Exhibit 99.2

 

 

NOTICE OF SPECIAL MEETING OF SECURITYHOLDERS OF

SIERRA WIRELESS, INC.

TO BE HELD ON SEPTEMBER 27, 2022

MANAGEMENT INFORMATION CIRCULAR

DATED AUGUST 26, 2022

 

 

August 26, 2022

Dear Securityholders:

The Board of Directors of Sierra Wireless, Inc. (“Sierra” or the “Company”) invites you to attend the special meeting (the “Meeting”) of the holders of common shares (“Shares”) of the Company (the “Shareholders”), the holders of options (“Options”) to purchase Shares of the Company (the “Optionholders”), the holders of restricted share units and phantom restricted share units (“RSUs”) of the Company (the “RSU Holders”) and the holders of performance share units (“PSUs”, collectively with the Shares, Options and RSUs, the “Securities”) of the Company (the “PSU Holders”, collectively with the Shareholders, Optionholders and RSU Holders, the “Securityholders”), to be held at 10:00 a.m. (Vancouver time) on September 27, 2022 at 595 Burrard Street, Suite 2600, Vancouver British Columbia, and virtually at https://meetnow.global/MPTKAYS.

Given the continuing uncertainty relating to the COVID-19 pandemic, its public health impact, the associated potential restrictions on and the risk in attending large group gatherings and to mitigate risks to the health and safety of the Company’s community, Securityholders, employees and other stakeholders, the Company has made arrangements to enable Securityholders to attend and vote virtually at the Meeting. Registered Shareholders, Optionholders, RSU Holders and PSU Holders and duly appointed proxyholders will be able to listen to the Meeting, ask questions and vote at the Meeting online in real time. Non-registered Shareholders who have not duly appointed themselves as proxyholder will be able to attend the Meeting virtually as guests, but guests will not be able to vote at the Meeting.

The Meeting will be available online at https://meetnow.global/MPTKAYS. In addition to the information below, a detailed guide to how to login to, and vote at, the Meeting can be found as Appendix I of this Management Information Circular.

Securityholders may attend the Meeting virtually using an internet connected device such as a laptop, computer, tablet or mobile phone and the meeting platform will be supported across browsers and devices that are running the most updated version of the applicable software plugins. Those wishing to attend and vote at the Meeting will need to ensure that they remain connected to the Meeting at all times in order to vote when balloting commences, and it is such persons’ responsibility to ensure internet connectivity for the duration of the Meeting. The steps that Securityholders will need to follow to access the Meeting will depend on whether they are registered Shareholders, Optionholders, RSU Holders, PSU Holders or non-registered Shareholders. Please read and follow the applicable instructions below carefully. If Securityholders decide to attend this year’s Meeting in person, Securityholders may be required to review the Company’s COVID-19 protocols upon arrival at the Meeting and sign an acknowledgement of adherence to such protocols in order to be admitted to the Meeting.

The Company is carefully monitoring the public health impact of the COVID-19 pandemic, and may decide to modify the date, time or location of the Meeting depending on the situation. While we understand this could disrupt the plans of those who plan to attend the Meeting, our first priority is the health and safety of our communities, Securityholders, employees and other stakeholders. In the event we decide to modify the date, time or location of the Meeting, Securityholders will be notified and provided with additional details in a press release, at our website at https://www.sierrawireless.com/company/newsroom/ and pursuant to filings we make with Canadian and United States securities regulatory authorities. As always, we encourage you to vote your Securities prior to the Meeting.

At the Meeting, Securityholders will be asked to vote on a special resolution to approve an arrangement under the Canada Business Corporations Act (the “Arrangement”) under which, among other things, 13548597 Canada Inc. (the “Purchaser”), a wholly-owned subsidiary of Semtech Corporation (“Semtech” or the “Parent”), will acquire all of the outstanding Shares for cash consideration of US$31.00 per Share.

The Arrangement is the outcome of a comprehensive review process conducted under the direction of the Board of Directors, with the assistance of a special committee composed entirely of independent directors (the “Special Committee”). The consideration per Share offered under the Arrangement represents a premium of approximately 25% to the closing Share price on July 29, 2022, the last trading day prior to media speculation regarding the Arrangement, a premium of approximately 30% to the Company’s unaffected 30-day volume weighted average price and a premium of approximately 49% to the Company’s volume weighted average price over the twelve-month period ended on July 29, 2022.

The Company engaged Qatalyst Partners LP (“Qatalyst”) and BMO Nesbitt Burns Inc. (“BMO Capital Markets”) as financial advisors.

The Board of Directors has received an opinion (the “Qatalyst Fairness Opinion”) from Qatalyst and an opinion (the “BMO Fairness Opinion”) from BMO Capital Markets that, as of August 2, 2022, and based upon and subject to the various respective assumptions, limitations and qualifications set forth therein, the consideration to be received by the Shareholders is fair, from a financial point of view, to such holders. Copies of the Qatalyst Fairness Opinion is included as Appendix A and the BMO Fairness Opinion is included as Appendix B to the management information circular accompanying this letter. We urge you to read them in their entirety.

Based on a number of factors, including the Qatalyst Fairness Opinion and the BMO Fairness Opinion, both the Special Committee and the Board of Directors unanimously concluded that the Arrangement is in the best interests of the Company and is fair to the Shareholders of Sierra.

 

The special resolution approving the Arrangement must be approved by: (i) at least two-thirds of the votes cast at the Meeting by Shareholders present in person or represented by proxy, and entitled to vote, at the Meeting and (ii) at least two-thirds of the votes cast at the Meeting by Securityholders, voting together as a single class, present in person or represented by proxy. The Arrangement is also subject to certain conditions described in the accompanying management information circular and the approval of the Supreme Court of British Columbia and applicable regulatory approvals.

The accompanying notice of meeting and management information circular provide a full description of the Arrangement and include certain other information, including the full text of the Qatalyst Fairness Opinion, the BMO Fairness Opinion and the special resolution approving the Arrangement, to assist you in considering how to vote on the Arrangement. You are urged to read this information carefully and, if you require assistance, to consult your financial or professional advisor(s).

Your vote is important regardless of the number of Shares, Options, RSUs or PSUs you own. If you are unable to be present at the Meeting in person, we encourage you to take the time to complete, sign, date and return the enclosed proxy or voting instruction form in accordance with the instructions set out therein and in the accompanying management information circular, so that your Securities can be voted at the Meeting in accordance with your instructions. If you hold your Shares through a broker, custodian, nominee or other intermediary, you should follow their instructions. To be effective, a proxy form must be received by Computershare no later than 10:00 a.m. (Vancouver time) two days (excluding Saturdays, Sundays, and statutory holidays) preceding the Meeting or any adjournment or postponement thereof.

The directors and members of senior management of the Company have entered into Support and Voting Agreements with the Purchaser and the Parent pursuant to which they have agreed, among other things, to vote in favor of the Arrangement Resolution.

If you are a registered Shareholder, in order to receive the cash that you are entitled to receive upon the completion of the Arrangement, you must complete and sign the enclosed letter of transmittal and return it, together with your share certificate(s) and any other required documents and instruments, to Computershare, the Company’s

transfer agent and depositary for the Arrangement, in accordance with the procedures set out in the letter of transmittal. If the proposed Arrangement is not completed, share certificate(s) sent to Computershare will be returned to you.

If you have any questions or need assistance in your consideration of the Arrangement or with the completion and delivery of your proxy, please contact the Company’s strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors, by email at contactus@kingsdaleadvisors.com or by telephone at 1-855-682-2019 (North American Toll-Free), or 1-416-867-2272 (Collect calls outside North America).

Subject to obtaining court approval and satisfaction or waiver of the other closing conditions, if Securityholders of Sierra approve the Arrangement, it is anticipated that the Arrangement will be completed during the Parent’s fiscal year 2023.

On behalf of Sierra, I thank all shareholders for their ongoing support.

Yours very truly,

“Philip Brace”

Philip Brace

President and Chief Executive Officer

Notice of Special Meeting of Securityholders

NOTICE IS HEREBY GIVEN that a special meeting (the “Meeting”) of the holders of common shares (“Shares”) of the Company (the “Shareholders”), the holders of options (“Options”) to purchase Shares of the Company (the “Optionholders”), the holders of restricted share units and phantom restricted share units (“RSUs”) of the Company (the “RSU Holders”) and the holders of performance share units (“PSUs”, collectively with the Shares, Options and RSUs, the “Securities”) of the Company (the “PSU Holders”, collectively with the Shareholders, Optionholders and RSU Holders, the “Securityholders”) of Sierra Wireless, Inc. (“Sierra” or the “Company”) will be held at 595 Burrard Street, Suite 2600, Vancouver British Columbia, and virtually at https://meetnow.global/MPTKAYS, on September 27, 2022 at 10:00 a.m. (Vancouver time) for the following purposes:

 

(a)

to consider, pursuant to an interim order of the Supreme Court of British Columbia dated August 24, 2022, as the same may be amended (the “Interim Order”) and, if deemed advisable, to pass, with or without variation, a special resolution of Securityholders (the “Arrangement Resolution”) substantially in the form attached as Appendix C to the management information circular dated August 26, 2022 (the “Circular”) accompanying this notice of meeting (“Notice of Meeting”), to approve an arrangement (the “Arrangement”) under Section 192 of the Canada Business Corporations Act (“CBCA”) involving the Company, Semtech Corporation (“Semtech” or the “Parent”) and 13548597 Canada Inc. (the “Purchaser”), a wholly-owned subsidiary of the Parent, pursuant to which, among other things, the Purchaser will acquire all of the issued and outstanding Shares for cash consideration of US$31.00 per Share, all as more particularly described in the Circular; and

 

(b)

to transact such other business as may properly come before the Meeting or any adjournment or postponement thereof.

The Board of Directors of the Company, after consultation with its financial advisors and outside legal counsel and the unanimous recommendation of the Special Committee of the Board of Directors, unanimously determined that the Arrangement Resolution is in the best interests of the Company and is fair to the Shareholders and that the Board unanimously recommends that the Securityholders vote FOR the Arrangement Resolution. Registered Shareholders (the “Registered Shareholders”), Optionholders, PSU Holders and RSU Holders of record as of 5:00 p.m. (Vancouver time) on August 23, 2022, (the “Record Date”) will be entitled to receive notice of, and to vote at, the Meeting and any adjournment(s) or postponement(s) thereof.

Given the continuing uncertainty relating to the COVID-19 pandemic, its public health impact, the associated potential restrictions on and the risk in attending large group gatherings and to mitigate risks to the health and safety of the Company’s community, Securityholders, employees and other stakeholders, the Company has made arrangements to enable Securityholders to attend and vote virtually at the Meeting. Registered Shareholders, Optionholders, RSU Holders and PSU Holders and duly appointed proxyholders will be able to listen to the Meeting, ask questions and vote at the Meeting online in real time. Non-registered Shareholders will be able to attend the Meeting virtually as guests, but guests will not be able to vote at the Meeting.

The Meeting will be available online at https://meetnow.global/MPTKAYS. A guide to how to login to, and vote at, the Meeting can be found on page 1 of the Management Information Circular (the “Circular”) accompanying this Notice of Meeting.

 

- i -

Each Registered Shareholder whose name is entered on the securities register of the Company at the close of business on the Record Date is entitled to one vote for each Share registered in his, her or its name. Each Optionholder, RSU Holder or PSU Holder whose name is entered on the applicable securities register of the Company for such Securities at the close of business on the Record Date is entitled to one vote for each Option, RSU and PSU held in his, her or its name. The Circular, form of proxy and Letter of Transmittal accompany this Notice of Meeting. Reference is made to the Circular for details of the matters to be considered at the Meeting. Initially capitalized terms used but not otherwise defined herein have the meanings ascribed thereto in the Circular.

The full text of the Plan of Arrangement implementing the Arrangement and the Interim Order are attached as Appendix E and Appendix F to the Circular, respectively.

To ensure your representation at the Meeting, return the enclosed proxy, whether or not you plan to personally attend the Meeting. Sending your proxy will not prevent you from voting in person at the Meeting. All proxies completed by Registered Shareholders, Optionholders, RSU Holders and PSU Holders must be returned to the Company:

 

•

by delivering the proxy to the Company’s transfer agent, Computershare Investor Services Inc. at its office at 100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1, for receipt not later than September 23, 2022, at 10:00 a.m. (Vancouver time);

 

•

by fax to the Toronto office of Computershare Investor Services Inc., Attention: Proxy Tabulation at 416-263-9524 (outside of North America) or 1-866-249-7775 (within North America) not later than September 23, 2022, at 10:00 a.m. (Vancouver time); or

 

•

by telephone or online, as instructed in the enclosed form of proxy, not later than September 23, 2022, at 10:00 a.m. (Vancouver time).

Non-Registered Shareholders who receive these materials through their broker or other Intermediary should complete and send the form of proxy or voting instruction form in accordance with the instructions provided by their broker or Intermediary. To be effective, a proxy must be received by Computershare Investor Services Inc. by not later than 10:00 a.m. (Vancouver time) on September 23, 2022 or, in the event the Meeting is adjourned or postponed, not less than two days, Saturdays, Sundays and holidays excepted, prior to the time of any reconvened or postponed Meeting. The time limit for deposit of proxies may, with the prior written consent of the Purchaser, be waived or extended by the Chair of the Meeting at his or her discretion, without notice.

Registered Shareholders as at the close of business on the Record Date have a right to dissent in respect of the Arrangement Resolution and, if the Arrangement becomes effective, to be paid the fair value of their Shares. This right is described in the Circular. Pursuant to section 190 of the CBCA, as modified by the Plan of Arrangement and the Interim Order, a Registered Shareholder who wishes to dissent must (i) send a written notice of objection to the Arrangement Resolution to Sierra c/o Blake, Cassels & Graydon LLP, 595 Burrard St #2600, Vancouver BC V7X 1L3, Attention: Alexandra Luchenko, or by email to alexandra.luchenko@blakes.com by no later than 10:00 a.m. (Vancouver time) on September 23, 2022 (or 10:00 a.m. (Vancouver time) on the Business Day which is two Business Days immediately preceding the date of the Meeting (as it may be adjourned or postponed from time to time)); and (ii) must otherwise comply strictly with the dissent procedures described in the Circular. Failure to comply strictly with the dissent procedures may result in the loss or unavailability of the right to dissent. See “Dissenting Shareholders’ Rights” in the Circular. Non-Registered Shareholders who wish to dissent should be aware that ONLY REGISTERED SHAREHOLDERS AS AT THE CLOSE OF BUSINESS ON THE RECORD DATE ARE ENTITLED TO DISSENT.

 

ii

If you have any questions or require more information with regard to the procedures for voting or completing your transmittal documentation, please contact Computershare Investor Services Inc., the Transfer Agent and Depositary for the Arrangement, toll-free, at 1-800-564-6253.

DATED at Richmond, British Columbia the 26^th day of August, 2022.

 

 

iii

TABLE OF CONTENTS

 

 

-i-

TABLE OF CONTENTS

(continued)

 

 

-ii-

Management Information Circular

As at August 26, 2022

SOLICITATION OF PROXIES

This Circular is furnished in connection with the solicitation by the management of Sierra Wireless, Inc. (“Sierra” or the “Company”) of proxies to be used at the Company’s special meeting (the “Meeting”) of holders of common shares (“Shares”) of the Company (the “Shareholders”), the holders of options (“Options”) to purchase Shares of the Company (the “Optionholders”), the holders of restricted share units and phantom restricted share units (“RSUs”) of the Company (the “RSU Holders”) and the holders of performance share units (“PSUs”, collectively with the Shares, Options and RSUs, the “Securities”) of the Company (the “PSU Holders”, collectively with the Shareholders, Optionholders and RSU Holders, the “Securityholders”) of the Company to be held at 595 Burrard Street, Suite 2600, Vancouver British Columbia, and virtually at https://meetnow.global/MPTKAYS, on September 27 2022 at 10:00 a.m. (Vancouver time) or at any adjournment or postponement thereof. It is expected that the solicitation will be primarily by mail, but proxies may also be solicited personally, by advertisement or by telephone, by directors, officers or employees of the Company without special compensation. The cost of the solicitation will be borne by Sierra.

Sierra has engaged Kingsdale Advisors (“Kingsdale”) as strategic shareholder advisor and proxy solicitation agent and will pay fees of approximately $32,500 to Kingsdale for the proxy solicitation service in addition to certain out-of-pocket expenses. Sierra Wireless, Inc. may also reimburse brokers and other persons holding Shares in their name or in the name of nominees for their costs incurred in sending proxy material to their principals in order to obtain their proxies.

CURRENCY

Unless otherwise stated, references to “$” or “US$” are references to U.S. dollars and references to “C$” are references to Canadian dollars. Where applicable, Canadian dollar amounts have been converted to U.S. dollar amounts at an exchange rate of C$1.00 = US$ 0.7672, unless otherwise stated.

NOTICE TO SHAREHOLDERS IN THE UNITED STATES

The Company is a corporation incorporated under the laws of Canada. The solicitation of proxies and the transactions contemplated in this Circular involve securities of a Canadian issuer and are being effected in accordance with Canadian corporate and securities laws. The proxy rules under the United States Securities Exchange Act of 1934, as amended, are not applicable to the Company or this solicitation, and therefore this solicitation is not being effected in accordance with such United States securities laws. Securityholders should be aware that disclosure requirements under Canadian laws are different from such requirements under United States securities laws.

The enforcement by investors of civil liabilities under United States securities laws may be affected adversely by the fact that the Company is organized under the laws of Canada, that some or all of its officers and directors are residents of Canada and that all or a substantial portion of the assets of the Company and such persons may be located outside the United States. You may not be able to sue a Canadian corporation or its officers or directors in a Canadian court for violations of United States securities laws. It may be difficult to compel a Canadian corporation and its affiliates to subject themselves to a judgment by a United States court.

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY ANY SECURITIES REGULATORY AUTHORITY IN CANADA, THE UNITED STATES OR ANY OTHER JURISDICTION, NOR HAS ANY SECURITIES REGULATORY AUTHORITY PASSED UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Securityholders should consult their own tax advisors with respect to the tax consequences of the Arrangement to them in light of their particular circumstances. Certain information concerning Canadian

 

- 1 -

federal income tax consequences of the Arrangement for Shareholders who are not resident in Canada is set forth under the heading “Certain Canadian Federal Income Tax Considerations for Shareholders — Holders Not Resident in Canada”. Certain information concerning U.S. federal income tax consequences of the Arrangement for Shareholders who are U.S. Holders is set forth under the heading “Certain United States Income Tax Considerations for Shareholders”.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Circular, including the information included in Appendices to this Circular, contains “forward-looking statements” and “forward-looking information” under applicable Securities Laws (collectively, the “forward-looking statements”) relating, but not limited to, the expected timetable for completing the Arrangement, benefits and synergies of the Arrangement, future opportunities for the combined company and products and any other statements regarding Sierra’s expectations, intentions, plans and beliefs. Forward-looking statements can often be identified by forward-looking words such as “anticipate”, “believe”, “expect”, “goal”, “plan”, “intend”, “estimate”, “optimize”, “may”, “will” or similar words suggesting future outcomes or other expectations, intentions, plans, beliefs, objectives, assumptions or statements about future events or performance.

Securityholders are cautioned not to place undue reliance on forward-looking statements. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, of both a general and specific nature, that could cause actual results to differ materially from those suggested by the forward-looking statements or contribute to the possibility that predictions, forecasts or projections will prove to be materially inaccurate.

Assumptions upon which forward-looking statements related to the Arrangement are based include, without limitation: (a) that Securityholders will approve the Arrangement Resolution in the manner required by the Interim Order; (b) that the Court will approve the Arrangement; and (c) that all other conditions to the completion of the Arrangement, including the receipt of Key Regulatory Approvals, will be satisfied or waived. Many of these assumptions are based on factors and events that are not within the control of Sierra and may not prove to be correct.

Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include, but are not limited to: the Parties’ ability to consummate the Arrangement; the conditions to the completion of the Arrangement, including the receipt of Key Regulatory Approvals, the Required Securityholder Approval, or Court approval on the terms expected or on the anticipated schedule; the Parties’ ability to meet expectations regarding the timing, completion and accounting and tax treatments of the Arrangement; the factors identified in the “Risk Factors” section in this Circular; and the factors identified under the heading entitled “Risk Factors” in Sierra’s most recent annual information form, as well as Sierra’s recent annual and quarterly financial reports, which are available on the SEDAR website maintained by the Canadian Securities Administrators at www.sedar.com.

Without limiting the generality of the other provisions of this cautionary statement, the Qatalyst Fairness Opinion attached as Appendix A and BMO Fairness Opinion attached as Appendix B to this Circular may contain or refer to forward-looking information and is subject to certain respective assumptions, limitations and qualifications as described herein and therein.

The Company cautions that the list of forward-looking statements, risks and assumptions set forth or referred to above is not exhaustive. All forward-looking statements in this Circular, including the information included in Appendices to this Circular, are qualified by these cautionary statements. These statements are made as of the date of this Circular and the Company does not undertake to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except to the extent expressly required by Law. The Company undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Company, its financial or operating results or its securities.

 

- 2 -

INFORMATION CONTAINED IN THIS CIRCULAR

Information contained in this Circular is given as of August 23, 2022, except as otherwise noted.

No person has been authorized to give information or to make any representations in connection with the Arrangement other than those contained in this Circular and, if given or made, any such information or representations should not be relied upon in making a decision as to how to vote on the Arrangement Resolution or be considered to have been authorized by the Company, the Parent or the Purchaser.

This Circular does not constitute an offer to buy, or a solicitation of an offer to sell, any securities, or the solicitation of a proxy, by any person in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such an offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such an offer or solicitation.

All summaries of, and references to, the Arrangement and the Arrangement Agreement in this Circular are qualified in their entirety by reference, in the case of the Arrangement, to the complete text of the Plan of Arrangement attached as Appendix E to this Circular and, in the case of the Arrangement Agreement, to the complete text of the Arrangement Agreement attached as Appendix D to this Circular, each of which is filed on SEDAR at www.sedar.com.

Securityholders should not construe the contents of this Circular as legal, tax or financial advice and should consult with their own professional advisors as to the relevant legal, tax, financial or other matters in connection herewith.

If you hold Shares through a broker, investment dealer, bank, trust company or other Intermediary, you should contact your Intermediary for instructions and assistance in voting and surrendering the Shares that you beneficially own.

Initially capitalized terms used herein have the meanings ascribed thereto in this Circular. See “Glossary of Terms”.

INFORMATION PERTAINING TO THE PARENT AND THE PURCHASER

Information pertaining to the Parent and the Purchaser in this Circular, including under “Information Concerning the Parent and the Purchaser”, has been furnished by the Parent and the Purchaser or is based on publicly available documents and records. Although the Company does not have any knowledge that would indicate that any such information is untrue or incomplete, neither the Company nor any of its directors, executive officers or advisors assumes any responsibility for the accuracy or completeness of such information, nor for any failure by the Parent and the Purchaser to disclose events which may have occurred or which may affect the completeness or accuracy of such information but which is unknown to them.

 

- 3 -

 

- 4 -

 

- 5 -

 

- 6 -

 

- 7 -

 

- 8 -

 

- 9 -

 

- 10 -

 

- 11 -

 

- 12 -

 

- 13 -

 

- 14 -

 

- 15 -

 

- 16 -

 

- 17 -

 

- 18 -

 

- 19 -

QUESTIONS AND ANSWERS ABOUT THE MEETING AND THE ARRANGEMENT

Your vote is important. The following are key questions that you as a Securityholder may have regarding the proposed Arrangement to be considered at the Meeting. You are urged to carefully read the remainder of this Circular as the information in this section does not provide all of the information that might be important to you with respect to the Arrangement. All capitalized terms used herein have the meanings ascribed to them in the “Glossary of Terms”.

 

Q.	Where and when will the Meeting be held?

 

A.	The Meeting will be held on September 27, 2022, at 10:00 a.m. (Vancouver time). The Meeting will be held at 595 Burrard Street, Suite 2600, Vancouver British Columbia, and virtually via live audio webcast. Shareholders can access the meeting by visiting https://meetnow.global/MPTKAYS.

 

Q.	What are Shareholders being asked to vote on?

 

A.

At the Meeting, Securityholders will be asked to vote on a special resolution to approve an arrangement under the Canada Business Corporations Act (the “Arrangement”) under which 13548597 Canada Inc. (the “Purchaser”), a wholly-owned subsidiary of Semtech Corporation (“Semtech” or the “Parent”), will acquire all of the outstanding common shares in the capital of Sierra for cash consideration of US$31.00 per Share. The Arrangement Resolution is attached to this Circular as Appendix “C”.

 

Q.	Does the Special Committee support the Arrangement?

 

A.

Yes. The Special Committee has unanimously determined that the Arrangement is in the best interests of the Company and is fair to Shareholders. Accordingly, the Special Committee unanimously recommended that the Board of Directors approve the Arrangement Agreement and recommend that Securityholders vote FOR the Arrangement Resolution. See “Recommendation of the Special Committee”.

 

Q.	Does the Board Support the Arrangement?

 

A.

Yes. The Board of Directors has unanimously determined that the Arrangement is in the best interests of the Company and is fair to Shareholders. Accordingly, the Board of Directors unanimously approved the Arrangement Agreement and unanimously recommends that Securityholders vote FOR the Arrangement Resolution. See “Recommendation of the Board of Directors”.

 

Q.	Who has agreed to support the Arrangement?

 

A.

On August 2, 2022, each director and executive officer of the Company (collectively holding, directly or indirectly, or exercising control or direction over, an aggregate of 329,703 Shares, representing approximately 0.84% of the issued and outstanding Shares, as well as a total of 985,155 Incentive Securities, representing approximately 46.52% of the outstanding Incentive Securities) entered into a Support and Voting Agreement pursuant to which such director or executive officer has agreed to, among other things, vote all of such individual’s Shares and Incentive Securities in favour of the Arrangement Resolution.

 

Q:	What approvals are required by Securityholders at the Meeting?

 

A:

The approval of the Arrangement Resolution will require the affirmative vote of (i) at least two-thirds (662⁄3%) of the votes cast by the Shareholders present in person or represented by proxy at the Meeting and entitled to vote and (ii) at least two-thirds of the votes cast at the Meeting by Securityholders, voting together as a single class, present or represented by proxy at the Meeting and entitled to vote, to seek the Final Order and implement the Arrangement on the Effective Date in accordance with the Final Order. See “Particulars of the Arrangement—Required Securityholder Approval”.

 

Q:	What other approvals are required for the Arrangement?

 

A:	The Arrangement is subject to certain regulatory approvals or filing requirements, including under the Competition Act and the HSR Act. See “Regulatory Approvals”.

 

- 20 -

The Arrangement must also be approved by the Court. The Court will be asked to make an order approving the Arrangement and to determine that the Arrangement is fair to the Shareholders. The Company will apply to the Court for this order if the Shareholders approve the Arrangement at the Meeting. See “Regulatory Approvals”.

 

Q:	When will the Arrangement become effective?

 

A:

Subject to receiving the Required Securityholder Approval and the Final Order, and satisfaction or waiver of applicable conditions, the Arrangement will become effective on the Effective Date which is anticipated to occur during the Parent’s fiscal year 2023. See “Arrangement Mechanics – Steps of the Arrangement”.

 

Q:	What will I receive for my Shares under the Arrangement?

 

A:

The Consideration of US$31.00 in cash to be received by Shareholders for each Share under the Plan of Arrangement represents a 25% premium over the closing price of the Shares on July 29, 2022, the last trading day prior media speculation regarding the proposed Arrangement. The Consideration also represents a premium of approximately 30% to the Company’s unaffected 30-day volume weighted average price and a premium of approximately 49% to the Company’s volume weighted average price over the twelve-month period ended on July 29, 2022. See “Market Price and Trading Volume Information”.

 

Q:	If I am a Registered Shareholder how do I receive my Consideration under the Arrangement?

 

A:

If you are a Registered Shareholder, in order to receive the cash that you are entitled to receive upon the completion of the Arrangement, you must complete and sign the enclosed Letter of Transmittal and return it, together with your share certificate(s) and/or DRS Advice(s) and any other required documents and instruments, to Computershare, the Company’s transfer agent and Depositary for the Arrangement, in accordance with the procedures set out in the Letter of Transmittal. If the proposed Arrangement is not completed, share certificate(s) and/or DRS Advice(s) sent to Computershare will be returned to you.

 

Q:	What happens if I do not deposit my Letter of Transmittal and my share certificate(s) and/or DRS Advice(s)?

 

A:

Registered Shareholders who do not deliver the certificates and/or DRS Advice(s) representing the Shares held by them and all other required documents to the Depositary on or before the date which is six years after the Effective Date will lose their right to receive the Consideration for their Shares under the Arrangement. See “Letter of Transmittal”.

 

Q:	What are the Canadian federal income tax consequences of the elections that I make with respect to the Arrangement?

 

A:

Residents of Canada. Generally, a Resident Holder who disposes of Shares to the Purchaser under the Arrangement will realize a capital gain (or a capital loss) equal to the amount by which the Consideration received by such Shareholder in consideration for the disposition of such Shares under the Arrangement, net of any reasonable costs of disposition, exceeds (or is less than) the adjusted cost base of such Shares to the Resident Holder.

Non-Residents of Canada. Generally, a Non-Resident Holder will not be subject to income tax under the Tax Act on any capital gain realized by such Non-Resident Holder on the disposition of Shares under the Arrangement, unless such Shares are “taxable Canadian property” to the Non-Resident Holder at the time such Shares are disposed of to the Purchaser and such gain is not otherwise exempt from income tax under the Tax Act pursuant to the provisions of an applicable income tax convention between Canada and the country in which the Non-Resident Holder is resident.

The foregoing is only a brief summary of certain material Canadian federal income tax considerations. Shareholders should read carefully the information in the Circular under the heading “Certain Canadian Federal Income Tax Considerations for Shareholders”, which qualifies the summary set forth above.

 

- 21 -

Shareholders are urged to consult their own tax advisors to determine the particular tax consequences to them of the Arrangement.

 

Q:	What are the United States income tax consequences of the elections that I make with respect to the Arrangement?

 

A:

Generally, the exchange of Shares for the Consideration pursuant to the Arrangement will be a taxable transaction for U.S. federal income tax purposes. A U.S. Holder (defined below) that exchanges Shares for the Consideration will generally recognize gain or loss equal to the difference between (i) the amount of cash received and (ii) such U.S. Holder’s adjusted U.S. federal income tax basis in the Shares exchanged therefor pursuant to the Arrangement. Such gain or loss will generally be long-term capital gain or loss if the Shares were held for more than one year at the time of the Arrangement. The foregoing is only a brief summary of certain material United States federal income tax considerations. Shareholders should read carefully the information in the Circular under the heading “Certain United States Income Tax Considerations for Shareholders”, which qualifies the summary set forth above. Shareholders are urged to consult their own tax advisors to determine the particular tax consequences to them of the Arrangement.

 

Q:	What will happen to the Company if the Arrangement is completed?

 

A:

If the Arrangement is completed, the Purchaser will have acquired all of the issued and outstanding Shares, Sierra will become a wholly-owned subsidiary of the Purchaser. Shortly after consummation of the Arrangement, it is expected that the Shares will cease to be listed on the TSX and the NASDAQ and trading of the Shares in the public market will no longer be possible. The Purchaser will seek to have Sierra be deemed to have ceased to be a reporting issuer under Canadian Securities Laws, in which case Sierra will also cease to be required to file continuous disclosure documents with Canadian Securities Administrators. Sierra will deregister its Shares under the U.S. Exchange Act subsequent to its filing and deemed effectiveness of a Form 15 (or Form 15F, as applicable).

For a discussion of certain Canadian federal income tax considerations relating to the disposition of Shares, please see “Certain Income Tax Considerations for Shareholders”.

 

Q:	What will happen to my Options, RSUs, and PSUs in connection with the Arrangement?

 

A:

Each Option (whether vested or unvested) outstanding immediately prior to the Effective Time on the Effective Date shall be deemed vested and shall be deemed to be assigned and surrendered to the Company in exchange for, in respect of each Option for which the Consideration exceeds the exercise price, an amount in cash equal to the Consideration less the applicable exercise price, less any applicable withholdings. Each RSU (whether vested or unvested) outstanding immediately prior to the Effective Time shall be deemed vested and transferred to the Company for an amount in cash equal to the Consideration, less any applicable withholdings. Each Non-Specified PSU outstanding immediately prior to the Effective Time (whether vested or unvested) shall, notwithstanding the terms of the Company RSU Plans or any award or similar agreement pursuant to which any Non-Specified PSUs were granted or awarded, as applicable, be deemed to vest into a number of vested Non-Specified PSUs calculated by multiplying each such Non-Specified PSU by one. Each Specified PSU outstanding immediately prior to the Effective Time (whether vested or unvested) shall, notwithstanding the terms of the Company RSU Plans or any award or similar agreement pursuant to which any Specified PSUs were granted or awarded, as applicable, be deemed to vest into a number of vested Specified PSUs calculated by multiplying each such Specified PSU by two. Each such PSU shall be deemed vested and transferred to the Company for an amount in cash equal to the Consideration, less any applicable withholdings.

See “Particulars of the Arrangement – Arrangement Mechanics” and “The Arrangement Agreement”.

As at the close of business on August 23, 2022, 39,020,098 Shares, 237,270 Options, 1,366,677 RSUs and 513,615 PSUs of the Company were issued and outstanding, each carrying the right to one vote at the Meeting.

 

- 22 -

Q.	What will happen if the Arrangement Resolution is not approved or the Arrangement is not completed for any reason?

 

A:

If the Arrangement is not approved by the Securityholders or if the Arrangement is not completed for any other reason, Securityholders will not receive any consideration for their Securities in connection with the Arrangement. Instead, Sierra will remain a public company and the Shares will continue to be listed and traded on the TSX and the NASDAQ. If the Arrangement is not completed, it is expected that Sierra’s management will operate Sierra in a manner similar to that in which it was being operated prior to the date of the Arrangement Agreement and that Shareholders will continue to be subject to the same risks and opportunities currently facing Sierra. There can be no assurance as to the effect of these risks and opportunities on the future trading price or value of the Shares. The Board of Directors would continue to evaluate and review, among other things, the performance of Sierra’s business and the capitalization of Sierra and would make such changes as are deemed appropriate. In addition, Sierra could be required to pay the Termination Fee to the Parent if the Arrangement Agreement is terminated in certain circumstances, including, but not limited to, if the Board of Directors makes a Change in Recommendation or the Board of Directors authorizes Sierra to enter into an agreement with respect to a Superior Proposal in certain circumstances. See “The Arrangement Agreement – Termination Fee”.

 

Q:	What do I need to do now in order to vote on the Arrangement Resolution?

 

A:

It is recommended that you vote by telephone or internet to ensure that your vote is received before the Meeting. To cast your vote by telephone or internet, please have your form of proxy or voting instruction form on hand and carefully follow the instructions contained therein. Your telephone or internet vote authorizes the named proxies to vote your Securities in the same manner as if you mark, sign and return your form of proxy. You may also vote by mail by completing, dating and signing the enclosed form of proxy or voting instruction form and return it in the envelope provided for that purpose. To be valid, proxies must be received before 10:00 a.m. (Vancouver time) on September 23, 2022 or, in the event the Meeting is adjourned or postponed, not less than two days, Saturdays, Sundays and holidays excepted, prior to the time of any reconvened or postponed Meeting.

 

Q:	If my Shares are held by my broker, investment dealer or other intermediary, will they vote my Shares or make an election for me?

 

A:

Non-Registered Shareholders who receive these materials through their broker or other intermediary should complete and send the form of proxy or voting instruction form in accordance with the instructions provided by their broker or intermediary. To be effective, a proxy must be received by Computershare Investor Services Inc. by not later than 10:00 a.m. (Vancouver time) on September 23, 2022 or, in the event the Meeting is adjourned or postponed, not less than two days, Saturdays, Sundays and holidays excepted, prior to the time of any reconvened or postponed Meeting. If you are a Non-Registered Shareholder and you do not instruct your broker, investment dealer, bank, trust company or other Intermediary how to vote, you will not be considered represented by proxy for the purpose of approving the Arrangement Resolution.

 

Q:	When will I receive the consideration payable to me under the Arrangement for my Shares?

 

A:

You will receive the consideration due to you under the Arrangement as soon as practicable after the Arrangement becomes effective and your Letter of Transmittal and Share certificate(s) and/or DRS Advice(s), if applicable, and all other required documents are properly completed and received by the Depositary. Subject to obtaining court approval and satisfaction or waiver of the other closing conditions, if Securityholders of Sierra approve the Arrangement, it is anticipated that the Arrangement will occur during the Parent’s fiscal year 2023.

 

Q:	What happens if I send in my certificate(s) and/or DRS Advice(s) and the Arrangement Resolution is not approved or the Arrangement is not completed?

 

A:	If the Arrangement Resolution is not approved or if the Arrangement is not otherwise completed, your Share certificate(s) and/or DRS Advice(s) will be returned promptly to you by the Depositary.

 

- 23 -

Q:	Can I revoke my vote after I have voted by proxy?

 

A:

Yes. Only Registered Shareholders, Optionholders, RSU Holders and PSU Holders have the right to revoke a proxy. The execution by a Registered Shareholder, Optionholder, RSU Holder or PSU Holder of a proxy will not affect such holder’s right to attend the Meeting and vote in person provided that the proxy is revoked prior to the commencement of the Meeting in the manner described above.

Non-Registered Shareholders who wish to change their vote must arrange for their respective Intermediaries to revoke the proxy on their behalf.

See “Voting Procedures and Revocation of Proxies for Securityholders – Revocation of Proxies”.

 

Q:	Who can help answer my questions?

 

A:

If you have any questions or need assistance in your consideration of the Arrangement or with the completion and delivery of your proxy, please contact the Company’s strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors, by email at contactus@kingsdaleadvisors.com or by telephone at 1-855-682-2019 (North American Toll-Free), or 1-416-867-2272 (Outside North America). If you have any questions or require more information with regard to the procedures for voting or completing your transmittal documentation, please contact Computershare Investor Services Inc., the Transfer Agent and Depositary for the Arrangement, toll-free, at 1-800-564-6253. If you have any questions about the other matters described in this Circular, please contact your professional advisor. If you have questions about deciding how to vote, you should contact your own legal, tax, financial or other professional advisor.

INFORMATION REGARDING PROXIES

Who Can Vote

The Board of Directors has fixed 5:00 p.m. (Vancouver time) on August 23, 2022 as the Record Date for the purpose of determining Securityholders entitled to receive notice of the Meeting. Each Shareholder is entitled to one vote for each Share held and shown as registered in such holder’s name on the list of Shareholders prepared as of 5:00 p.m. p.m. (Vancouver time) on the Record Date. Each Optionholder, RSU Holder and PSU Holder whose name is entered on the respective securities registers of the Company at the close of business on the Record Date is entitled to one vote for each such Option, RSU and PSU held in such holder’s name.

Voting Shares and Principal Securityholders

The authorized share capital of the Company consists of an unlimited number of Shares and an unlimited number of preference shares, issuable in series, of which, as of the Record Date, 39,020,098 Shares and no preference shares are issued and outstanding. As of the Record Date, a total of 237,270 Options, 1,366,677 RSUs and 513,615 PSUs are issued and outstanding. Accordingly, the maximum number of expected potential votes at the Meeting in respect of outstanding Shares, Options, RSUs and PSUs total 41,137,660. A quorum for the transaction of business at the Meeting is at least two persons present in person, each being a Shareholder entitled to vote thereat or a duly appointed proxyholder or representative for a Shareholder so entitled, irrespective of the number of Shares held by such persons.

To the knowledge of Sierra’s directors and executive officers, there are no persons or companies that beneficially own, or control or direct, directly or indirectly, Shares carrying 10  percent or more of the cumulative voting rights attached to the Shares.

Accessing and Voting at the Virtual Meeting

Given the continuing uncertainty relating to the COVID-19 pandemic, its public health impact, the associated potential restrictions on and the risk in attending large group gatherings and to mitigate risks to the health and safety of the Company’s community, Securityholders, employees and other stakeholders, the Company has made arrangements to enable Securityholders to attend and vote virtually at the Meeting. Registered Shareholders, Optionholders, RSU Holders and PSU Holders and duly appointed proxyholders will be able to listen to the Meeting, ask questions and vote at the Meeting online in real time. Non-registered Shareholders who have not duly appointed

 

- 24 -

themselves as proxyholder will be able to attend the Meeting virtually as guests, but guests will not be able to vote at the Meeting.

Registered Shareholder: You are a Registered Shareholder if your name appears on a share certificate or a DRS Advice confirming your holdings. If you are a Registered Shareholder, you have received a “Form of Proxy” for the Meeting.

Non-Registered Shareholder: You are a Non-Registered Shareholder if your Shares are held through an Intermediary (such as a broker, trustee or other financial institution). If you are a Non-Registered Shareholder, you have received a “voting instruction form” for the Meeting. Please make sure to follow instructions on your voting instruction form to be able to attend and vote at the Meeting.

The Meeting will be available online at https://meetnow.global/MPTKAYS.

Securityholders may attend the Meeting virtually using an internet connected device such as a laptop, computer, tablet or mobile phone and the meeting platform will be supported across browsers and devices that are running the most updated version of the applicable software plugins. Those wishing to attend and vote at the Meeting will need to ensure that they remain connected to the Meeting at all times in order to vote when balloting commences, and it is such persons’ responsibility to ensure internet connectivity for the duration of the Meeting. The steps that Securityholders will need to follow to access the Meeting will depend on whether they are registered Shareholders, Optionholders, RSU Holders, PSU Holders or Non-Registered Shareholders. Please read and follow the applicable instructions below carefully. If Securityholders decide to attend the Meeting in person, Securityholders may be required to review the Company’s COVID-19 protocols upon arrival at the Meeting and sign an acknowledgement of adherence to such protocols in order to be admitted to the Meeting.

Registered Shareholders, Optionholders, RSU Holders, PSU Holders and Duly Appointed Proxyholders

Registered Shareholders, Optionholders, RSU Holders and PSU Holders and duly appointed proxyholders can participate in the Meeting by clicking “Securityholder” and entering a control number or an invite code before the start of the Meeting.

 

•

Registered Shareholders, Optionholders, RSU Holders and PSU Holders—The 15-digit control number is located on the form of proxy or voting instruction form or in the email notification you received.

 

•

Duly appointed proxyholders – Computershare will provide the proxyholder with an invite code by email after the voting deadline has passed.

Securityholders who wish to appoint a third-party proxyholder to represent them at the online Meeting must submit their proxy or voting instruction form (as applicable) prior to registering their proxyholder. Registering the proxyholder is an additional step once a Securityholder has submitted their proxy/voting instruction form. Failure to register a duly appointed proxyholder will result in the proxyholder not receiving an invite code to participate in the online Meeting. To register a proxyholder, Securityholders MUST visit https://www.computershare.com/SierraWireless by 10:00 a.m. (Vancouver time) on September 23, 2022 and provide Computershare with their proxyholder’s contact information, so that Computershare may provide the proxyholder with an invite code via email.

It is important that you are connected to the internet at all times during the Meeting in order to vote when balloting commences.

To participate online, Securityholders must have a valid 15-digit control number and proxyholders must have received an email from Computershare containing an invite code.

Participating at the Virtual Meeting

The Meeting will be hosted online by way of a live audiocast. A summary of the information Securityholders will need to attend the online Meeting is provided below. The Meeting will begin at 10:00 a.m. (Vancouver time) on September 27, 2022.

 

- 25 -

•

Registered Shareholders, Optionholders, RSU Holders and PSU Holders that have a 15-digit control number, along with duly appointed proxyholders who were assigned an invite code by Computershare (see details under the heading “Registered Shareholders, Optionholders, RSU Holders, PSU Holders and Duly Appointed Proxyholders”), will be able to vote and submit questions during the Meeting. To do so, please go to https://meetnow.global/MPTKAYS prior to the start of the Meeting to login. Click on “Securityholder” and enter your 15-digit control number or click on “Invitation” and enter your invite code.

 

•

Non-Registered Shareholders wishing to attend the Meeting virtually who do not have a 15- digit control number or invite code will only be able attend as a guest by clicking “Guest” and completing the online form which allows them to listen to the Meeting however you will not be able to vote or submit questions.

 

•

U.S. Beneficial holders: To attend and vote at the Meeting virtually, you must first obtain a valid legal proxy from your broker, bank or other agent and then register in advance to attend the Meeting. Follow the instructions from your Intermediary included with these proxy materials, or contact your broker or bank to request a legal proxy form. After first obtaining a valid legal proxy from your broker, bank or other agent, to then register to attend the Meeting, you must submit a copy of your legal proxy to Computershare. Requests for registration should be directed to:

Computershare

100 University Avenue

8th Floor

Toronto, Ontario

M5J 2Y1

OR

Email at: uslegalproxy@computershare.com

 

•

Requests for registration must be labeled as “Legal Proxy” and be received no later than 10:00 a.m. (Vancouver time) on September 23, 2022. You will receive a confirmation of your registration by email after we receive your registration materials. You may attend the Meeting and vote your Securities at https://meetnow.global/MPTKAYS during the meeting. Please note that you are required to register your appointment at www.computershare.com/SierraWireless.

 

•

If you are using a 15-digit control number to login to the online Meeting and you accept the terms and conditions, you will be revoking any and all previously submitted proxies. However, in such a case, you will be provided the opportunity to vote by ballot on the matters put forth at the Meeting. If you DO NOT wish to revoke all previously submitted proxies, do not accept the terms and conditions, in which case you can only enter the Meeting as a guest.

 

•

If you are eligible to vote at the Meeting, it is important that you are connected to the internet at all times during the Meeting in order to vote when balloting commences. It is your responsibility to ensure connectivity for the duration of the Meeting.

Registered Shareholders, Optionholders, RSU Holders and PSU Holders

A Registered Shareholder, Optionholder, RSU Holder or PSU Holder may vote at the Meeting either in person or by proxy. A Registered Shareholder, Optionholder, RSU Holder or PSU Holder who wishes to vote in person at the Meeting need not complete or return the form of proxy or voting instruction form included with this Circular, as those such holders choosing to attend the Meeting may have their votes taken and counted at the Meeting. However, to ensure your representation at the Meeting, we encourage you to return the enclosed proxy or voting instruction form, whether or not you plan to personally attend. Sending your proxy or voting instruction form will not prevent you from voting in person at the Meeting.

 

- 26 -

A Registered Shareholder, Optionholder, RSU Holder or PSU Holder who chooses to vote by proxy can do so using several methods in addition to mailing the enclosed form of proxy or voting instruction form. All proxies completed by Registered Shareholders must be returned to the Company:

 

•

by delivering the proxy to the Company’s transfer agent, Computershare Investor Services Inc. at its office at 100 University Avenue, 8th Floor, Toronto, Ontario, M5J 2Y1, for receipt not later than September 23, 2022, at 10:00 a.m. (Vancouver time);

 

•

by fax to the Toronto office of Computershare Investor Services Inc., Attention: Proxy Tabulation at 416-263-9524 (outside of North America) or 1-866-249-7775 (within North America) not later than September 23, 2022, at 10:00 a.m. (Vancouver time); or

 

•

by telephone or internet, as instructed in the enclosed form of proxy, not later than September 23, 2022, at 10:00 a.m. (Vancouver time).

Please review the enclosed form of proxy carefully for additional information and resources for assistance.

To be effective, a proxy form or voting instruction form must be received by Computershare no later than 10:00 a.m. (Vancouver time) two days (excluding Saturdays, Sundays, and statutory holidays) preceding the Meeting or any adjournment or postponement thereof. The time limit for deposit of proxies may, with the prior written consent of the Purchaser, be waived or extended by the Chair of the Meeting at his or her discretion, without notice.

The Shares, Options, RSUs or PSUs represented by such Securityholder’s proxy or voting instruction form will be voted or withheld from voting in accordance with the instructions indicated by the holder on the form of proxy or voting instruction form or alternative method of voting on any ballot that may be called for.

Securityholders who wish to appoint a third-party proxyholder to represent them at the online Meeting must submit their proxy or voting instruction form (if applicable) prior to registering your proxyholder. Registering your proxyholder is an additional step once you have submitted your proxy or voting instruction form. Failure to register the proxyholder will result in the proxyholder not receiving an invite code to participate in the Meeting. To register a proxyholder, Securityholders MUST visit https://www.computershare.com/SierraWireless by 10:00 a.m. (Vancouver time) on September 23, 2022 and provide Computershare with their proxyholder’s contact information, so that Computershare may provide the proxyholder with an invite code via email. If a third-party proxyholder is attending the Meeting in person, you DO NOT need to register the appointment.

Without an invite code, proxyholders will not be able to participate online at the Meeting.

Non-Registered Shareholders

We have distributed copies of this Circular and accompanying Notice of Meeting to Intermediaries for distribution to Non-Registered Shareholders at the Company’s expense. Unless a Non-Registered Shareholder has waived its rights to receive these materials, an Intermediary is required to deliver them to the Non-Registered Shareholder and to seek instructions on how to vote the Shares beneficially owned by the Non-Registered Shareholder. In many cases, Intermediaries will have used a service company to forward these Meeting materials to Non-Registered Shareholders.

Non-Registered Shareholders who receive these Meeting Materials will typically be given the ability to provide voting instructions in one of two ways.

Usually, a Non-Registered Shareholder will be given a voting instruction form, which must be completed and signed by the Non-Registered Shareholder in accordance with the instructions provided by the Intermediary. In this case, a Non-Registered Shareholder cannot use the mechanisms described above for Registered Shareholders and must follow the instructions provided by their Intermediary (which in some cases may allow the completion of the voting instruction form by telephone or the internet).

 

- 27 -

Occasionally, however, a Non-Registered Shareholder may be given a proxy that has already been signed by the Intermediary. This form of proxy is restricted to the number of Shares beneficially owned by the Non-Registered Shareholder but is otherwise not completed. This form of proxy does not need to be signed by the Non-Registered Shareholder. In this case, the Non-Registered Shareholder can complete the proxy and vote by mail or facsimile only, as described above for Registered Shareholders.

These procedures are designed to enable Non-Registered Shareholders to direct the voting of their Shares. Any Non-Registered Shareholder receiving either a form of proxy or a voting instruction form who wishes to attend and vote at the Meeting in person (or have another person attend and vote on their behalf), should strike out the names of the persons identified in the form of proxy as the proxy holder and insert the Non-Registered Shareholder’s (or such other person’s) name in the blank space provided or, in the case of a voting instruction form, should follow the corresponding instructions provided by the Intermediary. In either case, the Non-Registered Shareholder should carefully follow the instructions provided by the Intermediary.

Non-Registered Shareholders who do not object to their name being made known to the Company may be contacted by our proxy solicitors to assist in conveniently voting their Shares directly by telephone. Sierra may also utilize the Broadridge QuickVote service to assist Non-Registered Shareholders with voting their Shares.

Appointment of Proxyholder

The persons named in the accompanying form of proxy are officers, directors and/or other nominees of the Company. A Securityholder has the right to appoint as a proxyholder a person or company (who need not be a Securityholder of the Company) other than the persons designated in the previous sentence to attend and act on the Securityholder’s behalf at the Meeting. To exercise this right, the Securityholder may either insert the name of such other person or company in the blank space provided in the form of proxy or complete and submit another form of proxy.

A person or company whose name appears on the books and records of the Company is a Registered Shareholder. A Non-Registered Shareholder is a beneficial owner of Shares that are registered in the name of an Intermediary.

If you have any questions or need assistance in your consideration of the Arrangement or with the completion and delivery of your proxy, please contact the Company’s strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors, by email at contactus@kingsdaleadvisors.com or by telephone at 1-855-682-2019 (North American Toll-Free), or 1-416-867-2272 (Collect calls outside North America).

Notice to United States Shareholders

The solicitation of proxies by the Company is not subject to the requirements of Section 14(a) of the United States Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”), by virtue of an exemption applicable to proxy solicitations by “foreign private issuers” as defined in Rule 3b-4 under the U.S. Exchange Act. Accordingly, this Circular has been prepared in accordance with the applicable disclosure requirements in Canada. Residents of the United States should be aware that such requirements are different than those of the United States applicable to proxy statements under the U.S. Exchange Act.

Voting of Proxies

The persons named in the enclosed form of proxy will vote or withhold from voting the Securities in respect of which they are appointed by proxy in accordance with the direction of the Securityholders as indicated on the proxy. In the absence of such direction, such Securities will be voted FOR the Arrangement Resolution.

Revocation of Proxy

A Registered Shareholder, Optionholder, RSU Holder or PSU Holder may revoke a proxy by delivering an instrument in writing executed by such holder or such holder’s attorney authorized in writing or, where such holder is a corporation, by a duly authorized officer or attorney for the corporation, either to the registered office of the Company at Suite 2600, Three Bentall Centre, 595 Burrard Street, Vancouver, British Columbia, V7X 1L3,

 

- 28 -

Attention: Evan Straight at any time up to 10:00 a.m. (Vancouver time) two days (excluding Saturdays, Sundays, and statutory holidays) preceding the Meeting, or if adjourned or postponed, any reconvening thereof, or to the Chair of the Meeting on the day of the Meeting before the vote shall have been taken or in any other manner provided by law.

A Registered Shareholder, Optionholder, RSU Holder or PSU Holder of the Company may also revoke a proxy by signing a form of proxy bearing a later date and returning such proxy and delivering it to Computershare as aforesaid at any time up to 10:00 a.m. (Vancouver time) two days (excluding Saturdays, Sundays, and statutory holidays) preceding the Meeting or any adjournment thereof.

A person duly appointed under a form of proxy will be entitled to vote the Securities represented thereby only if the form of proxy is properly completed and delivered in accordance with the requirements set out above and such proxy has not been revoked.

A Registered Shareholder, Optionholder, RSU Holder or PSU Holder attending the Meeting has the right to vote by attending the virtual Meeting and, if he or she does so, his or her proxy or voting information form is nullified with respect to the matters such person votes upon at the Meeting or any adjournment thereof.

Non-Registered Shareholders who wish to change their vote must arrange for their respective Intermediaries to revoke the proxy on their behalf.

Discretionary Authority of Proxyholder

The enclosed form of proxy confers discretionary authority upon the persons named therein with respect to amendments or variations to matters identified in the accompanying notice of meeting and with respect to other matters which may properly come before the Meeting or any adjournment or postponement thereof. As of the date of this Circular, management of the Company is not aware of any such amendment, variation or other matter to come before the Meeting. However, if any amendments or variations to matters identified in the accompanying notice of meeting or any other matters which are not now known to management should properly come before the Meeting or any adjournment or postponement thereof, the Shares, Options, RSUs and PSUs represented by properly executed proxies given in favour of the person(s) designated by management of the Company in the enclosed form of proxy will be voted on such matters pursuant to such discretionary authority.

BACKGROUND AND REASONS FOR THE ARRANGEMENT

Background to the Arrangement Agreement

The provisions of the Arrangement Agreement are the result of arm’s length negotiations conducted between representatives of Sierra, the Purchaser and the Parent. The following is a summary of the material events leading up to the negotiation of the Arrangement Agreement and the material meetings, negotiations and discussions between the Parties that preceded the execution and public announcement of the Arrangement Agreement.

The Board of Directors regularly reviews its overall corporate strategy and long-term strategic plan with the goal of maximizing shareholder value and strengthening the business of the Company, including assessing the relative merits of potential acquisitions and dispositions. In order to facilitate this review, the Board of Directors periodically receives updates and presentations from management and, in certain cases, external advisors on strategic alternatives. In addition, senior management facilitates a strategy session at least annually for the Board of Directors. In furtherance of such periodic review by the Company of potential strategic alternatives, on October 1, 2020, the Board of Directors established a Special Transactions Committee to consider such potential strategic opportunities. The Special Transactions Committee met periodically throughout the remainder of 2020 and during 2021 and was effectively suspended as of December 31, 2021, until there was a need to review future special transactions within its mandate, acknowledging that there would be some follow on work required in early 2022 in relation to the sale of Omnilink Systems, Inc., a former division of the Company, which was sold by the Company in April, 2022.

In the fourth quarter of 2020, Semtech approached the Company to explore potential strategic opportunities involving the Company. On October 8, 2020, the Company and Semtech entered into an initial non-disclosure agreement in connection with a proposed negotiated business transaction between Semtech and the Company. These

 

- 29 -

conversations did not advance beyond the initial stage, and no transaction resulted at such time. The initial non-disclosure agreement between the Company and Semtech expired by its terms in April 2022.

Further, over the past several years, the Company periodically has received inbound inquiries from other third parties relating to potential strategic acquisition and sale opportunities involving the Company or businesses

within the Company. As is customary for a public company, the review and consideration of opportunities such as these were undertaken by the Company, the Board of Directors and the Special Transactions Committee, as appropriate, when received. One such inquiry occurred during March 2022 regarding a potential transaction involving a portion of the Company’s business. These conversations did not result in any transaction and this party was not involved in further discussions with the Company.

On March 21, 2022, the Chief Executive Officer of Semtech, Mr. Maheswaran, reached out to the Chief Executive Officer of the Company, Mr. Brace, to request a meeting. Mr. Brace and Mr. Maheswaran met for lunch in San Jose, California on April 12, 2022, during which Mr. Maheswaran made an overture regarding the possibility of combining the two companies. Following this meeting, on April 16, 2022, Mr. Maheswaran emailed Mr. Brace a draft confidentiality agreement and a high-level summary outlining Semtech’s view regarding the compelling nature of a combination involving Semtech and the Company.

On May 19, 2022, Mr. Brace and Mr. Maheswaran met for dinner, during which they briefly again discussed a potential business combination at a high level. Subsequent to this discussion, the Company and Semtech entered into a non-disclosure agreement on May 22, 2022, to enable sharing of non-public information in connection with Semtech’s ongoing evaluation of a potential business combination with the Company. On May 25, 2022, Mr. Brace informed Mr. Jones, Chair of the Board of Directors, that there was potential for discussions with Semtech involving a potential strategic transaction. During this time, Mr. Brace kept Mr. Jones updated with respect to his discussions with Mr. Maheswaran and the execution of the non-disclosure agreement.

On May 23, 2022, the Company entered into a confidentiality agreement with Qatalyst Partners, who the Company preliminarily had sought advice from, as potential financial advisor, in connection with the initial outreach from Semtech.

On May 25, 2022, Mr. Cochrane, Chief Financial Officer for Sierra, held a call to discuss financial information for the Company with Mr. Chukwu, Chief Financial Officer for Semtech. During the call, Mr. Cochrane and Mr. Chukwu discussed, among other things, the long-term outlook for the Company, the Company’s earnings expectations for the second quarter of 2022 and likely timing for release of earnings for each company.

During the period from May 27, 2022 to June 6, 2022, representatives from management of each of the Company and Semtech held several virtual meetings during which the Company’s business, operations, financials and related matters were generally discussed.

On May 20, 2022, Mr. Brace and a senior executive of a third party private equity firm (“Party A”) held preliminary discussions regarding opportunities for strategic transactions involving the Company and Party A, which potential opportunities preliminarily included a range of strategic alternatives including the divestiture of certain parts of the Company’s business, other potential acquisitions and a “go-private” option. The Company and Party A entered into a confidentiality agreement on May 23, 2022 in connection with such discussions.

The Company and another third party private equity firm (“Party B”) also engaged in similar discussions on June 15, 2022 regarding opportunities for strategic transactions involving the Company and Party B, which potential opportunities preliminarily included a range of strategic alternatives, including the divestiture of certain parts of the Company’s business, other potential acquisitions and a “go-private” option. The Company and Party B entered into a confidentiality agreement on May 27, 2022 in connection with such discussions.

On May 31, 2022, Mr. Brace and Mr. Cochrane met with representatives from Party A to further discuss a potential business combination transaction.

On June 3, 2022, at a special meeting, Mr. Brace informed the Board of Directors over video conference about the Company’s recent discussions regarding a potential transaction with Semtech, Party A and Party B.

 

- 30 -

Also on June 3, 2022, Mr. Brace was approached by a third party who expressed its interest in making a proposal with respect to a transaction involving the Company. The third party indicated that it did not itself have sufficient funds to pursue such a transaction, but that it intended to seek co-investors. The third party never requested a confidentiality agreement, nor did it make a proposal.

On June 10, 2022, a senior executive of Party A informed Mr. Brace over telephone that Party A would no longer be pursuing a transaction with the Company.

On June 13, 2022, Mr. Brace and Mr. Maheswaran had a dinner meeting where they continued to discuss the potential transaction between the Company and Semtech and diligence related matters.

On June 14, 2022, Semtech delivered a non-binding proposal to the Company to acquire 100% of the Shares at a price of US$28.50 per Share to be paid in cash (the “Initial Proposal”). The Initial Proposal represented a 38% premium to the 30-day volume weighted average price of the Shares at such time. The Initial Proposal was circulated by the Company’s management team to the Board of Directors on June 14, 2022.

On June 17, 2022, the Board of Directors had a special meeting to receive a report from Mr. Brace, Mr. Cochrane and Ms. Farac with respect to the terms of the Initial Proposal and updates regarding discussions with Party A and Party B. Also in attendance at such meeting were Qatalyst Partners, as well as Blakes and Skadden, Arps, Slate, Meagher & Flom LLP, the Company’s legal advisors. The Company’s management team outlined the terms of the Initial Proposal, in addition to providing updates on discussions with Party A and Party B, noting that Party A had determined not to pursue a transaction with the Company. Blakes provided to the Board of Directors an overview of the fiduciary duties of the directors (and, if applicable, special committee) in the context of a potential change of control transaction, as well as their role in supervising the Company’s process of considering a potential transaction. In advance of the meeting, Blakes had also circulated a memorandum to the Board of Directors outlining such duties in more detail. In response to the Initial Proposal and the ongoing discussions with Party B, the Board of Directors unanimously resolved to form the Special Committee consisting of Ms. Bawa, as Chairperson, Mr. Jones and Mr. Waters, each of whom the Board of Directors determined was independent and disinterested with respect to the Initial Proposal and a proposed transaction, and approved a mandate for the Special Committee. Under its mandate, the Special Committee was given the responsibility to consider the Initial Proposal and any potential transaction with Semtech (the “Proposed Transaction”) and to consider, assess and examine any other offers, any other transaction and any other strategic alternatives to the Proposed Transaction that may be in the best interests of the Company and, in furtherance of the same, to: (i) examine and review, from the point of view of the best interests of the Company, the merits and fairness of the Proposed Transaction brought to it by the management of the Company, in conjunction with the management of the Company and its financial and legal advisors; (ii) assess, examine and advise the Board of Directors regarding any and all alternatives to the Proposed Transaction brought to it by management which may be available to the Company to enhance shareholder value; (iii) consider and advise the Board of Directors as to whether the Proposed Transaction is in the best interests of the Company and whether the Proposed Transaction should be pursued by the Company and, if necessary or appropriate, recommended to its Shareholders; (iv) to the extent necessary or appropriate, negotiate or supervise the negotiation by senior management of the final terms of the Proposed Transaction and any agreements or documents necessary to give effect thereto; (v) coordinate its efforts and discharge its mandate in coordination with senior management and the financial and legal advisors of the Company as it deems advisable or necessary; (vi) oversee and assist with the procedures necessary to obtain all necessary or appropriate regulatory, shareholder or other approvals of the Proposed Transaction and comply with applicable corporate and securities requirements and the preparation of all necessary or appropriate disclosure in respect of the Proposed Transaction, including such materials as are necessary in connection with obtaining shareholder approval of the Proposed Transaction; (vii) supervise the preparation of any fairness opinion or formal valuation that may be required or desirable and review with the opinion/valuation provider(s) the key factors, methodologies and assumptions used in preparing such valuation and/or opinion(s); (viii) report to the Board of Directors on its activities and recommendations from time to time and to provide such advice as requested by the Board of Directors; and (ix) perform such other duties and responsibilities as may be assigned by the Board of Directors to the Special Committee or requested by management from time to time, provided that (x) the Special Committee is entitled, without further authorization from the Board of Directors, to consider such additional matters as it may consider relevant to those listed above and (y) the Special Committee is not entitled to bind the Company in respect of any transaction or other value enhancement initiative, any such matters being subject to the approval of the Board of Directors. Also at this time, management recommended to the Board of Directors that the Company engage a financial advisor to assist it in

 

- 31 -

reviewing a potential business combination with Semtech. The Special Committee was formed in this context in the alternative to using the Special Transactions Committee, in order to create a smaller, more nimble team of directors that could work expeditiously given the nature of the Proposed Transaction and any other potential alternatives. The Board of Directors formally engaged Qatalyst Partners as the Company’s financial advisor based on their qualifications and prior experience on a broad array of strategic alternatives, including mergers and acquisitions in the technology sector, and the Company entered into an engagement letter with Qatalyst Partners on June 20, 2022, prior to which Qatalyst Partners provided its conflicts disclosure to the Company. At the end of the Board meeting, and at each subsequent meeting of the Special Committee or the Board to consider the Proposed Transaction, an in camera session of the Special Committee or the independent members of the Board, as applicable, was typically held, which sessions were often preceded by an in camera session of the Special Committee or the independent members of the Board, as applicable, with legal advisors.

The Special Committee met on June 21, 2022 with the Company’s financial and legal advisors to receive an overview and preliminary analysis of the Initial Proposal and the current market environment. The Special Committee preliminarily considered a potential process and timing related to consideration and negotiation of the Proposed Transaction, in addition to potential alternatives to the Proposed Transaction, including potential alternative transactions and a continuation of the status quo as a standalone entity. The Special Committee sought advice from management and Qatalyst Partners with respect to potential outreach to other third party candidates to understand their interest in potentially pursuing a transaction with the Company. In order to determine which third parties to contact to ascertain their interest in potentially acquiring the Company, management and Qatalyst Partners reviewed with the Special Committee a broad group of other parties. Following discussions, the Special Committee determined that three other strategic parties (referred to herein respectively as “Party C”, “Party D” and “Party E”), should be recommended to the Board of Directors for contact at the earliest opportunity to solicit their potential interest in pursuing a transaction with the Company.

Later on June 22, 2022, Party B informed Mr. Brace that it was no longer interested in exploring a possible transaction with the Company, of which Mr. Brace informed Mr. Jones, Chair of the Board of Directors, on June 24, 2022. On June 30, 2022, Mr. Brace informed the full Board of Directors that Party B determined not to pursue a possible transaction with the Company.

Also on June 22, 2022, the Board of Directors met in a regular meeting to discuss various previously scheduled matters as well as to receive an update with respect to the Proposed Transaction and any alternatives to the Proposed Transaction, including potential alternative transactions and a continuation of the status quo as a standalone entity. In attendance were representatives of Company management and the Company’s legal and financial advisors. Qatalyst Partners provided a preliminary analysis of the Initial Proposal to the Board of Directors and a summary of the current market environment as well as an overview of Semtech’s borrowing capacity in relation to financing the Proposed Transaction. Qatalyst Partners then identified a broad group of other parties that had been discussed with the Special Committee and who could be approached to solicit interest in potentially acquiring the Company. The Board of Directors was also informed that, following its discussion on June 21, 2022, the Special Committee had determined to recommend to the Board of Directors that Parties C, D and E, be contacted to ascertain their possible interest in potentially acquiring the Company. Following discussion, it was determined by the Board of Directors that a fourth outreach party (“Party F”) should be added to the list of parties to be contacted, making a total of four strategic parties that were proposed to be contacted, in addition to Semtech, Party A and Party B with whom discussions were previously held. The Board of Directors unanimously approved of Qatalyst Partners reaching out to Parties C, D, E and F. The Board of Directors also considered whether to engage with Semtech on the Initial Proposal, and the proposed response to Semtech if so. After discussion, the Board of Directors authorized Qatalyst Partners to preliminarily respond to Semtech to indicate that the price contemplated by the Initial Proposal was insufficient, and that the Board of Directors would consider something closer to a price in the USD “mid-thirties” per Share. The Board of Directors indicated that the timing of this messaging should be coordinated with Mr. Brace, but that it should be done after initial outreach to Parties C, D, E and F.

After receiving approval of the Board of Directors to conduct the outreach process, Qatalyst Partners reached out to Parties C, E and F on June 23, 2022. On June 24, 2022, Qatalyst Partners contacted Party D to initiate discussions. Party C informed Qatalyst Partners on June 27, 2022 that it was not interested in exploring a potential transaction with the Company and Party F informed Qatalyst Partners on June 30, 2022 that it was not interested in exploring a potential transaction with the Company.

 

- 32 -

The Company and Party E entered into a confidentiality agreement on June 27, 2022. Later on June 27, 2022, members of Company management, representatives of Qatalyst Partners, and representatives of Party E held a virtual meeting during which the Company’s business, operations, financials and related matters were generally discussed.

On June 28, 2022, the Special Committee met with the Company’s management and the Company’s financial and legal advisors to receive an update with respect to the transaction contemplated by the Initial Proposal and any alternative transaction. Management informed the Special Committee of the current status of Qatalyst Partners’ outreach to Parties C, D, E and F and the responses received to date. The Special Committee discussed, among other things, the action of the Board of Directors at its meeting on June 22, 2022 in which it had authorized Qatalyst Partners to preliminarily respond to Semtech to indicate that the price contemplated by the Initial Proposal was insufficient, and that the Board of Directors would consider something closer to a price in the USD “mid-thirties” per Share. The Special Committee confirmed that Qatalyst Partners and management should proceed with the soft counter previously authorized by the Board of Directors.

On June 28, 2022, in coordination with Mr. Brace, Qatalyst Partners spoke with J.P. Morgan Securities LLC (“J.P. Morgan”), financial advisor to Semtech, to relay that the price contemplated by the Initial Proposal was insufficient and that the Board of Directors would consider something closer to a price in the USD “mid-thirties” per Share. On June 29, 2022, Mr. Maheswaran spoke to Mr. Brace to negotiate the Semtech proposal price, and Mr. Maheswaran indicated that Semtech was determining whether to provide a revised proposal, and that it had room to move on price but that the USD “mid-thirties” price per Share would not be possible.

On July 1, 2022, Semtech delivered a revised non-binding proposal to the Company to acquire 100% of the Shares at a price of US$29.50 per Share to be paid in cash (the “Subsequent Proposal”). The Subsequent Proposal represented a 30% premium to the 30-day volume weighted average price of the Shares at such time. The Subsequent Proposal was provided to the Board on July 1, 2022.

On July 4, 2022, Party E indicated to Qatalyst Partners that it was no longer interested in exploring a possible transaction with the Company. Also on July 4, 2022, Party D executed a side letter with the Company to an existing commercial non-disclosure agreement in connection with an upcoming meeting to discuss a proposed transaction with the Company.

On July 5, 2022, Party D and members of Company management, as well as representatives of Qatalyst Partners, held a virtual meeting during which the Company’s business, operations, financials and related matters were generally discussed.

On July 5, 2022, the Special Committee met with the Company’s management and the Company’s financial and legal advisors to receive an overview and preliminary analysis of the Subsequent Proposal, in addition to receiving an update on the discussions with the other potential counterparties to which outreaches were made. After discussion, the Special Committee determined that it would recommend to the Board of Directors that a non-binding indicative counter-offer of US$32.50 per share in cash be made to Semtech.

Also on July 5, 2022, as authorized by the Special Committee, Mr. Brace informed Mr. Maheswaran that the Special Committee had determined that the Subsequent Proposal was insufficient and that Semtech should consider increasing its offer to acquire the Company. Mr. Brace indicated that the Special Committee would be discussing such matters with the Board of Directors.

On July 6, 2022, the Board of Directors met with the Special Committee, the Company’s management and its financial and legal advisors to receive an overview and preliminary analysis of the Subsequent Proposal, in addition to receiving an update on the discussions with the other potential counterparties to which outreaches were made. After discussion, and after recommendation from the Special Committee, the Board of Directors determined that a non-binding indicative counter-offer of US$32.50 in cash be made to Semtech.

On July 6, 2022, Qatalyst Partners delivered a message to J.P. Morgan indicating that the Board of Directors was willing to consider an offer of US$32.50 per Share in cash.

 

- 33 -

On July 7, 2022, Party D provided notice to Qatalyst Partners that it was no longer interested in exploring a possible transaction with the Company. Parties C, D, E and F were not provided with data room access given that each of those parties declined to pursue a possible transaction involving the Company shortly following the Company’s initial discussions with such parties. Data room access was also never provided to Party A or Party B given that neither progressed beyond initial conversations with the Company regarding a proposed transaction involving the Company.

Also on July 7, 2022, Mr. Maheswaran indicated to Mr. Brace that he understood that the Board of Directors had determined that the US$29.50 per Share in cash proposed in the Subsequent Proposal was insufficient, and indicated that he would discuss this with Semtech’s board of directors. During the discussion, in response to an inquiry from Mr. Maheswaran regarding whether Semtech should consider providing a counter-offer, Mr. Brace indicated that the Company and the Board of Directors would review, as appropriate, any such counter-offer and the merits thereof. Later on July 7, 2022, Mr. Maheswaran provided Mr. Brace with an oral counter-offer of US$30.50 per Share to be paid in cash.

On July 8, 2022, the Special Committee met with the Company’s management and its financial and legal advisors to receive an update on the latest counter-offer received from Semtech. Qatalyst Partners also informed the Special Committee at this meeting that Parties C, D, E and F had declined to pursue a possible transaction with the Company. After discussion, the Special Committee directed Mr. Brace and Qatalyst Partners to go back to Mr. Maheswaran to encourage him to further raise Semtech’s proposal price. The Special Committee also considered potential alternatives to the Proposed Transaction, including potential alternative transactions and a continuation of the status quo as a standalone entity.

Later on July 8, 2022, in coordination with Qatalyst Partners, Mr. Brace contacted Mr. Maheswaran to negotiate the proposal price. Mr. Maheswaran indicated that he would discuss the matter with Semtech’s board of directors. Also on July 8, 2022, Qatalyst Partners spoke with J.P. Morgan to negotiate the Semtech proposal price.

On July 10, 2022, Semtech delivered a “best and final” non-binding proposal to the Company management team to acquire 100% of the Shares at a price of US$31.00 per Share to be paid in cash (the “Final Proposal”). The Final Proposal represented a 34% premium to the 30-day volume weighted average price of the Shares at such time. The Final Proposal (i) indicated that it assumed the definitive agreement would include customary deal protections, including a 3.5% fiduciary out termination fee and no regulatory termination fee and (ii) included a proposed exclusivity agreement for the Company and Semtech to enter into. The Final Proposal was circulated to the Board of Directors by the Company management team on July 10, 2022.

On July 11, 2022, the Board of Directors met with the Company’s management and the Company’s financial and legal advisors to receive an overview and preliminary analysis of the Final Proposal, in addition to receiving an update on the discussions with the other potential counterparties. At the meeting, Qatalyst Partners noted that Semtech indicated that the price reflected in the Final Proposal reflected Semtech’s “best and final” offer. The Board of Directors also considered potential alternatives to the Proposed Transaction, including potential alternative transactions and a continuation of the status quo as a standalone entity. The Board of Directors was informed that all of the other potential counterparties with which discussions had taken place to such date (Parties A through F) had declined to pursue a possible transaction with the Company. After discussion, the Board of Directors determined that the Final Proposal contemplated an acceptable price upon which the Company would enter into exclusivity with Semtech, and to enter into negotiations with respect to the other terms and conditions of a potential transaction involving the Company and Semtech, subject to the terms of the exclusivity agreement being negotiated with a term that would not extend past (with extensions) August 10, 2022. In reaching this decision, the Board of Directors also considered ongoing merger activity in the IoT space and other industry developments, as well as the Company’s prospects should it remain a standalone entity. Later in the day on July 11, 2022, Mr. Brace contacted Mr. Maheswaran to indicate that the Board of Directors was willing to enter into exclusivity based on a price of US$31.00 per Share in cash and the proposed 3.5% fiduciary out termination fee.

Also on July 11, 2022, the Company and Semtech entered into an exclusivity agreement (the “Exclusivity Agreement”). The Exclusivity Agreement required the Company to negotiate exclusively with Semtech until July 31, 2022 (subject to automatic extension until August 10, 2022, upon the satisfaction of certain specified conditions).

 

- 34 -

Also on July 11, 2022, Semtech delivered its initial due diligence request list to the Company. On July 12, 2022 the Company through Qatalyst Partners granted Semtech and its advisors access to a virtual data room containing information regarding the Company. Semtech immediately commenced its due diligence investigation of the Company, including, but not limited to, business, financial, engineering, sales, product, operational, information technology, legal, human resources, tax and accounting diligence. These due diligence investigations included various discussions between the Company and Semtech and their respective advisors on an array of subject matters. These due diligence investigations continued throughout the period up to the signing of the Arrangement Agreement on August 2, 2022.

Between July 12 through July 19, 2022, the Special Committee held periodic meetings with the Company’s management, Qatalyst Partners, Blakes and Skadden to receive updates on matters related to the Proposed Transaction with Semtech, including with respect to the diligence process and other related matters. On July 19, 2022, a member of the Board of Directors was independently contacted by a third party who indicated they may be interested in a transaction involving the Company or a business thereof, but such third party never requested a confidentiality agreement or made a proposal.

On July 21, 2022, the Company received an initial draft of the Arrangement Agreement from Stikeman Elliott LLP, Canadian legal counsel to the Purchaser and Semtech. The Company’s management and its legal and financial advisors identified and discussed key legal and financial issues, respectively, arising out of the initial draft of the Arrangement Agreement and relating to the Proposed Transaction.

Early on July 25, 2022, representatives of IIROC contacted Sam Cochrane, Chief Financial Officer, in order to ask whether the Company could explain why its shares were trading down significantly and was subject to significant volatility. During discussions with IIROC, the representative independently and specifically asked whether the Company was in discussions with a potential counterparty. Mr. Cochrane, who had discussed the inquiry with the Company’s legal counsel, responded by phone that the Company was currently in confidential discussions regarding a potential strategic transaction but noted that the discussions may or may not lead to a transaction. He further noted that the Company would make complete disclosure on a timely basis of any event or action which constitutes a material change in its affairs and in respect of which disclosure is necessary or advisable. IIROC was satisfied with the response, and closed the inquiry. On July 25, 2022, the Special Committee held a meeting with the Company’s management, Qatalyst Partners, Blakes and Skadden to receive updates and advice of financial and legal advisors on matters related to the Proposed Transaction, including with respect to the initial draft Arrangement Agreement and the diligence process and other related matters.

On July 26, 2022, the Board of Directors held a meeting with Qatalyst Partners, Blakes, Skadden and the Company’s General Counsel & Corporate Secretary, Jennifer Farac, to receive updates and advice of financial and legal advisors on matters related to the Proposed Transaction, including a presentation by legal counsel with respect to the initial draft Arrangement Agreement, a presentation by Qatalyst Partners on valuation and related matters, the report of the Special Committee and other related matters.

On July 26, 2022, Mr. Jones and Mr. Maheswaran had a telephone conversation to discuss various topics relating to the Proposed Transaction, including the importance of both deal certainty and employee matters to the Company and the Board of Directors, and the timing considerations with respect to the Proposed Transaction, and execution of related definitive agreements, in light of recent trading volume and volatility in the stock of the Company.

On July 27, 2022, the Board of Directors held a meeting with Blakes and Skadden to discuss the provisions in the initial draft Arrangement Agreement regarding employee compensation matters and proposed responses thereto.

On July 27, 2022, legal counsel for the Company presented a revised draft of the Arrangement Agreement to legal counsel to Semtech reflecting the positions discussed with the Company’s management and the Special Committee and the Board of Directors over the period of July 25—27, 2022. On July 27, 2022, legal counsel for the Company presented a term sheet of proposed employee compensation matters to legal counsel for Semtech.

Also on July 28, 2022, Semtech delivered an initial draft of the form of Support and Voting Agreement and the Plan of Arrangement to the Company. Later on this same date, the Company received an updated draft of the Arrangement Agreement from Semtech. Legal counsel to the Company and Semtech, respectively, held a call to discuss the revised Arrangement Agreement, and also discussed the possibility of the Company obtaining a second

 

- 35 -

fairness opinion on a fixed fee basis in connection with the Proposed Transaction. In connection therewith, and after discussing with Company management, legal counsel to the Company made no-names inquiries to several investment banks to determine their ability to provide such services.

On July 29, 2022, the Special Committee met with Mr. Brace, Mr. Cochrane and Ms. Farac, on behalf of the Company management team, Qatalyst Partners, Blakes and Skadden. At this meeting, the Special Committee received an update on the status of negotiations with Semtech. The Special Committee also discussed with management and the Company’s legal and financial advisors the potential engagement of an additional independent financial advisor to obtain a second fairness opinion on a fixed fee basis, in addition to the fairness opinion from Qatalyst Partners. Following discussion, and after reviewing the potential options for financial advisors, the Special Committee resolved to retain BMO Capital Markets as financial advisor to deliver a fairness opinion to the Board of Directors, and authorized Mr. Jones to review, negotiate and execute the engagement letter with BMO Capital Markets on behalf of the Special Committee. On July 30, 2022, the Special Committee entered into an engagement letter with BMO Capital Markets. BMO Capital Markets’ compensation under its engagement letter does not depend in whole or in part on any conclusion reached by BMO Capital Markets or on the completion of the Arrangement. Also on July 30, 2022, BMO orally confirmed to Blakes that they believed that no conflicts existed that would prevent them from performing the services contemplated by the engagement with the Company. BMO subsequently communicated this orally to the Board of Directors and the Special Committee on August 2, 2022, and on August 3, 2022, BMO confirmed this in its conflicts disclosure memorandum to the Company.

On July 30, 2022, Qatalyst Partners, on behalf of the Company, delivered letters to Parties A, B and E requesting the return or destruction of confidential information under the terms of each such party’s applicable confidentiality agreement. No confidentiality agreements relating to a possible acquisition transaction were entered into with Parties C and F, as those parties declined to explore a possible acquisition transaction involving the Company shortly following outreach to them, and while Party D entered into a side letter to an existing confidentiality agreement as noted previously, it received very limited information based largely on public information. Of the confidentiality agreements relating to a transaction that were entered into with Parties A, B and E, no standstill or “don’t-ask-don’t-waive” provisions survived the signing of the Arrangement Agreement.

On July 30, 2022, the Special Committee met with its legal and financial advisors to receive an update on the Proposed Transaction and negotiations with Semtech. Mr. Brace, Ms. Farac and Mr. Cochrane were present as members of Company management. The attendees were provided with a summary of key issues in the second Arrangement Agreement draft that was received from legal counsel to Semtech. Following discussion and conclusion of this meeting, as authorized by the Special Committee, legal counsel to the Company sent a revised draft of the Arrangement Agreement to Semtech late in the evening on July 30, 2022.

On August 1, 2022, the Special Committee met to receive further updates from management and the Company’s financial and legal advisors with respect to the Proposed Transaction and negotiations with Semtech, and discussed the remaining issues reflected in the draft Arrangement Agreement. All members of the Board of Directors were invited to attend the meeting on an optional basis and three directors who were not members of the Special Committee attended the meeting. The key remaining issues in the Arrangement Agreement included financing matters with respect to a proposed marketing period and the related considerations, the regulatory efforts covenant and employment matters, including with respect to those relating to post-closing employment compensation and benefits and a request from the Company that the Company be permitted to indemnify any disqualified individuals on an after-Tax basis for the effect of any excise Taxes imposed under Section 4999 of the Code.

Also on August 1, 2022, Mr. Maheswaran met in person with members of the Company management and certain other employees as part of Semtech’s diligence process, in Vancouver, British Columbia.

Also on August 1, 2022, multiple media outlets reported that “Semiconductor maker Semtech Corp. is in advanced talks to buy Canadian peer Sierra Wireless Inc.” On August 2, 2022, the Company issued a pre-market press release confirming that it was engaged in advanced discussions regarding a potential transaction with Semtech at a price of US$31.00 per Share.

From August 1, 2022 to August 2, 2022, the Company and Semtech, together with their respective financial and legal advisors, finalized Semtech’s due diligence and negotiated the proposed terms of the Arrangement Agreement, the form of Support and Voting Agreement and the Plan of Arrangement. Over the course of this two-

 

- 36 -

day period, various drafts of the Arrangement Agreement and ancillary documents were exchanged between the Company and Semtech. Also during this period, various interviews took place between Representatives of Semtech and a limited set of the Company’s customers.

On the morning of August 2, 2022, the Special Committee met with Qatalyst Partners, Blakes and Skadden to receive further updates from management and the Company’s financial and legal advisors with respect to the Proposed Transaction and discussions with Semtech, and discussed the remaining issues reflected in the draft Arrangement Agreement as well as proposed compromises. Mr. Brace was present as a member of Company management. At the conclusion of the meeting, legal counsel was instructed to convey to Semtech the proposed resolutions to the outstanding issues in the Arrangement Agreement based on the discussions at the meeting. Following such meeting, legal counsel for each of the Company and Semtech exchanged revised drafts of the Arrangement Agreement relating to finalizing the relevant language based on the compromises on the final outstanding terms discussed with the Special Committee.

The Special Committee met again later on August 2, 2022 with Qatalyst Partners, BMO Capital Markets, Blakes and Skadden to discuss the proposed Arrangement and the Arrangement Agreement. The remainder of the Board of Directors also joined that meeting, such that the entire Board of Directors was present. During the meeting, Blakes and Skadden made a presentation setting out the material legal terms of the Arrangement Agreement. Qatalyst Partners and BMO Capital Markets confirmed to the Special Committee that they were ready and able to provide their respective oral opinions (subsequently confirmed in writing) to the Board of Directors that, subject to certain assumptions, limitations and qualifications, as of August 2, 2022, the Consideration to be received by Shareholders pursuant to the Arrangement was fair, from a financial point of view, to such Shareholders. The Special Committee, with the assistance of the Company’s financial and legal advisors, having considered the terms of the Arrangement Agreement and the readiness of Qatalyst Partners and BMO Capital Markets to provide their fairness opinions to the Board of Directors, discussed and analyzed the benefits and risks associated with the Arrangement. After careful consideration, the Special Committee unanimously determined that the Consideration to be received by the Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the Shareholders (other than Semtech, if Semtech owns Shares) and that the Arrangement is in the best interests of the Company and that the Special Committee recommends that the Board of Directors recommend that the Shareholders and holders of Incentive Securities vote in favour of the Arrangement Resolution, and unanimously resolved to recommend to the Board of Directors that the Arrangement Agreement be approved by the Board of Directors substantially in the form circulated to the Special Committee.

After the Special Committee meeting concluded, the Board of Directors met to consider such matters. The Board of Directors, having previously received the presentation by legal advisors that was given to the Special Committee at its meeting regarding the material terms of the Arrangement Agreement, then received the presentations by the financial advisors and each such advisor’s financial analysis. Qatalyst Partners reviewed with the Board of Directors its financial analysis and delivered to the Board of Directors an oral opinion (subsequently confirmed in writing), to the effect that, as of that date and based upon and subject to the assumptions, limitations and qualifications set forth therein, the Consideration to be received by Shareholders was fair, from a financial point of view, to such Shareholders. BMO Capital Markets also reviewed with the Board of Directors its financial analysis and delivered to the Board of Directors an oral opinion (subsequently confirmed in writing) to the effect that, as of that date and based upon and subject to the assumptions, limitations and qualifications set forth therein, the Consideration to be received by Shareholders was fair, from a financial point of view, to such Shareholders. The Special Committee reported to the Board of Directors on the process it had undertaken, and confirmed its unanimous recommendation that the Board of Directors approve the Arrangement and the Arrangement Agreement and recommend that Shareholders and holders of Incentive Securities vote in favour of the Arrangement Resolution. Following a discussion of the benefits and risks associated with the Arrangement, and other factors the Board of Directors deemed relevant, the Board of Directors then unanimously determined that the Arrangement is in the best interests of the Company and is fair, from a financial point of view, to the Shareholders (other than Semtech, if Semtech owns Shares), unanimously approved the Arrangement and the Arrangement Agreement, and the Company’s entrance into the Arrangement Agreement and performance of the transactions contemplated thereby, and unanimously resolved to recommend that Shareholders and holders of Incentive Securities vote in favour of the Arrangement Resolution, the Plan of Arrangement and the Arrangement Agreement.

 

- 37 -

Throughout August 2, 2022, the Company and Semtech, assisted by their respective legal and financial advisors, finalized the terms of the Arrangement Agreement and other transaction documents based on the final material terms approved by the Board of Directors. The Company, Semtech and the Purchaser executed the Arrangement Agreement later in the day on August 2, 2022 and jointly announced the Arrangement Agreement after the markets closed on August 2, 2022. The Company also issued an after-market press release announcing preliminary second quarter 2022 financial results.

Recommendation of the Special Committee

After careful consideration, including a thorough consideration of the terms of the Arrangement Agreement, the Qatalyst Fairness Opinion and the BMO Fairness Opinion provided to the Board of Directors and other matters, and taking into account the best interests of the Company, and after consultation with management and financial and legal advisors, the Special Committee unanimously determined that the Arrangement is fair to the Shareholders and that the Arrangement is in the best interests of the Company. Accordingly, the Special Committee unanimously recommended that the Board of Directors approve the Arrangement Agreement and recommend that Securityholders vote FOR the Arrangement Resolution.

Recommendation of the Board of Directors

After careful consideration, including a thorough consideration of the terms of the Arrangement Agreement, the recommendation of the Special Committee, the Qatalyst Fairness Opinion and the BMO Fairness Opinion provided to the Board of Directors and other matters, and taking into account the best interests of the Company, and after consultation with management and financial and legal advisors, the Board of Directors has unanimously determined that the Arrangement is in the best interests of the Company and is fair to Shareholders. Accordingly, the Board of Directors unanimously approved the Arrangement Agreement and unanimously recommends that Securityholders vote FOR the Arrangement Resolution.

Reasons for the Arrangement

In evaluating and approving the Arrangement and in making their determinations and recommendations, the Special Committee and the Board of Directors gave careful consideration to the current and expected future position of the business of Sierra and the terms of the Arrangement Agreement and the Plan of Arrangement. The Special Committee and the Board of Directors considered a number of factors including, among others, the following:

 

•

Premium. The Consideration represents a premium of approximately 25% to the closing price of the Shares on the NASDAQ on July 29, 2022, the last trading day prior to media speculation regarding a potential transaction, and a premium of approximately 30% to the Company’s unaffected 30-day volume-weighted average price (“VWAP”) of the Shares on the NASDAQ.

 

•

Fairness Opinions. The Fairness Opinions delivered to the Board of Directors by Qatalyst and BMO that, subject to and based on the considerations, assumptions and limitations described therein, the Consideration to be received by the Shareholders pursuant to the Arrangement is fair, from a financial point of view, to the Shareholders.

 

•

Acceptance by Directors and Senior Management. Pursuant to support and voting agreements, the directors and members of senior management of the Company have agreed to vote all of their Shares, including any Shares issuable upon exercise or settlement of Incentive Securities, in favour of the Arrangement.

 

•

Ability to Respond to Unsolicited Superior Proposals. Under the terms of the Arrangement Agreement, the Board of Directors will remain able to respond to any unsolicited written Acquisition Proposal that constitutes a Superior Proposal under the Arrangement Agreement.

 

•

Negotiated Transaction. The Arrangement Agreement is the result of a comprehensive negotiation process with the Parent that was undertaken by the Company and its legal and financial advisors with the oversight and participation of the Special Committee and the Board of Directors. The Arrangement

 

- 38 -

Agreement includes terms and conditions that are reasonable in the judgment of the Special Committee and the Board of Directors with the advice of the Company’s legal and financial advisors.

 

•

Shareholder Approval. The Arrangement must be approved by not less than two-thirds of the votes cast by Shareholders present in person or represented by proxy at the Meeting and not less than two-thirds of the votes cast by Securityholders, voting together as a single class, present in person or represented by proxy at the Meeting.

 

•

Court and Regulatory Approval. The Arrangement must be approved by the Court, which will consider, among other things, the fairness and reasonableness of the Arrangement to the Shareholders and by the respective regulatory bodies under the HSR and the Competition Act. Based on the assessment of the regulatory risk profile of the proposed transaction with the Purchaser and the Parent, the Special Committee and the Board of Directors, in consultation with the Company’s advisors regarding regulatory considerations, does not expect there to be antitrust or other regulatory impediments to the consummation of the Arrangement.

 

•

Dissent Rights. The terms of the Plan of Arrangement will provide that registered Shareholders who oppose the Arrangement may, upon compliance with certain conditions, exercise dissent rights and, if ultimately successful, receive fair value for their Shares.

 

•

Compelling Value Relative to Alternatives. The Board of Directors conducted a pre-signing market check process involving outreach to potential strategic partners, private equity firms and acquirors and the Special Committee and the Board of Directors determined that it was unlikely that any of those parties would complete a transaction on terms that were superior to the Arrangement, taking into account, among other things, the likelihood that the Purchaser would complete a transaction if all conditions are satisfied given the Parent’s strategic rationale and access to capital. The Special Committee and the Board of Directors also considered the Company’s standalone business strategy in the context of current economic and market conditions and current management projections and concluded that the Arrangement would provide greater and more certain value to Shareholders than would reasonably be expected from the continued execution of the Company’s strategic plan.

 

•

Deal Certainty. The Purchaser’s obligation to complete the Arrangement is subject to a limited number of conditions that the Special Committee and the Board of Directors believe, with the advice of their legal and financial advisors, are reasonable in the circumstances. The Arrangement is not subject to a financing condition, and the availability of the Committed Debt Financing at closing of the Arrangement is subject only to “certain funds” conditions that the Special Committee and the Board of Directors believe, with the advice of the Company’s legal and financial advisors, are appropriate for a transaction of this nature.

 

•

Appropriateness of Deal Protections. The Termination Fee of US$45 million, the Purchaser’s right to match a Superior Proposal and other deal protection measures contained in the Arrangement Agreement are, in the view of the Special Committee and the Board of Directors, after receiving legal and financial advice, appropriate for a transaction of this nature.

 

•

Profile of Parent. The Special Committee and the Board of Directors considered the due diligence and advice of the Company’s financial advisors regarding the Parent’s commitment, credit worthiness and anticipated ability to complete the transactions contemplated by the Arrangement Agreement.

 

•

Treatment of Employees. The Purchaser has agreed that for at least 12 months following the Effective Time, amongst other benefits and bonuses for certain eligible employees, the continuing employees’ salary, cash incentive compensation targets and employee benefits will be maintained at a level substantially comparable, when considered in the aggregate, to the salary, cash incentive compensation targets and employee benefits provided to continuing employees of the Company and its Subsidiaries immediately prior to the Effective Time. The Special Committee and the Board of Directors also

 

- 39 -

favorably evaluated Parent’s internal culture and strategic direction as being well suited for its employees.

 

•

Customer Considerations. The Special Committee and the Board of Directors considered the effect of the transaction with the Purchaser and the Parent on customers of the Company and concluded that the transaction would not be adverse to their interests.

 

•

Role of the Special Committee. The evaluation and negotiation process was supervised by the Special Committee, which is composed entirely of independent directors and was advised by experienced and qualified financial and legal advisors. The Special Committee met regularly with the Company’s advisors. The Arrangement was unanimously recommended to the Board of Directors by the Special Committee on the basis described herein and on the basis of the legal and financial advice that was received by the Special Committee.

The Special Committee and the Board of Directors with the support and advice from legal and financial advisors also considered a number of potential risks resulting from the Arrangement and the Arrangement Agreement and other factors, including:

 

•

the risks to the Company and the Shareholders if the Arrangement is not completed, including the costs to the Company in pursuing the Arrangement and the temporary diversion of the Company’s management from the conduct of the Company’s business in the ordinary course;

 

•

the fact that, following the implementation of the Plan of Arrangement, the Company will no longer exist as an independent public company and the Shareholders will forego any future increase in value that might result from future growth and the potential achievement of the Company’s long-term plans;

 

•

the conditions to the Parent’s and the Purchaser’s obligations to complete the Arrangement and the right of the Purchaser to terminate the Arrangement Agreement under certain circumstances;

 

•

the terms of the Arrangement Agreement, including those in respect of: (i) restricting the Company from soliciting third parties to make an Acquisition Proposal and (ii) the fact that if the Arrangement Agreement is terminated under certain circumstances, including in the event that the Company makes a Change in Recommendation or enters into an agreement in respect of a Superior Proposal, the Company must pay the Termination Fee to the Parent;

 

•

the fact that, if the Arrangement is not consummated and the Board of Directors decides to seek another transaction, there can be no assurance that the Company will be able to find a party willing to pay an equivalent or more attractive price than the Consideration to be paid under the Arrangement, or that the Shareholders would be able to receive cash or other consideration for their Shares equal to or greater than the Consideration payable under the Arrangement in any other future transaction that the Company may effect; and

 

•

the fact that certain of the Company’s directors and/or officers may receive additional and separate benefits in their capacity as such in connection with the Arrangement, than those received by the Shareholders generally in connection with the Arrangement (see “Particulars of the Arrangement – Interests of Certain Persons in the Arrangement”).

The foregoing summary of the information, factors and risks considered by the Special Committee and the Board of Directors is not, and is not intended to be, exhaustive. In view of the factors and the amount of information considered in connection with its evaluation of the Arrangement, the Special Committee and the Board of Directors did not find it practical to, and did not, quantify or otherwise attempt to assign any relative weight to each specific factor considered in reaching its conclusions and recommendations. The Special Committee’s and the Board of Directors’ recommendations were made after consideration of all of the above-noted factors and in light of their collective knowledge of the business, financial condition and prospects of Sierra, and were also based upon the advice of the Board of Directors’ and Special Committee’s financial advisors and the Company’s legal counsel. In addition,

 

- 40 -

individual members of the Special Committee and the Board of Directors may have assigned different weights to different factors.

Qatalyst Fairness Opinion

Pursuant to an engagement letter (the “Qatalyst Engagement Letter”) dated as of June 20, 2022 between the Company and Qatalyst Partners, Qatalyst Partners was retained to provide financial advice to the Board of Directors (and any special committee thereof) in considering the Arrangement, including providing an opinion to the Board of Directors (and any special committee thereof) as to the fairness, from a financial point of view, of the Consideration to be received by the Shareholders pursuant the Arrangement.

At the meeting of the Board of Directors held on August 2, 2022 to consider the Arrangement and the Arrangement Agreement, Qatalyst Partners orally delivered its opinion to the Board of Directors, which was subsequently confirmed in writing. The Qatalyst Fairness Opinion concluded that, as of the date of the opinion, and based upon and subject to the assumptions, limitations and qualifications set forth therein, the Consideration to be received by the Shareholders pursuant to the Arrangement, is fair, from a financial point of view, to such Shareholders.

Qatalyst Partners has not prepared a formal valuation or appraisal of the securities, assets or liabilities (contingent or otherwise) of the Company or its affiliates, and the Qatalyst Fairness Opinion should not be construed as such. The full text of the Qatalyst Fairness Opinion, which sets forth, among other things, assumptions made, information reviewed, matters considered and limitations on the scope of the review undertaken by Qatalyst Partners in rendering its opinion, is attached as Appendix A to this Circular. Securityholders are urged to read the Qatalyst Fairness Opinion in its entirety. The summary of the Qatalyst Fairness Opinion described in this Circular is qualified in its entirety by reference to the full text of the Qatalyst Fairness Opinion. The Qatalyst Fairness Opinion was provided to the Board of Directors in connection with their evaluation of the Consideration to be received by Shareholders pursuant to the Arrangement, and does not address any other aspect of the Arrangement and does not constitute a recommendation as to how Securityholders should vote or act with respect to the Arrangement or any other matter and does not in any manner address the price at which Shares will trade at any time.

Qatalyst Partners provides investment banking and other services to a wide range of entities and individuals, globally, 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 the Company, Parent or certain of their respective affiliates. During the two-year period prior to the date of Qatalyst Fairness Opinion, no material relationship existed between Qatalyst Partners or any of its affiliates and the Company or Parent 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 the Company or Parent and their respective affiliates for which Qatalyst Partners would expect to receive compensation.

The terms of the Qatalyst Engagement Letter provide that Qatalyst Partners is to be paid certain fees for its services as financial advisor in connection with the strategic review of any sale involving the Company to a third party, currently estimated at approximately US$29 million, US$200,000 of which was payable upon execution of the Qatalyst Engagement Letter and US$4 million of which was payable upon delivery of an opinion on August 2, 2022 (no part of which is contingent upon the Qatalyst Fairness Opinion being favourable or upon the successful completion of the Arrangement or any alternative transaction). In addition, the Company has agreed to reimburse Qatalyst Partners for certain of its expenses incurred in performing its services and 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 the applicable securities laws, and certain expenses related to or arising out of Qatalyst Partners’ engagement.

In arriving at its opinion, Qatalyst Partners reviewed a draft of the Arrangement Agreement, certain related documents and certain publicly available financial statements and other business and financial information of the Company. Qatalyst Partners also reviewed certain forward-looking information relating to the Company (the “Company Projections”) prepared by the management of the Company described in the section captioned “Background and Reasons for the Arrangement – Certain Financial Projections”. Additionally, Qatalyst Partners discussed the past and current operations and financial condition and the prospects of the Company with senior management of the Company, including their views on the risks and uncertainties of achieving the Company

 

- 41 -

Projections. Qatalyst Partners also reviewed the historical market prices and trading activity for the Shares and compared the financial performance of the Company and the prices and trading activity of the Shares 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 Qatalyst Partners deemed appropriate.

In arriving at its opinion, Qatalyst Partners assumed and relied upon, without independent verification, the accuracy, completeness and fair presentation of all financial and other information, data advice, opinions, representations and other material obtained by Qatalyst Partners from public sources or provided to Qatalyst Partners by or on behalf of the Company or otherwise obtained by Qatalyst Partners in connection with its engagement. With respect to the Company Projections, Qatalyst Partners was advised by the management of the Company, and Qatalyst Partners assumed based on discussions with the management and the Board of Directors, that the Company Projections had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company of the future financial performance of the Company and other matters covered thereby. Qatalyst Partners assumed that the terms of the draft Arrangement Agreement reviewed by Qatalyst Partners would not differ materially from the final executed Arrangement Agreement, and that the Arrangement will be consummated in accordance with the terms set forth in the Arrangement Agreement, without any modification, waiver or delay. In addition, Qatalyst Partners assumed that in connection with the receipt of all the necessary approvals of the Arrangement, no delays, limitations, conditions or restrictions will be imposed that could have an adverse effect on the Company or the contemplated benefits expected to be derived in the Arrangement. In addition, Qatalyst Partners relied, without independent verification, upon the assessment of the management of the Company as to the existing and future technology and products of the Company and the risks associated with such technology and products. The Qatalyst Fairness Opinion has been approved by its opinion committee in accordance with its customary practice.

The Qatalyst Fairness 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 Qatalyst Fairness Opinion. Events occurring after the date of the Qatalyst Fairness Opinion may affect Qatalyst Partners’ opinion and the assumptions used in preparing it, and Qatalyst Partners has not assumed any obligation to update, revise or reaffirm its opinion. The Qatalyst Fairness Opinion does not address the underlying business decision of the Company to engage in the Arrangement, or the relative merits of the Arrangement as compared to any strategic alternatives that may be available to the Company. The Qatalyst Fairness Opinion is limited to the fairness, from a financial point of view, of the Consideration to be received pursuant to, and in accordance with, the terms of the Arrangement Agreement by the Shareholders, 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 the Company or any of its affiliates, or any class of such persons, relative to such consideration.

The following is a brief summary of the material analyses performed by Qatalyst Partners in connection with the Qatalyst Fairness Opinion. The analyses and factors described below must be considered as a whole; 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 the Qatalyst Fairness Opinion. For purposes of its analyses, Qatalyst Partners utilized both the Company Projections described in the section captioned “Background and Reasons for the Arrangement – Certain Financial Projections” and third-party research analyst consensus estimates as of August 1, 2022 (which are referred to as the “Street Case”). 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.

Illustrative Discounted Cash Flow Analysis

Qatalyst Partners performed an illustrative discounted cash flow analysis, which is designed to imply a range of potential per-share present values for Shares as of June 30, 2022 (which is the end of Company’s most recent completed fiscal quarter and most recent balance sheet date) by:

 

- 42 -

•

adding:

 

(a)

the implied net present value of the estimated future unlevered free cash flows (which are referred to as the “UFCF”) of the Company, based on the Company Projections for the third quarter ending September 2022 through fiscal year 2027 (which implied present value was calculated using a range of discount rates of 10.25% to 13.25%, based on an estimated weighted average cost of capital for the Company);

 

(b)

the implied net present value of a corresponding terminal value of the Company, calculated by multiplying the Company’s estimated earnings before interest, taxes, depreciation and amortization (which are referred to as “EBITDA”) of approximately $232 million in fiscal year 2028, based on the Company Projections, by a range of fully diluted enterprise value to next-twelve-months’ estimated EBITDA multiples of 6.5x to 13.5x (which were chosen based on Qatalyst Partners’ professional judgment and experience), and discounted to present value using the same range of discount rates used in item (a) above; and

 

(c)

the cash and cash equivalents of the Company as of June 30, 2022, as provided by management of the Company; and

 

•

subtracting:

 

(a)

the value of the Company’s outstanding debt, as of June 30, 2022, as provided by management of the Company; and

 

•

dividing the resulting amount by the number of fully diluted Shares outstanding (calculated utilizing the treasury stock method, which takes into account outstanding RSUs, PSUs and PRSUs, all as provided by the Company management) as of July 29, 2022, with each of the above-referenced estimated future UFCFs and terminal value for the fiscal years 2028 and beyond having also been adjusted for the degree of estimated dilution to current shareholders through each respective applicable period (approximately 2.5% annually throughout the projection period) due to the estimated net effects of equity issuances and cancellations related to future equity compensation, based on estimates of future dilution provided by management of the Company.

Based on the calculations set forth above, this analysis implied a range of values for the Shares of approximately $26.88 to $50.46 per Share.

Illustrative Selected Companies Analysis

Qatalyst Partners reviewed and compared selected financial information and public market multiples for the Company with publicly available financial information and public market multiples for selected companies. The companies used in this comparison were those companies listed below, which were selected by Qatalyst Partners in its professional judgment, based on factors including that they are publicly traded companies in similar lines of business to the Company, have a similar business model, have similar financial performance or have other relevant or similar characteristics.

Based upon third-party research analyst consensus estimates as of August 1, 2022 and using the closing prices as of August 1, 2022 for shares of the selected companies, Qatalyst Partners calculated, among other things, the implied fully-diluted enterprise value divided by the estimated consensus revenue for the calendar year 2023 (which are referred to as the “CY2023E Revenue Multiples”) and the implied fully diluted enterprise value divided by the estimated consensus EBITDA for the calendar year 2023 (which are referred to as the “CY2023E EBITDA Multiples”) for each of the selected companies, as shown below:

 

- 43 -

Selected Companies		CY2023E Revenue Multiple		CY2023E EBITDA Multiple
Thales S.A.		1.5x		9.5x
Digi International Inc.		3.1x		14.6x
u-blox AG		1.4x		8.4x
Lantronix, Inc.		1.6x		11.9x
KORE Group Holdings, Inc.		2.1x		8.2x
CalAmp Corp.		1.2x		10.4x

 

Communications Modules & Components		CY2023E Revenue Multiple		CY2023E EBITDA Multiple
Infineon Technologies AG		2.6x		8.0x
STMicroelectronics N.V.		2.1x		6.4x
Skyworks Solutions, Inc.		3.2x		7.9x
Qorvo, Inc.		2.5x		6.0x
MKS Instruments, Inc.		2.1x		7.9x
Lumentum Holdings Inc.		3.2x		8.7x
IPG Photonics Corporation		2.6x		8.9x
Jenoptik AG		1.9x		10.4x

Based on an analysis of the CY2023E Revenue Multiples for the selected companies and the application of its professional judgment, Qatalyst Partners selected a representative multiple range of 1.25x and 2.25x.

Based on an analysis of the CY2023E EBITDA Multiples for the selected companies and the application of its professional judgment, Qatalyst Partners selected a representative multiple range of 8.0x and 14.0x.

Qatalyst Partners then applied these ranges to the Company’s estimated revenue and EBITDA, respectively, for calendar year 2023, based on the Company Projections and based on the Street Case. Based on the fully diluted shares of the Company outstanding as of July 29, 2022 (calculated utilizing the treasury stock method), the analysis of the CY2023E Revenue Multiples implied (a) a range of values for the Shares of approximately $23.62 to $41.08 per share based on the Company Projections for calendar year 2023 and (b) a range of values for the Shares of approximately $23.20 to $40.32 per share based on the Street Case for calendar year 2023, and the analysis of the CY2023E EBITDA Multiples implied (x) a range of values for the Shares of approximately $18.01 to $30.17 per share based on the Company Projections for calendar year 2023 and (y) a range of values for the Shares of approximately $15.60 to $25.95 per share based on the Street Case for calendar year 2023.

No company included in the selected companies’ analysis is identical to the Company. 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 the Company, such as the impact of competition on the Company’s business or the industry in general, industry growth and the absence of any material adverse change in the Company’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.

Illustrative Selected Transactions Analysis

Qatalyst Partners compared thirteen selected public company transactions, including transactions involving companies participating in similar lines of business to the Company or with similar business models, similar financial performance or other relevant or similar characteristics.

For each of the selected transactions listed below, Qatalyst Partners reviewed, among other things, (a) the implied fully diluted enterprise value of the target company as a multiple of next-twelve-months’ revenue of the target company (which are referred to as the “NTM Revenue Multiples”) and (b) the implied fully diluted enterprise value

 

- 44 -

of the target company as a multiple of third-party research analyst consensus estimates of the next twelve-months’ EBITDA of the target company (which are referred to as the “NTM EBITDA Multiples”).

 

Announcement Date		Target		Acquiror		NTM Revenue Multiple		NTM EBITDA Multiple
11/04/21		NeoPhotonics Corporation		Lumentum Holdings Inc.		2.1x		21.0x
05/25/21		Telit Communications Limited		DBAY Advisors Limited		1.0x		8.2x
04/08/21		ORBCOMM Inc.		GI Partners, L.L.C.		4.2x		17.6x
01/14/21		Acacia Communications, Inc.*		Cisco Systems, Inc.		7.0x		28.8x
11/09/18		Finisar Corporation		II-VI Incorporated		2.2x		12.5x
10/30/18		Electro Scientific Industries, Inc.		MKS Instruments, Inc.		2.9x		11.6x
03/12/18		Oclaro, Inc.		Lumentum Holdings Inc.		2.8x		14.7x
12/17/17		Gemalto N.V.		Thales S.A.		1.7x		11.2x
03/16/16		ROFIN-SINAR Technologies, Inc.		Coherent, Inc.		1.5x		10.7x
02/23/16		Newport Corporation		MKS Instruments, Inc.		1.5x		8.9x
11/19/14		Oplink Communications, Inc.		Koch Industries, Inc.		1.3x		8.1x
04/29/13		Telular Corporation		Avista Capital Partners		2.4x		9.4x
06/05/12		Miranda Technologies Inc.		Belden Inc.		1.7x		8.6x

 

*	Based on the revised proposed of $115.00 per share on January 14, 2021

Based on the analysis of the NTM Revenue Multiples for the selected transactions and its professional judgment, Qatalyst Partners selected a representative multiple range of 1.0x to 2.0x and then applied this range to the Street Case next-twelve-months’ revenue. Based on the fully diluted shares of the Company outstanding as of July 29, 2022 (calculated utilizing the treasury stock method), this analysis implied a range of values for the Shares of approximately $18.60 to $35.41 per share.

Based on the analysis of the NTM EBITDA Multiples for the selected transactions and its professional judgment, Qatalyst Partners selected a representative multiple range of 8.0x to 14.5x then applied this range to the Street Case next-twelve-months’ EBITDA. Based on the fully diluted shares of the Company outstanding as of July 29, 2022 (calculated utilizing the treasury stock method), this analysis implied a range of values for the Shares of approximately $14.66 to $25.12 per share.

No company or transaction utilized in the selected transactions analysis is identical to the Company or the Arrangement. In evaluating the selected transactions, Qatalyst Partners made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the Company’s control, such as the impact of competition on the Company’s business or the industry generally, industry growth and the absence of any material adverse change in the Company’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 transactional data. Because of the unique circumstances of each of these transactions and the Arrangement, Qatalyst Partners cautioned against placing undue reliance on this information.

Miscellaneous

In connection with the review of the Arrangement by the Board of Directors, 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 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

 

- 45 -

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 the Company or the Shares. 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 the control of the Company. 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 Consideration to be received by the Shareholders pursuant the Arrangement.

BMO Fairness Opinion

Pursuant to an engagement letter (the “BMO Engagement Letter”) dated as of July 30, 2022 between the Company and BMO Capital Markets, BMO Capital Markets was retained to act as financial advisor to the Special Committee and to prepare and deliver to the Board of Directors its opinion as to whether the Consideration to be received by Shareholders pursuant to the Arrangement is fair, from a financial point of view.

At the meeting of the Board of Directors held on August 2, 2022, BMO Capital Markets presented its opinion stating that, as of the date of the opinion, and based upon and subject to the assumptions, limitations and qualifications set forth therein, the Consideration payable under the Arrangement to the Shareholders is fair, from a financial point of view, to such Shareholders.

BMO Capital Markets has not prepared a formal valuation or appraisal of the Company or any of its securities or assets, and the BMO Fairness Opinion should not be construed as such. The full text of the BMO Fairness Opinion, which sets forth, among other things, assumptions made, information reviewed, matters considered and limitations on the scope of the review undertaken by BMO Capital Markets in rendering its opinion, is attached as Appendix B to this Circular. Shareholders are urged to read the BMO Fairness Opinion in its entirety. The summary of the BMO Fairness Opinion described in this Circular is qualified in its entirety by reference to the full text of the BMO Fairness Opinion. The BMO Fairness Opinion was provided to the Special Committee and the Board of Directors in connection with their evaluation of the Consideration to be received by Shareholders pursuant to the Arrangement, and does not address any other aspect of the Arrangement and does not constitute a recommendation as to how Shareholders should vote or act with respect to the Arrangement.

BMO Capital Markets is not an insider, associate, or affiliate of the Company, the Purchaser or the Parent and is not an advisor to any person or company other than to the Board of Directors and the Special Committee with respect to the Arrangement. BMO Capital Markets has not entered into any other agreements or arrangements with the Company, the Purchaser or the Parent or any of their affiliates with respect to any future dealings. In addition, BMO Capital Markets and its affiliates act as traders and dealers, both as principal and agent, in major financial markets and, as such, may have had and may in the future have long or short positions in the securities of the Company or any of its associates or affiliates and, from time to time, may have executed or may execute transactions on behalf of such companies or clients for which they receive or may receive commission. As an investment dealer, BMO Capital Markets and its affiliates conduct research on securities and may, in the ordinary course of their business, provide research reports and investment advice to their clients on investment matters, including with respect to the Company and the Arrangement. In addition, BMO Capital Markets and its affiliates may, in the ordinary course of their business, provide other financial services to the Company or any of its associates or affiliates.

The BMO Fairness Opinion was prepared in accordance with the Disclosure Standards for Formal Valuations and Fairness Opinions of IIROC but IIROC was not involved in the preparation or review of the Fairness Opinion.

The terms of the BMO Engagement Letter provide that BMO Capital Markets is to be paid certain fees for its services as financial advisor, including a fixed fee of C$1,250,000, upon delivery of the BMO Fairness Opinion, no part of which is contingent upon the BMO Fairness Opinion being favourable or upon the success of the Arrangement. In addition, the Company has agreed to reimburse BMO Capital Markets for its reasonable out-of-pocket expenses and to indemnify BMO Capital Markets in respect of certain liabilities that might arise in connection with its engagement.

 

- 46 -

Certain Financial Projections

Other than revenue guidance previously provided publicly on a quarterly basis with respect to the next fiscal quarter, management of the Company does not as a matter of course issue public financial projections as to future performance or earnings beyond the then current fiscal year or issue public financial projections for extended periods due to the unpredictability of the underlying assumptions and estimates. However, in connection with its strategic review process, including, without limitation, its evaluation of the Arrangement Agreement and the transactions contemplated thereby as described in this Circular, on June 21, 2022, the management of the Company prepared the Company Projections set forth below (as defined in the section of this Circular captioned “Background and Reasons for the Arrangement – Qatalyst Fairness Opinion”), which were reviewed with the Board of Directors on June 22, 2022 and which were provided to each of Qatalyst Partners and BMO Capital Markets in connection with their respective fairness opinions. The Company approved the use of the Company Projections by each of Qatalyst Partners and BMO Capital Markets in performing their respective financial analyses. To give the Shareholders access to certain non-public information that was available to the Board of Directors at the time of the evaluation of the Arrangement and the Arrangement Agreement, the management of the Company has included these projections below, subject to the following qualifications and cautionary statements.

The management of the Company prepared the Company Projections set forth below and delivered to the Board of Directors, Qatalyst Partners and BMO Capital Markets based on historical financial statements as well as a series of assumptions and estimates related to future results that it believed to be reasonable at the time, including assumptions and estimates relating to revenue growth, gross margin percentages, selling, general and administrative expenses, capital expenditures and related depreciation and amortization, and other relevant factors relating to the Company’s long-range operating plan, as well as how certain of these assumptions and estimates may change over time. The foregoing is a summary of certain key assumptions and estimates and does not purport to be a comprehensive overview of all assumptions and estimates reflected in the Company Projections prepared by the management of the Company. The Company also prepared upside and downside sensitivity cases for the Company Projections. Both Qatalyst Partners and BMO Capital Markets used the base case, as set forth in their respective financial analyses, for certain of their respective financial analyses as expressly noted therein. See “Background and Reasons for the Arrangement – Qatalyst Fairness Opinion” and “Background and Reasons for the Arrangement – BMO Fairness Opinion”.

The Company Projections set forth below, while presented with numerical specificity, necessarily were based on numerous assumptions and estimates that are inherently uncertain. Because the Company Projections cover multiple years, by their nature, they become subject to greater uncertainty with each successive year. In addition, the Company Projections would be affected by the Company’s ability to achieve strategic goals, objectives and targets over the applicable periods. The assumptions upon which the Company Projections were based necessarily involve subjective judgments with respect to, among other things, future economic, competitive and regulatory conditions and financial market conditions, all of which are difficult or impossible to predict accurately and many of which are beyond the Company’s control. The Company Projections also reflect assumptions as to certain business decisions that are subject to change. As such, there can be no assurance that the Company Projections will be realized or that actual results will not be significantly higher or lower than those forecasted. The inclusion of the Company Projections in this Circular should not be regarded as an indication that the Company, the Board of Directors, Qatalyst Partners, BMO Capital Markets, any of their respective affiliates, or any other recipient of this information considered, or now considers, such projections to be a reliable prediction of future results or any actual future events, and this information should not be relied upon as such. The inclusion of the Company Projections herein should not be deemed an admission or representation by the Company that they are viewed by the Company as material information of the Company. No representation is made by the Company or any other person to any Shareholder regarding the Company Projections or the ultimate performance of the Company compared to such information.

The Company Projections did not give effect to any changes or expenses as a result of the Arrangement Agreement, the Arrangement or other transactions contemplated by the Arrangement Agreement, or any other effects of such matters. The Company Projections were prepared solely for internal use and were not prepared with a view toward public disclosure or compliance with published guidelines of the Canadian Securities Administrators, the U.S. Securities and Exchange Commission or the guidelines established by the Canadian Institute of Chartered Accountants or the American Institute of Certified Public Accountants for preparation and presentation of prospective financial

 

- 47 -

information or GAAP or U.S. GAAP. No independent registered public accounting firm, has examined, compiled, nor performed any procedures with respect to the Company Projections.

The Company Projections include Adjusted EBITDA, Non-GAAP Operating Income and Unlevered Free Cash Flow, which are defined as non-GAAP financial measures by Regulation G adopted by the Securities and Exchange Commission. Please see Footnotes (1) through (3), inclusive, to the chart below setting forth the Company Projections for more details about such measures. The Company did not reconcile its forward-looking Adjusted EBITDA, Non-GAAP Operating Income and Unlevered Free Cash Flow to the corresponding GAAP or U.S. GAAP measure because due to the forward-looking nature of these projections they could be significantly impacted by future events, the timing and nature of which cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation is not available without unreasonable effort.

The Company Projections are not being included in this document to influence the decision of the Shareholders whether to vote for the Arrangement Resolution, but rather because such Company Projections, or portions of such Company Projections, were provided to the Board of Directors, Qatalyst Partners and BMO Capital Markets. The information from the Company Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding the Company contained in the Company’s public filings with the Canadian Securities Administrators or the U.S. Securities and Exchange Commission.

All financial projections are forward-looking statements. These and other forward-looking statements are expressly qualified in their entirety by the risks and uncertainties identified above and in the section of this Circular captioned “Cautionary Statement Regarding Forward-Looking Statements”.

As indicated above, the Company’s future financial results may materially differ from those expressed in the Company Projections due to factors that are beyond management’s ability to control or predict. The Company cannot assure that any of the Company Projections will be realized or that its future financial results will not materially vary from the Company Projections. The Company Projections do not take into account any circumstances or events occurring after the date they were prepared and have not been updated since their respective dates of preparation. They should not be utilized as public guidance and will not be provided in the ordinary course of the Company’s business in the future.

In light of the foregoing factors and the uncertainties inherent in the Company Projections, the Shareholders are cautioned not to place undue, if any, reliance on the Company Projections included in this Circular, including in making a decision as to whether to vote for the Arrangement Resolution.

The management of the Company developed the Company Projections. The management directed each of Qatalyst Partners and BMO Capital Markets to use the Company Projections for purposes of performing its financial analyses in connection with rendering their respective fairness opinions for presentation to the Board of Directors on August 2, 2022, as described in more detail above. The following is a summary of the Company Projections presented to the Board of Directors:

($ in millions)

Fiscal Year*		Q3-Q4’22E				FY 22E				FY 23E				FY 24E				FY 25E				FY 26E				FY 27E				FY 28E
Revenue		$	339				678				726				835				960				1,056				1,125				1,176
Adjusted EBITDA(1)		$	33				66				84				128				172				194				217				232
Non-GAAP Operating Income(2)		$	25				50				68				111				155				176				198				212
Unlevered Free Cash Flow(3)		$	12				36				41				101				138				149				162				173

 

*	The Company’s fiscal year ends December 31.

(1)

Adjusted EBITDA is defined as net earnings (loss) from continuing operations plus stock-based compensation expense and related social taxes, phantom RSU expense which represents expenses related to compensation units settled in cash based on the stock price at vesting, restructuring costs, government grants related to COVID-19 relief, CEO retirement/search, impairment, gain on sale of Omnilink, the ransomware incident, COVID-19 factory constraint incremental costs, certain other non-recurring costs or recoveries, amortization, interest and other income (expense), foreign exchange gains or losses on translation of certain balance sheet accounts, unrealized foreign exchange gains or losses on forward contracts, recognition of cumulative translation adjustments on dissolution of subsidiaries, and income tax expense (recovery).

(2)	Non-GAAP Operating Income excludes the impact of stock-based compensation expense and related social taxes, phantom RSU expense which represents expenses related to compensation units settled in cash based on the stock price at vesting,

 

- 48 -

restructuring costs, government grants related to COVID-19 relief, CEO retirement/search, impairment, gain on sale of Omnilink, the ransomware incident, COVID-19 factory constraint incremental costs, certain other non-recurring costs or recoveries, acquisition-related amortization, the impact of foreign exchange gains or losses on translation of certain balance sheet accounts, unrealized foreign exchange gains or losses on forward contracts, recognition of cumulative translation adjustments on dissolution of subsidiaries, and certain tax adjustments.

(3)	Unlevered free cash flow is defined as Non-GAAP Operating Income less (i) cash taxes, less (ii) capital expenditures, plus (iii) depreciation expense, less (iv) investment in working capital, less (v) restructuring expenses.

BY INCLUDING IN THIS CIRCULAR A SUMMARY OF THE COMPANY PROJECTIONS, THE COMPANY UNDERTAKES NO OBLIGATIONS TO UPDATE, OR PUBLICLY DISCLOSE ANY UPDATE TO, THE COMPANY PROJECTIONS TO REFLECT CIRCUMSTANCES OR EVENTS, INCLUDING UNANTICIPATED EVENTS, THAT MAY HAVE OCCURRED OR THAT MAY OCCUR AFTER THE PREPARATION OF THE COMPANY PROJECTIONS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE COMPANY PROJECTIONS ARE SHOWN TO BE IN ERROR OR CHANGE, EXCEPT AND ONLY TO THE EXTENT THAT MAY BE OTHERWISE REQUIRED BY APPLICABLE LAW.

PARTICULARS OF THE ARRANGEMENT

Arrangement Mechanics

The following description is qualified in its entirety by reference to the full text of the Plan of Arrangement, a copy of which is attached hereto in Appendix E to this Circular. Subject to receiving the Required Securityholder Approval and the Final Order, and satisfaction or waiver of applicable conditions, the Arrangement will become effective on the Effective Date which is anticipated to occur during the Parent’s fiscal year 2023. The following events shall occur and shall be deemed to occur sequentially as set out below without any further authorization, act or formality, in each case, unless stated otherwise starting at the Effective Time:

 

(1)

each Option outstanding immediately prior to the Effective Time (whether vested or unvested) shall, notwithstanding the terms of the Company Option Plan or any award or similar agreement pursuant to which any Options were granted or awarded, as applicable, be deemed to have vested and, without any further action by or on behalf of the holder thereof, shall be deemed to be assigned and surrendered by such holder to the Company in exchange for, in respect of each Option for which the Consideration exceeds the exercise price, an amount in cash from the Company equal to the Consideration less the applicable exercise price in respect of such Option, less any applicable withholdings, and such Option shall immediately be cancelled;

 

(2)	each RSU outstanding immediately prior to the Effective Time (whether vested or unvested) shall, notwithstanding the terms of the Company RSU Plans or any award or similar agreement pursuant to which any RSUs were granted or awarded, as applicable, be deemed to have vested;

 

(3)

each Non-Specified PSU outstanding immediately prior to the Effective Time (whether vested or unvested) shall, notwithstanding the terms of the Company RSU Plans or any award or similar agreement pursuant to which any Non-Specified PSUs were granted or awarded, as applicable, be deemed to vest into a number of vested Non-Specified PSUs calculated by multiplying each such Non-Specified PSU by one;

 

(4)

each Specified PSU outstanding immediately prior to the Effective Time (whether vested or unvested) shall, notwithstanding the terms of the Company RSU Plans or any award or similar agreement pursuant to which any Specified PSUs were granted or awarded, as applicable, be deemed to vest into a number of vested Specified PSUs calculated by multiplying each such Specified PSU by two;

 

(5)

an aggregate number of RSUs and PSUs equal to the number of Shares held in the Share Purchase Trust (the “Settled Share Units”), if any, shall be settled in exchange for one Share (all such Shares delivered in settlement, the “Trust Shares”) for each such Settled Share Unit and, without any further action by or on behalf of the holders of each such Settled Share Unit, the Company, the trustee under the Share Purchase Trust or the Share Purchase Trust, each such Trust Share shall thereupon be held by the Share Purchase Trust for and on behalf of the holders of each such Settled Share Unit (subject to any withholding) and each such Settled Share Unit shall be immediately cancelled; provided that the aggregate number of RSUs and PSUs to be so settled shall be allocated in descending order among the holders of RSUs and PSUs, beginning with

 

- 49 -

the holder having the most RSUs and PSUs in the aggregate as of the Effective Time, provided further that no allocation of Shares shall be made pursuant to this step (5) with respect to a fractional RSU or PSU that a holder may hold;

 

(6)

each Trust Share shall be transferred without any further action by or on behalf of the trustee under the Share Purchase Trust, the Share Purchase Trust or any holder of Settled Share Units, to the Purchaser in exchange for the Consideration, and in connection therewith: (i) a portion of the amount held by the Depositary as agent for and on behalf of the Purchaser, equal to the aggregate Consideration payable in respect of Trust Shares, shall be held by the Depositary as agent for and on behalf of holders of Settled Share Units (which amount, following the completion of the Plan of Arrangement, shall be transferred to the Company to be held on behalf of the applicable holders and paid to such holders (subject to any withholding)), (ii) the holder of each such Trust Share shall cease to be the holder thereof and to have any rights as a Shareholder other than the right to be paid as described in this step (6), and (iii) the Purchaser shall be recorded in the register of holders of Shares maintained by or on behalf of the Company as the holder of the Trust Shares so transferred and shall be deemed to be the legal and beneficial owner thereof;

 

(7)

each whole RSU and PSU that remains outstanding (for greater certainty, not including the Settled Share Units) shall, without any further action by or on behalf of the holder thereof, be deemed to be transferred by such holder to the Company in exchange for an amount in cash from the Company equal to the Consideration, in each case, with such amounts to be paid to the applicable holders less any applicable withholdings, and each such RSU and PSU shall immediately be cancelled;

 

(8)

each fractional RSU and PSU that remains outstanding, if any, shall, without any further action by or on behalf of the holder thereof, be deemed to be transferred by such holder to the Company in exchange for an amount in cash from the Company equal to the Consideration multiplied by the applicable fraction of an RSU or PSU held by the applicable holder, in each case, with such amounts to be paid to the applicable holders less any applicable withholdings, and each such fractional RSU and PSU shall immediately be cancelled;

 

(9)

(i) each former holder of Incentive Securities shall cease to be a holder of such Incentive Securities, (ii) such holder’s name shall be removed from each applicable register, (iii) the Incentive Plans and any and all option, award or similar agreements relating to the Incentive Securities shall be terminated and shall be of no further force and effect, and (iv) each such holder shall cease to have any rights as a holder in respect of such Incentive Securities or under the Incentive Plans and have only the right to receive the consideration, if any, to which it is entitled;

 

(10)	each outstanding Share held by a Dissenting Holder in respect of which Dissent Rights have been validly exercised shall be deemed to have been transferred without any further action by or on behalf of the holder thereof to the Purchaser, and:

 

(a)

such Dissenting Holder shall cease to be the holder of such Share and to have any rights as a Shareholder, other than the right to be paid the fair value of its Shares by the Purchaser;

 

(b)

such Dissenting Holder’s name shall be removed from the register of holders of Shares maintained by or on behalf of the Company; and

 

(c)

the Purchaser shall be recorded in the register of holders of Shares maintained by or on behalf of the Company as the holder of the Shares so transferred, and shall be deemed to be the legal and beneficial owner thereof;

 

(11)

concurrently with step (10) above, each outstanding Share (for greater certainty, other than the Trust Shares or Shares held by Dissenting Holders who have validly exercised their respective Dissent Rights) shall be transferred without any further action by or on behalf of the holder thereof, to the Purchaser in exchange for the Consideration, less any applicable withholdings, and:

 

(a)

the holder of each such Share shall cease to be the holder thereof and to have any rights as a Shareholder other than the right to be paid the Consideration in accordance with the Plan of Arrangement;

 

- 50 -

(b)

such holder’s name shall be removed from the register of holders of Shares maintained by or on behalf of the Company; and

 

(c)

the Purchaser shall be recorded in the register of holders of Shares maintained by or on behalf of the Company as the holder of the Shares so transferred, and shall be deemed to be the legal and beneficial owner thereof.

Certain Effects of the Arrangement

Upon completion of the Arrangement, the Purchaser will have acquired all of the issued and outstanding Shares and Sierra will become a wholly-owned subsidiary of the Purchaser. Shortly after consummation of the Arrangement, the Shares will cease to be listed on the TSX and a Form 25 will be filed to delist the Shares from the NASDAQ and trading of the Shares in the public market will no longer be possible. The Purchaser will seek to have Sierra be deemed to have ceased to be a reporting issuer under Canadian Securities Laws, in which case Sierra will also cease to be required to file continuous disclosure documents with Canadian Securities Administrators. Following completion of the Arrangement, Sierra will deregister its Shares under the U.S. Exchange Act subsequent to its filing and deemed effectiveness of a Form 15 (or Form 15F, as applicable).

For a discussion of certain income tax considerations relating to the disposition of Shares, please see “Certain Income Tax Considerations for Shareholders”.

Effects on Sierra if the Arrangement is Not Completed

If the Arrangement is not approved by the Securityholders or if the Arrangement is not completed for any other reason, Securityholders will not receive any consideration for their Securities in connection with the Arrangement. Instead, Sierra will remain a public company and the Shares will continue to be listed and traded on the TSX and the NASDAQ. If the Arrangement is not completed, it is expected that Sierra’s management will operate Sierra in a manner similar to that in which it was being operated prior to the date of the Arrangement Agreement and that Shareholders will continue to be subject to the same risks and opportunities currently facing Sierra. There can be no assurance as to the effect of these risks and opportunities on the future trading price or value of the Shares. The Board of Directors would continue to evaluate and review, among other things, the performance of Sierra’s business and the capitalization of Sierra and would make such changes as are deemed appropriate. In addition, Sierra could be required to pay the Termination Fee to the Purchaser if the Arrangement Agreement is terminated in certain circumstances, including, but not limited to, if, prior to obtaining the Required Securityholder Approval, (i) the Purchaser terminates the Arrangement Agreement because the Board of Directors makes a Change in Recommendation or (ii) the Company terminates the Arrangement Agreement because the Board of Directors authorizes Sierra to enter into a written agreement with respect to a Superior Proposal in certain circumstances. See “The Arrangement Agreement – Termination”.

Required Securityholder Approval

At the Meeting, Securityholders will be asked to consider and, if deemed advisable, to pass the Arrangement Resolution. The approval of the Arrangement Resolution will require the affirmative vote of (i) at least two-thirds (66²⁄₃%) of the votes cast by the Shareholders present in person or represented by proxy at the Meeting and entitled to vote; and (ii) at least two-thirds (66²⁄₃%) of the votes cast at the Meeting by Securityholders, voting together as a single class, present or represented by proxy at the Meeting and entitled to vote (together, the “Required Securityholder Approval”). Upon receipt of the Required Securityholder Approval, the Company will seek the Final Order and implement the Arrangement on the Effective Date in accordance with the Final Order. See “Principal Legal Matters – Canadian Securities Law Matters”.

Notwithstanding the approval by Securityholders of the Arrangement Resolution, Sierra reserves the right in certain circumstances to not proceed with the Arrangement in accordance with the terms of the Arrangement Agreement. See “The Arrangement Agreement – Termination”.

 

- 51 -

Support and Voting Agreements

The directors and members of senior management of the Company have entered into the Support and Voting Agreements with the Purchaser and the Parent pursuant to which they have agreed to vote in favour of the Arrangement Resolution. As of the Record Date, the directors and members of senior management hold a total of 329,703 Shares, representing approximately 0.84% of the issued and outstanding Shares, as well as a total of 985,155 Incentive Securities, representing approximately 46.52% of the outstanding Incentive Securities.

Pursuant to the terms of the Support and Voting Agreements, the directors and members of senior management of Sierra have agreed to, solely in their capacity as Securityholders and not in their capacity as directors or members of senior management of Sierra, among other things: (a) vote their Securities in favour of the approval of the Arrangement Resolution and against any proposed action that would reasonably be expected to adversely affect, materially delay or interfere the with completion of the Arrangement; (b) no later than 10 days prior to the Meeting, deliver or cause to be delivered duly executed proxies or voting instruction forms voting in favour of the approval of the Arrangement Resolution, such proxy or voting instruction form not to be revoked or withdrawn without the prior written consent of the Purchaser; (c) not to, directly or indirectly, (i) sell, transfer, gift, assign, grant a participation interest in, option, pledge, hypothecate, grant a security or voting interest in or otherwise convey or encumber (each, a “Transfer”), or enter into any agreement, option or other arrangement (including any profit sharing arrangement, forward sale or other monetization arrangement) with respect to the Transfer of any of their Securities to any person or entity, other than pursuant to the Arrangement Agreement; (ii) grant any proxies or power of attorney, deposit any of their Securities into any voting trust or enter into any voting arrangement, whether by proxy, voting agreement or otherwise, with respect to their Securities, other than pursuant to the Support and Voting Agreement; provided that, the directors and members of senior management may (x) exercise and/or settle Incentive Securities to acquire additional Shares, and (y) transfer Securities to a corporation, family trust, registered retirement savings plan or other entity directly or indirectly owned or controlled by the directors or members of senior management or under common control with or controlling such director or member of senior management provided that (A) such transfer shall not relieve or release them of or from their obligations under the Support and Voting Agreement; and (d) provided the Purchaser and the Parent are not in material breach of the Support and Voting Agreement or the Arrangement Agreement, not to exercise any rights of appraisal or rights of dissent provided under any applicable Laws or otherwise in connection with the Arrangement or the transactions contemplated by the Arrangement Agreement.

The Support and Voting Agreements signed by the directors and members of senior management of Sierra shall terminate upon the mutual written agreement of the parties thereto or shall automatically terminate upon the earlier of: (i) the Effective Time, (ii) the Purchaser, without the consent of the directors and members of senior management, decreases the Consideration payable under the Arrangement Agreement, or (iii) termination of the Arrangement Agreement in accordance with its terms.

Interests of Certain Persons in the Arrangement

In considering the recommendations of the Special Committee and Board of Directors with respect to the Arrangement, Securityholders should be aware that certain of the directors and executive officers of Sierra may have interests that differ from those of the Securityholders. The Special Committee and the Board of Directors were aware of these interests and considered them along with other matters in reaching their decision to approve the Arrangement and to recommend that Securityholders vote for the Arrangement Resolution. Except as described below, to the knowledge of Sierra, the directors and executive officers have no material interest in the Arrangement that differs from the interests of the Securityholders generally.

Sierra Shareholdings

The executive officers and directors of Sierra beneficially own, directly or indirectly, or exercise control or direction over, in the aggregate, 329,703 Shares, representing approximately 0.84% of the Shares issued and outstanding as of the close of business on August 23, 2022. All of the Shares held by the executive officers and directors of Sierra will be treated in the same fashion under the Arrangement as Shares held by any other Shareholder. See “Particulars of the Arrangement – Arrangement Mechanics”.

The following table sets out the names and positions of each of the directors and executive officers of Sierra and, as of the close of business on August 23, 2022, the number and percentage of Shares owned or over which control

 

- 52 -

or direction is exercised, directly or indirectly, by each such director or executive officer of Sierra and, where known after reasonable enquiry, by their respective associates or affiliates:

 

Name		Position		Aggregate Number of Shares				Total Cash Payment for Shares (USD)				Percentage of Outstanding Shares
Lori O’Neill		Director			0				0				0.00	%
Thomas Sieber		Director			75,751			$	2,348,281				0.19	%
Karima Bawa		Director			0				0				0.00	%
Russell Jones		Director			30,000			$	930,000				0.08	%
Gregory Waters		Director			67,386			$	2,088,966				0.17	%
James Anderson		Director			22,386			$	693,966				0.06	%
Martin Mc Court		Director			42,384			$	1,313,904				0.11	%
Philip Brace		President & Chief Executive Officer			26,438			$	819,578				0.07	%
Samuel Cochrane		Chief Financial Officer			21,128			$	654,968				0.05	%
Pravin Desale		Senior Vice- President, Engineering			8,620			$	267,220				0.02	%
Jennifer Farac		Corporate Secretary & General Counsel			41			$	1,271				0.00	%
Steve Harmon		Senior Vice- President, Global Sales			16,261			$	504,091				0.04	%
Roy MacLean		Senior Vice- President, Operations			12,702			$	393,762				0.03	%
Tom Mueller		Vice-President, Products			6,606			$	204,786				0.02	%

Sierra Options

The directors and executive officers of Sierra beneficially own, directly or indirectly, or exercise control or direction over, in the aggregate, 46,093 Options as of the close of business on August 23, 2022. All of the Options held by the directors and executive officers of Sierra will be treated in the same manner under the Arrangement as Options held by every other holder of Options.

The following table shows the total number Options held by each of the directors and executive officers of Sierra as of August 23, 2022 that are expected to be settled for cash upon closing of the Arrangement in accordance with the Plan of Arrangement and the amounts to be paid for the same, based on the Consideration, but exclusive of applicable withholdings and other source deductions. The Options have exercise prices ranging between $12.72 and $24.47 per Share. See “Particulars of the Arrangement – Arrangement Mechanics”.

 

- 53 -

Name		Number of Options				Total Cash Payment for Options (USD)(1)
Lori O’Neill			0				0
Thomas Sieber			0				0
Karima Bawa			0				0
Russell Jones			0				0
Gregory Waters			0				0
James Anderson			0				0
Martin Mc Court			0				0
Philip Brace			0				0
Samuel Cochrane			0				0
Pravin Desale			0				0
Jennifer Farac			16,555			$	292,427
Steve Harmon			0				0
Roy MacLean			0				0
Tom Mueller			29,538			$	484,592

 

(1)	Options are denominated in CAD and converted to USD at exchange rate of C$1.00 = US$ 0.7672

Sierra RSUs

The directors and executive officers of Sierra beneficially own, directly or indirectly, or exercise control or direction over, in the aggregate, 430,430 RSUs as of the close of business on August 23, 2022.

The following table shows the total number of RSUs held by each of the directors and executive officers of Sierra who holds RSUs as of August 23, 2022 that are expected to be settled for cash upon closing of the Arrangement in accordance with the Plan of Arrangement and the amounts to be paid for the same, based on the Consideration, but exclusive of applicable withholdings and other source deductions. See “Particulars of the Arrangement – Arrangement Mechanics”.

 

Name		Number of RSUs				Total Cash Payment for RSUs (USD)
Lori O’Neill			39,969			$	1,239,039
Thomas Sieber			7,294			$	226,114
Karima Bawa			29,680			$	920,080
Russell Jones			43,240			$	1,340,440
Gregory Waters			7,294			$	226,114
James Anderson			7,294			$	226,114
Martin Mc Court			7,294			$	226,114
Philip Brace			67,728			$	2,099,568
Samuel Cochrane			63,524			$	1,969,244
Pravin Desale			65,195			$	2,021,045
Jennifer Farac			23,834			$	738,854
Steve Harmon			23,144			$	717,464
Roy MacLean			18,576			$	575,856
Tom Mueller			26,364			$	817,284

 

- 54 -

Sierra PSUs

The directors and executive officers of Sierra beneficially own, directly or indirectly, or exercise control or direction over, in the aggregate, 508,632 PSUs as of the close of business on August 23, 2022.

The following table shows the total number of PSUs held by each of the directors and executive officers of Sierra who holds PSUs as of August 23, 2022 that are expected to be settled for cash upon closing of the Arrangement in accordance with the Plan of Arrangement and the amounts to be paid for the same, based on the Consideration, but exclusive of applicable withholdings and other source deductions. See “Particulars of the Arrangement – Arrangement Mechanics”.

 

Name		Number of PSUs(1)				Total Cash Payment for PSUs (USD)(2)
Lori O’Neill			0				0
Thomas Sieber			0				0
Karima Bawa			0				0
Russell Jones			0				0
Gregory Waters			0				0
James Anderson			0				0
Martin Mc Court			0				0
Philip Brace			243,228			$	13,808,113
Samuel Cochrane			115,077			$	6,766,804
Pravin Desale			65,194			$	3,806,490
Jennifer Farac			10,301			$	552,854
Steve Harmon			44,268			$	2,621,980
Roy MacLean			30,564			$	1,772,332
Tom Mueller			0				0

 

(1)	Number of PSUs does not include adjustment for performance multiples.

(2)	Total cash payment for PSUs includes adjustment for performance multiples pursuant to the Plan of Arrangement.

Change of Control Provisions

The Company has entered into executive employment agreements with each of Philip Brace, Samuel Cochrane, Pravin Desale, Roy MacLean, Steve Harmon, Tom Mueller and Jennifer Farac.

The executive employment agreements for Messrs. Brace, Cochrane, Desale, MacLean, Harmon, Mueller and Ms. Farac provide a “double trigger” approach upon a change of control for severance and accelerated vesting of equity-based awards.

If Messrs. Brace, Cochrane, Harmon, Desale or Ms. Farac’s employment is terminated 3 months prior to, or within 12 months for Messrs. Brace, Harmon, Desale and Ms. Farac or within 18 months for Mr. Cochrane, following a change of control, other than for just cause, disability or death (or is terminated by him or her for “good reason”), the Company will provide such executive with payments and benefits as follows: an amount equal to 24 months’ base salary, 18 months’ health and welfare benefit premiums continuation and 12 months’ target bonus in the case of Mr. Brace; an amount equal to 24 months’ base salary and 24 months’ health and welfare benefit premiums continuation and 12 months’ target bonus in the case of Mr. Cochrane and Ms. Farac; an amount equal to 18 months base salary and health and welfare benefit premiums continuation and 12 months target bonus in the case of Messrs. Harmon and Desale. All unvested RSUs and unexercised options, rights and warrants held by these executives shall be deemed to vest and will be exercisable for 90 days following the date of termination, and all unvested target PSUs will be accelerated and the current performance status against the performance conditions set out in the applicable grant agreement will be applied to determine the total shares to be issued.

 

- 55 -

If Messrs. MacLean or Mueller’s employment is terminated within 12 months following a change of control, other than for just cause, disability or death (or is terminated by him for “good reason”), the Company will provide such executive, an amount equal to up to 12 months average base salary and average bonus paid over the preceding two years, plus 15% of base salary in lieu of benefits continuation, all unvested RSUs and unexercised options, rights and warrants held by such executive shall be deemed to vest and will be exercisable for 90 days following the date of termination, and all unvested target PSUs will be accelerated and the current performance status against the performance conditions set out in the applicable grant agreement will be applied to determine the total shares to be issued.

The executive employment agreements of Messrs. Brace, Desale and Harmon described above contain provisions that would cut-back any amounts that would be subject to Section 280G of the Internal Revenue Code (the “Code”). However, in connection with the Arrangement, the Purchaser agreed that the Company may take the following actions in respect of potential “excess parachute payments” for “disqualified individuals” (each as defined in Section 280G of the Code): (i) to the extent that the Effective Time is anticipated to occur in 2023, accelerate and pay in 2022 compensation that would otherwise be payable in a future calendar year, provided, that in no event shall any such action materially increase the cost of providing any such payments (provided that an increased payment amount that results solely from an increase to a disqualified individual’s “base amount” or a decrease in the payments characterized as “parachute payments” (each as defined in Section 280G of the Code) as a result of any of the actions contemplated hereby shall not be deemed to be a material increase in the cost of providing such payments); (ii) obtain third party valuations of restrictive covenants; (iii) eliminate any “cut-back” provisions contained in any agreement between the Company or its affiliates and such disqualified individual; and (iv) indemnify any such disqualified individuals on an after-Tax basis for the effect of any excise Taxes imposed under Section 4999 of the Code; provided, however, that (A) in no event shall the maximum aggregate liability of Parent, the Company and their respective affiliates in respect of the excise tax indemnity set forth in the foregoing clause (iv) exceed $15,000,000 (the “Indemnification Amount”) and (B) to the extent the Indemnification Amount is not sufficient to fully indemnify all disqualified individuals on an after-tax basis for the effect of such excise Taxes, such amount shall be applied to reduce the liability of all disqualified individuals who are subject to such excise Taxes on a pro-rated basis.

Assuming that the triggering events requiring the foregoing payments occurred on the Effective Date, and the actions described above in respect of the “disqualified individuals” previously occurred, the above-mentioned executive officers would be entitled to receive the following amounts:

 

Name		Type of Termination		Salary Entitlement				Bonus Entitlement				Benefits				Total Payout(1)
Philip Brace		Change of control		$	1,200,000			$	600,000			$	48,444			$	1,848,444
Samuel Cochrane		Change of control		$	613,760			$	214,816			$	6,982			$	835,558
Pravin Desale		Change of control		$	495,000			$	231,000			$	48,444			$	774,444
Roy MacLean		Change of control		$	247,672				—			$	37,051			$	284,723
Steve Harmon		Change of control		$	433,125			$	288,750			$	47,080			$	768,955
Tom Mueller		Change of control		$	158,242				—			$	34,524			$	192,766
Jennifer Farac		Change of control		$	364,420			$	54,663			$	9,619			$	428,702

 

(1)

Amounts in this column do not include (i) the amounts payable to the executive officers in respect of their Incentive Securities, which are set forth in the tables above and (ii) Indemnification Amounts that may be payable to the executive officers if each executive officer experiences a qualifying termination of employment on the Effective Date, which results in the payment of all of the contingent payments described above to such executive officer. Messrs. Brace, Desale and Harmon would be entitled to receive the following Indemnification Amounts: Mr. Brace: $10,507,366; Mr. Desale: $3,144,117; and Mr. Harmon: $1,153,559. These amounts do not take into account the effect of any strategies to mitigate the effect of Section 280G and 4999 of the Code on the payments being made to such executive officers, which may reduce the Indemnification Amounts.

Sources of Funds for the Arrangement

Assuming that no Shareholders exercise their Dissent Rights, that 39,020,098 Shares are outstanding at the Effective Time, that no Options are exercised prior to the Effective Time and no RSUs or PSUs are settled prior to the Effective Time, under the terms of the Arrangement Agreement: (i) approximately US$1.21 billion will be required

 

- 56 -

to fund the cash consideration for the acquisition of all of the outstanding Shares; and (ii) approximately US$76.21 million will be required to fund the cash payments in respect of the outstanding Options, RSUs and PSUs.

In connection with the execution and delivery of the Arrangement Agreement, the Parent delivered to Sierra a commitment letter (the “Debt Commitment Letter”) dated August 2, 2022 made by JPMorgan Chase Bank, N.A. (the “Lender”), pursuant to which the Lender agreed to provide the Parent with debt financing (the “Committed Debt Financing”) including US$1.151 billion of secured term loans, for the purpose of funding amounts payable by the Parent and the Purchaser in connection with or pursuant to the Arrangement, and a US$600 million secured revolver, for working capital and other general corporate purposes (including in connection with transactions related to the Arrangement), in the event certain amendments to the Parent’s existing revolving credit facility are not obtained. The Parent and the Purchaser make customary representations and covenants under the Arrangement Agreement in respect of the Committed Debt Financing, including with respect to sufficiency of funds. The Debt Commitment Letter provides that the Lender’s commitments and other agreements under the Debt Commitment Letter in respect of the Committed Debt Financing will not terminate prior to the Outside Date set forth in the Arrangement Agreement, unless the Parent voluntarily terminates such commitments, the Arrangement Agreement is validly terminated or the Arrangement is consummated without the use of the Committed Debt Financing. The Debt Commitment Letter also provides for the automatic reduction of commitments of the Lender in connection with the receipt by the Parent or its subsidiaries of other sources of funds, or commitments therefor, to finance the Arrangement.

The Company provides customary covenants in the Arrangement Agreement to use its commercially reasonable efforts to cooperate with the Purchaser in connection with the arrangement, marketing, offering, syndication, documentation and consummation of any financing deemed reasonably necessary or advisable by the Parent or the Purchaser in connection with the consummation of the Arrangement (including using commercially reasonable efforts to assist the Parent or the Purchaser to obtain new or amend any existing credit facilities or arrange for any alternative credit facility or other financing or private or public equity, equity-linked or debt securities offering to be issued or incurred, including in lieu of all or a portion of any bridge facility, and any amendment, modification or replacement of any existing credit facility or debt instrument) (each, including the Committed Debt Financing, a “Covered Financing”), subject to the terms and the limitations set forth in the Arrangement Agreement. The Purchaser is not required to consummate the Arrangement until a marketing period of 15 consecutive Business Days (with customary exclusions and exceptions, including certain limitations related to blackout periods contemplated by the Debt Commitment Letter) has been completed, which, among other things, requires (i) the Purchaser to have received customary financial and other information by the Company to facilitate a Covered Financing and (ii) the Interim Order and the Final Order to have been obtained on terms consistent with the Arrangement Agreement, in order for such period to commence. However, the consummation of the Arrangement is not contingent on obtaining any Covered Financing or any other financing. The Committed Debt Financing will be required to be funded upon the satisfaction or waiver of customary “certain funds” conditions expressly set forth in the Debt Commitment Letter, regardless of whether the Parent’s marketing efforts are successful.

Expenses of the Arrangement

The estimated costs to be incurred by Sierra with respect to the Arrangement and related matters including, without limitation, financial advisory, accounting and legal fees, the costs of preparation, printing and mailing of this Circular and other related documents and agreements, and stock exchange and regulatory filing fees, are expected to be approximately $35 million in the aggregate, excluding applicable taxes.

Except as otherwise provided under the Arrangement Agreement, all fees, costs and expenses of the Parties in connection with the Arrangement are to be paid by the Party incurring such fees, costs and expenses.

THE ARRANGEMENT AGREEMENT

The following is a summary of certain material terms of the Arrangement Agreement, a copy of which is attached as Appendix D to this Circular. This summary and certain capitalized terms referred to in the summary do not contain all of the information about the Arrangement Agreement and is qualified in its entirety by reference to the Arrangement Agreement (which has been filed by the Company under its issuer profile on SEDAR at www.sedar.com). Therefore, Shareholders should read the Arrangement Agreement carefully and in its entirety, as the rights and obligations of Sierra, the Parent and the Purchaser are governed by the express terms of the Arrangement Agreement and not by this summary or any other information contained in this Circular.

 

- 57 -

The Arrangement Agreement contains representations and warranties made by Sierra, the Parent and the Purchaser. These representations and warranties, which are set forth in the Arrangement Agreement, were made by and to the parties thereto for the purposes of the Arrangement Agreement (and not to other parties such as the Securityholders) and are subject to qualifications and limitations agreed to by the Parties in connection with negotiating and entering into the Arrangement Agreement. In addition, these representations and warranties were made as of specified dates, may be subject to a contractual standard of materiality different from what may be viewed as material to Securityholders, or may have been used for the purpose of allocating risk between the Parties instead of establishing such matters as facts. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this Circular, may have changed since the date of the Arrangement Agreement.

On August 2, 2022, Sierra, the Parent and the Purchaser entered into the Arrangement Agreement, under which it was agreed that, subject to the terms and conditions set forth in the Arrangement Agreement, among other things, the Parent, through the Purchaser, will acquire all of the issued and outstanding Shares as part of a Plan of Arrangement, under which Shareholders (other than Dissenting Holders) will receive for each Share US$31.00 in cash. The terms of the Arrangement Agreement are the result of arm’s-length negotiations conducted between Sierra and the Parent and their respective advisors.

At the time specified in the Plan of Arrangement, without any further action by or on behalf of the Optionholder, each Option outstanding immediately prior to the Effective Time shall be deemed vested, immediately following which each Option shall be deemed to be assigned and surrendered to the Company in exchange for an amount in cash from the Company equal to the Consideration less the applicable exercise price in respect of such Option, less any applicable withholdings, and each Option shall immediately be cancelled.

At the time specified in the Plan of Arrangement, without any further action by or on behalf of the RSU Holder, each RSU (whether vested or unvested) outstanding immediately prior to the Effective Time shall be deemed vested and transferred to the Company for an amount in cash equal to the Consideration, less any applicable withholdings, and each RSU shall immediately be cancelled.

At the time specified in the Plan of Arrangement, without any further action by or on behalf of the PSU Holder, each Non-Specified PSU (whether vested or unvested) outstanding immediately prior to the Effective Time shall be deemed vested into a number of vested Non-Specified PSUs calculated by multiplying each Non-Specified PSU by one and transferred to the Company for an amount in cash equal to the Consideration, less any applicable withholdings, and each Non-Specified PSU shall immediately be cancelled.

At the time specified in the Plan of Arrangement, without any further action by or on behalf of the PSU Holder, each Specified PSU (whether vested or unvested) outstanding immediately prior to the Effective Time shall be deemed vested into a number of vested Specified PSUs calculated by multiplying each Specified PSU by two and transferred to the Company for an amount in cash equal to the Consideration, less any applicable withholdings, and each Specified PSU shall immediately be cancelled.

At the time specified in the Plan of Arrangement, without any further action on behalf of any trustee under the Share Purchase Trust, the Share Purchase Trust or any holder of Settled Share Units, each Trust Share shall be transferred to the Purchaser in exchange for the Consideration and in connection therewith: (i) a portion of the amount held by the Depositary as agent for and on behalf of the Purchaser, equal to the aggregate Consideration payable in respect of Trust Shares, shall thereupon be held by the Depositary as agent for and on behalf of holders of Settled Share Units (which amount, following the completion of the Plan of Arrangement, shall be transferred to the Company to be held on behalf of the applicable holders and paid to such holders in accordance with the Plan of Arrangement, less any applicable withholdings in accordance to the Plan of Arrangement), (ii) the holder of each such Trust Share shall cease to be the holder thereof and to have any rights as a Shareholder other than the right to be paid the amount determined in accordance with the Plan of Arrangement, and (iii) the Purchaser shall be recorded in the register of holders of Shares maintained by or on behalf of the Company as the holder of the Trust Shares so transferred and shall be deemed to be the legal and beneficial owner thereof.

 

- 58 -

Conditions Precedent to the Arrangement

Mutual Conditions Precedent

The Arrangement Agreement provides that the obligations of the Parties to complete the Arrangement are subject to the fulfillment, on or before the Effective Time, of each of the following conditions precedent, each of which may only be waived with the mutual consent of Sierra, the Parent and the Purchaser:

 

(a)

the Required Securityholder Approval has been obtained at the Meeting in accordance with the Interim Order;

 

(b)

the Interim Order and the Final Order have been obtained on terms consistent with the Arrangement Agreement, and have not been set aside or modified in a manner unacceptable to either the Company or the Purchaser, each acting reasonably, on appeal or otherwise;

 

(c)

each of the Key Regulatory Approvals have been made, given or obtained and is in force and has not been rescinded or modified;

 

(d)

no Law is in effect that makes the consummation of the Arrangement illegal or otherwise prohibits or enjoins the Company or the Purchaser from consummating the Arrangement.

Additional Conditions Precedent to the Obligations of the Purchaser

The Arrangement Agreement provides that the obligations of the Purchaser to complete the Arrangement is subject to the fulfillment of each of the following conditions precedent (each of which is for the exclusive benefit of the Purchaser and may only be waived, in whole or in part, by the Purchaser in its sole discretion):

 

(a)

(i) the representations and warranties of the Company regarding organization and qualification, company authorization, execution and binding obligation, no conflict/non-contravention with constating documents, capitalization, Subsidiaries and brokers being true and correct in all respects (except for de minimis inaccuracies) as of the date of the Arrangement Agreement and true and correct in all respects (except for de minimis inaccuracies, including as a result of transactions, changes, conditions, events or circumstances specifically permitted under the Arrangement Agreement), as of the Effective Time, as if made at and as of the such time (except for representations and warranties made as of a specified date, such accuracy of which being determined as of such specified date), and (ii) all other representations and warranties of the Company being true and correct in all respects (disregarding any materiality, material or Material Adverse Effect qualification contained in any such representation or warranty) as of the date of the Arrangement Agreement and as of the Effective Time as if made at and as of such time (except for representations and warranties made as of a specified date, such accuracy of which being determined as of such specified date), except in the case where the failure to be so true and correct in all respects, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect;

 

(b)

The Company has fulfilled or complied in all material respects with each of the covenants of the Company contained in the Arrangement Agreement to be fulfilled or complied with by it on or prior to the Effective Time;

 

(c)

no Proceeding shall be pending or threatened in writing by any Specified Governmental Entity of any jurisdiction in which any of Parent, any Subsidiary of Parent, the Company or any Subsidiary of the Company has any material operations or assets that is reasonably likely to prevent or materially impede the consummation of the Arrangement, or if the Arrangement is consummated, have a Material Adverse Effect (provided, however, that in no event shall any action that would not result in a Burdensome Effect be deemed or considered a Material Adverse Effect); and

 

(d)

the absence of a Material Adverse Effect that occurred after the date of the Arrangement Agreement and remains continuing.

 

- 59 -

Additional Conditions Precedent to the Obligations of Sierra

The Arrangement Agreement provides that the obligations of the Company to complete the transactions contemplated by the Arrangement Agreement are subject to the following conditions precedent (each of which is for the exclusive benefit of the Company and may only be waived, in whole or in part, by the Company in its sole discretion):

 

(a)

(i) the representations and warranties of the Purchaser and the Parent regarding organization and qualification, corporate authorization and execution and binding obligation being true and correct in all respects (except for de minimis inaccuracies) as of the date of the Arrangement Agreement and true and correct in all respects (except for de minimis inaccuracies, including as a result of transactions, changes, conditions, events or circumstances specifically permitted under the Arrangement Agreement) as of the Effective Time as if made at and as of such time (except for representations and warranties made as of a specified date, the accuracy of which being determined as of that specified date); and (ii) all other representations and warranties of the Purchaser and the Parent set forth in the Arrangement Agreement being true and correct in all respects (disregarding any materiality or material qualification contained in any such representation or warranty) as of the date of the Arrangement Agreement and as of the Effective Time as if made at and as of such time (except for representations and warranties made as of a specified date, such accuracy of which being determined as of such specified date), except where the failure to be so true and correct in all respects has not and would not reasonably be expected to, individually or in the aggregate, materially impede or prevent the completion of the Arrangement;

 

(b)

the Purchaser has fulfilled or complied in all material respects with each of the covenants of the Purchaser contained in the Arrangement Agreement to be fulfilled or complied with by it on or prior to the Effective Time; and

 

(c)

subject to obtaining the Final Order and the satisfaction or waiver of the other conditions precedent in the Arrangement Agreement (other than conditions which, by their nature, are only capable of being satisfied as of the Effective Time), the Purchaser shall have provided, or caused to be provided to, the Depositary sufficient funds to satisfy the aggregate Consideration payable to the Shareholders pursuant to the Plan of Arrangement (other than with respect to Shareholders exercising Dissent Rights), into escrow with the Depositary.

Representations and Warranties

The Arrangement Agreement contains customary representations and warranties of the Company relating to certain matters including the following: organization and qualification, corporate authorization, execution and binding obligation, governmental authorization, no conflict/non-contravention, capitalization, shareholders’ and similar agreements, Subsidiaries, securities law matters, financial statements, disclosure controls and internal control over financial reporting, minute books, auditors, no undisclosed liabilities, transactions with directors, officers and employees, absence of collateral benefits, absence of certain changes or events, compliance with laws, authorizations and licenses, opinions of financial advisors, brokers, Board and Special Committee Approval, material contracts, restrictions on conduct of business, real property, personal property, Intellectual Property, business systems, company software, litigation, environmental matters, employees, collective agreements, employee plans, insurance, customers and suppliers, products, inventories, tax matters, non-arm’s length transactions, compliance with anti-bribery laws, Federal Communications Commission licenses and authorizations, radio and telecommunications apparatus and equipment, compliance with the Telecommunications Act, compliance with trade controls laws, money laundering, compliance with data protection laws and compliance with anti-spam laws.

In addition, the Arrangement Agreement contains representations and warranties of the Parent and the Purchaser relating to certain matters including the following: organization and qualification, corporate authorization, execution and binding obligation, governmental authorization, no conflict/non-contravention, litigation, financing, security ownership, the status of the Purchaser under the Investment Canada Act and ownership of the Purchaser by the Parent.

 

- 60 -

Sierra Covenants

Covenants Regarding Conduct of Business

In the Arrangement Agreement, Sierra agreed to certain customary negative and affirmative covenants relating to the operation of its business between the date of the Arrangement Agreement and until the earlier of the Effective Time and the time that the Arrangement Agreement is terminated in accordance with its terms. In particular, Sierra agreed, except: (a) with the express prior written consent of the Purchaser, (b) as expressly required or permitted by the Arrangement Agreement, (c) as required by applicable Law, (d) to comply with or implement any COVID-19 measures (provided that, in respect of any COVID-19 measures, so long as the Company notifies the Purchaser reasonably promptly of such actions and considers in good faith any reasonable requests of the Purchaser with respect thereto), (e) as contemplated by any Pre-Acquisition Reorganization, or (f) as expressly set out in the Company Disclosure Letter, the Company shall and shall cause each of its Subsidiaries to (i) conduct business in the ordinary course and in accordance with all applicable Laws in all material respects, and (ii) use commercially reasonable efforts to maintain and preserve, in the ordinary course, its and its Subsidiaries’ business organization, operations, assets, properties, authorizations, Intellectual Property, goodwill and relationships with all employees, significant customers and significant suppliers of the Company or any of its Subsidiaries, landlords, creditors, lessors, lessees, suppliers, licensors, licensees, strategic or alliance partners and other persons or entities, in each case with whom the Company or any of its Subsidiaries have material business relations in the ordinary course. Notwithstanding this, the Company shall not be deemed to have failed to satisfy its obligations to the extent such failure resulted from the Company’s failure to take any action prohibited by the Arrangement Agreement. Without limiting the generality of the foregoing, during such above-mentioned time period and subject to such above-mentioned exceptions, the Company agreed that it will not, and will cause its Subsidiaries not to:

 

(a)

amend any portion of any of the constating documents of the Company or any of its Subsidiaries;

 

(b)

adjust, split, combine, reclassify or amend the terms of any securities of the Company or any of its Subsidiaries or reorganize, amalgamate or merge the Company, or any Subsidiary of the Company;

 

(c)

reduce the stated capital of the securities of the Company or any of its Subsidiaries;

 

(d)

purchase, redeem, repurchase or otherwise acquire or offer to purchase, redeem, repurchase or otherwise acquire any class of its securities, whether pursuant to any existing or future contract, arrangement, purchase plan, normal course issuer bid or otherwise;

 

(e)

adopt a plan of complete or partial liquidation, arrangement, dissolution, amalgamation, merger, consolidation, restructuring, recapitalization, winding-up or other reorganization of the Company or any of its Subsidiaries, or file a petition in bankruptcy under any applicable Law on behalf of the Company or any of its Subsidiaries, or consent to the filing of any bankruptcy petition against the Company or any of its Subsidiaries under any applicable Law;

 

(f)

enter into any new line of business or discontinue any existing line of business, or enter into any agreement or arrangement that would limit or restrict in any material respect the Company or any of its Subsidiaries from competing or carrying on any business in any manner, or that would prevent the Company or any of its Subsidiaries from soliciting, recruiting, encouraging or inducing employees of any third party from becoming employed or engaged as consultant by the Company or any of its Subsidiaries;

 

(g)

issue, grant, deliver, sell, exchange, amend, modify, accelerate, pledge or otherwise subject to any Lien (other than permitted liens), or authorize any such action in respect of, (i) any securities of the Company or any of its Subsidiaries, (ii) options, warrants, equity or equity-based awards or other rights to acquire, or exercisable or exchangeable for, or convertible into, any securities of the Company or any of its Subsidiaries (including any Incentive Securities, as applicable), or (iii) any rights that are linked in any way to the price of any shares of, or to the value of or of any part of, or to any dividends or distributions paid on any shares of, the Company or any of its Subsidiaries (including any Incentive Securities), in each case other than the issuance of Shares issuable upon

 

- 61 -

the settlement of Options, RSUs and PSUs outstanding on the date of the Arrangement Agreement in accordance with the terms of the incentive plans;

 

(h)

make, declare, set aside or pay any dividend or other distribution (whether in cash, securities or property or any combination thereof) on, any class of securities of the Company or any of its Subsidiaries;

 

(i)

acquire (by amalgamation, merger, consolidation, exchange, purchase of securities, contributions to capital or purchase, lease or license of assets or otherwise), directly or indirectly, in one transactions or in a series of related transactions, any interest in any person or entity, assets, properties, securities, interests or businesses having a cost, on a per transaction basis, in excess of $2,500,000 and subject to a maximum of $5,000,000 for all such transactions, other than any contract for the sale or procurement of goods or services entered into on arm’s length terms with a customer or supplier of the Company or any Subsidiary in the ordinary course, or enter into any joint venture, legal partnership or similar arrangement with any third person or entity;

 

(j)

make any capital expenditures or commitments in excess of $2,500,000 individually or $10,000,000 in the aggregate;

 

(k)

make any material changes to any Company platform or business system owned by or controlled by the Company or its Subsidiaries or any policies, procedures or practices of the Company or any of its Subsidiaries in respect thereof, other than in the ordinary course;

 

(l)

sell, sell and lease back, pledge, exclusively licence, lease, sublease, alienate, dispose, swap, transfer or voluntarily lose the right to use, in whole or in part, or otherwise dispose of, or subject to any Lien (other than permitted liens), any Company asset or any interest in any Company asset, or waive, cancel, release or assign to any person or entity (other than the Company and its wholly-owned Subsidiaries) any material right or claim (including indebtedness owed to the Company and its Subsidiaries), except for (i) Company assets sold, leased, licensed, disposed of or otherwise transferred in the ordinary course and that are not, individually or in the aggregate, material to the Company and its Subsidiaries, (ii) obsolete, damaged or destroyed assets in the ordinary course or Intellectual Property that is no longer used or useful in any material respect in the business of the Company and its Subsidiaries, (iii) transfers of assets between one or more of the Company and its wholly-owned Subsidiaries, (iv) as expressly required pursuant to the terms of any Material Contract in effect on the date of the Arrangement Agreement, and (v) expiration of owned Registered Intellectual Property in accordance with the applicable statutory period;

 

(m)

except in the ordinary course, make any loan or similar advance to, or any capital contribution or investment in, or assume, guarantee or otherwise become liable with respect to the liabilities or obligations of, any person or entity, other than the Company and any wholly-owned Subsidiary of the Company;

 

(n)

prepay any long-term indebtedness before its scheduled maturity, or increase, create, incur, assume or otherwise become liable for, in one transaction or in a series of related transactions, any indebtedness or guarantees thereof, in each case, other than (i) indebtedness incurred in the ordinary course not in excess of $5,000,000 in the aggregate, (ii) indebtedness owing by one wholly-owned Subsidiary of the Company to the Company or another wholly-owned Subsidiary of the Company or by the Company to another wholly-owned Subsidiary of the Company or (iii) in connection with the refinancing of any indebtedness outstanding on the date hereof and effected at the direction of the Purchaser pursuant to the transactions contemplated by the Arrangement Agreement;

 

(o)

except as may be required by the terms of any written employment contract or employee plan existing on the date of the Arrangement Agreement or as otherwise set forth or permitted by the Arrangement Agreement:

 

(i)

grant any increase in the rates of wages, salaries, benefits, bonuses or other remuneration of any employees (other than increases in the ordinary course that are not material in the

 

- 62 -

aggregate and solely with respect to employees that are not members of senior management);

 

(ii)

grant any increase in the rates of wages, salaries, benefits, bonuses, or other remuneration of any member of senior management;

 

(iii)

grant or increase any indemnification, retention, severance, change of control, transaction-based award, bonus or termination or similar compensation or benefits payable to any current or former employee, officer, director, consultant, agent or independent contractor of the Company or any of its Subsidiaries;

 

(iv)

hire or engage any employee or promote any existing employee, other than employees (other than at the senior management or vice presidents level) in the ordinary course on terms consistent with similarly situated employees, and employees at the senior management or vice presidents level, hired or promoted in the ordinary course, after reasonable consultation with the Purchaser;

 

(v)

terminate any member of senior management without cause;

 

(vi)

make any changes to the terms and conditions of employment applicable to any group of employees, as reflected in work rules, employee handbooks, policies and procedures, or otherwise (other than as permitted in (i) above);

 

(vii)

establish, adopt, enter into, amend or terminate any employee plan, or increase or accelerate the timing of any funding obligation, funding contribution or payment of any compensation or benefits under any employee plan, other than renewals of any employee plans that are health or welfare plans in the ordinary course that do not materially increase the cost of such employee plan; or

 

(viii)

reduce the Company’s or any of its Subsidiaries’ work force in a material way or so as to trigger any collective dismissal, plant closure or mass layoff provisions under applicable Laws;

 

(p)

enter into, modify or terminate or cancel any collective agreement or grant recognition to any labour union or similar labour organization for purposes of collective bargaining;

 

(q)

disclose any material trade secrets or material confidential information pertaining to the Company or any of its Subsidiaries to any person or entity, other than in the ordinary course to persons or entities who are under a contractual, legal, or ethical obligation to maintain the confidentiality of such information or to the Purchaser and its representatives;

 

(r)

except as contemplated in the Arrangement Agreement, amend, modify or terminate, cancel or let lapse, any insurance (or re-insurance) policy of the Company or any of its Subsidiaries, unless, simultaneously with any termination, cancellation or lapse, replacement policies underwritten by insurance and re-insurance companies of nationally recognized standing providing coverage equal to or greater than the coverage under the terminated, cancelled or lapsed policies for substantially similar premiums (other than increases reflecting changing market rates) are in full force and effect, and provided that no such termination, cancellation or lapse causes the Company or such Subsidiary to be in default of any Material Contract to which it is a party or by which it is bound or material authorization;

 

(s)

amend any existing or material authorization, or abandon or fail to diligently pursue any application for any required material authorization, or take or omit to take any action that would reasonably be expected to lead to the termination of, or imposition of conditions on, any such material authorization;

 

- 63 -

(t)

commence, waive, release, assign, settle or compromise any Proceeding or threatened Proceeding, in each case other than settlements or compromises in the ordinary course that involve only: (i) the payment of monetary damages (net of any payments or proceeds received through insurance) not in excess of $1,000,000 individually or $5,000,000 in the aggregate, or (ii) the payment of immaterial non-monetary compensation and/or immaterial restrictions, in each case without any admission of wrongdoing by the Company or any of its Subsidiaries and without the imposition of any material restrictions (including through the granting of equitable relief) on the business and operations of the Company or any of its Subsidiaries;

 

(u)

(i) materially amend or modify any Material Contract, or (ii) enter into, terminate or cancel any Material Contract (provided, however that the monetary thresholds provided for in each of the subparagraphs (a) and (b) of the definition of Material Contract shall be deemed to be $5,000,000 and $10,000,000, respectively);

 

(v)

engage in any transaction with any member of senior management, vice-president, director or any of their immediate family members (including spouses) or any related party (within the meaning of Multilateral Instrument 61-101-Protection of Minority Security Holders in Special Transactions), other than (i) expense reimbursements and advances in the ordinary course, (ii) employment contracts with employees hired in accordance with the Arrangement Agreement, or (iii) transactions between the Company and any of its wholly-owned Subsidiaries or between two or more wholly-owned Subsidiaries;

 

(w)

make, change or revoke any material Tax election, make any change in Tax or financial accounting policies, practices, principles, methods or procedures, except as required by concurrent changes in applicable Law or as required by U.S. GAAP, file any Tax Return other than in the ordinary course of business consistent with past practices, file any amended income or other material Tax Return, settle or compromise any Proceeding for a material amount of Taxes or assessments relating to Taxes, consent to any extension or waiver of the limitation period applicable to any material Tax claim or assessment, surrender a claim for any Tax refund, enter into any Tax sharing or similar agreement, or apply for, obtain, or enter into any Tax ruling, closing agreement or other similar contract, agreement or arrangement with a governmental entity relating to Taxes;

 

(x)

take any action or fail to take any action that would or would reasonably be expected to in the aggregate (i) cause the Tax attributes of assets of the Company or any of its Subsidiaries or the amount of Tax loss carry-forwards of the Company or any of its Subsidiaries to materially and adversely change from what is reflected in their respective Tax Returns, or (ii) render such Tax loss carry-forwards unusable (in whole or in part) by any of them or any successor of the Company;

 

(y)

enter into or terminate any swap outside of the ordinary course;

 

(z)

grant or commit to grant a licence or otherwise transfer any Company Intellectual Property or rights in or in respect thereto that is material to the Company and its Subsidiaries taken as a whole, other than to (i) the Company or wholly-owned Subsidiaries of the Company and (ii) non-exclusive licences granted in the ordinary course;

 

(aa)

abandon or withdraw, or permit the lapse, cancellation, or expiration of any owned Registered Intellectual Property that is material to the Company and its Subsidiaries taken as a whole (except for expiration of owned Registered Intellectual Property in accordance with the applicable statutory period); or

 

(bb)

authorize, agree, offer, resolve or otherwise commit, whether or not in writing, to do any of the foregoing.

 

- 64 -

Covenants of the Company Regarding the Performance of Obligations

Sierra further agreed that it shall, and shall cause its Subsidiaries, to perform all obligations required to be performed by the Company or any of its Subsidiaries subject to the terms and conditions of the Arrangement Agreement, reasonably cooperate with the Purchaser in connection therewith, and do all such other commercially reasonable acts and things as may be necessary to consummate and make effective, as soon as reasonably practicable, the transactions contemplated by the Arrangement Agreement and, without limiting the generality of the foregoing, the Company shall and, where appropriate, shall cause its Subsidiaries to:

 

(a)

use commercially reasonable efforts to satisfy all conditions precedent in the Arrangement Agreement to the Purchaser’s obligation to complete the closing and take all steps set forth in the Interim Order and the Final Order applicable to it and comply promptly with all requirements imposed by Law applicable to it or its Subsidiaries with respect to the Arrangement Agreement or the Arrangement;

 

(b)

use commercially reasonable efforts to provide, obtain and maintain all third party notices or other notices and consents, waivers, permits, exemptions, orders, approvals, agreements, amendments or confirmations that are reasonably required or reasonably requested by the Purchaser in connection with the Arrangement, the Arrangement Agreement or the other transactions contemplated thereby, in each case, that are required under any Material Contract to which the Company or any of its Subsidiaries is a party or those required to maintain in full force and effect any material authorization held by the Company or any of its Subsidiaries in each case, on terms that are reasonably satisfactory to the Purchaser, and without paying, and without committing itself or the Purchaser to pay, any material consideration or incur any liability or obligation without the prior written consent of the Purchaser;

 

(c)

use commercially reasonable efforts to effect all necessary registrations, filings and submissions of information required by governmental entities from the Company and its Subsidiaries relating to the Arrangement;

 

(d)

use commercially reasonable efforts to, upon reasonable consultation with the Purchaser, oppose, lift or rescind any order seeking to restrain, enjoin or otherwise prohibit or adversely affect the consummation of the Arrangement, and defend, or cause to be defended, any Proceedings to which it is a party or brought against it or its directors or officers challenging the Arrangement, the Arrangement Agreement or the transactions contemplated thereby, including seeking to have any stay or temporary restraining order entered by any governmental entity vacated or reserved, so as to enable closing to occur as soon as reasonably practicable (provided, that neither the Company nor any of its Subsidiaries shall consent to the entry of any judgment or settlement with respect to any such proceeding without the prior written approval of the Purchaser, not to be unreasonably withheld, conditioned or delayed);

 

(e)

use commercially reasonable efforts to not take any action, or refrain from taking any commercially reasonable action, or permit any action to be taken or not taken, in each case, which is inconsistent with the Arrangement Agreement or which would reasonably be expected to prevent, materially delay or otherwise impede the consummation of the Arrangement or the transactions contemplated by the Arrangement Agreement; and

 

(f)

use commercially reasonable efforts to assist the Purchaser in obtaining the resignations and mutual releases (in a form satisfactory to the Purchaser, acting reasonably) of each member of the Board of Directors and, to the extent requested by the Purchaser in writing no later than ten (10) Business Days prior to the Effective Time, each member of the board of directors of the Company’s wholly-owned Subsidiaries, and using commercially reasonable efforts to cause them to be replaced by persons designated or nominated by the Purchaser effective as of the Effective Time.

 

- 65 -

Purchaser Covenants

The Purchaser agreed that it shall perform all obligations required or reasonably desirable to be performed by the Purchaser under the Arrangement Agreement, reasonably cooperate with the Company in connection therewith, and do all such other commercially reasonable acts and things as may be necessary or reasonably desirable to consummate and make effective, as soon as reasonably practicable, the transactions contemplated by the Arrangement Agreement and the Purchaser shall:

 

(a)

use commercially reasonable efforts to satisfy all conditions precedent in the Arrangement Agreement to the Company’s obligation to complete the closing and take all steps set forth in the Interim Order and the Final Order applicable to it and comply promptly with all requirements imposed by Law applicable to it with respect to the Arrangement Agreement or the Arrangement, provided, however, that under no circumstances will the Purchaser be required to agree or consent to any increase in the Consideration;

 

(b)

use commercially reasonable efforts to effect all necessary registrations, filings and submissions of information required by Governmental Entities from it relating to the Arrangement;

 

(c)

use commercially reasonable efforts to oppose, lift or rescind any order seeking to restrain, enjoin or otherwise prohibit or adversely affect the consummation of the Arrangement, and defend, or cause to be defended, any Proceedings to which it is a party or brought against it or its directors or officers challenging the Arrangement, the Arrangement Agreement or the transactions contemplated thereby; and

 

(d)

not take any action, or refrain from taking any commercially reasonable action, or permit any action to be taken or not taken, in each case, which is inconsistent with the Arrangement Agreement or which would reasonably be expected to prevent, delay or otherwise impede the consummation of the Arrangement or the transactions contemplated by the Arrangement Agreement.

Regulatory Approvals

The Arrangement Agreement provides that, subject to the terms thereof, each of the parties to the Arrangement Agreement shall as promptly as possible, use its reasonable best efforts to obtain, or cause to be obtained, all consents and Authorizations, including the Regulatory Approvals, from all Governmental Entities that may be or become necessary for its execution and delivery of the Arrangement Agreement and the performance of its obligations under the Arrangement Agreement. Each Party shall co-operate fully with the other Parties and their affiliates in promptly seeking to obtain all such consents or Authorizations, including the Regulatory Approvals, from such Governmental Entities. The Purchaser’s reasonable best efforts shall not require the Purchaser to enter into any settlement, undertaking, consent decree, consent agreement, commitment, stipulation or other agreement or take any action or agree to take any action (including without limitation any divestitures), that would adversely affect any of the business, operations or assets of the Purchaser and its affiliates, or that would adversely affect the business, operations or assets of the Company and its Subsidiaries, other than, if required in order to obtain a Key Regulatory Approval, the entry into a settlement, undertaking, consent decree, consent agreement, commitment, stipulation or other agreement, in each case, that does not have a Burdensome Effect.

Financing Arrangements

In connection with the execution and delivery of the Arrangement Agreement, the Parent delivered to Sierra the Debt Commitment Letter, which provides for the Committed Debt Financing. The term loan portion of the Committed Debt Financing may be used for the purpose of funding amounts payable by the Parent and the Purchaser in connection with or pursuant to the Arrangement, and the revolver portion of the Committed Debt Financing may be used for working capital and other general corporate purposes (including in connection with the transactions related to the Arrangement). The Parent and the Purchaser make customary representations and covenants under the Arrangement Agreement in respect of the Committed Debt Financing, including with respect to sufficiency of funds. The Debt Commitment Letter provides that the Lender’s commitments and other agreements under the Debt Commitment Letter in respect of the Committed Debt Financing will not terminate prior to the Outside Date set forth in the Arrangement Agreement, unless the Parent voluntarily terminates such commitments, the Arrangement

 

- 66 -

Agreement is validly terminated or the Arrangement is consummated without the use of the Committed Debt Financing. The Debt Commitment Letter also provides for the automatic reduction of commitments of the Lender in connection with the receipt by the Parent or its subsidiaries of other sources of funds, or commitments therefor, to finance the Arrangement.

The Company has agreed that it shall, and shall cause its Subsidiaries to, prior to the earlier of the closing and termination of the Arrangement Agreement and subject to applicable law and the terms and limitations set forth in the Arrangement Agreement, use commercially reasonable efforts to provide and to cause their respective Representatives to provide such customary cooperation to the Purchaser as the Purchaser may reasonably request in connection with the arrangement, marketing, offering, syndication, documentation and consummation of any financing deemed reasonably necessary or advisable by the Parent or the Purchaser in connection with the consummation of the Arrangement (including using commercially reasonable efforts to assist the Parent or the Purchaser to obtain new or amend any existing credit facilities or arrange for any alternative credit facility or other financing or private or public equity, equity-linked or debt securities offering to be issued or incurred, including in lieu of all or a portion of any bridge facility, and any amendment, modification or replacement of any existing credit facility or debt instrument).

The Purchaser is not required to consummate the Arrangement until a marketing period of 15 consecutive Business Days (with customary exclusions and exceptions) has been completed in accordance with the Arrangement Agreement. However, the Parent and the Purchaser acknowledged and agreed that obtaining any financing is not a condition to any of their respective obligations under the Arrangement Agreement. The Committed Debt Financing will be required to be funded upon the satisfaction or waiver of customary “certain funds” conditions expressly set forth in the Debt Commitment Letter, regardless of whether the Parent’s marketing efforts are successful.

See “Particulars of the Arrangement – Sources of Funds for the Arrangement”.

Pre-Acquisition Reorganization

The Company agreed that, subject to certain exceptions set out in the Arrangement Agreement, upon request of the Purchaser, the Company shall, and shall cause its Subsidiaries to, use commercially reasonable efforts to (a) take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary, proper or advisable to perform such reorganizations of their corporate structure, capital structure, business, operations and assets or such other transactions as the Purchaser may request in writing, acting reasonably (each a “Pre-Acquisition Reorganization”), (b) cooperate with the Purchaser and its advisors to determine the nature of the Pre-Acquisition Reorganizations that might be undertaken and the manner in which they would most effectively be undertaken, and (c) cooperate with the Purchaser and its advisors to seek to obtain any consents, approvals, waivers or similar authorizations which are reasonably requested by the Purchaser (based on the applicable terms of the contract or Authorization) in connection with the Pre-Acquisition Reorganizations, if any. In addition, if the Arrangement Agreement is terminated, the Purchaser agreed to (a) reimburse the Company for all reasonable and documented out-of-pocket costs, fees and expenses incurred with the Pre-Acquisition Reorganization and (b) to indemnify the Company, its Subsidiaries from and against any and all liabilities, losses, damages, claims, penalties, interests, awards, judgements and Taxes (including the use of Tax attributes) suffered or incurred by any of them in connection with or as a result of any Pre-Acquisition Reorganization (including any rewinding thereof), or in taking reasonable steps to reverse or unwind any Pre-Acquisition Reorganization.

Non-Solicitation Obligations

The Arrangement Agreement provides that, until the earlier of the termination of the Arrangement Agreement and the Effective Time, subject to certain exceptions, Sierra shall not, and shall cause its Subsidiaries not to, directly or indirectly, through any of its Representatives, or affiliates or otherwise:

 

•

solicit, assist, initiate, knowingly encourage or otherwise facilitate (including by furnishing or providing copies of, access to, or disclosure of, any confidential information, properties, facilities, books or records of the Company or any Subsidiary or entering into any form of agreement, arrangement or understanding) any inquiry, proposal or offer (public or otherwise) that constitutes or may reasonably be expected to constitute or lead to, an Acquisition Proposal;

 

- 67 -

•

enter into, engage in, continue or otherwise participate in any discussions or negotiations with any person or entity (other than the Purchaser and its affiliates) regarding any inquiry, proposal or offer that constitutes or may reasonably be expected to constitute or lead to, an Acquisition Proposal;

 

•

make a Change in Recommendation;

 

•

accept, approve, endorse or recommend, or publicly propose to accept, approve, endorse or recommend, or take no position or remain neutral with respect to, any Acquisition Proposal, it being understood that publicly taking no position or a neutral position with respect to a publicly announced, or otherwise publicly disclosed, Acquisition Proposal for a period of no more than five (5) Business Days following the public announcement or public disclosure of such Acquisition Proposal or, in the event the Meeting is scheduled to occur within such five (5) Business Day period, prior to the third (3rd) Business Day prior to the date of the Meeting (or, if the public announcement were made less than three (3) Business Days prior to the Meeting, prior to the second Business Day before the Meeting) will not be considered to be in violation of the Arrangement Agreement, provided that the Board of Directors has rejected such Acquisition Proposal and affirmed the Board recommendation by press release before the end of such period; or

 

•

accept, approve, endorse, recommend or enter into, or publicly propose to accept, approve, endorse, recommend, execute or enter into, any letter of intent, memorandum of understanding, acquisition agreement, agreement in principle or similar agreement with any person or entity in respect of an Acquisition Proposal (other than a confidentiality agreement permitted by and in accordance with the Arrangement Agreement).

Under the Arrangement Agreement, an “Acquisition Proposal” means, other than the transactions contemplated by the Arrangement Agreement and other than any transaction involving only the Company and one or more of its wholly owned Subsidiaries, any offer, proposal or inquiry (written or oral) from any person or entity or group of persons or entities other than the Purchaser (or any affiliate of the Purchaser) made after the date of the Arrangement Agreement relating to (a) any direct or indirect sale, disposition, alliance or joint venture (or any lease, license, long-term supply agreement or other arrangement having the same economic effect as a sale), in a single transaction or a series of related transactions, of, or involving, assets (including voting or equity securities of, or securities convertible into or exercisable or exchangeable for voting or equity securities of, Subsidiaries of the Company) representing 20% or more of the consolidated assets or contributing 20% or more of the consolidated revenue of the Company and its Subsidiaries, taken as a whole, or 20% or more of the voting or equity securities of the Company (including securities convertible into or exercisable or exchangeable for voting or equity securities), (b) any direct or indirect take-over bid, tender offer, exchange offer, treasury issuance or other transaction, in a single transaction or a series of transactions, that, if consummated, would result in such person or entity or group of persons or entities beneficially owning, or exercising control or direction over, 20% or more of any class of voting or equity securities (including securities convertible into or exercisable or exchangeable for such voting or equity securities) of the Company (or any of its Subsidiaries whose assets individually or collectively represent 20% or more of the consolidated assets, or contribute 20% or more of the consolidated revenue, of the Company and its Subsidiaries, taken as a whole) then outstanding (assuming, if applicable, the conversion, exchange or exercise of such securities convertible into or exchangeable or exercisable for such voting or equity securities), or (c) any arrangement, merger, amalgamation, consolidation, security exchange, business combination, reorganization, recapitalization, liquidation, dissolution, winding up or exclusive license, in a single transaction or series of transactions involving the Company or any of its Subsidiaries whose assets individually or collectively represent 20% or more of the consolidated assets, or contribute 20% or more of the consolidated revenue, of the Company and its Subsidiaries, taken as a whole, in each case, determined based upon the most recently publicly available consolidated financial statements of the Company.

Except as otherwise expressly provided in the Arrangement Agreement, Sierra agreed that it shall, and shall cause its Subsidiaries and Representatives to, immediately cease and cause to be terminated any solicitation, encouragement, discussion, negotiations or other activities commenced prior to the date of the Arrangement Agreement with any person or entity (other than the Purchaser and its affiliates) with respect to any inquiry, proposal or offer that (x) if made after the date of the Arrangement Agreement would have constituted an Acquisition Proposal; or (y) may reasonably be expected to constitute or lead to, an Acquisition Proposal, and, in connection with such termination shall:

 

- 68 -

(a)

immediately discontinue access to, and disclosure of, all information regarding the Company and its Subsidiaries to any such person or entity, including any Data Room (whether physical or virtual) and any confidential information, properties, facilities and books and records of the Company or any of its Subsidiaries; and

 

(b)

request from any such person or entity, and exercise all rights it has to require (i) the return or destruction of all copies of any confidential information regarding the Company or any of its Subsidiaries provided to any such person or entity other than the Purchaser, its affiliates and their respective Representatives since April 1, 2022 in respect of any inquiry, proposal or offer that, if made after the date of the Arrangement Agreement, would have constituted or would have been reasonably expected to constitute or lead to, an Acquisition Proposal, and (ii) the destruction of all material to the extent including or incorporating such confidential information regarding the Company or any of its Subsidiaries, in each case, to the extent that such information has not previously been returned or destroyed (subject to the terms of the applicable confidentiality or similar agreement, including the rights of retention that such persons or entities may have thereunder).

Right to Match

Pursuant to the Arrangement Agreement, if at any time following the date of the Arrangement Agreement and prior to obtaining the Required Securityholder Approval, the Company receives an Acquisition Proposal that constitutes a Superior Proposal, the Board of Directors may, subject to compliance with the Arrangement Agreement, enter into a definitive agreement with respect to such Superior Proposal or make a Change in Recommendation in respect of such Superior Proposal, if and only if:

 

(a)

the Company has been, and continues to be, in compliance with its obligations under the non-solicitation provisions of the Arrangement Agreement in all material respects;

 

(b)

the Company has delivered to the Purchaser a written notice of the determination of the Board of Directors that such Acquisition Proposal constitutes a Superior Proposal and of the intention of the Board of Directors to enter into a definitive agreement and make a Change in Recommendation with respect to such Superior Proposal (the “Superior Proposal Notice”);

 

(c)

the Company has provided the Purchaser a copy of the definitive agreement for the Superior Proposal and all other material agreements to be entered into in connection therewith;

 

(d)

at least four (4) full Business Days (the “Matching Period”) have elapsed from the date that is the later of the date on which the Purchaser received the Superior Proposal Notice and the date on which the Purchaser received all of the requisite materials;

 

(e)

during any Matching Period, the Purchaser has had the opportunity (but not the obligation), in accordance with the Arrangement Agreement, to offer to amend the Arrangement Agreement and the Arrangement in order for such Acquisition Proposal to cease to be a Superior Proposal;

 

(f)

after the Matching Period, the Board of Directors has determined in good faith, after consultation with the Company’s outside legal counsel and financial advisors, (i) that such Acquisition Proposal continues to constitute a Superior Proposal (if applicable, compared to the terms of the Arrangement as proposed to be amended by the Purchaser) and (ii) that the failure by the Board of Directors to cause the Company to enter into a definitive agreement and make a Change in Recommendation with respect to such Superior Proposal would be inconsistent with its fiduciary duties; and

 

(g)

prior to or concurrently with entering into such definitive agreement, the Company terminates the Arrangement Agreement and pays the Termination Fee.

During the Matching Period, or such longer period as the Company may approve in its sole discretion in writing for such purpose: (a) the Purchaser shall have the opportunity (but not the obligation) to offer to amend the Arrangement and the Arrangement Agreement in order for such Acquisition Proposal to cease to be a Superior

 

- 69 -

Proposal and the Board of Directors (and Special Committee) shall, in consultation with the Company’s outside legal counsel and financial advisors, review any offer made by the Purchaser under clause (e) above to amend the terms of the Arrangement Agreement and the Arrangement in good faith in order to determine whether such proposal would, upon acceptance, result in the Acquisition Proposal previously constituting a Superior Proposal ceasing to be a Superior Proposal, and (b) if the Acquisition Proposal would no longer constitute a Superior Proposal, the Company shall, and shall cause its Representatives to, negotiate in good faith with the Purchaser to make such amendments to the terms of the Arrangement Agreement and the Plan of Arrangement as would enable the Purchaser to proceed with the transactions contemplated by the Arrangement Agreement on such amended terms. If the Board of Directors determines (based upon, inter alia, the recommendation of the Special Committee) that such Acquisition Proposal would cease to be a Superior Proposal, the Company shall promptly so advise the Purchaser and the Company and the Purchaser shall amend the Arrangement Agreement to reflect such offer made by the Purchaser, and shall take and cause to be taken all such actions as are necessary to give effect to the foregoing.

Each successive amendment or modification to any Acquisition Proposal that results in an increase in, or modification of, the consideration to be received by the Shareholders or other material terms or conditions thereof shall constitute a new Acquisition Proposal for the purposes of the right to match provision in the Arrangement Agreement, and the Purchaser shall be afforded a new full three (3) Business Day Matching Period from the later of the date on which the Purchaser received the Superior Proposal Notice and the date on which the Purchaser received all of the required materials with respect to each new Superior Proposal from the Company.

Termination

The Arrangement Agreement may be terminated and the Arrangement may be abandoned at any time prior to the Effective Time by:

 

(a)

mutual written agreement of Sierra, the Parent and the Purchaser;

 

(b)

either the Company or the Purchaser, if

 

(i)

the Required Securityholder Approval is not obtained at the Meeting in accordance with the Interim Order, provided that a party may not terminate the Arrangement Agreement pursuant to this provision if the failure to obtain the approval of the Shareholders has been primarily caused by, or is a result of, a breach by such party of any of its representations or warranties or the failure of such party to perform any of its covenants or agreements under the Arrangement Agreement;

 

(ii)

any Law (including with respect to the Key Regulatory Approvals) is enacted, made, enforced or amended, as applicable, that makes the consummation of the Arrangement illegal or otherwise permanently prohibits or enjoins the Company or the Purchaser from consummating the Arrangement, and such Law has, if applicable, become final and non-appealable, provided that a party may not terminate the Arrangement Agreement pursuant to this provision if the enactment, making, enforcement or amendment of such Law has been caused by, or is a result of, a breach by such party of any of its representations or warranties or the failure of such party to perform any of its covenants or agreements under the Arrangement Agreement; or

 

(iii)

the Effective Time does not occur on or prior to the Outside Date, provided that a party may not terminate the Arrangement Agreement pursuant to this provision if the failure of the Effective Time to so occur has been primarily caused by, a breach by such party of any of its representations or warranties or the failure of such party to perform any of its covenants or agreements under the Arrangement Agreement;

 

(c)

the Company, if:

 

(i)

a breach of any representation or warranty or failure to perform any covenant or agreement on the part of the Purchaser or the Parent under the Arrangement Agreement occurs that would cause the condition regarding the accuracy of the representations and warranties of

 

- 70 -

the Purchaser or the Parent or the condition regarding the performance of the covenants of the Purchaser or the Parent not to be satisfied, and such breach or failure is incapable of being cured or is not cured in accordance with the Arrangement Agreement; provided that the Company is not then in breach of the Arrangement Agreement so as to cause either the condition regarding the accuracy of the representations and warranties of the Company or the condition regarding the performance of the covenants of the Company not to be satisfied; or

 

(ii)

prior to obtaining the Required Securityholder Approval, the Board of Directors authorizes the Company, in accordance with the Arrangement Agreement, to enter into a written agreement (other than an acceptable confidentiality agreement) with respect to a Superior Proposal provided that the Company is not in breach of the non-solicitation provisions in the Arrangement Agreement and that prior to or concurrent with such termination the Company pays the Termination Fee; or

 

(d)

the Purchaser, if:

 

(i)

a breach of any representation or warranty or failure to perform any covenant or agreement on the part of the Company under the Arrangement Agreement occurs that would cause the condition regarding the accuracy of representations and warranties of the Company or the condition regarding the performance of the covenants of the Company not to be satisfied, and such breach or failure is incapable of being cured or is not cured in accordance with the Arrangement Agreement; provided that each of the Purchaser and the Parent is not then in breach of the Arrangement Agreement so as to cause either the condition regarding the accuracy of the representations and warranties of the Purchaser and the Parent or the condition regarding the performance of the covenants of the Purchaser not to be satisfied; or

 

(ii)

prior to the obtaining of the Required Securityholder Approval, if (A) the Board of Directors or any committee thereof fails to recommend or withdraws, amends, modifies or qualifies or publicly proposes or states an intention to withdraw, amend, modify or qualify, the recommendation of the Board of Directors that Securityholders vote in favour of the Arrangement Resolution, (B) the Board of Directors or any committee thereof accepts, approves, endorses or recommends, or publicly proposes to accept, approve, endorse or recommend an Acquisition Proposal or takes no position or remains neutral with respect to a publicly announced, or otherwise publicly disclosed, Acquisition Proposal for more than five (5) Business Days (or beyond the third (3rd) Business Day prior to the date of the Meeting, if sooner), (C) the Board of Directors or any committee thereof fails to publicly recommend or reaffirm by press release the recommendation of the Board of Directors that Securityholders vote in favour of the Arrangement Resolution within five (5) Business Days after having been requested in writing by the Purchaser to do so (or in the event that the Meeting is scheduled to occur within such five (5) Business Day period, prior to the third (3rd) Business Day prior to the date of the Meeting (or, if the public announcement were made less than three (3) Business Days prior to the Meeting, prior to the second Business Day before the Meeting)), (D) the Board of Directors or any committee thereof accepts, approves, endorses, recommends or authorizes the Company to enter into a written agreement (other than an acceptable confidentiality agreement) concerning an Acquisition Proposal (in each of the cases set forth in Clause (A), (B), (C), or (D), a “Change in Recommendation”) or (E) the Company breaches the non-solicitation provisions of the Arrangement Agreement in any material respect.

Termination Fee

If a Termination Fee Event occurs, the Company shall pay the termination fee of US$45 million (the “Termination Fee”) to the Parent by wire transfer of immediately available funds to an account designated by the Parent on the timing set forth in the Arrangement Agreement and summarized below. If the Arrangement Agreement is terminated (each below a “Termination Fee Event”):

 

- 71 -

(a)

by the Company, if, prior to obtaining the Required Securityholder Approval, the Board of Directors authorizes the Company, in accordance with the Arrangement Agreement, to enter into a written agreement (other than an acceptable confidentiality agreement) with respect to a Superior Proposal provided that the Company is not in breach of the non-solicitation provision in the Arrangement Agreement (and prior to or concurrent with such Termination Fee Event described in this paragraph (a), the Company must pay the Termination Fee to the Parent);

 

(b)

by the Purchaser, if, prior to obtaining the Required Securityholder Approval, a Change in Recommendation occurs or the Company breaches the non-solicitation provisions of the Arrangement Agreement in any material respect (and following such Termination Fee Event described in this paragraph (b), the Company must pay the Termination Fee to the Parent within five (5) Business Days);

 

(c)

by either the Company or the Purchaser, because the Required Securityholder Approval was not obtained at the Meeting and (i) the failure to obtain the approval of the Shareholders was not primarily caused by, or a result of, a breach by such party of any of its representations or warranties or the failure of such party to perform any of its covenants or agreements under the Arrangement Agreement, and (ii) at such time the Purchaser is entitled to terminate the Arrangement Agreement due to (x) a Change in Recommendation or (y) a breach by the Company of the non-solicitation provisions of the Arrangement Agreement in any material respect (and following such Termination Fee Event described in this paragraph (c), the Company must pay the Termination Fee to the Parent within five (5) Business Days);

 

(d)

(A) by either the Company or the Purchaser because, (i) the Required Securityholder Approval was not obtained at the Meeting and the failure to obtain the approval of the Shareholders was not primarily caused by, or a result of, a breach by such party of any of its representations or warranties or the failure of such party to perform any of its covenants or agreements under the Arrangement Agreement or (ii) the Effective Time does not occur on or prior to the Outside Date, and the failure of the Effective Time to so occur was not primarily caused by, or a result of, a breach by such party of any of its representations or warranties or the failure of such party to perform any of its covenants or agreements under the Arrangement Agreement, or (B) by the Purchaser (i) due to a breach of any representation or warranty or failure to perform any covenant or agreement on the part of the Company under the Arrangement Agreement occurred that would cause the condition regarding the accuracy of representations and warranties of the Company or the condition regarding the performance of the covenants of the Company not to be satisfied, (ii) such breach or failure is incapable of being cured or is not cured in accordance with the Arrangement Agreement, (iii) each of the Purchaser and the Parent is not then in breach of the Arrangement Agreement so as to cause either the condition regarding the accuracy of the representations and warranties of the Purchaser and the Parent or the condition regarding the performance of the covenants of the Purchaser and the Parent not to be satisfied and (iv) such termination is due to a willful breach or fraud, if, in either of the cases described in clause (A) or (B):

 

(i)

prior to such termination, a bona fide Acquisition Proposal is publicly announced or otherwise publicly disclosed by any person or entity (other than the Purchaser, the Parent or any of their respective affiliates); and

 

(ii)

within twelve (12) months following the date of such termination, (A) an Acquisition Proposal (whether or not such Acquisition Proposal is the same Acquisition Proposal referred to in clause (i) above) is consummated or effected, or (B) the Company and/or any of its Subsidiaries, directly or indirectly, in one or more transactions, enters into a written agreement (other than an acceptable confidentiality agreement), in respect of, or the Board of Directors approves or recommends, an Acquisition Proposal (whether or not such Acquisition Proposal is the same Acquisition Proposal referred to in clause (i) above) and such Acquisition Proposal is later consummated (whether or not within twelve (12) months after such termination);

 

- 72 -

provided that, for the purposes of this paragraph (d), all references to “20% or more” in the definition of Acquisition Proposal shall be changed to “50% or more” (and following such Termination Fee Event described in this paragraph (d), the Company must pay the Termination Fee to the Parent prior to or simultaneously with the consummation of the Acquisition Proposal).

PRINCIPAL LEGAL MATTERS

Court Approval of the Arrangement and Completion of the Arrangement

An arrangement under the CBCA requires Court approval. Prior to the mailing of this Circular, Sierra obtained the Interim Order, which provides for the calling and holding of the Meeting, the Dissent Rights and other procedural matters. A copy of the Interim Order is attached as Appendix F to this Circular.

Subject to obtaining the Required Securityholder Approval at the Meeting, the hearing in respect of the Final Order is currently scheduled to take place on or about September 29, 2022 at 10:00 a.m. (Vancouver time) in the Court at 800 Smithe Street, Vancouver, British Columbia. Any Securityholder or other person who wishes to appear, or to be represented, and to present evidence or arguments must serve and file a notice of appearance (a “Notice of Appearance”) as set out in the notice of hearing (the “Notice of Hearing”) of Petition and satisfy any other requirements of the Court. The Court will consider, among other things, the fairness and reasonableness of the Arrangement. The Court may approve the Arrangement in any manner the Court may direct, subject to compliance with any terms and conditions, if any, as the Court deems fit. In the event that the hearing is postponed, adjourned or rescheduled then, subject to further order of the Court, only those persons having previously served a Notice of Appearance in compliance with the Notice of Hearing and the Interim Order will be given notice of the postponement, adjournment or rescheduled date. A copy of the Notice of Hearing of Petition is attached as Appendix G to this Circular.

If (a) the Required Securityholder Approval is obtained, (b) the Final Order is obtained, and (c) all other conditions under the Arrangement Agreement are satisfied or waived, the Articles of Arrangement will be filed and the Arrangement will become effective on the Effective Date.

Canadian Securities Law Matters

Sierra is a reporting issuer under applicable Canadian securities legislation in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and is, among other things, subject to MI 61-101.

MI 61-101 is intended to regulate certain transactions to ensure equality of treatment among securityholders, generally requiring in certain circumstances enhanced disclosure, approval by a majority of securityholders excluding interested or related parties, independent valuations and/or approval and oversight of certain transactions by a special committee of independent directors. The protections afforded by MI 61-101 apply to “business combinations” (as such term is defined in MI 61-101) which terminate the interests of securityholders without their consent. If any of the “related parties” (as defined in MI 61-101) of Sierra is entitled to receive a “collateral benefit” (as defined in MI 61-101) in connection with the Arrangement, the Arrangement would constitute a “business combination” for the purposes of MI 61-101 and the Arrangement Resolution would, subject to certain exceptions, require “minority approval” in accordance with MI 61-101. If “minority approval” were required, the Arrangement Resolution would have had to have been approved by a majority of the votes cast, excluding those votes beneficially owned, or over which control or direction is exercised, by the “related parties” of Sierra who can be considered to be receiving a “collateral benefit” in connection with the Arrangement, their related parties and any “joint actors” (as defined in MI 61-101) thereof. This approval would have been in addition to the requirement under the CBCA and the Interim Order that the Arrangement must be approved by at least two-thirds (66²⁄₃%) of the votes cast by the Shareholders present in person or represented by proxy and at least two-thirds (66²⁄₃%) of the votes cast Securityholders, voting together as a single class, at the Meeting and entitled to vote thereat.

A “collateral benefit”, as defined under MI 61-101, includes any benefit that a “related party” of Sierra (which includes the directors and senior officers of Sierra) is entitled to receive as a consequence of the Arrangement, including a lump sum payment or an enhancement in benefits related to past or future services as an employee, director or consultant of Sierra; however, such a benefit will not constitute a “collateral benefit” provided that certain

 

- 73 -

conditions are satisfied. Under MI 61-101, a benefit received by a related party of Sierra is not considered to be a collateral benefit if the benefit is received solely in connection with the related party’s services as an employee, director or consultant of Sierra or an affiliated entity and: (i) the benefit is not conferred for the purpose, in whole or in part, of increasing the value of the consideration paid to the related party for securities relinquished under the Arrangement; (ii) the conferring of the benefit is not, by its terms, conditional on the related party supporting the Arrangement in any manner; (iii) full particulars of the benefit are disclosed in this Circular; and (iv) either (A) at the time the Arrangement was agreed to, the related party and its associated entities beneficially own or exercise control or direction over less than 1% of the outstanding Shares, or (B) (x) the related party discloses to an independent committee of the Board of Directors of Sierra the amount of consideration that the related party expects it will be beneficially entitled to receive, under the terms of the Arrangement, in exchange for the Shares beneficially owned by the related party, (y) the independent committee, acting in good faith, determines that the value of the benefit, net of any offsetting costs to the related party, is less than 5% of the value referred to in (x), and (z) the independent committee’s determination is disclosed in this Circular.

To the knowledge of Sierra, there are no related parties, as defined under MI 61-101, of Sierra who, at the time the Arrangement was agreed to, together with their associated entities, may each be considered to beneficially own or exercise control or direction over more than 1% of the Shares. The calculation of beneficial ownership has been performed pursuant to provisions of MI 61-101 which require that all Shares which could be acquired on the exercise or settlement of Incentive Securities held by the above individuals within 60 days of August 2, 2022 be included in the number of Shares each is deemed to beneficially own. The following table sets out the names and beneficial ownership of Shares of the directors and senior officers of Sierra, calculated in accordance with MI 61-101, as of August 2, 2022.

 

Name and Position		Shares				Vested Options				Unvested Options(1)				Vested RSUs				Unvested RSUs(1)				Vested PSUs				Unvested PSUs(1) (2)				Total Beneficial Ownership of Shares				Percentage of Beneficial Ownership of Shares
LORI O’NEILL, Director			—				—				—				32,675				7,294				—				—				32,675				0.08	%
THOMAS SIEBER, Director			75,751				—				—				—				7,294				—				—				75,751				0.19	%
KARIMA BAWA, Director			—				—				—				22,386				7,294				—				—				22,386				0.06	%
RUSSELL JONES, Director			30,000				—				—				35,946				7,294				—				—				65,946				0.17	%
GREGORY WATERS, Director			67,386				—				—				—				7,294				—				—				67,386				0.17	%
JAMES ANDERSON, Director			22,386				—				—				—				7,294				—				—				22,386				0.06	%
MARTIN MC COURT, Director			42,384				—				—				—				7,294				—				—				42,384				0.11	%
PHILIP BRACE, President & Chief Executive Officer			18,000				—				—				13,347				67,728				—				243,228				31,347				0.08	%
SAMUEL COCHRANE, Chief Financial Officer			21,128				—				—				—				63,524				—				115,077				21,128				0.05	%
PRAVIN DESALE, Senior Vice-President, Engineering			8,620				—				—				—				65,195				—				65,194				8,620				0.02	%
JENNIFER FARAC, Corporate Secretary & General Counsel			41				10,236				6,319				9,701				14,133				—				10,301				19,978				0.05	%
STEVE HARMON, Senior Vice-President, Global Sales			16,261				—				—				—				23,144				—				44,268				16,261				0.04	%

 

- 74 -

Name and Position		Shares				Vested Options				Unvested Options(1)				Vested RSUs				Unvested RSUs(1)				Vested PSUs				Unvested PSUs(1) (2)				Total Beneficial Ownership of Shares				Percentage of Beneficial Ownership of Shares
ROY MACLEAN, Senior Vice-President, Operations			12,702				—				—				—				18,576				—				30,564				12,702				0.03	%
TOM MUELLER, Vice-President, Products			6,606				24,356				5,182				—				26,364				—				—				30,962				0.08	%

 

(1)	Unvested Incentive Securities includes all Incentive Securities that will not vest within 60 days of August 2, 2022

(2)	Does not account for unvested performance multipliers

As a result of the foregoing, pursuant to MI 61-101, the Arrangement is not a “business combination”. Accordingly, the Company is not required to receive “minority approval” of the Arrangement or provide a “formal valuation” in accordance with MI 61-101.

Please see “Particulars of the Arrangement – Interests of Certain Persons in the Arrangement” for details of the benefits to be received by each of the directors and senior officers of Sierra.

Stock Exchange De-Listing and Reporting Issuer Status

The Shares are currently listed on the TSX under the symbol “SW” and the NASDAQ under the symbol “SWIR”. It is expected that trading of the Shares will cease in the public market shortly after completion of the Arrangement and the Shares will cease to be listed on the TSX and the NASDAQ. In addition, the Purchaser will seek to have Sierra deemed to have ceased to be a reporting issuer under Canadian Securities Laws, as a result of which Sierra will also cease to be required to file continuous disclosure documents with Canadian Securities Administrators upon ceasing to be a reporting issuer in Canada. Sierra will deregister its Shares under the U.S. Exchange Act subsequent to its filing and deemed effectiveness of a Form 15 (or Form 15F, as applicable). As of the Effective Date, Sierra Share certificates will only represent the right of a Registered Shareholder to receive, upon surrender thereof, the cash to which such holder is entitled under the Arrangement.

PROCEDURES FOR THE SURRENDER OF SHARE CERTIFICATES AND/OR DRS ADVICES AND PAYMENT OF CONSIDERATION

Letter of Transmittal

If you are a Registered Shareholder, you should have received with this Circular a Letter of Transmittal. If the Arrangement Resolution is passed and the Arrangement is implemented, in order to receive the payment for your Shares, you must complete and sign the Letter of Transmittal enclosed with this Circular and deliver it (or a manually executed facsimile thereof) together with your certificate(s) and/or DRS Advice(s) representing Shares and the other relevant documents required by the instructions set out therein to the Depositary in accordance with the instructions contained in the Letter of Transmittal. You can request additional copies of the Letter of Transmittal by contacting the Depositary. The Letter of Transmittal is also available under the Company’s profile on SEDAR at www.sedar.com.

The Letter of Transmittal contains procedural information relating to the Arrangement and should be reviewed carefully. The deposit of Shares pursuant to the procedures in the Letter of Transmittal will constitute a binding agreement between the depositing Shareholder and the Purchaser upon the terms and subject to the conditions of the Arrangement.

In all cases, payment for Shares deposited will be made only after timely receipt by the Depositary of certificates and/or DRS Advices representing such Shares, together with a properly completed and duly executed Letter of Transmittal in the form accompanying this Circular, or a manually executed facsimile thereof, relating to such Shares, with signatures guaranteed if so required in accordance with the instructions in the Letter of Transmittal, and any other required documents.

 

- 75 -

Shareholders who do not deliver the certificates and/or DRS Advices representing the Shares held by them and all other required documents to the Depositary on or before the date which is six years after the Effective Date will lose their right to receive the Consideration for their Shares under the Arrangement.

Where a certificate for Shares has been destroyed, lost or stolen, the Registered Shareholder of that certificate should immediately contact the Depositary at 1-800-564-6253. A replacement certificate will be issued upon the Registered Shareholder satisfying the requirements of the Transfer Agent and Sierra relating to replacement Share certificate(s).

Except as otherwise provided in the instructions to the Letter of Transmittal, the signature on the Letter of Transmittal must be guaranteed by an Eligible Institution. If a Letter of Transmittal is executed by a person other than the registered holder of the certificate(s) and/or DRS Advice(s) deposited therewith, the certificate(s) and/or DRS Advice(s) must be endorsed or be accompanied by an appropriate securities transfer power of attorney properly completed by the registered holder, with the signature on the endorsement panel, or securities transfer power of attorney guaranteed by an Eligible Institution.

All questions as to validity, form, eligibility (including timely receipt) and acceptance of any Shares deposited pursuant to the Arrangement will be determined by the Purchaser in its full and sole discretion. Depositing Shareholders agree that such determination shall be final and binding. The Purchaser reserves the right, if it so elects in its absolute discretion, to instruct the Depositary to waive any defect or irregularity contained in any Letter of Transmittal received by it. There shall be no duty or obligation on the Parent, the Purchaser, Sierra, the Depositary or any other person to give notice of any defect or irregularity in any deposit of Shares and no liability shall be incurred by any of them for failure to give such notice.

The method of delivery of certificates and/or DRS Advice(s) representing the Shares and all other required documents is at the option and risk of the person depositing the same. Sierra recommends that such documents be delivered by hand to the Depositary and a receipt obtained or, if mailed, that registered mail with return receipt requested be used and that appropriate insurance be obtained.

If you are a Non-Registered Shareholder, you should carefully follow the instructions from the Intermediary that holds Shares on your behalf in order to receive payment for your Shares.

Delivery of Consideration

In accordance with the terms of the Arrangement Agreement, on or immediately prior to the Closing, the Purchaser is required to provide, or cause to be provided to, the Depositary sufficient funds to satisfy the aggregate Consideration payable in cash to the Shareholders pursuant to the Plan of Arrangement (other than with respect to Shareholders exercising Dissent Rights as provided in the Plan of Arrangement), into escrow with the Depositary (the terms and conditions of such escrow to be satisfactory to the Company and the Purchaser, each acting reasonably).

The Depositary will act as the agent of persons who have deposited Shares pursuant to the Arrangement for the purpose of receiving payment from the Purchaser and transmitting payment from the Purchaser to such persons, and receipt of payment by the Depositary will be deemed to constitute receipt of payment by persons depositing Shares.

Upon surrender to the Depositary for cancellation of certificate(s) and/or DRS Advice(s) which immediately prior to the Effective Time represented one or more Shares, together with the Letter of Transmittal and such additional documents and instruments properly completed and duly executed as the Depositary may reasonably require, the Shareholder of such surrendered certificate(s) and/or DRS Advice(s) shall be entitled to receive in exchange therefor, and the Depositary shall deliver to such Shareholder, as directed by such Shareholder in their Letter of Transmittal, as soon as practicable after the Effective Date by wire transfer or by first-class insured mail, postage prepaid, a cheque, representing the Consideration in cash which such Shareholder has the right to receive under the Arrangement, less applicable withholdings and other source deductions in accordance with the Plan of Arrangement, and the certificate and/or DRS Advice so surrendered shall forthwith be cancelled. Until surrendered, each certificate and/or DRS Advice which immediately prior to the Effective Time represented Shares shall be deemed after the Effective Time to represent only the right to receive upon such surrender the Consideration in cash in lieu of such certificate and/or DRS Advice, less any amounts withheld pursuant to the Plan of Arrangement.

 

- 76 -

Unless otherwise directed in the Letter of Transmittal, cheques will be issued in the name of the registered holder of Shares so deposited. Unless the person who deposits Shares instructs the Depositary to hold a cheque for pick-up by checking the appropriate box in the Letter of Transmittal, cheques will be forwarded by first-class insured mail to the address provided in the Letter of Transmittal. If no address is provided, cheques will be forwarded to the address of the person as shown on the applicable register of Sierra.

Under no circumstances will interest accrue or be paid by Sierra, the Purchaser, the Parent or the Depositary to persons depositing Shares on the Consideration payable for Shares by the Purchaser under the Arrangement, regardless of any delay in making the payment.

Subject to any applicable escheat laws, any payment made by way of cheque by the Depositary on behalf of the Purchaser or Sierra that has not been deposited or has been returned to the Depositary or that otherwise remains unclaimed, in each case on or before the sixth anniversary of the Effective Date, shall cease to represent a right or claim of any kind or nature, and the right of the former Shareholder to receive the Consideration for Shares pursuant to the Plan of Arrangement shall terminate and be deemed to be surrendered and forfeited to Sierra for no consideration.

Sierra, the Purchaser, the Parent and the Depositary will be entitled to deduct and withhold from any Consideration otherwise payable to a Shareholder applicable withholdings and other source deductions in accordance with the Plan of Arrangement.

The Depositary will receive reasonable and customary compensation for its services in connection with the Arrangement, will be reimbursed for certain out of pocket expenses and will be indemnified by Sierra against certain liabilities under applicable securities laws and expenses in connection therewith.

INFORMATION CONCERNING THE COMPANY

The following information about the Company is a general summary only and is not intended to be comprehensive.

Sierra is a company organized and existing under the CBCA. The Company’s registered and records office is located at Suite 2600, Three Bentall Centre, 595 Burrard Street, Vancouver, British Columbia, Canada, V7X 1L3 and its head office and principal place of business is located at 13811 Wireless Way, Richmond, British Columbia, Canada, V6V 3A4.

Sierra provides leading solutions for the Internet of Things (“IoT”) comprised of our recurring connectivity services, cloud platform, routers and embedded cellular modules. Enterprises, industrial companies, public safety agencies and original equipment manufacturers worldwide rely on our expertise to digitize their assets by connecting their equipment and products from the edge of the cellular network to the cloud. The Company’s Device-to Cloud solutions reduce the complexity of IoT and allow our customers to scale their deployments quickly and securely. The Shares are listed on the TSX under the trading symbol “SW” and the NASDAQ under the symbol “SWIR”.

Market Price and Trading Volume Information

TSX

The following table summarizes the market prices (CAD) and volumes of trading of the Shares on the TSX for the 12 months preceding the date hereof:

 

Month		Price Range (C$)								Trading Volume
		High				Low
August 2021		$	26.22			$	19.19				1,561,130
September 2021		$	21.2			$	18.83				1,071,657
October 2021		$	21.02			$	18.2				929,464
November 2021		$	24.62			$	19.72				2,334,713

 

- 77 -

Month		Price Range (C$)								Trading Volume
		High				Low
December 2021		$	22.81			$	20.07				1,106,301
January 2022		$	22.72			$	17.17				1,133,121
February 2022		$	24.1			$	18.37				1,283,431
March 2022		$	25.24			$	22.04				1,620,202
April 2022		$	22.72			$	20.00				851,846
May 2022		$	29.1			$	19.52				2,138,710
June 2022		$	32.05			$	26.82				1,668,940
July 2022		$	34.74			$	26.64				2,613,481
August 1-23¸2022		$	40.31			$	36.00				3,099,928

NASDAQ

The following table summarizes the market prices (USD) and volumes of trading of the Shares on the NASDAQ for the 12 months preceding the date hereof:

 

Month		Price Range (US$)								Trading Volume
		High				Low
August 2021		$	20.87			$	15.06				1,672,594
September 2021		$	16.76			$	14.86				1,058,606
October 2021		$	17.05			$	14.43				825,851
November 2021		$	19.58			$	15.84				1,524,698
December 2021		$	17.99			$	15.6				1,004,094
January 2022		$	17.79			$	13.46				1,285,093
February 2022		$	19.00			$	14.44				1,290,773
March 2022		$	19.99			$	17.22				1,222,925
April 2022		$	18.15			$	15.56				664,828
May 2022		$	22.82			$	14.99				2,935,775
June 2022		$	25.04			$	20.4				3,265,062
July 2022		$	26.92			$	20.74				4,996,729
August 1-23¸2022		$	30.95			$	24.50				10,071,107

The Consideration of US$31.00 to be received by Shareholders for each Share under the Plan of Arrangement represents a 25% premium over the closing price of the Shares on July 29, 2022, the last trading day prior media speculation regarding the proposed Arrangement. The Consideration also represents a premium of approximately 30% to the Company’s unaffected 30-day volume weighted average price and a premium of approximately 49% to the Company’s volume weighted average price over the twelve-month period ended on July 29, 2022.

Previous Purchases and Sales

The following Shares or other Securities of Sierra have been issued by Sierra during the 12-month period preceding the date of this Circular:

 

Date of Issuance

Date/ Purpose

Description of Securities Issued

Number of Securities(1)

Price per Security

November 11, 2021

Employee Grant

RSU

7,571

C$

23.91

November 11, 2021

Employee Grant

PSU

42,399

$

19.02

November 11, 2021

Employee Grant

RSU

62,385

$

19.02

 

- 78 -