INVENSENSE, INC. (NYSE:INVN) Files An 8-K Entry into a Material Definitive Agreement
Item1.01
| Entry into a Material Definitive Agreement. |
Agreement and Plan of Merger
On December21, 2016, InvenSense, Inc., a Delaware corporation
(the Company or InvenSense), entered into an Agreement and Plan
of Merger (the Merger Agreement) with TDK Corporation, a company
organized under the laws of Japan (Parent or TDK), and TDK Sensor
Solutions Corporation, a Delaware corporation and a wholly-owned
subsidiary of Parent (Merger Sub), providing for the merger of
Merger Sub with and into the Company, with the Company surviving
the Merger as a wholly-owned subsidiary of Parent (the Merger).
The Merger Agreement was unanimously approved by the Companys
Board of Directors (the Board). Capitalized terms not otherwise
defined herein have the meaning set forth in the Merger
Agreement.
to the terms and subject to the conditions of the Merger
Agreement, at the effective time of the Merger (the Effective
Time), each outstanding share of the Companys common stock, par
value $0.001 per share (the Common Stock), will be automatically
converted into the right to receive $13.00 per share in cash,
without interest (the Merger Consideration), other than certain
shares owned by the Company, Parent and their respective
subsidiaries (which shares will be cancelled) and shares held by
stockholders who have validly exercised their appraisal rights
under Delaware law.
Treatment of Compensatory Equity Awards
At the Effective Time, (i)each outstanding and unexercised vested
option to purchase shares of Common Stock that has an exercise
price per share that is less than the Merger Consideration (each,
a Vested Option) will be cancelled and converted into the right
to receive a payment in cash equal to the product of (a)the total
number of shares of Common Stock subject to such Vested Option
and (b)the excess, if any, of the Merger Consideration over the
exercise price per share of such Vested Option, (ii)each
outstanding and unexercised unvested option to purchase shares of
Common Stock that has an exercise price per share that is less
than the Merger Consideration (each, an Unvested Option) will be
cancelled and converted into the right to receive a payment in
cash equal to the product of (a)the total number of shares of
Common Stock subject to such Unvested Option and (b)the excess,
if any, of the Merger Consideration over the exercise price per
share of such Unvested Option, but only if the holder of such
Unvested Option satisfies all of the vesting conditions that
would have related to the terminated Unvested Option (including
continued employment requirements through the applicable dates of
vesting), (iii)each outstanding vested restricted stock unit
(each, a Vested RSU) will be cancelled and exchanged for the
right to receive a payment in cash equal to the product of (a)the
total number of shares of Common Stock subject to such Vested RSU
and (b)the Merger Consideration, (iv)each outstanding unvested
restricted stock unit (each, an Unvested RSU) will be cancelled
and exchanged for the right to receive a payment equal to the
product of (a)the total number of shares of Common Stock subject
to such Unvested RSU and (b)the Merger Consideration, but only if
the holder of such Unvested RSU satisfies all of the vesting
conditions that would have related to the terminated Unvested RSU
(including continued employment requirements through the
applicable dates of vesting), and (v)each outstanding unvested
share of restricted Common Stock will be cancelled and converted
into the right to receive a payment in cash equal to the Merger
Consideration, but only if the holder of such restricted Common
Stock satisfies all of the vesting conditions that would have
related to the terminated unvested share of restricted Common
Stock. Each Vested Option or Unvested Option with an exercise
price per share that is equal to or greater than the Merger
Consideration shall be cancelled without consideration.
Closing Conditions; Closing Date
The closing of the Merger is subject to the adoption of the
Merger Agreement by the affirmative vote of holders of a majority
of the outstanding shares of Common Stock. The obligations of the
parties to consummate the Merger are also subject to the
satisfaction or waiver of various conditions set forth in the
Merger Agreement, including, but not limited to (i)the receipt of
regulatory approvals, including the
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expiration or termination of the applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, (ii)the accuracy of the representations and warranties
of each party contained in the Merger Agreement (subject to
certain materiality qualifications), and (iii)each partys
compliance with or performance of the covenants and agreements in
the Merger Agreement in all material respects.
Representations and Warranties; Covenants
The Merger Agreement contains customary representations and
warranties by the Company and Parent. The Merger Agreement also
contains customary covenants and agreements, including with
respect to the operations of the business of the Company and its
subsidiaries between signing and closing, restrictions on
responses by the Company with respect to the receipt of
alternative transactions, governmental filings and approvals and
other matters. Parent also has agreed to various covenants in the
Merger Agreement, including, among others, covenants to use
commercially reasonable efforts to take actions that may be
necessary in order to obtain approval of the Merger with certain
governmental authorities, subject to certain exceptions.
The Merger Agreement generally prohibits the Companys
solicitation of proposals relating to alternative transactions
and restricts the Companys ability to furnish non-public
information to, or participate in any discussions or negotiations
with, any third party with respect to any alternative
transaction, subject to certain limited exceptions.
The Merger Agreement requires the Company to call and hold a
special meeting of stockholders and requires the Companys Board
to recommend adoption by the Companys stockholders of the Merger
Agreement, subject to certain exceptions.
Termination and Termination Fees
The Merger Agreement contains termination rights for the Company
and Parent, including if the Merger is not consummated before
June21, 2017, subject to a three month extension if necessary to
obtain certain regulatory approvals. Upon termination of the
Merger Agreement under specified circumstances, including
termination including in connection with the Companys entry into
a definitive agreement providing for the consummation of a
superior alternative acquisition proposal as permitted under the
Merger Agreement, the Company will be required to pay Parent a
termination fee of $46.7 million.
The Merger Agreement also provides that, upon termination of the
Merger Agreement under specified circumstances, Parent will be
required to pay the Company a termination fee of $46.7 million.
The foregoing description of the Merger Agreement does not
purport to be complete and is qualified in its entirety by
reference to the Merger Agreement, which is filed as Exhibit2.1
hereto, and which is incorporated herein by reference. The Merger
Agreement has been provided solely to inform investors of its
terms. The representations, warranties and covenants contained in
the Merger Agreement were made only for purposes of such
agreement and as of specific dates, were made solely for the
benefit of the parties to the Merger Agreement, and are intended
not as statements of fact, but rather as a way of allocating risk
to one of the parties if those statements prove to be
inaccurate.In addition, such representations, warranties and
covenants may have been qualified by certain disclosures not
reflected in the text of the Merger Agreement and may apply
standards of materiality in a way that is different from what may
be viewed as material by stockholders of, or other investors in,
the Company. Investors are not third-party beneficiaries under
the Merger Agreement and should not rely on the representations,
warranties and covenants or any descriptions thereof as
characterizations of the actual state of facts or condition of
the Company, Parent, Merger Sub or any of their respective
subsidiaries or affiliates. Moreover, information concerning the
subject matter of the representations and warranties may change
after the date of the Merger Agreement, which subsequent
information may or may not be fully reflected in the Companys
public disclosures. The Merger Agreement should not be read
alone, but should instead be read in conjunction with the other
information regarding the Company that is or will be contained
in, or incorporated by reference into, the Forms 10-K, Forms
10-Q, Forms 8-K, proxy statements and other reports and documents
that the Company files with the Securities and Exchange
Commission.
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Voting Agreements
Concurrently with the execution of the Merger Agreement, the
directors, executive officers and certain stockholders of the
Company, in their capacities as holders of Common Stock or other
equity interests of the Company, each entered into a Voting
Agreement with Parent (the Voting Agreement) to which each
agreed, among other things, to (i)vote their Common Stock for the
approval of the Merger Agreement and against any alternative
proposal, and (ii)comply with certain restrictions on the
disposition of their Common Stock, subject to the terms and
conditions contained in the Voting Agreement. The Voting
Agreements will terminate upon the earlier of (a)the termination
of the Merger Agreement in accordance with its terms, (b)the
Effective Time, (c)the end date specified in the Merger Agreement
and (d)such time as the Merger Agreement is amended to change the
form or reduce the amount of the Merger Consideration. The
foregoing description of the Voting Agreements does not purport
to be complete and is qualified in its entirety by reference to
the Voting Agreements, a form of which is filed as Exhibit 99.1
hereto and is incorporated herein by reference.
| Item5.02 |
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; compensatory Arrangements of Certain Officers. |
In connection with, and contingent on, the Merger, the Company
entered into letter agreements with Behrooz Abdi, Daniel Goehl
and Mozafar Maghsoudnia (each, a Recipient, and collectively, the
Recipients) providing for the payment of a retention bonus
(Retention Bonus) to each Recipient if (a)the Recipient remains
an employee of the Company until the later of (i)the date on
which the transactions contemplated by the Merger Agreement are
consummated and (ii)the first anniversary of the date on which
the Merger Agreement is fully executed (such later date, the
Vesting Date), or (b)the Recipients employment with the Company
terminates prior to the Vesting Date as a result of a termination
by the Company without Cause (as defined in the letter agreement)
or the Recipients death or permanent disability (such date of
termination, the Termination Date). Payment of the Retention
Bonus is subject to the applicable Recipients execution of a
release of claims. The letter agreements also provide for the
accelerated payment of a certain percentage of the total cash
value payable for the unvested awards (limited to unvested
restricted stock unit awards in the case of Mr. Abdi) held by the
applicable Recipient under any Company Stock Plan (as defined in
the Merger Agreement), which accelerated payment will
proportionally reduce any future payments to be made to the
Recipient on the applicable vesting dates with respect to such
awards (such percentage, the Equity Award Acceleration
Percentage). The letter agreements also amend the definition of
Good Reason in each Recipients Executive Change in Control and
Severance Agreement with the Company to provide that any
diminution in the Recipients duties, authorities or
responsibilities as a result of the Merger would not trigger Good
Reason for the termination of the Recipients employment. The
Company has also entered into letter agreements providing for a
retention bonus with certain other officers who are not named
executive officers, which letter agreements are not described in
this report.
The letter agreement for Mr.Abdi also provides that he will be
entitled to a lump sum cash payment in an amount up to $857,500
if (a)(i)he remains employed through March31, 2018 and (ii)for
the Companys fiscal year ending March31, 2018, the Companys
revenue as reported on the Companys audited financial statements
in accordance with historical practices and generally accepted
accounting principles in the United States (GAAP) exceeds
$315,440,000 or (b)his employment with the Company terminates
prior to March31, 2018 as a result of a termination by the
Company without Cause or his death or permanent disability. The
amount of this bonus is equal to the product of $857,500,
multiplied by a fraction, the numerator of which is the
difference between the actual revenue for fiscal year ending
March31, 2018 and $315,440,000 and the denominator of which is
$78,860,000. In no event will this bonus exceed $857,500. In the
event of any termination of Mr.Abdis employment as a result of a
termination by the Company without Cause or his death or
permanent disability, the amount of the bonus payment will be
equal to $857,500.
The letter agreement for Mr.Abdi also provides that he will be
entitled to a lump sum cash payment in an amount up to $857,500
if (a)(i)he remains employed through March31, 2018 and (ii)for
the Companys fiscal year ending March31, 2018, the Companys
operating profit calculated in accordance with the Companys
historical practices on a non-GAAP basis that excludes
stock-based compensation expense and related payroll taxes,
accreting interest expense on the Companys 1.75% convertible
senior notes, amortization of acquisition-related intangible
assets, business acquisition costs and litigation-related
expenses (Operating Profit) exceeds $29,760,000 or (b)his
employment with the Company terminates prior to March31, 2018 as
a result of a termination by the Company without Cause or his
death or permanent disability. The amount of this bonus is equal
to the product of $857,500, multiplied by a fraction, the
numerator of which is the difference between the actual Operating
Profit for fiscal year ending March31, 2018 and $29,760,000 and
the denominator of which is $7,440,000. In no event will this
bonus exceed $857,500. In the event of any termination of
Mr.Abdis employment as a result of a termination by the Company
without Cause or his death or permanent disability, the amount of
the bonus payment will be equal to $857,500.
The letter agreement for Mr.Abdi also provides that he will be
entitled to a lump sum cash payment in an amount up to $857,500
if (a)(i)he remains employed through March31, 2019 and (ii)for
the Companys fiscal year ending March31, 2019, the Companys
revenue as reported on the Companys audited financial statements
in accordance with historical practices and GAAP exceeds
$503,520,000 or (b)his employment with the Company terminates
prior to March31, 2019 as a result of a termination by the
Company without Cause or his death or permanent disability. The
amount of this bonus is equal to the product of $857,500,
multiplied by a fraction, the numerator of which is the
difference between the actual revenue for fiscal year ending
March31, 2019 and $503,520,000 and the denominator of which is
$125,880,000. In no event will this bonus exceed $857,500. In the
event of any termination of Mr.Abdis employment as a result of a
termination by the Company without Cause or his death or
permanent disability, the amount of the bonus payment will be
equal to $857,500.
The letter agreement for Mr.Abdi also provides that he will be
entitled to a lump sum cash payment in an amount up to $857,500
if (a)(i)he remains employed through March31, 2019 and (ii)for
the Companys fiscal year ending March31, 2019, the Companys
Operating Profit exceeds $60,240,000 or (b)his employment with
the Company terminates prior to March31, 2019 as a result of a
termination by the Company without Cause or his death or
permanent disability. The amount of this bonus is equal to the
product of $857,500, multiplied by a fraction, the numerator of
which is the difference between the actual Operating Profit for
fiscal year ending March31, 2019 and $60,240,000 and the
denominator of which is $15,060,000. In no event will this bonus
exceed $857,500. In the event of any termination of Mr. Abdis
employment as a result of a termination by the Company without
Cause or his death or permanent disability, the amount of the
bonus payment will be equal to $857,500.
The letter agreement for Mr.Abdi also provides that his base
salary will be increased to a rate of $420,000 per year effective
immediately, and his annual target incentive bonus opportunity
for fiscal year ending March31, 2018 (which will be in addition
to the potential bonus payments described above) will be 50% of
his then-current base salary.
The foregoing description of the letter agreements does not
purport to be complete and is qualified in its entirety by
reference to the form of letter agreement, a copy of which is
filed as Exhibit 10.1 hereto and is incorporated herein by
reference.
The individual Retention Bonus amounts and individual Equity
Award Acceleration Percentages for the Recipients are set forth
below.
|
Recipient Name |
RetentionBonusAmount |
EquityAward AccelerationPercentage |
||||||
|
Behrooz Abdi |
$ | 1,000,000 | % | |||||
|
Daniel Goehl |
$ | 1,000,000 | % | |||||
|
Mozafar Maghsoudnia |
$ | 1,100,000 | % |
Item8.01 Other Events.
On December21, 2016, the Company and Parent issued a joint press
release announcing that they had entered into the Merger
Agreement, a copy of which is filed as Exhibit 99.2 hereto and is
incorporated herein by reference.
On December21, 2016, the Company sent an email to employees
announcing the Companys entry into the Merger Agreement, a copy
of which is filed as Exhibit 99.5 and is incorporated herein by
reference.
On December21, 2016, Behrooz Abdi, President and Chief Executive
Officer of the Company, and Shigenao Ishiguro, Representative
Director and President of Parent, will issue a letter to the
Companys customers announcing the Companys entry into the Merger
Agreement, a copy of which is filed as Exhibit 99.3 and is
incorporated herein by reference.
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On December21, 2016, Mo Maghsoudnia, VP of Technology and WW
Manufacturing of the Company, will issue a letter to the Companys
suppliers announcing the Companys entry into the Merger
Agreement, a copy of which is filed as Exhibit 99.4 and is
incorporated herein by reference.
Additional Information and Where to Find It
In connection with the proposed transaction, TDK and InvenSense
intend to file relevant materials with the United States
Securities and Exchange Commission (the SEC). InvenSense will
also file with the SEC a proxy statement on Schedule 14A.
Following the filing of the definitive proxy statement with the
SEC, InvenSense will mail the definitive proxy statement and a
proxy card to each stockholder entitled to vote at the InvenSense
special meeting relating to the proposed transaction. INVESTORS
AND SECURITY HOLDERS OF INVENSENSE ARE URGED TO CAREFULLY READ
THESE MATERIALS IN THEIR ENTIRETY (INCLUDING ANY AMENDMENTS OR
SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT TDK OR
INVENSENSE FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT TDK, INVENSENSE AND
THE PROPOSED TRANSACTION. The proxy statement and other documents
filed by InvenSense with the SEC may be obtained free of charge
at InvenSenses website at www.invensense.com or at the SECs
website at ww.sec.gov. These documents may also be obtained free
of charge from InvenSense by requesting them by mail at
InvenSense, Inc., 1745 Technology Drive Suite 200, San Jose,
California 95110, Attention: Investor Relations, or by telephone
at (408)501-2200. The documents filed by TDK with the SEC may be
obtained free of charge at the SECs website at www.sec.gov. These
documents may also be obtained free of charge from TDK by
requesting them by mail at Shibaura Renasite Tower, 3-9-1
Shibaura, Minato-ku, Tokyo 108-0023, Japan, Attention: Investor
Relations.
This communication does not constitute a solicitation of proxy,
an offer to purchase or a solicitation of an offer to sell any
securities. TDK, InvenSense, and certain of their directors,
officers and employees may be deemed to be participants in the
solicitation of proxies from the stockholders of InvenSense in
connection with the proposed transaction. Information about the
persons who may, under the rules of the SEC, be considered to be
participants in the solicitation of InvenSenses stockholders in
connection with the proposed transaction, and any direct or
indirect interests, by security holdings or otherwise, they have
in the proposed transaction, will be set forth in InvenSenses
definitive proxy statement when it is filed with the SEC.
Information regarding InvenSenses directors and executive
officers and their ownership of InvenSenses securities is set
forth in the definitive proxy statement for InvenSenses 2016
Annual Meeting of Stockholders, which was filed with the SEC on
July29, 2016, and its Annual Report on Form 10-K for the fiscal
year ended April3, 2016, which was filed with the SEC on May25,
2016. These documents may be obtained free of charge at the SECs
website at www.sec.gov.
Cautionary Statement Regarding Forward-Looking
Statements
This Current Report on Form 8-K contains forward-looking
statements that address a variety of subjects including, for
example, the expected timetable for closing of the transaction
between TDK and InvenSense, the expected benefits and synergies
of the transaction, TDKs and InvenSenses plans, objectives and
expectations and TDKs expected product offerings, product
development, marketing position and technical advances resulting
from the transaction. Statements that are not historical facts,
including statements about beliefs, plans and expectations, are
forward-looking statements. Such statements are based on current
expectations and are subject to a number of factors and
uncertainties, are not historical facts and are subject to risks
and uncertainties that could cause actual results to differ
5
materially from those described in the forward-looking
statements. These forward-looking statements include statements
that reflect the current expectations, estimates, beliefs,
assumptions, and projections of TDKs senior management about
future events with respect to InvenSenses business and its
industry in general. Statements that include words such as
anticipates, expects, intends, plans, predicts, believes, seeks,
estimates, may, will, should, would, potential, continue, goals,
targets and variations of these words (or negatives of these
words) or similar expressions of a future or forward-looking
nature identify forward-looking statements. In addition, any
statements that refer to projections or other characterizations
of future events or circumstances, including any underlying
assumptions, are forward-looking statements. Actual results could
differ materially from those projected or forecast in the
forward-looking statements. The following important factors and
uncertainties, among others, that could cause actual results to
differ materially from those described in these forward looking
statements include, without limitation: the parties ability to
satisfy the conditions precedent to the consummation of the
proposed transaction, including, without limitation, the receipt
of stockholder and regulatory approvals, including the potential
for regulatory authorities to require divestitures in connection
with the proposed transaction; the occurrence of any event that
could give rise to the termination of the merger agreement;
unanticipated difficulties or expenditures relating to the
proposed transaction; legal proceedings that may be instituted
against TDK or InvenSense and others following announcement of
the proposed transaction; disruptions of current plans and
operations caused by the announcement or pendency of the proposed
transaction; the risk that expected benefits, synergies and
growth prospects of the transaction may not be achieved in a
timely manner, or at all; the risk that InvenSenses business may
not be successfully integrated with TDKs following the closing;
potential difficulties in employee retention as a result of the
announcement and pendency of the proposed transaction; and the
response of customers, distributors, suppliers and competitors to
the announcement of the proposed transaction. For additional
information about factors that could cause actual results to
differ materially from those described in the forward-looking
statements, please refer to the proxy statement when it becomes
available and InvenSenses filings with the SEC, including the
risk factors contained in InvenSenses most recent Annual Report
on Form 10-K. Forward-looking statements represent managements
current expectations and are inherently uncertain. TDK and
InvenSense assume no obligation to update the information in this
communication, except as required by law. Readers are cautioned
not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof.
| Item9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits |
|
Exhibit No. |
Exhibit Title or Description |
|
| 2.1 |
Agreement and Plan of Merger among InvenSense, Inc., a Delaware corporation, TDK Corporation, a company organized under the laws of Japan, and TDK Sensor Solutions Corporation, a Delaware corporation and a wholly owned subsidiary of TDK Corporation, dated as of December 21, 2016.* |
|
| 10.1# | Form of Letter Agreement. | |
| 99.1 | Form of Voting Agreement. | |
| 99.2 |
Joint press release issued by InvenSense, Inc. and TDK Corporation, dated December 21, 2016. |
|
| 99.3 | Letter to Customers of InvenSense, Inc. | |
| 99.4 | Letter to Suppliers of InvenSense, Inc. | |
| 99.5 | Email to Employees of InvenSense, Inc. |
| * |
Certain schedules and exhibits to the Agreement and Plan of Merger have been have been omitted to Item601(b)(2) of Regulation S-K. The registrant agrees to furnish a supplemental copy of any omitted schedule to the Securities and Exchange Commission upon request. |
| # | Management contract or compensatory plan or arrangement. |
6
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: December21, 2016
| INVENSENSE, INC. | ||
| By: | /s/ Mark P. Detinger | |
|
Mark P. Detinger Chief Financial Officer |
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EXHIBIT INDEX
| 2.1 |
Agreement and Plan of Merger among InvenSense, Inc., a Delaware corporation, TDK Corporation, a company organized under the laws of Japan, and TDK Sensor Solutions Corporation, a Delaware corporation and a wholly owned subsidiary of TDK Corporation, dated as of December20, 2016.* |
|
| 10.1# | Form of Letter Agreement. | |
| 99.1 | Form of Voting Agreement. | |
| 99.2 |
Joint press release issued by InvenSense, Inc. and TDK Corporation dated December 21, 2016. |
|
| 99.3 | Letter to Customers of InvenSense, Inc. | |
| 99.4 | Letter to Suppliers of InvenSense, Inc. | |
| 99.5 | Email to Employees of InvenSense, Inc. |
| * |
Certain schedules and exhibits to the Agreement and Plan of Merger have been have been omitted |
About INVENSENSE, INC. (NYSE:INVN)
InvenSense, Inc. (InvenSense) is engaged in designing, developing, marketing and selling of sensor system-on-chip (SoC), including accelerometers, gyroscopes and microphones for the mobile, wearable, smart home, gaming, industrial and automotive market segments. The Company delivers solutions based on its motion and sound technology; focused on solutions, such as smartphones, tablets, wearables, console and portable video gaming devices, digital television and set-top box remote controls, fitness accessories, sports equipment, digital still cameras, automobiles, ultra-books, laptops, hearing aids, stabilization systems, tools, navigation devices, remote controlled toys and other household consumer and industrial devices. Its motion solutions detect and track an object’s motion in three-dimensional space. INVENSENSE, INC. (NYSE:INVN) Recent Trading Information
INVENSENSE, INC. (NYSE:INVN) closed its last trading session up +0.06 at 12.87 with 4,579,386 shares trading hands.