Item 1.01
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Entry into a Material Definitive Agreement.
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Agreement and Plan of Merger
On December 21, 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.
Pursuant 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 June 21, 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 Exhibit 2.1 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) pursuant 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.