Item 2.01. Completion of
Acquisition or Disposition of Assets.
As previously reported, on November 2, 2016, the Company entered into an Agreement and Plan
of Merger (the
Merger Agreement
) with Broadcom Limited, a limited company organized under the laws of the Republic of Singapore (
Ultimate Parent
), Broadcom Corporation, a California corporation, and Bobcat
Merger Sub, Inc., a Delaware corporation (
Merger Sub
), pursuant to which Ultimate Parent agreed to acquire the Company through an indirect subsidiary. Broadcom Corporation subsequently assigned all of its rights under the Merger
Agreement to LSI Corporation, a Delaware corporation (
Parent
), on December 19, 2016.
On November 17, 2017,
Ultimate Parent completed its previously announced acquisition of the Company. Pursuant to the terms of the Merger Agreement, as assigned, Merger Sub merged with and into the Company (the
Merger
), with the Company surviving the
Merger as a wholly owned subsidiary of Parent, subject to the terms and conditions set forth therein.
Pursuant to the terms of the Merger
Agreement, at the effective time of the Merger (the
Effective Time
), each share of common stock, par value $0.001 per share, of the Company (the
Company Common Stock
) that was issued and outstanding immediately
prior to such time (other than shares of Company Common Stock that were (i) owned directly by Ultimate Parent, Broadcom Corporation, Parent, Merger Sub or any other direct or indirect subsidiary of Ultimate Parent, (ii) held in treasury of
the Company, (iii) held by any subsidiary of the Company or (iv) held by any stockholders of the Company who were entitled to demand and properly demanded appraisals of such shares pursuant to their statutory rights of appraisal in
accordance with the General Corporation Law of the State of Delaware) was canceled and converted into the right to receive cash in an amount equal to $12.75 per share, without interest, less any required tax withholding (the
Merger
Consideration
). The aggregate consideration paid by Ultimate Parent in the Merger was approximately $6.1 billion, without giving effect to the related transaction fees and expenses.
At the Effective Time, subject to and upon the conditions set forth in the Merger Agreement, each
stock option to purchase Company Common Stock (an
Option
) with a per share exercise price less than the Merger Consideration (an
In-the-Money
Option
) that was outstanding and vested as of immediately prior to the Effective Time was cancelled immediately prior to the Effective Time and converted into the right to receive a cash payment (
cashed out
), and each
restricted stock unit award covering Company Common Stock (an
RSU Award
) that was not assumed (as described below) also was cashed out. The amount of the cash payment for each cashed out Option and cashed out RSU Award equaled the
number of shares of Company Common Stock subject to such award multiplied by (i) with respect to a cashed out Option, the excess of the Merger Consideration over the exercise price per share of such Option, or (ii) with respect to a cashed
out RSU Award, the Merger Consideration (the
Cash Out Payment
).
At the Effective Time, subject to and upon the
conditions set forth in the Merger Agreement, each outstanding and unvested
In-the-Money
Option, each outstanding Option that was not an
In-the-Money
Option, and each outstanding RSU Award, as of immediately prior to the Effective Time, and, in each case, held by an employee or other service provider of
the Company or its subsidiaries who provides service to the Company or its subsidiaries as of immediately following the Effective Time (a
Continuing Service Provider
) was assumed by Ultimate Parent and converted automatically into
an option (with respect to an assumed Option) or restricted share unit award (with respect to an assumed RSU Award) covering ordinary shares in the capital of Ultimate Parent (
Ultimate Parent Ordinary Shares
) having, subject to
applicable law, the same terms and conditions as the assumed Option or RSU Award, as applicable (each, an
Assumed Award
), except that (i) each such Assumed Award covers that number of Ultimate Parent Ordinary Shares equal to
the number of shares of Company Common Stock subject to such Assumed Award immediately prior to the Effective Time multiplied by 0.0486 (the
Exchange Ratio
),
which ratio was
determined as the Merger Consideration divided by the volume weighted average price for an Ultimate Parent Ordinary Share for the twenty trading days prior to the closing date of the Merger (the
Closing Date
), and (ii) with
respect to an Option that was assumed, the per share exercise price equals the exercise price per share of such Option divided by the Exchange Ratio (the
Assumption Treatment
).
At the Effective Time, all other Options not assumed or cashed out pursuant to the Merger Agreement (which includes any Options held by
individuals who are not Continuing Service Providers that have a per share exercise price equal to or greater than the Merger Consideration) were cancelled as of immediately prior to the Effective Time in exchange for no consideration.
As of the Closing Date, subject to and upon the conditions set forth in the Merger Agreement, each RSU Award that was subject to performance
criteria immediately prior to the Closing Date (a
PSU Award
) was treated in accordance with the terms of the applicable PSU Award agreement, including that (i) the PSU Awards performance period was deemed to end on the
Closing Date, (ii) the number of units eligible to vest based on performance achievement over the shortened performance period under the PSU Award (
Eligible Units
) was determined as of the Closing Date, (iii) 50% of the
Eligible Units vested as of immediately prior to the Effective Time, and (iv) the Eligible Units under the PSU Award were treated in the same manner as an RSU Award (whether cashed out or assumed) at the Effective Time, provided that any such
Eligible Units that were subject to the Assumption Treatment are scheduled to vest on the one (1) year anniversary of the Closing Date based on continued service through such date, subject to any accelerated vesting as may be specified under
any plan, agreement or other arrangement applicable to such PSU Award.
The foregoing description of the effects of the Merger and the
Merger Agreement, and the transactions contemplated thereby, is qualified in its entirety by reference to the full text of the Merger Agreement. A copy of the Merger Agreement is incorporated herein by reference as Exhibit 2.1 to this Current Report
on Form
8-K.
Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an
Obligation under an
Off-
Balance Sheet Arrangement.
Notes
The consummation of the Merger constitutes a Fundamental Change and a Make-Whole Fundamental Change under the Indenture (each, as defined in
the Indenture). Accordingly, the effective date of the Merger Event and the Effective Date (each, as defined in the Indenture) of the Fundamental Change and the Make-Whole
Fundamental Change is November 17, 2017. The Indenture provides that, as a result of the Fundamental Change, each Holder (as defined in the Indenture) of the Notes shall have the right to
either require the Company to purchase its Notes or, alternatively, to surrender its Notes for conversion. In addition, as a result of the Make-Whole Fundamental Change, Holders who convert their Notes during the Make-Whole Fundamental Change Period
(as defined below) shall be entitled to convert their Notes at an increased Conversion Rate.
Pursuant to the Indenture, each Holder may,
at such Holders election, surrender Notes for conversion at any time from and after November 17, 2017 and on or prior to 5:00 p.m., New York City time (the
Close of Business
), on January 9, 2018, the business day
immediately preceding the Fundamental Change Repurchase Date (as defined below) (the
Make-Whole Fundamental Change Period
). Pursuant to Section 14.03 of the Indenture, the Conversion Rate applicable to Notes that are surrendered
for conversion during the Make-Whole Fundamental Change Period, will be increased by 16.1043 shares of Company Common Stock per $1,000 principal amount of Notes to yield a Conversion Rate of 79.8131 shares of Company Common Stock per $1,000
principal amount of Notes. Accordingly, the total amount of consideration to be paid for each $1,000 principal amount of Notes surrendered for conversion during the Make-Whole Fundamental Change Period is expected to be $1,017.62 in cash.
Holders who surrender their Notes for conversion after the Make-Whole Fundamental Change Period will receive solely cash in an amount equal to
the applicable Conversion Rate of 63.7088 shares of Company Common Stock per $1,000 principal amount of Notes, multiplied by $12.75, the Merger Consideration. Accordingly, the total amount of consideration to be paid for each $1,000 principal amount
of Notes surrendered for conversion after the Make-Whole Fundamental Change Period is expected to be $812.29 in cash.
As an alternative
to surrendering Notes for conversion, each Holder has the right, at the Holders option (the
Repurchase Option
), to require the Company to purchase for cash all of such Holders Notes, or any portion thereof that is a
multiple of $1,000 principal amount, in accordance with the terms, procedures and conditions outlined in the Indenture and the Notes. In order to exercise the Repurchase Option, the Holder must validly tender such Notes from and after
November 20, 2017 and on or prior to the Close of Business on January 9, 2018, the business day immediately preceding January 10, 2018 (the
Fundamental Change Repurchase Date
).
The Company will purchase such Notes at a price equal to the sum of 100% of the principal amount of such Notes and the accrued and unpaid
interest thereon, to, but excluding, the Fundamental Change Repurchase Date. Accordingly, the total amount of consideration to be paid for each $1,000 principal amount of Notes validly tendered pursuant to the Repurchase Option is expected to be
$1,000.31 in cash.
In accordance with the Indenture, the Company delivered a notice to Wells Fargo and to the Holders (the
Notice
) setting forth the foregoing and containing additional information in relation thereto on November 17, 2017. The foregoing is only a brief description of the Notice and the Indenture and is qualified in its entirety by
reference to the Notice, a copy of which is filed as Exhibit 99.1 to this Current Report on Form
8-K,
and the Indenture, a copy of which is filed as Exhibit 4.2 to this Current Report on Form 8-K.
Interest Payments
Except as provided in
the Notes or the Indenture, no payment or adjustment will be made for accrued and unpaid interest in connection with the conversion of any Note. If a Holder surrenders a Note for conversion after the Close of Business on a Regular Record Date (as
defined in the Indenture) and prior to 9:00 a.m., New York City time (the
Open of Business
), on the immediately following Interest Payment Date (as defined in the Indenture), then, notwithstanding such conversion, the interest
payable with respect to such Note on such Interest Payment Date will be paid, on such Interest Payment Date, to the Holder of record of such Note at the Close of Business on such Regular Record Date. However, if a Holder surrenders Notes for
conversion during the period from the Close of Business on any Regular Record Date and prior to the Open of Business on the immediately following Interest Payment Date, then the surrendering Holder must pay to the Conversion Agent, upon surrender of
the Notes, an amount equal to the interest payable on such Interest Payment Date on the portion of the Notes being converted.
The Notes
bear interest at an annual rate of 1.375%, payable semi-annually in arrears, computed on the basis of a 360-day year of twelve 30-day months. The Interest Payment Dates for the Notes are January 1 and July 1 of each year, and the corresponding
Regular Record Date are the immediately preceding December 15 and June 15, respectively.
Convertible Note Hedge Transactions and Warrants
In connection with the sale of the Notes, the Company entered into convertible note hedge transactions with respect to Company Common Stock
with affiliates of certain initial purchasers and another financial institution, which were intended to reduce potential dilution to Company Common Stock upon any conversion of the Notes and/or offset any cash payments the Company would be required
to make in excess of the principal amount of converted Notes. In connection with the Merger, the Company intends to terminate the convertible note hedge transactions.