Item 2.01. Completion of Acquisition or Disposition of
Assets.
On April 4, 2019, the hearing (the “
Hearing
”)
of the High Court of Justice in England and Wales (the “
Court
”) was held for the purposes of sanctioning the
scheme of arrangement under Part 26 of the Companies Act 2006 (the “
Scheme
”) regarding the acquisition by CommScope
of all of the Ordinary Shares of ARRIS (the “
Acquisition
” or the “
Transaction
”) (other than
shares owned by (i) CommScope or any other direct or indirect wholly owned subsidiary of CommScope or (ii) ARRIS or any direct
or indirect wholly owned subsidiary of ARRIS) for the Per Share Consideration for each Ordinary Share. The Hearing
took place following the satisfaction or waiver of the other conditions to the Acquisition under the Bid Conduct Agreement (other
than those that were by their terms only capable of satisfaction at closing). At the Hearing, the Court sanctioned the Scheme
and issued a court order confirming the same (the “
Court Order
”). Shortly following the Hearing, the Court
Order was registered with the Registrar of Companies in the UK such that the Scheme became effective in accordance with its terms,
completing the Acquisition, and ARRIS became an indirect, wholly owned subsidiary of CommScope.
Except as summarized below and subject to certain exceptions,
the Bid Conduct Agreement provided that at the Effective Time, 50% of each unvested restricted stock unit or similar award of
ARRIS (each, an “
RSU
”) with time-based vesting was to become vested and cancelled and converted into the right
to receive an amount in cash equal to the Per Share Consideration multiplied by the number of Ordinary Shares so accelerated thereunder,
and the remaining 50% of such RSU was to be converted into CommScope restricted stock units (or, in the case of cash awards of
ARRIS, comparable cash awards of CommScope);
provided
,
that
, CommScope could elect to increase the portion of such
RSUs that were accelerated and cashed-out at the closing, which it elected to do. Specifically, CommScope elected to increase
the portion of such time-based vesting RSUs that became vested and cancelled and converted into the right to receive an amount
in cash (as described above) as follows: (i) for all time-based vesting RSUs other than those granted to David Potts and Robert
Stanzione, the amount of each such RSU that was so accelerated and cashed-out was increased from 50% to 55% and (ii) all time-based
vesting RSUs granted to David Potts and Robert Stanzione were accelerated and cashed-out. In addition, CommScope elected to treat
the vested phantom RSUs granted to employees of ARRIS in China similar to other vested RSUs and, accordingly, cash them out in
connection with the closing. Pursuant to the terms of the Bid Conduct Agreement, the portion of such time-based vesting RSUs that
were not accelerated and cashed-out (the “
Assumed RSUs
”) were converted into a number of CommScope restricted
stock units (or, in the case of cash awards of ARRIS, comparable cash awards of CommScope) equal to the number of RSUs being so
converted multiplied by an exchange ratio, the numerator of which is the Per Share Consideration and the denominator of which
is the volume-weighted average price per share of CommScope’s Common Stock for the 20 trading days prior to the Effective
Time of $22.0581 (the “
Exchange Ratio
”), but otherwise remained subject to the original terms and vesting schedule
associated with such Assumed RSU.
In addition, all non-employee director RSUs and all remaining
RSUs (including all RSUs with performance-based vesting conditions and all RSUs that vested prior to the Effective Time, but which
had not at such time otherwise been settled) became fully vested and cancelled and were converted into the right to receive an
amount in cash equal to the Per Share Consideration multiplied by the number of Ordinary Shares subject to such RSUs, with performance
for the “performance-based” RSUs deemed to be satisfied at target levels for all such RSUs other than those granted
in 2018, for which performance was deemed satisfied at a level which resulted in 150% of the Ordinary Shares under such RSUs vesting.
In addition, with respect to each outstanding warrant to purchase Ordinary Shares, at the Effective Time, such warrants converted
into the right to receive an amount in cash equal to the Warrant Consideration.
CommScope paid approximately $7.21 billion in
cash consideration in connection with the Transaction (inclusive of approximately $2.05 billion to repay third party
indebtedness of ARRIS outstanding at the closing), net of estimated cash acquired and excluding transaction-related costs.
The aggregate number of shares of Common Stock of CommScope issuable upon the vesting of the Assumed RSUs (inclusive of the
portion thereof constituting cash awards of ARRIS and to be settled in cash) is equal to approximately 3.72 million. CommScope assumed existing capacity under the
ARRIS International plc 2016 Stock Incentive Plan to settle up to 2,100,000 of the shares of Common Stock of CommScope
necessary to satisfy the Assumed RSUs, with the balance to be issued from existing capacity under CommScope’s Amended
and Restated 2013 Long-Term Incentive Plan and reserved for issuance thereunder. CommScope intends to file a Form S-8
Registration Statement covering the shares of Common Stock of CommScope underlying the Assumed RSUs with respect to the
portion to be satisfied from the assumption of the ARRIS International plc 2016 Stock Incentive Plan.
The cash consideration for the Transaction was funded with a
combination of (i) cash on hand, (ii) cash acquired from ARRIS, (iii) proceeds from the private placement transaction with
Carlyle Partners VII S1 Holdings, L.P. and (iv) proceeds from various debt financing transactions.
The foregoing description does not purport to be complete and
is subject to, and qualified in its entirety by, the full text of the Bid Conduct Agreement, which was filed as Exhibit 2.1 to
ARRIS’s Current Report on Form 8-K filed with the SEC on November 8, 2018, and the full text of the First Amendment thereto,
which was filed as Exhibit 2.1 to ARRIS’s Current Report on Form 8-K filed with the SEC on January 3, 2019, both of which
are incorporated herein by reference.
The representations, warranties and covenants of CommScope contained
in the Bid Conduct Agreement were made solely for the benefit of ARRIS, and the representations, warranties and covenants of ARRIS
were made solely for the benefit of CommScope. In addition, such representations, warranties and covenants (a) were made only for
purposes of the Bid Conduct Agreement, (b) are subject to materiality qualifications contained in the Bid Conduct Agreement which
may differ from what may be viewed as material by investors, (c) were made only as of the date of the Bid Conduct Agreement or
such other date as is specified in the Bid Conduct Agreement, (d) were included in the Bid Conduct Agreement for the purpose of
allocating risk between the contracting parties rather than establishing matters as fact and (e) with respect to ARRIS, were qualified
by (i) matters specifically disclosed in any reports filed by ARRIS with the SEC prior to the date of the Bid Conduct Agreement
and (ii) confidential disclosures made to CommScope in the disclosure letter delivered in connection with the Bid Conduct Agreement.
The Bid Conduct Agreement was filed to provide investors with information regarding its terms and is not intended to provide any
factual information about ARRIS, CommScope or any of their respective subsidiaries or affiliates. Investors should not rely on
the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or
condition of ARRIS, CommScope or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject
matter of the representations and warranties may change, or may have changed, after the date of the Bid Conduct Agreement, which
subsequent information may or may not be fully reflected in ARRIS’s or CommScope’s public disclosures. The Bid Conduct
Agreement should not be read alone, but should instead be read in conjunction with the other information regarding ARRIS and CommScope
that is or will be contained in, or incorporated by reference into, the other documents that each party files with the SEC.