As filed with the Securities and Exchange Commission on January 25, 2002
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
LSI LOGIC CORPORATION
(Exact name of Registrant as specified in its charter)
-------------------
DELAWARE 94-2712976
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1551 MCCARTHY BOULEVARD
MILPITAS, CALIFORNIA 95035
(408) 433-8000
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
DAVID G. PURSEL
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
LSI LOGIC CORPORATION
1551 MCCARTHY BOULEVARD
MILPITAS, CALIFORNIA 95035
(408) 433-8000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------
Copies to:
MICHAEL OCCHIOLINI, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(650) 493-9300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ____________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]______________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
-------------------
CALCULATION OF REGISTRATION FEE
================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED SECURITY(1) PRICE(1) FEE
----------------------------------------------------------------------------------------------------------------
4.00% Convertible Subordinated Notes due 2006. $ 490,000,000 100% $490,000,000 $ 45,080
----------------------------------------------------------------------------------------------------------------
common stock, $0.01 par value.................. 18,603,591(2) (2) (2) (3)
================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based upon the average of the bid and asked
prices of the Convertible Subordinated Notes due 2006 on The PORTAL
Market on January 24, 2002.
(2) Includes 18,603,591 shares of common stock initially upon conversion of
the notes at the conversion price of $26.339 per share of common stock.
Pursuant to Rule 416 under the Securities Act, such number of shares of
common stock registered hereby shall include an indeterminate number of
shares of common stock that may be issued in connection with a stock
split, stock dividend, recapitalization or similar event.
(3) Pursuant to Rule 457(i), there is no additional filing fee with respect
to the shares of common stock issuable upon conversion of the notes
because no additional consideration will be received in connection with
the exercise of the conversion privilege.
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JANUARY 25, 2002
$490,000,000
LSI LOGIC
4.00% CONVERTIBLE SUBORDINATED NOTES DUE 2006
AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
--------------------------------------------------------------------------------
We issued the notes in a private placement in October 2001. This prospectus will
be used by selling securityholders to resell their notes and the common stock
issuable upon conversion of their notes. We will not receive any proceeds from
this offering.
We will pay interest on the notes on May 1 and November 1 of each year. The
first interest payment will be made on May 1, 2002.
You may convert the notes into shares of our common stock at a conversion price
of $26.339, subject to adjustment as set forth in this prospectus.
On or after November 6, 2004, we may redeem some or all of the notes at the
redemption prices set forth in this prospectus. In the event of a fundamental
change, as described in this prospectus, holders of the notes may require us to
repurchase all or part of their notes.
The notes are subordinated in right of payment to all of our existing and future
senior indebtedness. Our common stock is quoted on the New York Stock Exchange
Composite Tape under the symbol "LSI". On January 24, 2002, the last reported
sale price for our common stock on the New York Stock Exchange Composite Tape
was $15.59 per share.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.
-------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus is dated January ___, 2002
--------------------------------------------------------------------------------
You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information contained in or incorporated by reference in this prospectus
supplement or the prospectus is accurate as of any date other than the date on
the front of this prospectus.
TABLE OF CONTENTS
PAGE
----
Where You Can Find More Information....................................2
Summary................................................................3
Risk Factors...........................................................5
Use of Proceeds.......................................................14
Description of the Notes..............................................15
Description of Capital Stock..........................................28
United States Federal Income Tax Consequences.........................32
Selling Securityholders...............................................37
Plan of Distribution..................................................39
Legal Matters.........................................................41
Experts...............................................................41
-i-
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"), in accordance with the Securities
Exchange Act of 1934. You may read and copy our reports, proxy statements and
other information filed by us at the public reference facilities of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of such materials can be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further
information about the public reference rooms. Our reports, proxy statements and
other information filed with the Commission are available to the public over the
Internet at the Commission's World Wide Web site at http://www.sec.gov.
The Commission allows us to "incorporate by reference" into this prospectus the
information we filed with the Commission. This means that we can disclose
important information by referring you to those documents. The information
incorporated by reference is considered to be a part of this prospectus.
Information that we file later with the Commission will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings made by us with the Commission under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act until our offering is complete.
- The description of the common stock in our Registration Statement on
Form 8-A filed on August 29, 1989, under Section 12(g) of the Exchange
Act.
- The description of our Amended and Restated Preferred Shares Rights
Agreement in our Registration Statement on Form 8-A-12G/A filed on
December 8, 1998, under Section 12(g) of the Exchange Act.
- The Annual Report on Form 10-K filed on March 8, 2001 for the fiscal
year ended December 31, 2000.
- Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
2001, June 30, 2001 and September 30, 2001.
- The Current Reports on Form 8-K and the Amended Current Reports on Form
8-K/A filed on April 4, 2001, April 25, 2001, May 21, 2001, June 5,
2001, June 15, 2001, June 18, 2001, June 26, 2001, July 20, 2001, July
30, 2001 and August 6, 2001, and the Current Reports on Form 8-K filed
on October 25, 2001 and January 25, 2002.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
Investor Relations
LSI Logic Corporation
1551 McCarthy Boulevard
Milpitas, California 95035
(408) 433-6777
You should rely only on the information contained in or incorporated by
reference or provided in this prospectus. We have not authorized anyone else to
provide you with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
the information in this prospectus is accurate as of any date other than the
date on the front of this prospectus.
-2-
SUMMARY
Because this is a summary, it may not contain all the information that
may be important to you. You should read this entire prospectus before making an
investment decision. When used in this prospectus, unless otherwise stated, the
terms "we," "our" and "us" refer to LSI Logic Corporation and its subsidiaries.
LSI LOGIC CORPORATION
We are a leader in the design, development, manufacture, and marketing of
complex, high-performance integrated circuits and storage systems. We are
focused on the four markets of broadband communications, networking
infrastructure, storage infrastructure, and storage area network system. Our
integrated circuits are used in a wide range of communication devices, including
devices used for wireless, broad band, data networking, and set-top-box
applications. We also provide other types of integrated circuit products and
board-level products for use in network computing applications, high-
performance storage controllers, and systems for storage area networks.
We operate in two segments - the Semiconductor segment and the Storage Area
Network ("SAN") Systems segment - in which we offer products and services for a
variety of electronic systems applications. Our products are marketed primarily
to original equipment manufacturers ("OEMs") who sell products targeted for
applications in four major markets, which are:
- Broadband Communications;
- Networking Infrastructure;
- Storage Infrastructure; and
- Storage Area Network Systems.
In the Semiconductor segment, we use advanced process technology and design
methodologies to design, develop and manufacture highly complex integrated
circuits. These include both application specific integrated circuits, commonly
referred to as ASICs, and standard products. ASICs are designed for specific
applications defined by the customer; whereas standard products are for market
applications that we define.
We have developed methods of designing integrated circuits based on a library of
building blocks of industry-standard electronic functions, interfaces, and
protocols. Among these is our CoreWare(R) design methodology. Our advanced
submicron manufacturing process technologies allow our customers to combine one
or more CoreWare library elements with memory and their own proprietary logic to
integrate a highly complex, system-level solution on a single chip. We have
developed and use complementary metal oxide semiconductor ("CMOS") process
technologies to manufacture our integrated circuits.
In the SAN Systems segment, our enterprise storage systems are designed,
manufactured, and sold by our wholly owned subsidiary--LSI Logic Storage
Systems, Inc. Our high-performance, highly scalable open storage area network
systems and storage solutions are available through leading original equipment
manufacturers, or OEMs and a worldwide network of resellers under the
MetaStor(R) brand name.
We were incorporated in California in 1980 and reincorporated in Delaware in
1987. Our principal offices are located at 1551 McCarthy Boulevard, Milpitas,
California 95035, and our telephone number at that location is (408) 433-8000.
Our home page on the Internet is at www.lsilogic.com. The information contained
on our website is not incorporated into this prospectus.
-3-
THE OFFERING
Securities Offered............ $490,000,000 aggregate principal amount of 4.00%
Convertible Notes due 2006, and shares of common
stock issuable upon conversion of the notes.
Maturity Date................. November 1, 2006.
Interest...................... We will pay interest on the notes semi-annually
in arrears on May 1 and November 1 of each year,
beginning May 1, 2002.
Conversion.................... You may convert the notes into shares of our
common stock at a conversion price of $26.339
per share, subject to adjustment in specified
events.
Subordination................. The notes are subordinated to all existing and
future senior indebtedness and are effectively
subordinated to all of the indebtedness and
other liabilities (including trade and other
payables) of our subsidiaries. As of September
30, 2001, we had approximately $1.5 billion of
indebtedness outstanding that would have
constituted senior indebtedness. As of September
30, 2001, our subsidiaries had approximately
$127 million of indebtedness and other
liabilities outstanding to which the notes would
have been effectively subordinated, including
trade and other payables, but excluding
intercompany liabilities. Neither we nor our
subsidiaries are limited from incurring
additional debt, including senior indebtedness,
under the indenture. See "Description of the
Notes--Subordination."
Redemption.................... We may redeem any of the notes on or after
November 6, 2004, by giving you at least 30
days' notice. We may redeem the notes either in
whole or in part at the redemption prices set
forth in this prospectus, together with accrued
and unpaid interest to the redemption date.
Fundamental Change............ If a fundamental change (as described under
"Description of the Notes--Repurchase at Option
of the Holder") occurs prior to maturity, you
may require us to repurchase all or part of your
notes at a repurchase price equal to 100% of
their principal amount, plus accrued and unpaid
interest to the repurchase date.
Use of Proceeds............... We will not receive any of the proceeds from the
sale by any selling securityholder of the notes
or the underlying common stock into which notes
may be converted.
Listing of Common Stock....... The Common Stock is listed on the New York Stock
Exchange Composite Tape under the symbol "LSI."
-4-
RISK FACTORS
Before you invest in the notes, you should be aware of various risks, including
those described below. You should carefully consider these risk factors,
together with all of the other information included or incorporated by reference
in this prospectus, before your decide whether to purchase the notes. The risks
set out below are not the only risks we face.
If any of the following risks occur, our business, financial condition and
results of operations could be materially adversely affected. In such case, the
trading price of the notes could decline, and you may lose all or part of your
investment.
Keep these risk factors in mind when you read "forward-looking" statements
elsewhere in this prospectus and in the documents incorporated by reference in
this prospectus. These are statements that relate to our expectations for future
events and time periods. Generally, the words, "anticipate", "expect", "intend"
and similar expressions identify forward-looking statements. Forward-looking
statements involve risks and uncertainties, and future events and circumstances
could differ significantly from those anticipated in the forward-looking
statements.
OUR PRODUCT AND PROCESS DEVELOPMENT ACTIVITIES OCCUR IN A HIGHLY COMPETITIVE
ENVIRONMENT.
The Semiconductor and SAN Systems segments in which we conduct business are
characterized by rapid technological change, short product cycles and evolving
industry standards. We believe our future success depends, in part, on our
ability to improve on existing technologies and to develop and implement new
ones in order to continue to reduce semiconductor chip size and improve product
performance and manufacturing yields. We must also be able to adopt and
implement emerging industry standards and to adapt products and processes to
technological changes. If we are not able to implement new process technologies
successfully or to achieve volume production of new products at acceptable
yields, our operating results and financial condition will be adversely
impacted.
In addition, we must continue to develop and introduce new products that compete
effectively on the basis of price and performance and that satisfy customer
requirements. We continue to emphasize engineering development and acquisition
of CoreWare building blocks and integration of our CoreWare libraries into our
design capabilities. Our cores and standard products are intended to be based
upon industry standard functions, interfaces and protocols so that they are
useful in a wide variety of systems applications. Development of new products
and cores often requires long-term forecasting of market trends, development and
implementation of new or changing technologies and a substantial capital
commitment. We cannot assure you that the cores or standard products that we
select for investment of our financial and engineering resources will be
developed or acquired in a timely manner or will enjoy market acceptance.
WE OPERATE HIGHLY COMPLEX AND COSTLY MANUFACTURING FACILITIES.
The manufacture and introduction of our products is a complicated process. We
confront challenges in the manufacturing process that require us to:
- maintain a competitive manufacturing cost structure;
- implement the latest process technologies required to manufacture new
products;
- exercise stringent quality control measures to ensure high yields;
-5-
- effectively manage the subcontractors engaged in the test and assembly
of products; and
- update equipment and facilities as required for leading edge production
capabilities.
We do not control the timing or size of orders for our products. We generally do
not have long-term volume production contracts with our customers. There is a
risk that we will be unable to meet sudden increases in demand beyond our
current manufacturing capacity, which may result in additional capital
expenditures and production costs. Meanwhile, order volumes below anticipated
levels may result in the under-utilization of our manufacturing facilities,
resulting in higher per unit costs, which could adversely affect our operating
results and financial condition.
OUR MANUFACTURING FACILITIES ARE SUBJECT TO DISRUPTION.
Our newest wafer fabrication site located in Gresham, Oregon is a highly
complex, state-of-the-art facility. Anticipated production rates depend upon the
reliable operation and effective integration of a variety of hardware and
software components. There is no assurance that all of these components will be
fully functional or successfully integrated on time or that the facility will
achieve the forecasted yield targets. The capital expenditures required to bring
the facility to full operating capacity may be greater than we anticipate and
result in lower margins.
Operations at any of our primary manufacturing facilities, or at any of our test
and assembly subcontractors, may be disrupted for reasons beyond our control,
including work stoppages, fire, earthquake, floods or other natural disasters.
In addition, California is currently experiencing a power shortage, which may
spread to other areas of the country, such as Oregon, where our newest wafer
fabrication facility is located. Such an unexpected disruption could cause
delays in shipments of products to our customers and alternate sources for
production may be unavailable on acceptable terms. This could result in the
cancellation of orders or loss of customers.
Our corporate headquarters and some of our manufacturing facilities are located
near major earthquake faults. As a result, in the event of a major earthquake,
we could suffer damages that could significantly and adversely affect our
operating results and financial condition.
Our operations depend upon a continuing adequate supply of electricity, natural
gas and water. These energy sources have historically been available on a
continuous basis and in adequate quantities for our needs. However, given the
current power shortage in California, it is possible that the shortage may
spread to other areas of the country, including Oregon. An interruption in the
supply of raw materials or energy inputs for any reason would have an adverse
effect on our manufacturing operations.
WE HAVE SIGNIFICANT CAPITAL REQUIREMENTS TO MAINTAIN AND GROW OUR BUSINESS.
In order to remain competitive, we must continue to make significant investments
in new facilities and capital equipment. We may seek additional equity or debt
financing (other than the notes issued hereunder) from time to time and cannot
be certain that additional financing will be available on favorable terms.
Moreover, any future equity or convertible debt financing will decrease the
percentage of equity ownership of existing stockholders and may result in
dilution, depending on the price at which the equity is sold or the debt is
converted. In addition, the high level of capital expenditures required to
remain competitive results in relatively high fixed costs. If demand for our
products does not absorb additional capacity, the fixed costs and operating
expenses related to increases in our production capacity could have a material
adverse impact on our operating results and financial condition.
-6-
WE ARE EXPOSED TO FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES.
We have international subsidiaries and distributors that operate and sell our
products globally. Further, we purchase a substantial portion of our raw
materials and manufacturing equipment from foreign suppliers, and incur labor
and other operating costs in foreign currencies, particularly in our Japanese
manufacturing facilities. As a result, we are exposed to the risk of changes in
foreign currency exchange rates or declining economic conditions in these
countries.
WE DO BUSINESS IN EUROPE AND FACE RISKS ASSOCIATED WITH THE EURO.
A new European currency was implemented in January 1999 to replace the separate
currencies of eleven western European countries. This has required changes in
our operations as we modified systems and commercial arrangements to deal with
the new currency. Although a three-year transition period is expected during
which transactions may also be made in the old currencies, this is requiring
dual currency processes for our operations. We have identified issues involved
and will continue to address them. There can be no assurances that all problems
will be foreseen and controlled without any adverse impact on our operating
results and financial condition.
WE PROCURE PARTS AND RAW MATERIALS FROM LIMITED DOMESTIC AND FOREIGN SOURCES.
We use a wide range of parts and raw materials in the production of our
semiconductors, host adapter boards, and storage systems, including silicon
wafers, processing chemicals, and electronic and mechanical components. We do
not generally have guaranteed supply arrangements with our suppliers and do not
maintain an extensive inventory of parts and materials for manufacturing. We
purchase some of these parts and materials from a limited number of vendors and
some from a single supplier. On occasion, we have experienced difficulty in
securing an adequate volume and quality of parts and materials. There is no
assurance that, if we have difficulty in obtaining parts or materials in the
future, alternative suppliers will be available, or that these suppliers will
provide parts and materials in a timely manner or on favorable terms. As a
result, we may be adversely affected by delays in new and current product
shipments. If we cannot obtain adequate materials for manufacture of our
products, there could be a material adverse impact on our operating results and
financial condition.
WE OPERATE IN HIGHLY COMPETITIVE MARKETS.
We compete in markets that are intensely competitive and that exhibit both rapid
technological change and continual price erosion. Our competitors include many
large domestic and foreign companies that have substantially greater financial,
technical and management resources than we do. Several major diversified
electronics companies offer ASIC products and/or other standard products that
are competitive with our product lines. Other competitors are specialized,
rapidly growing companies that sell products into the same markets that we
target. Some of our large customers may develop internal design and production
capabilities to manufacture their own products, thereby displacing our products.
There is no assurance that the price and performance of our products will be
superior relative to the products of our competitors. As a result, we may
experience a loss of competitive position that could result in lower prices,
fewer customer orders, reduced revenues, reduced gross profit margins and loss
of market share.
To remain competitive, we continually evaluate our worldwide operations, looking
for additional cost savings and technological improvements.
-7-
Our future competitive performance depends on a number of factors, including our
ability to:
- properly identify target markets;
- accurately identify emerging technological trends and demand for product
features and performance characteristics;
- develop and maintain competitive products;
- enhance our products by adding innovative features that differentiate
our products from those of our competitors;
- bring products to market on a timely basis at competitive prices;
- respond effectively to new technological changes or new product
announcements by others;
- adapt products and processes to technological changes; and
- adopt and/or set emerging industry standards.
We may not meet our design, development and introduction schedules for new
products or enhancements to our existing and future products. In addition, our
products may not achieve market acceptance or sell at favorable prices.
WE CONCENTRATE OUR SALES EFFORTS ON A LIMITED NUMBER OF CUSTOMERS.
We are increasingly dependent on a limited number of customers for a substantial
portion of revenues as a result of our strategy to focus our marketing and
selling efforts on select, large-volume customers. One customer represented 12%
of our total consolidated revenues for the year ended December 31, 2000. One
customer also represented 18% of our total consolidated revenues for the
nine-month period ended September 30, 2001. One customer represented 21% of
total revenues in the Semiconductor segment for the nine-month period ended
September 30, 2001. In the SAN Systems segment, there were three customers with
revenues representing 31%, 17% and 13% of total SAN Systems revenues for the
year ended December 31, 2000. In addition, there were four customers with
revenues representing 21%, 17%, 16% and 11% of total SAN Systems revenues for
the nine-month period ended September 30, 2001.
Our operating results and financial condition could be affected if:
- we do not win new product designs from major customers;
- major customers reduce or cancel their existing business with us;
- major customers make significant changes in scheduled deliveries; or
- there are declines in the prices of products that we sell to these
customers.
WE UTILIZE INDIRECT CHANNELS OF DISTRIBUTION OVER WHICH WE EXERCISE LIMITED
CONTROL.
We derive a material percentage of product revenues from independent reseller
and distributor channels. Our financial results could be adversely affected if
our relationship with these resellers or distributors were to deteriorate or if
the financial condition of these resellers or distributors were to decline. In
addition, as our
-8-
business grows, we may have an increased reliance on indirect channels of
distribution. There can be no assurance that we will be successful in
maintaining or expanding these indirect channels of distribution. This could
result in the loss of certain sales opportunities. Furthermore, the partial
reliance on indirect channels of distribution may reduce our visibility with
respect to future business, thereby making it more difficult to accurately
forecast orders.
OUR COMPANY OPERATIONS ARE AFFECTED BY CYCLICAL FLUCTUATIONS.
The Semiconductor and SAN Systems segments in which we compete are subject to
cyclical fluctuations in demand. As a result, we may experience periodic
declines in sales or the prices of our products as a result of the following:
- rapid technological change, product obsolescence, and price erosion in
our products;
- maturing product cycles in our products or products sold by our
customers;
- increases in worldwide manufacturing capacity for semiconductors,
resulting in declining prices; and
- changes in general economic conditions, which may cause declines in our
product markets or the markets of our suppliers and customers.
The semiconductor industry has in the past experienced periods of rapid
expansion of production capacity. Even when the demand for our products remains
constant, the availability of additional excess production capacity in the
industry creates competitive pressure that can degrade pricing levels, which can
reduce revenues. Furthermore, customers who benefit from shorter lead times may
defer some purchases to future periods, which could affect our demand and
revenues for the short term. As a result, we may experience downturns or
fluctuations in demand in the future and experience adverse effects on our
operating results and financial condition.
WE ENGAGE IN ACQUISITIONS AND ALLIANCES GIVING RISE TO ECONOMIC AND
TECHNOLOGICAL RISKS.
We intend to continue to make investments in companies, products and
technologies, either through acquisitions or investment alliances. Acquisitions
and investment activities often involve risks, including the need to:
- acquire timely access to needed capital for investments related to
acquisitions and alliances;
- conduct acquisitions that are timely relative to existing business
opportunities;
- successfully prevail over competing bidders for target acquisitions at
an acceptable price;
- invest in companies and technologies that contribute to the growth of
our business;
- retain the key employees of the acquired operation;
- incorporate acquired operations into our business and maintain uniform
standards, controls, and procedures; and
- develop the capabilities necessary to exploit newly acquired
technologies.
-9-
Some of these factors are beyond our control. Failure to manage growth
effectively and to integrate acquisitions could adversely affect our operating
results and financial condition.
THERE IS UNCERTAINTY ASSOCIATED WITH OUR RESEARCH AND DEVELOPMENT INVESTMENTS.
Our research and development activities are intended to maintain and enhance our
competitive position by utilizing the latest advances in the design and
manufacture of semiconductors and storage systems including networking,
communications and storage technologies. Technical innovations are inherently
complex and require long development cycles and the commitment of extensive
engineering resources. We must incur substantial research and development costs
to confirm the technical feasibility and commercial viability of a product that
in the end may not be successful. If we are not able to successfully and timely
complete our research and development programs, we may face competitive
disadvantages. There is no assurance that we will recover the development costs
associated with such programs or that we will be able to secure the financial
resources necessary to fund future research and development efforts.
THE PRICE OF OUR SECURITIES MAY BE AFFECTED BY A WIDE RANGE OF FACTORS.
Some of the factors that may cause volatility in the price of our securities
include:
- quarterly variations in results;
- business and product market cycles;
- fluctuations in customer requirements;
- the availability and utilization of manufacturing capacity;
- the timing of new product introductions; and
- the ability to develop and implement new technologies.
The price of our securities may also be affected by the estimates and
projections of the investment community, general economic and market conditions,
and the cost of operations in one or more of our product markets. While we
cannot predict the individual effect that these factors may have on the price or
our securities, these factors, either individually or in the aggregate, could
result in significant variations in price during any given period of time.
OUR GLOBAL OPERATIONS EXPOSE THE COMPANY TO NUMEROUS INTERNATIONAL BUSINESS
RISKS.
We have substantial business activities in Asia and Europe. Both manufacturing
and sales of our products may be adversely impacted by changes in political and
economic conditions abroad. A change in the current tax laws, tariff structures,
export laws, regulatory requirements or trade policies in either the United
States or foreign countries could adversely impact our ability to manufacture or
sell our products in foreign markets. Moreover, a significant decrease in sales
by our customers to end users in either Asia or Europe could result in a decline
in orders.
We subcontract test and assembly functions to independent companies located in
Asia. A reduction in the number or capacity of qualified subcontractors or a
substantial increase in pricing could cause longer lead times, delays in the
delivery of products to customers, or increased costs.
-10-
THE HIGH TECHNOLOGY INDUSTRY IN WHICH WE OPERATE IS PRONE TO INTELLECTUAL
PROPERTY LITIGATION.
Our success is dependent in part on our technology and other proprietary rights,
and we believe that there is value in the protection afforded by our patents,
patent applications and trademarks. However, the industry is characterized by
rapidly changing technology and our future success depends primarily on the
technical competence and creative skills of our personnel, rather than on patent
and trademark protection.
As is typical in the high technology industry, from time to time we have
received communications from other parties asserting that certain of our
products, processes, technologies or information infringe upon their patent
rights, copyrights, trademark rights or other intellectual property rights. We
regularly evaluate such assertions. In light of industry practice, we believe
with respect to existing or future claims that any licenses or other rights that
may be necessary can generally be obtained on commercially reasonable terms.
Nevertheless, there is no assurance that licenses will be obtained on acceptable
terms or that a claim will not result in litigation or other administrative
proceedings.
In February of 1999, a lawsuit alleging patent infringement was filed in the
United States District Court for the District of Arizona by the Lemelson
Medical, Education & Research Foundation, Limited Partnership against 88
electronics industry companies, including us. The case number is
CIV990377PHXRGS. The patents involved in this lawsuit are alleged to relate to
semiconductor manufacturing and computer imaging, including the use of bar
coding for automatic identification of articles. In September 1999, the Company
filed an answer denying infringement, raising affirmative defenses and asserting
a counterclaim for declaratory judgment of non-infringement, invalidity and
unenforceability of Lemelson's patents. As of June 30, 2001, the court had
completed its review of motion papers filed in connection with Cypress
Semiconductor's and plaintiff's cross-motions for summary judgment with respect
to the 4,390,586 patent and granted a motion for oral arguments which was held
in mid-December. These activities are ongoing, and, as of yet, no trial date has
been set. While we cannot make any assurance regarding the eventual resolution
of this matter, we do not believe it will have a material adverse effect on our
consolidated results of operations or financial condition.
In late 1995, a lawsuit was filed in the Court of Queen's Bench of Alberta,
Judicial District of Calgary (the "Court") between us, our Canadian subsidiary
("LSI Canada") and certain former shareholders of LSI Canada. Following a
hearing held in March 2001, the Court dismissed the motion of the former
shareholders that challenged the propriety of the fair value proceedings
initiated by LSI Canada and the jurisdiction of the Court to adjudicate the
matter. In addition, the Court ruled that the portions of the application of the
former shareholders to initiate a claim based upon allegations that our actions
and certain named (former) directors and a (former) officer of LSI Canada were
oppressive of the rights of minority shareholders of LSI Canada were to be
struck and the balance of the claims were stayed. The Court also directed all of
the litigants to recommence preparation for trial in the fair value proceeding
and advised the litigants of the Court's intention to schedule a date for trial
of that matter as soon as practicable. While we cannot give any assurances
regarding the resolution of these matters we believe that the final outcome will
not have a material adverse effect on our consolidated results of operations or
financial condition. No assurance can be given, however, that these matters will
be resolved without our becoming obligated to make payments or to pay other
costs to the opposing parties, with the potential for having an adverse effect
on our financial position or results of operations.
WE HAVE BEEN SERVED WITH A COMPLAINT IN A PATENT INFRINGEMENT SUIT FILED BY U.S.
PHILIPS CORPORATION.
U.S. Philips Corporation, a subsidiary of Royal Philips Electronics of
Netherlands, has filed suits in the U.S. District Court in New York against
eight companies, including us, for allegedly infringing and inducing
-11-
others to infringe on Philips U.S. Patent Number 4,689,740. This patent is
directed to devices and methods used with the Inter-Integrated Circuit Bus.
WE MUST ATTRACT AND RETAIN KEY EMPLOYEES IN A HIGHLY COMPETITIVE ENVIRONMENT.
Our employees are vital to our success and our key management, engineering and
other employees are difficult to replace. We do not generally have employment
contracts with our key employees. We do, however, maintain key person life
insurance for one of our employees. In past periods, the expansion of high
technology companies in Silicon Valley, Colorado, Oregon and elsewhere where we
operate our business has increased demand and competition for qualified
personnel. Our continued growth and future operating results will depend upon
our ability to attract, hire and retain significant numbers of qualified
employees.
RISKS RELATED TO THE OFFERING
THE NOTES ARE SUBORDINATED TO OUR SENIOR INDEBTEDNESS.
The notes are unsecured and subordinated in right of payment in full to all of
our existing senior indebtedness and rank on the same basis with our existing
notes. As a result, in the event of our bankruptcy, liquidation or
reorganization or upon acceleration of the notes due to an event of default
under the indenture and in certain other events, our assets will be available to
pay obligations on the notes only after all senior indebtedness has been paid in
full. After repaying our senior indebtedness, we may not have sufficient assets
remaining to pay amounts due on any or all of the notes then outstanding. We are
not prohibited from incurring additional debt under the Indenture. As of
September 30, 2001, we had approximately $1.5 billion of senior indebtedness
outstanding.
OUR CORPORATE STRUCTURE RESULTS IN SUBSTANTIAL STRUCTURAL SUBORDINATION AND MAY
AFFECT OUR ABILITY TO MAKE PAYMENTS ON NOTES.
The notes are obligations exclusively of LSI Logic. A substantial portion of our
operations are conducted through our subsidiaries. As a result, our cash flow
and our ability to service our debt, including the notes, is dependent upon the
earnings of our subsidiaries. In addition, any payment of dividends,
distributions, loans or advances by our subsidiaries to us could be subject to
statutory or contractual restrictions. Payments to us by our subsidiaries will
also be contingent upon our subsidiaries' earnings and business considerations.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders of the
notes to participate in those assets, will be effectively subordinated to the
claims of that subsidiary's creditors, including trade creditors. In addition,
even if we were a creditor of any of our subsidiaries, our rights as a creditor
would be subordinate to any security interest in the assets of our subsidiaries
and any indebtedness of our subsidiaries senior to that held by us.
As of September 30, 2001, our subsidiaries had approximately $127 million of
indebtedness and other liabilities outstanding to which the notes would have
been effectively subordinated, including trade and other payables but excluding
intercompany liabilities and liabilities of a type not required to be reflected
on a balance sheet in accordance with generally accepted accounting principles.
Our subsidiaries may also from time to time incur other additional indebtedness
and liabilities.
WE MAY NOT BE ABLE TO REPURCHASE THE NOTES UPON A FUNDAMENTAL CHANGE.
If a fundamental change occurs, you have the right, at your option, to require
us to repurchase all or a portion of your notes. If a fundamental change were to
occur, we may not have sufficient funds to pay the
-12-
redemption price for all notes tendered by the holders. Any future credit
agreements or other debt agreements may contain similar provisions. If a
fundamental change occurs at a time when we are prohibited from repurchasing
notes, we could seek the consent of our lenders to the repurchase of notes or
could attempt to refinance the borrowings that contain such prohibition. If we
do not obtain such a consent or repay such borrowings, we would remain
prohibited from repurchasing notes. Any failure by us to repurchase tendered
notes would constitute an event of default under the indenture, and may result
in a default under the terms of other indebtedness that we may enter into from
time to time. The term "fundamental change" is limited to certain specified
transactions and may not include other events that might adversely affect our
financial condition. In addition, the requirement that we offer to repurchase
the notes upon a fundamental change may not necessarily protect you if we
engaged in a highly leveraged transaction, reorganization, merger or similar
transaction. See "Description of the Notes--Repurchase at Option of the Holder."
OUR NOTES MAY NOT BE RATED OR MAY RECEIVE A LOWER RATING THAN ANTICIPATED.
We believe it is likely that one or more rating agencies may rate the notes. If
one or more rating agencies assign the notes a rating lower than expected by
investors, the market prices of the notes and our common stock would be
materially and adversely affected.
THERE MAY BE NO PUBLIC MARKET FOR THE NOTES, AND THERE ARE RESTRICTIONS ON
RESALE OF THE NOTES.
There is no established public trading market for the notes. At the time of the
original issuance of the notes in a private placement in October 2001, Lehman
Brothers Inc., the initial purchaser of the notes, advised us that it intended
to make a market in the notes. However, the initial purchaser is not obligated
to do so and may discontinue its market-making activities at any time without
notice. Consequently, we cannot be sure that any market for the notes will
develop, or if one does develop, that it will be maintained. If an active market
for the notes fails to develop or be sustained, the trading price of the notes
could decline. We do not intend to apply for listing of the notes on any
securities exchange or any automated quotation system.
-13-
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus, including the documents
incorporated herein by reference, are forward-looking statements, including but
not limited to those specifically identified as such, that involve risks and
uncertainties. The statements contained herein that are not purely historical
are forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act, including statements
regarding our expectations, beliefs, intentions or strategies regarding the
future. All forward-looking statements included in this prospectus are based on
information available to us on the date hereof, and we assume no obligation to
update any such forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors, which may cause our actual
results to differ materially from those implied by the forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "intends," "projects," "predicts," "target," "goal,"
"objectives," "potential," or "continue" or the negative of these terms or other
comparable terminology. For such statements, we claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. Moreover,
neither we nor the initial purchaser nor any other person assume responsibility
for the accuracy and completeness of such statements.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is as
follows:
NINE MONTHS
ENDED FISCAL YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------- --------------------------------------
2000 2001 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ---- ----
Ratio of earnings to fixed charges..... 8.8 -- 7.2 10.6 -- 5.3 8.7
These computations include us and our consolidated subsidiaries. Ratio
of earnings to fixed charges is computed by dividing:
- earnings before taxes adjusted for fixed charges, minority
interest and capitalized interest net of amortization by,
- fixed charges, which includes interest expense and capitalized
interest incurred, plus the portion of interest expense under
operating leases deemed by us to be representative of the
interest factor, plus amortization of the debt issuance costs.
For our fiscal year ended December 31, 1998, earnings were inadequate to cover
fixed charges by $140 million. For the nine months ended September 30, 2001,
earnings were inadequate to cover fixed charges by $778 million.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale by any selling
securityholder of the notes or the underlying common stock issuable upon
conversion of the notes.
-14-
DESCRIPTION OF THE NOTES
The notes were issued under an indenture dated as of October 30, 2001, between
us, as issuer, and State Street Bank and Trust Company of California, N.A., as
trustee. The notes and the shares issuable upon conversion of the notes are
covered by a registration rights agreement. You may request a copy of the
indenture and the registration rights agreement from the trustee.
The following description is a summary of the material provisions of the notes,
the indenture and the registration rights agreement. It does not purport to be
complete. This summary is subject to and is qualified by reference to all the
provisions of the indenture, including the definitions of certain terms used in
the indenture, which has been filed as an exhibit to this registration
statement. We urge you to read the indenture because it defines your rights as a
holder of the notes.
As used in this "Description of the Notes" section, references to "LSI," "we,"
"our" or "us" refer solely to LSI Logic Corporation and not to our subsidiaries.
GENERAL
The notes are general, unsecured obligations of LSI Logic Corporation. The notes
are subordinated to all existing and future senior indebtedness as described
under "-- Subordination." The notes are convertible into our common stock as
described under "-- Conversion of Notes."
The notes will be issued only in denominations of $1,000 and multiples of
$1,000. The notes will mature on November 1, 2006 unless earlier converted,
redeemed at our option or repurchased at your option upon a fundamental change.
Neither we nor any of our subsidiaries are subject to any financial covenants
under the indenture. In addition, neither we nor any of our subsidiaries are
restricted under the indenture from paying dividends, incurring debt, or issuing
or repurchasing our securities.
You are not afforded protection under the indenture in the event of a highly
leveraged transaction or a change in control of us except to the extent
described below under --Repurchase at Option of the Holder.
We will pay interest on May 1 and November 1 of each year, beginning May 1,
2002, to record holders at the close of business on the preceding April 15 and
October 15 as the case may be, except:
- interest payable upon redemption will be paid to the person to whom
principal is payable, unless the redemption date is an interest payment
date; and
- as set forth in the next sentence.
In case you convert any of your notes into common stock during the period after
any record date but prior to the next interest payment date, one of the
following will occur:
- we will not be required to pay interest on the interest payment date if
the note has been called for redemption on a redemption date that occurs
during this period;
- we will not be required to pay interest on the interest payment date if
the note is to be repurchased in connection with a fundamental change on
a repurchase date that occurs during this period; or
-15-
- if otherwise, any note not called for redemption or not subject to
repurchase that is submitted for conversion during this period must also
be accompanied by an amount equal to the interest due on the interest
payment date on the converted principal amount, unless at the time of
conversion there is a default in the payment of interest on the notes.
See "Conversion of Notes."
We will maintain an office in the Borough of Manhattan, The City of New York,
for the payment of interest, which shall initially be an office or agency of the
trustee. We may pay interest either:
- by check mailed to your address as it appears in the note register,
provided that if you are a holder with an aggregate principal amount in
excess of $10 million, you shall be paid, at your written election, by
wire transfer in immediately available funds; or
- by transfer to an account maintained by you in the United States.
However, payments to The Depository Trust Company, New York, New York, which we
refer to as DTC, will be made by wire transfer of immediately available funds to
the account of DTC or its nominee. Interest will be computed on the basis of a
360-day year composed of twelve 30-day months.
CONVERSION OF NOTES
You may convert your notes, in whole or in part, into common stock prior to the
final maturity date of the notes, subject to prior redemption or repurchase of
the notes. If we call notes for redemption, you may convert the notes only until
the close of business on the business day prior to the redemption date unless we
fail to pay the redemption price. If you have submitted your notes for
repurchase upon a fundamental change, you may convert your notes only if you
withdraw your repurchase election in accordance with the indenture. You may
convert your notes in part so long as this part is $1,000 principal amount or an
integral multiple of $1,000. If any notes not called for redemption or not
subject to repurchase are converted after a record date for any interest payment
date and prior to the next interest payment date, the notes must be accompanied
by an amount equal to the interest payable on the interest payment date on the
converted principal amount unless a default in the payment of interest exists at
the time of conversion.
The initial conversion price for the notes is $26.339 per share, subject to
adjustment as described below. We will not issue fractional shares of common
stock upon conversion of notes. Instead, we will pay cash equal to the closing
price of the common stock on the trading day prior to the conversion date.
Except as described below, you will not receive any accrued interest or
dividends upon conversion.
To convert interests in a global note, you must deliver to DTC the appropriate
instruction form for conversion pursuant to DTC's conversion program. To convert
a definitive note into common stock, you must:
- complete and manually sign the conversion notice on the back of the note
or facsimile of the conversion notice and deliver this notice to the
conversion agent;
- surrender the note to the conversion agent;
- if required, furnish appropriate endorsements and transfer documents;
- if required, pay all transfer or similar taxes; and
- if required, pay funds equal to interest payable on the next interest
payment date.
-16-
The date you comply with these requirements is the conversion date under the
indenture.
We will adjust the conversion price if any of the following events
occurs:
(1) we issue common stock as a dividend or distribution on our
common stock;
(2) we issue to all holders of common stock certain rights or
warrants to purchase our common stock;
(3) we subdivide or combine our common stock;
(4) we distribute to all holders of our common stock, shares of our
capital stock, evidences of indebtedness or assets, including
securities, but excluding:
- rights or warrants listed in (2) above;
- dividends or distributions listed in (1) above; and
- cash distributions listed in (5) below;
but including securities of our subsidiaries to the extent we do not
elect to reserve such securities on a pro rata basis for the benefit of
holders of notes as described below;
(5) we distribute cash, excluding any dividend or distribution in
connection with our liquidation, dissolution or winding up or
any quarterly cash dividend on our common stock, to the extent
that the aggregate cash dividend per share of common stock in
any quarter does not exceed the greater of:
- the amount per share of common stock of the next
preceding quarterly cash dividend on the common stock to
the extent that the preceding quarterly dividend did not
require an adjustment of the conversion price pursuant
to this clause (5), as adjusted to reflect subdivisions
or combinations of the common stock; and
- 3.75% of the average of the last reported sale price of
the common stock during the ten trading days immediately
prior to the declaration date of the dividend.
If an adjustment is required to be made under this clause (5) as a result of a
distribution that is a quarterly dividend, the adjustment would be based upon
the amount by which the distribution exceeds the amount of the quarterly cash
dividend permitted to be excluded pursuant to this clause (5). If an adjustment
is required to be made under this clause (5) as a result of a distribution that
is not a quarterly dividend, the adjustment would be based upon the full amount
of the distribution;
(6) we or one of our subsidiaries makes a payment in respect of a
tender offer or exchange offer for our common stock to the
extent that the cash and value of any other consideration
included in the payment per share of common stock exceeds the
current market price per share of common stock on the trading
day next succeeding the last date on which tenders or exchanges
may be made pursuant to such tender or exchange offer; and
(7) someone other than us or one of our subsidiaries makes a payment
in respect of a tender offer or exchange offer in which, as of
the closing date of the offer, our board of directors is not
-17-
recommending rejection of the offer. The adjustment referred to
in this clause (7) will only be made if:
- the tender offer or exchange offer is for an amount that
increases the offeror's ownership of common stock to
more than 25% of the total shares of common stock
outstanding; and
- the cash and value of any other consideration included
in the payment per share of common stock exceeds the
current market price per share of common stock on the
business day next succeeding the last date on which
tenders or exchanges may be made pursuant to the tender
or exchange offer.
However, the adjustment referred to in this clause (7) will generally not be
made if as of the closing of the offer, the offering documents disclose a plan
or an intention to cause us to engage in a consolidation or merger or a sale of
all or substantially all of our assets.
To the extent that we have a rights plan in effect upon conversion of the notes
into common stock, you will receive, in addition to the common stock, the rights
under the rights plan whether or not the rights have separated from the common
stock at the time of conversion, subject to limited exceptions. In the event of:
- any reclassification of our common stock;
- a consolidation, merger or combination involving us; or
- a sale or conveyance to another person or entity of all or substantially
all of our property and assets;
in which holders of our common stock would be entitled to receive stock, other
securities, other property, assets or cash for their common stock, upon
conversion of your notes you will be entitled to receive the same type of
consideration which you would have been entitled to receive if you had converted
the notes into our common stock immediately prior to any of these events.
If we distribute shares of common stock of a subsidiary of ours to all holders
of our common stock, we may elect to reserve the pro rata portion of such shares
for the benefit of the holders of notes in lieu of adjusting the conversion
price pursuant to (4) above with respect to the description of conversion price
adjustments.
You may in certain situations be deemed to have received a distribution subject
to United States federal income tax as a dividend in the event of any taxable
distribution to holders of common stock or in certain other situations requiring
a conversion price adjustment. See "United States Federal Income Tax
Consequences."
We may, from time to time, decrease the conversion price for a period of at
least 20 days if our board of directors has made a determination that this
decrease would be in our best interests. Any such determination by our board
will be conclusive. We would give holders at least 15 days' notice of any
decrease in the conversion price. In addition, we may decrease the conversion
price if our board of directors deems it advisable to avoid or diminish any
income tax to holders of common stock resulting from any stock or rights
distribution. See "United States Federal Income Tax Consequences."
We will not be required to make an adjustment in the conversion price unless the
adjustment would require a change of at least 1% in the conversion price.
However, we will carry forward any adjustments that are less than one percent of
the conversion price. Except as described above in this section, we will not
adjust the
-18-
conversion price for any issuance of our common stock or convertible or
exchangeable securities or rights to purchase our common stock or convertible or
exchangeable securities.
OPTIONAL REDEMPTION BY LSI LOGIC
The notes are not entitled to any sinking fund. At any time on or after November
6, 2004, we may redeem the notes in whole or in part at the following prices
expressed as a percentage of the principal amount:
REDEMPTION PERIOD PRICE
Beginning on November 6, 2004 and ending on October 31, 2005................. 101.6%
Beginning on November 1, 2005 and ending on October 31, 2006................. 100.8
and 100% if redeemed on November 1, 2006. In each case, subject to the next
sentence, we will pay interest to, but excluding, the redemption date to the
same holder that receives the redemption payment. However, if the redemption
date is an interest payment date, interest shall be paid to the record holder on
the relevant record date. We are required to give notice of redemption by mail
to holders not more than 60 but not less than 30 days prior to the redemption
date.
If less than all of the outstanding notes are to be redeemed, the trustee will
select the notes to be redeemed in principal amounts of $1,000 or multiples of
$1,000 by lot, pro rata or by another method the trustee considers fair and
appropriate. If a portion of your notes is selected for partial redemption and
you convert a portion of your notes, the converted portion will be deemed to be
of the portion selected for redemption.
We may not redeem the notes if we have failed to pay any interest on the notes
and such failure to pay is continuing.
REPURCHASE AT OPTION OF THE HOLDER
If a fundamental change of our company occurs at any time prior to the maturity
of the notes, you may require us to repurchase your notes, in whole or in part,
on a repurchase date that is 30 days after the date of our notice of the
fundamental change. The notes will be subject to repurchase in integral
multiples of $1,000 principal amount.
We will repurchase the notes at a price equal to 100% of the principal amount to
be repurchased, plus accrued interest to, but excluding, the repurchase date. If
the repurchase date is an interest payment date, we will pay interest to the
record holder on the relevant record date.
We will mail to all record holders a notice of a fundamental change of our
company within 10 days after it has occurred. We are also required to deliver to
the trustee a copy of the fundamental change notice. If you elect to submit your
notes for repurchase your notes, you must deliver to us or our designated agent,
on or before the 30th day after the date of our fundamental change notice, your
repurchase notice and any notes to be redeemed, duly endorsed for transfer. We
will promptly pay the redemption price for notes surrendered for redemption
following the repurchase date.
A "fundamental change" is any transaction or event (whether by means of an
exchange offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise) in connection with which all or
substantially all of our common stock is exchanged for, converted into, acquired
for or constitutes solely the right to receive, consideration which is not all
or substantially all common stock that:
-19-
- is listed on, or immediately after the transaction or event will be
listed on, a United States national securities exchange, or
- is approved, or immediately after the transaction or event will be
approved, for quotation on the NASDAQ National Market or any similar
United States system of automated dissemination of quotations of
securities prices.
We will comply with any applicable provisions of Rule 13e-4 and any other tender
offer rules under the Exchange Act in the event of a fundamental change.
These fundamental change repurchase rights could discourage a potential acquiror
of LSI. However, this fundamental change repurchase feature is not the result of
management's knowledge of any specific effort to obtain control of LSI by means
of a merger, tender offer or solicitation, or part of a plan by management to
adopt a series of anti-takeover provisions. The term "fundamental change" is
limited to specified transactions and may not include other events that might
adversely affect our financial condition or business operations. Our obligation
to offer to repurchase the notes upon a fundamental change would not necessarily
afford you protection in the event of a highly leveraged transaction,
reorganization, merger or similar transaction involving us.
We may be unable to repurchase the notes in the event of a fundamental change.
If a fundamental change were to occur, we may not have enough funds to pay the
repurchase price for all tendered notes. Any future credit agreements or other
agreements relating to our indebtedness may contain provisions prohibiting
repurchase of the notes under certain circumstances, or expressly prohibit our
repurchase of the notes upon a fundamental change or may provide that a
fundamental change constitutes an event of default under that agreement. If a
fundamental change occurs at a time when we are prohibited from repurchasing or
redeeming notes, we could seek the consent of our lenders to repurchase the
notes or attempt to refinance this debt. If we do not obtain consent, we would
not be permitted to purchase or repurchase the notes. Our failure to redeem
tendered notes would constitute an event of default under the indenture, which
might constitute a default under the terms of our other indebtedness.
SUBORDINATION
The indebtedness evidenced by the notes is subordinated to the extent provided
in the indenture to the prior payment in full in cash or other payment
satisfactory to holders of senior indebtedness of all senior indebtedness.
Upon any distribution of our assets upon any dissolution, winding up,
liquidation or reorganization, payments on the notes will be subordinated in
right of payment to the prior payment in full in cash or other payment
satisfactory to holders of senior indebtedness of all senior indebtedness.
In the event of any acceleration of the notes because of an event of default,
holders of any senior indebtedness would be entitled to payment in full in cash
or other payment satisfactory to holders of senior indebtedness of all senior
indebtedness before the holders of subordinated debt securities are entitled to
receive any payment or distribution.
We are required to promptly notify holders of senior indebtedness if payment of
the notes is accelerated because of an event of default.
-20-
As a result of these subordinated provisions, in the event of our bankruptcy,
dissolution or reorganization, holders of senior indebtedness may receive more,
ratably, and holders of the notes may receive less, ratably, than our other
creditors.
We may also not make payment on the notes if:
- a default in the payment of senior indebtedness occurs and is continuing
beyond any grace period,
- any other default occurs and is continuing with respect to designated
senior indebtedness that permits holders or their representatives of
designated senior indebtedness to accelerate its maturity, and the
trustee receives a payment blockage notice from us or some other person
permitted to give the notice under the indenture, or
- any judicial proceeding shall be pending with respect to any payment
default or non-payment default.
We may and shall resume payments on the notes:
- in case of a payment default, the date on which the default is cured or
waived or ceases to exist and
- in case of a nonpayment default, the date on which the default is cured
or waived or ceases to exist or 179 days after the receipt of the
payment blockage notice.
No new payment blockage period may start unless 365 days have elapsed from the
effectiveness of the prior payment blockage notice.
No nonpayment default that existed or was continuing on the date of delivery of
any payment blockage notice to the trustee shall be the basis for a subsequent
payment blockage notice.
The subordination provisions will not prevent the occurrence of any event of
default under the indenture.
If the trustee, any paying agent or any holder receives any payment or
distribution of assets in contravention of these subordination provisions before
all senior indebtedness is paid in full in cash or other payment satisfactory to
holders of senior indebtedness, then such payment or distribution will be held
in trust for the holders of senior indebtedness to the extent necessary to make
payment in full in cash or payment satisfactory to the holders of senior
indebtedness of all unpaid senior indebtedness.
The notes are obligations exclusively of LSI Logic. A substantial portion of our
operations are conducted through our subsidiaries. As a result, our cash flow
and our ability to service our debt, including the notes, is dependent upon the
earnings of our subsidiaries. In addition, any payment of dividends,
distributions, loans or advances by our subsidiaries to us could be subject to
statutory or contractual restrictions. Payments to us by our subsidiaries will
also be contingent upon our subsidiaries' earnings and business considerations.
Our right to receive any assets of any of our subsidiaries upon their
liquidation or reorganization, and therefore the right of the holders of the
notes to participate in those assets, will be effectively subordinated to the
claims of that subsidiary's creditors, including trade creditors. In addition,
even if we were a creditor of any of our subsidiaries, our rights as a creditor
would be subordinate to any security interest in the assets of our subsidiaries
and any indebtedness of our subsidiaries senior to that held by us.
As of September 30, 2001, our subsidiaries had approximately $127 million of
indebtedness and other liabilities outstanding to which the notes would have
been effectively subordinated, including trade and other
-21-
payables, but excluding intercompany liabilities and liabilities of a type not
required to be reflected on a balance sheet in accordance with generally
accepted accounting principles. Our subsidiaries may also from time to time
incur other additional indebtedness and liabilities.
As of September 30, 2001, we had approximately $1.5 billion of indebtedness
outstanding that would have constituted senior indebtedness. As of September 30,
2001, our subsidiaries had approximately $127 million of indebtedness and other
liabilities outstanding to which the notes would have been effectively
subordinated, including trade and other payables, but excluding intercompany
liabilities and liabilities of a type not required to be reflected on a balance
sheet in accordance with generally accepted accounting principles. Neither we
nor our subsidiaries are limited form incurring additional debt under the
indenture.
"designated senior indebtedness" means senior indebtedness under our existing
credit facility and any other senior indebtedness that expressly provides that
it is "designated senior indebtedness."
"indebtedness" means:
(1) all obligations
- for borrowed money,
- evidenced by a note, debenture, bond or written
instrument,
- in respect of leases required, in conformity with
generally accepted accounting principles, to be
accounted for as capitalized lease obligations on the
balance sheet,
- all obligations and other liabilities under any lease or
related document in connection with the lease of real
property which provides that such person is
contractually obligated to purchase or cause a third
party to purchase the leased property and as a result
guarantee a minimum residual value of the leased
property to the lessor and the obligations of such
person under such lease or related document to purchase
or to cause a third party to purchase such leased
property, and
- in respect of letters of credit, local guarantees or
bankers' acceptances;
(2) all obligation of others of the type described in clause (1)
above or clause (3), (4) or (5) below assumed by or guaranteed
or in effect guaranteed by such person;
(3) all obligations secured by a mortgage, pledge or similar
arrangement encumbering property or assets;
(4) all obligations under interest rate and currency swap
agreements, cap, floor and collar agreements, spot and forward
contracts and similar agreements and arrangements; and
(5) all deferrals or renewals of (1) through (4) above.
"senior indebtedness" means the principal, premium, if any, and interest,
including bankruptcy interest and fees, and rent payable on all our
indebtedness, whether outstanding on the date of the indenture or thereafter
created, incurred, assumed, guaranteed or in effect guaranteed by us, including
all renewals or extensions.
-22-
However, senior indebtedness shall not include:
- indebtedness evidenced by the notes;
- our 4 1/4% Convertible Subordinated Notes due 2004;
- our 4% Convertible Subordinated Notes due February 15, 2005;
- indebtedness to any of our subsidiaries, except it if is pledged as
security for any senior indebtedness;
- our accounts payable to trade creditors arising in the ordinary course
of business; and
- any indebtedness that expressly provides that it shall not be senior in
right of payment to, or on the same basis with, or is subordinated to or
junior to, the notes.
MERGER AND SALE OF ASSETS
The indenture provides that we may not consolidate with or merge with or into
any other person or convey, transfer or lease our properties and assets
substantially as an entirety to another person, unless among other items:
- we are the surviving person, or the resulting, surviving or transferee
person, if other than us, is organized and existing under the laws of
the United States, any state thereof or the District of Columbia;
- the successor entity assumes all of our obligations under the notes and
the indenture; and
- we or the successor entity will not be in default under the indenture
immediately after the transaction.
When such a person assumes our obligations in such circumstances, subject to
certain exceptions, we shall be discharged from all obligations under the notes
and the indenture.
EVENTS OF DEFAULT; NOTICE AND WAIVER
The following will be events of default under the indenture:
- we fail to pay principal or premium, if any, when due upon redemption or
repurchase or otherwise on the notes;
- we fail to pay any interest and additional interest, if any, on the
notes, when due and such failure continues for a period of 30 days;
- we fail to perform or observe any of the covenants in the indenture for
60 days after notice; or
- certain events involving our bankruptcy, insolvency or reorganization.
The trustee may withhold notice to the holders of the notes of any default,
except defaults in payment of principal, premium, if any, interest or additional
interest, if any, on the notes. However, the trustee must consider it to be in
the interest of the holders of the notes to withhold this notice.
If an event of default occurs and continues, the trustee or the holders of at
least 25% in principal amount of the outstanding notes may declare the
principal, premium, if any, and accrued interest and additional interest,
-23-
if any, on the outstanding notes to be immediately due and payable. In case of
certain events of bankruptcy or insolvency, the principal, premium, if any, and
accrued interest and additional interest, if any, on the notes will
automatically become due and payable. However, if we cure all defaults, except
the nonpayment of principal, premium, if any, interest or additional interest,
if any, that became due as a result of the acceleration, and meet certain other
conditions, with certain exceptions, this declaration may be cancelled and the
holders of a majority of the principal amount of outstanding notes may waive
these past defaults.
The holders of a majority of outstanding notes will have the right to direct the
time, method and place of any proceedings for any remedy available to the
trustee, subject to limitations specified in the indenture.
No holder of the notes may pursue any remedy under the indenture, except in the
case of a default in the payment of principal, premium, if any, or interest on
the notes, unless:
- the holder has given the trustee written notice of an event of default;
- the holders of at least 25% in principal amount of outstanding notes
make a written request, and offer reasonable indemnity, to the trustee
to pursue the remedy;
- the trustee does not receive an inconsistent direction from the holders
of a majority in principal amount of the notes; and
- the trustee fails to comply with the request within 60 days after
receipt.
We will furnish the trustee an annual statement by our officers as to whether or
not we have complied with our obligations under the indenture.
MODIFICATION AND WAIVER
The consent of the holders of majority in principal amount of the outstanding
notes is required to modify or amend the indenture. However, a modification or
amendment requires the consent of the holder of each outstanding note if it
would:
- extend the fixed maturity of any note;
- reduce the rate or extend the time for payment of interest of any note;
- reduce the principal amount or premium of any note;
- reduce any amount payable upon redemption of any note;
- adversely change our obligation to redeem any note upon a fundamental
change;
- impair the right of a holder to institute suit for payment on any note;
- change the currency in which any note is payable;
- modify the subordination provisions of any note in a manner materially
adverse to the holders;
- impair the right of a holder to convert any note;
- reduce the quorum or voting requirements under the indenture;
-24-
- subject to specified exceptions, modify certain of the provisions of the
indenture relating to modification or waiver of provisions of the
indenture; or
- reduce the percentage of notes required for consent to any modification
of the indenture.
We are permitted to modify certain provisions of the indenture without the
consent of the holders of the notes.
FORM, DENOMINATION AND REGISTRATION
The notes will be issued:
- in fully registered form;
- without interest coupons; and
- in denominations of $1,000 principal amount and integral multiples of
$1,000.
GLOBAL NOTE, BOOK-ENTRY FORM
Notes will be evidenced by one or more global notes. The global notes will be
registered in the name of Cede & Co. as DTC's nominee. Except as set forth
below, a global note may be transferred, in whole or in part, only to another
nominee of DTC or to a successor of DTC or its nominee.
Holders may hold their interests in a global note directly through DTC if such
holder is a participant in DTC, or indirectly through organizations that are
participants in DTC (called "participants"). Transfers between participants will
be effected in the ordinary way in accordance with DTC rules and will be settled
in clearing house funds. The laws of some states require that certain persons
take physical delivery of securities in definitive form. As a result, the
ability to transfer beneficial interests in a global note to such persons may be
limited.
Holders who are not participants may beneficially own interests in a global note
held by DTC only through participants, or certain banks, brokers, dealers, trust
companies and other parties that clear through or maintain a custodial
relationship with a participant, either directly or indirectly (called "indirect
participants"). So long as Cede & Co., as the nominee of DTC, is the registered
owner of a global note, Cede & Co. for all purposes will be considered the sole
holder of such global note. Except as provided below, owners of beneficial
interests in a global note will:
- not be entitled to have certificates registered in their names;
- not receive physical delivery of certificates in definitive registered
form; and
- not be considered holders of the global note.
We will pay interest on and the redemption price or repurchase price of a global
note to Cede & Co. as the registered owner of the global note, by wire transfer
of immediately available funds on each interest payment date or the redemption
date or repurchase date, as the case may be. Neither we, the trustee nor any
paying agent will be responsible or liable:
- for the records relating to, or payments made on account of, beneficial
ownership interests in a global note; or
-25-
- for maintaining, supervising or reviewing any records relating to the
beneficial ownership interests.
We have been informed that DTC's practice is to credit participants' accounts on
that payment date with payments in amounts proportionate to their respective
beneficial interests in the principal amount represented by a global note as
shown in the records of DTC, unless DTC has reason to believe that it will not
receive payment on that payment date. Payments by participants to owners of
beneficial interests in the principal amount represented by a global note held
through participants will be the responsibility of the participants, as is now
the case with securities held for the accounts of customers registered in
"street name."
Because DTC can only act on behalf of participants, who in turn act on behalf of
indirect participants, the ability of a person having a beneficial interest in
the principal amount represented by a global note to pledge such interest to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interest, may be affected by the lack of a physical
certificate evidencing its interest.
Neither we, the trustee, registrar, paying agent nor conversion agent will have
any responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations. DTC has advised us that it will take any action
permitted to be taken by a holder of notes, including the presentation of notes
for exchange, only at the direction of one or more participants to whose account
with DTC interests in a global note are credited, and only in respect of the
principal amount of the notes represented by the global note as to which the
participant or participants has or have given such direction.
DTC has advised us that it is:
- a limited purpose trust company organized under the laws of the State of
New York, and a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the Uniform Commercial
Code; and
- a "clearing agency" registered pursuant to the provisions of Section 17A
of the Exchange Act.
DTC was created to hold securities for its participants and to facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes to the accounts of its participants. Participants
include securities brokers, dealers, banks, trust companies and clearing
corporations and other organizations. Some of the participants or their
representatives, together with other entities, own DTC. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
DTC has agreed to the foregoing procedures to facilitate transfers of interests
in a global note among participants. However, DTC is under no obligation to
perform or continue to perform these procedures, and may discontinue these
procedures at any time. If DTC is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by us within 90 days, we
will issue notes in certificated form in exchange for global notes.
INFORMATION CONCERNING THE TRUSTEE
We have appointed State Street Bank and Trust Company of California, N.A., the
trustee under the indenture, as paying agent, conversion agent, note registrar
and custodian for the notes. The trustee or its affiliates may provide banking
and other services to us in the ordinary course of their business.
-26-
The indenture contains certain limitations on the rights of the trustee, if it
or any of its affiliates is then our creditor, to obtain payment of claims in
certain cases or to realize on certain property received on any claim as
security or otherwise. The trustee and its affiliates will be permitted to
engage in other transactions with us. However, if the trustee or any affiliate
continues to have any conflicting interest and a default occurs with respect to
the notes, the trustee must eliminate such conflict or resign.
-27-
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 1,300,000,000 shares of common stock,
par value $0.01 per share, and 2,000,000 shares of preferred stock, par value
$0.01 per share.
COMMON STOCK
As of January 11, 2002, there were 368,547,777 shares of common stock
outstanding held by approximately 4,443 holders of record. Each holder of common
stock is entitled to one vote per share on all matters to be voted upon by the
stockholders. Our certificate of incorporation provides that at all elections of
directors, each holder of stock shall be entitled to cumulative voting. The
holder may cast all of these votes for a single candidate or may distribute them
among the number of directors to be elected. Holders of common stock are
entitled to receive dividends declared by the board of directors, out of funds
legally available for the payment of dividends subject to preferences that may
be applicable to the holders of preferred stock. Upon liquidation, dissolution
or winding up of our business, the holders of common stock are entitled to share
equally in all assets available for distribution after payment of liabilities,
subject to prior distribution rights of preferred stock. The holders of common
stock have no preemptive or conversion rights or other subscription rights. No
redemption or sinking fund provisions apply to the common stock.
All outstanding shares of common stock are fully paid and nonassessable.
PREFERRED STOCK
As of January 11, 2002, no shares of preferred stock were issued and
outstanding. The board of directors has the authority to issue the preferred
stock in one or more series and to fix the following rights, preferences,
privileges and restrictions of the preferred stock without further vote or
action by our stockholders:
- dividend rights and rates,
- terms of conversion, voting rights, terms of redemption, liquidation
preferences,
- the number of shares constituting any series or the designation of such
series.
Preferred stock could be issued quickly with terms calculated to delay or
prevent a change in control and may adversely affect the voting and other rights
of the holders of common stock. Except in accordance with the rights plan
described below, we have no present plans to issue any shares of preferred
stock.
PREFERRED SHARES RIGHTS PLAN
On November 16, 1988, our board of directors authorized a dividend distribution
of one share purchase right for each share of common stock outstanding as of the
close of business on December 15, 1988 and each future share of common stock.
The Amended and Restated Preferred Shares Rights Agreement dated November 20,
1998 between us and BankBoston, N.A., as rights agent, provides, among other
things, that after a distribution date, each right entitles the registered
holder to purchase from us 1/1000 of a share of our Series A participating
preferred stock, $0.01 par value, initially at a price of $100.00.
The rights will expire ten years after the date of issuance, or December 15,
2008, unless earlier redeemed, and will become exercisable and transferable
separately from the common stock following the tenth day after a person or
group:
-28-
1. acquires beneficial ownership of 20% or more of our common
stock,
2. announces a tender or exchange offer, the consummation of which
would result in ownership by a person or group of 20% or more of
our common stock, or
3. a later date after the occurrence of an event described in
clause (1) or (2) above as may be determined by a majority of
directors not affiliated with the acquiring group or person.
Each right will entitle the holder to purchase, at the then-current purchase
price, a number of shares of common stock having a then-current market value of
twice the purchase price if:
- an acquiror obtains 20% or more of our common stock,
- an acquiring entity combines with us in a transaction in which
we are the surviving company and our common stock remains
outstanding and unchanged, or
- we effect or permit certain "self-dealing" transactions with an
owner of 20% or more of our common stock or its affiliates or
associates.
Each right will entitle the holder to purchase, at the then-current
purchase price, a number of shares of common stock of the person engaging in the
transaction having a then-current market value of twice the purchase price if:
- we merge into another entity,
- an acquiring entity merges into us and our common stock is
changed into or exchanged for other securities or assets, or
- we sell more than 50% of our assets or earning power.
The Series A participating preferred purchasable upon exercise of the rights
will be nonredeemable and junior to any other series of our preferred stock.
Each share of Series A participating preferred will have a preferential
cumulative quarterly dividend in an amount equal to 1,000 times the dividend
declared on each share of common stock. In the event of liquidation, the holders
of Series A participating preferred will receive a preferred liquidation payment
equal to 1,000 times the aggregate amount to be distributed per share to the
holders of shares of common stock plus accrued dividends. Following payment of
the Series A liquidation preference, and after the holders of shares of common
stock shall have received an amount per share equal to the quotient obtained by
dividing the Series A liquidation preference by 1,000, the holders of Series A
participating preferred and holders of common stock will share ratably and
proportionately the remaining assets to be distributed in liquidation. Each
share of Series A participating preferred will have 1,000 votes and will vote
together with the shares of common stock. In the event of any merger,
consolidation or other transaction in which shares of common stock are exchanged
for or changed into other securities, cash and/or other property, each share of
Series A participating preferred will be entitled to receive 1,000 times the
amount and type of consideration received per share of common stock.
Although the rights should not interfere with a business combination approved by
the board of directors in the manner set forth in the rights plan, they may
cause substantial dilution to a person or group that attempts to acquire control
without approval by the board.
-29-
DELAWARE GENERAL CORPORATION LAW SECTION 203
We are a Delaware corporation subject to Section 203 of the Delaware General
Corporation Law, an anti-takeover law. In general, Section 203 prohibits a
publicly held Delaware corporation from engaging in a "business combination"
transaction with an "interested stockholder" for a period of three years after
the person became an interested stockholder, unless the business combination or
the transaction in which the person became an interested stockholder is approved
in the manner described below.
The Section 203 restrictions do not apply if:
(1) the business combination or transaction is approved by our board
of directors before the date the interested stockholder obtained
the status,
(2) upon consummation of the transaction which resulted in the
stockholder obtaining the status, the stockholder owned at least
85% of the shares of stock entitled to vote in the election of
directors, the "voting stock." The 85% calculation does not
include those shares:
- owned by directors who are also officers of the target
corporation, and
- held by employee stock plans which do not permit
employees to decide confidentially whether to accept a
tender or exchange offer, or
(3) on or after the date the interested stockholder obtained its
status, the business combination is approved by our board of
directors and at a stockholder meeting by the affirmative vote
of at least 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder.
Generally, a "business combination" includes a merger, asset sale, or other
transaction resulting in a financial benefit to the interested stockholder.
Generally, an "interested stockholder" is a person who, together with affiliates
and associates, owns, or within three years prior to the determination of
interested stockholder status, did own, 15% or more of a corporation's voting
stock. Section 203 may prohibit or delay mergers or other takeover or change in
control attempts with respect to LSI Logic Corporation. As a result, Section 203
may discourage attempts to acquire us even though such transaction may offer our
stockholders the opportunity to sell their stock at a price above the prevailing
market price.
CHARTER AND BYLAW PROVISIONS
Our charter and bylaws include provisions that may have the effect of
discouraging, delaying or preventing a change in control or an unsolicited
acquisition proposal that a stockholder might consider favorable, including a
proposal that might result in the payment of a premium over the market price for
the shares held by stockholders as follows:
- our charter provides for cumulative voting at all elections of
directors,
- our board has the power to establish the rights, preferences and
privileges of authorized and unissued shares,
- our charter limits the liability of our directors, in their capacity as
directors but not in their capacity as officers, to LSI Logic
Corporation or its stockholders to the fullest extent permitted by
Delaware law.
-30-
INDEMNIFICATION ARRANGEMENTS
Our bylaws provide that our directors, officers and agents shall be indemnified
against expenses, including attorneys' fees, judgments, fines, settlements
actually and reasonably incurred in connection with any proceeding arising out
of their status as such, if such director, officer or agent acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of LSI Logic Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such conduct was
unlawful.
We have entered into agreements to indemnify our directors and officers, in
addition to the indemnification provided for in our Certificate of Incorporation
and Bylaws. These agreements, among other things, indemnify our directors and
officers for certain expenses, including attorney's fees, judgments, fines and
settlement amounts incurred by any such person in any action or proceeding,
including any action by or in the right of LSI, arising out of such person's
services as a director or officer of LSI, any subsidiary of LSI or any other
company or enterprise to which the person provides services at the request of
LSI.
CHANGE OF CONTROL AGREEMENTS
We have entered into certain severance agreements with each of our executive
officers providing for the acceleration of unvested options held by such
executive officers and the payment of certain lump sum amounts and benefits upon
an involuntary termination at any time within twelve (12) months after a change
of control.
A "change of control" is defined as
- the consummation of a merger or consolidation with any other
corporation, other than a merger or consolidation in which we are the
surviving entity,
- the approval by our stockholders of a plan of liquidation or an
agreement for the sale or disposition by us of all or substantially all
of our assets, and
- any person becoming the beneficial owner, as defined in Rule 13d-3 under
the Securities and Exchange Act of 1934, as amended, of 50% or more of
our total outstanding voting securities.
Our successors shall be bound under the change of control severance agreements.
The change of control severance agreements terminate on November 20, 2003.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is EquiServe Trust
Company, N.A.
-31-
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
This section summarizes the material U.S. federal income tax considerations
relating to the purchase, ownership, and disposition of the notes and of common
stock into which the notes may be converted. This summary does not provide a
complete analysis of all potential tax considerations. The information provided
below is based on existing authorities. These authorities may change, or the
Internal Revenue Service might interpret the existing authorities differently.
In either case, the tax consequences of purchasing, owning or disposing of notes
or common stock could differ from those described below. The summary generally
applies only to "U.S. Holders" that hold the notes or common stock as "capital
assets" (generally, for investment). For this purpose, U.S. Holders include
citizens or residents of the United States and corporations organized under the
laws of the United States or any state. Trusts are U.S. Holders if they are
subject to the primary supervision of a U.S. court and the control of one of
more U.S. persons. Special rules apply to nonresident alien individuals and
foreign corporations or trusts ("Non-U.S. Holders"). This summary describes
some, but not all, of these special rules. For U.S. federal income tax purposes,
income earned through a foreign or domestic partnership or similar entity is
attributed to its owners. The summary generally does not address tax
considerations that may be relevant to particular investors because of their
specific circumstances, or because they are subject to special rules. Finally,
the summary does not describe the effect of the federal estate and gift tax laws
on U.S. Holders or the effects of any applicable foreign, state, or local laws.
Investors considering the purchase of notes should consult their own tax
advisors regarding the application of the U.S. federal income tax laws to their
particular situations and the consequences of federal estate or gift tax laws,
foreign, state, or local laws, and tax treaties.
U.S. HOLDERS
TAXATION OF INTEREST
U.S. Holders will be required to recognize as ordinary income any interest paid
or accrued on the notes, in accordance with their regular method of accounting.
In general, if the terms of a debt instrument entitle a holder to receive
payments other than fixed periodic interest that exceed the issue price of the
instrument, the holder may be required to recognize additional interest as
"original issue discount" over the term of the instrument. We believe that the
notes will not be issued with original issue discount. The original issue
discount rules allow contingent payments such as these to be disregarded in
computing a holder's interest income if the contingency is "remote." We believe
that there is only a remote possibility that we would be required to pay
additional interest because of a failure to provide registration rights. Our
determination in this regard is binding on U.S. Holders unless they disclose
their contrary position. If, contrary to expectations, we pay additional
interest, U.S. Holders would be required to recognize additional interest
income.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
A U.S. Holder will generally recognize capital gain or loss if the holder
disposes of a note in a sale, redemption or exchange other than a conversion of
the note into common stock. The holder's gain or loss will equal the difference
between the proceeds received by the holder and the holder's adjusted tax basis
in the note. The proceeds received by the holder will include the amount of any
cash and the fair market value of any other property received for the note. The
holder's tax basis in the note will generally equal the amount the holder paid
for the note. The portion of any proceeds that is attributable to accrued
interest will not be
-32-
taken into account in computing the holder's capital gain or loss. Instead, that
portion will be recognized as ordinary interest income to the extent that the
holder has not previously included the accrued interest in income. The gain or
loss recognized by a holder on a disposition of the note will be long-term
capital gain or loss if the holder held the note for more than one year.
Long-term capital gains of non-corporate taxpayers are taxed at lower rates than
those applicable to ordinary income. The deductibility of capital losses is
subject to limitation.
CONVERSION OF THE NOTES
A U.S. Holder generally will not recognize any income, gain or loss on
converting a note into common stock. If the holder receives cash in lieu of a
fractional share of stock, however, the holder would be treated as if he
received the fractional share and then had the fractional share redeemed for the
cash. The holder would recognize gain or loss equal to the difference between
the cash received and that portion of his basis in the stock attributable to the
fractional share. The holder's aggregate basis in the common stock (including
any fractional share for which cash is paid) will equal his adjusted basis in
the note. The holder's holding period for the stock will include the period
during which he held the note.
DIVIDENDS
If, after a U.S. Holder converts a note into common stock, we make a
distribution in respect of that stock, the distribution will be treated as a
dividend, taxable to the U.S. Holder as ordinary income, to the extent it is
paid from our current or accumulated earnings and profits. If the distribution
exceeds our current and accumulated profits, the excess will be treated first as
a tax-free return of the holder's investment, up to the holder's basis in its
common stock. Any remaining excess will be treated as capital gain. If the U.S.
Holder is a U.S. corporation, it would generally be able to claim a deduction
equal to a portion of any dividends received.
The terms of the notes allow for changes in the conversion price of the notes in
certain circumstances. A change in conversion price that allows noteholders to
receive more shares of common stock on conversion may increase the noteholders'
proportionate interests in our earnings and profits or assets. In that case, the
noteholders would be treated as though they received a dividend in the form of
our stock. Such a constructive stock dividend could be taxable to the
noteholders, although they would not actually receive any cash or other
property. A taxable constructive stock dividend would result, for example, if
the conversion price is adjusted to compensate noteholders for distributions of
cash or property to our shareholders. Not all changes in conversion price that
allow noteholders to receive more stock on conversion, however, increase the
noteholders' proportionate interests in the company. For instance, a change in
conversion price could simply prevent the dilution of the noteholders' interests
upon a stock split or other change in capital structure. Changes of this type,
if made by a bona fide, reasonable adjustment formula, are not treated as
constructive stock dividends. Conversely, if an event occurs that dilutes the
noteholders' interests and the conversion price is not adjusted, the resulting
increase in the proportionate interests of our shareholders could be treated as
a taxable stock dividend to them. Any taxable constructive stock dividends
resulting from a change to, or failure to change, the conversion price would be
treated like dividends paid in cash or other property. They would result in
ordinary income to the recipient, to the extent of our current or accumulated
earnings and profits, with any excess treated as a tax-free return of capital or
as capital gain.
SALE OF COMMON STOCK
A U.S. Holder will generally recognize capital gain or loss on a sale or
exchange of common stock. The holder's gain or loss will equal the difference
between the proceeds received by the holder and the holder's adjusted tax basis
in the stock. The proceeds received by the holder will include the amount of any
cash and the fair market value of any other property received for the stock. The
gain or loss recognized by a holder on
-33-
a sale or exchange of stock will be long-term capital gain or loss if the holder
held the stock for more than one year.
SPECIAL TAX RULES APPLICABLE TO NON-U.S. HOLDERS
TAXATION OF INTEREST
Payments of interest to nonresident persons or entities are generally subject to
U.S. federal income tax at a rate of 30 percent, collected by means of
withholding by the payor. Payments of interest on the notes to most Non-U.S.
Holders, however, will qualify as "portfolio interest," and thus will be exempt
from the withholding tax, if the holders certify their nonresident status as
described below. The portfolio interest exception will not apply to payments of
interest to a Non-U.S. Holder that:
- owns, directly or indirectly, at least 10 percent of our voting stock,
or
- is a "controlled foreign corporation" that is related to us.
In general, a foreign corporation is a controlled foreign corporation if at
least 50 percent of its stock is owned, directly or indirectly, by one or more
U.S. persons that each owns, directly or indirectly, at least 10 percent of the
corporation's voting stock.
The portfolio interest exception and several of the special rules for Non-U.S.
Holders described below apply only if the holder certifies its nonresident
status. A Non-U.S. Holder can meet this certification requirement by providing a
Form W-8BEN or appropriate substitute form to us, or our paying agent. If the
holder holds the note through a financial institution or other agent acting on
the holder's behalf, the holder will be required to provide appropriate
documentation to the agent. The holder's agent will then be required to provide
certification to us or our paying agent, either directly or through other
intermediaries. For payments made to a foreign partnership, the certification
requirements generally apply to the partners rather than the partnership.
SALE, EXCHANGE OR REDEMPTION OF NOTES
Non-U.S. Holders generally will not be subject to U.S. federal income tax on any
gain realized on the sale, exchange, or other disposition of notes. This general
rule, however, is subject to several exceptions. For example, the gain would be
subject to U.S. federal income tax if:
- the gain is effectively connected with the conduct by the Non-U.S.
Holder of a U.S. trade or business,
- the Non-U.S. Holder was a citizen or resident of the United States and
thus is subject to special rules that apply to expatriates, or
- the rules of the Foreign Investment in Real Property Tax Act ("FIRPTA")
(described below) treat the gain as effectively connected with a U.S.
trade or business.
The FIRPTA rules may apply to a sale, exchange or other disposition of notes if
we are, or were within five years before the transaction, a "U.S. real property
holding corporation" ("USRPHC"). In general, we would be a USRPHC if interests
in U.S. real estate comprised most of our assets. We do not believe that we are
a USRPHC or that we will become one in the future.
-34-
CONVERSION OF THE NOTES
A Non-U.S. Holder generally will not recognize any income, gain or loss on
converting a note into common stock. Any gain recognized as a result of the
holder's receipt of cash in lieu of a fractional share of stock would also
generally not be subject to U.S. federal income tax. See--Special Tax Rules
Applicable to Non-U.S. Holders--Sale of Common Stock.
DIVIDENDS
Dividends paid to a Non-U.S. Holder on common stock received on conversion of a
note will generally be subject to U.S. withholding tax at a 30 percent rate.
Constructive dividends resulting from a change, or failure to change, the
conversion price of notes would probably also be subject to withholding tax. The
withholding tax might not apply, however, or might apply at a reduced rate,
under the terms of a tax treaty between the United States and the Non-U.S.
Holder's country of residence. A Non-U.S. Holder must demonstrate its
entitlement to treaty benefits by certifying its nonresident status. Some of the
common means of meeting this requirement are described above under "Special Tax
Rules Applicable to Non-U.S. Holders--Taxation of Interest."
SALE OF COMMON STOCK
Non-U.S. Holders will generally not be subject to U.S. federal income tax on any
gains realized on the sale, exchange, or other disposition of common stock. This
general rule, however, is subject to exceptions, some of which are described
under "Special Tax Rules Applicable to Non-U.S. Holders--Sale, Exchange or
Redemption of Notes."
INCOME OR GAINS EFFECTIVELY CONNECTED WITH A U.S. TRADE OR BUSINESS
The preceding discussion of the tax consequences of the purchase, ownership or
disposition of notes or common stock by a Non-U.S. Holder assumes that the
holder is not engaged in a U.S. trade or business. If any interest on the notes,
dividends on common stock, or gain from the sale, exchange or other disposition
of the notes or stock is effectively connected with a U.S. trade or business
conducted by the Non-U.S. Holder, then the income or gain will be subject to
U.S. federal income tax at the regular graduated rates. If the Non-U.S. Holder
is eligible for the benefits of a tax treaty between the United States and the
holder's country of residence, any "effectively connected" income or gain will
be subject to U.S. federal income tax only if it is also attributable to a
permanent establishment maintained by the holder in the United States. Payments
of dividends that are effectively connected with a U.S. trade or business, and
therefore included in the gross income of a Non-U.S. Holder, will not be subject
to the 30 percent withholding tax. To claim exemption from withholding, the
holder must certify its qualification, which can be done by filing a Form
W-8ECI. If the Non-U.S. Holder is a corporation, that portion of its earnings
and profits that is effectively connected with its U.S. trade or business would
generally be subject to a "branch profits tax." The branch profits tax rate is
generally 30 percent, although an applicable tax treaty might provide for a
lower rate.
U.S. FEDERAL ESTATE TAX
The estates of nonresident alien individuals are subject to U.S. federal estate
tax on property with a U.S. situs. The notes will not be U.S. situs property as
long as interest on the notes paid immediately before the death of the holder
would have qualified as portfolio interest, exempt from withholding tax as
described above under "Special Tax Rules Applicable to Non-U.S.
Holders--Taxation of Interest." Because we are a U.S. corporation, our common
stock will be U.S. situs property, and therefore will be included in the taxable
-35-
estate of a nonresident alien decedent. The U.S. federal estate tax liability of
the estate of a nonresident alien may be affected by a tax treaty between the
United States and the decedent's country of residence.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The Code and the Treasury regulations require those who make specified payments
to report the payments to the IRS. Among the specified payments are interest,
dividends, and proceeds paid by brokers to their customers. The required
information returns enable the IRS to determine whether the recipient properly
included the payments in income. This reporting regime is reinforced by "backup
withholding" rules. These rules require the payors to withhold tax from payments
subject to information reporting if the recipient fails to cooperate with the
reporting regime by failing to provide his taxpayer identification number to the
payor, furnishing an incorrect identification number, or repeatedly failing to
report interest or dividends on his returns. The withholding tax rate is
currently 30.5 percent but will be reduced in stages, down to 28 percent at the
beginning of 2006. The information reporting and backup withholding rules do not
apply to payments to corporations, whether domestic or foreign.
Payments of interest or dividends to individual U.S. Holders of notes or common
stock will generally be subject to information reporting, and will be subject to
backup withholding unless the holder provides us or our paying agent with a
correct taxpayer identification number.
The information reporting and backup withholding rules do not apply to payments
that are subject to the 30 percent withholding tax on dividends or interest paid
to nonresidents, or to payments that are exempt from that tax by application of
a tax treaty or special exception. Therefore, payments to Non-U.S. Holders of
dividends on common stock, or interest on notes, will generally not be subject
to information reporting or backup withholding. To avoid backup withholding, a
Non-U.S. Holder will have to certify its nonresident status. Some of the common
means of doing so are described under "Special Rules Applicable to Non-U.S.
Holders--Taxation of Interest."
Payments made to U.S. Holders by a broker upon a sale of notes or common stock
will generally be subject to information reporting and backup withholding. If,
however, the sale is made through a foreign office of a U.S. broker, the sale
will be subject to information reporting but not backup withholding. If the sale
is made through a foreign office of a foreign broker, the sale will generally
not be subject to either information reporting or backup withholding. This
exception may not apply, however, if the foreign broker is owned or controlled
by U.S. persons, or is engaged in a U.S. trade or business.
Payments made to Non-U.S. Holders by a broker upon a sale of notes or common
stock will not be subject to information reporting or backup withholding as long
as the Non-U.S. Holder certifies its foreign status.
Any amounts withheld from a payment to a holder of notes or common stock under
the backup withholding rules can be credited against any U.S. federal income tax
liability of the holder provided the required information is furnished to the
IRS.
The preceding discussion of U.S. federal income tax considerations is for
general information only. It is not tax advice. Each prospective investor should
consult its own tax advisor regarding the particular U.S. federal, state, local,
and foreign tax consequences of purchasing, holding, and disposing of our notes
or common stock, including the consequences of any proposed change in applicable
laws.
-36-
SELLING SECURITYHOLDERS
We originally issued the notes in a private placement to the initial purchaser
Lehman Brothers Inc. in October 2001. The initial purchaser resold the notes to
purchasers, including the selling securityholders listed below, in transactions
exempt from registration pursuant to Rule 144A. Selling securityholders may
offer and sell the notes and the underlying common stock pursuant to this
prospectus.
The following table contains information as of January 24, 2002 with respect to
the selling securityholders and the principal amount of notes and the underlying
common stock beneficially owned by each selling securityholder that may be
offered using this prospectus.
-------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT AT NUMBER OF
MATURITY OF SHARES OF
NOTES COMMON
BENEFICIALLY PERCENTAGE STOCK PERCENTAGE OF
OWNED THAT OF NOTES THAT MAY COMMON STOCK
NAME MAY BE SOLD OUTSTANDING BE SOLD(1) OUTSTANDING(2)
-------------------------------------------------------------------------------------------------------------
Akela Capital Master Fund, LTD $ 1,500,000 * 56,949 *
-------------------------------------------------------------------------------------------------------------
Allstate Insurance Company $ 2,350,000 * 89,221 *
-------------------------------------------------------------------------------------------------------------
Allstate Life Insurance Company $ 1,000,000 * 37,966 *
-------------------------------------------------------------------------------------------------------------
Alpha U.S. Sub Fund VIII, LLC $ 120,000 * 4,555 *
-------------------------------------------------------------------------------------------------------------
Banc of America Securities LLC $ 1,000,000 * 37,966 *
-------------------------------------------------------------------------------------------------------------
Bank Austria Cayman Islands LTD $ 4,900,000 1.0% 186,035 *
-------------------------------------------------------------------------------------------------------------
BankAmerica Pension Plan $ 1,000,000 * 37,966 *
-------------------------------------------------------------------------------------------------------------
Canyon Capital Arbitrage Master Hedge Fund, LTD $ 7,000,000 1.4% 265,765 *
-------------------------------------------------------------------------------------------------------------
Canyon Mac 18 LTD (RMF) $ 3,000,000 * 113,899 *
-------------------------------------------------------------------------------------------------------------
Canyon Value Realization Fund, L.P. $ 8,000,000 1.6% 303,732 *
-------------------------------------------------------------------------------------------------------------
Canyon Value Realization Fund (Cayman), LTD $15,000,000 3.1% 569,497 *
-------------------------------------------------------------------------------------------------------------
Cheyne Capital Management Limited $ 5,000,000 1.0% 189,832 *
-------------------------------------------------------------------------------------------------------------
Chrysler Corporation Master Retirement Trust $ 2,895,000 * 109,913 *
-------------------------------------------------------------------------------------------------------------
Cobra Master Fund, Ltd. $ 1,000,000 * 37,966 *
-------------------------------------------------------------------------------------------------------------
Credit Suisse Asset Management $ 1,500,000 * 56,949 *
-------------------------------------------------------------------------------------------------------------
Deephaven Domestic Convertible Trading Ltd. $ 3,600,000 * 136,679 *
-------------------------------------------------------------------------------------------------------------
Deeprock & Co. $ 1,000,000 * 37,966 *
-------------------------------------------------------------------------------------------------------------
Delta Air Lines Master Trust (c/o Oaktree
Capital Management, LLC) $ 785,000 * 29,803 *
-------------------------------------------------------------------------------------------------------------
Delta Pilots D & S Trust $ 390,000 * 14,806 *
-------------------------------------------------------------------------------------------------------------
Federated Equity Income Fund, Inc. $23,000,000 4.7% 873,229 *
-------------------------------------------------------------------------------------------------------------
Federated Insurance Series, on behalf of its $ 1,000,000 * 37,966 *
Federated Equity Income Fund II
-------------------------------------------------------------------------------------------------------------
First Union International Capital Markets Inc. $18,500,000 3.8% 702,380 *
-------------------------------------------------------------------------------------------------------------
General Motors Welfare Benefit Trust (VEBA) $ 1,000,000 * 37,966 *
-------------------------------------------------------------------------------------------------------------
Global Bermuda Limited Partnership $ 1,600,000 * 60,746 *
-------------------------------------------------------------------------------------------------------------
Goldman Sachs and Company $ 6,250,000 1.3% 237,290 *
-------------------------------------------------------------------------------------------------------------
Grace Brothers Management, LLC $ 2,000,000 * 75,933 *
-------------------------------------------------------------------------------------------------------------
J.P. Morgan Securities Inc. $16,250,000 3.3% 616,955 *
-------------------------------------------------------------------------------------------------------------
Lakeshore International Ltd. $ 6,400,000 1.3% 242,985 *
-------------------------------------------------------------------------------------------------------------
Maple Securities USA Inc. $ 1,000,000 * 37,966 *
-------------------------------------------------------------------------------------------------------------
Merrill, Lynch, Pierce, Fenner and Smith, Inc. $ 500,000 * 18,983 *
-------------------------------------------------------------------------------------------------------------
Microsoft Corporation $ 2,205,000 * 83,716 *
-------------------------------------------------------------------------------------------------------------
Morgan Stanley & Co. $10,000,000 2.0% 379,665 *
-------------------------------------------------------------------------------------------------------------
Motion Picture Industry Health Plan -- Active
Member Fund $ 265,000 * 10,061 *
-------------------------------------------------------------------------------------------------------------
Motion Picture Industry Health Plan -- Retiree
Member Fund $ 115,000 * 4,366 *
-------------------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust, on behalf of
its Federated NSAT Equity Income Fund $ 550,000 * 20,881 *
-------------------------------------------------------------------------------------------------------------
Newport Investments Inc. $ 280,000 * 10,630 *
-------------------------------------------------------------------------------------------------------------
OCM Convertible Trust $ 1,785,000 * 67,770 *
-------------------------------------------------------------------------------------------------------------
Ohio National Fund, Inc., on behalf of its
Equity Income Portfolio $ 100,000 * 3,796 *
-------------------------------------------------------------------------------------------------------------
-37-
-------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT AT NUMBER OF
MATURITY OF SHARES OF
NOTES COMMON
BENEFICIALLY PERCENTAGE STOCK PERCENTAGE OF
OWNED THAT OF NOTES THAT MAY COMMON STOCK
NAME MAY BE SOLD OUTSTANDING BE SOLD(1) OUTSTANDING(2)
-------------------------------------------------------------------------------------------------------------
Oppenheimer Convertible Securities Fund $ 5,000,000 1.0% 189,832 *
-------------------------------------------------------------------------------------------------------------
Pacific Life Insurance $ 1,000,000 * 37,966 *
-------------------------------------------------------------------------------------------------------------
Partner Reinsurance Company Ltd. $ 465,000 * 17,654 *
-------------------------------------------------------------------------------------------------------------
Peoples Benefit Life Insurance Company TEAMSTERS $ 6,000,000 1.2% 227,799 *
-------------------------------------------------------------------------------------------------------------
Qwest Occupational Health Trust $ 215,000 * 8,162 *
-------------------------------------------------------------------------------------------------------------
Ramius Capital Group $ 420,000 * 15,945 *
-------------------------------------------------------------------------------------------------------------
Retail Clerks Pension Trust $ 1,000,000 * 37,966 *
-------------------------------------------------------------------------------------------------------------
Retail Clerks Pension Trust #2 $ 1,000,000 * 37,966 *
-------------------------------------------------------------------------------------------------------------
RCG Halifax Master Fund, LTD $ 175,000 * 6,644 *
-------------------------------------------------------------------------------------------------------------
RCG Latitude Master Fund, LTD $ 1,225,000 * 46,508 *
-------------------------------------------------------------------------------------------------------------
RCG Multi Strategy LP $ 280,000 * 10,630 *
-------------------------------------------------------------------------------------------------------------
Robertson Stephens $ 15,000,000 3.1% 569,497 *
-------------------------------------------------------------------------------------------------------------
Salomon Brothers Asset Management Inc. $ 30,500,000 6.2% 1,157,978 *
-------------------------------------------------------------------------------------------------------------
Siemens/Convertibles Global Markets $ 1,000,000 * 37,966 *
-------------------------------------------------------------------------------------------------------------
St. Albans Partners Ltd. $ 5,000,000 1.0% 189,832 *
-------------------------------------------------------------------------------------------------------------
State Employees' Retirement Fund of the State
of Delaware $ 1,150,000 * 43,661 *
-------------------------------------------------------------------------------------------------------------
State of Connecticut Combined Investment Funds $ 2,435,000 * 92,448 *
-------------------------------------------------------------------------------------------------------------
Susquehanna Capital Group $ 6,250,000 1.3% 237,290 *
-------------------------------------------------------------------------------------------------------------
The Class I C Company $ 1,500,000 * 56,949 *
-------------------------------------------------------------------------------------------------------------
The Northwestern Mutual Life Insurance Company $ 19,250,000 3.9% 730,855 *
-------------------------------------------------------------------------------------------------------------
The Northwestern Mutual Life Insurance Company
for its Group Annuity Separate Account $ 1,300,000 * 49,356 *
-------------------------------------------------------------------------------------------------------------
Van Kampen Harbor Fund $ 5,000,000 1.0% 189,832 *
-------------------------------------------------------------------------------------------------------------
Vanguard Convertible Securities Fund, Inc. $ 2,795,000 * 106,116 *
-------------------------------------------------------------------------------------------------------------
Yield Strategies Fund II, LP $ 5,000,000 1.0% 189,832 *
-------------------------------------------------------------------------------------------------------------
Any other holder of Notes or future transferee,
pledgee, donee or successor of any holder (3)(4) $223,200,000 45.6% 8,474,125 2.3%
-------------------------------------------------------------------------------------------------------------
* Less than 1%
(1) Assumes conversion of all of the holder's notes at a conversion price of
approximately $26.339 per share of common stock. However, this
conversion price will be subject to adjustment as described under
"Description of Notes--Conversion of Notes". As a result, the amount of
common stock issuable upon conversion of the notes may increase or
decrease in the future.
(2) Calculated based on Rule 13d-3(d)(i) of the Exchange Act using
368,547,777 shares of common stock outstanding as of January 11, 2002.
In calculating this amount, we treated as outstanding the number of
shares of common stock issuable upon conversion of all of that
particular holder's notes. However, we did not assume the conversion of
any other holder's notes.
(3) Information about other selling security holders will be set forth in
prospectus supplements, if required.
(4) Assumes that any other holders of notes, or any future transferees,
pledgees, donees or successors of or from any such other holders of
notes, do not beneficially own any common stock other than the common
stock issuable upon conversion of the notes at the initial conversion
rate.
We prepared this table based on the information supplied to us by the selling
securityholders named in the table.
The selling securityholders listed in the above table may have sold or
transferred, in transactions exempt from the registration requirements of the
Securities Act of 1933, some or all of their notes since the date on which the
information in the above table is presented. Information about the selling
securityholders may change from over time. Any changed information will be set
forth in prospectus supplements.
Because the selling securityholders may offer all or some of their notes or the
underlying common stock from time to time, we cannot estimate the amount of the
notes or underlying common stock that will be held by the selling
securityholders upon the termination of any particular offering. See "Plan of
Distribution".
-38-
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the notes and the
underlying common stock offered by this prospectus. The notes and the underlying
common stock may be sold from time to time to purchasers:
- directly by the selling securityholders;
- through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from
the selling securityholders or the purchasers of the notes and the
underlying common stock.
The selling securityholders and any such broker-dealers or agents who
participate in the distribution of the notes and the underlying common stock may
be deemed to be "underwriters". As a result, any profits on the sale of the
notes and underlying common stock by selling securityholders and any discounts,
commissions or concessions received by any such broker-dealers or agents might
be deemed to be underwriting discounts and commissions under the Securities Act.
If the selling securityholders are deemed to be underwriters, the selling
securityholders may be subject to certain statutory liabilities of, including,
but not limited to, Sections 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act.
If the notes and underlying common stock are sold through underwriters or
broker-dealers, the selling securityholders will be responsible for underwriting
discounts or commissions or agent's commissions.
The notes and underlying common stock may be sold in one or more transactions
at:
- fixed prices;
- prevailing market prices at the time of sale;
- varying prices determined at the time of sale; or
- negotiated prices.
These sales may be effected in transactions:
- on any national securities exchange or quotation service on which the
notes and underlying common stock may be listed or quoted at the time of
the sale, including the Nasdaq National Market in the case of the common
stock;
- in the over-the-counter market;
- in transactions otherwise than on such exchanges or services or in the
over-the-counter market; or
- through the writing of options.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of the notes and underlying common stock or otherwise,
the selling securityholders may enter into hedging transactions with
broker-dealers. These broker-dealers may in turn engage in short sales of the
notes and underlying common stock in the course of hedging their positions. The
selling
-39-
securityholders may also sell the notes and underlying common stock short and
deliver notes and underlying common stock to close out short positions, or loan
or pledge notes and underlying common stock to broker-dealers that in turn may
sell the notes and underlying common stock.
To our knowledge, there are currently no plans, arrangement or understandings
between any selling securityholders and any underwriter, broker-dealer or agent
regarding the sale of the notes and the underlying common stock by the selling
securityholders. Selling securityholders may not sell any or all of the notes
and the underlying common stock offered by them pursuant to this prospectus. In
addition, we cannot assure you that any such selling securityholder will not
transfer, devise or gift the notes and the underlying common stock by other
means not described in this prospectus.
Our common stock is listed on the New York Stock Exchange Composite Tape under
the symbol "LSI". We do not intend to apply for listing of the notes on any
securities exchange or for quotation through the New York Stock Exchange.
Accordingly, no assurance can be given as to the development of liquidity or any
trading market for the notes. See "Risk Factors--A public market may not develop
for the notes".
There can be no assurance that any selling securityholder will sell any or all
of the notes or underlying common stock pursuant to this prospectus. In
addition, any notes or underlying common stock covered by this prospectus that
qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be
sold under Rule 144 or Rule 144A rather than pursuant to this prospectus.
The selling securityholders and any other person participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the notes and the underlying common stock by the
selling securityholders and any other such person. In addition, Regulation M of
the Exchange Act may restrict the ability of any person engaged in the
distribution of the notes and the underlying common stock to engage in
market-making activities with respect to the particular notes and the underlying
common stock being distributed for a period of up to five business days prior to
the commencement of such distribution. This may affect the marketability of the
notes and the underlying common stock and the ability of any person or entity to
engage in market-making activities with respect to the notes and the underlying
common stock.
Pursuant to the registration rights agreement filed as an exhibit to this
registration statement, we and the selling securityholders will be indemnified
by the other against certain liabilities, including certain liabilities under
the Securities Act or will be entitled to contribution in connection with these
liabilities.
We have agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the notes and underlying common stock to the
public other than commissions, fees and discounts of underwriters, brokers,
dealers and agents.
-40-
LEGAL MATTERS
The validity of the issuance of our securities offered by this prospectus will
be passed upon for LSI Logic Corporation by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California.
EXPERTS
The financial statements incorporated in this Prospectus by reference to LSI
Logic's Annual Report on Form 10-K for the year ended December 31, 2000, have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
-41-
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The aggregate estimated (other than the registration fee) expenses to be
paid by the Registrant in connection with this offering are as follows:
Securities and Exchange Commission registration fee...... $ 45,080
Trustee's fees and expenses.............................. $ 11,000
Accounting fees and expenses............................. $ 20,000
Legal fees and expenses.................................. $ 25,000
Miscellaneous............................................ $ 10,000
----------
Total............................................. $ 111,080
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF LSI
CERTIFICATE OF INCORPORATION
Article 10 of our Certificate of Incorporation provides that, to the
fullest extent permitted by Delaware law, as the same now exists or may
hereafter be amended, a director shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Delaware law provides that directors of a corporation will
not be personally liable for monetary damages for breach of their fiduciary
duties as directors, except for liability:
- for any breach of their duty of loyalty to the corporation or
its stockholders,
- for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law,
- for unlawful payments of dividends or unlawful stock repurchases
or redemptions as provided in Section 174 of the Delaware
General Corporation Law, or
- for any transaction from which the director derived an improper
personal benefit.
BYLAWS
INDEMNIFICATION ARRANGEMENTS
Our bylaws provide that our directors, officers and agents shall be
indemnified against expenses including attorneys' fees, judgments, fines,
settlements actually and reasonably incurred in connection with any proceeding
arising out of their status as such, if such director, officer or agent acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of LSI Logic Corporation, and, with the respect to any
criminal action or proceeding, had no reasonable cause to believe such conduct
was unlawful.
II-1
We have entered into agreements to indemnify our directors and officers,
in addition to the indemnification provided for in our Certificate of
Incorporation and Bylaws. These agreements, among other things, indemnify our
directors and officers for certain expenses, including attorney's fees,
judgments, fines and settlement amounts incurred by any such person in any
action or proceeding, including any action by or in the right of LSI, arising
out of such person's services as a director or officer of LSI, any subsidiary of
LSI or any other company or enterprise to which the person provides services at
the request of LSI.
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by reference
herein:
EXHIBIT
NUMBER EXHIBIT TITLE
------ -------------
3.1 Amended and Restated Certificate of Incorporation.(1)
3.2 Bylaws.(2)
4.1 Indenture.
4.2 Registration Rights Agreement.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.*
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).*
24.1 Power of Attorney of certain directors and officers of LSI Logic
Corporation (see page II-4 of this Form S-3).
25.1 Form T-1 Statement of Eligibility of Trustee for Indenture under
the Trust Indenture Act of 1939.*
* To be filed by amendment.
(1) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-8 (No. 333-57563) filed June 24, 1998
(2) Incorporated by reference to exhibits filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 2000.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act,
(b) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement,
II-2
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that clauses (a) and (b) do not apply if the information
required to be included in a post-effective amendment by such clauses is
contained in periodic reports filed with or furnished to the Securities and
Exchange Commission by the Registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") that are incorporated
by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act
that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities, other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding, is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Milpitas, State of California, on January 25,
2002.
LSI LOGIC CORPORATION
By: /s/ WILFRED J. CORRIGAN
--------------------------------------
Name: Wilfred J. Corrigan
Title: Chairman, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Wilfred J. Corrigan and David G. Pursel, and each
of them, as his true and lawful attorneys-in-fact and agent, each with the power
of substitution, for him in his name, place and stead, in any and all
capacities, to sign the Registration Statement filed herewith and any and all
amendments (including post-effective amendments) to this Registration Statement,
and to sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the foregoing, as full to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ Wilfred J. Corrigan Chairman, Chief Executive Officer and January 25, 2002
------------------------------ Director (Principal Executive Officer)
Wilfred J. Corrigan
/s/ Bryon Look Executive Vice President and January 25, 2002
------------------------------ Chief Financial Officer
Bryon Look
/s/ T.Z. Chu Director January 25, 2002
------------------------------
T.Z. Chu
/s/ R. Douglas Norby Director January 25, 2002
------------------------------
R. Douglas Norby
/s/ Matthew J. O'Rourke Director January 25, 2002
------------------------------
Matthew J. O'Rourke
/s/ Gregorio Reyes Director January 25, 2002
------------------------------
Gregorio Reyes
/s/ Larry W. Sonsini Director January 25, 2002
------------------------------
Larry W. Sonsini
II-4
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT TITLE
------ -------------
3.1 Amended and Restated Certificate of Incorporation.(1)
3.2 Bylaws.(2)
4.1 Indenture.
4.2 Registration Rights Agreement.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.*
12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).*
24.1 Power of Attorney of certain directors and officers of LSI Logic
Corporation (see page II-4 of this Form S-3).
25.1 Form T-1 Statement of Eligibility of Trustee for Indenture under
the Trust Indenture Act of 1939.*
* To be filed by amendment.
(1) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-8 (No. 333-57563) filed June 24, 1998.
(2) Incorporated by reference to exhibits filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 2000.