Item 1.01 Entry into a Material Definitive Agreement.
Agreement and Plan of Merger
On March 10, 2019, NVIDIA Corporation, a Delaware corporation (“NVIDIA” or the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with NVIDIA International Holdings Inc., a Delaware corporation and wholly owned subsidiary of NVIDIA (“Parent”), Mellanox Technologies Ltd., a company organized under the laws of the State of Israel (“Mellanox”), and Teal Barvaz Ltd., a company organized under the laws of the State of Israel and a wholly owned subsidiary of Parent (“Merger Sub”). The Merger Agreement and the Merger (as defined below) have been approved by the boards of directors of the Company, Parent, Mellanox and Merger Sub.
Structure.
The Merger Agreement provides that, upon the terms and subject to the satisfaction or valid waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Mellanox (the “Merger”), with Mellanox continuing as the surviving corporation and a wholly owned subsidiary of Parent.
Consideration.
At the effective time of the Merger (the “Effective Time”), each ordinary share, par value NIS 0.0175 per share, of Mellanox (a “Mellanox Ordinary Share”) issued and outstanding immediately prior to the Effective Time (other than Mellanox Ordinary Shares held by Mellanox, any direct or indirect wholly owned subsidiary of Mellanox, Parent, Merger Sub or any of their respective subsidiaries or held in Mellanox’s treasury) will be deemed to have been transferred to Parent in exchange for the right to receive $125.00 in cash (the “Per Share Merger Consideration”), without interest and subject to applicable tax withholding.
Effect on Mellanox Equity Awards.
At the Effective Time:
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each option to purchase Mellanox Ordinary Shares (a “Mellanox Option”) that is outstanding and unexercised immediately prior to the Effective Time, whether or not vested, will be cancelled and converted into the right to receive an amount in cash equal to the product of the number of shares of Mellanox Ordinary Shares subject to such Mellanox Option, and the excess, if any, of the Per Share Merger Consideration over the per share exercise price under such Mellanox Option;
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each Mellanox restricted share unit award (a “Mellanox RSU”) that is outstanding immediately prior to the Effective Time and either (i) has fully vested immediately prior to the Effective Time but has not yet been settled in Mellanox Ordinary Shares or (ii) is held by a non-employee director of Mellanox, whether or not vested (each, a “Cashed-Out Mellanox RSU”), will be cancelled and converted into the right of the holder to receive an amount in cash equal to the product of the number of shares of Mellanox Ordinary Shares subject to such Mellanox RSU and the Per Share Merger Consideration;
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each Mellanox RSU that is outstanding immediately prior to the Effective Time and is not a Cashed-Out Mellanox RSU (each, an “Assumed RSU”), will be assumed by NVIDIA and converted into an NVIDIA restricted stock unit having substantially the same terms and conditions as the Assumed RSU, including vesting schedule and payment timing, but entitling the holder to a number of NVIDIA common shares equal to the product of the number of Mellanox Ordinary Shares that were issuable with respect to the Assumed RSU immediately prior to the Effective Time multiplied by a fraction (such ratio, the “Exchange Ratio”), the numerator of which is the Per Share Merger Consideration and the denominator of which is the volume weighted average price for a common share of NVIDIA on NASDAQ, calculated based on the ten consecutive trading days ending on the third complete trading day prior to (and excluding) the closing date of the Merger; and
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the number of shares subject to each Mellanox performance share unit award (a “Mellanox PSU”) that is outstanding immediately prior to the Effective Time will be determined by the board of directors of Mellanox, as reasonably agreed to by Parent, as the greater of (i) the target number of Mellanox PSUs set forth in the applicable grant notice and (ii) a number of shares determined based on Mellanox’s actual achievement of the applicable performance goals as of the date of the closing of the Merger (such final amount, the “Performance Satisfied PSUs”). The Performance Satisfied PSUs will be assumed by NVIDIA and converted into an NVIDIA restricted stock unit having substantially the same terms and conditions as the Mellanox PSU, other than the performance goals, but entitling the holder to a number of NVIDIA common shares equal to the product of the number of Mellanox Ordinary Shares that were issuable with respect to the Performance Satisfied PSUs multiplied by the Exchange Ratio.
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Covenants, Representations and Warranties
. Each of Parent, Mellanox and Merger Sub have made customary representations, warranties and covenants in the Merger Agreement. Mellanox has made covenants, among others, relating to the conduct of its business prior to the closing of the Merger, including with respect to making acquisitions or conducting divestitures, incurring debt, capital expenditures, litigation matters and restrictions on employee compensation. Parent and Mellanox made certain other customary covenants, including, among others and subject to certain exceptions, in the case of Parent,
to provide continuing employees with salaries, wages, incentives and benefits that are no less favorable than the benefits package provided to such employees prior to the Effective Time.
The Merger Agreement contains customary non-solicitation restrictions prohibiting Mellanox, its subsidiaries and their representatives from soliciting alternative acquisition proposals from third parties or providing information to or participating in discussions or negotiations with third parties regarding alternative acquisition proposals, subject to customary exceptions relating to proposals that would reasonably be expected to lead to a superior proposal (as described in the Merger Agreement).
Each of NVIDIA and Mellanox have agreed in the Merger Agreement to use their reasonable best efforts to obtain all required governmental and regulatory consents and approvals;
provided, however
, that, other than certain stipulated actions, NVIDIA is not required to make any divestiture or accept any behavioral remedy (a) that would reasonably be anticipated to have a material adverse impact on the business of Mellanox and its subsidiaries taken as a whole following the Merger, (b) with respect to Mellanox’s technology that is core to the benefits that NVIDIA expects to receive from the Merger, and include InfiniBand and RDMA technology, or (c) with respect to the assets, properties or business of NVIDIA (other than, after the Effective Time, Mellanox and its subsidiaries).
NVIDIA has agreed to guarantee the obligations of Parent and Merger Sub under the Merger Agreement. In connection with such guarantee, NVIDIA has made representations and warranties that are customary for a guarantor.
Conditions to Merger
. The closing of the Merger is subject to certain conditions, including, among others, (a) approval of the Merger Agreement and the Merger by at least a majority of all of the outstanding voting power of Mellanox, (b) the absence of laws, orders, decrees, judgments and injunctions by any governmental authority of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the Merger, (c) expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, (d) receipt of any applicable clearance or affirmative approval by the Anti-Monopoly Bureau of the State Administration for Market Regulation in the People’s Republic of China and expiration of any mandatory waiting period related thereto, (e) receipt of specified governmental and regulatory consents and approvals and expiration of any mandatory waiting period related thereto, (f) the passage of certain statutory waiting periods following the filing of the merger proposal with the Companies Registrar of the Israeli Corporations Authority, (g) subject to certain exceptions, the accuracy of representations and warranties with respect to Mellanox, Parent and Merger Sub, and (h) compliance in all material respects by Mellanox, Parent and Merger Sub with their respective covenants contained in the Merger Agreement. Consummation of the Merger is not subject to a financing condition.
Termination Rights
. The Merger Agreement contains certain termination rights by either Parent or Mellanox, including if the Merger is not consummated by December 10, 2019, which date may be extended by three months on two separate occasions if, on the applicable date, the only conditions to the closing of the Merger (other than those that by their nature cannot be satisfied until the closing) relate to required regulatory approvals.
If the Merger Agreement is terminated under certain circumstances, including termination by Mellanox to enter into an agreement for a superior proposal, Mellanox will be obligated to pay Parent a termination fee equal to $225 million in cash. If the Merger Agreement is terminated under certain circumstances involving the failure to obtain required regulatory approvals, Parent will be obligated to pay Mellanox a termination fee equal to $350 million in cash.
The foregoing description of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 hereto, and is incorporated into this report by reference.
The Merger Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other factual information about Parent or Mellanox. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement as of the specific dates therein, were solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in NVIDIA’s public disclosures.
Voting Agreement
In connection with the Merger Agreement, the Chief Executive Officer of Mellanox and his affiliated entity entered into a Voting Agreement, dated March 10, 2019 (the “Voting Agreement”), with Parent, pursuant to which the Chief Executive Officer of Mellanox has agreed, among other things, to vote his beneficially owned shares or other voting securities of Mellanox in favor of the Merger and the other transactions contemplated by the Merger Agreement, subject to the terms and conditions contained therein.
The foregoing description of the Voting Agreement is qualified in its entirety by reference to the full text of the Voting Agreement, a copy of which is filed as Exhibit 10.1 hereto, and is incorporated into this report by reference.