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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

SCHEDULE 14A

(RULE 14a-101)

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. 1)

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

☒	Preliminary Proxy Statement

 

☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

☐	Definitive Proxy Statement

 

☐	Definitive Additional Materials

 

☐	Soliciting Material Pursuant to §240.14a-12

LATTICE SEMICONDUCTOR CORPORATION

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

☐	No fee required.

 

☐	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

Common stock, par value $0.01 per share

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

(5)

Total fee paid:

 

 

 

 

☒	Fee paid previously with preliminary materials.

 

☐	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

(3)

Filing Party:

 

 

(4)

Date Filed:

 

 

 

 

 

 

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Preliminary Proxy Statement — Subject to Completion, Dated November 30, 2016

 

Lattice Semiconductor Corporation

[●]

To the Stockholders of Lattice Semiconductor Corporation:

You are cordially invited to attend a special meeting of stockholders, which we refer to in this proxy statement as the “Special Meeting”, of Lattice Semiconductor Corporation, a Delaware corporation, which we refer to in this proxy statement as “Lattice”, the “Company”, “we”, “us”, or “our”, to be held on [●], 2017 at 8:00 am, Pacific time, at our principal executive offices, located on the 8th floor of the US Bancorp Tower, 111 SW 5th Ave., Portland, Oregon 97204.

At the Special Meeting, you will be asked to consider and vote on a proposal to adopt the Agreement and Plan of Merger, as it may be amended from time to time, which we refer to in this proxy statement as the “Merger Agreement”, dated November 3, 2016, among Lattice, Canyon Bridge Acquisition Company, Inc., a Delaware corporation, which we refer to in this proxy statement as “Parent”, and Canyon Bridge Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent, which we refer to in this proxy statement as “Merger Sub.” Upon the satisfaction or waiver of the conditions to the closing set forth in the Merger Agreement, Merger Sub will, at the closing, merge with and into Lattice, which we refer to in this proxy statement as the “Merger”, and Lattice will become a direct, wholly owned subsidiary of Parent. You will also be asked to consider and vote on a non-binding, advisory proposal to approve compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger.

If the Merger is completed, you will be entitled to receive $8.30 in cash, without interest, for each share of Lattice common stock that you own (unless you have properly exercised your appraisal rights), which represents a premium of approximately 30% to the closing price of Lattice’s common stock on November 2, 2016, the last trading day prior to the date on which Lattice entered into the Merger Agreement and the proposed Merger was publicly announced.

The Board of Directors of Lattice, which we refer to in this proxy statement as the “Board”, after considering the factors more fully described in the enclosed proxy statement, has unanimously determined that the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement are advisable and in the best interests of Lattice and its stockholders, and adopted and approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. The Board unanimously recommends that you vote “FOR” the adoption of the Merger Agreement, “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting, and “FOR” the non-binding, advisory proposal to approve compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger.

The enclosed proxy statement provides detailed information about the Special Meeting, the Merger Agreement and the Merger. A copy of the Merger Agreement is attached as Annex A to the proxy statement. The proxy statement also describes the actions and determinations of the Board in connection with its evaluation of the Merger Agreement and the Merger. We encourage you to read the proxy statement and its annexes, including the Merger Agreement, carefully and in their entirety, as they contain important information.

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Whether or not you plan to attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone. If you attend the Special Meeting and vote in person by ballot, your vote will revoke any proxy that you may have previously submitted.

If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.

Your vote is very important, regardless of the number of shares that you own. We cannot complete the Merger unless the proposal to adopt the Merger Agreement is approved by the affirmative vote of the holders of at least a majority of the outstanding shares of Lattice common stock.

If you have any questions or need assistance voting your shares, please contact our Proxy Solicitor:

Innisfree M&A Incorporated

501 Madison Avenue

New York, NY 10022

Stockholders Call Toll Free: (888) 750-5834

International Callers: +1 (412) 232-3651

Banks and Brokers Call Collect: (212) 750-5833

On behalf of the Board of Directors, I thank you for your support and appreciate your consideration of this matter.

Sincerely,

Darin G. Billerbeck

President and Chief Executive Officer

The accompanying proxy statement is dated [●] and, together with the enclosed form of proxy card, is first being mailed on or about [●].

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Lattice Semiconductor Corporation

111 SW Fifth Ave., Ste 700

Portland, Oregon 97204

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [●], 2017

Notice is hereby given that a special meeting of stockholders, which we refer to in this proxy statement as the “Special Meeting”, of Lattice Semiconductor Corporation, a Delaware corporation, which we refer to in this proxy statement as “Lattice”, the “Company”, “we”, “us”, or “our”, will be held on [●], 2017 at 8:00 a.m., Pacific time, at our principal executive offices, located on the 8th floor of the US Bancorp Tower, 111 SW 5th Ave., Portland, Oregon 97204, for the following purposes:

1. To consider and vote on the proposal to adopt the Agreement and Plan of Merger (as it may be amended from time to time), which we refer to in this proxy statement as the “Merger Agreement”, dated November 3, 2016, among Lattice, Canyon Bridge Acquisition Company, Inc., a Delaware corporation, which we refer to in this proxy statement as “Parent”, and Canyon Bridge Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent, which we refer to in this proxy statement as “Merger Sub.” Upon the satisfaction or waiver of the conditions to the closing set forth in the Merger Agreement, Merger Sub will, at the closing, merge with and into Lattice, which we refer to in this proxy statement as the “Merger”, and Lattice will become a direct, wholly owned subsidiary of Parent;

2. To consider and vote on any proposal to adjourn the Special Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and

3. To consider and vote on the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger.

Only stockholders of record as of the close of business on January 4, 2017 are entitled to notice of the Special Meeting and to vote at the Special Meeting or any adjournment, postponement or other delay thereof.

The Board unanimously recommends that you vote “FOR” the adoption of the Merger Agreement, “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting, and “FOR” the non-binding, advisory proposal to approve compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger.

Whether or not you plan to attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone. If you attend the Special Meeting and vote in person by ballot, your vote will revoke any proxy that you may have previously submitted. If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.

By the Order of the Board of Directors,

Darin G. Billerbeck

President and Chief Executive Officer

Dated [●]

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YOUR VOTE IS IMPORTANT

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE BY TELEPHONE, ELECTRONICALLY, THROUGH THE INTERNET, OR BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before it is voted at the Special Meeting.

If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.

If you are a stockholder of record, voting in person by ballot at the Special Meeting will revoke any proxy that you previously submitted. If you hold your shares through a bank, broker or other nominee, you must obtain a “legal proxy” in order to vote in person at the Special Meeting.

If you fail to return your proxy card, grant your proxy electronically over the Internet or by telephone; or attend the Special Meeting in person, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and, if a quorum is present, will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. A failure to submit a proxy or vote in person will have no effect on either (1) the proposal to adjourn the Special Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting, or (2) the proposal to consider and vote on the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger.

We encourage you to read the accompanying proxy statement and its annexes, including all documents incorporated by reference into the accompanying proxy statement, carefully and in their entirety. If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of common stock, please contact our proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue

New York, NY 10022

Stockholders Call Toll Free: (888) 750-5834

International Callers: +1 (412) 232-3651

Banks and Brokers Call Collect: (212) 750-5833

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TABLE OF CONTENTS

 

		Page
SUMMARY			1
Parties Involved in the Merger			1
The Merger			2
Treatment of Options and Restricted Stock Units			2
Financing of the Merger			4
Conditions to the Closing of the Merger			4
Regulatory Approvals Required for the Merger			5
Recommendation of the Board of Directors			6
Fairness Opinion of Morgan Stanley & Co. LLC			6
Interests of Lattice’s Directors and Executive Officers in the Merger			6
Appraisal Rights			7
U.S. Federal Income Tax Consequences of the Merger			7
Legal Proceedings Regarding the Merger			8
Alternative Acquisition Proposals			8
Termination of the Merger Agreement			9
Termination Fees			11
Effect on Lattice if the Merger is Not Completed			11
The Special Meeting			11
QUESTIONS AND ANSWERS			14
FORWARD-LOOKING STATEMENTS			23
THE SPECIAL MEETING			24
Date, Time and Place			24
Purpose of the Special Meeting			24
Record Date; Shares Entitled to Vote; Quorum			24
Vote Required; Abstentions and Broker Non-Votes			24
Shares Held by Lattice’s Directors and Executive Officers			25
Voting of Proxies			25
Revocability of Proxies			26
Board of Directors’ Recommendation			26
Solicitation of Proxies			27
Anticipated Date of Completion of the Merger			27
Appraisal Rights			27
Other Matters			28
Householding of Special Meeting Materials			28
Questions and Additional Information			28
PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT			29
PROPOSAL 2: ADJOURNMENT OF THE SPECIAL MEETING			30
PROPOSAL 3: ADVISORY, NON-BINDING VOTE ON MERGER-RELATED EXECUTIVE COMPENSATION ARRANGEMENTS			31
THE MERGER			34
Parties Involved in the Merger			34
Effect of the Merger			35
Effect on Lattice if the Merger is Not Completed			35
Merger Consideration			36
Background of the Merger			36
Recommendation of the Board of Directors and Reasons for the Merger			58
Certain Prospective Financial Data			63
Fairness Opinion of Morgan Stanley & Co. LLC			66
Interests of Lattice’s Directors and Executive Officers in the Merger			75
Treatment of Options and Restricted Stock Units			76
Financing of the Merger			83

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		Page
Closing and Effective Time			85
Appraisal Rights			85
U.S. Federal Income Tax Consequences of the Merger			90
Regulatory Approvals Required for the Merger			92
Legal Proceedings			94
THE MERGER AGREEMENT			96
Explanatory Note Regarding the Merger Agreement			96
Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws			96
Closing and Effective Time			97
Merger Consideration			97
Treatment of Equity-Based Awards			97
Exchange and Payment Procedures			98
Representations and Warranties			99
Conduct of Business Pending the Merger			102
Alternative Acquisition Proposals			104
The Board of Directors’ Recommendation; Adverse Recommendation Change			105
Employee Benefits			106
Efforts to Close the Merger			108
Deposit and Escrow Agreement			108
Indemnification and Insurance			108
Other Covenants			109
Conditions to the Closing of the Merger			109
Termination of the Merger Agreement			110
Termination Fees			112
Specific Performance			113
Fees and Expenses			114
Amendment			114
Governing Law and Dispute Resolution			114
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			116
FUTURE STOCKHOLDER PROPOSALS			118
WHERE YOU CAN FIND MORE INFORMATION			119
MISCELLANEOUS			121

Annexes:

Annex A — Agreement and Plan of Merger

Annex B — Morgan Stanley’s Fairness Opinion

Annex C — Appraisal Rights of Stockholders

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QUESTIONS AND ANSWERS

The following questions and answers address some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that are important to you. We encourage you to read carefully the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the caption “Where You Can Find More Information.”

 

Q:	Why am I receiving these materials?

 

A:	The Board is furnishing this proxy statement and form of proxy card to the holders of shares of common stock in connection with the solicitation of proxies to be voted at the Special Meeting.

 

Q:	What am I being asked to vote on at the Special Meeting?

 

A:	You are being asked to vote on the following proposals:

 

1.

To adopt the Merger Agreement pursuant to which Merger Sub will merge with and into Lattice, and Lattice will become a direct, wholly owned subsidiary of Parent;

 

2.

To approve the adjournment of the Special Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and

 

3.

To approve, by non-binding, advisory vote, compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger.

 

Q:	When and where is the Special Meeting?

 

A:	The Special Meeting will take place on [●], 2017, at 8:00 a.m., Pacific time, at our principal executive offices, located on the 8th floor of the US Bancorp Tower, 111 SW 5th Ave., Portland, Oregon 97204.

 

Q:	Who is entitled to vote at the Special Meeting?

 

A:

Stockholders as of the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting. Each holder of shares of common stock is entitled to cast one vote on each matter properly brought before the Special Meeting for each share of common stock owned as of the Record Date.

 

Q:	May I attend the Special Meeting and vote in person?

 

A:

Yes. All stockholders as of the Record Date may attend the Special Meeting and vote in person. Seating will be limited. Stockholders will need to present proof of ownership of shares of common stock, such as a bank or brokerage account statement, and a form of personal identification to be admitted to the Special Meeting. No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the Special Meeting.

Even if you plan to attend the Special Meeting in person, to ensure that your shares will be represented at the Special Meeting we encourage you to sign, date and return the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone. If you attend the Special Meeting and vote in person by ballot, your vote will revoke any proxy previously submitted.

 

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If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions. If you hold your shares in “street name,” you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.

 

Q:	What is the proposed Merger and what effects will it have on Lattice?

 

A:

The proposed Merger is the acquisition of Lattice by Parent. If the proposal to adopt the Merger Agreement is approved by stockholders and the other closing conditions under the Merger Agreement have been satisfied or waived, Merger Sub will merge with and into Lattice, with Lattice continuing as the Surviving Corporation. As a result of the Merger, Lattice will become a direct, wholly owned subsidiary of Parent, and Lattice common stock will no longer be publicly traded and will be delisted from Nasdaq. In addition, Lattice common stock will be deregistered under the Exchange Act, and Lattice will no longer file periodic reports with the SEC.

 

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

 

A:

Upon completion of the Merger, you will be entitled to receive the Per Share Merger Consideration for each share of common stock that you own, unless you have properly exercised and not withdrawn your appraisal rights under the DGCL. For example, if you own 100 shares of Lattice common stock, you will receive $830.00 in cash in exchange for your shares of common stock, less any applicable withholding taxes.

 

Q:	How does the Per Share Merger Consideration compare to the unaffected market price of the common stock?

 

A:

The relationship of the $8.30 Per Share Merger Consideration to the trading price of Lattice common stock constituted a premium of approximately 30% to the closing price of Lattice’s common stock on November 2, 2016, the last trading day prior to the date on which Lattice entered into the Merger Agreement and publicly announced the proposed Merger.

 

Q:	What do I need to do now?

 

A:

We encourage you to read this proxy statement, the annexes to this proxy statement and the documents that we refer to in this proxy statement carefully and consider how the Merger affects you. Then sign, date and return, as promptly as possible, the enclosed proxy card in the postage-paid envelope provided, or grant your proxy electronically over the Internet or by telephone, so that your shares can be voted at the Special Meeting, unless you plan to seek appraisal rights. If you hold your shares in “street name,” please refer to the voting instruction forms provided by your bank, broker or other nominee to vote your shares. Please do not send your stock certificates with your proxy card.

 

Q:	Should I send in my stock certificates now?

 

A:

No. After the Merger is completed, you will receive a letter of transmittal containing instructions for how to send your stock certificates to the payment agent in order to receive the appropriate cash payment for the shares of common stock represented by your stock certificates. You should use the letter of transmittal to exchange your stock certificates for the cash payment to which you are entitled. Please do not send your stock certificates with your proxy card.

 

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Q:	What happens if I sell or otherwise transfer my shares of common stock after the Record Date but before the Special Meeting?

 

A:

The Record Date for the Special Meeting is earlier than the date of the Special Meeting and the date the Merger is expected to be completed. If you sell or transfer your shares of common stock after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares and each of you notifies Lattice in writing of such special arrangements, you will transfer the right to receive the Per Share Merger Consideration, if the Merger is completed, to the person to whom you sell or transfer your shares, but you will retain your right to vote those shares at the Special Meeting. Even if you sell or otherwise transfer your shares of common stock after the Record Date, we encourage you to sign, date and return the enclosed proxy card in the accompanying reply envelope or grant your proxy electronically over the Internet or by telephone.

 

Q:	How does the Board of Directors recommend that I vote?

 

A:

The Board, after considering the various factors described under the caption “The Merger — Recommendation of the Board of Directors and Reasons for the Merger,” has unanimously (1) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are advisable and in the best interests of Lattice and its stockholders, and (2) adopted and approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.

The Board recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger.

 

Q:	What happens if the Merger is not completed?

 

A:

If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, stockholders will not receive any payment for their shares of common stock. Instead, Lattice will remain an independent public company, Lattice common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act, and Lattice will continue to file periodic reports with the SEC.

Under specified circumstances, Lattice will be required to pay Parent a termination fee upon the termination of the Merger Agreement; and under different specified circumstances, Parent will be required to pay Lattice a reverse termination fee upon the termination of the Merger Agreement. For more details see the section of this proxy statement captioned “The Merger Agreement — Termination Fees.”

 

Q:	What vote is required to adopt the Merger Agreement?

 

A:	The affirmative vote of the holders of a majority of the issued and outstanding shares of Lattice common stock is required to adopt the Merger Agreement.

If a quorum is present at the Special Meeting, the failure of any stockholder of record to: (1) submit a signed proxy card; (2) grant a proxy over the Internet or by telephone; or (3) attend the Special Meeting and vote in person by ballot at the Special Meeting will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If you hold your shares in “street name” and a quorum is present at the Special Meeting, the failure to instruct your bank, broker or other nominee how to vote your shares will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If a quorum is present at the Special Meeting, abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.

 

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Q:

What vote is required to approve any proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting and to approve, by non-binding, advisory vote, compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger?

 

A:

Approval of the proposal to adjourn the Special Meeting, whether or not a quorum is present, requires the affirmative vote of a majority of the shares of stock having voting power present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter. Approval, by non-binding, advisory vote, of compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger requires the affirmative vote of a majority of the shares of stock having voting power present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter.

The failure of any stockholder of record to (1) submit a signed proxy card, (2) grant a proxy over the Internet or by telephone, or (3) attend the Special Meeting and vote in person by ballot at the Special Meeting will not have any effect on the adjournment proposal or the compensation proposal. If you hold your shares in “street name,” the failure to instruct your bank, broker or other nominee how to vote your shares will not have any effect on the adjournment proposal and the compensation proposal. Abstentions will have the same effect as a vote “AGAINST” the adjournment proposal and the compensation proposal.

 

Q:	Why am I being asked to cast a non-binding, advisory vote regarding compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger?

 

A:	SEC rules require Lattice to seek a non-binding, advisory vote regarding compensation that will or may become payable by Lattice to its named executive officers in connection with the Merger.

 

Q:	What is the compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger for purposes of this advisory vote?

 

A:

The compensation that will or may become payable by Lattice to its named executive officers in connection with the Merger is certain compensation that is tied to or based on the Merger and payable to certain of Lattice’s named executive officers. For further detail, see the section captioned “Proposal 3: Advisory, Non-Binding Vote on Merger-Related Executive Compensation Arrangements.”

 

Q:	What will happen if stockholders do not approve the compensation that will or may become payable by Lattice to its named executive officers in connection with the Merger at the Special Meeting?

 

A:

Approval of the compensation proposal is not a condition to completion of the Merger. The vote with respect to the compensation proposal is an advisory vote and will not be binding on Lattice or Parent. If the Merger Agreement is adopted by the stockholders and the Merger is completed, the compensation that will or may become payable by Lattice to its named executive officers in connection with the Merger may be paid to Lattice’s named executive officers even if stockholders fail to approve the compensation proposal.

 

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

 

A:	If your shares are registered directly in your name with our transfer agent, Computershare Trust Company N.A., you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by Lattice.

If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares of common stock held in “street name.” In that case, this proxy

 

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statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the Special Meeting. However, because you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.

 

Q:	How may I vote?

 

A:	If you are a stockholder of record (that is, if your shares of common stock are registered in your name with Computershare Trust Company N.A., our transfer agent), there are four ways to vote:

 

•

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

 

•

by accessing the Internet address on your proxy card;

 

•

by calling toll-free (within the U.S. or Canada) the phone number on your proxy card; or

 

•

by attending the Special Meeting and voting in person by ballot.

A control number, located on your proxy card, is designed to verify your identity and allow you to vote your shares of common stock, and to confirm that your voting instructions have been properly recorded when voting electronically over the Internet or by telephone. Please be aware that, although there is no charge for voting your shares, if you vote electronically over the Internet or by telephone, you may incur costs such as Internet access and telephone charges for which you will be responsible.

Even if you plan to attend the Special Meeting in person, you are strongly encouraged to vote your shares of common stock by proxy. If you are a record holder or if you obtain a “legal proxy” to vote shares that you beneficially own, you may still vote your shares of common stock in person by ballot at the Special Meeting even if you have previously voted by proxy. If you are present at the Special Meeting and vote in person by ballot, your previous vote by proxy will not be counted.

If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee, or, if such a service is provided by your bank, broker or other nominee, electronically over the Internet or by telephone. To vote over the Internet or by telephone through your bank, broker or other nominee, you should follow the instructions on the voting form provided by your bank, broker or nominee.

 

Q:	If my broker holds my shares in “street name,” will my broker vote my shares for me?

 

A:

No. Your bank, broker or other nominee is only permitted to vote your shares on any proposal currently scheduled to be considered at the Special Meeting if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee to vote of your shares. Without instructions, your shares will not be voted on such proposals, which will have the same effect as if you voted against adoption of the Merger Agreement, but will have no effect on the adjournment proposal or the compensation proposal.

 

Q:	May I change my vote after I have mailed my signed proxy card?

 

A:	Yes. If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:

 

•

signing another proxy card with a later date and returning it to us prior to the Special Meeting;

 

•

submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;

 

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•

delivering a written notice of revocation to the Corporate Secretary; or

 

•

attending the Special Meeting and voting in person by ballot.

If you hold your shares of common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting only if you obtain a “legal proxy” from your bank, broker or other nominee.

 

Q:	What is a proxy?

 

A:

A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of common stock. The written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of common stock is called a “proxy card.” Darin G. Billerbeck, our President and Chief Executive Officer, and Byron W. Milstead, our Corporate Vice President, General Counsel and Secretary, with full power of substitution, are the proxy holders for the Special Meeting.

 

Q:	If a stockholder gives a proxy, how are the shares voted?

 

A:

Regardless of the method you choose to vote, the proxy holders will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the Special 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: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger.

 

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

 

A:	Please sign, date and return (or grant your proxy electronically over the Internet or by telephone) each proxy card and voting instruction card that you receive.

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card.

Q: Where can I find the voting results of the Special Meeting?

 

A:

If available, Lattice may announce preliminary voting results at the conclusion of the Special Meeting. Lattice intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the Special Meeting. All reports that Lattice files with the SEC are publicly available when filed. See the section of this proxy statement captioned “Where You Can Find More Information.”

 

Q:	Will I be subject to U.S. federal income tax upon the exchange of common stock for cash pursuant to the Merger?

 

A:	If you are a U.S. Holder (as defined under the caption “The Merger — U.S. Federal Income Tax Consequences of the Merger”), the exchange of common stock for cash pursuant to the Merger

 

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will be a taxable transaction for U.S. federal income tax purposes, which generally will require a U.S. Holder to recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received by such U.S. Holder in the Merger (determined before the deduction of any applicable withholding taxes) and such U.S. Holder’s adjusted tax basis in the shares of common stock surrendered in the Merger.

A Non-U.S. Holder (as defined under the caption “The Merger — U.S. Federal Income Tax Consequences of the Merger”) generally will not be subject to U.S. federal income tax with respect to the exchange of common stock for cash in the Merger unless such Non-U.S. Holder has certain connections to the United States.

Because particular circumstances may differ, we recommend that you consult your own tax advisor to determine the U.S. federal income tax consequences relating to the Merger in light of your own particular circumstances and any consequences arising under U.S. federal non-income tax laws or the laws of any state, local or non-U.S. taxing jurisdiction. A more complete description of U.S. federal income tax consequences of the Merger is provided under the caption “The Merger — U.S. Federal Income Tax Consequences of the Merger.”

 

Q:	What will the holders of Company Stock Options receive in the Merger?

 

A:

At the Effective Time, each Vested Company Option (after taking into account the measurement of any corporate performance goals that are required to be measured under the terms thereof and any accelerated vesting that is required to occur at or prior to the Effective Time) outstanding as of immediately prior to the Effective Time will be canceled and converted into the right to receive an amount in cash (without interest and subject to deduction for any required withholding tax) equal to the product obtained by multiplying (1) the number of shares subject to such Vested Company Option by (2) the amount by which $8.30 exceeds the per share exercise price of such Vested Company Option, which cash amount will be paid as soon as administratively practicable, but not later than ten business days, following the Effective Time.

At the Effective Time, each Unvested Company Option outstanding immediately prior to the Effective Time will be canceled and converted into the right to receive an amount in cash (without interest and subject to deduction for any required withholding tax) equal to the product obtained by multiplying (1) the number of shares subject to such Unvested Company Option by (2) the amount by which $8.30 exceeds the per share exercise price of such Unvested Company Option, which cash amount will be payable in accordance with the vesting schedule applicable to such Unvested Company Option as in effect immediately prior to the Effective Time, subject to the Unvested Company Option holder’s continued service on each applicable vesting date.

All Company Stock Options which are not In-the-Money Company Options and any other Company Stock Options that are not granted under any Company Stock Plan shall be canceled as of immediately prior to the Effective Time without the payment of any consideration.

For further detail on the treatment of Company Stock Options, see the section captioned “The Merger Agreement — Treatment of Equity-Based Awards.”

 

Q:	What will the holders of Company RSUs receive in the Merger?

 

A:

At the Effective Time, each Vested RSU (after taking into account any accelerated vesting that is required to occur at or prior to the Effective Time under the terms thereof) outstanding as of immediately prior to the Effective Time will be canceled and converted into the right to receive an amount in cash (without interest and subject to deduction for any required withholding tax) equal to the product obtained by multiplying (1) $8.30 by (2) the number of outstanding shares of Lattice common stock that are subject to such Vested RSU, which cash amount will become payable in accordance with the delivery schedule applicable to such Vested RSU as in effect immediately prior to the Effective Time.

 

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At the Effective Time, each Unvested RSU (after taking into account any accelerated vesting that is required to occur at or prior to the Effective Time under the terms thereof) outstanding as of immediately prior to the Effective Time will be canceled and converted into the right to receive an amount in cash (without interest and subject to deduction for any required withholding tax) equal to the product obtained by multiplying (1) $8.30 by (2) the number of outstanding shares of Lattice common stock that remain subject to such Unvested RSU, which cash amount will vest and become payable in accordance with the vesting and delivery schedule applicable to such Unvested RSU as in effect immediately prior to the Effective Time, subject to the Unvested RSU holder’s continued service on each applicable vesting date.

For further detail on the treatment of Company RSUs, see the section captioned “The Merger Agreement — Treatment of Equity-Based Awards.”

 

Q:	What will happen to the Company ESPP in the Merger?

 

A:

With respect to the Company ESPP, no new offering period will commence, no Lattice employee or other person will be permitted to begin participating in the Company ESPP, and no current participants will be permitted to increase elective deferrals in respect of the current offering period. The offering period in effect on November 3, 2016 will terminate no later than five days prior to the Effective Time, and amounts credited to the accounts of participants will be used to purchase shares in accordance with the terms of the Company ESPP, and such shares will be canceled and converted into the right to receive the Per Share Merger Consideration.

 

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

 

A:

We are working toward completing the Merger as quickly as practicable and currently expect to complete the Merger in early 2017. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to the closing conditions specified in the Merger Agreement, many of which are outside of our control.

 

Q:	Am I entitled to appraisal rights under the DGCL?

 

A:

If the Merger is completed, stockholders who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL. This means that holders of shares of common stock are entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares of common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court. Stockholders who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process. The DGCL requirements for exercising appraisal rights are described in additional detail in this proxy statement, and the relevant section of the DGCL regarding appraisal rights is reproduced in Annex C to this proxy statement.

 

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

 

A:

Yes. In considering the recommendation of the Board with respect to the proposal to adopt the Merger Agreement, you should be aware that our directors and executive officers may have interests in the Merger that are different from, or in addition to, the interests of stockholders generally. In (1) evaluating and negotiating the Merger Agreement, (2) approving the Merger Agreement and the Merger, and (3) recommending that the Merger Agreement be adopted by stockholders, the Board was aware of and considered these interests to the extent that they

 

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existed at the time, among other matters. For more information, see the section of this proxy statement captioned “The Merger — Interests of Lattice’s Directors and Executive Officers in the Merger.”

Our directors and executive officers have informed us that they currently intend to vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the non-binding, advisory proposal to approve compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger.

 

Q:	Who can help answer my questions?

 

A:	If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of common stock, please contact our Proxy Solicitor:

Innisfree M&A Incorporated

501 Madison Avenue

New York, NY 10022

Stockholders Call Toll Free: (888) 750-5834

International Callers: +1 (412) 232-3651

Banks and Brokers Call Collect: (212) 750-5833

 

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FORWARD-LOOKING STATEMENTS

Certain statements made herein, including, for example, the expected date of closing of the Merger and the potential benefits of the Merger, are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “will,” “may,” “would” and similar statements of a future or forward-looking nature may be used to identify forward-looking statements. In addition, any statement that refers to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements reflect the current analysis of the management of the Company of existing information as of the date of these forward-looking statements and are subject to various risks and uncertainties, many of which are beyond our control, and are not guarantees of future results or achievements. Consequently, no forward-looking statements may be guaranteed and there can be no assurance that the actual results or developments anticipated by such forward-looking statements will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company or its businesses or operations. As a result, you should not place undue reliance on any such statements and caution must be exercised in relying on forward-looking statements. Due to known and unknown risks, our actual results may differ materially from our expectations or projections.

The following factors, among others, could cause actual results to differ materially from those described in these forward-looking statements: the occurrence of any event, change or other circumstances that could give rise to the delay or termination of the Merger Agreement; the outcome or length of any legal proceedings that may be instituted related to the Merger Agreement; the inability to complete the Merger due to the failure to timely or at all obtain stockholder approval for the Merger or the failure to satisfy other conditions to completion of the Merger, including the receipt on a timely basis or at all of any required regulatory clearances related to the Merger, including the expiration or termination of the applicable waiting period under the HSR Act, the expiration or termination of the applicable waiting period under the Austrian Competition Act (Wettbewerbsgesetz) and/or the Austrian Cartel Act (Kartellgesetz) and the clearance of the Merger by CFIUS; the failure of Parent to obtain or provide on a timely basis or at all the necessary financing as set forth in the Equity Commitment Letter delivered pursuant to the Merger Agreement; risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the Merger; the effects of local and national economic, credit and capital market conditions on the economy in general; and the other risks and uncertainties described herein, as well as those risks and uncertainties discussed from time to time in our other reports and other public filings with the SEC, as described below. The foregoing review of important factors that could cause actual events to differ from expectations should not be construed as exhaustive.

Additional information concerning these and other factors that may affect our expectations and projections can be found in our periodic filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended January 2, 2016, and our Quarterly Reports on Form 10-Q for the quarters ended April 2, 2016, July 2, 2016 and October 1, 2016. Our SEC filings are available publicly on the SEC’s website at www.sec.gov, on the Company’s website at ir.latticesemi.com or upon request from the Company’s Investor Relations Department at lscc@globalirpartners.com. The Company can give no assurance that the conditions to the Merger will be satisfied. Except to the extent required by applicable law, we disclaim any obligation to revise or update any forward-looking statement, whether as a result of new information, future events or otherwise.

 

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THE SPECIAL MEETING

The enclosed proxy is solicited on behalf of the Board for use at the Special Meeting.

Date, Time and Place

We will hold the Special Meeting on [●], 2017, at 8:00 a.m., Pacific time, at our principal executive offices, located on the 8th floor of the US Bancorp Tower, 111 SW 5th Ave., Portland, Oregon 97204.

Purpose of the Special Meeting

At the Special Meeting, we will ask stockholders to vote on proposals to: (1) adopt the Merger Agreement; (2) adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) approve, by non-binding, advisory vote, compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger.

Record Date; Shares Entitled to Vote; Quorum

Only stockholders of record as of the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting. A list of stockholders entitled to vote at the Special Meeting will be available at our principal executive offices, located at 111 SW Fifth Ave., Ste 700, Portland, Oregon 97204, during regular business hours for a period of no less than ten days before the Special Meeting and at the place of the Special Meeting during the meeting.

As of the Record Date, there were [●] shares of common stock outstanding and entitled to vote at the Special Meeting.

The holders of a majority in voting power of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, will constitute a quorum at the Special Meeting. In the event that a quorum is not present at the Special Meeting, it is expected that the meeting will be adjourned to solicit additional proxies.

Vote Required; Abstentions and Broker Non-Votes

The affirmative vote of the holders of a majority of the outstanding shares of common stock on the Record Date is required to adopt the Merger Agreement. Adoption of the Merger Agreement by Lattice stockholders is a condition to the closing of the Merger.

Approval of the proposal to adjourn the Special Meeting, whether or not a quorum is present, requires the affirmative vote of a majority of the shares of stock having voting power present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter. Approval, by non-binding, advisory vote, of compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger requires the affirmative vote of a majority of the shares of stock having voting power present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter.

If a stockholder abstains from voting, that abstention will have the same effect as if the stockholder voted “AGAINST” the proposal to adopt the Merger Agreement. For stockholders who attend the meeting or are represented by proxy and abstain from voting, the abstention will have the same effect as if the stockholder voted “AGAINST” any proposal to adjourn the Special Meeting to a later date to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the

 

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Special Meeting and “AGAINST” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger. However, the failure of any stockholder of record to (1) submit a signed proxy card, (2) grant a proxy over the Internet or by telephone, or (3) vote in person by ballot at the Special Meeting will not have any effect on the adjournment proposal or the compensation proposal.

Each “broker non-vote” will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement, but will have no effect on (1) the proposal to adjourn the Special Meeting to a later date to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting or (2) the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger. A “broker non-vote” generally occurs when a bank, broker or other nominee holding shares on your behalf does not vote on a proposal because the bank, broker or other nominee has not received your voting instructions and lacks discretionary power to vote the shares. Under applicable stock exchange rules, as each of the proposals to be voted on at the Special Meeting is considered “non-routine,” brokers do not have discretion to vote on such proposals and as such, broker non-votes will not be included in the calculation of the number of shares of the Company’s common stock represented at the Special Meeting for purposes of determining a majority.

Shares Held by Lattice’s Directors and Executive Officers

As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, [●] shares of common stock, representing approximately [●]% of the shares of common stock outstanding on the Record Date. Our directors and executive officers have informed us that they currently intend to vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the non-binding, advisory proposal to approve compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger.

Voting of Proxies

If your shares are registered in your name with our transfer agent, Computershare Trust Company N.A., you may cause your shares to be voted by returning a signed and dated proxy card in the accompanying prepaid envelope, or you may vote in person at the Special Meeting. Additionally, you may grant a proxy electronically over the Internet or by telephone by following the instructions on your proxy card. You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to grant a proxy electronically over the Internet or by telephone. Based on your proxy cards or Internet and telephone proxies, the proxy holders will vote your shares according to your directions.

If you plan to attend the Special Meeting and wish to vote in person, you will be given a ballot at the Special Meeting. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the Special Meeting in person. If you attend the Special Meeting and vote in person by ballot, your vote will revoke any previously submitted proxy.

Voting instructions are included on your proxy card. All shares represented by properly signed and dated proxies received in time for the Special Meeting will be voted at the Special Meeting in accordance with the instructions of the stockholder. Properly signed and dated proxies that do not contain voting instructions will be voted: (1) “FOR” adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the

 

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proposal to approve, by non-binding, advisory vote, compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger.

If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee or attending the Special Meeting and voting in person with a “legal proxy” from your bank, broker or other nominee. If such a service is provided, you may vote over the Internet or telephone through your bank, broker or other nominee by following the instructions on the voting form provided by your bank, broker or other nominee. If you do not return your bank’s, broker’s or other nominee’s voting form, do not vote via the Internet or telephone through your bank, broker or other nominee, if possible, or do not attend the Special Meeting and vote in person with a “legal proxy” from your bank, broker or other nominee, it will have the same effect as if you voted “AGAINST” the proposal to adopt the Merger Agreement but will not have any effect on the adjournment proposal or the compensation proposal.

Revocability of Proxies

If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:

 

•

signing another proxy card with a later date and returning it to us prior to the Special Meeting;

 

•

submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;

 

•

delivering a written notice of revocation to our Corporate Secretary; or

 

•

attending the Special Meeting and voting in person by ballot.

If you have submitted a proxy, your appearance at the Special Meeting, in the absence of voting in person or submitting an additional proxy or revocation, will not have the effect of revoking your prior proxy.

If you hold your shares of common stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person at the Special Meeting only if you obtain a “legal proxy” from your bank, broker or other nominee.

Any adjournment, postponement or other delay of the Special Meeting, including for the purpose of soliciting additional proxies, will allow stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting as adjourned, postponed or delayed.

Board of Directors’ Recommendation

The Board, after considering various factors described under the caption “The Merger — Recommendation of the Board of Directors and Reasons for the Merger,” has unanimously (1) determined that the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement are advisable and in the best interests of Lattice and its stockholders and (2) adopted and approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. The Board unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger.

 

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Solicitation of Proxies

The expense of soliciting proxies will be borne by Lattice. Lattice has retained Innisfree M&A Incorporated , a proxy solicitation firm, which we refer to in this proxy statement as the “Proxy Solicitor”, to solicit proxies in connection with the Special Meeting at a fee of approximately $17,500 plus expenses. We will also indemnify the Proxy Solicitor against losses arising out of its provisions of these services on our behalf. In addition, we may reimburse banks, brokers and other nominees representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by our directors, officers and employees, personally or by telephone, email, fax, over the Internet or other means of communication. No additional compensation will be paid for such services.

Anticipated Date of Completion of the Merger

Assuming timely satisfaction of necessary closing conditions, including the approval by stockholders of the proposal to adopt the Merger Agreement, expiration or termination of the applicable waiting period under the HSR Act and CFIUS Approval, we anticipate that the Merger will be consummated in early 2017.

Appraisal Rights

If the Merger is completed, stockholders who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL. This means that holders of shares of common stock are entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of common stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court, so long as they comply with the procedures established by Section 262 of the DGCL. Due to the complexity of the appraisal process, stockholders who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.

Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the value of the Per Share Merger Consideration.

To exercise your appraisal rights, you must (1) deliver a written demand for appraisal to Lattice before the vote is taken on the adoption of the Merger Agreement, (2) not submit a proxy or otherwise vote in favor of the proposal to adopt the Merger Agreement, and (3) continue to hold your shares of common stock of record through the Effective Time. Your failure to follow exactly the procedures specified under the DGCL will result in the loss of your appraisal rights. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, and the relevant section of the DGCL regarding appraisal rights is reproduced and attached as Annex C to this proxy statement. If you hold your shares of common stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such bank, brokerage firm or nominee. A recent amendment to Section 262 of the DGCL allows the surviving corporation to make a cash payment prior to the entry of a judgment by the Delaware Court of Chancery to holders of shares of common stock exercising appraisal rights so no interest will accrue on the prepaid amount. Interest will still accrue on the difference, if any, between the paid amount and the fair value of the shares, as determined by the Delaware Court of Chancery, and on any interest accrued before the payment, unless it was included in the payment.

 

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Other Matters

At this time, we know of no other matters to be voted on at the Special Meeting. If any other matters properly come before the Special Meeting, your shares of common stock will be voted in accordance with the discretion of the appointed proxy holders.

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on [●], 2017

The proxy statement is available on the website of our transfer agent, Computershare Trust Company N.A., at www.envisionreports.com/lscc.

Householding of Special Meeting Materials

Unless we have received contrary instructions, we may send a single copy of this proxy statement to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. Each stockholder in the household will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps to reduce our expenses.

If you would like to receive your own set of our disclosure documents this year or in future years, follow the instructions described below. Similarly, if you share an address with another stockholder and together both of you would like to receive only a single set of our disclosure documents, follow these instructions.

If you are a stockholder of record, you may contact us by writing to Lattice Semiconductor Corporation, 111 SW Fifth Ave., Ste 700, Portland, Oregon 97204, Attention: Corporate Secretary or calling our Proxy Solicitor at the number provided below. Eligible stockholders of record receiving multiple copies of this proxy statement can request householding by contacting us in the same manner. If a bank, broker or other nominee holds your shares, please contact your bank, broker or other nominee directly.

Questions and Additional Information

If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of common stock, please contact our Proxy Solicitor:

Innisfree M&A Incorporated

501 Madison Avenue

New York, NY 10022

Stockholders Call Toll Free: (888) 750-5834

International Callers: +1 (412) 232-3651

Banks and Brokers Call Collect: (212) 750-5833

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

We are asking you to adopt the Merger Agreement.

For a summary of and detailed information regarding this proposal, see the information about the Merger Agreement and the Merger throughout this proxy statement, including the information set forth in the sections captioned “The Merger” beginning on page [●] of this proxy statement and “The Merger Agreement” beginning on page [●] of this proxy statement. A copy of the Merger Agreement is attached as Annex A to this proxy statement. You are urged to read the Merger Agreement carefully in its entirety.

Under applicable law, we cannot complete the Merger without the affirmative vote of a majority of the outstanding shares of Lattice common stock voting in favor of the proposal to adopt the Merger Agreement. If you abstain from voting, fail to cast your vote, in person or by proxy, or fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have the same effect as a vote against the proposal to adopt the Merger Agreement.

The affirmative vote of the holders of a majority of the issued and outstanding shares of Lattice common stock is required to approve this proposal.

The Board unanimously recommends that you vote “FOR” this proposal.

 

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PROPOSAL 2: ADJOURNMENT OF THE SPECIAL MEETING

We are asking you to approve a proposal to adjourn the Special Meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting. If stockholders approve the adjournment proposal, we could adjourn the Special Meeting and any adjourned session of the Special Meeting and use the additional time to solicit additional proxies, including proxies from stockholders that have previously returned properly executed proxies voting against adoption of the Merger Agreement. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing a sufficient number of votes against adoption of the Merger Agreement such that the proposal to adopt the Merger Agreement would be defeated, we could adjourn the Special Meeting without a vote on the adoption of the Merger Agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the Merger Agreement. Additionally, we may seek to adjourn the Special Meeting if a quorum is not present or otherwise at the discretion of the chairman of the Special Meeting.

The affirmative vote of the holders of a majority of the shares of Lattice stock having voting power present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter is required to approve this proposal.

The Board unanimously recommends that you vote “FOR” this proposal.

 

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PROPOSAL 3: ADVISORY, NON-BINDING VOTE ON MERGER-RELATED EXECUTIVE COMPENSATION ARRANGEMENTS

Section 14A of the Exchange Act, which was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires that we provide stockholders with the opportunity to vote to approve, on an advisory, non-binding basis, the payment of certain compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger. For a summary of the terms and conditions of the payments described below, see the section of this proxy statement captioned “The Merger — Interests of Lattice’s Directors and Executive Officers in the Merger.”

The information set forth in the table below titled “Quantification of Potential Payments and Benefits to Named Executive Officers in Connection with the Merger,” is intended to comply with Item 402(t) of the SEC’s Regulation S-K, which requires disclosure of information about certain compensation for each named executive officer of the Company that is based on, or otherwise relates to, the Merger. The amounts reported below are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement, and do not reflect certain actions that may occur before completion of the Merger (such as the exercise of outstanding Company Stock Options and the vesting and settlement of Company RSUs after the assumed completion date of the Merger). As a result, the actual amounts, if any, to be received by a named executive officer may materially differ from the amounts set forth below. In particular, for purposes of calculating the amounts set forth in the table below, we have assumed that (1) the Merger was completed on November 25, 2016 (the latest practicable date prior to filing this proxy statement) and each named executive officer’s outstanding equity awards, base salary and target bonus amounts are calculated as of such date, (2) the employment of each of the named executive officers was terminated either by Lattice without cause or by the named executive officer for good reason immediately thereafter, and (3) each named executive officer would receive approximately the amounts set forth in the table below, based on a $8.30 per share price for each share of Lattice common stock (which is the Per Share Merger Consideration).

Quantification of Potential Payments and Benefits to

Named Executive Officers in Connection with the Merger

 

Name(1)		Cash(2)				Equity(3)				Perquisites/ Benefits(4)				Total
Darin G. Billerbeck		$	2,000,000			$	3,854,932			$	25,241			$	5,880,173
Max Downing		$	412,500			$	460,882			$	25,241			$	898,624
Glen Hawk		$	630,000			$	1,212,217			$	17,956			$	1,860,173
Byron W. Milstead		$	524,700			$	816,869			$	17,956			$	1,359,525

 

(1)	On April 1, 2016, Joseph G. Bedewi, the Company’s former Chief Financial Officer, resigned from the position of Chief Financial Officer and terminated employment with the Company. Mr. Bedewi will not receive any compensation that will or may become payable in connection with the Merger.

(2)

The amount shown represents the double-trigger cash severance payable pursuant to the terms of each named executive officer’s employment agreement with Lattice, consisting of a lump-sum cash payment equal to 2.0 (in the case of Mr. Billerbeck) or 1.0 (in the case of each named executive officer other than Mr. Billerbeck) multiplied by the sum of each named executive officer’s annual base salary and his target annual bonus amount (with no proration).

(3)

The amount shown includes the value of single-trigger accelerated vesting of Company RSUs granted under Lattice’s 2013 Incentive Plan (as amended) or Lattice’s 1996 Stock Incentive Plan (as amended) that are held by each named executive officer as of November 25, 2016 and which will be converted into the right to receive the Per Share Merger Consideration for each Company RSU upon consummation of the Merger. This amount is computed as the product obtained by multiplying (a) $8.30 by (b) the number of shares subject to such Vested RSUs.

 

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In addition, the amount shown includes the value of performance-based In-the-Money Company Options held by the executive as of November 25, 2016 that will be converted into the right to receive the difference between Per Share Merger Consideration and the per share exercise price of each performance-based Company Stock Option upon consummation of the Merger, assuming that the target level of performance is achieved, with the resulting number of In-the-Money Company Options (as prorated based on the number of days that have elapsed from the date of grant through the Effective Time) becoming Vested Company Options as of the Effective Time. This amount is computed as the product obtained by multiplying (1) the total number of shares subject to each Vested Company Option by (2) the amount by which $8.30 exceeds the per share exercise price of such Vested Company Option. Assuming that the maximum level of performance is achieved (instead of target) and prorated based on the number of days that have elapsed from the date of grant through the Effective Time, the payout for the Performance-Based Company Options held by executive officers would increase by $385,458 for Mr. Billerbeck, $0 for Mr. Downing, $31,786 for Mr. Hawk and $79,378 for Mr. Milstead.

The amount shown includes the value of single-trigger or double-trigger accelerated vesting of Unvested Company Options held by each named executive officer as of November 25, 2016 pursuant to the terms of each named executive officer’s employment agreement with Lattice and Mr. Hawk’s letter agreement, dated November 3, 2016, with Parent and Lattice. This amount is computed as the product obtained by multiplying (1) the total number of shares subject to each Unvested Company Option by (2) the amount by which $8.30 exceeds the per share exercise price of such Unvested Company Option.

The values for Company RSUs and Company Options included in this column for each executive are as follows:

 

Name		Company RSUs				Company Options				Total Equity
Darin G. Billerbeck		$	2,407,191			$	1,447,741			$	3,854,932
Max Downing		$	277,494			$	183,389			$	460,882
Glen Hawk		$	388,440			$	823,777			$	1,212,217
Byron W. Milstead		$	542,546			$	274,323			$	816,869

 

(4)

This amount represents double-trigger benefits pursuant to the terms of each named executive officer’s employment agreement, consisting of the estimated costs of employer-paid premiums of $25,241 for Messrs. Billerbeck and Downing and $17,956 for Messrs. Hawk and Milstead to continue health benefits coverage, based on their current benefits elections, for 12 months following the termination date under the applicable provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, which we refer to in this proxy statement as “COBRA.”

We are asking stockholders to indicate their approval of the various compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger. These payments are set forth in the section captioned “The Merger — Interests of Lattice’s Directors and Executive Officers in the Merger — Payments Upon Termination Following Change-in-Control” and the accompanying footnotes. In general, the various plans and arrangements pursuant to which these compensation payments may be made have previously formed part of Lattice’s overall compensation program for our named executive officers and previously have been disclosed to stockholders as part of the Compensation Discussion and Analysis and related sections of our annual proxy statements. These historical arrangements were adopted and approved by the Compensation Committee of the Board, which is composed solely of non-management directors, and are believed to be reasonable and in line with marketplace norms.

Accordingly, we are seeking approval of the following resolution at the Special Meeting: “RESOLVED, that the stockholders of Lattice Semiconductor Corporation approve, on a nonbinding, advisory basis, the compensation that will or may become payable to Lattice’s named executive officers that is based on or otherwise relates to the Merger as disclosed pursuant to Item 402(t) of Regulation S-K above.

Stockholders should note that this proposal is not a condition to completion of the Merger, and as an advisory vote, the result will not be binding on Lattice, the Board or Parent. Further, the underlying plans and arrangements are contractual in nature and not, by their terms, subject to stockholder approval. Accordingly, regardless of the outcome of the advisory vote, if the Merger is consummated our named executive officers will be eligible to receive the compensation that is based on or otherwise relates to the Merger in accordance with the terms and conditions applicable to those payments.

 

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The affirmative vote of the holders of a majority of the shares of Lattice stock having voting power present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter is required to approve this proposal.

The Board unanimously recommends that you vote “FOR” this proposal.

 

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THE MERGER

This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should read the entire Merger Agreement carefully as it is the legal document that governs the Merger.

Parties Involved in the Merger

Lattice Semiconductor Corporation

111 SW Fifth Ave., Ste 700

Portland, Oregon 97204

Telephone: (503) 268-8000

Lattice provides smart connectivity solutions powered by low power FPGA, video ASSP, 60 GHz millimeter wave devices, and intellectual property products to the consumer, communications, industrial, computing, and automotive markets worldwide. Lattice’s common stock is listed on The Nasdaq Global Select Market, which we refer to in this proxy statement as “Nasdaq” under the symbol “LSCC.”

Canyon Bridge Acquisition Company, Inc.

Canyon Bridge Acquisition Company, Inc.

c/o Canyon Bridge Management Corp.

228 Hamilton Avenue, 3rd Floor

Palo Alto, California 94301

Telephone: (408) 456-1999

Canyon Bridge Acquisition Company, Inc. was formed on October 24, 2016 as a general acquisition vehicle and currently operates solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, including the arranging of equity financing in connection with the Merger. Parent is a wholly owned subsidiary of Canyon Bridge, an investment fund affiliated with CBC Partners. CBC Partners is a private equity firm based in Palo Alto, California that is focused on providing equity and strategic capital to enable technology companies to reach their full growth potential. CBC Partners combines a deep knowledge of the global technology industry with experience in financial markets to provide world-class investment expertise in creating and maximizing value for its investors.

Canyon Bridge Merger Sub, Inc.

Canyon Bridge Acquisition Company, Inc.

c/o Canyon Bridge Management Corp.

228 Hamilton Avenue, 3rd Floor

Palo Alto, California 94301

Telephone: (408) 456-1999

Canyon Bridge Merger Sub, Inc. is a wholly owned subsidiary of Parent and was formed on October 24, 2016, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement, including the arranging of the equity financing in connection with the Merger.

Canyon Bridge Fund I, LP

Canyon Bridge Fund I, LP

c/o Canyon Bridge Management Corp.

228 Hamilton Avenue, 3rd Floor

Palo Alto, California 94301

Telephone: (408) 456-1999

 

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Canyon Bridge, an affiliate of CBC Partners, is a recently established private equity buyout fund focused on technology companies. Canyon Bridge has one limited partner, a wholly owned subsidiary of CVC, a large Chinese investment fund. Canyon Bridge has entered into the Equity Commitment Letter with Parent, pursuant to which, subject to certain conditions, Canyon Bridge has agreed to provide or cause to be provided the equity financing necessary for Parent and Merger Sub to consummate the Merger.

The proceeds from the equity financing will be available to fund the payments contemplated by the Merger Agreement (pursuant to the terms and conditions as described further under the caption “The Merger — Financing of the Merger”).

Effect of the Merger

Upon the terms and subject to the conditions of the Merger Agreement, if the Merger is completed, Merger Sub will merge with and into Lattice, and Lattice will continue as the Surviving Corporation and as a direct, wholly owned subsidiary of Parent. As a result of the Merger, Lattice will become a direct, wholly owned subsidiary of Parent, and Lattice common stock will no longer be publicly traded and will be delisted from Nasdaq. In addition, Lattice common stock will be deregistered under the Exchange Act, and Lattice will no longer file periodic reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation.

Effect on Lattice if the Merger is Not Completed

If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, stockholders will not receive any payment for their shares of common stock. Instead, Lattice will remain an independent public company, Lattice common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act and Lattice will continue to file periodic reports with the SEC. In addition, if the Merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including risks related to the highly competitive industry in which Lattice operates and risks related to adverse economic or industry conditions.

Furthermore, if the Merger is not completed, and depending on the circumstances that caused the Merger not to be completed, the price of Lattice common stock may decline significantly. If that were to occur, it is uncertain when, if ever, the price of Lattice common stock would return to the price at which it trades as of the date of this proxy statement.

Accordingly, if the Merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of common stock. If the Merger is not completed, the Board will continue to evaluate and review Lattice’s business operations, strategic direction and capitalization, among other things, and will make such changes as are deemed appropriate. If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to the Board will be offered or that Lattice’s business, prospects or results of operation will not be adversely impacted.

In addition, Lattice will be required to pay to Parent a termination fee of $34,180,000 if the Merger Agreement is terminated under specified circumstances. For more information please see the section captioned “The Merger Agreement — Termination Fees.”

 

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Merger Consideration

At the Effective Time, each share of Lattice’s common stock, par value $0.01 per share, that is outstanding immediately prior to such time (other than (1) shares owned by Parent, Merger Sub, the Company (including any shares held in the treasury of the Company) or by any direct or indirect wholly owned subsidiary of Parent, Merger Sub or the Company, or (2) shares held by stockholders of the Company who not have voted in favor of the Merger and who are entitled to demand and properly demand their statutory rights of appraisal in accordance with the DGCL) will be canceled and extinguished and automatically converted into the right to receive cash in an amount equal to $8.30 per share (without interest and subject to deduction for any required withholding tax).

After the Merger is completed, you will have the right to receive the Per Share Merger Consideration, but you will no longer have any rights as a stockholder (except that stockholders who properly exercise their appraisal rights will have the right to receive a payment for the “fair value” of their shares as determined pursuant to an appraisal proceeding as contemplated by Delaware law, as described below under the caption “The Merger — Appraisal Rights”).

Background of the Merger

The Board and senior management team regularly review Lattice’s performance, future growth prospects and overall strategic direction, and consider potential opportunities to strengthen Lattice’s businesses and enhance stockholder value. These reviews have included consideration of a variety of strategic alternatives, including continuing to pursue Lattice’s current strategy and investments, potential changes to Lattice’s current strategy and investments, and potential strategic or financing transactions with third parties. The Board and senior management team evaluate these strategic alternatives based upon what they believe will create stockholder value, further Lattice’s strategic objectives, and enhance Lattice’s ability to serve customers, and based upon consideration of the potential benefits and risks of each of these alternatives in light of, among other things, the business environment, recent semiconductor industry consolidation trends and Lattice’s performance and competitive position.

On June 15, 2015, representatives of a financial advisor to Party A, a China-based financial sponsor, contacted Abid Ahmad, a senior advisor to Lattice in connection with strategic transactions, and informed him that Party A was interested in meeting with Lattice to discuss a potential strategic transaction involving Lattice and Party A. The representatives of Party A’s financial advisor indicated that they believed Party A was a highly motivated buyer and would be prepared to offer a price that represented a very meaningful premium to Lattice’s then-current valuation. Mr. Ahmad promptly notified Darin G. Billerbeck, Lattice’s Chief Executive Officer.

On June 17, 2015, Mr. Billerbeck advised John Bourgoin, Lattice’s Chairman of the Board of Directors, of Party A’s interest, and Mr. Bourgoin agreed that Mr. Billerbeck should have an introductory meeting with Party A. Later that day, Lattice sent a proposed form of nondisclosure agreement to Party A, and Mr. Ahmad subsequently scheduled a meeting with the representatives of Party A for July 15, 2015.

On June 22, 2015, Robin Abrams, a member of Lattice’s Board, was contacted by a business acquaintance, who introduced her to a representative of Party B, another China-based financial sponsor.

On July 6, 2015, Ms. Abrams met with a representative of Party B. During the meeting, the representative of Party B indicated that Party B was very interested in pursuing a strategic transaction with Lattice, and asked to be introduced to Mr. Bourgoin. Ms. Abrams contacted Mr. Bourgoin and they scheduled a meeting with representatives of Party B for August 11, 2015.

On July 14, 2015, Lattice and Party A entered into a nondisclosure agreement. Among other things, the nondisclosure agreement imposed a nine-month standstill on Party A’s ability to acquire any Lattice common stock. However, the standstill automatically terminated upon (1) the acquisition by any person or

 

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group of, or Lattice’s entry into an agreement for any person or group to acquire, 50% or more of Lattice’s common shares, or (2) the commencement by a third party of a tender or exchange offer for 50% or more of Lattice’s common shares that the Lattice Board does not recommend that Lattice stockholders reject. We refer to this form of nondisclosure agreement as “Lattice’s Standard Form NDA.”

On July 15 and 16, 2015, Mr. Billerbeck and Mr. Ahmad had meetings with representatives of Party A and Party A’s financial advisor in Beijing, China to discuss Lattice’s business and a possible strategic transaction involving Lattice and Party A. The representatives of Party A provided Mr. Billerbeck and Mr. Ahmad with additional information regarding Party A and why they believed that a transaction with Lattice would be a good strategic fit for Party A, and indicated that Party A was highly motivated and had been willing to pay a relatively high premium in another recent transaction. Mr. Billerbeck provided the representatives of Party A with an overview of Lattice’s current business and future plans. Mr. Billerbeck later reported to Mr. Bourgoin on the discussions with Party A.

On each of July 21 and July 28, 2015, a representative of Party A’s financial advisor contacted Mr. Ahmad to reiterate Party A’s interest in continuing to discuss a potential strategic transaction with Lattice, but noted that given the recent declines in Lattice’s stock price (the closing trading price for Lattice common shares was $4.92 on July 27, 2015, while it was $6.39 on June 12, 2015, the last trading day prior to the date Party A’s financial advisor first contacted Lattice), the timing might not be appropriate to make an offer.

On August 6, 2015, the Board held a meeting and discussed Lattice’s financial performance and prospects, including recent revenue shortfalls as compared to internal forecasts, and potential cost saving measures. Mr. Billerbeck reported on the discussions with Party A and the Board discussed Party A and the potential benefits of exploring a strategic transaction with Party A. The Board instructed Mr. Billerbeck to set up a meeting with representatives of Party A to discuss further Party A’s interest in a potential strategic transaction with Lattice, which was later set for September 1, 2015.

On August 11, 2015, Ms. Abrams and Mr. Bourgoin met with the representative of Party B, and discussed Party B’s interest in pursuing a potential strategic transaction with Lattice.

On August 23, 2015, representatives of Party B contacted Mr. Bourgoin to request a follow-up meeting, and the next day, Mr. Bourgoin discussed the meeting with Party B with the other members of the Board, and the Board determined that Lattice management should be instructed to meet with Party B and explore its interest in pursuing a potential strategic transaction with Lattice.

On August 31, 2015, the Board held a meeting, with members of Lattice’s senior management in attendance. Mr. Bourgoin reported on the discussions with Party B, and the Board instructed Mr. Billerbeck to set up a meeting with representatives of Party B to discuss further Party B’s interest in a potential strategic transaction with Lattice.

During September and October 2015, representatives of Lattice senior management met separately on several occasions with representatives of Party A and Party B, including in-person meetings in Beijing, China, regarding a potential strategic transaction involving Lattice.

In furtherance of discussions with Party B, on October 23, 2015, Lattice and Party B entered into Lattice’s Standard Form NDA.

On November 4, 2015, Mr. Ahmad met with representatives of Party A and discussed Lattice’s business, growth strategies and forecasts for 2015 and 2016. Party A’s representatives indicated that Party A was now preparing to submit a non-binding indication of interest proposing a strategic transaction involving Lattice and Party A, and that Party A was seeking investors who would be willing to provide the necessary financing.

 

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On November 5, 2015, the Board held a meeting. At this meeting, Mr. Billerbeck led a discussion of Lattice’s financial performance and prospects, including expectations for the fourth quarter of 2015 and projections for 2016 and subsequent years, product road map and key customer opportunities, potential cost cutting measures, and Lattice’s strategic position and strategic options, including the possibility of a strategic transaction. Also at this meeting, a prospective financial advisor made a presentation to the Board regarding the strategic landscape of the semiconductor industry and potential interest from buyers in China in acquiring semiconductor companies, and Mr. Billerbeck updated the Board on the discussions with Party A and Party B. Mr. Billerbeck discussed the possibility that a transaction with a China-based buyer may require approval from CFIUS and indicated that Lattice would seek a meaningful reverse termination fee payable in the event CFIUS approval was not obtained. The Board authorized Mr. Billerbeck to continue discussions with Party A and Party B.

On November 18, 2015, Mr. Ahmad met with representatives of Party B, and discussed Lattice’s business, growth strategies and views as to Lattice’s business prospects for 2015 and 2016. Party B indicated that they were seeking to put together a financing consortium and might seek to partner with another investor to submit a proposal for a potential strategic transaction involving Lattice.

On November 27, 2015, representatives of Party A contacted Mr. Ahmad to convey that Party A was continuing to seek to put together a financing consortium and that Party A might seek to partner with one or more investors to submit a proposal for a potential strategic transaction involving Lattice.

On December 2, 2015, Mr. Ahmad met with representatives of Party B to discuss Party B’s plans to submit a proposal for a potential strategic transaction involving Lattice. Party B indicated that it planned to partner with Party A to submit a proposal for a potential strategic transaction involving Lattice. While Lattice was aware that Party A and Party B had a number of significant investors in common, Lattice had not previously discussed the possibility of a joint bid with either Party A or Party B.

On December 3, 2015, the Board held a meeting, at which Mr. Billerbeck provided the Board with an update as to the status of the discussions with Party A and Party B, including the fact that Party A and Party B were now contemplating a joint bid. The Board discussed the financial resources and reputation of Party A and Party B, and encouraged management to continue discussion to see what kind of premium Party A and Party B would be prepared to offer.

On December 4, 2015, a representative of Party B contacted Mr. Ahmad to inform him that Party A and Party B were finalizing a non-binding indication of interest proposing a strategic transaction involving Lattice, Party A and Party B.

Subsequently, on each of December 5 and December 8, 2015, representatives of Party A contacted Mr. Ahmad to confirm that Party A intended to submit a proposal jointly with Party B, and that the proposal would be coming soon.

On December 8, 2015, Lattice engaged Skadden, Arps, Slate, Meagher & Flom LLP, which we refer to in this proxy statement as “Skadden”, to serve as Lattice’s legal advisor in connection with its discussions with respect to a potential strategic transaction with Party A and Party B. Lattice later also engaged Skadden in connection with its discussions with the other parties that approached or were approached by Lattice in the period leading up to when Lattice entered into the Merger Agreement.

On December 11, 2015, Party A and Party B jointly submitted a non-binding indication of interest proposing to purchase all of Lattice’s outstanding common shares for a price between $8.00 and $8.50 per share in cash. The proposal was subject to customary due diligence review and Lattice’s agreement to negotiate with Party A and Party B on an exclusive basis until February 10, 2016 (which exclusivity period would be automatically extended by one week in the event the parties were still in active negotiations as of February 10, 2016). The Board was promptly notified of the non-binding

 

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indication of interest. Based on the closing trading price of $6.26 for Lattice common shares on the previous trading day (December 10, 2015), the proposal’s range of $8.00 to $8.50 per share implied a premium of between 28% and 36%. The proposal was set to expire at 11:59 p.m. Pacific time on December 16, 2015. Party A and Party B also provided a list of requested diligence materials.

On December 14, 2015 the Board held a meeting at which representatives of Skadden advised the Board of their fiduciary duties in connection with the offer by Party A and Party B, and the Board discussed Lattice’s financial performance, prospects, and strategy. The Board also discussed engaging a financial advisor to help the Board evaluate whether the offer by Party A and Party B merited consideration at this time.

On December 17, 2015, Mr. Ahmad communicated to representatives of Party A, Party B and Party A’s financial advisor that Lattice’s Board was still considering the proposal from Party A and Party B. The parties also discussed the proposed scope of diligence that Party A and Party B were seeking to conduct.

On December 21, 2015, the Board held a meeting, with members of Lattice senior management, representatives of Skadden, and representatives of certain potential financial advisors in attendance. At this meeting, the Board approved the creation of a Strategic Alternatives Committee, which we refer to in this proxy statement as the “SAC”, which was tasked with meeting regularly, including between regularly scheduled meetings of the Board, and evaluating strategic options for Lattice to maximize stockholder value, including evaluating the proposal from Party A and Party B and any other proposals that other parties may submit with respect to potential strategic transactions with Lattice. The SAC consisted of Robert Herb (chairman), Mark Jensen and Jeff Richardson. Also at this meeting, the Board interviewed a number of potential financial advisors and selected Morgan Stanley to serve as its financial advisor, after considering Morgan Stanley’s presentation of its qualifications, related experience, reputation and prior representations, including the existence of any potential or actual conflicts of interest. The Board directed members of Lattice senior management to continue discussions with Party A and Party B to see if they could be convinced to increase their offer.

On December 23, 2015, Lattice entered into an engagement letter with Morgan Stanley to serve as its financial advisor.

Also on December 23, 2015, members of Lattice senior management, and representatives of Morgan Stanley met with representatives of Party A, Party B and Party A’s financial advisor to discuss Lattice’s business and strategy for growth, and informed them that the Board was still considering the proposal from Party A and Party B.

On December 28, 2015, representatives of Morgan Stanley and representatives of Party A’s financial advisor discussed valuation issues and Party A’s and Party B’s offer price of $8.00 to $8.50 per share.

On December 30, 2015, the Board held a meeting, with members of Lattice senior management and representatives of Morgan Stanley in attendance. At this meeting, the Board discussed Lattice’s financial performance and prospects, including the potential upside from a recent design win with a key customer, and strategic alternatives available to Lattice to maximize stockholder value, including remaining a stand-alone company, potential third party interest in investing in or acquiring a Lattice business unit, further cost reductions, a share buyback, the status of negotiations with Party A and Party B, and how to respond to the proposal from Party A and Party B. Also, the representatives of Morgan Stanley discussed their preliminary views on valuation with the Board. The Board determined that Lattice should decline to grant Party A and Party B exclusivity, but should continue to engage with Party A and Party B and allow them to conduct due diligence to determine if a higher price was attainable. The Board also discussed with representatives of Morgan Stanley other potentially interested parties, including Party C and Party D, each of which is a U.S.-based strategic entity.

 

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Also on December 30, 2015, representatives of Morgan Stanley and representatives of Party B discussed the non-binding indication of interest by Party A and Party B and the Board’s concerns with respect to exclusivity and valuation.

On January 4, 2016, the SAC held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley in attendance. At this meeting, the SAC discussed the status of negotiations with Party A and Party B, and Party A’s and Party B’s requests for additional information regarding Lattice. In addition, the SAC met in executive session (without Mr. Billerbeck in attendance) with representatives of Skadden to further discuss the progress of negotiations with Party A and Party B.

On January 8, 2016, the SAC held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley in attendance, and discussed the status of the negotiations with Party A and Party B. The SAC also met in executive session, also attended by representatives of Skadden, and discussed the negotiations with Party A and Party B.

Also on January 8, 2016, a member of Lattice senior management was introduced to a representative of the management of Party E, a China-based strategic entity. The member of Lattice senior management in turn introduced the Party E representative to Mr. Ahmad, and the parties agreed to have an initial discussion regarding a potential strategic transaction or other business relationship on January 20, 2016.

On January 11, 2016, Mr. Billerbeck, Mr. Ahmad, and representatives of Morgan Stanley met with representatives of Party A, Party B and Party A’s financial advisor. The Lattice representatives urged Party A and Party B to increase their offer based on the Board’s expectations with respect to valuation expressed in response to the prior offer from Party A and Party B, and reiterated that the Board was not willing to grant exclusivity at that time. The Lattice representatives also indicated that if an acceptable price could be negotiated, Lattice would expect a significant termination fee to be payable by Party A and Party B in the event the transaction was not completed, including if the transaction was not completed due to a failure to obtain CFIUS approval. The parties also discussed expectations with respect to timing of the transaction.

On January 12, 2016, the SAC held a meeting, also attended by Mr. Billerbeck, Mr. Ahmad and representatives of Skadden and Morgan Stanley. At this meeting, Mr. Billerbeck reported to the SAC on the results of the negotiations with Party A and Party B, including that he expected Party A and Party B would shortly be making a revised offer at a higher valuation. The SAC also discussed other parties that may be interested in pursuing a potential strategic transaction with Lattice and authorized representatives of Morgan Stanley to contact Party C and Party D to explore with each of them a potential strategic transaction with Lattice. The SAC also discussed the inquiry from Party E, and authorized management to meet with Party E and explore the nature of its interest. In addition, the SAC met in executive session to further discuss the process of negotiations with Party A and Party B, including a discussion of the timeline, risks (including with respect to deal certainty and the regulatory approval process), issues around confidentiality and the diligence process, and the identification of additional strategic and financial parties that may be interested in a strategic transaction with Lattice.

On January 13, 2016, Lattice received a revised non-binding indication of interest from Party A and Party B, which now contemplated a purchase price of $9.00 per share. In addition, the revised proposal no longer called for exclusivity. The Board was promptly notified of the revised proposal. Based on the closing trading price of $5.135 for Lattice common shares on the previous trading day (January 12, 2016), the revised proposal implied a premium of 75%.

Also on January 13, 2016, representatives of Morgan Stanley separately contacted representatives of each of Party C and Party D to inquire as to whether such parties would be interested in pursuing a potential strategic transaction involving Lattice.

 

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On January 14, 2016, the Board held a meeting, with members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance, and discussed the status of negotiations with Party A and Party B, as well as the meeting scheduled with Party E. At this meeting, representatives of Morgan Stanley provided an update on its preliminary analysis on valuation. The Board and representatives of Morgan Stanley also discussed other parties that may be interested in pursuing a potential strategic transaction with Lattice. The Board instructed Morgan Stanley to reach out at this time to Party F, a Europe-based strategic entity, and Party G, a U.S.-based strategic entity, and to continue to engage with Party C and Party D, to determine if any of these parties would be interested in a strategic transaction involving Lattice. On the same date, Lattice provided access to the diligence materials gathered in the online data room to the representatives of Party A and Party B.

On January 15, 2016, a representative of Morgan Stanley contacted representatives of Party F to inquire as to whether Party F would be interested in pursuing a potential transaction with Lattice.

On January 16, 2016, representatives of Party A’s financial advisor contacted representatives of Morgan Stanley to discuss the revised non-binding indication of interest with Party A and Party B and a projected timeline for a transaction, and to introduce Party A’s and Party B’s legal advisors. Morgan Stanley communicated that the Board had indicated the proposed price would be acceptable, subject to agreement on the amount of the reverse termination fee that would be payable in the event the transaction were not completed due to failure to obtain CFIUS approval, and the other terms of a definitive agreement, as well as Party A and Party B’s ability to demonstrate that financing was available.

On January 18, 2016, members of Lattice senior management and representatives of Morgan Stanley met with representatives of Party A, Party B and Party A’s financial advisor in San Jose, California to discuss the diligence information requested by Party A and Party B.

On January 19, 2016, Lattice and Party C entered into Lattice’s Standard Form NDA, except that in this case the nondisclosure agreement had a 12-month standstill period.

Also on January 19, 2016, a representative of Morgan Stanley contacted a representative of Party G, to inquire as to whether Party G would be interested in pursuing a potential strategic transaction involving Lattice.

On January 20, 2016, Mr. Billerbeck and other members of Lattice senior management met with representatives of Party E and discussed Lattice’s business and whether Party E was interested in pursuing a potential strategic transaction with Lattice. Party E indicated that while it may have some interest in a joint venture or other commercial relationship, it was not sure whether a strategic transaction involving Lattice and Party E would be of interest to Party E at this time, but that it would consider that possibility.

Later that day, Mr. Billerbeck and other members of Lattice senior management and representatives of Morgan Stanley met with representatives of Party A, Party B and Party A’s financial advisor for further due diligence. At this meeting, representatives of Party A and Party B indicated that they were no longer prepared to offer $9.00 per share in connection with the proposed transaction, and that the price they would be prepared to offer was much closer to $8.00. The representatives of Party A and Party B also stated that they would need more time to secure the necessary financing for the proposed transaction and that they were not willing to pay a significant reverse termination fee in connection with a failure to obtain approval from CFIUS with respect to any potential transaction.

On January 21, 2016, a representative of Party A’s financial advisor contacted representatives of Morgan Stanley to convey that Party A and Party B did not expect to be able to meet Lattice’s price expectations, and accordingly Party A and Party B would suspend their discussions regarding a potential transaction with Lattice.

 

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Also on January 21, 2016, representatives of Party G informed representatives of Morgan Stanley that Party G was not interested in pursuing a transaction involving Lattice due to alternate corporate priorities.

On January 22, 2016, Mr. Billerbeck and representatives of Morgan Stanley discussed with representatives of Party C and its financial advisor Lattice’s business and a potential strategic transaction involving Lattice and Party C.

Also on January 22, 2016, the SAC held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance, and discussed the status of negotiations with Party A and Party B, as well as the recent meeting with Party E and the fact that Party E was unlikely to make a proposal with respect to a strategic transaction with Lattice at this time. The SAC was informed that Party G had declined to pursue a transaction with Lattice and that Party F had yet to definitively respond to Lattice’s outreach. The SAC was also informed of Party A’s and Party B’s view that their price would be closer to $8.00 per share and their rejection of a significant reverse termination fee payable in connection with a failure to obtain CFIUS approval. The SAC discussed the fact that Party A and Party B had also not been able to demonstrate that financing was available. Mr. Billerbeck and representatives of Morgan Stanley advised the SAC on discussions with other potential bidders, following which the SAC directed that Morgan Stanley cease any additional outreach to potential acquirers. Lattice subsequently terminated access by representatives of Party A and Party B to the online data room. In addition, the SAC met in executive session with representatives of Skadden in order to further discuss the exploration of other strategic alternatives, including potential divestitures or further cost reductions.

On January 23, 2016, Mr. Billerbeck informed the full Board that negotiations with Party A and Party B had been terminated by Party A and Party B.

On January 29, 2016, a representative of the financial advisor to Party H, a China-based strategic entity, contacted Mr. Ahmad and informed him that Party H was interested in discussing a potential strategic transaction involving Lattice.

On February 2, 2016, a representative of Party C informed a representative of Morgan Stanley that Party C was not interested in pursuing a transaction with Lattice.

On February 5, 2016, Party H submitted a non-binding indication of interest to purchase all of the outstanding stock of Lattice for $9.00 per share in cash, contingent upon Party H’s ability to find financing sources to help finance the proposed transaction and satisfactory completion of customary due diligence. The Board was promptly notified of the non-binding indication of interest. Based on the closing trading price of $4.72 for Lattice common shares on the previous trading day (February 4, 2016), the proposal implied a premium of 91%.

On February 6, 2016, the SAC held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Morgan Stanley in attendance, and discussed Party H’s non-binding indication of interest, including a discussion of timeline, required regulatory approvals (including the fact that CFIUS approval would be required in connection with a transaction with Party H), deal certainty and whether Party H would be able to raise enough additional equity and debt financing to pursue a transaction with a company of Lattice’s size. After discussing Lattice’s stand-alone plan and strategic alternatives, the Board instructed Mr. Billerbeck and representatives of Morgan Stanley to pursue further discussions with each of Party D and Party H regarding a potential strategic transaction.

Also on February 6, 2016, Lattice and Party H entered into Lattice’s Standard Form NDA, except that in this case the nondisclosure agreement had a 12-month standstill period.

 

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On February 9, 2016, Lattice and Party D agreed upon the terms of a nondisclosure agreement, but Party D did not return a signed nondisclosure agreement at that time.

On February 10, 2016, Mr. Billerbeck, Mr. Ahmad and representatives of Morgan Stanley met with representatives of Party H for due diligence on Lattice’s business, and discussed expectations regarding timing and Party H’s ability to obtain the equity and debt financing that would be required.

On February 11, 2016, the Board held a meeting, with members of Lattice senior management and representatives of Skadden also in attendance, and discussed the status of negotiations with Party H and Party H’s ability to obtain financing, as well as Lattice’s stand-alone prospects and its forecast for fiscal year 2017, potential divestitures or further cost reductions, and the status of Lattice’s discussions with parties that might be interested in a strategic transaction.

On February 12, 2016, representatives of Party H’s financial advisor and representatives of Morgan Stanley discussed the status of Party H’s efforts to obtain financing. Later that day, Party H submitted a revised non-binding indication of interest to purchase all of the outstanding stock of Lattice for $9.00 per share in cash. The revised proposal now contemplated a three week deadline for demonstrating progress towards obtaining committed financing and the completion of diligence. The Board was promptly notified of the revised non-binding indication of interest. Based on the closing trading price of $4.32 for Lattice common shares on the previous trading day (February 11, 2016), the proposal implied a premium of 108%. Later that day, Lattice provided access to the diligence materials gathered in the online data room to the representatives of Party H, and continued to provide additional diligence materials through the online data room to Party H and a number of proposed lenders to Party H over the following weeks.

After being contacted by a representative of Party A, on February 18, 2016, Mr. Bourgoin met with representatives of Party A, who informed him that Party A remained interested in the possibility of a transaction. However, Party A did not make any specific proposal at that time.

On February 25, 2016, representatives of Morgan Stanley discussed with representatives of Party H’s financial advisor the status of Party H’s proposal and efforts to obtain committed financing since the February 10, 2016 management meeting.

On February 26, 2016, during an unrelated meeting with a representative of Party I, a U.S.-based strategic entity, a representative of Morgan Stanley discussed Party I’s strategic plans, including companies that Party I was considering for strategic transactions. During this conversation, Party I indicated that it believed there would be limited synergy potential in a transaction with Lattice and that a potential transaction with Lattice was not likely to be a good strategic fit for Party I.

On February 29, 2016, a representative of Party D informed representatives of Morgan Stanley that Party D did not intend to proceed with discussions with Lattice.

On March 3, 2016, representatives of Morgan Stanley had a discussion with representatives of Party H’s financial advisor, in which the financial advisor informed Morgan Stanley it was no longer serving as financial advisor to Party H. Subsequently, a member of Party H’s management confirmed that it was no longer working with its previous financial advisor and that it was in the process of retaining a new financial advisor.

On March 11, 2016, the SAC held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley in attendance, and discussed the status of negotiations with Party H, the communication from Party H’s former financial advisor, and the SAC’s concerns about Party H’s ability to obtain financing for a potential strategic transaction with Lattice. The SAC then discussed outreach with other potential bidders and the lack of interest from the other parties contacted.

 

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On March 16, 2016, representatives of Morgan Stanley and representatives of Party H discussed Party H’s efforts to secure financing and how much additional time Party H would need to secure financing commitments for a transaction.

After being contacted again by a representative of Party A, on March 23, 2016, Mr. Bourgoin met a second time with a representative of Party A, who again indicated that Party A remained potentially interested in the possibility of a transaction with Lattice. Mr. Bourgoin encouraged them to submit an updated proposal if they remained interested, however Party A did not subsequently submit a further proposal.

On each of March 28 and 29, 2016, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley met with representatives of Party H for due diligence sessions to discuss Lattice’s business and technology, and to discuss Party H’s efforts to secure financing for the transaction and set deadlines for Party H to obtain financing.

On April 4, 2016, the SAC held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance, and discussed the status of negotiations with Party H, including Party H’s prospects of obtaining the necessary financing, and the non-binding indications of interest from certain China-based lenders provided by Party H, and representatives of Morgan Stanley summarized the results of its outreach with other potential bidders.

On April 5, 2016, representatives of Skadden and Morgan Stanley discussed with representatives of Party H and its legal advisor potential issues with respect to a transaction with Party H, including Party H’s ability to obtain financing commitments for the funds necessary to complete a transaction, the size and triggers of termination and reverse termination fees, as well as potential alternatives to a reverse termination fee in the event of failure to obtain CFIUS approval, and a letter of credit to be established to secure Party H’s obligations.

On April 8, 2016, a representative of Lazard Frères & Co. LLC, which we refer to in this proxy statement as “Lazard”, financial advisor to China Reform Fund Management Co., Ltd., a China-based financial sponsor and affiliate of CVC, which we refer to in this proxy statement as Party J, contacted a representative of Morgan Stanley to inform them that Party J would be interested in discussing a potential strategic transaction involving Lattice.

On April 9, 2016, representatives of Skadden delivered a proposed merger agreement for the transaction with Party H to representatives of Party H’s legal advisor. Throughout April, Lattice’s and Party H’s senior management and legal advisors negotiated the terms of a proposed merger agreement.

On April 11, 2016, the SAC held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance, and discussed the status of the ongoing negotiations with Party H, the status of the outreach to Party F, and the inquiry from Party J. The SAC instructed Lattice management to engage in discussions with Party J and instructed Morgan Stanley to continue its outreach to Party F.

On April 13, 2016, Tsinghua Unigroup International Co., Ltd., which we refer to in this proxy statement as “Tsinghua”, filed a Schedule 13-D disclosing that it had acquired ownership of approximately 6% of Lattice’s outstanding common stock. Lattice’s stock price increased by 18% in response to this announcement.

On April 14, 2016, representatives of Morgan Stanley discussed with representatives of Party H and a new financial advisor to Party H the status of the potential transaction, Party H’s efforts to date to secure committed financing, and Party H’s financial due diligence.

 

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On April 15, 2016, a representative of Morgan Stanley again contacted representatives of Party F to discuss a potential transaction with Lattice.

On April 18, 2016, the SAC held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance, and discussed the status of the negotiations with Party H, as well as the Schedule 13-D filed by Tsinghua. Representatives of Morgan Stanley also discussed with the SAC other potential strategic buyers.

On April 25 and 26, 2016, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley met with representatives of Party H to discuss issues relating to the merger agreement and Party H’s efforts to secure financing.

On April 26, 2016, the SAC held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance, and discussed the status of key open items in the negotiations, including a discussion of reverse termination fees and regulatory approvals, the need to obtain a letter of credit, establish an escrow or otherwise secure Party H’s obligations, and the status of Party H’s diligence. The SAC discussed with Lattice management and Morgan Stanley the need for Party H to demonstrate that it can obtain the required financing for a transaction if Lattice was going to continue to engage in negotiations with Party H. Also at this meeting, representatives of Morgan Stanley provided the SAC with a summary of discussions with previously engaged potential strategic parties.

On April 27, 2016, Lattice and Party J entered into Lattice’s Standard Form NDA, except that in this case the nondisclosure agreement had a 12-month standstill period.

On April 28, 2016, the new financial advisor to Party H sent representatives of Morgan Stanley a presentation regarding potential financing sources for the transaction with Party H.

On May 2, 2016, representatives of Morgan Stanley and another new financial advisor to Party H discussed the status of ongoing negotiations. Also on May 2, 2016, based on a lack of progress on obtaining financing commitments, and in the negotiations over other key terms, including security for Party H’s obligations, representatives of Lattice informed representatives of Party H that Lattice would discontinue negotiations and the provision of additional due diligence materials to Party H, but that Morgan Stanley would continue to be available to discuss Party H’s efforts to obtain financing.

On May 3, 2016, a representative of Morgan Stanley met with a representative of Party E on an unrelated matter, and in the course of a discussion of Party E’s strategy, the representative of Party E indicated that it would now be interested in discussing a potential strategic transaction with Lattice, but that it had concerns about the need for potential CFIUS approval for such a transaction. A representative of Party E subsequently reached out to a representative of Morgan Stanley and a meeting between representatives of Lattice senior management and representatives of Party E management was set for May 18, 2016.

On May 5, 2016, Mr. Billerbeck, Mr. Ahmad, and representatives of Morgan Stanley discussed with Benjamin Chow, a representative of Party J, Lattice’s business and the possibility of a strategic transaction involving Lattice. Mr. Chow noted that, given that Party J was a private equity fund, rather than a strategic buyer, he would be seeking assurances that senior management planned to remain employed with Lattice post-transaction. Mr. Billerbeck stated that he understood Party J’s position and would discuss it with the Board and was willing to have such a discussion, but not until he and the other members of Lattice senior management were authorized to do so by the Board at the appropriate time.

 

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On May 10, 2016, representatives of Morgan Stanley had a discussion with representatives of another new financial advisor to Party H, during which the representatives of Morgan Stanley reiterated the need for Party H to secure financing before Lattice would provide additional diligence information to Party H.

On May 12, 2016, the Board held a meeting, and Mr. Billerbeck discussed Lattice’s financial performance, strategic initiatives, and key risks and opportunities as a stand-alone company, including Lattice’s prospects for future design wins to offset declines in certain areas of its business, as well as the upcoming meetings in China with Party E, Party K and Party J.

On May 17, 2016, Lattice and Party E entered into Lattice’s Standard Form NDA, except that in this case the nondisclosure agreement had a 12-month standstill period.

On May 18, Mr. Billerbeck and another member of Lattice senior management had a meeting in Beijing, China with representatives of Party E. The representatives of Party E indicated that, while Party E was interested in pursuing a transaction with Lattice, they were not sure that Party E could offer a satisfactory price and were unwilling to entertain any form of reverse termination fee payable in the event CFIUS approval were not obtained for the transaction.

Also on May 18, 2016, Mr. Billerbeck and other members of Lattice senior management had a meeting in Beijing, China with representatives of Party K, during which the representative of Party K indicated that they were not prepared to discuss a potential transaction with Lattice.

Later on May 18, 2016, Mr. Billerbeck had a meeting in Shanghai, China with Mr. Chow to discuss Lattice’s business prospects and a potential transaction with Lattice, including any potential regulatory approvals that would be required in connection with such a transaction. Mr. Chow stated that Party J and its affiliates would not be willing to pay any reverse termination fee if any required regulatory approval for such a transaction were not obtained.

On May 20, 2016, members of Lattice senior management and representatives of Skadden had a meeting with representatives of CFIUS in Washington, D.C. to discuss the potential acquisition interest received by Lattice from parties based in China, to provide an overview of Lattice’s business, technology and operations, and to better understand potential impediments or concerns that CFIUS may raise to any potential transaction.

Also on May 20, 2016, representatives of Lazard contacted representatives of Morgan Stanley to indicate that Party J was preparing a non-binding indication of interest for a potential transaction with Lattice.

On May 23, 2016, Mr. Chow contacted Mr. Billerbeck to inform him directly that Party J was preparing a non-binding indication of interest for a potential transaction involving Lattice and Party J.

On May 26, 2016, a representative of Party F informed a representative of Morgan Stanley that Party F was not interested in pursuing a potential transaction with Lattice.

On May 27, 2016, the SAC held a meeting, with Mr. Billerbeck, other members of Lattice senior management, and representatives of Skadden and Morgan Stanley in attendance, and discussed the fact that representatives of Morgan Stanley had continued to work with Party H, but that Party H had not been able to demonstrate progress in obtaining financing commitments. The SAC also discussed the Schedule 13-D filed by Tsinghua, and Lattice management reported that based on their meetings in China with an affiliate of Tsinghua, they believed Tsinghua’s investment in Lattice was not based on interest in pursuing a potential strategic transaction with Lattice.

 

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On July 7, 2016, Party J and its affiliates submitted a non-binding indication of interest, proposing to acquire all the outstanding shares of Lattice for $8.00 per share in cash, which non-binding indication of interest contemplated that Lattice and Party J would jointly approach CFIUS as part of the diligence process to better assess any potential regulatory risk. The non-binding indication of interest also stated that Party J and its affiliates had the financial resources to finance the transaction with equity without any need for third party financing. The Board was promptly notified of the non-binding indication of interest. Based on the closing trading price of $5.32 for Lattice common shares on the previous trading day (July 6, 2016), the proposal implied a premium of 50%.

On July 8, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley in attendance, and discussed the offer from Party J. Representatives of Morgan Stanley provided Morgan Stanley’s updated analysis on valuation, and the SAC discussed the absence of a termination fee payable if CFIUS approval was not obtained and the risk that CFIUS approval would not be obtained, the size of the proposed termination fee and reverse termination fee, and the fact that Party J had equity funding available to pay the entire purchase price. The SAC instructed Lattice management to permit Party J to conduct limited diligence and to negotiate with Party J to determine if Party J would offer a higher price.

On July 14, 2016, Lattice provided Party J and its affiliates and advisors with limited access to the online data room.

On each of July 19 and 20, 2016, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley met with representatives of Party J and Jones Day, legal advisor to Party J, at which meeting members of Lattice senior management provided a presentation on Lattice and the parties discussed other details of a potential strategic transaction, including the possibility of arranging a meeting among representatives of Lattice, Party J and CFIUS in order to better assess the prospects for obtaining CFIUS approval.

On July 26, 2016, Mr. Billerbeck, other members of Lattice senior management and representatives of Morgan Stanley had a meeting with Mr. Chow and representatives of Lazard. The members of Lattice senior management provided additional information on Lattice’s business and strategy. The parties also discussed Lattice’s expectations regarding valuation, with Lattice management pushing for a higher price.

On July 28, 2016, Party J and its affiliates submitted a revised non-binding indication of interest, indicating that Party J and its affiliates were interested in pursuing an all-cash transaction to acquire all the outstanding shares of Lattice for a price between $8.75 and $9.00 per share, and proposing that Lattice and Party J enter into an agreement providing for exclusivity until September 15, 2016 to incentivize Party J and its affiliates to dedicate the necessary resources to complete a transaction within a short timeframe. The Board was promptly notified of the non-binding indication of interest. Based on the closing trading price of $6.14 for Lattice common shares on the previous trading day (July 28, 2016), the proposal’s range of $8.75 to $9.00 per share implied a premium of between 43% and 47%. Over the following weeks, Lattice provided updated and further diligence material in the online data room in response to requests from Party J.

On August 1, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley in attendance, and reviewed and discussed Party J’s and its affiliates’ revised non-binding indication of interest and proposed exclusivity agreement. Following that discussion, the SAC determined to present the revised proposal to the Board at its next meeting later in the week, directed Lattice management to continue to pursue an increase in price, and authorized Lattice management to make available further due diligence materials to Party J to permit it to refine its view of price.

 

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Also on August 1, 2016 and again on August 5, 2016, Mr. Ahmad, Mr. Chow and representatives of Lattice’s and Party J’s legal advisors discussed the CFIUS approval process, including further discussion of the possibility of jointly engaging in discussions with representatives of CFIUS with respect to a potential transaction in order to better understand CFIUS’ position with respect to a potential transaction so as to, from Lattice’s perspective, mitigate the absence of any reverse termination fee being payable if CFIUS approval was not obtained.

On August 5, 2016, the Board held a meeting. Members of Lattice senior management and representatives of Skadden and Morgan Stanley also participated in this meeting. At this meeting, the Board discussed Lattice’s stand-alone business, including Lattice’s updated internal management forecasts, and the risks associated with achieving management’s forecasts. These forecasts were the “Upside Case” that was subsequently provided to Morgan Stanley (for purposes of its valuation analysis), and a subset of which was also provided to Canyon Bridge, as described under “The Merger – Certain Prospective Financial Data.” Morgan Stanley discussed its analysis on valuation and outreach efforts to date, and Skadden discussed the negotiations to date with respect to key issues in the transaction, including the risks related to obtaining CFIUS approval. Following discussion, the Board resolved to enter into an exclusivity arrangement with Party J to pursue active negotiations.

On August 8, 2016, Lattice and Party J entered into an exclusivity agreement pursuant to which Lattice agreed not to initiate or facilitate discussions regarding a potential strategic transaction with any third party through August 21, 2016, such exclusivity date to be automatically extended to September 21, 2016 should, on or prior to 11:59 p.m. on August 21, 2016, Party J confirm its continued willingness to negotiate a transaction with Lattice that involved a per share price of at least $8.75 to $9.00 per share of Lattice’s common stock.

Also on August 8, 2016, Mr. Ahmad, other members of Lattice senior management and representatives of Morgan Stanley met with Mr. Chow and representatives of Lazard to provide Party J with additional diligence information regarding Lattice’s business.

On each of August 10, 2016 and August 11, 2016, members of Lattice senior management provided Mr. Chow and representatives of Lazard with additional information on Lattice’s financials and products.

On August 12, 2016, the members of the Board other than Mr. Billerbeck, whom we refer to collectively in this proxy statement as the “Non-Management Lattice Directors”, held a meeting. Representatives of Skadden and Morgan Stanley also participated in this meeting. At this meeting, representatives of Morgan Stanley discussed their current view on valuation, and the Board discussed the proposed terms of the exclusivity agreement, the status of negotiations with respect to key issues related to a transaction with Party J and its affiliates (including the appropriate size of the termination fee and reverse termination fee and the establishment of an escrow at signing in support of the reverse termination fee), and the proposed timeline for further negotiations, as well as the status of discussions with respect to a potential transaction involving one of Lattice’s business units. The Non-Management Lattice Directors noted that Party J was required to confirm its preliminary valuation range for Lattice in order to maintain exclusivity by August 21, 2016.

Also on August 12, 2016, Mr. Billerbeck, Mr. Ahmad, Mr. Chow and representatives of Morgan Stanley and Lazard discussed Lattice’s business and managements forecasts for 2017 and 2018, including the assumptions and risks in connection with the updated Lattice management forecasts for 2017 and 2018, which had been furnished to Party J the day prior to the meeting. For further information regarding these management forecasts, please see the discussion of the “Upside Case” under “The Merger – Certain Prospective Financial Data.”

 

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On August 17, 2016, Lattice notified Party J that it received an inbound, unsolicited expression of interest to engage in an acquisition transaction from a representative of Party E, but that it had declined to meet with Party E pursuant to Lattice’s obligations under the exclusivity agreement with Party J.

Also on August 17, 2016, the SAC held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley in attendance, and discussed the status of the diligence process and negotiations with Party J. The SAC was also informed of Party E’s recent expression of interest in engaging in a potential transaction with Lattice.

On August 21, 2016, Party J submitted to Lattice a revised non-binding indication of interest which provided for a purchase price of $8.30 in cash per share of Lattice common stock and was contingent on an extension to the exclusivity period to September 12, 2016 (which exclusivity period would be automatically extended to September 30, 2016 should Lattice determine that Party J was negotiating in good faith and making satisfactory progress towards a mutually agreed upon transaction). The Board was promptly notified of the non-binding indication of interest. Based on the closing trading price of $6.10 for Lattice common shares on the previous trading day (August 19, 2016), the revised proposal implied a premium of 36%.

On August 22, 2016, representatives of Lattice, Party J and Morgan Stanley discussed Party J’s revised proposal. During such discussion, Mr. Chow stated that, after discussions with Party J, he was considering leaving Party J to form a new private equity fund, which CVC had agreed to invest in (which fund eventually became Canyon Bridge).

Also on August 22, 2016, the SAC held a meeting to review Party J’s revised proposal, with Mr. Bourgoin, Mr. Billerbeck and representatives of Skadden and Morgan Stanley also in attendance. Representatives of Morgan Stanley discussed certain financial analyses, and the SAC discussed Party J’s questions with respect to the updated management projections for 2017 and 2018 and the prospects of Lattice in case Lattice did or did not obtain a certain design win from a key customer. Based upon uncertainty regarding the proposed new fund and its ability to finance a transaction, and concern that the new lower price could be matched by other bidders, the SAC determined not to extend exclusivity. As Party J’s exclusivity had lapsed when it failed to reaffirm its prior valuation by August 21, 2016, the SAC discussed potential outreach to other bidders.

On August 23, 2016, representatives of Party E and a financial advisor informed Mr. Billerbeck that Party E wanted to continue discussions with Lattice regarding a potential transaction. Mr. Billerbeck encouraged Party E to reach out to Morgan Stanley, and inquired whether Party E was serious in its interest and had formally engaged financial and legal advisors.

On August 24, 2016, the SAC held a meeting, with Mr. Billerbeck and representatives of Skadden and Morgan Stanley in attendance. At this meeting, representatives of Morgan Stanley informed the SAC of the status of negotiations with Party J and Mr. Chow. At this meeting, representatives of Morgan Stanley provided an updated valuation analysis. Mr. Billerbeck also updated the SAC on his discussions with representatives of Party E. The SAC instructed Lattice management and Morgan Stanley to request further information regarding the plans for a new private equity fund and to inquire as to when financing commitments would be secured, and also instructed Morgan Stanley to engage with Party E and to prepare a list of other potential suitors for outreach.

On August 26, 2016, the Board held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley in attendance. At this meeting, representatives of Morgan Stanley advised the Board of developments related to the discussions with Party J, Party E and other potential strategic partners. Following the meeting, the Non-Management

 

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Lattice Directors met in executive session, also attended by representatives of Skadden, during which representatives of Skadden provided an overview of the Board members’ fiduciary duties in considering Party J’s proposal and the Non-Management Lattice Directors authorized outreach to various potential strategic acquirers, including Party C, Party D, Party E and Party L, a U.S.-based strategic entity. The Non-Management Lattice Directors also tasked Mr. Jensen, as chairman of the Audit Committee of the Board, to have the Audit Committee work with management to review the updated management forecasts.

Also on August 26, 2016, representatives of Morgan Stanley had a discussion with representatives of Party E’s financial advisor regarding Party E’s interest in pursuing a potential strategic transaction with Lattice, including a list of diligence information requested by Party E, and requested confirmation that Party E had formally engaged a financial advisor and legal advisor.

On August 29, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley in attendance. At this meeting, representatives of Morgan Stanley reported that Party E had confirmed that it had engaged a financial advisor for a potential strategic transaction with Lattice. The SAC proceeded to discuss an appropriate outreach strategy with regards to Party C, Party D, Party E and Party L with Morgan Stanley.

On August 30, 2016, representatives of Morgan Stanley contacted representatives of Party C to discuss a potential strategic transaction with Lattice.

Also on August 30, 2016, representatives of Morgan Stanley contacted representatives of Party E to discuss the list of requested diligence information and the need to enter into a new nondisclosure agreement that would also be binding on Party E’s affiliates.

On August 31, 2016, members of Lattice senior management met with Party L to engage in a general discussion with representatives of Party L regarding Lattice’s business and Party L’s potential interest in a strategic transaction involving Lattice.

Also on August 31, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. At this meeting, representatives of Morgan Stanley provided an update on discussions with Party J and reported on outreach efforts to Party C, Party D, Party E, Party L, and the SAC authorized Morgan Stanley to reach out to Party M, Party N, Party O and Party P, each of which is a U.S.-based strategic entity. The SAC again determined that Mr. Chow must provide additional details and documentation relating to the structure and financing of the new private equity fund as a precursor to consideration of a transaction with such private equity fund. Mr. Ahmad provided an update on his discussions with third parties with respect to a potential divestiture of a Lattice business unit.

Subsequently on August 31, 2016, representatives of Morgan Stanley separately contacted representatives of Party M, Party N, Party O and Party P to discuss each party’s level of interest regarding a potential strategic transaction with Lattice.

On September 1, 2016, a representative of Morgan Stanley again contacted a representative of Party C to discuss a potential strategic transaction with Lattice.

Also on September 1, 2016, Lattice and Party P entered into Lattice’s Standard Form NDA, except that in this case the nondisclosure agreement had a six-month standstill period.

On September 2, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management, and representatives of Skadden and Morgan Stanley also in attendance. At

 

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this meeting, representatives of Morgan Stanley confirmed that Mr. Chow had formed CBC Partners and was now in the process of forming a new private equity fund (the fund which would become Canyon Bridge) in which CVC would be an investor, and that the newly formed private equity fund would seek to effect a transaction with Lattice. The representatives of Morgan Stanley also confirmed that they had informed representatives of Lazard that Lattice would not consider exclusivity with Canyon Bridge until additional clarity had been provided with regards to Canyon Bridge’s structure and financing. The SAC also discussed updates on discussions with Party L, and updates on outreach efforts with Party C, Party D Party M, Party N, Party O and Party P. Members of Lattice senior management also provided an update on discussions with respect to a possible divestiture of a Lattice business unit.

Later on September 2, 2016, representatives of Party D informed representatives of Morgan Stanley that it was unlikely to move forward with an offer.

Also on September 2, 2016, representatives of Party N informed representatives of Morgan Stanley that they were not interested in pursuing a transaction with Lattice.

On September 3, 2016, representatives of Party M contacted representatives of Morgan Stanley to inform them that Party M was not interested in pursuing a transaction with Lattice because such a transaction did not fit Party M’s long term operating model.

On September 6, 2016, Mr. Billerbeck and Mr. Ahmad met with representatives of Party L and its financial advisor during which discussions both parties exchanged information regarding their strategy and business and discussed potential synergies in a transaction with Lattice.

Also on September 6, 2016, Lattice and Party L entered into Lattice’s Standard Form NDA, except that in this case the nondisclosure agreement had a six-month standstill period.

Additionally on September 6, 2016, a representative of Party E’s financial advisor communicated with a representative of Morgan Stanley and sent comments on the proposed form of nondisclosure agreement. The representative of Morgan Stanley indicated that the proposed comments were acceptable, but asked for confirmation that based on the proposed Party E signatory, the nondisclosure agreement would cover Party E’s affiliates.

On September 6, 2016, and again on September 7, 2016, Mr. Ahmad and representatives of Morgan Stanley met with Mr. Chow and discussed the proposed structure of Canyon Bridge and its funding commitments from investors, including CVC.

On September 7, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. At this meeting, representatives of Morgan Stanley provided an update on discussions with Canyon Bridge, as well as summarizing outreach efforts with Party C, Party D, Party E, Party M, Party N, Party O and Party P, including that Party D, Party M and Party N indicated that they had no interest in pursuing a potential strategic transaction with Lattice. Morgan Stanley reported that Canyon Bridge had committed to providing further information regarding the structure of Canyon Bridge and financing commitments by the end of the week. Mr. Billerbeck also summarized the September 6, 2016 meeting with Party L. Mr. Ahmad reported on the status of his discussions regarding a possible divestiture of a Lattice business unit.

Also on September 7, 2016, Mr. Ahmad and representatives of Morgan Stanley engaged in a general discussion with representatives of Party O, provided an overview of Lattice’s business based on publicly available information, and discussed the possibility of a potential strategic transaction involving Lattice and Party O.

 

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Additionally on September 7, 2016, a representative of Morgan Stanley communicated with a representative of Party E’s financial advisor and reiterated the need for Party E to confirm that it had formally engaged a financial advisor and legal advisor.

On September 8, 2016, Mr. Billerbeck and Mr. Ahmad met with representatives of Party P and discussed Lattice’s business and the possibility of a potential strategic transaction involving Lattice and Party P.

Also on September 8, 2016, the Audit Committee of the Board held a meeting, with Mr. Billerbeck and other members of Lattice senior management in attendance, and reviewed and asked questions regarding management’s forecasts for 2017 and 2018, including regarding the forecasting process, the revenue forecasts for key new products, and the assumptions, risks and opportunities reflected in such forecasts. Based on feedback from the Audit Committee, Lattice management developed a downside scenario showing the impact if Lattice failed to achieve an anticipated design win with a key customer, which we refer to in this proxy statement as the “Downside Case.” These management forecasts, including both the Upside Case and the Downside Case, were subsequently provided to Morgan Stanley for purposes of its valuation analysis, and subsets of which were also provided to Canyon Bridge. For further information regarding these management forecasts, please see “The Merger – Certain Prospective Financial Data.”

On September 9, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. At this meeting, representatives of Morgan Stanley provided an update on the discussions of a potential CFIUS filing with Canyon Bridge, as well as remaining outreach efforts with other parties, including that Party P had still not made an offer, and that Party L had indicated that the timing was not good given recent pressure on their stock price and the likelihood that any offer would need to include a stock component. The SAC also discussed the updated projections prepared by management, and discussed analyses with respect to valuation, the prospect for a design win with a key customer, and the operational risks inherent in the projections. Later on September 9, 2016, Lattice and Canyon Bridge entered into a nondisclosure agreement on the same terms as were agreed with Party J.

On September 10, 2016, Canyon Bridge submitted a non-binding indication of interest to acquire all of the equity interests of Lattice for $8.30 per share in an all-cash transaction, contingent upon receipt of final approval from Canyon Bridge’s investment committee and Lattice’s entry into an exclusivity agreement with Canyon Bridge by September 13, 2016, and which contemplated Canyon Bridge and Lattice jointly determining whether CFIUS clearance would be required for the transaction and, if so, that the parties would jointly approach CFIUS as part of the diligence process. The Board was promptly notified of the non-binding indication of interest. Based on the closing trading price of $5.98 for Lattice common shares on the previous trading day (September 9, 2016), the proposal implied a premium of 39%.

On September 11, 2016, a representative of Party P informed representatives of Morgan Stanley that Party P was no longer interested in pursuing a potential transaction with Lattice because such a transaction would not fit with Party P’s long-term business plans.

Later on September 11, 2016, a representative of Party C also informed a representative of Morgan Stanley that Party C was no longer interested in further pursuing a potential transaction with Lattice.

On September 12, 2016, a representative of Party O’s financial advisor informed a representative of Morgan Stanley that Party O was not interested in pursuing a potential transaction with Lattice.

On the morning of September 12, 2016, the SAC held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. At

 

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this meeting, representatives of Morgan Stanley confirmed that the outreach conducted had not resulted in any additional offers for a transaction with Lattice, and the SAC discussed the status of discussions regarding a potential divestiture of one of Lattice’s business units.

Also on September 12, 2016, Party L submitted a proposal to acquire Lattice at a significantly lower price than the offer from Canyon Bridge.

Later that day, the Board held a meeting, with representatives of Skadden and Morgan Stanley also in attendance. At this meeting, following discussion, the Board determined not to engage in negotiations with Party L based on the significantly lower price than the offer by Canyon Bridge. The Board also discussed that no follow up offer or response had been received from Party C. As no definitive proposal had been received from any of the parties that Morgan Stanley had engaged with, and after discussion with Morgan Stanley regarding their analysis on valuation, and after further discussion of the strategic alternatives available to Lattice, including continuing to pursue Lattice’s stand-alone plan, a potential divestiture of a Lattice business unit, and further cost reduction measures, and the risks associated with design wins with customers, the Board authorized entry into a new exclusivity agreement with Canyon Bridge, to prevent the offer from Canyon Bridge from lapsing, and instructed the SAC to supervise the negotiation of the definitive agreement with Canyon Bridge. At this meeting, Mr. Jensen also discussed the updated management projections developed by Lattice management previously discussed with the SAC, including the Upside Case and Downside Case. The Non-Management Lattice Directors then went into executive session and further discussed the strategic alternatives available to Lattice and the process for negotiations with Canyon Bridge.

On September 13, 2016, Lattice and Canyon Bridge entered into an exclusivity agreement, providing among other things that Lattice would not initiate discussions regarding a potential strategic transaction with any third party through October 4, 2016, which date would be automatically extended to October 18, 2016 absent affirmative action to the contrary. Also on September 13, 2016, Jones Day delivered to Skadden an initial draft of the merger agreement, which provided that an equity commitment letter would be executed simultaneously with the proposed merger agreement, but that no reverse termination fees would be payable to Lattice in the event of a failure to receive CFIUS approval. The initial draft merger agreement also provided that at signing an escrow account would be established and funded with an amount equal to the reverse termination fee, which escrow account would provide Lattice with certainty as to the availability of funds in the event the reverse termination fee were payable.

Between September 13, 2016 and November 2, 2016, representatives of Lattice management, Morgan Stanley, Skadden, Canyon Bridge, Lazard and Jones Day held various meetings and calls to negotiate the terms of the proposed merger agreement, and exchanged drafts of the merger agreement, and Canyon Bridge and its advisors continued to perform their due diligence on Lattice.

On September 14, 2016, Mr. Ahmad and representatives of Skadden and Jones Day discussed the CFIUS approval process in connection with a Canyon Bridge transaction.

On September 16, 2016, the SAC held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance, and discussed the status of negotiations and diligence with Canyon Bridge, and the possibility of scheduling an in-person informational session with members of CFIUS in two to three weeks.

On September 19, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. At this meeting, the SAC discussed issues in the initial draft of the merger agreement received from Canyon Bridge (including the identity of the parties to the agreement and recourse in case of a breach

 

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of the agreement, the level of efforts required to obtain CFIUS approval, termination fees and reverse termination fees and triggers and the mechanisms for obtaining any payment from the escrow account in the event the reverse termination fee were payable) and updates on the CFIUS review process with representatives of Skadden, and received an update from Mr. Billerbeck on the status of negotiations regarding a potential divestiture of one of Lattice’s business units. In response to Canyon Bridge’s indication in the merger agreement that, given that it intended to retain Lattice senior management post-transaction, it would seek to discuss post-transaction employment arrangements with certain senior executives in connection with a transaction, the SAC further resolved that any such discussions should take place only after all of the material issues in the transaction negotiations had been resolved. Later that day, Skadden delivered to Jones Day a revised merger agreement draft.

On September 21, 2016, Party E sent a representative of Morgan Stanley an executed copy of Lattice’s Standard Form NDA, except that in this case the nondisclosure agreement had a 12-month standstill period, and requested a call to discuss Lattice’s questions regarding whether Party E had engaged a financial and legal advisor. Morgan Stanley did not respond to Party E’s financial advisors pursuant to Lattice’s obligations under the exclusivity agreement with Canyon Bridge.

On September 22, 2016, members of Lattice senior management and representatives of Skadden and Morgan Stanley participated in meetings with representatives of Canyon Bridge management, Jones Day and Lazard to negotiate the merger agreement and conduct due diligence.

Also on September 22, 2016, a representative of Party E’s financial advisor reached out to Morgan Stanley to discuss Party E’s potential interest in a transaction with Lattice, but Morgan Stanley declined to meet with Party E’s financial advisors pursuant to Lattice’s obligations under the exclusivity agreement with Canyon Bridge.

On September 23, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. At this meeting, the SAC discussed the results of the prior day’s negotiations with Canyon Bridge, updates on Canyon Bridge’s financing commitments and the status of negotiations regarding the potential divestiture of one of Lattice’s business units. In particular, Mr. Billerbeck reported that the parties had discussed the potential range of termination fees and reverse termination fees, and had engaged in extensive discussions regarding the level of efforts required to obtain CFIUS approval, but that these issues would not be resolved prior to the parties’ meeting with members of CFIUS to better understand whether CFIUS would have any concerns in connection with this transaction. Mr. Billerbeck also reported that Canyon Bridge had engaged an accounting firm to conduct additional financial diligence over the coming week.

On September 28, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. At this meeting, the SAC discussed the status of negotiations with Canyon Bridge, efforts to set up a meeting with representatives of CFIUS for the following week, and the status of Canyon Bridge’s financing commitments, and recommended that the Board allow the exclusivity period under the exclusivity agreement with Canyon Bridge to automatically extend until October 18, 2016.

On September 29, 2016, the Board held a meeting, with members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance, and discussed the status of negotiations with Canyon Bridge, including progress in obtaining financing commitments, and resolved to allow the exclusivity period under the exclusivity agreement with Canyon Bridge to automatically extend until October 18, 2016.

On October 3, 2016, the SAC held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. At this meeting,

 

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the SAC discussed the latest draft merger agreement received on September 29, 2016 and updates on Canyon Bridge’s financing commitments, which were anticipated to be received on or about October 9, 2016. Mr. Billerbeck also reported that a meeting had been scheduled with representatives of CFIUS on October 6, 2016, and Mr. Ahmad reported on the status of discussions regarding a potential divestiture of one of Lattice’s business units, noting that based on discussions with potential interested parties, the proceeds of such a divestiture were not expected to be a significant.

On October 6, 2016, Mr. Billerbeck, Mr. Ahmad and representatives of Skadden, Canyon Bridge and Jones Day participated in a meeting in Washington, D.C. with representatives of CFIUS to preview with CFIUS the potential transaction, including the parties involved.

On October 10, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. At this meeting, the SAC discussed unresolved issues reflected in the updated merger agreement delivered by Lattice to Canyon Bridge on October 7, 2016, including the size and triggers for termination fees, available remedies (including the mechanisms related to when any escrowed funds could be released to Lattice in the event the reverse termination fee were payable), and required efforts by the parties to obtain CFIUS approval, as well as the risks associated with obtaining CFIUS approval generally, and the results of the meeting with representatives of CFIUS on October 6, 2016. Following discussion in executive session, in which only Non-Management Lattice Directors and representatives of Skadden were present, the SAC provided guidance on its positions on the unresolved items in the merger agreement, and also discussed the status of discussions regarding the possible divestiture of one of Lattice’s business units.

On October 12, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. At this meeting, in addition to discussing an overview of recent negotiations with Canyon Bridge, representatives of Skadden provided an overview of the CFIUS review process and outlined potential mitigation measures that may be sought by CFIUS in connection with a transaction. The SAC also discussed the appropriate size for the reverse termination fee.

On October 14, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. At this meeting, the SAC was provided with updates on the status of negotiations with Canyon Bridge and the potential divestiture of one of Lattice’s business units. The SAC also discussed the most recent draft of the merger agreement received from Canyon Bridge on October 11, 2016, including the interim operating covenants in the agreement in light of Lattice’s prospective expenditures and plans over the upcoming year, and the treatment of outstanding equity awards. In executive session, attended by only Non-Management Lattice Directors and representatives of Skadden, the SAC discussed alternatives in case agreement could not be reached with Canyon Bridge, including discussing Lattice’s stand-alone plan.

On October 18, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. At this meeting, the SAC discussed key remaining issues in the merger agreement negotiation, in light of additional drafts which had been exchanged over the course of the preceding week, including efforts required to obtain CFIUS approval, and termination fees and reverse termination fees, updates on the potential divestiture of one of Lattice’s business units. In addition, Morgan Stanley provided an update on Canyon Bridge’s financing, noting that Canyon Bridge had provided evidence that it had $1.4 billion in financing commitments from a wholly owned subsidiary of CVC. The SAC also discussed the management forecasts and approved use of the management forecasts discussed on August 31, 2016

 

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by Morgan Stanley for its valuation analysis and providing these forecasts to Canyon Bridge. For further information regarding these management forecasts, please see “The Merger – Certain Prospective Financial Data.” At this meeting, the SAC also gave Mr. Billerbeck the authority to extend Canyon Bridge’s exclusivity period through October 26, 2016. In executive session, attended by only Non-Management Lattice Directors and representatives of Skadden, the SAC further discussed the appropriate negotiation stance regarding key remaining issues in the merger agreement, including the obligations and potential mitigation measures that Canyon Bridge should be required to accept in order to obtain CFIUS approval, and the availability of recourse above and beyond the reverse termination fee. The SAC also again discussed alternatives in the event Lattice and Canyon Bridge were unable to come to terms on a transaction, including Lattice’s stand-alone plan.

Also on October 18, 2016, Lattice and Canyon Bridge amended their exclusivity agreement to extend exclusivity through October 26, 2016.

On October 19, 2016, Lattice furnished a subset of the Downside Case projections to Canyon Bridge. For further information on these projections, please see “The Merger – Certain Prospective Financial Data.”

On October 21, 2016, Mr. Ahmad and representatives of Morgan Stanley, Lazard and Jones Day discussed Lattice’s preliminary results for the third quarter of 2016 and the Downside Case projections for calendar years 2017, 2018 and 2019. Mr. Billerbeck and Mr. Chow discussed the fact that Canyon Bridge intended to retain Lattice’s management post-closing and Mr. Billerbeck and Mr. Chow also discussed plans to implement a retention plan for employees post-transaction, although no specifics were discussed at this time.

On October 24, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. At this meeting, the SAC discussed the CFIUS approval process in the context of a transaction with Canyon Bridge. In executive session with representatives of Skadden, the SAC further discussed outstanding issues reflected in the latest draft merger agreement (including the availability of recourse above and beyond the reverse termination fee, each party’s obligations in connection with seeking CFIUS approval and other regulatory approvals, and the circumstances under which Lattice would be entitled to receive the reverse termination fee) and again discussed Lattice’s available strategic alternatives, including its stand-alone prospects.

On October 26, 2016, the SAC held a meeting, with Mr. Bourgoin, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. At this meeting, the SAC discussed key open business points in the merger agreement negotiation and Canyon Bridge’s financing documentation, and authorized an amendment extending Canyon Bridge’s exclusivity period through October 28, 2016. The SAC also met in executive session, attended by only Non-Management Lattice Directors.

Between October 26, 2016 and October 28, 2016, Mr. Billerbeck and other members of Lattice senior management had meetings with representatives of Canyon Bridge and Jones Day in Beijing, China, with representatives of Skadden attending the meetings by phone, to negotiate open issues with respect to the proposed merger agreement, including each party’s obligations in connection with seeking CFIUS approval and other regulatory approvals, and the circumstances under which Lattice would be entitled to receive the reverse termination fee.

Also on October 26, 2016, Lattice and Canyon Bridge amended their exclusivity agreement to extend exclusivity through October 28, 2016.

On October 27, 2016, the Board held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. During this

 

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meeting, representatives of Skadden summarized and engaged the Board in a lengthy discussion regarding the terms of the proposed merger agreement, and Morgan Stanley reviewed its analysis on valuation. Mr. Billerbeck also discussed Lattice’s stand-alone prospects with the Board, noting potential sources of execution risk. The Board also discussed amending Lattice’s bylaws to provide for Delaware as the exclusive forum for certain suits. Subsequently, the Non-Management Lattice Directors met with representatives of Skadden, and determined to extend exclusivity with Canyon Bridge until November 2, 2016 to facilitate on-going negotiations. Following this discussion, the Board authorized management to start discussing their individual employment arrangements with Canyon Bridge.

On October 28, 2016, Lattice and Canyon Bridge amended their exclusivity agreement to extend exclusivity through November 2, 2016.

On October 31, 2016, a revised draft of the merger agreement was circulated to the Board for review.

Also on October 31, 2016, a representative of Party Q, a U.S.-based strategic entity, contacted Mr. Billerbeck to inform him of Party Q’s interest in a potential strategic transaction with Lattice. Mr. Billerbeck informed Party Q that the timing would not be appropriate, pursuant to Lattice’s obligations under its exclusivity agreement with Canyon Bridge.

On November 1, 2016 and November 2, 2016, Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden met with representatives of Canyon Bridge’s management, Jones Day and Lazard and finalized the merger agreement. During this period, Mr. Billerbeck and other members of Lattice senior management also negotiated amendments to existing employment arrangements with Lattice and Canyon Bridge that contemplated the waiver by such employees of acceleration of equity awards that would otherwise have occurred in connection with the proposed transaction. These employment agreements, including the letter agreements entered into among Parent, Lattice and Mr. Billerbeck and other members of Lattice senior management in connection with the Merger, are described in more detail under “The Merger – Interests of Lattice’s Directors and Executive Officers in the Merger” and in that section “– Arrangements with Parent.” Mr. Billerbeck and Mr. Chow also further discussed plans to implement a retention plan post-transaction.

On November 2, 2016, the Board held a meeting, with Mr. Billerbeck, other members of Lattice senior management and representatives of Skadden and Morgan Stanley also in attendance. During this meeting, representatives of Skadden provided an overview of several minor changes to the terms of the proposed merger agreement since the October 31, 2016 draft and the exclusive forum bylaw amendment that was proposed to be adopted in connection therewith. The Board discussed the proposed merger agreement at length, including the experience and reputations of Canyon Bridge’s co-founders, Raymond Bingham and Benjamin Chow, and the other factors considered by the Board as described under the caption “The Merger — Recommendation of the Board of Directors and Reasons for the Merger.’’ Representatives of Morgan Stanley discussed certain financial analyses with the Board, as well as the assumptions and matters considered in rendering its fairness opinion. Representatives of Morgan Stanley rendered to the Board its oral opinion (later confirmed in writing) that the $8.30 per share of Lattice common stock offered by Canyon Bridge was fair, from a financial point of view, to the holders of Lattice common stock. The Board discussed these matters with representatives of Morgan Stanley and the other participants in the meeting, including the intrinsic value and premium of Canyon Bridge’s offer and other inputs and assumptions in Morgan Stanley’s valuation analysis.

The meeting then adjourned, members of Lattice senior management and representatives of Morgan Stanley left the meeting, and a meeting of the SAC commenced, also attended by the Non-Management Lattice Directors and representatives of Skadden. Members of the SAC discussed the key terms of the merger agreement and thereupon unanimously resolved to recommend that the Board approve the merger agreement and the transactions contemplated thereby.

 

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Following the meeting of the SAC, the full Board reconvened. Following the recommendation of the SAC, the members of the Board unanimously (1) determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement were fair to, advisable and in the best interests of Lattice and its stockholders, (2) approved the form, terms, provisions and conditions of the merger agreement and the consummation of the merger and the other transactions contemplated by the merger agreement, (3) resolved to recommend that Lattice’s stockholders vote for the adoption of the merger agreement, and (4) approved the exclusive forum bylaw amendment.

During the early morning of November 3, 2016, the merger agreement and related documents were executed and delivered by Lattice, Canyon Bridge, Parent and Merger Sub.

Lattice and Canyon Bridge issued a joint press release announcing the execution of the Merger Agreement prior to the open of trading in Lattice’s common stock on Nasdaq on November 3, 2016.

Recommendation of the Board of Directors and Reasons for the Merger

At a meeting held on November 2, 2016, after carefully reviewing various factors and with the unanimous recommendation of the Strategic Alternatives Committee of the Board, consisting solely of independent and disinterested directors, the Board unanimously determined that the proposed Merger was advisable and in the best interests of, the stockholders of Lattice, unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Merger, directed that the Merger Agreement be submitted to the Company’s stockholders for adoption, and unanimously recommend that Lattice’s stockholders vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting; and (3) “FOR” the non-binding, advisory proposal to approve compensation that will or may become payable to Lattice’s named executive officers in connection with the Merger.

In evaluating the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, the Board consulted with the Company’s senior management team, as well as its outside legal and financial advisors, and considered a number of factors, including the following material factors (not in any relative order of importance):

Merger Consideration. With respect to the Merger Consideration to be received by the Company’s stockholders, the Board considered:

 

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that the Company’s stockholders will be entitled to receive offer consideration of $8.30 per share in cash upon the closing of the Merger, providing liquidity and certainty of value as compared to the uncertain future long-term value that the Company’s stockholders might or might not realize if it remained an independent public company;

 

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the fact that the $8.30 per share value of the cash Merger Consideration represented an approximately 30% premium over the last trading price of the Company’s common stock on The Nasdaq Global Select Market on November 2, 2016;

 

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the recent and historical market prices of the Company’s common stock over the last 12 months and the last five and 10 years;

 

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the financial presentation and opinion of Morgan Stanley delivered to the Board, that, based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the $8.30 per share Merger Consideration to be offered in cash to the stockholders of the Company was fair, from a financial point of view, to such stockholders, as more fully described under the heading “Opinion of the Company’s Financial Advisor.” The Board was aware that Morgan Stanley became entitled to certain fees upon delivery of its fairness

 

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opinion and will become entitled to additional fees upon consummation of the proposed transaction, as more fully described below under the heading “Opinion of the Company’s Financial Advisor”;

 

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its belief, based on the discussions and extensive negotiations with Parent, that $8.30 per share of the Company’s common stock was the highest price Parent would be willing to pay; and

 

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its belief, based on the discussions with several parties other than Parent, that it was unlikely that any other party would be willing to pay more than $8.30 per share in cash to acquire the Company.

Solicitation of Interest. The Board considered the fact that, prior to entry into an exclusivity agreement with Canyon Bridge, and at various times during which the exclusivity period had lapsed, the Board, with the assistance of Morgan Stanley, considered other potential acquirers and solicited interest from other parties that the Board determined would likely have the financial ability and strategic interest to be potentially interested in a business combination with Lattice, and that none of the other parties contacted made any superior proposals with respect to an acquisition of the Company.

Cash Consideration. The Board considered the form of consideration to be paid to the stockholders pursuant to the Merger and the liquidity and certainty of the value of an all-cash consideration compared to stock or other forms of consideration.

Availability of Funding. The Board reviewed and considered the terms, parties to and structure of the Equity Commitment Letter provided by Parent, including (1) the reputation of Raymond Bingham and Benjamin Chow, the co-founders of Canyon Bridge and CBC Partners, (2) that Canyon Bridge has received a capital commitment from a wholly owned subsidiary of CVC, a large Chinese investment fund, in an amount sufficient to fund its obligations under the Equity Commitment Letter, (3) the reputation of Canyon Bridge’s investors, (4) the fact that the equity financing provided pursuant to the Equity Commitment Letter will be sufficient to provide Parent with cash sufficient to pay the aggregate Per Share Merger Consideration and any and all fees and expenses required to be paid by Parent or Merger Sub in connection with the Merger, (5) that the Equity Commitment Letter was executed substantially concurrently with the Merger Agreement, and (6) that Parent agreed to deposit $58,750,000 into an escrow account located in the United States and held by Citibank, N.A. prior to the signing of the Merger Agreement to fund the payment of the reverse termination fee. The Board also considered the risk that Canyon Bridge was a newly formed private equity fund, that it may not be able to enforce its capital commitments and that the Company would not be able to force Parent to sue to enforce the Equity Commitment Letter.

Unanimity. The Board considered that the members of the Board were unanimous in their determination to recommend the Merger Agreement for adoption by the Company’s stockholders.

Prospects in Remaining Independent. The Board considered the possibility of the Company continuing to operate as an independent public company, and the risks and uncertainties of achieving the Company’s operating plan and projected results, including the risks and uncertainties of product development and market acceptance, as well as market and general economic risks. In considering this alternative, the Board considered the following factors:

 

•

the inherent uncertainty of attaining the internal financial projections prepared by the Company’s management and summarized below under the heading “Certain Unaudited Prospective Financial Information of the Company”, including the fact that the Company’s actual results could differ materially from the projected results;

 

•

the fact that, even if the Company were to achieve its operating plan and projected results, there would be no assurance that the implied present value of the Company’s future stock price would exceed the $8.30 per share cash Merger Consideration;

 

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•

the risks involved in the Company’s execution on its strategic plan as an independent company, including:

 

•

achieving the Company’s growth plans in light of the current and foreseeable market conditions, including the risks and uncertainties in the U.S. and global economy generally and the semiconductor industry specifically;

 

•

the Company’s dependence on sales to a concentrated group of customers for a significant part of its revenues, the fact that the selection process for the Company’s products to be included in its customers’ new products is highly competitive, and the potential significant impact on revenue if any of these customers reduce their use of the Company’s products;

 

•

the Company’s dependence upon distributors to generate a significant portion of its revenue and complete order fulfillment;

 

•

that the Company’s outstanding indebtedness could reduce its strategic flexibility and liquidity and may have other adverse effects on the results of its operations;

 

•

the risk that the Company may be unable to innovate, develop and introduce new products that achieve customer and market acceptance;

 

•

the dependency of the Company on the efforts and abilities of key members of management and other technical personnel, and the risk that the Company may be unable to retain such personnel and attract and retain other highly qualified personnel, particularly product engineers who can respond to market demands and required product innovation;

 

•

that consolidation in the industry has resulted in the Company being much smaller in scale than some of its competitors, making it harder to fund research and development needed to stay competitive; and

 

•

the “risk factors” set forth in the Company’s Form 10-K for the fiscal year ended January 2, 2016 and subsequent reports filed with the SEC.

Opinion of Morgan Stanley. Representatives of Morgan Stanley presented its financial analysis of Parent’s proposed purchase price of $8.30 per share and then rendered its oral opinion (which was subsequently confirmed in writing) to the Board that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the consideration to be offered to the stockholders of the Company in the proposed Merger is fair, from a financial point of view, to such stockholders. The full text of Morgan Stanley’s written opinion, which sets forth, among other things, the qualifications and assumptions made, procedures followed, factors considered and limitations upon the review undertaken by Morgan Stanley in rendering its opinion, is attached as Annex B and is incorporated by reference herein in its entirety.

Terms of the Merger Agreement. The Board considered the terms and conditions of the Merger Agreement and the course of negotiations thereof, including:

 

•

the conditions to the parties’ obligations to complete the Merger, including the commitment by Parent to seek to obtain CFIUS, HSR and other applicable regulatory approvals and assume the risks related to certain conditions and requirements that may be imposed by regulators in connection with securing such approvals, the absence of a financing condition and Parent’s representations, warranties and covenants related to obtaining financing for the transaction;

 

•

the requirement that the Merger will only be effective if approved by the holders of a majority of the outstanding shares of Company common stock;

 

•

the Company’s ability, under certain circumstances, to furnish information to and conduct negotiations with a third party, if the Board determines in good faith that the third party has made a Takeover Proposal (as defined in the Merger Agreement) that is, or may reasonably be expected to lead to, a Superior Proposal (as defined in the Merger Agreement);

 

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•

the ability of the Board, subject to compliance with the terms and conditions of the Merger Agreement, to consider and to accept an unsolicited Takeover Proposal that the Board has determined is a Superior Proposal and terminate the Merger Agreement, upon the payment to Parent of a termination fee of $34,180,000, in order to enter into a definitive agreement providing for a Superior Proposal, as long as the Company has complied with the notice and other requirements set forth in the Merger Agreement;

 

•

the Board’s belief that the termination fee of $34,180,000 was customary for a transaction of this size and type and would not preclude or substantially impede a possible Superior Proposal;

 

•

the Company’s entitlement to a reverse termination fee of $58,750,000 if the Merger Agreement is terminated under certain circumstances;

 

•

an amount equal to the reverse termination fee has been deposited in an escrow fund as collateral and security for the payment of the reverse termination fee;

 

•

the Board’s belief that the Company will retain sufficient operating flexibility to conduct its business in the ordinary course between the execution of the Merger Agreement and consummation of the Merger;

 

•

the limited conditions to Parent’s obligation to complete the Merger, including the absence of a financing condition or a need for a vote of Parent’s stockholders; and

 

•

that the Company’s stockholders who do not vote in favor of adoption of the Merger Agreement and comply with all the required procedures under DGCL will be entitled to appraisal rights, which provides those eligible stockholders with an opportunity to have a Delaware court determine the fair value of their shares, which may be more than, less than, or the same as the amount such stockholders would have received under the Merger Agreement.

In the course of its deliberations, the Board also considered a variety of negative factors weighing against the Merger, including:

Cash Transaction. The Board considered that the Per Share Merger Consideration is payable solely in cash and, as a result, the Company’s stockholders will forego any potential future increase in the Company’s value that might result from the Company’s possible growth, and that gains realized as a result of the Merger generally will be taxable to the Company’s stockholders.

Risks of Announcement; Risks of Closing. The Board considered:

 

•

the risks and contingencies related to the announcement and pendency of the Merger, including the potential impact on the Company’s employees and its relationships with existing and prospective customers and business partners, as well as other third parties;

 

•

the conditions of Parent’s obligation to complete the Merger and the right of Parent to terminate the Merger Agreement under certain specified circumstances;

 

•

the risks of a delay in receiving, or a failure to receive, the necessary CFIUS Approval and antitrust clearances to complete the Merger and the extent of Parent’s obligations to expend efforts in seeking such clearances, and that no reverse termination fee will be payable in connection with failure to receive such approval;

 

•

the risk that the equity financing contemplated by the Equity Commitment Letter will not be obtained, resulting in Parent not having sufficient funds to complete the Merger, that Parent and Merger Sub will have no assets if the Equity Commitment Letter is not funded, other than the funds held in escrow, and that the Company has no direct recourse against Canyon Bridge, CBC Partners or Canyon Bridge’s investors;

 

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•

the Company’s limited recourse in case of a breach by Parent or Merger Sub to the amount of the reverse termination fee, even in case of fraud or willful breach;

 

•

the Company’s risks and costs if the Merger is not completed, including the diversion of management and employee attention, potential employee attrition, the potential impact on the Company’s stock price and the effect on its business relationships;

 

•

the fact that the Company has incurred and will continue to incur significant transaction costs and expenses in connection with the proposed transaction, regardless of whether the Merger is consummated; and

 

•

the Company’s obligations not to solicit proposals or offers that constitute, or would reasonably be expected to lead to, Acquisition Proposals that may be superior to the Merger; the limited circumstances in which we may enter into, continue, or otherwise participate in any discussions regarding acquisition proposals, or agree to, accept, or recommend any Acquisition Proposals other than as described above with respect to Superior Proposals; the ability of Parent to match a Superior Proposal; and the requirement that the Company pay a $34,180,000 termination fee to Parent related to a termination of the Merger Agreement in connection with a Superior Proposal in the circumstances specified in the Merger Agreement, all of which could dissuade another party from making an acquisition proposal for the Company.

Limitations on the Company’s Business. The Board considered the potential limitations on the Company’s pursuit of business opportunities due to pre-closing covenants in the Merger Agreement whereby the Company agreed that it will carry on the Company’s business in the ordinary course of business consistent with past practice and, subject to specified exceptions, not to take certain actions related to the conduct of the Company’s business without the prior written consent of Parent.

Interests of Directors and Officers. The Board was aware of, and considered, the interests that the Company’s directors and executive officers may have with respect to the Merger in addition to their interests as the Company’s stockholders generally, as described under the heading “Agreements or Arrangements with Executive Officers and Directors of the Company.”

The Board concluded that the risks and other potentially negative factors associated with the Merger Agreement were outweighed by the potential benefits of the Merger Agreement.

The foregoing discussion of the information and factors considered by the Board is not intended to be exhaustive, but includes the material factors considered by the Board. In view of the variety of factors considered in connection with its evaluation of the Merger Agreement, the Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. The Board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The Board based its recommendation on the totality of the information presented.

For the reasons described above, the Board unanimously approved the Merger Agreement and unanimously recommends that the Company’s stockholders vote in favor of the adoption of the Merger Agreement.

In considering the recommendation of the Board that the Company’s stockholders vote in favor of the adoption of the Merger Agreement, the Company’s stockholders should be aware that the Company’s directors and executive officers may have interests in the Merger that are different from, or in addition to, the other stockholders of the Company. The Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Merger Agreement and in recommending that the Company’s stockholders vote in favor of the adoption of the Merger Agreement.

 

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Certain Prospective Financial Data

Lattice does not, as a matter of course, publicly disclose forecasts or internal projections as to its future performance, earnings or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, in connection with the Board’s consideration of the proposed Merger, Lattice management prepared two sets of unaudited financial projections regarding Lattice’s future performance for calendar years 2016 through 2018, which we refer to in this proxy statement as the “Management Projections.” The first set of unaudited financial projections assumed a certain amount of revenue from product sales resulting from a business arrangement with a key customer, which we refer to in this proxy statement as the “Upside Case.” The second set of unaudited financial projections assumed that Lattice would not obtain this design win and thus forecasted lower sales revenue, which we refer to in this proxy statement as the “Downside Case.” These projections were not prepared with a view to public disclosure. Rather, these projections were prepared for internal use and provided to the Board for the purposes of considering, analyzing and evaluating Lattice’s strategic and financial alternatives, including the Merger. At the direction of the Board, these projections were provided to Morgan Stanley in connection with its financial analyses during the strategic and financial review process, and in rendering its fairness opinion to the Board described below under the heading “Fairness Opinion of Morgan Stanley & Co. LLC,” and a subset of these projections (including the revenue, operating margin, projected EBIT and projected EBITDA line items) were also provided to Canyon Bridge and Parent in connection with its due diligence. In addition, at the direction of management and as described below, based on these projections and in connection with its financial analyses, Morgan Stanley extrapolated the financial projections for certain financial measures for calendar years 2017 through 2018, and for all financial measures for calendar years 2019 through the terminal year 2024, which extrapolations were discussed with, and approved by, Lattice management for Morgan Stanley’s use in connection with its financial analyses and provided to the Board. These extrapolations were not provided to Canyon Bridge or Parent. In addition, at the direction of management, Morgan Stanley calculated Lattice’s unlevered free cash flows for each period, including the Management Projections period, which calculations were discussed with, and approved for use by, Lattice management. We refer to these projections and extrapolations in this proxy statement collectively as the “Forecasts.”

The Forecasts do not, and were not intended to, act as public guidance regarding our financial performance, and the inclusion of the Forecasts in this proxy statement should not be regarded as an indication that the Board, Lattice management, Morgan Stanley or any of their respective affiliates or representatives or any other recipient of this information considered, or now considers, the Forecasts to be predictive of future results. Furthermore, the Forecasts were not prepared with a view to compliance with (1) GAAP, (2) the published guidelines of the SEC regarding projections and forward-looking statements, or (3) the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. KPMG LLP, our independent registered public accountant, has not examined, reviewed, compiled or otherwise applied procedures to the Forecasts and, accordingly, assumes no responsibility for, and expresses no opinion on, them. The Forecasts included in this proxy statement have been prepared by, and are the responsibility of, Lattice management.

Although a summary of the Forecasts is presented with numerical specificity, the Forecasts reflect numerous estimates, assumptions and judgments (in addition to those described below) as to future events made by Lattice management that they believed were reasonable at the time the Forecasts were prepared, taking into account the relevant information available to Lattice management at the time. In developing the Forecasts, Lattice management made assumptions with respect to Lattice’s performance, general business, economic, regulatory, litigation, geopolitical, market and financial conditions, as well as industry and Lattice specific factors such as supply and demand trends and the status of, and estimated revenues from, new products, all of which involve a high degree of uncertainty and are difficult to predict, and many of which are beyond Lattice’s control. Important factors that may

 

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affect actual results and cause the Forecasts not to be achieved include general economic or industry conditions, Lattice’s ability to achieve forecasted sales, gross margins or operating expenses, accuracy of certain accounting assumptions, changes in actual or projected cash flows, competitive pressures and changes in tax laws. In addition, the Forecasts do not take into account any circumstances or events occurring after the date that they were prepared and do not give effect to the Merger. There can be no assurance that the Forecasts will be realized and actual results may be materially better or worse than those contained in the Forecasts. The Forecasts cover multiple years, and such information by its nature becomes less reliable with each successive year.

The summary of the Forecasts is not included in this proxy statement to induce any stockholder to vote in favor of the proposal to adopt the Merger Agreement or any of the other proposals to be voted on at the Special Meeting. We do not intend to update or otherwise revise the Forecasts to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the Forecasts are shown to be in error or no longer appropriate. In light of the foregoing factors and the uncertainties inherent in the Forecasts, stockholders are cautioned not to place undue, if any, reliance on the projections included in this proxy statement.

Additionally, the Forecasts are forward-looking statements. For information on factors that may cause Lattice’s future results to materially vary, see the information under the section captioned “Forward-Looking Statements.”

The following table presents unaudited prospective financial data for the Upside Case and Downside Case, respectively (in millions, except percentages and per share data):

Upside Case

 

		Base Case												Extrapolation
		CY2016E				CY2017E				CY2018E				CY2019E				CY2020E				CY2021E				CY2022E				CY2023E				Terminal
Revenue(1)		$	439			$	501			$	550			$	591			$	627			$	658			$	684			$	712			$	726
% Growth			7	%			14	%			10	%			8	%			6	%			5	%			4	%			4	%			2	%
Projected Gross Margin(2)			54	%			55	%			55	%			—				—				—				—				—				—
Projected Operating Expenses(3)			183				168				186				—				—				—				—				—				—
Operating Margin			13	%			21	%			22	%			22	%			22	%			22	%			22	%			22	%			22	%
Projected EBITDA(4)			80				130				141				154				161				168				173				178				181
% Margin			18	%			26	%			26	%			26	%			26	%			26	%			25	%			25	%			25	%
Projected EBIT(5)			55				107				119				130				138				145				151				157				160
% Margin			13	%			21	%			22	%			22	%			22	%			22	%			22	%			22	%			22	%
Earnings per Share			0.25				0.66				0.68				—				—				—				—				—				—
Less: Projected Taxes(6)			(6.0	)			(3.0	)			(8.0	)			(8.0	)			(8.0	)			(8.0	)			(8.0	)			(8.0	)			(55.9	)
Projected NOPAT(7)			49				104				111				122				130				137				143				149				104
Plus: Projected Depreciation & Amortization(8)			25				23				22				24				23				23				22				21				22
% of Revenue			6	%			5	%			4	%			4	%			4	%			4	%			3	%			3	%			3	%
Less: Projected Stock-Based Compensation(9)			(17	)			(17	)			(17	)			(18	)			(20	)			(20	)			(21	)			(22	)			(23	)
% of Revenue			4	%			3	%			3	%			3	%			3	%			3	%			3	%			3	%			3	%
Less: Change in Net Working Capital(10)			(18	)			10				8				(4	)			(4	)			(3	)			(3	)			(3	)			(1	)
% Change in Revenue			(66	%)			15	%			15	%			(10	%)			(10	%)			(10	%)			(10	%)			(10	%)			(10	%)
Less: Projected Capital Expenditures(11)			(17	)			(14	)			(14	)			(15	)			(19	)			(20	)			(21	)			(21	)			(22	)
% of Revenue			4	%			3	%			3	%			3	%			3	%			3	%			3	%			3	%			3	%
Unlevered Free Cash Flow(12)		$	22			$	105			$	109			$	108			$	112			$	116			$	120			$	124			$	80
Unlevered Free Cash Flow Margin			5	%			21	%			20	%			18	%			18	%			18	%			18	%			17	%			11	%

 

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Downside Case

 

		Base Case												Extrapolation
		CY2016E				CY2017E				CY2018E				CY2019E				CY2020E				CY2021E				CY2022E				CY2023E				Terminal
Revenue(1)		$	439			$	458			$	499			$	536			$	569			$	597			$	621			$	646			$	659
% Growth			7	%			4	%			9	%			8	%			6	%			5	%			4	%			4	%			2	%
Projected Gross Margin(2)			54	%			55	%			55	%			—				—				—				—				—				—
Projected Operating Expenses(3)			183				168				176				—				—				—				—				—				—
Operating Margin			13	%			19	%			20	%			22	%			22	%			22	%			22	%			22	%			22	%
Projected EBITDA(4)			80				108				123				139				146				152				157				161				165
% Margin			18	%			24	%			25	%			26	%			26	%			26	%			25	%			25	%			25	%
Projected EBIT(5)			55				86				101				118				125				131				137				142				145
% Margin			13	%			19	%			20	%			22	%			22	%			22	%			22	%			22	%			22	%
Earnings per Share			0.25				0.49				0.59				—				—				—				—				—				—
Less: Projected Taxes(6)			(6.0	)			(3.0	)			(3.0	)			(8.0	)			(8.0	)			(8.0	)			(8.0	)			(8.0	)			(50.7	)
Projected NOPAT(7)			49				83				98				110				117				123				129				134				94
Plus: Projected Depreciation & Amortization(8)			25				22				22				21				21				21				20				19				20
% of Revenue			6	%			5	%			4	%			4	%			4	%			4	%			3	%			3	%			3	%
Less: Projected Stock-Based Compensation(9)			(17	)			(16	)			(16	)			(17	)			(18	)			(19	)			(19	)			(20	)			(21	)
% of Revenue			4	%			3	%			3	%			3	%			3	%			3	%			3	%			3	%			3	%
Less: Change in Net Working Capital(10)			(18	)			3				6				(4	)			(3	)			(3	)			(2	)			(2	)			(1	)
% Change in Revenue			(66	%)			15	%			15	%			(10	%)			(10	%)			(10	%)			(10	%)			(10	%)			(10	%)
Less: Projected Capital Expenditures(11)			(17	)			(13	)			(13	)			(15	)			(17	)			(18	)			(19	)			(19	)			(20	)
% of Revenue			4	%			3	%			3	%			3	%			3	%			3	%			3	%			3	%			3	%
Unlevered Free Cash Flow(12)		$	22			$	79			$	98			$	96			$	100			$	105			$	108			$	111			$	72
Unlevered Free Cash Flow Margin			5	%			17	%			20	%			18	%			18	%			18	%			17	%			17	%			11	%

 

(1)

Revenue was projected for calendar years 2016 through 2018 by Lattice management based upon historical results and management’s forecasts and was projected for calendar years 2019 through 2023 and subsequent years based upon extrapolations prepared by Morgan Stanley and approved for use by Lattice management.

(2)	Projected Gross Margin is a non-GAAP financial measure that represents projected GAAP gross margin, adjusted to exclude stock-based compensation. Projected Gross Margin was projected for calendar years 2016 through 2018 by Lattice management based upon historical results and forecasted Revenue.

(3)

Projected Operating Expenses is a non-GAAP financial measure that represents projected GAAP operating expenses, adjusted to exclude restructuring expenses, acquisition-related charges, amortization of acquired intangible assets, and stock-based compensation. Projected Operating Expenses was projected for calendar years 2016 through 2018 by Lattice management based upon historical results, forecasted Revenue, and certain expected strategic objectives and events that may not occur. A reconciliation of Projected Operating Expenses to GAAP operating expenses would be as follows. Under the Upside Case, GAAP operating expenses are projected to be $241 million in 2016, $222 million in 2017 and $240 million in 2018. Under the Downside Case, GAAP operating expenses are projected to be $241 million in 2016, $222 million in 2017 and $230 million in 2018.

(4)

Projected EBITDA is a non-GAAP financial measure that represents projected earnings before interest, taxes, depreciation and amortization, as defined for purposes of Lattice’s existing debt agreements, and represents projected GAAP net income, adjusted to exclude interest expense, income tax expense, depreciation and amortization, amortization of acquired intangible assets, stock-based compensation, restructuring charges and other non-cash income or expenses. Projected EBITDA was projected for calendar years 2016 through 2018 by Lattice management based upon historical results and management’s forecasts, and was projected for calendar years 2019 through 2023 and subsequent years based upon extrapolations prepared by Morgan Stanley and approved for use by Lattice management. A reconciliation of Projected EBITDA to GAAP net (loss) income would be as follows. Under the Upside Case, GAAP net (loss) income is projected to be ($30) million in 2016, $22 million in 2017 and $31 million in 2018. Under the Downside Case, GAAP net (loss) income is projected to be ($30) million for 2016, $5 million for 2017 and $17 million for 2018.

(5)

Projected EBIT is a non-GAAP financial measure that represents projected earnings before interest and taxes and was projected for calendar years 2016 through 2018 by multiplying projected Revenue, determined as set forth above, by the projected EBIT Margin, which was projected based upon historical results and management’s forecasts. Projected EBIT was projected for calendar years 2019 through 2023 and subsequent years based upon extrapolations prepared by Morgan Stanley and approved for use by Lattice management. A reconciliation of Projected EBIT to GAAP operating income would be as follows. Under the Upside Case, GAAP operating income is projected to be ($4) million in 2016, $51 million in 2017

 

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and $63 million in 2018. Under the Downside Case, GAAP operating income is projected to be ($4) million for 2016, $30 million for 2017 and $45 million for 2018.

(6)

Projected Taxes is a non-GAAP financial measure that represents Lattice management’s best estimate of projected cash taxes payable considering international income and withholding taxes, as well as expected utilization of net operating loss carryforwards for U.S. taxes. Projected Taxes was projected for calendar years 2016 through 2018 by Lattice management based upon historical results and management’s forecasts, and was projected for calendar years 2019 through 2023 and subsequent years based upon extrapolations prepared by Morgan Stanley and approved for use by Lattice management, such extrapolations assuming $8.0 million of projected cash taxes per year until 2023 and a 35% effective tax rate for subsequent years. A reconciliation of Projected Taxes to GAAP tax expense would be as follows. Under the Upside Case, GAAP tax expense is projected to be $8 million in 2016, $7 million in 2017 and $9 million in 2018. Under the Downside Case, GAAP tax expense is projected to be $6 million in 2016, $3 million in 2017 and $6 million in 2018.

(7)	Projected NOPAT is a non-GAAP financial measure that represents net operating profits after tax, and was estimated by taking Projected EBIT and subtracting Projected Taxes, each determined as set forth above.

(8)	Projected Depreciation & Amortization is a non-GAAP financial measure that represents projected depreciation and amortization, and was derived by taking Projected EBITDA and subtracting Projected EBIT, each determined as set forth above.

(9)

Projected Stock-Based Compensation is a non-GAAP financial measure that represents projected expenses related to stock-based compensation, and was projected for calendar year 2016 based upon historical results and management’s forecasts, and was projected for calendar years 2017 through 2023 and subsequent years based upon extrapolations prepared by Morgan Stanley and approved for use by Lattice management.

(10)

Change in Net Working Capital is a non-GAAP financial measure that represents projected changes in the amount of Lattice’s current assets less the amount of Lattice’s current liabilities, and was projected for calendar year 2016 based upon historical results and management’s forecasts, and was projected for calendar years 2017 through 2023 and subsequent years based upon extrapolations prepared by Morgan Stanley and approved for use by Lattice management.

(11)

Projected Capital Expenditures is a non-GAAP financial measure of projected capital expenditures, and was projected for calendar year 2016 based upon historical results and management’s forecasts, and was projected for calendar years 2017 through 2023 and subsequent years based upon extrapolations prepared by Morgan Stanley and approved for use by Lattice management.

(12)

Unlevered Free Cash Flow is a non-GAAP financial measure of projected cash flows, and was estimated by taking Projected NOPAT, and adding Projected Depreciation and Amortization, and adding (subtracting) Projected Stock-Based Compensation, Change in Net Working Capital, and Projected Capital Expenditures, each determined as set forth above.

As noted above, the Forecasts reflect numerous estimates and assumptions with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to our business, all of which are difficult to predict, and many of which are beyond our control.

Fairness Opinion of Morgan Stanley & Co. LLC

Lattice retained Morgan Stanley to act as financial advisor to the Board in connection with the proposed Merger. The Board selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, experience and expertise, its knowledge of and involvement in recent transactions in the semiconductor industry, and its knowledge of Lattice’s business and affairs. At the meeting of the Board on November 2, 2016, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that as of such date, and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in its written opinion, the consideration to be received by the holders of Lattice common shares pursuant to the Merger Agreement was fair from a financial point of view to the holders of Lattice common shares.

The full text of the written opinion of Morgan Stanley, dated as of November 2, 2016, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached to this proxy statement as Annex B. You are encouraged to read the entire opinion carefully and in its entirety. Morgan Stanley’s opinion was rendered for the benefit of the Board, in its capacity as such, and addressed only the fairness from a financial point of view of the consideration to be received by the holders of Lattice common

 

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shares pursuant to the Merger Agreement as of the date of the opinion. It does not address any other aspect or implications of the Merger. The opinion was addressed to, and rendered for the benefit of, the Board and was not intended to, and does not, constitute advice or a recommendation to any holder of Lattice common shares as to how to vote at any stockholders’ meeting to be held in connection with the Merger or take any action with respect to the Merger. The summary of Morgan Stanley’s opinion set forth below is qualified in its entirety by reference to the full text of the opinion.

In connection with rendering its opinion, Morgan Stanley, among other things:

 

•

reviewed certain publicly available financial statements and other business and financial information of Lattice;

 

•

reviewed certain internal financial statements and other financial and operating data concerning Lattice;

 

•

reviewed the Forecasts;

 

•

discussed the past and current operations and financial condition and the prospects of Lattice with senior executives of Lattice;

 

•

reviewed the reported prices and trading activity for the Lattice common shares;

 

•

compared the financial performance of Lattice and the prices and trading activity of the Lattice common shares with that of certain other publicly-traded companies comparable with Lattice and its securities;

 

•

reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;

 

•

participated in certain discussions and negotiations among representatives of Lattice and Parent and their financial and legal advisors;

 

•

reviewed drafts of (1) the Merger Agreement, (2) the Equity Commitment Letter, and (3) certain related documents; and

 

•

performed such other analyses, reviewed such other information and considered such other factors as Morgan Stanley deemed appropriate.

In arriving at its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to Morgan Stanley by Lattice and that formed a substantial basis for its opinion. With respect to the Forecasts, Morgan Stanley assumed that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Lattice of the future financial performance of Lattice. In addition, Morgan Stanley assumed that the Merger will be consummated in accordance with the terms set forth in the Merger Agreement without any waiver, amendment or delay of any terms or conditions, including, among other things, that Parent will obtain financing in accordance with the terms set forth in the draft Equity Commitment Letter. Morgan Stanley assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the Merger, no delays, limitations, conditions or restrictions will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the Merger. Morgan Stanley is not a legal, tax or regulatory advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessment of Lattice and its legal, tax or regulatory advisors with respect to legal, tax, or regulatory matters. Morgan Stanley’s opinion is limited to and addresses only the fairness, from a financial point of view and as of the date of the opinion, of the consideration to be received by the holders of Lattice common shares pursuant to the Merger Agreement. Morgan Stanley expressed no opinion with respect to the fairness of the

 

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amount or nature of any compensation to any of the Lattice officers, directors or employees, or any class of such persons, relative to the consideration to be received by the holders of Lattice common shares in the Merger. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of Lattice, nor was Morgan Stanley furnished with any such valuations or appraisals. Morgan Stanley’s opinion was necessarily based on financial, economic, market, and other conditions as in effect on, and the information made available to Morgan Stanley as of, November 2, 2016. Events occurring after November 2, 2016 may affect Morgan Stanley’s opinion and the assumptions used in preparing it, and Morgan Stanley did not assume any obligation to update, revise or reaffirm its opinion.

Summary of Financial Analyses

The following is a brief summary of the material financial analyses performed by Morgan Stanley in connection with its oral opinion and the preparation of its written opinion dated November 2, 2016. The following summary is not a complete description of Morgan Stanley’s opinion or the financial analyses performed and factors considered by Morgan Stanley in connection with rendering its opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. In connection with arriving at its opinion, Morgan Stanley considered all of its analyses as a whole and did not attribute any particular weight to any analysis described below. Considering any portion of these analyses and factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Morgan Stanley’s opinion. The various analyses summarized below were based on the closing price of $6.37 per Lattice common share as of November 2, 2016 (the last trading day before the public announcement of the Merger). Some of these summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Furthermore, mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using the data referred to below.

In performing the financial analyses summarized below and in arriving at its opinion, Morgan Stanley utilized and relied upon certain non-public financial projections provided by the management of Lattice and referred to below. In certain instances, the projections were extrapolated for future periods not accounted for in the Forecasts provided by the management of Lattice. For further information regarding these financial projections, see the section of this proxy statement captioned “— Certain Prospective Financial Data.”

Public Trading Valuation Analysis

Morgan Stanley performed a public trading valuation analysis, which is designed to provide an implied public trading valuation of a company by comparing representative trading multiples of companies engaged in a similar business. Morgan Stanley compared certain financial information of Lattice with comparable publicly available estimates for selected semiconductor companies that share similar business characteristics and have certain comparable operating characteristics including, among other things, similarly sized revenue and/or revenue growth rates, market capitalizations, profitability, scale

 

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and/or other similar operating characteristics. A list of the selected comparable companies and a summary of Morgan Stanley’s analysis is provided below:

 

CY2017E AV / Revenue

CY 2017E AV / EBITDA

CY 2017E P / E

Cirrus Logic, Inc.

2.3x

9.0x

13.0x

Cypress Semiconductor Corporation

2.1x

11.1x

13.6x

Integrated Device Technology, Inc.

4.1x

11.4x

15.0x

Microchip Technology Incorporated

5.0x

12.5x

16.0x

Microsemi Corporation

3.8x

9.3x

10.6x

Semtech Corporation

2.9x

9.3x

15.1x

Xilinx, Inc.

4.6x

14.7x

21.8x

For purposes of this analysis, Morgan Stanley analyzed (1) the ratio of aggregate value, which we refer to in this proxy statement as “AV”, which Morgan Stanley defined as fully diluted market capitalization plus total debt less cash and cash equivalents, to each of estimated revenue and EBITDA (which is defined in this section as net income excluding net interest expense, income tax expense and certain other non-cash and non-recurring items, principally depreciation, amortization and stock-based compensation and charges) for calendar year 2017, and (2) estimated price to earnings (which is defined in this section as the ratio of price per share to estimated diluted earnings per share) for calendar year 2017, which we refer to in this proxy statement as the “2017 PE Multiple”, in each case, for each of the comparable companies based on publicly available financial information compiled by Thomson Reuters for comparison purposes.

Based on its analysis of the relevant metrics for each of the comparable companies and upon the application of its professional judgment and experience, Morgan Stanley selected representative ranges of revenue, EBITDA, and price to earnings multiples and applied these ranges of multiples to the estimated relevant metric for Lattice. Based on the outstanding Lattice common shares on a fully-diluted basis (including outstanding options and restricted stock units) as of November 2, 2016, Morgan Stanley calculated the estimated implied value per share of Lattice common shares as of November 2, 2016 as follows:

 

Calendar Year Financial Statistic		Selected Comparable Company Multiple Ranges		Implied Present Value Per Share of Company Common Stock ($)
AV to Estimated 2017 Revenue of $483MM(1)		2.0x – 3.0x		5.82 – 9.36
AV to Estimated 2017 EBITDA of $108MM(2)		9.0x – 13.0x		5.88 – 9.05
Price to Estimated 2017 Earnings of $0.49 per share(3)		10.0x – 16.0x		4.88 – 7.81

 

(1)	The estimated 2017 revenue forecast used for this analysis was based on the median of the analyst estimates of Lattice’s revenue for the year 2017, based on analyst estimates compiled by Thomson Reuters as of November 2, 2016.

(2)

The estimated 2017 EBITDA forecast used for this analysis was based on the median of the analyst estimates of Lattice’s 2017 EBIT, and projected depreciation and amortization charges were determined by applying management’s forecast of depreciation and amortization charges as a percentage of revenue to the analyst estimates of 2017 revenue compiled by Thomson Reuters as of November 2, 2016.

(3)	The estimated 2017 earnings per share forecast used for this analysis was based on the median of the analyst estimates of Lattice’s earnings per share for the year 2017, based on analyst estimates compiled by Thomson Reuters as of November 2, 2016.

 

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No company utilized in the public trading valuation analysis is identical to Lattice. In evaluating comparable companies, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions, and other matters, many of which are beyond the control of Lattice, such as the impact of competition on the businesses of Lattice and the industry generally, industry growth and the absence of any adverse material change in the financial condition and prospects of Lattice.

Discounted Equity Valuation Analysis

Morgan Stanley performed a discounted equity valuation analysis, which is designed to provide insight into the potential future equity value of a company as a function of such company’s estimated future earnings. The resulting equity value is subsequently discounted to arrive at an estimate of the implied present value of such company’s equity value. In connection with this analysis, Morgan Stanley calculated a range of implied present equity values per share of Lattice common shares on a standalone basis. The discounted equity value was calculated by Morgan Stanley using estimated earnings for calendar year 2018. Based on its review of the 2017 PE Multiple for the comparable companies, and upon the application of its professional judgment and experience, Morgan Stanley then applied a selected range of earnings multiples to the estimates of earnings for calendar year 2018 provided by management in two sets of unaudited financial projections prepared by Lattice management: (1) the Upside Case, which assumed a certain amount of revenue from a design win with a key customer, and (2) the Downside Case, which assumed lower sales revenue if that design win is not achieved, to calculate the estimated equity values for Lattice based on each such case.

Morgan Stanley then discounted each such equity value to present value using a discount rate of 10.8%, which rate was selected, upon the application of Morgan Stanley’s professional judgment and experience, to reflect an estimate of Lattice’s cost of equity.

Based on the number of Lattice common shares outstanding as of November 2, 2016 on a fully-diluted basis (including outstanding options and restricted stock units), as provided by Lattice’s management, Morgan Stanley calculated the estimated implied value per share of Lattice’s common shares using the discounted equity valuation analysis as of November 2, 2016 as follows:

 

Calendar Year Estimated 2018 Earnings		Selected Earnings Multiple Ranges		Implied Present Value Per Share of Company Common Stock ($)
Upside Case		10.0x – 16.0x		6.13 – 9.81
Downside Case		10.0x – 14.0x		5.32 – 7.45

Discounted Cash Flow Analysis

Morgan Stanley performed a discounted cash flow analysis, which is designed to provide an implied value of a company by calculating the present value of the estimated future cash flows and terminal value of the company. Morgan Stanley calculated ranges of equity values per Lattice common share based on discounted cash flow analyses until December 31, 2023. For purposes of this analysis, Lattice was considered as a standalone entity. Morgan Stanley relied on the Upside Case and the Downside Case for fiscal years 2016 to 2018, extrapolated those projections through 2023 (as discussed with and approved by Lattice management) and used the following assumptions: (1) $8 million per year in taxes as a cash expense, and (2) a 35% tax rate in the terminal year. Morgan Stanley then calculated a range of implied values of Lattice by calculating a range of the present values of Lattice’s free cash flows for the period from November 2, 2016, through December 31, 2023, and a terminal value based on a terminal perpetual growth rate ranging from 1.0% to 3.0%. Morgan Stanley selected these terminal perpetual growth rates based on the application of its professional judgment and experience. The free cash flows were discounted to present values as of November 2,

 

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2016, at a range of discount rates of 8.6% to 10.0% (which range was selected in Morgan Stanley’s professional judgment and experience) to reflect Lattice’s weighted average cost of capital. The terminal values were discounted to present values as of November 2, 2016, at a range of discount rates of 8.0% to 9.4% (which range was selected in Morgan Stanley’s professional judgment and experience) to reflect Lattice’s weighted average cost of capital assuming a fully burdened tax rate. These calculations resulted in the following ranges:

 

		Implied Present Value Per Share of Company Common Stock ($)
Upside Case		6.96 – 10.31
Downside Case		6.08 –   9.12

Precedent Transactions Analysis

Precedent Multiples. Morgan Stanley performed a precedent transactions analysis, which is designed to imply a value of a company based on publicly available financial terms and premia of selected transactions that share some characteristics with the Merger. In connection with its analysis, Morgan Stanley compared publicly available statistics for selected semiconductor technology transactions, selected based on Morgan Stanley’s professional judgment and experience. The transactions reviewed and the date that each transaction was announced were as follows:

 

Date Announced		Acquiror		Target
10/27/2016		Qualcomm, Inc.		NXP Semiconductors N.V.
09/12/2016		Renesas Electronics Corp.		Intersil Corporation
07/26/2016		Analog Devices, Inc.		Linear Technology Corporation
06/15/2016		Cavium, Inc.		QLogic Corporation
02/23/2016		MKS Instruments, Inc.		Newport Corp.
02/04/2016		FormFactor, Inc.		Cascade Microtech, Inc.
01/12/2016		Microchip Technology Incorporated		Atmel Corporation
12/02/2015		Beijing E-Town Dragon Semiconductor Industry Investment Center (Limited Partnership)		Mattson Technology, Inc.
11/24/2015		Microsemi Corporation		PMC-Sierra, Inc.
11/18/2015		ON Semiconductor Corp.		Fairchild Semiconductor International, Inc.
10/21/2015		Western Digital Corporation		SanDisk Corporation
09/30/2015		Mellanox Technologies, Ltd.		EZChip Semiconductor Ltd.
09/20/2015		Dialog Semiconductor plc		Atmel Corporation
09/03/2015		Diodes Incorporated		Pericom Semiconductor Corporation
06/01/2015		Intel Corporation		Altera Corporation
05/28/2015		Avago Technologies Ltd		Broadcom Corporation
05/07/2015		Microchip Technology Incorporated		Micrel, Incorporated
03/18/2015		Microsemi Corporation		Vitesse Semiconductor Corporation
03/01/2015		NXP Semiconductors N.V.		Freescale Semiconductor, Ltd.
01/27/2015		Lattice Semiconductor Corporation		Silicon Image, Inc.
12/01/2014		Cypress Semiconductor Corporation		Spansion Inc.
10/15/2014		Qualcomm Global Trading Pte. Ltd		CSR plc
08/20/2014		Infineon Technologies AG		International Rectifier Corporation
06/11/2014		Shanghai Pudong Science and Technology Investment Co., Ltd		Montage Technology Group Limited
06/09/2014		Analog Devices, Inc.		Hittite Microwave Corp
05/22/2014		Microchip Technology Incorporated		Innovative Solutions and Support, Inc.
04/29/2014		Cirrus Logic, Inc.		Wolfson Microelectronics plc

 

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02/24/2014		RF Micro Devices, Inc.		TriQuint Semiconductor, Inc.
02/10/2014		Microchip Technology Incorporated		Supertex, Inc.
12/16/2013		Avago Technologies Ltd		LSI Corp
11/07/2013		Tsinghua Unigroup Ltd.		RDA Microelectronics, Inc.
11/05/2013		MACOM Technology Solutions Holdings, Inc.		Mindspeed Technologies, Inc.
08/15/2013		Maxim Integrated Products, Inc.		Volterra Semiconductor Corp
06/21/2013		Tsinghua Unigroup Ltd.		Spreadtrum Communications, Inc.
08/14/2012		MediaTek Inc.		Mstar Semiconductor, Inc.
06/12/2012		Cypress Semiconductor Corporation		Ramtron International Corporation
05/02/2012		Microchip Technology Incorporated		Standard Microsystems Corporation
04/30/2012		Integrated Device Technology, Inc.		PLX Technology, Inc.
01/23/2012		Semtech Corporation		Gennum Corporation

For each transaction listed above, Morgan Stanley noted (1) the ratio of AV of the transaction to the target company’s (a) last twelve month, which we refer to in this proxy statement as “LTM”, revenue and next twelve month, which we refer to in this proxy statement as “NTM”, revenue, and (b) LTM EBITDA and NTM EBITDA and (2) the LTM price to earnings and NTM price to earnings.

Based on the analysis of the relevant metrics and time frame for each transaction listed above, Morgan Stanley selected the representative range of multiples in each case below and applied these ranges of multiples to Lattice’s forecasts. The ranges of implied values per Lattice common share were:

 

Multiples		Implied Present Value Per Share of Company Common Stock ($)
AV / LTM Revenue (2.0x – 3.8x)		4.63 – 10.06
AV / NTM Revenue (2.0x – 3.5x)		5.59 – 10.74
AV / LTM EBITDA (13.0x – 19.0x)		2.14  –  4.00
AV / NTM EBITDA (10.0x – 17.0x)		6.09 – 11.21
LTM P / E (19.0x – 33.0x)		Not meaningful
NTM P / E (18.0x – 30.0x)		7.49 – 12.48

Precedent Premia. Morgan Stanley considered, based on publicly available information, premiums paid in all-cash acquisition transactions in Morgan Stanley’s transaction database occurring from 2011 through November 2, 2016, involving U.S. public company targets in the technology sector having a transaction value of more than $250 million (127 total transactions). Morgan Stanley reviewed the premium paid to the target company’s closing stock price one day, 30 days and LTM high premium prior to market awareness of such transaction. Morgan Stanley’s analysis identified the following premium ranges:

 

Financial Statistic		Premium to 1-Day Prior Price				Premium to 30-Day Prior Price				Premium to 52-week High Price
Top Quartile			49.4	%			50.7	%			8.6	%
Mean			40.4	%			43.5	%			5.1	%
Median			32.5	%			37.9	%			0.4	%
Bottom Quartile			21.1	%			25.1	%			(4.8	%)

Based on the top and bottom quartiles, Morgan Stanley then applied premium ranges of 20% to 50% to Lattice’s one-day prior stock price, 25% to 50% to Lattice’s 30-day average prior stock price and (5%) to 10% to Lattice’s 52-week high stock price, in each case prior to November 2, 2016 (the last

 

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trading day before the public announcement of the Merger). The analysis indicated an implied value per share of Lattice common shares reference range as follows:

 

Financial Statistic		Implied Present Value Per Share of Company Common Stock ($)
Premium to 1-Day Prior Price			7.64 – 9.56
Premium to 30-Day Prior Price			7.97 – 9.57
Premium to 52-week High Price			6.43 – 7.45

Additional Information. No company or transaction utilized in the precedent transactions analysis is identical to Lattice or the Merger. In evaluating the precedent transactions, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, market and financial conditions and other matters that are beyond the control of Lattice, such as the impact of competition on the business of Lattice or its industry generally, industry growth and the absence of any adverse material change in the financial condition of Lattice or its industry or in the financial markets in general, all of which could affect the public trading value of the companies and the aggregate value and equity value of the transactions to which they are being compared. Morgan Stanley considered a number of factors in analyzing the implied Merger consideration. That points in the range of implied present values per Lattice common share derived from the valuation of precedent transactions were less than or greater than the implied Merger consideration is not necessarily dispositive in connection with Morgan Stanley’s analysis of the implied Merger consideration, but one of many factors that Morgan Stanley considered.

Historical Trading Ranges Analysis

Morgan Stanley performed a trading range analysis with respect to the historical share prices of Lattice common shares. Morgan Stanley reviewed the range of closing prices of Lattice common shares for various periods ending on November 2, 2016. Morgan Stanley also reviewed the historical trading multiples for Lattice. Morgan Stanley observed the following:

 

Period Ending November 2, 2016		Range of Closing Prices
Last Month		6.01 – 6.56
Last Three Months		5.71 – 6.56
Last Twelve Months		4.32 – 6.77

Analysts’ Price Targets

Morgan Stanley reviewed and analyzed future public market trading price targets for Lattice common shares prepared and published by equity research analysts prior to November 2, 2016. These future share price targets reflected each analyst’s estimate of the future public market trading price of Lattice common shares and were not discounted to reflect present values. The range of undiscounted analysts’ future share price targets for Lattice common shares was $6.75 to $8.00 per share as of November 2, 2016. In order to better compare the equity research analysts’ future share price targets with the per share Merger consideration, Morgan Stanley discounted the range of analysts’ future share price targets for Lattice common shares for one year at a rate of 10.8%, which discount rate was selected based on Lattice’s cost of equity. This analysis indicated an implied range of equity values for Lattice common shares of $6.09 to $7.22 per share.

The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for Lattice common shares, and these estimates are subject to uncertainties, including the future financial performance of Lattice and future financial market conditions.

 

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General

In connection with the review of the Merger by the Board, Morgan Stanley performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor that it considered. Morgan Stanley believes that selecting any portion of its analyses, without considering all of the analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Morgan Stanley may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley’s view of the actual value of Lattice. In performing its analyses, Morgan Stanley made judgments and assumptions with regard to industry performance, general business, regulatory, economic, market and financial conditions and other matters that are beyond the control of Lattice. These include, among other things, the impact of competition on the business of Lattice and the industry generally, industry growth, and the absence of any material adverse change in the financial condition and prospects of Lattice and the industry, and in financial markets in general. Any estimates contained in Morgan Stanley’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

Morgan Stanley conducted the analyses described above solely as part of its analysis of the fairness from a financial point of view the consideration to be received by the holders of Lattice common shares pursuant to the Merger Agreement and in connection with the delivery of its opinion, dated November 2, 2016, to the Board. These analyses do not purport to be appraisals or to reflect the prices at which Lattice common shares might actually trade.

The consideration to be received by the holders of Lattice common shares pursuant to the Merger Agreement was determined by Lattice and Parent through arm’s length negotiations between Lattice and Parent and was approved by the Board. Morgan Stanley acted as financial advisor to the Board during these negotiations but did not recommend any specific consideration to Lattice or the Board or opine that any specific amount or form of consideration constituted the only appropriate amount or form of consideration for the Merger.

Morgan Stanley’s opinion and its presentation to the Board was one of many factors taken into consideration by the Board in deciding to adopt resolutions to approve the Merger Agreement and the transactions contemplated thereby, including the Merger. Consequently, the analyses described above should not be viewed as determinative of the opinion of the Board with respect to the consideration to be received by the holders of Lattice common shares pursuant to the Merger Agreement or of whether the Board would have been willing to agree to a different form or amount of consideration. Morgan Stanley’s opinion was approved by a committee of Morgan Stanley investment banking and other professionals in accordance with Morgan Stanley’s customary practice.

Morgan Stanley’s opinion was not intended to, and does not, constitute advice or a recommendation to any holder of Lattice common shares as to how to vote at any stockholders’ meetings to be held in connection with the Merger. Morgan Stanley’s opinion did not address any other aspect of the Merger or related transactions, including the prices at which Lattice common shares would trade at any time in the future.

The Board retained Morgan Stanley based upon Morgan Stanley’s qualifications, experience and expertise. Morgan Stanley is a global financial services firm engaged in the securities, investment

 

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management and individual wealth management businesses. Its securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, prime brokerage, as well as providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for their own account or for the accounts of their customers, in debt or equity securities or loans of Lattice, Parent or any other company, or any currency or commodity, that may be involved in the transactions contemplated by the Merger Agreement, or any related derivative instrument. In addition, Morgan Stanley, its affiliates, directors or officers, including individuals working with Lattice in connection with the Merger, may commit in the future to invest in private equity funds managed by Canyon Bridge.

Under the terms of its engagement letter, Morgan Stanley provided the Board with financial advisory services and a financial opinion in connection with the Merger, described in this section and attached to this proxy statement as Annex B, and Lattice has agreed to pay Morgan Stanley a fee for its services in an amount estimated, as of the date of Morgan Stanley’s written opinion, to be approximately $18 million, 25% of which was due upon announcement of the transaction and the remainder of which is contingent upon the completion of the Merger. Lattice has also agreed to reimburse Morgan Stanley for its reasonable expenses, including reasonable fees of outside counsel and other professional advisors, incurred in connection with its engagement. In addition, Lattice has agreed to indemnify Morgan Stanley and its affiliates, their respective directors, officers, agents and employees and each other person, if any, controlling Morgan Stanley or any of its affiliates against certain liabilities and expenses relating to or arising out of Morgan Stanley’s engagement.

In the two years prior to the date of its opinion, except for the engagement related to this transaction, Morgan Stanley and its affiliates have not been engaged on any financial advisory or financing assignments for Lattice, and have not received any fees for such services from Lattice during that time. In the two years prior to the date of its opinion, Morgan Stanley and its affiliates have not received any fees for financial advisory or financing assignments for Parent, Merger Sub or Canyon Bridge.

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

When considering the recommendation of the Board that you vote to approve the proposal to adopt the Merger Agreement, you should be aware that our directors and executive officers have interests in the Merger that are different from, or in addition to, the interests of stockholders generally, as more fully described below. The Board was aware of and considered these interests to the extent that they existed at the time, among other matters, in approving the Merger Agreement and the Merger and recommending that the Merger Agreement be adopted by stockholders.

The consummation of the Merger is expected to constitute a “change in control” for purposes of each of the Lattice compensation plans and agreements.

Insurance and Indemnification of Directors and Executive Officers

The Merger Agreement provides that the Surviving Corporation and its subsidiaries will (and Parent will cause the Surviving Corporation and its subsidiaries to) honor all rights to indemnification, advancement of expenses and exculpation of each former and present director or officer of Lattice or any of its subsidiaries, as provided in Lattice’s or its subsidiaries’ organizational documents or in any contract with Lattice or its subsidiaries, as in effect on the date of the Merger Agreement, for acts or omissions occurring prior to the Effective Time.

 

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In addition, the Merger Agreement provides that, during the six year period commencing at the Effective Time, Parent will cause to be maintained in effect the coverage provided by the directors’ and officers’ liability insurance policies in effect as of the Effective Time by Lattice and its subsidiaries on terms and conditions not less favorable to the insured parties than the directors’ and officers’ liability insurance coverage currently maintained by Lattice with respect to claims arising from facts, events, acts or omissions that occurred on or before the Effective Time, except that in no event will Parent be required to pay an annual premium for such insurance in excess of 300% of the aggregate annual premium payable by Lattice for such insurance policy in effect on July 1, 2016, and if the premium for that insurance coverage would exceed that amount, Parent shall be obligated to cause the Surviving Corporation to obtain the greatest coverage available for a cost equal to that amount. The Merger agreement also provides that, in lieu of the foregoing, Lattice or Parent may purchase a six-year pre-paid “tail” directors’ and officers’ liability insurance policy on terms and conditions not less favorable to the insured persons than the directors’ and officers’ liability insurance policies currently maintained by Lattice with respect to claims arising from facts, events, acts or omissions that occurred on or before the Effective Time, provided that the premium of such “tail” policy will not exceed the Maximum Amount without Parent’s consent. For more information, see the section of this proxy statement captioned “The Merger Agreement — Indemnification and Insurance.”

Treatment of Options and Restricted Stock Units

Stock Options

Except as described in this section, Company Stock Options held by our directors and executive officers will be treated like all other Company Stock Options at the Effective Time. For more information about the treatment of Company Stock Options in the Merger, see the section of this proxy statement captioned “The Merger Agreement — Treatment of Equity-Based Awards.”

Single Trigger Accelerated Vesting of Company Options Held by Non-Employee Directors of Lattice

In connection with the Merger, the vesting of any Unvested Company Options held by each non-employee director of Lattice will fully accelerate pursuant to the terms of such Unvested Company Options and, after giving effect to such acceleration, such Unvested Company Options will be treated as Vested Company Options as of immediately prior to the Effective Time under the Merger Agreement.

Treatment of Performance-Based Options

With respect to any performance-based In-the-Money Company Options that are outstanding at or immediately prior to the Effective Time, which we refer to in this proxy statement as the “Performance-Based Company Options”, Lattice will measure actual performance for any performance period that is ongoing at the Effective Time as of the last business day prior to the Effective Time, which we refer to in this proxy statement as the “Measurement Date.” Solely to the extent performance is so achieved, the number of Performance-Based Company Options will be prorated based on the number of days that have elapsed from the date of grant through the Effective Time during the applicable performance period, with the resulting number of Performance-Based Company Options becoming Vested Company Options as of immediately prior to the Effective Time under the Merger Agreement. Any portion of the Performance-Based Company Options for which performance is not so achieved will be canceled at the Effective Time for no consideration.

Treatment of Unvested Company Options Held by Mr. Billerbeck

In connection with the Merger, on November 3, 2016, Mr. Billerbeck entered into a letter agreement with Parent and Lattice, pursuant to which, consistent with the terms of Mr. Billerbeck’s employment agreement, any outstanding and unvested In-the-Money Company Options held by Mr. Billerbeck prior

 

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to the closing date of the Merger (after taking into account any vesting related to the satisfaction of any corporate performance goals) will not accelerate and become fully vested at or prior to the Effective Time, and, as with other holders of outstanding and unvested In-the-Money Company Options, will instead be treated as Unvested Company Options under the Merger Agreement. Thereafter, consistent with the terms of Mr. Billerbeck’s employment agreement, Mr. Billerbeck’s letter agreement provides that if, prior to the second anniversary of the closing date of the Merger, Mr. Billerbeck’s employment is terminated by Lattice without cause or by Mr. Billerbeck for good reason, then any such Unvested Company Options will become fully vested effective as of the date of such termination, subject to his satisfaction of certain conditions pursuant to his employment agreement. For further detail regarding the terms of Mr. Billerbeck’s letter agreement, see the section captioned “The Merger — Interests of Lattice’s Directors and Executive Officers in the Merger — Arrangements with Parent.”

Treatment of Company Options Held by Mr. Hawk

In connection with the Merger, on November 3, 2016, Mr. Hawk entered into a letter agreement with Parent and Lattice, pursuant to which all outstanding Company Stock Options held by Mr. Hawk as of November 3, 2016, whether vested or unvested, will be treated as Vested Company Options as of

immediately prior to the Effective Time under the Merger Agreement. For further detail regarding the terms of Mr. Hawk’s letter agreement, see the section captioned “ The Merger — Interests of Lattice’s Directors and Executive Officers in the Merger — Arrangements with Parent.”

Restricted Stock Units

Except as described in this section, Company RSUs held by our directors and executive officers will be treated like all other Company RSUs at the Effective Time. For more information about the treatment of Company RSUs in the Merger, see the section of this proxy statement captioned “The Merger Agreement — Treatment of Equity-Based Awards.”

Single Trigger Accelerated Vesting of Company RSUs Held by Non-Employee Directors of Lattice

In connection with the Merger, the vesting of each Company RSU held by each non-employee director of Lattice will fully accelerate pursuant to the terms of such Company RSUs and, after giving effect to such acceleration, such Company RSUs will be treated as Vested RSUs as of immediately prior to the Effective Time under the Merger Agreement.

Single Trigger Accelerated Vesting of Certain Company RSUs Held by Lattice Employees, including our Executive Officers

All Company RSUs granted pursuant to Lattice’s 2013 Incentive Plan (as amended) or Lattice’s 1996 Stock Incentive Plan (as amended) are subject to single trigger accelerated vesting at the Effective Time pursuant to the standard form of award agreement for such Company RSUs, which provides that in the event of a change in control of Lattice, if the acquiring corporation is not a “publicly held corporation” within the meaning of Section 162(m) of the Internal Revenue Code, the Company RSUs issued pursuant to such award agreement will fully vest at the time of such change in control. Because Parent is not a publicly held corporation, the vesting of such Company RSUs will fully accelerate upon the change in control of Lattice and, after giving effect to such acceleration, such Company RSUs will be treated as Vested RSUs under the Merger Agreement.

 

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Company Options and Company RSUs Canceled in Exchange for Merger Consideration Payable at Closing

The table below provides detail as to the value of the outstanding Vested Company Options, Unvested Company Options, Vested RSUs and Unvested RSUs (in each case, after taking into account any accelerated vesting that is required to occur at or prior to the Effective Time) held by Lattice’s directors and executive officers that will be canceled and converted into the right to receive the Per Share Merger Consideration in respect thereof payable in accordance with the terms of the Merger Agreement for the respective award. The amounts listed below are estimates based on an assumed closing date of November 25, 2016, and based on the number of Company Stock Options and Company RSUs held by each director and executive officer as of such date. However, the actual number of awards that will be canceled and converted into the right to receive the Per Share Merger Consideration will depend on the number of outstanding awards held by such individuals at the Effective Time.

 

		Vested Company Options(1)								Unvested Company Options(2)								Vested RSUs(3)								Total Value of All Equity
Name		Shares				Value(4)				Shares				Value(5)				Shares				Value(6)				Awards(7)
Non-Employee Directors
Robin Abrams			90,000			$	267,300				0			$	0				22,727			$	188,634			$	455,934
Brian Beattie			68,744			$	198,670				0			$	0				0			$	0			$	198,670
John Bourgoin			90,000			$	267,300				0			$	0				22,727			$	188,634			$	455,934
Robert Herb			90,000			$	294,300				0			$	0				22,727			$	188,634			$	482,934
Mark Jensen			90,000			$	294,300				0			$	0				22,727			$	188,634			$	482,934
Jeff Richardson			53,918			$	94,357				0			$	0				22,727			$	188,634			$	282,991
Fred Weber			60,639			$	126,736				0			$	0				22,727			$	188,634			$	315,370
Executive Officers
Darin G. Billerbeck			1,615,786			$	4,657,705				462,778			$	1,062,285				290,023			$	2,407,191			$	8,127,181
Max Downing			55,541			$	137,655				80,343			$	183,389				33,433			$	277,494			$	598,538
Glen Hawk			558,525			$	1,230,116				0			$	0				46,800			$	388,440			$	1,618,556
Byron W. Milstead			105,775			$	212,128				84,207			$	194,943				65,367			$	542,546			$	949,617

 

(1)

For Unvested Company Options held by non-employee directors of Lattice, the vesting of each Unvested Company Option will fully accelerate upon completion of the Merger pursuant to the terms of such Unvested Company Option; as such, outstanding Unvested Company Options held by each non-employee director as of November 25, 2016 are treated as Vested Company Options and are included in this computation as such.

For Performance-Based Company Options held by executive officers, the amount shown includes the value of Performance-Based Company Options held by the executive officer as of November 25, 2016 that will be converted into the right to receive the Per Share Merger Consideration as of immediately prior to the Effective Time, assuming that the target level of performance is achieved and prorated based on the number of days that have elapsed from the date of grant through the Effective Time. Assuming that the maximum level of performance is achieved (instead of target) and prorated based on the number of days that have elapsed from the date of grant through the Effective Time, the payout for the Performance-Based Company Options held by executive officers would increase by $385,458 for Mr. Billerbeck, $0 for Mr. Downing, $31,786 for Mr. Hawk, and $79,378 for Mr. Milstead.

Pursuant to Mr. Hawk’s letter agreement with Parent and Lattice, dated November 3, 2016, all outstanding Company Stock Options held by Mr. Hawk as of November 3, 2016, whether vested or unvested, will be treated as Vested Company Options. The amount shown for Mr. Hawk includes the value of such Vested Company Options.

(2)

Consistent with Mr. Billerbeck’s employment agreement with Lattice, Mr. Billerbeck’s letter agreement with Parent and Lattice, dated November 3, 2016, provides that any outstanding and unvested In-the-Money Company Options held by Mr. Billerbeck prior to the closing date of the Merger (after taking into account any vesting related to the satisfaction of any corporate performance goals) will not accelerate and become fully vested at or prior to the Effective Time, but will instead be treated as Unvested Company Options, subject to accelerated vesting if Mr. Billerbeck’s employment is terminated either by Lattice without cause or by Mr. Billerbeck for good reason prior to the second anniversary of the closing date of the Merger. The amount shown for Mr. Billerbeck includes the value of such Unvested Company Options.

For further detail, see the section of this proxy statement captioned “The Merger — Treatment of Options and Restricted Stock Units —Treatment of Unvested Company Options Held by Mr. Billerbeck.”

(3)

Vesting of outstanding Company RSUs held by non-employee directors of Lattice will fully accelerate upon completion of the Merger pursuant to the terms of such Company RSUs; as such, outstanding Company RSUs held by each non-employee director as of November 25, 2016 are treated as Vested RSUs and are included in this computation as such.

 

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All Company RSUs that were granted pursuant to Lattice’s 2013 Incentive Plan (as amended) or Lattice’s 1996 Stock Incentive Plan (as amended), which includes all Company RSUs that are held by the executive officers, are subject to single trigger accelerated vesting at the Effective Time pursuant to the standard form of award agreement evidencing such Company RSUs, and, after giving effect to such acceleration, such Company RSUs will be treated as Vested RSUs under the Merger Agreement. The amount shown for each executive officer includes the value of such Vested RSUs.

(4)	Represents an amount equal to the product obtained by multiplying (1) the number of shares subject to such Vested Company Option by (2) the amount by which $8.30 exceeds the per share exercise price of such Vested Company Option.

(5)	Represents an amount equal to the product obtained by multiplying (1) the number of shares subject to such Unvested Company Option by (2) the amount by which $8.30 exceeds the per share exercise price of such Unvested Company Option.

(6)	Represents an amount equal to the product obtained by multiplying (1) $8.30 by (2) the number of shares that remain subject to such Vested RSU.

(7)	As a result of the single-trigger vesting acceleration provided under the terms of the Company RSUs held by each of Lattice’s directors and executive officers, none of Lattice’s directors or executive officers will hold any Unvested RSUs at the Effective Time.

Executive Employment Agreements

Messrs. Billerbeck, Hawk and Milstead

Each of Messrs. Billerbeck, Hawk and Milstead has entered into an employment agreement with Lattice. Each of the employment agreements includes a “double trigger” change in control severance provision, whereby if the executive’s employment is terminated either by Lattice without “cause” or by the executive for “good reason” (as those terms are defined in the applicable employment agreement, as modified by the letter agreements entered into with Lattice and Parent described below) immediately prior to a change in control or within 24 months following such change in control, then the executive will be entitled to receive the following payments and benefits:

 

•

A lump sum cash payment equal to 2.0 (in the case of Mr. Billerbeck) or 1.0 (in the case of each executive other than Mr. Billerbeck) times the sum of the executive’s then-current annual base salary and his target annual bonus amount (with no proration);

 

•

Full acceleration of the vesting of the executive’s then-outstanding compensatory equity awards (as defined in the applicable employment agreement, as modified by the letter agreements entered into with Lattice and Parent described below); and

 

•

Payment by Lattice of the premiums required to continue the executive’s health benefits coverage under COBRA until the earlier of 12 months after the termination date or the date the executive receives substantially equivalent coverage in connection with new employment.

Each executive’s entitlement to the severance payments and benefits above is conditioned upon the executive entering into (and not subsequently revoking) a separation agreement and release of claims, and agreeing to certain non-solicitation and non-disparagement covenants. Certain provisions of each executive’s employment agreement will be modified by the letter agreements entered into with Lattice and Parent, effective as of the closing date of the Merger, and described in the section below captioned “The Merger — Interests of Lattice’s Directors and Executive Officers in the Merger — Arrangements with Parent.”

Mr. Downing

Mr. Downing is party to a severance letter agreement with Lattice which includes a “double trigger” change of control severance provision. On November 3, 2016, Mr. Downing entered into an employment agreement with Lattice and Parent that will become effective as of the Effective Time and supersede his severance letter agreement in its entirety, as described in the section below captioned “The Merger — Interests of Lattice’s Directors and Executive Officers in the Merger — Arrangements with Parent.”

 

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In the absence of the employment agreement, under Mr. Downing’s severance letter agreement, if a change in control of Lattice occurs prior to August 31, 2017 and Mr. Downing’s employment is “involuntarily terminated” (as defined in the severance letter agreement) either by Lattice or by him, in either case, within 24 months following such change in control, then Mr. Downing will be entitled to receive the following payments and benefits:

 

•

A lump sum cash payment equal to 1.0 times the sum of the executive’s then-current annual base salary and the executive’s target annual bonus amount;

 

•

Full acceleration of the vesting of the executive’s then-outstanding compensatory equity awards; and

 

•

Payment by Lattice of the premiums required to continue the executive’s health benefits coverage under COBRA until the earlier of 12 months after the termination date or the date the executive receives coverage in connection with new employment.

Under the severance letter agreement, Mr. Downing’s entitlement to the severance payments and benefits above is conditioned upon Mr. Downing entering into (and not subsequently revoking) a separation agreement and release of claims.

Estimated Severance Payable to Executives

For an estimate of the value of the amounts that would be paid or become payable to each of Lattice’s named executive officers, assuming, among other things, that the Merger was completed on November 21, 2016 and the employment of each named executive officer was terminated either by Lattice without cause or by the named executive officer for good reason immediately thereafter, see the section of this proxy statement entitled “Proposal 3: Advisory, Non-Binding Vote on Merger-Related Executive Compensation Arrangements.”

Arrangements with Parent

On November 3, 2016, each of Messrs. Billerbeck, Downing, Hawk and Milstead entered into letter agreements with Parent and Lattice which will become effective as of the Effective Time. If the Merger Agreement is terminated and the Merger does not occur for any reason, these letter agreements will be null, void and have no force and effect.

Letter Agreement with Mr. Billerbeck

Pursuant to Mr. Billerbeck’s letter agreement with Parent and Lattice, effective as of the closing date of the Merger:

 

•

Mr. Billerbeck agreed to waive his right to terminate his employment for good reason under his employment agreement as a result of, or in connection with, a diminution or adverse change to his duties, authority, title or responsibilities in connection with the Merger, including his right to receive severance payments and benefits pursuant to his employment agreement as a result thereof;

 

•

The definition of “good reason” under Mr. Billerbeck’s employment agreement was amended to provide that in the event that, after the closing date of the Merger, Mr. Billerbeck ceases to be the principal executive officer of Lattice without Mr. Billerbeck’s express written consent, such event will constitute good reason;

 

•

The amount of severance pay to which Mr. Billerbeck is entitled upon a termination of employment either by Lattice without cause or by Mr. Billerbeck for good reason after the closing date of the Merger (for purposes of this section, the “Cash Severance” as defined in

 

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the employment agreement) was amended to clarify that such amount will be equal to the greater of (1) $2,000,000 or (2) two times the sum of his then annual base salary and target bonus amount (with no proration), plus the amount of his monthly COBRA premiums until the earlier of twelve months after the termination date or the date he commences receiving substantially equivalent coverage in connection with new employment;

 

•

If Mr. Billerbeck remains continuously employed by Lattice through the second anniversary of the closing date of the Merger, Lattice will pay Mr. Billerbeck an amount equal to the Cash Severance (as described above), in a single lump sum on the 30th day following such date, subject to his execution of an effective and irrevocable release of claims;

 

•

The definition of “compensatory equity” under Mr. Billerbeck’s employment agreement was amended to refer to his outstanding Company Option and Company RSUs as of November 3, 2016, together with rights to receive cash in accordance with the Merger Agreement with respect to such awards, which we refer to in this proxy statement collectively as the “Compensatory Company Equity”;

 

•

Notwithstanding any provision in the Merger Agreement to the contrary, any outstanding and unvested Company Options held by Mr. Billerbeck immediately prior to the closing date of the Merger (after taking into account any vesting related to the satisfaction of any corporate performance goals) will not accelerate and become fully vested at or prior to the effective time of the Merger, but instead will be treated as Unvested Company Options pursuant to the terms of the Merger Agreement. If, prior to the second anniversary of the closing date of the Merger, Mr. Billerbeck’s employment is terminated either by Lattice without cause or by Mr. Billerbeck for good reason, then his then Unvested Company Options will become fully vested effective as of the date of such termination, subject to Mr. Billerbeck’s satisfaction of the conditions to such acceleration of Compensatory Company Equity pursuant to his employment agreement, including his execution of an effective and irrevocable release of claims; and

 

•

Mr. Billerbeck will be eligible to receive grants of equity pursuant to an equity plan with respect to the successor entity to Lattice as a result of the Merger on such terms to be approved by Parent, in consultation with Mr. Billerbeck.

Letter Agreement with Mr. Hawk

Pursuant to Mr. Hawk’s letter agreement with Parent and Lattice, effective as of the closing date of the Merger:

 

•

Mr. Hawk agreed to waive his right to terminate his employment for good reason under his employment agreement as a result of, or in connection with, a diminution or adverse change to his duties, authority, title or responsibilities in connection with the Merger, including his right to receive severance payments and benefits pursuant to his employment agreement as a result thereof;

 

•

The definition of “good reason” under Mr. Hawk’s employment agreement was amended to provide that in the event that, after the closing date of the Merger, Mr. Hawk ceases to report to the principal executive officer of Lattice without Mr. Hawk’s express written consent, such event will constitute good reason;

 

•

The amount of severance pay to which Mr. Hawk is entitled upon a termination of employment either by Lattice without cause or by Mr. Hawk for good reason after the closing date of the Merger (for purposes of this section, the “Cash Severance” as defined therein) was amended to clarify that such amount will be equal to the greater of (1) $630,000 or (2) one times the sum of his then annual base salary and target bonus amount (with no proration), plus the

 

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amount of his monthly COBRA premiums until the earlier of twelve months after the termination date or the date he commences receiving substantially equivalent coverage in connection with new employment;

 

•

If Mr. Hawk remains continuously employed by Lattice through the first anniversary of the closing date of the Merger, Lattice will pay Mr. Hawk an amount equal to the Cash Severance (as described above), in a single lump sum on the 30th day following such date, subject to his execution of an effective and irrevocable release of claims;

 

•

All outstanding stock options held by Mr. Hawk as of November 3, 2016, whether vested or unvested, will be treated as vested company options for purposes of the Merger Agreement; and

 

•

Mr. Hawk will be eligible to receive grants of equity pursuant to an equity plan with respect to the successor entity to Lattice as a result of the Merger on such terms to be approved by Parent.

Letter Agreement with Mr. Milstead

Pursuant to Mr. Milstead’s letter agreement with Parent and Lattice, effective as of the closing date of the Merger:

 

•

Mr. Milstead agreed to waive his right to terminate his employment for good reason under his employment agreement as a result of, or in connection with, a diminution or adverse change to his duties, authority, title or responsibilities in connection with the Merger, including his right to receive severance payments and benefits pursuant to his employment agreement as a result thereof;

 

•

The definition of “good reason” under Mr. Milstead’s employment agreement was amended to provide that no change in duties or responsibilities after the closing date of the Merger will constitute good reason if, after such change, the Board determines that Mr. Milstead will report to either the Lattice’s Chief Executive Officer or Chief Operating Officer; and

 

•

The definition of “compensatory equity” under Mr. Milstead’s employment agreement was amended to refer to the Compensatory Company Equity (as defined above).

Employment Agreement and Letter Agreement with Mr. Downing

On November 3, 2016, Lattice entered into an employment agreement with Max Downing, to be effective as of the closing date of the Merger, pursuant to which he will serve as the Corporate Vice President, Chief Financial Officer of Lattice.

Mr. Downing’s employment agreement provides for a term commencing on the closing date of the Merger and ending on the second anniversary thereof, and provides for an annual base salary of $275,000, subject to review and adjustment by the Compensation Committee of the Board, which we refer to in this proxy statement as the “Committee”, at least annually. In addition to his annual base salary, commencing with the Lattice’s 2017 fiscal year, Mr. Downing will be eligible for an annual incentive bonus at an initial target percentage amount of 50% of his base salary, which we refer to in this proxy statement as the “Target Bonus”, and a maximum percentage amount of annual incentive bonus of 200% of the Target Bonus. The actual amount of Mr. Downing’s annual incentive bonus will be based upon the achievement of specific milestones to be mutually agreed upon by Mr. Downing and the Committee no later than 60 days after the start of each fiscal year.

If Mr. Downing’s employment is terminated either by the Company without cause or by Mr. Downing for good reason, in either case, prior to the second anniversary of the closing date of the Merger, then

 

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Mr. Downing will immediately fully vest in all of his Compensatory Company Equity (as defined above). Additionally, Lattice will pay Mr. Downing (1) an amount equal to the sum of his then annual base salary and Target Bonus (with no pro ration), plus (2) the amount of his monthly COBRA premiums until the earlier of twelve months after the termination date or the date he commences receiving substantially equivalent coverage in connection with new employment.

Mr. Downing’s receipt of the severance payments and benefits pursuant to his employment agreement is subject to Mr. Downing entering into (and not subsequently revoking) a separation agreement and release of claims, and agreeing to certain non-solicitation and non-disparagement provisions that would be in effect for 12 months following his termination date.

If the severance payments and benefits payable to Mr. Downing constitute “parachute payments” and would be subject to the applicable excise tax under Section 280G of the Internal Revenue Code, then Mr. Downing’s severance and other benefits shall be either (1) delivered in full; or (2) delivered to such lesser extent which would result in no portion of such benefits being subject to the excise tax, whichever results in the receipt by Mr. Downing on an after-tax basis of the greatest amount of benefits.

In addition, Lattice and Parent entered into a letter agreement with Max Downing, pursuant to which, effective as of the closing date of the Merger, Mr. Downing agreed to waive his right to terminate his employment for good reason as a result of, or in connection with, a diminution or adverse change to his duties, authority, title or responsibilities in connection with the Merger, including his right to receive severance payments and benefits pursuant to his employment agreement as a result thereof.

Employee Benefits Following the Effective Time

The Merger Agreement provides that Parent will, or will cause the Surviving Corporation to, provide each Lattice employee who continues to be employed by Parent or the Surviving Corporation or any of their respective subsidiaries following the Effective Time with certain compensation and benefits during the period commencing at the Effective Time and ending on the first anniversary of the Effective Time, as described in the section captioned “The Merger Agreement — Employee Benefits.”

Sections 280G and 4999 of the Code

None of the executive officers are entitled to any gross-up payments in respect of any excise taxes imposed on “excess parachute payments” under Sections 280G and 4999 of the Code. Rather, if any of the amounts provided for under the executive officer’s employment agreement or otherwise would constitute “parachute payments” within the meaning of Section 280G of the Code and would be subject to the related excise tax imposed under Section 4999 of the Code, the executive officer would receive either the full amount of such payments and benefits or such lesser amount that would result in no portion of the payments and benefits being subject to such excise tax, whichever results in the greater net-after-tax amount to such executive officer.

Financing of the Merger

We anticipate that the total amount of funds necessary to complete the Merger and the related transactions will be approximately $1.3 billion. In connection with the financing of the Merger, Parent has received the Equity Commitment Letter from its parent, Canyon Bridge, pursuant to which Canyon Bridge has committed, subject to the satisfaction of the conditions set forth Equity Commitment Letter, to purchase, directly or indirectly, immediately prior to the completion of the Merger, additional equity interests of Parent for an aggregate purchase price equal to $1.3 billion. This amount will be used solely for the purpose of allowing Parent or Merger Sub to (1) pay the aggregate Per Share Merger

 

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Consideration, (2) satisfy all of the outstanding indebtedness of the Company or any of its subsidiaries to the extent required to be repaid in connection with the consummation of the Merger and the other transactions contemplated by the Merger Agreement, and (3) pay any and all fees and expenses required to be paid by Parent or Merger Sub at the completion of the Merger in connection with the consummation of the Merger and the other transactions contemplated by the Merger Agreement.

As of the date of this proxy statement, Canyon Bridge has one limited partner, a wholly owned

subsidiary of CVC. CVC is a large Chinese investment fund. That limited partner has provided

Canyon Bridge with an equity commitment sufficient to fund Canyon Bridge’s obligations under the

Equity Commitment Letter. A portion of that commitment was used to fund the $58,750,000 that was

placed by Parent in an escrow account located in the United States and held by Citibank, National

Association, which escrowed amount provides a source of funds in the event the reverse termination

fee may be payable to the Company. Canyon Bridge also intends to use the proceeds from that

commitment from Canyon Bridge’s limited partner to fund its obligations under the Equity Commitment

Letter.

Canyon Bridge’s obligations under the Equity Commitment Letter are conditioned upon (1) the execution and delivery of the Merger Agreement by Lattice, which has been met, and (2) the satisfaction or, to the extent permitted by law, waiver of Lattice’s and Parent’s mutual conditions to closing, and of Parent’s and Merger Sub’s conditions to closing (other than those conditions that by their nature are only capable of being satisfied at the closing of the Merger, but subject to the concurrent satisfaction or, to the extent permitted by law, waiver of such conditions at the closing).

Although Canyon Bridge is a limited partnership, pursuant to the terms of the Equity Commitment Letter, Parent has agreed that no party other than Canyon Bridge will have any obligation to, or liability for failure to, provide the equity financing, regardless of the party’s relation to Canyon Bridge, which includes Canyon Bridge, CBC Partners or Canyon Bridge’s investors, including CVC. The Equity Commitment Letter provides that Parent, Merger Sub, and Lattice will have no legal recourse or remedy against Canyon Bridge with respect to Parent’s rights pursuant to the Equity Commitment Letter, except that Parent has a right to receive the equity financing in accordance with the terms of the Equity Commitment Letter. However, pursuant to the terms of the Merger Agreement, Parent is not obligated to bring any enforcement action against Canyon Bridge or any other financing source, including any financing source of Canyon Bridge, to enforce Parent’s rights under the Equity Commitment Letter. Additionally, in the event that Canyon Bridge fails to provide the equity financing or the amount necessary to consummate the Merger exceeds the $1.3 billion amount contemplated by the Equity Commitment Letter, Parent and Merger Sub have no obligation to seek financing from any other source.

Furthermore, in the event that Lattice terminates the Merger Agreement when all of the mutual conditions to closing have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing, and other than conditions that have not been satisfied due to an action by a governmental entity in China) and all of the conditions to Parent and Merger Sub’s obligations to consummate the Merger have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing), and Lattice has provided Parent with an irrevocable written notice that all such conditions have been satisfied and stands ready, willing and able to consummate the Merger, but Parent and Merger Sub fail to consummate the Merger within five business days of such written notice, Lattice’s sole remedy will be to seek from Parent the reverse termination fee of $58,750,000. For more information, see the section of this proxy statement captioned “The Merger Agreement — Reverse Termination Fee Payable by Parent.”

 

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The Equity Commitment Letter also provides that, subject to the prior written consent of Parent, and in accordance with the terms of the Merger Agreement, Canyon Bridge may assign its rights, interests, obligations or a portion or all of its equity commitment under the Equity Commitment Letter. However, no such assignment shall relieve Canyon Bridge or any assigning investor of its obligations under the Equity Commitment Letter if any such assignee does not perform such obligations. In addition, the Equity Commitment Letter may not be amended, restated, supplemented or otherwise modified, and no provision of it may be waived, except by an instrument in writing signed by Parent and Canyon Bridge.

Closing and Effective Time

The closing of the Merger will take place at 8:30 a.m., Pacific time, at the offices of Jones Day, 1755 Embarcadero Road, Palo Alto, California, as soon as practicable, but no later than five business days following the satisfaction or waiver of all conditions to closing of the Merger (described below under the caption “The Merger Agreement — Conditions to the Closing of the Merger”) (other than those conditions to be satisfied at the closing of the Merger, but subject to satisfaction or waiver, if permitted, of those conditions) or such other place, time, and date as will be agreed to in writing by Parent and Lattice.

The Merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware or at such later date and time as the Company and Parent may agree upon and as is set forth in that certificate of merger.

Appraisal Rights

If the Merger is completed, stockholders who do not vote in favor of the adoption of the Merger Agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL, which we refer to in this proxy statement as Section 262.”

The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which is attached to this proxy statement as Annex C and incorporated herein by reference. The following summary does not constitute any legal or other advice and does not constitute a recommendation that stockholders exercise their appraisal rights under Section 262. Only a holder of record of shares of common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A person having a beneficial interest in shares of common stock held of record in the name of another person, such as a bank, broker or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. If you hold your shares of Lattice common stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or the other nominee.

Under Section 262, holders of shares of common stock who (1) do not vote in favor of the adoption of the Merger Agreement, (2) continuously are the record holders of such shares through the Effective Time, and (3) otherwise follow the procedures set forth in Section 262 will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares of common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court. Unless the Delaware Court of Chancery, in its discretion, determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective Time through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during such period.

 

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However, pursuant to a recent amendment to Section 262 of the DGCL, the surviving corporation may make a cash payment prior to the entry of a judgment by the Delaware Court of Chancery to holders of shares of common stock exercising appraisal rights so no interest will accrue on the prepaid amount. Interest will still accrue on the difference, if any, between the paid amount and the fair value of the shares, as determined by the Delaware Court of Chancery, and on any interest accrued before the payment, unless it was included in the payment.

Under Section 262, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders entitled to appraisal rights that appraisal rights are available and include in the notice a copy of Section 262. This proxy statement constitutes Lattice’s notice to stockholders that appraisal rights are available in connection with the Merger, and the full text of Section 262 is attached to this proxy statement as Annex C. In connection with the Merger, any holder of shares of common stock who wishes to exercise appraisal rights or who wishes to preserve such holder’s right to do so should review Annex C carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner will result in the loss of appraisal rights under the DGCL. A stockholder who loses his, her or its appraisal rights will be entitled to receive the Merger consideration described in the Merger Agreement. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of common stock, Lattice believes that if a stockholder considers exercising such rights, that stockholder should seek the advice of legal counsel.

Stockholders wishing to exercise the right to seek an appraisal of their shares of common stock must do ALL of the following:

 

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the stockholder must not vote in favor of the proposal to adopt the Merger Agreement;

 

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the stockholder must deliver to Lattice a written demand for appraisal before the vote on the Merger Agreement at the Special Meeting;

 

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the stockholder must continuously hold the shares from the date of making the demand through the Effective Time (a stockholder will lose appraisal rights if the stockholder transfers the shares before the Effective Time); and

 

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the stockholder or the Surviving Corporation must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares within 120 days after the Effective Time. The Surviving Corporation is under no obligation to file any petition and has no intention of doing so.

Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the Merger Agreement, a stockholder who votes by proxy and who wishes to exercise appraisal rights must vote against the adoption of the Merger Agreement, abstain or not vote its shares.

Filing Written Demand

Any holder of shares of common stock wishing to exercise appraisal rights must deliver to Lattice, before the vote on the adoption of the Merger Agreement at the Special Meeting at which the proposal to adopt the Merger Agreement will be submitted to the stockholders, a written demand for the appraisal of the stockholder’s shares, and that stockholder must not vote or submit a proxy in favor of the adoption of the Merger Agreement. A holder of shares of common stock exercising appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through the Effective Time. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, and it will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to

 

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exercise appraisal rights must submit a proxy containing instructions to vote against the adoption of the Merger Agreement or abstain from voting on the adoption of the Merger Agreement. Neither voting against the adoption of the Merger Agreement nor abstaining from voting or failing to vote on the proposal to adopt the Merger Agreement will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the adoption of the Merger Agreement. A proxy or vote against the adoption of the Merger Agreement will not constitute a demand. A stockholder’s failure to make the written demand prior to the taking of the vote on the adoption of the Merger Agreement at the Special Meeting of Lattice’s stockholders will constitute a waiver of appraisal rights.

Only a holder of record of shares of common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of common stock should be executed by or on behalf of the holder of record and must reasonably inform Lattice of the identity of the holder and state that the person intends thereby to demand appraisal of the holder’s shares in connection with the Merger. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the record owner, and if the shares are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners.

STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE OR BANK ACCOUNTS OR OTHER NOMINEE FORMS AND WHO WISH TO EXERCISE APPRAISAL RIGHTS SHOULD CONSULT WITH THEIR BANK, BROKER OR OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKER OR OTHER NOMINEE TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BANK, BROKER OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.

All written demands for appraisal pursuant to Section 262 should be mailed or delivered to:

Lattice Semiconductor Corporation

111 SW Fifth Ave., Ste. 700

Portland, Oregon 97204

Attention: Corporate Secretary

Any holder of shares of common stock may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the Merger Agreement by delivering to Lattice a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than 60 days after the Effective Time will require written approval of the Surviving Corporation. No appraisal proceeding in the Delaware Court of Chancery will be dismissed without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just.

Notice by the Surviving Corporation

If the Merger is completed, within 10 days after the Effective Time, the Surviving Corporation will notify each holder of shares of common stock who has made a written demand for appraisal pursuant to Section 262 and who has not voted in favor of the adoption of the Merger Agreement that the Merger has become effective and the effective date thereof.

 

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Filing a Petition for Appraisal

Within 120 days after the Effective Time, but not thereafter, the Surviving Corporation or any holder of shares of common stock who has complied with Section 262 and is entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the Surviving Corporation in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares held by all stockholders entitled to appraisal. The Surviving Corporation is under no obligation, and has no present intention, to file a petition, and holders should not assume that the Surviving Corporation will file a petition or initiate any negotiations with respect to the fair value of the shares of common stock. Accordingly, any holders of shares of common stock who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of their shares of common stock within the time and in the manner prescribed in Section 262. The failure of a holder of common stock to file such a petition within the period specified in Section 262 could nullify the stockholder’s previous written demand for appraisal.

Within 120 days after the Effective Time, any holder of shares of common stock who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of shares not voted in favor of the adoption of the Merger Agreement and with respect to which Lattice has received demands for appraisal, and the aggregate number of holders of such shares. The Surviving Corporation must mail this statement to the requesting stockholder within 10 days after receipt of the written request for such a statement or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. A beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition seeking appraisal or request from the Surviving Corporation the foregoing statements. As noted above, however, the demand for appraisal can only be made by a stockholder of record.

If a petition for an appraisal is duly filed by a holder of shares of common stock and a copy thereof is served upon the Surviving Corporation, the Surviving Corporation will then be obligated within twenty (20) days after such service to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. After notice to the stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the stockholders who demanded appraisal of their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and if any stockholder fails to comply with the direction, the Delaware Court of Chancery may dismiss that stockholder from the proceedings.

Determination of Fair Value

After determining the holders of common stock entitled to appraisal, the Delaware Court of Chancery will appraise the “fair value” of the shares of common stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. Unless the court in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment. In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed

 

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the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined by the Delaware Court of Chancery could be more than, the same as or less than the consideration they would receive pursuant to the Merger if they did not seek appraisal of their shares and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a Merger is not an opinion as to, and does not in any manner address, fair value under Section 262 of the DGCL. Although Lattice believes that the Per Share Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Per Share Merger Consideration. Neither Lattice nor Parent anticipates offering more than the Per Share Merger Consideration to any stockholder exercising appraisal rights, and each of Lattice and Parent reserves the right to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of common stock is less than the Per Share Merger Consideration. If a petition for appraisal is not timely filed, then the right to an appraisal will cease. The costs of the appraisal proceedings may be determined by the Delaware Court of Chancery and taxed upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a stockholder, the Delaware Court of Chancery may also order that all or a portion of the expenses incurred by a stockholder in connection with an appraisal, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to be appraised.

If any stockholder who demands appraisal of his, her or its shares of common stock under Section 262 fails to perfect, or loses or successfully withdraws, such holder’s right to appraisal, the stockholder’s shares of common stock will be deemed to have been converted at the Effective Time into the right to receive the Per Share Merger Consideration. A stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time or if the stockholder delivers to the Surviving Corporation a written withdrawal of the holder’s demand for appraisal and an acceptance of the Per Share Merger Consideration in accordance with Section 262.

From and after the Effective Time, no stockholder who has demanded appraisal rights will be entitled to vote such shares of common stock for any purpose or to receive payment of dividends or other distributions on the stock, except dividends or other distributions on the holder’s shares of common stock, if any, payable to stockholders as of a time prior to the Effective Time. If no petition for an appraisal is filed, or if the stockholder delivers to the Surviving Corporation a written withdrawal of the demand for an appraisal and an acceptance of the Merger, either within 60 days after the Effective Time

 

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or thereafter with the written approval of the Surviving Corporation, then the right of such stockholder to an appraisal will cease. Once a petition for appraisal is filed with the Delaware Court of Chancery, however, the appraisal proceeding may not be dismissed as to any stockholder who commenced the proceeding or joined that proceeding as a named party without the approval of the court.

Failure to comply strictly with all of the procedures set forth in Section 262 may result in the loss of a stockholder’s statutory appraisal rights. Consequently, any stockholder wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.

U.S. Federal Income Tax Consequences of the Merger

The following discussion is a summary of U.S. federal income tax consequences of the Merger generally applicable to U.S. Holders and Non-U.S. Holders (each as defined below) of shares of common stock whose shares are converted into the right to receive cash pursuant to the Merger. This discussion is based upon the Internal Revenue Code of 1986, as amended, which we refer to in this proxy statement as the “Code”, Treasury Regulations promulgated under the Code, court decisions, published positions of the Internal Revenue Service, which we refer to in this proxy statement as the “IRS”, and other applicable authorities, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations, possibly with retroactive effect. This discussion is limited to holders who hold their shares of common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment purposes).

This discussion is for general information only and does not address all of the tax consequences that may be relevant to holders in light of their particular circumstances. For example, this discussion does not address:

 

•

tax consequences that may be relevant to holders who may be subject to special treatment under U.S. federal income tax laws, such as financial institutions; tax-exempt organizations (including private foundations) or governmental organizations; S-corporations, partnerships or any other entities or arrangements treated as partnerships or pass-through entities for U.S. federal income tax purposes; insurance companies; mutual funds; dealers in stocks and securities; traders in securities that elect to use the mark-to-market method of accounting for their securities; regulated investment companies; real estate investment trusts; cooperatives; entities subject to the U.S. anti-inversion rules; or certain former citizens or long-term residents of the United States;

 

•

tax consequences to holders holding the shares of common stock as part of a hedging, constructive sale or conversion, straddle or other risk reduction transaction;

 

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tax consequences to holders that received their shares of common stock in a compensatory transaction or pursuant to the exercise of options or warrants;

 

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tax consequences to holders who own an equity interest, actually or constructively, in Parent or the Surviving Corporation following the Merger;

 

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tax consequences to U.S. Holders whose “functional currency” is not the U.S. dollar;

 

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tax consequences to holders who own or are deemed to own 5% or more of the outstanding shares of common stock;

 

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tax consequences to holders who hold their common stock through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States;

 

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tax consequences to holders who are “controlled foreign corporations,” “passive foreign investment companies” or “personal holding companies” for U.S. federal income tax purposes;

 

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•

tax consequences arising from the Medicare tax on net investment income;

 

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the non-income tax (such as the U.S. federal estate or gift tax) or alternative minimum tax consequences, if any;

 

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the U.S. federal estate, gift or alternative minimum tax consequences, if any;

 

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any state, local or non-U.S. tax consequences; or

 

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tax consequences to holders that do not vote in favor of the Merger and who properly demand appraisal of their shares under Section 262 of the DGCL.

If a partnership (including an entity or arrangement, domestic or foreign, treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of common stock, then the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partner and the partnership. Partnerships holding shares of common stock and partners therein should consult their tax advisors regarding the consequences of the Merger.

No ruling has been or will be obtained from the IRS regarding the U.S. federal income tax consequences of the Merger described below. If the IRS contests a conclusion set forth herein, no assurance can be given that a holder would ultimately prevail in a final determination by a court.

THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE TO ANY HOLDER. A HOLDER SHOULD CONSULT ITS OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER U.S. FEDERAL NON-INCOME TAX LAWS OR THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.

U.S. Holders

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of shares of common stock that is for U.S. federal income tax purposes:

 

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an individual who is a citizen or resident of the United States;

 

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a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

 

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an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

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a trust (1) that is subject to the primary supervision of a court within the United States and the control of one or more United States persons as defined in Section 7701(a)(30) of the Code, or (2) that has a valid election in effect under applicable Treasury regulations to be treated as a United States person.

The receipt of cash by a U.S. Holder in exchange for shares of common stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, such U.S. Holder’s gain or loss will be equal to the difference, if any, between the amount of cash received (determined before the deduction of any applicable withholding taxes) and the U.S. Holder’s adjusted tax basis in the shares surrendered pursuant to the Merger. A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares. Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one year at the time of the completion of the Merger. A reduced tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations.

 

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Non-U.S. Holders

For purposes of this discussion, the term “Non-U.S. Holder” means a beneficial owner of shares of common stock that is neither a U.S. holder nor an entity that is treated as a partnership for U.S. federal income tax purposes.

Any gain realized by a Non-U.S. Holder pursuant to the Merger generally will not be subject to U.S. federal income tax unless:

 

•

the gain is effectively connected with a trade or business of such Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by such Non-U.S. Holder in the United States), in which case such gain generally will be subject to U.S. federal income tax at rates generally applicable to U.S. persons, and, if the Non-U.S. Holder is a corporation, such gain may also be subject to the branch profits tax at a rate of 30% (or a lower rate under an applicable income tax treaty); or

 

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such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other specified conditions are met, in which case such gain will be subject to U.S. federal income tax at a rate of 30% (or a lower rate under an applicable income tax treaty).

Information Reporting and Backup Withholding

Information reporting and backup withholding (at a rate of 28%) may apply to the proceeds received by a holder pursuant to the Merger. Backup withholding generally will not apply to (1) a U.S. Holder that furnishes a correct taxpayer identification number and certifies that such holder is not subject to backup withholding on IRS Form W-9 (or a substitute or successor form) or (2) a Non-U.S. Holder that (a) provides a certification of such holder’s foreign status on the appropriate series of IRS Form W-8 (or a substitute or successor form) or (b) otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS. Holders should consult their tax advisors regarding the information reporting and backup withholding rules.

Regulatory Approvals Required for the Merger

The Merger is subject to routine review by antitrust authorities to determine whether the proposed transaction is likely to substantially lessen competition in any relevant market. Under the Merger Agreement, the Merger cannot be completed until (1) the expiration or termination of the applicable waiting period under the HSR Act, (2) the expiration or termination of the applicable waiting period under the Austrian Competition Act (Wettbewerbsgesetz) and/or the Austrian Cartel Act (Kartellgesetz), and (3) the clearance of the Merger by CFIUS.

CFIUS may determine that there are no national security concerns with the transaction, may impose mitigation terms to resolve any national security concerns with the covered transaction, or may send a report to the President recommending that the transaction be suspended or prohibited, or providing notice to the President that CFIUS cannot agree on a recommendation relative to the covered transaction. Accordingly, clearance may not be obtained if CFIUS and the President elect to suspend or prohibit the transaction. In addition, Parent may determine not to proceed with the Merger in the event that CFIUS imposes conditions that require Parent, Merger Sub or the Company to take certain specific types of actions as described in the Merger Agreement and outlined in the ‘CFIUS’ section below.

 

 

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HSR Act and U.S. Antitrust Matters

Under the HSR Act and the rules promulgated thereunder, certain transactions exceeding the applicable thresholds require notification to the FTC and DOJ and expiration or termination of the applicable waiting period before the transaction can be consummated, unless an exemption applies.

Parent or Merger Sub (and their respective affiliates, if applicable), on the one hand, and the Company (and its subsidiaries, if applicable), on the other hand, filed with the FTC and the DOJ on December 9, 2016 a Notification and Report Form relating to the Merger Agreement and the transactions contemplated hereby as required by the HSR Act. Under the HSR Act, the Merger may not be consummated until expiration or early termination of a 30-day waiting period, which will expire on January 9, 2017 at 11:59 p.m.

At any time before or after consummation of the Merger, even if the Merger does not require notification or has received termination of the waiting period under the HSR Act, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary under the applicable statutes, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. At any time before or after the completion of the Merger, even if the Merger does not require notification or has received termination of the waiting period under the HSR Act, any state could take such action under the antitrust laws as it deems necessary. Such action could include seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the parties, or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

CFIUS

The Merger is also conditioned on the clearance of the Merger by CFIUS. This CFIUS Approval takes the form of any of the following: (1) a written notification from CFIUS that the Merger is not a covered transaction and not subject to review under applicable law; (2) a written notification from CFIUS that it has concluded its review and that there are no unresolved national security concerns in connection with the Merger; or (3) inaction, or a decision not to take action, by the President. Section 721 of the Defense Production Act of 1950, as amended, which we refer to in this proxy statement as the “Defense Production Act”, including the implementing regulations thereof codified at 31 C.F.R. Part 800, as well as related Executive Orders and regulations, authorize the President and CFIUS to review transactions which could result in control of a U.S. business by a foreign person. Under the Defense Production Act, the Secretary of the Treasury acts through CFIUS to coordinate review of certain covered transactions that are voluntarily submitted to CFIUS or that are unilaterally reviewed by CFIUS. In general, CFIUS review of a covered transaction occurs in an initial 30-day review period that may be extended by CFIUS for an additional 45-day investigation period. At the close of its review or investigation, CFIUS may determine that there are no national security concerns with the transaction, may impose mitigation terms to resolve any national security concerns with the covered transaction, or may send a report to the President recommending that the transaction be suspended or prohibited, or providing notice to the President that CFIUS cannot agree on a recommendation relative to the covered transaction. The President has 15 days under the Defense Production Act to act on CFIUS’ report.

Lattice and Parent have filed a joint voluntary draft notice with CFIUS, have received comments from CFIUS staff on that draft notice, and have filed a joint voluntary final notice. Once that joint voluntary final notice is accepted by CFIUS, the CFIUS review process will commence. While we believe that CFIUS Approval will ultimately be obtained, this clearance is not assured. Each party’s obligations to complete the Merger are contingent upon CFIUS Approval.

 

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As noted above, CFIUS may impose conditions as a prerequisite for its clearance of the Merger. Except as otherwise agreed by Lattice and Parent, Parent may determine not to proceed with the Merger should such conditions require Parent, Merger Sub or Company to take actions that would reasonably be expected to (1) cause Parent’s control or ownership of the Surviving Corporation and its subsidiaries to be passive or to otherwise restrict the ability of Parent to control and operate the Surviving Corporation and its subsidiaries or their respective businesses, assets or operations by a requirement to enter into a Special Security Agreement or similar arrangement, appoint a proxy or elect one or more independent directors to the board of directors or governing body of Parent or the Surviving Corporation or any of their respective Subsidiaries, except through a requirement to relinquish ownership rights permitted pursuant to the following subsection, (2) require Parent to divest, exclusively license, transfer, hold separate, cease operating or otherwise relinquish ownership rights with respect to one or more FPGA, complex programmable logic devices or wireless business units, product lines, assets or technologies of the Surviving Corporation and its subsidiaries whose total revenue (a) over the 12 month period ended November 3, 2016 has exceeded, in the aggregate, $10.0 million, or (b) is anticipated to exceed in the period ending 24 months after November 3, 2016 based on forecasts provided by the Company to Parent, in the aggregate, $10.0 million, or (3) adversely affect in a material manner the operation or management of the Surviving Corporation’s and its subsidiaries’ businesses, as conducted as of the date hereof, except through a requirement to relinquish ownership rights permitted pursuant to the preceding subsection.

Austrian Competition Laws

The completion of the Merger is subject to the expiration or termination of the waiting period under the Austrian Competition Act (Wettbewerbsgesetz) and/or the Austrian Cartel Act (Kartellgesetz). Accordingly, Parent will notify the Austrian Federal Competition Authority (Bundeswettbewerbsbehörde) of the proposed Merger. Unless extended or earlier terminated, the applicable waiting period will expire four weeks after the date of filing of a notification of the proposed Merger to the Austrian Federal Competition Authority (Bundeswettbewerbsbehörde). If neither the Austrian Federal Competition Authority (Bundeswettbewerbsbehörde) nor the Austrian Federal Cartel Prosecutor (Bundeskartellanwalt) apply to the Cartel Court (Kartellgericht) for an in-depth investigation within this waiting period, the Merger is deemed legally cleared.

Other Regulatory Approvals

One or more governmental agencies may impose a condition, restriction, qualification, requirement or limitation when it grants the necessary approvals and consents to the consummation of the Merger. Third parties may also seek to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, any of which actions could significantly impede or even preclude obtaining required regulatory approvals. There is currently no way to predict how long it will take to obtain all of the required regulatory approvals or whether such approvals will ultimately be obtained and there may be a substantial period of time between the approval by stockholders and the completion of the Merger.

Although we expect that all required regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the Merger, including the requirement to divest assets, or require changes to the terms of the Merger Agreement. These conditions or changes could result in the conditions to the Merger not being satisfied.

 

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Legal Proceedings

Lattice has amended its bylaws to provide that, unless Lattice consents in writing to the selection of an alternative forum, the Delaware Court of Chancery will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of the Company, any action asserting a breach of a fiduciary duty, any action arising under the DGCL or the Company’s corporate governance documents, or any action asserting a claim that is governed by the internal affairs doctrine of the State of Delaware. In the event that the Delaware Court of Chancery lacks subject matter jurisdiction over any such action, the sole and exclusive forum for such action shall be another state or federal court located within the State of Delaware, in each case unless such court has dismissed a prior action by the same plaintiff asserting the same claims due to lack of personal jurisdiction over an indispensable party named as a defendant therein.

 

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THE MERGER AGREEMENT

Explanatory Note Regarding the Merger Agreement

The following summary describes the material provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. We encourage you to read the Merger Agreement carefully and in its entirety because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement. Capitalized terms used in this section but not defined in this proxy statement have the meaning ascribed to them in the Merger Agreement.

The representations, warranties, covenants and agreements described below and included in the Merger Agreement (1) were made only for purposes of the Merger Agreement and as of specific dates, (2) were made solely for the benefit of the parties to the Merger Agreement, and (3) may be subject to important qualifications, limitations and supplemental information agreed to by Lattice, Parent and Merger Sub in connection with negotiating the terms of the Merger Agreement. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to reports and documents filed with the SEC and in some cases were qualified by confidential matters disclosed to Parent and Merger Sub by Lattice in connection with the Merger Agreement. In addition, the representations and warranties may have been included in the Merger Agreement for the purpose of allocating contractual risk between Lattice, Parent and Merger Sub rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. Stockholders are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of Lattice, Parent or Merger Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of Lattice, Parent and Merger Sub, because the parties may take certain actions that are either expressly permitted in the confidential disclosure letter to the Merger Agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described below, and included as Annex A, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding Lattice, Parent, Merger Sub or their respective businesses. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding Lattice and our business.

Effects of the Merger; Directors and Officers; Certificate of Incorporation; Bylaws

The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time, (1) Merger Sub will be merged with and into Lattice, with Lattice becoming a wholly owned subsidiary of Parent, and (2) the separate corporate existence of Merger Sub will thereupon cease. From and after the Effective Time, the Surviving Corporation will possess all property, rights, privileges, immunities, powers and franchises of Lattice and Merger Sub, and all of the debts, liabilities and duties of Lattice and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation.

 

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From and after the Effective Time, the board of directors of the Surviving Corporation will consist of the directors of Merger Sub immediately prior to the Effective Time, to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their successors are duly elected or appointed and qualified. From and after the Effective Time, the officers of the Surviving Corporation at the Effective Time (other than as determined by Parent at any time prior to the Effective Time) will be the officers of Merger Sub immediately prior to the Effective Time, until their successors are duly appointed and qualified. At the Effective Time, the certificate of incorporation of Lattice as the Surviving Corporation will be amended and restated to read as set forth in Exhibit A to the Merger Agreement and such amended and restated certificate of incorporation will become the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with the applicable provisions of the DGCL and such certificate of incorporation, and the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, will become the bylaws of the Surviving Corporation, until thereafter amended.

Closing and Effective Time

The closing of the Merger will take place at 12:00 p.m., Pacific time, at the offices of Jones Day, 1755 Embarcadero Road, Palo Alto, California, as soon as practicable, but no later than five business days following the satisfaction or waiver of all conditions to closing of the Merger (described below under the caption “The Merger Agreement — Conditions to the Closing of the Merger”) (other than those conditions to be satisfied at the closing of the Merger, but subject to satisfaction or waiver, if permitted, of those conditions) or such other place, time, and date as will be agreed to in writing by Parent and Lattice.

The Merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware or at such later date and time as the Company and Parent may agree upon and as is set forth in that certificate of merger.

Merger Consideration

Common Stock

At the Effective Time, each outstanding share of common stock held by Lattice as treasury stock or owned by Parent, Merger Sub or a subsidiary of Lattice, will be canceled for no consideration. Each other outstanding share of common stock (other than shares owned by stockholders who are entitled to and who properly exercise appraisal rights under the DGCL) will be converted into the right to receive the Per Share Merger Consideration (which is $8.30 per share, without interest and less any applicable withholding taxes). All shares converted into the right to receive the Per Share Merger Consideration will automatically be canceled at the Effective Time.

Treatment of Equity-Based Awards

Treatment of Stock Options

At the Effective Time, each Vested Company Option will be canceled and converted into the right to receive an amount in cash (without interest and subject to deduction for any required withholding tax) equal to the product obtained by multiplying (1) the number of shares subject to such Vested Company Option by (2) the amount by which $8.30 exceeds the per share exercise price of such Vested Company Option, which cash amount will be paid to the holders of such Vested Company Options as soon as administratively practicable, but not later than ten business days, following the Effective Time.

At the Effective Time, each Unvested Company Option will be canceled and converted into the right to receive an amount in cash (without interest and subject to deduction for any required withholding tax)

 

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equal to the product obtained by multiplying (1) the number of shares subject to such Unvested Company Option by (2) the amount by which $8.30 exceeds the per share exercise price of such Unvested Company Option, which cash amount will be payable subject to and in accordance with the vesting schedule applicable to such Unvested Company Option as in effect immediately prior to the Effective Time, subject to the Unvested Company Option holder’s continued service on each applicable vesting date. As such, if the holder of an Unvested Company Option experiences a termination of employment with Parent, the Surviving Corporation or a subsidiary of Parent, as applicable, after the Effective Time but prior to the date on which that Unvested Company Option becomes fully vested, the holder will forfeit his or her right to receive any unpaid cash amount in respect of that Unvested Company Option to the extent that the Unvested Company Option is forfeited upon such termination pursuant to the terms of the Unvested Company Option, unless such he or she is entitled to acceleration pursuant to terms of an agreement with Lattice.

All Company Stock Options which are not In-the-Money Company Options and any other Company Stock Options that are not granted under any Company Stock Plan shall be canceled as of immediately prior to the Effective Time without the payment of any consideration.

Treatment of Restricted Stock Units

At the Effective Time, each Unvested RSU will be canceled and converted into the right to receive an amount in cash (without interest and subject to deduction for any required withholding tax) equal to the product obtained by multiplying (1) $8.30 by (2) the number of shares that remain subject to such Unvested RSU, which cash amount will vest and become payable subject to and in accordance with the vesting and delivery schedule applicable to such Unvested RSU as in effect immediately prior to the Effective Time subject to the Unvested RSU holder’s continued service on each applicable vesting date. As such, if the holder of an Unvested RSU experiences a termination of employment with Parent, the Surviving Corporation or a subsidiary of Parent, as applicable, after the Effective Time but prior to the date on which that Unvested RSU becomes fully vested, the holder will forfeit his or her right to receive any unpaid cash amount in respect of that Unvested RSU to the extent that the Unvested RSU is forfeited upon such termination pursuant to the terms of the Unvested RSU, unless such he or she is entitled to acceleration pursuant to terms of an agreement with Lattice.

At the Effective Time, each Vested RSU will be canceled and converted into the right to receive an amount in cash (without interest and subject to deduction for any required withholding tax) equal to the product obtained by multiplying (1) $8.30 by (2) the number of shares that remain subject to such Vested RSU, which cash amount will become payable subject to and in accordance with the delivery schedule applicable to such Vested RSU as in effect immediately prior to the Effective Time.

Treatment of Employee Stock Purchase Plan

With respect to the Company ESPP, no new offering period will commence, no Lattice employee or other person will be permitted to begin participating in the Company ESPP, and no current participants will be permitted to increase elective deferrals in respect of the current offering period. The offering period in effect on November 3, 2016 will terminate no later than five days prior to the Effective Time, and amounts credited to the accounts of participants will be used to purchase shares in accordance with the terms of the Company ESPP, and such shares will be canceled and converted into the right to receive the Per Share Merger Consideration.

Exchange and Payment Procedures

Prior to the closing of the Merger, Parent will designate a U.S.-based bank or trust company that is reasonably acceptable to Lattice, which we refer to as the “payment agent,” to make payments of the

 

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Merger consideration to stockholders. At or prior to the Effective Time, Parent will deposit or cause to be deposited with the payment agent cash sufficient, together with amounts in the escrow fund (as defined below under “Deposit and Escrow Agreement”) to be deposited with the payment agent at or prior to the effective time, to pay the aggregate Per Share Merger Consideration to stockholders.

As promptly as practicable following the Effective Time, the payment agent will send to each holder of record of shares of common stock a letter of transmittal and instructions advising stockholders how to surrender stock certificates and book-entry shares in exchange for their portion of the Merger Consideration. Upon receipt of (1) surrendered certificates (or affidavits of loss in lieu thereof) or book-entry shares representing the shares of common stock, and (2) a signed letter of transmittal and such other documents as may be required pursuant to such instructions, the holder of such shares will be entitled to receive their portion of the Merger Consideration in exchange therefor. The amount of any Merger Consideration paid to the stockholders may be reduced by any applicable withholding taxes.

If any cash deposited with the payment agent is not claimed within one year following the Effective Time, such cash will be returned to Parent, upon demand, and any holders of common stock who have not complied with the exchange procedures in the Merger Agreement will thereafter look only to Parent for payment of the Merger Consideration.

The letter of transmittal will include instructions if a stockholder has lost a share certificate or if such certificate has been stolen or destroyed. In the event any certificates have been lost, stolen or destroyed, then before such stockholder will be entitled to receive the Merger Consideration, such stockholder will have to make an affidavit of the loss, theft or destruction, and if required by Parent, deliver a bond in such customary amount as Parent or the payment agent may direct as indemnity against any claim that may be made against it with respect to such certificate.

Representations and Warranties

The Merger Agreement contains representations and warranties of Lattice, Parent and Merger Sub.

Some of the representations and warranties in the Merger Agreement made by Lattice are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes of the Merger Agreement, “Company Material Adverse Effect” means any circumstance, event, change, development, occurrence, state of facts, condition or effect, individually or in the aggregate, and taken together with all other changes, (1) that prevents or materially impairs the ability of Lattice to consummate the Merger or any other transaction contemplated by the Merger Agreement or (2) is or would reasonably be expected to be materially adverse to the business, assets financial condition or results of operations of Lattice and its subsidiaries, taken as a whole, unless they arise out of or result from:

 

•

changes or conditions generally affecting the industries in which Lattice or any of its subsidiaries operates, to the extent that they do not disproportionately affect Lattice and its subsidiaries, taken as a whole;

 

•

changes or conditions generally affecting currencies, currency exchange rates, the economy or financial, credit or securities markets in the United States or any other country or region where Lattice or any of its subsidiaries does business, including as a result of regulatory or political conditions or developments, to the extent that they do not disproportionately affect Lattice and its subsidiaries, taken as a whole;

 

•

the outbreak or escalation of war or acts of terrorism or armed hostilities, or the occurrence of natural or manmade disasters, to the extent that they do not disproportionately affect Lattice and its subsidiaries, taken as a whole;

 

•

changes in law, GAAP, accounting standards, or in the interpretation or enforcement of the foregoing, to the extent that they do not disproportionately affect Lattice and its subsidiaries, taken as a whole;

 

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•

the announcement, execution, performance or pendency of the Merger Agreement or the consummation of the Merger or the other transaction contemplated by the Merger Agreement;

 

•

any failure, in and of itself, by Lattice or any of its subsidiaries to meet any internal or published budgets, projections, forecasts or predictions of financial performance (but not the underlying cause of such failure); and

 

•

any changes in the price or trading volume of Lattice’s common stock (but not the underlying cause of such change).

In the Merger Agreement, Lattice has made customary representations and warranties to Parent and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

•

due organization, valid existence, good standing and authority and qualification to conduct business with respect to Lattice and its subsidiaries;

 

•

Lattice’s corporate power and authority to enter into and perform the Merger Agreement, and the enforceability of the Merger Agreement;

 

•

the necessary vote of stockholders in connection with the Merger Agreement;

 

•

the absence of any conflict, violation or modification of any organizational documents, existing contracts or permits, laws applicable to Lattice or its subsidiaries or the creation of any lien upon Lattice’s assets due to the entry into or performance of the Merger Agreement;

 

•

required consents, approvals and regulatory filings in connection with the Merger Agreement and performance thereof;

 

•

the capital structure of Lattice and its subsidiaries;

 

•

the absence of any contract relating to the voting of, requiring registration of, or granting any preemptive rights, anti-dilutive rights or rights of first refusal or other similar rights with respect to any of Lattice’s securities;

 

•

the accuracy and required filings of Lattice’s and its subsidiaries’ SEC filings and financial statements;

 

•

Lattice’s disclosure controls and procedures;

 

•

Lattice’s internal accounting controls and procedures;

 

•

the absence of specified undisclosed liabilities;

 

•

the conduct of the business of Lattice and its subsidiaries in the ordinary course consistent with past practice, since July 2, 2016, and the absence of a Company Material Adverse Effect, since January 2, 2016;

 

•

the existence and enforceability of specified categories of Lattice’s material contracts, including with governmental authorities, and any notices with respect to violation or breach of or default thereunder or intention to terminate or modify those material contracts;

 

•

real property owned, leased or subleased by Lattice and its subsidiaries;

 

•

personal property of Lattice;

 

•

Lattice’s major customers and suppliers;

 

•

Lattice’s indebtedness;

 

•

trademarks, patents, copyrights and other intellectual property matters;

 

•

tax matters;

 

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•

employee benefit plans;

 

•

labor matters;

 

•

Lattice’s compliance with laws and possession of necessary permits;

 

•

compliance with economic sanctions and anti-bribery and export control laws;

 

•

environmental matters;

 

•

legal proceedings and orders;

 

•

insurance matters;

 

•

the absence of any contracts or agreements between Lattice or any of its subsidiaries and any affiliate, officer, director or major stockholder;

 

•

payment of broker’s fees or commissions in connection with the Merger Agreement;

 

•

the rendering of Morgan Stanley’s fairness opinion to the Board;

 

•

the inapplicability of anti-takeover statutes to the Merger; and

 

•

that Lattice has no stockholders rights plan or comparable agreements.

In the Merger Agreement, Parent and Merger Sub have made customary representations and warranties to Lattice that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

 

•

due organization, good standing and authority and qualification to conduct business with respect to Parent and Merger Sub;

 

•

Parent’s and Merger Sub’s corporate authority to enter into and perform the Merger Agreement, and the enforceability of the Merger Agreement;

 

•

the absence of business of Parent or Merger Sub other than with respect to the transactions contemplated by the Merger Agreement, including the Merger;

 

•

the absence of any conflict, violation or modification of any organizational documents, existing contracts, laws applicable to Parent or Merger Sub or the creation of any lien upon Parent’s or Merger Sub’s assets due to the entry into or performance of the Merger Agreement;

 

•

required consents and regulatory filings in connection with the Merger Agreement;

 

•

Parent’s compliance with laws;

 

•

the absence of litigation;

 

•

the absence of ownership of Lattice capital stock by Parent or Merger Sub;

 

•

matters with respect to Parent’s financing and sufficiency of funds;

 

•

accuracy of information supplied by Parent and Merger Sub for inclusion in this proxy statement;

 

•

payment of broker’s fees or commissions in connection with the Merger Agreement; and

 

•

absence of reliance by Parent and Merger Sub on materials provided by Lattice other than those pursuant to the representations and warranties in the Merger Agreement.

The representations and warranties contained in the Merger Agreement will not survive the consummation of the Merger.

 

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Conduct of Business Pending the Merger

The Merger Agreement provides that, except as expressly contemplated by the Merger Agreement, required by applicable law, or approved by Parent, during the period of time between the date of the signing of the Merger Agreement and the Effective Time, Lattice will, and will cause each of its subsidiaries to:

 

•

carry on its business in the ordinary course consistent with past practice in al material respects;

 

•

comply in all material respects with all applicable laws and the requirements of all specified material contracts; and

 

•

use its reasonable efforts to preserve intact its business organization and advantageous business relationships, including by maintaining its relations and goodwill with all material suppliers, material customers and governmental entities.

In addition, Lattice has also agreed that, except as (1) expressly contemplated by the Merger Agreement, (2) disclosed in the confidential disclosure letter to the Merger Agreement, (3) required by applicable law or (4) approved in advance by Parent in writing, during the period of time between the date of the signing of the Merger Agreement and the Effective Time, Lattice will not, and will cause each of its subsidiaries not to, among other things:

 

•

(1) split, combine or reclassify any shares of its capital stock, (2) declare, set aside or pay any dividend or other distribution, or (3) repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, directly or indirectly, any securities of Lattice or its subsidiaries, except for the acquisition of shares in connection with the surrender of shares by holders of Company Stock Options to pay the exercise price thereof, the withholding of shares to satisfy tax obligations with respect to awards granted under the Company Stock Plans and the acquisition of awards granted pursuant to the Company Stock Plans in connection with the forfeiture of such awards;

 

•

issue, deliver, sell, grant, pledge, or otherwise encumber (whether through the issuance or granting of options, warrants, commitments, rights to acquire or otherwise) any equity interests or voting securities of Lattice or any of its subsidiaries, except for the issuance and sale of shares of Lattice’s common stock upon the exercise of Company Stock Options or settlement of Company RSUs pursuant to the Company Stock Plans, in each case, outstanding on the date of the Merger Agreement or upon the exercise of rights to acquire shares under the Company ESPP that are outstanding on the date of the Merger Agreement; provided, that Lattice may grant Company Stock Options and Company RSUs under the Company Stock Plans up to an aggregate share limit each quarter to newly hired or promoted employees in the ordinary course of business consistent with past practice and subject to certain vesting limitations;

 

•

amend the organizational documents of Lattice or any of its subsidiaries;

 

•

merge (other than any merger or consolidation of wholly owned Lattice subsidiaries), liquidate, dissolve or reorganize, or adopt a plan to do so, or file or consent to the filing of a petition in bankruptcy;

 

•

except to the extent required by any Lattice benefit plan in effect on the date of the Merger Agreement, (1) subject to certain exceptions, increase the compensation or benefits of any current or former employees, officers, directors or individual consultant of Lattice or any of its subsidiaries, (2) subject to certain exceptions, pay any severance or retention benefits to any current or former employees, directors or individual consultants of Lattice, (3) accelerate the vesting of, or the lapsing of forfeiture restrictions or conditions with respect to, any equity or

 

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equity-based awards, (4) establish or cause the funding of any “rabbi trust” or similar arrangement, (5) subject to certain exceptions, establish, adopt, amend or terminate any arrangement that would be a Lattice benefit plan if in effect on the date of the Merger Agreement, or (6) subject to certain exceptions, hire or promote any person for employment at a level of director or higher or terminate (other than for cause) the employment of any employee at a level of director or higher, or hire, promote or terminate the employment of any other employee other than in the ordinary course of business;

 

•

change accounting principles or practices;

 

•

acquire or agree to acquire (including by consolidation or merger) any equity interest in, or business or division of, any other entity, or properties or assets other than purchases of supplies and inventory in the ordinary course of business;

 

•

enter into any new line of business;

 

•

encumber or dispose of any material properties or material assets of Lattice or its subsidiaries;

 

•

incur, assume or modify any indebtedness other than ordinary course indebtedness not to exceed $1,000,0000 in the aggregate, prepay any equipment leases or sales installment contracts other than equipment leases entered into consistent with past practice, or make any loans, advances of investments in any third party;

 

•

incur or commit to incur any capital expenditure not included in or contemplated by Lattice’s capital expenditures budget that individually is in excess of $2,000,000;

 

•

subject to certain exceptions, other than in the ordinary course of business, terminate, amend or modify any material contract;

 

•

waive, release or assign and material rights, claims or benefits under any material contract or material lease;

 

•

enter into any collective bargaining or similar written material labor union agreement;

 

•

enter into any contract relating to the acquisition or sale of real property;

 

•

commence any litigation or settle any litigation involving individually more than $500,000 or in the aggregate more than $1,500,000;

 

•

abandon, allow to lapse, encumber, convey title (in whole or in party), exclusively license or grant any right or other licenses to material Lattice intellectual property, other than granting non-exclusive licenses to customers, suppliers or service providers made in the ordinary course of business consistent with past practice;

 

•

revoke or modify any material tax election, settle any material tax actions, request any tax ruling or tax holiday or file any material tax return other than on a basis consistent with past practice;

 

•

fail to renew, make payments as due and otherwise comply in all material respects with any material insurance policies;

 

•

take any action that is not permitted under the Merger Agreement or omit to take any action required by the Merger Agreement that would (1) result in any of the closing conditions not being satisfied, or (2) materially impair the ability of Parent or Lattice to consummate the transactions contemplated by the Merger Agreement, including the Merger; or

 

•

authorize or commit to do any of the foregoing.

 

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Alternative Acquisition Proposals

From the date of the Merger Agreement until the earlier to occur of the termination of the Merger Agreement and the Effective Time, Lattice has agreed not to, and to cause its affiliates and its and their respective representatives not to:

 

•

solicit, initiate or knowingly encourage, induce or facilitate any Takeover Proposal (as defined below) or any inquiry, proposal or request for information that may reasonably be expected to lead to a Takeover Proposal;

 

•

participate in discussions or negotiations with, furnish to any information to, or cooperate in any way with, any person (other than Parent, Merger Sub or any designees of Parent or Merger Sub) with respect to any Takeover Proposal or any inquiry, proposal or request for information that may reasonably be expected to lead to a Takeover Proposal;

 

•

agree to, approve, endorse, recommend or consummate any Takeover Proposal or enter into any letter of intent, memorandum of understanding, agreement in principle or similar document contemplating any Takeover Proposal;

 

•

take any action to make the provisions of any state takeover statute or similar law, or any anti-takeover provision in the Lattice charter, inapplicable to any transactions contemplated by any Takeover Proposal;

 

•

grant any waiver, amendment or release under any standstill or similar agreement;

 

•

enter into any contract that would restrict Lattice’s ability to comply with the foregoing obligations under; or

 

•

resolve or agree to do any of the foregoing.

Notwithstanding the restrictions described above, prior to the adoption of the Merger Agreement by Lattice’s stockholders, if Lattice receives from any person a bona fide, written and unsolicited Takeover Proposal not arising from a material breach of the Merger Agreement, then Lattice may provide confidential information to, and engage or participate in discussions or negotiations with, such person regarding a Takeover Proposal if the Board determines in good faith after consultation with its financial advisor and its outside legal counsel that such proposal is a Superior Proposal or is reasonably likely to lead to a Superior Proposal and the failure to take such action would be inconsistent with the Board’s fiduciary duties under applicable law; provided that (1) Lattice enters into, an acceptable confidentiality agreement with such third party and promptly notifies Parent of its intention to do so, (2) if Lattice furnishes non-public information to the third party which Parent has not yet received, it will furnish such information to Parent first or substantially contemporaneously, (3) Lattice promptly (and in any event with 48 hours) informs Parent of its intention to begin providing information or to engage in discussions or negotiations concerning a Takeover Proposal and provides Parent with the identity of such person and provides with a copy of such Takeover Proposal (or, if it is not in written form, a written description of Lattice’s understanding of the material terms and conditions of such Takeover Proposal), and (4) Lattice keeps Parent reasonably informed of the status of any Takeover Proposal.

For purposes of this proxy statement and the Merger Agreement:

“Takeover Proposal” means any inquiry, proposal, offer or indication of interest to engage in, or that otherwise could reasonably be expected to lead to, any transaction or series of related transactions resulting in:

(1) any direct or indirect purchase or other acquisition by any person or group of shares of Lattice capital stock representing more than 15% of the shares of any class of Lattice capital stock;

 

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(2) any direct or indirect purchase or other acquisition by any person or group of any business or assets that generate more than 15% of the consolidated total assets, revenues or net income of Lattice;

(3) any tender or exchange offer that, if consummated, would result in any entity beneficially owning, directly or indirectly, 15% or more of any class of Lattice capital stock;

(4) any merger, consolidation, exclusive license, business combination, or other transaction involving Lattice pursuant to which any person or its direct or indirect equity holders would beneficially own, directly or indirectly, 15% or more of any class of Lattice capital stock or the surviving entity resulting from any such transaction or series of related transactions; or

(5) a recapitalization, liquidation, dissolution or any other similar transaction or series of related transactions involving Lattice or any of its subsidiaries, other than a wholly owned Lattice subsidiary.

“Superior Proposal” means any written bona fide Takeover Proposal made by a natural person or other entity that, if consummated, would result in such entity owning, directly or indirectly, all of Lattice’s capital stock or all or substantially all of Lattice’s consolidated assets, on terms that the Board shall have determined in good faith (after consultation with its financial advisor and outside legal counsel), taking into account all legal, financial, regulatory and other aspects of such proposal that the Board deems is appropriate in the exercise of its fiduciary duty, that is reasonably capable of being consummated and is on terms that are more favorable to Lattice’s stockholders from a financial point of view than the transactions contemplated by the Merger Agreement, after taking into account any changes to the terms of the Merger Agreement offered by Parent in response to such acquisition proposal.

The Board of Directors’ Recommendation; Adverse Recommendation Change

As described above, and subject to the provisions described below, the Board has made the recommendation that the holders of shares of common stock vote “FOR” the proposal to adopt the Merger Agreement. The Merger Agreement provides that the Board will not change its recommendation that Lattice stockholders adopt the Merger Agreement except as described below.

Prior to the adoption of the Merger Agreement by stockholders, the Board may not (with any action described in the following being referred to as an “adverse recommendation change”):

 

•

withdraw, modify or qualify in any manner adverse to Parent or Merger Sub, its recommendation that Lattice stockholders adopt the Merger Agreement; or

 

•

approve, recommend or declare advisable, any Takeover Proposal.

The Board may only effect an adverse board recommendation for an intervening event if the Board determines in good faith (after consultation with its outside legal counsel) that the failure to effect an adverse recommendation change in response to such intervening event would be inconsistent with its fiduciary duties, and:

 

•

Lattice has provided prior written notice to Parent at least four business days in advance of making such adverse recommendation change, which notice will include the facts underlying the Board determination that an intervening event had occurred and the rationale and basis for making an adverse recommendation change as a result of such intervening event;

 

•

prior to effecting such adverse recommendation change, Lattice has negotiated with Parent in good faith to make such adjustments to the terms and conditions of the Merger Agreement so as to obviate the basis for such adverse recommendation change; and

 

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•

following any such negotiations, the Board determines, after taking into account any changes to the Merger Agreement agreed to or proposed in writing by Parent, that the failure to effect an adverse recommendation change in response to such intervening event would be inconsistent with its fiduciary duties.

In addition, the Board may only effect an adverse recommendation change in response to a Takeover Proposal received after the date of the Merger Agreement that the Board has concluded in good faith (after consultation with its financial advisor and outside legal counsel) is a Superior Proposal if:

 

•

a material breach by Lattice of its non-solicitation obligations under the Merger Agreement has not led to the making of such Takeover Proposal;

 

•

the Board (or a committee thereof) has determined in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to enter into a definitive agreement relating to such Superior Proposal would be inconsistent with its fiduciary duties;

 

•

Lattice has provided prior written notice to Parent at least four business days in advance of making such adverse recommendation change, which notice will include the material terms of such Superior Proposal (including the identity of the entity making such Superior Proposal) and a copy of all the relevant proposed transaction documents related thereto, and has provided new written notice to Parent with respect to any amendment to the material terms of such Superior Proposal at least two business days of making such adverse recommendation change;

 

•

prior to affecting such adverse recommendation change, Lattice has negotiated with Parent in good faith during such four day (in the case of the original notice) or two day (in the case of a notice of an amendment) notice period, to make such adjustments to the terms and conditions of the Merger Agreement so that the Takeover Proposal ceases to constitute a Superior Proposal; and

 

•

following any such negotiations, the Board determines, after taking into account any changes to the Merger Agreement agreed to or proposed in writing by Parent, that the Takeover Proposal continues to constitute a Superior Proposal and that the failure to approve or recommend such a Superior Proposal would be inconsistent with its fiduciary duties.

For purposes of this proxy statement and the Merger Agreement, an “intervening event” means a circumstance, event, change, development, occurrence, state of facts, condition or effect on the business, results of operations or financial condition of Lattice and its subsidiaries occurring or arising after the date of the Merger Agreement (other than and not related to a Takeover Proposal) that was not known (or, if known, the material consequences of which were not known or reasonably foreseeable) to the Board (assuming reasonable consultation with the executive officers of Lattice) on or prior to the date of the Merger Agreement and that is material to Lattice and its subsidiaries, taken as a whole; provided that any fluctuation in the market price or trading volume of Lattice’s common stock will not constitute an intervening event, though the underlying cause of such fluctuation may be taken into account.

Employee Benefits

Parent has agreed that for the period commencing at the Effective Time and ending on the first anniversary of the Effective Time, Parent will, or will cause the Surviving Corporation or applicable subsidiary of Parent to provide each employee of Lattice or its subsidiaries who continues to be employed by Parent, the Surviving Corporation or any subsidiary of Parent as of the Effective Time, each of whom we refer to in this proxy statement as a “Continuing Employee” with:

 

•

at least the same level of base salary or hourly wage rate, as the case may be, that was provided to such Continuing Employee immediately prior to the Effective Time;

 

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•

target annual cash performance bonus opportunities (but not equity or cash-settled equity-based incentive opportunities) that are no less than the target annual cash performance bonus opportunities in effect with respect to such Continuing Employee immediately prior to the Effective Time;

 

•

severance pay and benefits to any Continuing Employee who incurs a qualifying termination of employment at any time during the one-year period following the Effective Time at levels that are no less favorable than the levels of such severance pay and benefits as in effect under the applicable Lattice benefit plans immediately prior to the Effective Time; and

 

•

other employee benefits that are substantially comparable in the aggregate to those provided to such Continuing Employee immediately prior to the Effective Time.

Effective as of the Effective Time, Parent will, or will cause the Surviving Corporation or applicable subsidiary of Parent to, provide that periods of service with Lattice and its subsidiaries and their respective predecessor entities will be credited for purposes of eligibility, vesting and level of benefits under any employee benefit plans (other than any defined benefit pension, retiree welfare benefit or equity compensation plans) in which any Continuing Employee is eligible to participate following the Effective Time, which we refer to in this proxy statement as the “Post-Closing Plans”, in each case, to the same extent such service was recognized under a comparable Lattice benefit plan prior to the Effective Time (except to the extent such service credit would result in a duplication of benefits with respect to the same period of service).

With respect to any Post-Closing Plan that is a health or welfare benefit plan which replaces coverage under a comparable Lattice benefit plan in which such Continuing Employee participated immediately prior to the Effective Time, Parent will, and will cause its affiliates to (1) waive all limitations as to preexisting condition exclusions and all waiting periods with respect to participation and coverage requirements applicable to each Continuing Employee to the extent waived or satisfied under the comparable Lattice benefit plan in which such Continuing Employee participated immediately prior to the Effective Time, (2) provide that Continuing Employees will be immediately eligible to participate in any such Post-Closing Plan, without any waiting period, to the extent such Continuing Employee was eligible to participate in the comparable Lattice benefit plan immediately prior to the Effective Time, and (3) credit each Continuing Employee for any applicable amounts paid or eligible expenses incurred (whether in the nature of co-payments or coinsurance amounts, amounts applied toward deductibles or other out-of-pocket expenses) by such Continuing Employee (and his or her covered dependents) under the terms of the Lattice benefit plan toward satisfying any applicable deductible, copayment or out-of-pocket requirements under the applicable Post-Closing Plan that replaces such Lattice benefit plan for the plan year in which the Effective Time occurs.

With respect to any accrued but unused vacation and paid time off to which any Continuing Employee is entitled pursuant to the vacation and paid time off policies applicable to such Continuing Employee immediately prior to the Effective Time, Parent shall, or shall cause the Surviving Corporation or any subsidiary of Parent to, assume the liability for such accrued vacation and paid time off and allow such Continuing Employee to use such accrued vacation and paid time off in accordance with the practice and policies of Parent, the Surviving Corporation or any subsidiary of Parent.

The Merger Agreement does not confer upon any employee or other service provider of Lattice or its subsidiaries any right to continue in the employ or service of Parent, the Surviving Corporation or any subsidiary of Parent, or limit the rights of Parent or its affiliates to terminate the employment or service of any employee or other service provider of Lattice or its subsidiaries in accordance with applicable law.

 

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Efforts to Close the Merger

Subject to the exceptions set forth in the following paragraph, Lattice, Parent and Merger Sub have each agreed to use their reasonable best efforts to take, or cause to be taken, all actions necessary, proper or advisable to consummate the transactions contemplated by the Merger Agreement in the most expeditious manner practicable, including efforts needed to obtain all required consents from third parties, and to obtain all necessary regulatory and governmental approvals, including obtaining HSR antitrust clearance and the CFIUS Approval.

Notwithstanding the foregoing, in connection with obtaining HSR antitrust clearance or the CFIUS Approval, Lattice, Parent and Merger Sub shall not be required to take actions or submit to restrictions other than certain specified actions and restrictions, to the extent that such actions, restrictions or conditions, considered collectively, would reasonably be expected to (1) cause Parent’s control of the Surviving Corporation and its subsidiaries to be passive or otherwise restrict Parent’s ability to control and operate the Surviving Corporation and its subsidiaries by a requirement to enter into a special security arrangement, appoint a proxy or elect one or more independent directors to the governing body of Parent or the Surviving Corporation or any of their respective subsidiaries, (2) require Parent to relinquish ownership rights with respect to certain business units, product lines or technologies with a total revenue of over $10 million in the prior 12 month period or that is expected to have a total revenue of over $10 million in the 24 months after the date of the Merger Agreement, or (3) adversely affect in a material manner the operation or management of the Surviving Corporation’s and its subsidiaries’ businesses, as conducted as of the date of the Merger Agreement.

Deposit and Escrow Agreement

Pursuant to the Merger Agreement, on November 3, 2016, Lattice and Parent entered into the escrow agreement with Citibank, National Association providing for the establishment and administration of the escrow fund, as collateral and security for the payment of the reverse termination fee payable by Parent in accordance with the Merger Agreement and the escrow agreement. On November 3, 2016, Parent deposited in escrow $58,750,000.

Indemnification and Insurance

The Merger Agreement provides that the Surviving Corporation and its subsidiaries will (and Parent will cause the Surviving Corporation and its subsidiaries to) honor all rights to indemnification, advancement of expenses and exculpation of each former and present director or officer of Lattice or any of its subsidiaries, as provided in Lattice’s or its subsidiaries’ organizational documents or in any contract with Lattice or its subsidiaries, as in effect on the date of the Merger Agreement, for any acts or omissions occurring prior to the Effective Time.

In addition, the Merger Agreement provides that, during the six year period commencing at the Effective Time, Parent will cause to be maintained in effect the coverage provided by the directors’ and officers’ liability insurance policies in effect as of the Effective Time by Lattice and its subsidiaries on terms and conditions not less favorable to the insured parties than the directors’ and officers’ liability insurance coverage currently maintained by Lattice with respect to claims arising from facts, events, acts or omissions that occurred on or before the Effective Time, except that in no event will Parent be required to pay an annual premium for such insurance in excess of 300% of the aggregate annual premium payable by Lattice for such insurance policy in effect on July 1, 2016, and if the premium for that insurance coverage would exceed that amount Parent shall be obligated to cause the Surviving Corporation to obtain the greatest coverage available for a cost equal to that amount.

For more information, please refer to the section of this proxy statement captioned “The Merger — Interests of Lattice’s Directors and Executive Officers in the Merger.”

 

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Other Covenants

Stockholders Meeting

Lattice has agreed to take all necessary action (in accordance with applicable law and Lattice’s organizational documents) to establish a record date for, call, give notice of, convene and hold a Special Meeting of the stockholders as promptly as reasonably practical after the date this proxy statement is cleared by the SEC for the purpose of voting upon the adoption of the Merger Agreement.

Stockholder Litigation

Lattice will as promptly as reasonably practical (and in any event within two business days of being served) notify Parent in writing of and give Parent the opportunity to participate in the defense or settlement of any stockholder litigation against Lattice or its representatives relating to the Merger Agreement, and no such settlement will be agreed to without the prior written consent of Parent, which consent shall not be unreasonably withheld, conditioned or delayed.

Conditions to the Closing of the Merger

The obligations of Parent and Merger Sub, on the one hand, and Lattice, on the other hand, to consummate the Merger are subject to the satisfaction or waiver of each of the following conditions:

 

•

the adoption of the Merger Agreement by the requisite affirmative vote of stockholders;

 

•

the (1) expiration or termination of the applicable waiting period under the HSR Act, (2) the expiration or termination of the applicable waiting period under the Austrian Competition Act (Wettbewerbsgesetz) and/or the Austrian Cartel Act (Kartellgesetz), and (3) the CFIUS Approval is obtained;

 

•

the absence of any applicable law or order, whether preliminary, temporary or permanent, that prevents, makes illegal or prohibits the consummation of the Merger or other transactions contemplated by the Merger Agreement; and

 

•

the absence of any legal action brought by a governmental entity challenging or seeking to restrain, prohibit, rescind or unwind the consummation of the Merger or the other transactions contemplated by the Merger Agreement or the ability of Parent to (1) acquire, hold or exercise full right of ownership of Lattice or its subsidiaries or (2) control the business or operations of Lattice or its subsidiaries (however, Parent has agreed to accept certain conditions that may be imposed by CFIUS as a prerequisite for its clearance of the Merger, as described in the section captioned “The Merger — Regulatory Approvals Required for the Merger — CFIUS”).

In addition, the obligations of Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver of each of the following additional conditions:

 

•

the representations and warranties of Lattice relating to Lattice’s capitalization and outstanding RSUs and stock options being true and correct in all respects, except where the failure to be true and correct would not reasonably be expected to result in additional liability in excess of $500,000 in the aggregate;

 

•

the representations and warranties relating to the absence of a Company Material Adverse Effect since January 2, 2016 being true and correct in all respects;

 

•

the representations and warranties of Lattice relating to (1) organization, good standing and corporate power and authority, (2) due authorization and valid issuance of Lattice capital stock and other capitalization matters, (3) Lattice’s power and authority to execute the Merger Agreement and consummate the Merger and its Board’s recommendation that Lattice stockholders adopt the Merger Agreement, (4) Lattice’s draft financial statements for the

 

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quarter ended October 1, 2016, (5) brokers’ fees and expenses, (6) the fairness opinion from Morgan Stanley, and (7) the absence of any Lattice stockholder rights plans, being true and correct in all material respects at and as of the date of the Merger Agreement and at and as of the Closing Date as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such earlier date);

 

•

the other representations and warranties of Lattice set forth elsewhere in the Merger Agreement being true and correct in all respects at and as of the date of the Merger Agreement and at and as of the Closing Date as if made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such earlier date), disregarding all materiality qualifications contained in such representations and warranties, except where the failure of such representations and warranties to be true and correct, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect;

 

•

Lattice having performed in all material respects all obligations required to be performed by it under the Merger Agreement at or prior to the Closing Date;

 

•

since the date of the Merger Agreement, there not having occurred or arisen any Company Material Adverse Effect; and

 

•

the receipt by Parent of a certificate signed by the chief executive officer or chief financial officer of Lattice certifying as to the matters described in the preceding six paragraphs.

In addition, the obligation of Lattice to consummate the Merger is subject to the satisfaction or waiver of each of the following additional conditions:

 

•

the representations and warranties of Parent and Merger Sub set forth in the Merger Agreement being true and correct in all respects at and as of the date of the Merger Agreement and as of the Closing Date as if made at and as of such time, disregarding all materiality qualifications contained in such representations and warranties, except where the failure of such representations and warranties to be true and correct, individually or in the aggregate, is not and would not reasonably be expected to be a circumstance, event, change, development, occurrence, state of facts, condition or effect that prevents or materially impairs the ability of Parent to consummate the Merger or any of the other transactions contemplated by the Merger Agreement;

 

•

Parent and Merger Sub having performed in all material respects all obligations required to be performed by them under the Merger Agreement prior to the Closing Date; and

 

•

the receipt by Lattice of a certificate signed by the chief executive officer or chief financial officer of Parent certifying as to the matters described in the preceding two paragraphs.

Termination of the Merger Agreement

The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after the adoption of the Merger Agreement by stockholders, in the following ways:

 

•

by mutual written agreement of Lattice and Parent;

 

•

by either Lattice or Parent if:

 

•

the Effective Time shall not have occurred on or before August 1, 2017, which we refer to in this proxy statement as the “outside date”, provided that in case the last to be satisfied or waived (where permissible) of the closing conditions (other than those conditions that are only capable of being satisfied at the closing) occurs within five business days of August 1, 2017, then the outside date will be extended to no later than 12:00 p.m., Pacific

 

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time, on August 8, 2017 to the extent required to allow the closing to occur as described under the caption “The Merger Agreement — Closing and Effective Time”, and further provided that the right to terminate the Merger Agreement in this manner is not available to any party if the failure of the Merger to occur on or before the outside date is a result of a breach of the Merger Agreement by such party;

 

•

any governmental entity having competent jurisdiction, other than a governmental entity in China, shall have (1) enacted, issued, promulgated or enforced any law that makes consummation of the Merger illegal or otherwise prohibited or (2) enacted, issued, promulgated, enforced or entered any final and nonappealable order which has the effect of making the consummation of the Merger illegal or otherwise preventing or prohibiting consummation of the Merger; or

 

•

Lattice’s stockholders fail to adopt the Merger Agreement at the Special Meeting or any adjournment or postponement thereof;

 

•

by Lattice if:

 

•

Parent or Merger Sub has breached or failed to perform any of its respective representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain corresponding conditions set forth in the Merger Agreement are not satisfied, and such breach is not cured or reasonably capable to be cured by the outside date, provided that Lattice may not terminate the Merger Agreement in this manner if it has breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain corresponding conditions set forth in the Merger Agreement are not satisfied;

 

•

prior to the adoption of the Merger Agreement by stockholders and so long as Lattice did not breach or fail to perform in any material respect any of its obligations related to Takeover Proposals or Superior Proposals, in order to enter into a definitive agreement with respect to a Superior Proposal in accordance with the terms of the Merger Agreement, subject to Lattice paying to Parent a termination fee of $34,180,000 substantially concurrently with the termination of the Merger Agreement; or

 

•

(1) the Merger was not completed when it was required to have been under the terms of the Merger Agreement even though all of the mutual conditions to closing have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing, and other than conditions that have not been satisfied due to an action by a governmental entity in China) and all of the conditions to Parent and Merger Sub’s obligations to consummate the Merger have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing), (2) Lattice has provided Parent with an irrevocable written notice to this effect and stands ready, willing and able to consummate the Merger, and (3) Parent and Merger Sub fail to consummate the Merger within five business days of such written notice; and

 

•

by Parent if:

 

•

Lattice has breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain corresponding conditions set forth in the Merger Agreement are not satisfied, and such breach is not cured or reasonably capable to be cured by the outside date, provided that Parent may not terminate the Merger Agreement in this manner if it has breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain corresponding conditions set forth in the Merger Agreement are not satisfied; or

 

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prior to the adoption of the Merger Agreement by the stockholders: (1) the Board shall have effected an adverse recommendation change, (2) Lattice shall have failed to include the Board’s recommendation that Lattice stockholders adopt the Merger Agreement in this proxy statement, (3) a tender or exchange offer relating to Lattice’s common stock shall have commenced and Lattice shall not have publicly recommended against such tender or exchange offer within ten business days, (4) the Board fails to publicly reconfirm its recommendation that Lattice stockholders adopt the Merger Agreement within the ten business day period following the date on which Lattice receives written request from Parent to do so following public announcement or disclosure of a Takeover Proposal, or (5) there is a willful breach of its non-solicitation obligations by Lattice or its representatives.

In the event that the Merger Agreement is terminated pursuant to the termination rights above, the Merger Agreement will be of no further force or effect without liability of any party to the other parties, as applicable, except certain sections of the Merger Agreement will survive the termination of the Merger Agreement in accordance with their respective terms, including terms relating to the escrow arrangement. Subject to the limits specified in the Merger Agreement, termination of the Merger Agreement shall not relieve any party from any liability for fraud or willful breach, except that in no event will Parent, Merger Sub, Canyon Bridge, CVC or any of their respective affiliates and representatives have any liability for, or be required to pay, damages relating to or arising out of the Merger Agreement, the Equity Commitment Letter, any financing related to the Merger or any of the other transactions contemplated by the Merger Agreement (including for fraud or willful breach, including with respect to obtaining CFIUS Approval or otherwise), for an aggregate amount in excess of any amount then held in the escrow account established by Parent and Lattice at signing (which escrow account was funded at signing by Parent with an amount in cash equal to the $58,750,000 reverse termination fee). In addition, in no event is Lattice entitled to payment of both the reverse termination fee of $58,750,000 and specific performance. In addition, no termination of the Merger Agreement will affect the rights or obligations of any party pursuant to the confidentiality agreement between CBC Partners and Lattice, which rights, obligations and agreements will survive the termination of the Merger Agreement in accordance with their respective terms.

Termination Fees

Termination Fee Payable by Lattice

Parent will be entitled to receive a termination fee of $34,180,000 from Lattice if the Merger Agreement is terminated:

 

•

by Parent in the event that (1) the Board shall have effected an adverse recommendation change, (2) Lattice shall have failed to include the Board’s recommendation that Lattice stockholders adopt the Merger Agreement in this proxy statement, (3) a tender or exchange offer relating to Lattice’s common stock shall have commenced and Lattice shall not have publicly recommended against such tender or exchange offer within ten business days, (4) the Board fails to publicly reconfirm the board recommendation within the ten business day period following the date on which Lattice receives written request from Parent to do so following public announcement or disclosure of a Takeover Proposal, or (5) there is a willful breach of its non-solicitation obligations by Lattice or its representatives;

 

•

by Lattice, in order to enter into a definitive agreement with respect to a Superior Proposal in accordance with the terms of the Merger Agreement; or

 

•

by Parent or Lattice in the event that (1) (a) the Merger has not been consummated by the outside date, (b) the stockholders failed to adopt the Merger Agreement, or (c) Lattice breaches its covenants such that the applicable closing condition regarding performance of covenants would not be satisfied, (2) prior to any such termination of the Merger Agreement

 

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or the date of the Special Meeting of stockholders (in case of a termination because of failure to obtain stockholder approval) a Takeover Proposal was made directly to Lattice’s stockholders or was otherwise publicly disclosed or (other than in case of termination due to failure to obtain stockholder approval) was otherwise communicated to the Board, and (3) Lattice, within 12 months of any such termination, consummates any Takeover Proposal or enters into a definitive agreement to consummate any Takeover Proposal; provided that for the purposes of entitlement to receive the termination fee from Lattice, the references in the term “Takeover Proposal” to “15%” will instead be deemed to be references to “50%.”

Reverse Termination Fee Payable by Parent

Lattice will be entitled to receive a reverse termination fee of $58,750,000 from Parent if the Merger Agreement is terminated:

 

•

by Lattice if Parent or Merger Sub has breached or failed to perform any of its respective representations, warranties, covenants or other agreements set forth in the Merger Agreement, other than its obligations to seek the CFIUS Approval, such that certain corresponding conditions set forth in the Merger Agreement are not satisfied, and such breach is not cured or reasonably capable to be cured by the outside date, provided that Lattice may not terminate the Merger Agreement in this manner if it has breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain corresponding conditions set forth in the Merger Agreement are not satisfied; or

 

•

by Lattice if (1) the Merger was not completed when it was required to have been under the terms of the Merger Agreement even thought all of the mutual conditions to closing have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing, and other than conditions that have not been satisfied due to an action by a governmental entity in China) and all of the conditions to Parent and Merger Sub’s obligations to consummate the Merger have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing), (2) Lattice has provided Parent with an irrevocable written notice to this effect and stands ready, willing and able to consummate the Merger, and (3) Parent and Merger Sub fail to consummate the Merger within five business days of such written notice.

If the Merger Agreement is terminated and Lattice initiates an action against Parent or Merger Sub for breach of its obligations to seek the CFIUS Approval within 30 days of such termination, the reverse termination fee will not be payable to Lattice, but the funds placed into the escrow account by Parent as collateral and security for payment of the reverse termination fee will be frozen in escrow and any damages payable to Lattice in connection with such action shall not exceed such amount, even in the case of willful breach or fraud by Parent or Merger Sub.

Specific Performance

In the event of a breach or threatened breach of any covenant or obligation in the Merger Agreement, subject to the immediately following paragraph, the non-breaching party will be entitled to an injunction, specific performance or other equitable relief to enforce specifically the terms and provisions of the Merger Agreement.

Notwithstanding the foregoing, Lattice will be entitled to an injunction, specific performance or other equitable remedy in connection with enforcing Parent’s obligation to cause the full funding of the financing under the Equity Commitment Letter and to consummate the Merger only in the event that

 

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(1) all of the mutual conditions to closing have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing, and other than conditions that have not been satisfied due to an action by a governmental entity in China, and to the extent a non-worldwide closing is possible), (2) all of the conditions to Parent and Merger Sub’s obligations to consummate the Merger have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing) (3), Parent and Merger Sub have failed to consummate the Merger prior to the time the closing was required pursuant to the Merger Agreement, and (4) Lattice has irrevocably confirmed in writing to Parent that if specific performance is granted and the equity financing is funded, then closing will occur.

Although Lattice may pursue both a grant of specific performance and the payment of the reverse termination fee by Parent, Lattice will not be permitted to pursue an injunction, specific performance or other equitable relief or any other remedy under the Merger Agreement following the payment by Parent of the reverse termination fee.

Fees and Expenses

Except for the termination fee payable to Lattice by Parent and the reverse termination fee payable to Parent by Lattice, whether or not the Merger is completed, Lattice, on the one hand, and Parent and Merger Sub, on the other hand, are each responsible for all of their respective costs and expenses incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement.

Amendment

The Merger Agreement may be amended in writing signed by each of Lattice, Parent and Merger Sub at any time before or after adoption of the Merger Agreement by stockholders. However, after adoption of the Merger Agreement by stockholders, no amendment that by law requires further approval by such stockholders may be made without such approval.

Governing Law and Dispute Resolution

The Merger Agreement is governed by Delaware law. Any action seeking an order of specific performance or other equitable relief of Parent’s obligations under the Merger Agreement or taken by Lattice against Parent or Merger Sub seeking damages for fraud or willful breach shall be resolved by arbitration administered by the Singapore International Arbitration Centre. All other actions shall be submitted to the exclusive personal jurisdiction of the Court of Chancery of the State of Delaware.

 

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MARKET PRICES AND DIVIDEND DATA

Lattice common stock is listed on Nasdaq under the symbol “LSCC.” As of December 23, 2016, there were 121,435,504 shares of common stock outstanding, held by approximately 259 stockholders of record. The following table presents the high and low intra-day sale prices of Lattice common stock on Nasdaq during the fiscal quarters indicated:

 

		Common Stock Prices
		High				Low
December 31, 2016 (through December 23, 2016)		$	7.99			$	5.91
Fiscal Year Ended September 30, 2016 — Quarter Ended
December 31, 2015		$	7.07			$	3.57
March 31, 2016			6.67				4.02
June 30, 2016			6.47				4.89
September 30, 2016			6.69				5.21
Fiscal Year Ended September 30, 2015 — Quarter Ended
December 31, 2014		$	7.53			$	5.94
March 31, 2015			7.66				5.87
June 30, 2015			6.99				5.88
September 30, 2015			6.14				3.25
Fiscal Year Ended September 30, 2014 — Quarter Ended
December 31, 2013		$	5.77			$	4.17
March 31, 2014			8.09				5.30
June 30, 2014			9.19				7.37
September 30, 2014			8.50				6.03
Fiscal Year Ended September 30, 2013 — Quarter Ended
December 31, 2012		$	4.38			$	3.46
March 31, 2013			5.71				3.89
June 28, 2013			5.50				4.50
September 30, 2013			5.44				4.39

On December 23, 2016, the latest practicable trading day before the printing of this proxy statement, the closing price for Lattice common stock on Nasdaq was $7.24 per share. You are encouraged to obtain current market quotations for Lattice common stock.

Lattice has not paid a dividend on its common stock in the past two fiscal years and does not currently pay a dividend.

Following the Merger, there will be no further market for Lattice common stock and it will be delisted from Nasdaq and deregistered under the Exchange Act. As a result, following the Merger we will no longer file periodic reports with the SEC.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the beneficial ownership of Lattice common stock, as of December 23, 2016 of each person or entity who we know to beneficially own 5% or more of the outstanding shares of common stock and all of our current directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person, and the percentage ownership of that person, shares of common stock subject to stock options held by that person that are currently exercisable, or exercisable within 60 days of December 23, 2016 are deemed outstanding. Such shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated below, the address of each beneficial owner listed in the table is c/o Lattice Semiconductor Corporation, 111 SW Fifth Ave., Ste 700, Portland, Oregon 97204.

The percentages in the table below are based on 121,435,504 shares of common stock outstanding as of December 23, 2016. Except as indicated in the footnotes to this table and pursuant to applicable community property laws, to our knowledge, each stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite such stockholder’s name. The information provided in this table is based on our records and information filed with the SEC, unless otherwise noted.

 

Name and Address of 5% Beneficial Owners, Directors and Officers		Number of Shares				Percent of Total
Ameriprise Financial, Inc.(1)
Columbia Management Investment Advisors, LLC(1)
Columbia Seligman Communications & Information Fund(1)			14,591,328				12.02
NWQ Investment Management Company, LLC(2)			13,233,677				10.90
Franklin Resources, Inc.(3)
Charles B. Johnson(3)
Rupert H. Johnson, Jr.(3)
Franklin Advisers, Inc.(3)			11,077,033				9.12
The Vanguard Group(4)			8,123,075				6.69
BlackRock, Inc.(5)			6,290,975				5.18
Dimensional Fund Advisors LP(6)			6,145,512				5.06
Darin G. Billerbeck, Director, President & CEO(7)			1,837,924				1.51
Glen Hawk, Corporate Vice President & COO(8)			191,250				*
John Bourgoin, Director(9)			158,399				*
Robin A. Abrams, Director(10)			158,399				*
Byron W. Milstead, Corporate Vice President & General Counsel(11)			135,774				*
Mark E. Jensen, Director(12)			121,416				*
Max Downing, Vice President & Interim CFO(13)			79,883				*
Robert R. Herb, Director(14)			119,217				*
D. Jeffrey Richardson, Director(15)			43,998				*
Frederick D. Weber, Director(16)			20,213				*
Brian Beattie, Director			0				*
All directors and executive officers as a group (11 persons)			2,866,473				2.62	%

 

*	Less than one percent.

(1)

The information is as reported on Amendment No. 1 to Schedule 13G/A as filed on February 12, 2016. Ameriprise Financial, Inc., or AFI, has shared power to direct the disposition of 14,591,328 shares of our common stock and shared power to vote 14,466,489 shares of our common stock. AFI is the parent holding company of Columbia Management Investment Advisors, LLC, or CMIA, which has shared power to direct the disposition of 14,591,328 shares of our common stock and shared

 

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power to vote 14,466,489 shares of our common stock. CMIA is the investment advisor to Columbia Seligman Communications & Information Fund, or the Fund, an investment company, which has the shared power to direct the disposition of 10,907,877 shares of our common stock and sole power to vote 10,907,877 shares of our common stock. Although CMIA and AFI do not directly own any shares of our common stock, as the investment adviser to the Fund and various other unregistered and registered investment companies and other managed accounts, CMIA may be deemed to beneficially own the shares of our common stock reported by the Fund, and as the parent holding company of CMIA, AFI may be deemed to beneficially own the shares of our common stock reported by CMIA. Both AFI and CMIA disclaim beneficial ownership of any shares reported on their Amendment No. 1 to Schedule 13G/A. The principal address of AFI is 145 Ameriprise Financial Center, Minneapolis, MN 55474 and the principal address of CMIA and the Fund is 225 Franklin Street, Boston, MA 02110.

(2)

Pre-combination and post-combination holdings according to Schedule 13G/A filed on February 12, 2016. NWQ Investment Management Company, LLC’s address is 2049 Century Park East, 16th Floor Los Angeles, CA 90067. NWQ Investment Management Company, LLC has sole voting power for 13,231,547 shares of our common stock and sole dispositive power for all 13,233,677 shares of our common stock.

(3)

Pre-combination and post-combination holdings according to Schedule 13G/A filed on February 9, 2016. Franklin Resources, Inc.’s, Charles B. Johnson’s, Rupert H. Johnson, Jr.’s and Franklin Advisers, Inc.’s address is One Franklin Parkway, San Mateo, CA 94403. Franklin Advisers, Inc. is the beneficial owner of 10, 919, 233 shares of our common stock. Fiduciary Trust Company International has sole voting and dispositive power over 157,800 shares of our common stock and Franklin Advisers, Inc. has sole voting and dispositive power over 10,919,233 shares of our common stock.

(4)

Pre-combination and post-combination holdings according to Schedule 13G/A filed on February 10, 2016. The Vanguard Group’s address is 100 Vanguard Blvd., Malvern, PA 19355. The Vanguard Group has sole voting power over 176,011 shares of our common stock, sole dispositive power over 7,954,464 shares of our common stock and shared dispositive power over 168,611 shares of our common stock. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 168,611 shares of our common stock as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 7,400 shares of our common stock as a result of its serving as investment manager of Australian investment offerings.

(5)	Pre-combination and post-combination holdings according to Schedule 13G/A filed on January 26, 2016. BlackRock, Inc.’s address is 55 East 52nd Street, New York, NY 10055. BlackRock, Inc. has sole voting and dispositive power over all 6,290,975 shares of our common stock.

(6)

Pre-combination and post-combination holdings according to Schedule 13G/A filed on February 9, 2016. Dimensional Fund Advisors LP’s address is Building One, 6300 Bee Cave Road, Austin, TX 78746. Dimensional Fund Advisors LP has sole voting power over 5,875,781 shares of our common stock and dispositive power over all 6,145,512 shares of our common stock. Dimensional Fund Advisors LP serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts. In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain funds.

(7)	Includes 1,454,579 shares exercisable under options within 60 days of December 23, 2016.

(8)	Includes 191,250 shares exercisable under options within 60 days of December 23, 2016.

(9)	Includes 90,000 shares exercisable under options within 60 days of December 23, 2016.

(10)	Includes 90,000 shares exercisable under options within 60 days of December 23, 2016.

(11)

Includes 114,921 shares exercisable under options and 2,856 RSUs vesting within 60 days of December 23, 2016. Mr. Milstead disclaims beneficial ownership of 629 shares, 36,743 shares exercisable under options, and 347 RSUs vesting within 60 days of December 23, 2016 constructively transferred by Mr. Milstead to his former spouse pursuant to a judgment of dissolution of marriage.

(12)	Includes 90,000 shares exercisable under options within 60 days of December 23, 2016.

(13)	Includes 61,043 shares exercisable under options and 2,199 RSUs vesting within 60 days of December 23, 2016.

(14)	Includes 90,000 shares exercisable under options within 60 days of December 23, 2016.

(15)	Includes 35,946 shares exercisable under options within 60 days of December 23, 2016.

(16)	Includes 20,213 shares exercisable under options within 60 days of December 23, 2016.

 

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FUTURE STOCKHOLDER PROPOSALS

In light of the execution of the Merger Agreement, Lattice does not currently expect to hold an annual meeting of stockholders in 2017. If the Merger is completed, Lattice will have no public stockholders and there will be no public participation in any future meetings of stockholders of Lattice. However, if the Merger is not completed, Lattice stockholders will continue to be entitled to attend and participate in stockholder meetings.

Proposals of stockholders that are intended for inclusion in our proxy statement relating to our annual meeting in 2017, if held, must be received by us at our offices 111 SW Fifth Ave., Ste 700, Portland, Oregon 97204, Attention: Corporate Secretary, no later than ten calendar days after the date of public disclosure , via a press release or filing with the SEC, of the date of our 2017 annual meeting of stockholders, and must satisfy the conditions established by the SEC, including, but not limited to, Rule 14a-8 promulgated under the Exchange Act, and in our bylaws for stockholder proposals in order to be included in our proxy statement for that meeting.

Stockholders may only present a matter for consideration at our annual meeting in 2017, if held, if certain procedures are followed. Under our bylaws, in order for a matter to be deemed properly presented by a stockholder, timely notice must be delivered to or mailed and received by our Corporate Secretary at our principal executive offices not less than 90 nor more than 120 days in advance of the first anniversary of the date on which Lattice’s proxy statement was first mailed to stockholders for the preceding year’s annual meeting of stockholders; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than 30 days from the date of the prior year’s meeting, notice by the stockholder to be timely must be so received not later than the close of business on the later of 120 calendar days in advance of such meeting and 10 calendar days following the date on which public announcement of the date of such meeting is first made by Lattice.

Our bylaws specify the information with respect to making stockholder proposals that is required to be included in the written notice that must be provided to our Corporate Secretary. Stockholders may contact our Corporate Secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals.

 

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WHERE YOU CAN FIND MORE INFORMATION

The SEC allows us to “incorporate by reference” information into this proxy statement, which means that we can disclose important information to you by referring you to other documents filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement, except for any information superseded by information in this proxy statement or incorporated by reference subsequent to the date of this proxy statement. This proxy statement incorporates by reference the documents set forth below that we have previously filed with the SEC, which contain important information about us and our financial condition.

The following Lattice filings with the SEC are incorporated by reference:

 

•

Lattice’s Annual Report on Form 10-K for the fiscal year ended January 2, 2016;

 

•

Lattice’s Quarterly Reports on Form 10-Q for the fiscal quarter ended April 2, 2016, filed on July 1, 2016, and for the fiscal quarter ended October 1, 2016, filed on November 10, 2016; and

 

•

Lattice’s Current Reports on Form 8-K filed on March 4, 2016, May 16, 2016, July 7, 2016, September 22, 2016, November 3, 2016, as amended November 4, 2016, and November 4, 2016.

We also incorporate by reference into this proxy statement additional documents that we may file with the SEC between the date of this proxy statement and the earlier of the date of the Special Meeting or the termination of the Merger Agreement. These documents include periodic reports, such as Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as well as Current Reports on Form 8-K and proxy soliciting materials. The information provided on our website is not part of this proxy statement, and therefore is not incorporated by reference herein.

Information furnished under Item 2.02 or Item 7.01 of any Current Report on Form 8-K, including related exhibits, is not and will not be incorporated by reference into this proxy statement.

You may read and copy any reports, statements or other information that we file with the SEC at the SEC’s public reference room at the following location: Station Place, 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of those documents at prescribed rates by writing to the Public Reference Section of the SEC at that address. Please call the SEC at (800) SEC-0330 for further information on the public reference room. These SEC filings are also available to the public from commercial document retrieval services and at www.sec.gov.

You may obtain any of the documents we file with the SEC, without charge, by requesting them in writing from us at the following address:

Lattice Semiconductor Corporation

Attn: Corporate Secretary

111 SW Fifth Ave., Ste 700

Portland, Oregon 97204

You may also obtain any of the documents we file with the SEC upon request from the Company’s Investor Relations Department at lscc@globalirpartners.com. If you would like to request documents from us, please do so as soon as possible, to receive them before the Special Meeting. Please note that all of our documents that we file with the SEC are also promptly available through the Investor Relations section of our website, www.latticesemi.com. The information included on our website is not incorporated by reference into this proxy statement.

 

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If you have any questions concerning the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of common stock, please contact our Proxy Solicitor:

Innisfree M&A Incorporated

501 Madison Avenue

New York, NY 10022

Stockholders Call Toll Free: (888) 750-5834

International Callers: +1 (412) 232-3651

Banks and Brokers Call Collect: (212) 750-5833

 

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MISCELLANEOUS

Lattice has supplied all information relating to Lattice, and Parent has supplied, and Lattice has not independently verified, all of the information relating to Parent and Merger Sub contained in this proxy statement.

You should rely only on the information contained in this proxy statement, the annexes to this proxy statement and the documents that we incorporate by reference in this proxy statement in voting on the Merger. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated [●]. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date (or as of an earlier date if so indicated in this proxy statement), and the mailing of this proxy statement to stockholders does not create any implication to the contrary. This proxy statement does not constitute a solicitation of a proxy in any jurisdiction where, or to or from any person to whom, it is unlawful to make a proxy solicitation.

 

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Annex A

 

 

 

EXECUTION VERSION

 

 

AGREEMENT AND PLAN OF MERGER

Dated as of November 3, 2016

among

LATTICE SEMICONDUCTOR CORPORATION,

CANYON BRIDGE ACQUISITION COMPANY, INC.

and

CANYON BRIDGE MERGER SUB, INC.

 

 

 

 

 

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TABLE OF CONTENTS

 

				Page
ARTICLE I THE MERGER
Section 1.01		The Merger			A-1
Section 1.02		Closing			A-2
Section 1.03		Effective Time			A-2
Section 1.04		Effect			A-2
Section 1.05		Certificate of Incorporation and Bylaws			A-2
Section 1.06		Directors and Officers of the Surviving Corporation			A-2
ARTICLE II EFFECTS OF THE MERGER
Section 2.01		Effect on Capital Stock			A-2
Section 2.02		Payment of Merger Consideration; Surrender of Shares			A-3
Section 2.03		Dissenters’ Rights			A-5
Section 2.04		Company Stock Plans			A-5
Section 2.05		Company Employee Stock Purchase Plan			A-7
Section 2.06		Withholding Rights			A-7
Section 2.07		Adjustments			A-7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01		Organization, Standing and Power			A-8
Section 3.02		Company Subsidiaries			A-8
Section 3.03		Capitalization			A-9
Section 3.04		Authority; Execution and Delivery; Enforceability; Company Board Recommendation			A-10
Section 3.05		No Conflicts; Consents			A-11
Section 3.06		SEC Documents; Internal Controls and Procedures			A-11
Section 3.07		No Undisclosed Liabilities; Indebtedness			A-13
Section 3.08		Absence of Certain Changes or Events			A-14
Section 3.09		Taxes			A-14
Section 3.10		Employee Benefits			A-15
Section 3.11		Litigation			A-17
Section 3.12		Permits; Compliance with Applicable Laws			A-17
Section 3.13		Regulatory Matters; Certain Business Practices			A-17
Section 3.14		Environmental Matters			A-18
Section 3.15		Material Contracts			A-19
Section 3.16		Properties			A-21

 

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(continued)

 

				Page
Section 3.17		Intellectual Property			A-22
Section 3.18		Labor Matters			A-23
Section 3.19		Customers; Suppliers			A-24
Section 3.20		Brokers’ Fees and Expenses			A-24
Section 3.21		Opinions of Company Financial Advisor			A-24
Section 3.22		Insurance			A-25
Section 3.23		Affiliate Transactions			A-25
Section 3.24		No Rights Plan			A-25
Section 3.25		No Other Representations or Warranties			A-25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Section 4.01		Organization, Standing and Power			A-26
Section 4.02		Parent and Merger Sub			A-26
Section 4.03		Authority; Execution and Delivery; Enforceability			A-26
Section 4.04		No Conflicts; Consents			A-27
Section 4.05		Compliance with Applicable Laws			A-27
Section 4.06		Information Supplied			A-27
Section 4.07		Litigation			A-28
Section 4.08		Ownership of Shares			A-28
Section 4.09		Brokers’ Fees and Expenses			A-28
Section 4.10		Investigation by Parent and Merger Sub			A-28
Section 4.11		Financing			A-28
Section 4.12		No Other Representations or Warranties			A-29
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.01		Conduct of Business			A-29
Section 5.02		No Solicitation by the Company; Company Board Recommendation			A-33
ARTICLE VI ADDITIONAL AGREEMENTS
Section 6.01		Preparation of the Proxy Statement; Company Stockholders Meeting			A-36
Section 6.02		Access; Confidentiality			A-37
Section 6.03		Financing Arrangements			A-38
Section 6.04		Required Actions			A-40
Section 6.05		Indemnification, Exculpation and Insurance			A-42
Section 6.06		Fees and Expenses			A-43

 

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(continued)

 

				Page
Section 6.07		Transaction Litigation			A-43
Section 6.08		Section 16 Matters			A-43
Section 6.09		Public Announcements			A-43
Section 6.10		Takeover Statutes			A-44
Section 6.11		Stock Exchange De-listing			A-44
Section 6.12		Company SEC Documents			A-44
Section 6.13		Employees			A-44
Section 6.14		Escrow Matters			A-46
Section 6.15		Notification of Certain Matters			A-47
ARTICLE VII CONDITIONS PRECEDENT
Section 7.01		Conditions to Each Party’s Obligation to Effect the Merger			A-47
Section 7.02		Condition to Parent’s and Merger Sub’s Obligation to Effect the Merger			A-48
Section 7.03		Condition to the Company’s Obligation to Effect the Merger			A-48
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
Section 8.01		Termination			A-49
Section 8.02		Effects of Termination; Termination Fees			A-50
Section 8.03		Amendment			A-52
Section 8.04		Extension; Waiver			A-52
ARTICLE IX GENERAL PROVISIONS
Section 9.01		Nonsurvival of Representations and Warranties			A-53
Section 9.02		Notices			A-53
Section 9.03		Definitions			A-54
Section 9.04		Terms Defined Elsewhere			A-60
Section 9.05		General Interpretation			A-61
Section 9.06		Severability			A-62
Section 9.07		Counterparts; Effectiveness			A-62
Section 9.08		Entire Agreement; No Third-Party Beneficiaries			A-62
Section 9.09		Governing Law; Consent to Jurisdiction; Dispute Resolution			A-62
Section 9.10		Assignment			A-63
Section 9.11		Specific Performance			A-63
Section 9.12		Waiver of Jury Trial			A-64

EXHIBITS

Exhibit A         Form of Certificate of Incorporation

 

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AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of November 3, 2016, is entered into among Lattice Semiconductor Corporation, a Delaware corporation (the “Company”), Canyon Bridge Acquisition Company, Inc., a Delaware corporation (“Parent”), and Canyon Bridge Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub” and, collectively with the Company and Parent, the “Parties”).

RECITALS

A. The Parties intend to effect a merger (the “Merger”) of Merger Sub with and into the Company on the terms and subject to the conditions set forth in this Agreement and in accordance with the Delaware General Corporation Law (the “DGCL”).

B. The board of directors of the Company (the “Company Board”) has unanimously (1) determined that the Merger is fair to and in the best interests of the Company and its stockholders, (2) adopted resolutions approving and declaring the advisability of this Agreement and the Merger and the other transactions contemplated hereby, and (3) resolved to recommend that the stockholders of the Company adopt this Agreement on the terms and subject to the conditions set forth in this Agreement.

D. The board of directors of Parent has unanimously approved the execution, delivery and performance by Parent of this Agreement and the consummation of the transactions contemplated hereby, including the Merger.

E. The board of directors of Merger Sub has unanimously (1) determined that the Merger is fair to and in the best interests of Merger Sub and Parent, its sole stockholder, (2) adopted resolutions approving and declaring the advisability of this Agreement and the Merger and other transactions contemplated hereby, and (3) resolved to recommend that Parent, as the sole stockholder of Merger Sub, adopt this Agreement on the terms and subject to the conditions set forth in this Agreement.

F. Concurrently with the execution and delivery of this Agreement, Canyon Bridge Fund I, LP, a Delaware limited partnership (the “Equity Investor”), has entered into an equity financing commitment letter in favor of Parent (such letter, together with all exhibits, annexes, schedules and attachments thereto, in each case as amended or otherwise modified in accordance with this Agreement, “Equity Commitment Letter”), pursuant to which, subject to the terms and conditions contained therein, the Equity Investor has committed to invest in Parent the amounts set forth therein.

G. Concurrently with the execution and delivery of this Agreement, as a condition and inducement to the willingness of the Company to enter into this Agreement, Parent, the Company and the Escrow Agent have executed and delivered an escrow agreement (the “Escrow Agreement”), pursuant to which Parent has deposited an amount equal to the Parent Termination Fee with the Escrow Agent.

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements herein and intending to be legally bound, the Parties agree as follows:

ARTICLE I

THE MERGER

Section 1.01 The Merger. On the terms and subject to the conditions set forth in this Agreement and in accordance with the DGCL, at the Effective Time, Merger Sub will be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub will cease, and the Company will be the surviving corporation in the Merger (the “Surviving Corporation”).

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Section 1.02 Closing. Subject to the provisions of ARTICLE VII, the closing (the “Closing”) of the Merger (a) will take place at 12:00 p.m., Pacific Time, at the offices of Jones Day, 1755 Embarcadero Road, Palo Alto, California, as soon as practicable (but in no event later than five Business Days after all of the conditions set forth in ARTICLE VII (other than conditions which by their terms are required to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions) shall have been satisfied or, to the extent permitted by Law, waived by the Party entitled to the benefit of the same, or (b) will occur at such other place, time and date as will be agreed in writing between the Company and Parent (the date upon which the Closing occurs, the “Closing Date”).

Section 1.03 Effective Time. Subject to the provisions of this Agreement, at the Closing, the Company will file a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with, the relevant provisions of the DGCL. The Merger will become effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware or at such later date and time as the Company and Parent may agree upon and as is set forth in such Certificate of Merger (such time, the “Effective Time”).

Section 1.04 Effect. At the Effective Time, the effect of the Merger will be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL. Without limiting the generality of the foregoing and subject thereto, at the Effective Time, all of the property, rights, privileges, immunities, powers and franchises of the Company and Merger Sub will vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation.

Section 1.05 Certificate of Incorporation and Bylaws.

(a) At the Effective Time, the Company Charter will, by virtue of or in connection with the Merger, be amended and restated in its entirety to read as set forth in Exhibit A and, as so amended, will be the certificate of incorporation of the Surviving Corporation until thereafter further amended as provided therein or by applicable Law.

(b) At the Effective Time, and without any further action on the part of the Company and Merger Sub, the Company Bylaws will be amended and restated in their entirety to be the same as the bylaws of Merger Sub as in effect immediately prior to the Effective Time, except that the name of the Surviving Corporation will be “Lattice Semiconductor Corporation” and, as so amended, will be the bylaws of the Surviving Corporation until thereafter amended as provided therein or by applicable Law.

Section 1.06 Directors and Officers of the Surviving Corporation. The directors of Merger Sub immediately prior to the Effective Time will be the directors of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. Unless Parent, in its sole discretion, determines otherwise, the officers of Merger Sub immediately prior to the Effective Time will be the officers of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.

ARTICLE II

EFFECTS OF THE MERGER

Section 2.01 Effect on Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of any Party or the holders of any Shares or shares of common stock of Merger Sub:

(a) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of common stock, par value $0.01 per share, of the Company (such shares, collectively, the “Shares”) that is held by the

 

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Company as treasury stock and each Share that is owned by a Company Subsidiary, Parent or Merger Sub immediately prior to the Effective Time (collectively, “Excluded Shares”) will no longer be outstanding and will automatically be canceled and will cease to exist, and no consideration will be delivered in exchange therefor.

(b) Conversion of Shares. Each Share issued and outstanding immediately prior to the Effective Time (other than Excluded Shares and Dissenting Shares) will be converted into the right to receive $8.30 in cash (the “Merger Consideration”). All such Shares, when so converted, will no longer be outstanding and will automatically be canceled and will cease to exist, and each holder of a certificate or certificates that immediately prior to the Effective Time represented such Shares (“Certificates”) and each holder of such Shares outstanding immediately prior to the Effective Time that are not represented by Certificates (“Book-Entry Shares”) will thereafter cease to have any rights with respect to such Shares except the right to receive the Merger Consideration, to be paid, without interest, in consideration therefor upon surrender of such Certificate or Book-Entry Shares in accordance with Section 2.02(b) (or in the case of a lost, stolen or destroyed Certificate, Section 2.02(h)). As and to the extent provided in Section 2.06, the right of any holder of Shares to receive the Merger Consideration will be subject to and reduced by the amount of any withholding under applicable Tax Law.

(c) Conversion of Merger Sub Common Stock. Each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time will be converted into one fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation. From and after the Effective Time, all certificates representing shares of common stock of Merger Sub will be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted in accordance with the immediately preceding sentence.

Section 2.02 Payment of Merger Consideration; Surrender of Shares.

(a) Paying Agent. Prior to the Effective Time, Parent will appoint a U.S.-based bank or trust company reasonably acceptable to the Company to act as paying agent (the “Paying Agent”) for the purpose of exchanging Shares for the Merger Consideration. At or prior to the Effective Time, (i) in accordance with Section 6.14, Parent and the Company will cause the Escrow Agent to release all funds held in the Escrow Account to the Paying Agent, for the benefit of the holders of Shares, and (ii) Parent will deposit, or cause to be deposited, with the Paying Agent, for the benefit of the holders of Shares, cash in an amount sufficient, after taking into account the amount deposited with the Paying Agent pursuant to Section 2.02(a)(i), to pay the aggregate Merger Consideration required to be delivered pursuant to Section 2.01(b). All such cash deposited with the Paying Agent (including cash from the Escrow Fund deposited with the Paying Agent pursuant to Section 6.14) is hereinafter referred to as the “Payment Fund”. Any portion of the Merger Consideration made available to the Paying Agent pursuant to this Section 2.02(a) to pay for Shares for which appraisal rights have been perfected as described in Section 2.03 shall be returned to the Surviving Corporation upon demand; provided that the Parties acknowledge that, notwithstanding anything to the contrary in this Agreement, Parent shall not be required under this Section 2.02 or otherwise to deposit with the Paying Agent any cash to pay Merger Consideration with respect to Shares as to which its holder has purported to deliver a notice or demand of appraisal that has not been withdrawn prior to the Closing Date.

(b) Payment Procedures. As promptly as practicable after the Effective Time, Parent will cause the Paying Agent to mail to each Person who was, at the Effective Time, a holder of record of Shares entitled to receive the Merger Consideration pursuant to Section 2.01(b): (i) a letter of transmittal in customary form (including a provision confirming that delivery will be effected, and risk of loss and title will pass, only upon proper delivery of the Certificates to the Paying Agent or, in the case of Book-Entry Shares, upon adherence to the procedures set forth in the letter of transmittal) reasonably acceptable to Parent and the Company; and (ii) instructions for use in effecting the

 

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surrender of such holder’s Certificates or Book-Entry Shares in exchange for payment of the Merger Consideration issuable and payable in respect thereof pursuant to such letter of transmittal. Exchange of any Book-Entry Shares will be effected in accordance with the Paying Agent’s customary procedures with respect to securities represented by book entry. Upon surrender of a Certificate or Book-Entry Share to the Paying Agent for exchange, together with a duly executed letter of transmittal and such other documents as may be reasonably required by the Paying Agent or Parent, the holder of such Shares will be entitled to receive in exchange for such properly surrendered Shares an amount in cash equal to the product of (i) the number of Shares represented by such holder’s properly surrendered Certificates or Book-Entry Shares and (ii) the Merger Consideration. If payment of the Merger Consideration is to be made to a Person other than the Person in whose name the surrendered Certificate or Book-Entry Share is registered, it shall be a condition of payment that such Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer or such Book-Entry Share shall be properly transferred and that the Person requesting such payment shall have paid any transfer and other Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of such Certificate or Book-Entry Share or shall have established to the satisfaction of Parent that such Tax is not applicable.

(c) No Further Ownership Rights in Shares. Until surrendered as contemplated by this Section 2.02, each Share represented by a Certificate and each Book-Entry Share (other than Dissenting Shares and Excluded Shares) shall be deemed after the Effective Time to represent only the right to receive the Merger Consideration payable in respect thereof pursuant to this Article II, without any interest thereon, and subject to deduction for any required deduction for withholding Taxes pursuant to Section 2.06. All cash paid upon the surrender for exchange of Certificates or Book-Entry Shares in accordance with the terms of this Article II will be deemed to have been paid in full satisfaction of all rights pertaining to the Shares formerly represented by such Certificates or Book-Entry Shares.

(d) Stock Transfer Books. From and after the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of the Shares that were outstanding immediately prior to the Effective Time. If after the Effective Time Certificates are presented to the Surviving Corporation or the Paying Agent for transfer or transfer is sought for Book-Entry Shares, such Certificates or Book-Entry Shares shall be canceled and exchanged as provided in this Article II, subject to applicable Law in the case of Dissenting Shares.

(e) Termination of Payment Fund. Any portion of the Payment Fund (including any interest or other income received with respect thereto) that remains undistributed to the holders of Shares after the one year anniversary of the Closing Date will be delivered to Parent and any holder of Shares who has not theretofore complied with this Article II will thereafter look only to Parent for payment of its claim for Merger Consideration, without any interest thereon and subject to Tax or other applicable Law.

(f) No Liability. None of the Surviving Corporation, Parent, Merger Sub, the Paying Agent or any other Person will be liable to any Person in respect of any portion of the Payment Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. If any Certificates or Book-Entry Shares shall not have been exchanged prior to the date on which the related Merger Consideration would otherwise escheat to or become the property of any Governmental Entity, any such Merger Consideration in respect thereof shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any Person previously entitled thereto.

(g) Investment of Payment Fund. The Payment Fund will be invested by the Paying Agent as directed by Parent; provided, however, that any such investments shall be in (i) short-term obligations of the United States (or any instrumentality or agency thereof) with maturities of no more than 30 days or guaranteed by the United States (or any instrumentality or agency thereof) and backed by the full

 

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faith and credit of the United States, (ii) commercial paper obligations rated A1 or P1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation, respectively, with maturities of no more than six months, or (iii) certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $2.0 billion (based on the most recent financial statements of such bank that are then publicly available) with maturities of no more than six months. No gain or loss thereon will affect the amounts payable to the holders of Shares following completion of the Merger pursuant to this Agreement. Any and all interest and other income earned on the Payment Fund will promptly be paid to Parent or an Affiliate of Parent as directed by Parent. No investment of the Payment Fund shall relieve Parent or the Paying Agent from promptly making the payments required by this Article II, and following any losses from any such investment that diminishes the Payment Fund below the level required for the Paying Agent to make the payments required to be made by it pursuant to this Article II, Parent shall promptly provide or cause to be provided additional cash funds to the Paying Agent for the benefit of the Company’s stockholders at the Effective Time in the amount necessary to ensure the Payment Fund is sufficient for the Paying Agent to make the payments contemplated to be made by it pursuant to this Article II, which additional funds will be deemed to be part of the Payment Fund.

(h) Lost or Destroyed Certificates. In the event any Certificate is lost, stolen or destroyed, the Paying Agent will issue in exchange for such lost, stolen or destroyed Certificate, upon the making of an affidavit of that fact by the holder thereof, the Merger Consideration, except that Parent may, in its discretion and as a condition precedent to the payment of such Merger Consideration, require the owner of such lost, stolen or destroyed Certificate to deliver a bond in such customary amount as it may direct as indemnity against any claim that may be made against Parent, Merger Sub, the Surviving Corporation or the Paying Agent with respect to the Certificate alleged to have been lost, stolen or destroyed.

Section 2.03 Dissenters’ Rights. Notwithstanding anything in this Agreement to the contrary, Shares issued and outstanding immediately prior to the Effective Time that are held by any holder who has not voted in favor of the Merger and who is entitled to demand and properly demands appraisal of such Shares pursuant to Section 262 of the DGCL (“Dissenting Shares”) shall not be converted into the right to receive the Merger Consideration, unless and until such holder shall have failed to perfect, or shall have effectively withdrawn or lost, such holder’s right to appraisal under the DGCL. Dissenting Shares shall be treated in accordance with Section 262 of the DGCL. If any such holder fails to perfect or withdraws or loses any such right to appraisal, each such Share of such holder shall thereupon be converted into and become exchangeable only for the right to receive, as of the later of the Effective Time and the time that such right to appraisal has been irrevocably lost, withdrawn or expired, the Merger Consideration in accordance with Section 2.01(b). The Company will notify Parent as promptly as reasonably practicable of any written demands for appraisal of any Shares, withdrawals of such demands and any other written instruments received by the Company pursuant to Section 262 of the DGCL, and Parent will have the right to participate in all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company will not, without the prior written consent of Parent, make any payment with respect to, settle or offer to settle, or approve any withdrawal of any such demands.

Section 2.04 Company Stock Plans.

(a) Vested In-the-Money Stock Options. At the Effective Time, each option to purchase Shares (each, a “Company Stock Option”) granted under any Company Stock Plan with an exercise price per Share less than the Merger Consideration (an “In-the-Money Company Stock Option”) that is vested (after taking into account (i) the measurement of any corporate performance goals that are required to be measured at or prior to the Effective Time under the terms of such outstanding In-the-Money Company Stock Options as set forth in Section 2.04(a) of the Company Disclosure Letter, and (ii) any accelerated vesting that is required to occur at or prior to the Effective Time under the terms of

 

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such outstanding In-the-Money Company Stock Option) and outstanding immediately prior to the Effective Time (such vested outstanding In-the-Money Company Stock Options, the “Vested Company Options”) shall, automatically and without any action on the part of the holder of such Vested Company Option, be canceled and converted into the right of such holder to receive from the Surviving Corporation an amount in cash (without interest, and subject to deduction for any required withholding Tax) equal to the product of (i) the excess of the Merger Consideration over the exercise price per Share of such Vested Company Option and (ii) the number of Shares subject to such Vested Company Option.

(b) Unvested In-the-Money Stock Options. At the Effective Time, each outstanding In-the-Money Company Stock Option that is not a Vested Company Option shall, automatically and without any action on the part of the holder of such In-the-Money Company Stock Option, be canceled and converted into the right of the holder to receive from the Surviving Corporation an amount in cash (without interest, and subject to deduction for any required withholding Tax) equal to the product of (i) the excess of the Merger Consideration over the exercise price per Share of such unvested and outstanding In-the-Money Company Stock Option and (ii) the number of Shares subject to such unvested and outstanding In-the-Money Company Stock Option, which cash amount will be payable by the Surviving Corporation subject to and in accordance with the vesting schedule applicable to such unvested In-the-Money Company Stock Option as in effect immediately prior to the Effective Time.

(c) Other Company Stock Options. All Company Stock Options which are not In-the-Money Company Stock Options and any other Company Stock Options that are not granted under any Company Stock Plan shall be canceled as of immediately prior to the Effective Time in exchange for no consideration.

(d) Company RSUs. At the Effective Time, each award of restricted stock units (each, a “Company RSU”) granted under any Company Stock Plan that is outstanding and unvested (after taking into account any accelerated vesting that is required to occur at or prior to the Effective Time under the terms of such Company RSU) as of immediately prior to the Effective Time (such unvested Company RSU, an “Unvested RSU”) shall, automatically and without any action on the part of any holder of such Unvested RSU, be canceled and converted into the right to receive from the Surviving Corporation an amount in cash (without interest, and subject to deduction for any required withholding Tax) equal to the product of (i) the Merger Consideration and (ii) the number of Shares that remain subject to such Unvested RSU, which cash amount will vest and become payable by the Surviving Corporation subject to and in accordance with the vesting schedule and issuance or delivery schedule applicable to such Unvested RSU as in effect immediately prior to the Effective Time. Each Company RSU granted under a Company Stock Plan that is outstanding and vested (after taking into account any accelerated vesting that is required to occur at or prior to the Effective Time under the terms of such Company RSU) as of immediately prior to the Effective Time (such vested Company RSU, a “Vested RSU”) shall, automatically and without any action on the part of any holder of such Vested RSU, be canceled and converted into the right to receive from the Surviving Corporation an amount in cash (without interest, and subject to deduction for any required withholding Tax) equal to the product of (i) the Merger Consideration and (ii) the number of Shares that remain subject to such Vested RSU, which cash amount will become payable by the Surviving Corporation subject to and in accordance with the issuance or delivery schedule applicable to such Vested RSU as in effect immediately prior to the Effective Time.

(e) Payments. To the extent necessary, Parent shall provide to the Surviving Corporation all funds necessary to fulfill the obligations (i) under Section 2.04(a) no later than the Effective Time and (ii) under Section 2.04(b) and Section 2.04(d) on or as soon as reasonably practicable following the applicable vesting or issuance or delivery date. The Surviving Corporation shall pay or cause to be paid any amounts required to be paid pursuant to Section 2.04(a) as soon as administratively practicable, but no later than ten Business Days, following the Effective Time. All payments in respect of Company Stock Options and Company RSUs will be treated as a right to receive a series of

 

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separate payments and, accordingly, each such payment will be considered a separate and distinct payment for purposes of Section 409A of the Code (including for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)). All payments in respect of Company Stock Options and Company RSUs will, to the maximum extent permitted by Law, only be due and payable in accordance with Treasury Regulations Section 1.409A-3(i)(5)(iv)(A) or in a manner exempt from the requirements of Section 409A of the Code in reliance upon Treasury Regulations Section 1.409A-1(b)(4).

(f) Treatment of Company Stock Plans; Other Corporate Actions. The Company Board or a committee thereof shall adopt any resolutions and take any actions which are reasonably necessary to terminate the Company Stock Plans, effective as of, and contingent upon the occurrence of, the Effective Time. The Company shall take all actions necessary to ensure that, from and after the Effective Time, none of Parent or the Surviving Corporation will be required to issue Shares or other share capital of the Company or the Surviving Corporation to any Person pursuant to or in settlement of a Company Stock Option or Company RSU. Without liming the foregoing, the Company agrees to take any and all actions necessary to approve and effectuate the foregoing provisions of this Section 2.04, including making any determinations or resolutions of the Company Board or a committee thereof.

Section 2.05 Company Employee Stock Purchase Plan. With respect to the Company’s 2012 Employee Stock Purchase Plan (the “ESPP”), (a) no new offering period will commence after the date of this Agreement and, to the extent not already provided for under the terms of the ESPP as of the date of this Agreement, no Company Employees or other persons will be permitted to begin participating in the ESPP, and no participants will be permitted to increase elective deferrals in respect of the current offering period under the ESPP, in each case after the date of this Agreement, (b) any offering period under the ESPP that is in effect immediately prior to the date of this Agreement will terminate no later than five days prior to the Effective Time, and amounts credited to the accounts of participants will be used to purchase Shares in accordance with the terms of the ESPP, and (c) such Shares will be treated as other outstanding Shares in accordance with Section 2.01(b) of this Agreement. For the avoidance of doubt, each fractional Share held by any participant under the ESPP (if any) will be canceled and extinguished at the Effective Time, and be converted into the right to receive a commensurate fractional portion of the Merger Consideration, without interest, payable to the holder of each such fractional Share.

Section 2.06 Withholding Rights. Notwithstanding any provision contained herein to the contrary, each of the Paying Agent, the Surviving Corporation and Parent shall be entitled to deduct and withhold from the amount otherwise payable to any Person pursuant to this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of Law related to Taxes. If the Paying Agent, the Surviving Corporation or Parent, as the case may be, so withholds amounts and remits such amounts to the applicable Governmental Entity, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which the Paying Agent, the Surviving Corporation or Parent, as the case may be, made such deduction and withholding.

Section 2.07 Adjustments. The Merger Consideration will be automatically adjusted to reflect the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Shares), cash dividend, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Shares occurring on or after the date of this Agreement and prior to the Effective Time; provided, however, that nothing in this Section 2.07 will be construed as permitting the Company to take any action or enter into any transaction otherwise prohibited by this Agreement.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except (a) as set forth in the corresponding sections or subsections of the disclosure letter delivered to Parent by the Company contemporaneously with the execution of this Agreement (the “Company Disclosure Letter”), (b) as set forth in any other section or subsection of the Company Disclosure Letter to the extent it is reasonably apparent from the wording of such disclosure that such disclosure applies to such representation or warranty, or (c) as set forth in the Company SEC Documents filed since March 2, 2016 but prior to the date of this Agreement (excluding all disclosures in any “Risk Factors” section and any disclosures included in any such Company SEC Documents that are cautionary, predictive or forward looking in nature), the Company hereby represents and warrants to Parent and Merger Sub as follows:

Section 3.01 Organization, Standing and Power.

(a) The Company is duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all requisite corporate power and authority to own, operate, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted.

(b) The Company is duly qualified or licensed to do business in each jurisdiction where the nature of its business or the ownership or leasing of its properties make such qualification necessary, other than in such jurisdictions where the failure to be so qualified or licensed, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. The Company has Made Available to Parent, prior to execution of this Agreement, true, correct and complete copies of the restated certificate of incorporation of the Company in effect as of the date of this Agreement (the “Company Charter”) and the bylaws of the Company in effect as of the date of this Agreement (the “Company Bylaws”).

Section 3.02 Company Subsidiaries.

(a) Section 3.02(a) of the Company Disclosure Letter sets forth a true, correct and complete list of the name and jurisdiction of organization of each of the Company’s Subsidiaries (the “Company Subsidiaries”). All the outstanding shares of capital stock or voting securities of, or other equity interests in, each of the Company Subsidiaries have been validly issued and fully paid, are nonassessable, are not subject to and were not issued in violation of any preemptive or similar right, purchase option, call or right of first refusal or similar right and, except as set forth on Section 3.02(a) of the Company Disclosure Letter, are owned by the Company, by another wholly owned Company Subsidiary, or by the Company and another wholly owned Company Subsidiary, free and clear of all Liens (except for restrictions imposed by applicable securities Laws).

(b) Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, each Company Subsidiary (i) is duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is organized (in the case of good standing, to the extent such jurisdiction recognizes such concept), (ii) has all requisite corporate power and authority necessary to enable it to own, operate, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, and (iii) is duly qualified or licensed to do business in each jurisdiction where the nature of its business or the ownership or leasing of its properties make such qualification necessary. The Company has Made Available to Parent true, correct and complete copies of the certificates of incorporation and bylaws or other constituent governing documents, as amended to date, of each of the Company Subsidiaries.

(c) Except for the capital stock and voting securities of, and other equity interests in, the Company Subsidiaries and except as otherwise set forth in Section 3.02(c) of the Company Disclosure Letter, neither the Company nor any Company Subsidiary owns, directly or indirectly, any capital stock

 

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or voting securities of, or other equity interests in, or any interest convertible into or exchangeable or exercisable for, any capital stock or voting securities of, or other equity interests in, any Person.

Section 3.03 Capitalization.

(a) The authorized capital stock of the Company consists of 300,000,000 Shares and 10,000,000 shares of preferred stock, each with par value $0.01 per share (the “Company Preferred Stock” and together with Shares, the “Company Capital Stock”). At the close of business on October 28, 2016, (i) 121,073,026 Shares were issued and outstanding, (ii) no shares of Company Preferred Stock were issued and outstanding, (iii) no Shares were held by the Company in its treasury, and (iv) 16,379,899 Shares were subject to issuance in respect of outstanding awards under the Company Stock Plans, including (A) 12,865,133 Shares issuable upon the exercise of outstanding Company Stock Options (assuming target level of performance for Company Stock Options with performance-based vesting conditions) and (B) 3,514,766 Shares subject to outstanding Company RSUs. Except as set forth in this Section 3.03(a), at the close of business on October 28, 2016, no shares of capital stock or voting securities of, or other equity interests in, the Company were issued, reserved for issuance or outstanding. Since October 28, 2016, the Company has not issued any shares of its capital stock or other rights or securities exercisable, convertible into or exchangeable for shares in its capital, other than or pursuant to any equity awards (including any exercise or settlement thereof) or interests referred to above that were issued pursuant to the Company Stock Plans and that were outstanding on October 28, 2016 or that are equity awards (including any exercise or settlement thereof) permitted to be made under the Company Stock Plans after the date of this Agreement under the terms of this Agreement. No Company Subsidiary owns any Shares.

(b) Section 3.03(b) of the Company Disclosure Letter contains, as of October 28, 2016, a true, correct and complete list of each outstanding Company RSU and Company Stock Option, including the date of grant, the date of expiration, the number of Shares subject to such award, vesting schedule (including any rights to acceleration of vesting), the number of vested and unvested Shares, with respect to Company RSUs, whether the Company RSU is the subject of a deferral election or not otherwise exempt from Section 409A of the Code under Treasury Regulations Section 1.409A-1(b)(4), and with respect to Company Stock Options, the exercise price per Share.

(c) All outstanding shares of Company Capital Stock are, and, at the time of issuance, all such shares that may be issued upon the exercise of Company Stock Options or settlement of Company RSUs under the Company Stock Plans will be, duly authorized, validly issued, fully paid and nonassessable and not subject to, or issued in violation of, any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the DGCL, the Company Charter, the Company Bylaws or any Contract to which the Company is a party or otherwise bound. With respect to each grant of Company Stock Options or Company RSUs, each such grant was made in accordance in all material respects with the terms of the applicable Company Stock Plan and applicable Law (including NASDAQ rules). Each Company Stock Option (i) has an exercise price per Share equal to or greater than the fair market value of a Share on the date of such grant and (ii) has a grant date no later than the date on which the Company Board or compensation committee thereof took action to grant such Company Stock Option. The Company has Made Available to Parent each form of award agreement under the Company Stock Plans. All Company Stock Options and Company RSUs may, by their terms, be treated in accordance with Section 2.04.

(d) Except as set forth above in Section 3.03(a), there are no issued, reserved for issuance or outstanding, and there are no outstanding obligations of the Company or any Company Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, (i) any capital stock of the Company or any Company Subsidiary or any securities of the Company or any Company Subsidiary convertible into or exchangeable or exercisable for shares of capital stock or voting securities of, or other equity interests in, the Company or any Company Subsidiary, (ii) any warrants, calls, options or other rights to acquire from the Company or any Company Subsidiary, or any other obligation of the Company or any

 

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Company Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, any capital stock or voting securities of, or other equity interests in, the Company or any Company Subsidiary, or (iii) any rights issued by or other obligations of the Company or any Company Subsidiary that are linked in any way to the price of any class of the Company Capital Stock or any shares of capital stock of any Company Subsidiary, the value of the Company, any Company Subsidiary or any part of the Company or any Company Subsidiary or any dividends or other distributions declared or paid on any shares of capital stock of the Company or any Company Subsidiary. Other than (i) the acquisition by the Company of Shares in connection with the surrender of Shares by holders of Company Stock Options in order to pay the exercise price thereof, (ii) the withholding of Shares to satisfy Tax obligations with respect to awards granted pursuant to the Company Stock Plans, (iii) between the Company and any Company Subsidiary, and (iv) the acquisition by the Company of awards granted pursuant to the Company Stock Plans in connection with the forfeiture of such awards, there are not any outstanding obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of capital stock or voting securities or other equity interests of the Company or any Company Subsidiary or any securities, interests, warrants, calls, options or other rights referred to in clause (i), (ii) or (iii) of the immediately preceding sentence.

(e) There are no bonds, debentures, notes or other Indebtedness of the Company or any Company Subsidiary having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company or any Company Subsidiary may vote (collectively, “Company Voting Debt”). Other than Contracts, proxies or understandings solely among wholly owned Company Subsidiaries or between any wholly owned Company Subsidiary and the Company or any other wholly owned Company Subsidiary, there are no voting agreements, voting trusts, stockholders agreements, proxies or other Contracts to which the Company or any Company Subsidiary is a party with respect to the voting of the capital stock or other equity interest of the Company or any Company Subsidiary, or restricting the transfer of such capital stock or other equity interest of any Company Subsidiary or to designate or nominate for election a director to the Company Board or the board of directors of any Company Subsidiary.

Section 3.04 Authority; Execution and Delivery; Enforceability; Company Board Recommendation.

(a) The Company has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Merger and the other transactions contemplated by this Agreement, subject, in the case of consummation of the Merger, to the receipt of the affirmative vote of holders of a majority of the issued and outstanding Shares for adoption of this Agreement (the “Company Stockholder Approval”). Except for the Company Stockholder Approval, no other corporate proceedings on the part of the Company are necessary to authorize, adopt or approve, as applicable, this Agreement or to consummate the Merger or the other transactions contemplated hereby (except for the filing of the Certificate of Merger in accordance with the DGCL). The Company Stockholder Approval is the only vote or approval of the holders of Shares or any other class or series of Company Capital Stock or capital stock or equity interests of any Company Subsidiary which are necessary to adopt this Agreement and approve the transactions contemplated herein. The Company has duly executed and delivered this Agreement and, assuming the due authorization, execution and delivery by Parent and Merger Sub, this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms except, in each case, as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditors’ rights or by rules of law and equity governing specific performance, injunctive relief and other equitable remedies (the “Bankruptcy and Equity Exception”).

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(ii) determining that entering into this Agreement is in the best interests of the Company and its stockholders, (iii) declaring this Agreement advisable, and (iv) recommending that the Company’s stockholders adopt this Agreement (the “Company Board Recommendation”) and directing that this Agreement be submitted to the Company’s stockholders for adoption at a duly held meeting of such stockholders for such purpose (the “Company Stockholders Meeting”). As of the date of this Agreement, such resolutions have not been amended or withdrawn. The Company Board has taken all necessary actions so that no “fair price,” “moratorium,” “control share acquisition” or other anti-takeover Law or any anti-takeover provision in the Company Charter or Company Bylaws is applicable to th