Item 1.01 Entry into a Material Definitive Agreement.
Merger Agreement
On February 6, 2018, Identiv, Inc.,
a Delaware corporation (Identiv) entered into an Agreement and Plan of Merger (the Merger Agreement) by and among Identiv, Eagle Acquisition, Inc., a California corporation and a wholly owned subsidiary of Identiv
(Merger Sub), 3VR Security, Inc., a California corporation (3VR) and Fortis Advisors LLC, a Delaware limited liability company, acting as Securityholder Representative (Securityholder Representative). Capitalized
terms used and not otherwise defied herein have the meanings set forth in the Merger Agreement.
Pursuant to the terms and conditions set forth in the
Merger Agreement, at the effective time of the merger, Merger Sub will merge with and into 3VR and 3VR will become a wholly-owned subsidiary of Identiv (the Acquisition). Under the terms of the Merger Agreement, the aggregate
consideration to be paid by Identiv at the closing of the Acquisition is approximately $6.9 million, consisting of (i) approximately $1.6 million in cash, subject to adjustments based on 3VRs closing working capital,
(ii) the issuance of subordinated unsecured promissory notes by Identiv in an aggregate principal amount of $2.0 million (the Promissory Notes), and (iii) the issuance of shares of Identivs common stock with a value
of approximately $3.3 million. Additionally, in the event that the surviving corporation achieves $24.1 million in product shipments in 2018, Identiv will be obligated to issue
earn-out
consideration
of $3.5 million payable in shares of Identivs common stock (subject to certain conditions) with a potential maximum
earn-out
value of $7.0 million in the event that such shipments exceed
$48.2 million. Identiv may also be obligated to pay, in cash, and subject to certain conditions, contingent consideration equal to the lesser of (A) 35% of the gross margin of certain products sold and services rendered by the surviving
corporation in 2018 pursuant to a supply arrangement and (B) $25.0 million, each subject to adjustments (collectively, all consideration issuable in connection with the Acquisition, the Merger Consideration). $1.0 million of
Identivs common stock issuable at the closing of the transaction will be placed in an escrow fund for up to 12 months following the closing for the satisfaction of certain indemnification claims.
Completion of the Acquisition is subject to customary closing conditions, including, but not limited to, the absence of any material adverse effect, receipt
of certain third party consents, the receipt of 3VR shareholder approval of the Acquisition from the holders of at least 85% of the outstanding shares of 3VR capital stock, and the delivery of certain other closing deliverables. The Acquisition is
expected to close no later than February 20, 2018 (the Closing).
It is expected that the shares of common stock issued by Identiv at the
Closing, and any
earn-out
consideration paid out in shares (the Identiv Shares), will be issued pursuant to an exemption under Section 4(a)(2) of the Securities Act of 1933, as amended, and/or
Regulation D, as promulgated thereunder. Identiv has also agreed to file a registration statement on Form
S-3
registering the Identiv Shares following Closing.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger
Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The Merger Agreement has been attached to provide investors with information regarding its terms. It is not intended to provide any other factual
information about the parties. The terms of the Merger Agreement govern the contractual rights and relationships, and allocate risks, among the parties in relation to the transactions contemplated by the Merger Agreement. In particular, the
assertions embodied in the representations and warranties in the Merger Agreement reflect negotiations between, and are solely for the benefit of, the parties thereto and may be limited, qualified or modified by a variety of factors, including:
subsequent events, information included in public filings, disclosures made during negotiations, correspondence between the parties and in confidential disclosure schedules to the Merger Agreement. Moreover, certain representations and warranties in
the Merger Agreement were used for the purpose of allocating risk between the parties rather than establishing matters as facts and may not describe the actual state of affairs at the date they were made or at any other time. Accordingly, you should
not rely on the representations and warranties in the Merger Agreement as characterizations of the actual state of facts about the parties.
Securityholder Agreement
Concurrently with entry into the Merger Agreement, Identiv entered into a Securityholder Agreement (the Securityholder Agreement), dated as of
February 6, 2018, with (i) the shareholders of 3VR (3VR Shareholders), (ii) certain holders of convertible notes issued by 3VR (3VR Noteholders), and (iii) participants in the Management
Carve-out
Plan of 3VR (the 3VR Management
Carve-out
Plan, and (i), (ii) and (ii) together, the Securityholders).
The Securityholder Agreement, among other things, prohibits the Securityholders from selling any of the Identiv Shares for a period of six months following
Closing, and thereafter, prohibits them from selling more than 50% of such shares for an additional three months. The Securityholder Agreement also provides the Securityholders with certain registration rights related to the Identiv Shares.
The foregoing description of the Securityholder Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of
the Securityholder Agreement, a form of which is attached hereto as Exhibit 10.1 and the terms of which are incorporated herein by reference.
Subordinated Unsecured Promissory Notes
As part of the
Merger Consideration, Identiv has agreed to issue the Promissory Notes in an aggregate principal amount of $2.0 million. The Promissory Notes bear simple interest at the rate of 3% per annum and mature on the
one-year
anniversary of Closing, unless repayment thereof is accelerated pursuant to a change in control of Identiv or other standard events of default. The Promissory Notes are subordinated to Identivs
existing and future secured indebtedness to banks, insurance companies, lease financing institutions or other lending institutions.
The foregoing
description of the Promissory Notes does not purport to be complete and is qualified in its entirety by reference to the full text of the Subordinated Unsecured Promissory Notes, a form of which is attached hereto as Exhibit 10.2 and the terms of
which are incorporated herein by reference.