BUSINESS COMBINATIONS AND DISPOSITIONS

During the fiscal years ended July 2, 2016, June 27, 2015 and June 28, 2014, we recorded minimal, $1.0 million and $7.8 million, respectively, in legal and other direct acquisition-related costs in connection with business combinations and asset dispositions.

Sale of Komoro, Japan Industrial and Consumer Business ("Komoro Business")

On August 5, 2014, Oclaro Japan, Inc., our wholly-owned subsidiary (“Oclaro Japan”), entered into a Master Separation Agreement (“MSA”) with Ushio Opto and Ushio, Inc. (“Ushio”), whereby Ushio Opto agreed to acquire the industrial and consumer business of Oclaro Japan located at its Komoro, Japan facility (the “Komoro Business”), by means of an absorption-type demerger under the Japanese Companies Act. On October 27, 2014, the sale was completed. Initial consideration for this transaction consisted of 1.85 billion Japanese yen (approximately $17.1 million based on the exchange rate on October 27, 2014) in cash, of which 1.6 billion Japanese yen (approximately $14.8 million based on the exchange rate on October 27, 2014) was paid at the closing and 250 million Japanese yen (approximately $2.1 million based on the exchange rate on April 24, 2015) was paid into escrow and was released to Oclaro Japan on April 24, 2015. In addition, under the MSA, we are subject to a post-closing net asset valuation adjustment. We determined that based on the net assets transferred to Ushio Opto during the second quarter of fiscal year 2015, we owed Ushio Opto a post-closing net asset valuation adjustment of $1.4 million, which was paid to Ushio Opto in the third quarter of fiscal year 2015.

In connection with the sale of the Komoro Business, we transferred net assets with a book value of $6.3 million to Ushio Opto, consisting of $3.4 million in accounts receivable, $4.6 million in inventories, $0.9 million in prepaid expenses and other current assets, $3.7 million in property, plant and equipment, $4.4 million in other intangible assets, $5.9 million in accounts payable, $2.9 million in accrued expenses, other liabilities and capital lease obligations, and $1.9 million in other non-current liabilities. We also incurred $1.0 million in legal fees and other administrative costs related to this transaction. We completed the transfer of net assets in fiscal year 2015 and recognized a gain of $8.3 million within restructuring, acquisition and related (income) expense, net in the consolidated statements of operations.

At the closing of the transaction, Oclaro Japan and Ushio Opto entered into certain transition services and reciprocal services agreements to allow the Komoro Business to continue operations during the ownership transition, as well as an intellectual property agreement. Ushio has guaranteed the performance of Ushio Opto’s obligations under the MSA. Oclaro Japan, Ushio Opto and Ushio each provided customary and reciprocal representations, warranties and covenants in the MSA.

Income from continuing operations before income taxes attributable to the Komoro Business was $1.3 million for the year ended June 27, 2015 (up through October 27, 2014, the date the sale was completed), and $6.4 million for the year ended June 28, 2014, respectively.

Sale of Amplifier Business

On October 10, 2013, Oclaro Technology Limited entered into an Asset Purchase Agreement with II-VI, whereby Oclaro Technology Limited agreed to sell to II-VI and certain of its affiliates its Amplifier Business for $88.6 million in cash. The transaction closed on November 1, 2013. We classified the sale of our Amplifier Business as a discontinued operation as of September 12, 2013, the date management committed to sell the business.

Consideration, valued initially at $88.6 million consisting of $79.6 million in cash, which was received on November 1, 2013, $4.0 million which was subject to hold-back by II-VI until December 31, 2014 to address any post-closing claims and $5.0 million related to the exclusive option, which was received on September 12, 2013 and was credited against the purchase price upon closing of the sale. On December 30, 2014, Oclaro Technology Limited entered into a Settlement Agreement with II-VI and II-VI Holdings B.V. regarding disposition of the amounts held back by the II-VI parties pursuant to the Asset Purchase Agreement. Of the $4.0 million subject to hold-back until December 31, 2014, we received $0.9 million in January 2015 and we released II-VI from the remaining $3.1 million. In connection with the Settlement Agreement, we also agreed with the II-VI parties to a mutual release of certain claims related to the Asset Purchase Agreement, and certain related documents and transactions.

In connection with this transaction, we transferred $16.2 million in net assets to II-VI. We also incurred approximately $3.0 million in legal fees, commissions and other administrative costs related to this transaction. We recognized an initial gain of $68.9 million on the sale of the Amplifier Business, which is recorded within discontinued operations in the consolidated statement of operations in fiscal year 2014. We recorded the $3.1 million release of the hold-back as a loss from discontinued operations within the consolidated statement of operations in fiscal year 2015.

The following table presents the statements of operations for the discontinued operations of the Amplifier Business:



	Year Ended
	June 27, 2015			June 28, 2014
	(Thousands)
Revenues	$	—		$	35,185
Cost of revenues	—			26,389
Gross profit	—			8,796
Operating expenses	161			5,545
Other income (expense), net	(3,060		)	68,923
Income (loss) from discontinued operations before income taxes	(3,221		)	72,174
Income tax provision	—			13,068
Income (loss) from discontinued operations	$	(3,221	)	$	59,106

In connection with the sale of the Amplifier Business, we entered into certain transition service and manufacturing service agreements to allow the Amplifier Business to continue operations during the ownership transition. Both parties provided customary and reciprocal representations, warranties and covenants in the Asset Purchase Agreement.

Sale of Zurich Business

On September 12, 2013, we completed a Share and Asset Purchase Agreement with II-VI, pursuant to which we sold our Oclaro Switzerland GmbH subsidiary and associated laser diodes and pump business to II-VI, which includes its GaAs fabrication facility, and also the corresponding high power laser diodes, VCSEL and 980 nm pump laser product lines, including intellectual property, inventory, equipment and a related research and development facility in Tucson. Also, as part of the agreement, II-VI purchased certain pieces of equipment which are located in our Caswell facility. We continue to operate this equipment on behalf of II-VI, and provide certain wafer processing services in Caswell as part of an ongoing manufacturing services agreement. We have classified the sale of our Zurich Business as a discontinued operation.

We received proceeds of $90.6 million in cash on September 12, 2013, and $2.9 million in cash during the third quarter of fiscal year 2014 which related to a final settlement of the post-closing working capital adjustment. We were also scheduled to receive an additional $6.0 million subject to hold-back by II-VI until December 31, 2014 to address any post-closing adjustments or claims. On December 30, 2014, we entered into a Settlement Agreement with II-VI and II-VI Holdings B.V. regarding disposition of the amounts held back by the II-VI parties pursuant to the Share and Asset Purchase Agreement. Of the $6.0 million subject to hold-back until December 31, 2014, we received $1.4 million in January 2015 and we released II-VI from the remaining $4.6 million. In connection with the Settlement Agreement, we also agreed with the II-VI parties to a mutual release of certain claims related to the Share and Asset Purchase Agreement, and certain related documents and transactions.

In connection with this transaction, we transferred $31.4 million in net assets to II-VI and incurred approximately $4.8 million in legal fees, commissions and other administrative costs. We retained approximately $14.7 million in accounts receivable related to the Zurich Business and approximately $9.6 million of supplier and employee related payables related to the Zurich Business which were not included in the Zurich subsidiary.

We recognized an initial gain of $63.2 million on the sale of the Zurich Business, which was recorded within discontinued operations in the consolidated statement of operations in fiscal year 2014. In fiscal year 2014, we also recorded $3.1 million in income from discontinued operations related to the release of the cumulative translation adjustment from deconsolidating our Swiss subsidiary and a $4.8 million loss from discontinued operations related to the interest charges incurred in connection with the settlement of the term loan (refer to Note 6, Credit Line and Notes for further details.) In fiscal year 2015, we recorded the $4.6 million release of the hold-back as a loss from discontinued operations within the consolidated statement of operations.

The following table presents the statements of operations for the discontinued operations of the Zurich Business:



	Year Ended
	June 27, 2015			June 28, 2014
	(Thousands)
Revenues	$	—		$	13,896
Cost of revenues	163			11,029
Gross profit	(163		)	2,867
Operating expenses	484			3,426
Other income (expense), net	(4,590		)	61,595
Income (loss) from discontinued operations before income taxes	(5,237		)	61,036
Income tax provision	—			198
Income (loss) from discontinued operations	$	(5,237	)	$	60,838

In connection with the sale of the Zurich Business, we entered into certain transition service and manufacturing service agreements to allow the Zurich Business to continue operations during the ownership transition. Both parties provided customary and reciprocal representations, warranties and covenants in the Share and Asset Purchase Agreement.

Acquisition of Opnext

On March 26, 2012, we entered into an Agreement and Plan of Merger and Reorganization, by and among Opnext, Tahoe Acquisition Sub, Inc., a newly formed wholly-owned subsidiary of Oclaro (Merger Sub), and Oclaro, pursuant to which we acquired Opnext through a merger of Merger Sub with and into Opnext. On July 23, 2012, we consummated the acquisition following approval by the stockholders of both companies. The acquisition is more fully discussed in Note 3, Business Combinations and Dispositions, to our consolidated financial statements included in our 2015 Form 10-K.