DEFM14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934 (Amendment No.     )

(Rule 14a-101)

 

 

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

Quantenna Communications, Inc.

(Name of Registrant as Specified in Its Charter)

N/A

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

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  (1)  

Title of each class of securities to which transaction applies:

 

     

  (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):

 

     

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Proposed maximum aggregate value of transaction:

 

     

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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:

 

     

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LOGO

QUANTENNA COMMUNICATIONS, INC.

1704 Automation Parkway

San Jose, California 95131

Telephone: (669) 209-5500

May 14, 2019

Dear Stockholder,

You are cordially invited to attend a special meeting of stockholders of Quantenna Communications, Inc., a Delaware corporation (which we refer to as “Quantenna”, “we” or “us”), to be held on Friday, June 14, 2019 at 9:00 am, local time, at the offices of O’Melveny & Myers LLP, located at 2765 Sand Hill Road, Menlo Park, CA 94025.

At the special meeting, you will be asked to consider and vote upon (i) a proposal to adopt the Agreement and Plan of Merger, dated March 27, 2019 (which we refer to as the “merger agreement”), among ON Semiconductor Corporation (which we refer to as “ON Semiconductor”), Raptor Operations Sub, Inc. (which we refer to as “Merger Sub”), which is a wholly owned subsidiary of ON Semiconductor, and Quantenna, pursuant to which Merger Sub will be merged with and into Quantenna (which we refer to as the “merger”), with Quantenna continuing as the surviving corporation in the merger and a wholly owned subsidiary of ON Semiconductor, (ii) a non-binding, advisory proposal to approve specified compensation that may be paid or may become payable to Quantenna’s named executive officers based on or otherwise relating to the merger, and (iii) a proposal to adjourn the special meeting to a later date or time, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

If the merger is completed, you, as a holder of shares of Quantenna common stock, will be entitled to receive $24.50 in cash, without interest and less applicable withholding taxes, for each share of Quantenna common stock you own (unless you have properly exercised your appraisal rights with respect to such shares).

After careful consideration, our board of directors has unanimously (with Mr. Lazar recusing himself) determined that the merger agreement and the transactions contemplated thereby are fair to and in the best interests of Quantenna’s stockholders and adopted and declared advisable the merger agreement and the transactions contemplated thereby. Accordingly, the board of directors of Quantenna unanimously (with Mr. Lazar recusing himself) recommends that our stockholders vote “FOR” the adoption of the merger agreement; “FOR” the non-binding, advisory proposal to approve specified compensation that may be paid or may become payable to Quantenna’s named executive officers based on or otherwise relating to the merger; and “FOR” the adjournment of the special meeting to a later date or time, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

The accompanying 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 of directors 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.

Whether or not you plan to attend the special meeting in person, please complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid envelope or grant your proxy electronically over the Internet or by telephone. If you hold your shares in street name, you should instruct your


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broker, bank or other nominee how to vote in accordance with the voting instruction form you will receive from your broker, bank or other nominee. Your broker, bank or other nominee cannot vote on any of the proposals at the special meeting, including the proposal to adopt the merger agreement, without your instructions.

Your vote is very important. The merger cannot be completed unless the proposal to adopt the merger agreement is approved by the affirmative vote of holders of a majority of the outstanding shares of our common stock entitled to vote thereon. Therefore, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person, if you abstain from voting or if you hold your shares in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the proposal to adopt the merger agreement, it will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. Therefore, please submit your proxy or voting instruction form as soon as possible to ensure your shares are represented and voted at the special meeting.

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

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 10005

Banks and Brokers Call: (212) 269-5550

All Others Call Toll-free: (888) 414-5566

Email: qtna@dfking.com

On behalf of the entire board of directors of Quantenna, thank you for your continued support.

Sincerely,

Sam Heidari

Chairman and Chief Executive Officer

The accompanying proxy statement is dated May 14, 2019, and is first being mailed to our stockholders of record on or about May 15, 2019.


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LOGO

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held on Friday, June 14, 2019

To Our Stockholders:

Notice is hereby given that a special meeting of stockholders of Quantenna Communications, Inc., a Delaware corporation (which we refer to as “Quantenna”, “we” or “us”), will be held on Friday, June 14, 2019 at 9:00 am, local time, at the offices of O’Melveny & Myers LLP, located at 2765 Sand Hill Road, Menlo Park, CA 94025, for the following purposes:

 

  1.

To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated March 27, 2019 (which we refer to as the “merger agreement”), among ON Semiconductor Corporation (which we refer to as “ON Semiconductor”), Raptor Operations Sub, Inc. (which we refer to as “Merger Sub”), which is a wholly owned subsidiary of ON Semiconductor, and Quantenna, pursuant to which Merger Sub will be merged with and into Quantenna (which we refer to as the “merger”), with Quantenna continuing as the surviving corporation in the merger and a wholly owned subsidiary of ON Semiconductor (which we refer to as the “merger proposal”).

 

  2.

To consider and vote on a non-binding, advisory proposal to approve specified compensation that may be paid or may become payable to Quantenna’s named executive officers based on or otherwise relating to the merger (which we refer to as the “proposal to approve the merger-related executive compensation”).

 

  3.

To consider and vote on a proposal to adjourn the special meeting to a later date or time, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement (which we refer to as the “adjournment proposal”).

The accompanying 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. We encourage you to read the proxy statement and its annexes, including the merger agreement, carefully and in their entirety.

Only stockholders of record as of the close of business on May 13, 2019 are entitled to receive notice of, and to vote at, the special meeting and any adjournments or postponements thereof. You will be entitled to one vote for each share of our common stock that you held on the record date.

YOUR VOTE IS VERY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN. The merger cannot be completed unless the merger proposal is approved by the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote thereon. Whether or not you plan to attend the special meeting in person, please complete, 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 hold your shares in street name, you should instruct your broker, bank or other nominee how to vote in accordance with the voting instruction form you will receive from your broker, bank or other nominee. Your broker, bank or other nominee cannot vote on any of the proposals at the special meeting, including the merger proposal, without your instructions.

The board of directors of Quantenna has unanimously (with Mr. Lazar recusing himself) determined that the merger agreement and the transactions contemplated thereby are fair to and in the best interests of Quantenna’s stockholders, adopted and declared advisable the merger agreement and the transactions contemplated thereby, and recommends that our stockholders vote “FOR” the merger proposal; “FOR” the proposal to approve the merger-related executive compensation; and “FOR” the adjournment proposal.

By Order of the Board of Directors,

Tom MacMitchell

General Counsel and Corporate Secretary

San Jose, California

Dated: May 14, 2019


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TABLE OF CONTENTS

 

SUMMARY

     1  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

     13  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     23  

PARTIES TO THE MERGER

     24  

Quantenna

     24  

ON Semiconductor

     24  

Merger Sub

     24  

THE SPECIAL MEETING

     25  

Date, Time and Place of the Special Meeting

     25  

Purpose of the Special Meeting

     25  

Record Date and Quorum

     25  

Attendance at the Special Meeting

     26  

Shares Held in Street Name

     26  

Vote Required

     26  

Voting

     27  

Revocation of Proxies

     28  

Voting by Quantenna’s Directors and Executive Officers

     28  

Solicitation of Proxies; Payment of Solicitation Expenses

     28  

Householding

     28  

Adjournments and Postponements

     29  

Anticipated Date of Completion of the Merger

     29  

Rights of Stockholders Who Seek Appraisal

     29  

Questions and Additional Information

     30  

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

     31  

THE MERGER

     31  

Merger Consideration

     31  

Background of the Merger

     31  

Reasons for the Merger; Recommendation of the Board

     47  

Certain Company Forecasts

     49  

Opinion of Qatalyst Partners

     52  

Financing of the Merger

     58  

Closing and Effective Time of Merger

     59  

Payment of Merger Consideration and Surrender of Stock Certificates

     59  

Interests of Certain Persons in the Merger

     60  

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

     64  

Regulatory Approvals

     66  

Litigation Related to the Merger

     67  

THE MERGER AGREEMENT

     68  

Explanatory Note Regarding the Merger Agreement

     68  

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

     68  

Closing and Effective Time of the Merger

     69  

Treatment of Common Stock, Stock-Based Awards and Performance Awards

     69  

Surrender and Payment Procedures

     70  

Representations and Warranties

     71  

Conduct of Our Business Pending the Merger

     74  

No Solicitation of Acquisition Proposals; Board Recommendation Changes

     77  

 

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Stockholders Meeting

     81  

Filings; Other Actions; Notification

     81  

Employee Benefits Matters

     82  

Other Covenants and Agreements

     82  

Conditions to the Merger

     83  

Termination

     85  

Termination Fee

     86  

Directors’ and Officers’ Indemnification and Insurance

     87  

Expenses

     88  

Specific Performance

     88  

Amendments

     88  

Governing Law

     88  

PROPOSAL 2: NON-BINDING, ADVISORY VOTE ON MERGER-RELATED COMPENSATION FOR QUANTENNA’S NAMED EXECUTIVE OFFICERS

     89  

Golden Parachute Compensation

     89  

Merger-Related Compensation Proposal

     92  

PROPOSAL 3: VOTE ON ADJOURNMENT

     93  

MARKET PRICE OF COMMON STOCK

     94  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     95  

APPRAISAL RIGHTS

     98  

DELISTING AND DEREGISTRATION OF COMMON STOCK

     102  

SUBMISSION OF STOCKHOLDER PROPOSALS

     102  

WHERE YOU CAN FIND MORE INFORMATION

     104  

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

     104  

Annex A

  Agreement and Plan of Merger, dated March 27, 2019, by and among Quantenna Communications, Inc., ON Semiconductor Corporation and Raptor Operations Sub, Inc.      A-1  

Annex B

  Opinion of Qatalyst Partners LP, dated as of March 27, 2019      B-1  

Annex C

  Section 262 of the General Corporation Law of the State of Delaware      C-1  

 

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SUMMARY

This summary, together with the following section entitled “Questions and Answers About The Special Meeting and The Merger,” highlights selected information in this proxy statement and does not contain all of the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes, and the documents referred to or incorporated by reference in this proxy statement for a more complete understanding of the matters being considered at the special meeting. Each item in this summary includes a page reference directing you to a more complete description of that topic. This proxy statement is dated May 14, 2019, and is first being mailed to our stockholders of record on or about May 15, 2019.

In this proxy statement, the terms “Quantenna,” the “Company,” “we,” “us” and “our” refer to Quantenna Communications, Inc. and, where appropriate, its subsidiaries. We refer to ON Semiconductor Corporation as “ON Semiconductor” and Raptor Operations Sub, Inc. as “Merger Sub.” All references to the “merger” refer to the merger of Merger Sub with and into Quantenna, with Quantenna continuing as the surviving corporation and becoming a wholly owned subsidiary of ON Semiconductor, and all references to the “merger agreement” refer to the Agreement and Plan of Merger, dated March 27, 2019, as it may be amended from time to time, by and among Quantenna, ON Semiconductor and Merger Sub, a copy of which is included as Annex A to this proxy statement. Quantenna, following the consummation of the merger, is sometimes referred to as the “surviving corporation.”

Parties to the Merger (Page 24)

Quantenna Communications, Inc., a Delaware corporation, is a leader in the design, development, and marketing of advanced high-speed wireless communication solutions enabling wireless local area networking. Quantenna’s solutions are designed to deliver leading-edge Wi-Fi performance to support an increasing number of connected devices accessing a rapidly growing pool of digital content. Quantenna applies its wireless systems and software expertise with high-performance radio frequency, mixed-signal and digital semiconductor design skills to provide highly integrated Wi-Fi solutions to its customers. Quantenna’s principal executive offices are located at 1704 Automation Parkway, San Jose, California 95131.

Quantenna common stock (which we refer to as our “common stock”) is listed on the Nasdaq Global Select Market (which we refer to as “Nasdaq”), under the symbol “QTNA.” Additional information about Quantenna can be found at www.quantenna.com. The information provided on or accessible through Quantenna’s website is not a part of or incorporated by reference in this proxy statement or any other report or document we file with or furnish to the Securities and Exchange Commission (which we refer to as the “SEC”).

ON Semiconductor Corporation, a Delaware corporation, is driving energy efficient innovations, empowering customers to reduce global energy use. ON Semiconductor is a leading supplier of semiconductor-based solutions, offering a comprehensive portfolio of energy efficient power management, analog, sensors, logic, timing, connectivity, discrete, SoC and custom devices. ON Semiconductor’s products help engineers solve their unique design challenges in automotive, communications, computing, consumer, industrial, medical, aerospace and defense applications. ON Semiconductor operates a responsive, reliable, world-class supply chain and quality program, a robust compliance and ethics program and a network of manufacturing facilities, sales offices and design centers in key markets throughout North America, Europe and the Asia Pacific regions. ON Semiconductor’s principal executive offices are located at 5005 E. McDowell Road, Phoenix, Arizona 85008.

ON Semiconductor’s common stock is listed on Nasdaq under the symbol “ON.” Additional information about ON Semiconductor can be found at www.onsemi.com. The information provided on or accessible through ON Semiconductor’s website is not a part of or incorporated by reference in this proxy statement or any other report or document we file with or furnish to the SEC.



 

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Raptor Operations Sub, Inc., a Delaware corporation and a wholly owned subsidiary of ON Semiconductor, was incorporated for the sole purpose of consummating the transactions contemplated by the merger agreement. Prior to the effective time of the merger, Merger Sub will have engaged in no other business activities and will have incurred no liabilities or obligations, other than activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement. Upon the completion of the merger, Merger Sub will cease to exist and Quantenna will continue as the surviving corporation. Merger Sub’s principal executive offices are located at 5005 E. McDowell Road, Phoenix, Arizona 85008.

The Special Meeting (Page 25)

Time and Place of the Special Meeting (Page 25)

This proxy statement is being furnished to our stockholders of record as part of the solicitation of proxies by the board of directors of Quantenna (which we refer to as the “Board”) for use at the special meeting to be held on Friday, June 14, 2019 at 9:00 am, local time, at the offices of O’Melveny & Myers LLP, located at 2765 Sand Hill Road, Menlo Park, CA 94025, or at any adjournment or postponement thereof.

The Purpose of the Special Meeting (Page 25)

At the special meeting, holders of our common stock will be asked to (i) approve the proposal to adopt the merger agreement (which we refer to as the “merger proposal”), (ii) approve a non-binding, advisory proposal to approve specified compensation that may be paid or may become payable to Quantenna’s named executive officers based on or otherwise relating to the merger (which we refer to as the “proposal to approve the merger-related executive compensation”), and (iii) approve a proposal to adjourn the special meeting to a later date or time, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement (which we refer to as the “adjournment proposal”).

The Board has unanimously (with Mr. Lazar recusing himself) determined that the merger agreement and the transactions contemplated thereby are fair to and in the best interests of Quantenna’s stockholders, adopted and declared advisable the merger agreement and the transactions contemplated thereby, and recommends that our stockholders vote “FOR” approval of the merger proposal, “FOR” approval of the proposal to approve the merger-related executive compensation, and “FOR” the adjournment proposal.

Record Date, Notice and Quorum (Page 25)

You are entitled to receive notice of, and to vote at, the special meeting if you held shares of our common stock at the close of business on May 13, 2019, which the Board has set as the record date for the special meeting. As of the close of business on the record date, there were 38,611,258 shares of our common stock outstanding. The presence at the special meeting, in person or represented by proxy, of the holders of a majority of our common stock issued and outstanding and entitled to vote at the special meeting constitutes a quorum for the transaction of business at the special meeting. If a quorum is not present at the special meeting, we expect that the special meeting will be adjourned to solicit additional proxies as permitted by our Amended and Restated Bylaws (which we refer to as our “bylaws”). Abstentions will count as present and entitled to vote for purposes of determining the existence of a quorum. If you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares at the special meeting, your shares will not be counted for purposes of determining the existence of a quorum.

Vote Required (Page 26)

Each holder of our common stock is entitled to one vote for each share of our common stock held on the record date.



 

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Approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote thereon. Abstentions will have the same effect as a vote “AGAINST” the merger proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the merger proposal, it will have the same effect as a vote “AGAINST” the merger proposal.

Approval of the proposal to approve the merger-related executive compensation and the adjournment proposal each require the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on the proposal. Abstentions with respect to each of the proposal to approve the merger-related executive compensation and the adjournment proposal will have the same effect as a vote “AGAINST” the proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the merger proposal, your shares will not be voted at the special meeting and will not be counted in determining the outcome of the proposal to approve the merger-related compensation or the adjournment proposal. Approvals of the proposal to approve the merger-related executive compensation and the adjournment proposal are not conditions to the completion of the merger.

As of the record date, the directors and executive officers of Quantenna beneficially owned and were entitled to vote, in the aggregate, 1,989,951 (5.15%) shares of our common stock (not including any shares of our common stock deliverable upon exercise or conversion of or underlying any options or Quantenna restricted stock unit awards). The directors have informed Quantenna that they currently intend to vote all such shares of our common stock “FOR” approval of the merger proposal, “FOR” approval of the proposal to approve the merger-related executive compensation and “FOR” the adjournment proposal.

How to Vote Your Shares (Page 26)

If you are a stockholder of record, you may cause your shares to be voted by using one of the following methods:

 

   

in person at the special meeting;

 

   

via the Internet, at the Internet address provided on the proxy card;

 

   

by telephone, by using the toll-free number listed on the proxy card; or

 

   

by mail, by completing, signing and dating the enclosed proxy card and returning it in the accompanying prepaid envelope.

If you hold your shares in street name, you will receive instructions from the broker, bank or other nominee that holds your shares as to how to vote your shares at the special meeting. 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 the broker, bank or other nominee that holds your shares, giving you the right to vote the shares at the special meeting.

If you are a stockholder of record, you may change or revoke a previously submitted proxy at any time before it is exercised by one of the following methods:

 

   

delivering a later dated proxy card or by submitting another proxy by telephone or the Internet (your latest telephone or Internet voting instructions will be followed);

 

   

delivering to the Corporate Secretary of Quantenna a written notice of revocation prior to the voting of the proxy at the special meeting; or



 

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by voting in person at the special meeting. Attendance at the special meeting will not, by itself, revoke your proxy.

The Merger (Page 31)

The merger agreement provides that, subject to the satisfaction or waiver of the conditions set forth therein, Merger Sub will merge with and into Quantenna. Quantenna will be the surviving corporation following the merger. As a result of the merger, Quantenna will cease to be a publicly traded company and will become a wholly owned subsidiary of ON Semiconductor. You will not own any shares of the capital stock of the surviving corporation.

Merger Consideration (Page 31)

In the merger, each share of our common stock outstanding immediately prior to the effective time of the merger will automatically be canceled and converted into the right to receive an amount in cash equal to $24.50 (which we refer to as the “merger consideration”), without interest and less any applicable withholding taxes, other than shares of our common stock held by (i)(x) ON Semiconductor or its subsidiaries immediately prior to the effective time, or (y) Quantenna as treasury stock (which we refer to together as “excluded shares”), and (ii) stockholders of Quantenna who properly exercised their appraisal rights under the Section 262 of the Delaware General Corporation Law (which we refer to as the “DGCL”) and who do not thereafter withdraw, fail to perfect or otherwise lose their appraisal rights (which we refer to as “dissenting shares”). Dissenting shares will not be converted into a right to receive the merger consideration but instead shall entitle the holder thereof to receive payment of the fair value of such shares as determined by the Delaware Court of Chancery in accordance with Section 262 of the DGCL and subject to the conditions thereof.

Reasons for the Merger; Recommendation of the Board (Page 47)

After careful consideration of various factors as described in the section entitled “The Merger—Reasons for the Merger; Recommendation of the Board” beginning on page 47, the Board unanimously (with Mr. Lazar recusing himself) determined that the merger agreement and the transactions contemplated thereby are fair to and in the best interests of Quantenna’s stockholders, and adopted and declared advisable the merger agreement and the transactions contemplated thereby. The Board unanimously (with Mr. Lazar recusing himself) resolved, subject to certain provisions of the merger agreement, to recommend that Quantenna’s stockholders adopt the merger agreement (which we refer to as the “Board recommendation”), all upon the terms and subject to the conditions set forth therein. The Board consulted with Quantenna’s outside financial and legal advisors and senior management and considered a number of factors that the Board believes support its decision.

In considering the recommendation of the Board with respect to the merger proposal, you should be aware that our directors and executive officers may have interests in the merger that may be different from, or in addition to, yours. The Board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement, and in recommending that the merger agreement be adopted by the stockholders of Quantenna. See “The Merger—Interests of Certain Persons in the Merger” beginning on page 60.

The Board has unanimously (with Mr. Lazar recusing himself) determined that the merger agreement and the transactions contemplated thereby are fair to and in the best interests of Quantenna’s stockholders, adopted and declared advisable the merger agreement and the transactions contemplated thereby, and recommends that you vote “FOR” approval of the merger proposal, “FOR” approval of the proposal to approve the merger-related executive compensation, and “FOR” the adjournment proposal.

Opinion of Qatalyst Partners LP (Page 52)

Quantenna engaged Qatalyst Partners LP (which we refer to “Qatalyst Partners”) to provide financial advice in connection with the proposed merger based on Qatalyst Partners’ qualifications, expertise, reputation and



 

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knowledge of Quantenna’s business and the industry in which Quantenna operates. At the meeting of the Board on March 27, 2019, Qatalyst Partners delivered to the Board its oral opinion, subsequently confirmed in writing, to the effect that, as of March 27, 2019 and based upon and subject to the various assumptions, qualifications, limitations and other matters set forth therein, the merger consideration to be received by the holders of shares of common stock (other than ON Semiconductor or any affiliate of ON Semiconductor) pursuant to, and in accordance with, the terms of the merger agreement was fair, from a financial point of view, to such holders.

The full text of the opinion of Qatalyst Partners, dated as of March 27, 2019, is attached to this proxy statement as Annex B and is incorporated into this proxy statement by reference. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Qatalyst Partners in rendering its opinion. You should read the opinion carefully in its entirety.

Qatalyst Partners’ opinion was provided to the Board and addressed only, as of the date of the opinion, the fairness, from a financial point of view, of the merger consideration to be received by the holders of shares of common stock (other than ON Semiconductor or any affiliate of ON Semiconductor) pursuant to, and in accordance with, the terms of the merger agreement to such holders. It does not address any other aspect of the merger. It does not constitute a recommendation to any Quantenna stockholder as to how to vote with respect to the merger or any other matter and does not in any manner address the prices at which the shares of common stock will trade at any time.

Financing of the Merger (Page 58)

ON Semiconductor expects to fund amounts needed to acquire Quantenna under the merger agreement through a combination of debt incurred under its existing credit agreement and its cash and cash equivalents on hand at closing. ON Semiconductor’s and Merger Sub’s obligations under the merger agreement are not subject to, or conditioned on, the receipt or availability of any funds or financing.

Interests of Certain Persons in the Merger (Page 60)

In considering the recommendation of the Board that you vote to approve the merger proposal, you should be aware that Quantenna’s directors and executive officers may have interests in the merger that may be different from, in conflict with or in addition to, those of Quantenna stockholders generally. Members of the Board were aware of and considered these interests, at the time, among other matters, in evaluating and negotiating the merger agreement and the merger, approving the merger agreement, and in recommending to Quantenna stockholders that the merger agreement be adopted.

Interests of Quantenna’s directors and executive officers include, but are not limited to, the following:

 

   

Quantenna options and restricted stock unit (which we refer to as an “RSU”) awards held by Quantenna’s executive officers, and the Quantenna RSUs held by Quantenna’s non-employee directors, immediately prior to the effective time of the merger will be treated in the same manner as those Quantenna options and RSUs held by other employees of Quantenna;

 

   

The Quantenna Communications, Inc. 2016 Omnibus Equity Incentive Plan (which we refer to as the “2016 Omnibus Plan”) provides that in the event of a change in control of Quantenna (such as the merger) non-employee directors will fully vest in all outstanding equity awards granted under the 2016 Omnibus Plan;

 

   

Each executive officer is party to a change in control and severance agreement (which we refer to as a “change in control agreement”) that provides for certain severance benefits, including the acceleration of outstanding equity awards, in the event the executive officer’s employment is terminated by Quantenna without cause, due to the executive officer’s death or disability, or by the executive officer



 

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for good reason (as such terms are defined in the change in control agreement) within three months prior to and twelve months following a change in control of Quantenna;

 

   

Each executive officer will be paid a cash incentive award pursuant to Quantenna’s Fiscal 2019 Executive Non-Equity Bonus Plan, which provides for a pro-rata cash bonus based on Quantenna’s actual performance for the shortened performance period (due to the merger); and

 

   

Quantenna’s directors and officers will be entitled to certain ongoing indemnification and advancement rights as well as coverage under directors’ and officers’ liability policies.

For more information, see the sections entitled “The Merger—Background of the Merger” beginning on page 31 and “The Merger—Reasons for the Merger; Recommendation of the Board” beginning on page 47. These interests are described in more detail below, and certain of them are quantified in the narrative and in the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for Quantenna’s Named Executive Officers—Golden Parachute Compensation” beginning on page 89.

Material U.S. Federal Income Tax Consequences of the Merger (Page 64)

The exchange of shares of our common stock for cash pursuant to the merger, generally, will be a taxable transaction to U.S. holders (as defined in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” on page 64) for U.S. federal income tax purposes. Stockholders who are U.S. holders will generally recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received with respect to their shares of our common stock pursuant to the merger and their adjusted tax basis in such shares. You should read “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 64 for a more detailed discussion of the U.S. federal income tax consequences of the merger. You should also consult your tax advisor for a complete analysis of the effect of the merger on your federal, state and local and/or foreign taxes.

Regulatory Approvals (Page 66)

Quantenna, ON Semiconductor, and Merger Sub have agreed to cooperate and coordinate with each other and, subject to the terms and conditions of the merger agreement, use their respective reasonable best efforts to, among other matters, obtain and maintain all approvals, consents, registrations, permits, authorizations, licenses, waivers and other confirmations required to be obtained from any governmental entity that are necessary to consummate the transactions contemplated by the merger agreement, including under relevant antitrust laws (as described more particularly in the section entitled “The Merger—Regulatory Approvals” beginning on page 66).

HSR Clearance. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (which we refer to as the “HSR Act”), and related rules, certain transactions, including the merger, may not be completed until notifications have been given and information furnished to the Antitrust Division of the Department of Justice (which we refer to as the “Antitrust Division”), and the United States Federal Trade Commission (which we refer to as the “FTC”), and all statutory waiting period requirements have been satisfied. The merger agreement requires that the parties use reasonable best efforts to make all necessary filings under the HSR Act as promptly as practicable after the date of the merger agreement. Completion of the merger is subject to the expiration or termination of the applicable waiting period under the HSR Act.

On April 8, 2019, Quantenna filed its notification of the proposed merger with the Antitrust Division and the FTC under the HSR Act. On April 9, 2019, ON Semiconductor filed its notification of the proposed merger with the Antitrust Division and the FTC under the HSR Act. On April 22, 2019, the FTC granted early termination of the waiting period under the HSR Act.

Other Antitrust Law Clearances. Completion of the merger is further subject to the clearances, consents, approvals, and waiting periods applicable to the consummation of the merger under certain foreign antitrust laws



 

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(as described more particularly in the section entitled “The Merger—Regulatory Approvals” beginning on page 66). In this context, on April 22, 2019, ON Semiconductor submitted a filing to the State Administration for Market Regulation (which we refer to as the “SAMR”) in China under the Anti-monopoly Law of the People’s Republic of China of 2008 (as amended).

The Merger Agreement (Page 68)

Treatment of Common Stock, Stock-Based Awards and Performance Awards (Page 69)

 

   

Common Stock. Each share of our common stock outstanding immediately prior to the effective time of the merger (other than excluded shares and dissenting shares) will be canceled and converted into the right to receive $24.50 in cash from ON Semiconductor, without interest and less any applicable withholding taxes.

 

   

Vested Options. At or immediately prior to the effective time of the merger, each Quantenna stock option that is then outstanding and vested (after giving effect to any applicable accelerated vesting provisions that may apply) (which we refer to as a “vested Quantenna stock option”) and has an exercise price that is less than $24.50 will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash determined by multiplying (i) the excess of $24.50 over the exercise price of the vested Quantenna stock option by (ii) the number of shares of our common stock subject to such vested Quantenna stock option.

 

   

Out-of-the Money Options. At or immediately prior to the effective time, each Quantenna stock option that has an exercise price that is equal to or greater than $24.50 (whether or not vested) shall be canceled without payment.

 

   

Unvested Options. As of the effective time of the merger, each Quantenna stock option that is then outstanding and unvested (after giving effect to any applicable accelerated vesting provisions that may apply) (which we refer to as an “unvested Quantenna stock option”) and has an exercise price that is less than $24.50 will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash determined by multiplying (i) the excess of $24.50 over the exercise price of the unvested Quantenna stock option by (ii) the number of shares of our common stock subject to such unvested Quantenna stock option. Such amount will be payable, subject to the holder’s continued employment or service to ON Semiconductor or its affiliates through the applicable payment date, on the earliest of: (x) the same vesting dates that applied to the corresponding unvested Quantenna stock option, (y) the last regularly scheduled payroll date of the calendar year in which the effective time occurs, and (z) if applicable, the termination date of the holder’s employment or service with ON Semiconductor and its affiliates, if the corresponding unvested Quantenna stock option (or an applicable agreement between Quantenna and the holder of the option) provided for accelerated vesting on such termination. If the holder terminates employment or service to ON Semiconductor or its affiliates prior to the applicable payment date, the unvested portion (after giving effect to any applicable accelerated vesting provision) of such cash payment amount shall be forfeited.

 

   

Vested Restricted Stock Unit Awards. At or immediately prior to the effective time of the merger, each Quantenna RSU that is then outstanding and vested (after giving effect to any applicable accelerated vesting provisions that may apply) (which we refer to as a “vested Quantenna RSU”) will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash equal to (i) the number of shares of our common stock subject to the vested Quantenna RSU award multiplied by (ii) $24.50.

 

   

Unvested Restricted Stock Unit Awards. As of the effective time of the merger, each Quantenna RSU award that is then outstanding and unvested (after giving effect to any applicable accelerated vesting provisions) (which we refer to as an “unvested Quantenna RSU”) will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash equal to



 

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(i) the number of shares of our common stock subject to the unvested Quantenna RSU award multiplied by (ii) $24.50. Such amount will be payable on the same vesting dates that applied to the corresponding unvested Quantenna RSU, subject to the holder’s continued employment or service to ON Semiconductor or its affiliates through the applicable vesting date and subject to any right to vesting acceleration as was in effect with respect to such unvested Quantenna RSU immediately prior to the effective time. If the holder terminates employment or service to ON Semiconductor or its affiliates prior to the applicable vesting date, the unvested portion (after giving effect to any applicable accelerated vesting provisions) of such cash payment amount shall be forfeited.

 

   

Treatment of Employee Stock Purchase Plan. In connection with the execution of the merger agreement, we have caused the offering period currently in progress under the Quantenna employee stock purchase plan (which we refer to as the “ESPP”) to be the final offering period under the ESPP and to be terminated no later than the earlier of the day that is five business days prior to the effective time of the merger and May 15, 2019 (the currently-scheduled termination date for such offering) (which we refer to such date as the “final exercise date”). We have also caused each participant’s then-outstanding share purchase right under the ESPP to be exercised as of the final exercise date. On the final exercise date, the funds credited for each participant under the ESPP will be used to purchase shares of our common stock in accordance with the terms of the ESPP, and each share that is outstanding immediately prior the effective time will be canceled and converted into the right to receive $24.50 in cash, less any applicable withholding taxes and without interest. Any funds credited to a participant under the ESPP that are not used to purchase shares in accordance with the terms of the ESPP will be refunded to such participant on or promptly following the final exercise date. No further share purchase rights will be granted or exercised under the ESPP after the final exercise date. The ESPP will be terminated as of the effective time of the merger.

No Solicitation of Acquisition Proposals; Board Recommendation Changes (Page 77)

Under the terms of the merger agreement, subject to certain exceptions, Quantenna has agreed not to, directly or indirectly (i) solicit, initiate or knowingly facilitate or encourage the submission of any inquiry, proposal or offer which constitutes, or would reasonably be expected to result in, an acquisition proposal (as defined in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals; Board Recommendation Changes” beginning on page 77), (ii) enter into, continue or participate in any discussions or negotiations with, or furnish any non-public information relating to Quantenna or any of its subsidiaries to, any third party in connection with an acquisition proposal, (iii) approve, recommend, publicly declare advisable or enter into any agreement in principle, letter of intent, merger agreement, acquisition agreement, joint venture agreement or other similar agreement relating to an acquisition proposal (other than a confidentiality agreement entered into in accordance with the provisions of the merger agreement (we refer to such a confidentiality agreement as an “acceptable confidentiality agreement”)), or (iv) agree to or propose publicly to do any of the foregoing.

Notwithstanding these restrictions, at any time prior to the time the merger agreement is adopted by our stockholders, subject to the terms and conditions described in the merger agreement, Quantenna may engage in negotiations or discussions with a third party and its representatives and actual or potential sources of financing and furnish to such persons non-public information relating to Quantenna or any of its subsidiaries pursuant to an acceptable confidentiality agreement so long as such actions are in response to a written acquisition proposal from any third party that did not result from a breach of the non-solicitation obligations of Quantenna contained in the merger agreement and that the Board determines in good faith: (i) to be bona fide, (ii) after consultation with its financial advisor and outside legal counsel, constitutes, or would reasonably be expected to result in, a superior proposal (as defined in the section entitled “The Merger Agreement—No Solicitation of Acquisition Proposals; Board Recommendation Changes” beginning on page 77), or (iii) after consultation with its outside legal counsel, that the failure to take such action would reasonably be expected to result in a breach of the fiduciary duties of Quantenna’s directors under applicable law.



 

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Quantenna must notify ON Semiconductor orally and in writing promptly (but in no event later than 24 hours) after receipt of any acquisition proposal, any proposals or inquiries that would reasonably be expected to lead to an acquisition proposal, or any inquiry or request for nonpublic information relating to Quantenna or its subsidiaries by any person who had made or has expressly indicated that it is contemplating making any acquisition proposal.

The merger agreement provides that (subject to certain exceptions described below) the Board will not (i) fail to make, withdraw or modify in a manner adverse to ON Semiconductor (or publicly propose to withdraw, modify or qualify in any manner adverse to ON Semiconductor) the Board recommendation, (ii) adopt, approve, or publicly recommend, endorse or otherwise declare advisable the adoption of, an acquisition proposal, or (iii) fail to include in this proxy statement the Board recommendation (any of the foregoing, we refer to as an “adverse recommendation change”).

Notwithstanding the foregoing, the Board may make an adverse recommendation change (or terminate the merger agreement as described in the section entitled “The Merger Agreement—Termination” starting on page 85) in response to an acquisition proposal only so long as (i) such acquisition proposal was not the result of a breach of the non-solicitation obligations of Quantenna set forth in the merger agreement and such acquisition proposal is not withdrawn, and (ii) the Board determines in good faith, after consultation with its financial advisor and outside legal counsel and after taking into account any revisions to the terms of the merger agreement that may be offered in writing by ON Semiconductor in accordance with the merger agreement (including following the provision of the negotiation period set forth in the merger agreement), (A) that such acquisition proposal constitutes a superior proposal, and (B) that the failure to make an adverse recommendation change would reasonably be expected to result in a breach of its fiduciary duties under applicable law. Further, the Board may make an adverse recommendation change in response to a material fact, event, circumstance, development or change (other than in connection with any acquisition proposal) that occurs, arises or comes to the attention of the Board after the date of the merger agreement that affects the business, assets or operations of Quantenna and its subsidiaries, that was not known by, or if known, the effect of which was not reasonably foreseeable by, the Board on the date of the merger agreement and the Board determines in good faith, after taking into account any revisions to the terms of the merger agreement that may be offered in writing by ON Semiconductor in accordance with the merger agreement (including following the provision of the negotiation period set forth in the merger agreement) and after consultation with its outside legal counsel and its financial advisors, that the failure to effect an adverse recommendation change would reasonably be expected to result in a breach of its fiduciary duties under applicable law.

Conditions to the Merger (Page 83)

The respective obligations of Quantenna, ON Semiconductor and Merger Sub to consummate the merger are subject to the satisfaction or waiver of certain customary conditions, including the adoption of the merger agreement by our stockholders, receipt of certain regulatory approvals, the absence of any legal prohibitions to the consummation of the merger, the accuracy of the representations and warranties of the parties and compliance in all material respects by the parties with their respective obligations under the merger agreement. See “The Merger Agreement—Conditions to the Merger” beginning on page 83.

Termination (Page 85)

Quantenna and ON Semiconductor may, by mutual written agreement, terminate the merger agreement and abandon the merger at any time prior to the effective time of the merger.



 

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The merger agreement may also be terminated and the merger abandoned at any time prior to the effective time of the merger, as follows:

 

   

by either Quantenna or ON Semiconductor, if:

 

   

the merger has not been consummated on or before January 27, 2020 (as may be automatically extended for an additional 90 days under certain circumstances) so long as the breach of the terminating party in any material respect is not the primary cause of the failure of the merger to be consummated by such date (which we refer to as the “end date”), as described in the section entitled “The Merger Agreement—Termination” beginning on page 85;

 

   

any order permanently restraining, enjoining or otherwise prohibiting consummation of the merger has become final and non-appealable, so long as the breach of the terminating party in any material respect is not the primary cause of such governmental restraint; or

 

   

stockholder approval of the merger proposal is not obtained at the special meeting (after giving effect to any adjournment or postponement of the special meeting), as described in the section entitled “The Merger Agreement—Termination” beginning on page 85;

provided that certain conditions are satisfied as described in the section entitled “The Merger Agreement—Termination” beginning on page 85;

 

   

by ON Semiconductor (with certain limitations as set forth in the merger agreement), if:

 

   

prior to obtaining stockholder approval of the merger proposal, (i) the Board makes an adverse recommendation change, or (ii) following public announcement of an acquisition proposal or a material modification thereto, Quantenna or the Board fails to publicly reaffirm the Board recommendation within 10 business days of being requested to do so by ON Semiconductor (in each case, we refer to as an “adverse recommendation change termination event”); or

 

   

there is any inaccuracy of any representation or warranty made by Quantenna in the merger agreement or any breach, violation or failure to perform any covenant or agreement on the part of Quantenna set forth in the merger agreement and such inaccuracy or breach would cause Quantenna to fail to satisfy the applicable condition to closing of the merger related to performance of covenants and agreements or accuracy of representations and warranties and that inaccuracy or breach is incapable of being cured by the end date as described in the section entitled “The Merger Agreement—Termination” beginning on page 85;

 

   

by Quantenna (with certain limitations as set forth in the merger agreement), if:

 

   

there is any inaccuracy of any representation or warranty made by ON Semiconductor or Merger Sub in the merger agreement or any breach, violation or failure to perform any covenant or agreement on the part of ON Semiconductor or Merger Sub set forth in the merger agreement and such inaccuracy or breach would cause ON Semiconductor or Merger Sub to fail to satisfy the applicable condition to closing of the merger related to performance of covenants and agreements or accuracy of representations and warranties and that inaccuracy or breach is incapable of being cured by the end date (collectively, such termination trigger we refer to as a “Quantenna terminating breach”), as described in the section entitled “The Merger Agreement—Termination” beginning on page 85; or

 

   

if the Board authorizes Quantenna, pursuant to, and in compliance with the applicable terms of the merger agreement, to enter into a definitive agreement concerning a superior proposal; so long as Quantenna pays a termination fee of $32,165,000 to ON Semiconductor substantially concurrently with (and as a condition to) such termination (which we refer to as the “superior proposal termination event”).



 

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Termination Fee (Page 86)

In certain circumstances, Quantenna may be required to pay ON Semiconductor a termination fee of $32,165,000 (which we refer to as the “termination fee”) if the merger agreement is terminated.

The termination fee would be payable if all of the following occur:

 

   

following the date of the merger agreement, a bona fide acquisition proposal has been publicly made, publicly announced or otherwise communicated to the Board or to Quantenna or will have been made directly to the stockholders of Quantenna generally (and in, any such case, such acquisition proposal is not withdrawn);

 

   

thereafter, (i) either ON Semiconductor or Quantenna terminates the merger agreement for the failure of the merger to be consummated by the end date or for failure to obtain stockholder approval of the merger proposal, or (ii) ON Semiconductor terminates the merger agreement because of a Quantenna terminating breach, as described in the section entitled “The Merger Agreement—Termination” beginning on page 85; and

 

   

within 12 months of such termination, Quantenna consummates any acquisition proposal or enters into a definitive agreement with respect of any acquisition proposal that is later consummated (in each case, the references to “20%” in the definition of “acquisition proposal” being deemed to be references to “50%”); in which case Quantenna must pay ON Semiconductor the termination fee on the date of consummation of such acquisition proposal.

The termination fee would also be payable in the following circumstances:

 

   

ON Semiconductor terminates the merger agreement pursuant to an adverse recommendation change termination event, in which case Quantenna must pay ON Semiconductor the termination fee within 2 business days after such termination; or

 

   

Quantenna terminates the merger agreement pursuant to a superior proposal termination event, in which case Quantenna must pay ON Semiconductor the termination fee substantially concurrently with (and as a condition to) such termination.

Specific Performance (Page 88)

Quantenna and ON Semiconductor have agreed that irreparable damage for which monetary damages, even if available, would not be an adequate remedy would occur in the event that the parties do not perform their obligations under the merger agreement in accordance with its specified terms or otherwise breach such provisions. Quantenna and ON Semiconductor have further agreed each party is entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement without proof of damages.

Market Price of Common Stock (Page 94)

Quantenna’s common stock is listed on Nasdaq under the symbol “QTNA.” The closing price of our common stock on Nasdaq on March 27, 2019, the last trading day prior to the public announcement of the execution of the merger agreement, was $20.50 per share. On May 13, 2019, the most recent practicable date before this proxy statement was mailed to our stockholders, the closing price for our common stock on Nasdaq was $23.99 per share. You are encouraged to obtain current market quotations for our common stock in connection with voting your shares of common stock.



 

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Delisting and Deregistration of Common Stock (Page 102)

If the merger is completed, our common stock will be delisted from Nasdaq and deregistered under the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”), and we will no longer file periodic reports with the SEC.

Appraisal Rights (Page 98)

If the merger is completed and subject to compliance with the requirements of Section 262 of the DGCL, Quantenna’s stockholders will be entitled to appraisal rights under Section 262 of the DGCL. This means that you are entitled to have the fair value of your shares of our common stock determined by the Delaware Court of Chancery and to receive payment based on that valuation in lieu of the merger consideration if you follow exactly the procedures set forth in Section 262 of the DGCL. The ultimate amount you receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the merger agreement.

To exercise your appraisal rights, you must submit a written demand for appraisal to Quantenna before the vote is taken on the merger proposal and you must not vote (either in person or by proxy) in favor of the merger proposal. If you fail to follow exactly the procedures set forth in Section 262 of the DGCL, you may lose your appraisal rights. See “Appraisal Rights” beginning on page 98 and the text of the DGCL appraisal rights statute reproduced in its entirety as Annex C to this proxy statement. If you hold your shares of our common stock through a broker, bank or other nominee and you wish to exercise your appraisal rights, you should consult with your broker, bank or other nominee to determine the appropriate procedures for the making of a demand for appraisal by your broker, bank or other nominee. In view of the complexity of the DGCL, stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors promptly.

Litigation Related to the Merger (Page 67)

As of May 13, 2019, four lawsuits have been filed by alleged Quantenna stockholders challenging the merger. The first complaint, a putative class action complaint, was filed by Gerald Clarke on behalf of himself and all other public stockholders of Quantenna, in the United States District Court for the Northern District of California, and is captioned Clarke v. Quantenna Communications, Inc., et al., 5:19-cv-02508. The second complaint, an individual action was filed by Elaine Wang in the United States District Court for the Northern District of California and is captioned Wang v. Quantenna Communications, Inc., et al., 5:19-cv-02511-SVK. The third complaint, a putative class action complaint, was filed by Earl Wheby, Jr. on behalf of himself and all other public stockholders of Quantenna, in the United States District Court for the District of Delaware and is captioned Wheby v. Quantenna Communications, Inc., et al., 1:19-cv-00877-UNA. The fourth complaint, a putative class action complaint, was filed by Mark Kerry on behalf of himself and all other public stockholders of Quantenna, in the United States District Court for the Northern District of California and is captioned Kerry v. Quantenna Communications, Inc., et al., 3:19-cv-02535. The complaints name as defendants Quantenna and each member of the Board. See “The Merger—Litigation Related to the Merger” beginning on page 67.



 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a stockholder of Quantenna. Please refer to the “Summary” beginning on page 1 and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement, which you should read carefully and in their entirety. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page 104 or “Incorporation of Certain Information By Reference” beginning on page 104.

 

Q.

Why am I receiving this proxy statement?

 

A.

On March 27, 2019, Quantenna entered into the merger agreement providing for the merger of Merger Sub with and into Quantenna, with Quantenna continuing as the surviving corporation in the merger and a wholly owned subsidiary of ON Semiconductor. You are receiving this proxy statement in connection with the solicitation of proxies in favor of the merger proposal and to approve the other proposals to be voted on at the special meeting and because you have been identified as a stockholder of Quantenna as of the close of business on the record date.

 

Q.

What is the proposed merger and what effects will it have on Quantenna?

 

A.

The proposed merger is the acquisition of Quantenna by ON Semiconductor pursuant to the merger agreement. If the merger proposal is approved by our stockholders and the other closing conditions under the merger agreement have been satisfied or waived, Merger Sub will merge with and into Quantenna, with Quantenna continuing as the surviving corporation and becoming a wholly owned subsidiary of ON Semiconductor. We refer to this transaction as the merger. As a result of the merger, Quantenna will no longer be a publicly held corporation, and you, as a holder of our common stock, will no longer have any interest in our future earnings or growth. In addition, following the merger, our common stock will be delisted from Nasdaq and deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC on account of our common stock.

 

Q.

What will I receive if the merger is completed?

 

A.

Upon completion of the merger, you will be entitled to receive the merger consideration of $24.50 in cash, without interest, less any applicable withholding taxes, for each share of our common stock that you own, unless you have properly exercised your appraisal rights under the DGCL and do not thereafter withdraw, fail to perfect or otherwise lose your appraisal rights with respect to such shares. For example, if you own 100 shares of our common stock, you will receive $2,450 in cash in exchange for your shares of our common stock, less any applicable withholding taxes. You will not own any shares of the capital stock in the surviving corporation. Please do NOT return any stock certificates you hold with your proxy.

 

Q.

When and where is the special meeting?

 

A.

The special meeting of stockholders of Quantenna will be held on Friday, June 14, 2019 at 9:00 am, local time, at the offices of O’Melveny & Myers LLP, located at 2765 Sand Hill Road, Menlo Park, CA 94025.

 

Q.

What am I being asked to vote on at the special meeting?

 

A.

At the special meeting, holders of our common stock will be asked to consider and vote on the following three proposals:

 

   

the merger proposal;

 

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the proposal to approve the merger-related executive compensation; and

 

   

the adjournment proposal.

 

Q.

How does the Board recommend that I vote?

 

A.

The Board recommends that you vote your shares of our common stock:

 

   

FOR” the merger proposal;

 

   

FOR” the proposal to approve the merger-related executive compensation; and

 

   

FOR” the adjournment proposal.

For a discussion of the factors that the Board considered in determining to approve the execution and delivery of the merger agreement by Quantenna and to recommend the adoption of the merger agreement, please see the section entitled “The Merger—Reasons for the Merger; Recommendation of the Board.” In considering the recommendation of the Board that you vote to adopt the merger agreement, you should be aware that Quantenna’s directors and executive officers may have interests in the merger that may be different from, or in addition to, those of Quantenna stockholders generally. For a discussion of these interests, please see the section entitled “The Merger—Interests of Certain Persons in the Merger.”

 

Q.

Who is entitled to vote at the special meeting?

 

A.

All holders of shares of Quantenna common stock as of the close of business on May 13, 2019, the record date, are entitled to vote at the special meeting. Each holder of our common stock is entitled to one vote for each share of our common stock held on the record date. As of the close of business on the record date, there were 38,611,258 shares of our common stock outstanding.

 

Q.

What is the difference between holding shares as a stockholder of record and in street name as a beneficial owner?

 

A.

Our stockholders may hold their shares of our common stock through a broker, bank or other nominee (that is, in “street name”) rather than directly in their own name. Summarized below are some of the differences between shares held of record and those owned beneficially in street name.

 

   

Stockholder of Record. If your shares are registered directly in your name with Quantenna’s transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, the stockholder of record and this proxy statement was sent directly to you by Quantenna. As the stockholder of record, you have the right to vote your shares in person at the special meeting or to grant your proxy directly to certain officers of Quantenna to vote your shares at the special meeting.

 

   

Beneficial Owner. If your shares are held through a broker, bank or other nominee, you are considered the beneficial owner of shares held in street name, and this proxy statement was forwarded to you by your broker, bank or other nominee. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares on your behalf at the special meeting, or you may contact your broker, bank or other nominee to obtain a “legal proxy” giving you the right to vote in person at the special meeting.

 

Q.

What must I do if I want to attend the special meeting in person?

 

A.

All holders of shares of Quantenna common stock as of the close of business on the record date, including stockholders of record and stockholders who hold our common stock through a broker, bank or other nominee, are invited to attend the special meeting. Proof of ownership of Quantenna common stock (such as a brokerage statement or the appearance of such stockholder’s name on Quantenna’s stockholder list as of

 

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  the record date), along with valid photo identification (such as a driver’s license or passport), must be presented to be admitted to the special meeting. Please note that 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 the broker, bank or other nominee that holds your shares, giving you the right to vote your shares at the special meeting.

 

Q.

What is a quorum?

 

A.

The presence at the special meeting, in person or represented by proxy, of the holders of a majority of our common stock issued and outstanding and entitled to vote at the special meeting constitutes a quorum for the transaction of business at the special meeting. If a quorum is not present at the special meeting, we expect that the special meeting will be adjourned to solicit additional proxies as permitted by our bylaws. Abstentions will count as present and entitled to vote for purposes of determining the existence of a quorum. If you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares at the special meeting, your shares will not be counted for purposes of determining the existence of a quorum.

 

Q.

How do I vote?

 

A.

Voting in Person at the Special Meeting

All holders of shares of Quantenna common stock as of the close of business on the record date, including stockholders of record and stockholders who hold shares of our common stock in street name, may attend the special meeting and vote their shares in person. Please note that 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 the broker, bank or other nominee that holds your shares, giving you the right to vote the shares at the special meeting.

Voting by Proxy

 

   

Submitting a Proxy for Shares Registered Directly in the Name of the Stockholder. If you hold your shares of common stock as a record holder, you may cause your shares to be voted by completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid envelope. You may also submit a proxy over the Internet or by telephone by following the instructions on the enclosed proxy card. If you submit a proxy by Internet or telephone, you need not return a written proxy card by mail.

 

   

Submitting Voting Instructions for Shares Registered in Street Name. If you hold your shares of common stock in street name, you will receive instructions from your broker, bank or other nominee on how to vote your shares. Your broker, bank or other nominee will allow you to deliver your voting instructions over the Internet and may also permit you to provide your voting instructions by telephone. In addition, you may submit your voting instructions by completing, signing and dating the voting instruction form that was included with this proxy statement and returning it in the accompanying prepaid envelope. If you provide voting instructions by Internet or telephone, you need not return a written voting instruction form by mail.

 

Q.

What is the deadline for voting?

 

A.

If you are a stockholder of record, your proxy must be received by telephone or Internet by 11:59 p.m., Eastern Time, on June 13, 2019, the day before the special meeting, in order for your shares to be voted at the special meeting. If you are a stockholder of record and you cause your shares to be voted by completing, signing, dating and returning the enclosed proxy card, your proxy card must be received before the special meeting for your shares to be voted at the special meeting.

 

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If you hold your shares in street name, please comply with the deadlines for voting provided by the broker, bank or other nominee that holds your shares.

 

Q.

How can I change or revoke my vote?

 

A.

If you are a stockholder of record, you may change or revoke a previously submitted proxy at any time before it is exercised by one of the following methods:

 

   

delivering a later dated proxy card or by submitting another proxy by telephone or the Internet as provided above under “How do I vote?” (your latest telephone or Internet voting instructions will be followed);

 

   

delivering to the Corporate Secretary of Quantenna a written notice of revocation prior to the voting of the proxy at the special meeting; or

 

   

by voting in person at the special meeting. Attendance at the special meeting will not, by itself, revoke your proxy.

Written notices of revocation should be addressed to:

Quantenna Communications, Inc.

Attn: Corporate Secretary

1704 Automation Parkway

San Jose, California 95131

Any change to your proxy that is provided by telephone or the Internet must be submitted by 11:59 p.m., Eastern Time, on June 13, 2019, the day before the special meeting.

If your shares are held in “street name,” you must contact your broker, bank or other nominee to find out how to change or revoke your voting instructions.

 

Q.

What happens if I do not give specific voting instructions?

 

A.

If you are a stockholder of record and you properly submit a signed proxy card or submit your proxy by telephone or the Internet, but do not specify how you want to vote your shares on a particular proposal, then the named proxy holders will vote your shares in accordance with the recommendations of the Board on all matters presented in this proxy statement. See above under “How does the Board recommend that I vote?”

In accordance with applicable stock exchange rules, if you hold your shares through a brokerage account and you fail to provide voting instructions to your broker, your broker may generally vote your uninstructed shares of common stock in its discretion on routine matters at a stockholder meeting. However, a broker cannot vote shares of common stock held in street name on non-routine matters unless the broker receives voting instructions from the stockholder. Generally, if a broker exercises this discretion on routine matters at a stockholder meeting, a stockholder’s shares will be voted on the routine matter in the manner directed by the broker, but will constitute a “broker non-vote” on all of the non-routine matters to be presented at the stockholder meeting. All of the proposals to be voted on at the special meeting are non-routine matters. Accordingly, if you hold your shares in street name through a brokerage account, your broker will not be able to exercise its discretion to vote uninstructed shares on any of the proposals presented at the special meeting. As a result, we do not expect any broker non-votes at the special meeting.

 

Q.

What will happen if I abstain from voting or fail to vote on the proposals or fail to instruct my broker, bank or other nominee how to vote on the proposals?

 

A.

For the merger proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions will have the same effect as a vote “AGAINST” the merger proposal. In addition, if you do not submit a valid proxy or

 

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  attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the merger proposal, it will have the same effect as a vote “AGAINST” the merger proposal.

For the proposal to approve the merger-related executive compensation and the adjournment proposal, you may vote FOR,” “AGAINST” or “ABSTAIN.” Abstentions with respect to each of the proposal to approve the merger-related executive compensation and the adjournment proposal will have the same effect as a vote “AGAINST” the proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the merger proposal, your shares will not be voted at the special meeting and will not be counted in determining the outcome of the proposal to approve the merger-related compensation or the adjournment proposal.

 

Q.

Who will count the votes?

 

A.

The votes will be counted by the inspector of elections appointed for the special meeting.

 

Q.

What do I do if I receive more than one proxy or set of voting instructions?

 

A.

If you received more than one proxy card or voting instruction form, your shares are likely registered in different names or with different addresses or are in more than one account. You must separately vote the shares shown on each proxy card or voting instruction form that you received in order for all of your shares to be voted at the special meeting.

 

Q.

What vote is required for Quantenna’s stockholders to approve the merger proposal?

 

A.

Approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote thereon. Abstentions will have the same effect as a vote “AGAINST” the merger proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the merger proposal, it will have the same effect as a vote “AGAINST” the merger proposal.

 

Q.

What vote of our stockholders is required to approve the proposal to approve the merger-related executive compensation?

 

A.

Approval of the proposal to approve the merger-related executive compensation requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on the proposal. Abstentions will have the same effect as a vote “AGAINST” the proposal to approve the merger-related executive compensation. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the merger proposal, your shares will not be voted at the special meeting and will not be counted in determining the outcome of the proposal to approve the merger-related compensation.

 

Q.

What vote of our stockholders is required to approve the adjournment proposal?

 

A.

Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on the proposal. Abstentions will have the same effect as a vote “AGAINST” the adjournment proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common

 

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  stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the merger proposal, your shares will not be voted at the special meeting and will not be counted in determining the outcome of the adjournment proposal.

 

Q.

Why am I being asked to consider and vote the proposal to approve the merger-related executive compensation?

 

A.

Under SEC rules, we are required to seek a non-binding, advisory vote with respect to the compensation that may be paid or become payable to our named executive officers that is based on or otherwise relates to the merger, or “golden parachute” compensation.

 

Q.

What will happen if Quantenna’s stockholders do not approve the proposal to approve the merger-related executive compensation?

 

A.

The vote on the proposal to approve the merger-related executive compensation is a vote separate and apart from the vote to adopt the merger agreement. Accordingly, a stockholder may vote to approve the proposal to approve the merger-related executive compensation and vote not to adopt the merger agreement and vice versa. Because the vote on the proposal to approve the merger-related executive compensation is advisory in nature only, it will not be binding on Quantenna, ON Semiconductor or the Merger Sub. Accordingly, if the merger proposal is approved by Quantenna’s stockholders and the merger is completed, the merger-related compensation will be paid to Quantenna’s named executive officers to the extent payable in accordance with the terms of their compensation agreements and arrangements even if the stockholders do not approve the proposal to approve the merger-related executive compensation.

 

Q.

How does the merger consideration compare to the market price of our common stock?

 

A.

The merger consideration of $24.50 per share represents a premium of approximately 20% to $20.50 per share, the closing price of our common stock on Nasdaq on March 27, 2019, the last trading day prior to the public announcement of the execution of the merger agreement. The merger consideration represents a premium of approximately 25% and 45% to the 30-day and 90-day, respectively, volume weighted average price per share of our common stock prior to the public announcement of the execution of the merger agreement.

 

Q.

What will holders of Quantenna equity-based and performance awards receive in the merger?

 

A.

At or immediately prior to the effective time of the merger, each vested Quantenna stock option that has an exercise price that is less than $24.50 will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash determined by multiplying (i) the excess of $24.50 over the exercise price of the vested Quantenna stock option by (ii) the number of shares of our common stock subject to such vested Quantenna stock option.

At or immediately prior to the effective time, each Quantenna stock option that has an exercise price that is equal to or greater than $24.50 (whether or not vested) shall be canceled without payment.

As of the effective time of the merger, each unvested Quantenna stock option that has an exercise price that is less than $24.50 will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash determined by multiplying (i) the excess of $24.50 over the exercise price of the unvested Quantenna stock option by (ii) the number of shares of our common stock subject to such unvested Quantenna stock option. Such amount will be payable, subject to the holder’s continued employment or service to ON Semiconductor or its affiliates through the applicable payment date, on the earliest of (but in no event later than December 31 of the calendar year in which the effective time occurs): (x) the same vesting dates that applied to the corresponding unvested Quantenna stock option, (y) the last regularly scheduled payroll date of the calendar year in which the effective time occurs, and (z) if

 

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applicable, the termination date of the holder’s employment or service with ON Semiconductor and its affiliates, if the corresponding unvested Quantenna stock option (or an applicable agreement between Quantenna and the holder of the option) provided for accelerated vesting on such termination. If the holder terminates employment or service to ON Semiconductor or its affiliates prior to the applicable payment date, the unvested portion (after giving effect to any applicable accelerated vesting provision) of such cash payment amount shall be forfeited.

At or immediately prior to the effective time of the merger, each vested Quantenna RSU award will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash equal to (i) the number of shares of our common stock subject to the vested Quantenna RSU award multiplied by (ii) $24.50.

As of the effective time of the merger, each unvested Quantenna RSU award (including each unvested performance-based RSU award (which we refer to as a “PSU”)) will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash equal to (i) the number of shares of our common stock subject to the unvested Quantenna RSU award multiplied by (ii) $24.50. Such amount will be payable on the same vesting dates that applied to the corresponding unvested Quantenna RSU, subject to the holder’s continued employment or service to ON Semiconductor or its affiliates through the applicable vesting date and subject to any right to vesting acceleration as was in effect with respect to such unvested Quantenna RSU immediately prior to the effective time. If the holder terminates employment or service to ON Semiconductor or its affiliates prior to the applicable vesting date, the unvested portion (after giving effect to any applicable accelerated vesting provisions) of such cash payment amount shall be forfeited.

In connection with the execution of the merger agreement, we have caused the offering period currently in progress under the ESPP to be the final offering period under the ESPP and to be terminated as of the final exercise date. We have also caused each participant’s then-outstanding share purchase right under the ESPP to be exercised as of the final exercise date. On the final exercise date, the funds credited for each participant under the ESPP will be used to purchase shares of our common stock in accordance with the terms of the ESPP, and each share that is outstanding immediately prior the effective time will be canceled and converted into the right to receive $24.50 in cash, less any applicable withholding taxes and without interest. Any funds credited to a participant under the ESPP that are not used to purchase shares in accordance with the terms of the ESPP will be refunded to such participant on or promptly following the final exercise date. No further share purchase rights will be granted or exercised under the ESPP after the final exercise date. The ESPP will be terminated as of the effective time of the merger.

 

Q.

When do you expect the merger to be completed?

 

A.

We are working towards completing the merger as soon as possible. Assuming timely receipt of required regulatory approvals and satisfaction of other closing conditions, including approval by our stockholders of the merger proposal, we anticipate that the merger will be completed in the second half of calendar year 2019.

 

Q.

When will stockholders receive the merger consideration?

 

A.

At or prior to the effective time of the merger, ON Semiconductor will deposit, or will cause to be deposited, with a paying agent selected by ON Semiconductor and reasonably acceptable to Quantenna (which we refer to as the “paying agent”), for the benefit of the holders of shares of our common stock, an amount of cash sufficient to pay the aggregate merger consideration payable to our stockholders.

Promptly after the effective time of the merger (but in no event later than 2 business days thereafter), ON Semiconductor will send, or will cause the paying agent to send, to each holder of certificates that immediately prior to the effective time of the merger represented shares of our common stock and whose shares were converted into the merger consideration a letter of transmittal (in a form that was reasonably

 

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acceptable to Quantenna prior to the effective time of the merger) and instructions (which will specify that the delivery will be effected, and risk of loss and title will pass, only upon proper delivery of the certificates representing shares of our common stock or transfer of uncertificated shares of our common stock to the paying agent) for use in connection with exchanging such certificates for the merger consideration. The paying agent will pay each holder of record the aggregate merger consideration to which such holder is entitled (i) in the case of certificated shares, after surrendering the certificate(s) representing shares of our common stock, together with a properly completed letter of transmittal, and (ii) in the case of uncertificated shares, without any action on the part of the person in whose name such uncertificated shares are registered except as may be required by the paying agent.

 

Q.

What happens if the merger is not completed?

 

A.

If the merger proposal is not approved by the stockholders of Quantenna or if the merger is not completed for any other reason, the stockholders of Quantenna will not receive any payment for their shares of our common stock in connection with the merger. Instead, Quantenna will remain an independent public company and our common stock will continue to be listed and traded on Nasdaq. Under specified circumstances, Quantenna may be required to pay to ON Semiconductor a $32,165,000 termination fee with respect to the termination of the merger agreement, as described under “The Merger Agreement—Termination Fee” beginning on page 86.

 

Q.

What conditions must be satisfied to complete the merger?

 

A.

Quantenna, ON Semiconductor and Merger Sub are not required to complete the merger unless a number of conditions are satisfied or waived. These conditions include, among others: (i) the approval of the merger proposal by our stockholders at the special meeting; (ii) all waiting periods (and extensions thereof) applicable to the transactions contemplated by the merger agreement under the HSR Act having expired or been terminated and all other applicable antitrust, competition, or fair trade laws in jurisdictions specified in the disclosure letter delivered in connection with the merger agreement having expired, lapsed or been terminated (as described more particularly in the section entitled “The Merger—Regulatory Approvals” beginning on page 66), (iii) no temporary restraining order, decree, ruling, injunction or judgment, preliminary or permanent injunction or other judgment issued by any governmental authority of competent jurisdiction being in effect enjoining, restraining or otherwise prohibiting the consummation of the merger and no governmental authority of competent jurisdiction having enacted, issued, promulgated, enforced or declared applicable to the merger any applicable law that is in effect, which has the effect of enjoining, restraining or otherwise prohibiting the consummation of the merger, and (iv) customary conditions in favor of each of the parties regarding the accuracy of the other party’s representations and warranties (subject to customary materiality qualifiers) and the other party’s compliance with its covenants and agreements contained in the merger agreement (subject to customary materiality qualifiers). For a more complete summary of the conditions that must be satisfied or waived prior to the completion of the merger, see “The Merger Agreement—Conditions to the Merger” beginning on page 83.

 

Q.

Is the merger expected to be taxable to me?

 

A.

Yes. The exchange of shares of our common stock for the merger consideration of $24.50 per share in cash pursuant to the merger, generally, will be a taxable transaction to U.S. holders (as defined in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” on page 64) for U.S. federal income tax purposes. If you are a U.S. holder and you exchange your shares of our common stock in the merger for cash, you generally will recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received with respect to such shares and your adjusted tax basis in such shares. We encourage you to read “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 64 for a more detailed discussion of the U.S. federal income tax consequences of the merger. You should also consult your tax advisor for a complete analysis of the effect of the merger on your federal, state and local and/or foreign taxes.

 

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Q.

Do any of Quantenna’s directors or officers have interests in the merger that may differ from or be in addition to my interests as a stockholder?

 

A.

In considering the recommendation of the Board with respect to the merger proposal, you should be aware that our directors and executive officers may have interests in the merger that may be different from, in conflict with or in addition to, the interests of our stockholders generally. The Board was aware of and considered these interests, at the time, among other matters, in evaluating and negotiating the merger agreement, approving the merger agreement and the merger, and in recommending that the merger agreement be adopted by the stockholders of Quantenna. See “The Merger—Interests of Certain Persons in the Merger” beginning on page 60 and “Non-Binding, Advisory Vote on Merger-Related Compensation for Quantenna’s Named Executive Officers” beginning on page 89.

 

Q.

What happens if I sell my shares of our common stock before the special meeting?

 

A.

The record date for stockholders entitled to vote at the special meeting is earlier than both the date of the special meeting and the consummation of the merger. If you transfer your shares of our 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 transfer your shares, you will retain your right to vote such shares at the special meeting but will transfer the right to receive the merger consideration to the person to whom you transfer your shares.

 

Q.

What happens if I sell my shares of common stock after the special meeting but before the effective time of the merger?

 

A.

If you transfer your shares after the special meeting but before the effective time of the merger, you will have transferred the right to receive the merger consideration to the person to whom you transfer your shares. In order to receive the merger consideration, you must hold your shares of our common stock through the completion of the merger.

 

Q.

Should I send in my stock certificates now?

 

A.

No. If you hold certificated shares of our common stock and the merger proposal is approved and the merger is consummated, you will be sent a letter of transmittal promptly, and in any event within 2 business days, after the effective time of the merger, describing how you may exchange your certificates that formerly represented shares of our common stock for the merger consideration. If you hold uncertificated shares of our common stock, your shares will be converted into the merger consideration following the completion of the merger without any further action by you. If your shares of our common stock are held in “street name” through a broker, bank or other nominee, you should contact your broker, bank or other nominee for instructions as to how to effect the surrender of your “street name” shares of our common stock in exchange for the merger consideration. See “The Merger—Payment of Merger Consideration and Surrender of Stock Certificates” beginning on page 59. Please do NOT return any stock certificates you hold with your proxy.

 

Q.

Am I entitled to exercise appraisal rights under the DGCL instead of receiving the merger consideration for my shares of our common stock?

 

A.

Yes. As a holder of our common stock, you are entitled to exercise appraisal rights under Section 262 of the DGCL in connection with the merger if you take certain actions and meet certain conditions, including that you do not vote (in person or by proxy) in favor of the merger proposal. See “Appraisal Rights” beginning on page 98.

 

Q.

Who will solicit and pay the cost of soliciting proxies?

 

A.

Quantenna has engaged D.F. King & Co., Inc. (which we refer to as the “proxy solicitor”) to assist in the solicitation of proxies for the special meeting. Quantenna estimates that it will pay the proxy solicitor a fee

 

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  of $12,500, plus reimbursement of related expenses. Quantenna has also agreed to reimburse the proxy solicitor for certain reasonable and documented fees and expenses and will indemnify the proxy solicitor and all of its directors, officers, employees and agents against certain claims, expenses, losses, damages and/or liabilities. Quantenna may also reimburse banks, brokers or their agents for their expenses in forwarding proxy materials to beneficial owners of our common stock. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q.

Who can help answer any other questions I might have?

 

A.

If you have additional questions about the merger, need assistance in submitting your proxy or voting your shares of our common stock, or need additional copies of the proxy statement or the enclosed proxy card, please contact D.F. King & Co., Inc. our proxy solicitor, by calling (212) 269-5550 if you are a bank or broker or, for all others, calling toll-free at (888) 414-5566 or using the contact information below.

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 10005

Banks and Brokers Call: (212) 269-5550

All Others Call Toll-free: (888) 414-5566

Email: qtna@dfking.com

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (which we refer to as the “Securities Act”), and Section 21E of the Exchange Act, which statements involve substantial risks and uncertainties. All statements, other than statements of historical or current facts included in this proxy statement, are forward-looking statements. These statements are often identified by the words “believe,” “expect,” “may,” “anticipate,” “intend,” “estimate,” “project,” “plan,” “assume,” “seek to” or other similar expressions, whether in the negative or the affirmative, that are not statements of historical fact.

These forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict and many of which we have no control over. You should not place undue reliance on our forward-looking statements. These factors, risks and uncertainties include, but are not limited to, the following: (i) the possibility that Quantenna may be unable to obtain the required stockholder approval or antitrust regulatory approvals or that other conditions to closing the merger may not be satisfied, such that the merger will not close or that the closing may be delayed; (ii) the reaction of customers to the merger; (iii) general economic conditions; (iv) the merger may involve unexpected costs, liabilities or delays; (v) risks that the merger disrupts current plans and operations of the parties to the merger; (vi) the amount of the costs, fees, expenses and charges related to the merger; (vii) the outcome of any legal proceedings related to the merger; (viii) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; and (ix) other factors discussed from time to time in our reports filed with the SEC, including the factors discussed in Item 1A, “Risk Factors” of Quantenna’s 2018 Annual Report on Form 10-K filed with the SEC on March 1, 2019, and subsequent filings Quantenna makes with the SEC, which are available at www.sec.gov.

You should not rely upon forward-looking statements as predictions of future events. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this proxy statement. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this proxy statement relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this proxy statement to reflect events or circumstances after the date of this proxy statement or to reflect new information or the occurrence of unanticipated events, except as required by law.

 

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PARTIES TO THE MERGER

Quantenna

Quantenna Communications, Inc.

1704 Automation Parkway

San Jose, California 95131

Quantenna, a Delaware corporation, is a leader in the design, development, and marketing of advanced high-speed wireless communication solutions enabling wireless local area networking. Quantenna’s solutions are designed to deliver leading-edge Wi-Fi performance to support an increasing number of connected devices accessing a rapidly growing pool of digital content. Quantenna applies its wireless systems and software expertise with high-performance radio frequency, mixed-signal and digital semiconductor design skills to provide highly integrated Wi-Fi solutions to its customers.

Quantenna’s common stock is listed on Nasdaq under the symbol “QTNA.”

ON Semiconductor

ON Semiconductor Corporation

5005 E. McDowell Road

Phoenix, Arizona 85008

ON Semiconductor, a Delaware corporation, is driving energy efficient innovations, empowering customers to reduce global energy use. ON Semiconductor is a leading supplier of semiconductor-based solutions, offering a comprehensive portfolio of energy efficient power management, analog, sensors, logic, timing, connectivity, discrete, SoC and custom devices. ON Semiconductor’s products help engineers solve their unique design challenges in automotive, communications, computing, consumer, industrial, medical, aerospace and defense applications. ON Semiconductor operates a responsive, reliable, world-class supply chain and quality program, a robust compliance and ethics program and a network of manufacturing facilities, sales offices and design centers in key markets throughout North America, Europe and the Asia Pacific regions.

ON Semiconductor’s common stock is listed on Nasdaq under the symbol “ON.”

Merger Sub

Raptor Operations Sub, Inc.

5005 E. McDowell Road

Phoenix, Arizona 85008

Merger Sub, a Delaware corporation and a wholly owned subsidiary of ON Semiconductor, was incorporated for the sole purpose of consummating the transactions contemplated by the merger agreement. Prior to the effective time of the merger, Merger Sub will have engaged in no other business activities and will have incurred no liabilities or obligations other than activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement. Upon the completion of the merger, Merger Sub will cease to exist and Quantenna will continue as the surviving corporation.

 

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THE SPECIAL MEETING

We are furnishing this proxy statement to Quantenna stockholders as part of the solicitation of proxies by the Board for use at the special meeting or any adjournment or postponement thereof. This proxy statement provides Quantenna stockholders with the information they need to know to be able to vote at the special meeting or any adjournment or postponement thereof.

Date, Time and Place of the Special Meeting

The special meeting will be held on Friday, June 14, 2019 at 9:00 am, local time, at the offices of O’Melveny & Myers LLP, located at 2765 Sand Hill Road, Menlo Park, CA 94025, or at any adjournment or postponement thereof.

Purpose of the Special Meeting

At the special meeting, holders of our common stock will be asked to consider and vote on the following:

 

   

the merger proposal;

 

   

the proposal to approve the merger-related executive compensation; and

 

   

the adjournment proposal.

The Board has unanimously (with Mr. Lazar recusing himself) determined that the merger agreement and the transactions contemplated thereby are fair to and in the best interests of Quantenna’s stockholders, adopted and declared advisable the merger agreement and the transactions contemplated thereby, and recommends that our stockholders vote “FOR” approval of the merger proposal, “FOR” approval of the proposal to approve the merger-related executive compensation, and “FOR” the adjournment proposal.

If our stockholders fail to approve the merger proposal, the merger will not occur. A copy of the merger agreement is attached as Annex A to this proxy statement, and the material provisions of the merger agreement are summarized in the section of this proxy statement entitled “The Merger Agreement” beginning on page 68 of this proxy statement.

Record Date and Quorum

The Board has fixed the close of business on May 13, 2019 as the record date for determination of stockholders entitled to receive notice of, and to vote at, the special meeting, and any adjournments or postponements thereof. As of the close of business on the record date, there were 38,611,258 shares of our common stock outstanding and entitled to vote at the special meeting.

The presence at the special meeting, in person or represented by proxy, of the holders of a majority of our common stock issued and outstanding and entitled to vote at the special meeting constitutes a quorum for the transaction of business at the special meeting. If a quorum is not present at the special meeting, we expect that the special meeting will be adjourned to a later date to solicit additional proxies as permitted by our bylaws. See below under “Adjournments and Postponements” for additional information.

Abstentions will count as present and entitled to vote for purposes of determining the existence of a quorum.

Your vote is very important, regardless of the number of shares of our common stock you own. Because stockholders cannot take any action at the meeting unless a majority of our common stock issued and outstanding and entitled to vote thereat is represented, it is important that you attend the meeting in person or are represented by proxy at the special meeting.

 

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Attendance at the Special Meeting

All holders of shares of Quantenna common stock as of the close of business on the record date, including stockholders of record and stockholders who hold our common stock through a broker, bank or other nominee (that is, in “street name”), are invited to attend the special meeting. Proof of ownership of Quantenna common stock (such as a brokerage statement or the appearance of such stockholder’s name on Quantenna’s stockholder list as of the record date), along with valid photo identification (such as a driver’s license or passport), must be presented to be admitted to the special meeting. Please note that 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 the broker, bank or other nominee that holds your shares, giving you the right to vote your shares at the special meeting.

Please note that cameras, recording devices and other electronic devices will not be permitted at the special meeting.

Shares Held in Street Name

If your shares are held in “street name” through a broker, bank or other nominee, you will need to provide voting instructions to your broker, bank or other nominee to instruct how to vote your shares at the special meeting. Please follow the instructions provided by your broker, bank or other nominee.

In accordance with applicable stock exchange rules, if you hold your shares through a brokerage account and you fail to provide voting instructions to your broker, your broker may generally vote your uninstructed shares of common stock in its discretion on routine matters at a stockholder meeting. However, a broker cannot vote shares of common stock held in street name on non-routine matters such as the merger proposal unless the broker receives voting instructions from the stockholder. Generally, if a broker exercises this discretion on routine matters at a stockholder meeting, a stockholder’s shares will be voted on the routine matter in the manner directed by the broker, but will constitute a “broker non-vote” on all of the non-routine matters to be presented at the stockholder meeting. All of the proposals to be voted on at the special meeting are non-routine matters. Accordingly, if you hold your shares in street name through a brokerage account, your broker will not be able to exercise its discretion to vote uninstructed shares on any of the proposals presented at the special meeting. As a result, we do not expect any broker non-votes at the special meeting.

Vote Required

Each holder of our common stock is entitled to one vote for each share of our common stock held on the record date.

Approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote thereon. For the merger proposal, you may vote FOR,” AGAINST” or ABSTAIN.” Abstentions will have the same effect as a vote “AGAINST” the merger proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the merger proposal, it will have the same effect as a vote “AGAINST” the merger proposal.

Approval of the proposal to approve the merger-related executive compensation and the adjournment proposal each require the affirmative vote of the holders of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on the proposal. For each of these proposals, you may vote “FOR,” AGAINST” or ABSTAIN.” Abstentions with respect to each of the proposal to approve the merger-related executive compensation and the adjournment proposal will have the same effect as a vote “AGAINST” the proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail

 

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to instruct your broker, bank or other nominee how to vote your shares on the merger proposal, your shares will not be voted at the special meeting and will not be counted in determining the outcome of the proposal to approve the merger-related compensation or the adjournment proposal.

Because the vote on the proposal to approve the merger-related executive compensation is advisory in nature only, it will not be binding on Quantenna, ON Semiconductor or the surviving corporation in the merger. Accordingly, if the merger agreement is adopted by Quantenna’s stockholders at the special meeting and the merger is completed, the merger-related compensation will be paid to Quantenna’s named executive officers to the extent payable in accordance with the terms of their compensation agreements and arrangements even if the stockholders do not approve the proposal to approve the merger-related executive compensation.

Voting

Voting in Person at the Special Meeting

All holders of shares of Quantenna common stock as of the close of business on the record date, including stockholders of record and stockholders who hold shares of our common stock in street name, may attend the special meeting and vote their shares in person. Please note that 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 the broker, bank or other nominee that holds your shares, giving you the right to vote the shares at the special meeting.

Voting by Proxy

 

   

Submitting a Proxy for Shares Registered Directly in the Name of the Stockholder. If you hold your shares of common stock as a record holder, you may cause your shares to be voted by completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid envelope. You may also submit a proxy over the Internet or by telephone by following the instructions on the enclosed proxy card. If you submit a proxy by Internet or telephone, you need not return a written proxy card by mail.

 

   

Submitting Voting Instructions for Shares Registered in Street Name. If you hold your shares of common stock in street name, you will receive instructions from your broker, bank or other nominee on how to vote your shares. Your broker, bank or other nominee will allow you to deliver your voting instructions over the Internet and may also permit you to provide your voting instructions by telephone. In addition, you may submit your voting instructions by completing, signing and dating the voting instruction form that was included with this proxy statement and returning it in the accompanying prepaid envelope. If you provide voting instructions by Internet or telephone, you need not return a written voting instruction form by mail.

If you are a stockholder of record and you properly submit a proxy card or submit your proxy by telephone or over the Internet, your shares will be voted as instructed or, if no instruction is given, “FOR” approval of the merger proposal, “FOR” approval of the proposal to approve the merger-related executive compensation, and “FOR” the adjournment proposal. If you hold your shares in street name through a brokerage account and you do not submit voting instructions to your broker on one or more proposals, your shares will not be voted on such proposal(s) at the special meeting. See above under “Shares Held in Street Name.”

Deadline for Voting

If you are a stockholder of record, your proxy must be received by telephone or Internet by 11:59 p.m., Eastern Time, on June 13, 2019, the day before the special meeting, in order for your shares to be voted at the special meeting. If you are a stockholder of record and you choose to cause your shares to be voted by completing, signing, dating and returning the enclosed proxy card, your proxy card must be received before the special meeting for your shares to be voted at the special meeting.

 

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If you hold your shares in street name, please comply with the deadlines for voting provided by the broker, bank or other nominee that holds your shares.

Revocation of Proxies

If you are a stockholder of record, you may change or revoke a previously submitted proxy at any time before it is exercised by one of the following methods:

 

   

delivering a later dated proxy card or by submitting another proxy by telephone or the Internet as provided above under “Voting” (your latest telephone or Internet voting instructions will be followed);

 

   

delivering to the Corporate Secretary of Quantenna a written notice of revocation prior to the voting of the proxy at the special meeting; or

 

   

by voting in person at the special meeting. Attendance at the special meeting will not, by itself, revoke your proxy.

Written notices of revocation should be addressed to:

Quantenna Communications, Inc.

Attn: Corporate Secretary

1704 Automation Parkway

San Jose, California 95131

Any change to your proxy that is provided by telephone or the Internet must be submitted by 11:59 p.m., Eastern Time, on June 13, 2019, the day before the special meeting.

If your shares are held in “street name,” you must contact your broker, bank or other nominee to find out how to change or revoke your voting instructions.

Voting by Quantenna’s Directors and Executive Officers

As of the record date, the directors and executive officers of Quantenna beneficially owned and were entitled to vote, in the aggregate, 1,989,951 (5.15%) shares of our common stock (not including any shares of our common stock deliverable upon exercise or conversion of or underlying any options or Quantenna restricted stock unit awards). The directors have informed Quantenna that they currently intend to vote all such shares of our common stock “FOR” approval of the merger proposal, “FOR” approval of the proposal to approve the merger-related executive compensation for the named executive officers and “FOR” the adjournment proposal.

Solicitation of Proxies; Payment of Solicitation Expenses

Quantenna has engaged D.F. King & Co., Inc. to assist in the solicitation of proxies for the special meeting. Quantenna estimates that it will pay the proxy solicitor a fee of $12,500, plus reimbursement of related expenses. Quantenna has also agreed to reimburse the proxy solicitor for certain reasonable and documented fees and expenses and will indemnify the proxy solicitor and all of its directors, officers, employees and agents against certain claims, expenses, losses, damages and/or liabilities. Quantenna may also reimburse banks and brokers or their agents for their expenses in forwarding proxy materials to beneficial owners of our common stock. Quantenna’s directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

Householding

In accordance with the rules of the SEC, we are permitted to send a single set of proxy materials to stockholders who share the same address, unless such stockholders have notified us of their desire to receive

 

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multiple copies of our proxy materials. This is known as householding. We will promptly deliver, upon oral or written request, a separate copy of the proxy materials to any stockholder residing at an address to which only one copy was mailed. Stockholders who currently receive multiple copies of proxy materials at their address and would like to request householding of their communications should contact us. Requests for additional copies or requests for householding now or in the future should be directed in writing to our principal executive offices at 1704 Automation Parkway, San Jose, California 95131, Attn: Investor Relations or by telephone at (669) 209-5500.

If you hold your shares in street name, please contact your broker, bank or other nominee directly if you have questions, require additional copies of the proxy materials, or wish to receive multiple copies of the proxy materials now or in the future.

Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed. If a quorum is not present or represented at the special meeting, our bylaws provide that the special meeting may be adjourned to a later date by either (i) the chairperson of the special meeting, or (ii) the stockholders entitled to vote at the special meeting, present in person or represented by proxy. If a quorum is present at the special meeting but there are not sufficient votes at the time of the special meeting to approve the merger proposal, then Quantenna stockholders may be asked to vote on the adjournment proposal. Pursuant to our bylaws, notices of an adjourned meeting need not be given if the time and place, if any, to which the meeting is adjourned and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken, unless the adjournment is for more than 30 days or the Board sets a new record date for such meeting, in which case a written notice of the place, date and time of the adjourned meeting will be given to each Quantenna stockholder of record entitled to vote at the meeting. At any subsequent reconvening of the special meeting at which a quorum is present, any business may be transacted that might have been transacted at the original meeting and all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the time the proxy is voted at the reconvened meeting.

Anticipated Date of Completion of the Merger

We are working towards completing the merger as soon as possible. Assuming timely receipt of required regulatory approvals and satisfaction of other closing conditions, including the approval by our stockholders of the merger proposal, we anticipate that the merger will be completed in the second half of calendar year 2019. If our stockholders vote to approve the merger proposal, the merger will become effective as promptly as practicable following the satisfaction or waiver of the remaining conditions to the merger, subject to the terms of the merger agreement. See “The Merger Agreement—Closing and Effective Time of the Merger” beginning on page 69.

Rights of Stockholders Who Seek Appraisal

If the merger is completed, Quantenna’s stockholders will be entitled to appraisal rights under Section 262 of the DGCL in connection with the merger. This means that you are entitled to have the fair value of your shares of our common stock determined by the Delaware Court of Chancery and to receive payment based on that valuation in lieu of the merger consideration if you follow exactly the procedures set forth in Section 262 of the DGCL. The ultimate amount you receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the merger agreement.

To exercise your appraisal rights, you must submit a written demand for appraisal to Quantenna before the vote is taken on the merger proposal and you must not vote (either in person or by proxy) in favor of the merger

 

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proposal. If you fail to follow exactly the procedures set forth in Section 262 of the DGCL, you may lose your appraisal rights. See “Appraisal Rights” beginning on page 98 and the text of the DGCL appraisal rights statute reproduced in its entirety as Annex C to this proxy statement. If you hold your shares of our common stock through a broker, bank or other nominee and you wish to exercise your appraisal rights, you should consult with your broker, bank or other nominee to determine the appropriate procedures for the making of a demand for appraisal by your broker, bank or other nominee. In view of the complexity of the DGCL, stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors promptly.

Other Information

You should not return any evidence of your shares of Quantenna’s common stock or send documents representing Quantenna’s common stock with the proxy card. If the merger is completed, the paying agent for the merger will send to you a letter of transmittal, if applicable, and related materials and instructions for exchanging your shares of Quantenna’s common stock.

Questions and Additional Information

If you have questions about the merger, need assistance in submitting your proxy or voting your shares of our common stock, or need additional copies of the proxy statement or the enclosed proxy card, please contact the proxy solicitor using the contact information below.

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 10005

Banks and Brokers Call: (212) 269-5550

All Others Call Toll-free: (888) 414-5566

Email: qtna@dfking.com

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

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. You should read the entire merger agreement carefully and in its entirety, as it is the legal document that governs the merger.

The merger agreement provides that, subject to the satisfaction or waiver of the conditions set forth in the merger agreement, Merger Sub will merge with and into Quantenna. Quantenna will be the surviving corporation following the merger. As a result of the merger, Quantenna will cease to be a publicly traded company and will become a wholly owned subsidiary of ON Semiconductor. You will not own any shares of the capital stock of the surviving corporation.

Merger Consideration

In the merger, each outstanding share of our common stock will automatically be canceled and converted into the right to receive an amount in cash equal to $24.50, without interest and less any applicable withholding taxes, other than the excluded shares and dissenting shares. Dissenting shares will not be converted into a right to receive the merger consideration but instead shall be entitled to such holder’s right to appraisal pursuant to the DGCL. Dissenting shares will not be converted into a right to receive the merger consideration but instead shall entitle the holder thereof to receive payment of the fair value of such shares as determined by the Delaware Court of Chancery in accordance with Section 262 of the DGCL.

Background of the Merger

On a regular basis since Quantenna’s initial public offering was completed in October 2016, the Board, together with Quantenna’s management team (which we refer to as “management”), has reviewed and assessed Quantenna’s performance, future growth prospects, business strategies, opportunities and competitive position and challenges as part of its evaluation of Quantenna’s prospects and strategies for enhancing stockholder value. As part of that review process, the Board and management have regularly reviewed and considered Quantenna’s strategic direction and business objectives, including strategic opportunities that might be available to Quantenna, such as possible acquisitions, divestitures and business combination transactions.

The merger and the terms of the merger agreement are the result of arm’s length negotiations conducted between representatives of ON Semiconductor, Quantenna and their respective advisors. The following is a summary of the principal events, meetings, negotiations and actions among the parties leading to the execution and public announcement of the merger agreement.

In July 2017, representatives of a potential strategic party (which we refer to as “Party A”), and a financial advisory firm on behalf of Party A, initially reached out, on an unsolicited basis, to Dr. Sam Heidari, the Chairman of the Board and the Chief Executive Officer of Quantenna, and discussed a potential business combination transaction between the parties.

In November 2017, Party A again contacted Dr. Heidari and discussed a potential business combination between Quantenna and Party A.

On November 15, 2017, the Board held a regularly scheduled meeting. Also present were certain members of management. Representatives from two financial advisory firms, neither of which had been retained by Quantenna at that time, also participated in separate portions of the meeting. Representatives of each such financial advisory firm led separate discussions regarding their perspectives on the semiconductor industry, Quantenna’s positioning in this industry and potential opportunities for inorganic growth and strategic partner considerations.

 

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On November 30, 2017, Quantenna and Party A entered into a confidentiality agreement, which agreement included a customary standstill provision that would automatically terminate upon Quantenna’s entry into a merger agreement with a third party.

On December 18, 2017, the Board held a special meeting. Also present were certain members of management. Dr. Heidari, and Mr. Sean Sobers, Chief Financial Officer of Quantenna, provided an update regarding, among things, communications from Party A inquiring as to whether Quantenna would be interested in a potential business combination transaction between the parties. During this meeting, Mr. Tom MacMitchell, General Counsel and Corporate Secretary of Quantenna, reviewed for the Board their fiduciary duties under Delaware law. The Board conveyed to management that it was open to further discussions with Party A regarding a potential business combination transaction between the parties.

On December 21, 2017, management and representatives of Party A held meetings during which each of management and the representatives of Party A presented on their respective companies.

Thereafter, between December 21, 2017 and January 9, 2018, Dr. Heidari and Mr. Sobers had multiple conversations with representatives of Party A regarding a potential business combination transaction between the parties.

On January 10, 2018, a representative of Party A delivered to Dr. Heidari a written non-binding indication of interest to acquire all of the outstanding common stock of Quantenna for $15.00 per share, with such consideration consisting of $10.50 in cash and $4.50 in shares of Party A’s common stock (which we refer to as the “January 10 Offer”). In the January 10 Offer, Party A requested an exclusive negotiating period of 45 days.

On January 15, 2018, the Board held a special meeting. Also present were certain members of management, representatives of Qatalyst Partners (for a portion of the meeting) and representatives of O’Melveny & Myers LLP (which we refer to as “O’Melveny”), legal counsel to Quantenna. Dr. Heidari reviewed for the Board the terms of the January 10 Offer as well as the conversations that Dr. Heidari had with the Chief Executive Officer of Party A subsequent to the December 18, 2017 Board meeting. Representatives of Qatalyst Partners then joined the meeting and presented to the Board regarding, among other matters, Qatalyst Partners’ credentials, Quantenna’s industry generally, and other aspects relating to potential strategic transactions with Quantenna. After representatives of Qatalyst Partners left the special meeting, the Board engaged in a discussion regarding whether to engage a financial advisor at this time, and if so, which one to engage. Among other matters, the Board discussed the background, performance, capabilities, relationship disclosures, transactions and results achieved by Qatalyst Partners. The Board then discussed next steps in connection with considering potential strategic transactions, including the preparation of financial projections, the engagement of a financial advisor, potential responses to the January 10 Offer and other potential strategic partners. The Board determined not to grant Party A’s request for an exclusive 45-day negotiating period at this time, but agreed to continue discussions with Party A on a preliminary basis. The Board also determined not to formally engage a financial advisor at this time.

On January 26, 2018, representatives of Party A and its financial advisor spoke with Dr. Heidari and Mr. Sobers regarding a potential acquisition of Quantenna.

On January 31, 2018, the Board held a special meeting. Also present were certain members of management, representatives of Qatalyst (for a portion of the meeting), representatives of a potential financial advisor (for a portion of the meeting) and representatives of O’Melveny. Mr. Sobers then reviewed with the Board a preliminary three-year management forecast of Quantenna’s future financial performance and assumptions relating thereto. Mr. MacMitchell and a representative of O’Melveny then reviewed with the Board its fiduciary duties. Representatives of Qatalyst Partners then joined the special meeting and again presented to the Board regarding, among other matters, Qatalyst Partners’ credentials, Quantenna’s industry generally, and other aspects relating to potential strategic transactions with Quantenna. Representatives of Qatalyst Partners then left the

 

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meeting. An additional potential financial advisor then joined the meeting and presented to the Board regarding, among other matters, its credentials, Quantenna’s industry generally, other aspects relating to potential strategic transactions with Quantenna and key process considerations. Such additional potential financial advisor then left the meeting and the Board then discussed the background, performance, capabilities, relationship disclosures, transactions and results achieved by Qatalyst Partners and such other potential financial advisor. The Board then agreed not to formally and exclusively engage a financial advisor at such time. The Board then discussed potential responses to the January 10 Offer. The Board discussed other potential alternatives, including remaining independent, acquiring assets or other businesses, and other potential acquisition partners. After discussion, the Board determined that a sale of Quantenna at this time would be premature and that it was in the best interests of Quantenna’s stockholders for Quantenna to continue to execute on its business plan as an independent company. The Board instructed Dr. Heidari to inform Party A that Quantenna was not at this time going to pursue a potential business combination transaction with Party A based on the January 10 Offer.

On February 2, 2018, Dr. Heidari informed representatives of Party A that Quantenna was not interested at this time in pursuing a potential business combination transaction with Party A based on the January 10 Offer. Thereafter, representatives of Party A informed representatives of Quantenna that Party A would not submit a revised proposal regarding a potential business combination transaction with Quantenna.

In March 2018, representatives of another potential strategic party (which we refer to as “Party B”) initiated discussions with Dr. Heidari and Mr. Sobers regarding a potential strategic transaction. The parties discussed a potential acquisition of Quantenna by Party B as well as a potential acquisition of a certain part of Party B’s business by Quantenna. On March 27, 2018, Quantenna and Party B entered into a confidentiality agreement, which did not include a standstill. Between March 2018 and July 9, 2018, there were limited discussions between Dr. Heidari and Mr. Sobers and representatives of Party B regarding a potential strategic transaction between the parties.

On July 9, 2018, management held a meeting with representatives of Party B regarding a potential acquisition of Quantenna by Party B.

On August 6, 2018, Mr. Sobers and a representative of Party B discussed that Party B remained interested in a potential acquisition of Quantenna, but Party B was non-committal at such time where Quantenna stood in terms of Party B’s priorities. Shortly thereafter, Party B indicated that while it still had an interest in acquiring Quantenna, it planned on pursuing other strategic opportunities prior to any strategic transaction with Quantenna at this time.

On August 24, 2018, Dr. Heidari had a telephone call with a representative of a potential strategic partner (which we refer to as “Party C”) regarding a potential acquisition of Quantenna as well as potential partnership opportunities for the two companies.

On September 6, 2018, the Board held a regularly scheduled meeting. Also present were certain members of management, representatives of another potential financial advisor (for a portion of the meeting), and representatives of Qatalyst Partners (for a portion of the meeting). The Board discussed Quantenna’s performance, future growth prospects, business opportunities, potential strategic transactions and strategies for enhancing stockholder value. Representatives of a potential financial advisor joined the meeting and presented to the Board regarding, among other matters, recent developments and trends relating to Quantenna’s industry and the semiconductor industry more generally, timing considerations and other aspects relating to potential strategic transactions involving Quantenna, including potential targets that might be acquired by Quantenna. Representatives of the potential financial advisor then left the meeting. Representatives of Qatalyst Partners then joined the meeting and presented to the Board regarding, among other matters, recent developments and trends relating to Quantenna’s industry and the semiconductor industry more generally, timing considerations and other aspects relating to potential strategic transactions of Quantenna. Representatives of Qatalyst Partners then left the meeting and the Board continued to discuss various strategic possibilities.

 

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On November 2, 2018, representatives of a potential strategic partner (which we refer to as “Party D”) met with Dr. Heidari to discuss a potential strategic partnership between the companies in response to representatives of Party D requesting such a meeting.

On November 13, 2018, Quantenna entered into a confidentiality agreement with Party D, which agreement included a customary standstill provision that would automatically terminate upon Quantenna’s entry into a merger agreement with a third party.

On November 30, 2018, a representative of Party D and Mr. Sobers met socially and had an informal conversation regarding a potential strategic partnership between Quantenna and Party D.

On December 4, 2018, a representative of a potential strategic partner (which we refer to as “Party E”) reached out to Dr. Heidari to introduce himself and to arrange for a meeting.

Also on December 4, 2018, the Board held a regularly scheduled meeting. Also present were certain members of management, representatives of Qatalyst Partners (for a portion of the meeting) and representatives of another potential financial advisor (for a portion of the meeting). Representatives of a potential financial advisor joined the meeting to discuss potential strategic targets that Quantenna could consider acquiring and then left the meeting. Mr. Jack Lazar, a member of the Board, reminded the Board of his status as a member of the board of directors of one potential strategic partner. No other Board member indicated that he or she had an interest or potential interest in Quantenna’s evaluation of its strategic alternatives that is different from, or in addition to, the interests of Quantenna’s stockholders generally or a significant relationship with any other potential strategic party. At the conclusion of this discussion, the Board and Mr. Lazar agreed that Mr. Lazar would recuse himself from the presentation to be given by Qatalyst Partners later at this meeting and from all future Board meetings (or portions thereof) that discuss any potential strategic transactions involving Quantenna to the extent that the other company for which he was a director could reasonably be a participant in any such transaction. Mr. Lazar then left the meeting. Representatives of Qatalyst Partners then joined the meeting and discussed with the Board aspects relating to the current market environment, the status of strategic discussions to date with potential strategic partners and considerations relating to various strategic paths, including, without limitation, a potential sale of Quantenna and potential strategic partners that may be interested in acquiring Quantenna. Representatives of Qatalyst then left the meeting and the Board continued its discussion regarding strategic opportunities. The Board determined to continue to explore strategic opportunities and instructed management accordingly.

On December 6, 2018, a representative of Party D spoke with Dr. Heidari at an industry conference and indicated that Party D would be interested in participating in a sale process if Quantenna should determine to conduct one.

On December 7, 2018, Dr. Heidari and representatives of Party C had a meeting to discuss a potential partnership between the two companies. During this discussion, the potential for a business combination between Party C and Quantenna was also discussed.

On December 14, 2018, the Board held a special telephonic meeting. Also present were certain members of management, representatives of Qatalyst Partners (for a portion of the meeting) and a representative of O’Melveny. Mr. MacMitchell and a representative of O’Melveny confirmed with the Board that no directors (other than Mr. Lazar, which had been previously discussed) had any interest or potential interest in Quantenna’s evaluation of its strategic alternatives that is different from, or in addition to, the interests of Quantenna’s stockholders generally or had significant relationships with any potential strategic party with which the Company could engage. Mr. Lazar then recused himself from the meeting. The Board then discussed potential strategic opportunities as well as the potential engagement of a financial advisor. The Board discussed the experience, credentials, and track record of Qatalyst Partners in advising companies in the semiconductor and wireless spaces. In addition, the Board considered the experience, credentials, and track record of another potential

 

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financial advisor in advising companies in the semiconductor industry and other relevant industries. The Board also discussed Qatalyst Partners’ initial relationship disclosure letter circulated to the Board on December 12, 2018. Mr. Sobers reviewed for the Board the terms of the proposed engagement letter that management, together with representatives of O’Melveny, had negotiated with Qatalyst Partners, a draft of which was previously distributed to the Board. Representatives of Qatalyst Partners then joined the meeting. Representatives of Qatalyst Partners discussed with the Board aspects relating to a potential sale of Quantenna. Representatives of Qatalyst Partners, management and the Board discussed potential strategic partners and after reviewing for each such potential strategic partner the anticipated level of interest of the party, the relative ability of the party to complete an acquisition of Quantenna, and the potential competitive harm to including the party in a process, agreed on a list of 11 potential strategic partners for Qatalyst Partners to contact to determine their interest in a potential acquisition of Quantenna. The representatives of Qatalyst Partners also discussed with the Board their views that private equity sponsors were not likely to be very interested in a potential acquisition of Quantenna at this time. The Board instructed management to prepare presentation materials and a financial forecast that could be used for meetings with potential strategic partners. The representatives for Qatalyst Partners then left the meeting and the Board continued to discuss potential strategic opportunities. The Board then determined to enter into the engagement letter and engage Qatalyst Partners as its financial advisor. The Board also authorized and instructed management to work with Qatalyst Partners and to have Qatalyst Partners approach the agreed upon list of strategic partners on behalf of Quantenna to determine their interest in a potential acquisition of Quantenna and to facilitate a process for the Board to review and evaluate potential proposals to acquire Quantenna.

Following the conclusion of the meeting of the Board and in furtherance of and consistent with the discussion with the Board, management instructed representatives of Qatalyst Partners to contact two additional potential strategic partners for a total of, together with the 11 potential strategic partners previously designated by the Board on December 14, 2018, 13 potential strategic partners.

Between December 18, 2018 and January 2, 2019, representatives of Qatalyst Partners and members of management contacted the 13 potential strategic partners. Of the 13 potential strategic partners contacted, eight parties (which included ON Semiconductor and Parties A, C, D, E, F, G and H (each, to the extent not previously defined, as defined below)) executed a confidentiality agreement with Quantenna (including the confidentiality agreements with Party A, executed on November 30, 2017 and Party D executed on November 13, 2018) and participated in meetings with management and, in the case of the five potential strategic partners that submitted indications of interest during Quantenna’s process, were provided access to an electronic data room populated with information about Quantenna for due diligence purposes. All of the confidentiality agreements entered into by Quantenna in this process with the parties referenced above contained a standstill provision that automatically terminated upon Quantenna’s entry into a merger agreement with a third party. (The confidentiality agreement previously entered into with Party B on March 27, 2018 did not contain a standstill provision.) The remaining five parties contacted by Qatalyst Partners did not elect to proceed and accordingly did not enter into a confidentiality agreement and did not participate in a management presentation or receive access to Quantenna’s electronic data room.

On December 18, 2018, representatives of Qatalyst Partners reached out to representatives of ON Semiconductor regarding a potential acquisition of Quantenna.

On December 19, 2018, representatives of Qatalyst Partners spoke with representatives of ON Semiconductor regarding a potential acquisition of Quantenna. Representatives of ON Semiconductor indicated that they would discuss internally and respond. Thereafter on December 19, 2018, representatives of Qatalyst Partners sent to representatives of ON Semiconductor a draft confidentiality agreement.

Also on December 21, 2018, representatives of ON Semiconductor delivered to representatives of Qatalyst Partners a markup of the draft confidentiality agreement.

On December 23, 2018, representatives of Qatalyst Partners had a telephone call with a representative of Party A regarding a potential acquisition of Quantenna. The representative of Party A requested a meeting with management, but also stated that such a transaction may not be desirable for Party A at this time.

 

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On December 28, 2018, representatives of Qatalyst Partners delivered to representatives of ON Semiconductor a markup of the confidentiality agreement.

On January 11, 2019, management held a meeting with Party D regarding due diligence matters. Representatives of Qatalyst Partners and of Party D’s financial advisor were present.

On January 12, 2019, management held a meeting with Party C regarding due diligence matters. Representatives of Qatalyst Partners were present.

On January 15, 2019, as indicated above, Quantenna entered into a confidentiality agreement with ON Semiconductor, which agreement was dated effective as of December 21, 2018 and included a customary standstill provision that would automatically terminate upon Quantenna’s entry into a merger agreement with a third party.

On January 21, 2019, management held a meeting with ON Semiconductor regarding due diligence matters. Representatives of Qatalyst Partners were present.

Also on January 21, 2019, management and representatives of Party D had a due diligence call regarding financial matters and customers of Quantenna. Representatives of Qatalyst Partners were present.

On January 22, 2019, management held a telephonic meeting with a potential strategic partner (which we refer to as “Party F”) regarding due diligence matters. Representatives of Qatalyst Partners were present.

Also on January 22, 2019, management held a meeting with a potential strategic partner (which we refer to as “Party G”) regarding due diligence matters. Representatives of Qatalyst Partners were present.

Also starting on January 22, 2019 and ending on January 28, 2019, representatives of Qatalyst Partners, with the authorization of management, and following each such potential strategic partner’s meeting with management, sent to representatives of each of ON Semiconductor, Party A, Party C, Party D, Party E, Party F, Party G and Party H a process letter inviting each of them to submit by February 8, 2019 a non-binding indication of interest to acquire Quantenna.

On January 23, 2019, management held a meeting with Party E regarding due diligence matters. Representatives of Qatalyst Partners and Party E’s financial advisor were present.

On January 24, 2019, management held a meeting with a potential strategic partner (which we refer to as “Party H”) regarding due diligence matters. Representatives of Qatalyst Partners and of Party H’s financial advisor were present.

Also on January 24, 2019, a representative of a potential strategic partner (which we refer to as “Party I”) contacted Mr. Lazar indicating that Party I may be interested in exploring potential discussions with Quantenna that could ultimately lead to a business collaboration between the parties or a strategic transaction. Mr. Lazar then reported this conversation to Dr. Heidari.

On January 28, 2019, management held an in-person meeting with Party A regarding due diligence matters. Representatives of Qatalyst Partners were present.

On January 29, 2019, representatives of Party B informed Dr. Heidari that Party B may be ready to engage in more serious discussions regarding a potential strategic transaction between Quantenna and Party B.

On February 1, 2019, representatives of Party C stated to representatives of Qatalyst Partners that Party C had not reached a decision regarding whether to submit a proposal to potentially acquire Quantenna and would not likely reach a decision by February 8, 2019.

 

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On February 4, 2019, representatives of Qatalyst Partners followed up with representatives of Party A and received no response. Thereafter, there was no further contact with Party A.

On February 5, 2019, representatives of Party D’s financial advisor called representatives of Qatalyst Partners to inform Qatalyst Partners that Party D was withdrawing from Quantenna’s process.

Later on February 5, 2019, a representative of Party D called Dr. Heidari and they discussed the potential transaction. During this conversation, the representative from Party D commented that they would reconsider participating in the process subject to further internal discussion.

On February 7, 2019, representatives of Qatalyst Partners spoke with representatives of Party D’s financial advisor, who informed representatives of Qatalyst Partners that the board of directors of Party D was still considering submitting an indication of interest to potentially acquire Quantenna, but that Party D would not be in a position to submit such indication of interest on February 8, 2019.

On February 8, 2019, representatives of ON Semiconductor delivered to representatives of Qatalyst Partners a non-binding written indication of interest to acquire Quantenna for an all-cash purchase price of $21.00 per share. Such non-binding written indication of interest stated that ON Semiconductor would fund the purchase price through cash on hand or through funds available under its revolving credit facility.

Also on February 8, 2019, representatives of Party E delivered to representatives of Qatalyst Partners a non-binding written indication of interest to acquire Quantenna for an all-cash purchase price of $21.50 per share, and noted that Party E was open to considering including shares of Party E common stock as a portion of the consideration. Such non-binding written indication of interest stated that Party E would fund the purchase price through a combination of cash from Party E’s balance sheet and debt financing. Representatives of Party E also delivered to representatives of Qatalyst Partners a highly confident letter from Party E’s potential financing source.

Also on February 8, 2019, representatives of Party H delivered to representatives of Qatalyst Partners a non-binding written indication of interest to acquire Quantenna for an all-cash purchase price of $22.00 per share. Such non-binding written indication of interest stated that Party H would fund the purchase price through a combination of pro forma balance sheet cash, an existing revolving credit facility and new debt financing if required.

Also on February 8, 2019, representatives of Party G delivered to representatives of Qatalyst Partners a non-binding written indication of interest to acquire Quantenna for an all-cash purchase price range of $19.00 to $21.00 per share. Such non-binding written indication of interest stated that Party G would fund the purchase price through debt financing without further detail. In addition, in such non-binding written indication of interest, Party G requested 45 days of exclusivity.

Also on February 8, 2019, representatives of Party F informed representatives of Qatalyst Partners that Party F was withdrawing from participation in Quantenna’s process.

On February 10, 2019, representatives of Party D delivered to representatives of Qatalyst Partners a non-binding written indication of interest to acquire Quantenna for an all-cash purchase price of $18.00 per share. In such non-binding written indication of interest, Party D requested 30 days of exclusivity, with the potential for an additional 10-day extension of such exclusivity.

On February 11, 2019, representatives of Qatalyst Partners spoke with representatives of ON Semiconductor to clarify certain points in ON Semiconductor’s written indication of interest. On such call, representatives of ON Semiconductor reiterated their ability and readiness to proceed with a potential acquisition of Quantenna quickly.

 

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On February 12, 2019, the Board held a special telephonic meeting. Also present were certain members of management, representatives of Qatalyst Partners (for a portion of the meeting) and representatives of O’Melveny. After joining the meeting to confirm the presence of a quorum, Mr. Lazar was recused. Mr. Sobers reviewed, among other matters, the 2019 annual operating plan of Quantenna as well as the risks associated with achieving such plan. Following discussion, the Board approved the 2019 annual operating plan in the form presented by Mr. Sobers. Mr. Sobers also reviewed a management-prepared preliminary ten-year forecast of Quantenna’s projected results of operations (which incorporated the 2019 annual operating plan) as well as the risks associated with achieving such forecasts. Following discussion, the Board expressed its support for using the preliminary ten-year forecast in its review and consideration of strategic transactions and with the distribution of the first three years of such forecast to potential strategic partners, which such ten-year forecasts are collectively the “management projections” and such three-year forecasts are collectively the “management subset projections.” See the section entitled “The Merger—Certain Company Forecasts” beginning on page 49. Dr. Heidari reported that, as agreed upon, Qatalyst Partners had reached out to the 13 potential strategic partners to explore if there would be an interest in a potential acquisition of the Company. The Board then discussed whether to include in the process four competitively sensitive potential strategic partners (which were not included in the 13 potential strategic partners approached by Qatalyst Partners as a result of such competitive sensitivities), including Party B and Party I. The Board discussed the competitive risks presented by each such potential strategic partner, and antitrust and other regulatory considerations relating to a potential acquisition of Quantenna by such competitively sensitive potential strategic partners. Representatives of Qatalyst Partners then joined the meeting and discussed, among other matters, a status and summary update of the process, including that of the 13 potential strategic partners that were contacted, eight attended a meeting with management, four declined to participate in a meeting and one was still reviewing whether to proceed with a meeting. Representatives of Qatalyst Partners then noted that of the eight potential strategic partners that participated in a meeting with management, 5 submitted non-binding indications of interest, which were ON Semiconductor, Party D, Party E, Party G and Party H. Representatives of Qatalyst Partners also noted that the proposed acquisition price in the indications of interest ranged from a low of $18 per share to a high of $22 per share and that all were cash bids. Representatives of Qatalyst Partners then provided a summary of the non-binding indications of interest received from ON Semiconductor, Party D, Party E, Party G and Party H. Representatives of Qatalyst Partners then discussed advancing ON Semiconductor, Party E, Party G and Party H in Quantenna’s process and informing Party D that as a result of its materially lower initial bid as compared to the other four initial bids, Party D would not be advanced in Quantenna’s process. Representatives of Qatalyst Partners then discussed the four competitively sensitive potential strategic partners (including Party B and Party I), including the potential risks and benefits of including any or all of them in Quantenna’s process. A representative of O’Melveny reviewed antitrust considerations relating to such competitively sensitive potential strategic partners. Following discussions, the Board instructed (i) Qatalyst Partners to approach ON Semiconductor, Party E, Party G and Party H regarding moving them forward in Quantenna’s process and in connection therewith, permitting each such party to conduct further due diligence, (ii) Qatalyst Partners to advise Party D that it would not be invited to continue in Quantenna’s process due to its materially lower initial bid, (iii) Dr. Heidari to respond to the inbound inquiries from each of Party B and Party I for meetings regarding potential business development discussions or a potential strategic transaction, but to not at this time reference the existing Quantenna process and (iv) Qatalyst Partners and management not to include the other two competitively sensitive potential strategic partners in the process at this time. Representatives of Qatalyst Partners then left the meeting and the Board continued to discuss the strategic transaction process. Mr. MacMitchell and representatives of O’Melveny then discussed with the Board information regarding the summary of a draft merger agreement prepared by representatives of O’Melveny, which provided, among other matters, that the draft merger agreement to be provided to potential strategic partners who would be continuing to participate in Quantenna’s process included (i) a “hell or high water” regulatory efforts covenant and (ii) a 2% of equity value termination fee payable by Quantenna, among other circumstances, in connection with Quantenna accepting a superior proposal or making a recommendation change.

Also on February 12, 2019, representatives of Qatalyst Partners spoke with representatives of ON Semiconductor, Party E, Party G and Party H and informed each of them that each such party would be invited to

 

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conduct further due diligence and move on in Quantenna’s process, but that the process is competitive and each party would need to increase their purchase price.

Also on February 12, 2019, representatives of Qatalyst Partners informed representatives of Party D that the Board had not invited Party D to move forward in Quantenna’s process due to the materially lower price included in Party D’s non-binding indication of interest letter. Representatives of Qatalyst Partners also provided the same information to representatives of Party D’s financial advisor.

On February 13, 2019, representatives of Party D called Dr. Heidari and verbally delivered a revised proposal to potentially acquire Quantenna for an all-cash purchase price of $22.00 per share and stated that Party D’s board of directors had approved such proposal.

On February 14, 2019, representatives of Party D’s financial advisor delivered to representatives of Qatalyst Partners a revised written proposal for Party D to potentially acquire Quantenna for an all-cash purchase price of $22.00 per share, including a highly confident letter from Party D’s potential financing source.

Also on February 14, 2019, Dr. Heidari spoke with a representative of Party I in response to the January 24, 2019 outreach from Party I to Mr. Lazar. The parties agreed to schedule an in-person meeting (not including Mr. Lazar) to engage in discussions regarding a potential collaboration or strategic transaction between the parties.

On February 15, 2019, representatives of Qatalyst Partners informed representatives of the financial advisor of Party D that based on the revised proposal that Party D would be invited to conduct further due diligence and move on in Quantenna’s process.

Also on February 15, 2019, representatives of Party B discussed its business and a potential business combination between Party B and Quantenna with Dr. Heidari. The representatives of Party B informed Dr. Heidari that Party B expected to make a decision by March 14, 2019. Thereafter, representatives of Party B did not reach out to Dr. Heidari or representatives of Qatalyst Partners to further discuss a potential acquisition of Quantenna. Quantenna and representatives of Qatalyst Partners also did not reach out further to Party B due to potential competitive dynamics and other considerations consistent with the Board discussion at the meeting of the Board on February 12, 2019.

Starting on February 16, 2019, and following confirmation from management that it should proceed, Qatalyst Partners provided representatives of ON Semiconductor, Party D, Party E, Party G and Party H with access to an electronic data room populated with information about Quantenna for due diligence purposes. In the following weeks until March 20, 2019, in addition to the meetings held by management with ON Semiconductor, Party D, Party E, Party G and Party H detailed below, management responded to follow-up diligence questions from, held multiple follow-up diligence telephone calls with, and shared additional diligence materials with, representatives of ON Semiconductor, Party D, Party E, Party G and Party H.

On February 19, 2019, management had in-person diligence meetings with representatives of Party D, which primarily focused on revenue forecasts, customers, product roadmap, Quantenna’s financial model and cost structures. Representatives of Qatalyst Partners and Party D’s financial advisor also attended such meetings.

On February 20 and 21, 2019, management had in-person diligence meetings with representatives of Party E, which primarily focused on technology, engineering, operations, quality, sales, finance, legal and human resources topics. Representatives of Qatalyst Partners and Party E’s financial advisor attended such meetings.

On February 21, 2019, representatives of Party I requested a meeting with Dr. Heidari.

 

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On February 22, 2019, management had in-person diligence meetings with representatives of Party G, which primarily focused on product, sales and finance diligence. Representatives of Qatalyst Partners and Party G’s financial advisor were also present.

On February 26, 2019, management had in-person diligence meetings with representatives of Party G, which primarily focused on financial diligence. Representatives of Qatalyst Partners and Party G’s financial advisor were also present.

On February 27, 2019, representatives of Qatalyst Partners, with the authorization of management, delivered to representatives of each of ON Semiconductor, Party D, Party E, Party G and Party H a process letter and draft merger agreement and requested that revised proposals to acquire Quantenna be submitted by March 20, 2019, along with a markup of the draft merger agreement, committed financing, confirmation that due diligence is complete and that applicable necessary approvals have been obtained by such date.

Also on February 27, 2019, representatives of Party G’s financial advisor called representatives of Qatalyst Partners and, among other matters discussed, asked whether Quantenna would be willing to consider common stock consideration. The representatives of Qatalyst Partners responded that they believed Quantenna would be willing to consider common stock consideration if necessary. Representatives of Party G’s financial advisor communicated that Party G’s diligence should be completed by March 20, 2019, but that Party G may have a few confirmatory diligence items to finalize thereafter.

Also on February 27, 2019, representatives of Party C stated to representatives of Qatalyst Partners that Party C had not yet reached a decision regarding whether to submit a proposal to potentially acquire Quantenna and stated that Party C understood that their continued inaction could effectively remove Party C from Quantenna’s process.

On March 6, 2019, management had in-person diligence meetings with representatives of Party D, which primarily focused on finance, technology, engineering, legal, operations and human resources. Representatives of Qatalyst Partners and Party D’s financial advisor were also present.

On March 7, 2019, representatives of ON Semiconductor and management held in-person due diligence meetings, focusing primarily on human resources, legal and finance matters. Representatives of Qatalyst Partners were also present. Representatives of O’Melveny and representatives of Morrison & Foerster LLP, legal counsel to ON Semiconductor (which we refer to as “Morrison & Foerster”), also attended a portion of such meetings.

Also on March 7, 2019, representatives of O’Melveny delivered to representatives of each of ON Semiconductor, Party D, Party E, Party G and Party H the draft disclosure letter to the merger agreement.

On March 11 and 12, 2019, representatives of Party H and management held in-person due diligence meetings, focusing primarily on operations and technology, engineering, finance, legal and human resources. Representatives of Qatalyst Partners and Party H’s financial advisor also attended such meetings. Representatives of O’Melveny and representatives of Party H’s legal counsel also attended a portion of such meetings.

Also on March 11, 2019, a representative of Party E communicated to Dr. Heidari that Party E was withdrawing from Quantenna’s process. Quantenna then terminated Party E’s access to the electronic data room.

Also on March 11, 2019, Dr. Heidari attended a meeting with representatives of Party I, but there was no discussion regarding a potential acquisition of Quantenna by Party I. Thereafter, there were no further communications with Party I regarding a potential strategic transaction between Quantenna and Party I.

On March 12, 2019, representatives of ON Semiconductor and management held in-person due diligence meetings, focusing primarily on technology, engineering, operations and sales of Quantenna.

 

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Also on March 12, 2019, representatives of Party E’s financial advisor spoke with a representative of Qatalyst Partners and confirmed that Party E was withdrawing from Quantenna’s process.

Also on March 12, 2019, representatives of Qatalyst Partners spoke with representatives of ON Semiconductor. Representatives of ON Semiconductor communicated that they intended to submit a revised proposal on March 20, 2019 to acquire Quantenna and in that proposal would provide information regarding ON Semiconductor’s cash balance and available capacity under its revolving credit facility, noting that ON Semiconductor would not require additional financing in connection with a potential acquisition of Quantenna. Representatives of ON Semiconductor further noted to representatives of Qatalyst Partners that an updated proposal to potentially acquire Quantenna would be approved by the Executive Committee of the board of directors of ON Semiconductor, not ON Semiconductor’s full board of directors, but that ON Semiconductor would be able to quickly assemble its board of directors for approval to execute a merger agreement, when a definitive agreement with Quantenna was ready for approval.

Also on March 12, 2019, representatives of Party G’s financial advisor spoke with representatives of Qatalyst Partners and communicated that (i) if Party G were to make a final proposal, it would be within the range previously provided in its written indication of interest dated February 8, 2019 (which was $19.00 to $21.00 per share), (ii) financing commitments would not be available by March 20, 2019, and (iii) Party G was unlikely to provide a markup of the draft merger agreement. As a result, representatives of Party G inquired regarding whether or not Party G should submit a final proposal. Representatives of Qatalyst Partners reiterated the position that (a) the Board was focused only on the high end of the purchase price range Party G provided, (b) such a price would likely still not be sufficient to prevail in Quantenna’s process, and (c) ultimately it would be Party G’s decision whether to submit a final proposal.

On March 14, 2019, representatives of ON Semiconductor spoke with representatives of Qatalyst Partners regarding the status of due diligence and indicated that ON Semiconductor had made strong progress and would be ready to move quickly (reaching a decision and executing a merger agreement in as little as a week or less) if needed in connection with a potential acquisition of Quantenna.

On March 15, 2019, representatives of Party G informed representatives of Qatalyst Partners that Party G was withdrawing from Quantenna’s process. Quantenna then terminated Party G’s access to the electronic data room.

On March 17, 2019, a representative of Party D reached out to Dr. Heidari and communicated that Party D was withdrawing from Quantenna’s process. Quantenna then terminated Party D’s access to the electronic data room.

On March 18, 2019, representatives of Party H informed representatives of Qatalyst Partners that Party H required more time to submit an updated proposal to acquire Quantenna and that Party H was targeting March 22, 2019 to submit such updated proposal.

On March 19, 2019, representatives and advisors of ON Semiconductor conducted a review of the workpapers of PricewaterhouseCoopers LLP, Quantenna’s independent registered public accounting firm (which we refer to as “PwC”).

Also on March 19, 2019, representatives of Qatalyst Partners spoke with representatives of Party H and requested that Party H provide its markup of the merger agreement by March 20, 2019 even if Party H could not submit its updated proposal at such time. Representatives of Qatalyst Partners further requested that if Party H could not submit its revised proposal prior to March 22, 2019, that Party H provide it during the morning of March 22, 2019 to allow for the Board to consider Party H’s proposal at the Board’s special meeting on March 22, 2019.

 

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On March 20, 2019, representatives of ON Semiconductor delivered to representatives of Qatalyst Partners a non-binding written letter of intent, which provided for the acquisition of Quantenna for an all-cash purchase price of $23.00 per share, as well as a markup of the draft merger agreement and the Quantenna disclosure letter. ON Semiconductor confirmed in its non-binding written letter of intent, among other matters, that diligence was substantially complete, that the submission of such non-binding written letter of intent was approved by the Executive Committee of ON Semiconductor and that ON Semiconductor intended to fund the potential acquisition of Quantenna using cash on its balance sheet and/or its existing revolving credit facility. ON Semiconductor again reiterated its ability to move rapidly to execute a merger agreement. The revised draft of the merger agreement, among other matters, (i) removed the “hell or high water” regulatory efforts covenant, (ii) included revisions to the non-solicitation and deal protection provisions and related termination rights and fees, including revising the draft to provide that the Quantenna termination fee would equal 3% of the equity value of Quantenna and (iii) replaced the financing provisions with a representation that ON Semiconductor will have, at the closing of the merger, sufficient cash on hand and available under its existing revolving credit facility to pay the merger consideration.

Also on March 20, 2019, representatives and advisors of Party H conducted a review of PwC’s work papers and participated in multiple diligence calls with management regarding tax matters.

During the morning of March 22, 2019, representatives of Party H delivered to representatives of Qatalyst Partners a non-binding written letter of intent, which provided for the acquisition of Quantenna for an all-cash purchase price of $22.75 per share, as well as a markup of the draft merger agreement and a financing commitment letter from Party H’s potential lender. The non-binding written letter of intent also indicated that, prior to or concurrently with entering into a merger agreement, Party H expected to enter into agreements with Dr. Heidari and certain other key members of management for retention purposes and also expected to conduct customer due diligence telephone calls. Such non-binding written letter of intent also referenced a target date of April 8, 2019 for signing the draft merger agreement and announcement of the potential acquisition of Quantenna.

On March 22, 2019, the Board held a special meeting. Also present were certain members of management, representatives of Qatalyst Partners (for a portion of the special meeting) and representatives of O’Melveny. After joining the meeting to confirm the presence of a quorum, Mr. Lazar was recused. Dr. Heidari led a review of Quantenna’s business, reviewing customer relations, competitive challenges, Quantenna’s product portfolio, engineering and technology matters, human resources matters, and potential investment opportunities. Mr. MacMitchell also provided a legal update. Mr. Sobers provided a financial update for the Board and confirmed that the management projections had not changed since the Board last reviewed the management projections at the February 12, 2019 special meeting. Dr. Heidari and Messrs. Sobers and MacMitchell led the Board in a discussion of the potential risks associated with achieving such forecasts. Mr. MacMitchell and representatives of O’Melveny reviewed for the Board its fiduciary duties under Delaware law. Representatives of Qatalyst Partners then joined the meeting and (i) reviewed with the Board the process conducted to date, including the interactions with Party B and Party I, (ii) reviewed for the Board the letter of intent submitted by ON Semiconductor on March 20, 2019 and the letter of intent submitted by Party H earlier on March 22, 2019, including the manner in which each party proposed to finance the transaction, the proposed revisions to the draft merger agreement and the contingencies to signing the merger agreement, including the contingencies included in Party H’s non-binding written letter of intent that were not included in ON Semiconductor’s non-binding written letter of intent, and (iii) discussed with the Board the recent trading activity of Quantenna’s common stock. The Board then discussed the management projections, including the risks associated with achieving such forecasts. Representatives of Qatalyst Partners then discussed with the Board next steps. Following discussion, the Board instructed Qatalyst Partners to communicate to each of ON Semiconductor and Party H that (a) the Board is seeking an all-cash price of $24.75 per share and (b) the importance of eliminating any contingencies to entering into a merger agreement, and doing so in an expedited fashion. The Board also instructed Qatalyst Partners to respond to Party H that it was behind on price, speed, contingencies to signing and the extent of the substantive comments in its markup of the draft merger agreement. Representatives of Qatalyst Partners then left

 

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the meeting to contact ON Semiconductor and Party H, and Mr. MacMitchell and representatives of O’Melveny reviewed the material terms of the markups of the draft merger agreements by ON Semiconductor and Party H. Mr. MacMitchell and representatives of O’Melveny then discussed regulatory matters with the Board, including the differences in regulatory approval requirements between a transaction with ON Semiconductor and a transaction with Party H. The representatives of Qatalyst Partners then rejoined the meeting to report on a conversation they had with representatives of ON Semiconductor. The representatives of Qatalyst Partners reported that they had delivered the message as instructed to the representatives of ON Semiconductor. The representatives of Qatalyst Partners reported that the representatives of ON Semiconductor inquired as to whether Quantenna would agree to exclusivity in exchange for a higher price and that the Qatalyst Partners representatives had responded that Quantenna was not willing to grant exclusivity at this time and that ON Semiconductor’s best avenue for securing the transaction was to increase its bid and be prepared to quickly enter into the merger agreement (and noted in their conversation with the representatives of ON Semiconductor that O’Melveny would be providing a revised draft of the merger agreement shortly to Morrison & Foerster). The representatives of Qatalyst Partners then left the meeting to contact Party H and returned after they had spoken with representatives of Party H, reporting to the Board that they had delivered the message to the representatives of Party H as instructed. The Board concluded the meeting by determining to hold telephonic Board meetings on a daily basis at 5:00 p.m. PT until further notice.

Later on March 22, 2019, representatives of O’Melveny, on behalf of Quantenna, delivered to representatives of Morrison & Foerster a markup of the draft merger agreement. The revised draft, among other matters, (i) provided for a heightened regulatory efforts covenant and a reverse termination fee in the event that regulatory approvals were not obtained, (ii) included revisions to the non-solicitation and deal protection provisions and related termination rights and fees, (iii) added a representation to confirm that not only would ON Semiconductor have sufficient funds to pay the aggregate merger consideration at the closing of the merger, but that they would also have sufficient funds upon signing of the merger agreement to pay the merger consideration, (iv) provided Quantenna with greater flexibility to operate its business during the interim period between signing the merger agreement and closing the merger (we refer to these provisions as the “interim operating covenants”), and (v) revised the treatment of unvested, in-the-money stock options.

Later on March 22, 2019, a representative of O’Melveny spoke with a representative of Party H’s legal counsel and advised him that Party H was in a competitive process, but that the revised draft of the merger agreement they submitted was not competitive and that O’Melveny was working on a revised draft in response.

On March 23, 2019, representatives of ON Semiconductor spoke with representatives of Qatalyst Partners and informed them that ON Semiconductor was not prepared to increase its proposed acquisition price of $23.00 per share. Representatives of Qatalyst Partners and representatives of ON Semiconductor further discussed such purchase price and Quantenna’s process and representatives of Qatalyst Partners encouraged representatives of ON Semiconductor to submit a revised letter of intent increasing its purchase price prior to the meeting of the Board scheduled for later on March 23, 2019.

Also on March 23, 2019, representatives of Qatalyst Partners spoke with representatives of Party H and its financial advisor regarding the process and reiterated that Party H would need to increase its purchase price.

Later on March 23, 2019, representatives of ON Semiconductor communicated verbally to representatives of Qatalyst Partners a revised proposal to potentially acquire Quantenna for $23.75 per share of Quantenna common stock, with such proposal conditioned upon Quantenna granting a period of two weeks of exclusivity to ON Semiconductor, while also noting that despite the request for two weeks of exclusivity, ON Semiconductor expected to be able to execute a merger agreement with Quantenna within one week.

Later on March 23, 2019, representatives of O’Melveny spoke with representatives of Morrison & Foerster regarding the draft merger agreement and the representatives of Morrison & Foerster expressed the following as the key open points for ON Semiconductor in the draft merger agreement: (i) the regulatory efforts standard and

 

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related termination fee that would be payable by ON Semiconductor if the regulatory conditions were not satisfied (at a time when the other conditions to closing were satisfied), (ii) the scope of the interim operating covenants, (iii) the scope of the non-solicitation and deal protection provisions and related termination rights, and (iv) the treatment of unvested, in-the-money stock options.

Later on March 23, 2019, representatives of Qatalyst Partners informed representatives of Party H and its financial advisor that there had been further developments regarding the Quantenna process and requested that Party H, prior to the meeting of the Board scheduled for later on March 23, 2019, provide a revised proposal to potentially acquire Quantenna before the special meeting of the Board scheduled for later on March 23, 2019, including further clarity from Party H regarding timing to execute a merger agreement.

Immediately preceding the special meeting of the Board on March 23, 2019, representatives of Party H submitted to representatives of Qatalyst Partners a revised non-binding written letter of intent, which stated it was their best and final proposal, to acquire Quantenna at an all-cash purchase price of $24.50 per share, subject to a seven-day exclusivity period. Party H’s revised offer included certain signing contingencies relating to further customer diligence and retention of certain key employees of Quantenna.

Later on March 23, 2019, the Board held a special telephonic meeting. Also present were certain members of management, representatives of Qatalyst Partners and representatives of O’Melveny. After joining the meeting to confirm the presence of a quorum, Mr. Lazar was recused. Representatives of Qatalyst Partners provided an update to the Board regarding communications with ON Semiconductor and Party H since the Board meeting on March 22, 2019, including with respect to the verbal proposal that had been provided by ON Semiconductor and the revised non-binding written letter of intent that had been submitted by Party H. The Board, together with representatives of Qatalyst Partners and O’Melveny, discussed (i) the price proposed by Party H in comparison to the price proposed by ON Semiconductor, (ii) the additional conditions to executing a merger agreement included in Party H’s non-binding written letter of intent, which were not present in ON Semiconductor’s non-binding written letter of intent, and (iii) the additional regulatory approvals required in connection with an acquisition by Party H as opposed to an acquisition by ON Semiconductor. The Board, together with representatives of O’Melveny, also noted that Party H’s markup of the draft merger agreement was much more extensive and less favorable to Quantenna than the markup from ON Semiconductor. The Board then discussed the requests by ON Semiconductor and Party H for exclusivity. Following discussion, the Board instructed representatives of Qatalyst Partners to communicate to ON Semiconductor that the Board was willing to enter into a very limited exclusivity period with ON Semiconductor if ON Semiconductor was prepared to increase its bid to at least $24.50 per share. The Board also instructed Dr. Heidari to discuss with Party H the various conditions that Party H required before Party H would enter into a merger agreement with Quantenna and attempt to resolve the issues of greatest concern to Party H. The Board then unanimously (with Mr. Lazar recused) authorized Dr. Heidari to enter into an exclusivity agreement with ON Semiconductor if ON Semiconductor increased its all-cash bid to at least $24.50 per share.

Later on March 23, 2019, representatives of Qatalyst Partners spoke with representatives of ON Semiconductor and reiterated that the Board was seeking a price of $24.75 per share of Quantenna common stock, informed them that ON Semiconductor was not the highest bidder for Quantenna and that ON Semiconductor would need to raise their purchase price to no less than $24.50 per share in order for the Board to consider entering into a short period of exclusivity.

Later on March 23, 2019, representatives of ON Semiconductor then verbally communicated to representatives of Qatalyst Partners that ON Semiconductor would submit a revised proposal to potentially acquire Quantenna for $24.50 per share of Quantenna common stock and would provide a limited exclusivity agreement.

On March 24, 2019, Dr. Heidari spoke with the Chief Executive Officer of Party H. The Chief Executive Officer of Party H reiterated Party H’s intention to perform additional customer diligence and stated that such a

 

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meeting would preferably occur in-person prior to any execution of a definitive merger agreement. The Chief Executive Officer of Party H also stated that further actions would need to be taken prior to any execution of a definitive merger agreement to ensure key employee retention, including that Dr. Heidari would need to waive acceleration of his unvested equity in connection with the transaction, noting that it was expected that Dr. Heidari would be granted additional incentive compensation by Party H.

Also on March 24, 2019, Dr. Heidari spoke with Mr. Keith Jackson, President and Chief Executive Officer of ON Semiconductor, regarding the potential acquisition of Quantenna by ON Semiconductor. Mr. Jackson reiterated ON Semiconductor’s interest to acquire Quantenna as proposed and willingness to proceed on the accelerated basis previously discussed.

Also on March 24, 2019, representatives of Morrison & Foerster delivered to representatives of O’Melveny a draft exclusivity agreement, which provided that exclusivity would continue through the end of the day on March 27, 2019, subject to two potential two-day automatic extensions of exclusivity if at the expirations thereof both parties remained in good faith working towards a signing of the merger agreement.

Later on March 24, 2019, representatives of O’Melveny, on behalf of Quantenna, delivered to representatives of Morrison & Foerster a revised draft of the exclusivity agreement removing the two potential two-day automatic extensions of exclusivity and adding that the exclusivity period would terminate if ON Semiconductor lowered its price per share of Quantenna common stock below $24.50. Thereafter on the same day, Quantenna and ON Semiconductor signed such revised exclusivity agreement.

Prior to Quantenna and ON Semiconductor entering into the exclusivity agreement on March 24, 2019, representatives of Quantenna informed representatives of Party H that Quantenna was going to enter into exclusivity with another party and would need to cease communications. At this time, Party H’s access to the electronic data room of Quantenna was terminated.

Later on March 24, 2019, the Board held a special telephonic meeting Also present were certain members of management, representatives of Qatalyst Partners and representatives of O’Melveny. Mr. Lazar was not present as he was recused. Representatives of Qatalyst Partners provided an update to the Board regarding communications with ON Semiconductor and Party H since the prior Board meeting on March 23, 2019. Representatives of Qatalyst Partners and O’Melveny reviewed the ON Semiconductor exclusivity agreement with the Board and informed the Board that Quantenna had executed such exclusivity agreement. Representatives of O’Melveny then reviewed with the Board the open material issues in the draft merger agreement, noting that the issues were unchanged from those reported by O’Melveny to the Board at the March 23, 2019 Board meeting, except that the treatment of the unvested, in-the-money stock options had been resolved. The representatives of O’Melveny noted that they expected to receive a revised draft of the merger agreement from Morrison & Foerster later on March 24, 2019 and expected to engage in further detailed negotiations with representatives of Morrison & Foerster on the draft merger agreement beginning on March 25, 2019.

Later on March 24, 2019, representatives of Morrison & Foerster, on behalf of ON Semiconductor, delivered to representatives of O’Melveny a markup of the draft merger agreement. The revised draft, among other matters, (i) removed the heightened regulatory efforts covenant and removed the reverse termination fee in the event that regulatory approvals were not obtained, and (ii) included revisions to the non-solicitation and deal protection provisions and related termination rights.

Between March 25, 2019 and March 27, 2019, representatives of O’Melveny and representatives of Morrison & Foerster engaged in further detailed negotiations regarding the draft merger agreement and draft disclosure letter.

On March 25, 2019, the Board held a special telephonic meeting. Also present were certain members of management, representatives of Qatalyst Partners and representatives of O’Melveny. After joining the meeting to

 

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confirm the presence of a quorum, Mr. Lazar was recused. Representatives of O’Melveny reviewed with the Board the open issues in the draft merger agreement, including the regulatory efforts covenant and reverse termination fee and next steps for finalizing the draft merger agreement. Together with representatives of O’Melveny, the Board then discussed regulatory aspects of the contemplated merger with ON Semiconductor. Following discussion, the Board expressed that Quantenna should show flexibility on the regulatory covenant and reverse termination fee open issues.

Later on March 25, 2019, representatives of O’Melveny, on behalf of Quantenna, delivered to representatives of Morrison & Foerster a markup of the draft merger agreement in which, among other matters, Quantenna accepted the removal of the reverse termination fee tied to any failure to obtain regulatory approvals and accepted ON Semiconductor’s formulation of the regulatory efforts covenant.

On March 26, 2019, representatives of Morrison & Foerster, on behalf of ON Semiconductor, delivered to representatives of O’Melveny a markup of the draft merger agreement.

Later on March 26, 2019, the Board held a special telephonic meeting. Also present were certain members of management, representatives of Qatalyst Partners and representatives of O’Melveny. After joining the meeting to confirm the presence of a quorum, Mr. Lazar was recused. Representatives of O’Melveny reviewed with the Board the remaining open issues in the draft merger agreement, including the definition of superior proposal and the consequences if Quantenna breached the non-solicitation provisions. Following discussion, the Board instructed O’Melveny to finalize negotiations of the draft merger agreement and that the Board would be willing to accept ON Semiconductor’s position with respect to the definition of superior proposal but instructed O’Melveny to continue to push for Quantenna’s position with respect to the consequences if Quantenna breached the non-solicitation provisions.

Later on March 26, 2019, representatives of O’Melveny, on behalf of Quantenna, delivered to representatives of Morrison & Foerster a markup of the draft merger agreement in which Quantenna, among other matters, accepted ON Semiconductor’s formulation of the definition of superior proposal and retained Quantenna’s position with respect to the consequences if Quantenna breached the non-solicitation provisions. After conferring with representatives of ON Semiconductor, the representatives of Morrison & Foerster informed the representatives of O’Melveny that the proposed compromise was acceptable and then the representatives of O’Melveny and Morrison & Foerster worked to finalize the draft merger agreement and disclosure letter, both of which were finalized on March 27, 2019, prior to the respective board of directors meetings of the parties.

On March 27, 2019, the Board held a special telephonic meeting to consider the terms of the final proposed acquisition of Quantenna by ON Semiconductor, including the terms of the merger agreement. Also present were representatives of Qatalyst Partners and O’Melveny. Mr. Lazar was not present as he was recused. Representatives of O’Melveny reviewed with the Board the proposed acquisition of Quantenna by ON Semiconductor and the final material terms of the merger agreement. Representatives of O’Melveny also notified the Board during the course of the meeting that Morrison & Foerster had confirmed that the board of directors of ON Semiconductor had approved the merger agreement as proposed at its board of directors meeting. Representatives of Qatalyst Partners highlighted for the Board the above-described process that had been conducted by the Board, management and representatives of Qatalyst Partners. Representatives of Qatalyst Partners then presented to the Board their financial analyses of the $24.50 per share of Quantenna common stock cash consideration to be received by the holders of shares of Quantenna common stock pursuant to the merger agreement. At the request of the Board, a representative of Qatalyst Partners then delivered its oral opinion, which was subsequently confirmed in writing, to the effect that, based on and subject to the assumptions in the written opinion letter, Qatalyst Partners was of the opinion on March 27, 2019 that the merger consideration to be received by the holders of shares of Quantenna common stock (other than ON Semiconductor or any affiliate of ON Semiconductor) pursuant to, and in accordance with, the terms of the merger agreement, is fair, from a financial point of view, to such holders of shares of Quantenna common stock. The full text of the written opinion of Qatalyst Partners, dated March 27, 2019, which sets forth, among other matters, the assumptions

 

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made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Qatalyst Partners in rendering their opinion, is attached as Annex B to this proxy statement. See also “The Merger—Opinion of Qatalyst Partners LP”. After discussion among the directors, the Board unanimously (without Mr. Lazar due to his recusal) (i) determined that the merger agreement and the transactions contemplated thereby are fair to and in the best interests of Quantenna’s stockholders, (ii) adopted and declared advisable the merger agreement and the transactions contemplated thereby, and (iii) resolved to recommend that Quantenna’s stockholders adopt the merger agreement, all upon the terms and subject to the conditions set forth in the merger agreement.

Following the closing of the financial markets in the United States on March 27, 2019, Quantenna and ON Semiconductor entered into the merger agreement and issued a joint press release announcing the proposed merger.

Reasons for the Merger; Recommendation of the Board

The Board recommends that you vote “FOR” the merger proposal.

The Board held numerous meetings at which the business strategies, opportunities and challenges of Quantenna were evaluated and potential strategic alternatives, including a sale of Quantenna, were considered.

At a meeting held on March 27, 2019, after careful consideration, the Board unanimously (with Mr. Lazar recusing himself) (i) determined that the merger agreement and the transactions contemplated thereby are fair to and in the best interests of Quantenna’s stockholders, (ii) adopted and declared advisable the merger agreement and the transactions contemplated thereby, and (iii) resolved, subject to certain provisions of the merger agreement, to recommend that Quantenna’s stockholders adopt the merger agreement, all upon the terms and subject to the conditions set forth therein.

In evaluating and reaching its decision, the Board consulted with senior management and the representatives of O’Melveny & Myers LLP and Qatalyst Partners at various times and considered a number of factors, including the following material factors (not in any relative order of importance) that the Board believes support its decision to approve the merger and adopt the merger agreement:

 

   

historical information regarding (i) Quantenna’s business, financial performance and results of operations, (ii) market prices, volatility and trading activity with respect to Quantenna’s common stock, and (iii) market prices with respect to other industry participants and general market indices;

 

   

current information regarding (i) Quantenna’s business, prospects, financial condition, operations, technology, products, services, management, competitive position and strategic business goals and objectives, (ii) general economic, industry and financial market conditions, and (iii) opportunities and competitive factors within Quantenna’s industry;

 

   

the prospects and likelihood of realizing superior benefits through remaining an independent company, risks associated with remaining an independent company, and possible alternative business strategies;

 

   

the relative confidence of the Board in the ability and likelihood of Quantenna to achieve its projected financial performance;

 

   

the potential for other third parties to enter into strategic relationships with or to seek to acquire Quantenna, including a review of management’s dealings with other possible buyers in the past and assessment of the likelihood that a third party would offer a transaction that would be more favorable to Quantenna’s stockholders from a financial point of view than the merger and the other transactions contemplated by the merger agreement;

 

   

the acknowledgement by the Board that, as of the date of the merger agreement, the merger consideration represented a premium close to the all-time high price of the common stock;

 

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the timing of the merger and the risk that if Quantenna did not accept ON Semiconductor’s offer at that time, it may not have had another opportunity to do so or to pursue an opportunity offering the same value and certainty of closing to Quantenna’s stockholders;

 

   

the fact that, during the course of its negotiations with ON Semiconductor, ON Semiconductor raised the value of the consideration per share of Quantenna’s common stock from $21.00 to $24.50;

 

   

(i) the belief of the Board that continuing with the strategic process was unlikely to result in a transaction that would be more favorable to Quantenna’s stockholders from a financial point of view than the merger and the other transactions contemplated by the merger agreement, and (ii) the fact that Quantenna would be permitted, under circumstances described in the merger agreement, to terminate the merger agreement in order to enter into an agreement with respect to a superior proposal after giving ON Semiconductor the opportunity to match the superior proposal and upon payment of a termination fee equal to $32,165,000;

 

   

the belief of the Board that, although antitrust filings or notifications will be required to be made in the U.S. and China, the merger has a strong likelihood of closing without any material issues under applicable antitrust laws or from any governmental authorities that would prevent the consummation of the merger, and that no other regulatory approvals are anticipated to be required in connection with the merger;

 

   

the (i) oral opinion of Qatalyst Partners, subsequently confirmed in writing, to the effect that, as of March 27, 2019 and based upon and subject to the assumptions, qualifications, limitations and other matters set forth in such written opinion, the merger consideration to be received by the holders of shares of Quantenna common stock (other than ON Semiconductor or any affiliate of ON Semiconductor) pursuant to, and in accordance with, the Merger Agreement was fair, from a financial point of view, to such holders, and (ii) financial analyses presented by Qatalyst Partner to the Board on such date, each as more fully described below under the section of this proxy statement captioned “The Merger—Opinion of Qatalyst Partners LP.” The full text of the written opinion is attached as Annex B to this proxy statement and is incorporated by reference in this proxy statement in its entirety;

 

   

the fact that (i) ON Semiconductor is representing to Quantenna in the merger agreement that as of the date of the merger agreement it has sufficient funds to pay the merger consideration, and will also have at the closing sufficient funds to pay the merger consideration, and (ii) that ON Semiconductor’s obligation to complete the merger and pay the merger consideration is not conditioned on ON Semiconductor obtaining financing;

 

   

the Board’s belief, after consultation with representatives of Qatalyst Partners, that private equity firms would be constrained by their leverage models from being able to make a competitive offer for an acquisition of Quantenna; and

 

   

the fact that ON Semiconductor has a strong balance sheet, with cash on hand as of December 31, 2018, in excess of the aggregate merger consideration, and has a track record of completing acquisition transactions without undue delay.

The Board also considered the following potentially negative factors in its deliberations concerning the merger agreement and the merger:

 

   

the fact that Quantenna will no longer exist as an independent public company and Quantenna’s stockholders will forego any future increase in its value as an independent public company that might result from its possible growth;

 

   

the possible negative effects of the merger and public announcement of the merger on Quantenna’s financial performance, operating results and stock price and Quantenna’s relationships with customers, suppliers, distributors, other business partners, management and employees;

 

   

the fact that the merger agreement (i) precludes Quantenna from actively soliciting competing acquisition proposals and (ii) obligates Quantenna (or its successor) to pay ON Semiconductor a

 

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termination fee equal to $32,165,000 under specified circumstances, which could discourage the making of a competing acquisition proposal or adversely impact the price offered in such a proposal;

 

   

the fact that the merger agreement imposes restrictions on the conduct of Quantenna’s business prior to the effective time of the merger, which may adversely affect Quantenna’s business in the event the merger is not completed (including by delaying or preventing Quantenna from pursuing business opportunities that may arise or precluding actions that would be advisable if Quantenna were to remain an independent company);

 

   

the risks involved with the merger and the likelihood that Quantenna and ON Semiconductor will be able to complete the merger, the possibility that the merger might not be consummated (including because of failure to obtain the required antitrust clearances) and Quantenna’s prospects going forward without the combination with ON Semiconductor;

 

   

the substantial transaction expenses to be incurred in connection with the merger and the negative impact of such expenses on Quantenna’s cash reserves and operating results should the merger not be completed;

 

   

all known interests of directors and executive officers of Quantenna in the merger that may be different from, or in addition to, their interests as stockholders of Quantenna or the interests of Quantenna’s other stockholders generally; and

 

   

the availability of appraisal rights to stockholders of Quantenna in connection with the merger.

Certain Company Forecasts

Although Quantenna has publicly issued limited short-term guidance concerning certain aspects of its expected financial performance, it does not, as a matter of course, make public disclosure of detailed forecasts or projections of its expected financial performance for extended periods due to, among other things, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. However, in connection with Quantenna’s evaluation of strategic alternatives and a potential strategic transaction involving Quantenna, at the direction of the Board, Quantenna management prepared certain projections and estimates of future financial and operating performance with respect to Quantenna’s fiscal year 2019, 2020, 2021, 2022, 2023, 2024, 2025, 2026, 2027 and 2028 (which we refer to as the management projections). Of the management projections, Quantenna made available the projections and estimates of future financial and operating performance only with respect to calendar years 2019, 2020 and 2021 (which we refer to as the management subset projections) to the parties that had expressed interest in a potential acquisition of Quantenna and participated in a meeting, telephone call or online conference (ON Semiconductor, Party A, Party B, Party C, Party D, Party E, Party H and Party I). Quantenna made available, however, the full set of the management projections to the Board and Qatalyst Partners.

In addition, at the direction of Quantenna’s management and Board, certain sensitivities with respect to the management projections (which we refer to as the sensitivities) were prepared in February 2019 to enable the Board to review certain alternative scenarios relating to the management projections in the event that one or more of the risks to the business of Quantenna discussed by the Board were to materialize. At a meeting on March 22, 2019, the Board approved the use by Qatalyst Partners of the sensitivities in connection with its financial analysis and the rendering of its opinion.

A summary of the management projections is being included in this proxy statement because they were made available to the Board and Qatalyst Partners and the management subset projections were made available to ON Semiconductor, Party A, Party B, Party C, Party D, Party E, Party H and Party I. A summary of the sensitivities are being included in this proxy statement because they were made available to the Board and Qatalyst Partners. This information is not intended to influence your decision whether to vote for or against the merger proposal. The inclusion of this information should not be regarded as an indication that the Board, its

 

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advisors or any other person considered, or now considers, the management projections or the sensitivities to be material or to be a reliable prediction of actual future results, and the management projections and sensitivities should not be relied upon as such. The management projections and the sensitivities are subjective in many respects. There can be no assurance that the management projections or the sensitivities will be realized or that actual results will not be significantly higher or lower than reflected in the management projections or the sensitivities. The management projections and the sensitivities cover multiple years and such information by its nature becomes subject to greater uncertainty with each successive year. As a result, the inclusion of the management projections and the sensitivities in this proxy statement should not be relied on as necessarily predictive of actual future events.

The management projections and the sensitivities were prepared on a stand-alone basis and do not take into account any of the transactions contemplated by the merger agreement, including the merger and associated expenses, or Quantenna’s compliance with its covenants under the merger agreement. For these reasons and for the reasons described above, actual results likely will differ, and may differ materially, from those contained in the management projections and in the sensitivities.

The management projections were prepared by, and are the responsibility of, Quantenna’s management for internal use and use by Qatalyst Partners (with the exception of the management subset projections, which were also made available to the certain potential bidders as described above) by Quantenna and approved by the Board. The sensitivities were prepared at the direction of Quantenna’s management and Board for internal use by Quantenna and Qatalyst Partners. The management projections and the sensitivities were (i) used by Qatalyst Partners in its financial analyses undertaken in connection with rendering its opinion to the Board, (ii) not prepared for purposes of public disclosure, and (iii) not prepared on a basis designed to comply with published guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial data, published guidelines of the SEC (including those regarding forward-looking statements and the use of non-GAAP measures) or GAAP. PricewaterhouseCoopers LLP, Quantenna’s independent registered public accounting firm, has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the management projections and the sensitivities contained in this proxy statement and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report incorporated by reference in this proxy statement relates to Quantenna’s previously issued financial statements. It does not extend to the management projections or the sensitivities and should not be read to do so. Further, the management projections and the sensitivities include non-GAAP financial measures. Non-GAAP financial measures are not prepared in accordance with GAAP and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

Although the management projections and the sensitivities presented below are presented with numerical specificity, they are estimates of future performance and not historical facts. The management projections and the sensitivities were based on numerous variables and assumptions that were deemed to be reasonable as of the respective dates when such projections were finalized. Realization of such assumptions is inherently uncertain and may be beyond the control of Quantenna. Important factors that may affect actual results and cause the management projections or the sensitivities not to be achieved include, but are not limited to, risks and uncertainties relating to Quantenna’s business (including, without limitation, risks relating to competition; customer risks; scale; market and product diversification; breadth of solution offerings; technology risks; innovation demands of customers; organic growth opportunities; inorganic opportunities; and industry consolidation and other factors described or referenced under “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 23. In the view of Quantenna’s management, the management projections had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of Quantenna’s management of the future financial performance of Quantenna and other matters covered thereby. In the view of Quantenna’s management, the sensitivities are also reasonable estimates and judgments as to the future financial performance of Quantenna and the other matters covered thereby. In addition, the assumptions underlying the management projections and the sensitivities are subject to change and

 

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have not been revised since their preparation to reflect any changes in Quantenna’s business, industry performance, the legal or regulatory environment, general business or economic conditions, or any other transaction or event that has occurred or that may occur and that was not anticipated as the management projections and the sensitivities were prepared. Neither Quantenna nor ON Semiconductor undertakes any obligation, except as required by law, to update or otherwise revise the management projections or the sensitivities to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error or to not be appropriate, or to reflect changes in Quantenna’s business, industry performance, the legal or regulatory environment, or general business or economic conditions. There can be no assurance that the management projections or the sensitivities will be realized or that Quantenna’s future financial results will not materially vary from the management projections or the sensitivities.

Management Projections

The following is a summary of the management projections prepared by Quantenna’s management and provided to the Board and Qatalyst Partners and a subset of which (as described above), the management subset projections, were provided to ON Semiconductor, Party A, Party E, Party D, Party F and Party H.

 

    Fiscal Year  
(in millions, except per share amount
and percentages)
(1)
  CY2019     CY2020     CY2021     CY2022     CY2023     CY2024     CY2025     CY2026     CY2027     CY2028  

Revenue

  $ 265     $ 344     $ 426     $ 490     $ 564     $ 632     $ 707     $ 778     $ 840     $ 882  

Non-GAAP COGS

  $ (131   $ (162   $ (197   $ (230   $ (271   $ (309   $ (354   $ (389   $ (412   $ (424

Non-GAAP Gross Profit

  $ 134     $ 182     $ 229     $ 260     $ 293     $ 322     $ 354     $ 389     $ 429     $ 459  

Non-GAAP Operating Expense

  $ (98   $ (113   $ (127   $ (162   $ (195   $ (221   $ (233   $ (249   $ (269   $ (282

Non-GAAP Operating Income

  $ 36     $ 69     $ 103     $ 98     $ 99     $ 101     $ 120     $ 140     $ 160     $ 176  

Less: Taxes

  $ (1   $ (1   $ (1   $ (7   $ (17   $ (17   $ (20   $ (24   $ (27   $ (30

NOPAT (2)

  $ 35     $ 68     $ 101     $ 91     $ 82     $ 84     $ 100     $ 116     $ 133     $ 146  

Less: Capital Expenditures

  $ (5   $ (6   $ (7   $ (8   $ (17   $ (11   $ (12   $ (13   $ (14   $ (15

Plus: Depreciation

  $ 6     $ 6     $ 6     $ 6     $ 6     $ 6     $ 6     $ 6     $ 6     $ 6  

Less: Investment in Working Capital

  $ (10   $ (11   $ (12   $ (9   $ (11   $ (12   $ (16   $ (14   $ (10   $ (9

Unlevered Free Cash Flow(3)

  $ 27     $ 57     $ 88     $ 79     $ 60     $ 67     $ 78     $ 95     $ 114     $ 128  

Cumulative Dilution to Current Shareholders(4)

    3     6     10     13     16     20     23     26     28  

EBITDA(5)

  $ 42     $ 75     $ 108     $ 104     $ 105     $ 107     $ 126     $ 146     $ 166     $ 182  

Non-GAAP Earnings per Share

  $ 0.90     $ 1.64     $ 2.36                

 

(1)

Non-GAAP metrics exclude stock-based compensation expense, non-recurring items, including acquisition related costs, and changes to deferred tax balances.

(2)

NOPAT is a non-GAAP financial measure known as Net Operating Profit After Tax, calculated as Non-GAAP Operating Income after taxes.

(3)

Unlevered Free Cash Flow” is a non-GAAP financial measure calculated by starting with NOPAT (as shown in the table above) and subtracting capital expenditures and investment in working capital and then adding back depreciation expense.

(4)

“Cumulative Dilution to Current Shareholders” is the projected dilution to current stockholders through the issuance of equity awards over the projection period calculated on a cumulative basis for each successive year shown. Projected dilution amounts are calculated as new equity award issuances less cancellations (which may be due to non-achievement of time-based, performance-based or other milestones).

 

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(5)

EBITDA” is a non-GAAP financial measure known as Earnings Before Income Taxes, Depreciation and Amortization, calculated by starting with Non-GAAP Operating Income and adding back depreciation and amortization (without adding back any duplicative amounts, such as amortization of acquired intangibles).

Sensitivities

The sensitivities adjusted the management projections by applying the operating margin sensitivities (as described below) to each of three revenue cases: (i) the projected revenue set forth in the management projections; (ii) a revenue sensitivity case culminating in 2028 terminal year revenue of $788 million, which used a calendar year 2018 to 2021 compound annual growth rate of 20% and annual revenue growth based on the management projections for calendar years 2022 through 2028; and (iii) a second revenue sensitivity case culminating in 2028 terminal year revenue of $658 million, which used revenues based on the consensus of third-party research analysts’ projections (which we refer to as the analyst projections) for calendar years 2019 through 2021 and annual revenue growth based on the management plan for calendar years 2022 through 2028. The “operating margin sensitivities” were three operating margin cases: (i) the projected operating margins set forth in the management projections (approximately 24% calendar year 2021 operating margin); (ii) an operating margin sensitivity case reflecting intermediate operating margins for calendar years 2019 through 2021 (20% calendar year 2021 operating margin), and management projections operating margins for calendar years 2022 through 2028; and (iii) a second operating margin sensitivity case which used operating margins based on the analyst projections for calendar years 2019 through 2021 (approximately 16% calendar year 2021 operating margin), and management projections operating margins for calendar years 2022 through 2028.

Opinion of Qatalyst Partners

Quantenna retained Qatalyst Partners to act as financial advisor to our Board in connection with a potential transaction such as the merger and to evaluate whether the merger consideration to be received by the holders of shares of Quantenna common stock (other than ON Semiconductor or any affiliate of ON Semiconductor) pursuant to, and in accordance with, the terms of the merger agreement was fair, from a financial point of view, to such holders. Quantenna selected Qatalyst Partners to act as Quantenna’s financial advisor based on Qatalyst Partners’ qualifications, expertise, reputation and its knowledge of Quantenna’s business and the industry in which Quantenna operates. Qatalyst Partners has provided its written consent to the reproduction of its opinion, which is attached as Annex B, in this proxy statement. At the meeting of our Board held on March 27, 2019 to evaluate the merger, Qatalyst Partners rendered to our Board its oral opinion, subsequently confirmed in writing by delivery of its written opinion, to the effect that, as of March 27, 2019, and based upon and subject to the various assumptions, qualifications, limitations and other matters set forth therein, the merger consideration to be received by the holders of shares of Quantenna common stock (other than ON Semiconductor or any affiliate of ON Semiconductor) pursuant to, and in accordance with, the terms of the merger agreement was fair, from a financial point of view, to such holders. Following the meeting, Qatalyst Partners delivered its written opinion, dated March 27, 2019, to our Board.

The full text of the opinion of Qatalyst Partners, dated as of March 27, 2019, is attached to this proxy statement as Annex B and is incorporated into this proxy statement by reference. The opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Qatalyst Partners in rendering its opinion. You should read the opinion carefully in its entirety. Qatalyst Partners’ opinion was provided to our Board and addresses only, as of the date of the opinion, the fairness, from a financial point of view, of the merger consideration to be received by the holders of shares of Quantenna common stock (other than ON Semiconductor or any affiliate of ON Semiconductor) pursuant to, and in accordance with, the terms of the merger agreement to such holders, and it does not address any other aspect of the merger. It does not constitute a recommendation to any Quantenna stockholder as to how to vote with respect to the merger or any other matter and does not in any manner address the prices at which the shares of Quantenna common stock will trade at any time. The summary of Qatalyst Partners’ opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached to this proxy statement as Annex B.

 

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For purposes of the opinion set forth therein, Qatalyst Partners reviewed the merger agreement, certain related documents and certain publicly available financial statements and other business and financial information of Quantenna. Qatalyst Partners also reviewed certain forward-looking information relating to Quantenna prepared by management of Quantenna, including financial projections and operating data of Quantenna summarized in the section of this proxy statement captioned “—Certain Company Forecasts” (which we refer to as the “management projections”). Qatalyst Partners also reviewed certain forward-looking information relating to Quantenna approved for its use by the management of Quantenna comprised of sensitivities with respect to the management projections (which we refer to as the “sensitivities”), as described in more detail in “—Certain Company Forecasts.” Additionally, Qatalyst Partners discussed the past and current operations and financial condition and the prospects of Quantenna with management of Quantenna (including the management projections, the sensitivities and their respective underlying assumptions). Qatalyst Partners also reviewed the historical market prices and trading activity for Quantenna common stock and compared the financial performance of Quantenna and the prices and trading activity of Quantenna common stock with that of certain other selected publicly-traded companies and their securities. In addition, Qatalyst Partners reviewed the financial terms, to the extent publicly available, of selected acquisition transactions and performed such other analyses, reviewed such other information and considered such other factors as it deemed appropriate.

In arriving at its opinion, Qatalyst Partners 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, or discussed with, Qatalyst Partners by Quantenna. With respect to the management projections, Qatalyst Partners was advised by Quantenna’s management, and Qatalyst Partners assumed, that the management projections had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Quantenna of the future financial performance of Quantenna and other matters covered thereby. With respect to the sensitivities, Qatalyst Partners was advised by the management of Quantenna, and Qatalyst Partners assumed, that they were also reasonable estimates and judgments as to the future financial performance of Quantenna and the other matters covered thereby, and Quantenna’s management consented to Qatalyst Partners’ use of the sensitivities for purposes of its opinion. Qatalyst Partners also assumed that the merger will be consummated in accordance with the terms set forth in the merger agreement, without any modification, waiver or delay that would be material to Qatalyst Partners’ analysis. In addition, Qatalyst Partners assumed that in connection with the receipt of all the necessary approvals of the proposed merger, no delays, limitations, conditions or restrictions will be imposed that could have an adverse effect on the Quantenna stockholders receiving the merger consideration and that would be material to Qatalyst Partners’ analysis. Qatalyst Partners did not make any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Quantenna or its affiliates, nor was Qatalyst Partners furnished with any such evaluation or appraisal. In addition, Qatalyst Partners relied, without independent verification, upon the assessment of the management of Quantenna as to the existing and future technology and products of Quantenna and the risks associated with such technology and products. Qatalyst Partners’ opinion has been approved by Qatalyst Partners’ opinion committee in accordance with its customary practice.

Qatalyst Partners’ opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion. Events occurring after the date of the opinion may affect Qatalyst Partners’ opinion and the assumptions used in preparing it, and Qatalyst Partners did not assume any obligation to update, revise or reaffirm its opinion. Qatalyst Partners’ opinion did not address the underlying business decision of Quantenna to engage in the merger, or the relative merits of the merger as compared to any strategic alternatives that may be available to Quantenna. Qatalyst Partners’ opinion is limited to the fairness, from a financial point of view, of the merger consideration to be received by the holders of shares of Quantenna common stock (other than ON Semiconductor or any affiliate of ON Semiconductor) pursuant to, and in accordance with, the terms of the merger agreement, and Qatalyst Partners expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of the officers, directors or employees of Quantenna or any of its affiliates, or any class of such persons, relative to such merger consideration.

The following is a summary of the material analyses performed by Qatalyst Partners in connection with its opinion dated March 27, 2019. The analyses and factors described below must be considered as a whole;

 

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considering any portion of such analyses or factors, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Qatalyst Partners’ opinion. For purposes of its analyses, Qatalyst Partners utilized the consensus of third-party research analysts’ projections (which we refer to as the “analyst projections”), the management projections and the sensitivities. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by Qatalyst Partners, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Qatalyst Partners financial analyses.

Discounted Cash Flow Analysis

Qatalyst Partners performed an illustrative discounted cash flow analysis, which is designed to imply a range of estimated potential, present values per share for Quantenna common stock as of December 31, 2018, based on the management projections, by:

 

   

adding:

 

  a)

the implied net present value of the estimated future unlevered free cash flows of Quantenna, based on the management projections, for calendar year 2019 through calendar year 2027 (which implied present value was calculated by using a range of discount rates of 10.5% to 14.0%, based on an estimated weighted average cost of capital for Quantenna);

 

  b)

the implied net present value of a corresponding terminal value of Quantenna, calculated by multiplying the estimated net operating profit after taxes in calendar year 2028 based on the management projections, by a range of multiples of enterprise value to next-twelve-months estimated net operating profit after taxes of 12.0x to 22.0x, and discounted to present value using the same range of discount rates used in item (a) above; and

 

  c)

Quantenna’s cash net of debt, as of December 30, 2018, as provided by Quantenna management; and

 

   

dividing the resulting amount by the number of fully-diluted shares of Quantenna common stock (calculated utilizing the treasury stock method), adjusted for restricted stock units, performance stock units, and stock options, outstanding as of March 25, 2019, all of which amounts were provided by Quantenna’s management (which we refer to as the “Fully Diluted Shares”), with each of the above-referenced estimated future unlevered free cash flows and terminal value having also been adjusted for the degree of estimated dilution to current stockholders through each respective applicable period (which totaled approximately 28% in the case of the terminal value) due to the estimated net effects of equity issuances and cancellations related to future equity compensation, based on estimates of future dilution as estimated by Quantenna management.

Based on the calculations set forth above, this analysis implied a range of per share values for Quantenna common stock of approximately $19.93 to $34.26.

Qatalyst Partners performed alternative versions of the illustrative discounted cash flow analysis based on the sensitivities and utilizing the same methodology described above. Based on such calculations, this analysis implied a range of per share values for Quantenna common stock of approximately (i) $19.07 to $34.26 based on the application of the operating margin sensitivities to the Management Plan revenue projections (approximately $882 million calendar year 2028 revenue), (ii) $17.55 to $31.16 based on the application of the operating margin sensitivities to the $788 million calendar year 2028 revenue sensitivity and (iii) $15.46 to $26.91 based on the application of the operating margin sensitivities to the $658 million calendar year 2028 revenue sensitivity.

 

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Selected Companies Analysis

Qatalyst Partners reviewed and compared selected publicly-available financial and stock market information and public market multiples of Quantenna with publicly available information and public market multiples for selected companies. The companies, which Qatalyst considered generally relevant to a financial comparison with Quantenna, used in this comparison are listed below.

 

Selected Semiconductor Companies

   CY20E P/E Multiples*  

Acacia Communications, Inc.

     28.4x  

Silicon Laboratories Inc.

     21.8x  

Inphi Corporation

     20.3x  

Nordic Semiconductor

     19.9x  

Realtek Semiconductor Corp.

     17.9x  

MaxLinear, Inc.

     17.7x  

MediaTek Inc.

     17.4x  

Marvell Technology Group Ltd.

     14.0x  

Cypress Semiconductor Corporation

     12.3x  

QUALCOMM Incorporated

     12.3x  

Qorvo, Inc.

     11.3x  

Broadcom Inc.

     11.1x  

Skyworks Solutions, Inc.

     10.7x  

Intel Corporation

     10.7x  

Aquantia Corp.

     NM**  

 

(*)

Estimates generally based on non-GAAP statistics as defined by each company and explicitly excluding stock-based compensation, amortization of intangibles and other non-recurring items regardless of non-GAAP treatment.

(**)

Multiples greater than 75.0x considered not meaningful (“NM”).

Based upon research analyst projections as of March 26, 2019 for calendar year 2020, and using the per share closing prices as of March 26, 2019 for shares of the selected companies, Qatalyst Partners calculated, among other things, the price/earnings per share multiple for calendar year 2020 (which we refer to as the “CY2020E P/E Multiple”) for each of the selected companies.

The CY2020E P/E Multiple for Quantenna was 18.4x based on research analyst projections and the closing price of Quantenna as of March 26, 2019.

Based on an analysis of the CY2020E P/E Multiple for each of the selected companies, Qatalyst Partners selected a representative range of 14.0—20.0x and applied this range to Quantenna’s estimated calendar year 2020 earnings based on each of the analyst projections and the management projections. This analysis implied a range of per share values for Quantenna common stock of approximately $15.65 to $22.36 based on the analyst projections and approximately $23.02 to $32.89 based on the management projections.

No company included in the selected companies analysis is identical or directly comparable to Quantenna. In evaluating the selected companies, Qatalyst Partners made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters. Many of these matters are beyond the control of Quantenna, such as the impact of competition on Quantenna’s business and the industry in general, industry growth and the absence of any material adverse change in Quantenna’s financial condition and prospects or the industry or in the financial markets in general. Individual multiples or mathematical analysis, such as determining the arithmetic mean, median, or the high or low, is not in itself a meaningful method of using selected company data.

 

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Selected Transactions Analysis

Qatalyst Partners compared 39 selected public semiconductor transactions with equity value greater than $490 million announced between January 2011 and March 2019. These transactions are listed below:

 

Announcement

Date

 

Target

 

Acquiror

  NTM
Revenue Multiple
  NTM
P/E Multiple*
03/11/19   Mellanox Technologies, Ltd.   NVIDIA Corporation   5.5   20.2
09/10/18   Integrated Device Technology, Inc.   Renesas Electronics Corporation   7.4   25.9
03/01/18   Microsemi Corporation   Microchip Technology Incorporated   5.0   15.5
11/20/17   Cavium, Inc.   Marvell Technology Group Ltd.   5.9   23.7
03/29/17   Exar Corporation   MaxLinear, Inc.   3.8   31.3
12/20/16   InvenSense, Inc.   TDK Corporation   4.0   NM**
11/21/16   Applied Micro Circuits Corporation   MACOM Technology Solutions Holdings, Inc.   3.7   NM**
09/12/16   Intersil Corporation   Renesas Electronics   5.4   31.1
07/26/16   Linear Technology Corporation   Analog Devices, Inc.   9.0   25.3
06/15/16   QLogic Corporation   Cavium, Inc.   2.1   14.9
01/19/16   Atmel Corporation   Microchip Technology Incorporated   2.9   21.7
11/24/15   PMC-Sierra, Inc.   Microsemi Corporation   4.2   18.6
11/18/15   Fairchild Semiconductor International, Inc.   ON Semiconductor Corporation   1.7   20.9
10/21/15   SanDisk Corporation   Western Digital Corporation   3.1   25.3
09/30/15   EZchip Semiconductor Ltd.   Mellanox Technologies, Ltd.   4.8   16.2
06/01/15   Altera Corporation   Intel Corporation   7.7   35.6
05/28/15   Broadcom Corporation   Avago Technologies Limited   3.6   15.0
05/07/15   Micrel, Incorporated   Microchip Technology Incorporated   3.0   42.4
04/30/15   OmniVision Technologies, Inc.   Investor Group   1.0   22.0
03/02/15   Freescale Semiconductor, Ltd.   NXP Semiconductors N.V.   3.4   16.7
02/25/15   Emulex Corporation   Avago Technologies Limited   1.5   14.3
01/27/15   Silicon Image, Inc.   Lattice Semiconductor Corporation   1.9   36.9
12/01/14   Spansion Inc.   Cypress Semiconductor Corporation   1.5   16.8
10/14/14   CSR plc   QUALCOMM Incorporated   2.8   27.1
08/20/14   International Rectifier Corporation   Infineon Technologies AG   2.0   22.3
06/11/14   Montage Technology Group Limited   Shanghai Pudong Science and Technology Investment Co., Ltd.   3.4   13.6
06/09/14   Hittite Microwave Corporation   Analog Devices, Inc.   6.5   28.6
02/24/14   TriQuint Semiconductor, Inc.   RF Micro Devices, Inc.   1.8   32.4
12/16/13   LSI Corporation   Avago Technologies Limited   2.7   17.1
11/11/13   RDA Microelectronics, Inc.   Tsinghua Unigroup Ltd.   1.8   14.1
08/15/13   Volterra Semiconductor Corporation   Maxim Integrated Products, Inc.   3.1   30.5
07/12/13   Spreadtrum Communications, Inc.   Tsinghua Unigroup, Ltd.   1.5   10.6
06/22/12   MStar Semiconductor, Inc.   MediaTek Inc.   2.1   15.9
05/02/12   Standard Microsystems Corporation   Microchip Technology Incorporated   1.8   22.1
01/23/12   Gennum Corporation   Semtech Corporation   3.1   20.1
09/22/11   Zarlink Semiconductor Inc.   Microsemi Corporation   2.0   16.9
09/12/11   NetLogic Microsystems, Inc.   Broadcom Corporation   8.3   29.2
04/04/11   National Semiconductor Corporation   Texas Instruments Incorporated   4.4   18.8
01/05/11   Atheros Communications, Inc.   QUALCOMM Incorporated   3.4   23.5

 

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(*)

Estimates generally based on non-GAAP statistics as defined by each company and explicitly excluding stock-based compensation, amortization of intangibles and other non-recurring items regardless of non-GAAP treatment.

(**)

Multiples greater than 75.0x considered not meaningful (“NM”).

For each of the transactions listed above, Qatalyst Partners reviewed, among other things, the implied fully-diluted enterprise value of the target company as a multiple of (a) the revenue of the target company for next-twelve month period (which we refer to as the “NTM Revenue Multiple”) and (b) the price to earnings per share multiple for such next-twelve month period (which we refer to as the “NTM P/E Multiple”), as reflected in certain publicly available financial statements, research analyst reports and press releases as of the announcement of the applicable transaction. The median and mean of the NTM Revenue Multiples for the transactions listed above were 3.1x and 3.7x, respectively, and were 2.4x and 2.5x, respectively, for the transactions listed above involving target companies with less than 55% gross margins. The median and mean of the NTM P/E Multiples for the transactions listed above were 21.7x and 22.5x, respectively, and were 21.7x and 21.8x, respectively, for the transactions listed above involving target companies with less than 55% gross margins.

Based on an analysis of the NTM Revenue Multiple for each of the selected transactions, Qatalyst Partners selected a representative range of 2.5x to 4.0x and applied that range to Quantenna’s revenue for the twelve-month period ended on December 31, 2019 reflected in the analyst projections. This analysis implied a range of per share values for Quantenna common stock of approximately $17.81 to $26.32.

Based on an analysis of the NTM P/E Multiple for each of the selected transactions, Qatalyst Partners selected a representative range of 15.0x to 30.0x and applied that range to Quantenna’s estimated earnings per share for the twelve-month period ending on December 31, 2019 reflected in the analyst projections. This analysis implied a range of per share values for Quantenna common stock of approximately $12.02 to $24.03.

No company or transaction utilized in the selected transactions analysis is identical or directly comparable to Quantenna or the merger. In evaluating the selected transactions, Qatalyst Partners made judgments and assumptions with regard to general business, market and financial conditions and other matters, many of which are beyond Quantenna’s control, such as the impact of competition on Quantenna’s business or the industry generally, industry growth and the absence of any material adverse change in Quantenna’s financial condition and prospects or the industry or in the financial markets in general, which could affect the public trading value of the companies and the aggregate value of the transactions to which they are being compared. Individual multiples or mathematical analysis, such as determining the arithmetic mean, median, or the high or low, is not in itself a meaningful method of using selected transactions data. Because of the unique circumstances of each of these transactions and the merger, Qatalyst Partners cautioned against placing undue reliance on this information.

Miscellaneous

In connection with the review of the merger by our Board, Qatalyst Partners 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 amenable to a partial analysis or summary description. In arriving at its opinion, Qatalyst Partners considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Qatalyst Partners believes that selecting any portion of its analyses, without considering all analyses as a whole, could create a misleading or incomplete view of the process underlying its analyses and opinion. In addition, Qatalyst Partners 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 Qatalyst Partners’ view of the actual value of Quantenna. In performing its analyses, Qatalyst Partners made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond

 

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Quantenna’s control. Any estimates contained in Qatalyst Partners’ 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.

Qatalyst Partners conducted the analyses described above solely as part of its analysis of the fairness, from a financial point of view, of the merger consideration to be received by the holders of shares of Quantenna common stock (other than ON Semiconductor or any affiliate of ON Semiconductor) pursuant to, and in accordance with, the terms of the merger agreement to such holders. This analysis does not purport to be an appraisal or to reflect the prices at which Quantenna common stock might actually trade at any time.

Qatalyst Partners’ opinion and its presentation to our Board was one of many factors considered by our Board in deciding to approve the merger agreement. Consequently, the analyses as described above should not be viewed as determinative of the opinion of our Board with respect to the merger consideration to be received pursuant to, and in accordance with, the terms of the merger agreement by the holders of shares of Quantenna common stock, in their capacity as such holders (other than ON Semiconductor or any affiliate of ON Semiconductor), or of whether our Board would have been willing to agree to different consideration. The merger consideration payable in the merger was determined through arm’s-length negotiations between Quantenna and ON Semiconductor and was unanimously approved by our Board (with Mr. Lazar recused). Qatalyst Partners provided advice to Quantenna during these negotiations. Qatalyst Partners did not, however, recommend any specific consideration to Quantenna or that any specific consideration constituted the only appropriate consideration for the merger.

Qatalyst Partners provides investment banking and other services to a wide range of entities and individuals, domestically and offshore, from which conflicting interests or duties may arise. In the ordinary course of these activities, affiliates of Qatalyst Partners may at any time hold long or short positions, and may trade or otherwise effect transactions in debt or equity securities or loans of Quantenna, ON Semiconductor or certain of their respective affiliates. Other than as set forth below, during the two-year period prior to the date of Qatalyst Partners’ opinion, no material relationship existed between Qatalyst Partners or any of its affiliates and Quantenna or ON Semiconductor pursuant to which compensation was received by Qatalyst Partners or its affiliates. Qatalyst Partners and/or its affiliates may in the future provide investment banking and other financial services to Quantenna or ON Semiconductor and their respective affiliates for which Qatalyst Partners or its affiliates would expect to receive compensation.

Qatalyst Partners provided Quantenna with financial advisory services in connection with the proposed merger for which it will be paid approximately $20.5 million, $125,000 of which was payable upon execution of the Qatalyst Partners engagement letter, $2.5 million of which was payable upon the delivery of its opinion (regardless of the conclusion reached in the opinion), and the remaining portion of which will be paid upon, and subject to, the consummation of the merger. Quantenna has also agreed to reimburse Qatalyst Partners for its reasonable expenses incurred in performing its services. Quantenna has also agreed to indemnify Qatalyst Partners and its affiliates, their respective members, directors, officers, partners, agents and employees and any person controlling Qatalyst Partners or any of its affiliates against certain liabilities, including liabilities under federal securities law, and certain expenses related to or arising out of Qatalyst Partners’ engagement.

Financing of the Merger

ON Semiconductor and Merger Sub estimate that the total amount of funds necessary to complete the merger and the other transactions contemplated by the merger agreement will be approximately $1.1 billion, which will be funded through a combination of debt incurred under ON Semiconductor’s existing credit agreement and ON Semiconductor’s cash and cash equivalents on hand at closing. This amount includes the funds needed to (1) pay Quantenna’s stockholders the amounts due to them under the merger agreement, (2) make payments in respect of Quantenna’s outstanding equity-based awards pursuant to the merger agreement, and (3) pay related fees, expenses and taxes.

 

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Although obtaining any financing is not a condition to the consummation of the merger, we cannot assure you that the amounts available under ON Semiconductor’s existing credit agreement together with ON Semiconductor’s combined cash and cash equivalents on hand at closing will be sufficient to consummate the merger.

Closing and Effective Time of Merger

Assuming receipt of required regulatory approvals and timely satisfaction of other closing conditions, including the approval by our stockholders of the merger proposal, we currently expect the closing of the merger to occur in the second half of calendar year 2019. See the section entitled “The Merger Agreement—Closing and Effective Time of the Merger” beginning on page 69.

The effective time of the merger will occur upon a certificate of merger having been duly filed with and accepted by the Secretary of State of the State of Delaware (or at such later time as may be specified in the certificate of merger).

Payment of Merger Consideration and Surrender of Stock Certificates

At or prior to the effective time of the merger, ON Semiconductor will deposit, or will cause to be deposited, with the paying agent, for the benefit of the holders of shares of our common stock, an amount of cash sufficient to pay the aggregate merger consideration payable to our stockholders.

Promptly after the effective time of the merger (but in no event later than 2 business days thereafter), ON Semiconductor will send, or will cause the paying agent to send, to each holder of certificates that immediately prior to the effective time of the merger represented shares of our common stock and whose shares were converted into the merger consideration a letter of transmittal (in a form that was reasonably acceptable to Quantenna prior to the effective time of the merger) and instructions (which will specify that the delivery will be effected, and risk of loss and title will pass, only upon proper delivery of the certificates representing shares of our common stock or transfer of uncertificated shares of our common stock to the paying agent) for use in such exchange.

The paying agent will pay each holder of record the aggregate merger consideration to which such holder is entitled (i) in the case of certificated shares, after surrendering the certificate(s) representing shares of our common stock, together with a properly completed letter of transmittal, and (ii) in the case of uncertificated shares, without any action on the part of the person in whose name such uncertificated shares are registered, except as may be required by the paying agent (including in respect of any applicable tax forms or other documentation required to be delivered by such holder). Interest will not be paid or accrue in respect of the merger consideration. From the effective time of the merger until the surrender or transfer of certificates or book-entry shares, as the case may be, each such certificate or book-entry share will represent only the right to receive in exchange therefor a cash amount (after giving effect to any required tax withholdings) equal to the merger consideration.

You should not return any stock certificates you hold with the enclosed proxy card, and you should not forward any stock certificates to the paying agent without a letter of transmittal.

Any holder of uncertificated shares will not be required to deliver a certificate or an executed letter of transmittal to the paying agent to receive the merger consideration that such holder is entitled to receive. ON Semiconductor will cause the paying agent to pay and deliver, as promptly as reasonably practicable after the effective time of the merger, the merger consideration in respect of such uncertificated shares (and such shares will be canceled).

From and after the effective time of the merger, there will be no further registration of transfers of shares of our common stock that were outstanding immediately prior to the effective time of the merger.

 

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If any cash deposited with the paying agent remains unclaimed for one year following the effective time of the merger, such cash will be returned to ON Semiconductor upon demand. Thereafter, holders of our common stock (other than holders of excluded shares) who have not received payment will be entitled to look only to ON Semiconductor with respect to payment of the merger consideration (after giving effect to any required tax withholdings), without any interest thereon, as general creditors thereof.

If you have lost a certificate, or if it has been stolen or destroyed, then before you will be entitled to receive the merger consideration, you will be required to provide an affidavit of the loss, theft or destruction, and, if required by the surviving corporation, post a bond in a reasonable amount as the surviving corporation may direct, as indemnity against any claim that may be made against it with respect to such certificate. These procedures will be described in the letter of transmittal and related instructions that you will receive, which you should read carefully and in their entirety.

ON Semiconductor, Merger Sub, the surviving corporation and the paying agent will be entitled to deduct and withhold from the merger consideration such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign tax law. Any sum that is withheld will be remitted to the appropriate taxing authority, and will be treated for all purposes of the merger agreement as having been paid to the holder of shares with regard to whom it is deducted and withheld.

Interests of Certain Persons in the Merger

In considering the recommendation of the Board that you vote to adopt the merger agreement, you should be aware that aside from their interests as Quantenna stockholders, Quantenna’s directors and executive officers may have interests in the merger that may be different from, in conflict with or in addition to, those of Quantenna stockholders generally. Members of the Board were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to Quantenna stockholders that the merger agreement be adopted. For more information, see the sections entitled “The Merger—Background of the Merger” beginning on page 31 and “The Merger—Reasons for the Merger; Recommendation of the Board” beginning on page 47. These interests are described in more detail below in the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for Quantenna’s Named Executive Officers—Golden Parachute Compensation” beginning on page 89.

Treatment of Outstanding Equity-Based Awards

The Quantenna options and RSUs (which we collectively refer to as “Quantenna equity awards”), held by Quantenna’s executive officers, and the Quantenna RSUs held by Quantenna’s non-employee directors, immediately prior to the effective time of the merger will be treated in the same manner as those Quantenna equity awards held by other employees of Quantenna. The outstanding ESPP share purchase rights of Quantenna’s executive officers will be treated in the same manner as outstanding ESPP share purchase rights held by other employees of Quantenna. As described further in the section titled “The Merger Agreement—Treatment of Common Stock, Stock-Based Awards and Performance Awards” beginning on page 69, Quantenna equity awards will be subject to the following treatment:

 

   

Vested Options. At or immediately prior to the effective time of the merger, each vested Quantenna stock option that has an exercise price that is less than $24.50 will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash determined by multiplying (i) the excess of $24.50 over the exercise price of the vested Quantenna stock option by (ii) the number of shares of our common stock subject to such vested Quantenna stock option.

 

   

Out-of-the Money Options. At or immediately prior to the effective time, each Quantenna stock option that has an exercise price that is equal to or greater than $24.50 (whether or not vested) shall be canceled without payment.

 

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Unvested Options. As of the effective time of the merger, each unvested Quantenna stock option that has an exercise price that is less than $24.50 will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash determined by multiplying (i) the excess of $24.50 over the exercise price of the unvested Quantenna stock option by (ii) the number of shares of our common stock subject to such unvested Quantenna stock option. Such amount will be payable, subject to the holder’s continued employment or service to ON Semiconductor or its affiliates through the applicable payment date, on the earliest of (but in no event later than December 31 of the calendar year in which the effective time occurs): (x) the same vesting dates that applied to the corresponding unvested Quantenna stock option, (y) the last regularly scheduled payroll date of the calendar year in which the effective time occurs, and (z) if applicable, the termination date of the holder’s employment or service with ON Semiconductor and its affiliates, if the corresponding unvested Quantenna stock option (or an applicable agreement between Quantenna and the holder of the option) provided for accelerated vesting on such termination. If the holder terminates employment or service to ON Semiconductor or its affiliates prior to the applicable payment date, the unvested portion (after giving effect to any applicable accelerated vesting provision) of such cash payment amount shall be forfeited.

 

   

Vested Restricted Stock Unit Awards. At or immediately prior to the effective time of the merger, each vested Quantenna RSU award will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash equal to (i) the number of shares of our common stock subject to the vested Quantenna RSU award multiplied by (ii) $24.50.

 

   

Unvested Restricted Stock Unit Awards. As of the effective time of the merger, each unvested Quantenna RSU award (including each unvested PSU award) will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash equal to (i) the number of shares of our common stock subject to the unvested Quantenna RSU award multiplied by (ii) $24.50. Such amount will be payable on the same vesting dates that applied to the corresponding unvested Quantenna RSU, subject to the holder’s continued employment or service to ON Semiconductor or its affiliates through the applicable vesting date and subject to any right to vesting acceleration as was in effect with respect to such unvested Quantenna RSU immediately prior to the effective time. If the holder terminates employment or service to ON Semiconductor or its affiliates prior to the applicable vesting date, the unvested portion (after giving effect to any applicable accelerated vesting provisions) of such cash payment amount shall be forfeited.

 

   

Employee Stock Purchase Plan. In connection with the execution of the merger agreement, we have caused the offering period currently in progress under the ESPP to be the final offering period under the ESPP and to be terminated as of the final exercise date. We have also caused each participant’s then-outstanding share purchase right under the ESPP to be exercised as of the final exercise date. On the final exercise date, the funds credited for each participant under the ESPP will be used to purchase shares of our common stock in accordance with the terms of the ESPP, and each share that is outstanding immediately prior to the effective time will be canceled and converted into the right to receive $24.50 in cash, less any applicable withholding taxes and without interest. Any funds credited to a participant under the ESPP that are not used to purchase shares in accordance with the terms of the ESPP will be refunded to such participant on or promptly following the final exercise date. No further share purchase rights will be granted or exercised under the ESPP after the final exercise date. The ESPP will be terminated as of the effective time of the merger.

Assuming the merger was completed on April 29, 2019, the estimated aggregate amount that would be payable to Quantenna’s executive officers (i.e., Dr. Heidari and Messrs. Sobers and Carroll) as a group for their Quantenna equity awards is as follows: (a) with respect to vested Quantenna stock options (including stock options that will vest in connection with the merger), $28,693,117, (b) with respect to unvested Quantenna stock options (that may become payable after the effective time as described above), $5,638,675, (c) with respect to vested Quantenna RSUs (including RSUs that will vest in connection with the merger), $0, and (d) with respect

 

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to unvested Quantenna RSUs (that may become payable after the effective time as described above and assuming PSUs will be eligible to vest as to 100% of the target number of shares subject to the award based on the actual level of achievement of the applicable performance goals through the effective time), $10,795,925 (or $11,815,125 assuming the PSUs would be eligible to vest as to the maximum number of PSUs subject to the award based on the actual level of achievement of the applicable performance goals through the effective time).

Assuming the merger was completed on April 29, 2019, the estimated aggregate amount that would be payable to Quantenna’s non-employee directors as a group for their vested Quantenna RSUs (including RSUs that will vest in connection with the merger) is $1,426,390. As described below, all of the Quantenna RSUs held by Quantenna’s non-employee directors will vest in connection with the merger. Quantenna’s non-employee directors do not currently hold any Quantenna stock options.

For an estimate of the amounts that would be payable to each of Quantenna’s executive officers in connection with any acceleration of their Quantenna equity awards, see the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for Quantenna’s Named Executive Officers—Golden Parachute Compensation” beginning on page 89. The amounts in the preceding paragraph were determined using the merger consideration of $24.50 per share.

Acceleration of Non-Employee Director RSU Awards

Pursuant to our non-employee director compensation policy, each of our non-employee directors was granted an annual RSU award under the 2016 Omnibus Plan on the date of our 2018 annual meeting of stockholders and are expected to be granted an annual RSU award on or about June 2019 on substantially the same terms and conditions. These awards would have vested, subject to the director’s continued service to Quantenna, on the earlier of the one year anniversary of the grant date or the day prior to our next annual meeting of stockholders. Additionally, certain directors were granted initial RSU awards under the 2016 Omnibus Plan in connection with the director’s appointment to the Board. These initial RSU awards would have vested as to one-third of the shares subject to the RSU award on each of the first, second and third anniversaries of the date of grant (or the first, second and third annual meetings following the date of grant, if earlier). However, the 2016 Omnibus Plan provides that in the event of a change in control of Quantenna (such as the merger) non-employee directors will fully vest in all outstanding equity awards granted under the 2016 Omnibus Plan.

2019 Performance RSU Awards

Each executive officer was granted a PSU award in February 2019, which vests based on Quantenna’s revenue, gross margin and operating margin for the 2019 fiscal year. The award agreement provides that if a change in control of Quantenna (such as the merger) occurs, the performance period will end with the change in control and the administrator of the 2016 Omnibus Plan will determine the number of PSUs eligible to vest based on the actual level of achievement of the applicable performance goals for such shortened performance period (with the applicable performance targets adjusted to reflect the shortened performance period) (which we refer to as the “eligible RSUs”). One-third of the eligible PSUs will vest on the first anniversary of the applicable vesting commencement date for the award, and one-sixth of the eligible PSUs will vest every six months thereafter until the award has fully vested on the third anniversary of the vesting commencement date, subject to the executive’s continued employment or service through the vesting date (except as provided in the change in control agreements described below).

Dr. Heidari was granted a PSU award with respect to a target number of 56,300 shares of Quantenna common stock, Mr. Sobers was granted a PSU award with respect to a target number of 14,500 shares of Quantenna common stock, and Mr. Carroll was granted a PSU award with respect to a target number of 12,400 shares of Quantenna common stock. The maximum number of shares that may vest as to each award is 150% of the target number of shares subject to the award.

 

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For an estimate of the amounts that would be payable to each of Quantenna’s executive officers in connection with any acceleration of their Quantenna equity awards assuming a qualifying termination of the executive officer’s employment occurs on April 29, 2019, see the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for Quantenna’s Named Executive Officers—Golden Parachute Compensation” beginning on page 89.

Change in Control Agreements

Each of the executive officers is party to a change in control agreement that provides for certain severance benefits in the event the executive officer’s employment is terminated by Quantenna without cause, due to the executive officer’s death or disability, or by the executive officer for good reason (as such terms are defined in the change in control agreement) (which we refer to as a “qualifying termination”) within three months prior to and twelve months following a change in control of Quantenna (which we refer to as a “change in control period”). The merger will constitute a change in control for purposes of the change in control agreements. Each of the change in control agreements had an initial five year term (ending in 2021), which automatically renews for additional one year terms following the fifth anniversary of the agreement, unless either party gives six-months’ notice of non-renewal.

The change in control agreements provide that, in the event the executive officer’s employment is terminated in a qualifying termination within the change in control period, the executive officer will be entitled to:

 

   

a lump sum payment of one times the executive officer’s base salary;

 

   

a lump sum payment of one times the executive officer’s target annual bonus for the fiscal year in which the qualified termination occurs;

 

   

continued payment or reimbursement by Quantenna of premiums for the executive officer’s health insurance under COBRA until the earliest of (i) the twelve-month anniversary of the qualified termination, (ii) the date the executive officer is covered under similar plans or (iii) the date the executive ceases to be eligible for coverage under COBRA (or a lump sum payment equal to such amount if Quantenna determines it cannot legally pay the COBRA reimbursements); and

 

   

full acceleration of the executive officer’s outstanding and unvested equity awards (with PSU awards deemed to vest at the greater of actual performance or 100% of target).

All payments to the executive officers in connection with a qualifying termination are contingent upon the executive officer’s execution of a general release agreement in favor of Quantenna. The severance payments are generally scheduled to be paid as soon as practicable after the release becomes effective and irrevocable but not later than sixty-one days following termination (or, if later, on the effective date of the change in control, if the qualified termination occurred prior to the effective time of the merger).

The change in control agreement provides that in the event any payments and benefits provided to the executive officer under any Quantenna plan or agreement would cause the executive officer to be subject to an excise tax for “excess parachute payments” under Sections 280G and 4999 of the Code, then such payments and benefits will be reduced if and to the extent a reduction in payments or benefits would result in the executive officer retaining a larger amount on an after-tax basis than if the executive officer received all the payments and benefits.

For an estimate of the value of the payments and benefits described above that would be payable to Quantenna’s executive officers under their respective change in control agreements upon a qualifying termination of the executive officer’s employment in connection with the merger, see the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for Quantenna’s Named Executive Officers—Golden Parachute Compensation” beginning on page 89.

 

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Fiscal 2019 Executive Non-Equity Incentive Awards

Each of the executive officers was granted a cash incentive award opportunity under Quantenna’s Fiscal 2019 Executive Non-Equity Bonus Plan (which we refer to as the “fiscal 2019 cash incentive plan”), which provides for the payment of cash bonuses based on Quantenna’s financial performance, and the individual executive officer’s performance, for fiscal 2019. The fiscal 2019 cash incentive plan provides that upon a change in control of Quantenna, such as the merger, during fiscal 2019, the performance period will end as of the effective date of the change in control and the executive officer will receive a pro-rata cash bonus based on Quantenna’s actual performance for the shortened performance period (with the applicable performance targets adjusted to reflect the shortened performance period), provided the executive officer remains employed by Quantenna as of the date immediately prior to the change in control or is terminated by Quantenna within three months prior to and in anticipation of the change in control. Such cash bonus will be paid as soon as practicable after the merger.

For an estimate of the value of the fiscal 2019 cash incentive awards that will be payable to Quantenna’s executive officers in connection with the merger, see the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for Quantenna’s Named Executive Officers—Golden Parachute Compensation” beginning on page 89.

Other Compensation Matters

Under the merger agreement, Quantenna may grant annual RSU awards to Quantenna’s non-employee directors in or around June 2019 consistent with Quantenna’s Outside Director Compensation Policy.

In January 2019, as part of Quantenna’s annual compensation review, the Compensation Committee of the Board of Directors of Quantenna approved increases to the annual base salary amount and target annual cash bonus opportunity of each executive officer (other than Dr. Heidari) that will be effective June 1, 2019. Mr. Sober’s base salary will be increased from $310,000 to $325,000 and his target annual bonus will be increased from $185,000 to $195,000. Mr. Carroll’s base salary will be increased from $278,000 to $290,000 and his target annual bonus will be increased from $187,000 to $232,000.

Indemnification and Insurance

Pursuant to the terms of the merger agreement, Quantenna’s directors and officers will be entitled to certain ongoing indemnification and advancement rights as well as coverage under directors’ and officers’ liability insurance policies. See the section entitled “The Merger Agreement—Directors’ and Officers’ Indemnification and Insurance” beginning on page 87 for a description of such ongoing indemnification, advancement and coverage obligations of the surviving corporation and ON Semiconductor.

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

The following is a summary of the material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) whose shares of our common stock are converted into the right to receive cash in the merger. This summary does not purport to consider all aspects of U.S. federal income taxation that might be relevant to our stockholders. For purposes of this discussion, we use the term “U.S. holder” to mean a beneficial owner of shares of our common stock that is, for U.S. federal income tax purposes:

 

   

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

 

   

a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States or any of its political subdivisions;

 

   

a trust that (i) is subject to the primary supervision of a court within the United States and of which one or more U.S. persons have the authority to control all substantial decisions or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or

 

   

an estate that is subject to U.S. federal income tax on its income regardless of its source.

 

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If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our common stock, the U.S. federal income tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership. A partner of a partnership holding our common stock should consult its tax advisor regarding the U.S. federal income tax consequences of the merger.

This discussion is based on the Internal Revenue Code of 1986, as amended (which we refer to as the “Code”), Treasury regulations promulgated under the Code and published rulings of the Internal Revenue Service (which we refer to as the “IRS”) and court decisions, all as of the date hereof. These laws are subject to change or differing interpretation, possibly on a retroactive basis, which could affect the treatment described below. In addition, we have not sought, and do not intend to seek, any ruling from the IRS with respect to the statements made and the conclusions reached in the following discussion, and no assurance can be given that the IRS will agree with the views expressed herein, or that a court will not sustain any challenge by the IRS in the event of litigation. The discussion applies only to U.S. holders who hold shares of our common stock as capital assets, and does not apply to holders of shares of our common stock received in connection with the exercise of employee stock options or otherwise as compensation, holders who hold an equity interest, actually or constructively, in ON Semiconductor or Quantenna after the merger, holders who have perfected and not withdrawn a demand for, or lost the right to, appraisal under the DGCL or to holders who may be subject to special rules under the U.S. federal income tax laws (such as insurance companies, banks, tax-exempt organizations, financial institutions, broker-dealers, partnerships, S corporations or other pass-through entities (or investors therein), mutual funds, traders in securities who elect the mark-to-market method of accounting, stockholders subject to the alternative minimum tax, stockholders that have a functional currency other than the U.S. dollar or stockholders who hold our common stock as part of a hedge, straddle, wash sale, constructive sale or conversion transaction). This discussion also does not address the U.S. tax consequences of the receipt of cash in connection with the cancellation of restricted stock units or options to purchase shares of our common stock and does not address any other matters relating to equity compensation or benefit plans or any aspect of state, local or foreign tax laws. This discussion does not address any consequences under the U.S. federal tax laws other than those pertaining to the income tax, does not discuss the unearned income Medicare contribution tax on “net investment income” imposed pursuant to the Health Care and Education Reconciliation Act of 2010 and does not address any consequences under any applicable state, local or foreign tax laws. Holders of our common stock should consult their own tax advisors to determine the particular tax consequences to them of the merger, including the applicability and effect of any state, local, foreign or other tax laws.

Exchange of Shares of Our Common Stock for Cash Pursuant to the Merger

The exchange of shares of our common stock for cash in the merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder whose shares of our common stock are converted into the right to receive cash in the merger will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received with respect to such shares (determined before the deduction of any applicable withholding taxes, as described below under “Backup Withholding and Information Reporting”) and the U.S. holder’s adjusted tax basis in such shares. A U.S. holder’s adjusted tax basis will generally equal the price the U.S. holder paid for its shares. Gain or loss will be determined separately for each block of shares of our common stock held by a U.S. holder (i.e., shares of our common stock acquired at the same cost in a single transaction). Any such capital gain or loss will be long-term capital gain or loss where the U.S. holder’s holding period for such shares of our common stock is more than one year at the effective time of the merger. Long-term capital gain of a non-corporate U.S. holder is generally taxed at preferential rates. There are limitations on the deductibility of capital losses.

Backup Withholding and Information Reporting

A U.S. holder may be subject to information reporting with respect to any payments made pursuant to the merger. In addition, backup withholding of tax will apply at the statutory rate to such payments, unless the U.S. holder or other applicable payee provides a taxpayer identification number, certifies that such number is correct

 

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and otherwise complies with the backup withholding rules or otherwise establishes an exemption. Each U.S. holder should complete and sign, under penalty of perjury, the Form W-9 to be included as part of the letter of transmittal and return it to the payment agent, in order to provide the information and certification necessary to avoid backup withholding, unless an exemption applies and is established in a manner satisfactory to the payment agent.

Backup withholding is not an additional tax. Any amounts withheld from payments to a U.S. holder pursuant to the merger under the backup withholding rules will generally be allowable as a refund or a credit against such U.S. holder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS. U.S. holders are urged to consult their tax advisors as to qualifications for exemption from backup withholding and the procedure for obtaining the exemption.

The U.S. federal income tax consequences described above are not intended to constitute a complete description of all tax consequences relating to the merger. Because individual circumstances may differ, each stockholder should consult the stockholder’s tax advisor regarding the applicability of the rules discussed above to the stockholder and the particular tax effects to the stockholder of the merger in light of such stockholder’s particular circumstances, the application of state, local and foreign tax laws, and, if applicable, the treatment of stock-based awards or any other matters relating to equity compensation or benefit plans.

Regulatory Approvals

Completion of the merger is subject to the U.S. and foreign antitrust clearances listed below. Although Quantenna and ON Semiconductor believe that they will be able to obtain these clearances in a timely manner, the governmental agencies that have jurisdiction over the clearances listed below have broad discretion in making their decisions as to whether to grant such clearances and the conditions that such clearances will be subject to. Moreover, recent protectionist statements and actions of the United States government, including President Trump preventing Broadcom Ltd.’s pending acquisition of Qualcomm Inc. from being completed, have raised concerns that the governments of other countries may also act in a protectionist manner, including with respect to antitrust clearances. Such countries may include China where industrial policy considerations have been known to affect the timetable for antitrust clearances or, in extreme situations, the competition authority’s willingness to issue a clearance decision. If ON Semiconductor and Quantenna are not able to obtain the regulatory approvals required to complete the merger, the merger will not be completed.

Hart Scott Rodino Antitrust Improvements Act

The merger is subject to the requirements of the HSR Act and the related rules and regulations, which provide that certain transactions may not be completed until required information has been furnished to the Antitrust Division and the FTC and until certain waiting periods have been terminated or have expired. The HSR Act requires Quantenna and ON Semiconductor to observe a 30-day waiting period after the submission of their HSR filings before consummating the merger, unless the waiting period is terminated early. By April 9, 2019, each of Quantenna and ON Semiconductor filed a Notification and Report Form under the HSR Act with the Antitrust Division and the FTC, which filings started the initial 30 day waiting period required by the HSR Act. On April 22, 2019, the FTC granted early termination of the waiting period under the HSR Act.

Other Regulatory Approvals

China

Under the Anti-Monopoly Law of the People’s Republic of China of 2008 (as amended), transactions involving parties with sales above certain revenue levels globally and in China cannot be completed until they are reviewed and approved by the SAMR. ON Semiconductor and Quantenna have sufficient revenues globally

 

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and in China to exceed the statutory thresholds, and completion of the merger is therefore conditioned upon an approval being granted by the SAMR. ON Semiconductor agreed to submit the required filing to the SAMR as promptly as is reasonably practicable. Quantenna agreed to provide ON Semiconductor with all necessary assistance in this context, including by providing information in respect of Quantenna’s operations for the purposes of the filing. On April 22, 2019, ON Semiconductor submitted the required filing to the SAMR.

Other Regulatory Matters

In addition, non-U.S. regulatory bodies and U.S. state attorneys general could take action under the antitrust laws as they deem necessary or desirable in the public interest, including, without limitation, seeking to enjoin the completion of the merger or permitting completion subject to regulatory conditions. Private parties may also seek to take legal action under the antitrust laws under some circumstances. Although neither ON Semiconductor nor Quantenna believes that the merger will violate the antitrust laws, there can be no assurance that a challenge to the merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.

Litigation Related to the Merger

As of May 13, 2019, four lawsuits have been filed by alleged Quantenna stockholders challenging the merger. The first complaint, a putative class action complaint, was filed by Gerald Clarke on behalf of himself and all other public stockholders of Quantenna, in the United States District Court for the Northern District of California, and is captioned Clarke v. Quantenna Communications, Inc., et al., 5:19-cv-02508. The second complaint, an individual action was filed by Elaine Wang in the United States District Court for the Northern District of California and is captioned Wang v. Quantenna Communications, Inc., et al., 5:19-cv-02511-SVK. The third complaint, a putative class action complaint, was filed by Earl Wheby, Jr. on behalf of himself and all other public stockholders of Quantenna, in the United States District Court for the District of Delaware and is captioned Wheby v. Quantenna Communications, Inc., et al., 1:19-cv-00877-UNA. The fourth complaint, a putative class action complaint, was filed by Mark Kerry on behalf of himself and all other public stockholders of Quantenna, in the United States District Court for the Northern District of California and is captioned Kerry v. Quantenna Communications, Inc., et al., 3:19-cv-02535. The complaints name as defendants Quantenna and each member of the Board.

The complaints purport to state claims for violations of Section 14(a) and 20(a) of the Exchange Act and Rule 14a-9. The plaintiffs in these actions generally allege that the preliminary proxy statement issued in connection with ON Semiconductor’s proposed acquisition of Quantenna omits material information with respect to the proposed transaction which renders the preliminary proxy statement false and misleading. The Clarke complaint also alleges that the Board breached its fiduciary duties to the Quantenna stockholders by, among other things, agreeing to sell Quantenna without first taking steps to ensure that the Quantenna stockholders would obtain adequate, fair and maximum consideration under the circumstances and filing a materially deficient proxy statement. The plaintiffs in these actions seek injunctive relief, including, among others, enjoining or rescinding the transaction and rescissory damages to the extent already implemented and an award of attorneys’ and experts’ fees.

The defendants have not yet responded to these complaints. While it is too early to predict the outcome of litigation or a reasonable range of potential losses, Quantenna believes each of these lawsuits are without merit. A negative outcome in any of these lawsuits, however, could have a material adverse effect on Quantenna if it results in preliminary or permanent injunctive relief, rescission of the merger agreement, or an award of damages. Additional lawsuits arising out of or relating to the merger agreement or the merger may be filed in the future.

 

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THE MERGER AGREEMENT

This section describes the material terms of the merger agreement. The description of the merger agreement in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We encourage you to read the merger agreement carefully and in its entirety.

Explanatory Note Regarding the Merger Agreement

The merger agreement, a copy of which is attached as Annex A, and this summary of its terms are included in this proxy statement to provide you with information regarding its terms. Factual disclosures about Quantenna contained in this proxy statement or in Quantenna’s public reports filed with the SEC may supplement, update or modify the factual disclosures about Quantenna contained in the merger agreement. The representations, warranties and covenants made in the merger agreement by Quantenna, ON Semiconductor and Merger Sub were made solely to the parties to, and solely for the purposes of, the merger agreement and as of specific dates and were qualified and subject to important limitations agreed to by Quantenna, ON Semiconductor and Merger Sub in connection with negotiating the terms of the merger agreement. The Company’s stockholders and other investors are not third party beneficiaries under the merger agreement except with respect to the right to receive the merger consideration following the consummation of the merger in accordance with the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated for the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to consummate the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and, in some cases, were qualified by matters set forth on the disclosure letter delivered to ON Semiconductor in connection with the merger agreement (which we refer to as the “disclosure letter”), which disclosures are not reflected in the merger agreement. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement.

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

The merger agreement provides for the merger of Merger Sub with and into Quantenna upon the terms, and subject to the conditions, set forth in the merger agreement. As a result of the merger, the separate corporate existence of Merger Sub will cease and Quantenna will continue as the surviving corporation and a wholly-owned subsidiary of ON Semiconductor.

The directors of Merger Sub and the officers of Quantenna at the effective time of the merger will, from and after the effective time of the merger, be the directors and officers of the surviving corporation until their respective successors have been duly elected or appointed and qualified.

At the effective time of the merger, the amended and restated certificate of incorporation of Quantenna will be amended and restated to read as set forth in an exhibit to the merger agreement, until thereafter amended in accordance with applicable law, and the bylaws of Merger Sub in effect immediately prior to the effective time of the merger will be the bylaws of the surviving corporation, until thereafter amended in accordance with applicable law.

Following the completion of the merger, our common stock will be delisted from Nasdaq, will be deregistered under the Exchange Act and will cease to be publicly traded.

 

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Closing and Effective Time of the Merger

The merger agreement provides that the closing of the merger (which we refer to as the “closing”), will take place as soon as possible, but in any event no later than the third business day following the date on which the last of the conditions to closing (described in the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 83) has been satisfied or waived (other than those conditions that by their nature are to be satisfied at the closing of the merger, but subject to the satisfaction or waiver of those conditions on the closing date of the merger), or such other time and date as may be mutually agreed in writing by Quantenna and ON Semiconductor.

Assuming receipt of required regulatory approvals and timely satisfaction of other closing conditions, including the approval by our stockholders of the merger proposal, we currently expect the closing of the merger to occur in the second half of calendar year 2019. However, the parties cannot predict the exact timing of completion of the merger or whether the merger will be completed at an earlier or later time, as agreed by the parties, or at all.

The effective time of the merger will occur upon a certificate of merger having been duly filed with and accepted by the Secretary of State of the State of Delaware (or at such later time as may be specified in the certificate of merger).

Treatment of Common Stock, Stock-Based Awards and Performance Awards

At the effective time of the merger, each share of our common stock outstanding immediately prior to the effective time of the merger (other than excluded shares and dissenting shares) will be canceled and converted into the right to receive $24.50 in cash from ON Semiconductor, without interest, less any applicable withholding taxes.

At or immediately prior to the effective time of the merger, each vested Quantenna stock option that has an exercise price that is less than $24.50 will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash determined by multiplying (i) the excess of $24.50 over the exercise price of the vested Quantenna stock option by (ii) the number of shares of our common stock subject to such vested Quantenna stock option.

At or immediately prior to the effective time, each Quantenna stock option that has an exercise price that is equal to or greater than $24.50 (whether or not vested) shall be canceled without payment.

As of the effective time of the merger, each unvested Quantenna stock option that has an exercise price that is less than $24.50 will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash determined by multiplying (i) the excess of $24.50 over the exercise price of the unvested Quantenna stock option by (ii) the number of shares of our common stock subject to such unvested Quantenna stock option. Such amount will be payable, subject to the holder’s continued employment or service to ON Semiconductor or its affiliates through the applicable payment date, on the earliest of (but in no event later than December 31 of the calendar year in which the effective time occurs): (x) the same vesting dates that applied to the corresponding unvested Quantenna stock option, (y) the last regularly scheduled payroll date of the calendar year in which the effective time occurs, and (z) if applicable, the termination date of the holder’s employment or service with ON Semiconductor and its affiliates, if the corresponding unvested Quantenna stock option (or an applicable agreement between Quantenna and the holder of the option) provided for accelerated vesting on such termination. If the holder terminates employment or service to ON Semiconductor or its affiliates prior to the applicable payment date, the unvested portion (after giving effect to any applicable accelerated vesting provision) of such cash payment amount shall be forfeited.

At or immediately prior to the effective time of the merger, each vested Quantenna RSU award will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an

 

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amount in cash equal to (i) the number of shares of our common stock subject to the vested Quantenna RSU award multiplied by (ii) $24.50.

As of the effective time of the merger, each unvested Quantenna RSU award (including each unvested PSU award) will be canceled and converted into the right to receive (less applicable withholding taxes and without interest) an amount in cash equal to (i) the number of shares of our common stock subject to the unvested Quantenna RSU award multiplied by (ii) $24.50. Such amount will be payable on the same vesting dates that applied to the corresponding unvested Quantenna RSU, subject to the holder’s continued employment or service to ON Semiconductor or its affiliates through the applicable vesting date and subject to any right to vesting acceleration as was in effect with respect to such unvested Quantenna RSU immediately prior to the effective time. If the holder terminates employment or service to ON Semiconductor or its affiliates prior to the applicable vesting date, the unvested portion (after giving effect to any applicable accelerated vesting provisions) of such cash payment amount shall be forfeited.

In connection with the execution of the merger agreement, we have caused the offering period currently in progress under the ESPP to be the final offering period under the ESPP and to be terminated as of the final exercise date. We have also caused each participant’s then-outstanding share purchase right under the ESPP to be exercised as of the final exercise date. On the final exercise date, the funds credited for each participant under the ESPP will be used to purchase shares of our common stock in accordance with the terms of the ESPP, and each share that is outstanding immediately prior to the effective time will be converted into the right to receive $24.50 in cash, less any applicable withholding taxes and without interest. Any funds credited to a participant under the ESPP that are not used to purchase shares in accordance with the terms of the ESPP will be refunded to such participant on or promptly following the final exercise date. No further share purchase rights will be granted or exercised under the ESPP after the final exercise date. The ESPP will be terminated as of the effective time of the merger.

Surrender and Payment Procedures

At or prior to the effective time of the merger, ON Semiconductor will deposit, or will cause to be deposited, with the paying agent, for the benefit of the holders of shares of our common stock, an amount of cash sufficient to pay the aggregate merger consideration payable to our stockholders.

Promptly after the effective time of the merger (but in no event later than 2 business days after thereafter), ON Semiconductor will send, or will cause the paying agent to send, to each holder of certificates that immediately prior to the effective time of the merger represented shares of our common stock and whose shares were converted into the merger consideration a letter of transmittal (in a form that was reasonably acceptable to Quantenna prior to the effective time of the merger) and instructions (which will specify that the delivery will be effected, and risk of loss and title will pass, only upon proper delivery of the certificates representing shares of our common stock or transfer of uncertificated shares of our common stock to the paying agent) for use in connection with the exchange of such certificates for the merger consideration.

The paying agent will pay each holder of record the aggregate merger consideration to which such holder is entitled (i) in the case of certificated shares, after surrendering the certificate(s) representing shares of our common stock, together with a properly completed letter of transmittal, and (ii) in the case of uncertificated shares, without any action on the part of the person in whose name such uncertificated shares are registered, except as may be required by the paying agent (including in respect of any applicable tax forms or other documentation required to be delivered by such holder). Interest will not be paid or accrue in respect of the merger consideration. From the effective time of the merger until the surrender or transfer of certificates or book-entry shares, as the case may be, each such certificate or book-entry share will represent only the right to receive in exchange therefor a cash amount (after giving effect to any required tax withholdings) equal to the merger consideration.

 

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Any holder of uncertificated shares will not be required to deliver a certificate or an executed letter of transmittal to the paying agent to receive the merger consideration that such holder is entitled to receive. ON Semiconductor will cause the paying agent to pay and deliver, as promptly as reasonably practicable after the effective time of the merger and subject to the delivery by the holder of any documentation required by the paying agent, the merger consideration in respect of such uncertificated shares (and such shares will be canceled).

From and after the effective time of the merger, there will be no further registration of transfers of shares of our common stock that were outstanding immediately prior to the effective time of the merger.

If any cash deposited with the paying agent remains unclaimed for one year following the effective time of the merger, such cash will be returned to ON Semiconductor upon demand. Thereafter, holders of our common stock (other than holders of excluded shares) who have not received payment will be entitled to look only to ON Semiconductor with respect to payment of the merger consideration (after giving effect to any required tax withholdings), without any interest thereon, as general creditors thereof.

ON Semiconductor, Merger Sub, the surviving corporation and the paying agent will be entitled to deduct and withhold from the merger consideration such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign tax law. Any sum that is withheld will be remitted to the appropriate taxing authority, and will be treated for all purposes of the merger agreement as having been paid to the holder of shares with regard to whom it is deducted and withheld.

Representations and Warranties

Representations and Warranties of Quantenna

We made customary representations and warranties in the merger agreement that are subject, in many cases, to exceptions and qualifications contained in the merger agreement, in the disclosure letter or in certain reports filed with the SEC. These representations and warranties relate to, among other things:

 

   

our and our subsidiaries’ due organization, existence, good standing and authority to carry on our and their businesses as currently conducted;

 

   

our corporate power and authority related to the merger agreement, including as it relates to our entry into and performance of our obligations under the merger and the other transactions contemplated by the merger agreement;

 

   

the required vote of our stockholders to adopt the merger agreement and to consummate the transactions contemplated thereby;

 

   

required actions by or in respect of, and filings with, governmental authorities in connection with the merger and the merger agreement;

 

   

our execution, delivery and performance under the merger agreement, and whether such execution, delivery and performance would result in violations of, or conflicts with, governing documents or applicable law, or any defaults, terminations, cancellations or accelerations under certain agreements or the creation of liens on any of our assets;

 

   

our and our subsidiaries’ capitalization and the absence of any voting agreements by us with respect to our and our subsidiaries’ securities;

 

   

our SEC filings since October 27, 2016, the absence of material misstatements or omissions in such filings and documents, and compliance of such filings with legal requirements;

 

   

maintenance and effectiveness of internal controls and disclosure controls and procedures;

 

   

compliance by us with the listing and corporate governance requirements of Nasdaq;

 

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our financial statements;

 

   

compliance of this proxy statement with the Exchange Act;

 

   

our conduct of business in the ordinary course from December 30, 2018 through the date of the merger agreement, and the absence since December 30, 2018 of certain changes, including any fact, event, circumstance, change or effect that has had, individually or in the aggregate, a material adverse effect (as described below), as well as other specific actions;

 

   

the absence of certain undisclosed liabilities;

 

   

the absence of certain legal proceedings;

 

   

since October 27, 2016, our and our subsidiaries’ compliance with applicable laws and the absence of written notices from governmental authorities alleging any such violations, and the absence of any orders from governmental authorities;

 

   

our properties and the property of our subsidiaries, including leasehold interests;

 

   

certain intellectual property matters relating to Quantenna and its subsidiaries;

 

   

certain tax matters relating to Quantenna and its subsidiaries;

 

   

certain matters relating to employee benefit plans of Quantenna and its subsidiaries;

 

   

certain labor and employment matters relating to Quantenna and its subsidiaries;

 

   

the maintenance of sufficient and customary insurance;

 

   

certain environmental matters relating to Quantenna and its subsidiaries;

 

   

certain matters relating to material contracts;

 

   

certain matters relating to the largest suppliers and customers of Quantenna and its subsidiaries;

 

   

since October 27, 2016, the compliance of Quantenna and its subsidiaries with the provisions of the U.S. Foreign Corrupt Practices Act of 1977, as amended, and other applicable anti-corruption laws;

 

   

the absence of any undisclosed broker’s or finder’s fees except for those owed to Qatalyst Partners;

 

   

the receipt by the Board of the Qatalyst Partners’ opinion;

 

   

the inapplicability of any anti-takeover provision set forth in the DGCL; and

 

   

since January 1, 2017, the compliance of Quantenna with applicable trade laws and applicable export licenses.

The representations and warranties in the merger agreement of Quantenna will not survive the consummation of the merger.

Material Adverse Effect

Many of our representations and warranties are qualified by, among other things, exceptions relating to the absence of a “material adverse effect”, which means any change, effect, event, circumstance, development, condition or occurrence that (i) has, or would reasonably be expected to have, a material adverse effect on the condition (financial or otherwise), business, assets or results of operations of Quantenna and its subsidiaries, taken as a whole, or (ii) prevents, materially impedes, interferes with, hinders or delays, or would reasonably be expected to prevent or, materially impede, interfere with, hinder or delay the consummation by Quantenna of the merger or any of the other transactions contemplated by the merger agreement on a timely basis, but excluding, in the case of clause (i) only, any of the foregoing resulting from:

 

   

changes in the financial, securities, credit or other capital markets or general economic or regulatory, legislative or political conditions;

 

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changes or conditions generally affecting the industry in which Quantenna and its subsidiaries operate, including changes in interest and exchange rates, in the United States or any other jurisdiction in which Quantenna or its subsidiaries operate;

 

   

geopolitical conditions, any outbreak or escalation of hostilities, acts of war (whether or not declared), acts of armed hostility, sabotage, terrorism or national or international calamity (or material worsening of any such conditions);

 

   

any hurricane, tornado, tsunami, flood, volcanic eruption, earthquake, nuclear incident, pandemic, quarantine restrictions, weather conditions or other natural or man-made disaster or other force majeure event;

 

   

changes or prospective changes in applicable law or GAAP or authoritative interpretation or enforcement thereof;

 

   

the failure, in and of itself, of Quantenna to meet any internal or published projections, forecasts, budgets, guidance, estimates or predictions in respect of revenues, earnings or other financial or operating metrics or other matters before, on or after the date of the merger agreement, or changes or prospective changes in the market price or trading volume of the securities of Quantenna or the credit rating of Quantenna (with it being understood that the underlying facts giving rise or contributing to such failure or change may be taken into account in determining whether there has been a material adverse effect if such facts are not otherwise excluded under the definition of material adverse effect);

 

   

the identity of, or any facts or circumstances solely relating to ON Semiconductor, Merger Sub or their respective affiliates;

 

   

the negotiation, announcement, pendency or consummation of the transactions contemplated by the merger agreement, including (1) any loss or change in relationship of such person and its subsidiaries with any customer, supplier, vendor, distributor, lender, employee, investor, venture partner or other business partner of Quantenna and its subsidiaries in connection therewith, or (2) any other disruption to the business of Quantenna (including supplier, supply chain or distributor disruptions, or the failure to obtain customer orders or design wins) in connection therewith;

 

   

any stockholder class action, derivative or similar litigation, suit, action or proceeding in respect of the merger agreement or any other agreement executed and delivered in connection with the merger agreement (or the transactions contemplated thereby), or this proxy statement (including breach of fiduciary duty and disclosure claims); and

 

   

(1) any action taken by Quantenna or any of its subsidiaries at the written request, or with the written consent, of ON Semiconductor or Merger Sub, or (2) compliance by Quantenna with the terms of, or the taking by Quantenna of any action required by, the merger agreement, or the failure by Quantenna to take any action prohibited by the merger agreement;

except, in the case of the initial five bullet points of the foregoing, to the extent that there is a material disproportionate effect on Quantenna and its subsidiaries, taken as a whole, relative to other participants in the industry in which Quantenna and its subsidiaries operate (in which case the disproportionate impact or impacts may be taken into account in determining whether there has been a material adverse effect).

Representations and Warranties of ON Semiconductor and Merger Sub

The merger agreement also contains customary representations and warranties made by ON Semiconductor and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the merger agreement. The representations and warranties of ON Semiconductor and Merger Sub relate to, among other things:

 

   

their due organization, existence, good standing and authority to carry on their businesses as currently conducted;

 

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their corporate power and authority related to the merger agreement, including their power to enter into the merger agreement, perform their obligations under, and consummate the transactions contemplated by the merger agreement and the enforceability of the merger agreement against them;

 

   

required actions by or in respect of, and filings with, governmental authorities in connection with the merger and the merger agreement;

 

   

their entry into and performance under the merger agreement, and whether such entry and performance would result in violations of, or conflicts with, their governing documents or applicable law, or any defaults, terminations, cancellations or accelerations under certain agreements or the creation of liens on any of their assets;

 

   

the accuracy of information supplied or to be supplied by ON Semiconductor and Merger Sub for use in this proxy statement;

 

   

availability of funds as of the date of the merger agreement and as of the effective time of the merger to pay all amounts to be paid by ON Semiconductor in connection with the merger agreement, including the aggregate merger consideration and all other cash amounts payable in connection with the closing pursuant to the merger agreement;

 

   

the absence of certain contracts or commitments among ON Semiconductor, Merger Sub and any director, officer or employee of Quantenna or any of its subsidiaries;

 

   

the absence of certain legal proceedings or investigations against ON Semiconductor or Merger Sub;

 

   

that neither ON Semiconductor nor Merger Sub is, or at any time during the 3 years prior to the date of the merger agreement was, an “interested stockholder” as defined in Section 203 of the DGCL;

 

   

each of ON Semiconductor’s and Merger Sub’s solvency; and

 

   

the absence of any undisclosed broker’s or finder’s fees.

The representations and warranties in the merger agreement of each of ON Semiconductor and Merger Sub will not survive the consummation of the merger.

Parent Material Adverse Effect

Many of ON Semiconductor’s and Merger Sub’s representations and warranties are qualified by, among other things, exceptions relating to the absence of a “parent material adverse effect,” which means any change, effect, event, circumstance, development, condition or occurrence that prevents or materially impedes, interferes with, hinders or delays or would reasonably be expected to prevent or materially impede, interfere with, hinder or delay the consummation by ON Semiconductor or Merger Sub of the merger or any of the other transactions contemplated by the merger agreement on a timely basis.

Conduct of Our Business Pending the Merger

Under the merger agreement, between the date of the merger agreement and the earlier of the effective time of the merger and the termination of the merger agreement in accordance with its terms, except as (i) expressly permitted or required by the merger agreement, (ii) required by applicable law or governmental authority, (iii) consented to in advance in writing by ON Semiconductor (such consent not to be unreasonably withheld, conditioned or delayed), or (iv) set forth on the disclosure letter, Quantenna has agreed that it will, and will cause its subsidiaries to, conduct its business in the ordinary course of business consistent with past practice and use its commercially reasonable efforts to (a) preserve intact its present business organization, (b) keep available the services of its present directors, officers, and certain key employees, and (c) preserve its relationships with its material customers, lenders, suppliers and others having material business relationships with it.

 

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Quantenna has further agreed that, between the date of the merger agreement and the earlier of the effective time of the merger and the termination of the merger agreement in accordance with its terms, except as (i) expressly permitted or required by the merger agreement, (ii) required by applicable law, (iii) consented to in advance in writing by ON Semiconductor (such consent not to be unreasonably withheld, conditioned or delayed), or (iv) set forth on the disclosure letter, Quantenna will not, and will not permit its subsidiaries to take certain actions, including the following:

 

   

amend the organizational documents of Quantenna or amend, other than immaterial changes in respect of wholly-owned subsidiaries, the organizational documents of its subsidiaries;

 

   

split, combine or reclassify any shares of its capital stock;

 

   

authorize, declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock, property or otherwise) in respect of, or enter into any agreement with respect to the voting of, any capital stock of Quantenna or any of its subsidiaries, other than dividends and distributions by a direct or indirect wholly owned subsidiary to its parent;

 

   

redeem, repurchase or otherwise acquire or offer to redeem, repurchase or otherwise acquire any securities of Quantenna or any of its subsidiaries, subject to certain exceptions with respect to stock options, restricted stock, other equity awards, and employee plans in effect as of the date of the merger agreement;

 

   

issue, deliver, sell, grant, pledge, transfer, subject to any lien or otherwise encumber or dispose of, any securities of Quantenna, other than the issuance of (i) any shares upon the exercise of options or any options or purchase rights under the ESPP or settlement of RSUs, in each case, that are outstanding on the date of the merger agreement and in each case in accordance with their terms on the date of the merger agreement, (ii) awards of RSUs to consultants and awards of to any newly hired or promoted employees or to employees for retention purposes (which we refer to collectively as the “RSU recipients”) (in each case, other than to certain officers as specified in the merger agreement), in each case, in the ordinary course of business consistent with past practice, provided that (x) such awards shall not provide for accelerated vesting in connection with the transactions contemplated by the merger agreement, and (y) Quantenna may not, pursuant to this clause (ii), issue prior to the effective time of the merger more than an aggregate number of RSUs equal to the lesser of (1) 250,000 RSUs, and (2) an aggregate of 1,900,000 RSUs during calendar year 2019 (taking into account all RSUs previously granted during 2019 prior to the date of the merger agreement and all RSUs to be granted in accordance with clause (ii) during the remainder of 2019) (which we refer to as the “RSU cap”); provided, however, that if any RSU recipient receives any RSUs pursuant to clause (ii) and any of such RSUs are thereafter forfeited back to Quantenna without vesting, such RSUs shall not count against the RSU cap, or (iii) any securities of a subsidiary of Quantenna to Quantenna or any other wholly-owned subsidiary of Quantenna;

 

   

amend any term of any securities of Quantenna or any of its subsidiaries;

 

   

adopt a plan or agreement of, or resolutions providing for or authorizing, complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization, each with respect to Quantenna or any of its subsidiaries (other than the dissolution of any inactive subsidiary and reorganizations solely among subsidiaries of Quantenna) or consummate any of the foregoing;

 

   

acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, any equity interest or securities in, or any material amount of other assets, properties, interests or businesses of, any person, or enter into any new line of business that is material to Quantenna and its subsidiaries, taken as a whole;

 

   

sell, lease, exclusively license, exchange, swap, abandon, allow to lapse or cancel any intellectual property owned by Quantenna (other than the natural expiration thereof or, with respect to allowing such intellectual property to become abandoned, lapsed, or canceled, in connection with Quantenna’s exercise of its reasonable business judgment);

 

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sell, lease, exchange, swap, or otherwise transfer or dispose of any of Quantenna’s or its subsidiaries’ material assets, securities, properties, interests or businesses, other than (i) pursuant to existing contract in effect prior to the date of the merger agreement, or (ii) sales of Quantenna’s products and services, inventory or used equipment in the ordinary course of business consistent with past practice;

 

   

repurchase, prepay, redeem, defease, assume, endorse, guarantee, incur or otherwise become liable for or modify the terms of any indebtedness for borrowed money or sell or issue any debt securities or other rights to acquire any debt securities (directly, contingently or otherwise);

 

   

make any loans, advances or capital contributions to, or investments in, any other person (other than to Quantenna or any of its wholly-owned subsidiaries in the ordinary course of business and advances of expenses to employees in the ordinary course of business);

 

   

except as required by the terms of any employee plan as in effect on the date of the merger agreement):

 

   

grant any severance, retention or termination pay to, or enter into or amend any employment, severance, retention, termination, change in control or severance agreement with, any current or former key employee;

 

   

hire any new employee who would constitute a key employee under the merger agreement, other than in the ordinary course of business consistent with past practice in order to replace a key employee whose employment terminates (so long as the applicable replacement key employee receives compensation and benefit terms that are no more favorable to the new key employee than compensation and benefits held by the key employee that is being replaced);

 

   

grant to any current or former director or key employee of Quantenna or any of its subsidiaries any material increase in compensation, target bonus or benefits, in addition to those pursuant to arrangements in effect on the date of the merger agreement, other than in the ordinary course of business;

 

   

establish, adopt, enter into or materially amend or modify any employee plan (other than entering into offer letters that contemplate “at will” employment that is terminable without payment or notice or, where required by applicable law, employment agreements consistent with Quantenna’s practices in the applicable jurisdiction, or cash bonus or cash incentive plans for performance periods not exceeding one year in the ordinary course of business consistent with past practice to replace such plans covering performance periods that end prior to the closing of the merger);

 

   

take any action to accelerate any payment or benefit, or the funding of any payment or benefit, payable or to become payable to any of its directors, employees or other service providers, other than in the ordinary course of business consistent with past practice;

 

   

establish, enter into, adopt or amend any works council, collective bargaining or similar labor-related agreement, except as required by applicable law;

 

   

announce, implement or effect any material reduction in labor force, lay-off, early retirement program or other effort concerning termination of employment of employees of Quantenna or any of its subsidiaries (other than routine employee terminations in the ordinary course of business); or

 

   

terminate any key employee other than for cause;

 

   

make any change in any financial accounting principles, methods or practices (including any tax accounting policies or procedures) or any of its methods of reporting income, deductions or other material items for financial or tax accounting purposes, in each case except for any such change required by GAAP or applicable law;

 

   

make, change or revoke any material tax election (other than in the ordinary course of business consistent with past practice), change any annual tax accounting period, adopt or change any method of material tax accounting, amend, refile or otherwise revise any previously filed tax returns, enter into

 

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any closing agreement, settle or compromise any tax claim or assessment, consent to any extension or waiver of the statutory period of limitations applicable to any claim or assessment in respect of taxes, enter into any tax indemnity or similar agreements or arrangements (other than customary commercial agreements not primarily related to taxes), undertake any restructuring or engage in any transaction that may transfer the ownership of any intellectual property;

 

   

discharge, pay, settle or offer or propose to settle, (i) any litigation, investigation, arbitration, proceeding or other claim involving or against Quantenna or any of its subsidiaries, (ii) any stockholder litigation or dispute against Quantenna or any of its officers or directors, or (iii) any litigation, arbitration, proceeding or dispute that relates to the transactions contemplated by the merger agreement;

 

   

enter into, as a tenant or subtenant, any lease of real property, under which the rent to be charged exceeds $250,000 for any 12 month period, other than ordinary course of business extensions and renewals of leases existing as of the date of the merger agreement with a term of no more than one calendar year;

 

   

except in the ordinary course of business consistent with the past practice and except as provided in the 2019 annual operating plan as approved by the Board and made available to ON Semiconductor, make any new capital expenditure or expenditures, or commit to do so;

 

   

enter into any contract, excluding contracts containing non-exclusive licenses ancillary to the sale of products in Quantenna’s ordinary course of business and in a manner consistent with past practices and non-exclusive licenses granted in the ordinary course of business (but excluding non-exclusive licenses of (i) all or substantially all of Quantenna’s or its subsidiaries’ owned and issued patents or pending patent applications or (ii) material intellectual property owned by Quantenna outside the ordinary course of business or inconsistent with past practice), (A) that will cause or require Quantenna or its subsidiaries to (x) grant to any third party any license, covenant not to sue, release, immunity or other right with respect to or under any intellectual property, or (y) be obligated to pay any material amount of royalties or other material amounts to any third party (other than royalties and other amounts paid by Quantenna or its subsidiaries to any third party), or (B) under which Quantenna or its subsidiaries establishes with any third party a joint venture, strategic relationship, or legal partnership pursuant to which Quantenna or its subsidiaries agrees to develop or create (whether jointly or individually) any material intellectual property, products, or services;

 

   

terminate, cancel, amend or modify any insurance coverage policy maintained by Quantenna or any of its subsidiaries that is not concurrently replaced by a comparable amount of insurance coverage, other than renewals in the ordinary course of business;

 

   

except in the ordinary course of business consistent with past practice, (i) enter into, materially modify, materially amend or terminate material contracts, or (ii) waive, release, terminate, amend, renew or assign any material rights or claims of Quantenna or any of its subsidiaries under any material contracts; or

 

   

agree, authorize or commit to do any of the foregoing.

No Solicitation of Acquisition Proposals; Board Recommendation Changes

No Solicitation or Negotiation

Except as permitted by the terms of the merger agreement described below, from and after the date of the merger agreement until the earlier of the effective time of the merger or the termination of the merger agreement in accordance with its terms, Quantenna has agreed that neither Quantenna nor any of its subsidiaries will, nor will Quantenna or any of its subsidiaries authorize or knowingly permit any of the directors of Quantenna, the officers or employees of Quantenna, or any investment bankers, attorneys, accountants or other advisors or other

 

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representatives retained by Quantenna or its subsidiaries (collectively, we refer to such persons as “Quantenna representatives”) to, directly or indirectly:

 

   

solicit, initiate or knowingly facilitate or encourage the submission of any inquiry, proposal or offer which constitutes, or would reasonably be expected to result in, an acquisition proposal (as defined below);

 

   

enter into, continue or participate in any discussions or negotiations with, or furnish any non-public information relating to Quantenna or any of its subsidiaries to, any third party in connection with an acquisition proposal;

 

   

approve, recommend, publicly declare advisable or enter into any agreement in principle, letter of intent, merger agreement, acquisition agreement, joint venture agreement or other similar agreement relating to an acquisition proposal (other than an acceptable confidentiality agreement); or

 

   

agree to or propose publicly to do any of the foregoing.

The merger agreement defines the term “acquisition proposal” to mean, other than the transactions contemplated by the merger agreement, any written or oral offer, or proposal of any third party or “group” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) relating to a transaction or series of related transactions involving: (i) any acquisition or purchase (including through any lease, exchange, exclusive license, transfer or disposition, in each case, other than in the ordinary course of business), direct or indirect, of assets equal to 20% or more of the consolidated assets or businesses of Quantenna and its subsidiaries, taken as a whole, or to which 20% or more of the consolidated revenues or earnings of Quantenna and its subsidiaries, taken as a whole, are attributable, or 20% or more of any class of equity or voting securities of Quantenna, (ii) any tender offer or exchange offer that, if consummated, would result in such third party or group beneficially owning 20% or more of any class of equity or voting securities of Quantenna, or (iii) a merger, consolidation, business combination, sale of all or substantially all of the assets, liquidation, dissolution or other similar extraordinary transaction (A) involving Quantenna or any of its subsidiaries whose assets, individually or in the aggregate, constitute 20% or more of the consolidated assets of Quantenna or to which 20% or more of the consolidated revenues or earnings of Quantenna and its subsidiaries, taken as a whole, are attributable or (B) pursuant to which the stockholders of Quantenna immediately prior to the consummation of such transaction would, as a result of such transaction, hold less than 80% of the equity interests in the surviving entity of such transaction.

No Solicitation Exceptions

Notwithstanding the foregoing, any time after the date of the merger agreement and prior to Quantenna stockholders’ adoption of the merger agreement, Quantenna, directly or indirectly through Quantenna representatives, may (i) engage in negotiations or discussions with a third party and its representatives and actual or potential sources of financing (including making any counterproposal), and (ii) furnish to such persons non-public information relating to Quantenna or any of its subsidiaries pursuant to an acceptable confidentiality agreement, but only in the event all of the following occur:

 

   

Quantenna, any subsidiary of Quantenna or a Quantenna representatives receives a written acquisition proposal from such third party that did not result from a breach of Quantenna’s non-solicitation obligations and that the Board determines in good faith: (i) to be bona fide, (ii) after consultation with its financial advisor and outside legal counsel, constitutes, or would reasonably be expected to result in, a superior proposal, or (iii) after consultation with its outside legal counsel, that the failure to take such action would reasonably be expected to result in a breach of the fiduciary duties of Quantenna’s directors under applicable law; and

 

   

prior to or substantially concurrently with the time any non-public information relating to Quantenna is made available to such third party, Quantenna makes available to ON Semiconductor any such information that is made available to the third party that was not previously made available to ON Semiconductor.

 

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The merger agreement defines the term “superior proposal” to mean a bona fide, written acquisition proposal (with all percentages included in the definition of “acquisition proposal” changed to 80%) made after the date of the merger agreement that the Board determines in good faith, after consultation with its financial advisor and outside legal counsel, and taking into account all relevant terms and conditions of such acquisition proposal (including any termination or break-up fees and conditions to consummation), the person making such acquisition proposal, the likelihood and timing of consummation of such acquisition proposal and all financial, legal, regulatory, and other aspects of such acquisition proposal, is more favorable to Quantenna’s stockholders from a financial point of view than the merger and the other transactions contemplated by the merger agreement.

Quantenna agrees to promptly (but in no event later than 24 hours) notify ON Semiconductor orally and in writing of its receipt of any acquisition proposal, any proposals or inquiries that would reasonably be expected to lead to an acquisition proposal, or any inquiry or request for nonpublic information relating to Quantenna or any of its subsidiaries by any person who has made, or has expressly indicated that such person is contemplating making, any acquisition proposal. The notice provided to ON Semiconductor must identify the third party making, and the material terms and conditions of (or the nature of), any such acquisition proposal, inquiry or request and must include a copy of any written acquisition proposal (or summary of the terms of any oral acquisition proposal) and a copy of all written materials provided by such Person with respect to such acquisition proposal. Further, Quantenna has agreed to keep ON Semiconductor reasonably informed promptly (but in no event later than 24 hours) after any material changes in status or material terms of any acquisition proposal and shall provide to Parent promptly (but in no event later than 24 hours) after receipt thereof of copies of proposed transaction agreements or proposal letters sent or provided to Quantenna or any of its subsidiaries that describe any material terms or conditions of any acquisition proposal. Quantenna has also agreed to keep ON Semiconductor reasonably informed as to the nature of any information requested of Quantenna with respect thereto. Upon the request of ON Semiconductor, Quantenna must apprise ON Semiconductor of the status of any such acquisition proposal, inquiry or request.

If an acquisition proposal is publicly announced (other than by ON Semiconductor, its subsidiaries or any of their respective affiliates or representatives), Quantenna has agreed to publicly reaffirm the Board recommendation within 10 business days after receipt of a written request by ON Semiconductor to provide such reaffirmation, unless an adverse recommendation change (as defined below) is permitted under the terms of the merger agreement, except that Quantenna is not obligated to publicly reaffirm such recommendation on more than one occasion with respect to each such publicly announced acquisition proposal by any third party or on more than one occasion with respect to each publicly announced material modification thereto.

Adverse Recommendation Change

The merger agreement provides that (subject to certain exceptions described below) the Board will not (i) fail to make, withdraw or modify in a manner adverse to ON Semiconductor (or publicly propose to withdraw, modify or qualify in any manner adverse to Parent) the Board recommendation, (ii) adopt, approve, or publicly recommend, endorse or otherwise declare advisable the adoption of, an acquisition proposal, or (iii) fail to include in this proxy statement the Board recommendation (any of the foregoing, we refer to as an “adverse recommendation change”).

Adverse Recommendation Change Exceptions

Notwithstanding the foregoing, the Board, at any time before the Quantenna stockholders adopt the merger agreement, may make an adverse recommendation change (or terminate the merger agreement as described in the section entitled “The Merger Agreement—Termination” starting on page 85) in response to an acquisition proposal, only so long as (i) such acquisition proposal was not the result of a breach of the non-solicitation obligations of Quantenna described above and such acquisition proposal is not withdrawn, and (ii) the Board determines in good faith, after consultation with its financial advisor and outside legal counsel and after taking into account any revisions to the terms of the merger agreement that may be offered in writing by ON

 

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Semiconductor in accordance with the merger agreement, (A) that such acquisition proposal constitutes a superior proposal, and (B) that the failure to make an adverse recommendation change would reasonably be expected to result in a breach of its fiduciary duties under applicable law.

In addition, the Board may not effect an adverse recommendation (or terminate the merger agreement as described in the section entitled “The Merger Agreement—Termination” starting on page 85) change unless:

 

   

Quantenna notifies ON Semiconductor in writing (which we refer to as a “change notice”) at least 3 business days (which we refer to as the “negotiation period”) before the making of any adverse recommendation change or the Board’s determination that such acquisition proposal constitutes a superior proposal and of its intention to make an adverse recommendation change, with the most current version of all proposed agreements under which such superior proposal is proposed to be consummated and all other material terms and conditions in respect of such acquisition proposal and the identity of the third party making such superior proposal attached to the change notice;

 

   

during the negotiation period, Quantenna was available to negotiate in good faith with ON Semiconductor (if requested by ON Semiconductor) any proposal by ON Semiconductor to amend the terms and conditions of the merger agreement such that the acquisition proposal would no longer constitute a superior proposal (provided that Quantenna delivered a new change notice and entered into a new 2 business day negotiation period for any amendment, supplement or modification to any acquisition proposal); and

 

   

at the end of the negotiation period (and any subsequent negotiation periods with respect to an amended, supplemented or modified acquisition proposal), the Board, after considering in good faith any revisions to the terms of the merger agreement offered in writing by ON Semiconductor pursuant to the merger agreement, determined in good faith, after consultation with its financial advisor and outside legal counsel, that such acquisition proposal remained a superior proposal.

Further, the Board may make an adverse recommendation change if (i) an intervening event (as defined below) has occurred, (ii) the Board determines in good faith and after taking into account any revisions to the terms of the merger agreement that may be offered in writing by Parent in accordance with the merger agreement, after consultation with outside legal counsel and its financial advisors, that the failure to make an adverse recommendation change would reasonably be expected to result in a breach of its fiduciary duties under applicable law, and (iii) prior to making the adverse recommendation change, Quantenna (A) provided ON Semiconductor at least 3 business days’ prior written notice that it intends to take such action and specifying in reasonable detail the facts underlying the decision by the Board to take such action (provided that Quantenna delivered a new notice and entered into a new 3 business day period for any material change in the facts or circumstances relating to an intervening event) and (B) during such period, if requested by ON Semiconductor, engaged in good faith negotiations with ON Semiconductor to amend the merger agreement in such a manner that obviates the need for such adverse recommendation change.

The merger agreement defines “intervening event” to mean a material fact, event, circumstance, development or change that occurs, arises or comes to the attention of the Board after the date of the merger agreement that (w) affects the business, assets or operations of Quantenna and its subsidiaries, (x) was not known by, or if known, the effect of which was not reasonably foreseeable by, the Board (assuming consultations with appropriate officers and representatives of Quantenna) on the date of the merger agreement, (y) becomes known to the Board prior to receipt of Quantenna stockholders’ adoption of the merger agreement, and (z) did not result from or arise out of the announcement or pendency of, or any actions required to be taken (or refrained from taken) pursuant to the merger agreement; provided, however, that (i) the receipt, existence of or terms of an acquisition proposal will not constitute, or be considered in determining whether there has been, an intervening event, and (ii) a change in the market price or trading volume of the equity or debt securities of Quantenna or of the equity or credit ratings or the ratings outlook for Quantenna by any applicable rating agency shall not (in and of themselves) constitute an intervening event.

 

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Stockholders Meeting

Quantenna has agreed to cause the special meeting to be duly called and held as soon as reasonably practicable following clearance of this proxy statement by the SEC for the purpose of voting on the merger proposal by Quantenna’s stockholders. Quantenna’s Board has agreed to, subject to the provisions of the merger agreement discussed above under “The Merger Agreement—No Solicitation of Acquisition Proposals; Board Recommendation Changes” beginning on page 77), recommend that Quantenna stockholders adopt the merger agreement, to use its reasonable best efforts to obtain stockholder approval of the merger proposal and to otherwise comply with all legal requirements applicable to the special meeting.

Filings; Other Actions; Notification

Quantenna and ON Semiconductor have agreed to cooperate with each other and use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable law to consummate the merger and the other transactions contemplated by the merger agreement as promptly as practicable, including:

 

   

preparing and filing as promptly as practicable after the date of the merger agreement with any governmental authority all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, financial statements, records, applications and other documents, in each case, to the extent applicable;

 

   

obtaining and maintaining all approvals, consents, registrations, permits, authorizations, licenses, waivers and other confirmations required to be obtained from any governmental authority that are necessary to consummate the transactions contemplated by the merger agreement; and

 

   

executing and delivering any additional instruments necessary to consummate the transactions contemplated by the merger agreement.

Subject to the provisions of the merger agreement and applicable law, and except as prohibited by any governmental authority, each of ON Semiconductor and Quantenna is required to make (i) an appropriate filing of a notification and report form pursuant to the HSR Act as promptly as practicable (and in any event within 10 business days after the date of the merger agreement), and (ii) each other appropriate filing required by the antitrust laws of any applicable foreign jurisdiction as promptly as practicable (and in any event within 20 business days after the date of the merger agreement) (including as described more particularly in the section entitled “The Merger—Regulatory Approvals” beginning on page 66).

Each of ON Semiconductor and Quantenna is also required to comply at the earliest practicable date with any request under applicable antitrust laws for additional information, documents, or other materials received by each of them or any of their respective subsidiaries or affiliates from any governmental authority in respect of such filings or such transactions, and cooperate with each other in connection with any such filing, and in connection with resolving any investigation or other inquiry of any governmental authority under applicable antitrust laws with respect to any such filing or any such transaction.

Notwithstanding the foregoing, none of ON Semiconductor, Merger Sub nor Quantenna will be required to take any of the following actions:

 

   

sell or otherwise dispose of, and hold separate or agree to sell or otherwise dispose of, assets, categories of assets or businesses of Quantenna or ON Semiconductor or their respective subsidiaries;

 

   

terminate existing relationships, contractual rights or obligations of Quantenna or ON Semiconductor or their respective subsidiaries;

 

   

terminate any venture or other arrangement;

 

   

create any relationship, contractual rights or obligations of Quantenna or ON Semiconductor or their respective subsidiaries;

 

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effectuate any other change or restructuring of Quantenna or ON Semiconductor or their respective subsidiaries; or

 

   

defend, challenge or contest any action, suit or proceeding challenging the merger agreement or the transactions contemplated thereby.

Employee Benefits Matters

ON Semiconductor has agreed that employees of Quantenna and any subsidiary of Quantenna who continue to be employed after the effective time of the merger (which we refer to collectively as the continuing employees), will:

 

   

during the period commencing at the effective time of the merger and ending on the first anniversary of the effective time of the merger (or, if earlier, the termination date of the employee), be provided with base salary or wages, commission and target annual cash incentive opportunity that in the aggregate are not less favorable than the base salary or wages, commission and target annual cash incentive opportunity provided to such continuing employee immediately prior to the effective time of the merger; and

 

   

during the period commencing at the effective time of the merger and ending on the first anniversary of the effective time of the merger (or, if earlier, the termination date of the employee), be provided with employee benefits and equity awards that are substantially comparable in the aggregate to the employee benefits and equity awards provided to similarly situated employees of ON Semiconductor and its affiliates.

Additionally, during the period commencing on the effective time of the merger and ending on the first anniversary of the effective time of the merger (or, if earlier, until all obligations have been satisfied), ON Semiconductor has agreed to assume, honor and continue the employment, bonus, commission, severance, change in control, retention and termination plans and agreements maintained by Quantenna prior to the effective time of the merger and set forth in the disclosure letter.

From and after the effective time of the merger, ON Semiconductor has agreed to (i) for purposes of vesting, eligibility to participate, and level of benefits, and, in the case of severance, vacation and paid time-off, benefits and accruals, ensure that (subject to the consent of the applicable insurance provider, if required, which ON Semiconductor shall use its commercially reasonable efforts to obtain) each continuing employee’s employment with Quantenna or any of its subsidiaries (including their predecessors) will be treated as if such service were with ON Semiconductor, Merger Sub or their affiliates (except to the extent it would result in a duplication of benefits, and except with respect to benefit accruals under any defined benefit pension plan or any other arrangement other than in respect of vacation, paid time-off or severance), (ii) cause any pre-existing condition and eligibility limitations under welfare benefit plans of ON Semiconductor or its affiliates to be waived with respect to the continuing employees, and (iii) give each continuing employee credit for eligible expenses for co-payments, deductible, and out-of-pocket expenses paid under the Quantenna benefit plans the continuing employee participated in prior to the effective time of the merger for purposes of satisfying the co-payment, deductible, and out-of-pocket expense requirements under the relevant benefit plans of ON Semiconductor or its affiliates in which the continuing employees will participate for the plan year in which the effective time occurs.

Other Covenants and Agreements

The merger agreement contains certain other covenants and agreements, including covenants relating to:

 

   

with respect to Quantenna, access to certain information during the period prior to the effective time of the merger and reasonable access during normal business hours to employees, offices, properties, books and records;

 

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each party’s agreement to use commercially reasonable efforts not to take or omit to take any action that impedes, interferes with, hinders or delays in any material respect, or would reasonably be expected to prevent or materially impede, interfere with, hinder or delay in any material respect, the consummation of the merger or any of the other transactions contemplated by the merger agreement on a timely basis;

 

   

cooperation between Quantenna and ON Semiconductor in the preparation of this proxy statement;

 

   

cooperation between Quantenna and ON Semiconductor in connection with press releases and other public announcements with respect to the merger or the merger agreement;

 

   

notification by each party in response to certain events, including, among others, (i) any actions, suits, claims, investigations or proceedings commenced or, to their knowledge, threatened against Quantenna or any of its subsidiaries or ON Semiconductor or any of its subsidiaries, as the case may be, that relate to the consummation of the transactions contemplated by the merger agreement, and (ii) any representation or warranty made in the merger agreement becoming untrue or inaccurate and such inaccuracy or breach would cause the applicable party to fail to satisfy any condition to closing of the merger related to performance of covenants and agreements or accuracy of representations and warranties;

 

   

with respect to Quantenna, adopting resolutions consistent with the interpretive guidance of the SEC so that the disposition of our common stock (including derivatives thereof) pursuant to the merger agreement by any officer or director of Quantenna who is a covered person for purposes of Section 16 of the Exchange Act will be an exempt transaction for purposes of Section 16 of the Exchange Act;

 

   

with respect to Quantenna and ON Semiconductor, each taking actions reasonably necessary on its part under applicable laws and rules and policies of Nasdaq to enable the de-listing by the surviving corporation of our common stock from Nasdaq and the deregistration of our common under the Exchange Act as promptly as practicable after the effective time of the merger; and

 

   

cooperation between Quantenna and ON Semiconductor in the defense or settlement of any litigation brought by Quantenna stockholders against Quantenna relating to transactions contemplated by the merger agreement.

Conditions to the Merger

The respective obligations of Quantenna, ON Semiconductor and Merger Sub to consummate the merger are subject to the satisfaction or (to the extent permitted by applicable law) waiver at or prior to the effective time of the merger of the following conditions:

 

   

the affirmative vote in favor of the merger proposal by the holders of a majority of the outstanding shares of our common stock entitled to vote thereon;

 

   

no temporary restraining order, decree, ruling, injunction or judgment, preliminary or permanent injunction or other judgment issued by any governmental authority of competent jurisdiction will be in effect enjoining, restraining or otherwise prohibiting the consummation of the merger and no governmental authority of competent jurisdiction will have enacted, issued, promulgated, enforced or declared applicable to the merger any applicable law that is in effect, which has the effect of enjoining, restraining or otherwise prohibiting the consummation of the merger; and

 

   

(i) any applicable waiting period under the HSR Act relating to the merger will have expired or been terminated and any extensions thereof, or any timing agreements or legally binding commitments obtained by request or other action of the U.S. Federal Trade Commission and/or the U.S. Department of Justice, as applicable, will have expired or been terminated; and (ii) all applicable waiting and other time periods under certain foreign antitrust laws will have expired, lapsed or been terminated (as appropriate), in each case, in respect of the merger.

 

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The obligations of ON Semiconductor and Merger Sub to consummate the merger are subject to the satisfaction or (to the extent permitted by applicable law) waiver at or prior to the effective time of the merger of the following further conditions:

 

   

Quantenna must have performed or complied with, in all material respects, all of its obligations under the merger agreement required to be performed by it at or prior to the effective time of the merger;

 

   

the representations and warranties of Quantenna regarding the absence of a material adverse effect since December 30, 2018 must be true in all respects as of the date of the merger agreement and as of the effective time of the merger as if made at and as of such time;

 

   

the representations and warranties of Quantenna regarding organization, good standing and qualification, corporate authority and approval, broker’s and finder’s fees, and the inapplicability of certain takeover statutes (disregarding all materiality and material adverse effect qualifications contained therein) must be true in all material respects as of the date of the merger agreement and at and as of the effective time as if made at and as of such time (other than such representations and warranties that by their terms address matters only as of another specified time, which must be true only as of such time);

 

   

the representations and warranties of Quantenna regarding certain aspects of its capital structure (disregarding all materiality and material adverse effect qualifications contained therein) must be true and correct in all but de minimis respects as of the date of the merger agreement and as of the effective time of the merger agreement as if at and as of such time (other than such representations and warranties that by their terms address matters only as of another specified time, which must be true only as of such time);

 

   

Quantenna’s other representations and warranties set forth in the merger agreement (disregarding all materiality and material adverse effect qualifications contained therein) must be true and correct as of the date of the merger agreement and at and as of the effective time of the merger as if made at and as of such time (other than such representations and warranties that by their terms address matters only as of another specified time, which must be true only as of such time), with, only such exceptions as would not have, individually or in the aggregate, a material adverse effect; and

 

   

ON Semiconductor must have received a certificate signed on behalf of Quantenna by an executive officer of Quantenna, certifying as to the satisfaction of all of the above conditions.

Quantenna’s obligations to consummate the merger is subject to the satisfaction or (to the extent permitted by applicable law) waiver at or prior to the effective time of the following further conditions:

 

   

each of ON Semiconductor and Merger Sub must have performed, in all material respects, all of its obligations under the merger agreement required to be performed by it at or prior to the effective time of the merger agreement;

 

   

the representations and warranties of ON Semiconductor and Merger Sub regarding availability of funds must be true in all respects at and as of the effective time of the merger as if made at and as of such time (other than such representations and warranties that by their terms address matters only as of another specified time, which must be true only as of such time);

 

   

the representations and warranties of ON Semiconductor and Merger Sub regarding organization, good standing and qualification, corporate authority and approval, and interested stockholders, must be true in all material respects at and as of the effective time as if made at and as of such time (other than such representations and warranties that by their terms address matters only as of another specified time, which must be true only as of such time);

 

   

ON Semiconductor’s and Merger Sub’s other representations and warranties set forth in the merger agreement (disregarding all materiality and parent material adverse effect qualifications contained therein) must be true at and as of the effective time of the merger as if made at and as of such time

 

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(other than such representations and warranties that by their terms address matters only as of another specified time, which must be true only as of such time), with only such exceptions as would not have, individually or in the aggregate, a parent material adverse effect; and

 

   

Quantenna must have received a certificate signed by an executive officer ON Semiconductor as to the satisfaction of all of the above conditions.

Termination

Quantenna and ON Semiconductor may, by mutual written agreement, terminate the merger agreement and abandon the merger at any time prior to the effective time of the merger.

The merger agreement may also be terminated and the merger abandoned at any time prior to the effective time of the merger, as follows:

 

   

by either Quantenna or ON Semiconductor if:

 

   

the merger has not been consummated on or before January 27, 2020 (which we refer to as the “end date”), which date may be automatically extended by an additional 90 days if the closing has not occurred prior to such date and all conditions, other than those relating to the specific antitrust clearances that Quantenna and ON Semiconductor have identified as being required to complete the merger, have been satisfied, such termination trigger we refer to as “the failure of the merger to be consummated by the end date”; provided that neither party has the right to terminate if such party’s breach of any provision of the merger agreement in any material respect is the primary cause of the failure of the merger to be consummated by the end date;

 

   

any order permanently restraining, enjoining or otherwise prohibiting consummation of the merger on substantially the terms contemplated by the merger agreement has become final and non-appealable; provided that a party does not have a right to terminate if such party’s breach of any provision of the merger agreement in any material respect is the primary cause of such restraint; or

 

   

at the special meeting, including any adjournment or postponement thereof, the stockholders of Quantenna do not approve the merger proposal, such termination trigger we refer to as a failure to obtain stockholder approval of the merger proposal;

 

   

by ON Semiconductor, if:

 

   

prior to obtaining stockholder approval of the merger proposal at the special meeting, (i) the Board or any committee thereof makes an adverse recommendation change, or (ii) following a publicly announced acquisition proposal (or publicly announced material modification thereto), Quantenna or the Board or any committee thereof fails to publicly reaffirm the Board recommendation within 10 business days (or if the special meeting is scheduled to be held within 10 business days from the date of such announcement, promptly and in any event prior to the date on which the special meeting is scheduled to be held) of being requested to do so by ON Semiconductor (in each case, we refer to as an “adverse recommendation change termination event”) (except that Quantenna is not obligated to publicly reaffirm the Board recommendation on more than one occasion with respect to each such publicly announced acquisition proposal by any third party or on more than one occasion with respect to each publicly announced material modification thereto); or

 

   

there is any inaccuracy of any representation or warranty made by Quantenna in the merger agreement or any breach, violation or failure to perform any covenant or agreement on the part of Quantenna set forth in the merger agreement, which inaccuracy, breach, violation or failure, either individually or in the aggregate, if continuing at the closing (i) would cause the conditions to closing related to the accuracy of Quantenna’s representations and warranties and the performance

 

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of its obligations under the merger agreement to not be satisfied, and (ii) is incapable of being cured by the end date (collectively, such termination trigger we refer to as “Quantenna terminating breach”), except that ON Semiconductor does not have the right to terminate if a Parent terminating breach (as defined below) has occurred and is continuing at the time that ON Semiconductor delivers a termination notice in connection with a Quantenna terminating breach;

 

   

by Quantenna, if:

 

   

if the Board authorizes Quantenna, pursuant to, and in compliance with the applicable terms of the merger agreement, to enter into a definitive agreement concerning a superior proposal (which we refer to as a “superior proposal termination event”); provided that Quantenna pays a termination fee of $32,165,000 to ON Semiconductor substantially concurrently with (and as a condition to) such termination; or

 

   

there is any inaccuracy of any representation or warranty made by ON Semiconductor or Merger Sub in the merger agreement or any breach, violation or failure to perform any covenant or agreement on the part of ON Semiconductor or Merger Sub set forth in the merger agreement which inaccuracy, breach, violation or failure, either individually or in the aggregate, if continuing at the closing (i) would cause the conditions to closing related to the accuracy of ON Semiconductor’s and Merger Sub’s representations and warranties and the performance of its obligations under the merger agreement, to not be satisfied, and (ii) is incapable of being cured by the end date (collectively, such termination trigger we refer to as “Parent terminating breach”), except that Quantenna does not have this right to terminate if a Quantenna terminating breach has occurred and is continuing at the time Quantenna delivers a termination notice in connection with a Parent terminating breach.

Termination Fee

In certain circumstances, Quantenna may be required to pay ON Semiconductor the termination fee if the merger agreement is terminated.

The termination fee would be payable if all of the following occur:

 

   

following the date of the merger agreement, a bona fide acquisition proposal has been publicly made, publicly announced or otherwise communicated to the Board or to Quantenna or will have been made directly to the stockholders of Quantenna generally (and in, any such case, such acquisition proposal is not withdrawn);

 

   

thereafter, (i) either ON Semiconductor or Quantenna terminates the merger agreement for the failure of the merger to be consummated by the end date or for failure to obtain stockholder approval of the merger proposal, or (ii) ON Semiconductor terminates the merger agreement because of a Quantenna terminating breach, as described in the section entitled “The Merger Agreement—Termination” beginning on page 85; and

 

   

within 12 months of such termination, Quantenna consummates any acquisition proposal or enters into a definitive agreement in respect of any acquisition proposal that is later consummated (in each case, the references to “20%” in the definition of “acquisition proposal” being deemed to be references to “50%”); in which case Quantenna must pay ON Semiconductor the termination fee on the date of consummation of such acquisition proposal.

The termination fee would also be payable in the following circumstances:

 

   

ON Semiconductor terminates the merger agreement pursuant to an adverse recommendation change termination event, in which case Quantenna must pay ON Semiconductor the termination fee within 2 business days after such termination; or

 

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Quantenna terminates the merger agreement pursuant to a superior proposal termination event, in which case Quantenna must pay ON Semiconductor the termination fee substantially concurrently with (and as a condition to) such termination.

Directors’ and Officers’ Indemnification and Insurance

The obligations of Quantenna and its subsidiaries under their respective organizational documents and all agreements in respect of all rights to indemnification, exculpation of liability and advancement of expenses, in effect as of the date of the merger agreement between Quantenna or any of its subsidiaries and any of their respective present or former directors, officers, employees or agents (which we refer to as the “indemnified persons”) shall survive the merger and may not be amended, repealed or otherwise modified in any manner that would adversely affect any right thereunder of any indemnified person.

For 6 years after the effective time of the merger, ON Semiconductor will cause the organizational documents of the surviving corporation and its subsidiaries to contain provisions no less favorable with respect to elimination of liability of directors, indemnification of officers, directors and employees, and advancement of expenses than are presently set forth in the organizational documents of Quantenna and its subsidiaries.

Additionally, for 6 years after the effective time of the merger, the surviving corporation will indemnify and hold harmless all indemnified persons to the fullest extent permitted by the DGCL in the event of any threatened or actual claim, suit, action, proceeding or investigation, whether civil, criminal or administrative, based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that such indemnified person is or was a director, officer, employee or agent of Quantenna, its subsidiaries or any of their respective predecessors prior to the effective time of the merger, or (ii) the merger agreement, the merger or any of the transactions contemplated thereby. Neither ON Semiconductor nor the surviving corporation will settle or consent to the entry of a judgment in any threatened or actual claim for which indemnification could be sought by an indemnified person under the merger agreement, unless such settlement or consent includes an unconditional release of such indemnified person from all liability arising out of such claim or such indemnified person otherwise consents in writing to such settlement or consent. ON Semiconductor and the surviving corporation will cooperate with an indemnified person in the defense of any matter for which such indemnified person could seek indemnification under the merger agreement.

Prior to the effective time of the merger, Quantenna will, or if Quantenna is unable to, ON Semiconductor will cause the surviving corporation to, obtain and fully pay the premium for the non-cancellable extension of the directors’ and officers’ liability coverage of Quantenna’s existing directors’ and officers’ insurance policies and Quantenna’s existing fiduciary liability insurance policies (collectively, we refer to such insurance as the “D&O insurance”), in each case for a claims reporting or discovery period of at least 6 years from and after the effective time of the merger with respect to any claim related to any period of time at or prior to the effective time of the merger from an insurance carrier with the same or better credit rating as Quantenna’s current insurance carrier with respect to D&O insurance with terms, conditions, retentions and limits of liability that are no less favorable than the coverage provided under Quantenna’s existing policies; provided that in no event will Quantenna, ON Semiconductor or the surviving corporation be obligated to pay annual premiums for insurance in excess of 300% of the most recent annual premiums paid by Quantenna prior to the date of the merger agreement.

The indemnified persons have the right to enforce the provisions of the merger agreement relating to their indemnification. Such provisions may not be terminated, amended or otherwise modified in such a manner as to adversely affect any indemnified person without the prior written consent of such person. In addition, the surviving corporation shall, and ON Semiconductor shall cause the surviving corporation to, pay all reasonable expenses, including reasonable attorneys’ fees, that may be incurred by any indemnified person in enforcing the indemnity and other obligations provided in the merger agreement.

If ON Semiconductor or the surviving corporation (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or

 

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substantially all of its properties and assets to any person, then proper provision must be made so that such continuing or surviving corporation or entity or transferee of such assets, as the case may be, assumes the obligations set forth above relating to the indemnified person.

Expenses

Except as otherwise provided in the merger agreement, all costs and expenses incurred in connection with the merger agreement will be paid by the party incurring such cost or expense.

Specific Performance

Quantenna and ON Semiconductor have agreed that irreparable damage for which monetary damages, even if available, would not be an adequate remedy would occur in the event that the parties do not perform their obligations under the merger agreement in accordance with its specified terms or otherwise breach such provisions. Quantenna and ON Semiconductor have further agreed each party is entitled to an injunction or injunctions, specific performance or any other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement without proof of damages.

Amendments

The merger agreement may be amended or waived prior to the effective time of the merger if such amendment or waiver is in writing and is signed, in the case of an amendment, by Quantenna, ON Semiconductor and Merger Sub or, in the case of a waiver, by each party against whom the waiver is to be effective. However, once the merger proposal has been adopted by Quantenna’s stockholders, there may not be any amendment or waiver that requires further approval by Quantenna’s stockholders without such approval having been obtained.

Governing Law

The merger agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such state.

 

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PROPOSAL 2: NON-BINDING, ADVISORY VOTE ON MERGER-RELATED COMPENSATION

FOR QUANTENNA’S NAMED EXECUTIVE OFFICERS

This section sets forth the information required by Item 402(t) of the SEC’s Regulation S-K regarding compensation for each named executive officer of Quantenna that is based on, or otherwise relates to, the merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section we use such term to describe the merger-related compensation payable to our named executive officers. The “golden parachute” compensation payable to these individuals is subject to a non-binding, advisory vote of Quantenna’s stockholders, as described below in this section.

The table below sets forth, for the purposes of this golden parachute disclosure, the approximate amount of the payments and benefits that each of Quantenna’s named executive officers would receive, assuming that (1) the effective time of the merger occurred on April 29, 2019 (which is the assumed date solely for purposes of this golden parachute compensation disclosure), (2) each of Quantenna’s named executive officers experienced a qualifying termination (as defined in their change in control agreements described on page 63 above) and received his severance payments at such time, and (3) none of the named executive officers would receive “excess parachute payments” subject to an excise tax under Section 4999 of the Code. The amounts below are determined using the merger consideration of $24.50 per share, and are based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described in the footnotes to the table. These amounts are based upon the named executive officer’s compensation levels in effect on April 29, 2019 and outstanding equity awards on April 29, 2019. As a result of the foregoing assumptions, the actual amounts, if any, to be received by a named executive officer may materially differ from the amounts set forth below. For a narrative description of the terms and conditions applicable to the payments quantified in the table below, see “The Merger—Interests of Certain Persons in the Merger” on page 60.

Golden Parachute Compensation

 

Name

   Cash
($)(1)
     Equity
($)(2)
     Perquisites/Benefits
        ($)(3)         
     Total
($)
 

Sam Heidari

     1,185,000        10,575,887        30,000        11,790,887  

Sean Sobers

     612,167        4,246,019        30,000        4,888,186  

David Carroll

     583,433        2,631,894        30,000        3,245,327  

 

(1)

The estimated amount listed in this column for each named executive officer represents the aggregate value of cash severance (i.e., 12 months of the executive’s base salary and the executive’s target annual cash bonus amount) that such named executive officer would be entitled to receive from Quantenna under his respective change in control agreement upon a “double trigger” qualifying termination, where the named executive officer’s employment is terminated by Quantenna without cause, due to the named executive officer’s death or disability, or by the named executive officer for good reason within a change in control period (the terms “cause,” “disability,” “good reason,” and “change in control period” are each defined in the change in control agreement). For additional information, see the section entitled “The Merger—Interests of Certain Persons in the Merger—Change in Control Agreements” beginning on page 63. The estimated amount also includes the pro-rated fiscal 2019 cash incentive award that will be paid on a “single trigger” basis to each named executive officer in connection with the merger, assuming the maximum level of performance is achieved. The Compensation Committee of the Board will determine the amount of fiscal 2019 cash incentive awards to be paid in connection with the merger, based on Quantenna’s actual performance for the shortened performance period ending at the effective time of the merger, and the actual cash incentive award could range from zero to the maximum incentive award amount. For additional information, see the section entitled “The Merger—Interests of Certain Persons in the Merger—Fiscal 2019 Executive Non-Equity Incentive Awards” beginning on page 64.

 

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The following table quantifies each separate form of cash compensation included in the aggregate total reported in the column (as in effect on April 29, 2019 and prior to the planned adjustments to base salary and target annual cash bonus for Messrs. Sobers and Carroll).

 

Name

   Lump Sum
Base Salary
($)
     Lump Sum Bonus
Payment ($)
     Pro-Rata Fiscal
2019 Cash
Incentive Award
(at Maximum
Level  of
Performance) ($)*
     Total ($)  

Sam Heidari

     450,000        450,000        285,000        1,185,000  

Sean Sobers

     310,000        185,000        117,167        612,167  

David Carroll

     278,000        187,000        118,433        583,433  

 

  *

As noted above, the actual amount of the pro-rata fiscal 2019 cash incentive bonus award for each named executive officer will be determined by the Compensation Committee of the Board, based on Quantenna’s actual performance for the shortened performance period ending at the effective time of the merger, and may range from zero dollars to the named executive officer’s maximum incentive award amount (190% of target) based on financial performance and other performance metrics, pro-rated for the portion of the year worked as of the date of the termination of the executive’s employment. For purposes of this disclosure, the maximum annual incentive award amounts have been assumed and are included in the tables above. If an executive receives an increase in his target bonus opportunity during a fiscal year, the executive’s actual incentive award for that fiscal year will be based on the weighted average of the executive’s target bonus opportunity as in effect before and after giving effect to the increase and the portion of the year that the executive worked while each such target bonus opportunity level was in effect. The pro-rata fiscal 2019 cash incentive award for each of the named executive officers at the target level of performance and assuming an April 29, 2019 termination of employment is as follows:

 

Name

   Pro-Rata Fiscal
2019 Cash
Incentive Award
(at Target Level  of
Performance) ($)
 

Sam Heidari

     150,000  

Sean Sobers

     61,667  

David Carroll

     62,333  

As approved by the Compensation Committee of the Board of Directors of Quantenna in January 2019 in connection with its annual compensation review, effective June 1, 2019, Messrs. Sobers’ and Carroll’s annual base salary amounts and target annual cash bonus opportunities will be increased, as described in the section entitled “The Merger—Interests of Certain Persons in the Merger—Other Compensation Matters” beginning on page 64. If such qualifying termination had occurred after June 1, 2019, the lump sum base salary and lump sum bonus payment components of the cash severance amount for Messrs. Sobers and Carroll would have been $325,000 and $195,000, respectively, for Mr. Sobers and $290,000 and $232,000 respectively, for Mr. Carroll.

 

(2)

Pursuant to the terms of the change in control agreements, each outstanding Quantenna equity award held by the named executive officers will immediately vest upon a “double trigger” qualifying termination, where the named executive officer’s employment is terminated by Quantenna without cause, due to the named executive officer’s death or disability, or by the named executive officer for good reason within a change in control period (the terms “cause,” “disability,” “good reason,” and “change in control period” are each defined in the change in control agreement) as described in the section entitled “The Merger—Interests of Certain Persons in the Merger— Change in Control Agreements” beginning on page 63.

For purposes of this note and the table above, the value of the unvested Quantenna RSU and PSU awards is calculated using the merger consideration of $24.50 per share multiplied by the number of shares of Quantenna common stock subject to the RSU or PSU award, and the value of the unvested Quantenna

 

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option awards is calculated by multiplying (i) the difference between $24.50 and the exercise price of the option, by (ii) the number of shares subject to the option award. For purposes of this disclosure, the number of shares of Quantenna common stock subject to each Quantenna PSU is assumed to vest at the maximum level of performance.

The following table illustrates the allocation of the aggregate total reported in the column for each named executive officer’s (i) Quantenna unvested time-based RSUs, (ii) Quantenna PSUs (assuming maximum level of performance), and (iii) unvested Quantenna stock options.

 

Name

   RSUs ($)      PSUs (at
Maximum Level
of Performance)*
($)
     Stock Options ($)      Total ($)  

Sam Heidari

     5,714,625        2,069,025        2,792,237        10,575,887  

Sean Sobers

     1,626,800        532,875        2,086,344        4,246,019  

David Carroll

     1,416,100        455,700        760,094        2,631,894  

 

  *

Pursuant to the terms of the PSU award agreements and as described in the section entitled “The Merger—Interests of Certain Persons in the Merger—2019 Performance RSU Awards” beginning on page 62, the administrator of the 2016 Omnibus Plan will determine the number of Quantenna PSUs that will be eligible to vest based on our actual performance for the shortened performance period ending at the effective time of the merger (with the applicable performance targets adjusted to reflect the shortened performance period). Pursuant to the terms of the change in control agreements, the number of Quantenna PSUs that are outstanding and eligible to vest will immediately vest upon a “double trigger” qualifying termination (as described above). For purposes of this disclosure, the maximum vesting levels have been assumed and included in the tables above. The value of the Quantenna PSUs for each of the named executive officers at the target level of performance is as follows:

 

Name

   PSUs (at Target
Level of
Performance) ($)
 

Sam Heidari

     1,379,350  

Sean Sobers

     355,250  

David Carroll

     303,800  

 

(3)

This column includes, for each named executive officer, (i) the estimated amount of the executive’s COBRA premiums for health insurance for one year, and (ii) payout of accrued vacation, which, in the case of continued medical benefits, will be provided where the named executive officer’s employment is terminated by Quantenna without cause, due to the named executive officer’s death or disability, or by the named executive officer for good reason within a change in control period (the terms “cause,” “disability,” “good reason,” and “change in control period” are each defined in the change in control agreement) as described in the section entitled “The Merger—Interests of Certain Persons in the Merger—Change in Control Agreements” beginning on page 63. The named executive officer would receive a payout of accrued vacation upon any termination of employment.

The following table quantifies each separate perquisite or benefit included in the aggregate total reported in the column.

 

Name

   Payment of COBRA
Premiums ($)
     Accrued Vacation ($)      Total ($)  

Sam Heidari

     30,000        —          30,000  

Sean Sobers

     30,000        —          30,000  

David Carroll

     30,000        —          30,000  

 

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Merger-Related Compensation Proposal

Pursuant to Section 14A of the Exchange Act and Rule 14a-21(c) thereunder, Quantenna is seeking non-binding, advisory stockholder approval of the compensation of Quantenna’s named executive officers that is based on or otherwise relates to the merger as disclosed above in this section. The proposal gives Quantenna’s stockholders the opportunity to express their views on the merger-related compensation of Quantenna’s named executive officers.

Accordingly, Quantenna is asking Quantenna stockholders to vote in favor of the adoption of the following resolution, on a non-binding, advisory basis:

“RESOLVED, that the compensation that will or may be paid or become payable to Quantenna’s named executive officers, in connection with the merger, and the agreements or understandings pursuant to which such compensation will or may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in “Non-Binding, Advisory Vote on Merger-Related Compensation for Quantenna’s Named Executive Officers” are hereby APPROVED.”

The vote on the proposal to approve the merger-related executive compensation is a vote separate and apart from the vote on the merger proposal. Accordingly, you may vote to approve the merger proposal and vote not to approve the proposal to approve the merger-related executive compensation and vice versa. If the merger is completed, the merger-related compensation will be paid to Quantenna’s named executive officers to the extent payable in accordance with the terms of the compensation agreements and arrangements even if Quantenna common stockholders fail to approve the proposal to approve the merger-related executive compensation.

The Board unanimously (with Mr. Lazar recusing himself) recommends a vote “FOR” the proposal to approve the merger-related executive compensation.

 

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PROPOSAL 3: VOTE ON ADJOURNMENT

If at the special meeting there are not sufficient votes to adopt the merger agreement, we intend to move to vote on this adjournment proposal. We do not intend to move to a vote on this adjournment proposal if the merger proposal is approved by the requisite number of shares of Quantenna common stock at the special meeting.

In this adjournment proposal, Quantenna’s stockholders are being asked to approve a proposal that will give the Board authority to adjourn the special meeting to a later date or time, if necessary, to solicit additional proxies in favor of the merger proposal if there are insufficient votes at the time of the special meeting to approve the merger proposal. If the 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 the solicitation of proxies from stockholders that have previously voted. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing a sufficient number of votes against the merger proposal to defeat that proposal, we could adjourn the special meeting without a vote on the merger proposal and seek to convince the holders of those shares to change their votes to votes in favor of the merger proposal.

Approval of the adjournment proposal requires the affirmative vote of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote on the proposal.

The Board unanimously (with Mr. Lazar recusing himself) recommends a vote “FOR” the adjournment proposal.

 

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MARKET PRICE OF COMMON STOCK

Our common stock is listed for trading on the Nasdaq Global Select Market under the symbol “QTNA.”

The closing price of our common stock on Nasdaq on March 27, 2019, the last trading day prior to the public announcement of the execution of the merger agreement, was $20.50 per share. On May 13, 2019, the most recent practicable date before this proxy statement was mailed to our stockholders, the closing price for our common stock on Nasdaq was $23.99 per share. In addition, the merger consideration represents a premium of approximately 25% and 45% to the 30-day and 90-day, respectively, volume weighted average price per share of our common stock prior to the public announcement of the execution of the merger agreement. You are encouraged to obtain current market quotations for our common stock in connection with voting your shares of common stock.

We have never declared or paid a cash dividend on our common stock and we intend to retain all available funds and any future earnings to fund the development and growth of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future.

If the merger is completed, our common stock will be delisted from Nasdaq and deregistered under the Exchange Act and there will be no further market for our common stock.

 

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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 our capital stock as of April 26, 2019 for:

 

   

each of our named executive officers;

 

   

each of our directors;

 

   

all of our current directors and executive officers as a group; and

 

   

each person known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock.

We have determined beneficial ownership in accordance with the rules of the SEC, and thus it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable. The information does not necessarily indicate beneficial ownership for any other purpose, including for purposes of Sections 13(d) and 13(g) of the Securities Act.

We have based our calculation of the percentage of beneficial ownership on 38,547,504 shares of our common stock outstanding as of April 26, 2019. In accordance with SEC rules, we have deemed shares of our common stock subject to stock options that are currently exercisable or exercisable within 60 days of April 26, 2019 and shares of our common stock underlying RSUs that are currently releasable or releasable within 60 days of April 26, 2019 to be outstanding and to be beneficially owned by the person holding the common stock options or RSUs for the purpose of computing the percentage ownership of that person. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.

Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Quantenna Communications, Inc., 1704 Automation Parkway, San Jose, California 95131. The information provided in the table is based on our records, information filed with the SEC and information provided to us, except where otherwise noted.

 

     Shares Beneficially Owned  

Name of Beneficial Owner

       Number              Percent      

Directors and Named Executive Officers

     

Sam Heidari(1)

     1,341,070        3.48

Sean Sobers(2)

     293,355            

David Carroll(3)

     47,385            

Glenda Dorchak(4)

     5,545            

Edwin (Ned) B. Hooper III(5)

     65,010            

Harold Hughes(6)

     87,444            

Jack Lazar(7)

     101,933            

John Scull(8)

     1,742,878        4.52

Mark Stevens(9)

     154,225            

All executive officers and directors as a group (9 persons)(10)

     3,838,845        9.96

Greater than 5% Security Holders

     

BlackRock, Inc.(11)

     2,252,719        5.84

JPMorgan Chase & Co.(12)

     2,089,649        5.42

Entities affiliated with DAG Ventures(13)

     1,970,342        5.11

 

*

Represents beneficial ownership of less than one percent (1%) of the outstanding shares of our common stock.

 

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(1)

Consists of (i) 55,136 shares held of record by Dr. Heidari and (ii) 1,285,934 shares subject to equity awards exercisable or releasable within 60 days of April 26, 2019.

(2)

Consists of (i) 32,056 shares held of record by Mr. Sobers and (ii) 261,299 shares subject to equity awards exercisable or releasable within 60 days of April 26, 2019.

(3)

Consists of (i) 8,854 shares held of record by Mr. Carroll and (ii) 38,531 shares subject to equity awards exercisable or releasable within 60 days of April 26, 2019.

(4)

Consists of 5,545 shares subject to equity awards exercisable or releasable within 60 days of April 26, 2019.

(5)

Consists of (i) 23,100 shares held of record by Mr. Hooper (ii) 33,593 shares held by Centerview Capital Technology Employee Fund, L.P., (“Centerview”), and (iii) 8,317 shares subject to equity awards exercisable or releasable within 60 days of April 26, 2019. Mr. Hooper is a managing partner of Centerview and shares voting and investment power with respect to the shares held by Centerview. The address for Centerview is 64 Willow Place, Suite 101, Menlo Park, California 94025.

(6)

Consists of (i) 7,127 shares held of record by Mr. Hughes and (ii) 80,317 shares subject to equity awards exercisable or releasable within 60 days of April 26, 2019, of which 222 shares are unvested and subject to a right of repurchase by us, if Mr. Hughes does not satisfy such option’s vesting requirements.

(7)

Consists of (i) 21,616 shares held of record Mr. Lazar and (ii) 80,317 shares subject to equity awards exercisable or releasable within 60 days of April 26, 2019, of which 2,000 shares are unvested and subject to a right of repurchase by us, if Mr. Lazar does not satisfy such option’s vesting requirements.

(8)

Consists of (i) 7,127 shares held of record by Mr. Scull, (ii) 1,727,434 shares held by Southern Cross Venture Partners Management Pty Ltd as trustee for Southern Cross Fund No 1 Trust (“Southern Cross”), and (iii) 8,317 shares subject to equity awards exercisable or releasable within 60 days of April 26, 2019. Mr. Scull is a director of Southern Cross Venture Partners Pty Ltd and shares voting and investment power with respect to the shares held by Southern Cross Venture Partners Management Pty Ltd as trustee for Southern Cross Fund No 1 Trust. The address for Southern Cross is PO Box 1743, North Sydney, NSW, Australia.

(9)

Consists of (i) 58,908 shares held of record by Mr. Stevens, (ii) 15,000 shares purchased in our directed share program at the closing of our initial public offering by S-Cubed Capital (“SCC”), of which Mr. Stevens is the managing partner and has voting and investment power with respect to the shares held by SCC and (iii) 80,317 shares subject to equity awards exercisable or releasable within 60 days of April 26, 2019, of which 2,000 shares are unvested and may be acquired upon early exercise, subject to a right of repurchase by us, if Mr. Stevens does not satisfy such option’s vesting requirements.

(10)

Consists of (i) 1,989,951 shares held by our current directors and executive officers and (ii) 1,848,894 shares subject to equity awards held by our current directors and executive officers and exercisable or releasable within 60 days of March 31, 2019.

(11)

According to a Schedule 13G filed with the SEC on February 8, 2019, the shares consist of 2,252,719 shares held by BlackRock, Inc. (“BlackRock”). Of the shares of our common stock that BlackRock beneficially owned, BlackRock reported that it has sole voting power with respect to 2,185,854 shares of our common stock and sole dispositive power with respect to 2,252,719 shares of our common stock. The address of BlackRock is 55 East 52nd Street, New York, New York 10055.

(12)

According to a Schedule 13G filed with the SEC on January 14, 2019, the shares consist of 2,089,649 shares held by JPMorgan Chase & Co and its wholly-owned subsidiaries, J.P. Morgan Investment Management Inc. and JPMorgan Chase Bank, National Association (together, “JPMorgan”). Of the shares of our common stock that JPMorgan beneficially owned, JPMorgan reported that it has sole voting power with respect to 1,884,255 shares of our common stock and sole dispositive power with respect to 2,089,649 shares of our common stock. The address of JPMorgan is 270 Park Avenue, New York, New York 10017.

(13)

According to a Schedule13G/A filed with the SEC on February 12, 2018, the shares consist of (i) 1,633,818 shares held by DAG Ventures IV-QP, L.P. (“DAG IV-QP”) (ii) 163,862 shares held by DAG Ventures IV-A, LLC (“DAG IV-A”) and (iii) 172,662 shares held by DAG Ventures IV, L.P. (“DAG IV”). DAG Ventures Management IV, LLC (“DAG IV LLC”) serves as the general partner of DAG IV-QP and DAG IV, and serves as the manager of DAG IV-A. As such, DAG IV LLC possesses power to direct the voting and disposition of the shares owned by DAG IV-QP, DAG IV and DAG IV-A and may be deemed to have indirect beneficial ownership of the shares held by DAG IV-QP, DAG IV and DAG IV-A. DAG IV LLC

 

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  owns no shares directly. Messrs. R. Thomas Goodrich and John J. Cadeddu are Managing Directors of DAG IV LLC. As such, Messrs. R. Thomas Goodrich and John J. Cadeddu possess power to direct the voting and disposition of the shares owned by DAG IV-QP, DAG IV and DAG IV-A and may be deemed to have indirect beneficial ownership of the shares held by DAG IV-QP, DAG IV and DAG IV-A. Messrs. R. Thomas Goodrich and John J. Cadeddu own no shares directly. The address each of the entities identified in this footnote is 251 Lytton Avenue, Suite 200, Palo Alto, California 94301.

 

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APPRAISAL RIGHTS

If the merger is completed, Quantenna’s stockholders will be entitled to appraisal rights under Section 262 of the DGCL, provided that they comply with the conditions set forth in that statute.

Pursuant to Section 262 of the DGCL, if you do not wish to accept the merger consideration provided for in the merger agreement, you have the right to seek appraisal of your shares of our common stock and to receive payment in cash for the fair value of your shares of our common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be fair value. The “fair value” of your shares of our common stock as determined by the Delaware Court of Chancery may be less than, equal to or more than the $24.50 per share that you are otherwise entitled to receive under the terms of the merger agreement. These rights are known as appraisal rights. Quantenna’s stockholders who do not vote in favor of the merger proposal and who properly demand appraisal for their shares in compliance with the provisions of Section 262 of the DGCL will be entitled to appraisal rights. Strict compliance with the statutory procedures set forth in Section 262 of the DGCL is required. Failure to follow precisely any of the statutory requirements will result in the loss of your appraisal rights.

This section is intended only as a brief summary of certain provisions of the statutory procedures that a stockholder must follow under the DGCL in order to seek and perfect appraisal rights. This summary, however, is not a complete statement of all applicable requirements and the law pertaining to appraisal rights under the DGCL, and is qualified in its entirety by reference to Section 262 of the DGCL, the full text of which appears in Annex C to this proxy statement. The following summary does not constitute any legal or other advice, nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262 of the DGCL.

Pursuant to Section 262 of the DGCL, when a merger agreement will be submitted for adoption at a meeting of stockholders, Quantenna must notify the stockholders who were stockholders of record on the record date for notice of such meeting, not less than 20 days before the meeting to vote on the merger, that appraisal rights will be available. A copy of Section 262 of the DGCL must be included with the notice.

This proxy statement constitutes Quantenna’s notice to our stockholders that appraisal rights are available in connection with the merger and the full text of Section 262 of the DGCL is attached to this proxy statement as Annex C, in compliance with the requirements of Section 262 of the DGCL. If you wish to exercise your appraisal rights, you should carefully review the text of Section 262 of the DGCL contained in Annex C . Failure to comply timely and properly with the requirements of Section 262 of the DGCL will result in the loss of your appraisal rights. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of our common stock, Quantenna believes that a stockholder considering the exercise of such rights should seek the advice of legal counsel.

If you wish to demand appraisal of your shares of our common stock, you must satisfy each of the following conditions: (i) you must deliver to Quantenna a written demand for appraisal of your shares of our common stock before the vote is taken to approve the merger proposal; (ii) the written demand must reasonably inform us of the identity of the holder of record of shares of our common stock who intends to demand appraisal of his, her or its shares of our common stock and that such stockholder intends thereby to demand the appraisal of such stockholder’s shares; and (iii) you must not vote or submit a proxy in favor of the merger proposal.

If you fail to comply with any of these conditions and the merger is completed, you will be entitled to receive payment for your shares of our common stock as provided in the merger agreement, but you will not have appraisal rights with respect to your shares of our common stock. A holder of shares of our common stock wishing to exercise appraisal rights must hold of record the shares of our common stock on the date the written demand for appraisal is made and must continue to hold the shares of our common stock of record through the effective time of the merger. A proxy that is submitted and does not contain voting instructions will, unless

 

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revoked, be voted “FOR” the merger proposal, and it will result in the loss 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 exercise appraisal rights must either submit a proxy containing instructions to vote “AGAINST” the merger proposal or “ABSTAIN” from voting on the merger proposal. Voting against or failing to vote for the merger proposal by itself does not constitute a demand for appraisal within the meaning of Section 262 of the DGCL. The written demand for appraisal must be in addition to and separate from any proxy or vote on the merger proposal.

All demands for appraisal should be addressed to the Secretary at 1704 Automation Parkway, San Jose, California 95131, and must be delivered to Quantenna before the vote is taken to approve the merger proposal at the special meeting, and must be executed by, or on behalf of, the record holder of the shares of our common stock. The demand will be sufficient if it reasonably informs Quantenna of the identity of the stockholder and the intention of the stockholder to demand appraisal of the “fair value” of his, her or its shares of our common stock. A stockholder’s failure to deliver to Quantenna the written demand for appraisal prior to the taking of the vote on the merger proposal at the special meeting of stockholders will result in the loss of appraisal rights.

Only a holder of record of shares of our common stock is entitled to demand an appraisal of the shares registered in that holder’s name. Accordingly, to be effective, a demand for appraisal by a holder of our common stock must be made by, or on behalf of, the record stockholder. The demand should set forth, fully and correctly, the record stockholder’s name as it appears on the stockholder’s stock certificate(s) or in the transfer agent’s records, and in the case of uncertificated shares, should specify the stockholder’s mailing address and the number of shares registered in the stockholder’s name. The demand must state that the person intends thereby to demand appraisal of the stockholder’s shares in connection with the merger. The demand cannot be made by the beneficial owner if he or she does not also hold the shares of our common stock of record. The beneficial holder must, in such cases, have the registered owner, such as a broker, bank or other nominee, submit the required demand in respect of those shares of our common stock. If you hold your shares of our common stock through a broker, bank or other nominee and you wish to exercise your appraisal rights, you should consult with your broker, bank or other nominee to determine the appropriate procedures for the making of a demand for appraisal by the nominee and obtaining notice of the effective date of the merger.

If shares of our common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a demand for appraisal must be made in that capacity. If the shares of our common stock are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand must be executed by or for all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, he or she is acting as agent for the record owner or owners. A record owner, such as a broker, bank or other nominee, who holds shares of our common stock as a nominee for others, may exercise his, her or its right of appraisal with respect to shares of our common stock held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares of our common stock as to which appraisal is sought. Where no number of shares of our common stock is expressly mentioned, the demand will be presumed to cover all shares of our common stock held in the name of the record owner. If a stockholder holds shares of our common stock through a broker who in turn holds the shares through a central securities depository nominee such as Cede & Co., a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as record owner.

Within 10 days after the effective time of the merger, the surviving corporation in the merger must give notice of the date that the merger became effective to each of Quantenna’s record stockholders who has complied with Section 262 of the DGCL and who did not vote in favor of the merger proposal. At any time within 60 days after the effective time of the merger, any stockholder who has not commenced an appraisal proceeding or joined a proceeding as a named party may withdraw the stockholder’s demand and accept the merger consideration specified by the merger agreement for that holder’s shares of our common stock by delivering to the surviving

 

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corporation 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 of the merger will require written approval of the surviving corporation. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, with such approval conditioned upon such terms as the Delaware Court of Chancery deems just. If the surviving corporation does not approve a request to withdraw a demand for appraisal when that approval is required, or if the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding, the stockholder will be entitled to receive only the appraised value of his, her or its shares of our common stock determined in any such appraisal proceeding, which value may be less than, equal to or more than the merger consideration offered pursuant to the merger agreement.

Within 120 days after the effective time of the merger, but not thereafter, either the surviving corporation or any stockholder who has complied with the requirements of Section 262 of the DGCL and is entitled to appraisal rights under Section 262 of the DGCL may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares of our common stock held by all such stockholders. Upon the filing of the petition by a stockholder, service of a copy of such petition shall be made upon the surviving corporation. The surviving corporation has no obligation to file such a petition, has no present intention to file a petition and holders should not assume that the surviving corporation will file a petition. Accordingly, it is the obligation of the holders of our common stock to initiate all necessary petitions to perfect their appraisal rights in respect of shares of our common stock within the time prescribed in Section 262 of the DGCL and the failure of a stockholder to file such a petition within the period specified in Section 262 of the DGCL could nullify the stockholder’s previous written demand for appraisal. In addition, within 120 days after the effective time of the merger, any stockholder who has properly complied with the requirements of Section 262 of the DGCL and who did not vote in favor of the merger proposal will be entitled to receive from the surviving corporation, upon written request, a statement setting forth the aggregate number of shares of our common stock not voted in favor of the merger proposal and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The statement must be mailed within 10 days after such written request has been received by the surviving corporation or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. A person who is the beneficial owner of shares of our common stock 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 for appraisal or request from the surviving corporation such statement.

If a petition for appraisal is duly filed by a stockholder and a copy of the petition is delivered to the surviving corporation, then the surviving corporation will be obligated, within 20 days after receiving service of a copy of the petition, to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares of our common stock and with whom agreements as to the value of their shares of our common stock have not been reached. After notice to stockholders who have demanded appraisal from the Register in Chancery, if such notice is ordered by the Delaware Court of Chancery, the Delaware Court of Chancery will conduct a hearing upon the petition and determine those stockholders who have complied with Section 262 of the DGCL and who have become entitled to the appraisal rights provided by Section 262 of the DGCL. The Delaware Court of Chancery may require stockholders who have demanded payment for their shares of our common stock to submit their stock certificates to the Register in Chancery for notation of the pendency of the appraisal proceedings; if any stockholder fails to comply with that direction, the Delaware Court of Chancery may dismiss the proceedings as to that stockholder. Additionally, because our common stock will have been publicly listed on Nasdaq immediately prior to the effective time of the merger, the Delaware Court of Chancery is required under Section 262 of the DGCL to dismiss the proceedings as to all holders of such shares who are otherwise entitled to appraisal rights unless (1) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of our common stock or (2) the value of the consideration provided in the merger for such total number of shares of common stock exceeds $1 million.

After determination by the Delaware Court of Chancery of the stockholders entitled to appraisal of their shares of our common stock, the appraisal proceeding is conducted in accordance with the rules of the Delaware

 

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Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Delaware Court of Chancery will appraise the shares of our common stock, determining their fair value as of the effective time of the merger after taking into account all relevant factors 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. When the fair value has been determined, the Delaware Court of Chancery will direct the payment of such value upon surrender by those stockholders of the certificates representing their shares of our common stock. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall 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 of the merger and the date of payment of the judgment. At any time before the entry of judgment in the proceedings, the surviving corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter only upon the sum of (1) the difference, if any, between the amount paid and the fair value of the shares as determined by the Delaware Court of Chancery, and (2) interest theretofore accrued, unless paid at that time.

You should be aware that an investment banking opinion as to the fairness from a financial point of view of the consideration to be received in a sale transaction, such as the merger, is not an opinion as to fair value under Section 262 of the DGCL. Although we believe that the 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 that may be less than, equal to or more than the merger consideration. Moreover, we do not anticipate offering more than the merger consideration to any stockholder exercising appraisal rights and reserve the right to assert, in any appraisal proceeding, that, for purposes of Section 262 of the DGCL, the “fair value” of a share of our common stock is less than the merger consideration. In determining “fair value,” the Delaware Court of Chancery is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed 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 has 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 which could be ascertained as of the date of the merger which throw any light on future prospects of the merged corporation. Section 262 of the DGCL 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 Delaware Supreme Court 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.”

Upon application by the surviving corporation or by any holder of our common stock entitled to participate in the appraisal proceeding, the Delaware Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any holder of shares of our common stock whose name appears on the verified list and who has submitted such stockholder’s stock certificates, if any, to the Delaware Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights. The Delaware Court of Chancery will direct the payment of the fair value of our shares of common stock, together with interest, if any, by the surviving corporation to the stockholders entitled thereto. Payment will be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and in the case of holders of shares of our common stock represented by certificates upon the surrender to the surviving corporation of such stockholder’s certificates.

 

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Costs of the appraisal proceeding (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and imposed upon the surviving corporation and the stockholders participating in the appraisal proceeding by the Delaware Court of Chancery, as it deems equitable in the circumstances. Upon the application of a stockholder, the Delaware Court of Chancery may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts used in the appraisal proceeding, to be charged pro rata against the value of all shares of our common stock entitled to appraisal. Any stockholder who demanded appraisal rights will not, after the effective time of the merger, be entitled to vote shares of our common stock subject to that demand for any purpose or to receive payments of dividends or any other distribution with respect to those shares of our common stock, other than with respect to payment as of a record date prior to the effective time of the merger. If no petition for appraisal is filed within 120 days after the effective time of the merger, or if the stockholder otherwise fails to perfect, successfully withdraws or loses such holder’s right to appraisal, then the right of that stockholder to appraisal will cease and that stockholder will be deemed to have been converted at the effective time of the merger into the right to receive the $24.50 cash payment (without interest) for each of his, her or its shares of our common stock pursuant to the merger agreement. Inasmuch as Quantenna has no obligation to file such a petition, and Quantenna has no present intention to do so, any holder of shares of our common stock who desires such a petition to be filed is advised to file it on a timely basis. A stockholder will fail to perfect or effectively lose the right to appraisal if no petition for appraisal is filed within 120 days after the effective date of the merger. In addition, as indicated above, a stockholder may withdraw his, her or its demand for appraisal in accordance with Section 262 of the DGCL and accept the merger consideration offered pursuant to the merger agreement.

Failure to comply strictly with all of the procedures set forth in Section 262 of the DGCL will result in the loss of a stockholder’s statutory appraisal rights.

In view of the complexity of Section 262 of the DGCL, Quantenna’s stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors.

DELISTING AND DEREGISTRATION OF COMMON STOCK

If the merger is completed, our common stock will be delisted from Nasdaq and deregistered under the Exchange Act and we will no longer file periodic reports with the SEC on account of our common stock.

SUBMISSION OF STOCKHOLDER PROPOSALS

If the merger is consummated, we will not have public stockholders and there will be no public participation in any future stockholder meetings. We intend to hold the 2019 annual meeting of stockholders (which we refer to as the “2019 Annual Meeting”) only if the merger is not expected to be consummated before the end calendar year 2019.

The deadline to receive stockholder proposals under Rule 14a-8 of the Exchange Act to be considered for inclusion in Quantenna’s proxy statement for the 2019 Annual Meeting was December 25, 2018 (which was 120 calendar days before the date Quantenna’s proxy statement was released to stockholders in connection with the prior year’s annual meeting of stockholders). If, however, the merger is not expected to be consummated before the end calendar year 2019 and the date of the 2019 Annual Meeting is changed by more than 30 days from the anniversary date of the previous year’s annual meeting of stockholders on June 5, 2018, then the deadline will be a reasonable time before we begin to print and mail proxy materials for the 2019 Annual Meeting. Upon receipt of any such proposal, we will determine whether or not to include such proposal in the proxy statement and related proxy for the 2019 Annual Meeting in accordance with regulations governing the solicitation of proxies.

 

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Stockholder proposals submitted for consideration at the 2019 Annual Meeting but not submitted for inclusion in Quantenna’s proxy statement for the 2019 Annual Meeting must have been made not earlier than February 8, 2019, and not later March 10, 2019 (provided, however, that if the 2019 Annual Meeting is more than 30 days prior to, or more than 60 days after, the first anniversary of the previous year’s annual meeting of stockholders on June 5, 2018, nominations and proposals must be received no earlier than the close of business on the 120th day prior to the 2019 Annual Meeting and not later than the close of business on the later of (i) the 90th day prior to the date of the 2019 Annual Meeting, or (ii) the 10th day following the day on which public announcement of the date of the 2019 Annual Meeting is first made). All proposals must be communicated in writing to our Corporate Secretary at our principal office, 1704 Automation Parkway, San Jose, California 95131, Attn: Corporate Secretary. Such written notice must include certain information concerning the stockholder and each nominee or item of business proposed to be presented as specified in Article II, Section 2.4 of our bylaws.

 

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WHERE YOU CAN FIND MORE INFORMATION

Quantenna files annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, including us. The address of that site is www.sec.gov

You can also review Quantenna’s SEC filings on its web site at www.quantenna.com. Through links on the “Investors” portion of our website, we make available free of charge our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, any amendments to those reports and other information filed with, or furnished to, the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act. Such material is made available through our website as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. The information contained on or that can be accessed through our website does not constitute part of this proxy statement, other than documents that we file with the SEC that are specifically incorporated by reference into this proxy statement.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

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 another document filed separately with the SEC. The information incorporated by reference herein is deemed to be part of this proxy statement. This proxy statement incorporates by reference the documents and reports listed below (other than, in each case, the portions that are deemed to have been furnished and not filed in accordance with SEC rules):

 

   

our Annual Report on Form 10-K, for the fiscal year ended December 30, 2018, filed with the SEC on March 1, 2018, and Amendment No.  1 on Form 10-K/A, filed with the SEC on April 26, 2019;

 

   

our Quarterly Report on Form 10-Q, for the quarterly period ended March 31, 2019, filed with the SEC on April 30, 2019; and

 

   

our Current Report on Form 8-K, filed with the SEC on March 27, 2019.

We also incorporate by reference the information contained in all other documents we file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than the portions that are deemed to have been furnished and not filed in accordance with SEC rules, unless otherwise indicated therein) on or after the date of this statement and through the date on which the special meeting is held (including any adjournments or postponements thereof). Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this proxy statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this proxy statement.

We will provide, free of charge, to each person, including any beneficial owner, to whom a proxy statement is delivered a copy of any or all of the documents incorporated by reference into this proxy statement (including any exhibits that are specifically incorporated by reference in those documents). Any such request can be made by writing or telephoning us at the following address and telephone number:

Quantenna Communications, Inc.

1704 Automation Parkway

San Jose, California 95131

Tel: (669) 209-5500

 

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You should rely only on the information contained in this proxy statement, including the annexes attached hereto or the information incorporated by reference herein, to vote your shares at the special meeting of Quantenna stockholders. We have not authorized anyone to provide you with information or any representation about the merger that is different from, or in addition to, that contained in this proxy statement. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date, and the mailing of this proxy statement to stockholders shall not create any implication to the contrary.

 

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Annex A

EXECUTION VERSION

AGREEMENT AND PLAN OF MERGER

dated as of

MARCH 27, 2019

among

QUANTENNA COMMUNICATIONS, INC.,

ON SEMICONDUCTOR CORPORATION

and

RAPTOR OPERATIONS SUB, INC.


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TABLE OF CONTENTS

 

     PAGE  
ARTICLE 1           DEFINITIONS      1  
  Section 1.01.   Definitions      1  
  Section 1.02.   Other Definitional and Interpretative Provisions      8  
ARTICLE 2           THE MERGER      9  
  Section 2.01.   The Merger      9  
  Section 2.02.   Conversion of Shares      9  
  Section 2.03.   Surrender and Payment      10  
  Section 2.04.   Appraisal Shares      11  
  Section 2.05.   Company Equity Awards      12  
  Section 2.06.   Treatment of Company ESPP      13  
  Section 2.07.   Withholding Rights      13  
  Section 2.08.   Lost Certificates      13  
ARTICLE 3           THE SURVIVING CORPORATION      14  
  Section 3.01.   Certificate of Incorporation      14  
  Section 3.02.   Bylaws      14  
  Section 3.03.   Directors and Officers      14  
ARTICLE 4           REPRESENTATIONS AND WARRANTIES OF THE COMPANY      14  
  Section 4.01.   Corporate Existence and Power      14  
  Section 4.02.   Corporate Authorization      15  
  Section 4.03.   Governmental Authorization      15  
  Section 4.04.   Non-contravention      15  
  Section 4.05.   Capitalization      16  
  Section 4.06.   Subsidiaries      16  
  Section 4.07.   SEC Filings and the Sarbanes-Oxley Act      17  
  Section 4.08.   Financial Statements      18  
  Section 4.09.   Disclosure Documents      18  
  Section 4.10.   Absence of Certain Changes      18  
  Section 4.11.   No Undisclosed Material Liabilities      18  
  Section 4.12.   Compliance with Laws and Court Orders      19  
  Section 4.13.   Litigation      19  
  Section 4.14.   Properties      19  

    

  Section 4.15.   Intellectual Property      19  
  Section 4.16.   Taxes      21  
  Section 4.17.   Employee Benefit Plans      23  
  Section 4.18.   Labor and Employment Matters      24  
  Section 4.19.   Insurance      24  
  Section 4.20.   Environmental Matters      25  
  Section 4.21.   Material Contracts      25  
  Section 4.22.   Customers and Suppliers      26  
  Section 4.23.   Compliance with the U.S. Foreign Corrupt Practices Act and Other Applicable Anti-Corruption Laws      26  
  Section 4.24.   Finders’ Fees      26  
  Section 4.25.   Opinion of Financial Advisor      27  
  Section 4.26.   Antitakeover Statutes      27  
  Section 4.27.   Trade Laws      27  
  Section 4.28.   No Additional Representations      27  

 

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(continued)

 

     PAGE  
ARTICLE 5          REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
                              SUBSIDIARY
     27  
  Section 5.01.   Corporate Existence and Power      27  
  Section 5.02.   Corporate Authorization      28  
  Section 5.03.   Governmental Authorization      28  
  Section 5.04.   Non-contravention      28  
  Section 5.05.   Disclosure Documents      28  
  Section 5.06.   Availability of Funds; Financing      29  
  Section 5.07.   Certain Arrangements      29  
  Section 5.08.   Litigation      29  
  Section 5.09.   Ownership of Company Securities; Delaware Law Section 203      29  
  Section 5.10.   Solvency      29  
  Section 5.11.   Finders’ Fees      30  
  Section 5.12.   Non-Reliance on Company Estimates      30  
  Section 5.13.   No Additional Representations      30  

ARTICLE 6           COVENANTS OF THE COMPANY

     30  
 

Section 6.01.

  Conduct of the Company      30  
 

Section 6.02.

  Company Stockholder Meeting      33  
 

Section 6.03.

  Acquisition Proposals      34  
 

Section 6.04.

  Access to Information      36  
 

Section 6.05.

  Intentionally Omitted      37  

    

 

Section 6.06.

  Conduct of the Company      37  

ARTICLE 7           COVENANTS OF PARENT AND MERGER SUBSIDIARY

     37  
 

Section 7.01.

  Conduct of Parent      37  
 

Section 7.02.

  Obligations of Merger Subsidiary      38  
 

Section 7.03.

  Parent Owned Shares      38  
 

Section 7.04.

  Indemnification and Insurance      38  
 

Section 7.05.

  Employee Matters      40  

ARTICLE 8           COVENANTS OF PARENT, MERGER SUBSIDIARY AND THE COMPANY

     41  
 

Section 8.01.

  Reasonable Best Efforts      41  
 

Section 8.02.

  Proxy Statement; Stockholder Approval      42  
 

Section 8.03.

  Public Announcements      43  
 

Section 8.04.

  Further Assurances      43  
 

Section 8.05.

  Notices of Certain Events      43  
 

Section 8.06.

  Section 16 Matters      43  
 

Section 8.07.

  Stock Exchange De-listing; 1934 Act Deregistration      43  
 

Section 8.08.

  Transaction Litigation      44  
 

Section 8.09.

  No Control of Other Party’s Business      44  

ARTICLE 9           CONDITIONS TO THE MERGER

     44  
 

Section 9.01.

  Conditions to the Obligations of Each Party      44  
 

Section 9.02.

  Conditions to the Obligations of Parent and Merger Subsidiary      44  
 

Section 9.03.

  Conditions to the Obligations of the Company      45  

ARTICLE 10          TERMINATION

     45  
 

Section 10.01.

  Termination      45  
 

Section 10.02.

  Effect of Termination      47  

 

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TABLE OF CONTENTS

(continued)

 

     PAGE  

ARTICLE 11          MISCELLANEOUS

     48  
 

Section 11.01.

  Notices      48  
 

Section 11.02.

  Non-Survival of Representations, Warranties, Covenants and Agreements      49  
 

Section 11.03.

  Amendments and Waivers      49  
 

Section 11.04.

  Expenses      49  
 

Section 11.05.

  Disclosure Letter References      49  
 

Section 11.06.

  Binding Effect; Benefit; Assignment      49  
 

Section 11.07.

  Governing Law      50  
 

Section 11.08.

  Consent to Jurisdiction      50  
 

Section 11.09.

  WAIVER OF JURY TRIAL      50  
 

Section 11.10.

  Counterparts; Effectiveness      50  
 

Section 11.11.

  Entire Agreement; No Other Representations and Warranties      51  
 

Section 11.12.

  Severability      51  
 

Section 11.13.

  Specific Performance      51  
Exhibit A — Certificate of Incorporation of the Surviving Corporation   

 

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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this “Agreement”) dated as of March 27, 2019 among Quantenna Communications, Inc. a Delaware corporation (the “Company”), ON Semiconductor Corporation, a Delaware corporation (“Parent”), and Raptor Operations Sub, Inc. a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Subsidiary”).

W I T N E S S E T H:

WHEREAS, the Board of Directors of the Company has (i) approved and adopted this Agreement and the transactions contemplated hereby, (ii) determined that this Agreement, the Merger and the other transactions contemplated hereby are advisable, fair to and in the best interests of the Company and its stockholders, and (iii) deemed it advisable that the stockholders of the Company adopt this Agreement on the terms and subject to the conditions set forth in this Agreement and directed that this Agreement be submitted for consideration at a meeting of the stockholders of the Company;

WHEREAS, the Board of Directors of Parent has approved and adopted this Agreement and the transactions contemplated hereby;

WHEREAS, the Board of Directors of Merger Subsidiary has (i) approved and adopted this Agreement and the transactions contemplated hereby and (ii) deemed it advisable that Parent as the sole stockholder of the Merger Subsidiary adopt this Agreement on the terms and subject to the conditions set forth in this Agreement; and

WHEREAS, in furtherance of such acquisition, the parties hereto intend to effect a merger in which Merger Subsidiary will be merged with and into the Company, with the Company surviving the Merger on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE 1

Definitions

Section 1.01. Definitions. As used herein, the following terms have the following meanings:

1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Acquisition Proposal” means, other than the transactions contemplated by this Agreement, any written or oral offer, or proposal of any Third Party or “group” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) relating to a transaction or series of related transactions involving: (i) any acquisition or purchase (including through any lease, exchange, exclusive license, transfer or disposition, in each case, other than in the ordinary course of business), direct or indirect, of assets equal to 20% or more of the consolidated assets or businesses of the Company and its Subsidiaries, taken as a whole, or to which 20% or more of the consolidated revenues or earnings of the Company and its Subsidiaries, taken as a whole, are attributable, or 20% or more of any class of equity or voting securities of the Company, (ii) any tender offer or exchange offer that, if consummated, would result in such Third Party or group beneficially owning 20% or more of any class of equity

 

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or voting securities of the Company, or (iii) a merger, consolidation, business combination, sale of all or substantially all of the assets, liquidation, dissolution or other similar extraordinary transaction (A) involving the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute 20% or more of the consolidated assets of the Company or to which 20% or more of the consolidated revenues or earnings of the Company and its Subsidiaries, taken as a whole, are attributable or (B) pursuant to which the stockholders of the Company immediately prior to the consummation of such transaction would, as a result of such transaction, hold less than 80% of the equity interests in the surviving entity of such transaction.

Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto.

Applicable Law” means, with respect to any Person, any federal, state, local or foreign statute, law (including common law), ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is legally binding upon and applicable to such Person.

Business Day” means a day, other than Saturday, Sunday or other day on which commercial banks in the states of California or New York are authorized or required by Applicable Law to close.

Code” means the Internal Revenue Code of 1986, as amended.

Company Balance Sheet” means the consolidated balance sheet of the Company as of December 30, 2018 and the notes thereto set forth in the Company’s Form 10-K filed with the SEC for the fiscal year ended December 30, 2018.

Company Balance Sheet Date” means December 30, 2018.

Company Disclosure Letter” means the disclosure letter dated the date hereof regarding this Agreement that has been provided by the Company to Parent and Merger Subsidiary.

Company Employee Plan” means each “employee benefit plan,” as defined in Section 3(3) of ERISA (whether or not such plan is subject to ERISA) and each other employment, severance or similar Contract, plan, practice, arrangement or policy providing for compensation, bonuses, profit-sharing, stock option or other stock-related rights or other forms of incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangements), health, medical or welfare benefits, perquisites, employee assistance program, disability or sick leave benefits, or post-employment or retirement benefits (including compensation, pension, health, medical or life insurance benefits) which is maintained, administered or contributed to by the Company or any of its Subsidiaries or with respect to which the Company or any of its Subsidiaries has any actual or contingent liability, other than any plan, policy, program or arrangement (i) mandated by Applicable Law and maintained solely by a Governmental Authority or (ii) sponsored or maintained by a professional employer organization.

Company ESPP” means the Company’s 2016 Employee Stock Purchase Plan.

Company Owned IP” means any and all Intellectual Property that is owned by the Company or any of its Subsidiaries (including any and all Company Registered IP).

Company Registered IP” means all of the Registered IP owned by the Company or any of its Subsidiaries.

 

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Company Stock” means the common stock, par value $0.0001 per share, of the Company.

Company Stock Plans” means each plan or non-plan award agreement of the Company (including any such award agreement assumed by the Company), other than the Company ESPP, pursuant to which stock options or other equity awards have been granted to current or former employees, officers, directors or other service providers.

Confidentiality Agreement” means the letter agreement between Parent and the Company dated December 21, 2018.

Contract” means any legally binding contract, agreement, note, bond, indenture, lease, license, or other legally binding agreement, commitment or undertaking, in each case, whether written or oral.

Delaware Law” means the General Corporation Law of the State of Delaware.

Electronic Data Room” means that certain electronic data room run by Firmex and maintained by the Company for purposes of the Merger and the other transactions contemplated by this Agreement.

Environmental Laws” means any Applicable Laws relating to pollution, or the protection of the environment or natural resources, or, solely as it relates to exposure to hazardous or toxic substances, human health.

Environmental Permits” means all permits, licenses, authorizations, and approvals required by Environmental Laws for the operation of the business of the Company or any of its Subsidiaries as currently conducted.

ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

ERISA Affiliate” of any entity means any other entity that, together with such entity, would be treated as a “single employer” within the meaning of Section 414(b), (c), (m) or (o) of the Code.

Existing Credit Agreement” means that certain Credit Agreement, dated as of April 15, 2016, as amended by that certain First Amendment to Credit Agreement, dated as of September 30, 2016, that certain Second Amendment to Credit Agreement, dated as of March 31, 2017, that certain Third Amendment to Credit Agreement, dated as of November 30, 2017, that certain Fourth Amendment to Credit Agreement, dated as of May 31, 2018, and the Credit Agreement Amendment, among Parent, Deutsche Bank AG New York Branch, as the Administrative Agent and as the Collateral Agent, the lenders from time to time party thereto, and various other parties.

GAAP” means generally accepted accounting principles in the United States.

Governmental Authority” means any transnational, domestic or foreign, federal, provincial, regional, state, municipal or local governmental, quasi-governmental, regulatory or administrative authority, department, court, agency or official, including any political subdivision thereof.

Hazardous Substance” means any toxic, radioactive or otherwise hazardous substance, waste or material that in relevant form and concentration is regulated under any Environmental Law.

HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Indebtedness” means with respect to any Person, all obligations of such Person (a) for borrowed money, whether secured or unsecured, (b) evidenced by notes, debentures or similar Contracts, (c) in respect of

 

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outstanding letters of credit to the extent drawn and not reimbursed and (d) any guarantee (other than customary non-recourse carve-out or “badboy” guarantees), keepwell or similar arrangement for any of the foregoing. Notwithstanding the foregoing, Indebtedness shall not include (A) any obligations or indebtedness among the Company and its wholly owned Subsidiaries or among wholly owned Subsidiaries of the Company, and (B) guarantees by the Company of obligations or indebtedness of Subsidiaries of the Company or guarantees by Subsidiaries of the Company of obligations or indebtedness of the Company or any Subsidiary of the Company.

Intellectual Property” means any or all of the following and all rights in: (i) all United States, international and foreign patents and applications therefor and all reissues, divisions, divisionals, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (ii) all inventions (whether or not patentable), trade secrets, know-how, databases, business methods, processes, designs, schematics, drawings, formulae, technical data, specifications, research and development information, technology, business plans and customer lists and other proprietary information; (iii) all copyrights, whether registered or unregistered, and registrations and applications for registration thereof, including in computer software, throughout the world, mask works, whether registered or unregistered, and any registrations and applications for registration thereof; (iv) all industrial designs and any registrations and applications therefor throughout the world; (v) all trade names, trade dress, brand names, corporation names, logos, common law trademarks and service marks, domain names, URLs, and trademark and service mark, whether registered or unregistered, and the goodwill associated therewith, together with any registrations and applications therefor throughout the world; and (vi) and any governmental grant for the protection of inventions or industrial designs.

International Plan” means any Company Employee Plan that is maintained primarily for the benefit of current or former employees or other service providers of the Company or any of its Subsidiaries based outside of the United States.

Key Employee” means an employee of the Company or any of its Subsidiaries whose annual base compensation is $200,000 or more.

knowledge” means (i) with respect to the Company, the actual knowledge of the individuals listed in Section 1.01 of the Company Disclosure Letter and (ii) with respect to Parent, the actual knowledge of the individuals listed on Section 1.01 of the Parent Disclosure Letter.

Lien” means, with respect to any property or asset, any mortgage, lien (statutory or otherwise), pledge, charge, security interest, encumbrance, option or other adverse claim or similar restriction of any kind in respect of such property or asset, other than a Permitted Lien.

Major Customer” means the 10 largest customers of the Company and its Subsidiaries as measured by revenue for the twelve-month period ended December 30, 2018.

Major Supplier” means the 6 largest suppliers of products or services to the Company and its Subsidiaries as measured by expense for the twelve-month period ended on December 30, 2018.

Material Adverse Effect” means any change, effect, event, circumstance, development, condition or occurrence that (i) has, or would reasonably be expected to have, a material adverse effect on the condition (financial or otherwise), business, assets or results of operations of the Company and its Subsidiaries, taken as a whole, excluding any change, effect, event, circumstance, development, condition or occurrence resulting from or arising in connection with (A) changes in the financial, securities, credit or other capital markets or general economic or regulatory, legislative or political conditions, (B) changes or conditions generally affecting the industry in which the Company and its Subsidiaries operate, including changes in interest and exchange rates, in the United States or any other jurisdiction in which the Company or its Subsidiaries operate, (C) geopolitical conditions, any outbreak or escalation of hostilities, acts of war (whether or not declared), acts of armed hostility, sabotage, terrorism or national or international calamity (or material worsening of any such conditions), (D) any

 

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hurricane, tornado, tsunami, flood, volcanic eruption, earthquake, nuclear incident, pandemic, quarantine restrictions, weather conditions or other natural or man-made disaster or other force majeure event, (E) changes or prospective changes in Applicable Law or GAAP or authoritative interpretation or enforcement thereof, (F) the failure, in and of itself, of the Company to meet any internal or published projections, forecasts, budgets, guidance, estimates or predictions in respect of revenues, earnings or other financial or operating metrics or other matters before, on or after the date hereof, or changes or prospective changes in the market price or trading volume of the securities of the Company or the credit rating of the Company (it being understood that the underlying facts giving rise or contributing to such failure or change may be taken into account in determining whether there has been a Material Adverse Effect if such facts are not otherwise excluded under this definition), (G) the identity of, or any facts or circumstances solely relating to Parent, Merger Subsidiary or their respective Affiliates, (H) the negotiation, announcement, pendency or consummation of the transactions contemplated by this Agreement, including (1) any loss or change in relationship of such Person and its Subsidiaries with any customer, supplier, vendor, distributor, lender, employee, investor, venture partner or other business partner of the Company or its Subsidiaries in connection therewith, or (2) any other disruption to the business of the Company (including supplier, supply chain or distributor disruptions, or the failure to obtain customer orders or design wins) in connection therewith, (I) any stockholder class action, derivative or similar litigation, suit, action or proceeding in respect of this Agreement or the other Transaction Documents (or the transactions contemplated hereby or thereby), or the Proxy Statement (including breach of fiduciary duty and disclosure claims) and (J) (1) any action taken by the Company or any of its Subsidiaries at the written request, or with the written consent, of Parent or Merger Subsidiary or (2) compliance by the Company with the terms of, or the taking by the Company of any action required by, this Agreement, or the failure by the Company to take any action prohibited by this Agreement; except, in the case of clauses (A), (B), (C), (D) or (E), to the extent that there is a material disproportionate effect on the Company and its Subsidiaries, taken as a whole, relative to other participants in the industry in which the Company and its Subsidiaries operate (in which case the disproportionate impact or impacts may be taken into account in determining whether there has been a Material Adverse Effect), or (ii) prevents, materially impedes, interferes with, hinders or delays, or would reasonably be expected to prevent or, materially impede, interfere with, hinder or delay the consummation by the Company of the Merger or any of the other transactions contemplated by this Agreement on a timely basis.

NASDAQ” means the Nasdaq Global Select Market, but if the Nasdaq Global Select Market is not then the principal U.S. trading market for the Company Stock, then “Nasdaq” shall be deemed to mean the principal U.S. national securities exchange registered under the 1934 Act on which the Company Stock is then traded.

Officers” means the persons set forth on Section 1.01 of the Company Disclosure Letter under the heading “Officers”.

Parent Material Adverse Effect” means any change, effect, event, circumstance, development, condition or occurrence that prevents or materially impedes, interferes with, hinders or delays or would reasonably be expected to prevent or materially impede, interfere with, hinder or delay the consummation by Parent or Merger Subsidiary of the Merger or any of the other transactions contemplated by this Agreement on a timely basis.

Permitted Liens” means (i) Liens for Taxes that are not due and payable, or that are being contested in good faith by appropriate proceedings and for which adequate accruals and reserves have been established and disclosed in the Company’s financial statements, (ii) mechanics’, carriers’, workmen’s, warehousemen’s, repairmen’s or other like Liens arising or incurred in the ordinary course of business, (iii) zoning, building and other similar codes and regulations, (iv) Liens, easements, rights-of-way, covenants and other similar restrictions on real property over which the Company or any of its Subsidiaries has easement rights or on any real property leased by the Company or any of its Subsidiaries and subordination or similar agreements relating thereto, (v) licenses of Intellectual Property, (vi) Liens the existence of which are disclosed in the notes to the consolidated financing statements of the Company included in the Company SEC Documents, and (vii) Liens (other than Liens securing indebtedness for borrowed money), defects or irregularities in title, easements, rights-of-way, covenants, restrictions and other similar matters that would not reasonably be expected to,

 

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individually or in the aggregate, materially impair the continued (A) ownership or possession of the applicable property by the Company and its Subsidiaries or (B) use and operation of the assets to which they relate by the Company and its Subsidiaries under the terms and for the purposes for which the assets are currently being used.

Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

Personal Information” means any information that relates to an identified or identifiable individual or device.

Registered IP” means all registrations or applications to register Intellectual Property with any Government Authority.

Release” means any release, spill, emission, leaking, dumping, injection, emptying, pumping, pouring, disposal or discharge into or through the environment, including indoor and outdoor air, surface and subsurface water, soil and sediments.

Representative” means, with respect to any Person, such Person’s directors, officers, employees, Affiliates, investment bankers, attorneys, accountants and other advisors or representatives.

Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002.

SEC” means the United States Securities and Exchange Commission.

Subsidiary” means, with respect to any Person, any entity of which (i) securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at any time directly or indirectly owned by such Person, or (ii) such Person is a general partner.

Tax” means any tax or other like assessment or charge of any kind whatsoever (including withholding on amounts paid to or by any Person), together with any interest, penalty, or addition to tax.

Tax Return” means any Tax return, statement, report, election, declaration, disclosure, schedule or form (including any estimated tax or information return or report) filed or required to be filed, or maintained or required to be maintained, in connection with Taxes.

Taxing Authority” means any Governmental Authority (domestic or foreign) responsible for the imposition or collection of any Tax.

Third Party” means any Person, including as defined in Section 13(d) of the 1934 Act, other than Parent or any of its Affiliates.

Trade Laws” means any law, regulations, order, permit or other decision or requirement having the force or effect of law and as amended from time to time, of any Governmental Authority, concerning the importation of products, the exportation or reexportation of products (including hardware, software, and technology and services), the terms and conduct of international transactions, and the making or receiving of international payments, including, as applicable, the Tariff Act of 1930 and other laws and programs administered or enforced by U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement, and their predecessor agencies, the Export Administration Act of 1979, Export Administration Regulations, International Emergency Economic Powers Act, Trading With the Enemy Act, Arms Export Control Act, International Traffic in Arms Regulations, Executive Orders of the President regarding embargoes and restrictions on transactions with designated entities, the embargoes and restrictions administered by the U.S. Department of the Treasury, Office

 

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of Foreign Assets Control and the antiboycott laws administered by the U.S. Departments of Commerce and Treasury, and any similar customs and international trade laws in any jurisdiction in which Company conducts business.

Transaction Documents” means this Agreement and any other agreement executed and delivered in connection with this Agreement on the date hereof.

US Plan” means any Company Employee Plan that is not an International Plan.

(b)    Each of the following terms is defined in the Section set forth opposite such term:

 

Term

  

Section

    
Acceptable Confidentiality Agreement    Section 6.03(g)(i)   
Adverse Recommendation Change    Section 6.03(a)   
Agreement    Preamble   
Antitrust Laws    Section 8.01(b)   
Appraisal Shares    Section 2.04   
Cash Option Award    Section 2.05(b)   
Cash RSU Award    Section 2.05(d)   
Certificates    Section 2.03(a)   
Change Notice    Section 6.03(f)   
Claim    Section 7.04(b)   
Closing    Section 2.01(b)   
Closing Date    Section 2.01(b)   
Company    Preamble   
Company Board Recommendation    Section 4.02(b)   
Company Employees    Section 7.05(a)   
Company ESPP Rights    Section 2.06   
Company Preferred Stock    Section 4.05(a)   
Company Reference Time    Section 4.05(a)   
Company Representatives    Section 6.03(a)   
Company RSU    Section 2.05(c)   
Company RSU Cap    Section 6.01(c)   
Company SEC Documents    Section 4.07(a)   
Company Securities    Section 4.05(b)   
Company Stock Option    Section 2.05(a)   
Company Stockholder Approval    Section 4.02(a)   
Company Stockholder Meeting    Section 6.02   
Company Subsidiary Securities    Section 4.06(c)   
Company Terminating Breach    Section 10.02(c)(ii)   
Company Termination Fee    Section 10.02(b)(i)   
D&O Insurance    Section 7.04(c)   
Effective Time    Section 2.01(c)   
End Date    Section 10.01(b)(i)   
Final Exercise Date    Section 2.06   
Foreign Antitrust Laws    Section 4.03   
Indemnified Person    Section 7.04(a)   
Internal Controls    Section 4.07(f)   
Intervening Event    Section 6.03(g)(ii)   
Lease    Section 4.14(b)   
Material Contract    Section 4.21(a)   
Merger    Section 2.01(a)   
Merger Consideration    Section 2.02(a)(i)   

 

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Term

  

Section

    
Merger Subsidiary    Preamble   
Option Consideration    Section 2.05(a)   
Option Exercise Price    Section 2.05(a)   
Out-of-the-Money Option    Section 2.05(a)   
Parent    Preamble   
Parent Common Stock    Section 2.05(b)   
Parent Terminating Breach    Section 10.01(d)(ii)   
Paying Agent    Section 2.03(a)   
Payment Fund    Section 2.03(c)   
Proxy Statement    Section 4.09   
Restraints    Section 9.01(b)   
RSU Consideration    Section 2.05(c)   
RSU Recipients    Section 6.01(c)   
Superior Proposal    Section 6.03(g)(iii)   
Surviving Corporation    Section 2.01(a)   
Tax Incentive    Section 4.16(l)   
Uncertificated Shares    Section 2.03(a)   
Unvested Company RSU    Section 2.05(d)   
Unvested Company Stock Option    Section 2.05(b)   
Vested Company Stock Option    Section 2.05(a)   

Section 1.02. Other Definitional and Interpretative Provisions. The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The table of contents, and the article and section and other titles, headings and captions herein, are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Annexes, Exhibits and Schedules are to Articles, Sections, Annexes, Exhibits and Schedules of this Agreement unless otherwise specified. All Annexes, Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any terms used in any Annex, Exhibit or Schedule or in any certificate or other document made or delivered pursuant hereto but not otherwise defined therein shall have the meaning as defined in this Agreement. The definition of terms herein shall apply equally to the singular and the plural. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The word “will” shall be construed to have the same meaning as the word “shall”. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or thing extends, and such shall not mean simply “if”. The word “or” shall not be exclusive. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. Unless otherwise specified, references to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder. References to any agreement or Contract are to that agreement or Contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. The phrase “date hereof” or “date of this Agreement” shall be deemed to refer to the date set forth in the preamble of this Agreement. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. The measure of a period of one month or year for purposes of this Agreement will be the date of the following month or year corresponding to the starting date; and, if no corresponding date exists, then the end date of such period being measured will be the next actual date of the following month or year (for example, one month following February 18 is March 18 and one month following March 31 is May 1). References to “law”, “laws” or to a particular statute or law shall be deemed also to include any Applicable Law.

 

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Any references in this Agreement to “dollars” or “$” shall be to U.S. dollars. The terms “furnished,” “made available” and other similar terms shall mean the inclusion of any documents, agreements and other instruments in the Electronic Data Room or publicly filed or furnished with the SEC.

ARTICLE 2

The Merger

Section 2.01. The Merger.

(a)    On the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with Delaware Law, at the Effective Time, Merger Subsidiary shall be merged (the “Merger”) with and into the Company in accordance with Delaware Law, whereupon, the separate existence of Merger Subsidiary shall cease and the Company shall be the surviving corporation (the “Surviving Corporation”).

(b)    Subject to the provisions of Article 9, the closing of the Merger (the “Closing”) shall take place at the offices of O’Melveny & Myers LLP, 2765 Sand Hill Road, Menlo Park, California 94025 at 5:00 a.m. Menlo Park, California time, as soon as possible, but in any event no later than the third (3rd) Business Day after the date the conditions set forth in Article 9 (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permissible, waiver of those conditions at the Closing) have been satisfied or, to the extent permissible, waived by the party or parties entitled to the benefit of such conditions, or at such other place, at such other time or on such other date as Parent and the Company may mutually agree consistent with Delaware Law (the “Closing Date”).

(c)    At the Closing, the Company and Merger Subsidiary shall file a certificate of merger with the Secretary of State of the State of Delaware and make all other filings or recordings required by Delaware Law in connection with the Merger. The Merger shall become effective at such time (the “Effective Time”) as the certificate of merger is duly filed with the Secretary of State of the State of Delaware (or at such later time as may be specified in the certificate of merger).

(d)    From and after the Effective Time, the Merger shall have the effects set forth in Section 259 of Delaware Law.

Section 2.02. Conversion of Shares.

(a)    At the Effective Time, by virtue of the Merger and without any action on the part of the parties hereto or the holders thereof:

(i)    except as otherwise provided in Section 2.02(a)(ii), Section 2.02(a)(iii) or Section 2.04, each share of Company Stock outstanding immediately prior to the Effective Time shall no longer be outstanding and shall be automatically be canceled and converted into the right to receive $24.50 in cash, without interest (the “Merger Consideration”);

(ii)    each share of Company Stock held by the Company as treasury stock or owned by Parent or Merger Subsidiary immediately prior to the Effective Time shall be canceled and shall cease to exist, and no payment shall be made with respect thereto;

(iii)    each share of Company Stock held by any Subsidiary of Parent (other than Merger Subsidiary) immediately prior to the Effective Time shall be converted into such number of shares of common stock, par value $0.0001 per share, of the Surviving Corporation such that each such Person owns the same percentage of the Surviving Corporation immediately following the Effective Time as such Person owned of the Company immediately prior to the Effective Time; and

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Surviving Corporation with the same rights, powers and privileges as the shares so converted and, together with the shares described in Section 2.02(a)(iii), and shall constitute the only outstanding shares of capital stock of the Surviving Corporation.

(b)    If, during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of the Company shall occur, including by reason of any reclassification, recapitalization, stock split, division, subdivision or combination, exchange or readjustment of shares, or any stock dividend or stock distribution thereon with a record date during such period, but excluding any change that results from any exercise of options or the vesting of restricted share units outstanding as of the date hereof to purchase shares of Company Stock granted under the Company’s stock option or compensation plans or arrangements that are permitted by this Agreement, the Merger Consideration and any other amounts payable pursuant to this Agreement shall be appropriately adjusted.

Section 2.03. Surrender and Payment.

(a)    Prior to the Effective Time, Parent shall appoint an agent reasonably acceptable to the Company (the “Paying Agent”) for the purpose of exchanging for the Merger Consideration (A) certificates representing shares of Company Stock (the “Certificates”) or (B) uncertificated shares of Company Stock (the “Uncertificated Shares”). Promptly after the Effective Time (but in no event later than two (2) Business Days after the Effective Time), Parent shall send, or shall cause the Paying Agent to send, to each holder of Certificates that immediately prior to the Effective Time represented shares of Company Stock and whose shares were converted into the Merger Consideration pursuant to Section 2.02 a letter of transmittal (in a form that was reasonably acceptable to the Company prior to the Effective Time) and instructions (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificates or transfer of the Uncertificated Shares to the Paying Agent) for use in such exchange.

(b)    Each holder of Certificates that immediately prior to the Effective Time represented shares of Company Stock that have been converted into the right to receive the Merger Consideration shall be entitled to receive, upon surrender to the Paying Agent of a Certificate, together with a properly completed letter of transmittal, the Merger Consideration. Payment of the Merger Consideration, in each case to which such holders are entitled pursuant to the terms of this Agreement with respect to Uncertificated Shares shall be made promptly following the Effective Time without any action on the part of the person in whose name such Uncertificated Shares are registered, except as may be required by the Paying Agent (including in respect of any applicable tax forms or other documentation required to be delivered by such holder). No interest shall be paid or accrued with respect to the Merger Consideration payable upon surrender of Certificates or Uncertificated Shares.

(c)    At or prior to the Effective Time, Parent shall deposit, or cause to be deposited, with the Paying Agent, for the benefit of the holders of Company Stock, an aggregate amount of cash comprising the amount sufficient to pay the aggregate Merger Consideration (such cash referred to as the “Payment Fund”). The Payment Fund shall not be used for any purpose other than for the purpose provided for in this Agreement and shall be held in trust for the benefit of the holders of Company Stock entitled to receive the Merger Consideration pursuant to the terms of Section 2.02. The Payment Fund shall, pending its disbursement to the holders of Company Stock and subject to the applicable requirements of the Paying Agent, be invested by the Paying Agent as directed by Parent or, after the Effective Time, the Surviving Corporation in (i) short-term direct obligations of the United States of America, (ii) short-term obligations for which the full faith and credit of the United States of America is pledged to provide for the payment of principal and interest, (iii) short-term commercial paper rated the highest quality by either Moody’s Investors Service, Inc. or Standard and Poor’s Ratings Services, or (iv) certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks reasonably acceptable to the Company; provided that no such investment or losses shall affect the amounts payable to such holders of Company Stock and Parent shall promptly replace or cause to be replaced any funds deposited with the Paying Agent that are lost through any investment so as to ensure that the Payment Fund is at all times maintained at a level sufficient for the Paying Agent to pay the Merger Consideration. Earnings from investments, subject to the

 

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immediately preceding proviso, shall be paid to and shall be the sole and exclusive property of Parent and the Surviving Corporation. Except as contemplated by Section 2.03(g) hereof, the Payment Fund shall not be used for any other purpose.

(d)    If any portion of the Merger Consideration is to be paid to a Person other than the Person in whose name the surrendered Certificate or the transferred Uncertificated Share is registered, it shall be a condition to such payment that (i) either such Certificate shall be properly endorsed or shall otherwise be in proper form for transfer or such Uncertificated Share shall be properly transferred and (ii) the Person requesting such payment shall pay to the Paying Agent any transfer or other Taxes required as a result of such payment to a Person other than the registered holder of such Certificate or Uncertificated Share or establish to the satisfaction of the Paying Agent that such Tax has been paid or is not payable.

(e)    At the Effective Time, there shall be no further registration of transfers of shares of Company Stock and the holders of Certificates and Uncertificated Shares that evidenced shares of Company Stock prior to the Effective Time shall cease to have any rights with respect to such shares of Company Stock, other than the right to receive the Merger Consideration. If, after the Effective Time, Certificates or Uncertificated Shares are presented to the Surviving Corporation or the Paying Agent, they shall be canceled and exchanged for the Merger Consideration as provided for, and in accordance with the procedures set forth, in this Article 2.

(f)    Any portion of the Merger Consideration deposited with the Paying Agent pursuant to Section 2.03(c) that remains unclaimed by the holders of shares of Company Stock 12 months after the Effective Time shall be returned to Parent, upon demand, and any such holder who has not exchanged shares of Company Stock for the Merger Consideration in accordance with this Section 2.03 prior to that time shall thereafter look only to Parent for payment of the Merger Consideration, in respect of such shares without any interest thereon, as general creditors thereof. Notwithstanding the foregoing, Parent shall not be liable to any holder of shares of Company Stock for any amounts paid to a public official pursuant to applicable abandoned property, escheat or similar laws. Any amounts remaining unclaimed by holders of shares of Company Stock immediately prior to such time when such amounts would otherwise escheat to or become property of any Governmental Authority shall become, to the extent permitted by Applicable Law, the property of Parent free and clear of any claims or interest of any Person previously entitled thereto.

(g)    Any portion of the Merger Consideration made available to the Paying Agent pursuant to Section  2.04 in respect of any Appraisal Shares shall be returned to Parent, upon demand.

Section 2.04. Appraisal Shares. Notwithstanding Section 2.02, shares of Company Stock issued and outstanding immediately prior to the Effective Time (other than shares of Company Stock canceled in accordance with Section 2.02(a)(ii)) and held by a holder who has not voted in favor of adoption of this Agreement or consented thereto in writing and who is entitled to demand and properly demands appraisal of such shares of Company Stock pursuant to, and who complies, in all respects, with Delaware Law (such shares being referred to collectively as the “Appraisal Shares” until such time as such holder fails to perfect, withdraws or otherwise loses such holder’s appraisal rights under Delaware Law with respect to such shares) shall not be converted into a right to receive the Merger Consideration but instead shall be entitled only to such rights as are granted by Delaware Law to Appraisal Shares; provided that if, after the Effective Time, such holder fails to perfect, withdraws or otherwise waives, withdraws or loses such holder’s right to appraisal pursuant to Delaware Law, or if a court of competent jurisdiction shall determine that such holder is not entitled to the relief set forth in the Delaware Law in respect of appraisal, then the right of such holder to receive such payment in respect of such Appraisal Shares will cease and such shares of Company Stock will be deemed to have been converted as of the Effective Time into, and will be exchangeable solely for, the right to receive the Merger Consideration in accordance with Section 2.02(a)(i), without interest thereon, upon surrender of such Certificate formerly representing such share or transfer of such Uncertificated Share, as the case may be. The Company shall provide Parent prompt written notice of any demands received by the Company for appraisal of shares of Company Stock, any withdrawal of any such demand and any other demand, notice or instrument delivered to the Company

 

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prior to the Effective Time pursuant to Delaware Law that relates to such demand, and Parent shall have the opportunity and right to participate in and direct all negotiations and proceedings with respect to such demands under Delaware Law consistent with the obligations of the Company thereunder. Except with the prior written consent of Parent, the Company shall not make any payment with respect to, or offer to settle or settle, any such demands.

Section 2.05. Company Equity Awards.

(a)    At or immediately prior to the Effective Time, each option to purchase shares of Company Stock (other than any Company ESPP Rights) that is then outstanding under any Company Stock Plan (a “Company Stock Option”), is then vested (after giving effect to any accelerated vesting of the Company Stock Option that may apply in the circumstances) (a “Vested Company Stock Option”), and has an exercise price per share of Company Stock underlying such Vested Company Stock Option (the “Option Exercise Price”) that is less than the Merger Consideration shall be canceled and converted into the right to receive an amount in cash determined by multiplying (i) the excess of the Merger Consideration over the Option Exercise Price of such Vested Company Stock Option by (ii) the number of shares of Company Stock subject to such Vested Company Stock Option (such amount, the “Option Consideration”). Parent shall cause the Surviving Corporation to pay the Option Consideration to the holders of the Vested Company Stock Options at or reasonably promptly after the Effective Time (but in no event later than three (3) Business Days after the Effective Time). At or immediately prior to the Effective Time, each Company Stock Option that has an Option Exercise Price that is equal to or greater than the Merger Consideration, whether or not exercisable or vested (an “Out-of-the-Money Option”), shall be canceled without payment.

(b)    Effective as of the Effective Time, each Company Stock Option that is then outstanding and unvested (after giving effect to any accelerated vesting of the Company Stock Option that may apply in the circumstances) (an “Unvested Company Stock Option”) and is not an Out-of-the-Money Option shall be canceled and converted into the right (each such right, a “Cash Option Award”) to receive an amount in cash, payable by the Surviving Corporation at the respective times and subject to the contingencies specified herein, determined by multiplying (i) the excess of the Merger Consideration over the Option Exercise Price of such Unvested Company Stock Option by (ii) the number of shares of Company Stock subject to such Unvested Company Stock Option. Such amount shall be payable on the earliest of the following dates (but in no event later than December 31 of the calendar year in which the Effective Time occurs), in each case, subject to the holder remaining continuously employed by or in service to Parent or its Affiliate from the Closing Date through the applicable payment date: (x) the same vesting dates that applied to the corresponding Unvested Company Stock Option, (y) the last regularly scheduled payroll date of the calendar year in which the Effective Time occurs, and (z) if applicable, the date on which the holder’s employment or service with Parent and its Affiliates terminates, if the corresponding Unvested Company Stock Option as in effect immediately prior to cancellation pursuant to this Section 2.05(b) (or an applicable agreement between the Company and the holder of the Unvested Company Stock Option disclosed in Section 4.18(i) of the Company Disclosure Letter) provided for accelerated vesting on such termination. A holder of a Cash Option Award who has not remained continuously employed with or in service to Parent or its Affiliate through the applicable payment date shall permanently forfeit the unvested portion of such Cash Option Award.

(c)    At or immediately prior to the Effective Time, each award of restricted stock units with respect to shares of Company Stock that is then outstanding under a Company Stock Plan (each such award, a “Company RSU”) and is then vested (after giving effect to any accelerated vesting of the Company RSU that may apply in the circumstances) shall be canceled and converted into the right to receive an amount in cash equal to (i) the number of shares of Company Stock subject to such vested Company RSU award immediately prior to the Effective Time multiplied by (ii) the Merger Consideration (such amount, the “RSU Consideration”). Parent shall cause the Surviving Corporation to pay the RSU Consideration to the holders of the Company RSU awards at or reasonably promptly after the Effective Time (but in no event later than three (3) Business Days after the Effective Time).

 

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(d)    Effective as of the Effective Time, each Company RSU that is then outstanding and unvested (after giving effect to any accelerated vesting of the Company RSU that may apply in the circumstances) (an “Unvested Company RSU”) shall be canceled and converted into the right (each such right, a “Cash RSU Award”) to receive an amount in cash, payable by the Surviving Corporation at the respective times and subject to the contingencies specified herein, equal to (i) the number of shares of Company Stock subject to such Unvested Company RSU immediately prior to the Effective Time multiplied by (ii) the Merger Consideration. Such amount shall be payable on the same vesting schedule that applied to the corresponding Unvested Company RSU, subject to the holder remaining continuously employed by or in service to Parent or its Affiliate from the Closing Date through the applicable vesting date, subject to any right to vesting acceleration as was in effect with respect to such Unvested Company RSU immediately prior to cancellation pursuant to this Section 2.05(d). A holder of a Cash RSU Award who has not remained continuously employed with or in service to Parent or its Affiliate through a particular vesting date, subject to any right to vesting acceleration, or who otherwise does not satisfy the vesting requirements of such Cash RSU Award, shall permanently forfeit the unvested portion of such Cash RSU Award that would otherwise have vested on such vesting date.

(e)    Prior to the Effective Time, the Board of Directors of the Company (or, if appropriate, any committee thereof administering any Company Stock Plan) shall adopt such resolutions, or take action by written consent in lieu of a meeting, as may be necessary to provide for the transactions contemplated by this Section 2.05.

Section 2.06. Treatment of Company ESPP. As soon as reasonably practicable following the date of this Agreement, the Company and the Company’s Board of Directors (or applicable committee thereof) shall take such action as may be necessary to and shall adopt such resolutions (the form and substance of which shall be subject to review and reasonable approval by Parent): (i) cause any offering period (or similar period during which shares may be purchased) in progress under the Company ESPP as of the date of this Agreement to be the final offering period under the Company ESPP and to be terminated no later than the earlier of the day that is five (5) Business Days prior to the Effective Time and the currently-scheduled termination date for such offering (such date, the “Final Exercise Date”); (ii) cause each participant’s then-outstanding share purchase right under the Company ESPP (the “Company ESPP Rights”) to be exercised as of the Final Exercise Date; and (iii) terminate the Company ESPP effective as of, and subject to, the Effective Time. On the Final Exercise Date, the funds credited as of such date under the Company ESPP within the associated accumulated payroll withholding account for each participant under the Company ESPP shall be used to purchase shares of Company Stock in accordance with the terms of the Company ESPP, and each share purchased thereunder and outstanding immediately prior to the Effective Time shall be canceled at the Effective Time and converted into the right to receive the Merger Consideration in accordance with Section 2.02(a)(i), subject to withholding of any applicable income and employment withholding Taxes. Any accumulated contributions of each participant under the Company ESPP as of the Final Exercise Date shall, to the extent not used to purchase shares in accordance with the terms and conditions of the Company ESPP (as amended pursuant to this Section 2.06), be refunded to such participant on or as promptly as practicable following the Final Exercise Date (without interest). No further Company ESPP Rights shall be granted or exercised under the Company ESPP after the Final Exercise Date. The Company shall provide timely notice to participants of the setting of the Final Exercise Date and termination of the Company ESPP in accordance with the Company ESPP.

Section 2.07. Withholding Rights. Each of the Paying Agent, Merger Subsidiary, the Surviving Corporation and Parent shall be entitled to deduct and withhold from the consideration 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 federal, state, local or foreign Tax law. If the Paying Agent, Merger Subsidiary, the Surviving Corporation or Parent, as the case may be, withholds any such amounts and properly pays such amounts over to the appropriate Taxing Authority, such amounts shall be treated for all purposes of this Agreement as having been paid to Person in respect of which such withholding was made.

Section 2.08. Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required

 

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by the Surviving Corporation, the posting by such Person of a bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent will issue, in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration to be paid in respect of the shares of Company Stock represented by such Certificate, as contemplated by this Article 2.

ARTICLE 3

The Surviving Corporation

Section 3.01. Certificate of Incorporation. The certificate of incorporation of the Company shall be amended and restated at the Effective Time to read in its entirety as set forth in Exhibit A hereto and, as so amended and restated, shall be the certificate of incorporation of the Surviving Corporation until amended in accordance with Applicable Law.

Section 3.02. Bylaws. Subject to Section 7.04, the bylaws of the Company shall be amended and restated at the Effective Time to read in their entirety as the bylaws of Merger Subsidiary in effect immediately prior to the Effective Time and, as so amended and restated, shall be the bylaws of the Surviving Corporation until amended in accordance with Applicable Law, other than that the name of the Surviving Corporation may be changed at the Effective Time.

Section 3.03. Directors and Officers. From and after the Effective Time, until successors are duly elected or appointed and qualified in accordance with Applicable Law, (i) the directors of Merger Subsidiary at the Effective Time shall be the directors of the Surviving Corporation and (ii) the officers of the Company at the Effective Time shall be the officers of the Surviving Corporation.

ARTICLE 4

Representations and Warranties of the Company

Subject to Section 11.05, except as disclosed in any Company SEC Documents filed with the SEC on its Electronic Data Gathering Analysis and Retrieval System before the date of this Agreement (but excluding any forward-looking disclosures set forth in any “risk factors” section, any disclosures in any “forward-looking statements” section and any other disclosures included therein that are cautionary, predictive or forward-looking in nature, which in no event shall be deemed to be an exception to or a disclosure against any representation or warranty set forth in this Article 4) or as set forth in the Company Disclosure Letter, the Company represents and warrants to Parent that:

Section 4.01. Corporate Existence and Power.

(a)    The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all corporate powers and all governmental licenses, authorizations, Permits, consents and approvals required to carry on its business as currently conducted, except for those licenses, authorizations, Permits, consents and approvals the absence of which would not have, individually or in the aggregate, a Material Adverse Effect. The Company is duly qualified to do business as a foreign corporation and (where applicable and recognized) is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would have, individually or in the aggregate, a Material Adverse Effect.

(b)    Complete and correct copies of the certificate of incorporation and bylaws of the Company, each as amended to the date of this Agreement, have been made available through filings with the SEC.

 

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(c)    Other than the Subsidiaries of the Company, neither the Company nor any of its Subsidiaries directly or indirectly owns any equit