affirmative vote of a majority of votes cast on the proposal at the meeting. Because under this policy abstentions are counted as “votes cast” for purposes of determining whether a majority of “votes cast” are in favor of the proposal, the requirements for approval under the bylaws and the NYSE policy are equivalent. Therefore, abstentions will have the same effect as a vote “AGAINST” the proposal in determining whether the proposal has received the requisite number of affirmative votes. Broker non-votes, if any, will have no effect on the outcome of this proposal. Stockholders may vote “FOR”, “AGAINST” or “ABSTAIN” on the approval of certain issuances of Cyan common stock in excess of 20% of Cyan’s outstanding shares.

Proposal No. 4: Under the Cyan bylaws, the approval of certain issuances of Cyan common stock to certain affiliated holders upon conversion of the convertible notes and exercise of related warrants issued in December 2014 must receive the affirmative vote of a majority of the shares present or represented by proxy at the meeting and entitled to vote on the proposal at the meeting. Abstentions will be treated as present at the meeting for purposes of establishing a quorum. Under the applicable NYSE stockholder approval policy, approval of this proposal requires the affirmative vote of a majority of votes cast on the proposal at the meeting. Because under this policy abstentions are counted as “votes cast” for purposes of determining whether a majority of “votes cast” are in favor of the proposal, the requirements for approval under the bylaws and the NYSE policy are equivalent. Therefore, abstentions will have the same effect as a vote “AGAINST” the proposal in determining whether the proposal has received the requisite number of affirmative votes. Broker non-votes, if any, will have no effect on the outcome of this proposal. Stockholders may vote “FOR”, “AGAINST” or “ABSTAIN” on the approval of certain issuances of Cyan common stock to certain affiliated holders.

Proposal No. 5: The ratification of the appointment of Ernst & Young LLP as Cyan’s independent registered public accounting firm for Cyan’s fiscal year ending December 31, 2015 must receive the affirmative vote of a majority of the shares present in person or by proxy at the meeting and entitled to vote thereon to be approved. Abstentions will have the same effect as a vote “AGAINST” the proposal. Broker non-votes, if any, will have no effect on the outcome of this proposal. Stockholders may vote “FOR”, “AGAINST” or “ABSTAIN” on the ratification of Ernst & Young LLP.

Proposal No. 6: The approval of the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement or the NYSE share issuance proposals must receive the affirmative vote of a majority of the shares present in person or by proxy at the meeting and entitled to vote thereon to be approved. Abstentions will have the same effect as a vote “AGAINST” the proposal in determining whether the proposal has received the requisite number of affirmative votes. Broker non-votes, if any, will have no effect on the outcome of this proposal. Stockholders may vote “FOR”, “AGAINST” or “ABSTAIN” on the approval of the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies.

See the section entitled “Information About the Postponed Annual Meeting” beginning on page 56 of this proxy statement/prospectus.

 

Q: How does the Cyan board recommend that I vote at the postponed annual meeting?

 

A: The board of directors of Cyan unanimously recommends that Cyan stockholders vote:

 

    FOR” the proposal to adopt the merger agreement;

 

    FOR” the nominees for election as Class II directors to the Cyan board;

 

    FOR” the approval of the NYSE share issuance proposals;

 

3


Table of Contents
    FOR” the ratification of the appointment of Ernst & Young LLP as Cyan’s independent registered public accounting firm for the fiscal year ending December 31, 2015; and

 

    FOR” the approval of the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement or the NYSE share issuance proposals.

See the section entitled “The Merger—Recommendation of the Cyan Board; Cyan’s Reasons for the Merger” beginning on page 88 of this proxy statement/prospectus.

 

Q: What is the effect of the voting agreements on the proposal to adopt the merger agreement and the NYSE share issuance proposals?

 

A: Certain Cyan officers and directors and affiliated stockholders, including investment funds affiliated with certain directors, have entered into voting agreements with Ciena pursuant to which each such person has agreed to vote all beneficially owned shares in favor of the adoption of the merger agreement and approval of the NYSE share issuance proposals, subject to certain limitations and conditions. The voting agreements do not change the amount of votes required to approve the proposal to adopt the merger agreement or approve the NYSE share issuance proposals. The approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Cyan common stock entitled to vote on the matter at the postponed annual meeting, and the approval of the NYSE share issuance proposals requires the affirmative vote of a majority of the shares present or represented by proxy at the meeting and entitled to vote on the proposals at the meeting voting to approve the proposals (which is the equivalent of the NYSE stockholder approval policy requirement that a majority of votes cast must vote in favor), in each case including the shares held by Cyan’s directors and executive officers.

 

Q: What will happen to Cyan as a result of the merger?

 

A: Merger Sub will be merged with and into Cyan, with Cyan continuing as the surviving corporation and a wholly owned subsidiary of Ciena. Immediately thereafter, Cyan will be merged with and into Ciena, and the separate existence of Cyan will cease. This second merger is referred to as the “second step merger.” No additional consideration will be issued in the second step merger.

 

Q: What will I receive if the merger is completed?

 

A: If the merger is completed, each share of Cyan common stock issued and outstanding immediately prior to the completion of the merger will be converted into the right to receive merger consideration having a value at closing of the aggregate exchange ratio (0.224 shares of Ciena common stock), consisting of: (i) 0.19936 (89% of the aggregate exchange ratio) shares of Ciena common stock (plus cash in lieu of any fractional shares resulting therefrom equal to the product of (A) the fractional share interest to which a stockholder would otherwise be entitled and (B) the volume weighted average price per share of Ciena common stock on the NYSE on the last trading day prior to closing, rounded to the nearest cent), and (ii) an amount of cash, without interest, equal to the product of (A) 0.02464 (11% of the aggregate exchange ratio) multiplied by (B) the volume weighted average price per share of Ciena common stock on the NYSE on the last trading day prior to closing.

To facilitate the merger’s compliance with the “continuity of interest” requirement for tax-free reorganizations under the Internal Revenue Code of 1986, as amended, which we refer to as the Code, the merger consideration is subject to potential adjustment to ensure that, for U.S. federal income tax purposes, the merger qualifies as such a reorganization. For more information regarding the potential adjustments that may result to the merger consideration for U.S. federal income tax purposes, see “The Merger Agreement—Potential Adjustment to Merger Consideration” beginning on page 116.

 

4


Table of Contents
Q: How do I calculate the value of the per share merger consideration?

 

A: Because the per share merger consideration consists of a variable amount of cash that is dependent on the value of the Ciena common stock at closing and a fixed number of shares of Ciena common stock, the value of the per share merger consideration will depend on the price per share of Ciena common stock on the NYSE at the time the merger is completed. That price, which will not be known at the time of the postponed annual meeting, may be greater or less than the price of Ciena common stock as of the date of this document or at the time of the postponed annual meeting.

Based on the closing price of $21.29 of Ciena common stock on the NYSE on May 1, 2015, the last business day before public announcement of the merger agreement, the total value of the cash and stock consideration to be paid in the merger represented approximately $4.77 per share of Cyan common stock. As of such date, this represented a premium of approximately 31% to the closing price of Cyan common stock of $3.65 on the NYSE on May 1, 2015. Based on the closing price of $25.04 of Ciena common stock on the NYSE on June 24, 2015, the latest practicable date before the date of this proxy statement/prospectus, the total value of the per share merger consideration represented approximately $5.61 per share of Cyan common stock.

 

Q: What happens if I am eligible to receive a fraction of a share of Ciena common stock as part of the per share merger consideration?

 

A: If the aggregate number of shares of Ciena common stock that you are entitled to receive as part of the per share merger consideration includes a fraction of a share of Ciena common stock, you will receive cash in lieu of that fractional share.

See the section entitled “The Merger Agreement—Fractional Shares” beginning on page 118 of this proxy statement/prospectus.

 

Q: What will holders of Cyan stock based compensation plans receive in the merger?

 

A: Upon completion of the merger:

 

    Each Cyan stock option that is outstanding and unexercised immediately prior to the effective time of the merger, which we refer to as the effective time, whether or not vested, will be automatically converted into and become an option to purchase Ciena common stock, and Ciena will assume such Cyan stock option in accordance with the terms of the applicable Cyan stock plan and the terms of the stock option agreement, employment agreement or other agreement by which such Cyan stock option is evidenced immediately prior to the effective time including the term, exercisability, vesting schedule and terms of acceleration.

 

    Each Cyan restricted stock unit (which we also refer to as an RSU) that remains unvested as of the effective time will be converted automatically into a restricted stock unit with respect to Ciena common stock and will remain subject to the same terms and conditions set forth in the applicable Cyan stock plan and the applicable restricted stock unit agreement, employment agreement or other agreement evidencing such Cyan restricted stock unit immediately prior to the effective time, including the vesting conditions and terms of acceleration. Each Cyan restricted stock unit that is vested but not yet settled as of the effective time and, pursuant to the terms of the applicable restricted stock unit agreement, employment agreement or other agreement evidencing such Cyan restricted stock unit, would otherwise be settled in shares of Cyan common stock upon or by reference to a change in control (as defined in such restricted stock unit agreement, employment agreement or other agreement), will be paid or deemed paid in shares of Cyan common stock immediately prior to the effective time, and the holder of such restricted stock unit will be entitled to receive the per share merger consideration with respect to each such share of Cyan common stock otherwise issuable pursuant to such vested (but not yet settled) Cyan restricted stock units.

 

5


Table of Contents
    Upon exercise of assumed options and settlement of assumed RSUs, holders will solely receive shares of Ciena common stock and not a combination of stock and cash.

In each case, the number of shares of Ciena common stock underlying the assumed stock options and restricted stock units will be adjusted to give effect to the aggregate exchange ratio in the merger, which is 0.224. For additional information, see the section entitled “The Merger Agreement—Treatment of Cyan Stock Options and Other Stock-Based Awards” beginning on page 116 of this proxy statement/prospectus.

 

Q: What equity stake will Cyan stockholders hold in Ciena immediately following the merger?

 

A: Based on the number of issued and outstanding shares of Ciena common stock and Cyan common stock as of June 24, 2015, the latest practicable date prior to the date of this proxy statement/prospectus, holders of shares of Cyan common stock as of immediately prior to the closing of the merger will hold, in the aggregate, approximately 8.2% of the issued and outstanding shares of Ciena common stock immediately following the closing of the merger. The exact equity stake of Cyan stockholders in Ciena immediately following the merger will depend on the number of shares of Ciena common stock and Cyan common stock issued and outstanding immediately prior to the merger.

 

Q: Do any of Cyan’s directors or executive officers have interests in the merger that may differ from those of Cyan stockholders generally?

 

A: Yes. In considering the recommendation of the Cyan board of directors with respect to the proposals set forth in this proxy statement/prospectus, you should be aware that Cyan’s directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of stockholders generally. In (i) evaluating and negotiating the merger agreement; (ii) approving the merger agreement and the merger; and (iii) recommending that the merger agreement be adopted by stockholders, the Cyan board of directors was aware of and considered these interests to the extent that they existed at the time, among other matters. For more information, see the section entitled “Interests of Cyan’s Directors and Executive Officers in the Merger” beginning on page 141 of this proxy statement/prospectus.

 

Q: How will I receive the per share merger consideration to which I am entitled?

 

A: Following the effective time, the exchange agent will (i) mail to each holder of Cyan common stock materials advising such holder of the effectiveness of the merger and the conversion of such holder’s shares into the right to receive the per share merger consideration and (ii) issue, without interest, to each holder of Cyan common stock the number of whole shares of Ciena common stock and the amount of cash that such holder is entitled to receive in respect of each such Cyan share. More information may be found under the caption “Exchange and Payment Procedures” beginning on page 117 of this proxy statement/prospectus.

 

Q: Will my shares of Ciena common stock acquired in the merger receive a dividend?

 

A: After the closing of the merger, as a holder of Ciena common stock you will receive the same dividends on shares of Ciena common stock that all other holders of shares of Ciena common stock will receive for any dividend for which the record date occurs after the merger is completed. Any dividends with respect to shares of Ciena common stock with a record date after the closing of the merger and payable before the merger consideration is paid will be paid to former Cyan stockholders, without interest, at the time of the payment of the merger consideration. Ciena has never paid cash dividends on its capital stock and does not presently anticipate paying any dividends on its common stock in the foreseeable future. Any future Ciena dividends will remain subject to approval by the board of directors of Ciena.

 

Q: What are the material United States federal income tax consequences of the merger to Cyan stockholders?

 

A:

It is the intention of Ciena and Cyan that the merger and second step merger, considered together as a single integrated transaction for U.S. federal income tax purposes, will constitute a reorganization within the

 

6


Table of Contents
  meaning of Section 368(a) of the Code. Assuming that such treatment is proper, if you are a holder of Cyan common stock you generally will only recognize gain (but not loss) in an amount not to exceed the cash received as part of the merger consideration but will recognize gain or loss with respect to any cash received in lieu of fractional shares of Cyan common stock.

Because individual circumstances may differ, we recommend that you consult your own tax advisor to determine the particular tax effects of the merger to you.

You should read the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 190 of this proxy statement/prospectus for a more complete discussion of the material U.S. federal income tax consequences of the merger.

 

Q: When do you expect the merger to be completed?

 

A: Subject to the satisfaction or waiver of the closing conditions described under the section entitled “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 132 of this proxy statement/prospectus, including the adoption of the merger agreement by Cyan stockholders at the postponed annual meeting, Cyan and Ciena expect that the merger will be completed during the third quarter of calendar year 2015. However, it is possible that factors outside the control of both companies could result in the merger being completed at a different time or not at all.

 

Q: Who can vote at the postponed annual meeting?

 

A: All holders of record of Cyan common stock as of the close of business on June 25, 2015, the record date, are entitled to receive notice of, and to vote at, the postponed annual meeting. Each holder of Cyan common stock is entitled to cast one vote on each matter properly brought before the postponed annual meeting for each share of Cyan common stock that such holder owned of record as of the record date.

 

Q: When and where is the postponed annual meeting?

 

A: The postponed annual meeting will be held at Cyan’s headquarters, located at 1383 N. McDowell Blvd., Suite 300, Petaluma, California 94954, on July 31, 2015, at 8:00 a.m., local time. All Cyan stockholders of record as of the close of business on the record date, their duly authorized proxy holders and beneficial owners with proof of ownership are invited to attend the postponed annual meeting in person. A government-issued picture identification, such as a driver’s license or passport, will be required to enter the postponed annual meeting. You will find a map with directions to the annual meeting on the final page of the proxy statement/prospectus.

 

Q: Why did I previously receive proxy materials for Cyan’s annual meeting of stockholders?

 

A: After providing proxy materials to stockholders for its 2015 annual meeting, Cyan postponed the annual meeting of stockholders to permit its stockholders to vote on the proposal to adopt the merger agreement at the postponed annual meeting. Stockholders should review the information contained in this proxy statement/prospectus in considering the proposals before the postponed annual meeting.

 

Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

A: If your shares of Cyan common stock are registered directly in your name with Computershare Trust Company, N.A., Cyan’s transfer agent, you are considered the stockholder of record with respect to those shares. As the stockholder of record, you have the right to vote, or to grant a proxy for your vote directly to Cyan or to a third party to vote, at the postponed annual meeting.

If your shares are held by a bank, brokerage firm or other nominee, you are considered the beneficial owner of shares held in “street name,” and your bank, brokerage firm or other nominee is considered the stockholder of record with respect to those shares. Your bank, brokerage firm or other nominee will send

 

7


Table of Contents

you, as the beneficial owner, a package describing the procedure for voting your shares. You should follow the instructions provided by them to vote your shares. You are invited to attend the postponed annual meeting, however, you may not vote these shares in person at the postponed annual meeting unless you obtain a “legal proxy” from your bank, brokerage firm or other nominee that holds your shares, giving you the right to vote the shares at the postponed annual meeting.

 

Q: If my shares of Cyan common stock are held in “street name” by my bank, brokerage firm or other nominee, will my bank, brokerage firm or other nominee automatically vote those shares for me?

 

A: Except with respect to the sole “routine” matter being voted on at the postponed annual meeting—the proposal to ratify the appointment of Ernst & Young LLP (Proposal No. 5)—your bank, brokerage firm or other nominee will only be permitted to vote your shares of Cyan common stock if you instruct your bank, brokerage firm or other nominee how to vote. You should follow the procedures provided by your bank, brokerage firm or other nominee regarding the voting of your shares of Cyan common stock.

In accordance with the rules of the NYSE, banks, brokerage firms and other nominees who hold shares of Cyan common stock in street name for their customers have authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms and other nominees are precluded from exercising their voting discretion with respect to non-routine matters, such as the proposal to adopt the merger agreement and the NYSE share issuance proposals. As a result, absent specific instructions from the beneficial owner of such shares, banks, brokerage firms and other nominees are not empowered to vote such shares, which we refer to as a broker non-vote. The effect of not instructing your broker how you wish your shares to be voted will be the same as a vote “AGAINST” the proposal to adopt the merger agreement, but will not be counted as “FOR” or “AGAINST” the NYSE share issuance proposals and each of the other proposals before the postponed annual meeting.

 

Q: How many votes do I have?

 

A: Each Cyan stockholder is entitled to one vote for each share of Cyan common stock held of record as of the close of business on the record date. As of the close of business on the record date, there were 49,311,592 outstanding shares of Cyan common stock.

 

Q: What is a quorum, and what constitutes a quorum for the postponed annual meeting?

 

A: A quorum is the minimum number of shares required to be present at the postponed annual meeting for the meeting to be properly held under Cyan’s amended and restated bylaws, which we refer to as the Cyan bylaws, and Delaware law. The presence, in person or by proxy, of a majority of all issued and outstanding shares of Cyan common stock entitled to vote at the postponed annual meeting will constitute a quorum. A proxy submitted by a stockholder may indicate that all or a portion of the shares represented by the proxy are not being voted, which we refer to as stockholder withholding, with respect to a particular matter. Similarly, there may be a broker non-vote. The shares subject to a proxy that are not being voted on a particular matter because of either stockholder withholding or a broker non-vote will count for purposes of determining the presence of a quorum. Abstentions are also counted in the determination of a quorum.

 

Q: How do I vote?

 

A: Stockholder of Record. If you are a stockholder of record, you may have your shares of Cyan common stock voted on the matters to be presented at the postponed annual meeting in any of the following ways:

 

    by submitting your proxy by telephone or over the Internet, by accessing the telephone number or Internet website specified on the enclosed proxy card. The control number provided on your proxy card is designed to verify your identity when submitting your proxy by telephone or over the Internet. Please be aware that if you submit your proxy by telephone or over the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible;

 

8


Table of Contents
    by completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope; or

 

    in person—you may attend the postponed annual meeting and cast your vote there.

Beneficial Owner. If you are a beneficial owner (i.e., hold Cyan common stock in “street name”), please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you. Please note that if you are a beneficial owner and wish to vote in person at the postponed annual meeting, you must obtain a legal proxy from your bank, brokerage firm or other nominee.

 

Q: Is my vote confidential?

 

A: Proxy instructions, ballots, and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be publicly disclosed, except as necessary to meet applicable legal requirements, to allow for the tabulation of votes and certification of the vote or to facilitate a successful proxy solicitation.

 

Q: How can I change or revoke my vote?

 

A: You have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by submitting a later dated proxy through any of the methods available to you, by attending the postponed annual meeting and voting in person, or by giving written notice of revocation to Cyan prior to the time the postponed annual meeting begins. Written notice of revocation should be mailed to: Cyan, Inc., Attention: Corporate Secretary, 1383 N. McDowell Blvd., Suite 300, Petaluma, California 94954.

 

Q: If a stockholder submits a proxy, how are the shares of Cyan common stock voted?

 

A: Regardless of the method you choose to submit a proxy, the individuals named on the enclosed proxy card will vote your shares of Cyan common stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of Cyan common stock should be voted for or against, or abstain from voting on, all, some or none of the specific items of business to come before the postponed annual meeting.

If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: “FOR” the proposal to adopt the merger agreement; “FOR” the nominees for election as Class II directors to the Cyan board; “FOR” the approval of the NYSE share issuance proposals; “FOR” the ratification of the appointment of Ernst & Young LLP as Cyan’s independent registered public accounting firm for the fiscal year ending December 31, 2015; and “FOR” the approval of the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement or the NYSE share issuance proposals.

 

Q: What should I do if I receive more than one set of voting materials?

 

A: If you hold shares of Cyan common stock in “street name” and also directly in your name as a stockholder of record or otherwise or if you hold shares of Cyan common stock in more than one brokerage account, you may receive more than one set of voting materials relating to the postponed annual meeting. For shares of Cyan common stock held directly, please complete, sign, date and return each proxy card (or submit your proxy by telephone or Internet as provided on each proxy card) or otherwise follow the voting instructions provided in this proxy statement/prospectus in order to ensure that all of your shares of Cyan common stock are voted. For shares of Cyan common stock held in “street name” through a bank, brokerage firm or other nominee, you should follow the procedures provided by your bank, brokerage firm or other nominee to vote your shares.

 

9


Table of Contents
Q: What happens if I sell my shares of Cyan common stock before the postponed annual meeting?

 

A: The record date is earlier than both the date of the postponed annual meeting and the effective time. If you transfer your shares of Cyan common stock after the record date but before the postponed annual meeting, you will, unless the transferee requests a proxy from you, retain your right to vote at the postponed annual meeting but will transfer the right to receive the per share merger consideration if the merger is completed to the person who is the record holder of such shares at the effective time of the merger. If the merger is completed, in order to receive the per share merger consideration, you must hold your shares through the effective time.

 

Q: Who is soliciting and paying the cost of soliciting proxies?

 

A: Cyan has engaged Okapi to assist in the solicitation of proxies for the postponed annual meeting. Cyan estimates that it will pay Okapi a fee not to exceed $8,500 plus an additional fee of $5.75 per incoming and outgoing telephone contact and $5.50 per telephonic vote received. Cyan has agreed to reimburse Okapi for certain out-of-pocket fees and expenses and also will indemnify Okapi against certain claims, costs, damages, liabilities, judgments or expenses. Cyan also may reimburse banks, brokerage firms, other nominees or their respective agents for their expenses in forwarding proxy materials to beneficial owners of Cyan common stock. Cyan’s directors, officers and employees also may solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q: What do I need to do now?

 

A: Even if you plan to attend the postponed annual meeting in person, after carefully reading and considering the information contained in this proxy statement/prospectus, please submit a proxy promptly to ensure that your shares are represented at the postponed annual meeting. If you hold your shares of Cyan common stock in your own name as the stockholder of record, you may submit a proxy to have your shares of Cyan common stock voted at the postponed annual meeting in one of three ways:

 

    by telephone or over the Internet, by accessing the telephone number or Internet website specified on the enclosed proxy card. The control number provided on your proxy card is designed to verify your identity when voting by telephone or over the Internet. Please be aware that if you submit your proxy by telephone or over the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible;

 

    by completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope; or

 

    in person—you may attend the postponed annual meeting and cast your vote there.

If you decide to attend the postponed annual meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. Your attendance at the postponed annual meeting will not by itself revoke your proxy. If you are a beneficial owner (i.e., hold Cyan common stock in “street name”), please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you. Please note that if you are a beneficial owner and wish to vote in person at the postponed annual meeting, you must obtain a legal proxy from your bank, brokerage firm or other nominee.

 

Q: Where can I find the voting results of the postponed annual meeting?

 

A: The preliminary voting results will be announced at the postponed annual meeting. In addition, within four business days following certification of the final voting results, Cyan intends to file the final voting results with the SEC on a Current Report on Form 8-K.

 

10


Table of Contents
Q: Will Cyan be required to submit the proposal to adopt the merger agreement to Cyan stockholders even if the Cyan board has withdrawn (or modified or qualified in a manner adverse to Ciena) its recommendation that Cyan stockholders adopt the merger agreement?

 

A: Unless Cyan or Ciena terminates the merger agreement prior to the proposed postponed annual meeting, Cyan is required to submit the proposal to adopt the merger agreement to Cyan stockholders even if the Cyan board has withdrawn or modified or qualified in a manner adverse to Ciena its recommendation that Cyan stockholders adopt the merger agreement. For more information regarding the ability of Cyan and Ciena to terminate the merger agreement, see the section entitled “The Merger Agreement—Termination of the Merger Agreement” beginning on page 134 of this proxy statement/prospectus.

 

Q: Am I entitled to exercise appraisal rights instead of receiving the per share merger consideration for my shares of Cyan common stock?

 

A: Stockholders are entitled to appraisal rights under Section 262 of the General Corporation Law of the State of Delaware, which we refer to as the DGCL, provided they follow the procedures and satisfy the conditions set forth in Section 262 of the DGCL. For more information regarding appraisal rights, see the section entitled “Appraisal Rights of Cyan Stockholders” beginning on page 203 of this proxy statement/prospectus. In addition, a copy of Section 262 of the DGCL is attached as Annex E to this proxy statement/prospectus. Failure to strictly comply with Section 262 of the DGCL will result in the loss of appraisal rights.

 

Q: Are there any risks that I should consider in deciding whether to vote for the proposal to adopt the merger agreement?

 

A: Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 47 of this proxy statement/prospectus. You also should read and carefully consider the risk factors of Ciena and Cyan contained in the documents that are incorporated by reference into this proxy statement/prospectus.

 

Q: What are the conditions to completion of the merger?

 

A: In addition to approval of the proposal to adopt the merger agreement by Cyan stockholders as described above, completion of the merger is subject to the satisfaction or waiver of a number of other conditions, including receipt of required regulatory approvals, the accuracy of representations and warranties under the merger agreement (subject to certain materiality exceptions), the absence of material adverse effects with respect to Ciena and Cyan, the receipt of tax opinions from outside counsel concerning the tax treatment of the merger, and Ciena’s and Cyan’s performance in all material respects of their respective obligations under the merger agreement. Further, Ciena’s obligation to consummate the merger is subject to the approval of the NYSE share issuance proposals by Cyan stockholders. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the merger, see the sections entitled “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 132 of this proxy statement/prospectus.

 

Q: Is Ciena’s obligation to complete the merger subject to Ciena receiving financing?

 

A: No. Ciena’s obligations under the merger agreement are not subject to any condition regarding its ability to finance, or obtain financing for, the transactions contemplated by the merger agreement. For more information regarding financing, see the section entitled “The Merger—Financing of the Merger” beginning on page 112 of this proxy statement/prospectus.

 

11


Table of Contents
Q: How will Ciena fund the cash portion of the merger consideration?

 

A: Based on the closing price per share of Ciena common stock as of June 24, 2015, the latest practicable date prior to the date of this proxy statement/prospectus, Ciena estimates that it will need (i) approximately $32.9 million to pay the cash consideration to Cyan stockholders in the transaction (including holders of outstanding warrants deemed to be automatically exercised and converted into Cyan common stock immediately prior to the effective time of the merger); and (ii) approximately $29.7 million of non-recurring costs associated with financial, legal and accounting advisors, facilities and systems consolidation costs, and severance and other potential employment-related costs, including payments that may be made to certain Cyan executives. In addition, Ciena will assume $50 million in aggregate principal amount of Cyan’s convertible notes to the extent these notes are not converted into Ciena common stock or put to Ciena for repurchase by the holders thereof in connection with the merger. Ciena anticipates that the funds needed to pay the foregoing amounts will be derived from cash on hand.

See the section entitled “The Merger—Financing of the Merger” beginning on page 112 of this proxy statement/prospectus.

 

Q: Is consummation of the merger contingent upon approval by the holders of Ciena stock?

 

A: No. A vote of holders of Ciena’s capital stock is not required to consummate the merger.

 

Q: What will happen if some or all of the proposals to be considered at the postponed annual meeting are not approved?

 

A: For the merger to be completed, Cyan stockholders must approve the proposal to adopt the merger agreement. Ciena’s obligation to consummate the merger is also conditioned on stockholder approval of the NYSE share issuance proposals. The merger is not, however, conditioned or dependent on Cyan stockholder approval of any other proposal before the postponed annual meeting.

 

Q: What happens if the merger is not completed?

 

A: If the merger agreement is not adopted by Cyan stockholders or if the merger is not completed for any other reason, Cyan stockholders will not receive any consideration for their shares of Cyan common stock. Instead, Cyan will remain an independent public company, Cyan common stock will continue to be listed and traded on the NYSE and registered under the Exchange Act and Cyan will continue to file periodic reports with the SEC. If the merger agreement is terminated, under specified circumstances, Cyan may be required to pay Ciena a termination fee of $15.0 million.

In addition, if the merger agreement is terminated, under specified circumstances, Cyan must reimburse Ciena for out-of-pocket expenses up to a maximum of $2.0 million. Any such expense reimbursement will be credited towards any termination fee required to be paid by Cyan.

See the section entitled “The Merger Agreement—Termination Fees and Expenses” beginning on page 135 of this proxy statement/prospectus and the section entitled “The Merger Agreement—Expenses” beginning on page 136 of this proxy statement/prospectus.

 

Q: Who can help answer any other questions I have?

 

A: If you have additional questions about the merger, need assistance in submitting your proxy or voting your shares of Cyan common stock, or need additional copies of this proxy statement/prospectus or the enclosed proxy card, please contact Okapi, Cyan’s proxy solicitor, by calling toll-free at (855) 305-0855. Banks, brokerage firms, and other nominees may call Okapi collect at (212) 297-0720.

 

12


Table of Contents

SUMMARY

The following summary highlights selected information in this proxy statement/prospectus and may not contain all the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement/prospectus, its annexes and the documents referred to in this proxy statement/prospectus. Each item in this summary includes a reference directing you to the page in this proxy statement/prospectus where the subject is discussed in more detail. You may obtain the information incorporated by reference into this proxy statement/prospectus without charge by following the instructions under the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus.

The Merger and the Merger Agreement

The terms and conditions of the merger are contained in the merger agreement, a copy of which is attached as Annex A to this proxy statement/prospectus. We encourage you to read the merger agreement carefully and in its entirety, as it is the legal document that governs the merger.

Pursuant to the merger agreement, Merger Sub will merge with and into Cyan, with Cyan continuing as the surviving corporation and a wholly owned subsidiary of Ciena. Immediately thereafter, Cyan will be merged with and into Ciena, and the separate existence of Cyan will cease. Following the merger, Cyan common stock will be delisted from the NYSE, deregistered under the Exchange Act and will cease to be publicly traded.

Per Share Merger Consideration (Page 65)

At the effective time, each share of Cyan common stock issued and outstanding immediately prior to the effective time will be converted into the right to receive merger consideration having a value at closing of the aggregate exchange ratio (0.224 shares of Ciena common stock), consisting of: (i) 0.19936 (89% of the aggregate exchange ratio) shares of Ciena common stock (plus cash in lieu of any fractional shares resulting therefrom equal to the product of (A) the fractional share interest to which a stockholder would otherwise be entitled and (B) the volume weighted average price per share of Ciena common stock on the NYSE on the last trading day prior to closing, rounded to the nearest cent), and (ii) an amount of cash, without interest, equal to the product of (A) 0.02464 (11% of the aggregate exchange ratio) multiplied by (B) the volume weighted average price per share of Ciena common stock on the NYSE on the last trading day prior to closing.

Financing of the Merger (Page 112)

Ciena’s obligation to complete the merger is not contingent upon receipt by Ciena of any financing. Ciena anticipates that the funds needed to pay the cash portion of the merger consideration and other merger fees and expenses will be derived from cash on hand.

For more information on the financing of the merger, see the section entitled “The Merger—Financing of the Merger” beginning on page 112 of this proxy statement/prospectus.

Recommendation of the Cyan Board; Cyan’s Reasons for the Merger (Page 88)

At a meeting held on May 3, 2015, the Cyan board unanimously approved the merger agreement, the merger and all of the other transactions contemplated by the merger agreement, declared that it is in the best interests of Cyan and its stockholders to enter into the merger agreement and consummate the merger and all of the other transactions contemplated by the merger agreement, directed that the adoption of the merger agreement be submitted to a vote at a meeting of the Cyan stockholders and recommended that the Cyan stockholders vote to adopt the merger agreement. Accordingly, the Cyan board unanimously recommends that the Cyan stockholders

 

 

13


Table of Contents

vote “FOR” the proposal to adopt the merger agreement. The Cyan board also unanimously recommends that the Cyan stockholders vote “FOR” the NYSE share issuance proposals, “FOR” the nominees for election as Class II directors to the Cyan board, “FOR” the ratification of the appointment of Ernst & Young LLP as Cyan’s independent registered public accounting firm for the fiscal year ending December 31, 2015, and “FOR” the approval of the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement or the NYSE share issuance proposals.

In evaluating the merger, the Cyan board consulted with and received the advice of Cyan’s outside legal and financial advisors, discussed certain issues with Cyan senior management and considered a number of factors that it believed supported its decision to enter into the merger agreement and consummate the merger, including, without limitation, those listed in “The Merger—Recommendation of the Cyan Board; Cyan’s Reasons for the Merger” beginning on page 88 of this proxy statement/prospectus.

Opinions of Cyan’s Financial Advisors (Page 92)

Opinion of Jefferies LLC

In connection with the merger and the second step merger, Jefferies LLC, which we refer to as Jefferies, Cyan’s financial advisor, delivered a written opinion, dated May 3, 2015, to the Cyan board as to the fairness, from a financial point of view and as of such date, of the merger consideration to be received by holders of Cyan common stock pursuant to the merger agreement. The full text of Jefferies’ opinion, a copy of which is attached as Annex C to this proxy statement/prospectus, describes the various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Jefferies. Jefferies’ opinion was provided for the use and benefit of the Cyan board (in its capacity as such) in its evaluation of the merger consideration from a financial point of view and did not address any other aspect of the merger or any other matter. The opinion did not address the relative merits of the merger or other transactions contemplated by the merger agreement as compared to any alternative transaction or opportunity that might be available to Cyan, nor did it address the underlying business decision by Cyan to engage in the merger. Jefferies’ opinion does not constitute a recommendation as to how any stockholder should vote or act in connection with the merger or any other transactions. The summary of Jefferies’ opinion set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of Jefferies’ opinion.

Opinion of Houlihan Lokey Capital, Inc.

Cyan also engaged Houlihan Lokey Capital, Inc., which we refer to as Houlihan Lokey, to render an opinion with respect to the fairness of the per share merger consideration to holders of Cyan common stock. On May 3, 2015, at the Cyan board meeting at which the Cyan board approved the merger agreement and proposed merger, Houlihan Lokey rendered an oral opinion to the Cyan board (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion to the Cyan board dated May 3, 2015), as to the fairness, from a financial point of view, of the per share merger consideration to be received by the holders of Cyan common stock in the merger, as of May 3, 2015, based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion.

Houlihan Lokey’s opinion was directed to the Cyan board and only addressed the fairness, from a financial point of view, of the per share merger consideration to be received by the holders of Cyan common stock in the merger and does not address any other aspect or implication of the merger. The summary of Houlihan Lokey’s opinion in this proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex D to this proxy statement/prospectus and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion. However,

 

 

14


Table of Contents

neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this proxy statement/prospectus are intended to be, and do not constitute, advice or a recommendation to the Cyan board or any stockholder as to how to act or vote with respect to the merger or related matters.

See “The Merger – Opinions of Cyan’s Financial Advisors”.

Information About the Postponed Annual Meeting (Page 56)

The postponed annual meeting will be held at Cyan’s headquarters, located at 1383 N. McDowell Blvd., Suite 300, Petaluma, California 94954 , on July 31, 2015, at 8:00 a.m., local time. The postponed annual meeting is being held in order to vote on:

 

    a proposal to adopt the merger agreement;

 

    the election of three nominees for Class II directors to the Cyan board;

 

    a proposal to approve certain issuances of Cyan common stock in excess of 20% of Cyan’s outstanding shares upon conversion of the convertible notes, and exercise of related warrants issued in December 2014;

 

    a proposal to approve certain issuances of Cyan common stock to certain affiliated holders upon conversion of the convertible notes and exercise of related warrants issued in December 2014 which, together with the immediately preceding proposal we refer to as the NYSE share issuance proposals;

 

    a proposal to ratify the selection by the audit committee of the Cyan board of Ernst & Young LLP as Cyan’s independent registered public accounting firm for its fiscal year ending December 31, 2015; and

 

    a proposal to approve the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement or the NYSE share issuance proposals.

Completion of the merger is conditioned on approval of the proposal to adopt the merger agreement. Further, Ciena’s obligation to consummate the merger is subject to approval of the NYSE share issuance proposals, but approval of the other matters before the postponed annual meeting is not a condition to the obligation of either Cyan or Ciena to complete the merger.

Only holders of record of issued and outstanding shares of Cyan common stock as of the close of business on June 25, 2015, the record date, are entitled to notice of, and to vote at, the postponed annual meeting or any adjournment or postponement of the postponed annual meeting. You may cast one vote for each share of Cyan common stock that you owned as of that record date.

Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Cyan common stock entitled to vote on the matter at the postponed annual meeting. Shares not present, and shares present and not voted, whether by broker non-vote, abstention or otherwise, will have the same effect as votes cast “AGAINST” the proposal to adopt the merger agreement.

For the NYSE share issuance proposals to be considered approved, a majority of the shares present or represented by proxy at the meeting and entitled to vote on the proposals at the meeting must be cast “FOR” the proposals. Under the applicable NYSE stockholder approval policy, approval of these proposals requires the affirmative vote of a majority of votes cast on the proposals at the meeting. Because under this policy abstentions are counted as “votes cast” for purposes of determining whether a majority of “votes cast” are in favor of the proposals, the requirements for approval under the bylaws and the NYSE policy are equivalent. Therefore, abstentions will have the same effect as a vote “AGAINST” the proposals in determining whether the proposals have received the requisite number of affirmative votes. Broker non-votes, if any, will have no effect on the outcome of the NYSE share issuance proposals.

 

 

15


Table of Contents

The election of directors requires a plurality vote of the shares of common stock voted at the meeting. “Plurality” means that the individuals who receive the largest number of votes cast “FOR” are elected as directors. As a result, any shares not voted “FOR” a particular nominee (whether as a result of stockholder withholding or a broker non-vote) will not be counted in such nominee’s favor and will have no effect on the outcome of the election.

For the proposal to ratify the appointment of independent accountants and the proposal to adjourn the meeting to be considered approved, they must receive the affirmative vote of a majority of the shares present in person or by proxy at the meeting and entitled to vote thereon. Abstentions will have the same effect as a vote “AGAINST” the proposals. Broker non-votes, if any, will have no effect on the outcome of these proposals.

As of the close of business on the record date, there were 49,311,592 shares of Cyan common stock outstanding and entitled to vote.

Voting by Cyan’s Directors and Executive Officers (Page 57)

As of the record date, Cyan’s directors and executive officers and certain of their affiliates beneficially owned 24,018,189 shares of Cyan common stock entitled to vote at the postponed annual meeting. This represents approximately 45.0% in voting power of the outstanding shares of Cyan common stock entitled to be cast at the postponed annual meeting. Certain officers and directors and affiliated stockholders, including investment funds affiliated with certain directors, have entered into voting agreements that obligate them to vote “FOR” the proposal to adopt the merger agreement and “FOR” the NYSE share issuance proposals. Additionally, Cyan currently expects that the Cyan directors and executive officers will vote their shares of Cyan common stock “FOR” each of the other proposals before the postponed annual meeting, although none of them is obligated to do so.

Interests of Cyan’s Directors and Executive Officers in the Merger (Page 141)

In considering the recommendation of the Cyan board to adopt the merger agreement, Cyan stockholders should be aware that some of the Cyan directors and executive officers have interests in the merger and have arrangements that are different from, or in addition to, those of Cyan stockholders generally, including, but not limited to, the following:

 

    Cyan has in place severance and change in control agreements with certain employees, including its executive officers, entitling them to certain payments, vesting acceleration and other specified benefits in connection with a termination of employment in connection with a change in control of Cyan;

 

    Ciena has entered into term sheets with certain employees, including executive officers, describing post-closing employment and compensation arrangements with those employees;

 

    directors and executive officers of Cyan may be entitled to vesting acceleration upon specified circumstances and in connection with a change in control under various plans, equity awards and agreements;

 

    in connection with the merger, Ciena will assume outstanding options to purchase shares of Cyan common stock and restricted stock units held by such directors and executive officers;

 

    certain executive officers and funds affiliated with a director of Cyan will be entitled to cash and shares of stock, if any, issuable on conversion of the convertible notes and upon exercise of the warrants held by such affiliated holders; and

 

    directors and officers will be indemnified by Ciena for a period of six years following completion of the merger with respect to acts or omissions by them in their capacities as such prior to the effective time of the merger.

 

 

16


Table of Contents

These interests and arrangements may create potential conflicts of interest. The Cyan board was aware of these potential conflicts of interest and considered them, among other matters, in reaching its decision to approve the merger agreement, the merger, and the other transactions contemplated by the merger agreement. See the section entitled “Interests of Cyan’s Directors and Executive Officers in the Merger” beginning on page 141 of this proxy statement/prospectus for additional information.

Regulatory Approvals (Page 113)

The completion of the merger is subject to antitrust review in the United States. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which we refer to as the HSR Act, and the rules promulgated thereunder, the merger may not be completed until notification and report forms have been filed with the Federal Trade Commission, which we refer to as the FTC, and the Department of Justice, which we refer to as the DOJ, and the applicable waiting period (or any extensions thereof) has expired or been terminated.

On May 15, 2015, Cyan and Ciena filed with the FTC and DOJ notification and report forms under the HSR Act with respect to the proposed merger. The waiting period under the HSR Act for the proposed merger terminated on June 15, 2015.

Ciena and Cyan have agreed to cooperate with each other and use, and cause their respective affiliates to use, their respective reasonable best efforts to obtain all regulatory approvals required to complete the merger in the most expeditious manner practicable. In furtherance of the foregoing, and subject to certain limitations, Ciena and Cyan have agreed to use their reasonable best efforts to:

 

    make all necessary registrations, declarations, filings and notices with governmental entities applicable to the transactions contemplated by the merger agreement; and

 

    obtain all waivers, consents, authorizations, orders and approvals from governmental entities that are required in order to consummate the merger or any of the other transactions contemplated by the merger agreement.

Appraisal Rights of Cyan Stockholders (Page 203)

Cyan stockholders of record have appraisal rights under the DGCL in connection with the merger. Cyan stockholders who do not vote in favor of the adoption of the merger agreement and who otherwise comply with the applicable provisions of Section 262 of the DGCL will be entitled to exercise appraisal rights thereunder. Any shares of Cyan common stock held by a Cyan stockholder as of the record date who has not voted in favor of the adoption of the merger agreement and who has demanded appraisal for such shares in accordance with the DGCL will not be converted into a right to receive the per share merger consideration, unless such Cyan stockholder fails to perfect or withdraws or otherwise loses such stockholder’s appraisal rights under the DGCL. If, after the effective time, such holder of Cyan common stock fails to perfect or withdraws or otherwise loses his, her or its appraisal rights, each such share will be treated as if it had been converted as of the effective time into a right to receive the per share merger consideration, without interest thereon, less any withholding taxes. The relevant provisions of the DGCL are included as Annex E to this proxy statement/prospectus.

You are encouraged to read these provisions carefully and in their entirety. Due to the complexity of the procedures for exercising your appraisal rights, Cyan stockholders who are considering exercising such rights are encouraged to seek the advice of legal counsel. Failure to strictly comply with these provisions will result in the loss of appraisal rights. See the section entitled “Appraisal Rights of Cyan Stockholders” beginning on page 203 of this proxy statement/prospectus for additional information and the text of Section 262 of the DGCL reproduced in its entirety as Annex E to this proxy statement/prospectus.

 

 

17


Table of Contents

Conditions to Completion of the Merger (Page 132)

Each party’s obligation to consummate the merger is subject to the satisfaction or waiver, to the extent applicable, of the following conditions:

 

    adoption of the merger agreement by the affirmative vote of the holders of a majority of the outstanding shares of Cyan common stock entitled to vote thereon at the postponed annual meeting;

 

    the expiration or termination of the waiting period (or any extension thereof) applicable to the merger under the HSR Act and the consents required to be obtained under any other antitrust laws having been obtained and being in full force and effect;

 

    the absence of any law, regulation, order, judgment or injunction that restrains, enjoins or otherwise prohibits the closing of the merger;

 

    the effectiveness of the registration statement of which this proxy statement/prospectus forms a part and the absence of a stop order or proceedings seeking a stop order by the SEC; and

 

    the shares of Ciena common stock to be issued in the merger having been approved for listing on the NYSE, subject to official notice of issuance.

In addition, the obligations of Ciena and Merger Sub to effect the merger are subject to the satisfaction, or waiver of the following additional conditions:

 

    the accuracy of the representations and warranties of Cyan to the extent required under the merger agreement;

 

    Cyan having performed or complied with, in all material respects, its obligations under the merger agreement to be performed or complied with at or prior to the closing of the merger;

 

    receipt by Ciena of a certificate executed by the chief financial officer of Cyan certifying as to the satisfaction of the conditions described in the preceding two bullets;

 

    the absence of a material adverse effect with respect to Cyan since May 3, 2015 (see page 119 of this proxy statement/prospectus for a more detailed explanation of “material adverse effect”);

 

    approval of the NYSE share issuance proposals; and

 

    the receipt by Ciena of a written opinion from legal counsel to the effect that the merger and the second step merger, considered together as a single integrated transaction for U.S. federal income tax purposes, will constitute a reorganization within the meaning of Section 368(a) of the Code.

In addition, the obligations of Cyan to effect the merger are subject to the satisfaction or waiver of the following additional conditions:

 

    the accuracy of the representations and warranties of Ciena and Merger Sub to the extent required under the merger agreement;

 

    Ciena and Merger Sub having performed or complied with, in all material respects, their respective obligations under the merger agreement required to be performed or complied with at or prior to the closing of the merger;

 

    receipt by Cyan of a certificate executed by an executive officer of Ciena certifying as to the satisfaction of the conditions described in the preceding two bullets;

 

 

18


Table of Contents
    the absence of a material adverse effect with respect to Ciena since May 3, 2015; and

 

    the receipt by Cyan of a written opinion from legal counsel to the effect that the merger and the second step merger, considered together as a single integrated transaction for U.S. federal income tax purposes, will constitute a reorganization within the meaning of Section 368(a) of the Code.

For a more complete summary of the conditions that must be satisfied or waived prior to completion of the merger, see the section entitled “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 132 of this proxy statement/prospectus.

No Solicitation or Negotiation of Takeover Proposals (Page 125)

The merger agreement provides that neither Cyan nor any of its subsidiaries will, and Cyan will instruct and cause its and its subsidiaries’ respective directors, officers and other representatives not to, directly or indirectly:

 

    solicit, initiate, knowingly encourage or otherwise knowingly facilitate any inquiries regarding or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, any takeover proposal (as defined below);

 

    engage in, participate in or otherwise continue any discussions or negotiations with any person regarding any takeover proposal;

 

    provide any non-public information to any person with respect to, or otherwise knowingly facilitate, any proposal or offer that constitutes or may reasonably be expected to lead to any takeover proposal; or

 

    enter into or agree to enter into any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement or other similar agreement relating to any takeover proposal other than a confidentiality agreement.

Notwithstanding these restrictions, prior to the adoption of the merger agreement by the stockholders of Cyan, Cyan may, after providing notice to Ciena and entering into a confidentiality agreement with the applicable third party:

 

    furnish information with respect to Cyan and its subsidiaries to the person making such unsolicited takeover proposal (provided that Cyan concurrently provides (and in any event within 24 hours) to Ciena any non-public information concerning Cyan or its subsidiaries provided to such other person which was not previously provided to Ciena); and

 

    engage in discussions or negotiations with the person making such takeover proposal;

in each case if:

 

    the Cyan board has determined in good faith after consultation with its outside legal counsel and financial advisor that an unsolicited bona fide written takeover proposal received after the date of the merger agreement either constitutes a superior proposal or would reasonably be expected to lead to a superior proposal;

 

    the Cyan board determines after consultation with outside counsel that the failure to take such action would reasonably be expected to result in a violation of the fiduciary duties of the Cyan board under applicable law;

 

 

19


Table of Contents
    Cyan has not materially breached its obligations not to solicit takeover proposals under the merger agreement with respect to such takeover proposal;

 

    Cyan has provided at least 24 hours prior written notice to Ciena; and

 

    Cyan has provided Ciena with a copy of the takeover proposal.

No Change in Recommendations (Page 127)

Subject to certain exceptions described below, the Cyan board and each committee of the Cyan board may not:

 

    withdraw, modify or qualify or publicly propose to withdraw, modify or qualify the Cyan board recommendations to Cyan stockholders that they vote in favor of the adoption of the merger agreement and approval of the NYSE share issuance proposals, which we refer to as the Cyan recommendations;

 

    recommend the approval or adoption of, or approve or adopt, declare advisable or publicly propose to recommend, approve, adopt or declare advisable, any takeover proposal;

 

    publicly take a neutral position or no position with respect to a takeover proposal at any time beyond ten business days after the first public announcement of such takeover proposal by Cyan or by the party that made the takeover proposal;

 

    fail to publicly reaffirm the Cyan recommendations within five business days of a written request by Ciena to make such public reaffirmation; or

 

    make any public statement in connection with the postponed annual meeting that is inconsistent with the Cyan recommendations that Cyan stockholders vote in favor of the adoption of the merger agreement and the approval of the NYSE share issuance proposals (any of the foregoing five bullet points we refer to as an adverse recommendation change).

However, at any time before the Cyan stockholder approval is obtained, the Cyan board may make an adverse recommendation change in response to an intervening event or a superior proposal (as such terms are specifically defined in the merger agreement), subject to compliance in all material respects with requirements in the merger agreement with respect to any such intervening event or superior proposal, if the Cyan board determines in good faith, after consultation with its outside legal counsel, that the failure to take such action would reasonably be expected to result in a violation of the Cyan board’s fiduciary duties under applicable law.

The Cyan board may not make an adverse recommendation change until after at least three business days following Ciena’s receipt of written notice from Cyan advising that the Cyan board intends to take such action and the basis for doing so. After providing such notice and prior to making such adverse recommendation change:

 

    Cyan must, during such three business day period, negotiate in good faith with Ciena and its representatives with respect to any revisions to the terms of the transaction contemplated by the merger agreement proposed by Ciena; and

 

    in determining whether to make an adverse recommendation change, the Cyan board will take into account any changes to the terms of the transaction contemplated by the merger agreement proposed by Ciena and any other information provided by Ciena in response to such notice during such three business day period.

 

 

20


Table of Contents

Any amendment to the financial terms or other material terms of any takeover proposal will be deemed to be a new takeover proposal except that the three business day notice period for such new acquisition proposal will be two business days for such purposes.

Termination of the Merger Agreement (Page 134)

The merger agreement may be terminated at any time prior to the effective time, whether before or (unless otherwise specified below) after the receipt of the Cyan stockholder approval, by delivery of written notice to the other parties to the merger agreement under the following circumstances:

 

    by mutual written consent of Ciena and Cyan.

 

    by either Ciena or Cyan:

 

    if the merger is not consummated by November 30, 2015; provided, however, that this right to terminate the merger agreement will not be available to any party if the failure of such party (and in the case of Ciena, Merger Sub) to perform any of its obligations under the merger agreement has been a principal cause of or resulted in the failure of the merger to be consummated on or before such date;

 

    if any law, regulation, order, judgment or injunction enacted, issued, promulgated, enforced or entered by a governmental entity of competent jurisdiction that restrains, enjoins or otherwise prohibits the closing of the merger is in effect and becomes final and nonappealable; provided that the party seeking to terminate the agreement has complied in all material respects with its obligations under the merger agreement regarding its efforts to obtain regulatory approvals necessary to consummate the merger; or

 

    if the postponed annual meeting, as adjourned or postponed from time to time, has been held, the proposal to adopt the merger agreement and the NYSE share issuance proposals shall have been submitted to the Cyan stockholders for approval at such postponed annual meeting, and the proposal to adopt the merger agreement or the NYSE share issuance proposals shall not have been approved thereat by the Cyan stockholders.

 

    by Ciena:

 

    if Cyan has breached any of its representations or warranties or failed to perform any of its covenants or agreements set forth in the merger agreement such that the conditions of Ciena’s and Merger Sub’s obligations to complete the merger with respect to Cyan’s representations and warranties or covenants, as applicable, are not satisfied and such breach or failure to perform is incapable of being cured prior to November 30, 2015, or is not cured by the earlier of (x) 30 calendar days following written notice from Ciena of such breach or failure and (y) November 30, 2015; provided that Ciena does not have the right to terminate the merger agreement as a result of such breach if either Ciena or Merger Sub is then in material breach of any of its own representations, warranties, covenants or agreements under the merger agreement; or

 

    if at any time before Cyan stockholder approval of the proposal to adopt the merger agreement, (i) the Cyan board fails to include its recommendations to the Cyan stockholders for the approval of the proposal to adopt the merger agreement and approve the NYSE share issuance proposals in this proxy statement/prospectus or shall have effected an adverse recommendation change, or (ii) Cyan breaches its non-solicitation obligations under the merger agreement in any material respect.

 

    By Cyan:

 

   

if Ciena or Merger Sub has breached any of its representations or warranties or failed to perform any of its covenants or agreements set forth in the merger agreement such that the conditions to Cyan’s obligations to complete the merger with respect to Ciena’s or Merger Sub’s

 

 

21


Table of Contents
 

representations and warranties or covenants, as applicable, are not satisfied and such breach or failure to perform is incapable of being cured prior to November 30, 2015, or is not cured by the earlier of (x) 30 calendar days following written notice from Cyan of such breach or failure and (y) November 30, 2015; provided that Cyan does not have the right to terminate the merger agreement as a result of such breach if Cyan is then in material breach of any of its own representations, warranties, covenants or agreements under the merger agreement; or

 

    if at any time before Cyan stockholder approval of the proposal to adopt the merger agreement, the Cyan board effects an adverse recommendation change in respect of a superior proposal, in compliance with its non-solicitation obligations under the merger agreement, and Cyan substantially simultaneously with such termination enters into a definitive agreement with respect to such superior proposal.

Termination Fees and Expenses (Page 135)

Cyan will be required to pay a termination fee of $15.0 million to Ciena if:

 

    (i) after the date of the merger agreement, and prior to the termination of the merger agreement, a takeover proposal is made to Cyan or any of its subsidiaries or a takeover proposal was made directly to the Cyan stockholders generally, or an intention (whether or not conditional) to make such takeover proposal was publicly announced or such takeover proposal had otherwise become publicly known; (ii) thereafter, the merger agreement is terminated (A) by Ciena or Cyan following a failure of the Cyan stockholder proposals to adopt the merger agreement and approve the NYSE share issuance proposals (but solely to the extent prior to such termination of the merger agreement a takeover proposal was publicly announced or a takeover proposal had otherwise become publicly known, or if a takeover proposal has not been publicly announced or otherwise public known, an adverse recommendation change shall have been made for any reason), (B) by Ciena or Cyan if the merger is not consummated by November 30, 2015 (but only if the postponed annual meeting has not been held by November 30, 2015 and at the time of such termination the Form S-4 of which this proxy statement/prospectus is a part had been declared effective by the SEC, unless the failure to be declared effective was the result of any breach of the merger agreement by Cyan), or (C) by Ciena as a result of Cyan’s breach of its representations or warranties, or failure to perform any of its covenants or agreements set forth in the merger agreement, to the extent any such breach of failure would grant Ciena a right to terminate the merger agreement in accordance with its terms; and (iii) within twelve months after such termination, Cyan enters into a definitive agreement to consummate a takeover proposal or consummates any takeover proposal; or

 

    Ciena terminates the merger agreement before Cyan stockholder approval of the proposal to adopt the merger agreement after (i) the Cyan board fails to include its recommendations to the Cyan stockholders for the approval of the proposal to adopt the merger agreement and approve the NYSE share issuance proposals in this proxy statement/prospectus or shall have effected an adverse recommendation change, or (ii) Cyan breaches its non-solicitation obligations under the merger agreement in any material respect; or

 

    Cyan terminates the merger agreement in connection with an adverse recommendation change in respect of a superior proposal and Cyan substantially simultaneously with such termination enters into a definitive agreement with respect to such superior proposal.

If the merger agreement is terminated pursuant to the first bullet above, the termination fee must be paid on the earlier of (i) the date of entry into a definitive agreement with respect to a takeover proposal or (ii) the date of consummation of the transaction referenced in clause (iii) of the first bullet above. If the termination is made

 

 

22


Table of Contents

pursuant to the second bullet above, the termination fee must be paid within three business days of the date of termination. If the termination is made pursuant to the third bullet above, the termination fee must be paid contemporaneously with the termination of the merger agreement.

Cyan will be required to reimburse Ciena for all documented out-of-pocket expenses, including those of the exchange agent and its representatives, incurred by Ciena or Merger Sub in connection with the merger agreement and the transactions contemplated thereby in the event of clauses (i) and (ii) of the first bullet above apply, in each case up to a maximum amount of $2.0 million. Any termination fee payable by Cyan will be offset by the amount of any of Ciena or Merger Sub’s expenses previously reimbursed pursuant to the merger agreement. In the event any such expenses are paid, and thereafter Cyan becomes obligated to pay a termination fee as a result of any of the items set forth above becoming applicable, then the amount of such termination fee shall be reduced by the amount of any such expenses so paid.

If Cyan fails promptly to pay any of the foregoing fees or expenses, and, in order to obtain such payment, Ciena commences a suit that results in a judgment against Cyan for the payment of such fees or expenses, Cyan must pay to Ciena its costs and expenses (including attorneys’ fees and expenses) in connection with such suit, together with interest on the amount of such amount from the date such payment was required to be made until the date of payment at the prime rate as published in The Wall Street Journal in effect on the date such payment was required to be made.

Treatment of Cyan Warrants and Convertible Notes (Page 130)

With respect to Cyan’s $50.0 million principal amount of outstanding convertible notes, the merger is expected to constitute a “fundamental change,” as such term is defined in the indenture governing the convertible notes, which we refer to as the indenture. The indenture provides that for a period of time beginning 25 trading days prior to the anticipated effective date of the merger and continuing until the date set for repurchase of any convertible notes tendered for purchase under the special purchase rights of holders triggered if the merger constitutes a “fundamental change” as described below, the note holders will be entitled to convert their convertible notes into the amount of cash and shares of Cyan common stock provided for in the indenture. If converted on or after the effective date of the merger, a converting noteholder will receive the cash and shares of Ciena common stock that a holder of the number of shares of Cyan common stock into which such notes were convertible immediately prior to the merger would have been entitled to receive in connection with the merger, subject to Ciena’s right to elect to pay cash in lieu of issuing such shares. The merger is also expected to constitute a “make-whole fundamental change” under the indenture. As a result, the applicable conversion rate will be increased pursuant to a make-whole provision in the indenture with respect to any conversion that occurs within the conversion period following the effective date of the merger and prior to the related repurchase date set by Ciena (but not with respect to future conversions), as further described in the indenture. The merger will also give rise to a right of holders of the convertible notes to require Ciena to repurchase their convertible notes at 100% of the principal amount thereof plus accrued and unpaid interest, to the extent the merger constitutes a “fundamental change.” The value of the merger consideration is expected to be higher than the principal amount of the convertible notes.

The merger also is expected to constitute a “fundamental transaction” as defined in the warrants. Cyan will issue timely notices to the holders of the warrants as to the record date for determining rights to vote with respect to the merger (notwithstanding that the warrants are not exercisable), and Cyan will otherwise take all actions required by the warrants in connection with the merger. Pursuant to their terms, the warrants will be deemed to have been automatically exercised on a cashless basis immediately prior to the effective time of the merger, at an exercise price of $3.62 per share. The shares of Cyan common stock issuable as a result of such deemed exercise will be deemed issued and outstanding immediately prior to the effective time and the shares of Ciena common stock issued in exchange for such Cyan shares pursuant to the merger will be registered pursuant to the Form S-4

 

 

23


Table of Contents

of which this proxy statement/prospectus forms a part. Before the effective time, Cyan may, and intends to, amend one or more of the warrants to delete the provisions limiting the number of shares issuable under the warrants to any holder to 9.99% of the outstanding shares of Cyan.

The shares issuable on conversion of the convertible notes and upon exercise of the warrants are currently limited by the terms of those securities as a consequence of the limitations on private placements of voting equity securities, including to affiliates of Cyan, under the listing standards of the NYSE. The NYSE share issuance proposals are required in order to lift the restrictions on the issuance of Cyan shares under these instruments. See “Proposal No. 3—Approval of Certain Issuances of Cyan Common Stock in Excess of 20% of Cyan’s Outstanding Shares upon Conversion of Cyan’s Outstanding Convertible Notes and Exercise of Related Warrants Issued December 2014” on page 154 and “Proposal No. 4—Approval of Certain Issuances of Cyan’s Common Stock to Certain Affiliated Holders upon Conversion of Cyan’s Outstanding Convertible Notes and Exercise of Related Warrants Issued December 2014” on page 161. Prior to obtaining stockholder approval of such issuances, Cyan is required to pay the cash value of the shares that would otherwise be issuable upon conversion or exercise, as the case may be.

The Voting Agreements (Page 138)

On May 3, 2015, Ciena and certain Cyan officers and directors and affiliated stockholders, including investment funds affiliated with certain directors, entered into voting agreements. As of the record date, these persons beneficially owned in the aggregate 22,311,690 shares of Cyan common stock, comprising 19,411,926 shares of Cyan common stock (or approximately 39.4% of the shares of Cyan common stock outstanding as of the close of business on the record date) and 2,899,764 shares issuable upon exercise of Cyan options exercisable or the settlement of Cyan restricted stock units within 60 days of the record date, for aggregate beneficial ownership of approximately 42.7% of the shares of Cyan common stock outstanding as of the close of business on the record date. Each of these persons has agreed to vote all beneficially owned shares of Cyan common stock in favor of adoption of the merger agreement and the NYSE share issuance proposals and any other matter that must be approved by Cyan stockholders in order to facilitate the merger, and to vote against, among other things, any proposal opposing or competing with the merger. Each voting agreement will terminate on the earliest to occur of the effective time of the consummation of the merger, the termination of the merger agreement, and mutual agreement of Ciena and the applicable stockholder. Notwithstanding the foregoing, if the Cyan board of directors makes an adverse recommendation change with respect to an “intervening event”, as such term is defined in the merger agreement, then the obligation of the stockholder to vote as described above will be modified such that the stockholder, together with the other Cyan stockholders entering into voting agreements, shall only be required to collectively vote an aggregate number of shares equal to 35% of the total voting power of the outstanding Cyan shares as described above, and the number of shares in excess of that percentage shall be voted on a pro rata basis on the merger and the NYSE share issuance proposals in a manner equivalent to the proportion of votes “FOR” and “AGAINST”, or abstain, cast by all of Cyan’s other stockholders on these matters. Each Cyan director and officer who has entered into a voting agreement has done so solely in his or her capacity as a stockholder and not in his or her capacity as a director or officer of Cyan or any of its subsidiaries. Accordingly, the voting agreements do not restrict or limit any of Cyan’s directors or officers from taking or omitting to take any action in his or her capacity as a director or officer of Cyan in order to fulfill his or her fiduciary obligations under applicable law or acting in such capacity or voting in such capacity in the good faith exercise of his or her fiduciary duties under applicable law. A copy of the form of voting agreement is attached to this proxy statement/prospectus as Annex B.

Accounting Treatment (Page 114)

Ciena prepares its financial statements in accordance with accounting principles generally accepted in the United States of America, which we refer to as GAAP. The merger will be accounted for using the acquisition method of accounting. Ciena will be treated as the acquiror for accounting purposes.

 

 

24


Table of Contents

Material U.S. Federal Income Tax Consequences of the Merger (Page 190)

It is the intention of Ciena and Cyan that the merger and second step merger, considered together as a single integrated transaction for U.S. federal income tax purposes, will qualify as a “reorganization” within the meaning of the Code. Therefore, for U.S. federal income tax purposes, as a result of the merger, it is expected that a U.S. holder of shares of Cyan common stock generally will only recognize gain (but not loss) in an amount not to exceed the cash received as part of the merger consideration and will recognize gain or loss if such holder received cash in lieu of fractional shares of Cyan common stock.

Because individual circumstances may differ, we recommend that you consult your own tax advisor to determine the particular tax effects of the merger to you.

You should read the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 190 of this proxy statement/prospectus for a more complete discussion of the material U.S. federal income tax consequences of the merger.

Comparison of Stockholders’ Rights (Page 194)

The rights of Cyan stockholders are governed by Cyan’s restated certificate of incorporation, which we refer to as the Cyan charter, by Cyan’s amended and restated bylaws, which we refer to as the Cyan bylaws, and by the DGCL. Your rights as a stockholder of Ciena will be governed by Ciena’s amended and restated certificate of incorporation, which we refer to as the Ciena charter, by Ciena’s amended and restated bylaws, which we refer to as the Ciena bylaws, and by the DGCL. Your rights under the Ciena charter and the Ciena bylaws will differ in some respects from your rights under the Cyan charter and the Cyan bylaws. For more detailed information regarding a comparison of your rights as a stockholder of Cyan and Ciena, see the section entitled “Comparison of Stockholders’ Rights” beginning on page 194 of this proxy statement/prospectus.

Parties to the Merger (Page 63)

Cyan, Inc.

1383 N. McDowell Blvd.

Suite 300

Petaluma, California 94954

(707) 735-2300

Cyan, a Delaware corporation, is a pioneer in innovative, carrier-grade networking solutions that transform disparate and inefficient legacy networks into open, high-performance networks. Cyan’s solutions include high-capacity, multi-layer switching and transport platforms as well as a carrier-grade software-defined networking platform for network virtualization and control. Cyan’s solutions enable network operators to virtualize their networks, accelerate service delivery and increase scalability and performance, while reducing costs. Cyan has designed its solutions to enable a variety of existing and emerging applications, including business Ethernet, wireless backhaul, broadband backhaul, cloud connectivity, bandwidth on demand, and network functions virtualization (NFV). By deploying Cyan’s solutions, network operators can transform legacy networks into open, multi-vendor, carrier-grade software-controlled networks. Cyan’s solutions not only reduce network operators’ ongoing capital and operating expenses, but also enable their networks to more flexibly support rapidly changing service requirements and new business models. Cyan is headquartered in Petaluma, California.

Cyan common stock is listed on the NYSE under the symbol “CYNI.”

 

 

25


Table of Contents

Ciena Corporation

7035 Ridge Road

Hanover, Maryland 21076

(410) 694-5700

Ciena, a Delaware corporation, is a network specialist focused on communications networking solutions that enable converged, next-generation architectures, optimized to create and deliver the broad array of high-bandwidth services relied upon by business and consumer end users. Ciena provides equipment, software and services that support the transport, switching, aggregation, service delivery and management of voice, video and data traffic on communications networks. These solutions enable network operators to adopt software-programmable network infrastructures that offer the on-demand experience required by end users of services and applications. At the same time, these solutions yield business and operational value for network operators.

Ciena common stock is listed on the NYSE under the symbol “CIEN.”

Neptune Acquisition Subsidiary, Inc.

c/o Ciena Corporation

7035 Ridge Road

Hanover, Maryland 21076

(410) 694-5700

Merger Sub, a Delaware corporation and a wholly owned subsidiary of Ciena, was formed solely for the purpose of facilitating the merger. Merger Sub has not carried on any activities or operations to date, except for those activities incidental to its formation and undertaken in connection with the transactions contemplated by the merger agreement. By operation of the merger, Merger Sub will be merged with and into Cyan, with Cyan surviving the merger as a wholly owned subsidiary of Ciena. In the second step merger, Cyan will merge with and into Ciena.

 

 

26


Table of Contents

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CYAN

The following table presents selected historical consolidated financial data for Cyan as of and for the fiscal years ended December 31, 2010, 2011, 2012, 2013 and 2014 and as of and for the three months ended March 31, 2014 and 2015. The balance sheet data as of December 31, 2013 and 2014 and the statement of operations data for the fiscal years ended December 31, 2012, 2013 and 2014 have been obtained from Cyan’s audited consolidated financial statements included in Cyan’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, which is incorporated by reference into this proxy statement/prospectus. The balance sheet data as of December 31, 2011 and 2012 and the statement of operations data for the fiscal years ended December 31, 2010 and 2011 have been derived from Cyan’s audited consolidated financial statements not incorporated into this document by reference. The balance sheet data as of March 31, 2015 and the statement of operations data for the three months ended March 31, 2014 and 2015 have been obtained from Cyan’s unaudited consolidated financial statements included in Cyan’s Quarterly Report on Form 10-Q for the three months ended March 31, 2015, which is incorporated by reference into this proxy statement/prospectus. The balance sheet data as of March 31, 2014 has been derived from Cyan’s unaudited consolidated financial statements included in Cyan’s Quarterly Report on Form 10-Q for the three months ended March 31, 2014, which has not been incorporated into this document by reference.

 

 

27


Table of Contents

The information set forth below is not necessarily indicative of future results and should be read together with the other information contained in Cyan’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and Cyan’s Quarterly Report on Form 10-Q for the three months ended March 31, 2015, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes therein. See the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus.

 

    Year Ended December 31,
(in thousands, except per share data)
    Three Months Ended
March 31,

(in thousands,
except per share  data)
(unaudited)
 
    2010     2011     2012     2013     2014           2014                 2015        

Revenue

  $ 23,484      $ 40,421     $ 95,872     $ 116,582      $ 100,483      $ 19,038      $ 36,005   

Cost of revenue(1)

    18,263        27,074       57,315       68,376        58,651        11,615        20,974   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

  5,221      13,347     38,557     48,206      41,832      7,423      15,031   

Operating expenses(1):

Research and development

  10,430      12,986     18,447     32,609      36,115      9,472      8,941   

Sales and marketing

  7,919      12,825     25,243     40,102      43,565      11,029      11,436   

General and administrative

  2,380      3,310     6,055     13,082      15,241      4,563      5,082   

Restructuring charges

  —        —       —       —       627     —        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

  20,729      29,121     49,745     85,793      95,548      25,064      25,459   

Loss from operations

  (15,508   (15,774 )   (11,188 )   (37,587   (53,716   (17,641   (10,428

Other income (expense), net:

Change in fair value of derivative and warrant liabilities

  —        —       —       —       (4,710 )   —        (41,285

Interest expense

  (429   (419 )   (33 )   (367   (486   (47   (1,546

Other income (expense), net

  (406   322     (5,340 )   (2,635   (32   (62   419   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense), net

  (835   (97 )   (5,373 )   (3,002   (5,228   (109   (42,412
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before provision for income taxes

  (16,343   (15,871 )   (16,561 )   (40,589   (58,944   (17,750   (52,840

Provision for income taxes

  1      14     40     143      280      50      51   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

$ (16,344 $ (15,885 ) $ (16,601 ) $ (40,732 $ (59,224 $ (17,800 $ (52,891
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted net loss per share(2)

$ (7.54 $ (6.63 ) $ (6.60 ) $ (1.32 $ (1.26 $ (0.38 $ (1.11
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average number of shares used in computing basic and diluted net loss per share

  2,167      2,396     2,515     30,836      46,956      46,636      47,818   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Stock-based compensation included in the statements of operations data above was as follows:

 

     Year ended December 31,
(in thousands)
     Three Months Ended
March 31,

(in thousands)
(unaudited)
 
     2010      2011      2012      2013      2014          2014              2015      

Cost of revenue

   $ —         $ 73      $ 57      $ 160      $ 378      $ 60       $ 224   

Research and development

     57         338        745        2,348        3,800        915         1,530   

Sales and marketing

     66         229        656        2,165        3,701        798         1,485   

General and administrative

     72         125        639        2,576        2,674        742         1,164   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total stock-based compensation

$ 195    $ 765   $ 2,097   $ 7,249   $ 10,553   $ 2,515    $ 4,403   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

28


Table of Contents
(2) See Note 9 to Cyan’s audited consolidated financial statements appearing in Cyan’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 for an explanation of the calculations of Cyan’s basic and diluted net loss per share of common stock.

 

     December 31,
(in thousands)
     March 31,
(in thousands, unaudited)
 
     2011     2012     2013      2014            2014                  2015        

Consolidated Balance Sheet Data

               

Cash and cash equivalents

   $ 25,740      $ 20,221     $ 32,509      $ 47,740      $ 16,446       $ 53,870   

Short-term restricted cash

     —          —         —          4,165        —          4,165   

Marketable securities

     —          —         31,639        —          30,387         —    

Working capital

     26,703        13,919       72,193        63,368        56,584         56,856   

Property and equipment, net

     3,791        6,485       11,155        11,896        11,724         12,129   

Long-term restricted cash

     —          —         —          7,868        —          7,868   

Total assets

     43,528        70,789       121,520        115,675        99,577         112,130   

Total debt

     45        12,563       5,000        18,498        4,604         18,917   

Total deferred revenue

     5,219        17,417       19,093        7,491        16,304         7,092   

Derivative and warrant liabilities

     —          —         —          36,280        —          77,565   

Preferred stock warrant liability

     900        6,254       —          —          —          —    

Redeemable convertible preferred stock

     98,133        98,133       —          —          —          —    

Total stockholders’ equity (deficit)

     (68,675     (83,055 )     78,937        29,944        63,941         (18,374

 

 

29


Table of Contents

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CIENA

The following table presents selected historical consolidated financial data for Ciena as of and for the fiscal years ended October 31, 2010, 2011, 2012, 2013 and 2014 and as of and for the six months ended April 30, 2014 and 2015. The statement of operations data for the fiscal years ended October 31, 2012, 2013 and 2014 and the balance sheet data as of October 31, 2013 and 2014 have been obtained from Ciena’s audited consolidated financial statements included in Ciena’s Annual Report on Form 10-K for the fiscal year ended October 31, 2014, which is incorporated by reference into this proxy statement/prospectus. The statement of operations data for the fiscal years ended October 31, 2010 and 2011 and the balance sheet data as of October 31, 2010, 2011 and 2012 have been derived from Ciena’s audited consolidated financial statements for such years, which have not been incorporated into this document by reference. The financial data as of April 30, 2015 and for the six months ended April 30, 2014 and 2015 have been obtained from Ciena’s unaudited condensed consolidated financial statements included in Ciena’s Quarterly Report on Form 10-Q for the six months ended April 30, 2015, which is incorporated by reference into this proxy statement/prospectus. The financial data as of April 30, 2014 has been derived from Ciena’s unaudited condensed consolidated financial statements included in Ciena’s Quarterly Report on Form 10-Q for the six months ended April 30, 2014.

The information set forth below is not necessarily indicative of future results and should be read together with the other information contained in Ciena’s Annual Report on Form 10-K for the fiscal year ended October 31, 2014 and Ciena’s Quarterly Report on Form 10-Q for the six months ended April 30, 2015, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes therein. See the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus.

 

 

30


Table of Contents

STATEMENT OF OPERATIONS DATA:

 

    Year Ended October 31,
(in thousands, except per share data)
    Six Months
Ended April 30,
(in thousands,
except per share data)
(unaudited)
 
    2010     2011     2012     2013     2014     2014     2015  

Revenue

  $ 1,236,636      $ 1,741,970      $ 1,833,923      $ 2,082,546      $ 2,288,289      $ 1,093,764      $ 1,150,764   

Cost of goods sold

    739,135        1,032,824        1,109,699        1,217,371        1,339,937        630,222        648,058   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

  497,501      709,146      724,224      865,175      948,352      463,542      502,706   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

Research and development

  327,626      379,862      364,179      383,408      401,180      204,989      205,963   

Selling and marketing

  193,515      251,990      266,338      304,170      328,325      162,010      159,183   

General and administrative

  102,692      126,242      114,002      122,432      126,824      61,979      59,855   

Acquisition and integration costs

  101,379      42,088      —        —        —        —        1,020   

Amortization of intangible assets

  99,401      69,665      51,697      49,771      45,970      23,932      22,038   

Restructuring costs

  8,514      5,781      7,854      7,169      349      115      8,068   

Change in fair value of contingent consideration

  (13,807   (3,289   —        —        —        —        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

  819,320      872,339      804,070      866,950      902,648      453,025      456,127   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gain (loss) from operations

  (321,819   (163,193   (79,846   (1,775   45,704      10,517      46,579   

Interest and other income (loss), net

  3,917      6,022      (15,200   (5,744   (25,262   (7,903   (13,782

Interest expense

  (18,619   (37,926   (39,653   (44,042   (47,115   (22,048   (26,608

Gain on cost method investments

  —        7,249      —        —        —        —        —     

Gain (loss) on extinguishment of debt

  4,948      —        —        (28,630   —        —        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

  (331,573   (187,848   (134,699   (80,191   (26,673   (19,434   6,189   

Provision for income taxes

  1,941      7,673      9,322      5,240      13,964      6,660      4,315   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

$ (333,514 $ (195,521 $ (144,021 $ (85,431 $ (40,637 $ (26,094 $ 1,874   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic net income (loss) per common share

$ (3.58 $ (2.04 $ (1.45 $ (0.83 $ (0.38 $ (0.25 $ 0.02   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income (loss) per potential common share

$ (3.58 $ (2.04 $ (1.45 $ (0.83 $ (0.38 $ (0.25 $ 0.02   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average basic common shares outstanding

  93,103      95,854      99,341      102,350      105,783      104,977      110,578   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average dilutive potential common shares outstanding

  93,103      95,854      99,341      102,350      105,783      104,977      111,762   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE SHEET DATA:

 

    October 31,
(in thousands)
    April 30,
(in thousands)
(unaudited)
 
    2010     2011     2012     2013     2014     2014     2015  

Cash and cash equivalents

  $ 688,687      $ 541,896      $ 642,444      $ 346,487      $ 586,720      $ 325,083      $ 586,338   

Short-term investments

  $ —        $ —        $ 50,057      $ 124,979      $ 140,205      $ 90,049      $ 145,089   

Long-term investments

  $ —        $ 50,264      $ —        $ 15,031      $ 50,057      $ 15,042      $ 85,233   

Total assets

  $ 2,118,093      $ 1,951,418      $ 1,881,143      $ 1,802,770      $ 2,072,632      $ 1,795,464      $ 2,091,564   

Short-term debt

  $ —        $ —        $ 216,210      $ —        $ 190,063      $ 187,647      $ 2,500   

Long-term debt

  $ 1,442,705      $ 1,442,364      $ 1,225,806      $ 1,212,019      $ 1,274,791      $ 1,026,641      $ 1,276,107   

Total liabilities

  $ 1,958,800      $ 1,937,545      $ 1,970,115      $ 1,885,447      $ 2,142,247      $ 1,876,304      $ 1,952,901   

Stockholders’ equity (deficit)

  $ 159,293      $ 13,873      $ (88,972   $ (82,677   $ (69,615   $ (80,840   $ 138,663   

 

 

31


Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the merger, the second step merger and related transactions. Under the terms of the merger agreement, each outstanding share of Cyan common stock at the effective time will be exchanged for merger consideration having a value at closing of 0.224 shares of Ciena common stock, consisting of: (i) 0.19936 (89% of the aggregate exchange ratio) shares of Ciena common stock (plus cash in lieu of any fractional shares resulting therefrom equal to the product of (A) the fractional share interest to which a stockholder would otherwise be entitled and (B) the volume weighted average price per share of Ciena common stock on the NYSE on the last trading day prior to closing, rounded to the nearest cent); and (ii) an amount of cash, without interest, equal to the product of (A) 0.02464 (11% of the aggregate exchange ratio) multiplied by (B) the volume weighted average price per share of Ciena common stock on the NYSE on the last trading day prior to closing.

The unaudited pro forma condensed combined financial statements give effect to the merger under the acquisition method of accounting in accordance with Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 805, Business Combinations, which we refer to as ASC 805, with Ciena treated as the legal and accounting acquirer. The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the merger, (2) factually supportable and (3) with respect to the statements of operations, expected to have a continuing impact on the combined results of Ciena and Cyan. Although Ciena and Cyan have entered into the merger agreement, there is no guarantee that the merger will be completed. The unaudited pro forma condensed combined financial statements present the effect of the pending merger between Ciena and Cyan as if the merger had been completed on November 1, 2013 for statement of operations purposes and on April 30, 2015 for balance sheet purposes. Due to different fiscal periods for Ciena and Cyan, the April 30, 2015 pro forma condensed combined balance sheet is based upon the historical consolidated balance sheet data of Ciena as of April 30, 2015, and the historical balance sheet data of Cyan as of March 31, 2015. The October 31, 2014 pro forma condensed combined statement of operations includes the historical consolidated statement of operations data of Ciena for the twelve months ended October 31, 2014 and the historical consolidated statement of operations data of Cyan for the twelve months ended December 31, 2014. The April 30, 2015 pro forma condensed combined statement of operations includes the historical consolidated statement of operations data of Ciena for the six months ended April 30, 2015 and the historical consolidated statement of operations data of Cyan for the six months ended March 31, 2015. Due to the difference in fiscal year ends, Cyan’s fourth quarter 2014 operating results are included in both the year ended October 31, 2014 and six months ended April 30, 2015 pro forma operating results. The unaudited pro forma condensed combined statements of operations do not reflect future events that may occur after the merger, including, but not limited to, the anticipated realization of ongoing savings from operating synergies and certain one-time charges Ciena expects to incur in connection with the transaction, and including, but not limited to, costs in connection with integrating the operations of Ciena and Cyan.

These unaudited pro forma condensed combined financial statements are for informational purposes only. They do not purport to indicate the results that would actually have been obtained had the merger been completed on the assumed date or for the periods presented, or which may be realized in the future. To produce the pro forma financial information, Ciena adjusted Cyan’s assets and liabilities to their estimated fair values. As of the date of this proxy statement/prospectus, Ciena has not completed the detailed valuation work necessary to arrive at the required estimates of the fair value of the Cyan assets to be acquired and the liabilities to be assumed and the related allocation of purchase price, nor has it identified all adjustments necessary to conform Cyan’s accounting policies to Ciena’s accounting policies. A final determination of the fair value of Cyan’s assets and liabilities will be based on the actual net tangible and intangible assets and liabilities of Cyan that exist as of the date of completion of the merger and, therefore, cannot be made prior to that date. Additionally, the value of merger consideration will be determined based on the trading price of Ciena common stock at the time of the

 

 

32


Table of Contents

completion of the merger. Accordingly, the accompanying unaudited pro forma purchase price allocation is preliminary and is subject to further adjustments as additional information becomes available and as additional analyses are performed. The preliminary unaudited pro forma purchase price allocation has been made solely for the purpose of preparing the accompanying unaudited pro forma condensed combined financial statements. The preliminary purchase price allocation was based on Ciena’s historical experience and certain data available through the public domain and Ciena’s due diligence review of Cyan’s business. Until the merger is completed, both companies are limited in their ability to share information with each other. Upon completion of the merger, valuation work will be performed and any increases or decreases in the fair value of relevant statement of financial position amounts will result in adjustments to the statement of financial position and/or statements of operations until the purchase price allocation is finalized.

There can be no assurance that such finalization will not result in material changes from the preliminary purchase price allocation included in the accompanying unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined financial statements should be read in conjunction with:

 

    The accompanying notes to the unaudited pro forma condensed combined financial statements;

 

    Ciena’s audited consolidated financial statements and related notes thereto contained in its Annual Report on Form 10-K for the year ended October 31, 2014 and Ciena’s Quarterly Report on Form 10-Q for the quarterly period ended April 30, 2015; and

 

    Cyan’s audited consolidated financial statements and related notes thereto contained in its Annual Report on Form 10-K for the year ended December 31, 2014 and Cyan’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015.

 

 

33


Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED

BALANCE SHEET

(in thousands)

 

    Historical                       Pro Forma  
    April 30, 2015
Ciena
    March 31, 2015
Cyan
    Reclassifications     Adjustments           April 30, 2015
Combined
 

ASSETS

           

Current assets:

           

Cash and cash equivalents

  $ 586,338      $ 53,870      $ —        $ (26,773     a      $ 613,435   

Restricted cash

    —          4,165        —          —            4,165   

Short-term investments

    145,089        —          —          —            145,089   

Accounts receivable, net

    553,306        17,794        —          —            571,100   

Inventories

    214,593        9,267        —          2,658        b        226,518   

Deferred costs

    —          1,305        (1,305     —            —     

Prepaid expenses and other

    183,512        2,546        1,305        —            187,363   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total current assets

  1,682,838      88,947      —        (24,115   1,747,670   

Long-term investments

  85,233      —        —        —        85,233   

Restricted cash

  —        7,868      —        —        7,868   

Equipment, building, furniture and fixtures, net

  139,064      12,129      —        —        151,193   

Goodwill

  —        —        —        178,495      c      178,495   

Other intangible assets, net

  102,238      —        —        119,000      d      221,238   

Other long-term assets

  82,191      3,186      —        —        85,377   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total assets

$ 2,091,564    $ 112,130    $ —      $ 273,380    $ 2,477,074   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities

Accounts payable

$ 210,002    $ 12,756    $ —      $ —      $ 222,758   

Accrued liabilities

  253,871      7,638      5,352      16,000      e      282,861   

Accrued compensation

  —        5,317      (5,317   —        —     

Deferred revenue

  109,120      5,503      842      —        115,465   

Deferred rent

  —        35      (35   —        —     

Other current obligations

  —        842      (842   —        —     

Current portion of long-term debt

  2,500      —        —        —        2,500   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total current liabilities

  575,493      32,091      —        16,000      623,584   

Long-term deferred revenue

  49,845      1,589      —        —        51,434   

Deferred rent

  —        342      (342   —        —     

Other long-term obligations

  51,456      —        342      —        51,798   

Derivative and warrants liabilities

  —        77,565      —        (77,565   f      —     

Long-term debt, net

  1,276,107      18,917      —        30,398      g      1,325,422   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities

  1,952,901      130,504      —        (31,167   2,052,238   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Commitments and contingencies

  —        —        —        —     

Stockholders’ equity (deficit):

Preferred stock

  —        —        —        —        —     

Common stock

  1,177      5      —        97      h      1,279   

Additional paid-in capital

  6,167,862      221,305      —        80,766      h      6,469,933   

Accumulated other comprehensive loss

  (21,793   (287   —        287      h      (21,793

Accumulated deficit

  (6,008,583   (239,397   —        223,397      h,e      (6,024,583
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total stockholders’ equity (deficit)

  138,663      (18,374   —        304,547      424,836   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities and stockholders’ equity (deficit)

$ 2,091,564    $ 112,130    $ —      $ 273,380    $ 2,477,074   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

 

 

34


Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED

STATEMENTS OF OPERATIONS

Year Ended

(in thousands, except per share data)

 

    Historical                       Pro Forma  
    October 31, 2014
Ciena
    December 31, 2014
Cyan
    Reclassifications     Adjustments           October 31, 2014
Combined
 

Revenue:

           

Products

  $ 1,865,826      $ 100,483      $ (7,500   $ —          $ 1,958,809   

Services

    422,463        —          7,500        —            429,963   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total Revenue

  2,288,289      100,483      —        —        2,388,772   

Cost of goods sold:

Products

  1,083,022      58,651      (3,188   6,602      i      1,145,087   

Services

  256,915      —        3,188      —        260,103   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total cost of goods sold

  1,339,937      58,651      —        6,602      1,405,190   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Gross profit

  948,352      41,832      —        (6,602   983,582   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Operating expenses:

Research and development

  401,180      36,115      —        —        437,295   

Selling and marketing

  328,325      43,565      —        —        371,890   

General and administrative

  126,824      15,241      —        —        142,065   

Amortization of intangible assets

  45,970      —        —        12,403      i      58,373   

Restructuring costs

  349      627      —        —        976   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total operating expenses

  902,648      95,548      —        12,403      1,010,599   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Income (loss) from operations

  45,704      (53,716   (27,017

Interest and other income (loss), net

  (25,262   (32   (25,294

Change in fair value of derivative and warrant liabilities

  —        (4,710   —        4,710      j      —     

Interest expense

  (47,115   (486   —        —        (47,601
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Loss before income taxes

  (26,673   (58,944   —        4,710      (99,912

Provision for income tax

  13,964      280      —        —        k      14,244   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net loss

$ (40,637 $ (59,224 $ —      $ 4,710    $ (114,156
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Basic net loss per common share

$ (0.38 $ (1.26 $ —      $ —      $ (0.98
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Diluted net loss per potential common share

$ (0.38 $ (1.26 $ —      $ —      $ (0.98
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Weighted average basic common shares outstanding

  105,783      46,956      —        (36,781   h      115,958   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Weighted average dilutive potential common shares outstanding

  105,783      46,956      —        (36,781   h      115,958   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

 

 

35


Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED

STATEMENTS OF OPERATIONS

Six Months Ended

(in thousands, except per share data)

 

    Historical                       Pro Forma  
    April 30, 2015
Ciena
    March 31, 2015
Cyan
    Reclassifications     Adjustments           April 30, 2015
Combined
 

Revenue:

           

Products

  $ 934,195      $ 66,459      $ (3,387   $ —          $ 997,267   

Services

    216,569        —          3,387        —            219,956   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total Revenue

  1,150,764      66,459      —        —        1,217,223   

Cost of goods sold:

Products

  523,446      38,058      (1,670   5,852      i      565,686   

Services

  124,612      —        1,670      —        126,282   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total cost of goods sold

  648,058      38,058      —        5,852      691,968   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Gross profit

  502,706      28,401      —        (5,852   525,255   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Operating expenses:

Research and development

  205,963      17,108      —        —        223,071   

Selling and marketing

  159,183      22,126      —        —        181,309   

General and administrative

  59,855      8,518      —        —        68,373   

Acquisition and integration costs

  1,020      —        —        —        1,020   

Amortization of intangible assets

  22,038      —        —        6,202      i      28,240   

Restructuring costs

  8,068      627      —        —        8,695   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total operating expenses

  456,127      48,379      —        6,202      510,708   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Income (loss) from operations

  46,579      (19,978   —        (12,054   14,547   

Interest and other income (loss), net

  (13,782   90      —        —        (13,692

Change in fair value of derivative and warrant liabilities

  —        (45,995   —        45,995      j      —     

Interest expense

  (26,608   (1,898   —        —        (28,506
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Income (loss) before income taxes

  6,189      (67,781   —        33,941      (27,651

Provision for income tax

  4,315      150      —        —        k      4,465   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss)

$ 1,874    $ (67,931 $ —      $ 33,941    $ (32,116
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Basic net income (loss) per common share

$ 0.02    $ (1.43 $ —      $ —      $ (0.27
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Diluted net income (loss) per potential common share

$ 0.02    $ (1.43 $ —      $ —      $ (0.27
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Weighted average basic common shares outstanding

  110,578      47,519      —        (37,344   h      120,753   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Weighted average dilutive potential common shares outstanding

  111,762      47,519      —        (38,528   h      120,753   
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

 

 

36


Table of Contents

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

1.    Basis of Presentation

The merger is reflected in the unaudited pro forma condensed combined financial statements under the acquisition method in accordance with ASC 805, with Ciena treated as the acquirer. Under the acquisition method, the total estimated purchase price allocation is calculated as described in Note 3 below. In accordance with ASC 805, the assets acquired and the liabilities assumed have been measured at fair value based on various preliminary estimates, and these estimates are subject to change pending further review of the fair value of assets acquired and liabilities assumed. The final amounts recorded for the merger may differ materially from the information presented herein.

The unaudited pro forma condensed combined financial statements were prepared in accordance with GAAP and pursuant to SEC Regulation S-X Article 11, and present the pro forma financial position and results of operations of the combined companies based upon the historical information after giving effect to the merger and adjustments described in these Notes to the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements present the effect of the pending merger between Ciena and Cyan as if the merger had been completed on November 1, 2013 for results of operations purposes and on April 30, 2015 for balance sheet purposes. Due to different fiscal periods for Ciena and Cyan, the April 30, 2015 pro forma condensed combined balance sheet is based upon the historical consolidated balance sheet data of Ciena as of April 30, 2015, and the historical balance sheet data of Cyan as of March 31, 2015. The October 31, 2014 pro forma condensed combined statement of operations includes the historical consolidated statement of operations data of Ciena for the twelve months ended October 31, 2014 and the historical consolidated statement of operations data of Cyan for the twelve months ended December 31, 2014. The April 30, 2015 pro forma condensed combined statement of operations includes the historical consolidated statement of operations data of Ciena for the six months ended April 30, 2015 and the historical consolidated statement of operations data of Cyan for the six months ended March 31, 2015. Due to the difference in year ends, Cyan’s fourth quarter 2014 operating results are included in both the year ended October 31, 2014 and six months ended April 30, 2015 pro forma operating results. Cyan’s revenue and net loss for the fourth quarter of 2014 were $30.5 million and ($15.0) million, respectively.

Ciena and Cyan have historically recorded a full valuation allowance on their deferred tax assets since it was more-likely-than not that such assets would not be realized. Following the merger, Ciena will need to assess whether a valuation allowance should be recorded on the deferred tax assets of the combined company. In accordance with the requirements of ASC 805, any change in the valuation allowance of Ciena would be reflected in the income tax provision.

Certain reclassifications have been made relative to Ciena’s and Cyan’s historical financial statements to conform to the financial statement presentation of Ciena and the combined company. The reclassification adjustments related to the balance sheet include the following: (i) reclassification of deferred costs to prepaid expenses and other; (ii) reclassification of accrued compensation and deferred rent to accrued liabilities; (iii) reclassification of deferred rent to other long-term obligations (iv) reclassification of deferred product credits included in other current obligations into deferred revenue. The reclassification adjustments on the statement of operations pertain to the following: (1) reclassification reflects the allocation of product and services revenue; (2) reclassification reflects the allocation of product and services cost of sales.

2.    Preliminary Estimated Purchase Price Consideration

Under the terms of the merger agreement, each outstanding share of Cyan common stock at the effective time will be exchanged for per share merger consideration having a value at closing of 0.224 shares of Ciena common stock, consisting of: (i) 0.19936 (89% of the aggregate exchange ratio) shares of Ciena common stock

 

 

37


Table of Contents

(plus cash in lieu of any fractional shares resulting therefrom equal to the product of (A) the fractional share interest to which a stockholder would otherwise be entitled and (B) the volume weighted average price per share of Ciena common stock on the NYSE on the last trading day prior to closing, rounded to the nearest cent); and (ii) an amount of cash, without interest, equal to the product of (A) 0.02464 (11% of the aggregate exchange ratio) multiplied by (B) the volume weighted average price per share of Ciena common stock on the NYSE on the last trading day prior to closing.

The nature of the merger consideration is expected to constitute a fundamental change under the terms of Cyan’s outstanding convertible notes and warrants. Under the terms of the convertible notes, in the event of a fundamental change, the holders may convert each $1,000 par value of the notes into 409.3998 shares of Cyan common stock, as well as incremental shares subject to a make-whole table. For purposes of calculating the preliminary purchase price, Ciena assumed these convertible notes did not convert. Under the terms of the warrants, in the event of a fundamental change, the warrants will be automatically exercised on a cashless basis, which will result in the elimination of the warrants and the issuance of approximately 2.7 million shares of Cyan common stock. These shares will be considered in the total preliminary purchase price.

The merger agreement further provides for each Cyan stock option that is outstanding and unexercised and each Cyan restricted stock unit that is unvested at the closing date to be assumed and converted into an option to purchase Ciena common stock and Ciena restricted stock units, respectively, based on the 0.224 aggregate exchange ratio. Based on Cyan’s stock options outstanding at May 3, 2015 and the 0.224 aggregate exchange ratio, the unaudited pro forma condensed combined financial statements present the assumption of Cyan options to purchase approximately 11.2 million shares of Cyan common stock and conversion into options to purchase approximately 2.5 million shares of Ciena common stock.

The fair value of stock options assumed was determined using a Black-Scholes valuation model with market based assumptions. The fair value of unvested Cyan stock awards assumed will be recorded as operating expenses on a straight-line basis over the remaining service periods, while the fair value of vested options assumed is included in the total purchase price. Option pricing models require the use of highly subjective market assumptions, including expected stock price volatility, which if changed can materially affect fair value estimates.

The requirement to determine the final purchase price using the number of Cyan shares outstanding at the closing date and the closing price of Ciena’s common stock as of the closing date could result in a total purchase price different from the price assumed in these unaudited pro forma condensed combined financial statements, and that difference may be material. Therefore, the estimated merger consideration reflected in these unaudited pro forma condensed combined financial statements does not purport to represent the actual merger consideration at the time the merger is completed.

Ciena’s closing stock price at the closing date of the merger will be a determining factor in arriving at the final purchase price. Solely for purposes of these pro forma condensed combined financial statements, and determining the total preliminary purchase price, Ciena has assumed a stock price of $21.29 per share, representing the closing price of Ciena’s common stock on the NYSE on May 1, 2015, the last trading day prior to the public announcement of the merger agreement.

 

 

38


Table of Contents

Based on the closing price of Ciena’s common stock on May 1, 2015, the total preliminary purchase price was approximately $265.6 million, including estimated fair values of vested Cyan stock option awards assumed, and comprised of:

 

     (In thousands,
except exchange
ratio and share price)
 

Estimated number of outstanding Cyan shares to be acquired

     48,326   

Estimated number of Cyan shares to be issued under automatic exercise of warrants

     2,710   
  

 

 

 

Total Cyan shares to be exchanged for Ciena shares

  51,036   

Multiplied by the conversion ratio

  0.224   
  

 

 

 

Equivalent Ciena shares to be issued to Cyan stockholders

  11,432   

Multiplied by the assumed price per Ciena common share

$ 21.29   
  

 

 

 

Total value of merger consideration to be distributed to Cyan stockholders

$ 243,389

Estimated fair value of outstanding Cyan vested stock options to be assumed and converted into Ciena stock options

  22,222   
  

 

 

 

Estimated total preliminary purchase price

$ 265,611   
  

 

 

 
* Value will be paid in 89% Ciena shares and 11% cash per the merger consideration described above

For purposes of these unaudited pro forma condensed combined financial statements, the estimated total preliminary purchase price has been allocated among Cyan’s tangible and intangible assets and liabilities based on their estimated fair value as of March 31, 2015. The final determination of the allocation of the purchase price will be based on the fair value of such assets and liabilities as of the date of closing of the merger. Such final determination of the purchase price allocation may be significantly different from the preliminary estimates used in these unaudited pro forma condensed combined financial statements.

An increase of 20% in the price per share of Ciena common stock as of May 1, 2015 would increase the consideration transferred and the purchase price by approximately $63.1 million, whereas a decrease of 20% would result in a decline of approximately $62.8 million. Such changes would be reflected in these unaudited pro forma condensed combined financial statements as an increase or decrease to goodwill.

3.    Preliminary Estimated Purchase Price Allocation

Based upon a preliminary valuation, the total estimated preliminary purchase price consideration was allocated to the fair value of Cyan’s assets and liabilities as follows:

 

Cash, cash equivalents & restricted cash

$ 65,903   

Accounts receivable

  17,794   

Inventory

  11,925   

Prepaid expenses and other

  3,851   

Equipment, building, furniture and fixtures

  12,129   

Goodwill

  178,495   

Intangible assets, net

  119,000   

Other long-term assets

  3,186   
  

 

 

 

Total assets acquired

  412,283   

Accounts payable

  12,756   

Accrued liabilities

  12,990   

Deferred revenue

  7,934   

Other long-term obligations

  342   

Long-term debt including equity component(1)

  112,650   
  

 

 

 

Total liabilities and equity component assumed

  146,672   
  

 

 

 

Fair value of net assets acquired

$ 265,611   
  

 

 

 

 

 

39


Table of Contents
(1) Comprise the total fair value of the debt and equity components of Cyan’s convertible notes. For the purpose of pro forma condensed combined financial statements, Ciena does not assume the conversion of the convertible notes.

The final determination of the purchase price allocation will be based on the actual net tangible and intangible assets of Cyan on the closing date of the merger and completion of the valuation of the fair value of such net assets. Ciena anticipates that the ultimate purchase price allocation of balance sheet amounts such as current assets and liabilities, property and equipment, intangible assets and long-term assets and liabilities (including debt) will differ from the preliminary assessment outlined above. Any changes to the preliminary estimates of the fair value of the acquired assets and assumed liabilities will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill.

The compensation expense associated with the portion of the assumed stock options and restricted stock units that are subject to future service requirements have not been included in the above purchase price allocation and have not been included in the unaudited pro forma condensed combined financial statements.

4.    Preliminary Pro Forma Financial Statement Adjustments

Adjustments included in the column under the heading “Adjustments” represent the following:

 

  (a) Represents the estimated cash due to Cyan stockholders in the merger.

 

  (b) To record the difference in book value and fair value of inventory acquired in the merger.

 

  (c) Reflects the preliminary pro forma adjustment to goodwill, calculated as follows:

 

     (in thousands)  

Preliminary purchase price

   $ 265,611   

Less: Fair value of net assets acquired

     (87,116
  

 

 

 

Total estimated goodwill

$ 178,495   
  

 

 

 

 

  (d) Reflects the components of the preliminary estimates of the fair value of intangible assets to be acquired by Ciena at the closing of the merger, which are as follows:

 

     Estimated useful life     

Estimated

fair value

(in thousands)

 

Developed Technology

     5-7 years       $ 77,400   

Trademarks

     3-7 years         3,100   

Customer relationships

     4-7 years         36,800   

Backlog

     3 months         1,700   
     

 

 

 
$ 119,000   
     

 

 

 

 

  (e) Reflects certain transaction costs expected to be incurred.

 

  (f) Reflects the elimination of the outstanding Cyan warrants in the merger. Such warrants will be deemed to have been automatically exercised on a cashless basis immediately prior to the effective time of the merger, with such shares of Cyan common stock exchanged for Ciena shares pursuant to the merger. Also reflects the derecognition of the bifurcated conversion features in Cyan’s convertible notes as a result of Cyan stockholder approval of the NYSE share issuance proposals, which is a condition of Ciena’s obligation to complete the merger.

 

 

40


Table of Contents
  (g) Represents an adjustment to the fair value of the liability component of Cyan’s convertible notes.

 

     (in thousands)  

Fair value of liability portion of convertible note

   $ 49,315   

Less: historical value of liability portion of convertible note

     18,917   
  

 

 

 

Adjustment

$ 30,398   
  

 

 

 

 

  (h) Represents the elimination of historical stockholders’ equity for Cyan and Ciena common stock issued for consideration.

 

    

(in thousands, except

per share amounts)

 

Estimated number of Cyan shares to be acquired

     51,036   

Fixed exchange ratio

     0.224   
  

 

 

 

Equivalent Ciena shares to be issued to Cyan stockholders

  11,432   

Percent to be delivered in the form of shares

  89
  

 

 

 

Ciena shares to be delivered

  10,175   

Closing stock price for Ciena common stock on May 1, 2015

$ 21.29   
  

 

 

 

Estimated equity consideration

$ 216,617   

Plus: estimated fair value of outstanding Cyan vested stock options to be exchanged for Ciena stock options

$ 22,222   
  

 

 

 

Estimated total equity purchase price

$ 238,838   

Plus: historical Cyan stockholders’ deficit

  18,374   

Less: transaction costs expected to be incurred

  (16,000

Plus: fair value of equity portion of long-term debt

  63,335   
  

 

 

 

Pro forma adjustment to stockholders’ equity

$ 304,547   
  

 

 

 

 

  (i) Reflects pro forma adjustments to amortization of acquisition-related intangibles assuming the preliminary estimates of their fair value and estimated weighted average lives as described in Note (d).

 

  (j) Represents (i) the elimination of mark to market changes in the fair value of Cyan’s warrants, as they are automatically exercised on a cashless basis immediately prior to the effective time of the merger, and (ii) the elimination of mark to market changes in the fair value of bifurcated conversion features in Cyan’s convertible notes, as a result of Cyan stockholder approval of the NYSE share issuance proposals, which is a condition of Ciena’s obligation to complete the merger.

 

  (k) Due to valuation allowances on net deferred tax assets for both Ciena and Cyan, the unaudited pro forma condensed combined consolidated statements of operations do not reflect statutory rate tax adjustments for pro forma purposes.

 

 

41


Table of Contents

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following selected unaudited pro forma per share information for the year ended October 31, 2014 and the six month period ended April 30, 2015 reflects the merger as if it had occurred on November 1, 2013. The information in the table is based on, and should be read together with, the historical financial information that Ciena and Cyan have presented in their respective filings with the SEC. See the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus.

The unaudited pro forma combined per share data is presented for illustrative purposes only and are not necessarily indicative of actual or future financial position or results of operations that would have been realized if the proposed merger had been completed as of the dates indicated or will be realized upon the completion of the proposed merger. The summary pro forma information is preliminary, based on initial estimates of the fair value of assets acquired (including intangible assets) and liabilities assumed, and is subject to change as more information regarding the fair values are obtained, which changes could be materially different than the initial estimates.

Neither Ciena nor Cyan declared or paid any dividends during the periods presented.

 

     Year Ended
October 31, 2014
    Six Months
Ended
April 30, 2015
 

CIENA HISTORICAL PER SHARE DATA:

  

 

Basic net income (loss) per common share

   $               (0.38   $               0.02   

Diluted net income (loss) per common and dilutive potential common share

   $ (0.38   $ 0.02   

Book value per share at period end

   $ (0.65   $ 1.18   
     Year Ended
December 31, 2014
    Six Months
Ended
March 31, 2015
 

CYAN HISTORICAL PER SHARE DATA:

  

 

Basic net loss per common share

   $ (1.26   $ (1.43

Diluted net loss per common and dilutive potential common share

   $ (1.26   $ (1.43

Book value per share at period end

   $ 0.63      $ (0.38
     Year Ended
October 31, 2014
    Six Months
Ended
April 30, 2015
 

UNAUDITED PRO FORMA COMBINED CIENA:

  

 

Basic net loss per common share

   $ (0.98   $ (0.27

Diluted net loss per common and dilutive potential common share

   $ (0.98   $ (0.27

Book value per share at period end

     N/A      $ 3.32   
     Year Ended
October 31, 2014
    Six Months
Ended
April 30, 2015
 

EQUIVALENT PRO FORMA COMBINED CYAN:

  

 

Basic net loss per common share

   $ (0.20   $ (0.05

Diluted net loss per common and dilutive potential common share

   $ (0.20   $ (0.05

Book value per share at period end

     N/A      $ 0.66   

 

 

42


Table of Contents

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

Comparative Per Share Market Price Information

Cyan common stock trades on the NYSE under the symbol “CYNI” and Ciena common stock trades on the NYSE under the symbol “CIEN.” The following table presents the closing prices of Cyan common stock and Ciena common stock on May 1, 2015, the last trading day before the public announcement of the merger agreement, and June 24, 2015, the last practicable trading day prior to the date of this proxy statement/prospectus. The table also shows the estimated implied value of the per share merger consideration for each share of Cyan common stock on the relevant date.

 

Date

   Cyan
Closing Price
     Ciena
Closing
Price
     Exchange
Ratio
     Estimated
Equivalent
Per Share
Value(1)
 
           
           

May 1, 2015

$ 3.65    $ 21.29      0.224    $ 4.77   

June 24, 2015

$ 5.57    $ 25.04      0.224    $ 5.61   

 

(1) The implied value of the per share merger consideration for each relevant date is calculated by multiplying the closing price of Ciena common stock on the relevant date by the exchange ratio of 0.224.

The above table shows only historical comparisons. These comparisons may not provide meaningful information to Cyan stockholders in determining whether to adopt the merger agreement. Cyan stockholders are urged to obtain current market quotations for Ciena common stock and Cyan common stock and to review carefully the other information contained in this proxy statement/prospectus or incorporated by reference into this proxy statement/prospectus in considering whether to adopt the merger agreement and vote in favor of the NYSE share issuance proposals. See the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus.

Comparative Stock Prices and Dividends

Cyan’s common stock has traded on the NYSE under the symbol “CYNI” since its initial public offering on May 9, 2013. During fiscal 2013, Ciena’s common stock was traded on the NASDAQ Global Select Market. On December 23, 2013, Ciena transferred the listing of its common stock from the NASDAQ Global Select Market to the NYSE. Ciena common stock trades under the stock symbol “CIEN.”

The following tables show, for the periods indicated, the high and low sale prices per share of Cyan common stock and Ciena common stock, as reported on the NASDAQ Global Select Market or the New York Stock Exchange, as applicable, for the fiscal periods indicated. Cyan and Ciena have not historically paid any dividends on common stock, and Cyan and Ciena do not presently anticipate paying any dividends on their respective common stock in the foreseeable future.

 

 

43


Table of Contents

Cyan’s fiscal year ends on December 31 and Ciena’s fiscal year ends on October 31.

 

     Cyan Common Stock  

Fiscal Quarters

     High          Low    

Fiscal Year 2013

     

Second Quarter (from May 9, 2013)

   $ 15.05       $ 9.50   

Third Quarter

   $ 11.39       $ 7.85   

Fourth Quarter

   $ 10.10       $ 3.61   

Fiscal Year 2014

     

First Quarter

   $ 5.34       $ 3.19   

Second Quarter

   $ 4.74       $ 3.18   

Third Quarter

   $ 4.43       $ 3.00   

Fourth Quarter

   $ 3.40       $ 2.02   

Fiscal Year 2015

     

First Quarter

   $ 4.30       $ 2.27   

Second Quarter (through June 24, 2015)

   $ 5.79       $ 3.62   
     Ciena Common Stock  

Fiscal Quarters

     High          Low    

Fiscal Year 2013

     

First Quarter

   $ 16.48       $ 13.16   

Second Quarter

   $ 17.53       $ 14.32   

Third Quarter

   $ 22.96       $ 14.91   

Fourth Quarter

   $ 27.67       $ 19.92   

Fiscal Year 2014

     

First Quarter

   $ 24.37       $ 20.93   

Second Quarter

   $ 27.16       $ 18.88   

Third Quarter

   $ 22.94       $ 18.00   

Fourth Quarter

   $ 20.98       $ 13.77   

Fiscal Year 2015

     

First Quarter

   $ 20.32       $ 14.69   

Second Quarter

   $ 22.50       $ 17.86   

Third Quarter (through June 24, 2015)

   $ 26.20       $ 20.67   

 

 

44


Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This registration statement on Form S-4, of which this proxy statement/prospectus forms a part, and the documents to which Cyan and Ciena refer you to in this registration statement, of which this proxy statement/prospectus forms a part, as well as oral statements made or to be made by Cyan and Ciena, include certain “forward-looking statements” within the meaning of, and subject to the safe harbor created by, Section 21E of the Exchange Act with respect to the businesses, strategies and plans of Cyan and Ciena, their expectations relating to the merger and their future financial condition and performance. Statements included in or incorporated by reference into this registration statement, of which this proxy statement/prospectus forms a part, that are not historical facts, including statements about the beliefs and expectations of the management of each of Cyan and Ciena, are forward-looking statements. Words such as “believes,” “anticipates,” “estimates,” “expects,” “intends,” “aims,” “potential,” “will,” “would,” “could,” “considered,” “likely,” “estimate” and variations of these words and similar future or conditional expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. While Cyan and Ciena believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the control of Ciena and Cyan. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend upon future circumstances that may or may not occur. Actual results may differ materially from the current expectations of Cyan and Ciena depending upon a number of factors affecting their businesses and risks associated with the successful execution of the merger and the integration and performance of their businesses following the merger. These factors include, but are not limited to, risks and uncertainties detailed in Ciena’s periodic public filings with the SEC, including those discussed in the sections entitled “Risk Factors” in Ciena’s Annual Report on Form 10-K for the fiscal year ended October 31, 2014 and Ciena’s Quarterly Reports on Form 10-Q for the periods ended January 31, 2015 and April 30, 2015 and in Cyan’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and Cyan’s Quarterly Report on Form 10-Q for the period ended March 31, 2015, factors contained or incorporated by reference into such documents and in subsequent filings by Ciena and Cyan with the SEC, and the following factors:

 

    the occurrence of any change, effect, event, occurrence, development, matter, state of facts, series of events or circumstances that could give rise to the termination of the merger agreement, including a termination of the merger agreement under circumstances that could require Cyan to pay a termination fee and expenses to Ciena;

 

    uncertainties related to the timing of the receipt of required regulatory approvals for the merger;

 

    the ability to implement integration plans for the merger and the ability to recognize the anticipated growth and cost savings and benefits of the merger;

 

    the inability to complete the merger due to the failure to obtain the Cyan stockholder approval or the failure to satisfy other conditions to the closing of the merger;

 

    the failure of the merger to close for any other reason;

 

    risks that the merger and the other transactions contemplated by the merger agreement disrupt current plans and operations and the potential difficulties in retention of any members of senior management of Cyan and any other key employees that Ciena is interested in retaining after the closing of the merger;

 

    the outcome of any legal proceedings that have been or may be instituted against Cyan and/or others relating to the merger agreement;

 

    diversion of the attention of Cyan and Ciena management from ongoing business concerns;

 

    limitations placed on the ability of Cyan to operate its business by the merger agreement and the limitations put on Cyan’s ability to pursue alternatives to the merger pursuant to the merger agreement;

 

    the effect of the announcement of the merger on Cyan’s and Ciena’s business relationships, employees, customers, suppliers, vendors, other partners, operating results and businesses generally;

 

45


Table of Contents
    the amount of any costs, fees, expenses, impairments and charges related to the merger;

 

    factors that affect customer demand;

 

    customers’ financial strength;

 

    shortages or changes in availability, or increases in costs of, key supplies;

 

    the market price for Ciena common stock potentially being affected, following the merger, by factors that historically have not affected the market price for Ciena common stock;

 

    the possibility that the expected synergies from the merger will not be realized or will take longer to realize than expected;

 

    changes in tax laws or interpretations that could increase the consolidated tax liabilities of Cyan and Ciena;

 

    competitive pressures in all markets in which Cyan and Ciena operate;

 

    the possibility of Cyan’s directors and officers having interests in the merger that are different from, or in addition to, the interests of Cyan stockholders more generally; and

 

    the possibility of actual results of operations, cash flows and financial position after the merger materially differing from the unaudited pro forma condensed combined financial information contained in this proxy statement/prospectus.

Consequently, all of the forward-looking statements Cyan or Ciena make in this document are qualified by the information contained or incorporated by reference into this proxy statement/prospectus, including, but not limited to (i) the information contained under this heading and (ii) the information discussed under the sections entitled “Risk Factors” in Ciena’s Annual Report on Form 10-K for the fiscal year ended October 31, 2014 and Ciena’s Quarterly Reports on Form 10-Q for the periods ended January 31, 2015 and April 30, 2015 and in Cyan’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and Cyan’s Quarterly Report on Form 10-Q for the period ended March 31, 2015. See the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus.

Neither Ciena nor Cyan is under any obligation, and each expressly disclaim any obligation, to update, alter, or otherwise revise any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise. Persons reading this announcement are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof.

 

46


Table of Contents

RISK FACTORS

By voting in favor of the proposal to adopt the merger agreement, Cyan stockholders will be choosing to invest in Ciena common stock. An investment in Ciena common stock involves a high degree of risk. Before you vote, you should carefully consider the risks described below, those described in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 45 of this proxy statement/prospectus and the other information contained in this proxy statement/prospectus or in the documents of Cyan and Ciena incorporated by reference into this proxy statement/prospectus, particularly the risk factors set forth in the documents of Cyan and Ciena incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus. In addition to the risks set forth below, new risks may emerge from time to time and it is not possible to predict all risk factors, nor can Cyan or Ciena assess the impact of all factors on the merger and the combined company following the merger or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in or implied by any forward-looking statements.

Risks Relating to the Merger

Because the market price of shares of Ciena common stock will fluctuate, you cannot be sure of the market value of the shares of Ciena common stock you will receive in the merger or the amount of cash you will receive in the merger.

Upon completion of the merger, each share of Cyan common stock that you hold will be converted into the right to receive the per share merger consideration having a value at closing of 0.224 shares of Ciena common stock, consisting of: (i) 0.19936 (89% of the aggregate exchange ratio) shares of Ciena common stock (plus cash in lieu of any fractional shares resulting therefrom equal to the product of (A) the fractional share interest to which a stockholder would otherwise be entitled and (B) the volume weighted average price per share of Ciena common stock on the NYSE on the last trading day prior to closing, rounded to the nearest cent), and (ii) an amount of cash, without interest, equal to the product of (A) 0.02464 (11% of the aggregate exchange ratio) multiplied by (B) the volume weighted average price per share of Ciena common stock on the NYSE on the last trading day prior to closing. There will be no adjustment to the per share merger consideration due to changes in the market price of either shares of Cyan common stock or Ciena common stock and the merger agreement does not provide for any price-based termination right. Accordingly, the market value of the shares of Ciena common stock that you will be entitled to receive upon completion of the merger with respect to the stock consideration, and the amount of cash consideration you will receive, will depend on the market value of the shares of Ciena common stock at the time of the completion of the merger and could vary significantly from the market value on the date of this proxy statement/prospectus or the date of the postponed annual meeting. In addition, the market value of the shares of Ciena common stock that you will be entitled to receive in the merger with respect to the stock consideration also will continue to fluctuate after the completion of the merger and you could lose the value of your investment in Ciena common stock. See the section entitled “Comparative Per Share Market Price and Dividend Information” beginning on page 43 of this proxy statement/prospectus.

Such variations could be the result of changes in the business, operations or products of Cyan or Ciena prior to the merger and Ciena following the merger, market assessments of the likelihood that the merger will be completed or the timing of the completion of the merger, regulatory considerations, general market and economic conditions and other factors both within and beyond the control of Ciena or Cyan. Because the date that the merger will be completed will be later than the date of the postponed annual meeting, at the time of the meeting you will not know the value of the merger consideration that you will receive upon completion of the merger.

The market price for Ciena common stock may be affected by factors different from those that historically have affected Cyan common stock.

Upon completion of the merger, Cyan stockholders will become Ciena stockholders. Ciena’s business differs from that of Cyan, and accordingly the results of operations of Ciena will be affected by certain factors that are different from those currently affecting the results of operations of Cyan. For a discussion of the

 

47


Table of Contents

businesses of Ciena and Cyan and of some important factors to consider in connection with those businesses, see the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus for the location of information incorporated by reference into this proxy statement/prospectus.

The shares of Ciena common stock to be received by Cyan stockholders as a result of the merger will have rights different from the shares of Cyan common stock.

Upon consummation of the merger, the rights of Cyan stockholders, who will become Ciena stockholders, will be governed by the charter and bylaws of Ciena. The rights associated with Cyan common stock are different from the rights associated with the Ciena common stock. See the section entitled “Comparison of Stockholders’ Rights” beginning on page 194 of this proxy statement/prospectus for a discussion of these rights.

If the merger does not qualify as a reorganization within the meaning of Section 368(a) of the Code, Cyan stockholders may be subject to U.S. federal income tax on the full value of the merger consideration.

Although Ciena and Cyan intend that the merger and second step merger, considered together as a single integrated transaction for U.S. federal income tax purposes, will qualify as a reorganization within the meaning of Section 368(a) of the Code, it is possible that the Internal Revenue Service may assert that the merger fails to qualify as such. If the Internal Revenue Service were to be successful in such assertion, or if for any other reason the merger were to fail to qualify as a reorganization within the meaning of Section 368(a) of the Code, each U.S. holder (as defined on page 190) of shares of Cyan common stock would recognize gain or loss with respect to its shares of Cyan common stock based on the difference between (i) that U.S. holder’s tax basis in such shares and (ii) the fair market value of the shares of Ciena common stock and cash received.

Unanticipated regulatory actions could prevent, or substantially delay, consummation of the merger.

Under the provisions of the HSR Act, the merger may not be completed until the expiration of a statutory 30 day waiting period, or the early termination of that waiting period, following the parties’ filing of their respective notification and report forms. On May 15, 2015, Cyan and Ciena filed with the FTC and DOJ notification and report forms under the HSR Act. The waiting period under the HSR Act for the proposed merger terminated on June 15, 2015.

Notwithstanding the expiration of the statutory waiting period, at any time before or after completion of the merger, the FTC or DOJ could act under the antitrust laws to prevent a substantial lessening of competition or the creation of a monopoly, including by seeking to enjoin completion of the transaction or seeking divestiture of assets, businesses or product lines of Cyan or Ciena. A delay could, among other things, increase the chance that: an event occurs that constitutes a material adverse effect with respect to Cyan and thereby may cause the failure of a Ciena closing condition; other adverse effects with respect to Cyan could occur, such as the loss of key personnel, potentially affecting the success of the combined entities; or an event could occur that causes a failure of a Cyan closing condition or that adversely impacts the value of Ciena common stock, and thus has a negative impact on the per share merger consideration.

Under the merger agreement, Ciena and Cyan generally must use their respective reasonable best efforts to obtain all regulatory approvals required to complete the merger, including the expiration or early termination of the waiting period under the HSR Act. However, Ciena is not required under the merger agreement to accept or agree to limitations on its right to control or operate its business or assets (including the business or assets of Cyan and its subsidiaries after the effective time) or to agree to sell or otherwise dispose of, hold (through the establishment of a trust or otherwise) or divest itself of all or any portion of its business, assets or operations (including the business, assets or operations of Cyan and its subsidiaries after the effective time) in order to obtain such regulatory approvals, nor is Ciena obligated to engage in litigation with any governmental authorities in order to obtain any regulatory approvals.

 

48


Table of Contents

The closing of the merger is subject to conditions and if these conditions are not satisfied or waived, the merger will not be completed.

The closing of the merger is subject to a number of conditions as set forth in the merger agreement that must be satisfied or waived, including the Cyan stockholder approval of the proposal to adopt the merger agreement, the Cyan stockholder approval of the NYSE share issuance proposals, the expiration or termination of the waiting period applicable to the merger under the HSR Act, the absence of any law, regulation, order, judgment or injunction restraining, enjoining or otherwise prohibiting the closing of the merger, the declaration by the SEC of the effectiveness of the registration statement on Form S-4 filed by Ciena in respect of the shares of Ciena common stock to be issued in the merger, of which this proxy statement/prospectus forms a part, and the approval of the listing on the NYSE of the shares of Ciena common stock to be issued in the merger.

The closing of the merger is also dependent on the accuracy of representations and warranties made by the parties to the merger agreement (subject to customary materiality qualifiers and other customary exceptions) and the performance in all material respects by the parties of obligations imposed under the merger agreement. Under the merger agreement, Ciena and Cyan generally must use their respective reasonable best efforts to obtain all regulatory approvals required to complete the merger, including the expiration or early termination of the waiting period under the HSR Act. However, Ciena is not required under the merger agreement to accept or agree to limitations on its right to control or operate its business or assets (including the business or assets of Cyan and its subsidiaries after the effective time) or to agree to sell or otherwise dispose of, hold (through the establishment of a trust or otherwise) or divest itself of all or any portion of its business, assets or operations (including the business, assets or operations of Cyan and its subsidiaries after the effective time) in order to obtain such regulatory approvals nor is Ciena obligated to engage in litigation with any governmental authorities in order to obtain any regulatory approvals.

For a more complete summary of the conditions that must be satisfied or waived prior to completion of the merger, see the section entitled “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 132 of this proxy statement/prospectus.

There can be no assurance as to whether or when the conditions to the closing of the merger will be satisfied or waived or as to whether or when the merger will be consummated.

Ciena and Cyan will be subject to business uncertainties and certain operating restrictions until consummation of the merger.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Ciena, Cyan or the combined company following the merger. These uncertainties could disrupt the business of Ciena or Cyan and cause customers, suppliers, vendors, partners and others that deal with Ciena and Cyan to defer entering into contracts with Ciena and Cyan or making other decisions concerning Ciena and Cyan or seek to change or cancel existing business relationships with Ciena and Cyan. The uncertainty and difficulty of integration could also cause key employees of Ciena and Cyan to leave their employment. In addition, the merger agreement restricts Cyan from making certain acquisitions and taking other specified actions until the merger occurs without the consent of Ciena. These restrictions may prevent Cyan from pursuing attractive business opportunities that may arise prior to the completion of the merger. See the section entitled “The Merger Agreement—Conduct of Business Prior to Effective Time” beginning on page 122 of this proxy statement/prospectus for a description of the restrictive covenants to which Cyan is subject.

The merger agreement may be terminated in accordance with its terms and the merger may not be consummated.

Either Cyan or Ciena may terminate the merger agreement under certain circumstances, including, among other reasons, if the merger is not completed by November 30, 2015. In addition, if the merger agreement is terminated under certain circumstances specified in the merger agreement, Cyan may be required to pay Ciena a termination fee of $15.0 million, including in the event Cyan terminates the merger agreement to enter into an

 

49


Table of Contents

agreement with respect to a superior proposal. In certain other circumstances, Cyan may be obligated to reimburse Ciena for its transaction expenses up to $2.0 million. See the section entitled “The Merger Agreement—Termination of the Merger Agreement” beginning on page 134 of this proxy statement/prospectus and the section entitled “The Merger Agreement—Termination Fees and Expenses” beginning on page 135 of this proxy statement/prospectus for a more complete discussion of the circumstances under which the merger agreement could be terminated and when the termination fee and expense payment may be payable by Cyan.

The merger agreement contains restrictions on the ability of Cyan to pursue other alternatives to the merger.

The merger agreement contains non-solicitation provisions that, subject to limited exceptions, restrict the ability of Cyan to solicit, initiate, knowingly encourage, or take any other action to knowingly facilitate any inquiries regarding any third party offer or proposal that might reasonably be expected to lead to a takeover proposal. Also, subject to limited exceptions, consistent with applicable law, the merger agreement provides that the Cyan board will not withdraw, publicly propose to withdraw or modify in a manner adverse to Ciena its recommendations that Cyan stockholders vote in favor of the proposal to adopt the merger agreement and the NYSE share issuance proposals, and in specified circumstances Ciena has a right to negotiate with Cyan in order to match any competing takeover proposals that may be made. In addition, Ciena and certain Cyan officers and directors and affiliated stockholders beneficially owning approximately 40% of Cyan common stock outstanding as of the record date have entered into voting agreements. Even if the Cyan board of directors makes an adverse recommendation change with respect to an “intervening event”, such stockholders will still be obligated to collectively vote in favor of the merger an aggregate number of shares equal to 35% of the total voting power of the outstanding Cyan shares, and the number of shares in excess of that percentage shall be voted on a pro rata basis on the merger and the NYSE share issuance proposals in a manner equivalent to the proportion of votes “FOR” and “AGAINST”, or abstain, cast by all of Cyan’s other stockholders on these matters.

Although the Cyan board is permitted to take certain actions in response to a superior proposal or a takeover proposal that is reasonably likely to result in a superior proposal if it determines that the failure to do so would be reasonably expected to result in a violation of its fiduciary duties, doing so in specified situations could require Cyan to pay to Ciena a termination fee of $15.0 million. See the section entitled “The Merger Agreement—No Solicitation or Negotiation of Takeover Proposals” beginning on page 125 of this proxy statement/prospectus and the section entitled “The Merger Agreement—Termination Fees and Expenses” beginning on page 135 of this proxy statement/prospectus for a more complete discussion of these restrictions and consequences.

Such provisions could discourage a potential acquiror that might have an interest in making a proposal from considering or proposing any such acquisition, even if it were prepared to pay consideration with a higher value than that to be paid in the merger. There also is a risk that the requirement to pay the termination fee or expense payment to Ciena in certain circumstances may result in a potential acquiror proposing to pay a lower per share price to acquire Cyan than it might otherwise have proposed to pay.

The termination of the merger agreement could negatively impact Cyan.

If the merger is not completed for any reason, including as a result of Cyan stockholders failing to adopt the merger agreement, the ongoing business of Cyan may be adversely affected and, without realizing any of the benefits of having completed the merger, Cyan would be subject to a number of risks, including the following:

 

    Cyan may experience negative reactions from the financial markets, including negative impacts on its stock price;

 

    Cyan may experience negative reactions from its customers and employees;

 

    Cyan will be required to pay its own expenses relating to the merger, whether or not the merger is completed;

 

50


Table of Contents
    the merger agreement places certain restrictions on the conduct of Cyan’s business prior to completion of the merger and such restrictions, the waiver of which is subject to the consent of Ciena (in certain cases, not to be unreasonably withheld, conditioned or delayed), may prevent Cyan from making certain acquisitions or taking certain other specified actions during the pendency of the merger (see the section entitled “The Merger Agreement—Conduct of Business Prior to Effective Time” beginning on page 122 of this proxy statement/prospectus for a description of the restrictive covenants applicable to Cyan); and

 

    matters relating to the merger (including integration planning) will require substantial commitments of time and resources by Cyan management, which would otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to Cyan as an independent company.

If the merger agreement is terminated and the Cyan board seeks another merger or business combination, Cyan stockholders cannot be certain that Cyan will be able to find a party willing to offer equivalent or more attractive consideration than the per share merger consideration Ciena has agreed to provide in the merger. If the merger agreement is terminated under certain circumstances, Cyan may be required to pay a termination fee of $15.0 million, depending on the circumstances surrounding the termination. Cyan may be required to reimburse Ciena for its expenses, up to an amount of $2.0 million, if the merger agreement is terminated in certain specified circumstances. See the section entitled “The Merger Agreement—Termination Fees and Expenses” beginning on page 135 of this proxy statement/prospectus.

Directors and officers of Cyan may have interests in the merger that are different from those of Cyan stockholders generally.

In considering the recommendation of the Cyan board to adopt the merger agreement, Cyan stockholders should be aware that some of the Cyan directors and executive officers have interests in the merger and have arrangements that are different from, or in addition to, those of Cyan stockholders generally, including, but not limited to, the following:

 

    Cyan has in place severance and change in control agreements with certain employees, including its executive officers, entitling them to certain payments, vesting acceleration and other specified benefits in connection with a termination of employment in connection with a change in control of Cyan;

 

    Ciena has entered into term sheets with certain employees, including executive officers, describing post-closing employment and compensation arrangements with those employees;

 

    directors and executive officers of Cyan may be entitled to vesting acceleration upon specified circumstances and in connection with a change in control under various plans, equity awards and agreements;

 

    in connection with the merger, Ciena will assume outstanding options to purchase shares of Cyan common stock and restricted stock units held by such directors and executive officers;

 

    certain executive officers and funds affiliated with a director of Cyan will be entitled to cash and shares of stock, if any, issuable on conversion of the convertible notes and upon exercise of the warrants held by such affiliated holders; and

 

    directors and officers will be indemnified by Ciena for a period of six years following completion of the merger with respect to acts or omissions by them in their capacities as such prior to the effective time of the merger.

The Cyan board was aware of and considered these interests when it declared advisable the merger agreement and the consummation of the transactions contemplated thereby, determined that the terms of the merger agreement and the transactions contemplated thereby were fair to, and in the best interests of, Cyan and its stockholders, and recommended that Cyan stockholders adopt the merger agreement. See the section entitled “Interests of Cyan’s Directors and Executive Officers in the Merger” beginning on page 141 of this proxy statement/prospectus.

 

51


Table of Contents

The unaudited pro forma condensed combined financial statements included in this proxy statement/prospectus are presented for illustrative purposes only and the actual financial condition and results of operations of Ciena following the merger may differ materially.

The unaudited pro forma condensed combined financial statements contained in this proxy statement/prospectus are presented for illustrative purposes only, are based on various adjustments, assumptions and preliminary estimates and may not be an indication of Ciena’s financial condition or results of operations following the merger for several reasons. The actual financial condition and results of operations of Ciena following the merger may not be consistent with, or evident from, these unaudited pro forma condensed combined financial statements. In addition, the assumptions used in preparing the unaudited pro forma financial information may not prove to be accurate, and other factors may affect Ciena’s financial condition or results of operations following the merger. Any potential decline in Ciena’s financial condition or results of operations may cause significant variations in the stock price of Ciena.

Lawsuits have been filed against Ciena and Cyan challenging the merger, and one or more adverse rulings may prevent the merger from being completed.

On May 15, 2015, two putative class action lawsuits in connection with the merger were filed in the Court of Chancery of the State of Delaware, naming Cyan, Ciena, Merger Sub and members of the Cyan board as defendants. The cases were captioned Luvishis v. Cyan, Inc., et al., C.A. No. 11027-CB, and Poll v. Cyan, Inc., et al., C.A. No. 11028-CB. On May 20, 2015, a third putative class action lawsuit was filed in the Court of Chancery of the State of Delaware under the caption Canzano v. Floyd, et al., Case No. 11052-CB, naming Ciena, Merger Sub and members of the Cyan board as defendants. On May 27, 2015, a fourth putative class action lawsuit was filed in the Court of Chancery of the State of Delaware under the caption Kassis v. Cyan, Inc., et al., Case No. 11069-CB, naming Cyan, Ciena, Merger Sub and members of the Cyan board as defendants. On June 3, 2015, a fifth putative class action lawsuit was filed in the Court of Chancery of the State of Delaware under the caption Fenske v. Cyan, Inc., et al., Case No. 11090-CB, naming Cyan, Ciena, Merger Sub and members of the Cyan board as defendants. On June 23, 2015, the Court entered an order consolidating each of the foregoing lawsuits and providing that the consolidated case shall be captioned In re Cyan, Inc. Stockholder Litigation, Consolidated Case No. 11027-CB. The Court further appointed co-lead plaintiffs and co-lead counsel and directed the plaintiffs to file a consolidated amended complaint. Each of the complaints generally alleges, among other things, that members of the Cyan board breached their fiduciary duties by failing to take steps to maximize the value of Cyan to its public stockholders, taking steps to avoid competitive bidding or deter superior proposals, failing to properly value Cyan and obtain the best exchange ratio, and ignoring or not protecting against conflicts of interest. The complaints also allege that Cyan, Ciena and Merger Sub have aided and abetted the Cyan board members’ breaches of their fiduciary duties. The actions seek (i) preliminary and permanent injunctive relief enjoining Cyan and Ciena from consummating the merger; (ii) in the event the merger is consummated prior to the entry of the Court’s final judgment, rescission of the merger or awarding rescissory damages; and (iii) recovery through an accounting by the defendants of all damages caused by them as a result of the alleged breaches of fiduciary duties. The actions also seek to recover costs, including attorneys’ fees and experts’ fees. The consolidated lawsuit is in a preliminary stage. Additional lawsuits may be filed against Cyan, Ciena, Merger Sub and their respective directors and officers alleging similar or additional claims. The outcome of the putative class action lawsuit described above or any other lawsuit that may be brought challenging the merger is uncertain. An adverse judgment for monetary damages could have an adverse effect on the operations and liquidity of Cyan. A preliminary injunction could delay or jeopardize the completion of the merger, and an adverse judgment granting permanent injunctive relief could indefinitely enjoin completion of the merger.

Both Cyan and Ciena management believe the claims made in the consolidated lawsuit are without merit.

See the section entitled “The Merger—Litigation Related to the Merger” beginning on page 114 of this proxy statement/prospectus for more information about litigation related to the merger.

 

52


Table of Contents

One of the conditions to the closing of the merger is that no governmental entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law, injunction, order or other judgment which is in effect and restrains, enjoins or otherwise prohibits the closing of the merger. Therefore, if the plaintiffs in this action or in any additional lawsuit that may be filed secure injunctive relief or other relief prohibiting, delaying or otherwise adversely affecting the parties’ ability to complete the merger, then such injunctive or other relief may prevent the merger from becoming effective within the expected timeframe or at all.

Cyan stockholders will have less influence, as a group, as stockholders of Ciena than as stockholders of Cyan.

Immediately after completion of the merger, former Cyan stockholders, who collectively own 100% of Cyan, will own approximately 8.2% of outstanding Ciena common stock, based on the number of shares of Cyan common stock and the number of shares of Ciena common stock outstanding as of June 24, 2015, the latest practicable date prior to the date of this proxy statement/prospectus. Consequently, Cyan stockholders, as a group, will exercise less influence over the management and policies of Ciena than they currently may have over the management and policies of Cyan.

Risks Relating to the Combined Company Upon Completion of the Merger

Ciena may fail to realize the anticipated benefits of the merger.

The success of the merger will depend on, among other things, Ciena’s ability to combine its business with that of Cyan in a manner that facilitates growth opportunities and realizes anticipated growth and cost savings. Ciena believes that the merger will provide an opportunity for long-term revenue growth based on Cyan’s software capabilities as well as near term value in Cyan’s packet-optical hardware business. The addition of Cyan’s technology also is expected to accelerate the availability of Ciena to offer a complete on-demand solution for virtualized networks and services in an open ecosystem.

However, Ciena must successfully combine the businesses of Ciena and Cyan in a manner that permits these benefits to be realized. In addition, Ciena must achieve the anticipated growth and cost savings without adversely affecting current revenues and investments in future growth. If Ciena is not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully, or at all, or may take longer to realize than expected.

The failure to integrate successfully the business and operations of Cyan in the expected time frame may adversely affect Ciena’s future results.

Historically, Ciena and Cyan have operated as independent companies, and they will continue to do so until the completion of the merger. There can be no assurances that their businesses can be integrated successfully. It is possible that the integration process could result in the loss of key Ciena or Cyan employees, the loss of customers, the disruption of either company’s or both companies’ ongoing businesses or in unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. See the risk factors entitled “—Ciena may be unable to retain Cyan personnel successfully after the merger is completed” and “—Ciena and Cyan will be subject to business uncertainties and certain operating restrictions until consummation of the merger” above. Specifically, the following issues, among others, must be addressed in integrating the operations of Ciena and Cyan in order to realize the anticipated benefits of the merger so the combined company performs as expected:

 

    combining the companies’ operations and corporate functions;

 

    combining the businesses of Ciena and Cyan and meeting the capital requirements of the combined company, in a manner that permits Ciena to achieve the cost savings or revenue synergies anticipated to result from the merger, the failure of which would result in the anticipated benefits of the merger not being realized in the time frame currently anticipated or at all;

 

    integrating the companies’ technologies and unifying the hardware and software solutions offerings and services available to customers;

 

53


Table of Contents
    identifying and eliminating redundant and underperforming functions and assets;

 

    harmonizing the companies’ operating practices, employee related policies and compensation programs, internal controls and other policies, procedures and processes;

 

    maintaining existing agreements with customers, distributors and vendors and avoiding delays in entering into new agreements with prospective customers, distributors and vendors;

 

    addressing possible differences in business backgrounds, corporate cultures and management philosophies;

 

    consolidating the companies’ administrative information technology and business systems infrastructure;

 

    coordinating distribution and marketing efforts; and

 

    effecting actions that may be required in connection with obtaining regulatory approvals.

In addition, at times the attention of certain members of either company’s or both companies’ management and resources may be focused on completion of the merger and the integration of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt each company’s ongoing business and the business of the combined company.

Combining the businesses of Ciena and Cyan may be more difficult, costly or time-consuming than expected, which may adversely affect Ciena’s business results and negatively affect the value of Ciena common stock following the merger.

Ciena and Cyan have entered into the merger agreement because each believes that the merger will be in the best interests of its stockholders and that combining the businesses of Ciena and Cyan will produce benefits and cost savings. If Ciena is not able to successfully combine the businesses of Ciena and Cyan in an efficient and effective manner, the anticipated benefits and cost savings of the merger may not be realized fully, or at all, or may take longer to realize than expected, and the value of Ciena common stock may be affected adversely.

An inability to realize the full extent of the anticipated benefits of the merger and the other transactions contemplated by the merger agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, level of expenses and operating results of Ciena, which may adversely affect the value of Ciena common stock after the completion of the merger.

In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. Actual growth and cost savings, if achieved, may be lower than what Ciena expects and may take longer to achieve than anticipated. If Ciena is not able to adequately address integration challenges, Ciena may be unable to successfully integrate Ciena’s and Cyan’s operations or to realize the anticipated benefits of the integration of the two companies.

Ciena and Cyan will incur significant transaction and merger-related costs in connection with the merger.

Ciena and Cyan have incurred and expect to incur a number of non-recurring costs associated with the merger. These transaction costs and expenses include fees paid to financial, legal and accounting advisors, filing fees, printing expenses and other related charges. Some of these costs are payable by Ciena and Cyan regardless of whether the merger is completed. Ciena currently estimates the aggregate amount of its transaction expenses to be $6 million, and Cyan currently estimates the aggregate amount of its transaction expenses to be $10 million. Ciena also expects to incur additional integration or restructuring costs such as facilities and systems consolidation costs, severance and other potential employment-related costs, including payments that may be made to certain Cyan executives. There are also a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the merger and the integration of the two

 

54


Table of Contents

companies’ businesses. While both Ciena and Cyan have assumed that a certain level of expenses would be incurred in connection with the merger and the other transactions contemplated by the merger agreement, there are many factors beyond their control that could affect the total amount or the timing of the integration and implementation expenses.

There may also be additional unanticipated significant costs in connection with the merger that Ciena may not recoup. These costs and expenses could reduce the realization of efficiencies, strategic benefits and additional income Ciena expects to achieve from the merger. Although Ciena expects that these benefits will offset the transaction expenses and implementation costs over time, this net benefit may not be achieved in the near term or at all.

Third parties may terminate or alter existing contracts or relationships with Cyan or Ciena.

Cyan has contracts with customers, suppliers, vendors, landlords, licensors and other business partners that may require Cyan to obtain consent from these other parties in connection with the merger and the second step merger. If these consents cannot be obtained, Cyan may suffer a loss of potential future revenue and may lose rights that are material to its business and the business of the combined company. In addition, third parties with whom Cyan or Ciena currently have relationships may terminate or otherwise reduce the scope of their relationship with either party in anticipation of the merger. Any such disruptions could limit Ciena’s ability to achieve the anticipated benefits of the merger. The adverse effect of such disruptions could also be exacerbated by a delay in the completion of the merger or the termination of the merger agreement.

Ciena may be unable to retain Cyan personnel successfully after the merger is completed.

The success of the merger will depend in part on Ciena’s ability to retain the talents and dedication of key professionals currently employed by Cyan. It is possible that these employees may decide not to remain with Cyan while the merger is pending or with the combined company after the merger is consummated. If key employees terminate their employment, or if an insufficient number of employees is retained to maintain effective operations, the combined company’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating Cyan to hiring suitable replacements, all of which may cause the combined company’s business to suffer. In addition, Ciena and Cyan may not be able to locate suitable replacements for any key employees that leave either company or offer employment to potential replacements on reasonable terms.

Risks Relating to Ciena’s Business

You should read and consider risk factors specific to Ciena’s business that will also affect the combined company after the merger. These risks are described in the sections entitled “Risk Factors” in Ciena’s Annual Report on Form 10-K for the fiscal year ended October 31, 2014, Ciena’s Quarterly Reports on Form 10-Q for the periods ended January 31, 2015 and April 30, 2015 and in other documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus for the location of information incorporated by reference into this proxy statement/prospectus.

Risks Relating to Cyan’s Business

You should read and consider risk factors specific to Cyan’s business that will also affect the combined company after the merger. These risks are described in the sections entitled “Risk Factors” in Cyan’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, Cyan’s Quarterly Report on Form 10-Q for the period ended March 31, 2015 and in other documents incorporated by reference into this proxy statement/prospectus and in other documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus for the location of information incorporated by reference into this proxy statement/prospectus.

 

55


Table of Contents

INFORMATION ABOUT THE POSTPONED ANNUAL MEETING

General

This proxy statement/prospectus is being provided to the stockholders of Cyan as part of a solicitation of proxies by the Cyan board for use at the postponed annual meeting to be held at the time and place specified below, and at any adjournment or postponement thereof. This proxy statement/prospectus provides stockholders of Cyan with the information they need to know to be able to vote or instruct their vote to be cast at the postponed annual meeting.

Date, Time and Place

The postponed annual meeting will be held at Cyan’s headquarters, located at 1383 N. McDowell Blvd., Suite 300, Petaluma, California 94954, on July 31, 2015, at 8:00 a.m., local time.

Purpose of the Postponed Annual Meeting

At the postponed annual meeting, Cyan stockholders will be asked to consider and vote on:

 

    a proposal to adopt the merger agreement;

 

    the election of three nominees for Class II directors to hold office until the 2018 annual meeting of stockholders or until their successors are duly elected and qualified, subject to earlier resignation or removal;

 

    the approval, as required by NYSE Listed Company Rule 312.03(c), certain issuances of Cyan common stock in excess of 20% of Cyan’s outstanding shares upon conversion of the convertible notes, and exercise of related warrants issued in December 2014;

 

    the approval, as required by NYSE Listed Company Rule 312.03(b), of certain issuances of Cyan common stock to certain affiliated holders upon conversion of the convertible notes and exercise of related warrants issued in December 2014 which, together with the immediately preceding proposal we refer to as the NYSE share issuance proposals;

 

    the ratification of the selection by the audit committee of the Cyan board of Ernst & Young LLP as Cyan’s independent registered public accounting firm for Cyan’s fiscal year ending December 31, 2015;

 

    a proposal to approve the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement or the NYSE share issuance proposals; and

 

    any other business that may properly come before the meeting.

Recommendations of the Cyan Board

After careful consideration, the Cyan board has unanimously approved the merger agreement, the merger and all of the other transactions contemplated by the merger agreement, declared that it is in the best interests of Cyan and its stockholders to enter into the merger agreement and consummate the merger and all of the other transactions contemplated by the merger agreement, directed that adoption of the merger agreement be submitted to a vote at a meeting of the Cyan stockholders, and recommended that the Cyan stockholders vote to adopt the merger agreement. ACCORDINGLY, THE CYAN BOARD UNANIMOUSLY RECOMMENDS THAT CYAN STOCKHOLDERS VOTE “FOR” THE PROPOSAL TO ADOPT THE MERGER AGREEMENT.

The Cyan board also unanimously recommends that the Cyan stockholders vote “FOR” the NYSE share issuance proposals, “FOR” the nominees for election as Class II directors to the Cyan board, “FOR”

 

56


Table of Contents

the ratification of the appointment of Ernst & Young LLP as Cyan’s independent registered public accounting firm for the fiscal year ending December 31, 2015, and “FOR” the approval of the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement or the NYSE share issuance proposals.

Record Date; Stockholders Entitled to Vote

The Cyan board has fixed the close of business on June 25, 2015 as the record date for determination of Cyan stockholders entitled to receive notice of, and to vote at, the postponed annual meeting or any adjournments or postponements thereof. Only holders of record of issued and outstanding Cyan common stock at the close of business on the record date are entitled to receive notice of, and to vote at, the postponed annual meeting or any adjournments or postponements thereof.

At the close of business on the record date, there were 49,311,592 shares of Cyan common stock issued and outstanding and entitled to vote at the postponed annual meeting. Cyan stockholders are entitled to one vote for each share of Cyan common stock they owned as of the close of business on the record date.

Voting by Cyan’s Directors and Executive Officers

At the close of business on the record date, directors and executive officers of Cyan and their affiliates were entitled to vote approximately 24,018,189 shares of Cyan common stock, or approximately 45.0% of the shares of Cyan common stock outstanding on that date. Certain Cyan officers and directors and affiliated stockholders, including investment funds affiliated with certain directors, have entered into voting agreements that obligate them to vote “FOR” the proposal to adopt the merger agreement and “FOR” the NYSE share issuance proposals. Additionally, Cyan currently expects that the Cyan directors and executive officers will vote their shares “FOR” each of the other proposals before the postponed annual meeting, although none of them is obligated to do so.

Quorum

The presence, in person or by proxy, of a majority of all issued and outstanding shares of Cyan common stock entitled to vote at the postponed annual meeting will constitute a quorum. The shares subject to a proxy that are not being voted on a particular matter because of either stockholder withholding or a broker non-vote will count for purposes of determining the presence of a quorum. Abstentions are also counted in the determination of a quorum. At any adjourned meeting at which a quorum shall be present, any business may be transacted that might have been transacted at the original meeting.

Required Vote

Proposal No. 1: The approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Cyan common stock entitled to vote on the matter at the postponed annual meeting. Because the affirmative vote required to approve the proposal to adopt the merger agreement is based upon the total number of outstanding shares of Cyan common stock entitled to vote on the matter at the postponed annual meeting, if you fail to submit a proxy or vote in person at the postponed annual meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. Stockholders may vote “FOR”, “AGAINST” or “ABSTAIN” on the approval of the proposal to adopt the merger agreement

Proposal No. 2: The election of directors requires a plurality vote of the shares of common stock voted at the meeting. “Plurality” means that the individuals who receive the largest number of votes cast “FOR” are elected as directors. As a result, any shares not voted “FOR” a particular nominee (whether as a result of stockholder withholding or a broker non-vote) will not be counted in such nominee’s favor and will have no effect on the outcome of the election. Stockholders may vote “FOR” or “WITHHOLD” on each of the nominees for election as a director.

 

57


Table of Contents

Proposal No. 3: Under the Cyan bylaws, the approval of certain issuances of Cyan common stock in excess of 20% of Cyan’s outstanding shares upon conversion of the convertible notes and exercise of related warrants issued in December 2014 must receive the affirmative vote of a majority of the shares present or represented by proxy at the meeting and entitled to vote on the proposal at the meeting. Abstentions will be treated as present at the meeting for purposes of establishing a quorum. Under the applicable NYSE stockholder approval policy, approval of this proposal requires the affirmative vote of a majority of votes cast on the proposal at the meeting. Because under this policy abstentions are counted as “votes cast” for purposes of determining whether a majority of “votes cast” are in favor of the proposal, the requirements for approval under the bylaws and the NYSE policy are equivalent. Therefore, abstentions will have the same effect as a vote “AGAINST” the proposal in determining whether the proposal has received the requisite number of affirmative votes. Broker non-votes, if any, will have no effect on the outcome of this proposal. Stockholders may vote “FOR”, “AGAINST” or “ABSTAIN” on the approval of certain issuances of Cyan common stock in excess of 20% of Cyan’s outstanding shares.

Proposal No. 4: Under the Cyan bylaws, the approval of certain issuances of Cyan common stock to certain affiliated holders upon conversion of the convertible notes and exercise of related warrants issued in December 2014 must receive the affirmative vote of a majority of the shares present or represented by proxy at the meeting and entitled to vote on the proposal at the meeting. Abstentions will be treated as present at the meeting for purposes of establishing a quorum. Under the applicable NYSE stockholder approval policy, approval of this proposal requires the affirmative vote of a majority of votes cast on the proposal at the meeting. Because under this policy abstentions are counted as “votes cast” for purposes of determining whether a majority of “votes cast” are in favor of the proposal, the requirements for approval under the bylaws and the NYSE policy are equivalent. Therefore, abstentions will have the same effect as a vote “AGAINST” the proposal in determining whether the proposal has received the requisite number of affirmative votes. Broker non-votes, if any, will have no effect on the outcome of this proposal. Stockholders may vote “FOR”, “AGAINST” or “ABSTAIN” on the approval of certain issuances of Cyan common stock to certain affiliated holders.

Proposal No. 5: The ratification of the appointment of Ernst & Young LLP as Cyan’s independent registered public accounting firm for Cyan’s fiscal year ending December 31, 2015 must receive the affirmative vote of a majority of the shares present in person or by proxy at the meeting and entitled to vote thereon to be approved. Abstentions will have the same effect as a vote “AGAINST” the proposal. Broker non-votes, if any, will have no effect on the outcome of this proposal. Stockholders may vote “FOR”, “AGAINST” or “ABSTAIN” on the ratification of Ernst & Young LLP.

Proposal No. 6: The approval of the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement or the NYSE share issuance proposals, must receive the affirmative vote of a majority of the shares present in person or by proxy at the meeting and entitled to vote thereon to be approved. Abstentions will have the same effect as a vote “AGAINST” the proposal. Broker non-votes, if any, will have no effect on the outcome of this proposal. Stockholders may vote “FOR”, “AGAINST” or “ABSTAIN” on the approval of the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies.

Failure to Vote, Broker Non-Votes and Abstentions

Except with respect to the sole “routine” matter being voted on at the postponed annual meeting—the proposal to ratify the appointment of Ernst & Young LLP (Proposal No. 5)—your bank, brokerage firm or other nominee will only be permitted to vote your shares of Cyan common stock if you instruct your bank, brokerage firm or other nominee how to vote. You should follow the procedures provided by your bank, brokerage firm or other nominee regarding the voting of your shares of Cyan common stock.

In accordance with the rules of the NYSE, banks, brokerage firms and other nominees who hold shares of Cyan common stock in street name for their customers have authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms and other nominees are

 

58


Table of Contents

precluded from exercising their voting discretion with respect to non-routine matters, such as the proposal to adopt the merger agreement and the NYSE share issuance proposals. As a result, absent specific instructions from the beneficial owner of such shares, banks, brokerage firms and other nominees are not empowered to vote such shares, which we refer to as a broker non-vote. The effect of not instructing your broker how you wish your shares to be voted will be the same as a vote “AGAINST” the proposal to adopt the merger agreement, but will not be counted as “FOR” or “AGAINST” or have an effect on the NYSE share issuance proposals or any other proposal before the postponed annual meeting.

Because the approval and adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Cyan common stock entitled to vote on the matter at the postponed annual meeting, abstentions will be the same as a vote “AGAINST” the proposal to adopt the merger agreement. Under applicable NYSE rules, abstentions are counted as “votes cast” for purposes of determining whether a majority of “votes cast” are in favor of the NYSE share issuance proposals. Abstentions will therefore have the same effect as a vote “AGAINST” the NYSE share issuance proposals. Abstentions will also be considered as representing shares present at the meeting and entitled to vote, and therefore will be the same as a vote “AGAINST” the other proposals requiring approval by a majority of shares present and entitled to vote at the meeting.

How to Submit Your Proxy

Registered stockholders may submit a proxy (i) through the Internet by logging onto the website indicated on the enclosed proxy card and following the prompts using the control number located on the proxy card; (ii) by telephone (from the United States, Puerto Rico and Canada) using the toll-free telephone number listed on the enclosed proxy card; or (iii) by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If your shares are held in the name of a bank, broker or other nominee, follow the instructions you receive from your nominee on how to vote your shares. Registered stockholders who attend the postponed annual meeting may vote their shares personally even if they previously have submitted a proxy.

Voting in Person

All stockholders must have a government-issued picture identification to attend the postponed annual meeting. Stockholders may obtain directions to Cyan’s headquarters, located at 1383 N. McDowell Blvd., Suite 300, Petaluma, California 94954, where the postponed annual meeting will be held, by writing to Cyan, Inc., Attention: Corporate Secretary, 1383 N. McDowell Blvd., Suite 300, Petaluma, California 94954. Admission to the postponed annual meeting will be on a first-come, first-served basis.

Voting of Proxies

When you provide your proxy, the shares of Cyan common stock represented by the proxy will be voted in accordance with your instructions. If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: “FOR” the proposal to adopt the merger agreement; “FOR” the nominees for election as Class II directors to the Cyan board; “FOR” the approval of the NYSE share issuance proposals; “FOR” the ratification of the appointment of Ernst & Young LLP as Cyan’s independent registered public accounting firm for the fiscal year ending December 31, 2015; and “FOR” the approval of the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies in favor of the adoption of the merger agreement or the NYSE share issuance proposals.

Your vote is important. Accordingly, please submit your proxy promptly by telephone, by internet or by mail, whether or not you plan to attend the postponed annual meeting in person.

Revocation of Proxies

You may revoke your proxy at any time before it is exercised in any one of three ways: (i) by giving written notice to the Corporate Secretary of Cyan, (ii) by submitting a subsequently dated and properly signed proxy card

 

59


Table of Contents

or submitting a later dated proxy through the Internet or by phone or (iii) by attending the postponed annual meeting and revoking the proxy. Your attendance at the postponed annual meeting will not by itself revoke your proxy. Written notices of revocation and other communications with respect to the revocation of proxies should be addressed as follows:

Cyan, Inc.

Attention: Corporate Secretary

1383 N. McDowell Blvd.

Suite 300

Petaluma, California 94954

Please note that if your shares are held in the name of a broker, bank, trust company or other nominee, you may change your voting instructions by submitting new voting instructions to your broker, bank, trust company or other nominee in accordance with its established procedures.

Solicitation of Proxies

Directors, present and former officers and other employees of Cyan may solicit proxies by telephone, facsimile or mail, or by meetings with stockholders or their representatives. Cyan will reimburse brokers, banks or other custodians, nominees and fiduciaries for their charges and expenses in forwarding proxy material to beneficial owners. Cyan has engaged Okapi to solicit proxies for the postponed annual meeting for a fee not to exceed $8,500 and an additional fee of $5.75 per incoming and outgoing telephone contact and $5.50 per telephonic vote received plus the payment of certain out of pocket expenses. All expenses of solicitation of proxies will be borne by Cyan.

Adjournments

The postponed annual meeting may adjourn to reconvene at the same or some other place. Under the Cyan bylaws, the chairman of the postponed annual meeting has the authority to adjourn the meeting if a quorum is not present. In addition, Cyan is seeking stockholder approval to adjourn the meeting if Cyan reasonably believes that it will not receive proxies sufficient to obtain stockholder approval of the adoption of the merger agreement or the NYSE share issuance proposals (See “Proposal No. 6—Adjournment of the Postponed Annual Meeting” on page 165). Notice of any adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, Cyan may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Proposal No. 1—Adoption of the Merger Agreement

This proxy statement/prospectus is being furnished to you as a stockholder of Cyan as part of the solicitation of proxies by the Cyan board for use at the postponed annual meeting to consider and vote upon a proposal to adopt the merger agreement, which is attached as Annex A to this proxy statement/prospectus.

The merger between Merger Sub and Cyan cannot be completed without the approval of the proposal to adopt the merger agreement by the affirmative vote of the holders of a majority of the outstanding shares of Cyan common stock entitled to vote on the matter at the postponed annual meeting. If you do not vote, the effect will be the same as a vote “AGAINST” the proposal to adopt the merger agreement.

The Cyan board, after due and careful discussion and consideration, has (i) approved and declared advisable the merger agreement, the merger and all of the other transactions contemplated by the merger agreement and (ii) declared that it is in the best interests of Cyan and its stockholders that Cyan enter into the merger agreement and consummate the merger and all of the other transactions contemplated by the merger agreement.

 

60


Table of Contents

The Cyan board accordingly unanimously recommends that Cyan stockholders vote “FOR” the proposal to adopt the merger agreement.

Proposal No. 2—Election of Class II Directors

The Cyan board is composed of seven members, who are divided into three staggered classes of directors. At each postponed annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring. Upon recommendation of its nominating and governance committee, the Cyan board has nominated the following candidates for re-election as Class II directors at this postponed annual meeting for a three-year term expiring in 2018: Promod Haque, Michael L. Hatfield and M. Niel Ransom. All director nominees attended at least 75% of the total number of meetings of the Cyan board and the committees of which he was a member. For detailed biographical information, please see beginning on page 151.

The Cyan board recommends a vote “FOR” the election of Promod Haque, Michael L. Hatfield and M. Niel Ransom.

Proposal No. 3—Approval of Certain Issuances of Cyan Common Stock upon Conversion of Cyan’s Convertible Notes and Exercise of the Related Warrants

In December 2014, Cyan issued $50.0 million aggregate principal amount of 8.0% convertible senior secured notes due 2019 and related warrants to purchase up to an aggregate of 11.25 million shares of Cyan common stock in a private placement. Since Cyan common stock is listed on the NYSE, Cyan is subject to NYSE Listed Company Rule 312.03(c), which requires stockholder approval prior to the issuance of securities in connection with certain transactions involving the sale or issuance by Cyan of common stock (or securities convertible into common stock) equal to 20% or more of Cyan’s outstanding common stock or 20% or more of the voting power outstanding before the issuance of such securities. Therefore, as a result of NYSE Rule 321.03(c) and the terms of the indenture, Cyan is limited to issuing a number of shares equal to 19.99% of the number of shares of its common stock outstanding on December 4, 2014 unless Cyan obtains approval of the NYSE share issuance proposals. In addition, until Cyan obtains the requisite approval from its stockholders, any exercises of the warrants is required to be cash settled based on a net value formula set forth in the warrants. For more information on the terms of the convertible notes and warrants, please see beginning on page 156.

If Cyan receives the requested approval, upon conversion of the convertible notes and exercise of the warrants, Cyan will be permitted to issue a number of shares of its common stock exceeding 20% of both the voting power and the number of shares of its common stock outstanding at the time of issuance of the convertible notes. Hence, the conversion of the convertible notes and exercise of the warrants could result in additional dilution of the voting power of Cyan’s existing stockholders. If Cyan does not receive the requested approval, Cyan will be required to (i) pay cash in lieu of the number of shares of common stock deliverable upon conversion of the convertible notes in excess of the conversion share cap of 19.99% and (ii) cash settle any exercises of warrants. As a result, Cyan’s liquidity could be adversely affected and Cyan may not have enough available cash or be able to obtain financing at the time Cyan is required to settle any conversions of the convertible notes or exercises of the warrants, which may raise concerns about Cyan’s viability.

The Cyan board recommends a vote “FOR” the approval of certain issuances of Cyan common stock in excess of 20% of Cyan’s outstanding shares upon conversion of its outstanding convertible notes and exercise of related warrants issued December 2014.

Proposal No. 4—Approval of Certain Issuances of Cyan Common Stock to Affiliates upon Conversion of Cyan’s Convertible Notes and Exercise of the Related Warrants

Certain affiliated parties of Cyan purchased in total $17.0 million in aggregate principal amount of convertible notes and related warrants to purchase an aggregate of 3,825,000 shares of Cyan common stock in Cyan’s December 2014 offering. The affiliated holders did not set nor approve the pricing terms of the offering,

 

61


Table of Contents

and they purchased the convertible notes and related warrants on the same terms on which convertible notes and warrants were issued to non-affiliated investors. For more details on the affiliated holders, please see beginning on page 161.

NYSE Listed Company Rule 312.03(b) requires stockholder approval prior to the issuance of common stock, or of securities convertible into or exercisable for common stock to a director, officer or substantial security holder of the company if the number of shares of common stock to be issued, or if the number of shares of common stock into which securities may be convertible or exercisable, exceeds either 1% of the number of shares of common stock or 1% of the voting power outstanding before the issuance. Therefore, approval of Cyan stockholders is required to permit Cyan to issue its common stock in full satisfaction of the conversion of convertible notes and exercise of warrants issued to the affiliated holders.

The Cyan board recommends a vote “FOR” the approval of certain issuances of Cyan common stock to certain affiliated holders upon conversion of its outstanding convertible notes and exercise of related warrants issued December 2014.

Proposal No. 5—Ratification of Appointment of Independent Registered Public Accounting Firm

Subject to stockholder ratification, Cyan’s audit committee has selected Ernst & Young LLP as Cyan’s independent registered public accounting firm to audit Cyan’s financial statements for the fiscal year ending December 31, 2015. Ernst & Young LLP has audited Cyan’s financial statements since 2009. For a detailed description of the fees paid to Ernst & Young LLP, please see beginning on page 163. Representatives of Ernst & Young LLP are expected to be present at the postponed annual meeting and will be given the opportunity to make statements and will be available to respond to appropriate questions.

The Cyan board recommends a vote “FOR” the ratification of appointment of Ernst & Young LLP as Cyan’s independent registered public accounting firm for the fiscal year ending December 31, 2015.

Proposal No. 6—Adjournment

Cyan stockholders are being asked to approve the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to adopt the merger agreement or NYSE share issuance proposals at the time of the postponed annual meeting. If Cyan receives the requested approval, the postponed annual meeting may be adjourned as long as the date of the postponed annual meeting is not adjourned more than an aggregate of 20 calendar days, if Cyan reasonably believes that (i) it will not receive sufficient proxies to obtain stockholder approval of the adoption of the merger agreement or the NYSE share issuance proposals, or (ii) it will not have sufficient shares of Cyan common stock represented to constitute a quorum necessary to conduct the business of the postponed annual meeting. If the postponed annual meeting is adjourned, Cyan stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use.

The Cyan board recommends a vote “FOR” the adjournment of the postponed annual meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to adopt the merger agreement or NYSE share issuance proposals.

 

62


Table of Contents

THE PARTIES TO THE MERGER

Cyan, Inc.

1383 N. McDowell Blvd.

Suite 300

Petaluma, California 94954

(707) 735-2300

Cyan, a Delaware corporation, is a pioneer in innovative, carrier-grade networking solutions that transform disparate and inefficient legacy networks into open, high-performance networks. Cyan’s solutions include high-capacity, multi-layer switching and transport platforms as well as a carrier-grade software-defined networking platform for network virtualization and control. Cyan’s solutions enable network operators to virtualize their networks, accelerate service delivery and increase scalability and performance, while reducing costs. Cyan has designed its solutions to enable a variety of existing and emerging applications, including business Ethernet, wireless backhaul, broadband backhaul, cloud connectivity, bandwidth on demand, and network functions virtualization (NFV). By deploying Cyan’s solutions, network operators can transform legacy networks into open, multi-vendor, carrier-grade software-controlled networks. Cyan’s solutions not only reduce network operators’ ongoing capital and operating expenses, but also enable their networks to more flexibly support rapidly changing service requirements and new business models. Cyan is headquartered in Petaluma, California.

Cyan common stock is listed on the NYSE under the symbol “CYNI.”

For more information about Cyan, please visit Cyan’s Internet website at www.cyaninc.com. Cyan’s Internet website address is provided as an inactive textual reference only. The information contained on Cyan’s Internet website is not incorporated into, and does not form a part of, this proxy statement/prospectus or any other report or document on file with or furnished to the SEC. Additional information about Cyan is included in the documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus.

Ciena Corporation

7035 Ridge Road

Hanover, Maryland 21076

(410) 694-5700

Ciena, a Delaware corporation, is a network specialist focused on communications networking solutions that enable converged, next-generation architectures, optimized to create and deliver the broad array of high-bandwidth services relied upon by business and consumer end users. Ciena provides equipment, software and services that support the transport, switching, aggregation, service delivery and management of voice, video and data traffic on communications networks. These solutions enable network operators to adopt software-programmable network infrastructures that offer the on-demand experience required by end users of services and applications. At the same time, these solutions yield business and operational value for network operators.

Ciena common stock is listed on the NYSE under the symbol “CIEN.”

For more information about Ciena, please visit Ciena’s Internet website at www.ciena.com. Ciena’s Internet website address is provided as an inactive textual reference only. The information contained on Ciena’s Internet website is not incorporated into, and does not form a part of, this proxy statement/prospectus or any other report or document on file with or furnished to the SEC. Additional information about Ciena is included in the documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus.

 

63


Table of Contents

Neptune Acquisition Subsidiary, Inc.

c/o Ciena Corporation

7035 Ridge Road

Hanover, Maryland 21076

(410) 694-5700

Merger Sub, a Delaware corporation and a wholly owned subsidiary of Ciena, was formed solely for the purpose of facilitating the merger. Merger Sub has not carried on any activities or operations to date, except for those activities incidental to its formation and undertaken in connection with the transactions contemplated by the merger agreement. By operation of the merger, Merger Sub will be merged with and into Cyan, with Cyan surviving the merger as a wholly owned subsidiary of Ciena. In the second step merger, Cyan will merge with and into Ciena.

 

64


Table of Contents

PROPOSAL No. 1—PROPOSAL TO ADOPT THE MERGER AGREEMENT

THE MERGER

This section describes the merger. The description in this section and elsewhere in this proxy statement/prospectus is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement/prospectus. This summary does not purport to be complete and may not contain all of the information about the merger that is important to you. You are encouraged to read the merger agreement carefully and in its entirety. This section is not intended to provide you with any factual information about Cyan or Ciena. Such information can be found elsewhere in this proxy statement/prospectus and in the public filings Cyan and Ciena make with the SEC, as described in the section entitled “Where You Can Find More Information” beginning on page 211 of this proxy statement/prospectus.

Per Share Merger Consideration

Upon completion of the merger, each share of Cyan common stock issued and outstanding immediately prior to the effective time (other than certain awards of restricted stock granted to Cyan employees, shares owned directly by Cyan as treasury stock, shares owned directly by Ciena or Merger Sub and shares held by Cyan stockholders who have perfected and not withdrawn a demand for appraisal rights with respect to such shares in accordance with Section 262 of the DGCL) will be cancelled and converted automatically into the right to receive, in accordance with the terms of the merger agreement, the per share merger consideration, having a value at closing of the aggregate exchange ratio (0.224 shares of Ciena common stock), consisting of: (i) 0.19936 (89% of the aggregate exchange ratio) shares of Ciena common stock (plus cash in lieu of any fractional shares resulting therefrom equal to the product of (A) the fractional share interest to which a stockholder would otherwise be entitled and (B) the volume weighted average price per share of Ciena common stock on the NYSE on the last trading day prior to closing, rounded to the nearest cent), and (ii) an amount of cash, without interest, equal to the product of (A) 0.02464 (11% of the aggregate exchange ratio) multiplied by (B) the volume weighted average price per share of Ciena common stock on the NYSE on the last trading day prior to closing, with the portion of the aggregate exchange ratio paid in cash subject to possible adjustment, if necessary, to preserve the desired characterization of the transaction as a reorganization for U.S. federal income tax purposes.

Immediately following the consummation of the merger between Cyan and Merger Sub, Cyan will be merged with and into Ciena, and the separate existence of Cyan will cease. This second merger is referred to as the second step merger. No consideration will be issued in the second step merger.

Background of the Merger

Introduction

In the fourth quarter of 2013 and first quarter of 2014, Cyan’s revenue declined sharply from prior periods primarily as a result of significantly reduced orders from its largest customer. As a result of these developments and the limited visibility into 2014 revenue levels, beginning in January 2014 and continuing throughout 2014, the Cyan board focused its attention on Cyan’s spending levels and cash used in the business. By mid-2014, the Cyan board’s focus expanded to include exploring opportunities for Cyan to raise additional capital in the near term to enable Cyan to achieve its objectives as an independent enterprise. During this time, the Cyan board also began to discuss, in general terms, what strategic alternatives might be available to Cyan. Notwithstanding such discussions, the Cyan board remained focused on Cyan raising the capital necessary to enable it to remain an independent enterprise.

Also commencing in early 2014, in order to expand its market reach and opportunities, Cyan began to increase its efforts to expand its business and technology ecosystem. On January 1, 2014, there were 15 members in Cyan’s Blue Orbit ecosystem program. As a result of Cyan’s efforts to expand its ecosystem, this number grew

 

65


Table of Contents

to 21 members at December 31, 2014 and to 25 members at May 31, 2015. Through these efforts, as well as through individual and joint responses to prospective customer requests for information (RFIs) or requests for proposals (RFPs), Cyan interacted with many participants in Cyan’s industry. In some cases, interactions that started as exploration of opportunities to jointly pursue business opportunities, for example through jointly bidding or reseller or referral agreements, evolved into discussions with these parties about establishing a more strategic relationship ranging from Cyan licensing its technology, to the other party making an investment in Cyan, either as part of the general capital raising activity or in lieu thereof, to the other party acquiring Cyan.

In addition, from time-to-time members of Cyan management received unsolicited calls from third parties—including in late 2014 a call from Ciena—wishing to discuss the possibility of Cyan engaging in a strategic transaction with such party. While the Cyan board and management remained focused on raising capital during 2014, management kept the Cyan board informed of the discussions with the third parties engaged in commercial ecosystem discussions, particularly when the discussions expanded from routine business development topics to potentially more strategic topics, and the discussions with the third parties that had made unsolicited calls to Cyan.

As more fully described below, in January 2015, with the convertible debt offering completed and Cyan’s near-term liquidity concerns addressed, the Cyan board determined to engage Jefferies to assist Cyan in exploring strategic alternatives, including the potential for a transaction with one of the companies with which Cyan had interacted during 2014 including Ciena—or with other potentially interested parties with which there had been no prior interaction.

Detailed Timeline of Significant Events

On January 6, 2014, Cyan preliminarily announced its fiscal fourth quarter 2013 results, and on January 21, 2014, Cyan announced its final fiscal fourth quarter and full calendar year 2013 results, reflecting negative year-over-year revenue growth. Revenue for the fourth quarter of 2013 was $20.9 million compared with $29.8 million in the fourth quarter of 2012 and $37.7 million for the third quarter of 2013. The primary reason for the revenue decline in the fourth quarter of 2013 was a sharp decline in Cyan’s sales to its largest customer, the revenue from which historically exhibited significant volatility.

On January 30, 2014, the Cyan board held a meeting with members of management in attendance, during which the Cyan board and Cyan management discussed in depth Cyan’s need to conserve spending to ensure that it had sufficient capital to finance operations through the end of 2015.

On February 20, 2014, the Cyan board held a meeting with members of management in attendance to discuss, among other things, Cyan’s finances and 2014 operating plan. The Cyan board and management discussed Cyan’s liquidity and potential cash burn in 2014. The Cyan board and management then had a discussion regarding managing Cyan’s spending to ensure that its existing capital resources would be sufficient to fund operations at least through calendar year 2015.

On April 11, 2014, an executive of a third party (referred to herein as Party 1) contacted Jeffrey Ross, Cyan’s Chief Financial Officer, to discuss Party 1’s interest in learning about Cyan’s business.

On April 14, 2014, Mr. Ross communicated to the executive at Party 1 that Cyan was willing to arrange a meeting to provide Party 1 information about Cyan’s business.

On May 6, 2014, Cyan reported its financial results for the fiscal first quarter of 2014, detailing negative year-over-year revenue growth. Revenue for the first quarter of 2014 was $19.0 million compared with $26.3 million in the first quarter of 2013 and $20.9 million for the fourth quarter of 2013. GAAP net loss for the first quarter of 2014 was $17.8 million, or $0.38 per share, compared with a net loss of $9.4 million, or $3.61 per share, in the same period the prior year, and a net loss of $13.7 million, or $0.29 per share, in the fourth quarter of 2013.

On May 8, 2014, Mr. Ross participated in a telephone call with the executive of Party 1 to determine who the appropriate participants from Party 1 and Cyan would be for a discussion of whether there were potential mutually-

 

66


Table of Contents

beneficial opportunities to explore between Party 1 and Cyan. During the call, Party 1 indicated that it was more interested in exploring a strategic transaction than any form of commercial or technological partnership.

On May 22, 2014, the Cyan board held a meeting with members of management in attendance. The Cyan board and members of management held a discussion regarding Cyan’s recently announced results for the fiscal first quarter of 2014. Specifically, the Cyan board and management discussed Cyan’s cash flow for the first quarter of 2014, why the cash burn had exceeded expectations, Cyan’s cash and marketable securities’ balances, the forecasts and analyses of cash requirements and Cyan management’s determination that Cyan had sufficient cash to fund operations only through the second quarter of 2015.

The Cyan board then discussed the nascent state of the software-defined networking (“SDN”) and network functions virtualizations (“NFV”) solutions market and the potential timeframe for beginning to realize the benefits of these solutions, whether Tier 1 customers (which Cyan considers to be major, national scale telecommunications carriers in the United States and other countries) would purchase critical technologies such as SDN and NFV from a small company or whether Cyan would need to partner with, or be acquired by, a larger company to successfully realize opportunities with Tier 1 customers—and what those strategic alternatives may look like. The Cyan board discussed the need to raise additional capital if Cyan was to achieve its objectives as an independent enterprise, as well as potential strategic alternatives to remaining independent. Management and the Cyan board also discussed the overtures made by Party 1.

During late May to early June 2014, Mr. Ross contacted several potential lenders to determine whether debt funding would be available to Cyan and, if so, the amounts and indicative terms of such debt funding. The preliminary indications were that debt may be available to Cyan but not in significant amounts and with a structure that would require Cyan to repay its outstanding credit facility, thus resulting in only modestly more debt available than was then available under its outstanding credit facility.

On May 28, 2014, at the request of a third party (referred to herein as Party 2), members of Cyan’s management participated in phone calls with executives of Party 2 to discuss a possible commercial transaction.

On May 30, 2014, Mr. Ross participated in a phone call with an executive from Party 1 to coordinate the logistics necessary for the parties to substantively discuss a potential commercial transaction and the execution of a confidentiality agreement.

On June 3, 2014, members of Cyan’s management held a technical diligence meeting with Party 2 at Party 2’s offices.

In early June 2014, Mark Floyd, Cyan’s Chief Executive Officer, held discussions with representatives of Jefferies to discuss opportunities for Cyan to raise additional capital.

On June 11, 2014, Mr. Floyd met with a representative of a third party (referring to herein as Party 3). During the months prior to this meeting, Party 3 and Cyan had engaged in discussions relating to potential commercial transactions between the two parties, and had previously signed a confidentiality agreement in connection with those discussions. During this meeting, Mr. Floyd and Party 3 discussed how networks will be built in the future with the rise of SDN and NFV solutions. They further discussed that Cyan and Party 3 fundamentally viewed the market in the same manner and should continue their discussions. Also during such meeting, the representative of Party 3 indicated that Party 3 was interested in discussing a range of potential transactions, including potential commercial as well as strategic transactions.

On June 16, 2014, Mr. Floyd met with a representative from Party 2 regarding Party 2’s interest in Cyan’s SDN and NFV solutions and the potential for Party 2 to evaluate a commercial, and potentially a strategic, relationship with Cyan.

Beginning on June 24, 2014, in connection with Cyan’s efforts to raise capital and the likelihood that potential lenders would request information about Cyan, its business, finances, and operations, Cyan’s management established a virtual data room that contained confidential, non-public information of Cyan.

 

67


Table of Contents

On June 26, 2014, following an introduction by a representative of Jefferies, Mr. Floyd held a meeting with a third party (referred to herein as Party 4) to discuss Cyan’s and Party 4’s businesses, including the extent to which their hardware products may overlap and the ability to utilize Cyan’s Blue Planet solution to manage Party 4’s products. The representative of Party 4 indicated Party 4’s potential interest in investing in, or potentially acquiring, Cyan. Other than a general statement from Party 4 that Cyan’s value was too high, no specific structure, pricing or other terms were discussed.

On June 30, 2014, Party 2 provided Cyan with access to its equipment testing laboratory facility to determine Cyan’s ability to build adaptors enabling Cyan’s Blue Planet solution to manage Party 2’s networking equipment.

On July 2, 2014, Mr. Ross and Kenneth Siegel, Cyan’s Vice President and General Counsel, participated in a phone call with representatives of a bulge bracket investment bank to discuss potential fundraising opportunities available to Cyan. The representatives of the investment bank believed that convertible debt was likely the best option, and provided information on the terms of recent convertible debt transactions. The representative also expressed the view that it would be difficult to successfully complete a convertible debt offering absent one or more key business developments—for example, a major customer win or other substantial validation of Cyan’s SDN and NFV solutions.

On July 10, 2014, the Cyan board held a meeting with members of management in attendance. Mr. Floyd and Mr. Ross led a discussion of the preliminary results of Cyan’s fiscal quarter ended June 30, 2014 and the outlook for the third quarter. Mr. Floyd led a discussion regarding engagements with prospective Tier 1 customers and the continued uncertainty as to whether such prospective customers would purchase key technologies from a supplier as small as Cyan or whether Cyan needed to partner with, or be acquired by, a larger third party to effectively compete in the Tier 1 market.

Mr. Floyd also provided an update on Cyan management’s preliminary discussions with an investment bank about raising additional capital, and reported that the discussions had focused primarily on issuing debt convertible into Cyan common stock. Members of Cyan management led a discussion regarding such potential convertible debt offering and the potential timing of such offering. The Cyan board authorized management to explore opportunities with this investment bank to raise additional capital.

On July 11, 2014, members of management held a meeting with representatives of Party 2 at which Cyan demonstrated that its Blue Planet solution could identify and manage Party 2’s network equipment in a testing laboratory environment.

On July 18, 2014, Mr. Floyd participated in a telephone call with a representative of Party 4 to continue discussions regarding a potential transaction, potentially ranging from an investment to an acquisition by Party 4. That same day, Cyan sent Party 4 a confidentiality agreement to consider in connection with future discussions.

On July 23, 2014, Mr. Siegel and Mr. Ross met with representatives of the bulge bracket investment bank that Cyan had met with earlier regarding the potential convertible debt offering. This investment bank indicated it did not believe Cyan could execute a successful offering without a significant positive development in Cyan’s business.

On July 23, 2014, members of management held a second demonstration meeting for representatives of Party 2 at Party 2’s offices.

On July 24, 2014, Cyan and Party 4 entered into a confidentiality agreement.

On July 29, 2014, Cyan and Party 1 entered into a confidentiality agreement.

On August 1, 2014, members of management held a third demonstration meeting for representatives of Party 2 at Party 2’s offices.

 

68


Table of Contents

On August 4, 2014, Mr. Ross sent Party 4 certain non-public Cyan information relating to its business plan. That same day, Party 4 provided Mr. Siegel and Cyan with an initial set of due diligence questions it deemed relevant in considering a potential transaction between Party 4 and Cyan.

On August 6, 2014, the Cyan board held a meeting with members of management in attendance. The Cyan board reviewed the business highlights of the second quarter of 2014 and then discussed Cyan’s financial results for the second fiscal quarter in 2014. As Cyan would disclose on August 11, 2014, revenues for the second quarter of 2014 decreased to $24.4 million from $31.7 million in the second quarter of 2013, and the GAAP net loss for the second quarter 2014 increased to $14.7 million compared to a net loss of $9.1 million in the same period the year prior.

Mr. Ross then led a discussion with the Cyan board regarding Cyan’s cash and marketable securities’ balances, the forecasts and analyses of cash requirements, and the determination that Cyan had sufficient capital resources to fund operations through the second quarter of 2015. The Cyan board discussed the need to raise additional capital in the next few quarters if Cyan was to achieve its objectives as a strategic enterprise.

Mr. Floyd then briefed the Cyan board regarding Cyan’s financing discussions with the bulge bracket investment bank and that investment bank’s belief that Cyan would need a significant positive business development in order to successfully complete a convertible debt offering. Mr. Floyd also updated the Cyan board regarding Cyan’s preliminary discussions with Jefferies regarding a potential convertible debt offering as a means by which Cyan could raise additional capital, the indicative terms of which were discussed by the Cyan board. In order to provide guidance to management during the capital raising process at times when the full Cyan board might not be available, the Cyan board created the Strategic/Finance Committee, which consisted of directors Mark Floyd, Paul Ferris and Bob Switz. The Cyan board authorized the Strategic/Finance Committee to undertake and approve a convertible debt offering, including, but not limited to, approving the issuance of shares of Cyan’s common stock in connection with any such convertible debt, warrant and/or other equity offerings, including as a result of the conversion or exchange of such convertible debt, warrants or other equity instruments into shares of Cyan’s common stock, and negotiating with Jefferies and approving the terms and conditions of the offerings. The Cyan board also authorized Cyan’s officers and Strategic/Finance Committee to engage Jefferies on Cyan’s behalf to assist Cyan in raising funds necessary to execute on its business plans and to discuss with Jefferies the possibility of assisting Cyan with exploring other potential strategic alternatives.

On August 6, 2014, Cyan provided Party 4 access to Cyan’s virtual data room.

On August 7, 2014, Mr. Siegel, Mr. Ross and Michael Hatfield, Cyan’s President, held a meeting with representatives of Party 4, during which the parties shared information about their respective businesses and the potential opportunities for a combined company. There were no discussions of potential structure, price or other financial terms.

On August 11, 2014, Mr. Floyd participated in a call with Party 4 to answer follow-up questions from the August 7th meeting.

On August 12, 2014, Cyan and Jefferies met at Cyan’s headquarters in Petaluma, California to discuss the specifics of a potential convertible debt offering.

On August 13, 2014, Mr. Floyd held a meeting with representatives of Party 2 to discuss Party 2’s ongoing technology assessment, partnership opportunities and Cyan’s financing plans.

On August 15, 2014, members of Cyan’s management participated in a conference call with Party 4 to address and answer technical questions related to Cyan’s business. During the following week, Cyan’s management provided further information to Party 4 regarding Cyan’s business and answered additional diligence-related questions.

 

69


Table of Contents

On August 18, 2014, members of Cyan’s management participated in a meeting with a representative of Party 2. The representative of Party 2 indicated that there was insufficient internal support within Party 2 to explore a strategic transaction with Cyan at that time.

On August 20, 2014, Mr. Floyd met with representatives from Party 4 in Chicago, Illinois to discuss a potential commercial or strategic transaction.

On August 25, 2014, at Cyan’s direction, representatives of Jefferies participated in a telephone call with Party 4 to discuss a potential strategic transaction.

On August 29, 2014, Mr. Corker participated in a telephone call with Party 2 regarding Party 2’s interest in pursuing discussions related to a potential commercial transaction.

On September 2, 2014, a representative of Party 3 called Mr. Floyd to follow-up on the August 28th meeting to indicate that Party 3 was interested in exploring either a potential partnership or an acquisition of Cyan. There were no discussions of structure, price or other financial terms.

On September 2, 2014, Mr. Hatfield, Mr. Ross and Mr. Siegel held a meeting with Party 1 in Dallas, Texas. Mr. Hatfield delivered a presentation that provided an overview of Cyan, its products, and its vision for the market. Party 1 stated that it was evaluating a potential acquisition of Cyan. There were no discussions of structure, price or other financial terms.

On September 4, 2014, Mr. Corker participated in a telephone call with Party 2 regarding Party 2’s interest in pursuing discussions related to a potential commercial transaction.

On September 5, 2014, Cyan granted Party 1 access to Cyan’s virtual data room that contained confidential, non-public information of Cyan. Party 1 conducted due diligence on Cyan during September 2014 and October 2014.

On September 12, 2014, Mr. Floyd participated in a telephone call with a representative of Party 2 during which the representative of Party 2 indicated to Mr. Floyd that Party 2 intended to cease discussions with Cyan related to a potential commercial transaction.

On September 17, 2014, Cyan terminated Party 4’s access to Cyan’s virtual data room due to inactivity on Party 4’s part.

On September 17, 2014, members of Cyan’s management participated in a telephone call with Party 3 to discuss Cyan’s Blue Planet platform and engage in a technical analysis of Cyan’s business and product offerings.

On September 22, 2014, members of Cyan management hosted representatives of a third party (referred to herein as Party 5) at which Cyan provided Party 5 with an overview of Cyan’s products, business and prospects, in connection with the potential for Party 5 to participate in Cyan’s financing activities.

On September 23, 2014, Mr. Hatfield led a conference call with Party 3 to discuss possible software collaboration.

On September 25, 2014, Party 3 delivered a set of questions to Cyan regarding Cyan’s NFV solutions.

On September 30, 2014, Mr. Floyd contacted Party 3 to continue discussions regarding a potential strategic transaction, but Party 3 did not respond.

On October 2, 2014, representatives for Party 4 contacted Mr. Floyd to discuss Party 4’s renewed interest in evaluating an opportunity for an investment in the proposed convertible debt offering, or providing an alternative thereto.

 

70


Table of Contents

On October 3, 2014, the Cyan board held a meeting with members of management in attendance. Mr. Floyd and Mr. Ross led a discussion with the Cyan board regarding Cyan’s preliminary financial results for the third fiscal quarter ended September 30, 2014, the results of which when formally announced on November 6, 2014 would reflect a decrease of revenue for the third quarter to $26.6 million compared with revenue of $37.7 million for the same period in the prior year, and a GAAP net loss increase for the third quarter 2014 to $11.7 million versus $8.6 million for the same period in the prior year. For the nine months ended September 2014, Cyan had used approximately $35.2 million of cash, cash equivalents and marketable securities, including $30.4 million used in operating activities. As of September 30, 2014, Cyan had cash, cash equivalents and marketable securities of $28.9 million. Given Cyan’s forecasted levels of revenue, expenses and capital expenditures, Cyan believed that its existing cash, cash equivalents and marketable securities, together with its cash collections would be sufficient to meet Cyan’s projected operating and capital expenditure requirements only through the first quarter of 2015.

Management then discussed with the Cyan board the status and potential timeline if Cyan determined to pursue a convertible debt offering to be led by Jefferies. The Cyan board discussed the potential terms and conditions of such a convertible debt offering, detailing that the notes would be convertible into shares of Cyan’s common stock and subject to such terms and conditions as determined by the Strategic/Finance Committee. The Cyan board then determined that it was in the best interests of Cyan to issue debt securities and further resolved to create and issue a series of convertible notes under certain terms and conditions. The Cyan board also reaffirmed its prior authorization to the Strategic/Finance Committee, which included, without limitation, the authority to ratify the selection of the initial Note purchaser(s) and to establish the final terms of the Notes.

The Cyan board discussed the strategic outlook for Cyan, including whether Cyan could substantially improve its competitive position in the marketplace and among potential customers by partnering with, or being acquired by, a larger partner to realize potential revenue opportunities with more high-profile companies with greater position in the marketplace. Mr. Floyd then provided the Cyan board with an update on recent discussions with third parties interested in potential financings or potential strategic transactions, including preliminary discussions that were held with Party 4 regarding its potential interest in investing in the proposed convertible debt offering or providing an alternative to such offering. A representative from Wilson Sonsini Goodrich and Rosati P.C. (“WSGR”) then joined the meeting and provided an overview of the Cyan board’s fiduciary obligations in connection with evaluating potential strategic transactions.

On October 6, 2014, the Cyan board held a meeting with members of management in attendance. Management first updated the Cyan board regarding the proposed convertible debt offering and management’s discussions with those third parties that had indicated potential interest in investing in the proposed convertible debt offering, providing an alternative to such financing or engaging in potential strategic transactions. Management then updated the Cyan board regarding Cyan’s discussions with third parties regarding potential financings or potential strategic transactions.

On October 9, 2014, the Cyan board held a meeting with members of management in attendance. Management first updated the Cyan board regarding the proposed convertible debt offering and the timing of releasing Cyan’s financial results for the quarter ended September 30, 2014. Management then updated the Cyan board regarding the latest discussions management had held with Party 4, which previously had indicated potential interest in investing in the proposed convertible debt offering or providing alternative financing.

On October 9, 2014, members of Cyan management participated in a telephone call with Party 5 regarding Party 5’s interest in a potential investment.

On October 9, 2014, representatives of a third party (referred to herein as Party 6) contacted Steve West, then Chief Technology Officer at Cyan, to discuss potential commercial opportunities for the two companies. This contact was forwarded to Mr. Corker and resulted in a meeting on November 18, 2014, as described below.

 

 

71


Table of Contents

Between October 10, 2014 and October 16, 2014, Mr. Floyd participated in a series of telephone calls with representatives of Party 4 to discuss a possible investment by Party 4 in Cyan, and the scheduling of a meeting between Party 4 and Cyan personnel.

On October 10, 2014, at the request of a third party (referred to herein as Party 7) Mr. Hatfield participated in a phone call with a representative of Party 7 to discuss a potential strategic transaction.

On October 15, 2014, Mr. Floyd participated in a telephone call with a representative of Party 5 during which Party 5 indicated it was interested in pursuing discussions related to a potential investment.

On October 16, 2014, Mr. Floyd sent Party 5 the possible terms of the convertible debt offering, certain Cyan operating plan information, and Cyan’s investor relations materials.

On October 18, 2014, a representative of Party 5 communicated to Mr. Floyd that Party 5 was not interested in pursuing further discussions regarding a possible investment. Party 5 indicated that timing was a concern, and that there was not sufficient internal support at Party 5 to continue discussions.

On October 19, 2014, Party 4 contacted Mr. Floyd to request that Cyan once again provide Party 4 access to Cyan’s data room.

On October 20, 2014, members of Cyan’s management and representatives of Party 1 met to discuss the status of Party 1’s due diligence. During the following weeks, Cyan continued to provide diligence materials to answer Party 1’s diligence-related questions.

On October 21, 2014, the Cyan board held a meeting with members of management in attendance. The Cyan board discussed the continued opportunity for SDN and NFV solutions, but noted there was uncertainty as to when the markets for such products would begin to generate meaningful revenue and whether potential buyers would buy from small providers. Management then updated the Cyan board on discussions with third parties regarding potential financings or potential strategic transactions. In addition, management updated the Cyan board regarding the terms of a proposed convertible debt offering that management was working on with Jefferies, and that management anticipated such offering to commence in November 2014.

The Cyan board and management also discussed the need for Cyan to reduce its operating expense levels, including through head-count reductions and, in this regard, adopted a severance plan to be used in connection with a reduction.

On October 21, 2014 and October 22, 2014, Mr. Floyd, Mr. Hatfield, Mr. Ross, Mr. Siegel and other members of Cyan’s management held business due diligence meetings with Party 4 at Cyan’s Petaluma, California headquarters. There were no discussions of financial terms.

On October 24, 2014, Cyan held a meeting with Party 3 to discuss the latter’s interest in pursuing a strategic transaction with Cyan, likely in the form of acquiring the entire company or carving out and purchasing Cyan’s SDN and NFV-related assets. Party 3 indicated that it was having internal discussions regarding their perception of the value of Cyan and/or the SDN and NFV business.

On October 26, 2014, Cyan provided Party 4 with access to Cyan’s virtual data room.

On October 27, 2014, Mr. Corker met with Party 3 in San Francisco, California, principally for Cyan to provide some information on Cyan’s business, including operational details such as head count, resources devoted to hardware versus software and the market opportunity for NFV solutions.

On October 31, 2014, Mr. Floyd contacted a representative of Party 4 to determine whether it would be interested in providing financing to Cyan in lieu of Cyan executing a convertible debt transaction. Five days

 

72


Table of Contents

later, on November 4, 2014, Party 4 sent Mr. Floyd a term sheet providing for $35 million of debt financing. A representative of Party 4 informed Mr. Floyd that the party would not be interested in acquiring Cyan because the cost to Party 4 would, in Party 4’s view, be prohibitive.

On October 31, 2014, Mr. Ross had a call with Party 1 during which Party 1 said it needed additional time to consider a potential strategic transaction with Cyan.

On November 1, 2014, Party 1 instructed Cyan that it would indicate whether it was still interested in a potential strategic transaction later in November 2014.

On November 7, 2014, James Frodsham, Ciena’s Senior Vice President and Chief Strategy Officer, contacted Mr. Floyd to discuss a potential strategic relationship with Cyan. Three days later, on November 10, 2014, Mr. Frodsham proposed that Cyan and Ciena meet on November 25, 2014 in San Francisco, California.

On November 10, 2014, Cyan and Party 7 entered into a mutual non-disclosure agreement.

On November 10-13, 2014, Mr. Floyd, Mr. Hatfield and Mr. Ross travelled to New York City to participate in initial investor meetings regarding Cyan’s proposed convertible debt offering.

On November 13, 2014, Mr. Floyd and Mr. Ross met with members of Party 1’s management in New York City. During the meeting, Party 1 expressed that it might be interested in a potential strategic transaction, but that it would not be able to pursue such a transaction until mid-2015 at the earliest. There were no discussions regarding structure, price or other financial terms.

On November 13, 2014, Mr. Hatfield participated in a phone call with Party 7 to discuss a potential strategic transaction.

On November 14, 2014, Ciena sent Mr. Floyd a draft confidentiality agreement.

On November 15, 2014, the Cyan board held a meeting with members of management in attendance. Management updated the Cyan board regarding Cyan’s proposed convertible debt offering. Specifically, management informed the Cyan board that Jefferies had indicated that it believed that the public markets would not support a convertible debt offering on the terms previously discussed with the Cyan board, although Cyan might be able to obtain financing through a convertible debt offering with different terms that would include, among other things, restrictive covenants limiting Cyan’s ability to raise future debt, and the issuance of warrants in addition to convertible notes, with a substantially higher cost of capital than contemplated with the convertible debt structure previously discussed.

The Cyan board discussed the indicative terms of the newly proposed convertible debt offering as well as Cyan’s then-current liquidity and capital resources. Management noted that customers and potential customers were beginning to express concern about Cyan’s viability and were, in some cases, delaying purchasing decisions pending an improved outlook. The Cyan board also discussed the risk that Cyan might begin to lose key personnel and that suppliers may limit the credit that they were willing to extend to Cyan. The Cyan board then discussed potential alternative sources of capital. The Cyan board discussed that indicative terms had been provided by Party 4 for additional capital, but determined that these terms were substantially less favorable to Cyan and its stockholders than the proposed convertible debt offering. The Cyan board concluded that the revised terms outlined by Jefferies for the convertible debt offering represented the best alternative for Cyan and its stockholders, and reaffirmed its approval to proceed with a convertible debt offering led by Jefferies on such terms. The Cyan board also reaffirmed its delegation of authority to the Strategic/Financing Committee to approve the final pricing terms and forms of agreement.

On November 17, 2014, Mr. Ross and Mr. Siegel participated in a call with representatives of Party 7 to discuss structuring issues to consider in cross-border transactions.

 

73


Table of Contents

On November 18, 2014, Mr. Corker met with representatives of a Party 6 at Party 6’s offices for an initial discussion between the two companies regarding the interoperability of their respective products.

On November 25, 2014, after Cyan and Ciena entered into a mutual confidentiality agreement, Mr. Floyd and other members of Cyan’s management met with members of Ciena’s management, including Mr. Frodsham, to discuss an overview of Cyan and its business and a detailed review of Cyan’s software solutions and market and customer engagement with a view toward a potential strategic transaction.

On November 26, 2014, Mr. Hatfield participated in a call with Party 7 to discuss a potential business combination.

On November 30, 2014, Mr. Floyd spoke with Mr. Frodsham to review the November 25, 2014 meeting, to discuss next steps, and to plan a technical due diligence meeting between the two parties. The next day, Mr. Frodsham proposed that such meeting take place on December 9, 2014.

On December 2, 2014, Mr. Floyd informed Mr. Frodsham that Cyan planned to launch its convertible debt offering in the coming days.

On December 4, 2014, the Cyan board held a meeting with members of management in attendance (Mr. Promod Haque was absent from this meeting). The Cyan board discussed with management the status of discussions with companies potentially interested in a strategic transaction with Cyan. The Cyan board also discussed Cyan’s proposed convertible debt offering, with particular focus on terms that had changed from the indicative convertible debt terms that the Cyan board previously had considered, including, among others, (i) that the debt would be secured by a first priority interest in substantially all of Cyan’s assets and (ii) that the full conversion of the notes and exercise of the warrants would result in the issuance of greater than 20% of Cyan’s outstanding common stock and thus necessitated approval by stockholders under applicable NYSE rules.

The Cyan board then discussed that it had not been able to secure sufficient commitments from unaffiliated investors to satisfy the lead investor’s minimum investment condition with respect to the proposed convertible debt offering. As a result, in order to enable Cyan to complete the financing, Cyan would need to obtain funds from Cyan’s directors and, as applicable, their affiliated funds, to invest in the proposed convertible debt offering on the same terms offered to the unaffiliated investors. Management advised the Cyan board that Norwest Venture Partners, an affiliate of Cyan director Promod Haque, would agree to invest $11 million, Mr. Hatfield would agree to invest $4 million and Mr. Floyd would agree to invest $2 million. Further, the Cyan board discussed that, even with these commitments, Cyan was unable to secure sufficient commitments from investors to meet the lead investor’s minimum investment condition and, at the Cyan board’s request, Jefferies indicated that it would be willing to backstop the unsubscribed balance of approximately $5 million of the convertible debt and warrant offering in order to facilitate the completion of the financing. The Cyan board then discussed that certain directors and their affiliates would purchase approximately one-third of the notes and warrants to be issued in the proposed convertible debt offering.

Mr. Hatfield and Mr. Floyd then left the meeting and the remaining directors proceeded to review the terms of the proposed financing and discussed the limited financing alternatives available to Cyan. The remaining directors approved resolutions, which, among other things, declared that the proposed convertible debt offering was fair to and in the best interests of Cyan and its stockholders, and approved execution of the final terms of the notes, warrants and other agreements in connection with the convertible debt offering.

Finally, the remaining directors discussed the composition of the Strategic/Finance Committee. Specifically, because Mr. Floyd was originally appointed to serve on such committee and was now participating in the proposed convertible debt offering, the remaining members of the Cyan board determined to remove Mr. Floyd from the Strategic/Finance Committee such that the committee would consist of Mr. Ferris and Mr. Switz. The remaining members of the Cyan board also resolved that the Strategic/Finance Committee would have the authority previously granted to it as well as the authority to determine the final pricing negotiations and the

 

74


Table of Contents

number of authorized but unissued shares of common stock to be reserved for issuance upon conversion of the notes and exercise of the warrants.

Mr. Hatfield and Mr. Floyd re-joined the meeting and the Cyan board proceeded to discuss Cyan’s financial condition. Management updated the Cyan board on recent cost reduction efforts and Cyan’s operating expenses in the context of current and forecasted revenues. The Cyan board discussed that Cyan’s operating expenses and cash burn rate would need to be monitored closely and that if the intended savings did not result from the latest efforts, or if revenue failed to increase as projected, further cost reduction efforts would be required with a view toward enabling Cyan to achieve positive cash flow from operations within the operating window created by the capital infusion provided by the convertible debt offering.

In addition, on December 4, 2014, in accordance with Cyan’s Related Party Transactions Policy, the audit committee of the Cyan board discussed and approved the proposed investments by Mr. Hatfield, Mr. Floyd and Mr. Haque (or their affiliates) in the convertible notes on the same terms as other investors in the transaction.

On December 4, 2014, Cyan priced its 8.0% Convertible Senior Secured Notes due 2019 in an aggregate principal amount of $50 million and related warrants to purchase up to an aggregate of 11.25 million shares of Cyan’s common stock. The sale and issuance of the notes and warrants were completed on December 12, 2014. In connection with the offering, as previously approved by the Cyan board, an affiliate of Mr. Haque invested $11 million, Mr. Hatfield invested $4 million, Mr. Floyd invested $2 million and Jefferies invested $5.5 million, constituting the unsubscribed balance of the convertible debt and warrant offering.

On December 8, 2014, Mr. Floyd informed a representative of Party 4 that Cyan was proceeding with its convertible debt offering. Cyan did not engage in further discussions with Party 4 regarding a potential financing or strategic transaction.

On December 9, 2014, a representative of Party 3 contacted a representative of Cyan to indicate that Party 3 was interested in exploring a possible acquisition of Cyan’s software business and assets. Party 3 did not propose any structure, price or other financial terms.

Also on December 9, 2014, Cyan hosted representatives of Ciena for a detailed technical diligence meeting at Cyan’s headquarters in Petaluma, California.

On December 11, 2014, Party 1 participated in a telephone call with Mr. Ross to indicate that Party 1 was interested in conducting further diligence on Cyan and to discuss potential synergies between the two parties. Party 1 and Mr. Ross also discussed the convertible debt offering.

On December 16, 2014, Mr. Hatfield participated in a phone call with Party 7 to discuss financial models and potential synergies of a potential business combination.

On December 17, 2014, the Cyan board held a meeting with members of management in attendance. Management reported to the Cyan board that Cyan had received renewed interest from certain parties that had earlier expressed a strategic interest in Cyan. The Cyan board then discussed Cyan’s prospects as an independent company, and the difficulty of determining whether Tier 1 service providers and other large customers and prospective customers would be willing to acquire critical technologies from a small company with limited resources. It was also noted that each engagement with Tier 1 service providers and other large companies interested in utilizing Cyan’s SDN and NFV technology involved the allocation of extensive time and resources to develop and articulate use cases, conduct proofs of concept and lab trials and, in certain instances, engage in incremental development efforts, some of which would be generally applicable across a range of customers but some of which would be unique to the specific customer. Gaining this understanding of how the market was developing further indicated that a strategic combination that increased scale and resources may be critical to successfully win large SDN and NFV opportunities.

 

75


Table of Contents

In light of these factors and the number and nature of inbound inquires, the Cyan board discussed the desirability (including the benefit of allowing management to focus its attention on Cyan’s business) of formally engaging a financial advisor to assist the Cyan board in evaluating potential strategic opportunities for Cyan, and if appropriate, to assist Cyan in contacting other strategic parties with which a combination might make strategic sense, with a view toward enhancing stockholder value should Cyan proceed with a sale or other strategic transaction. After discussion, the Cyan board instructed management to contact Jefferies and request that Jefferies propose terms of an engagement for the Cyan board to consider, specifically with respect to assisting the Cyan board in identifying parties potentially interested in engaging in a strategic transaction with Cyan and evaluating potential proposals for a strategic transaction.

On December 17, 2015, Mr. Frodsham contacted Mr. Floyd to request that Cyan arrange a further technical software diligence meeting to address outstanding questions and provide a view of Blue Planet’s commercial model, market approach and revenue plan.

On December 18, 2014, Mr. Ross, Mr. Siegel and other members of Cyan’s management participated in a conference call with Party 3 to discuss Party 3’s continued interest in a potential strategic transaction. Party 3 indicated that it was most interested in Cyan’s software business, but that it would, if necessary, consider a potential acquisition of the entire company. There were no discussions regarding price or other financial terms.

On December 22, 2014, Party 3 sent Cyan additional due diligence requests, to which Cyan responded within a day.

On January 6, 2015, Mr. Corker again met with representatives of Party 6 to further discuss the interoperability of their respective products and a potential strategic transaction.

On January 8, 2015, Cyan again hosted Ciena for a diligence meeting at Cyan’s headquarters in Petaluma, California, to address, among other things, Mr. Frodsham’s requests from December 17, 2014. The next day, Mr. Frodsham called Mr. Floyd to indicate that Ciena would be in touch regarding next steps.

On January 9, 2015, the Cyan board held a meeting with members of management in attendance. Management reported to the Cyan board on strategic discussions with a number of parties. Mr. Floyd also reported that, at the request of the Cyan board, he had contacted Jefferies to discuss engaging Jefferies to assist Cyan in assessing potential strategic alternatives. The Cyan board authorized the Strategic/Finance Committee to engage Jefferies as Cyan’s financial advisor, to approve the terms of an engagement letter with Jefferies and to authorize the appropriate officers of Cyan to execute and deliver such an engagement letter on agreed upon terms. The Cyan board also authorized the Strategic/Finance Committee to represent the Board in ongoing discussions with Jefferies and others with respect to exploring strategic transactions, provided that the entry into any agreement with respect to any such transaction would require approval of the full Cyan board. Finally, the Cyan board noted that Mr. Floyd had served on the Strategic/Finance Committee since its formation but was removed from the committee because the committee, at that time, was tasked with approving the convertible debt offering and Mr. Floyd was investing in that offering. The Cyan board determined it would be advantageous to re-appoint Mr. Floyd to the Strategic/Finance Committee in connection with the strategic transaction process, and authorized such re-appointment.

On January 13, 2015, Party 1 sent Mr. Hatfield and Mr. Ross an analysis of the potential cost synergies between Cyan and Party 1.

On January 13, 2015, Mr. Hatfield participated in a phone call with Party 7 to further discuss financial models and potential synergies of a potential strategic transaction.

On January 15, 2015 and January 16, 2015, Mr. Hatfield, Mr. Siegel and other members of Cyan’s management held a meeting with Party 3 at Cyan’s headquarters in Petaluma, California for discussions regarding Cyan’s solutions, particularly its software solutions, business strategy and the potential for a strategic transaction.

 

76


Table of Contents

On January 16, 2015, Cyan and Party 6 entered into a confidentiality agreement.

On January 17, 2015, Mr. Frodsham and Mr. Floyd participated in a telephone call during which Mr. Frodsham indicated that Ciena was continuing to evaluate the technical and commercial feedback from Cyan and that Ciena continued to consider whether to move potential strategic discussions forward. The following day, January 18, 2015, Mr. Frodsham and Mr. Floyd spoke again about next steps and that Ciena expected to follow up in approximately one week.

On January 20, 2015, the Strategic/Finance Committee of the Cyan board held a meeting with members of management and representatives of Jefferies in attendance. The Committee, management and representatives of Jefferies discussed that Cyan had received several inbound inquiries from third parties, including Ciena, about the possibility of acquiring Cyan or substantial parts of Cyan, and discussed a process by which Cyan and the Cyan board would be able to explore possible alternatives, including the alternative of remaining independent, in a comprehensive manner. This discussion included a discussion of the identity and nature of the parties that previously had expressed interest in a strategic transaction with Cyan, the nature of these discussions and a discussion of other parties that might have an interest and how and when it may be appropriate to approach such additional parties. The Committee, management and Jefferies also discussed the then-current state of Cyan’s business and key business developments that could occur over the next several quarters that might impact the market perception and valuation of Cyan and how those developments could impact a potential strategic transaction.

On January 23, 2015, based on the prior direction of the Cyan board, Cyan commenced a process with Jefferies’ assistance to identify and contact companies that might have an interest in pursuing a strategic transaction with Cyan and with which representatives of Cyan were not already engaged in discussions.

On January 25, 2015, Mr. Floyd and Mr. Frodsham participated in a call to discuss high-level terms for a potential strategic transaction. The following day, January 26, 2015, Mr. Frodsham sent Mr. Floyd an initial term sheet that provided for an all-stock acquisition of Cyan at an enterprise value ranging from $150-200 million (estimated to equal $2.71 - $3.43 per share) that was both below and above Cyan’s closing trading price on January 23, 2015 of $2.88 per share. The term sheet also indicated that Ciena would determine through the due diligence process certain key personnel from whom Ciena would request signed employment agreements as part of an acquisition, and noted that Ciena would expect voting agreements in support of Ciena’s offer to be signed by certain major stockholders. The term sheet was accompanied by a modified confidentiality agreement with provisions providing for a proposed exclusive negotiating period.

On January 26, 2015, Mr. Hatfield, Mr. Siegel, Mr. Ross and Mr. Corker participated in an update conference call with Party 3. The parties discussed Cyan’s SDN solutions and whether Party 3 still had interest in a potential strategic transaction. Party 3 indicated that it only was interested in Cyan’s software business, and that if it pursued such a strategic transaction, it would search for another party that had interest in Cyan’s hardware business. The parties did not discuss valuation terms, but Party 3 communicated to Cyan’s management that it now perceived value in both Cyan’s SDN and NFV solutions, and would therefore analyze and value a potential strategic transaction accordingly.

On January 27, 2015, the Strategic/Finance Committee of the Cyan board held a meeting with members of management in attendance. The committee discussed the indication of interest and term sheet that Cyan had received from Ciena concerning a potential acquisition. The committee noted that the indication of interest would require further clarification before it could be evaluated in depth. The committee discussed the process for responding to Ciena and engaging in discussions with other parties that had expressed interest. The committee then reviewed the terms of a proposed engagement letter to formally engage Jefferies as Cyan’s financial advisor for a potential strategic transaction. Management and the committee discussed that, in connection with the backstop provided by Jefferies at Cyan’s request in Cyan’s convertible debt and warrants offering in December 2014, Jefferies had purchased, and held, $5.5 million of Cyan’s 8% convertible notes and related warrants and, as

 

77


Table of Contents

such, could have an interest in the outcome of a strategic transaction in addition to the fee arrangement from its financial advisory engagement. The committee also noted that as a result of certain securities litigation related to the Company’s initial public offering, Jefferies was being indemnified by Cyan from potential liabilities in connection with that litigation. The committee discussed these factors and concluded that they would not present a conflict of interest that would preclude Jefferies from rendering advice and, if applicable, an opinion in connection with a transaction, and authorized management to execute an engagement letter with Jefferies on the terms discussed with the committee.

On January 29, 2015, the Cyan board held a meeting with members of management and representatives of Jefferies in attendance. The Cyan board discussed the potential strategic transaction with Ciena. The Cyan board reviewed the strategic compatibility of Cyan and Ciena from a product, customers and general market standpoint, reviewed the indication of interest that Cyan had received from Ciena both in terms of the indicated value placed on Cyan and other indicative terms. The Cyan board discussed that Ciena’s indication of interest included a provision requiring that certain key Cyan employees sign employment agreements as part of an acquisition. The Cyan board discussed that Mr. Hatfield, a director of Cyan, would likely be required by Ciena to continue as a key employee, in addition to other Cyan personnel that Ciena would identify through its due diligence process. The Cyan board noted that Ciena’s proposed confidentiality agreement included provisions for an exclusivity period. The Cyan board then discussed the current state of Cyan’s business and key business developments that may occur over the next several quarters that could impact the market perception and valuation of Cyan, and how those developments might impact a potential strategic transaction. The Cyan board then discussed the identity and nature of the other parties that had expressed interest in a strategic transaction with Cyan, the nature of the discussions and a discussion of other parties that may have an interest and how and when it may be appropriate to approach such additional parties. Jefferies then led a discussion of the financial terms of the indication of interest provided by Ciena. The Cyan board then directed a member of management to introduce representatives of Jefferies to Cyan’s lead contact at Ciena so that Jefferies could obtain additional information from Ciena.

On January 29, 2015, Mr. Floyd and Mr. Frodsham participated in a telephone call to discuss the initial term sheet and the Cyan board’s reaction. The next day, at Cyan’s request, a representative of Jefferies spoke with Mr. Frodsham.

On January 29, 2015, Cyan, Party 7 and a prospective financial sponsor of a potential combination of Cyan and Party 7 signed a three-way confidentiality agreement.

On January 30, 2015, Mr. Floyd contacted Mr. Frodsham to indicate that Cyan had engaged Jefferies and later that day representatives of Jefferies contacted Mr. Frodsham to discuss and clarify aspects of Ciena’s January 26, 2015 term sheet.

On January 30, 2015, Cyan provided answers to Party 3’s outstanding due diligence requests.

On February 4, 2015, Mr. Hatfield and Mr. Corker had a telephone call with Party 6. The parties discussed the structure, but not the terms or price, of a potential strategic transaction.

On February 5, 2015, the Cyan board held a meeting with members of management in attendance. The Cyan board considered the status of discussions with Ciena, Party 1, Party 3 and Party 6, as well as indications from other third parties. The Cyan board then discussed next steps.

On February 10, 2015, the Cyan board held a meeting with members of management and representatives of Jefferies in attendance. The Cyan board gave further consideration to the term sheet Cyan had received from Ciena on January 26, 2015. Jefferies discussed Cyan’s then-current business and market position, noting that there were significant positive developments at Cyan with respect to unforecasted orders that Cyan had received from its largest customer. The Cyan board then discussed in further detail Ciena’s proposal, noting that it contained limited terms and included an estimated enterprise value ranging from $150-200 million (estimated to

 

78


Table of Contents

equal $2.71 - $3.43 per share) that was below Cyan’s closing trading price on February 9, 2015 of $3.61 per share. The Cyan board then discussed the exclusivity period that Ciena had requested in connection with its proposal. The Cyan board determined that Cyan’s management and Jefferies should update Ciena on the developments in, and status of, Cyan’s business and prospects, and then request that Ciena make a revised proposal that did not involve a range if it were interested in continuing discussions. The Cyan board also instructed management and Jefferies to continue pursuing on Cyan’s behalf discussions previously initiated with other parties that might be interested in a strategic transaction with Cyan, including Party 3 and Party 1. Further, the Cyan board instructed management and Jefferies to evaluate other parties that might have an interest in Cyan, and authorized Jefferies to contact such parties to ascertain if they had an interest in learning about Cyan and the opportunity it presented. Finally, the Cyan board affirmed that the Strategic/Finance Committee would have the authority to represent the Cyan board in evaluating potential strategic alternatives for Cyan, with the understanding that any proposed agreement related to a strategic transaction (other than customary confidentiality agreements) would be presented to the full Board for discussion and approval prior to any such agreement being executed.

On February 10, 2015, at the Cyan board’s direction, representatives of Jefferies contacted Ciena to propose a meeting with Cyan management for an update regarding Cyan’s business—specifically Cyan’s software business—because the Cyan board did not believe that Ciena’s initial valuation as set forth in its initial term sheet reflected a complete understanding of the potential value of Cyan.

On February 11, 2015 and February 12, 2015, Mr. Hatfield and Mr. Siegel, together with other members of Cyan management, participated in conference calls with Party 3 regarding Cyan’s SDN offerings, software business and software business model.

On February 11, 2015 members of Cyan’s management participated in a conference call with Party 6 during which Party 6 confirmed its interest in pursuing a strategic partnership, but that its interest was limited to Cyan’s software business. The parties did not discuss terms, price or structure of a potential strategic transaction.

On February 12, 2015, in accordance with the Cyan board’s directives, representatives of Jefferies contacted Party 8 to determine Party 8’s interest in a potential strategic transaction with Cyan.

On February 13, 2015, in accordance with the Cyan board’s directives, representatives of Jefferies spoke with Party 6 regarding a potential strategic transaction.

On February 17, 2015, Cyan and Party 8 entered into a confidentiality agreement.

On February 18, 2015, Mr. Hatfield, Mr. Ross and Mr. Siegel participated in a conference call with Party 3 to discuss due diligence, valuation and a potential bid. Party 3 informed the members of Cyan’s management that it was still analyzing Cyan and formulating a valuation of its business.

On February 18, 2015, Mr. Hatfield, Mr. Ross, Mr. Siegel and Mr. Corker participated in a conference call with members of Party 1’s management regarding Party 1’s interest in pursuing a potential strategic transaction. Party 1 said that it was not prepared to pursue such an opportunity at that time.

On February 18, 2015, members of Cyan management, together with representatives of Jefferies, held a meeting with Party 2 to discuss Party 2’s interest in a potential strategic transaction.

On February 19, 2015 and February 20, 2015, Mr. Hatfield, Mr. Ross, Mr. Siegel, Mr. Coker, together with representatives of Jefferies, met with members of Party 6’s management at Party 6’s headquarters for due diligence. There were no discussions regarding price, terms or transaction structure.

On February 20, 2015, Mr. Hatfield participated in a phone call with Party 7 and the financial sponsor to further discuss financial models in connection with a potential strategic transaction.

 

79


Table of Contents

On February 24, 2015, Mr. Hatfield, Mr. Corker, Mr. Ross and other members of Cyan’s management, together with representatives of Jefferies, held a meeting with Party 2 at Cyan’s Petaluma, California headquarters to engage in business due diligence discussions.

On February 26, 2015, Mr. Hatfield, Mr. Ross, Mr. Siegel, Mr. Corker and other members of Cyan’s management hosted an introductory meeting with members of Party 8’s management at Cyan’s headquarters in Petaluma, California. Representatives of Jefferies also attended this meeting. From February 26, 2015 through March 11, 2015, in accordance with the Cyan board’s directives, representatives of Jefferies held occasional conversations with Party 8 regarding Party 8’s interest in a potential strategic transaction.

On March 3, 2015, at Cyan’s request, representatives of Jefferies sent diligence materials relating to Cyan to Party 2.

On March 5, 2015, Morgan Stanley, Ciena’s financial advisor for the potential strategic transaction with Cyan, sent Cyan an agenda for a meeting with Ciena scheduled for March 10, 2015 at Cyan’s headquarters in Petaluma, California.

On March 5, 2015, Mr. Corker held a due diligence meeting with Party 6.

On March 6, 2015, Party 2 called a representative of Jefferies to inform Cyan that it was no longer interested in a pursuing a strategic transaction with Cyan.

On March 10, 2015, Mr. Floyd, Mr. Ross, Mr. Siegel, together with representatives of Jefferies, participated in a meeting with members of Ciena’s management at Cyan’s Petaluma, California headquarters. The parties discussed, among other items, Cyan’s hardware business, software business, pipeline and customers. There was no discussion regarding price, terms or structure of a potential strategic transaction.

On March 10, 2015, Mr. Hatfield, Mr. Ross, Mr. Corker, together with representatives of Jefferies, participated in a conference call with Party 3 to discuss business diligence matters.

On March 11, 2015, in accordance with the Cyan board’s directives, a representative of Jefferies contacted a third party (referred to herein as Party 9) to determine whether Party 9 had interest in a potential strategic transaction with Cyan. A representative of Party 9 indicated that Party 9 had interest in Cyan’s software business.

On March 11, 2015, Party 8 declined to engage in any further discussions related to strategic opportunities.

On March 11, 2015, in accordance with the Cyan board’s directives, representatives of Jefferies contacted Party 6 regarding a planned diligence meeting, and the need for Party 6 to promptly present a specific indication of interest to Cyan if it was interested in proceeding with a meeting. On March 12, 2015, at Cyan’s request, representatives of Jefferies sent additional due diligence materials regarding Cyan to Party 6.

On March 12, 2015, at Cyan’s request, representatives of Jefferies sent additional diligence materials regarding Cyan to Ciena.

On March 12, 2015, in accordance with the Cyan board’s directives, representatives of Jefferies contacted a representative of Party 5 to inquire if Party 5 had interest in a potential strategic transaction with Cyan. Party 5 indicated that it had interest in scheduling a telephone call to discuss the matter further.

On March 12, 2015, a representative of Party 9 contacted Mr. Hatfield to indicate its interest in pursuing a potential strategic transaction.

On March 13, 2015, Party 3 indicated that it would decline to engage in further discussions relating to a potential strategic transaction. Party 3 indicated that it did not have internal support for a proposal at the current valuation.

 

80


Table of Contents

On March 17, 2015, Cyan and Party 9 executed a mutual confidentiality agreement. That same day, Cyan sent to Party 9 a presentation regarding Cyan’s software business.

On March 17, 2015, members of Cyan’s management met with Jefferies to discuss the best options for moving forward with respect to Party 6 and discussions regarding a potential strategic transaction.

On March 19, 2015, members of Cyan management participated in a telephone call with representatives of Party 5 to discuss a potential strategic transaction. Following this call, Party 5 was not responsive to further attempts to engage in discussions regarding a potential strategic transaction.

On March 20, 2015, the Cyan board held a meeting with members of management in attendance. Mr. Floyd provided an update to the Cyan board as to the status of discussions with Ciena and other potentially interested strategic parties.

On March 24, 2015, at Cyan’s request, representatives of Jefferies provided Ciena diligence materials related to Cyan’s capitalization.

On March 24, 2015, Mr. Hatfield, Mr. Ross, Mr. Corker, Mr. Siegel and other members of Cyan’s Management, together with representatives of Jefferies, participated in telephone call with members of management of Party 9 to discuss Party 9’s interest in pursuing a strategic transaction.

On March 25, 2015 and March 26, 2015, Mr. Floyd participated in phone calls with Party 9 to engage in discussions regarding a potential strategic transaction.

On March 27, 2015, Mr. Hatfield, Mr. Corker and Mr. Siegel called Party 6 to discuss next steps. Three days later, on March 30, 2015, Mr. Hatfield and Mr. Corker held a discussion with Party 6 to discuss the potential cost structure and synergies of Party 6 acquiring only the software business and only including a modest engineering team with the acquisition. The Representatives of Party 6 expressed Party 6’s need to further review the opportunity internally.

On March 31, 2015, Mr. Hatfield participated in a phone call with the potential sponsor of combining Cyan and Party 7. The sponsor indicated it did not have an interest in pursuing a potential business combination at the present time. Lacking financial backing for a business combination, Cyan and Party 7 discontinued their discussions.

On March 31, 2015, Mr. Corker held a meeting with a representative of Party 9 in Santa Clara, CA. During the meeting, the representative of Party 9 indicated that Party 9 had no interest in continuing discussions regarding a potential strategic transaction because Cyan was too expensive.

On April 1, 2015, Mr. Floyd spoke with Mr. Frodsham. Following the call, Mr. Frodsham sent Mr. Floyd an amended term sheet, the terms of which reflected Ciena’s proposed acquisition of Cyan at a purchase price of $4.50 for each outstanding share of Cyan common stock in an all-stock transaction and Ciena’s proposal for a restated mutual confidentiality agreement that included a proposed exclusivity period. On that date, the closing market price of Cyan’s common stock was $4.01.

On April 2, 2015, the Cyan board held a meeting with members of management and representatives of WSGR and Jefferies in attendance to discuss, among other items, Ciena’s amended term sheet. The Cyan board first discussed the third parties with which Cyan, with Jefferies’ assistance, had engaged in the past months with respect to evaluating a potential strategic transaction with Cyan, and the current status of those third party engagements. Representatives of Jefferies noted that parties approached by Jefferies regarding a potential transaction with Cyan had been informed of Cyan’s willingness to consider an acquisition of the entire Company or an acquisition of Cyan’s software business separate from the hardware business. The Cyan board reviewed the indication of interest that Cyan had received from Ciena, which reflected a significant increase in valuation compared to Ciena’s indication of interest in January 2015. The Cyan board discussed the term sheet, including

 

81


Table of Contents

the proposed purchase price, the indication from Ciena that certain key Cyan employees, likely including Mr. Hatfield, would be expected to enter into employment arrangements effective upon closing, that Ciena would be requiring certain stockholders of Cyan to enter into voting agreements in connection with a transaction, as well as certain other legal terms presented in Ciena’s indication of interest. The Cyan board then discussed specific aspects of the proposal that could be negotiated if the Cyan board elected to pursue the opportunity, particularly the proposed purchase price. After discussion, the Cyan board directed Jefferies to seek a higher purchase price from Ciena and an improvement in the other terms of Ciena’s indication of interest.

On April 3, 2015, Mr. Hatfield and Mr. Corker contacted Party 6 to determine if Party 6 had any interest in still pursuing a strategic transaction with Cyan.

On April 6, 2015, the Cyan board held a meeting with members of management and representatives of WSGR and Jefferies in attendance. At this meeting, the Cyan board discussed that since late January 2015, management had participated in discussions with 19 third parties regarding their potential interest in engaging in a strategic transaction with Cyan. Certain companies were either not responsive to initial inquiries or indicated that they were not interested in evaluating any such opportunity. Certain other companies indicated potential interest in engaging in a strategic transaction with Cyan, and a selection of these companies conducted technology-based due diligence. As a result of these discussions, while several companies had indicated a potential interest in acquiring Cyan or its software business, only Ciena submitted a proposal (and a proposed purchase price) for an acquisition of Cyan. No proposals were received for the software or other portions of Cyan’s business.

The Cyan board then reviewed the revised indication of interest that Ciena sent on April 1, 2015, noting the changes from Ciena’s initial indication received in January 2015. The revised indication of interest included, among other things, a higher proposed purchase price of $4.50 per share in stock. The revised term sheet requested a 45 day exclusivity period during which Ciena would conduct due diligence and negotiate the terms of a definitive agreement. The Cyan board then discussed the potential merits of a transaction in which the consideration would consist of Ciena’s common stock. The Cyan board then discussed that in its revised indication of interest, Ciena would require that certain key employees enter into employment arrangements effective upon closing, and that Michael Hatfield likely would be required by Ciena to continue as a key employee, in addition to other Cyan personnel that Ciena would identify through its due diligence process. Representatives of WSGR then reviewed with the Cyan board its fiduciary obligations when evaluating strategic transactions in general and specifically in the context of a stock-for-stock transaction.

Jefferies then updated the Cyan board regarding the valuation implied by Ciena’s initial term sheet and offered in its revised term sheet and the implied premiums and revenue multiples at the initial term sheet level, the revised term sheet level and additional data points. The revised term sheet included, among other things, a proposed purchase price of $4.50 payable in shares of Ciena common stock, which represented a 31%-66% increase in the per share price from the valuation implied in the initial term sheet and an increase of 53% - 104% in enterprise value from the level implied in the initial term sheet. The Cyan board discussed the implied equity and enterprise values for Cyan, and the value of the proposal to the convertible note and warrant holders. The Cyan board then discussed the stock trading and other publicly available information about Ciena, including the average daily trading volume and corresponding liquidity that would be available to Cyan stockholders, Ciena’s balance sheet and trading multiples and upcoming events that could impact Ciena’s stock price to the benefit or detriment of Cyan stockholders if Cyan were to proceed with a stock-for-stock transaction in light of different timing of setting an exchange ratio.

The Cyan board then requested that Jefferies contact Morgan Stanley to express the view of the Cyan board that the price proposed by Ciena was too low in light of the opportunity and to seek to clarify the approach for determining the exchange ratio.

On April 6, 2015, Party 6 notified Mr. Hatfield and Mr. Corker that Party 6 was no longer interested in pursuing discussions related to a strategic transaction.

 

82


Table of Contents

On April 6, 2015 and April 7, 2015, Mr. Siegel exchanged emails with David Rothenstein, Ciena’s Senior Vice President and General Counsel, to finalize the terms of a mutual confidentiality agreement.

On April 7, 2015, in accordance with the Cyan board’s directives, representatives of Jefferies participated in a call with Morgan Stanley concerning the terms of Ciena’s indication of interest that Cyan received on April 1, 2015 and Cyan’s updated business plan. During such call, Ciena proposed to (i) increase its proposal to acquire Cyan to $4.75 per share, (ii) utilize a fixed exchange ratio based on Ciena’s 10-day volume weighted average price (“VWAP”) ending the last trading day before an announcement regarding the transaction, and (iii) shorten the exclusive due diligence/negotiation period to May 4, 2015.

On April 7, 2015, Mr. Hatfield participated in a phone call with a representative of Party 1 to discuss the need for Party 1 to submit an offer if Party 1 was interested in pursuing a potential strategic transaction. After this discussion, Party 1 and Cyan did not engage in any further discussions regarding a potential strategic transaction.

On April 8, 2015, the Cyan board held a meeting with members of management and representatives of WSGR and Jefferies in attendance to discuss, among other items, the additional terms proposed by Ciena on April 7, 2015. Representatives of Jefferies updated the Cyan board on Jefferies’ discussions with Morgan Stanley following the April 6, 2015 Cyan board meeting. The Cyan board then discussed the longer term value creation opportunity for Cyan’s stockholders that would derive from receiving shares of Ciena common stock in a transaction. The Cyan board noted the potential growth opportunities and synergies of a combination and potential market advantage that the combined company would have in pursuing the SDN and NFV software market.

The Cyan board then reviewed the process that had taken place since late January 2015, in which 19 parties had been contacted to determine their interest in a potential strategic transaction with Cyan. Of the 19 companies contacted, nine—Party 1, Party 2, Party 3, Party 5, Party 6, Party 7, Party 8, Party 9 and Ciena—engaged in substantive discussions regarding a potential strategic transaction, conducted due diligence, and signed a confidentiality agreement with Cyan if they had not previously done so. Of these nine companies, only Ciena submitted a proposal to acquire Cyan.

In light of the opportunities presented by a combination with Ciena and the opportunities and risks that Cyan faced as an independent company, the Cyan board authorized and directed Cyan’s officers to execute an amended confidentiality agreement with Ciena providing Ciena with exclusive negotiations through May 4, 2015 to conduct due diligence and negotiate the terms of an acquisition agreement with Cyan.

On April 8, 2015, following the Cyan board meeting, Cyan and Ciena entered into an amended confidentiality agreement providing for an exclusivity period.

On April 9, 2015, Cyan provided Ciena with access to Cyan’s virtual data room.

On April 9, 2015 Mr. Siegel and representatives of WSGR participated in a call with representatives of Ciena and Ciena’s outside counsel, Hogan Lovells US LLP (“Hogan Lovells”) to discuss how Cyan’s outstanding convertible notes and warrants would be treated in accordance with their terms in the context of the proposed strategic transaction. Representatives of Hogan Lovells expressed Ciena’s concern that based on the proposed structure of the strategic transaction and the terms of the convertible notes, the note holders’ security interest in Cyan’s assets and the negative covenants in the convertible notes would continue to apply after the closing. Representatives of Hogan Lovells conveyed Ciena’s preference for the proposed transaction to be structured in such a way so as to trigger a “Fundamental Change” in respect of the convertible notes, which would cause the security interests in Cyan’s assets to terminate and the negative operating covenants in the convertible notes to terminate after the closing of the proposed transaction. Representatives of Hogan Lovells then discussed that a “Fundamental Change” could be triggered in a change of control transaction in which the consideration paid for Cyan common stock was a mix of both cash and stock.

On April 10, 2015, representatives of Hogan Lovells communicated to WSGR that Ciena would propose that the form of merger consideration consist of 15% cash and 85% Ciena common stock.

 

83


Table of Contents

On April 14, 2015, Mr. Floyd, Mr. Hatfield and Ciena’s Mr. Frodsham held a meeting at Cyan’s headquarters to discuss potential synergies in consideration of a potential strategic transaction.

On April 14, 2015, Hogan Lovells sent to WSGR a draft merger agreement and draft form of voting agreement that Ciena proposed to be entered into by Cyan’s directors and certain of their affiliates, and Cyan’s named executive officers. The merger agreement reflected a proposed transaction structure with the form of merger consideration consisting of both cash and stock.

Members of Cyan management and representative of WSGR held meetings over several days following receipt of the merger agreement on April 14, 2015 to discuss the terms of the merger agreement.

On April 18, 2015, representatives of Hogan Lovells participated in a telephone call with representatives of WSGR to discuss Ciena’s requirement that the form of merger consideration be adjusted to consist of both cash and stock so as to trigger a “Fundamental Change” in respect of the convertible notes. Representatives of Hogan Lovells and WSGR discussed the proportion of the merger consideration that would be comprised of cash, and the mechanism for determining the cash and stock mix.

On April 19, 2015, WSGR sent Hogan Lovells a revised draft of the merger agreement.

On April 21, 2015, at the direction and on behalf of Cyan, representatives of Jefferies participated in a call with Morgan Stanley during which representatives of Morgan Stanley formally proposed on behalf of Ciena that, in order to achieve Ciena’s desired disposition of Cyan’s outstanding convertible notes and related warrants, the form of merger consideration Ciena was offering was changing from all stock to a mix of cash and stock consisting of 11% cash and 89% stock measured by the value of Ciena’s common stock at closing, a structure that would trigger a “Fundamental Change” in respect of Cyan’s outstanding convertible notes and warrants. (For a more detailed discussion of these terms of the consequences thereof, please see the section entitled “Treatment of Cyan Warrants and Convertible Notes” beginning on page 130 of this proxy statement/prospectus.)

On April 21, 2015, Cyan and Ciena also held a diligence call, and Mr. Siegel and Mr. Rothenstein spoke regarding key employee matters and a process to advance the merger agreement negotiations.

On April 23, 2015, Mr. Siegel and Mr. Rothenstein participated in a call to discuss key employee term sheets, issues pertaining to the merger agreement and voting agreements, and communications with respect to the proposed strategic transaction.

On April 24, 2015, Cyan and Ciena held a software due diligence meeting in Santa Rosa, California.

On April 24, 2015, Mr. Siegel and Mr. Rothenstein participated in a call to discuss provisions of the merger agreement, and Ciena’s proposed arrangements for nine key Cyan employees who would join Ciena in the proposed strategic transaction.

On April 26, 2015, representatives of Cyan, WSGR, Ciena and Hogan Lovells participated in a call to negotiate certain provisions of the merger agreement. Among the material terms discussed were whether Cyan would have the right to terminate the merger agreement in order to accept a “Superior Proposal,” the circumstances under which the Cyan board would be entitled to make an “Adverse Recommendation Change” and the appropriate termination fee payable to Ciena should Cyan terminate the merger agreement in certain specified circumstances. Please refer to the section entitled “The Merger Agreement—No Solicitation or Negotiation of Takeover Proposals” beginning on page 125 of this proxy statement/prospectus and the section entitled “The Merger Agreement—Termination Fees and Expenses” beginning on page 135 of this proxy statement/prospectus for a more complete discussion of these matters.

On April 26, 2015, Mr. Rothenstein provided a draft employment term sheet to Mr. Hatfield. On that same date, Mr. Rothenstein and Mr. Hatfield participated in a call to review and discuss the terms thereof, as well as

 

84


Table of Contents

the potential terms of similar term sheets for eight other Cyan employees identified by Ciena during the due diligence process.

On April 28, 2015, the Strategic/Finance Committee held a meeting with members of management and representatives of WSGR in attendance to discuss the terms of the merger agreement and the proposed transaction. The committee discussed Ciena’s proposal to adjust the proposed form of merger consideration to consist of 11% cash and 89% stock at closing, a structure that was designed to trigger a “Fundamental Change” in respect of Cyan’s outstanding convertible notes. The committee discussed how the “Fundamental Change” would result in releasing the security interest the note holders had in Cyan’s assets, would cause the negative covenants in the convertible notes to terminate at closing and would also cause the outstanding warrants to be deemed to exercise immediately prior to closing. The committee then discussed how the “Fundamental Change” would also trigger the right for holders of convertible notes to receive additional shares of stock upon the conversion of the notes in connection with the proposed transaction. The Strategic/Finance Committee then discussed the fact that given that Jefferies held convertible notes and warrants and because Ciena proposed to structure the transaction to result in a “Fundamental Change” which would trigger additional rights of the holders of convertible notes, Jefferies may be deemed to have an interest in the transaction. The Strategic/Finance Committee therefore determined it would be advisable to contact an additional disinterested financial advisor to perform an analysis with respect to the fairness, from a financial point of view, of the per share merger consideration to be received by the holders of Cyan common stock in the proposed transaction. After further discussion, the Strategic/Finance Committee authorized management to contact Houlihan Lokey to determine if Houlihan Lokey would perform such an analysis and prepare a written opinion to the Cyan board as to the fairness, from a financial point of view, of the per share merger consideration to be received by the holders of Cyan common stock in the merger, pursuant to the proposed terms of the merger agreement and its analysis thereof.

On April 28, 2015 and April 29, 2015, Mr. Siegel and Mr. Ross participated in calls with representatives of Houlihan Lokey to discuss whether Houlihan Lokey would prepare an opinion for the Cyan board as to the fairness, from a financial point of view, of the per share merger consideration to be received by the holders of Cyan common stock in the merger based on the proposed terms of the agreement and its analysis thereof. Houlihan Lokey agreed to perform such an analysis and to render an opinion to the Cyan board with respect to the fairness, from a financial point of view, of the per share merger consideration to be received by the holders of Cyan common stock in the merger. Following the phone calls, Mr. Ross sent materials relating to the proposed transaction to Houlihan Lokey.

On April 29, 2015, members of Cyan’s management, together with representatives of Jefferies and Houlihan Lokey, participated in a phone call with Ciena to conduct due diligence on Ciena.

On April 29, 2015, Mr. Siegel and Mr. Rothenstein participated in a telephone call to discuss Cyan’s engagement of Houlihan Lokey as a second financial advisor, and to discuss certain other outstanding issues both in the merger agreement and the due diligence process.

On April 29, 2015, and continuing through until signing a final version of the term sheet on May 3, 2015, Mr. Hatfield, with the assistance of independent counsel, negotiated the terms of his employment term sheet with representatives of Ciena.

On April 30, 2015, the Cyan board met with members of management and representatives of Jefferies, Houlihan Lokey and WSGR in attendance at various points in the meeting (specifically, representatives of Jefferies and Houlihan Lokey were not in attendance at the same time) to further consider the proposed transaction. Representatives of WSGR reviewed with the Cyan board its fiduciary obligations. Representatives of WSGR then summarized the material terms of the merger agreement, including Ciena’s requirement that the merger consideration consist of 11% cash and 89% stock at closing to prompt a “Fundamental Change” of the convertible notes and the rationale therefor, and the terms that remained subject to ongoing negotiations. WSGR also summarized the material terms of the proposed voting agreements that were being entered into by certain stockholders of Cyan, including the fact that Ciena was requesting that stockholders representing approximately

 

85


Table of Contents

40% of Cyan’s issued and outstanding stock would execute voting agreements. The Cyan board then discussed certain termination rights subject to then-current negotiation, Cyan’s discussions in 2014 and 2015 with third parties regarding potential strategic transactions, and the importance of ensuring the certainty of the merger’s closing, including by negotiating the parameters of the events that would constitute a material adverse change. The Cyan board then provided guidance to Cyan’s management regarding material outstanding terms, particularly, termination rights, termination fee and closing certainty provisions. Jefferies then provided the Cyan board with an overview of the financial terms of the transaction. Representatives of Jefferies and members of the Cyan board that held Cyan’s convertible notes (Mr. Haque, Mr. Floyd and Mr. Hatfield) were then excused from the meeting.

Mr. Siegel then began a discussion about the Company’s hiring of Houlihan Lokey to analyze the transaction and provide an additional opinion as to the fairness, from a financial point of view, of the per share merger consideration to be received by the holders of Cyan common stock in the merger, due to the potential appearance of a conflict of interest as a result of Jefferies owning the Company’s convertible notes and warrants. Representatives of Houlihan Lokey then joined the meeting and provided an update on their review of certain financial analyses to the remaining members of the Cyan board. Representatives of Houlihan Lokey then noted prior work that Houlihan Lokey had performed for Ciena in the past and noted that Houlihan Lokey was not currently engaged by Ciena. At this time, representatives for Houlihan Lokey left the meeting.

The excused members of the Cyan board and representatives of Jefferies then re-joined the meeting, and the full Cyan board then discussed that the price of Ciena common stock had increased and that, as a result, the currently proposed 10-day VWAP would result in fewer shares for Cyan stockholders than if the parties had agreed to a longer VWAP period. The Cyan board directed representatives of Jefferies, in light of recent movements in Ciena’s stock price, to negotiate the exchange ratio based on a 30-day pre-signing VWAP versus the pre-signing 10-day VWAP, as this would be more advantageous to Cyan’s stockholders.

On April 30, 2015 and May 1, 2015, in accordance with the Cyan board’s directives, representatives of Jefferies engaged in discussions with representatives of Morgan Stanley regarding the exchange ratio. Specifically, representatives of Jefferies conveyed the Cyan board’s request that the exchange ratio be based on a 30-day pre-signing VWAP versus Ciena’s proposed 10-day VWAP.

On May 1, 2015, Mr. Siegel and Mr. Rothenstein participated in a telephone call to discuss the items that remained open under the merger agreement and the plan for external communications once the proposed strategic transaction had signed. Mr. Rothenstein informed Mr. Siegel that Ciena would accept an exchange ratio based on a 20-day VWAP, not the 30-day VWAP that Cyan requested. Mr. Rothenstein simultaneously provided to Cyan a proposed set of compromises on the material open items remaining in the Merger Agreement, including, among other things, treatment of certain operative covenants, granting Cyan the right to terminate the merger agreement in order to enter into a definitive agreement with respect to a “Superior Proposal,” granting Cyan various terms regarding closing certainty that the Cyan board previously had indicated it valued highly particularly with respect to the definition of a material adverse effect and setting the termination fee payable by Cyan in certain circumstances at 3.75% of the total consideration payable by Ciena in the transaction, which would equal $15,000,000.

On May 1, 2015, Cyan further agreed, in connection with such proposed terms, that it would permit Ciena to engage in limited pre-signing diligence calls to certain key customers of Cyan.

On May 2, 2015, Mr. Floyd participated in a call with Mr. Frodsham and Mr. Rothenstein to discuss open items related to the key employees. That same day, Mr. Siegel and Mr. Rothenstein participated in a call regarding a number of open issues under the merger agreement and voting agreements, including the proposed size of the termination fee payable by Cyan to Ciena, as well as the status of discussions related to key employees.

On May 2, 2015, representatives of Morgan Stanley reiterated to representatives of Jefferies the position previously communicated by Mr. Rothenstein, namely that Ciena would not accept an exchange ratio based on a 30-day VWAP, but would accept setting a fixed exchange ratio based on a 10-day to 20-day VWAP, which would

 

86


Table of Contents

result in a fixed exchange ratio of 0.224 of a share of Ciena common stock based on a 20-day VWAP (with 89% payable in Ciena common stock and 11% in cash based on the value of Ciena common stock at closing).

On May 3, 2015, the Cyan board met with members of management and representatives of Jefferies, Houlihan Lokey and WSGR in attendance at various points in the meeting to consider approving the transaction with Ciena, pending the results of the latest updates from its advisors regarding the negotiations of the purchase price and other terms of the merger agreement. A representative of Jefferies updated the Cyan board that, as instructed by the Cyan board, Jefferies had held discussions with Morgan Stanley regarding increasing Ciena’s purchase price. Specifically, the representative of Jefferies indicated that Jefferies had conveyed to Morgan Stanley the Cyan board’s position that the exchange ratio be based on a 30-day pre-signing VWAP and that Morgan Stanley had informed Jefferies that Ciena would not accept an exchange ratio based on a 30-day VWAP, but would accept setting a fixed exchange ratio based on a 20-day VWAP, resulting in a final purchase price equal to an exchange ratio of 0.224 of a share of Ciena common stock, based on a 20-day VWAP. The Cyan board then discussed the 20-day VWAP and the increased purchase price, and determined that the proposed terms were acceptable. The Cyan board then approved the final purchase price, reflecting an exchange ratio of 0.224. Based on the closing price of Ciena common stock on May 1, 2015 of $21.29, this exchange ratio represented approximately $4.77 per share of Cyan common stock, which was above Cyan’s most recent closing price of $3.65 per share.

Jefferies then reviewed with the Cyan board its financial analysis of the merger consideration and rendered an oral opinion, confirmed by the delivery of a written opinion, dated May 3, 2015, to the Cyan board to the effect that, as of such date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, the merger consideration to be received by holders of Cyan common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders.

A representative from Houlihan Lokey then reviewed and discussed its financial analyses with respect to Cyan, Ciena and the proposed merger. Thereafter, at the request of the Cyan board, Houlihan Lokey rendered its oral opinion, which was subsequently confirmed by delivery of Houlihan Lokey’s written opinion to the Cyan board dated May 3, 2015, to the effect that, as of that date and based on and subject to the assumptions, qualifications, limitations and other matters considered in connection with the preparation of such opinion, the per share merger consideration to be received by the holders of Cyan common stock in the merger pursuant to the merger agreement was fair, from a financial point of view, to such holders.

Representatives of WSGR then updated the Cyan board with respect to the current status of certain terms in the merger agreement that remained open as of the April 30, 2015 Cyan board Meeting, including that Ciena had made certain concessions that permitted Cyan to terminate the merger agreement in order to enter into a definitive agreement with respect to a “Superior Proposal” and granted Cyan various terms regarding closing certainty, particularly with respect to the definition of a material adverse effect, while Cyan had agreed to pay a termination fee in certain circumstances that would be equal to 3.75% of the total consideration payable by Ciena in the transaction, which would equal $15,000,000. Representatives from WSGR then answered questions from the Cyan board regarding the terms of the merger agreement, and then summarized the material terms of the voting agreements that each of the directors were executing in connection with the merger.

Following the foregoing discussion, representatives of WSGR reviewed proposed resolutions approving the transaction. In addition to the adoption of the merger agreement, the resolutions contained, among other matters, resolutions acknowledging the possible interest of certain parties to the merger, including that certain members of the Cyan board and Jefferies held Cyan’s convertible notes and warrants, and that certain Cyan directors were entering into employment arrangements with Ciena in connection with the merger. In particular, management discussed with the Cyan board that Michael Hatfield, a director, was entering into an employment arrangement with Ciena, contingent upon the transaction being consummated. The Cyan board, following a review of the proposed resolution, unanimously adopted the resolutions and, among other things, (1) determined that the

 

87


Table of Contents

Merger Agreement, the Merger, and the other Transactions were advisable and in the best interests of Cyan and its stockholders, (2) determined that the entry into the Merger Agreement and the consummation of the Merger and the other Transactions on the terms and subject to the conditions set forth in the Merger Agreement were advisable and in the best interests of Cyan and its stockholders, (3) approved the Merger Agreement and the voting agreements and (4) resolved to recommend that the stockholders of Cyan adopt the Merger Agreement.

On May 3, 2015, Cyan, Ciena and Merger Sub signed the Merger Agreement.

On May 4, 2015, Ciena and Cyan issued press releases announcing the Merger.

Recommendations of the Cyan Board; Cyan’s Reasons for the Merger

The Cyan board, at a meeting held on May 3, 2015, unanimously:

 

    approved the merger agreement, the merger and all of the other transactions contemplated by the merger agreement;

 

    determined that it is in the best interests of Cyan and its stockholders to enter into the merger agreement and consummate the merger and all of the other transactions contemplated by the merger agreement;

 

    directed that the merger agreement be submitted to a vote at a meeting of the Cyan stockholders; and

 

    recommended that the Cyan stockholders vote to adopt the merger agreement.

Accordingly, the Cyan board unanimously recommends that the Cyan stockholders vote “FOR” the proposal to adopt the merger agreement.

In evaluating the merger, the Cyan board consulted with Cyan’s senior management and outside legal and financial advisors, considered a number of alternatives to enhance Cyan’s competitive position in the networking industry and to increase stockholder value and considered a number of factors that it believed supported its decision to enter into the merger agreement and consummate the merger. These discussions included executive sessions with outside legal advisors without management and financial advisors present. The factors considered by the Cyan board included, but were not limited to, the following:

 

    the per share merger consideration, having a value at closing of 0.224 of a share of Ciena common stock, which represented $4.75 per share of Cyan common stock based on Ciena’s 20-day volume weighted average price as of May 1, 2015, which was a 30% premium to Cyan’s closing stock price of $3.65 per share on May 1, 2015;

 

    the Cyan board’s view that the merger would provide near-term value and liquidity to Cyan’s stockholders;

 

    the Cyan board’s view that while Cyan stock might reach the value of the merger consideration at some point in the future, there was risk associated with that in light of industry- and Cyan-specific dynamics and outlook previously considered by the Cyan board;

 

    the Cyan board’s views of the challenges and opportunities facing the networking industry, including the service providers’ continued intense focus on reducing capital expenditures;

 

    the Cyan board’s understanding of the business operations, financial condition, earnings and prospects of Cyan, including the prospects of Cyan on a standalone basis, whether a company of Cyan’s size would be able to effectively address the needs of larger service providers and to compete with larger and more established competitors, the significant risk associated with Cyan’s reliance on its top customer for a substantial portion of its revenue and the risk of Cyan attempting to grow by focusing more heavily on unproven revenue streams from its software business;

 

88


Table of Contents
    the Cyan board’s review of Ciena’s business operations, financial condition, earnings and prospects;

 

    the Cyan board’s views as to the potential impact of the merger on Cyan’s business and its customer relationships, employees and other business partners, and the prospects that a combination of Cyan with Ciena would have the potential to strengthen these relationships;

 

    the Cyan board’s consideration, with the assistance of Cyan’s management team and its outside legal and financial advisors, of the results of a third-party solicitation process to uncover strategic opportunities including other potential sale and acquisition transactions, the sale of a portion of Cyan’s business or a simultaneous sale of all of Cyan’s businesses to separate buyers, and continuing to operate on a standalone basis;

 

    the financial presentation and written opinion, dated May 3, 2015, of Jefferies to the Cyan board as to the fairness, from a financial point of view and as of such date, to holders of Cyan common stock of the merger consideration to be received by such holders pursuant to the merger agreement, which opinion was based on and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Jefferies as more fully described under the caption “The Merger—Opinions of Cyan’s Financial Advisors”;

 

    the financial analyses reviewed by Houlihan Lokey with the Cyan board, and the oral opinion to the Cyan board (which was confirmed in writing by delivery of Houlihan Lokey’s written opinion dated May 3, 2015), with respect to the fairness, from a financial point of view, of the per share merger consideration to be received by the holders of Cyan common stock in the merger, as of May 3, 2015, based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion. See “The Merger—Opinions of Cyan’s Financial Advisors”;

 

    the anticipated market capitalization, liquidity and capital structure of the combined company;

 

    the likelihood that the merger would be consummated based on, among other things:

 

    the fact that Ciena had sufficient cash on hand to finance the cash consideration and other cash payments in the merger;

 

    the absence of a financing condition in the merger agreement;

 

    the likelihood and anticipated timing of consummating the merger in light of the scope of the conditions to closing;

 

    that Cyan is entitled to specific performance to prevent breaches of the merger agreement and to enforce specifically the terms of the merger agreement;

 

    other terms of the merger agreement, including:

 

    the Cyan board’s belief that the terms of the merger agreement, including the parties’ mutual representations, warranties, covenants and closing conditions, are reasonable;

 

    the covenants contained in the merger agreement obligating each of the parties to use reasonable best efforts to take all actions necessary to cause the closing conditions in the merger agreement to be satisfied as promptly as practicable, except that neither Ciena nor any of its affiliates is required to agree to limitations on their right to control or operate Ciena’s business or assets (including the business and assets of Cyan and its subsidiaries after the consummation of the merger) or to exercise full ownership rights of such businesses, or agree or be required to sell or otherwise dispose of, hold or divest itself of all or any portion of such business or assets;

 

   

Cyan’s ability, at any time prior to (but not after) obtaining the Cyan stockholder approval, to consider and respond to an unsolicited written takeover proposal, to furnish non-public information to the person making such a proposal and to engage in discussions or negotiations with the person making such a takeover proposal, if the Cyan board, prior to taking any such

 

89


Table of Contents
 

actions, and among other requirements more fully described in the merger agreement, determines in good faith and after consultation with its outside legal and financial advisors that such takeover proposal either constitutes a superior proposal or could reasonably be expected to result in a superior proposal and after consultation with its outside legal counsel that failure to take such action would be inconsistent with the Cyan board’s fiduciary duties to the Cyan stockholders;

 

    the Cyan board’s ability, under certain circumstances, to withhold, modify or qualify, the Cyan board recommendation to Cyan stockholders that they vote in favor of the adoption of the merger agreement or recommend the approval or adoption of, or approve or adopt, declare advisable or publicly propose to recommend, approve, adopt or declare advisable, a takeover proposal;

 

    Cyan’s ability, under certain circumstances, to terminate the merger agreement in order to enter into an agreement providing for a superior proposal, provided that Cyan complies with its obligations relating to the entering into of any such agreement and concurrently with the termination of the merger agreement pays to Ciena a termination fee of $15.0 million, in connection with an agreement for a superior proposal; and

 

    the availability of appraisal rights under the DGCL to Cyan stockholders who comply with all of the required procedures under the DGCL, which allows such holders to seek appraisal of the fair value of their shares of Cyan common stock as determined by the Delaware Court of Chancery;

 

    the fact that the merger was unanimously approved by the Cyan board, none of the members of which is affiliated with Ciena;

 

    the risk that continuing to pursue other potential alternatives could have resulted in the loss of an opportunity to consummate a transaction with Ciena;

 

    the fact that the merger is designed to qualify as a “reorganization” under Section 368(a) of the Code;

 

    the fact that a significant portion of the consideration to be received by Cyan stockholders will consist of Ciena common stock, providing Cyan stockholders the opportunity to participate as stockholders in the potential appreciation in the stock of the combined company, in light of the perceived strategic benefits of the proposed merger of creating a larger, more competitive company, more capable of competing against larger networking companies in more markets, and the significant cost synergies that would be obtained by the combined company; and

 

    the fact that Ciena common stock issued in the merger will be registered with the SEC and listed on the NYSE, and therefore holders of Cyan common stock who wish to obtain liquidity with respect to their merger consideration will have the opportunity to do so.

In the course of its deliberations, the Cyan board also considered a variety of risks and other countervailing factors related to entering into the merger agreement, the merger and all other transaction contemplated thereby, including but not limited to:

 

    the fact that the merger may be delayed or not occur at all, due to a failure of certain conditions, including regulatory approval of the transaction;

 

    the possibility that regulatory approvals required in connection with the merger, including the risk that regulatory clearances may not be obtained;

 

    the risks and costs to Cyan if the merger is delayed or does not occur at all, including the potential negative impact on Cyan’s ability to retain key employees, the diversion of Cyan management and employee attention and the potential disruptive effects on Cyan’s day-to-day operations and Cyan’s relationships with third parties;

 

    the restrictions on the conduct of Cyan’s business prior to the consummation of the merger, which may delay or prevent Cyan from undertaking business opportunities that may arise or any other action it would otherwise take with respect to the operations of Cyan pending consummation of the merger;

 

90


Table of Contents
    the risk that as a result of the announcement of the merger, Cyan’s existing relationships with customers could be significantly disrupted and Cyan might have increased difficulty attracting new customers after such announcement;

 

    the potential risks associated with achieving anticipated synergies and successfully integrating Cyan’s business, operations and workforce with those of Ciena;

 

    the fact that a significant portion of the consideration to be received by Cyan’s stockholders will consist of Ciena common stock, and therefore if the risks described in the preceding bullet point materialize, the long-term value of the stock portion of the merger consideration may be materially less than the value of such consideration expected as of the date that the merger agreement was signed;

 

    the risk of incurring substantial expenses related to the merger, including in connection with any litigation resulting from the announcement or pendency of the merger;

 

    the possibility that, if the merger is not consummated, under certain circumstances, Cyan may be required to pay up to $2.0 million in Ciena’s expenses or a termination fee of $15.0 million, as more fully described in the section entitled “The Merger Agreement—Expenses” beginning on page 136 of this proxy statement/prospectus and the section entitled “The Merger Agreement—Termination Fees and Expenses” beginning on page 135 of this proxy statement/prospectus, which could discourage other third parties from making an alternative takeover proposal with respect to Cyan, but which the Cyan board believes would not be a meaningful deterrent;

 

    the risk that the price of Ciena common stock determined at the time of the closing of the merger could be lower than the price of such stock as of the time of signing the merger agreement, and accordingly, the value of the consideration received by the Cyan stockholders in the merger could be materially less than the value of such stock consideration as of the date that the merger agreement was signed; and

 

    the other potential risks described in the section entitled “Risk Factors” beginning on page 47 of this proxy statement/prospectus.

In addition, the Cyan board was aware of and considered the interests of its directors and executive officers that are different from, or in addition to, the interests of Cyan stockholders generally, including the treatment in the merger of Cyan stock options and other equity awards and the warrants and convertible notes held by such directors and executive officers described in the section entitled “Interests of Cyan’s Directors and Executive Officers in the Merger” beginning on page 141 of this proxy statement/prospectus and Ciena’s agreement to indemnify Cyan directors and officers against certain claims and liabilities.

The foregoing discussion of the information and factors that the Cyan board considered is not intended to be exhaustive, but rather is meant to include the material factors that the Cyan board considered. The Cyan board collectively reached the conclusion to approve the merger agreement, the merger and all of the other transactions contemplated by the merger agreement in light of the various factors described above and other factors that the members of the Cyan board believed were appropriate. In view of the complexity and wide variety of factors, both positive and negative, that the Cyan board considered in connection with its evaluation of the merger, the Cyan board did not find it practical, and did not attempt, to quantify, rank or otherwise assign relative weights or values to any of the factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determination of the Cyan board. Rather, in considering the various factors, individual members of the Cyan board considered all of these factors as a whole and concluded, based on the totality of information presented to them and the investigation conducted by them, that, on balance, the positive factors outweighed the negative factors and that they supported a determination to approve the merger agreement, declare its advisability and recommend that the Cyan stockholders vote to adopt the merger agreement. In considering the factors discussed above, individual directors may have given different weights to different factors.

 

91


Table of Contents

Opinions of Cyan’s Financial Advisors

Opinion of Jefferies LLC

Cyan has retained Jefferies as a financial advisor in connection with the mergers. In connection with this engagement, Cyan requested that Jefferies evaluate the fairness, from a financial point of view, of the merger consideration to be received by holders of Cyan common stock pursuant to the merger agreement. At a meeting of the Cyan board held on May 3, 2015, Jefferies rendered an oral opinion, confirmed by delivery of a written opinion dated May 3, 2015, to the Cyan board to the effect that, as of that date and based on and subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken as described in its opinion, the merger consideration to be received by holders of Cyan common stock pursuant to the merger agreement was fair, from a financial point of view, to holders of Cyan common stock.

The full text of Jefferies’ opinion describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Jefferies. This opinion is attached as Annex C and is incorporated herein by reference. Jefferies’ opinion was provided for the use and benefit of the Cyan board (in its capacity as such) in its evaluation of the merger consideration from a financial point of view and did not address any other aspect of the mergers or any other matter. The opinion did not address the relative merits of the mergers or other transactions contemplated by the merger agreement as compared to any alternative transaction or opportunity that might be available to Cyan, nor did it address the underlying business decision by Cyan to engage in the mergers. Jefferies’ opinion does not constitute a recommendation as to how any stockholder should vote or act in connection with the mergers or any other transactions. The following summary is qualified in its entirety by reference to the full text of Jefferies’ opinion.

In arriving at its opinion, Jefferies, among other things:

 

    reviewed an execution version of the merger agreement provided to Jefferies on May 3, 2015;

 

    reviewed certain publicly available financial and other information about Cyan and Ciena;

 

    reviewed certain information furnished to Jefferies by the respective managements of Cyan and Ciena relating to the businesses, operations and prospects of Cyan and Ciena, including financial forecasts and estimates relating to Cyan prepared or provided by Cyan management and publicly available financial forecasts and estimates relating to Ciena confirmed with Ciena management;

 

    held discussions with members of the senior managements of Cyan and Ciena concerning the matters described in the second and third bullets immediately above;

 

    held discussions, at the direction of the Cyan Board, with selected third parties to solicit indications of interest in the possible acquisition of all or a part of Cyan;

 

    reviewed the stock trading price history and implied trading multiples for Cyan and Ciena and compared them with those of certain publicly traded companies or businesses that Jefferies deemed relevant in evaluating Cyan and Ciena;

 

    compared the financial terms of the merger with publicly available financial terms of certain other transactions that Jefferies deemed relevant in evaluating the mergers; and

 

    conducted such other financial studies, analyses and investigations as Jefferies deemed appropriate.

In its review and analysis and in rendering its opinion, Jefferies assumed and relied upon, but did not assume any responsibility to independently investigate or verify, the accuracy and completeness of all financial and other information that was supplied or otherwise made available by Cyan and Ciena or that was publicly available to Jefferies (including, without limitation, the information described above) or that was otherwise reviewed by Jefferies. Jefferies relied on assurances of the managements of Cyan and Ciena that they were not aware of any facts or circumstances that would make such information incomplete, inaccurate or misleading. In

 

92


Table of Contents

its review, Jefferies did not obtain any independent evaluation or appraisal of any of the assets or liabilities (contingent, off-balance sheet or otherwise and including, without limitation, liabilities relating to pending litigation in connection with Cyan’s initial public offering or otherwise), nor did Jefferies conduct a physical inspection of any of the properties or facilities, of Cyan, Ciena or any other entity and Jefferies was not furnished with, and assumed no responsibility to obtain, any such evaluations, appraisals or physical inspections.

With respect to the financial forecasts and estimates, including estimates as to potential net operating loss carryforwards and other potential tax attributes of Cyan on a standalone basis, provided to and reviewed by Jefferies, Jefferies noted that projecting future results of any company is inherently subject to uncertainty. Jefferies was informed, however, and assumed, that the financial forecasts and estimates relating to Cyan which Jefferies was directed to utilize in its analyses were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of Cyan management as to the future financial performance of Cyan and the other matters covered thereby. With respect to the publicly available financial forecasts and estimates relating to Ciena which Ciena management had confirmed as appropriate for use in Jefferies’ analyses with respect to Ciena, Jefferies was informed, and assumed, that such financial forecasts and estimates were a reasonable basis upon which to evaluate Ciena. Jefferies expressed no opinion as to any such financial forecasts or estimates or the assumptions on which they were based and Jefferies assumed that the financial results reflected in the financial forecasts and estimates utilized in its analyses would be realized in the amounts and at the times projected. Jefferies relied upon the assessments of Cyan management as to, among other things, (i) the potential impact on Cyan and Ciena of market, cyclical and other trends in and prospects for, and governmental, regulatory and legislative matters relating to or affecting, the communications networking solutions industry, (ii) the products, technology and intellectual property of Cyan and Ciena (including the validity and associated risks thereof), (iii) existing and future relationships, agreements and arrangements with, and the ability to retain, key employees, customers, suppliers and other commercial relationships of Cyan and Ciena, and (iv) the ability to integrate the businesses and operations of Cyan with those of Ciena. At Cyan’s direction, Jefferies assumed that there would not be any developments with respect to any such matters that would have an adverse effect on Cyan, Ciena or the mergers (or the contemplated benefits thereof) or that otherwise would be meaningful in any respect to Jefferies’ analyses or opinion. Jefferies also assumed, at Cyan’s direction, that any adjustments to the merger consideration would not be meaningful in any respect to Jefferies’ analyses or opinion.

Jefferies’ opinion was based on economic, monetary, regulatory, market and other conditions existing and which could be evaluated as of the date of Jefferies’ opinion. Jefferies expressly disclaimed any undertaking or obligation to advise any person of any change in any fact or matter affecting its opinion of which Jefferies becomes aware after the date of its opinion.

Jefferies made no independent investigation of any legal, accounting or tax matters affecting Cyan, Ciena or the mergers and Jefferies assumed the correctness in all respects meaningful to its analysis and opinion of all legal, accounting and tax advice given to Cyan or the Cyan board, including, without limitation and at the direction of the Cyan board, advice as to the legal, accounting and tax consequences of the terms of, and transactions contemplated by, the merger agreement and related documents. In addition, in preparing its opinion, Jefferies did not take into account any tax or other consequences of the mergers to any holder of Cyan common stock. Jefferies assumed that the merger and the second step merger, considered together as a single integrated transaction, would constitute a reorganization for U.S. federal income tax purposes pursuant to Section 368(a) of the Internal Revenue Code of 1986, as amended, as contemplated by the merger agreement. Jefferies also assumed, at the direction of the Cyan board, that the final merger agreement, when signed by the parties thereto, would not differ from the execution version of the merger agreement reviewed by Jefferies in any respect meaningful to its analyses or opinion. Jefferies further assumed that the mergers would be consummated in accordance with their respective terms and in compliance with all applicable laws and other requirements and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the mergers, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Cyan, Ciena or the mergers (including the contemplated benefits thereof).

 

93


Table of Contents

Jefferies’ opinion was provided for the use and benefit of the Cyan board (in its capacity as such) in its evaluation of the merger consideration from a financial point of view. Jefferies’ opinion did not address the relative merits of the mergers or other transactions contemplated by the merger agreement as compared to any alternative transaction or opportunity that might be available to