8-KMaterial AgreementsShareholder MattersExhibits & Filings

MICRON TECHNOLOGY INC 8-K Report, Material Agreement (Jul 22, 2016)

Filed July 22, 2016For Securities:MU

Summary

Micron Technology, Inc. has implemented a Section 382 Rights Agreement, effective July 20, 2016. This move is primarily designed to protect the company's ability to utilize its Net Operating Loss (NOL) carryforwards and other valuable tax benefits. The agreement establishes a "poison pill" mechanism where "rights" are issued to shareholders. These rights become exercisable if an "Acquiring Person" (an individual or group) accumulates a significant stake, specifically 4.99% or more of Micron's outstanding common stock, without prior board approval. The intent is to deter hostile takeovers that could trigger an "ownership change" under Section 382 of the Internal Revenue Code, which would otherwise jeopardize these crucial tax assets. This proactive measure aims to maintain Micron's financial flexibility by preserving its tax assets, which are essential for future growth and operational stability. While the rights are not immediately exercisable and do not confer shareholder privileges like voting or dividends, they serve as a significant deterrent against unsolicited acquisition attempts. The Board retains the right to redeem these rights under certain conditions, including if they are no longer deemed necessary to preserve tax benefits or if stockholder approval is not obtained by July 19, 2017.

Key Highlights

  • 1Micron adopted a Section 382 Rights Agreement to preserve Net Operating Loss (NOL) carryforwards and other tax benefits.
  • 2The agreement functions as a 'poison pill' to deter hostile takeovers by imposing a 4.99% ownership threshold for 'Acquiring Persons'.
  • 3These rights will be distributed as a dividend to shareholders of record as of August 1, 2016.
  • 4The rights become exercisable if a triggering event (acquisition of 4.99% or more of stock) occurs without board approval.
  • 5Upon triggering, rights holders can purchase Micron stock at a discount, diluting the acquirer's stake.
  • 6The Board has the option to redeem the rights, particularly if they are no longer necessary for preserving tax benefits, with an expiration date of July 19, 2019 (or earlier if not approved by shareholders by July 19, 2017).
  • 7This is a defensive measure to prevent an 'ownership change' under IRS Section 382, which would impair the usability of valuable tax assets.

Frequently Asked Questions

A Section 382 Rights Agreement is a corporate governance measure, often referred to as a 'poison pill,' designed to prevent a hostile takeover that could trigger an 'ownership change' under Section 382 of the Internal Revenue Code. Micron adopted this agreement to preserve its substantial Net Operating Loss (NOL) carryforwards and other tax benefits. An ownership change could severely limit or eliminate Micron's ability to use these valuable tax assets to offset future taxable income.

Shareholders will receive one 'right' for each share of common stock they own as of August 1, 2016. These rights are not immediately exercisable and do not grant shareholders voting rights or the right to receive dividends. They are essentially a contingency that becomes active only if a triggering event occurs. If the rights become exercisable, shareholders may recognize taxable income, and they should consult their tax advisors.

A triggering event occurs when an 'Acquiring Person' (an individual or group) acquires beneficial ownership of 4.99% or more of Micron's outstanding common stock without the prior approval of Micron's Board of Directors. This threshold also applies to 'Grandfathered Persons,' who are existing large shareholders, with a slightly modified trigger if they increase their stake beyond their initial percentage by more than 0.5%.

If a triggering event occurs, the rights become exercisable. Holders of the rights (excluding the 'Acquiring Person') will be entitled to purchase shares of Micron's common stock at a significantly discounted price. This action would effectively dilute the ownership stake of the acquiring person and make the takeover much more expensive and less attractive. In certain merger or asset sale scenarios, the rights would allow holders to purchase shares of the acquiring company's stock.

Yes, the Board of Directors has the option to redeem all outstanding rights at a nominal price ($0.001 per right) at any time before a triggering event occurs, or under specific circumstances even after. The agreement also has an expiration date of July 19, 2019, unless stockholder approval is not obtained by July 19, 2017, in which case it expires on that date. The Board will periodically review the necessity of the rights and can terminate the agreement if they are no longer needed to preserve tax benefits or are not in the best interest of the company and its stockholders.