Common use of Background to and reasons for the Merger Clause in Contracts

Background to and reasons for the Merger.

Background to and reasons for the Merger. On 10 May 2021, NortonLifeLock presented its “transforming for growth” strategy to enable NortonLifeLock to achieve its long-term vision through improved customer experience, enhancing the scale of its Cyber Safety platform and accelerating innovation of trust-based solutions. NortonLifeLock’s strategy is underpinned by the following ambitions: (i) make customers happy and double its net promoter score to over 70; (ii) popularise Cyber Safety by doubling the number of customers to approximately 100 million; and (iii) expand NortonLifeLock’s trust-based digital solutions to drive double digit revenue growth and double non-GAAP EPS to approximately USD 3.00 within three to five years, with business growth and productivity, reinvestment strategies, its share buyback programme, as well as mergers and acquisitions, as levers and accelerators. The boards of NortonLifeLock and Avast recognise the unique opportunity for the businesses to combine their complementary strengths and accelerate such strategy by creating a new, global player able to lead the transformation of consumer Cyber Safety by leveraging the established brands, go-to-market reach, technical expertise and innovation of NortonLifeLock and Avast. The Merger will combine NortonLifeLock’s vision to protect and empower people to live their digital lives safely with Avast’s vision to empower digital citizens to have safer online experiences, creating a common determination to empower digital freedom for everyone. The global Cyber Safety segment was estimated at USD 13 billion in 2020 – however, the NortonLifeLock Board believes that the market is still significantly under-penetrated, with less than 5% penetration of an estimated 5 billion internet users globally, as the segment has expanded from securing personal devices to protecting consumers to enable them to live their digital lives safely. The NortonLifeLock Board believes that this presents a large and growing TAM opportunity with the core addressable space (security, identity and privacy) expected to grow at a 5% to 10% CAGR in the coming years to reach more than USD 16 billion by 2023, with an additional USD 10 billion in trust-based adjacent segments (equivalent to a 10% to 15% CAGR between 2020 and 2023). A key problem to address is cyber criminality, which currently encompasses a broader variety of activities and an expanded reach supported by a dark economy re-sell market. Threats continue to increase every day and attacks have become extremely sophisticated, more broadly targeted, more complex and faster, with identity records and confidential personal information being sold in underground markets. People’s dependence on technology has continuously increased, fuelled by an increasingly digital and connected world, making cyber criminality today a USD 6 trillion problem which touches our modern society in many ways. The Merger will create a comprehensive suite of complementary consumer Cyber Safety solutions, delivering giga-scale endpoint visibility, next-generation insights, autonomous defence and personalised protection. The boards of NortonLifeLock and Avast believe that the Merger has a compelling strategic and financial rationale, with the potential to deliver substantial benefits to consumers, shareholders and other stakeholders. Accelerate the transformation of consumer Cyber Safety, with the Combined Company having over 500 million users The Merger will create a leading global consumer Cyber Safety business with combined revenues of approximately USD 3.5 billion (based on the latest reported full year results for each of NortonLifeLock and Avast), an enlarged base of over 500 million users and approximately 40 million direct customers, and a common vision to empower digital freedom for everyone. The Combined Company will benefit from: (i) enhanced scale; (ii) a broadened suite of established consumer Cyber Safety brands; (iii) leading Cyber Safety solutions; (iv) global consumer reach; and (v) expansion, through both free and paid solutions, to new customer audiences, regions and products. In addition to a broader range of consumer Cyber Safety solutions, the Combined Company will benefit from a more diverse channel mix, including consumer direct, indirect, and partners. The Combined Company will be well positioned to capitalise on the continued growth and to lead digital disruption in the Cyber Safety segment, combining two businesses with complementary technology-oriented cultures and a shared, consumer-centric, long-term vision. The Combined Company will benefit from NortonLifeLock’s and Avast’s history of customer-centric innovation and will continue to focus on, and invest in, R&D to create industry leading Cyber Safety products to protect consumers and benefit all stakeholders. The Combined Company will extend and expand Cyber Safety available to everyone through freemium offerings. Positive experiences with these products will expand the Combined Company’s user base and increase opportunities for paid product sales. Furthermore, the Combined Company will benefit from a diverse and talented workforce, facilitating the delivery of innovative Cyber Safety solutions on a global scale. Combine Avast’s strength in privacy and NortonLifeLock’s strength in identity, to create a broad and complementary product portfolio beyond core security and towards adjacent trust-based solutions The Combined Company will benefit from the complementary nature of NortonLifeLock’s and Avast’s solutions, in particular NortonLifeLock’s strength in identity and Avast’s strength in privacy. This will unlock opportunities to cross-sell a richer Cyber Safety offering to the Combined Company’s users and direct customers while continuing to maintain core Cyber Safety functionality to free users. The Combined Company will bring a differentiated approach to the Cyber Safety segment supported by greater scale in threat visibility, a geographically distributed cloud data platform and advanced AI-based automation. The Combined Company will be able to deliver: (i) giga- scale endpoint visibility, by gaining enhanced visibility on threat and behavioural trajectories across more than 500 million endpoints and networks; (ii) next-generation insight, supported by AI-based enrichment and best-in-class analytics of multi-factor, large-scale behaviour data in real time; (iii) autonomous defence, with automation of the detection pipeline by leveraging modern, featureless and explainable AI; and (iv) personalised protection, with AI-powered creation of a safe environment that matches the security, privacy and identity needs of individual users. The Combined Company will be able to offer a market-leading suite of consumer Cyber Safety solutions to millions of individuals and families globally across identity, security and privacy, including restoration and insurance, identity protection, performance and utility, device security, connected home, family safety and privacy and access, complemented by adjacent trust-based solutions. NortonLifeLock’s and Xxxxx’s positions have been built over many years, resulting in brand recognition across large user bases in their respective existing segments. This presents an attractive opportunity to continue to innovate and offer new and enhanced solutions and services, with improved capabilities from access to superior data insights, in turn driving growth across new growth segments. Provide greater geographic diversification and access to a larger global user base, as well as facilitating expansion into the SOHO and VSB segments, and the building of stronger B2B2C and OEM partnerships NortonLifeLock and Avast currently operate in highly complementary end markets and geographic regions. The Combined Company will benefit from enhanced revenue and geographic diversification combining NortonLifeLock’s and Avast’s complementary positions in their consumer Cyber Safety segments. Based on the latest reported full year results for each of NortonLifeLock and Avast, on an aggregated basis, approximately 65% of the Combined Company’s revenue was derived from the US, approximately 24% from Europe, Middle East and Africa and approximately 11% from the rest of the world. Following completion of the Merger, the Combined Company will have dual headquarters in Prague, Czech Republic, and Tempe, Arizona, USA, reflecting its global strength. The Combined Company will have the ability to leverage the combined regional expertise of both businesses and flexibility to reinvest in product and marketing to target new growth segments and regions, including expansion into the SOHO and VSB segments, OEM PC manufacturing channels and B2B2C partnerships. There is further potential to accelerate international growth through investment in Avast’s freemium business model and cross-selling of complementary NortonLifeLock identity products, which are currently sold primarily in the US, to Avast’s international user and direct customer base and cross-selling Avast’s privacy offerings to NortonLifeLock’s full customer base. Unlock significant value creation through approximately USD 280 million of annual gross cost synergies, providing additional upside potential from new reinvestment capacity for innovation and growth Given the complementary nature of both NortonLifeLock and Avast, the NortonLifeLock Directors believe that the Merger will generate synergies that could not be achieved independently of the Merger and will lead to significant long-term value creation for all shareholders. Significant recurring cost synergies opportunity NortonLifeLock anticipates that the Merger will result in recurring annual pre-tax gross cost synergies for the Combined Company to reach a run-rate of approximately USD 280 million, representing between approximately 15% and 20% of combined adjusted cost of sales and operating spend, based on the latest full year reported results for each of NortonLifeLock and Avast. The synergies are expected to be fully realised by the end of the second year following completion of the Merger. NortonLifeLock intends to approach integration with the aim of retaining and motivating the best talent and structure across the Combined Company to create a best-in-class organisation. The expected sources of the identified cost synergies are as follows: • Organisation: approximately 50% of the total annual run-rate pre-tax gross cost synergies are expected to be generated through the adoption of shared best practice across existing functions and the reduction of duplicate roles across all geographies, and from a broad range of job categories, including management, shared services, product and commercial functions; • Systems & Infrastructure operating costs: approximately 25% of the total annual run-rate pre-tax gross cost synergies are expected to be realised through migration onto a common data and security platform, integration of systems, and shared technology and analytics infrastructure; and • Contracts & Shared Services: approximately 25% of the total annual run-rate pre-tax gross cost synergies are expected to be generated primarily from site rationalisation, procurement and vendor consolidation, and spend de-duplication. NortonLifeLock expects to realise approximately 60% of the run-rate cost savings by the end of the first full year following completion of the Merger and 100% by the end of the second full year following completion of the Merger, excluding any potential synergy reinvestment and associated benefits. On a reported basis, the synergies assume the Combined Company expects to benefit from approximately USD 75 million of cost savings in the first full year following completion of the Merger, approximately USD 245 million of cost savings in the second full year following completion of the Merger, and the full USD 280 million of the cost savings in the third full year following completion of the Merger, excluding any potential synergy reinvestment and associated benefits. One-off costs In order to realise these synergies, NortonLifeLock is expected to incur one-off restructuring and integration costs of approximately one year’s run-rate pre-tax cost savings, or USD 280 million, with approximately USD 180 million estimated to be incurred in the first full year following completion of the Merger and approximately USD 100 million estimated to be incurred in the second full year following completion of the Merger. Aside from integration costs, no material dis-benefits are expected to arise in connection with the Merger. The expected synergies will accrue as a direct result of the Merger and would not be achieved on a standalone basis. The paragraphs above relating to expected cost synergies constitute a “Quantified Financial Benefits Statement” for the purposes of Rule 28 of the Code. Given the strong strategic, cultural and operational fit of the two companies, NortonLifeLock believes that the quantified cost synergies are readily achievable. NortonLifeLock expects to achieve the quantified cost synergies while maintaining appropriate investment levels in sales and technology to meet the Combined Company’s growth targets and other objectives. The estimated cost synergies referred to above reflect both the beneficial elements and the relevant costs. Revenue opportunities In addition to the quantified cost synergies set out in this paragraph 3, NortonLifeLock believes that there will be significant revenue opportunities that the Combined Company could pursue, which have not yet been quantified, but which solidify the foundation for driving double digit revenue growth in the long-term. Following the completion of the Merger, the Combined Company intends to bring additional value propositions to a larger user base by leveraging its broader global reach and cross- selling enhanced products and solutions across core security and privacy and identity. This proposition will be supported by targeted sales and marketing investment in the geographies where its industry-leading brands, Norton, Avira, LifeLock and Avast, are most established to deliver localised experiences, promote customer service differentiation and drive enhanced customer experience and retention. By leveraging the sales and marketing expertise of both organisations, the Combined Company will operate new and diversified sales channels through the scaling of its freemium offering, SOHO and VSB targeting and expanded B2B2C partnerships. The Combined Company will also benefit from a strong balance sheet and reinvestment capacity to drive innovation and expand into adjacent trust-based solutions.

Background to and reasons for the Merger. On 10 May 2021, NortonLifeLock presented its “transforming for growth” strategy to enable NortonLifeLock to achieve its long-term vision through improved customer experience, enhancing the scale of its Cyber Safety platform and accelerating innovation of trust-based solutions. NortonLifeLock’s strategy is underpinned by the following ambitions: (i) make customers happy and double its net promoter score to over 70; (ii) popularise Cyber Safety by doubling the number of customers to approximately 100 million; and (iii) expand NortonLifeLock’s trust-based digital solutions to drive double digit revenue growth and double non-GAAP EPS to approximately USD 3.00 within three to five years, with business growth and productivity, reinvestment strategies, its share buyback programme, as well as mergers and acquisitions, as levers and accelerators. The boards of NortonLifeLock and Avast recognise the unique opportunity for the businesses to combine their complementary strengths and accelerate such strategy by creating a new, global player able to lead the transformation of consumer Cyber Safety by leveraging the established brands, go-to-market reach, technical expertise and innovation of NortonLifeLock and Avast. The Merger will combine NortonLifeLock’s vision to protect and empower people to live their digital lives safely with Avast’s vision to empower digital citizens to have safer online experiences, creating a common determination to empower digital freedom for everyone. The global Cyber Safety segment was estimated at USD 13 billion in 2020 – however, the NortonLifeLock Board believes that the market is still significantly under-penetrated, with less than 5% penetration of an estimated 5 billion internet users globally, as the segment has expanded from securing personal devices to protecting consumers to enable them to live their digital lives safely. The NortonLifeLock Board believes that this presents a large and growing TAM opportunity with the core addressable space (security, identity and privacy) expected to grow at a 5% to 10% CAGR in the coming years to reach more than USD 16 billion by 2023, with an additional USD 10 billion in trust-based adjacent segments (equivalent to a 10% to 15% CAGR between 2020 and 2023). A key problem to address is cyber criminality, which currently encompasses a broader variety of activities and an expanded reach supported by a dark economy re-sell market. Threats continue to increase every day and attacks have become extremely sophisticated, more broadly targeted, more complex and faster, with identity records and confidential personal information being sold in underground markets. People’s dependence on technology has continuously increased, fuelled by an increasingly digital and connected world, making cyber criminality today a USD 6 trillion problem which touches our modern society in many ways. The Merger will create a comprehensive suite of complementary consumer Cyber Safety solutions, delivering giga-scale endpoint visibility, next-generation insights, autonomous defence and personalised protection. The boards of NortonLifeLock and Avast believe that the Merger has a compelling strategic and financial rationale, with the potential to deliver substantial benefits to consumers, shareholders and other stakeholders. Accelerate the transformation of consumer Cyber Safety, with the Combined Company having over 500 million users The Merger will create a leading global consumer Cyber Safety business with combined revenues of approximately USD 3.5 billion (based on the latest reported full year results for each of NortonLifeLock and Avast), an enlarged base of over 500 million users and approximately 40 million direct customers, and a common vision to empower digital freedom for everyone. The Combined Company will benefit from: (i) enhanced scale; (ii) a broadened suite of established consumer Cyber Safety brands; (iii) leading Cyber Safety solutions; (iv) global consumer reach; and (v) expansion, through both free and paid solutions, to new customer audiences, regions and products. In addition to a broader range of consumer Cyber Safety solutions, the Combined Company will benefit from a more diverse channel mix, including consumer direct, indirect, and partners. The Combined Company will be well positioned to capitalise on the continued growth and to lead digital disruption in the Cyber Safety segment, combining two businesses with complementary technology-oriented cultures and a shared, consumer-centric, long-term vision. The Combined Company will benefit from NortonLifeLock’s and Avast’s history of customer-centric innovation and will continue to focus on, and invest in, R&D to create industry leading Cyber Safety products to protect consumers and benefit all stakeholders. The Combined Company will extend and expand Cyber Safety available to everyone through freemium offerings. Positive experiences with these products will expand the Combined Company’s user base and increase opportunities for paid product sales. Furthermore, the Combined Company will benefit from a diverse and talented workforce, facilitating the delivery of innovative Cyber Safety solutions on a global scale. Combine Avast’s strength in privacy and NortonLifeLock’s strength in identity, to create a broad and complementary product portfolio beyond core security and towards adjacent trust-based solutions The Combined Company will benefit from the complementary nature of NortonLifeLock’s and Avast’s solutions, in particular NortonLifeLock’s strength in identity and Avast’s strength in privacy. This will unlock opportunities to cross-sell a richer Cyber Safety offering to the Combined Company’s users and direct customers while continuing to maintain core Cyber Safety functionality to free users. The Combined Company will bring a differentiated approach to the Cyber Safety segment supported by greater scale in threat visibility, a geographically distributed cloud data platform and advanced AI-based automation. The Combined Company will be able to deliver: (i) giga- scale endpoint visibility, by gaining enhanced visibility on threat and behavioural trajectories across more than 500 million endpoints and networks; (ii) next-generation insight, supported by AI-based enrichment and best-in-class analytics of multi-factor, large-scale behaviour data in real time; (iii) autonomous defence, with automation of the detection pipeline by leveraging modern, featureless and explainable AI; and (iv) personalised protection, with AI-powered creation of a safe environment that matches the security, privacy and identity needs of individual users. The Combined Company will be able to offer a market-leading suite of consumer Cyber Safety solutions to millions of individuals and families globally across identity, security and privacy, including restoration and insurance, identity protection, performance and utility, device security, connected home, family safety and privacy and access, complemented by adjacent trust-based solutions. NortonLifeLock’s and Avast’s positions have been built over many years, resulting in brand recognition across large user bases in their respective existing segments. This presents an attractive opportunity to continue to innovate and offer new and enhanced solutions and services, with improved capabilities from access to superior data insights, in turn driving growth across new growth segments. Provide greater geographic diversification and access to a larger global user base, as well as facilitating expansion into the SOHO and VSB segments, and the building of stronger B2B2C and OEM partnerships NortonLifeLock and Avast currently operate in highly complementary end markets and geographic regions. The Combined Company will benefit from enhanced revenue and geographic diversification combining NortonLifeLock’s and Avast’s complementary positions in their consumer Cyber Safety segments. Based on the latest reported full year results for each of NortonLifeLock and Avast, on an aggregated basis, approximately 65% of the Combined Company’s revenue was derived from the US, approximately 24% from Europe, Middle East and Africa and approximately 11% from the rest of the world. Following completion of the Merger, the Combined Company will have dual headquarters in Prague, Czech Republic, and Tempe, Arizona, USA, reflecting its global strength. The Combined Company will have the ability to leverage the combined regional expertise of both businesses and flexibility to reinvest in product and marketing to target new growth segments and regions, including expansion into the SOHO and VSB segments, OEM PC manufacturing channels and B2B2C partnerships. There is further potential to accelerate international growth through investment in Avast’s freemium business model and cross-selling of complementary NortonLifeLock identity products, which are currently sold primarily in the US, to Avast’s international user and direct customer base and cross-selling Avast’s privacy offerings to NortonLifeLock’s full customer base. Unlock significant value creation through approximately USD 280 million of annual gross cost synergies, providing additional upside potential from new reinvestment capacity for innovation and growth Given the complementary nature of both NortonLifeLock and Avast, the NortonLifeLock Directors believe that the Merger will generate synergies that could not be achieved independently of the Merger and will lead to significant long-term value creation for all shareholders. Significant recurring cost synergies opportunity NortonLifeLock anticipates that the Merger will result in recurring annual pre-tax gross cost synergies for the Combined Company to reach a run-rate of approximately USD 280 million, representing between approximately 15% and 20% of combined adjusted cost of sales and operating spend, based on the latest full year reported results for each of NortonLifeLock and Avast. The synergies are expected to be fully realised by the end of the second year following completion of the Merger. NortonLifeLock intends to approach integration with the aim of retaining and motivating the best talent and structure across the Combined Company to create a best-in-class organisation. The expected sources of the identified cost synergies are as follows: • Organisation: approximately 50% of the total annual run-rate pre-tax gross cost synergies are expected to be generated through the adoption of shared best practice across existing functions and the reduction of duplicate roles across all geographies, and from a broad range of job categories, including management, shared services, product and commercial functions; • Systems & Infrastructure operating costs: approximately 25% of the total annual run-rate pre-tax gross cost synergies are expected to be realised through migration onto a common data and security platform, integration of systems, and shared technology and analytics infrastructure; and • Contracts & Shared Services: approximately 25% of the total annual run-rate pre-tax gross cost synergies are expected to be generated primarily from site rationalisation, procurement and vendor consolidation, and spend de-duplication. NortonLifeLock expects to realise approximately 60% of the run-rate cost savings by the end of the first full year following completion of the Merger and 100% by the end of the second full year following completion of the Merger, excluding any potential synergy reinvestment and associated benefits. On a reported basis, the synergies assume the Combined Company expects to benefit from approximately USD 75 million of cost savings in the first full year following completion of the Merger, approximately USD 245 million of cost savings in the second full year following completion of the Merger, and the full USD 280 million of the cost savings in the third full year following completion of the Merger, excluding any potential synergy reinvestment and associated benefits. One-off costs In order to realise these synergies, NortonLifeLock is expected to incur one-off restructuring and integration costs of approximately one year’s run-rate pre-tax cost savings, or USD 280 million, with approximately USD 180 million estimated to be incurred in the first full year following completion of the Merger and approximately USD 100 million estimated to be incurred in the second full year following completion of the Merger. Aside from integration costs, no material dis-benefits are expected to arise in connection with the Merger. The expected synergies will accrue as a direct result of the Merger and would not be achieved on a standalone basis. The paragraphs above relating to expected cost synergies constitute a “Quantified Financial Benefits Statement” for the purposes of Rule 28 of the Code. Given the strong strategic, cultural and operational fit of the two companies, NortonLifeLock believes that the quantified cost synergies are readily achievable. NortonLifeLock expects to achieve the quantified cost synergies while maintaining appropriate investment levels in sales and technology to meet the Combined Company’s growth targets and other objectives. The estimated cost synergies referred to above reflect both the beneficial elements and the relevant costs. Revenue opportunities In addition to the quantified cost synergies set out in this paragraph 3, NortonLifeLock believes that there will be significant revenue opportunities that the Combined Company could pursue, which have not yet been quantified, but which solidify the foundation for driving double digit revenue growth in the long-term. Following the completion of the Merger, the Combined Company intends to bring additional value propositions to a larger user base by leveraging its broader global reach and cross- selling enhanced products and solutions across core security and privacy and identity. This proposition will be supported by targeted sales and marketing investment in the geographies where its industry-leading brands, Norton, Avira, LifeLock and Avast, are most established to deliver localised experiences, promote customer service differentiation and drive enhanced customer experience and retention. By leveraging the sales and marketing expertise of both organisations, the Combined Company will operate new and diversified sales channels through the scaling of its freemium offering, SOHO and VSB targeting and expanded B2B2C partnerships. The Combined Company will also benefit from a strong balance sheet and reinvestment capacity to drive innovation and expand into adjacent trust-based solutions.