Item 1.01.
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Entry into a Material Definitive Agreement.
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On June 15, 2016, Cavium, Inc., a Delaware corporation
(
Parent
or
Cavium
), entered into an Agreement and Plan of Merger (the
Merger Agreement
) with Quasar Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Cavium
(
Sub
) and QLogic Corporation, a Delaware corporation (
QLogic
or the
Company
).
The Offer and
the Merger
Upon the terms and subject to the conditions of the Merger Agreement, Sub will commence a tender offer (the
Offer
) for
any and all outstanding shares of common stock of the Company (the
Company Common Stock
), for (i) $11.00 in cash (such amount, or any greater cash amount per share of Company Common Stock paid pursuant to the Offer, the
Cash Consideration
) and (ii) 0.098 (the
Exchange Ratio
) shares of common stock of Cavium (
Cavium Common Stock
) per share of Company Common Stock (the
Share Consideration
and
together with the Cash Consideration, the
Merger Consideration
), without interest and subject to any required withholding for taxes. The Offer will be scheduled to expire on the
20
th
business day following the commencement of the Offer unless extended in accordance with the terms of the Merger Agreement and applicable law. As soon as practicable following the consummation
of the Offer, and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Sub will merge with and into the Company (the
Merger
) pursuant to the provisions of Section 251(h) of the
Delaware General Corporation Law, with no stockholder vote required to consummate the Merger. In the Merger, the Company will survive as a wholly owned subsidiary of Cavium, and each issued and outstanding share of Company Common Stock, other than
shares of Company Common Stock held in treasury of the Company, shares of Company Common Stock owned by Cavium or any subsidiary of Cavium (including Sub) or shares of Company Common Stock owned by stockholders who have validly exercised their
appraisal rights under Delaware law, will be converted into the right to receive the Merger Consideration. Cavium intends to fund the Merger Consideration with a combination of cash on hand and committed debt financing.
As a result of the Merger, at the effective time of the Merger (i) each outstanding and unvested Company Stock Option (as defined in the Merger
Agreement) (other than any such unvested Company Stock Option that is an Underwater Option (as defined in the Merger Agreement)), shall be assumed by Cavium and converted into an option to purchase, on the same terms and conditions as were
applicable under such Company Stock Option, that number of shares of Cavium Common Stock, as described by the Merger Agreement (including adjustment of the number of shares and exercise price of the Company Stock Option as set forth therein);
(ii) each outstanding and vested Company Stock Option (including those Company Stock Options that become vested by their terms immediately prior to or as of the effective time of the Merger) with an exercise price less than the sum of
(a) the Cash Consideration and (b) the Share Consideration Value, which means the product of the Exchange Ratio and the volume weighted average trading price of Cavium Common Stock on the Nasdaq Global Select Market
(
Nasdaq
) for the five consecutive trading days ending on the trading day immediately preceding the closing date of the Merger, shall be cancelled and the holder thereof shall be entitled to receive Vested Option Consideration (as
defined in the Merger Agreement), as described by the Merger Agreement; (iii) each outstanding Company Stock Option that is an Underwater Option shall be cancelled, and the holder thereof shall receive no payment on account thereof;
(iv) the unvested Company Restricted Stock Units (as defined in the Merger Agreement) outstanding immediately prior to the effective time shall be assumed and converted into restricted stock units of Cavium Common Stock, as described by the
Merger Agreement (including adjustment of the number of shares subject to the award as set forth therein); (v) each outstanding and vested Company Restricted Stock Unit (including those Company Restricted Stock Units that become vested by their
terms immediately prior to or as of the effective time) shall be cancelled and extinguished and the holder thereof shall be entitled to receive an amount equal to the Merger Consideration that would be payable in respect of the total number of
shares of Company Common Stock subject to such Company Restricted Stock Unit, as described by the Merger Agreement; and (vi) the unvested Company Performance Restricted Stock Units (as defined in the Merger Agreement) outstanding immediately
prior to the effective time shall be assumed by Cavium and (after giving effect to any applicable change of control or other accelerated vesting provisions) converted into restricted stock units of Cavium Common Stock, as described by the Merger
Agreement (including adjustment of the number of shares subject to the award as set forth therein and after giving effect to the determination of achievement of the applicable performance-based vesting requirements based on the Companys
relative total stockholder return, with such number determined as of the last trading day prior to the closing date of the Merger by the Compensation Committee of the Board of Directors of the Company (the
Board
)). Effective
immediately prior to the time at which Sub first accepts for payment the shares of Company Common Stock tendered in the Offer, each Company Stock Option and Company Restricted Stock Unit granted to a member of the Board pursuant to the Non-Employee
Director Equity Award Program adopted under the Companys 2005 Performance Incentive Plan, as amended, that is then outstanding and unvested, shall accelerate and be fully vested and shall be treated as a vested Company Stock Option or vested
Company Restricted Stock Unit, as applicable, under the Merger Agreement as described above.
Closing Conditions
The obligation of each party to consummate the Offer and the Merger is subject to the satisfaction or waiver of customary closing conditions set forth in the
Merger Agreement, including (i) at least a majority of the outstanding Company Common Stock, when added to shares of Company Common Stock already owned by Sub, having been validly tendered into (and not withdrawn from) the Offer prior to the
expiration date of the Offer (the
Minimum Condition
), (ii) the exchange of shares of Cavium Common Stock pursuant to the Offer and the Merger having been registered pursuant to a registration statement filed by Cavium with
the Securities
and Exchange Commission (the
SEC
) and declared effective by the SEC, (iii) shares of Cavium Common Stock issuable pursuant to the Offer and the Merger having been
authorized for listing on Nasdaq, (iv) the expiration or termination of any applicable regulatory waiting periods and/or receipt of regulatory clearance, (v) the absence of any order or ruling prohibiting the consummation of the Merger,
and (vi) subject to certain exceptions, the accuracy of the other partys representations and warranties and compliance with covenants. In addition, the obligation of Cavium and Sub to consummate the Merger is also subject to the
satisfaction or waiver of the condition that no material adverse effect on the Company shall have occurred since the date of the Merger Agreement. Caviums and the Companys obligations are not subject to any financing condition.
Representations and Warranties; Covenants
Each of the
Company, Cavium and Sub has made customary representations and warranties and covenants in the Merger Agreement, including covenants to use their respective reasonable best efforts to secure required regulatory approvals. In addition, the Company
has agreed to other customary covenants, including, among others, covenants to conduct its business in the ordinary course during the interim period between the execution of the Merger Agreement and the closing of the Merger, and not to solicit
alternative transactions or, subject to certain exceptions, not to enter into discussions concerning, or provide confidential information in connection with, an alternative transaction, and Cavium and Sub have agreed to other customary covenants,
including, among others, covenants to use their reasonable best efforts to consummate the committed debt financing.
Termination and Termination Fees
The Merger Agreement contains certain termination rights for each of the Company and Cavium, including, among others, if the Offer is not consummated
at or prior to 11:59 p.m. (New York City Time) on November 12, 2016. Upon termination of the Merger Agreement under specified circumstances, including a termination by the Company to enter into an agreement for an alternative transaction
pursuant to a superior proposal, the Company has agreed to pay Cavium a termination fee of $47.8 million.
The foregoing description of the
Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and incorporated herein by
reference.
The Merger Agreement has been included to provide investors and security holders with information regarding the terms of the Merger. It is not
intended to provide any other factual information about the Company. The representations, warranties, covenants and agreements contained in the Merger Agreement, which were made only for purposes of that agreement and as of specific dates, 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 and security holders. Investors
and security holders are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or
condition of the Company, Cavium or Sub or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which
subsequent information may or may not be fully reflected in the Companys public disclosures.
Commitment Letter
On June 15, 2016, Cavium entered into a commitment letter (the
Commitment Letter
) with JPMorgan Chase Bank, N.A. (
JPMCB
)
pursuant to which JPMCB has committed to provide (i) a $650,000,000 senior secured term loan facility and (ii) a $100,000,000 senior secured interim term loan facility ((i) and (ii) together, the
Facilities
and the
provision of such funds as set forth in the Commitment Letter, the
Financing
), subject to satisfaction of customary closing conditions. The Facilities are available to (i) finance the Offer and the Merger, (ii) repay
existing indebtedness of the Company under its existing credit facility, and (iii) pay fees and expenses related to the Offer, the Merger and the Financing. Under the terms of the Commitment Letter, JPMCB will act as a joint lead arranger and a
joint bookrunning manager. The actual documentation governing the Facilities has not been finalized, and accordingly, the actual terms may differ from the description of such terms in the Commitment Letter.
The foregoing summary of the Commitment Letter does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the
Commitment Letter attached as Exhibit 10.1 to this Report and incorporated herein by reference.