Item 1.01. Entry into a Material Definitive Agreement.
On November 21, 2016, MACOM Technology Solutions Holdings, Inc., a Delaware corporation (MACOM), entered into an Agreement and Plan of Merger and
Reorganization (the Merger Agreement) with Applied Micro Circuits Corporation, a Delaware corporation (AMCC), Montana Merger Sub I, Inc., a Delaware corporation and a wholly owned subsidiary of MACOM (Purchaser),
and Montana Merger Sub II, LLC, a Delaware limited liability company and a wholly owned subsidiary of MACOM (LLC Sub).
Pursuant to the Merger
Agreement, and upon the terms and subject to the conditions described therein, Purchaser will commence an exchange offer (the Offer) to purchase all of the outstanding shares of common stock of AMCC (the AMCC Stock), with
each share of AMCC Stock accepted by Purchaser in the Offer to be exchanged for the right to receive (i) $3.25 in cash (the Cash Consideration) and (ii) 0.1089 shares of MACOM common stock, par value $0.001 per share
(MACOM Stock), plus cash in lieu of any fractional shares of MACOM Stock (the Stock Consideration), in each case, without interest ((i) and (ii) together, the Transaction Consideration). If the conditions to
the Offer are satisfied and the Offer closes, Purchaser would acquire any remaining AMCC Stock by a merger of Purchaser with and into AMCC (the First Merger), with AMCC surviving the First Merger. Immediately following the First Merger,
AMCC, as the surviving company of the First Merger, will be merged with and into LLC Sub (the Second Merger and together with the First Merger, the Mergers), with LLC Sub surviving the Second Merger as a wholly owned
subsidiary of MACOM. AMCC and MACOM intend, for U.S. federal income tax purposes, that the Offer and the Mergers, taken together, will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of
1986.
The obligation of MACOM and Purchaser to consummate the Offer is subject to customary closing conditions, including (i) shares of AMCC Stock
having been validly tendered and not properly withdrawn that represent at least a majority of the then-outstanding shares of AMCC Stock, (ii) the expiration or termination of the waiting period applicable to the Offer and the Mergers under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) the absence of any injunction or other order issued by a court of competent jurisdiction prohibiting the consummation of the Offer or the Mergers and (iv) other
customary conditions set forth in Annex A of the Merger Agreement. Accordingly, no vote of AMCC stockholders will be required in connection with the Mergers if MACOM and Purchaser consummate the Offer. The Merger Agreement contemplates that, if the
Offer is completed, the First Merger will be effected pursuant to Section 251(h) of the General Corporation Law of the State of Delaware, which permits completion of the First Merger upon the acquisition by MACOM of one share more than 50% of
the number of shares of AMCC Stock that are then issued and outstanding. The consummation of the Offer is not subject to any financing condition.
At the
effective time of the First Merger (the Effective Time), each share of AMCC Stock issued and outstanding immediately prior to the Effective Time (other than any AMCC Stock owned or held in treasury by AMCC or shares owned by any person
who is entitled to and properly demands statutory appraisal of his or her shares) will be converted into the right to receive the Transaction Consideration, without interest, subject to any required withholding taxes.
Each option to purchase shares of AMCC Stock (Option) that is outstanding as of immediately prior to the Effective Time and has a per share
exercise price that is less than the Transaction Consideration (with the MACOM Stock valued based on its closing price on the Nasdaq Global Select Market (Nasdaq) on the last trading day immediately prior to the Effective Time), to the
extent vested as of the Effective Time, will be cancelled as of the Effective Time and will entitle the holder thereof to receive an amount in cash and a number of shares of MACOM Stock equal to the product of (i) the Transaction Consideration
(with the MACOM Stock valued based on its closing price on Nasdaq on the last trading day immediately prior to the Effective Time) multiplied by (ii) the number of shares of AMCC Stock subject to such Option equal to the excess of (A) the
total number of shares of AMCC Stock subject to such Option over (B) the number of shares of AMCC Stock that, when multiplied by the closing price of the AMCC Stock on Nasdaq on the last trading day immediately prior to the Effective Time, is
equal to the aggregate exercise price of such Option. Each AMCC restricted stock unit (RSU) that is vested and outstanding as of the Effective Time will be settled in the number of shares of AMCC Stock underlying such RSU and thereafter
will entitle the holder thereof to receive an amount in cash and a number of shares of MACOM Stock equal to the Transaction Consideration (with the MACOM Stock valued based on its closing price on Nasdaq on the last trading day immediately prior to
the Effective Time) in respect of each share of AMCC Stock underlying such RSU. MACOM may, in its option, pay the foregoing amounts in respect of Options and RSUs solely in cash. RSUs that are outstanding and unvested as of the Effective Time and
Options that are outstanding as of immediately prior to the Effective Time and that are either unvested or have a per share exercise price in excess of the Transaction Consideration (with the MACOM Stock valued based on its closing price on Nasdaq
on the last trading day immediately prior to the Effective Time) will generally, as of the Effective Time, be converted into stock options (in the case of Options) or restricted stock units (in the case of RSUs) with respect to MACOM Stock, having
the same terms and conditions as applied prior to the Mergers, except for such terms rendered inoperative by reason of the Mergers and such other
adjustments as may be determined by MACOM. With respect to its Employee Stock Purchase Plan (ESPP), AMCC will cause any outstanding offering period under such plan to terminate as of
the Effective Time, with the ESPP and all outstanding rights under such plan being terminated as of such time. Any shares of AMCC Stock so purchased under the ESPP will be canceled and converted into the right to receive the Transaction
Consideration.
The Merger Agreement contains representations, warranties and covenants of the parties customary for a transaction of this nature,
including an agreement that, subject to certain exceptions, the parties will use reasonable best efforts to cause the Offer and the Mergers to be consummated. Additionally, AMCC has agreed not to solicit or initiate discussions with third parties
regarding other proposals to acquire AMCC and to certain restrictions on its ability to respond to any such proposals. Until the earlier of the termination of the Merger Agreement and the Effective Time, AMCC has agreed to operate its business in
the ordinary course of business consistent with past practice and has agreed to certain other negative operating covenants, as set forth more fully in the Merger Agreement.
The Merger Agreement includes customary termination provisions for both MACOM and AMCC, and provides that, in connection with the termination of the Merger
Agreement under specified circumstances, including a termination by AMCC to make a stockholder recommendation adverse to tendering into the Offer, AMCC will pay MACOM a termination fee of $30,000,000.
The foregoing description of the Merger Agreement does not purport to be complete, and is qualified in its entirety by reference to the full text of the
Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
A copy of the Merger Agreement has been
included to provide MACOM stockholders and other security holders with information regarding its terms and is not intended to provide any factual information about MACOM or AMCC. The representations, warranties and covenants contained in the Merger
Agreement have been made solely for the purposes of the Merger Agreement and as of specific dates; were solely for the benefit of the parties to the Merger Agreement; are not intended as statements of fact to be relied upon by MACOM stockholders or
other security holders, but rather as a way of allocating the risk between the parties to the Merger Agreement in the event the statements therein prove to be inaccurate; have been modified or qualified by certain confidential disclosures that were
made between the parties in connection with the negotiation of the Merger Agreement, which disclosures are not reflected in the Merger Agreement itself; may no longer be true as of a given date; and may apply standards of materiality in a way that
is different from what may be viewed as material by MACOM stockholders or other security holders. MACOM stockholders or other security holders 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 MACOM, Purchaser or AMCC. 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 MACOMs or AMCCs public disclosures.
Support Agreements
On November 21, 2016, in connection
with the Merger Agreement, certain directors, officers and affiliated stockholders of AMCC (the Stockholders), solely in their respective capacities as stockholders of AMCC, entered into Support Agreements with MACOM and Purchaser
(Support Agreements). These agreements provide, among other things, that the Stockholders will not sell or dispose of their AMCC Stock except to participate in the Offer and to tender their shares within 10 business days of the
commencement of the Offer.
The foregoing description of the Support Agreements is qualified in its entirety by the full text of the form of the
agreements, which is attached hereto as Exhibit 99.1, and is incorporated by reference herein.