UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report:
April 19, 2010
(Date of earliest
event reported)
TECHWELL,
INC.
(Exact name of
registrant as specified in its charter)
Delaware
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0-52014
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77-0451738
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(State or other jurisdiction
of incorporation)
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(Commission File Number)
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(IRS Employer
Identification No.)
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408 E. Plumeria Drive, San Jose,
California 95134
(Address of
principal executive offices) (Zip Code)
Registrants telephone number, including area
code:
(408) 435-3888
Check the appropriate box
below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligations of the registrant under any of the following provisions (see
General Instruction A.2. below):
o
Written communications pursuant to Rule 425 under
the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under
the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act (17 CFR 240-13e-4(c))
Item 7.01
Regulation FD Disclosure
On March 22, 2010, Techwell, Inc.
(Techwell) entered into an
Agreement and Plan of Merger (the Merger
Agreement) with Intersil Corporation (Intersil) and Navajo Merger Sub, Inc., an indirect
wholly-owned subsidiary of Intersil (Purchaser),
pursuant to which Purchaser agreed, subject to the terms and conditions of the
Merger Agreement, to commence a cash tender offer to acquire all shares of
common stock, par value $0.001 per share, of Techwell (Techwell Common Stock)
that are outstanding and the associated preferred stock purchase rights (the Techwell
Rights) issued in connection with and subject to the Rights Agreement, dated August 4,
2009, between Techwell and Computershare Trust Company, N.A. (which Techwell
Rights, together with the shares of the Techwell Common Stock are herein
referred to as the Shares), at a purchase price of $18.50 per Share (the Offer). Purchaser commenced the Offer on March 30,
2010. In connection with the
commencement of the Offer, Techwell filed a Solicitation/Recommendation
Statement on Schedule 14D-9 with the Securities and Exchange Commission (the SEC)
on March 30, 2010 (the Schedule 14D-9).
The Offer is subject to certain closing conditions, including the
expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. As soon as
practicable following the completion of the Offer, Purchaser will merge with
and into Techwell (the Merger). Following the consummation of the Merger,
Techwell will be a wholly-owned subsidiary of Intersil.
As previously announced by
Techwell, on April 1, 2010, a purported class action lawsuit,
Mike Tamashiro v. Techwell, Inc., et al.
,
was filed in the Superior Court of California, Santa Clara County against
Techwell, current members of Techwells Board of Directors and certain officers
of Techwell, Intersil and Purchaser. On
April 19, 2010, Techwell entered into a memorandum of understanding with
plaintiffs and the other defendants to settle the
Tamashiro
lawsuit,
subject to court approval.
As part of the settlement,
the defendants deny all allegations of wrongdoing and deny that the previous
disclosures were inadequate but Techwell agreed to make available certain
additional information to its stockholders in Amendment No. 3 to the
Schedule 14D-9 (Amendment No. 3), which Techwell filed with the SEC on April 19,
2010. This additional information is
also set forth below in Item 8.01 of this Form 8-K. The memorandum of understanding further
contemplates that the parties will enter into a stipulation of settlement. The
stipulation of settlement will be subject to customary conditions, including
court approval following notice to members of the proposed settlement class. If
finally approved by the court, the settlement will resolve all of the claims
that were or could have been brought on behalf of the proposed settlement class
in the action being settled, including all claims relating to the Offer, the
Merger, the Merger Agreement, the adequacy of the merger consideration, the
negotiations preceding the Merger Agreement, the adequacy and completeness of
the disclosures made in connection with the Offer and the Merger and any
actions or inactions of the defendants in connection with, or related in any
way to, the Offer, the Merger or the Merger Agreement, including any alleged
breaches of the fiduciary duties of any of the defendants, or the aiding and
abetting thereof. If the court does approve of the settlement after a notice
period, then all public stockholders who did not elect to opt out of such
settlement will be bound thereby.
In addition, in connection
with the settlement and as provided in the memorandum of understanding, and
subject to approval by the court, Techwell or its insurer will pay to
plaintiffs counsel for their fees and expenses an amount not to exceed
$300,000. This payment will not affect the amount of consideration to be paid
to stockholders of Techwell in connection with the
2
Offer and the subsequent Merger.
Furthermore, any payment is also conditioned on the Offer being consummated so
Techwells stockholders will not indirectly bear such payment.
Under the terms of the
Merger Agreement, the settlement is subject to the approval of Intersil, which
may not be unreasonably withheld, conditioned or delayed. Intersil has given
its approval to the settlement described by the memorandum of understanding.
Techwell and the other
defendants maintain that the lawsuit is completely without merit. Nevertheless,
in order to avoid costly litigation and eliminate the risk of any delay to the
closing of the Offer and subsequent Merger, and because the only effect of the
settlement on the stockholders is to provide additional disclosure, the
defendants have agreed to the settlement contemplated in the memorandum of
understanding.
Item 8.01 Other Events.
The following is additional
information that Techwell has made available to its stockholders in Amendment No. 3
to the Schedule 14D-9 that Techwell filed with the SEC on April 19, 2010.
1.
The
following sets forth additional disclosure included under the subheading
entitled
Background of the Offer
in Item 4(b) of
the Schedule 14D-9 (
Background and Reasons for
the Recommendation
):
As previously disclosed,
representatives from Deutsche Bank contacted eleven companies in 2010 to
determine if there was interest in exploring a strategic transaction with
Techwell. The eleven companies were
identified by the members of the Techwell Board based on their extensive
industry knowledge and after consultation with management and its
advisers. The Techwell Board believed
and determined that these companies would most likely be interested in
acquiring Techwell because they would see value in Techwells technology and
customer relationships and would derive greater profitability from Techwells
business than Techwell could on a standalone basis through consolidation and
because of their greater scale. The
Techwell Board determined, based on industry knowledge and after consultation
with management and its advisors, that other candidates were significantly less
likely to be interested in acquiring Techwell due to the absence or materially
lesser magnitude of these synergies. The
Techwell Board concluded that only buyers who could realize synergies similar
to those described above would be willing to pay a substantial premium above
Techwells current stock price, and therefore, determined and believed that it
would not be productive or otherwise worthwhile to contact purely financial
or non-strategic buyers, such as private equity funds.
As previously disclosed,
on December 18, 2009, members of Techwells management met with
representatives from Deutsche Bank to discuss the current status of Techwells
business and began to develop a specific process to initial communications with
parties who were not likely to be interested in purchasing Techwell, including
those parties previously discussed with the Techwell Board. One of the items discussed during this
meeting was an illustrative analysis of the maximum price various potential
strategic buyers could pay to acquire Techwell with no future period earnings
dilution to such strategic buyer (and based on Wall Street estimates for such
potential buyers) under various scenarios (with and without hypothetical
transaction synergies and using all cash and 50% cash/50% stock acquisition
currency).
As previously disclosed,
on March 6, 2010, Techwell received a written nonbinding indication of
interest from Company A to acquire Techwell for a price of $16.28 per share in
an
3
all-cash transaction. Company A reserved the right to
use up to $50 million worth of Company A stock as part of the
consideration. Company A requested a 45-day period of exclusivity to continue
discussions with Techwell. In its
indication of interest, Company A also indicated that it would focus on
retaining Techwells employees by giving them an opportunity to excel as part
of a larger organization. Company A did
not specifically identify any Techwell employees in its indication of interest.
As previously disclosed,
on March 7, 2010, Company A submitted a revised nonbinding indication of
interest with an offer price of $17.08 per share. Company A continued to
reserve the right to issue up to $50 million worth of Company A stock as
part of the consideration. Company A requested a two-week period of exclusivity
to continue discussions with Techwell.
In its revised indication of interest, Company A also continued to indicate
that it would focus on retaining Techwells employees by giving them an
opportunity to excel as part of a larger organization. Company A did not specifically identify any
Techwell employees in its revised indication of interest.
As previously disclosed,
on March 9, 2010, Techwell received a nonbinding indication of interest
from Company B, which proposed the acquisition of Techwell for an offer price
in the range of $16.50 to $17.50 per share, using a combination of cash and
Company B stock as consideration. The proposed consideration would consist of
between 75% and 80% cash and the remainder in Company B stock. Company Bs
offer was contingent and subject to Company B board approval and the
availability of financing to Company B. Company B also indicated that an
acquisition would be subject to execution of employment agreements with key
employees of Techwell. Company B did not
identify the key employees it would require to become parties to employment
agreements.
As previously disclosed
on March 9, 2010, the Techwell Board held a telephonic meeting to consider
the indications of interest received from Intersil, Company A,
Company B and Company C and the status of discussions with
Company D. In addition to the
matters previously disclosed that were discussed and considered by the Techwell
Board, in evaluating the offers from Company A, Company B and Company C, all of
which contained a stock component to the consideration being offered to
Techwell stockholders, the Techwell Board, in consultation with management and
its advisors, attempted to form a judgment about the value of the stock from
these other bidders based only on publicly available information. In this context, the Techwell Board discussed
the value of potential revenue and expense synergies with these other bidders,
which could increase the value of the combined entity and allow the Techwell
stockholders to participate in this potential increase in value through
ownership of the shares of any of these bidders that would be issued as consideration
in the proposed transaction. Although
the Board did not believe it was feasible to obtain concrete estimates of these
potential synergies, it applied its judgment, after consulting with management
and its advisors, to determine that the expense synergies would not materially
impact the post-transaction value of the combined entity with any of the
bidders. The Techwell Board further
determined that any revenue synergies would be subject to risks of execution,
including the risk that the two combined companies would not be effectively
integrated. In forming this judgment,
the Techwell Board did not seek any non-public information about the
bidders. The Techwell Board did not
discuss the value of Intersils stock because the offer from Intersil consisted
entirely of cash consideration. In
determining that the Intersil all-cash offer of $18.00 per share was the
highest offer price of any bidder, the Techwell Board applied its judgment as
to the value of the stock being offered by the other bidders and the risks and
uncertainties associated with a partial stock transaction.
4
As previously disclosed
on March 9, 2010 and after Techwell entered into an exclusivity agreement
with Intersil, Company A sent a revised, nonbinding written indication of
interest to Techwell indicating an increase in its prior offer price to $18.28
per share and eliminating the stock component of its prior offer, resulting in
an all-cash offer that was not subject to any financing contingencies. Company
A requested a two-week exclusivity period.
Company A also continued to indicate that it would focus on retaining
Techwells employees by giving them the opportunity to excel as part of a
larger organization. Company A did not
specifically identify any Techwell employees in its revised indication of
interest.
As previously disclosed
on March 11, 2010, Techwell provided additional due diligence materials to
Intersil, including granting Intersil access to a virtual data room containing
detailed information about Techwell, and Intersil continued its due diligence
review of Techwell. The virtual data
room contained confidential, non-public information about Techwell, such as
information about Techwells intellectual property, customers, suppliers, board
and committee meeting minutes, employee information and certain detailed
financial information, such as a schedule of Techwells fixed assets. Techwell did not provide these additional due
diligence materials to any other interested bidders, including Company A,
Company B, Company C, Company D or Company E, because these bidders were
current and potential competitors and Techwell determined it was not in
Techwells best interest for this confidential information to be broadly
disseminated.
As previously disclosed
on March 16, 2010, Dechert sent Pillsbury an initial draft of the
Agreement and Plan of Merger and a form of Tender and Voting Agreement. The initial draft of the Agreement and Plan
of Merger contained a top-up option providing Intersil an option, subject to
certain conditions and limitations, to purchase additional shares of up to that
number of Shares that, when added to the number of Shares owned by Intersil
following consummation of the proposed tender offer, would constitute one Share
more than 90% of the Shares then outstanding (after giving effect to the
issuance of the Shares under such top-up option). The top-up option provisions contained in the
initial draft of the Agreement and Plan of Merger were substantially similar to
those contained in the final Agreement and Plan of Merger executed by Techwell,
Intersil and Purchaser. The initial
draft of the Agreement and Plan of Merger also contained a provision whereby
Techwell would be required under certain circumstances to pay Intersil a
termination fee equal to three percent of the total equity value of the
transaction on a fully diluted basis.
As previously disclosed
on March 19, 2010, Company A sent a revised, nonbinding written indication
of interest to Techwell indicating an increase in its prior offer price to
$18.50 per share, reiterating the all-cash structure of the offer and
confirming that the offer was not subject to any financing contingencies. In
its communication, Company A expressed its willingness, to the extent Techwell
had negotiated a merger agreement with an alternative purchaser and assuming
that merger agreement contained customary terms and conditions for a
transaction of this nature, to enter into such pre-negotiated definitive
agreement with Techwell. Company A also indicated its ability to complete its
confirmatory due diligence within two days.
Company A also continued to indicate that it would focus on retaining
Techwells employees by giving them the opportunity to excel as part of a
larger organization. Company A did not
specifically identify any Techwell employees in its revised indication of
interest.
2.
The
following sets forth additional disclosure included under the subheading
entitled
Reasons for Recommendation
in Item 4(b) of
the Schedule 14D-9 (
Background and Reasons for
the Recommendation
):
5
As previously disclosed,
one of the material factors that the Techwell Board took into account that
supported its decision to recommend that all stockholders accept the Offer and,
if required by applicable law, vote all shares in favor of the adoption of the
Merger Agreement, was Techwells operating and financial condition and its
prospects. In this context, the Techwell
Board discussed the risks associated with achieving and executing upon Techwells
current financial plan and the fact that Techwell required significant
additional investments for both acquisitions and future growth. In this discussion, the Techwell Board also
considered the potential effect on Techwells financial and strategic
flexibility if Techwell funded its growth plans in whole or in part by
incurring debt and leveraging its balance sheet. The Techwell Board discussed, among other
things, the resulting impact of the risks and potential consequences to
Techwell of being subject to and potentially falling out of compliance with
certain customary negative covenants and other terms that it would likely
become subject to in incurring any future debt.
3.
The
following sets forth additional information included under the subheading
entitled
Opinion of Techwells Financial Advisor
in Item 4(b) of the Schedule 14D-9 (
Background and Reasons for
the Recommendation
):
With respect to the
selected publicly traded company analysis prepared by Deutsche Bank, the
financial information and valuation measurements for the Selected Companies
included the following:
·
Revenue multiples, on an estimated
calendar year 2010 basis:
·
Small Mixed Signal Companies mean of
2.0x
·
Small Mixed Signal Companies medium
of 1.6x
·
Large Mixed Signal Companies mean of
3.1x
·
Large Mixed Signal Companies medium
of 2.7x
·
Revenue multiples, on an estimated
calendar year 2011 basis:
·
Small Mixed Signal Companies mean of
1.8x
·
Small Mixed Signal Companies medium
of 1.5x
·
Large Mixed Signal Companies mean of
2.9x
·
Large Mixed Signal Companies medium
of 2.5x
·
EPS multiples, on an estimated
calendar year 2010 basis:
·
Small Mixed Signal Companies mean of
18.0x
·
Small Mixed Signal Companies medium
of 17.5x
·
Large Mixed Signal Companies mean of
15.5x
·
Large Mixed Signal Companies medium
of 13.9x
·
EPS multiples, on an estimated calendar
year 2011 basis:
·
Small Mixed Signal Companies mean of
16.9x
·
Small Mixed Signal Companies medium
of 15.7x
·
Large Mixed Signal Companies mean of
14.0x
·
Large Mixed Signal Companies medium
of 12.3x
With respect to the
selected precedent transaction analysis prepared by Deutsche Bank, the
financial multiples for the Selected Transactions included the following:
·
Revenue multiples for the last twelve
months:
6
·
Mean of 2.6x
·
Medium of 1.8x
·
Revenue multiples for the next twelve
months:
·
Mean of 2.1x
·
Medium of 1.6x
With respect to the
discounted cash flow analysis prepared by Deutsche Bank, Deutsche Bank
calculated the discounted cash flow values for Techwell as the sum of the net
present values of (i) the estimated unlevered free cash flows that
Techwell will generate for the second half of calendar year 2010 and calendar
years 2011 through 2015, plus (ii) the terminal value of Techwell at the
end of such period. The terminal value of Techwell was calculated based on the
perpetuity method. Deutsche Bank used discount rates ranging from 13.5% to
14.5% and perpetuity growth rates ranging from 3.0% to 5.0%. Deutsche Bank
derived such range of discount rates by utilizing a weighted average cost of
capital analysis based on certain financial metrics for Techwell and the
Selected Companies and such perpetuity growth rates based on its judgment of
the long-term growth rates in the semiconductor and analog semiconductor
industries as supported by third party research.
As
previously disclosed, as compensation for Deutsche Banks services in
connection with the Transaction, Techwell agreed to pay Deutsche Bank a
customary fee upon delivery of its opinion (the Opinion Fee) and a customary
fee if the Transaction is consummated (the Transaction Fee) (against which
the opinion fee will be credited). The
Opinion Fee that Techwell agreed to pay Deutsche Bank is a cash fee of $1.0
million and the Transaction Fee that Techwell agreed to pay Deutsche Bank is a
cash fee estimated to be $7.9 million (against which the opinion fee will be
credited).
4.
The
following sets forth additional information included under Section (vii) entitled
Projected Financial Information
in Item
8 of the Schedule 14D-9 (
Additional Information
):
In its quarterly
earnings releases, Techwell regularly discloses its projected revenue for its
next quarterly period. The following
table sets forth the quarterly projections that Techwell provided in 2009 and
to date in 2010:
Quarterly
Period
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Projected Revenue
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Actual Revenue
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First
Quarter 2009
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$10 million to $11 million
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$10.3 million
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Second
Quarter 2009
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$11 million to $12 million
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$12.0 million
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Third
Quarter 2009
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$16 million to $17 million
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$18.0 million
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Fourth
Quarter 2009
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$21 million to $23 million*
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$22.8 million
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First Quarter 2010
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$19.5
million to $20.5 million
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Pending**
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* In its quarterly
earnings release issued on October 29, 2009, Techwell projected quarterly
revenue for the fourth quarter of 2009 to be between $19 million and $20
million. Techwell revised its projected
quarterly revenue for the fourth quarter of 2009 in a press release issued on November 18,
2009 to be between $21 million and $23 million.
** Techwell intends to issue a written earnings
release with its preliminary, unaudited financial results for the first quarter
of 2010 on April 21, 2010. Techwells
financial results will also be contained in a Current Report on Form 8-K
to be filed with the SEC.
7
Techwells management
provided, at the request of Deutsche Bank and solely for the purpose of
facilitating Deutsche Banks preparation of its discounted cash flow analysis,
which analysis is described in more detail above in Opinion of Techwells
Financial Advisor, financial projections for the second half of calendar year
2010 and calendar years 2011 through 2015.
These financial projections were not approved by the Techwell
Board. These financial projections
reflect numerous estimates and assumptions made by management with respect to
industry performance, general business, economic, regulatory, market and
financial conditions, including industry analyst forecasts about the cyclical
nature of the semiconductor industry and managements estimates on the
potential impact that fluctuations in the industry may have on Techwell, as
well as matters specific to Techwells business.
5.
The following
sets forth additional information included under Section (ix) entitled
Legal Proceedings Regarding the Offer
in Item 8 of the Schedule 14D-9 (
Additional Information
):
On April 19, 2010,
Techwell entered into a memorandum of understanding with plaintiffs and the
other defendants to settle the class action lawsuit,
Mike
Tamashiro v. Techwell, Inc., et al.
Under the terms of the
memorandum of understanding, Techwell, the other named defendants and the
plaintiffs have agreed to settle the lawsuit, subject to court approval. As
part of the settlement, the defendants deny all allegations of wrongdoing and
deny that the previous disclosures were inadequate but Techwell agreed to make
available certain additional information to its stockholders, which is set
forth above under the subheadings
Background of the Offer
in Item 4 The
Solicitation or Recommendation,
Reasons for Recommendation
in Item 4
The Solicitation or Recommendation,
Opinion of Techwells Financial Advisor
in
Item 4 The Solicitation or Recommendation, and
Projected
Financial Information
in Item 8 Additional Information, in
this Schedule 14D-9. The memorandum of understanding further contemplates that
the parties will enter into a stipulation of settlement. The stipulation of
settlement will be subject to customary conditions, including court approval
following notice to members of the proposed settlement class. If finally
approved by the court, the settlement will resolve all of the claims that were
or could have been brought on behalf of the proposed settlement class in the
action being settled, including all claims relating to the Offer, the Merger,
the Merger Agreement, the adequacy of the merger consideration, the
negotiations preceding the Merger Agreement, the adequacy and completeness of
the disclosures made in connection with the Offer and the Merger and any actions
or inactions of the defendants in connection with, or related in any way to,
the Offer, the Merger or the Merger Agreement, including any alleged breaches
of the fiduciary duties of any of the defendants, or the aiding and abetting
thereof. If the court does approve of the settlement after a notice period,
then all public stockholders who did not elect to opt out of such settlement
will be bound thereby.
In addition, in connection
with the settlement and as provided in the memorandum of understanding, and
subject to approval by the court, Techwell or its insurer will pay to
plaintiffs counsel for their fees and expenses an amount not to exceed
$300,000. This payment will not affect the amount of consideration to be paid
to stockholders of Techwell in connection with the Offer and the subsequent
Merger. Furthermore, any payment is also conditioned on the Offer being
consummated so Techwells stockholders will not indirectly bear such payment.
Under the terms of the
Merger Agreement, the settlement is subject to the approval of Intersil, which
may not be unreasonably withheld, conditioned or delayed. Intersil has given
its approval to the settlement described by the memorandum of understanding.
8
Techwell and the other
defendants maintain that the lawsuit is completely without merit. Nevertheless,
in order to avoid costly litigation and eliminate the risk of any delay to the
closing of the Offer and subsequent Merger, and because the only effect of the
settlement on the stockholders is to provide additional disclosure, the
defendants have agreed to the settlement contemplated in the memorandum of
understanding.
Important
Additional Information About the Transaction
This Report is neither an offer to purchase nor a
solicitation of an offer to sell any securities. The solicitation and the offer
to buy the Shares are being made pursuant to an offer to purchase and related
materials that Purchaser has filed with the SEC and mailed to Techwells
stockholders. Purchaser has filed a tender offer statement on Schedule TO with
the SEC with respect to the offer, and Techwell has filed a
solicitation/recommendation statement on Schedule 14D-9 with respect to the
Offer. The tender offer statement (including an offer to purchase, a related
letter of transmittal and other offer documents) and the
solicitation/recommendation statement contain important information that should
be read carefully and considered before any decision is made with respect to
the tender offer. These materials are available at no charge from the SEC
through its website at www.sec.gov.
9
SIGNATURE
Pursuant
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:
April 20, 2010
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TECHWELL, INC.
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By:
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/s/ Mark Voll
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Mark
Voll
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Vice
President of Finance and Administration and Chief Financial Officer
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