Item 1.01.
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Entry Into a Material Definitive Agreement.
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On May 7, 2018, Cohu, Inc., a Delaware corporation (“
Parent
” or “
Cohu
”), entered into an Agreement and Plan of Merger (the “
Merger Agreement
”) with Xavier Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent (“
Merger Sub
”), and Xcerra Corporation, a Massachusetts corporation (“
Xcerra
” or the “
Company
”). Under the terms of the Merger Agreement, the acquisition of Xcerra will be accomplished through a merger of Merger Sub with and into Xcerra (the “
Merger
”), with Xcerra surviving the Merger as a wholly-owned subsidiary of Parent.
At the effective time of the Merger (the “
Effective Time
”), each share of Xcerra’s common stock, par value $0.05 per share (“
Company
Common Stock
”), issued and outstanding immediately prior to the Effective Time other than dissenting shares and shares held by Parent, Merger Sub, Xcerra or any direct or indirect wholly-owned subsidiary of Parent or Xcerra) will be converted into the right to receive (i) $9.00 in cash, without interest, (the “
Cash Consideration
”) and (ii) 0.2109 of a validly issued, fully paid and nonassessable share of common stock of Parent, par value $1.00 per share (“
Parent
Common Stock
”), (the “
Stock Consideration
” and, together with the Cash Consideration, the “
Merger Consideration
”).
Pursuant to the Merger Agreement, each outstanding Company restricted stock unit (a “
Company
Restricted Stock Unit
”) that will either (i) vest automatically according to its terms at the Effective Time, or (ii) is held by a member of Xcerra’s board of directors, will be cancelled and converted into the right to receive the Merger Consideration. All Company Restricted Stock Units not described in the preceding sentence that are outstanding and unvested at the Effective Time will be assumed by Parent and converted into a restricted stock unit award representing that number of shares of Parent Common Stock equal to the product of A) the number of shares of Company Common Stock represented by such Company Restricted Stock Unit immediately prior to the Effective Time multiplied by (B) the sum of (1) the Stock Consideration plus (2) the quotient of (x) the Cash Consideration divided by (y) the volume weighted average of the trading prices of Parent Common Stock on each of the three consecutive trading days ending on the trading day that is one trading day prior to the date of the closing of the Merger.
Each of Parent’s and Xcerra’s obligation to consummate the Merger is subject to a number of conditions specified in the Merger Agreement, including the following: (i) approval of the issuance of Parent Common Stock in the Merger by the affirmative vote of the holders of a majority of the outstanding shares of Parent Common Stock, (ii) approval of the Merger Agreement by the affirmative vote of the holders of two-thirds of the outstanding shares of Company Common Stock, (iii) expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 and receipt of customary antitrust clearances in Germany, (iv) the Parent Common Stock to be issued in the Merger being approved for listing on Nasdaq, (v) the Form S-4 to be filed by Parent with respect to the Parent Common Stock to be issued in the Merger being declared effective by the Securities and Exchange Commission, (vi) the representations and warranties of the other party being true and correct, subject to the materiality standards contained in the Merger Agreement, (vii) absence of specified adverse laws or orders, (viii) material compliance by the other party with its covenants and (ix) the absence of a material adverse effect with respect to the other party after execution of the Merger Agreement. The consummation of the Merger is not subject to a financing condition.
In addition to the above conditions to closing, Parent is not required to consummate the Merger until after completion of a marketing period related to its debt financing. The marketing period will not begin until Parent receives certain specified financial information from Xcerra and certain conditions to closing of the Merger have been satisfied.
The Merger Agreement contains customary representations, warranties and covenants by Parent, Xcerra and Merger Sub. Xcerra has agreed not to solicit any offers or proposals for alternative transactions, or engage in discussions or participate in negotiations regarding such offer or proposal or furnish any nonpublic information regarding Xcerra to any person that has or expressed an interest in making such offer or proposal, except that if Xcerra’s board of directors determines that a proposal not resulting from a breach of the Merger Agreement constitutes, or would reasonably be expected to result in, a “Company Superior Proposal” (as defined in the Merger Agreement) Xcerra will be entitled to furnish the person making such proposal with non-public information and negotiate with such person. The Merger Agreement also requires each of Parent and Xcerra to call and hold shareholder meetings and requires Parent’s and Xcerra’s respective board of directors to recommend that such party’s shareholders approve the issuance of Parent Common Stock or approve the Merger Agreement, respectively. Each of Parent’s and Xcerra’s respective boards of directors is permitted to change its recommendation to shareholders in response to (i) a “Company Intervening Event” or “Parent Intervening Event,” as applicable and as defined in the Merger Agreement or (ii) a competing proposal that such board of directors determines is a “Company Superior Proposal” or a “Parent Superior Proposal,” as applicable and as defined in the Merger Agreement. In addition, Xcerra’s board of directors is also permitted to terminate the Merger Agreement, subject to payment of a termination fee to Parent (as described further below), if Xcerra’s board of directors determines that a competing proposal constitutes a “Company Superior Proposal.”
Each of the Parent and Xcerra has agreed, subject to the terms and conditions of the Merger Agreement, to use its reasonable best efforts to satisfy the conditions to the Merger.
The Merger Agreement contains certain customary termination rights, including, among others, (i) the right of either Parent or Xcerra to terminate the Merger Agreement if Xcerra’s shareholders fail to approve the Merger Agreement or if Parent’s shareholders fail to approve the issuance of Parent Common Stock, (ii) the right of either Parent or Xcerra to terminate the Merger Agreement if the board of directors of the other party changes its recommendation to such party’s shareholders, (iii) the right of Xcerra to terminate the Merger Agreement to accept a Company Superior Proposal as described above, (iv) the right of either Parent or Xcerra to terminate the Merger Agreement if the Merger has not occurred by November 7, 2018 (the “
Termination Date
,” subject to extension pursuant to the Merger Agreement) and (v) the right of either Parent or Xcerra to terminate the Merger Agreement due to a material breach by the other party of any of its representations, warranties or covenants, subject to certain conditions.
The Merger Agreement provides for Xcerra to pay to Parent a termination fee of $22.8 million if the Merger Agreement is terminated (i) by Parent as a result of a change in the Xcerra board of director’s recommendation to Xcerra’s shareholders or a failure of Xcerra to comply with the non-solicitation and board recommendation covenants in the Merger Agreement; (ii) by Xcerra in order to accept a Company Superior Proposal; (iii) by either Parent or Xcerra if (A) the Merger has not been consummated by the Termination Date or (B) Xcerra shall have failed to obtain the necessary shareholder approval for the Merger and, in each case of (A) and (B) a competing proposal with respect to Xcerra was publicly disclosed and not publicly withdrawn prior to the meeting of Xcerra’s shareholders and Xcerra either consummates a transaction with respect to a competing proposal or enters into a definitive agreement with respect to a competing proposal, in each case within twelve months of such termination; or (iv) by Parent if Xcerra is in breach of a representation, warranty or covenant that would cause the closing conditions to fail to be satisfied, and the breach cannot be cured within 20 calendar days, so long as Parent has not materially breached the Merger Agreement.
The Merger Agreement provides for Parent to pay to Xcerra a termination fee of $22.8 million if the Merger Agreement is terminated by Xcerra (i) as a result of Parent’s breach of a representation, warranty or covenant that would cause the closing conditions to fail, and the breach cannot be cured within 20 calendar days, so long as Xcerra has not materially breached the Merger Agreement or (ii) as a result of a change by Parent’s board of directors in its recommendation that Parent’s shareholders approve the issuance of Parent Common Stock. The Merger Agreement further provides for Parent to pay to Xcerra a termination fee of $45 million if the Merger Agreement is terminated by Xcerra as a result of Parent’s failure to consummate the Merger within five business days of written notice from Xcerra to Parent at a time when all closing conditions have been satisfied or waived and the marketing period has expired.
Additionally, Parent has agreed that it will appoint to its board of directors, two members of Xcerra’s board of directors immediately after the closing of the Merger.
The Merger Agreement contains representations and warranties by Parent and Xcerra with respect to matters as of specified dates. The representations and warranties: reflect negotiations between Parent and Xcerra and are not intended as statements of fact to be relied upon by Parent’s or Xcerra’s shareholders; in certain cases, merely represent risk-allocation decisions among Parent and Xcerra; have been modified or qualified by certain confidential disclosures that were made between Parent and Xcerra in connection with the negotiation of the Merger Agreement, which disclosures are not reflected in the Merger Agreement itself; may no longer be true as of a given date; and may apply standards of materiality in a way that is different from what may be viewed as material by shareholders. As such, the representations and warranties are solely for the benefit of the parties to the Merger Agreement and may be limited or modified by a variety of factors, including: subsequent events, information included in public filings, disclosures made during negotiations, correspondence between Parent and Xcerra and disclosure schedules to the Merger Agreement. Accordingly, the representations and warranties may not describe the actual state of affairs at the date they were made or at any other time and you should not rely on them as statements of fact. 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 Parent’s public disclosures.
In connection with the proposed Merger, on May 7, 2018, Parent has obtained a financing commitment (the “
Commitment Letter
”) from Deutsche Bank AG New York Branch (the “
Lender
”), pursuant to which the Lender (acting alone or through or with affiliates selected by it) has committed to provide a first lien term loan facility in an aggregate principal amount of up to $350.0 million (the “
Term Facility
”) and if cash on hand of Xcerra is not available at the closing of the Merger, a cash bridge facility in an aggregate principal amount of up to $100.0 million (the “
Cash Bridge Facility
” and together with the Term Facility, the “
Facilities
”) to finance a portion of the Merger Consideration. The obligations of the Lender to provide the Facilities are subject to a number of customary conditions, including, without limitation, execution and delivery of definitive documentation consistent with the Commitment Letter and the documentation standard specified therein. The Commitment Letter terminates upon the earliest of (i) the valid termination or abandonment of the Merger Agreement prior to the consummation of the Merger, (ii) the consummation of the Merger without the use of the Facilities, and (iii) the Termination Date (including as extended in accordance with the Merger Agreement).
The foregoing description of the Merger and 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 is incorporated herein by reference. A copy of the Merger Agreement has been included to provide shareholders with information regarding its terms and is not intended to provide any factual information about Parent or Xcerra.