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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material under §240.14a-12

TRANSPHORM, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

 

No fee required.

 

Fee paid previously with preliminary materials.

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 


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PRELIMINARY PROXY STATEMENT - SUBJECT TO COMPLETION

 

LOGO

Transphorm, Inc.

75 Castilian Drive

Goleta, California 93117

To the Stockholders of Transphorm, Inc.:

You are cordially invited to attend a special meeting of stockholders (which is referred to, together with any adjournment, postponement, or other delay thereof, as the “special meeting”) of Transphorm, Inc, a Delaware corporation (which is referred to as “Transphorm”). The special meeting will be held on [●], 2024, at [●], Pacific Daylight Time. You may attend the special meeting via a live interactive webcast on the internet at [●]. You will be able to listen to the special meeting live and vote online. Transphorm believes that a virtual meeting provides expanded access, improved communication, and cost savings for Transphorm’s stockholders.

At the special meeting, you will be asked to consider and vote on a proposal to adopt the Agreement and Plan of Merger (as it may be amended from time to time), dated January 10, 2024 (which is referred to as the “merger agreement”), by and among Renesas Electronics America Inc., a California corporation (which is referred to as “Renesas”), Travis Merger Sub, Inc., a Delaware corporation (which is referred to as “Merger Sub”), Renesas Electronics Corporation, a Japanese corporation (which is referred to as “Guarantor”), which is only a party for the purposes set forth in Section 9.17 of the merger agreement, and Transphorm. The merger of Merger Sub (a wholly owned subsidiary of Renesas) with and into Transphorm is referred to as the “merger.” At the special meeting, you will also be asked to consider and vote on a proposal for the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

If the merger is completed, you will be entitled to receive $5.10 in cash, without interest and subject to any applicable withholding taxes, for each share of Transphorm common stock that you own (unless you have properly exercised your appraisal rights). This amount represents a premium of approximately 35 percent over Transphorm’s closing stock price on January 10, 2024, the last full trading day prior to the public announcement that Transphorm entered into the merger agreement.

Transphorm’s Board of Directors, after considering the factors more fully described in the enclosed proxy statement, unanimously: (1) determined that the merger agreement, and the other transactions contemplated by the merger agreement, including the merger, are advisable and in the best interests of Transphorm and its stockholders; and (2) adopted and approved the merger agreement, the merger, and the other transactions contemplated by the merger agreement in all respects.

Transphorm’s Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the merger agreement and approval of the merger; and (2) “FOR” the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

The accompanying proxy statement provides detailed information about the special meeting, the merger agreement, the merger, and the proposals to be considered at the special meeting. A copy of the merger agreement is attached as Annex A to the proxy statement.

The accompanying proxy statement also describes the actions and determinations of Transphorm’s Board of Directors in connection with its evaluation of the merger agreement and the merger. Please read the proxy statement and its annexes, including the merger agreement, carefully and in their entirety, as they contain important information.


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Even if you plan to attend the special meeting, please sign, date, and return, as promptly as possible, the enclosed proxy card (a prepaid reply envelope is provided for your convenience) or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card). If you attend and vote at the special meeting, your vote will revoke any proxy that you have previously submitted. If you fail to return your proxy or attend the special meeting, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting or be voted at the special meeting, which, if a quorum is present, will have the same effect as a vote against the proposal to adopt the merger agreement.

If your shares are held through a bank, broker, or other nominee, you are considered the “beneficial owner” of shares held in “street name.” If you hold your shares in “street name,” you will receive instructions from your bank, broker, or other nominee that you must follow in order to submit your voting instructions and have your shares counted at the special meeting. Without your instructions, your bank, broker, or other nominee cannot vote on any of the proposals to be considered at the special meeting, and your shares will not be counted for purposes of determining whether a quorum is present at the special meeting, which, if a quorum is present, will have the same effect as a vote against the proposal to adopt the merger agreement.

Your vote is very important, regardless of the number of shares that you own.

If you have any questions or need assistance voting your shares, please contact Transphorm’s proxy solicitor:

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 10005

Stockholders Call Toll-Free: (800) 967-5068

Banks and Brokers Call: (212) 257-2543

Email: TGAN@dfking.com

On behalf of Transphorm’s Board of Directors, thank you for your support of Transphorm.

 

Very truly yours,

 

 

Primit Parikh

Director, President and Chief Executive Officer

The accompanying proxy statement is dated [●], 2024, and, together with the enclosed form of proxy card, is first being sent to stockholders on or about [●], 2024.


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PRELIMINARY PROXY STATEMENT – SUBJECT TO COMPLETION

 

LOGO

Transphorm, Inc.

75 Castilian Drive

Goleta, California 93117

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD VIRTUALLY VIA WEBCAST ON [], 2024

Notice is given that a special meeting of stockholders (which is referred to, together with any adjournment, postponement, or other delay thereof, as the “special meeting) of Transphorm, Inc., a Delaware corporation (which is referred to as “Transphorm”), will be held on [●], 2024, at [●], Pacific Daylight Time, for the following purposes:

 

  1.

To consider and vote on the proposal to adopt the Agreement and Plan of Merger (as it may be amended from time to time), dated January 10, 2024, between Renesas Electronics America Inc., a California corporation (which is referred to as “Renesas”), Travis Merger Sub, Inc., a Delaware corporation (which is referred to as “Merger Sub”), Renesas Electronics Corporation, a Japanese corporation (solely for the purposes set forth in Section 9.17 of the merger agreement), and Transphorm (which is referred to as the “merger agreement”);

 

  2.

To consider and vote on any proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting; and

 

  3.

To transact any other business that may properly come before the special meeting.

The special meeting will be held by means of a live interactive webcast on the internet at [●]. By accessing that web address and using the control number found on your proxy card, you will be able to listen to the special meeting live and vote online. The special meeting will begin promptly at [●], Pacific Daylight Time. Online check-in will begin a few minutes prior to the special meeting. You will need the control number found on your proxy card or voting instruction form in order to participate in the special meeting (including voting your shares).

Only Transphorm stockholders as of the close of business on [●], 2024, are entitled to notice of, and to vote at, the special meeting.

The merger of Merger Sub (a wholly owned subsidiary of Renesas) with and into Transphorm is referred to as the “merger.”

Transphorm’s Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the merger agreement and approval of the merger; and (2) “FOR” the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

Transphorm stockholders of record or beneficial owners who do not vote in favor of the proposal to adopt the merger agreement will have the right to seek appraisal of the “fair value” of their shares of Transphorm common stock (exclusive of any elements of value arising from the accomplishment or expectation of the merger and together with interest (as described in the accompanying proxy statement) to be paid on the amount determined to be “fair value”) in lieu of receiving $5.10 per share in cash, without interest and subject to any applicable withholding taxes, for each share of Transphorm common stock that they own if the merger is completed, as determined in accordance with Section 262 of the General Corporation Law of the State of Delaware (which is referred to as the “DGCL”). To do so, a Transphorm stockholder of record or beneficial owner must properly demand appraisal before the vote is taken on the merger agreement and comply with all other requirements of the


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DGCL, including Section 262 of the DGCL, which are summarized in the accompanying proxy statement. A copy of Section 262 of the DGCL is available as a publicly available electronic resource, which may be accessed without subscription or cost, at the following hyperlink: https://delcode.delaware.gov/title8/c001/sc09/index.html#262.

Even if you plan to attend the special meeting, please sign, date, and return, as promptly as possible, the enclosed proxy card (a prepaid reply envelope is provided for your convenience) or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card). If you attend the special meeting and vote at the special meeting, your vote will revoke any proxy that you have previously submitted. If you fail to return your proxy or to attend the special meeting, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting or be voted at the special meeting, which, if a quorum is present, will have the same effect as a vote against the proposal to adopt the merger agreement.

If your shares are held through a bank, broker, or other nominee, you are considered the “beneficial owner” of shares held in “street name.” If you hold your shares in “street name,” you will receive instructions from your bank, broker, or other nominee that you must follow in order to submit your voting instructions and have your shares counted at the special meeting. Without your instructions, your bank, broker, or other nominee cannot vote on any of the proposals to be considered at the special meeting, and your shares will not be counted for purposes of determining whether a quorum is present at the special meeting, which, if a quorum is present, will have the same effect as a vote against the proposal to adopt the merger agreement.

 

By Order of the Board of Directors,

 

 

Primit Parikh

Director, President and Chief Executive Officer

Dated: [●], 2024

Goleta, California


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PRELIMINARY PROXY STATEMENT – SUBJECT TO COMPLETION

 

LOGO

TRANSPHORM, INC.

PROXY STATEMENT

FOR

SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD VIRTUALLY VIA WEBCAST ON [], 2024

This proxy statement is dated [], 2024, and, together with the enclosed form of proxy card,

is first being sent to stockholders on or about [], 2024.

 

 


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TABLE OF CONTENTS

 

TRANSACTION SUMMARY

     1  

Introduction

     1  

Parties Involved in the Merger

     1  

Effect of the Merger

     2  

Per Share Price

     3  

The Special Meeting

     3  

Recommendation of the Transphorm Board and Reasons for the Merger

     5  

Opinion of BofA Securities, Inc.

     5  

Treatment of Warrants in the Merger

     5  

Treatment of Equity Awards in the Merger

     6  

Employee Matters

     7  

Interests of Transphorm’s Directors and Executive Officers in the Merger

     8  

Appraisal Rights

     9  

Material U.S. Federal Income Tax Consequences of the Merger

     10  

Regulatory Approvals Required for the Merger

     11  

Financing of the Merger

     11  

Voting Agreement

     12  

No Solicitation of Other Acquisition Offers

     12  

Conditions to the Closing of the Merger

     14  

Termination of the Merger Agreement

     15  

Termination Fees and Remedies

     16  

Delisting and Deregistration of Transphorm Common Stock

     17  

Effect on Transphorm if the Merger is Not Completed

     17  

QUESTIONS AND ANSWERS

     18  

FORWARD-LOOKING STATEMENTS

     28  

THE SPECIAL MEETING

     30  

Date, Time, and Place

     30  

Purpose of the Special Meeting

     30  

Attending the Special Meeting

     30  

Record Date; Shares Entitled to Vote; Quorum

     30  

Vote Required; Abstentions and Broker Non-Votes

     31  

Shares Held by Transphorm’s Directors

     31  

Voting of Proxies

     31  

Revocability of Proxies

     32  

The Transphorm Board’s Recommendation

     32  

Adjournment

     33  

Solicitation of Proxies

     33  

Anticipated Date of Completion of the Merger

     33  

Appraisal Rights

     33  

Other Matters

     34  

Householding of Special Meeting Materials

     34  

Questions and Additional Information

     35  

THE MERGER

     36  

Parties Involved in the Merger

     36  

Effects of the Merger

     37  

Effect on Transphorm if the Merger is Not Completed

     37  

Effect of the Merger on Transphorm’s Outstanding Common Stock

     38  

Background of the Merger

     38  

Recommendation of the Transphorm Board and Reasons for the Merger

     51  


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Opinion of BofA Securities, Inc.

     56  

Financial Projections

     62  

Interests of Transphorm’s Directors and Executive Officers in the Merger

     67  

Closing and Effective Time of the Merger

     74  

Appraisal Rights

     74  

Accounting Treatment

     80  

Material U.S. Federal Income Tax Consequences of the Merger

     80  

Regulatory Approvals Required for the Merger

     84  

Financing of the Merger

     85  

The Voting Agreement

     86  

Delisting and Deregistration of Transphorm Common Stock

     86  

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

     87  

PROPOSAL 2: ADJOURNMENT OF THE SPECIAL MEETING

     88  

THE MERGER AGREEMENT

     89  

Closing and Effective Time of the Merger

     89  

Effects of the Merger; Certificate of Incorporation; Bylaws; Directors and Officers

     90  

Conversion of Shares

     90  

Payment Agent, Exchange Fund and Exchange and Payment Procedures

     92  

Representations and Warranties

     93  

Conduct of Business Pending the Merger

     97  

No Solicitation of Other Acquisition Offers

     100  

The Transphorm Board’s Recommendation; Board Recommendation Change

     102  

Stockholder Special Meeting

     104  

Employee Matters

     104  

Efforts to Close the Merger

     105  

Indemnification and Insurance

     107  

Conditions to the Closing of the Merger

     108  

Termination of the Merger Agreement

     109  

Termination Fees and Remedies

     110  

Fees and Expenses

     111  

No Third-Party Beneficiaries

     111  

Amendment, Extension and Waiver

     111  

Governing Law and Venue

     112  

Waiver of Jury Trial

     112  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     113  

FUTURE STOCKHOLDER PROPOSALS

     115  

WHERE YOU CAN FIND MORE INFORMATION

     116  

MISCELLANEOUS

     118  

ANNEX A: AGREEMENT AND PLAN OF MERGER

     A-1  

ANNEX B: OPINION OF BOFA SECURITIES, INC.

     B-1  

ANNEX C: VOTING AGREEMENT

     C-1  


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YOUR VOTE IS IMPORTANT

EVEN IF YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE ENCOURAGED TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE: (1) OVER THE INTERNET; (2) BY TELEPHONE; OR (3) BY SIGNING, DATING, AND RETURNING THE ENCLOSED PROXY CARD (A PREPAID REPLY ENVELOPE IS PROVIDED FOR YOUR CONVENIENCE). You may revoke your proxy or change your vote at any time before your proxy is voted at the special meeting.

If your shares are held through a bank, broker, or other nominee, you are considered the “beneficial owner” of shares held in “street name.” If you hold your shares in “street name,” you will receive instructions from your bank, broker, or other nominee that you must follow in order to submit your voting instructions and have your shares counted at the special meeting. Without your instructions, your bank, broker, or other nominee cannot vote on any of the proposals to be considered at the special meeting, and your shares will not be counted for purposes of determining whether a quorum is present at the special meeting, which, if a quorum is present, will have the same effect as a vote against the proposal to adopt the merger agreement.

If you are a stockholder of record, voting at the special meeting will revoke any proxy that you previously submitted. If you hold your shares through a bank, broker, or other nominee, you must obtain a “legal proxy” from the bank, broker, or other nominee that holds your shares in order to vote at the special meeting.

If you fail to (1) return your proxy card; (2) grant your proxy electronically over the internet or by telephone; or (3) vote by virtual ballot during the special meeting, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting or be voted at the special meeting, which, if a quorum is present, will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement but will have no effect on the proposal to adjourn the special meeting if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

You are encouraged to read this proxy statement and its annexes, including all documents incorporated by reference into this proxy statement, carefully and in their entirety. If you have any questions concerning the merger, the special meeting, or this proxy statement, would like additional copies of this proxy statement, or need help voting your shares, please contact Transphorm’s proxy solicitor:

D.F. King & Co., Inc.

48 Wall Street, 22nd floor

New York, NY 10005

Stockholders Call Toll Free: (800) 967-5068

Banks and Brokers Call: (212) 257-2543

Email: TGAN@dfking.com


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TRANSACTION SUMMARY

Except as otherwise specifically noted in this proxy statement, “Transphorm” refers to Transphorm, Inc., including, in certain cases, Transphorm’s subsidiaries. Throughout this proxy statement Transphorm’s Board of Directors is referred to as the “Transphorm Board.” Throughout this proxy statement, Renesas Electronics America Inc. is referred to as “Renesas,” Travis Merger Sub, Inc. is referred to as “Merger Sub,” and Renesas Electronics Corporation is referred to as “Guarantor.” In addition, throughout this proxy statement the Agreement and Plan of Merger (as it may be amended from time to time), dated January 10, 2024, by and among Renesas, Merger Sub, Guarantor (a party solely for purposes set forth in Section 9.17 of the merger agreement) and Transphorm is referred to as the “merger agreement.”

This summary highlights selected information from this proxy statement related to the proposed merger of Merger Sub (a wholly owned subsidiary of Renesas) with and into Transphorm, with Transphorm surviving and continuing as a wholly owned subsidiary of Renesas. That transaction is referred to as the “merger.”

This proxy statement may not contain all of the information that is important to you. To understand the merger more fully and for a complete description of its legal terms, you should carefully read this entire proxy statement, including the annexes to this proxy statement and the other documents referred to in this proxy statement. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions in the section of this proxy statement captioned “Where You Can Find More Information.” A copy of the merger agreement is attached as Annex A to this proxy statement. You are encouraged to read the merger agreement, which is the legal document that governs the merger, carefully and in its entirety.

Introduction

On January 10, 2024, Transphorm agreed to be acquired by Renesas, which is a wholly owned subsidiary of Renesas Electronics Corporation, which is a premier supplier of advanced semiconductor solutions. If the merger is completed, each outstanding share of Transphorm common stock (which is referred to as “common stock”) (subject to certain exceptions) will be converted into the right to receive an amount in cash equal to $5.10 per share, without interest and less any applicable withholding taxes.

Parties Involved in the Merger

Transphorm

Transphorm is a global semiconductor company founded in 2007. Transphorm is a pioneer and market and technology leader in the wide-bandgap gallium nitride (which is referred to as “GaN”) power electronics field for high voltage power conversion applications. Transphorm delivers high-quality and reliable GaN devices with high performance, while providing application design support to a growing customer base. Transphorm’s GaN devices allow customers to design smaller, lighter and cooler power systems that create increased functional value in end products including smartphone power adapters/fast-chargers, power supplies for datacenter servers/communication, industrial power converters, and chargers/converters/inverters for electric vehicles, among other applications. Transphorm deploys its unique vertically-integrated innovation model that leverages one of the industry’s most experienced GaN engineering teams (with over 300 years of combined experience) at every development stage: device design, materials growth, device fabrication, packaging, circuits and application support. This approach is backed by one of the GaN power industry’s largest intellectual property portfolios with access to over 1,000 world-wide patents. Transphorm’s innovations are designed to move power electronics beyond the limitations of silicon and provide Transphorm’s customers with the potential to achieve higher efficiency (e.g., titanium-class performance in power supplies), higher power density and, in some designs, an overall lower system cost.

 

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Transphorm’s common stock is listed on the Nasdaq Capital Market (which is referred to as the “Nasdaq”) under the symbol “TGAN.” Transphorm’s principal executive offices are located at 75 Castilian Drive, Goleta, California 93117, and Transphorm’s telephone number is (805) 456-1300.

Renesas Electronics America Inc.

Renesas is a California corporation and a wholly owned subsidiary of Guarantor.

Renesas’ address is c/o Renesas Electronics Corporation, 3-2-24, Toyosu, Koto-ku, Tokyo 135-0061, Japan, and its telephone number is 03-6773-3000.

Travis Merger Sub, Inc.

Merger Sub is a Delaware corporation and a wholly owned subsidiary of Renesas. Merger Sub was formed on January 3, 2024, solely for the purpose of engaging in the transactions contemplated by the merger agreement. Merger Sub has not engaged in any business activities other than as incidental to its formation and in connection with the transactions contemplated by the merger agreement. Upon completion of the merger, Merger Sub will cease to exist and Transphorm will continue as the surviving corporation.

Merger Sub’s address is c/o Renesas Electronics Corporation, 3-2-24, Toyosu, Koto-ku, Tokyo 135-0061, Japan, and its telephone number is 03-6773-3000.

Renesas Electronics Corporation

Guarantor is a corporation organized under the laws of Japan (kabushiki kaisha). Guarantor is a premier supplier of advanced semiconductor solutions and delivers trusted embedded design innovation with complete semiconductor solutions that enable billions of connected, intelligent devices to enhance the way people work and live – securely and safely.

Guarantor’s common stock is listed on the Tokyo Stock Exchange under code 6723.

Guarantor’s address is 3-2-24, Toyosu, Koto-ku, Tokyo 135-0061, Japan, and its telephone number is 03-6773-3000.

Renesas and Merger Sub are each affiliated with Guarantor. In connection with the transactions contemplated by the merger agreement, Guarantor has guaranteed the due and punctual payment and performance of each of the covenants, obligations and agreements of Renesas and Merger Sub set forth in the merger agreement.

Effect of the Merger

Upon the terms and subject to the conditions of the merger agreement, and in accordance with the General Corporation Law of the State of Delaware (which is referred to as the “DGCL”), at the effective time of the merger: (1) Merger Sub will merge with and into Transphorm; (2) the separate corporate existence of Merger Sub will cease; and (3) Transphorm will continue as the surviving corporation of the merger and as a wholly owned subsidiary of Renesas. Throughout this proxy statement, the term “surviving corporation” refers to Transphorm as the surviving corporation following the merger.

As a result of the merger, Transphorm will cease to be a publicly traded company. If the merger is completed, you will not own any shares of capital stock of the surviving corporation as a result of the merger.

 

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The time at which the merger becomes effective (which is referred to as the “effective time of the merger”) will occur upon the filing of a certificate of merger with, and acceptance of that certificate by, the Secretary of State of the State of Delaware (or at a later time as Transphorm, Renesas, and Merger Sub may agree and specify in the certificate of merger).

Per Share Price

Upon the terms and subject to the conditions set forth in the merger agreement, at the effective time of the merger, each share of Transphorm common stock that is issued and outstanding as of immediately prior to the effective time of the merger (other than as specified in the merger agreement) will be automatically converted into the right to receive an amount in cash equal to $5.10 per share, without interest and less any applicable withholding taxes. Throughout this proxy statement this amount is referred to as the “per share price.”

The consummation of the merger will take place at a closing (which is referred to as the “closing”). At or prior to the closing, an amount of cash will be deposited with a designated payment agent that is sufficient to pay the aggregate per share price. Once a stockholder has provided the payment agent with any documentation required by the payment agent, the payment agent will pay the stockholder the appropriate portion of the aggregate per share price in exchange for the shares of Transphorm common stock held by that stockholder. For more information, see the section of this proxy statement captioned “The Merger Agreement—Payment Agent, Exchange Fund and Exchange and Payment Procedures.”

After the merger is completed, you will have the right to receive the per share price for each share of Transphorm common stock that you owned prior to the effective time of the merger, but you will no longer have any rights as a stockholder (except that Transphorm’s stockholders holding shares with respect to which an appropriate person has properly and validly exercised and perfected, and has not validly withdrawn or otherwise lost, their demand for appraisal or dissenters’ rights under the DGCL or other applicable law will have the right to receive a payment for the “fair value” of their shares as determined pursuant to an appraisal proceeding as contemplated by the DGCL, as described in the section of this proxy statement captioned “The Merger—Appraisal Rights”).

The Special Meeting

Date, Time, and Place

A special meeting of Transphorm stockholders will be held on [●], 2024, at [●], Pacific Daylight Time. You may attend this special meeting solely via a live interactive webcast on the internet at [●]. This special meeting, and any adjournment, postponement, or other delay of this special meeting, is referred to as the “special meeting.” You will need the control number found on your proxy card or voting instruction form in order to participate in the special meeting (including voting your shares). Transphorm believes that a virtual meeting provides expanded access, improved communication, and cost savings for its stockholders and Transphorm.

Purpose

At the special meeting, Transphorm will ask stockholders to (1) vote on a proposal to adopt the merger agreement, (2) vote on a proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting, and (3) transact any other business that may properly come before the special meeting.

Record Date; Shares Entitled to Vote

You are entitled to vote at the special meeting if you owned shares of Transphorm common stock as of the close of business on [●], 2024 (which is referred to as the “record date”). For each share of Transphorm common stock that you owned as of the close of business on the record date, you will have one vote on each matter submitted for a vote at the special meeting.

 

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Quorum

As of the record date, there were [●] shares of Transphorm common stock outstanding and entitled to vote at the special meeting. The holders of a majority of the voting power of the capital stock of Transphorm issued and outstanding and entitled to vote as of the record date, present in person or represented by proxy, shall constitute a quorum for the transaction of business at the special meeting.

Required Vote

The proposals to be voted on at the special meeting require the following votes:

 

   

Proposal 1: Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the issued and outstanding shares of Transphorm common stock as of the record date.

 

   

Proposal 2: Approval of the proposal to adjourn the special meeting to a later date or dates to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting requires the affirmative vote of a majority of the voting power of the shares of Transphorm common stock present in person or represented by proxy at the special meeting and entitled to vote on the proposal.

Voting and Proxies

Any stockholder of record entitled to vote at the special meeting may vote in any of the following ways:

 

   

by proxy, by returning a signed and dated proxy card (a prepaid reply envelope is provided for your convenience);

 

   

by proxy, by granting a proxy electronically over the internet or by telephone (using the instructions found on the proxy card); or

 

   

by attending the special meeting virtually and voting at the special meeting using the control number on the enclosed proxy card.

If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by (1) signing another proxy card with a later date and returning it prior to the special meeting; (2) submitting a new proxy electronically over the internet or by telephone after the date of the earlier submitted proxy; (3) delivering a written notice of revocation to Transphorm’s Corporate Secretary; or (4) attending the special meeting virtually and voting at the special meeting.

If you are a beneficial owner and hold your shares of Transphorm common stock in “street name” through a bank, broker, or other nominee, you will receive instructions from your bank, broker, or other nominee that you must follow in order to submit your voting instructions and have your shares counted at the special meeting. Under applicable stock exchange rules, banks, brokers, or other nominees have the discretion to vote on routine matters, but not on non-routine matters. THE PROPOSALS TO BE CONSIDERED AT THE SPECIAL MEETING ARE ALL NON-ROUTINE MATTERS, AND BANKS, BROKERS, AND OTHER NOMINEES CANNOT VOTE ON THESE PROPOSALS WITHOUT YOUR INSTRUCTIONS. THEREFORE, IT IS IMPORTANT THAT YOU CAST YOUR VOTE OR INSTRUCT YOUR BANK, BROKER, OR NOMINEE ON HOW YOU WISH TO VOTE YOUR SHARES.

If you hold your shares of Transphorm common stock in “street name,” you should contact your bank, broker, or other nominee for instructions regarding how to change your vote. You may also vote at the special meeting if you obtain a “legal proxy” from your bank, broker, or other nominee giving you the right to vote your shares at the special meeting.

 

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Recommendation of the Transphorm Board and Reasons for the Merger

The Transphorm Board, after considering various factors described in the section of this proxy statement captioned “The Merger—Recommendation of the Transphorm Board and Reasons for the Merger,” unanimously: (1) determined that the merger agreement, and the transactions contemplated by the merger agreement, including the merger, are advisable and in the best interests of Transphorm and its stockholders; and (2) adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement in all respects.

The Transphorm Board unanimously recommends that you vote: (1) “FOR” the adoption of the merger agreement and approval of the merger; and (2) “FOR” the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

Opinion of BofA Securities, Inc.

In connection with the merger, BofA Securities, Inc. (which is referred to as “BofA Securities”), Transphorm’s financial advisor, delivered to the Transphorm Board a written opinion, dated January 10, 2024, as to the fairness, from a financial point of view and as of the date of the opinion, of the consideration to be received by holders of Transphorm common stock (other than holders of Owned Company Shares and Dissenting Company Shares (each as defined in the merger agreement)). The full text of the written opinion, dated January 10, 2024, of BofA Securities, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex B to this proxy statement and is incorporated by reference. BofA Securities provided its opinion to the Transphorm Board (in its capacity as such) for the benefit and use of the Transphorm Board in connection with and for purposes of its evaluation of the consideration from a financial point of view. BofA Securities’ opinion does not address any other aspect of the merger, and no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to Transphorm or in which Transphorm might engage or as to the underlying business decision of Transphorm to proceed with or effect the merger. BofA Securities’ opinion does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed merger or any related matter.

For additional information, see the section of this proxy statement captioned “The Merger—Opinion of BofA Securities, Inc.” and Annex B to this proxy statement.

Closing and Effective Time of the Merger

The closing of the merger will take place (1) on a date that is agreed upon by Transphorm, Renesas, and Merger Sub, but no later than four business days after the last condition is satisfied or waived (excluding conditions that by their terms are to be satisfied at the closing of the merger, but subject to the satisfaction or waiver of each of such conditions) (further described in the section of this proxy statement captioned “The Merger Agreement—Conditions to the Closing of the Merger”); or (2) at such other time agreed to by Transphorm, Renesas, and Merger Sub. On the date the merger is consummated (which is referred to as the “closing date”), the parties will file a certificate of merger with the Secretary of State of the State of Delaware as provided under the DGCL. The merger will become effective upon the filing and acceptance of such certificate of merger, or at a later time agreed to in writing by the parties and specified in such certificate of merger in accordance with the DGCL.

Treatment of Warrants in the Merger

The merger agreement provides that Transphorm’s warrants that are outstanding as of immediately prior to the effective time of the merger (which are referred to as the “Transphorm warrants”) will automatically and without any action on the part of the holder thereof, be cancelled and converted into the right to receive (without

 

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interest) an amount in cash, equal to (1) the total number of shares of Transphorm common stock subject to the Transphorm warrant multiplied by (2) the excess, if any, of the per share price over the exercise price per share of Transphorm common stock under such Transphorm warrant, less any applicable withholding taxes. Any Transphorm warrant with an exercise price per share of Transphorm common stock that is greater than or equal to the per share price will be cancelled at the effective time of the merger for no consideration or payment.

Treatment of Equity Awards in the Merger

The merger agreement provides that Transphorm’s equity awards that are outstanding immediately prior to the effective time of the merger will be treated in the following manner in connection with the merger. For more information, see the section of this proxy statement captioned “The Merger Agreement—Conversion of Shares—Treatment of Equity Awards.”

Treatment of Transphorm Restricted Stock Units

 

   

At the effective time of the merger, each Transphorm restricted stock unit (each of which is referred to as a “Transphorm RSU”) that is vested (taking into account any vesting acceleration in connection with the merger) but has not yet been settled will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Transphorm common stock subject to such vested Transphorm RSUs immediately prior to the effective time of the merger, multiplied by (2) the per share price, less applicable tax withholding. These Transphorm RSUs are referred to as “vested Transphorm RSUs.”

 

   

At the effective time of the merger, except as agreed by the affected parties or as otherwise described below, each unvested Transphorm RSU (which is referred to as an “unvested Transphorm RSU”) (taking into account the effect of any applicable vesting acceleration in connection with the merger) held by an employee who is a tax resident in the United States and continues to be an employee of Renesas or its subsidiaries immediately following the effective time of the merger (which is referred to as a “U.S. continuing employee”) will be cancelled and converted into the right to receive an unvested Guarantor restricted stock unit award (each of which is referred to as a “Guarantor RSU Grant”) covering a number of Guarantor restricted stock units equal to (1) the total number of shares of Transphorm common stock subject to such unvested Transphorm RSU immediately prior to the effective time of the merger, multiplied by (2) the per share price (converted into Japanese Yen using the U.S. dollar to Japanese Yen exchange rate 30-day trailing average of the closing daily exchange rates published by the Wall Street Journal (U.S. online edition) over the 30 consecutive trading days ending immediately preceding the closing date of the merger), divided by (3) the average of the closing prices (in Japanese Yen) of a share of the common stock of Guarantor on the Tokyo Stock Exchange over the 30 consecutive trading days ending immediately preceding the closing date of the merger (which is referred to as the “Guarantor common stock price”), rounded up to the nearest 100 Guarantor restricted stock units. Each Guarantor RSU Grant will be subject to the terms and conditions in Guarantor’s stock compensation plan. Each Guarantor RSU Grant will vest according to a modified vesting schedule that is based on the vesting schedule that applied to the corresponding unvested Transphorm RSU, except that (a) any Guarantor restricted stock units that otherwise would be scheduled to vest before the first quarterly vesting date of Guarantor that occurs after the closing of the merger (which is referred to as the “initial vest date”) instead will be scheduled to vest on the closing date of the merger, and (b) any Guarantor restricted stock units that otherwise would be scheduled to vest after the initial vest date, will vest as of the Guarantor’s quarterly vesting date that occurs on or immediately before the applicable scheduled vesting date under the corresponding unvested Transphorm RSU. Guarantor’s quarterly vesting dates are February 1, May 1, August 1 and November 1.

 

   

At the effective time of the merger, except as agreed by the affected parties or as otherwise described below, each unvested Transphorm RSU (taking into account the effect of any applicable vesting

 

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acceleration in connection with the merger) held by a person who is not a U.S. continuing employee will be cancelled and converted into the right to receive, at Renesas’ discretion, either (1) a Guarantor RSU Grant on the same terms and conditions as the Guarantor RSU Grants for U.S. continuing employees described above, or (2) a cash payment (without interest) equal to, for each share of Transphorm common stock subject to such unvested Transphorm RSU, the per share price, less applicable tax withholding (which is referred to as “unvested Transphorm RSU consideration”), which will vest on the same modified vesting schedule that applies to the Guarantor RSU Grants.

 

   

To the extent that the vesting schedule that applied to any Transphorm RSU as of immediately prior to the effective time of the merger otherwise would have caused any of those Transphorm RSUs to vest before the grant date of the Guarantor RSU Grants, then at the effective time of the merger, those Transphorm RSUs will not be converted into the right to receive Guarantor restricted stock units and instead will be converted into the right to receive the unvested Transphorm RSU consideration, which will be paid, less applicable tax withholding, no later than 30 days after the applicable vesting date.

 

   

As of immediately prior to the effective time of the merger, the vesting of any outstanding then-unvested Transphorm RSUs that vest solely on the basis of continued service over specified period(s) of time will be accelerated as follows: (1) for any such Transphorm RSUs that were granted before August 1, 2023, as to all of such Transphorm RSUs, and (2) for any such Transphorm RSUs that were granted on or after August 1, 2023, but on or prior to December 31, 2023, as to 50 percent of such Transphorm RSUs.

Treatment of Transphorm Options

 

   

At the effective time of the merger, each outstanding Transphorm stock option (each of which is referred to as a “Transphorm option”), whether vested or unvested, will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Transphorm common stock subject to the Transphorm option, multiplied by (2) the excess, if any, of the per share price over the exercise price per share of such Transphorm option, less applicable tax withholding.

 

   

Any Transphorm option that has an exercise price per share that is greater than or equal to the per share price (each of which is referred to as an “underwater Transphorm option”), whether vested or unvested, will be cancelled at the effective time of the merger for no consideration or payment.

Employee Matters

From and after the effective time of the merger, the surviving corporation will honor all of Transphorm’s arrangements providing for compensation or employee benefits (which are referred to as “Transphorm benefit plans”) and compensation and severance arrangements in accordance with their terms as in effect immediately prior to the effective time of the merger, except that other than as described in the following two paragraphs, nothing will prohibit Renesas or the surviving corporation or their respective affiliates from amending, modifying, or terminating any Transphorm benefit plans or compensation or severance arrangements in accordance with their terms or as otherwise required pursuant to applicable law. Each individual who is an employee of Transphorm or any of Transphorm’s subsidiaries immediately prior to the effective time of the merger and continues to be an employee of Renesas or one of its subsidiaries (including the surviving corporation) immediately following the effective time of the merger is referred to as a “continuing employee.”

For the one-year period immediately following the effective time of the merger (which is referred to as the “benefits period”), the surviving corporation and its subsidiaries will either, generally speaking:

 

   

maintain for each continuing employee the Transphorm benefit plans and any other employee benefit plans or other compensation (excluding certain limited types of compensation and benefits) of the surviving corporation or any of its subsidiaries (which are referred to as “Transphorm plans”) that are

 

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no less favorable in the aggregate than those in effect at Transphorm or its subsidiaries on the date of the merger agreement;

 

   

provide compensation and benefits (excluding certain limited types of compensation and benefits) to each continuing employee that are no less favorable in the aggregate than the compensation and benefits (excluding certain limited types of compensation and benefits) provided to such continuing employee immediately prior to the effective time of the merger (which are referred to as “comparable plans”); or

 

   

provide a combination of Transphorm plans and comparable plans such that each continuing employee receives compensation and benefits (excluding certain limited types of compensation and benefits) that, taken as a whole, are no less favorable in the aggregate than the compensation and benefits (excluding certain limited types of compensation and benefits) provided to such continuing employee immediately prior to the effective time of the merger.

Base compensation and target cash incentive compensation opportunity will not be decreased during the benefits period for any continuing employee employed during that period. During the benefits period, the surviving corporation will provide to continuing employees severance benefits no less favorable than those provided by Transphorm and its subsidiaries as of the date of the merger agreement and as disclosed to Renesas.

At or after the effective time of the merger, Renesas will use commercially reasonable efforts to provide continuing employees credit for service with Transphorm and its subsidiaries before the effective time of the merger and with Renesas, the surviving corporation, and any of their subsidiaries on or after the effective time of the merger, for purposes of eligibility to participate, vesting and entitlement to benefits where length of service is relevant, except where doing so would result in duplication.

In addition, the merger agreement provides that:

 

   

each continuing employee will be immediately eligible to participate, without any waiting period, in the employee benefit plans sponsored by Renesas and its subsidiaries (other than the Transphorm plans) to the extent that any such new welfare benefit plan replaces a comparable Transphorm plan in which such continuing employee participates immediately before the effective time of the merger;

 

   

for each such new welfare benefit plan for any continuing employee, Renesas will use commercially reasonable efforts to waive waiting periods, pre-existing conditions or limitations, and similar requirements, and give credit for eligible expenses incurred during the portion of the plan year of the comparable Transphorm plan ending on the date that such continuing employee’s participation in the new welfare benefit plan begins for satisfying deductibles, co-payments, coinsurance, offset and maximum out-of-pocket requirements as if such amounts had been paid under such new welfare benefit plan;

 

   

Renesas will use commercially reasonable efforts to credit accounts of continuing employees for any new flexible spending plan with any unused balance in the account of such continuing employee; and

 

   

any vacation or paid time off accrued but unused by a continuing employee as of immediately prior to the effective time of the merger will be credited to such continuing employee following the effective time of the merger, will not be subject to accrual limits or other forfeiture and will not limit future accruals.

Interests of Transphorm’s Directors and Executive Officers in the Merger

When considering the recommendation of the Transphorm Board that you vote to approve the proposal to adopt the merger agreement, you should be aware that Transphorm’s directors and executive officers may have interests in the merger that are different from, or in addition to, your interests as a stockholder. In (1) evaluating

 

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and negotiating the merger agreement; (2) approving the merger agreement and the merger; and (3) recommending that the merger agreement be adopted by Transphorm’s stockholders, the Transphorm Board was aware of and considered these interests to the extent that they existed at the time, among other matters. These interests include the following:

 

   

For Transphorm’s executive officers, the treatment of their outstanding awards of Transphorm RSUs and Transphorm options, as described in more detail in the section of this proxy statement captioned “The Merger—Interests of Transphorm’s Directors and Executive Officers in the Merger—Treatment of Equity Awards.”

 

   

For Transphorm’s non-employee directors, the accelerated vesting, at or immediately prior to the effective time of the merger, of Transphorm RSUs and Transphorm options, and the treatment of such equity awards, as described in more detail in the section of this proxy statement captioned “The Merger—Interests of Transphorm’s Directors and Executive Officers in the Merger—Treatment of Equity Awards.”

 

   

The entitlement of each of Transphorm’s current executive officers to receive payments and benefits pursuant to Transphorm’s Key Executive Severance Change in Control and Severance Plan (which is referred to as the “Key Executive Severance Plan”) if, during the period beginning with Transphorm’s change in control and ending 24 months after Transphorm’s change in control, the executive officer incurs an “involuntary termination” (as defined in the Key Executive Severance Plan), as described in more detail in the section of this proxy statement captioned “The Merger—Interests of Transphorm’s Directors and Executive Officers in the Merger—Change in Control and Severance Benefits Under Existing Relationships.”

 

   

The entitlement of each of Transphorm’s current executive officers to receive a retention bonus if the executive officer provides continuous service with Transphorm or any of its subsidiaries through the date that is three months following the closing date of the merger or experiences an “involuntary termination” (within the meaning of the Key Executive Severance Plan) after the effective time of the merger but before such date, as described in more detail in the section of this proxy statement captioned “The Merger—Interests of Transphorm’s Directors and Executive Officers in the Merger—Retention Bonuses.”

 

   

The continued indemnification and insurance coverage for Transphorm’s directors and executive officers from the surviving corporation and Renesas under the terms of the merger agreement.

Appraisal Rights

Transphorm’s stockholders and beneficial owners of Transphorm common stock are entitled, under certain circumstances, to seek appraisal of their shares in connection with the merger under Delaware law. Pursuant to Section 262(d) of the DGCL, this proxy statement serves as notice that record or beneficial owners of Transphorm common stock may be entitled to appraisal rights under Section 262 (which is referred to as “Section 262”) of the DGCL in connection with the merger. Under Section 262, if the merger is consummated, Transphorm’s stockholders (including beneficial owners of shares of capital stock) will be entitled to seek appraisal of their shares of Transphorm common stock if they (1) do not vote in favor of the adoption of the merger agreement; (2) continuously hold of record or beneficially own their applicable shares of Transphorm common stock through the effective time of the merger; (3) properly demand appraisal of their shares; (4) meet certain statutory requirements described in this proxy statement; and (5) do not withdraw their demands or otherwise lose their rights to appraisal, will be entitled to seek appraisal of their shares of Transphorm common stock in connection with the merger under Section 262 if certain conditions set forth in Section 262(g) of the DGCL are satisfied. This means that these persons will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of Transphorm common

 

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stock, exclusive of any elements of value arising from the accomplishment or expectation of the merger, together with (unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown) interest, if any, on the amount determined by the Delaware Court of Chancery to be the fair value from the effective time of the merger through the date of payment of the judgment at a rate of five percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the merger and the date of payment of the judgment, compounded quarterly (except that, if at any time before the entry of judgment in the proceeding, the surviving corporation makes a voluntary cash payment to each person seeking appraisal, interest will accrue thereafter only upon the sum of (1) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery; and (2) interest theretofore accrued, unless paid at that time). The surviving corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment. Due to the complexity of the appraisal process, persons who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.

Persons considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 could be more than, the same as or less than the value of the consideration that they would receive pursuant to the merger agreement if they did not seek appraisal of their shares.

Only a stockholder of record or a beneficial owner of Transphorm common stock may submit a demand for appraisal. To exercise appraisal rights, such person must (1) deliver a written demand for appraisal of such person’s shares to Transphorm before the vote is taken on the proposal to adopt the merger agreement; (2) not vote, in person or by proxy, in favor of the proposal to adopt the merger agreement; (3) continuously hold of record or own beneficially the subject shares of Transphorm common stock through the effective time of the merger; (4) otherwise comply with the procedures for exercising appraisal rights under the DGCL; and (5) not withdraw such person’s demand or otherwise lose such person’s right to appraisal. The failure to follow exactly the procedures specified under the DGCL may result in the loss of appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings in respect of Transphorm unless certain conditions are satisfied by the persons seeking appraisal, as described further below. The requirements under Section 262 for exercising appraisal rights are described in further detail in this proxy statement, which description is qualified in its entirety by Section 262. Pursuant to Subsection (d)(1) of Section 262, this proxy statement is to include either a copy of Section 262 or information directing the stockholders to a publicly available electronic resource at which Section 262 may be accessed without subscription or cost. You may find an electronic copy of Section 262 available at the following URL, accessible without subscription or cost, which is incorporated in this proxy statement by reference: https://delcode.delaware.gov/title8/c001/sc09/index.html#262. In the event of any inconsistency between the information contained in this summary, this proxy statement or any of the documents incorporated herein or therein by reference, and the actual text of Section 262, the actual text of Section 262 controls. All references in Section 262 and in this summary to a “stockholder” are to the record holder of shares as to which appraisal rights are asserted, unless otherwise expressly noted herein. All references in Section 262 and in this summary to “beneficial owner” mean a person who is the beneficial owner of shares of stock held either in voting trust or by a nominee on behalf of such person, unless otherwise expressly noted. All references in Section 262 and in this summary to a “person” mean any individual, corporation, partnership, unincorporated association or other entity.

Material U.S. Federal Income Tax Consequences of the Merger

For U.S. federal income tax purposes, the receipt of cash by a U.S. holder (as defined in the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) in exchange for such U.S. holder’s shares of Transphorm common stock in the merger generally will result in the recognition of gain or loss in an amount measured by the difference, if any, between the amount of cash that such

 

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U.S. holder receives in the merger and such U.S. holder’s adjusted tax basis in the shares of Transphorm common stock surrendered in the merger.

A Non-U.S. holder (as defined in the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will not be subject to U.S. federal income tax with respect to the exchange of Transphorm common stock for cash in the merger unless such Non-U.S. holder has certain connections to the United States, but may be subject to backup withholding tax unless the Non-U.S. holder complies with certain certification procedures or otherwise establishes a valid exemption from backup withholding tax.

For more information, see the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.” Stockholders should consult their tax advisors concerning the U.S. federal income tax consequences relating to the merger in light of their particular circumstances and any consequences arising under U.S. federal non-income tax laws or the laws of any state, local or non-U.S. taxing jurisdiction.

Regulatory Approvals Required for the Merger

Under the merger agreement, the merger cannot be completed until the waiting period (and extensions thereof, if any) applicable to the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (which is referred to as the “HSR Act”) has expired or otherwise been terminated.

Transphorm and Renesas each filed or caused to be filed the requisite notification forms under the HSR Act with the Federal Trade Commission (which is referred to as the “FTC”) and the Antitrust Division of the Department of Justice (which is referred to as the “DOJ”) on January 25, 2024. The applicable waiting period under the HSR Act is scheduled to expire at 11:59 p.m., Eastern Standard Time, on February 26, 2024.

In addition, under the merger agreement, the merger cannot be completed until: (1) the parties have received from the interagency Committee on Foreign Investment in the United States (which is referred to as “CFIUS”) written notice that it has concluded all action pursuant to Section 721 of the Defense Production Act of 1950, as amended and codified at 50 U.S.C. Section 4565 (which is referred to as “Section 721”) and has determined that there are no unresolved national security concerns with respect to the merger; (2) CFIUS has sent a report to the President of the United States requesting the President’s decision and either (a) the President has announced a decision not to take any action to suspend or prohibit the merger or (b) the President has not taken any action within 15 days from the date that the President received the report from CFIUS; or (3) the parties have received from CFIUS a written notice that the transaction is not a “covered transaction” within the meaning of Section 721. The approval described in the prior sentence is referred to as the “CFIUS approval.” Each party’s obligations to complete the merger are contingent upon receipt of CFIUS approval. For more information, see the section of this proxy statement captioned “The Merger—Regulatory Approvals Required for the Merger.”

Financing of the Merger

The obligation of Renesas and Merger Sub to consummate the merger is not subject to any financing condition. Renesas and Merger Sub have represented to Transphorm that, as of January 10, 2024, they had and will have available to them sufficient funds to make the payments required to be paid at the closing of the merger by Renesas and Merger Sub under the merger agreement. This includes funds needed to: (1) pay Transphorm stockholders the amounts due under the merger agreement for their Transphorm common stock and (2) make payments in respect of outstanding Transphorm RSUs, Transphorm options, and Transphorm warrants payable at the closing of the merger pursuant to the merger agreement.

 

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For more information, see the section of this proxy statement captioned “The Merger—Financing of the Merger.”

Voting Agreement

In connection with Transphorm’s entry into the merger agreement, on January 10, 2024, KKR Phorm Investors L.P. (which is referred to as “Phorm Investor”), in its capacity as a stockholder of Transphorm, entered into a voting and support agreement (which is referred to as the “voting agreement”) with Renesas. Under the voting agreement, Phorm Investor has agreed to, among other things, vote its shares of Transphorm common stock in favor of the adoption of the merger agreement and for the approval of any proposal to adjourn the meeting to a later date or dates if there are not sufficient votes present for there to be a quorum or for the adoption of the merger agreement on the date on which such meeting is held. The voting agreement terminates in certain circumstances, including upon termination of the merger agreement in accordance with its terms. The voting agreement does not restrict any designee of Phorm Investor who is a director of Transphorm from acting in such capacity or fulfilling the obligations of such office. The voting agreement also contains restrictions on the transfer of shares of Transphorm common stock held by Phorm Investor, subject to certain exceptions. A copy of the voting agreement is attached as Annex C to this proxy statement.

Phorm Investor beneficially owned and was entitled to vote approximately 38.6 percent of the number of shares of Transphorm common stock issued and outstanding as of the record date. For more information, see the section of this proxy statement captioned “The Merger—The Voting Agreement.”

No Solicitation of Other Acquisition Offers

From the date of the merger agreement until the effective time of the merger (or the earlier termination of the merger agreement) (which is referred to as the “no-shop period”) Transphorm agreed to cease and cause to be terminated any discussions or negotiations with, and terminate any data room access (or other access to diligence) of any person and its representatives relating to an acquisition transaction, and agreed to (1) cause its subsidiaries and its executive officers and directors, (2) instruct its legal and financial advisors, and (3) use reasonable best efforts to cause each of its other representatives (subject to certain exceptions) to, in each case, cease and cause to be terminated any discussions or negotiations with, and terminate any data room access (or other access to diligence) of any person and its representatives relating to an acquisition transaction.

In particular, under and subject to the terms of the merger agreement, from the date of the merger agreement until the earlier to occur of the effective time of the merger or the termination of the merger agreement, Transphorm, its subsidiaries, and their respective directors and executive officers, will not, and Transphorm will not authorize or direct any of its and its subsidiaries’ other employees, consultants or other representatives to, directly or indirectly, subject to certain exceptions:

 

   

solicit, initiate, or propose the making, submission, or announcement of, or knowingly induce, encourage, facilitate, or assist, any proposal that constitutes, or is reasonably expected to lead to, an acquisition proposal;

 

   

furnish to any person or group (other than Renesas, Merger Sub, or any of their respective representatives) any non-public information relating to Transphorm or any of its subsidiaries or afford to any person or group (other than Renesas, Merger Sub, or any of their respective representatives) access to the business, properties, assets, books, records or other non-public information, or to any personnel of Transphorm or any of its subsidiaries, in any such case in connection with any acquisition proposal or with the intent to induce the making, submission, or announcement of, or to knowingly induce, encourage, facilitate or assist, an acquisition proposal or the making of any proposal that would reasonably be expected to lead to an acquisition proposal;

 

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participate, knowingly facilitate, or engage in discussions or negotiations, with any person or group (other than Renesas, Merger Sub, or any of their respective representatives) with respect to an acquisition proposal or with respect to any inquiries from third persons relating to the making of an acquisition proposal, subject to certain exceptions under the merger agreement;

 

   

approve, endorse, or recommend any proposal that constitutes, or is reasonably expected to lead to, an acquisition proposal;

 

   

enter into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement, or other contract relating to an acquisition transaction (each of which is referred to as an “alternative acquisition agreement”), other than an acceptable confidentiality agreement; or

 

   

authorize or commit to do any of the foregoing.

However, prior to the adoption of the merger agreement by Transphorm’s stockholders, if (1) any person or group or their respective representative makes, renews or delivers to Transphorm an acquisition proposal that was not solicited in material breach of the applicable restrictions in the merger agreement, and (2) the Transphorm Board (or a committee thereof) has determined in good faith (after consultation with its financial advisor and outside legal counsel) that (A) such acquisition proposal either constitutes a superior proposal or is reasonably likely to lead to a superior proposal, and (B) the failure to take such actions would reasonably be expected to be inconsistent with its fiduciary duties pursuant to applicable law, Transphorm or the Transphorm Board (or a committee thereof) may, directly or indirectly through one or more of their representatives (including its financial advisor):

 

   

participate or engage in discussions or negotiations with such person or group or their respective representatives;

 

   

subject to an acceptable confidentiality agreement, (1) furnish any non-public information relating to Transphorm or any of its subsidiaries, or (2) afford access to the business, properties, assets, books, records, or other non-public information or to any personnel of Transphorm or any of its subsidiaries to such person or group or their respective representatives; or

 

   

otherwise facilitate the making of a superior proposal by such person or group or their respective representatives.

Transphorm is not entitled to terminate the merger agreement to enter into an agreement for a superior proposal unless it complies with certain procedures in the merger agreement, including engaging in good faith negotiations with Renesas during a specified period. If Transphorm terminates the merger agreement in order to accept a superior proposal from a third party, it must pay a termination fee to Renesas. For more information, see the section of this proxy statement captioned “The Merger Agreement—No Solicitation of Other Acquisition Offers.”

Change in Transphorm Board’s Recommendation

The Transphorm Board may not withdraw its recommendation that Transphorm’s stockholders adopt the merger agreement or take certain similar actions other than, under certain circumstances, if (1) the Transphorm Board (or a committee thereof) determines in good faith, after consultation with its financial advisor and outside legal counsel, that failure to do so would reasonably be expected to be inconsistent with the Transphorm Board’s fiduciary duties pursuant to applicable law, and (2) the Transphorm Board (or a committee thereof) complies in all material respects with the terms of the merger agreement.

Moreover, the Transphorm Board cannot withdraw its recommendation that Transphorm’s stockholders adopt the merger agreement or take certain similar actions unless it complies with certain procedures in the merger agreement, including engaging in good faith negotiations with Renesas during a specified period. If Transphorm or Renesas terminates the merger agreement under certain circumstances, including because the Transphorm

 

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Board withdraws its recommendation that Transphorm’s stockholders adopt the merger agreement, then Transphorm must pay to Renesas a termination fee. For more information, see the section of this proxy statement captioned “The Merger Agreement—The Transphorm Board’s Recommendation; Board Recommendation Change.”

Conditions to the Closing of the Merger

The respective obligations of Renesas, Merger Sub and Transphorm to consummate the merger are subject to the satisfaction or waiver (where permissible pursuant to applicable law) at or prior to the effective time of the merger of certain conditions, including the following:

 

   

the adoption of the merger agreement by the affirmative vote of the holders of a majority of the issued and outstanding shares of Transphorm common stock as of the record date;

 

   

the expiration or termination of the waiting periods, if any, applicable to the merger pursuant to the HSR Act or receipt of all requisite consents pursuant to the HSR Act;

 

   

the absence of (1) any order or injunction issued by any court of competent jurisdiction; (2) any action taken by any governmental authority of competent jurisdiction; or (3) any law applicable to the merger, enacted by a competent jurisdiction, that in the case of each of the foregoing clauses prohibits or makes illegal the consummation of the merger (any such order, action or law is referred to as a “restraint”); and

 

   

the receipt of CFIUS approval.

In addition, the obligations of Renesas and Merger Sub to consummate the merger are subject to the satisfaction or waiver (where permissible pursuant to applicable law) at or prior to the effective time of the merger of each of the following additional conditions, any of which may be waived exclusively by Renesas:

 

   

the accuracy of the representations and warranties of Transphorm set forth in the merger agreement, subject to applicable materiality or other qualifiers, as of the closing or the date in respect of which such representation or warranty was specifically made;

 

   

Transphorm having performed and complied in all material respects with all covenants in the merger agreement required to be performed and complied with by it at or prior to the closing;

 

   

the receipt by Renesas and Merger Sub of a customary closing certificate of Transphorm; and

 

   

the absence of any company material adverse effect (as defined in the section of this proxy statement captioned “The Merger Agreement—Representations and Warranties”) having occurred after the date of the merger agreement that is continuing.

In addition, the obligations of Transphorm to consummate the merger are subject to the satisfaction or waiver (where permitted by applicable law) at or prior to the effective time of the merger of each of the following additional conditions, any of which may be waived exclusively by Transphorm:

 

   

the accuracy of the representations and warranties of Renesas and Merger Sub set forth in the merger agreement, subject to applicable materiality or other qualifiers, as of the effective time of the merger or the date in respect of which such representation or warranty was specifically made;

 

   

Renesas and Merger Sub having performed and complied in all material respects with all covenants in the merger agreement required to be performed and complied with by Renesas and Merger Sub at or prior to the closing; and

 

   

the receipt by Transphorm of a customary closing certificate of Renesas and Merger Sub.

 

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Termination of the Merger Agreement

The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after the adoption of the merger agreement by Transphorm’s stockholders (except as otherwise provided in the merger agreement), in the following circumstances:

 

   

by mutual written agreement of Transphorm and Renesas;

 

   

by either Transphorm or Renesas if:

 

   

any restraint becomes final and non-appealable that prohibits or makes illegal the consummation of the merger, except that the right to terminate pursuant to this provision will not be available to any party that has failed to comply with certain covenants set forth in the merger agreement;

 

   

the merger has not been consummated by 11:59 p.m., Eastern time, on January 10, 2025 (which is referred to as the “termination date”), except that if as of the termination date, (1) the relevant waiting periods applicable to the merger pursuant to the HSR Act have not expired or otherwise been terminated or requisite consents pursuant to the HSR Act have not been obtained, (2) a restraint related to CFIUS, the HSR Act or antitrust laws has been issued by a governmental authority of competent jurisdiction, that in any such case prohibits or makes illegal the consummation of the merger, or (3) the CFIUS approval has not been obtained, the termination date will automatically be extended to 11:59 p.m., Eastern time, on July 10, 2025; or

 

   

Transphorm’s stockholders do not adopt the merger agreement at the special meeting, except that a party may not terminate the merger agreement pursuant to this provision if such party’s action or failure to act constitutes a breach of the merger agreement and is the primary cause of, or primarily resulted in, the failure to approve the adoption of the merger agreement by Transphorm’s stockholders at the special meeting;

 

   

by Transphorm if:

 

   

subject to a 40-day cure period, Renesas or Merger Sub has breached or failed to perform in any material respect any of its respective representations, warranties, or covenants in the merger agreement such that the related closing condition would not be satisfied, except that Transphorm is not entitled to terminate the merger agreement, if, at the time that such termination would otherwise take effect, Transphorm is in material breach of the merger agreement;

 

   

prior to the adoption of the merger agreement by Transphorm’s stockholders: (1) Transphorm has received a superior proposal as defined in the section of this proxy statement captioned “The Merger Agreement—No Solicitation of Other Acquisition Offers”; (2) the Transphorm Board (or a committee thereof) has authorized Transphorm to enter into an alternative acquisition agreement to consummate the acquisition transaction contemplated by that superior proposal; (3) Transphorm has complied in all material respects with its covenants under the merger agreement with respect to such superior proposal; and (4) Transphorm pays Renesas or its designee the applicable termination fee; and

 

   

by Renesas if:

 

   

subject to a 40-day cure period, Transphorm has breached or failed to perform in any material respect any of its representations, warranties, or covenants in the merger agreement such that the related closing condition would not be satisfied, except that Renesas is not entitled to terminate the merger agreement, if, at the time that such termination would otherwise take effect, Renesas is in material breach of the merger agreement; or

 

   

prior to the adoption of the merger agreement by Transphorm’s stockholders, the Transphorm Board (or a committee thereof) has effected a Transphorm Board recommendation change (as defined in the section of this proxy statement captioned “The Merger Agreement—The

 

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Transphorm Board’s Recommendation; Board Recommendation Change”) (except that Renesas’ right to terminate in such instance will expire at 5:00 p.m., Eastern time, on the 10th business day following the date on which such right to terminate first arose).

Termination Fees and Remedies

The merger agreement contains certain termination rights for Transphorm and Renesas. Upon valid termination of the merger agreement under specified circumstances, Transphorm agreed to pay Renesas a termination fee of $12,938,000. Specifically, this termination fee will be payable by Transphorm to Renesas if the merger agreement is terminated:

 

   

by Transphorm prior to the adoption of the merger agreement by Transphorm stockholders, in order to enter into a definitive agreement providing for a superior proposal; or

 

   

by Renesas if there is a Transphorm Board recommendation change.

The termination fee will also be payable by Transphorm in certain circumstances if:

 

   

the merger agreement is terminated (1) because of Transphorm’s failure to obtain the required approval of Transphorm’s stockholders, or (2) subject to a 40-day cure period, because Transphorm breaches or fails to perform in any material respect any of its representations, warranties, or covenants in a manner that would cause the related closing conditions to not be satisfied;

 

   

prior to the termination of the merger agreement, an acquisition proposal has been publicly announced or publicly disclosed and not withdrawn or otherwise abandoned; and

 

   

within one year of such termination, either (i) Transphorm consummates an acquisition transaction (as defined in the section of this proxy statement captioned “The Merger Agreement—No Solicitation of Other Acquisition Offers”) or (ii) Transphorm enters into a definitive agreement providing for the consummation of an acquisition transaction and such acquisition transaction is subsequently consummated.

Upon valid termination of the merger agreement under specified circumstances Renesas will be required to pay Transphorm a termination fee of $20,000,000. Specifically, this termination fee will be payable by Renesas to Transphorm if:

 

   

the merger agreement is terminated by Transphorm or Renesas if the merger has not occurred by the termination date (as it may be extended) and at the time of such termination, all of the conditions to closing have been satisfied or are capable of being satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the closing), other than the conditions of (1) a CFIUS-related restraint which prohibits or makes illegal the closing or (2) the failure of the parties to obtain CFIUS approval;

 

   

the merger agreement is terminated by Transphorm or Renesas as a result of a court of competent jurisdiction or other governmental entity issuing an order permanently enjoining or otherwise permanently prohibiting the consummation of the merger, which order or other action has become final and nonappealable and solely to the extent such order or other action relates to CFIUS; or

 

   

the merger agreement is terminated by Transphorm due to Renesas’ failure to perform its covenants related to obtaining CFIUS approval.

The merger agreement also provides that Transphorm, on the one hand, or Renesas and Merger Sub, on the other hand, may specifically enforce the obligations under the merger agreement, including the obligation to consummate the merger if the conditions set forth in the merger agreement are satisfied.

 

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Under the merger agreement, Guarantor guarantees, among other things, the payment of the termination fee payable by Renesas to Transphorm, subject to the conditions set forth in the merger agreement.

Delisting and Deregistration of Transphorm Common Stock

If the merger is completed, Transphorm common stock will no longer be traded on the Nasdaq and will be deregistered under the Securities Exchange Act of 1934 (which is referred to as the “Exchange Act”). Transphorm will no longer be required to file periodic reports, current reports and proxy and information statements with the Securities and Exchange Commission (which is referred to as the “SEC”) with respect to Transphorm common stock.

Effect on Transphorm if the Merger is Not Completed

If the merger agreement is not adopted by Transphorm’s stockholders, or if the merger is not completed for any other reason, Transphorm’s stockholders will not receive any payment for their shares of Transphorm common stock in connection with the merger. Instead (1) Transphorm will remain an independent public company, (2) Transphorm common stock will continue to be listed and traded on the Nasdaq and registered under the Exchange Act, and (3) Transphorm will continue to file periodic reports with the SEC.

 

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QUESTIONS AND ANSWERS

The following questions and answers address some commonly asked questions regarding the merger, the merger agreement, and the special meeting. These questions and answers may not address all questions that are important to you. You are encouraged to carefully read the more detailed information contained elsewhere in this proxy statement, including the annexes to this proxy statement and the other documents referred to in this proxy statement. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions in the section of this proxy statement captioned “Where You Can Find More Information.”

 

Q:

Why am I receiving these materials?

 

A:

On January 10, 2024, Transphorm announced that it entered into the merger agreement. Under the merger agreement, Renesas will acquire Transphorm for $5.10 in cash per share of Transphorm common stock, without interest and less any applicable withholding taxes. In order to complete the merger, the affirmative vote of Transphorm’s stockholders holding a majority of the issued and outstanding shares of Transphorm common stock as of the record date must vote to approve the proposal to adopt the merger agreement at the special meeting. This approval is a condition to the consummation of the merger. See the section of this proxy statement captioned “The Merger Agreement—Conditions to the Closing of the Merger.” The Transphorm Board is furnishing this proxy statement and form of proxy card to the holders of shares of Transphorm common stock in connection with the solicitation of proxies of Transphorm’s stockholders to be voted at the special meeting.

This proxy statement, which you should read carefully, contains important information about the merger, the merger agreement, the special meeting, and the matters to be voted on at the special meeting. The enclosed materials allow you to submit a proxy to vote your shares of Transphorm common stock without attending the special meeting and to ensure that your shares of Transphorm common stock are represented and voted at the special meeting.

Your vote is very important. Even if you plan to attend the special meeting, you are encouraged to submit a proxy as soon as possible.

 

Q:

What is the proposed merger and what effects will it have on Transphorm?

 

A:

The proposed merger will result in the acquisition of Transphorm by Renesas. If the proposal to adopt the merger agreement is approved by Transphorm’s stockholders and the other closing conditions under the merger agreement are satisfied or waived, Merger Sub will merge with and into Transphorm, with Transphorm continuing as the surviving corporation. As a result of the merger, Transphorm will become a wholly owned subsidiary of Renesas, and Transphorm common stock will no longer be publicly traded and will be delisted from the Nasdaq. In addition, Transphorm common stock will be deregistered under the Exchange Act, and Transphorm will no longer file periodic reports, current reports and proxy and information statements with the SEC with respect to Transphorm common stock. If the merger is completed, holders of Transphorm common stock will not own any shares of capital stock of the surviving corporation.

 

Q:

What will I receive if the merger is completed?

 

A:

Upon completion of the merger, you will be entitled to receive $5.10 in cash, without interest and less any applicable withholding taxes, for each share of Transphorm common stock that you own as of immediately prior to the effective time of the merger, unless you have properly exercised, and not validly withdrawn or subsequently lost, your appraisal rights under the DGCL, and certain other conditions under the DGCL are satisfied. For example, if you own 100 shares of Transphorm common stock, you will receive $510 in cash in exchange for your shares of Transphorm common stock, without interest and less any applicable withholding taxes.

 

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Q:

How does the per share price compare to the market price of Transphorm common stock?

 

A:

This amount constitutes a premium of approximately 35 percent to the closing stock price of Transphorm common stock on January 10, 2024, the last full trading day prior to the public announcement that Transphorm entered into the merger agreement.

 

Q:

What will happen to Transphorm RSUs, Transphorm options, and Transphorm warrants?

 

A:

Generally speaking, Transphorm RSUs, Transphorm options, and Transphorm warrants will be treated as follows:

 

   

As of immediately prior to the effective time of the merger, the vesting of any outstanding then-unvested Transphorm RSUs that vest solely on the basis of continued service over specified period(s) of time will be accelerated as follows: (i) for any such Transphorm RSUs that were granted before August 1, 2023, as to all of such Transphorm RSUs, and (ii) for any such Transphorm RSUs that were granted on or after August 1, 2023, but on or prior to December 31, 2023, as to 50 percent of such Transphorm RSUs.

 

   

At the effective time of the merger, each vested Transphorm RSU will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Transphorm common stock subject to such vested Transphorm RSU immediately prior to the effective time of the merger, multiplied by (2) the per share price, less applicable tax withholding.

 

   

At the effective time of the merger, except as agreed by the affected parties or as otherwise described below, each award of unvested Transphorm RSUs (taking into account the effect of any applicable vesting acceleration in connection with the merger) held by a U.S. continuing employee will be cancelled and converted into the right to receive an award of a number of unvested Guarantor restricted stock units equal to (x) the number of unvested Transphorm RSUs held by such holder multiplied by the per share price (converted into Japanese Yen using the U.S. dollar to Japanese Yen exchange rate 30-day trailing average of the closing daily exchange rates published by the Wall Street Journal (U.S. online edition) over the 30 consecutive trading days ending immediately preceding the closing date of the merger), divided by (y) the Guarantor common stock price, rounded up to the nearest 100 Guarantor restricted stock units. Each Guarantor RSU Grant will vest according to the modified vesting schedule described above and will be subject to the terms and conditions in Guarantor’s stock compensation plan.

 

   

At the effective time of the merger, except as agreed by the affected parties or as otherwise described below, each award of unvested Transphorm RSUs (taking into account the effect of any applicable vesting acceleration in connection with the merger) held by a person who is not a U.S. continuing employee will be cancelled and converted into the right to receive, at Renesas’ discretion, either (1) a Guarantor RSU Grant on the same terms and conditions as the Guarantor RSU Grants for U.S. continuing employees described above, or (2) the unvested Transphorm RSU consideration, which will vest on the same modified vesting schedule that applies to the Guarantor RSU Grants.

 

   

To the extent that the vesting schedule that applied to any Transphorm RSUs as of immediately prior to the effective time of the merger otherwise would have caused any of those Transphorm RSUs to vest before the grant date of the Guarantor RSU Grants, then at the effective time of the merger, those Transphorm RSUs will not be converted into the right to receive Guarantor restricted stock units and instead will be converted into the right to receive the unvested Transphorm RSU consideration, which will be paid, less applicable tax withholding, no later than 30 days after the applicable vesting date.

 

   

Each outstanding Transphorm option (whether vested or unvested) will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Transphorm common stock subject to the Transphorm option multiplied by (2) the excess, if any, of the per share price over the exercise price per share of such Transphorm option, less applicable tax withholding.

 

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Any underwater Transphorm option (whether vested or unvested) will be cancelled at the effective time of the merger for no consideration or payment.

 

   

Each Transphorm warrant that is outstanding immediately prior to the effective time of the merger will be cancelled and converted into the right to receive (without interest) an amount in cash equal to (1) the total number of shares of Transphorm common stock subject to such Transphorm warrant multiplied by (2) the excess, if any, of the per share price over the exercise price per share of Transphorm common stock under such Transphorm warrant, less applicable taxes.

 

   

Any Transphorm warrant with an exercise price per share of Transphorm common stock that is greater than or equal to the per share price will be cancelled at the effective time of the merger for no consideration or payment.

 

Q:

What am I being asked to vote on at the special meeting?

 

A:

You are being asked to vote on the following proposals:

 

   

Proposal 1: to adopt the merger agreement pursuant to which Merger Sub will merge with and into Transphorm and Transphorm will become a wholly owned subsidiary of Renesas; and

 

   

Proposal 2: to approve the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

 

Q:

When and where is the special meeting?

 

A:

The special meeting will take place on [●], 2024 at [●], Pacific Daylight Time. You may attend the special meeting via a live interactive webcast on the internet at [●]. You will be able to listen to the special meeting live and vote online. You will need the control number found on your proxy card or voting instruction form in order to participate in the special meeting (including voting your shares).

 

Q:

Who is entitled to vote at the special meeting?

 

A:

All of Transphorm’s stockholders as of the close of business on [●], 2024, which is the record date for the special meeting, are entitled to vote their shares of Transphorm common stock at the special meeting. As of the close of business on the record date, there were [●] shares of Transphorm common stock outstanding and entitled to vote at the special meeting. Each share of Transphorm common stock outstanding as of the record date is entitled to one vote per share on each matter properly brought before the special meeting.

 

Q:

What is a quorum?

 

A:

A quorum is the minimum number of shares required to be present at the special meeting for it to be properly held under Transphorm’s bylaws and the DGCL. The holders of a majority of the voting power of Transphorm’s common stock issued and outstanding and entitled to vote as of the record date, present in person or represented by proxy, will constitute a quorum at the special meeting.

 

Q:

What vote is required to approve the proposal to adopt the merger agreement?

 

A:

The affirmative vote of the holders of a majority of the issued and outstanding shares of Transphorm common stock as of the record date is required to adopt the merger agreement. In connection with the transactions contemplated by the merger agreement, Phorm Investor, which beneficially owned and was entitled to vote approximately 38.6 percent of the total outstanding shares of Transphorm common stock as of the record date, entered into a voting agreement with Renesas pursuant to which it agreed to, among other things, vote its shares of Transphorm common stock in favor of the adoption of the merger agreement, unless the voting agreement has terminated in accordance with its terms. For more information, see the section of this proxy statement captioned “The Merger—The Voting Agreement.”

 

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The failure of any stockholder of record to (1) submit a signed proxy card; (2) grant a proxy over the internet or by telephone; or (3) attend and vote at the special meeting, will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. If you hold your shares in “street name,” the failure to instruct your bank, broker, or other nominee how to vote your shares will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. Abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

 

Q:

What vote is required to approve the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting?

 

A:

Approval of the proposal to adjourn the special meeting to a later date or dates to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting requires the affirmative vote of a majority of the voting power of the shares of Transphorm common stock present in person or represented by proxy at the special meeting and entitled to vote on the proposal.

The failure of any stockholder of record to (1) submit a signed proxy card; (2) grant a proxy over the internet or by telephone; or (3) vote at the special meeting will not have any effect on the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting, except to the extent that such failure affects obtaining a quorum at the meeting. If you hold your shares in “street name,” the failure to instruct your bank, broker, or other nominee how to vote your shares will not have any effect on this proposal, except to the extent that such failure affects obtaining a quorum at the meeting. In all cases, abstentions will have the same effect as a vote “AGAINST” this proposal.

 

Q:

What do I need to do now?

 

A:

You are encouraged to read this proxy statement, the annexes to this proxy statement, and the documents that Transphorm refers to or incorporates by reference in this proxy statement carefully and consider how the merger affects you. Then, even if you expect to attend the special meeting, please sign, date, and return, as promptly as possible, the enclosed proxy card (a prepaid reply envelope is provided for your convenience) or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card), so that your shares can be voted at the special meeting. If you hold your shares in “street name,” please refer to the voting instruction form provided by your bank, broker, or other nominee for information on how to vote your shares. Please do not send your stock certificates with your proxy card. If you attend the special meeting and vote at the special meeting, your vote will revoke any previously submitted proxy.

 

Q:

How does the Transphorm Board recommend that I vote?

 

A:

The Transphorm Board unanimously recommends that you vote: (1) “FOR” the adoption of the merger agreement and approval of the merger and (2) “FOR” the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

 

Q:

What happens if the merger is not completed?

 

A:

If the merger agreement is not adopted by Transphorm’s stockholders or if the merger is not completed for any other reason, Transphorm’s stockholders will not receive any payment for their shares of Transphorm common stock in connection with the merger. Instead (1) Transphorm will remain an independent public company, (2) Transphorm common stock will continue to be listed and traded on the Nasdaq and registered under the Exchange Act, and (3) Transphorm will continue to file periodic reports with the SEC.

 

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In specified circumstances in which the merger agreement is terminated, Transphorm has agreed to pay Renesas (or its designee) a termination fee. Further, in specified circumstances in which the merger agreement is terminated, Renesas has agreed to pay Transphorm a termination fee.

For more information, see the section of this proxy statement captioned “The Merger Agreement—Termination Fees and Remedies.”

 

Q:

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

A:

If your shares are registered directly in your name with Transphorm’s transfer agent, Pacific Stock Transfer Company, you are considered, with respect to those shares, to be the “stockholder of record.” If you are a stockholder of record, this proxy statement and your proxy card have been sent directly to you by or on behalf of Transphorm. As a stockholder of record, you may attend the special meeting and vote your shares at the special meeting using the control number on the enclosed proxy card.

If your shares are held through a bank, broker, or other nominee, you are considered the “beneficial owner” of shares of Transphorm common stock held in “street name.” If you are a beneficial owner of shares of Transphorm common stock held in “street name,” this proxy statement has been forwarded to you by your bank, broker, or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker, or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the special meeting. However, because you are not the stockholder of record, you may not vote your shares at the special meeting unless you provide a “legal proxy” from your bank, broker, or other nominee giving you the right to vote your shares at the special meeting.

 

Q:

If my bank, broker or other nominee holds my shares in “street name,” will my bank, broker or other nominee automatically vote my shares for me?

 

A:

No. Your bank, broker, or other nominee is permitted to vote your shares on any proposal currently scheduled to be considered at the special meeting only if you instruct your bank, broker, or other nominee how to vote. You should follow the procedures provided by your bank, broker, or other nominee to vote your shares. Without instruction, your shares will not be counted for the purpose of obtaining a quorum or voted on the proposals, which will have the same effect as if you voted “AGAINST” adoption of the merger agreement, but will have no effect on the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

 

Q:

How may I vote?

 

A:

If you are a stockholder of record (that is, if your shares of Transphorm common stock are registered in your name with Pacific Stock Transfer Company, Transphorm’s transfer agent), there are four ways to vote:

 

   

by signing, dating, and returning the enclosed proxy card (a prepaid reply envelope is provided for your convenience);

 

   

by visiting the internet address on your proxy card;

 

   

by calling the toll-free (within the United States or Canada) phone number on your proxy card; or

 

   

by attending the special meeting virtually and voting at the special meeting using the control number on the enclosed proxy card.

The control number located on your proxy card is designed to verify your identity and allow you to vote your shares of Transphorm common stock and to confirm that your voting instructions have been properly recorded when voting electronically over the internet or by telephone. Although there is no charge for voting your shares, if you vote electronically over the internet or by telephone, you may incur costs such as internet access and telephone charges for which you will be responsible.

 

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Even if you plan to attend the special meeting, you are strongly encouraged to vote your shares of Transphorm common stock by proxy. If you are a stockholder of record or if you obtain a “legal proxy” to vote shares that you beneficially own, you may still vote your shares of Transphorm common stock at the special meeting even if you have previously voted by proxy. If you attend the special meeting and vote at the special meeting, your vote will revoke any previously submitted proxy.

If your shares are held in “street name” through a bank, broker, or other nominee, you may vote through your bank, broker, or other nominee by completing and returning the voting instruction form provided by your bank, broker, or other nominee, or, if such a service is provided by your bank, broker, or other nominee, electronically over the internet or by telephone. To vote over the internet or by telephone through your bank, broker, or other nominee, you should follow the instructions on the voting instruction form provided by your bank, broker, or nominee. However, because you are not the stockholder of record, you may not vote your shares at the special meeting unless you provide a “legal proxy” from your bank, broker, or other nominee giving you the right to vote your shares at the special meeting.

If you hold your shares of Transphorm common stock in “street name,” you should contact your bank, broker, or other nominee for instructions regarding how to change your vote.

 

Q:

May I attend the special meeting and vote at the special meeting?

 

A:

Yes. You may attend the special meeting via a live interactive webcast on the internet at [●]. You will be able to listen to the special meeting live and vote online. The special meeting will begin at [●], Pacific Daylight Time, on [●], 2024. Online check-in will begin a few minutes prior to the special meeting. You will need the control number found on your proxy card or voting instruction form in order to participate in the special meeting (including voting your shares). As the special meeting is virtual, there will be no physical meeting location.

Even if you plan to attend the special meeting, to ensure that your shares will be represented at the special meeting, you are encouraged to sign, date and return the enclosed proxy card (a prepaid reply envelope is provided for your convenience) or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card). If you attend the special meeting and vote at the special meeting, your vote will revoke any proxy previously submitted.

If, as of the record date, you are a beneficial owner of shares held in “street name,” you may not vote your shares at the special meeting unless you provide a “legal proxy” from your bank, broker or other nominee giving you the right to vote your shares at the special meeting. Otherwise, you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form provided by your bank, broker or other nominee. Without your instructions, your bank, broker or other nominee cannot vote on any of the proposals to be considered at the special meeting, and your shares will not be counted for purposes of determining whether a quorum is present at the special meeting, which, if a quorum is present, will have the same effect as voting “AGAINST” the proposal to adopt the merger agreement.

 

Q:

Why did Transphorm choose to hold a virtual special meeting?

 

A:

The Transphorm Board decided to hold the special meeting virtually in order to facilitate stockholder attendance and participation by enabling stockholders to participate fully, and equally, from virtually any location around the world, at no cost. However, you will bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies. Transphorm believes this is the right choice for a company with a global footprint. A virtual special meeting makes it possible for more stockholders (regardless of size, resources or physical location) to have direct access to information, while saving Transphorm and its stockholders time and money. Transphorm also believes that the online tools that it has selected will increase stockholder communication. Transphorm remains very sensitive to concerns that

 

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  virtual meetings may diminish stockholder voice or reduce accountability. Accordingly, Transphorm has designed the virtual meeting format to enhance, rather than constrain, stockholder access, participation and communication.

 

Q:

What is a proxy?

 

A:

A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of Transphorm common stock. The written document describing the matters to be considered and voted on at the special meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of Transphorm common stock is called a “proxy card.” You may follow the instructions on the proxy card to designate a proxy by telephone or by the internet in the same manner as if you had signed, dated and returned a proxy card. Primit Parikh and Cameron McAulay, each with full powers of substitution, are the proxy holders for the special meeting.

 

Q:

May I change my vote after I have mailed my signed and dated proxy card?

 

A:

Yes. If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by:

 

   

signing another proxy card with a later date and returning it to Transphorm prior to the special meeting;

 

   

submitting a new proxy electronically over the internet or by telephone after the date of the earlier submitted proxy;

 

   

delivering a written notice of revocation to Transphorm’s Corporate Secretary; or

 

   

attending the special meeting virtually and voting at the special meeting using the control number on the enclosed proxy card.

 

Q:

If a stockholder gives a proxy, how are the shares voted?

 

A:

Regardless of the method you choose to grant your proxy, the individuals named on the enclosed proxy card will vote your shares in the way that you direct.

If you sign and date your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted as recommended by the Transphorm Board with respect to each proposal. This means that they will be voted: (1) “FOR” the adoption of the merger agreement and (2) “FOR” the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

 

Q:

Should I send in my stock certificates now?

 

A:

No. After the merger is completed, any holders of physical stock certificates will receive a letter of transmittal containing instructions for how to send your stock certificates to the payment agent in order to receive the appropriate cash payment for the shares of Transphorm common stock represented by your stock certificates. Unless you are seeking appraisal, you should use the letter of transmittal to exchange your stock certificates for the cash payment to which you are entitled. Please do not send your stock certificates with your proxy card.

If you hold your shares of Transphorm common stock in book-entry form, you will not receive a letter of transmittal. Instead, the payment agent will pay you the appropriate portion of the merger consideration upon receipt of a customary “agent’s message” and any other items specified by the payment agent.

 

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Q:

What happens if I sell or transfer my shares of common stock after the record date but before the special meeting?

 

A:

The record date for the special meeting is earlier than the date of the special meeting and the expected effective time of the merger. If you sell or transfer your shares of Transphorm common stock after the record date but before the special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or transfer your shares and each of you notifies Transphorm in writing of such special arrangements, you will transfer the right to receive an amount in cash equal to the per share price with respect to such shares, if the merger is completed, to the person to whom you sell or transfer your shares, but you will retain your right to vote those shares at the special meeting. Even if you sell or transfer your shares of Transphorm common stock after the record date, you are encouraged you to sign, date, and return the enclosed proxy card (a prepaid reply envelope is provided for your convenience) or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card).

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

Please sign, date, and return (or grant your proxy electronically over the internet or by telephone ) each proxy card and voting instruction form that you receive to ensure that all of your shares are voted.

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction forms, if your shares are registered differently or are held in more than one account. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction form for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please vote all voting materials that you receive.

 

Q:

Where can I find the voting results of the special meeting?

 

A:

If available, Transphorm may announce preliminary voting results at the conclusion of the special meeting. Transphorm intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the special meeting. All reports that Transphorm files with the SEC are publicly available when filed. For more information, see the section of this proxy statement captioned “Where You Can Find More Information.”

 

Q:

Will I be subject to U.S. federal income tax upon the exchange of common stock for cash pursuant to the merger?

 

A:

If you are a U.S. holder, the exchange of Transphorm common stock for cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes, which generally will require a U.S. holder to recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between (i) the amount of cash received by such U.S. holder in the merger and (ii) such U.S. holder’s adjusted tax basis in the shares of Transphorm common stock surrendered in the merger.

A Non-U.S. holder (as defined in the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will not be subject to U.S. federal income tax with respect to the exchange of Transphorm common stock for cash in the merger unless such Non-U.S. holder has certain connections to the United States, but may be subject to backup withholding tax unless the Non-U.S. holder complies with certain certification procedures or otherwise establishes a valid exemption from backup withholding tax.

Because particular circumstances may differ, Transphorm recommends that you consult your tax advisor to determine the U.S. federal income tax consequences relating to the merger in light of your own particular

 

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circumstances and any consequences arising under U.S. federal non-income tax laws or the laws of any state, local or non-U.S. taxing jurisdiction. This discussion is provided for general information only and does not constitute legal advice to any holder. A more complete description of material U.S. federal income tax consequences of the merger is provided in the section of this proxy statement captioned “The Merger—Material U.S. Federal Income Tax Consequences of the Merger.”

 

Q:

When do you expect the merger to be completed?

 

A:

Transphorm currently expects to complete the merger in the second half of 2024. However, the exact timing of completion of the merger, if at all, cannot be predicted because the merger is subject to the closing conditions specified in the merger agreement, many of which are outside of Transphorm’s control.

 

Q:

What governmental and regulatory approvals are required?

 

A:

Under the terms of the merger agreement, the merger cannot be completed until the waiting period (and extensions thereof, if any) applicable to the merger under the HSR Act has expired or been terminated, and no agreement with any governmental authority not to consummate the merger shall be in effect. In addition, the merger cannot be completed until the CFIUS approval has been obtained.

Transphorm and Renesas each filed or caused to be filed the requisite notification forms under the HSR Act with the FTC and the DOJ on January 25, 2024. The applicable waiting period under the HSR Act is scheduled to expire at 11:59 p.m., Eastern Standard Time on February 26, 2024.

 

Q:

Am I entitled to appraisal rights under the DGCL?

 

A:

If the merger is consummated, Transphorm’s stockholders (including beneficial owners of shares of capital stock) who (1) do not vote in favor of the adoption of the merger agreement; (2) continuously hold their shares of Transphorm’s common stock through the effective time of the merger; (3) properly perfect appraisal of their shares; (4) meet certain other conditions and statutory requirements as described in this proxy statement; and (5) do not withdraw their demands or otherwise lose their rights to appraisal will be entitled to seek appraisal of their shares in connection with the merger under Section 262 if certain conditions set forth in Section 262(g) of the DGCL are satisfied. This means that these persons will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares, exclusive of any elements of value arising from the accomplishment or expectation of the merger, together with (unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown) interest on the amount determined by the Delaware Court of Chancery to be the fair value from the effective time of the merger through the date of payment of the judgment at a rate of five percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the merger and the date of payment of the judgment, compounded quarterly (except that, if at any time before the entry of judgment in the proceeding, the surviving corporation makes a voluntary cash payment to each person seeking appraisal, interest will accrue thereafter only upon the sum of (x) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery; and (y) interest theretofore accrued, unless paid at that time). The surviving corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment.

Persons who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process. The DGCL requirements for exercising appraisal rights are described in additional detail in the section of this proxy statement captioned “The Merger—Appraisal Rights.”

 

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Q:

Do any of Transphorm’s directors or officers have interests in the merger that may differ from those of Transphorm stockholders generally?

 

A:

Yes. In considering the recommendation of the Transphorm Board with respect to the proposal to adopt the merger agreement, you should be aware that Transphorm’s directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of Transphorm’s stockholders generally. In (1) evaluating and negotiating the merger agreement, (2) approving the merger agreement, and (3) unanimously recommending that the merger agreement be adopted by Transphorm’s stockholders, the Transphorm Board was aware of and considered these interests to the extent that they existed at the time, among other matters. For more information, see the section of this proxy statement captioned “The Merger—Interests of Transphorm’s Directors and Executive Officers in the Merger.”

 

Q:

Who can help answer my questions?

 

A:

If you have any questions concerning the merger, the special meeting, or this proxy statement, would like additional copies of this proxy statement or need help submitting your proxy or voting your shares of Transphorm common stock, please contact Transphorm’s proxy solicitor:

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 10005

Stockholders Call Toll-Free: (800) 967-5068

Banks and Brokers Call: (212) 257-2543

Email: TGAN@dfking.com

 

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FORWARD-LOOKING STATEMENTS

This proxy statement, the documents referred to in this proxy statement and the information included in oral statements or other written statements made or to be made by Transphorm or on Transphorm’s behalf may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995, which are intended to be covered by the safe harbor created by such sections and other applicable laws. Such forward-looking statements include statements relating to Transphorm’s strategy, goals, future focus areas, and the value of the proposed transaction to Transphorm’s stockholders. These forward-looking statements are based on Transphorm’s management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include all statements that are not historical facts and may be identified by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or similar expressions and the negatives of those terms. These forward-looking statements involve risks and uncertainties, including statements regarding: the merger, including the expected timing of the closing of the merger; considerations taken into account by the Transphorm Board in approving the merger; and expectations for Transphorm following the closing of the merger.

If any of these risks or uncertainties materialize, or if any of Transphorm’s assumptions prove incorrect, Transphorm’s actual results could differ materially from the results expressed or implied by these forward-looking statements. Additional risks and uncertainties include those associated with:

 

   

the possibility that the conditions to the closing of the merger are not satisfied, including the risk that required approvals from Transphorm’s stockholders for the merger or required regulatory approvals to consummate the merger are not obtained, on a timely basis or at all;

 

   

the occurrence of any event, change or other circumstance that could give rise to the right to terminate the merger agreement, including in circumstances requiring Transphorm to pay a termination fee;

 

   

uncertainties as to the timing of the consummation of the merger and the ability of each party to consummate the merger;

 

   

the nature, cost, and outcome of any legal proceeding that may be instituted against Transphorm and others relating to the merger;

 

   

economic, market, business, or geopolitical conditions (including resulting from the COVID-19 pandemic, inflationary pressures, supply chain disruptions, or the military conflict in Ukraine and related sanctions against Russia and Belarus) or competition, or changes in such conditions, negatively affecting Transphorm’s business, operations, and financial performance;

 

   

the effect of the announcement or pendency of the merger on Transphorm’s business relationships, customers, operating results, and business generally, including risks related to the diversion of the attention of Transphorm management or employees during the pendency of the merger;

 

   

risks that the pendency of the merger affects Transphorm’s current operations or Transphorm’s ability to retain or recruit employees;

 

   

the amount of the costs, fees, expenses, and charges related to the merger agreement or the merger;

 

   

the risk that Transphorm’s stock price may fluctuate during the pendency of the merger and may decline significantly if the merger is not completed on the terms reflected in the merger agreement, or at all;

 

   

the fact that under the terms of the merger agreement, Transphorm is restrained from soliciting other acquisition proposals during the pendency of the merger;

 

   

the effect of the restrictions placed on Transphorm’s business activities pursuant to the merger agreement and the limitations on Transphorm’s ability to pursue certain business opportunities and alternatives to the merger during the pendency of the merger;

 

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the fact that, if the merger is completed, Transphorm’s stockholders will forgo the opportunity to realize the potential long-term value of the successful execution of Transphorm’s current strategy as an independent company;

 

   

the risk that Transphorm may not obtain sufficient short-term financing to fund Transphorm’s operations through the closing of the merger; and

 

   

other risks and uncertainties detailed in the periodic reports that Transphorm files with the SEC, including Transphorm’s Annual Report on Form 10-K filed with the SEC on June 28, 2023, and most recent Quarterly Report on Form 10-Q filed with the SEC on February 20, 2024.

All forward-looking statements contained or referred to in this proxy statement are based on information available to Transphorm as of the date of this proxy statement, and Transphorm does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date of this proxy statement, except as required by law. Transphorm expressly qualifies in their entirety all forward-looking statements attributable to either Transphorm or any person acting on Transphorm’s behalf by the cautionary statements contained or referred to in this proxy statement.

 

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THE SPECIAL MEETING

Date, Time, and Place

Transphorm will hold the special meeting on [●], 2024, at [●], Pacific Daylight Time. You may attend the special meeting via a live interactive webcast on the internet at [●]. You will be able to listen to the special meeting live and vote online. You will need the control number found on your proxy card or voting instruction form in order to participate in the special meeting (including voting your shares). Transphorm believes that a virtual meeting provides expanded access, improved communication, and cost savings for Transphorm’s stockholders.

If you encounter technical difficulties accessing the special meeting or during the special meeting, a support line will be available on the login page of the special meeting website.

Purpose of the Special Meeting

At the special meeting, Transphorm will ask stockholders to (1) vote on a proposal to adopt the merger agreement, (2) vote on a proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting, and (3) transact any other business that may properly come before the special meeting.

Attending the Special Meeting

The special meeting will begin at [●], Pacific Daylight Time. Online check-in will begin a few minutes prior to the special meeting. You are encouraged to access the meeting prior to the start time.

As the special meeting is virtual, there will be no physical meeting location. To attend the special meeting, log in at [●]. You will need the control number found on your proxy card or voting instruction form in order to participate in the special meeting (including voting your shares). If you encounter technical difficulties accessing the special meeting or during the special meeting, a support line will be available on the login page of the special meeting website.

Once online access to the special meeting is open, stockholders may submit questions pertinent to meeting matters, if any, through the special meeting website. You will need the control number found on your proxy card or voting instruction form in order to submit questions. Questions pertinent to meeting matters will be answered during the meeting, subject to time constraints and any rules of conduct adopted with respect to the special meeting.

Record Date; Shares Entitled to Vote; Quorum

Only Transphorm’s stockholders as of the close of business on the record date are entitled to notice of, and to vote at, the special meeting. A list of stockholders of record entitled to vote at the special meeting will be available for inspection by stockholders for any purpose germane to the special meeting at Transphorm’s principal executive offices located at 75 Castilian Drive, Goleta, California 93117, during regular business hours for a period of 10 days ending on the day before the date of the special meeting. You will need the control number included on your proxy card or otherwise provided by your bank, broker, or other nominee to access the stockholder list during the special meeting.

As of the record date, there were [●] shares of Transphorm common stock issued and outstanding and entitled to vote at the special meeting. Each share of Transphorm common stock issued and outstanding as of the close of business on the record date is entitled to one vote per share on each matter properly submitted for a vote at the special meeting.

The holders of a majority of the voting power of Transphorm common stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum for the transaction of business at the special meeting.

 

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Vote Required; Abstentions and Broker Non-Votes

Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the issued and outstanding shares of Transphorm common stock as of the record date. Adoption of the merger agreement by Transphorm’s stockholders is a condition to the closing of the merger.

Approval of the proposal to adjourn the special meeting to a later date or dates to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting requires the affirmative vote of a majority of the voting power of the shares of Transphorm common stock present in person or represented by proxy at the special meeting and entitled to vote on the proposal.

If a stockholder abstains from voting, that abstention will have the same effect as if the stockholder voted (1) “AGAINST” the proposal to adopt the merger agreement, and (2) “AGAINST” the proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting. Abstentions will be counted as present for purposes of determining whether a quorum exists.

A “broker non-vote” generally occurs when a bank, broker, or other nominee holding shares on your behalf does not vote on a proposal because the bank, broker, or other nominee has not received your voting instructions and lacks discretionary power to vote your shares. Transphorm does not expect any “broker non-votes” at the special meeting because none of the proposals are considered routine. If there are broker non-votes, each broker non-vote will be counted for the purpose of determining whether a quorum is present and will count as a vote “AGAINST” the proposal to adopt the merger agreement, but will have no effect on the proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

Shares Held by Transphorm’s Directors

As of the record date, Transphorm’s directors, in their capacities as stockholders of Transphorm, beneficially owned and were entitled to vote, in the aggregate, 521,490 shares of Transphorm common stock, representing less than one percent of the total issued and outstanding shares of Transphorm common stock as of the record date.

As of the date of this proxy statement, Transphorm has not been informed that any of Transphorm’s directors intend to vote all of their shares of Transphorm common stock other than (1) “FOR” the adoption of the merger agreement, and (2) “FOR” the adjournment of the special meeting, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

Voting of Proxies

If your shares are registered in your name with Transphorm’s transfer agent, Pacific Stock Transfer Company, you may vote your shares by returning a signed and dated proxy card (a prepaid reply envelope is provided for your convenience), or you may vote at the special meeting using the control number located on the enclosed proxy card. Additionally, you may grant a proxy electronically over the internet or by telephone by following the instructions on your proxy card. You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to grant a proxy electronically over the internet or by telephone.

If you attend the special meeting and wish to vote at the special meeting, you will need the control number located on the enclosed proxy card. Beneficial owners of shares held in “street name” must also provide a “legal proxy” from their bank or broker in order to vote at the special meeting. You are encouraged to vote by proxy even if you plan to attend the special meeting. If you attend the special meeting and vote at the special meeting, your vote will revoke any previously submitted proxy.

 

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All shares represented by properly signed and dated proxy cards (or proxies granted electronically over the internet or by telephone) will, if received before the special meeting, be voted at the special meeting in accordance with the instructions of the stockholder. Properly signed and dated proxy cards (or proxies granted electronically over the internet or by telephone) that do not contain voting instructions will be voted (1) “FOR” adoption of the merger agreement, and (2) “FOR” the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

If your shares are held in “street name” through a bank, broker, or other nominee, you may vote through your bank, broker, or other nominee by completing and returning the voting instruction form provided by your bank, broker, or other nominee. You may also attend the special meeting and vote at the special meeting if you have a “legal proxy” from your bank, broker, or other nominee giving you the right to vote your shares at the special meeting. If available from your bank, broker, or other nominee, you may vote over the internet or telephone through your bank, broker, or other nominee by following the instructions on the voting instruction form provided by your bank, broker, or other nominee. If you do not (1) return your bank’s, broker’s, or other nominee’s voting instruction form; (2) vote over the internet or by telephone through your bank, broker, or other nominee; or (3) attend the special meeting and vote at the special meeting with a “legal proxy” from your bank, broker, or other nominee, it will have the same effect as if you voted “AGAINST” the proposal to adopt the merger agreement. It will not, however, have any effect on the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

Revocability of Proxies

If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the special meeting by:

 

   

signing another proxy card with a later date and returning it to Transphorm prior to the special meeting;

 

   

submitting a new proxy electronically over the internet or by telephone after the date of the earlier submitted proxy;

 

   

delivering a written notice of revocation to Transphorm’s Corporate Secretary; or

 

   

attending the special meeting and voting at the special meeting using the control number on the enclosed proxy card.

If you have submitted a proxy, your attendance at the special meeting, in the absence of voting at the special meeting or submitting an additional proxy or revocation, will not have the effect of revoking your prior proxy.

If you hold your shares of Transphorm common stock in “street name” through a bank, broker, or other nominee, you should contact your bank, broker, or other nominee for instructions regarding how to change your vote. You may also vote at the special meeting if you obtain a “legal proxy” from your bank, broker, or other nominee giving you the right to vote your shares at the special meeting.

Any adjournment, postponement, or other delay of the special meeting, including for the purpose of soliciting additional proxies, will allow Transphorm’s stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned, postponed or delayed.

The Transphorm Board’s Recommendation

The Transphorm Board, after considering various factors described in the section of this proxy statement captioned “The Merger—Recommendation of the Transphorm Board and Reasons for the Merger,” has unanimously: (1) determined that the merger agreement, and the other transactions contemplated by the merger

 

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agreement, including the merger, are advisable and in the best interests of Transphorm and its stockholders; (2) adopted and approved the execution and delivery of the merger agreement by Transphorm, the performance by Transphorm of its covenants in the merger agreement, and the consummation of the merger, in each case, upon the terms and subject to the conditions set forth in the merger agreement; (3) directed that the adoption of the merger agreement be submitted to a vote of the Transphorm stockholders at the special meeting; and (4) resolved to recommend that the Transphorm stockholders vote in favor of the adoption of the merger agreement in accordance with the DGCL.

The Transphorm Board unanimously recommends that you vote (1) “FOR” the adoption of the merger agreement and approval of the merger, and (2) “FOR” the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

Adjournment

In addition to the proposal to adopt the merger agreement, Transphorm’s stockholders are also being asked to approve any proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional votes or proxies in favor of the proposal to adopt the merger agreement if there are insufficient votes at the time of the special meeting to approve the merger agreement. If a quorum is not present, the chairperson of the special meeting or the stockholders entitled to vote at the special meeting, present in person or represented by proxy, may adjourn the special meeting, from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. The chairperson may also adjourn the meeting to another place, if any, date or time, even if a quorum is present. In addition, the special meeting could be postponed before it commences, subject to the terms of the merger agreement. If the special meeting is adjourned or postponed, Transphorm’s stockholders who have already submitted their proxies will be able to revoke them at any time before they are voted at the special meeting.

Solicitation of Proxies

The expense of soliciting proxies will be borne by Transphorm. Transphorm has retained D.F. King & Co., Inc., a professional proxy solicitation firm, to assist in the solicitation of proxies, and provide related advice and informational support during the solicitation process, for a fee of up to $9,500, plus reasonable out-of-pocket expenses. Generally, Transphorm will indemnify this firm against losses arising out of its provision of these services on Transphorm’s behalf. Renesas has agreed to reimburse Transphorm for any payments made to this firm. In addition, Transphorm may reimburse banks, brokers and other nominees representing beneficial owners of shares of Transphorm common stock for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by Transphorm’s directors, officers and employees, personally or by telephone, email, fax or over the internet. No additional compensation will be paid to such individuals for such services.

Anticipated Date of Completion of the Merger

Transphorm currently expects to complete the merger in the second half of 2024. However, the exact timing of completion of the merger, if at all, cannot be predicted because the merger is subject to the closing conditions specified in the merger agreement, many of which are outside of Transphorm’s control.

Appraisal Rights

If the merger is consummated, Transphorm’s stockholders (including beneficial owners of shares of capital stock) who (1) do not vote in favor of the adoption of the merger agreement; (2) continuously hold of record or beneficially own their shares through the effective time of the merger; (3) properly perfect appraisal of their shares; (4) meet certain other conditions and statutory requirements described in this proxy statement; and (5) do not withdraw their demands or otherwise lose their rights to appraisal will be entitled to seek appraisal of their

 

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shares in connection with the merger under Section 262 if certain conditions set forth in Section 262(g) of the DGCL are satisfied. This means that such persons will be entitled to seek appraisal of their shares by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of Transphorm common stock, exclusive of any elements of value arising from the accomplishment or expectation of the merger, together with (unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown) interest on the amount determined by the Delaware Court of Chancery to be the fair value from the effective time of the merger through the date of payment of the judgment at a rate of five percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the merger and the date of payment of the judgment, compounded quarterly (except that, if at any time before the entry of judgment in the proceeding, the surviving corporation makes a voluntary cash payment to each person seeking appraisal, interest will accrue thereafter only upon the sum of (x) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery; and (y) interest theretofore accrued, unless paid at that time). The surviving corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment. Due to the complexity of the appraisal process, persons who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.

Persons considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 could be more than, the same as or less than the value of the consideration that they would receive pursuant to the merger agreement if they did not seek appraisal of their shares.

For information on exercising appraisal rights, see the section of this proxy statement captioned “The Merger – Appraisal Rights.”

Other Matters

At this time, Transphorm knows of no other matters to be voted on at the special meeting. If any other matters properly come before the special meeting and you deliver a proxy to Transphorm, your shares of Transphorm common stock will be voted in accordance with the discretion of the appointed proxy holders, with full power of substitution and re-substitution.

Householding of Special Meeting Materials

Transphorm has adopted a procedure approved by the SEC called “householding.” Under this procedure, stockholders who have the same address and last name will receive only one copy of this proxy statement unless one or more of these stockholders notifies us that they wish to continue receiving individual copies. This procedure reduces printing costs, postage fees, and the use of natural resources. Each stockholder who participates in householding will continue to be able to access or receive a separate proxy card. If you wish to receive a separate set of Transphorm’s disclosure documents at this time, please notify Transphorm by sending a written request to Corporate Secretary, 75 Castilian Drive, Goleta, California 93117, or by telephone at (805) 456-1300.

If you are a stockholder who has multiple accounts in your name or you share an address with other stockholders and would like to receive a single set of Transphorm’s disclosure documents for your household, you may notify your broker, if your shares are held in a brokerage account, or you may contact Transphorm’s Corporate Secretary using the contact method above, if you hold registered shares.

 

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Questions and Additional Information

If you have any questions concerning the merger, the special meeting, or this proxy statement, would like additional copies of this proxy statement or need help submitting your proxy or voting your shares of Transphorm common stock, please contact Transphorm’s proxy solicitor:

D.F. King & Co., Inc.

48 Wall Street, 22nd floor

New York, NY 10005

Stockholders Call Toll Free: (800) 967-5068

Banks and Brokers Call: (212) 257-2543

Email: TGAN@dfking.com

 

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THE MERGER

The rights and obligations of the parties to the merger agreement are governed by the specific terms and conditions of the merger agreement and not by any summary or other information provided in this proxy statement. Therefore, this discussion of the merger is qualified in its entirety by reference to the merger agreement, a copy of which is attached as Annex A to this proxy statement and incorporated into this proxy statement by reference. You should read the entire merger agreement carefully as it is the legal document that governs the merger.

Parties Involved in the Merger

Transphorm, Inc.

75 Castilian Drive

Goleta, California 93117

(805) 456-1300

Transphorm is a global semiconductor company founded in 2007. Transphorm is a pioneer and market and technology leader, in the wide-bandgap GaN power electronics field for high voltage power conversion applications. Transphorm delivers high-quality and reliable GaN devices with high performance, while providing application design support to a growing customer base. Transphorm’s GaN devices allow customers to design smaller, lighter and cooler power systems that create increased functional value in end products including smartphone power adapters/fast-chargers, power supplies for datacenter servers/communication, industrial power converters, and chargers/converters/inverters for electric vehicles, among other applications. Transphorm deploys its unique vertically-integrated innovation model that leverages one of the industry’s most experienced GaN engineering teams (with over 300 years of combined experience) at every development stage: device design, materials growth, device fabrication, packaging, circuits and application support. This approach is backed by one of the GaN power industry’s largest intellectual property portfolios with access to over 1,000 world-wide patents. Transphorm’s innovations are designed to move power electronics beyond the limitations of silicon and provide Transphorm’s customers with the potential to achieve higher efficiency (e.g., titanium-class performance in power supplies), higher power density and, in some designs, an overall lower system cost.

Transphorm common stock is listed on the Nasdaq under the symbol “TGAN.”

Renesas Electronics America Inc.

c/o Renesas Electronics Corporation

3-2-24, Toyosu, Koto-ku,

Tokyo 135-0061, Japan

03-6773-3000

Renesas is a California corporation and a wholly owned subsidiary of Guarantor.

Travis Merger Sub, Inc.

c/o Renesas Electronics Corporation

3-2-24, Toyosu, Koto-ku,

Tokyo 135-0061, Japan

03-6773-3000

Merger Sub is a Delaware corporation and a wholly owned subsidiary of Renesas. Merger Sub was formed on January 3, 2024, solely for the purpose of engaging in the transactions contemplated by the merger agreement. Merger Sub has not engaged in any business activities other than as incidental to its formation and in connection with the transactions contemplated by the merger agreement. Upon completion of the merger, Merger Sub will cease to exist and Transphorm will continue as the surviving corporation.

 

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Renesas Electronics Corporation

3-2-24, Toyosu, Koto-ku,

Tokyo 135-0061, Japan

Guarantor is a corporation organized under the laws of Japan (kabushiki kaisha). Guarantor is a premier supplier of advanced semiconductor solutions and delivers trusted embedded design innovation with complete semiconductor solutions that enable billions of connected, intelligent devices to enhance the way people work and live – securely and safely.

Guarantor’s common stock is listed on the Tokyo Stock Exchange under code 6723.

Renesas and Merger Sub are each affiliated with Guarantor. In connection with the transactions contemplated by the merger agreement, Guarantor has guaranteed the due and punctual payment and performance of each of the covenants, obligations and agreements of Renesas and Merger Sub set forth in the merger agreement.

Effects of the Merger

Upon the terms and subject to the conditions of the merger agreement, and in accordance with the DGCL, at the effective time of the merger, (1) Merger Sub will merge with and into Transphorm; (2) the separate corporate existence of Merger Sub will cease; and (3) Transphorm will continue as the surviving corporation of the merger and a wholly owned subsidiary of Renesas.

As a result of the merger, Transphorm will cease to be a publicly traded company, Transphorm common stock will be delisted from the Nasdaq and deregistered under the Exchange Act and Transphorm will no longer file periodic reports, current reports and proxy and information statements with the SEC with respect to Transphorm common stock. If the merger is completed, you will not own any shares of capital stock of the surviving corporation.

The effective time of the merger will occur upon the filing of a certificate of merger with, and acceptance of that certificate by, the Secretary of State of the State of Delaware (or at a later time as Transphorm, Renesas and Merger Sub may agree and specify in such certificate of merger, in accordance with the DGCL).

Effect on Transphorm if the Merger is Not Completed

If the merger agreement is not adopted by Transphorm’s stockholders, or if the merger is not completed for any other reason, Transphorm’s stockholders will not receive any payment for their shares of Transphorm common stock in connection with the merger. Instead, (1) Transphorm will remain an independent public company; (2) Transphorm common stock will continue to be listed and traded on the Nasdaq and registered under the Exchange Act; and (3) Transphorm will continue to file periodic reports with the SEC. In addition, if the merger is not completed, Transphorm expects that: (A) Transphorm’s management will continue to operate the business as it is currently being operated; and (B) Transphorm’s stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including risks related to the highly competitive industry in which Transphorm operates and adverse economic conditions.

Furthermore, if the merger is not completed, and depending on the circumstances that cause the merger not to be completed, there can be no assurance as to the price at which Transphorm common stock may trade, and the price of Transphorm common stock could decline significantly.

Accordingly, there can be no assurance as to the effect of the merger not being completed on the future value of your shares of Transphorm common stock. If the merger is not completed, the Transphorm Board will continue to evaluate and review, among other things, Transphorm’s business, operations, strategic direction, and capitalization, and will make whatever changes it deems appropriate. If the merger agreement is not adopted by Transphorm’s stockholders or if the merger is not completed for any other reason, Transphorm’s business, prospects or results of operation may be adversely impacted.

 

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In specified circumstances in which the merger agreement is terminated, Transphorm has agreed to pay Renesas (or its designee) the applicable termination fee. Further, in specified circumstances in which the merger agreement is terminated, Renesas has agreed to pay Transphorm the applicable termination fee.

Effect of the Merger on Transphorm Common Stock

Upon the terms and subject to the conditions set forth in the merger agreement, at the effective time of the merger:

 

   

each outstanding share of Transphorm common stock that is (1) held by Transphorm as treasury stock; (2) owned by Renesas or Merger Sub; or (3) owned by any direct or indirect wholly owned subsidiary of Renesas or Merger Sub as of immediately prior to the effective time of the merger will automatically be cancelled and will cease to exist without any conversion thereof or consideration paid in exchange therefor;

 

   

each share of Transphorm common stock that is issued and outstanding as of immediately prior to the effective time of the merger (other than the shares identified in the prior bullet and shares of Transphorm common stock held by persons who have (1) neither voted in favor of the adoption of the merger agreement or the merger nor consented thereto in writing; and (2) properly demanded appraisal of such shares of Transphorm common stock pursuant to, and in accordance with Section 262, if any) will be automatically converted into the right to receive an amount in cash equal to the per share price without interest and less any applicable withholding taxes; and

 

   

each certificate formerly representing any shares of Transphorm common stock or any book-entry shares that represented shares of Transphorm common stock immediately prior to the effective time of the merger will automatically be cancelled and retired and all such shares will cease to exist and will thereafter only represent the right to receive an amount in cash equal to the per share price without interest and less any applicable withholding taxes.

At or prior to the closing, Renesas will deposit (or cause to be deposited) with the payment agent an amount of cash that is sufficient in the aggregate to pay the aggregate per share price. Once a stockholder has provided the payment agent with his, her, or its stock certificates (or an affidavit of loss in lieu of a stock certificate) or customary agent’s message with respect to book-entry shares, appropriate letter of transmittal and other items specified by the payment agent, then the payment agent will pay the stockholder his, her, or its applicable portion of the aggregate per share price. For more information, see the section of this proxy statement captioned “The Merger Agreement—Payment Agent, Exchange Fund and Exchange and Payment Procedures.”

After the merger is completed, each of Transphorm’s stockholders will have the right to receive the per share price for each share of Transphorm common stock that such stockholder owned, as described in the section of this proxy statement captioned “The Merger Agreement—Conversion of Shares,” but will no longer have any rights as a Transphorm stockholder (except that Transphorm’s stockholders holding shares with respect to which an appropriate person has properly and validly exercised and perfected, and has not validly withdrawn or otherwise lost their appraisal rights will have the right to receive payment for the “fair value” of their shares, determined pursuant to an appraisal proceeding contemplated by the DGCL as described below in the section of this proxy statement captioned “—Appraisal Rights”).

Background of the Merger

The following chronology summarizes the key meetings and events that led to the signing of the merger agreement. This chronology does not purport to catalogue every conversation of or among the Transphorm Board, the Strategic Committee (as defined below), Transphorm’s representatives, and other parties.

The Transphorm Board regularly evaluates Transphorm’s strategic direction and ongoing business plans with a view toward growing Transphorm’s business to achieve profitability and enhance stockholder value. As part of

 

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this evaluation, the Transphorm Board has, from time to time, considered a variety of strategic alternatives. These have included, among others, (1) the continuation of, and potential improvements to, Transphorm’s current business plan, with Transphorm remaining an independent company; (2) capital raising activities; (3) potential expansion opportunities through investments, acquisitions, partnerships, licensing agreements or other commercial relationships; and (4) business combinations, acquisitions and other financial and strategic alternatives, including a sale of Transphorm. In addition, Transphorm management regularly holds introductory and informational meetings with financial advisors (including BofA Securities), actual and potential investors in Transphorm, and other industry participants, including financial buyers and strategic counterparties that may have an interest in engaging in a strategic transaction with Transphorm, for the purpose of discussing, in general terms and based on publicly available information, Transphorm’s business and industry. Transphorm management regularly updates the Transphorm Board with respect to these meetings.

Transphorm has historically struggled to maintain sufficient working capital to fund its ongoing operations. The Transphorm Board regularly considers Transphorm’s working capital needs, as well as transactions that could provide Transphorm with sufficient working capital to execute its business plan. At times, Transphorm’s limited working capital has impacted its ability to compete for and win new business, with potential customers expressing concerns about Transphorm’s scale and ability to meet its commitments.

In February 2023, representatives of a potential strategic acquiror (which is referred to as “Party A”) met with Dr. Primit Parikh, who at the time was Transphorm’s President and Chief Operating Officer, to discuss Transphorm’s and Party A’s respective businesses. No specific transaction or proposal was discussed. Dr. Parikh subsequently reported this meeting to the Transphorm Board.

In March 2023, Transphorm attempted to raise new working capital through an equity financing. This offering was not successful, and no working capital was raised.

Also in March 2023, representatives of Party A and Transphorm management (including Dr. Parikh) met to discuss Party A’s preliminary interest in investing in Transphorm. Dr. Parikh subsequently reported this meeting to the Transphorm Board.

In April 2023, Transphorm repaid a $12,000,000 loan that had matured in the ordinary course. This payment substantially decreased Transphorm’s working capital such that, without new debt or equity financing, Transphorm would not have sufficient working capital to get to the end of calendar year 2023.

Also in April 2023, representatives of a potential strategic acquiror (which is referred to as “Party B”) met with Dr. Parikh to discuss Transphorm’s and Party B’s respective businesses. Party B expressed a preliminary interest in a combination with Transphorm, but no specific terms for a combination were discussed. Dr. Parikh subsequently reported this meeting to the Transphorm Board.

Still later in April 2023, representatives of Party B, together with representatives of Party B’s financial advisor, contacted Dr. Parikh to express Party B’s preliminary interest in a combination with Transphorm. No specific terms for a combination were discussed, but Dr. Parikh did offer his opinion that, to position the combined company for success, it would need to have a robust working capital balance at the closing of the combination. Dr. Parikh subsequently reported this contact to the Transphorm Board. From time to time following this discussion, representatives of Party B contacted Transphorm management (including Dr. Parikh) to reiterate Party B’s interest in exploring a combination with Transphorm. Transphorm management kept the Transphorm Board updated regarding these contacts.

In May 2023, in light of the decline in Transphorm’s working capital balance and the possibility that third parties could have an interest in acquiring, or engaging in a strategic transaction with, Transphorm, the Transphorm Board invited representatives of BofA Securities to a meeting of the Transphorm Board. The representatives of BofA Securities provided BofA Securities’ perspective on recent market interest in GaN, including the identity of

 

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third parties looking to acquire GaN technology, and reviewed the terms of recent transactions in the GaN space. BofA Securities is well known to the Transphorm Board given BofA Securities’ qualifications, extensive expertise, international reputation, knowledge of the semiconductor industry and experience in advising companies in connection with potential strategic transactions. The Transphorm Board also met separately with representatives of the financial advisor to Party B to receive an overview of Party B and Party B’s perspective on a potential combination with Transphorm. No specific terms for a combination were discussed. After considering a variety of strategic alternatives for Transphorm, the Transphorm Board determined to focus in the near term on addressing Transphorm’s imminent working capital needs while continuing to explore Transphorm’s strategic alternatives. Dr. Parikh subsequently reported to Party B that Transphorm’s immediate priority was to focus on executing its business plan as an independent company.

Also in May 2023, Party A provided Transphorm with a non-binding letter of intent expressing interest in a potential investment by Party A in Transphorm of up to $20,000,000. This investment did not ultimately occur.

On May 10, 2023, the Transphorm Board appointed Dr. Parikh as Chief Executive Officer and as a member of the Transphorm Board, effective as of May 15, 2023.

On June 27, 2023, the Transphorm Board publicly announced that it would undertake a rights offering to raise up to $15,000,000 for working capital purposes. In connection with the public announcement of the rights offering, Transphorm announced that it would also (1) pursue obtaining conventional asset-based financing; and (2) commence a strategic review of opportunities to enhance stockholder value in the second quarter of Transphorm’s fiscal year 2024. The Transphorm Board determined to commence a strategic review process in light of (1) the continuing challenges to maintaining adequate working capital to operate Transphorm’s business; (2) recent acquisitions of companies in the GaN space; and (3) the possibility that a sale of Transphorm could, depending on its terms, be in the best interests of Transphorm and its stockholders relative to the continued execution of Transphorm’s business plan as an independent company.

On July 3, 2023, Shibata Hidetoshi, Guarantor’s Chief Executive Officer, contacted Dr. Parikh to request that Transphorm management inform Renesas when Transphorm commenced its previously announced strategic review process. Renesas and Transphorm are well known to each other, given that Mr. Shibata was, until 2013, a member of the Transphorm Board and representatives of each of Renesas and Transphorm would meet from time to time to discuss, in general terms, ways that the companies could work together. Dr. Parikh subsequently reported this contact to the Transphorm Board.

On July 25, 2023, Transphorm publicly announced that it was able to raise only $7.94 million through the rights offering. Transphorm also publicly re-confirmed its prior announcement regarding the exploration of strategic alternatives later in Transphorm’s fiscal year 2024.

Following the rights offering, Transphorm was unsuccessful in obtaining conventional asset-based financing. Had the rights offering been fully subscribed and the conventional asset-based financing been successful, Transphorm management publicly estimated that Transphorm would have had sufficient working capital to meet Transphorm’s needs into its fiscal year 2025.

On September 13, 2023, the Transphorm Board met, with Transphorm management and representatives of Wilson Sonsini Goodrich & Rosati, Professional Corporation, outside counsel to Transphorm (which is referred to as “Wilson Sonsini”), in attendance. The Transphorm Board discussed an illustrative approach (as provided by BofA Securities) to structuring the strategic review process, including potential acquirers and their potential level of interest in pursuing acquisition discussions with Transphorm. After discussing a variety of potential candidates to serve as financial advisor to Transphorm, as well as BofA Securities’ familiarity with Transphorm’s business, strategy, financial condition and industry, the Transphorm Board (1) determined to request additional information from BofA Securities related to a potential strategic review process, including a potential sale of Transphorm; and (2) instructed Transphorm management to obtain a proposal from BofA Securities to serve as financial advisor to Transphorm.

 

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On September 21, 2023, the Transphorm Board met, with Transphorm management and representatives of Wilson Sonsini in attendance. The representatives of Wilson Sonsini reviewed with the members of the Transphorm Board their fiduciary duties under Delaware law. To provide assistance to, and oversight of, Transphorm management during the strategic review process, the Transphorm Board established a committee of independent directors (which is referred to as the “Strategic Committee”). The Strategic Committee was formed in light of the benefits, convenience and efficiency of having a subset of directors oversee any process of considering strategic alternatives given the (1) potentially significant workload that could be involved in such process; and (2) possibility that Transphorm management and Transphorm’s advisors could need feedback and direction on relatively short notice. The Strategic Committee was not formed due to any actual or perceived conflict of any director or officer of Transphorm. The Transphorm Board delegated to the Strategic Committee the full power and authority of the Transphorm Board to (1) explore, evaluate and consider any strategic transaction; (2) explore, evaluate, consider, review, negotiate and, as appropriate, recommend to the Transphorm Board for approval, the terms and conditions of a strategic transaction involving Transphorm; (3) supervise and direct discussions and negotiations related to a strategic transaction involving Transphorm; (4) authorize and direct Transphorm management, employees and advisors in connection with a strategic transaction; and (5) take or approve any and all actions that the Strategic Committee deemed necessary, appropriate, desirable, useful, helpful or convenient in connection with a strategic transaction. The Transphorm Board retained the exclusive power and authority to approve the final decision to enter into any definitive agreement for a strategic transaction. In addition, the Strategic Committee was authorized by the Transphorm Board to engage, oversee and direct advisors to assist with the strategic review process. The Transphorm Board appointed Julian Humphreys, Katharina McFarland and Kelly Smales to the Strategic Committee, with Dr. Humphreys serving as chair. These members of the Transphorm Board were selected because of, among other things, their substantial familiarity with Transphorm and its business and their experience in similar circumstances. The Transphorm Board did not provide for the payment of any new or additional compensation to the members of the Strategic Committee in connection their service on the Strategic Committee.

At its September 21, 2023 meeting, the Transphorm Board again reviewed an illustrative approach (as provided by BofA Securities) to structuring the strategic review process, including potential acquirers and their potential level of interest in pursuing acquisition discussions with Transphorm. The Transphorm Board determined to commence the strategic review process by contacting the most likely potential acquirers of Transphorm concerning their interest in an acquisition, and decided that BofA Securities should use its judgment to appropriately sequence such contacts. In making that determination, the Transphorm Board was aware that financial buyers were likely to have little to no interest in pursuing an acquisition of Transphorm given its history of losses and limited ability to service any acquisition-related debt. In that regard, the Transphorm Board noted that Kohlberg Kravis Roberts & Co. L.P. (which, together with its affiliates, is referred to as “KKR”), had informed the Transphorm Board that it was not interested in participating in the strategic review process; KKR is one of the largest and most sophisticated financial buyers. Through Phorm Investor, KKR is Transphorm’s largest stockholder. The Transphorm Board (1) reviewed the terms of the proposed engagement of BofA Securities as Transphorm’s financial advisor; (2) determined to proceed with the engagement of BofA Securities; and (3) requested that the Strategic Committee work with Wilson Sonsini to finalize the engagement letter with BofA Securities. The Transphorm Board separately directed Transphorm management to continue its efforts to secure additional working capital.

Following the meeting of the Transphorm Board on September 21, 2023, BofA Securities ultimately engaged with 24 potential strategic acquirers (including Renesas, Party A and Party B) and two financial buyers concerning their interest in an acquisition of Transphorm. As part of this process, Transphorm ultimately entered into confidentiality agreements with 22 potential strategic acquirers (including Renesas, Party A, Party B, Party C (as defined below) and Party E (as defined below)) and two financial buyers (including Party D (as defined below)). All of these confidentiality agreements contained “standstill” provisions restricting the counterparty from making public proposals with respect to an acquisition of Transphorm without Transphorm’s prior consent (which restrictions would terminate upon the occurrence of certain customary events involving Transphorm). None of these confidentiality agreements (1) restricted the counterparty from making confidential

 

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proposals to the Transphorm Board; or (2) included “don’t ask, don’t waive” provisions prohibiting the counterparty from requesting that Transphorm release the counterparty from its “standstill” restrictions. Both before and after entering into confidentiality agreements, members of Transphorm management met with potential acquirers to discuss Transphorm and its business (with any discussions that occurred prior to entry into a confidentiality agreement being limited to publicly available information). Representatives of BofA Securities frequently attended these meetings. Certain of the potential acquirers had existing relationships with Transphorm, including existing confidentiality agreements (which did not include “standstill” provisions). In the interest of expediency, at times Transphorm elected to have discussions related to the strategic review process under these confidentiality agreements. In addition, given his extensive knowledge of Transphorm and its business, at times certain potential acquirers spoke directly with Dr. Parikh concerning the strategic process. Dr. Parikh regularly updated the Strategic Committee on these conversations.

On October 3, 2023, the Strategic Committee met, with Transphorm management and representatives of Wilson Sonsini in attendance. Transphorm management discussed trends and expectations for Transphorm’s fiscal year 2024 operational and financial results and presented a preliminary draft long-term financial and operating plan for the second half of fiscal year 2024 through fiscal year 2028. The Strategic Committee discussed this draft plan, including with respect to (1) the underlying growth and operating expense assumptions; (2) Transphorm’s current operations and resource limitations; and (3) Transphorm’s working capital requirements. The Strategic Committee requested that Transphorm management prepare additional refinements to the draft plan for continued discussion with the Strategic Committee. The Strategic Committee also considered the final terms of the engagement letter with BofA Securities. The Strategic Committee also reviewed the customary relationship disclosures provided by BofA Securities. The Strategic Committee did not identify any potential or actual conflicts that would affect the ability of BofA Securities to fulfill its responsibilities as Transphorm’s financial advisor. The Strategic Committee approved the engagement letter with BofA Securities. The Strategic Committee also met in executive session, and it was the practice of the Strategic Committee at future meetings to meet in executive session.

Later on October 3, 2023, the engagement letter with BofA Securities was signed.

On October 4, 2023, Transphorm publicly disclosed that it had engaged BofA Securities as Transphorm’s financial advisor in connection with Transphorm’s strategic review process.

Also on October 4, 2023, the Transphorm Board met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. The representatives of BofA Securities provided an overview of the strategic review process, including the parties contacted and the initial level of interest expressed by each. The Transphorm Board reviewed Transphorm’s working capital balance, and noted that Transphorm had only a few months before its working capital would be exhausted. As such, the Transphorm Board directed Transphorm management, concurrent with the strategic review process, to continue with its efforts to secure additional working capital.

On October 6, 2023, the Strategic Committee met, with Transphorm management and representatives of Wilson Sonsini in attendance. Transphorm management presented a revised draft long-term financial and operating plan for the second half of fiscal year 2024 through fiscal year 2028 that reflected the refinements requested by the Strategic Committee at its prior meeting. The Strategic Committee discussed such draft plan, including with respect to (1) the underlying growth and operating expense assumptions; (2) Transphorm’s current operations and resource limitations; and (3) Transphorm’s working capital requirements. The Strategic Committee requested that Transphorm management prepare additional refinements to the draft plan. The Strategic Committee also discussed the current status of Transphorm’s efforts to secure additional working capital.

On October 10, 2023, the Strategic Committee met, with Transphorm management and representatives of Wilson Sonsini in attendance. Transphorm management presented a revised draft long-term financial and operating plan for the second half of fiscal year 2024 through fiscal year 2028 that reflected the refinements requested by the

 

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Strategic Committee at its prior meeting. The Strategic Committee discussed such draft plan, including with respect to (1) the underlying growth and operating expense assumptions; (2) Transphorm’s current operations and resource limitations; and (3) Transphorm’s working capital requirements. The Strategic Committee requested that Transphorm management prepare additional refinements to the draft plan. The Strategic Committee also discussed the current status of Transphorm’s efforts to secure additional working capital.

On October 17, 2023, the Strategic Committee met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. Transphorm management presented a revised draft long-term financial and operating plan for the second half of fiscal year 2024 through fiscal year 2028 that reflected the refinements requested by the Strategic Committee at its prior meeting. The Strategic Committee adopted this October long-range plan, including for purposes of the strategic transaction process (and specifically instructed BofA Securities to provide this plan to a potential acquirer with whom Transphorm management had already spoken as part of the strategic review process). This October long-range plan is referred to as the “October 2023 Long-Term Plan.” Additional information about the preparation and substance of the October 2023 Long-Term Plan is contained in the section of this proxy statement captioned “ —Financial Projections.” The Strategic Committee authorized and ratified Transphorm management and BofA Securities to, as appropriate, provide the October 2023 Long-Term Plan to third parties pursuing a strategic transaction with Transphorm. The representatives of BofA Securities reviewed BofA Securities’ preliminary financial analyses of Transphorm and provided an update on the strategic transaction process, including the level of engagement being expressed by each of the parties contacted to date. The Strategic Committee also discussed the current status of Transphorm’s efforts to secure additional working capital.

On October 18, 2023, members of Transphorm management met with representatives of Renesas to discuss Transphorm’s business. Representatives of each of BofA Securities and Renesas’ financial advisor attended this meeting.

On October 20, 2023, representatives of Party A informed representatives of BofA Securities that Party A was not interested in pursuing an acquisition of Transphorm because Transphorm did not fit with Party A’s product roadmap.

On October 24, 2023, the Strategic Committee met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. Transphorm management noted Party B’s participation in the strategic review process and described Party B’s ongoing (and so far unsuccessful) efforts to obtain financing to support a proposed combination with Transphorm. The representatives of BofA Securities provided an update on the strategic review process and recommended that, as a next step, bid process letters be delivered to each of the potential acquirers who were still actively considering a strategic transaction with Transphorm (which included Renesas and Party B). The Strategic Committee concurred with the recommendation of BofA Securities and directed BofA Securities to deliver bid process letters requesting that initial acquisition proposals be delivered on or before November 16, 2023. The representatives of BofA Securities also discussed the feedback received from a variety of potential acquirers concerning their reasons for not pursuing a transaction with Transphorm. Among the reasons given were (1) the proposed acquisition not being consistent with the party’s strategic or product roadmap; (2) the unpredictability of regulatory outcomes in connection with the proposed acquisition; and (3) product overlap. The Strategic Committee also discussed the current status of Transphorm’s efforts to secure additional working capital.

On October 26, 2023, BofA Securities distributed bid process letters to each of the potential acquirers who were still actively considering a strategic transaction with Transphorm (which included Renesas and Party B). The bid process letter requested that initial acquisition proposals be submitted no later than November 16, 2023.

On October 27, 2023, members of Transphorm management met with representatives of Renesas to provide financial and regulatory due diligence information regarding Transphorm’s business. Representatives of each of BofA Securities and Renesas’ financial advisor attended this meeting. In the interest of expediency, Transphorm

 

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elected to have this and prior discussions with Renesas under an existing confidentiality agreement (which did not include “standstill” provisions) entered into between Renesas and Transphorm in connection with general discussions regarding ways that the two companies could work together. As discussions with Renesas progressed, the parties determined that a confidentiality agreement specifically related to the strategic review process was warranted and, on November 15, 2023, Transphorm entered into a confidentiality agreement with Renesas that contained “standstill” provisions restricting Renesas from making public proposals with respect to an acquisition of Transphorm without Transphorm’s prior consent (which restrictions would terminate upon the occurrence of, among other things, Transphorm’s execution of a definitive agreement with a third party to acquire more than 50 percent of Transphorm’s outstanding voting securities). This confidentiality agreement did not (1) restrict Renesas from making confidential proposals to the Transphorm Board; or (2) include “don’t ask, don’t waive” provisions prohibiting Renesas from requesting that Transphorm release Renesas from its “standstill” restrictions.

On October 31, 2023, the Strategic Committee met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. The representatives of BofA Securities provided an update regarding the strategic review process, including as to the current level of engagement of each potential acquirer. The Strategic Committee also discussed the current status of Transphorm’s efforts to secure additional working capital.

On November 6, 2023, members of Transphorm management met with representatives of Party B to discuss Transphorm’s business and a possible combination of Transphorm and Party B. Representatives of each of BofA Securities and the financial advisor to Party B attended this meeting.

On November 7, 2023, the Strategic Committee met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. The representatives of BofA Securities provided an update regarding the strategic review process, including as to the current level of engagement of each potential acquirer. The Strategic Committee also discussed the current status of Transphorm’s efforts to secure additional working capital.

On November 9, 2023, as part of the public announcement of its second quarter results for fiscal year 2024, Transphorm publicly reconfirmed that it had engaged BofA Securities to act as Transphorm’s financial advisor in its strategic review process.

On November 14, 2023, the Strategic Committee met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. The representatives of BofA Securities provided an update regarding the strategic review process, including as to the current level of engagement of each of the potential acquirers. The Strategic Committee also discussed the current status of Transphorm’s efforts to secure additional working capital. At this and future meetings of the Strategic Committee, the possibility of approaching KKR about providing bridge financing to Transphorm was discussed.

Also on November 14, 2023, representatives of the financial advisor to Party B informed representatives of BofA Securities that Party B was prepared to submit, on or before November 16, 2023, a proposal to combine with Transphorm, and stated that, although Party B had contacted several potential financing sources, Party B had not yet secured committed financing to support the combination.

Also on November 14, 2023, members of Transphorm management met with representatives of Renesas to further discuss Transphorm’s business. Representatives of each of BofA Securities and Renesas’ financial advisor attended this meeting.

On November 16, 2023, Transphorm received five non-binding acquisition proposals:

 

   

Renesas proposed to acquire Transphorm for $3.60 in cash per share of Transphorm common stock.

 

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Party B proposed to combine with Transphorm in an all-equity transaction involving the issuance of Transphorm equity to Party B. Party B expressed its belief, based on a number of assumptions, that the combined company should be valued at 6.0-8.0x pro forma calendar year 2024 revenue, which implied a valuation in the combination of $4.04 - $5.34 per share of Transphorm common stock.

 

   

A strategic acquirer (which is referred to as “Party C”) proposed to acquire Transphorm for $3.18 in cash per share of Transphorm common stock. Prior to the strategic review process, Party C and Transphorm had not discussed a transaction between them.

 

   

A financial buyer (which is referred to as “Party D”) proposed to acquire Transphorm for $6.50 in cash per share of Transphorm common stock. Party D was acquainted with Transphorm prior to the strategic review process, but the parties had not discussed an acquisition of Transphorm by Party D. Party D’s acquisition proposal did not provide any details on the source of Party D’s financing for an acquisition of Transphorm, other than that Party D did not have, and would need to raise, such financing.

 

   

A strategic acquirer (which is referred to as “Party E”) proposed to acquire Transphorm for an implied value of $6.09 per share of Transphorm common stock in a cash and stock merger. This valuation was subject to a number of assumptions and then-current market conditions. Party E and Transphorm had an existing relationship prior to the strategic review process, but had not discussed an acquisition of Transphorm by Party E. Party E’s acquisition proposal did not provide details on the source of Party E’s financing for an acquisition, other than that Party E would need to raise such financing.

On November 20, 2023, the Strategic Committee met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. The representatives of BofA Securities reviewed the terms of each of the non-binding acquisition proposals described above, including with respect to the value and closing certainty of each acquisition proposal. The representatives of BofA Securities provided BofA Securities’ preliminary financial analyses of each acquisition proposal. The representatives of Wilson Sonsini reviewed with the members of the Transphorm Board their fiduciary duties under Delaware law. The representatives of Wilson Sonsini provided preliminary analyses of the regulatory considerations associated with each acquisition proposal, noting that there was a high risk that regulatory approvals could not be obtained, and that a transaction might not be completed, with respect to the proposed transactions with Party D and Party E. With respect to Party B, the Strategic Committee noted the complexity of a transaction between Party B and Transphorm, including that Party B’s proposal contemplated a simultaneous fundraise by Party B (which injected substantial execution risk into the transaction), and that Party B had been unsuccessful in locating a financing source for this fundraise. With respect to Party D, in addition to substantial regulatory risks, the Strategic Committee noted that Party D’s acquisition proposal did not provide any details on the source of Party D’s financing for an acquisition of Transphorm, other than that Party D did not have, and would need to raise, such financing; in the view of the Strategic Committee, this injected substantial additional risk into an acquisition by Party D. With respect to Party E, the Strategic Committee noted the complexity of a transaction between Party E and Transphorm, and that Party E’s proposal omitted significant details on how Party E would complete the transaction, including how Party E would obtain necessary financing; in the view of the Strategic Committee, there was substantial risk to completing a transaction with Party E. The Strategic Committee discussed ways to improve the value of each acquisition proposal and the risks inherent in each proposal. The Strategic Committee noted Transphorm’s working capital level and the lack of success, to that point, by Transphorm management in securing additional working capital. In light of these challenges, the Strategic Committee determined to focus on negotiating a transaction with Renesas or Party C in the near term because both transactions potentially represented, in the opinion of the Strategic Committee, the most expedited and certain path to a transaction that could be in the best interests of Transphorm and its stockholders relative to the continued execution of Transphorm’s business plan as an independent company. However, to maximize flexibility and preserve a competitive dynamic, the Strategic Committee did not wish to terminate discussions with Party B, Party D or Party E. Accordingly, the Strategic Committee instructed Transphorm management and BofA Securities to (1) inform each of Renesas and Party C that each would need to increase the value of its acquisition proposal to remain in the strategic review process; (2) inform each of Party B and Party E that Transphorm preferred an all-cash transaction with a high certainty of closing; (3) provide Party B and Party D with a diligence questionnaire to gather additional information from each

 

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to allow the Strategic Committee to better understand the regulatory implications of an acquisition of Transphorm by each such party; (4) provide Renesas and Party C with access to a virtual data room containing additional due diligence information; and (5) provide an initial draft of the merger agreement in the virtual data room. The Strategic Committee also discussed the current status of Transphorm’s efforts to secure additional working capital.

Following the meeting of the Strategic Committee, representatives of BofA Securities communicated the perspectives of the Strategic Committee to representatives of each of Renesas, Party B, Party C, Party D and Party E. With respect to Party D, in the weeks that followed the November 20, 2023 meeting of the Strategic Committee, representatives of BofA Securities repeatedly encouraged representatives of Party D to complete the diligence questionnaire provided by Transphorm so that the Strategic Committee could better understand the regulatory implications of an acquisition of Transphorm by Party D. Party D never provided a completed questionnaire, and did not undertake additional substantive engagement in connection with pursuing an acquisition.

On November 21, 2023, the Strategic Committee met, with Transphorm management and representatives of Wilson Sonsini in attendance. The Strategic Committee discussed Transphorm’s current working capital balance, including that Transphorm management anticipated that, without additional financing, Transphorm would run out of cash in early January 2024. Transphorm management reviewed Transphorm’s current options to secure additional working capital, including an equity line of credit, a warrant repricing, a debt financing and the sale of certain assets. The Strategic Committee discussed these various funding options, the certainty of completion of each transaction and the funds to be received from each transaction, and directed Transphorm management to pursue the equity line of credit and warrant repricing. The Strategic Committee also instructed Transphorm management to ask KKR whether it would be willing to provide bridge financing.

On November 22, 2023, Party C notified representatives of BofA Securities in writing that it was increasing its acquisition proposal to $3.98 in cash per share of Transphorm common stock.

On November 24, 2023, members of Transphorm management met with representatives of Party E to discuss Party E’s non-binding proposal to acquire Transphorm. The representatives of Party E stated that Party E was also considering alternative transactions with Transphorm, including a licensing transaction. Representatives of BofA Securities attended this meeting.

Also on November 27, 2023, Renesas notified representatives of BofA Securities in writing that it was increasing its acquisition proposal to $4.70 in cash per share of Transphorm common stock.

On November 28, 2023, the Strategic Committee met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. The representatives of BofA Securities reviewed the revised non-binding acquisition proposals from Renesas and Party C. The Strategic Committee discussed the continuing challenges to reaching a transaction with any of Party B, Party D and Party E, including (1) the regulatory and closing certainty concerns previously identified; and (2) each party’s failure to improve any of the terms of its transaction proposal. The Strategic Committee noted Transphorm’s working capital balance and the lack of success, to that point, by Transphorm management in securing additional working capital. The Strategic Committee discussed the potential merits of contacting additional financial buyers regarding their interest in pursuing an acquisition of Transphorm. The Strategic Committee concluded not to pursue such contacts because (1) financial buyers were likely to have little to no interest in pursuing an acquisition of Transphorm given its history of losses and limited ability to service any acquisition-related debt; and (2) it did not wish to jeopardize the favorable acquisition proposals from Renesas and Party C. The Strategic Committee determined to continue to focus on reaching a transaction with Renesas or Party C (including by providing access to additional due diligence information in a virtual data room) because both transactions represented, in the opinion of the Strategic Committee, the most expedited and certain path to a transaction that could be in the best interests of Transphorm and its stockholders relative to the continued execution of Transphorm’s business plan as an independent company. As before, the Strategic Committee determined not to terminate transaction discussions with Party B, Party D or Party E (including, with respect to Party E, the continuation of discussions regarding alternative transactions between Transphorm and Party E) in order to maximize flexibility and preserve a competitive dynamic.

 

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Later on November 28, 2023, Renesas, Party C and their respective representatives were granted access to a virtual data room containing operational, financial and legal information regarding Transphorm’s business. From time to time thereafter, Transphorm management and Transphorm’s legal and financial advisors met with representatives of Renesas and Party C and their respective representatives to provide operational, financial and legal due diligence information regarding Transphorm.

On December 1, 2023, BofA Securities posted the initial draft of the merger agreement to the virtual data room.

On December 5, 2023, the Strategic Committee met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. Transphorm management described various possible updates to the October 2023 Long-Term Plan to account for (1) Transphorm’s actual second quarter fiscal year 2024 performance; and (2) Transphorm management’s updated assumptions and estimates regarding Transphorm’s third quarter and fourth quarter fiscal year 2024 financial performance. The representatives of BofA Securities provided an update on the due diligence being undertaken by each of Renesas and Party C. The representatives of BofA Securities also reviewed a proposed timeline for the next phase of the strategic review process, and recommended that, as a next step, bid process letters be delivered to Renesas and Party C. The Strategic Committee concurred with the recommendation of BofA Securities and directed BofA Securities to deliver bid process letters requesting that final acquisition proposals be delivered on or before December 22, 2023. The Strategic Committee discussed the current status of Transphorm’s efforts to secure additional working capital.

Later on December 5, 2023, Party B returned a completed diligence questionnaire to BofA Securities. Party B also noted that it was focusing its efforts on identifying financing resources for a potential combination with Transphorm. In the weeks that followed, representatives of BofA Securities periodically requested updates on Party B’s financing efforts, but Party B never provided specific information or an actionable path to any type of transaction with Transphorm.

Still later on December 5, 2023, BofA Securities distributed bid process letters to Renesas and Party C. The bid process letter requested that final acquisition proposals be submitted no later than December 22, 2023.

On December 12, 2023, the Strategic Committee met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. The representatives of BofA Securities provided an update on the due diligence being undertaken by each of Renesas and Party C. Dr. Parikh provided an update regarding ongoing discussions with Party E, including that Party E was continuing to focus its efforts on a licensing transaction. The Strategic Committee discussed the immediate need to secure additional working capital and directed Transphorm management to continue to actively seek additional working capital, including through bridge financing.

On December 19, 2023, the Strategic Committee met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. Transphorm management presented a revised version of the October 2023 Long-Term Plan to account for (1) Transphorm’s actual second quarter fiscal year 2024 performance; and (2) Transphorm management’s updated assumptions and estimates regarding Transphorm’s third quarter and fourth quarter fiscal year 2024 financial performance. This December long-range plan is referred to as the “December 2023 Long-Term Plan.” Additional information about the preparation and substance of the December 2023 Long-Term Plan is contained in the section of this proxy statement captioned “—Financial Projections.” The Strategic Committee adopted the December 2023 Long-Term Plan, including for purposes of BofA Securities’ financial analyses of Transphorm, and approved and ratified sharing the December 2023 Long-Term Plan with Renesas and Party C. The representatives of BofA Securities (1) provided an update on the due diligence being undertaken by each of Renesas and Party C; (2) described the relative level of engagement being exhibited by Renesas and Party C (including that Party C was showing significantly less engagement than Renesas); and (3) reported that Renesas had provided a preliminary revised draft of the merger agreement for discussion with Wilson Sonsini. The representatives of BofA Securities also noted that there were no active discussions or updates with respect to Party B or Party D. Dr. Parikh provided an update regarding ongoing discussions with Party E, which remained focused on a licensing transaction. Members of Transphorm

 

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management described a warrant repricing and equipment sale that Transphorm intended to engage in to secure additional working capital. The Strategic Committee discussed the strategic review process and the urgency with which Transphorm needed to secure additional working capital. It was noted that reaching an agreement for the acquisition of Transphorm in the near term could provide substantial benefits to Transphorm and its stockholders, including by providing Transphorm with an easier path to obtaining additional working capital, which would reduce customer and supplier concerns regarding Transphorm’s viability as an independent company.

Later on December 19, 2023, representatives of Party C informed representatives of BofA Securities that Party C would not submit a final acquisition proposal and was no longer considering an acquisition of Transphorm because Party C had determined that an acquisition of Transphorm was not consistent with Party C’s long-term product and growth objectives.

On December 20, 2023, representatives of Wilson Sonsini, on behalf of Transphorm, and representatives of Renesas’ outside legal counsel discussed the preliminary revised draft of the merger agreement provided by Renesas, including ways that Renesas could improve the legal terms of its acquisition proposal.

On December 21, 2023, Transphorm raised (1) $3,000,000 through the warrant repricing; and (2) $2,100,000 through the sale of certain equipment.

On December 22, 2023, Renesas provided a revised non-binding proposal to acquire Transphorm for $5.10 in cash per share of Transphorm common stock (which is referred to as the “Renesas Final Proposal”).

Also on December 22, 2023, representatives of BofA Securities spoke with representatives of Party B. During this call, the representatives of Party B expressed Party B’s continued interest in a combination with Transphorm, but that Party B remained unable to secure necessary financing.

Later on December 22, 2023, the Strategic Committee met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. The representatives of BofA Securities reviewed the Renesas Final Proposal. The representatives of BofA Securities reviewed the status of the strategic review process, including that, of the five non-binding acquisition proposals submitted, only the Renesas Final Proposal was capable of being accepted. The Strategic Committee discussed (1) the Renesas Final Proposal; (2) Transphorm’s working capital balance, including that the warrant repricing and equipment sale had provided Transphorm with only approximately 10 weeks of additional working capital; (3) the difficulty encountered by Transphorm management in its ongoing efforts to secure additional working capital; (4) the status of discussions to combine with Party B (including that Party B had not obtained necessary financing), Party D (including that Party D had not engaged further in the strategic review process and had not returned the diligence questionnaire) and Party E (including that Party E appeared more focused on a licensing transaction and had not actively pursued discussions to acquire Transphorm); and (5) the feedback received from participants in the strategic review process regarding their respective reasons for not pursuing an acquisition of Transphorm. The Strategic Committee discussed possible responses to the Renesas Final Proposal, including whether to seek an increase in the price per share contemplated by the Renesas Final Proposal. In light of the challenges facing Transphorm in the near term, including the immediate need to secure additional working capital, it was the consensus of the Strategic Committee that (1) a sale of Transphorm in the near term could be in the best interests of Transphorm and its stockholders relative to the continued execution of Transphorm’s business plan as an independent company; and (2) Transphorm’s acute need to secure additional working capital made it imperative that Transphorm enter into a transaction with Renesas as quickly as possible. The Strategic Committee determined not to seek an increase in the per share price to be paid by Renesas and instead to focus on increasing the certainty of closing a transaction with Renesas (including by obtaining an appropriate termination fee from Renesas should the CFIUS approval not be obtained). The Strategic Committee discussed the current status of Transphorm’s efforts to secure additional working capital, including Transphorm’s request that KKR consider providing bridge financing. The Strategic Committee instructed Transphorm management to continue to attempt to secure bridge financing from KKR.

 

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On December 26, 2023, the Strategic Committee met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. The representatives of BofA Securities reviewed the status of discussions with Renesas.

On December 28, 2023, representatives of Wilson Sonsini delivered a revised draft of the merger agreement to Renesas and its representatives. Thereafter, Renesas and its representatives met regularly with members of Transphorm management and representatives of Wilson Sonsini to negotiate the merger agreement. Key negotiated terms were: (1) the terms of each party’s obligations to obtain required regulatory approvals, including the CFIUS approval; (2) the terms of the no-shop provisions in the merger agreement; (3) the conditions to each party’s obligations to complete the merger, including the definition of “material adverse effect”; (4) the amount of the termination fee payable by Transphorm and the circumstances in which it would be payable; (5) the amount of the termination fee payable by Renesas and the circumstances in which it would be payable; (6) the termination date and the circumstances in which the parties could terminate the merger agreement; and (7) the interim operating covenants applicable to Transphorm prior to the closing of the merger.

Also on December 28, 2023, a draft of the voting agreement was provided to Renesas. Thereafter, Renesas and its representatives, Phorm Investor and its representatives, and Transphorm management and representatives of Wilson Sonsini negotiated the terms of the voting agreement.

On January 2, 2024, the Strategic Committee met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. The representatives of BofA Securities reviewed the status of negotiations with Renesas. Dr. Parikh provided an update on Transphorm’s efforts to obtain bridge financing, noting that it was his understanding that KKR was considering providing a term sheet for a bridge financing (although KKR did not ultimately provide such a term sheet). The representatives of Wilson Sonsini summarized the open points in the merger agreement. The Strategic Committee discussed (1) the merger agreement and the possible acquisition of Transphorm by Renesas; (2) Transphorm’s working capital balance, including that the warrant repricing and equipment sale had provided Transphorm with only approximately 10 weeks of additional working capital; (3) the difficulty encountered by Transphorm management in its ongoing efforts to secure additional working capital (including the possibility that KKR would not provide bridge financing); (4) the status of discussions to combine with Party B (including that Party B had not obtained necessary financing), Party D (including that Party D had not engaged further in the strategic review process and had not returned the diligence questionnaire) and Party E (including that Party E appeared more focused on a licensing transaction and had not actively pursued discussions to acquire Transphorm); and (5) the feedback received from participants in the strategic review process regarding their reasons for not pursuing an acquisition of Transphorm. The Strategic Committee determined that (1) Transphorm management should continue to seek bridge financing; and (2) Transphorm’s acute need to secure additional working capital made it imperative that Transphorm enter into a transaction with Renesas as quickly as possible. The Strategic Committee discussed, and provided guidance on, the termination fee to be paid by Renesas if the CFIUS approval was not obtained. The Strategic Committee instructed Transphorm management and the representatives of each of Wilson Sonsini and BofA Securities to focus on obtaining bridge financing (including, when appropriate, seeking bridge financing from Renesas as part of the acquisition) and on reaching an agreement with Renesas quickly.

On January 3, 2024, representatives of BofA Securities contacted representatives of Renesas’ financial advisor to discuss the prospect of Renesas providing bridge financing to Transphorm.

On January 4, 2024, the Strategic Committee met, with members of each of Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. The Strategic Committee discussed the status of negotiations with Renesas, including that Renesas appeared open to providing bridge financing.

On January 5, 2024, representatives of BofA Securities and representatives of Renesas’ financial advisor held a conference call to discuss open points in the merger agreement. During this conversation, the representatives of BofA Securities continued to discuss the prospect of Renesas providing bridge financing to Transphorm.

 

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On January 8, 2024, representatives of BofA Securities and representatives of Renesas’ financial advisor held a conference call to further discuss Renesas providing bridge financing to Transphorm. During this call, the representatives of Renesas’ financial advisor confirmed Renesas’ willingness to provide bridge financing following the public announcement of an acquisition of Transphorm by Renesas.

On January 9, 2024, Renesas’ outside legal counsel distributed a draft bridge loan facility term sheet to Transphorm and representatives of Wilson Sonsini. Thereafter, Renesas and its representatives negotiated the terms of the bridge loan facility term sheet with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities. Key negotiated terms were: (1) the aggregate commitment amount of the bridge loan; (2) the amount, circumstances and timing of each tranche of the bridge loan; and (3) circumstances that would (a) constitute an event of default under the bridge loan; (b) permit Renesas to terminate its funding obligations under the bridge loan; (c) require repayment of borrowed amounts; and (d) permit Transphorm to seek alternative bridge financing.

Later on January 9, 2024, the Transphorm Board met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. The representatives of Wilson Sonsini reviewed with the members of the Transphorm Board their fiduciary duties under Delaware law. The representatives of BofA Securities presented BofA Securities’ financial analyses of the acquisition of Transphorm by Renesas and confirmed that BofA Securities would be prepared to deliver an opinion on the Renesas Final Proposal if and when requested by the Transphorm Board. The representatives of Wilson Sonsini reviewed the key terms of the merger agreement, the voting agreement and the other transaction documents. The representatives of BofA Securities summarized the strategic review process, including the parties contacted and the feedback received from each party. The Strategic Committee reviewed updated customary relationship disclosures provided by representatives of BofA Securities, which included disclosures related to BofA Securities’ relationship with Renesas. The Strategic Committee did not identify any potential or actual conflicts that would affect the ability of BofA Securities to fulfill its responsibilities as Transphorm’s financial advisor. The Transphorm Board discussed (1) Transphorm’s working capital balance, including that the warrant repricing and equipment sale had provided Transphorm with only approximately 10 weeks of additional working capital; (2) the difficulty encountered by Transphorm management in its ongoing efforts to secure additional working capital; and (3) Renesas’ willingness to provide bridge financing following entry into the merger agreement and the terms of such bridge financing. The Transphorm Board directed Wilson Sonsini to finalize the merger agreement, the voting agreement, and the other related transaction documents with Renesas’ legal advisors.

On January 10, 2024, the merger agreement, the voting agreement, and the other related transaction documents were finalized.

Later on January 10, 2024, the Transphorm Board met, with Transphorm management and representatives of each of Wilson Sonsini and BofA Securities in attendance. The representatives of Wilson Sonsini reviewed with the members of the Transphorm Board their fiduciary duties under Delaware law. The representatives of Wilson Sonsini reviewed the final terms of the merger agreement, the voting agreement and the other related transaction documents. The representatives of BofA Securities, after reviewing with the Transphorm Board the financial analyses of the acquisition of Transphorm by Renesas, rendered BofA Securities’ oral opinion, subsequently confirmed in writing, that, as of January 10, 2024, and based upon and subject to the various assumptions, qualifications, limitations and other matters specified in the written opinion, the per share price of $5.10 to be received in the merger by holders of Transphorm common stock (other than as set forth in the merger agreement) is fair, from a financial point of view, to such holders of Transphorm common stock, as more fully described in the section of this proxy statement captioned “—Opinion of BofA Securities, Inc.” The Transphorm Board, after considering the factors more fully described in the section of this proxy statement captioned “—Recommendation of the Transphorm Board and Reasons for the Merger,” (1) determined that the merger and the other transactions contemplated by the merger agreement are in the best interests of Transphorm and Transphorm’s stockholders; and (2) approved and declared advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement.

 

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Still later on January 10, 2024, the merger agreement, the voting agreement and the other related transaction documents were executed by the relevant parties.

Still later on January 10, 2024, Transphorm and Renesas issued a joint press release announcing entry into the merger agreement.

Recommendation of the Transphorm Board and Reasons for the Merger

Recommendation of the Transphorm Board

On January 10, 2024, the Transphorm Board unanimously: (1) determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and in the best interests of Transphorm and its stockholders; (2) approved the execution and delivery of the merger agreement by Transphorm, the performance by Transphorm of its covenants and other obligations under the merger agreement, and the consummation of the merger upon the terms and subject to the conditions in the merger agreement; (3) directed that the adoption of the merger agreement be submitted for consideration by the Transphorm stockholders; and (4) recommended that Transphorm stockholders adopt the merger agreement and approve the transactions contemplated by the merger agreement.

The Transphorm Board unanimously recommends that you vote: (1) “FOR” the adoption of the merger agreement; and (2) “FOR” the adjournment of the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting.

Reasons for the Merger

In evaluating the merger agreement and the merger, the Transphorm Board consulted with Transphorm management, as well as representatives of each of Wilson Sonsini and BofA Securities. In recommending that Transphorm stockholders vote “FOR” the adoption of the merger agreement and approval of the merger, the Transphorm Board considered and analyzed a number of factors, including the following (which factors are not necessarily presented in order of relative importance). Based on these consultations, considerations and analyses, and the factors discussed below, the Transphorm Board concluded that entering into the merger agreement was advisable and in the best interests of Transphorm and Transphorm stockholders.

The Transphorm Board believed that the following material factors and benefits supported its determination and recommendation:

 

   

Business, Financial Condition, Prospects and Execution Risks. The Transphorm Board considered the current and historical financial condition, results of operations, business and competitive positioning of Transphorm, as well as Transphorm’s prospects and risks if it were to remain an independent company. In particular, the Transphorm Board considered Transphorm management’s then-current business plan, including the December 2023 Long-Term Plan. Additional information about the preparation and substance of the December 2023 Long-Term Plan is contained in the section of this proxy statement captioned “—Financial Projections.” The Transphorm Board considered that business plan and the potential opportunities that it presented against, among other things, various execution and other risks to achieving that business plan, including (1) the likelihood that Transphorm management’s business plan could be achieved in the face of operational and execution risks in the short and long term; (2) the impact of market, customer and competitive trends on Transphorm; (3) market volatility and the general risks related to market conditions that could negatively impact Transphorm’s valuation or reduce the price of Transphorm common stock; and (4) the inherent uncertainty in forecasting Transphorm’s future financial performance. In particular, the Transphorm Board considered the likelihood and timing of, and risks to, achieving the operational improvements, financial objectives and market share improvements underlying

 

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the business plan, as well as the estimated projections of Transphorm’s financial prospects (as reflected in the Financial Projections). Among the potential risks identified by the Transphorm Board were:

 

   

Transphorm’s prospects and competitive position as an independent company. Included among these risks were consideration of:

 

   

Transphorm’s size, as well as its financial resources and access to capital on a cost-effective basis, relative to those of Transphorm’s competitors.

 

   

The rapid technological change, frequent new product and service introductions and enhancements, changing customer demands and evolving industry standards that characterize Transphorm’s industry.

 

   

New and evolving competitive threats.

 

   

Challenges to acquiring new customers and retaining existing customers, including challenges to increasing manufacturing productivity and addressing customers’ concerns related to Transphorm’s overall scale and financial resources relative to its competitors.

 

   

Other factors affecting the revenues, operating costs and profitability of companies in Transphorm’s industry generally.

 

   

The other risk factors described in Transphorm’s other filings with the SEC, as listed in the section of this proxy statement captioned “Where You Can Find More Information.”

 

   

Recent market volatility and the current and prospective business environment in which Transphorm operates, including evolving macroeconomic headwinds facing Transphorm and its industry more generally and the impact of changed economic circumstances on key customer segments, and the likely effect of these factors on Transphorm and its business plans as an independent public company.

 

   

Transphorm’s financial results for the third quarter of fiscal year 2024.

 

   

Transphorm’s history of losses, and the challenges to it achieving profitability in the near term, along with evolving investor expectations regarding profitability at technology companies.

 

   

Transphorm’s limited cash resources and the ongoing working capital needs. The Transphorm Board was aware of the difficulty that Transphorm could have (and had historically had) in obtaining additional working capital on favorable terms or at all. The Transphorm Board was aware that the failure to obtain additional working capital could raise doubt about Transphorm’s ability to operate as a going concern and could ultimately lead to the reorganization or liquidation of Transphorm in a voluntary or involuntary bankruptcy proceeding.

 

   

The challenges of making investments to achieve long-term growth prospects for a publicly traded company, which is subject to scrutiny based on its quarterly performance. The Transphorm Board was aware that the price of Transphorm common stock could be negatively impacted if Transphorm failed to meet investor expectations, including if Transphorm failed to meet its growth or profitability objectives.

 

   

The historical market prices, volatility and trading information with respect to shares of Transphorm common stock.

 

   

Results of Strategic Review Process. The merger was the result of a comprehensive strategic review process overseen by the Strategic Committee. On June 16, 2023, Transphorm publicly announced that it would (1) pursue conventional asset-based financing; and (2) commence a strategic review of opportunities to enhance stockholder value in the second quarter of fiscal year 2024. In addition, on October 3, 2023, and again on November 9, 2023, Transphorm publicly announced that it had engaged BofA Securities to act as financial advisor to assist Transphorm in connection with its strategic review to enhance stockholder value. The Transphorm Board considered that, at Transphorm’s direction, representatives of BofA Securities, together with representatives of Transphorm management, contacted

 

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24 potential strategic acquirors (including Renesas) and two financial sponsors concerning their interest in an acquisition of Transphorm. The Transphorm Board considered the nature of the engagement by each of these potential acquirors, and that, of these potential acquirors, only Renesas made a proposal for an acquisition of Transphorm that the Transphorm Board was willing to accept. The Transphorm Board also considered the potential risk of losing the favorable opportunity with Renesas if the Transphorm Board sought to continue to pursue discussions with other third parties and the potential negative effect that the continuation of the strategic review process might have on Transphorm’s business (including in relation to Transphorm’s working capital needs). For more information on this process, see the section of this proxy statement entitled “—Background of the Merger.”

 

   

Cash Consideration and Certainty of Value. The consideration to be received by Transphorm stockholders in the merger consists entirely of cash, which provides certainty of value measured against the ongoing business and financial execution risks of management’s business plan. The receipt of cash consideration eliminates uncertainty and risk for Transphorm stockholders related to the continued execution of Transphorm’s business plan as well as the risks related to the financial markets generally.

 

   

Best Value Reasonably Obtainable. The belief of the Transphorm Board that the per share price represents the best value reasonably obtainable for the shares of Transphorm common stock, taking into account the Transphorm Board’s familiarity with the business, operations, prospects, business strategy, assets, liabilities and general financial condition of Transphorm on a historical and prospective basis. In addition, the Transphorm Board believed that, measured against Transphorm’s longer-term execution risks, the per share price reflects a favorable price for the shares of Transphorm common stock. The Transphorm Board also considered that the per share price constitutes a premium of approximately 35 percent over Transphorm’s closing stock price on January 10, 2024, the last full trading day prior to public announcement that Transphorm entered into the merger agreement.

 

   

Potential Strategic Alternatives. The assessment of the Transphorm Board that none of the possible alternatives to the merger (including the possibility of continuing to operate Transphorm as an independent public company or pursuing a different transaction, and the desirability and perceived risks of those alternatives, as well as the potential benefits and risks to Transphorm’s stockholders of those alternatives and the timing and likelihood of effecting such alternatives) was reasonably likely to present superior opportunities for Transphorm to create greater value for Transphorm stockholders, taking into account execution risks as well as business, competitive, financial, industry, legal, market and regulatory risks.

 

   

Opinion of BofA Securities. The opinion of BofA Securities, dated January 10, 2024, delivered to the Transphorm Board as to the fairness, from a financial point of view and as of the date of the opinion, of the consideration to be received by holders of Transphorm common stock (other than as specified in the merger agreement). The opinion is more fully described in the section of this proxy statement captioned “—Opinion of BofA Securities, Inc.,” and the full text of the opinion is attached as Annex B to this proxy statement.

 

   

Negotiations with Renesas and Terms of the Merger Agreement. The terms of the merger agreement, which was the product of arms’-length negotiations, and the belief of the Transphorm Board that the merger agreement contained terms that provided Transphorm with a reasonable level of closing certainty. The factors considered included:

 

   

Transphorm’s ability, under certain circumstances, to furnish information to, and conduct negotiations with, third parties regarding alternative acquisition proposals.

 

   

The Transphorm Board’s belief that the terms of the merger agreement would not preclude third parties from making a superior proposal.

 

   

The Transphorm Board’s ability, under certain circumstances, to withdraw or modify its recommendation that Transphorm stockholders vote in favor of the adoption of the merger agreement.

 

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Transphorm’s ability, under certain circumstances, to terminate the merger agreement to enter into an alternative acquisition agreement. In that regard, the Transphorm Board believed that the termination fee payable by Transphorm in such instance was reasonable, consistent with or below similar fees payable in comparable transactions, and not preclusive of other offers.

 

   

The limited conditions to Renesas obligation to consummate the merger, making the merger reasonably likely to be consummated.

 

   

Transphorm’s ability to specifically enforce Renesas obligation to cause the merger to be completed.

 

   

The $20,000,000 termination fee payable by Renesas to Transphorm if, generally speaking, the CFIUS approval cannot be obtained.

 

   

The guaranty of Renesas and Merger Sub’s obligations under the merger agreement by Guarantor pursuant to the merger agreement, which provides substantial assurance that Renesas and Merger Sub will perform their respective obligations under the merger agreement.

 

   

The consummation of the merger is not subject to a financing condition. In addition, Renesas represented in the merger agreement that it will have sufficient funds to consummate the merger.

 

   

Reasonable Likelihood of Consummation. The belief of the Transphorm Board that an acquisition by Renesas has a reasonable likelihood of closing, including the Transphorm Board’s belief that there was a reasonable likelihood that the regulatory approvals required to consummate the merger would be obtained.

 

   

Business Reputation of Renesas and Guarantor. The belief of the Transphorm Board that the business reputation and financial resources of Renesas and Guarantor supported the conclusion that a transaction with Renesas (which is wholly owned by Guarantor) could be completed quickly and in an orderly manner, and had a substantial likelihood of being consummated successfully. The Transphorm Board was aware that Guarantor had cash on hand or other sources of immediately available funds to pay the merger consideration and to otherwise consummate the merger.

 

   

Bridge Financing. Renesas’ willingness to provide Transphorm with bridge financing on terms that the Transphorm Board found to be favorable relative to other bridge financing options available to Transphorm. The Transphorm Board also considered that the merger agreement permits Transphorm to seek alternative bridge financing from other third parties to the extent it is unable to reach an agreement with Renesas on acceptable terms for bridge financing.

 

   

Appraisal Rights. The appraisal rights available to Transphorm stockholders in connection with the merger, which rights allow Transphorm stockholders to have the “fair value” of their Transphorm common stock determined by a neutral party, subject to compliance with applicable laws.

The Transphorm Board also considered a number of uncertainties and risks and other potentially negative factors related to its recommendation, including the following:

 

   

No Stockholder Participation in Future Growth or Earnings. The nature of the merger as a cash transaction means that Transphorm stockholders will not participate in Transphorm’s future earnings or growth and will not benefit from any appreciation in value of the surviving corporation following the merger. The Transphorm Board also considered the other potential alternative strategies available to Transphorm as an independent company, which, despite significant uncertainty, had the potential to result in a more successful and valuable company.

 

   

Uncertain Regulatory Approval Process. The possibility that regulatory agencies may delay, object to or challenge the merger or may seek to impose terms and conditions on their approvals that are not acceptable to Renesas and that could ultimately result in the merger not occurring. In this regard, although the merger agreement provides that Renesas will pay Transphorm a $20,000,000 termination fee if, generally speaking, the CFIUS approval cannot be obtained, the Transphorm Board was aware

 

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that such fee would not completely compensate Transphorm for the expenses incurred, opportunities forgone and overall impact on Transphorm’s business of the failure to consummate the merger (as described in more detail below). The Transphorm Board was also aware that the regulatory approval process could be prolonged and could have an impact on Transphorm’s business.

 

   

No Ability to Solicit an Alternative Transaction. The restrictions in the merger agreement that prevent Transphorm from soliciting competing proposals from the date of the merger agreement (subject to certain exceptions to allow the Transphorm Board to exercise its fiduciary duties and to accept a superior proposal, and then only upon the payment of a termination fee).

 

   

Termination Fee Payable by Transphorm. The requirement that Transphorm pay Renesas a termination fee of $12,938,000 under certain circumstances following termination of the merger agreement, including if the Transphorm Board terminates the merger agreement to accept a superior proposal. The Transphorm Board considered the potentially dampening effect that this termination fee could have on a third party’s interest in making a proposal to acquire Transphorm.

 

   

Risk Associated with Failure to Consummate the Merger. The possibility that the merger might not be consummated, and if it is not consummated, that: (1) Transphorm’s directors, senior management and other employees will have expended extensive time and effort and will have experienced significant distractions from their work on behalf of Transphorm during the pendency of the merger; (2) Transphorm will have incurred significant transaction and other costs; (3) Transphorm’s continuing business relationships with customers, business partners and employees may be adversely affected; (4) the trading price of Transphorm common stock could be adversely affected; (5) the other contractual and legal remedies available to Transphorm in the event of the termination of the merger agreement may be insufficient, costly to pursue or both; and (6) the failure of the merger to be consummated could result in an adverse perception about Transphorm among its current and prospective customers, partners, suppliers, vendors, employees and investors, which could cause an adverse impact on Transphorm’s operating results.

 

   

Impact of Interim Restrictions on Transphorm’s Business Pending the Completion of the Merger. The restrictions on Transphorm’s conduct of its business prior to the consummation of the merger, which may delay or prevent Transphorm from undertaking strategic initiatives before the completion of the merger that, absent the merger agreement, Transphorm might have pursued.

 

   

Effects of the Announcement of the Merger. The effects of the public announcement of the merger, including the: (1) effects on Transphorm’s employees, customers, partners, suppliers, vendors, operating results and stock price; (2) impact on Transphorm’s ability to attract and retain management, sales and marketing, engineering, and technical personnel; and (3) potential for litigation in connection with the merger.

 

   

Taxable Consideration. The receipt of cash in exchange for shares of Transphorm common stock in the merger will generally be a taxable transaction for U.S. federal income tax purposes for many Transphorm stockholders that are U.S. persons.

 

   

Interests of Transphorm’s Directors and Executive Officers. The interests that Transphorm’s directors and executive officers may have in the merger, which may be different from, or in addition to, those of other Transphorm stockholders.

 

   

Costs and Time Required. The significant costs involved in connection with entering into the merger agreement and consummating the merger (many of which are payable whether or not the merger is consummated) and the substantial time and effort of Transphorm’s management required to complete the merger.

This discussion is not meant to be exhaustive. Rather, it summarizes the material reasons and factors evaluated by the Transphorm Board in its consideration of the merger, and such reasons and factors are not necessarily presented in order of importance. After considering these and other factors, the Transphorm Board concluded that the potential benefits of entering into the merger agreement outweighed the uncertainties and risks. In light of the

 

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variety of factors considered by the Transphorm Board and the complexity of these factors, the Transphorm Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the foregoing factors in reaching its determination and recommendations. Moreover, each member of the Transphorm Board applied his or her own personal business judgment to the process and may have assigned different relative weights to the different factors. The Transphorm Board adopted and approved the merger agreement and the merger, and recommended that Transphorm stockholders adopt the merger agreement, based upon the totality of the information presented to, and considered by, the Transphorm Board. The explanation of the factors and reasoning set forth above may contain forward-looking statements, which should be read in conjunction with the section of this proxy statement captioned “Forward-Looking Statements.”

Opinion of BofA Securities, Inc.

Transphorm has retained BofA Securities to act as Transphorm’s financial advisor in connection with the merger. BofA Securities is an internationally recognized investment banking firm which is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. Transphorm selected BofA Securities to act as Transphorm’s financial advisor in connection with the merger on the basis of BofA Securities’ experience in transactions similar to the merger and its reputation in the investment community.

On January 10, 2024, at a meeting of the Transphorm Board, BofA Securities delivered to the Transphorm Board an oral opinion, which was confirmed by delivery of a written opinion dated January 10, 2024, to the effect that, as of the date of the opinion and based on and subject to various assumptions and limitations described in its opinion, the consideration to be received by holders of Transphorm common stock (other than holders of Owned Company Shares and Dissenting Company Shares) was fair, from a financial point of view, to such holders.

The full text of BofA Securities’ written opinion to the Transphorm Board, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex B to this proxy statement and is incorporated by reference. The following summary of BofA Securities’ opinion is qualified in its entirety by reference to the full text of the opinion. BofA Securities delivered its opinion to the Transphorm Board for the benefit and use of the Transphorm Board (in its capacity as such) in connection with and for purposes of its evaluation of the consideration from a financial point of view. BofA Securities’ opinion does not address any other aspect of the merger and no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to Transphorm or in which Transphorm might engage or as to the underlying business decision of Transphorm to proceed with or effect the merger. BofA Securities’ opinion does not address any other aspect of the merger and does not constitute a recommendation to any stockholder as to how to vote or act in connection with the proposed merger or any related matter.

In connection with rendering its opinion, BofA Securities:

 

  1.

reviewed certain publicly available business and financial information relating to Transphorm;

 

  2.

reviewed certain internal financial and operating information with respect to the business, operations and prospects of Transphorm furnished to or discussed with BofA Securities by Transphorm management, including the Financial Projections;

 

  3.

reviewed the estimated net operating loss tax attributes of Transphorm provided by Transphorm management (which are referred to collectively as the “NOLs”) with Transphorm management;

 

  4.

discussed the past and current business, operations, financial condition and prospects of Transphorm with members of senior management of Transphorm;

 

  5.

reviewed the trading history for Transphorm common stock and a comparison of that trading history with the trading histories of other companies BofA Securities deemed relevant;

 

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  6.

compared certain financial and stock market information of Transphorm with similar information of other companies BofA Securities deemed relevant;

 

  7.

compared certain financial terms of the merger to financial terms, to the extent publicly available, of other transactions BofA Securities deemed relevant;

 

  8.

considered the fact that Transphorm publicly announced that it would explore its strategic alternatives and the results of BofA Securities’ efforts on behalf of Transphorm to solicit, at the direction of Transphorm, indications of interest and definitive proposals from third parties with respect to a possible acquisition of all or a portion of Transphorm;

 

  9.

reviewed a draft, dated January 10, 2024, of the merger agreement (which is referred to as the “Draft Agreement”); and

 

  10.

performed such other analyses and studies and considered such other information and factors as BofA Securities deemed appropriate.

In arriving at its opinion, BofA Securities assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with it and relied upon the assurances of Transphorm management that they were not aware of any facts or circumstances that would make such information or data inaccurate or misleading in any material respect. With respect to the Financial Projections and the NOLs, BofA Securities was advised by Transphorm, and assumed, that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of Transphorm management as to the future financial performance of Transphorm. BofA Securities relied, at the direction of Transphorm, upon the assessments of Transphorm management as to the potential impact of market, governmental and regulatory trends and developments relating to or affecting Transphorm and its business. BofA Securities also relied, at the direction of Transphorm, on the assessments of Transphorm management as to the ability to utilize the NOLs and was advised by Transphorm, and assumed, at the direction of Transphorm, that such NOLs will be utilized in the amounts and at the times projected. BofA Securities neither made nor was provided with any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Transphorm, nor did it make any physical inspection of the properties or assets of Transphorm. BofA Securities did not evaluate the solvency or fair value of Transphorm or Renesas under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. BofA Securities is not a legal, tax or regulatory advisor. BofA Securities is a financial advisor only and relied upon, without independent verification, the assessment of Transphorm and its legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. BofA Securities assumed, at the direction of Transphorm, that the merger would be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the merger, no delay, limitation, restriction or condition, including any divestiture requirements or amendments or modifications, would be imposed that would have an adverse effect on Transphorm or the contemplated benefits of the merger. BofA Securities also assumed, at the direction of Transphorm, that the final executed merger agreement would not differ in any material respect from the Draft Agreement.

BofA Securities expressed no view or opinion as to any terms or other aspects or implications of the merger (other than the consideration to the extent expressly specified in its opinion), including, without limitation, the form or structure of the merger, the form or structure, or financial or other terms, aspects or implications of any voting or support agreements or any other arrangements, agreements or understandings entered into in connection with or related to the merger or otherwise. BofA Securities’ opinion was limited to the fairness, from a financial point of view, of the consideration to be received by the holders of shares of Transphorm common stock (other than holders of Owned Company Shares and Dissenting Company Shares) and no opinion or view was expressed with respect to any consideration received in connection with the merger by the holders of any other class of securities, creditors or other constituencies of any party. In addition, no opinion or view was expressed with respect to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to any of the officers, directors or employees of any party to the merger, or class of such persons,

 

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relative to the consideration or otherwise. Furthermore, no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to Transphorm or in which Transphorm might engage or as to the underlying business decision of Transphorm to proceed with or effect the merger. BofA Securities did not express any view or opinion with respect to, and relied, at the direction of Transphorm, upon the assessment of representatives of Transphorm regarding legal, regulatory, accounting, tax and similar matters relating to Transphorm or the merger, as to which matters we understand that Transphorm obtained such advice as it deemed necessary from qualified professionals. BofA Securities also did not express any opinion as to the prices at which Transphorm common stock would trade at any time, including following announcement of the merger. In addition, BofA Securities expressed no opinion or recommendation as to how any stockholder should vote or act in connection with the merger or any other matter. Except as described above, Transphorm imposed no other limitations on the investigations made or procedures followed by BofA Securities in rendering its opinion.

BofA Securities’ opinion was necessarily based on financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information made available to BofA Securities as of, the date of its opinion. BofA Securities noted that the credit, financial and stock markets had been experiencing unusual volatility and BofA Securities expressed no opinion or view as to any potential effects of such volatility on Transphorm, Renesas or the merger. It should be understood that subsequent developments may affect its opinion, and BofA Securities does not have any obligation to update, revise or reaffirm its opinion. The issuance of BofA Securities’ opinion was approved by a fairness opinion review committee of BofA Securities.

The following represents a summary of the material financial analyses presented by BofA Securities to the Transphorm Board in connection with its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed by BofA Securities, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses performed by BofA Securities. Considering the data set forth in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by BofA Securities.

Transphorm Financial Analyses

Selected Publicly Traded Companies Analysis

BofA Securities reviewed publicly available financial and stock market information for Transphorm and 10 publicly traded companies in the semiconductor industry. The selected publicly traded companies were divided into a group of companies that BofA Securities considered, based on its professional judgment and experience, to be “primary peers” for Transphorm and a separate group of small cap semiconductor companies.

The selected companies are summarized below:

 

Selected Company

   EV/2023E Revenue      EV/2024E Revenue  

Primary Peers

     

Infineon Technologies AG

     3.0x        2.8x  

onsemi

     4.2x        4.3x  

Wolfspeed, Inc.

     9.6x        7.5x  

Power Integrations, Inc.

     9.3x        9.1x  

Vicor Corporation

     3.6x        3.4x  

Navitas Semiconductor Corporation

     15.5x        9.2x  

Small Cap Semis

     

Indie Semiconductor, Inc.

     6.1x        4.0x  

Telechips, Inc.

     2.3x        1.9x  

Valens Semiconductor, Ltd.

     1.5x        1.8x  

Sivers Semiconductors AB

     5.2x        2.7x  

 

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BofA Securities reviewed, among other things, enterprise values of the selected publicly traded companies, calculated as equity values based on closing stock prices on January 8, 2024, plus debt less cash, short and long term investments and equity investments, as a multiple of calendar year 2023 and calendar year 2024 estimated revenue (which is referred to as “EV / 2023E Revenue” and “EV / 2024E Revenue,” respectively). Estimated financial data of the selected publicly traded companies were based on publicly available information obtained from FactSet, CapitalIQ and other publicly available research analysts’ estimates as of January 8, 2024, and estimated financial data of Transphorm were based on the Financial Projections.

BofA Securities then applied a selected range of EV / 2023E Revenue and EV / 2024E Revenue multiples derived from the primary peers of 3.5x to 9.0x and 3.5x to 9.0x, respectively, to Transphorm’s estimated revenue for 2023 and 2024, respectively, as set forth in the Financial Projections. BofA Securities then calculated an implied equity value per share of Transphorm common stock by adding to this range of implied enterprise values an estimate of the net cash of Transphorm as of December 2023 of $5.9 million, as provided by the management of Transphorm, and dividing the result by a number of fully diluted shares of Transphorm common stock outstanding.

This analysis indicated the following approximate implied per share equity value reference ranges for Transphorm, as compared to the consideration:

 

Implied Per Share Equity Value Reference Ranges for Transphorm

EV /2023E Revenue

   EV /2024E Revenue    Consideration

$1.17 -$2.87

   $2.25 - $5.49    $5.10

No company used in this analysis is identical or directly comparable to Transphorm. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which Transphorm was compared.

Selected Precedent Transactions Analysis

BofA Securities reviewed, to the extent publicly available, financial information relating to the following 14 selected transactions involving companies in the semiconductor industry that BofA Securities, based on its professional judgement and experience, considered generally relevant for purposes of analysis (which is referred to as, the “selected transactions”):

 

Date
Announced

  

Acquiror

  

Target

   TV / NTM
Revenue
 
2/8/2021    Renesas Electronics Corporation    Dialog Semiconductor plc      3.8x  
2/20/2020    Dialog Semiconductor plc    Adesto Technologies Corporation      3.2x  
9/10/2018    Renesas Electronics Corporation    Integrated Device Technology, Inc.      7.3x  
3/1/2018    Microchip Technology, Inc.    Microsemi Corporation      4.7x  
10/5/2017    Dialog Semiconductor plc    Silego Technology Inc.      3.4x  
2/13/2017    Integrated Device Technology, Inc.    GigPeak, Inc.      3.0x  
9/12/2016    Renesas Electronics Corporation    Intersil Corporation      5.4x  
7/14/2016    Infineon Technologies AG    Wolfspeed, Inc. – RF Portfolio      4.4x  
11/18/2015    ON Semiconductor Corporation    Fairchild Semiconductor International, Inc.      1.7x  
3/2/2015    NXP Semiconductors N.V.    Freescale Semiconductor, Ltd.      3.4x  
8/20/2014    Infineon Technologies AG    International Rectifier      2.0x  
2/10/2014    Microchip Technology, Inc.    Supertex, Inc.      3.3x  
8/15/2013    Maxim Integrated Products, Inc.    Volterra Semiconductor Corporation      3.1x  
7/2/2013    Dialog Semiconductor plc    IWatt Inc.      3.5x  

BofA Securities reviewed, among other information and to the extent publicly available, transaction values, calculated as the transaction value implied for the target company based on the consideration payable in the selected transaction, as a multiple of the target company’s estimated revenue for the 12 months following the announcement date (which is referred to as “NTM Revenue”).

 

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BofA Securities then applied a selected range of NTM Revenue multiples derived from the selected transactions of 3.0x to 7.0x to Transphorm’s estimated revenue for 2024. Estimated financial data of the selected transactions were based on publicly available information at the time of announcement of the relevant transaction. Estimated financial data of Transphorm were based on the Financial Projections. BofA Securities then calculated an implied equity value per share of Transphorm common stock by adding to this range of implied enterprise values an estimate of the net cash of Transphorm as of December 2023 of $5.9 million, as provided by the management of Transphorm, and dividing the result by a number of fully diluted shares of Transphorm common stock outstanding

This analysis indicated the following approximate implied per share equity value reference ranges for Transphorm, as compared to the consideration:

 

Implied Per Share Equity Value Reference
Ranges for Transphorm NTM Revenue

   Consideration

$1.94 - $4.36

   $5.10

No company, business or transaction used in this analysis is identical or directly comparable to Transphorm or the merger. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the acquisition or other values of the companies, business segments or transactions to which Transphorm and the merger were compared.

Discounted Cash Flow Analysis

BofA Securities performed a discounted cash flow analysis of Transphorm to calculate the estimated present value of the standalone unlevered, after-tax free cash flows that Transphorm was forecasted to generate during Transphorm’s fiscal years 2024 through 2034 based on the Financial Projections. BofA Securities calculated terminal values for Transphorm by applying perpetuity growth rates ranging from 2.0 percent to 4.0 percent, based on BofA Securities’ professional judgement and experience, to Transphorm’s estimated fiscal year 2034 free cash flow. The cash flows and terminal values were then discounted to present value as of December 31, 2023, using discount rates ranging from 11.0 percent to 14.0 percent, which were based on an estimate of Transphorm’s weighted average cost of capital. BofA Securities then calculated an implied equity value per share of Transphorm common stock by adding to this range of implied enterprise values an estimate of the net cash of Transphorm as of December 2023 of $5.9 million, as provided by the management of Transphorm, and dividing the result by a number of fully diluted shares of Transphorm common stock outstanding This analysis indicated the following approximate implied per share equity value reference ranges for Transphorm as compared to the consideration:

 

Implied Per Share Equity Value

Reference Range for Transphorm

   Consideration

$2.94 - $6.00

   $5.10

Other Factors

BofA Securities also noted certain additional factors that were not considered part of BofA Securities’ material financial analyses with respect to its opinion but were referenced for informational purposes, including, among other things, the following:

 

   

historical trading prices of Transphorm common stock for the six-month period ended January 8, 2024, which ranged from $1.94 to $4.02 per share, as compared to the closing price per share of Transphorm common stock as of January 8, 2024, of $3.82;

 

   

stock price targets for Transphorm as reflected in FactSet and selected publicly available Wall Street research analysts’ reports as of January 8, 2024, which indicated a range of stock price targets for Transphorm (discounted one year by a 12.5 percent cost of equity) of approximately $4.44 to $7.11 per share; and

 

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the premia paid in selected precedent public company semiconductor acquisitions occurring between January 2019 and January 8, 2024:

 

   

(i) measured in relation to each target company’s closing share price on the day prior to the announcement of the applicable transaction (or on the day prior to the last unaffected date prior to the announcement of the transaction, when applicable), which based on application of an illustrative range of premia of 22.0 percent to 55.0 percent (derived by reference to the 25th and 75th percentile of the observed premiums) to the unaffected share price of Transphorm common stock on January 8, 2024 of $3.82, indicated an implied equity value reference range per share of $4.58 to $5.92; and

 

   

(ii) measured in relation to the one-month average share price prior to the announcement of the applicable transaction (or on the day prior to the last unaffected date prior to the announcement of the transaction, when applicable), which based on application of an illustrative range of premia of 30.0 percent to 60.0 percent (derived by reference to the 25th and 75th percentile of the observed premiums) to the one-month average share price of Transphorm common stock leading up to January 8, 2024, indicated an implied equity value reference range per share of $4.49 to $5.53.

Miscellaneous

As noted above, this discussion is a summary of the material financial analyses presented by BofA Securities to the Transphorm Board in connection with its opinion and is not a comprehensive description of all analyses undertaken by BofA Securities in connection with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. BofA Securities believes that its analyses summarized above must be considered as a whole. BofA Securities further believes that selecting portions of its analyses and the factors considered or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying BofA Securities’ analyses and opinion. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary.

In performing its analyses, BofA Securities considered industry performance, general business and economic conditions, and other matters, many of which are beyond the control of Transphorm and Renesas. The estimates of the future performance of Transphorm in or underlying BofA Securities’ analyses are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by BofA Securities’ analyses. These analyses were prepared solely as part of BofA Securities’ analysis of the fairness, from a financial point of view, of the consideration and were provided to the Transphorm Board in connection with the delivery of BofA Securities’ opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the estimates used in, and the ranges of valuations resulting from, any particular analysis described above are inherently subject to substantial uncertainty and should not be taken to be BofA Securities’ view of the actual values of Transphorm.

The type and amount of consideration payable in the merger was determined through negotiations between Transphorm and Renesas, rather than by any financial advisor, and was approved by the Transphorm Board. The decision to enter into the merger agreement was solely that of the Transphorm Board. As described above, BofA Securities’ opinion and analyses were only one of many factors considered by the Transphorm Board in its evaluation of the proposed merger and should not be viewed as determinative of the views of the Transphorm Board or Transphorm management with respect to the merger or the consideration.

Transphorm has agreed to pay BofA Securities for its services in connection with the merger an aggregate fee currently estimated to be approximately $6.21 million, $1.5 million of which was payable in connection with

 

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the delivery of its opinion and a significant portion of which is contingent upon consummation of the merger. Transphorm also has agreed to reimburse BofA Securities for its expenses incurred in connection with BofA Securities’ engagement and to indemnify BofA Securities, any controlling person of BofA Securities and each of their respective directors, officers, employees, agents and affiliates against liabilities arising out of BofA Securities’ engagement, including liabilities under the federal securities laws.

BofA Securities and its affiliates comprise a full service securities firm and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities, and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing and financial advisory services and other commercial services and products to a wide range of companies, governments and individuals. In the ordinary course of their businesses, BofA Securities and its affiliates may invest on a principal basis or on behalf of customers or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions in the equity, debt or other securities or financial instruments (including derivatives, bank loans or other obligations) of Transphorm and certain of its affiliates, KKR & Co. Inc., an affiliate of a significant stockholder of Transphorm, and certain of its affiliates and portfolio companies, and Renesas and certain of its affiliates.

BofA Securities and its affiliates in the past have not provided material investment banking, commercial banking and other financial services to Transphorm, although they may provide such services in the future. BofA Securities and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other financial services to KKR & Co. Inc. and its affiliates and portfolio companies, and have received or in the future may receive compensation for the rendering of these services. With respect to KKR & Co. Inc. and/or its affiliates and/or portfolio companies, BofA Securities and its affiliates are acting or have acted as financial advisor in connection with the acquisition or sale of certain portfolio companies, and the acquisition or sale of the assets in connection with certain portfolio companies. In addition, BofA Securities and its affiliates are currently acting or have acted as arranger and lender in connection with the acquisition or sale of certain portfolio companies of KKR & Co. Inc. and/or its affiliates or the assets thereof. BofA Securities and its affiliates are acting or have acted as a bookrunner or manager in connection with sales of equity, debt and equity-linked securities by KKR & Co. Inc. and/or its affiliates and/or portfolio companies. BofA Securities and its affiliates are currently acting or have acted in various capacities including lender, bookrunner and arranger in connection with certain credit facilities and lending arrangements, and BofA Securities and its affiliates provide certain markets, trading and treasury services, in each case to KKR & Co. Inc. and/or its affiliates and/or portfolio companies. From January 2022 through December 2023, BofA Securities and its affiliates derived aggregate revenues from KKR & Co. Inc. and its affiliates and portfolio companies of approximately $442,000,000 for investment banking, commercial banking and other financial services.

In addition, BofA Securities and its affiliates in the past have provided, currently are providing, and in the future may provide investment banking, commercial banking and other financial services to Renesas and/or its affiliates and have received or in the future may receive compensation for the rendering of these services, including providing certain treasury, markets, liquidity and foreign exchange services, as well as commercial credit services such as acting as lender and providing letters of credit, and providing certain debt capital markets and advisory services. From January 2022 through December 2023, BofA Securities and its affiliates derived aggregate revenues from Renesas and its affiliates of approximately $32,000,000 for investment banking, commercial banking and other financial services.

Financial Projections

Other than in connection with Transphorm’s regular earnings press releases and related investor materials, Transphorm does not, as a matter of course, make public Transphorm’s financial projections, due to, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. However, Transphorm management regularly prepares, and the Transphorm Board regularly evaluates, prospective

 

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financial information relating to Transphorm’s future performance as part of its long-term business and strategic planning processes. In addition, Transphorm management regularly makes and reviews with the Transphorm Board updates to Transphorm’s long-term business plan, including to reflect actual results, Transphorm’s strategic initiatives, and trends in Transphorm’s performance and the industry in which Transphorm operates.

As part of Transphorm’s evaluation of strategic alternatives (including continuing as an independent public company), Transphorm management prepared and reviewed with the Strategic Committee and the Transphorm Board unaudited prospective financial information for the second half of fiscal year 2024 through fiscal year 2028 (which financial information is referred to as the “October 2023 Long-Term Plan”). In December 2023, to account for Transphorm’s actual second quarter fiscal year 2024 financial performance and Transphorm management’s updated assumptions and estimates regarding Transphorm’s third quarter and fourth quarter fiscal 2024 financial performance, Transphorm management prepared unaudited prospective financial information for the fourth quarter of fiscal year 2024 through fiscal year 2028 (which financial information is referred to as the “December 2023 Long-Term Plan”). Transphorm management also prepared an illustrative extrapolation of the December 2023 Long-Term Plan for fiscal years 2029 through 2034 (which are referred to as the “extrapolations”). For purposes of this proxy statement, the October 2023 Long-Term Plan, the December 2023 Long-Term Plan and the extrapolations are referred to collectively as the “Financial Projections.”

The Financial Projections were (1) prepared by Transphorm management for Transphorm’s internal use and not for public disclosure; and (2) provided by Transphorm management to the Strategic Committee and the Transphorm Board for the purposes of considering, analyzing and evaluating the merger and other strategic alternatives available to Transphorm. The December 2023 Long-Term Plan and the extrapolations were used by BofA Securities for purposes of performing its financial analyses in connection with rendering its opinion to the Transphorm Board (as more fully described in the section of this proxy statement captioned “—Opinion of BofA Securities Inc.”). In addition, as described in the section of this proxy statement captioned “—Background of the Merger,” the October 2023 Long-Term Plan, the December 2023 Long-Term Plan and the extrapolations were provided to, and discussed with, Renesas as part of its due diligence review. For more information on the preparation and use of the Financial Projections, please see the sections of this proxy statement captioned “—Background of the Merger” and “—Opinion of BofA Securities, Inc.”

The Financial Projections were developed by Transphorm management as then-current estimates of Transphorm’s future financial performance as an independent company. The Financial Projections do not give effect to the merger, including (1) any impact of the negotiation or execution of the merger agreement; (2) the expenses that have already and will be incurred in connection with completing the merger; or (3) any changes to Transphorm’s operations or strategy that may be implemented in connection with the pendency, or following the consummation, of the merger. The Financial Projections also do not consider the effect of any failure of the merger to be completed, and the Financial Projections should not be viewed as accurate or continuing in that context.

The Financial Projections are not included in this proxy statement to influence any decision on how to vote with respect to any matter to be considered at the special meeting. Rather, they are included in this proxy statement to give stockholders access to certain non-public information that was provided to the Strategic Committee, the Transphorm Board, BofA Securities and Renesas for the purposes described above. By including the Financial Projections in this proxy statement, none of the Strategic Committee, the Transphorm Board, Transphorm, Transphorm management, BofA Securities or any other person has made or makes any representation regarding Transphorm’s ultimate performance as compared to the information contained in the Financial Projections. The inclusion of the Financial Projections in this proxy statement should not be regarded as an indication that the Strategic Committee, the Transphorm Board, Transphorm, Transphorm management, BofA Securities or any other person considered, or now considers, such information to be necessarily predictive of Transphorm’s actual future results, and such information should not be relied on as such. Further, the inclusion of the Financial Projections in this proxy statement does not constitute an admission or representation by Transphorm or any other person that the information presented is material.

The Financial Projections were not prepared with a view toward public disclosure or complying with U.S. generally accepted accounting principles (which is referred to as “GAAP”). In addition, the Financial Projections were not

 

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prepared with a view toward complying with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation or presentation of prospective financial information. Tranphorm’s independent registered public accounting firm, KPMG LLP, has not audited, reviewed, examined or compiled the Financial Projections or applied agreed-upon procedures with respect to the Financial Projections, and, accordingly, neither KPMG LLP nor any other registered public accounting firm expresses an opinion or any other form of assurance with respect thereto. Any report of a registered public accounting firm incorporated by reference in this proxy statement relates to Transphorm’s previously issued financial statements. It does not extend to the Financial Projections and should not be read to do so.

Although the Financial Projections are presented with numerical specificity, they reflect numerous assumptions, estimates and uncertainties as to future events made by Transphorm management that Transphorm management believed in good faith were reasonable at the time that the Financial Projections were prepared. Transphorm’s ability to achieve the financial results contemplated by the Financial Projections will be affected by Transphorm’s ability to achieve its strategic goals, objectives and targets over the applicable periods, and will be subject to related operational and execution risks. The Financial Projections (1) are forward-looking information; (2) are subject to many risks and uncertainties; and (3) reflect assumptions as to certain business decisions that are subject to change. Important factors that may affect actual results and cause the Financial Projections not to be achieved include and can be found in the section of this proxy statement captioned “Forward-Looking Statements” and in the various risk factors included in Transphorm’s periodic filings with the SEC. These factors are difficult to predict, and many of them are outside of Transphorm’s control. As a result, there can be no assurance that the Financial Projections will be realized (in part or at all), and Transphorm’s actual results may be materially better or worse than implied by the Financial Projections.

Transphorm has reported, and may continue to report, results of operations for periods included in the Financial Projections that were or will be completed following the preparation of the Financial Projections. The Financial Projections should be evaluated in conjunction with Transphorm’s historical financial statements and other information regarding Transphorm contained in Transphorm’s public filings with the SEC. The Financial Projections may not be consistent with, or comparable to, Transphorm’s historical results as a result of the assumptions utilized in preparing such information; please refer to Transphorm’s periodic filings with the SEC for information on Transphorm’s actual historical results. Other than as described in this proxy statement, the Financial Projections do not include any updates or revisions to reflect information or results as of any date subsequent to their preparation. Except to the extent required by applicable federal securities laws, Transphorm does not intend to update or otherwise revise the Financial Projections to reflect circumstances existing after the date that they were prepared or to reflect the occurrence of future events.

Because the Financial Projections reflect estimates and judgments, they are susceptible to sensitivities and assumptions, as well as to multiple interpretations based on actual experience and business developments. The Financial Projections also cover multiple years, and such information by its nature becomes less predictive with each succeeding year. The Financial Projections are not, and should not be considered to be, a guarantee of future operating results. Further, the Financial Projections are not fact and should not be relied upon as being necessarily indicative of Transphorm’s future results or for purposes of making any investment decision.

Certain of the financial measures included in the Financial Projections are non-GAAP financial measures (which are referred to as “Transphorm’s non-GAAP financial measures”). These are financial performance measures that are not calculated in accordance with GAAP. Transphorm’s non-GAAP financial measures should not be viewed as a substitute for GAAP financial measures, and may be different from similarly titled non-GAAP financial measures used by other companies. Furthermore, there are limitations inherent in Transphorm’s non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, Transphorm’s non-GAAP financial measures should be considered together with, and not as an alternative to, Transphorm’s financial results prepared in accordance with GAAP.

Financial measures included in forecasts provided to a financial advisor and a board of directors in connection with a business combination transaction, such as the Financial Projections, are excluded from the definition of

 

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“non-GAAP financial measures” under applicable SEC rules and regulations. As a result, the Financial Projections are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure. Reconciliations of non-GAAP financial measures were not provided to or relied upon by the Strategic Committee, the Transphorm Board, BofA Securities or, to Transphorm’s knowledge, any other person. Accordingly, no reconciliation of the financial measures included in the Financial Projections is provided in this proxy statement.

The following table summarizes the October 2023 Long-Term Plan.

 

 

(dollars in millions)    2024
Q3E
     2024
Q4E
     2025E      2026E      2027E      2028E  

Revenue

   $ 6      $ 9        $47        $81        $136        $212  

Adj. EBITDA1

   ($ 5    ($ 2      ($12)        $1        $14        $31  

Less Depreciation

   $ 0      $ 0        ($2      ($3      ($4      ($4
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adj. EBITA2

   ($ 5    ($ 3      ($14      ($3      $10        $27  

Less: Taxes3

   $ 0      $ 0        $0        $0        $0        $0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Tax-effected Adj. EBITA

   ($ 5    ($ 3      ($14)        ($3)        $10        $27  

Plus: Depreciation

   $ 0      $ 0        $2        $3        $4        $4  

Less: Taxes-effected SBC4

   ($ 1    ($ 1      ($5      ($6      ($8      ($10

Less: Change in Net Working Capital

   ($ 1    $ 0        ($5      ($10      ($9      ($17

Less: Capital Expenditures

   $ 0      $ 0        ($6      ($6      ($4      ($4
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Unlevered Free Cash Flow5

   ($ 7    ($ 3      ($28)        ($21)        ($7      ($1

 

(1)

Adj. EBITDA is defined as Transphorm’s earnings before interest, taxes, depreciation and amortization of intangible assets, and unburdened by stock-based compensation expense.

(2)

Adj. EBITA is defined as Transphorm’s earnings before interest and taxes and excluding the impact of amortization of intangible assets.

(3)

Statutory tax rate of 21 percent offset by $178.2 million available in federal net operating losses as of March 31, 2023. Transphorm’s NOLs consist of $97.4 million of NOLs that can be used to offset 100 percent of pre-tax income, and $80.8 million NOLs that can be used to offset 80 percent of pre-tax income.

(4)

Stock-based compensation is defined as compensation expense for all stock-based payment awards granted to Transphorm’s employees, directors, and non-employees based on the estimated fair values of such awards on the date of the grant. The fair value of Transphorm options granted is estimated on the grant date using the Black-Scholes option pricing model. The fair value of Transphorm RSUs is estimated on the date of grant based on the fair value of the underlying Transphorm common stock.

(5)

Free cash flow is defined as Transphorm’s EBITDA less stock-based compensation expense, taxes, capital expenditures, and plus or minus changes in net working capital.

In preparing the October 2023 Long-Term Plan, Transphorm management utilized the following material assumptions, which Transphorm management, using its business judgement, believed in good faith to be reasonable at the time that the October 2023 Long-Term Plan was prepared:

 

   

Revenue growth in the second half of fiscal year 2024 would be influenced by increasing licensing fees and commercial product sales and services contracts.

 

   

From fiscal year 2024 until fiscal year 2028, the compound annual growth rate in revenue is expected to be approximately 61 percent.

 

   

Consistent EBITDA growth from fiscal year 2024 through fiscal year 2028 as a result of realizing future efficiencies as Transphorm’s business scales. This growth reflects (1) Transphorm’s expectations of improved cost structures on current and new products; (2) Transphorm’s expectations of decreased overall expenditures, assuming an additional partner becomes a member of the GaNovation joint venture; and (3) enhancement of manufacturing efficiency and improvement of capacity.

 

   

Unlevered free cash flow is forecasted to improve as a percentage of revenue in fiscal year 2028 as the result of the forecasted revenue growth and the reduction in Transphorm’s operating expenses as a percentage of revenue.

 

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No material acquisitions or divestures by Transphorm.

 

   

Increased capital investments by Transphorm during fiscal years 2024 to 2028 to maintain and operate Transphorm’s businesses and support increased demand for Transphorm’s products.

The following table summarizes the December 2023 Long-Term Plan and the extrapolations.

 

    December 2023 Long-Term Plan     Extrapolations  
(dollars in millions)   2024
Q3E
    2024
Q4E
    2025E     2026E     2027E     2028E     2029E     2030E     2031E     2032E     2033E     2034E  

Revenue

    $6       $9       $47       $81       $136       $212       $275       $352       $413       $494       $573       $601  

Adj. EBITDA1

    ($4)       ($1)       ($12)       $1       $14       $31       $48       $65       $79       $101       $124       $130  

Less Depreciation

    $0       $0       ($2)       ($3)       ($4)       ($4)       ($5)       ($5)       ($6)       ($7)       ($9)       ($9)  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adj. EBITA2

    ($4)       ($2)       ($14)       ($3)       $10       $27       $43       $59       $73       $93       $116       $121  

Less: Taxes3

    $0       $0       $0       $0       $0       $0       $0       ($2)       ($3)       ($15)       ($24)       ($25)  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tax-effected Adj. EBITA

    ($4)       ($2)       ($14)       ($3)       $10       $27       $43       $57       $69       $78       $91       $96  

Plus: Depreciation

    $0       $0       $2       $3       $4       $4       $5       $5       $6       $7       $9       $9  

Less: Taxes-effected SBC4

    ($1)       ($1)       ($5)       ($6)       ($8)       ($10)       ($13)       ($16)       ($19)       ($20)       ($22)       ($23)  

Less: Change in Net Working Capital

    ($1)       $0       ($6)       ($10)       ($9)       ($17)       ($14)       ($17)       ($14)       ($18)       ($18)       ($7)  

Less: Capital Expenditures

    $0       $0       ($6)       ($6)       ($4)       ($4)       ($5)       ($6)       ($6)       ($7)       ($9)       ($9)  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Unlevered Free Cash Flow5

    ($6)       ($3)       ($29)       ($21)       ($7)       ($1)       $15       $23       $36       $40       $51       $66  

 

(1)

Adj. EBITDA is defined as Transphorm’s earnings before interest, taxes, depreciation and amortization of intangible assets, and unburdened by stock-based compensation expense.

(2)

Adj. EBITA is defined as Transphorm’s earnings before interest and taxes and excluding the impact of amortization of intangible assets.

(3)

Statutory tax rate of 21 percent offset by $178.2 million available in federal net operating losses as of March 31, 2023. Transphorm’s NOLs consist of $97.4 million of NOLs that can be used to offset 100 percent of pre-tax income, and $80.8 million NOLs that can be used to offset 80 percent of pre-tax income.

(4)

Stock-based compensation is defined as compensation expense for all stock-based payment awards granted to Transphorm’s employees, directors, and non-employees based on the estimated fair values of such awards on the date of the grant. The fair value of Transphorm options granted is estimated on the grant date using the Black-Scholes option pricing model. The fair value of Transphorm RSUs is estimated on the date of grant based on the fair value of the underlying Transphorm common stock.

(5)

Free cash flow is defined as Transphorm’s EBITDA less stock-based compensation expense, taxes, capital expenditures, and plus or minus changes in net working capital.

In preparing the December 2023 Long-Term Plan, Transphorm management utilized the following material assumptions, which Transphorm management, using its business judgement, believed in good faith to be reasonable at the time that the December 2023 Long-Term Plan was prepared:

 

   

Revenue growth in the second half of fiscal year 2024 would be influenced by increasing licensing fees and commercial product sales and services contracts.

 

   

From fiscal year 2024 until fiscal year 2028, the compound annual growth rate in revenue would be approximately 61.6 percent.

 

   

Consistent EBITDA growth from fiscal year 2024 through fiscal year 2028 as a result of realizing future efficiencies as Transphorm’s business scales. This growth reflects (1) Transphorm’s expectations of improved cost structures on current and new products; (2) Transphorm’s expectations of decreased overall expenditures, assuming an additional partner becomes a member of the GaNovation joint venture; and (3) enhancement of manufacturing efficiency and improvement of capacity.

 

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Unlevered free cash flow is forecasted to improve as a percentage of revenue in fiscal year 2028 as the result of the forecasted revenue growth and the reduction in Transphorm’s operating expenses as a percentage of revenue.

 

   

No material acquisitions or divestures by Transphorm.

 

   

Increased capital investments by Transphorm during fiscal years 2024 to 2028 to maintain and operate Transphorm’s businesses and support increased demand for Transphorm’s products.

Interests of Transphorm’s Directors and Executive Officers in the Merger

You should be aware that Transphorm’s directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of Transphorm’s stockholders. In (1) evaluating and negotiating the merger agreement; (2) approving the merger agreement and the merger; and (3) recommending that the merger agreement be adopted by Transphorm’s stockholders, the Transphorm Board was aware of and considered these interests to the extent that they existed at the time, among other matters. These interests are more fully described below.

Insurance and Indemnification of Directors and Executive Officers

Pursuant to the terms of the merger agreement, directors and officers of Transphorm will be entitled to certain ongoing indemnification and insurance coverage, including under directors’ and officers’ liability insurance policies. For more information, see the section of this proxy statement captioned “The Merger Agreement—Indemnification and Insurance.”

Treatment of Equity Awards

Treatment of Transphorm Restricted Stock Units

As of February 15, 2024, there were outstanding awards of Transphorm RSUs that cover an aggregate of 2,915,696 shares of Transphorm common stock, of which Transphorm RSUs covering an aggregate of 180,739 shares of Transphorm common stock were held by Transphorm’s current non-employee directors and of which Transphorm RSUs covering an aggregate of 611,069 shares of Transphorm common stock were held by any individual who is a current Transphorm executive officer or has been a Transphorm executive officer at any time since the beginning of Transphorm’s fiscal year ended March 31, 2023.

At the effective time of the merger, each vested Transphorm RSU will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Transphorm common stock subject to such vested Transphorm RSU immediately prior to the effective time of the merger, multiplied by (2) the per share price, less applicable tax withholding.

At the effective time of the merger, except as agreed by the affected parties or as otherwise described below, each unvested Transphorm RSU (taking into account the effect of any applicable vesting acceleration in connection with the merger) held by a U.S. continuing employee will be cancelled and converted into the right to receive an unvested Guarantor RSU Grant covering a number of Guarantor restricted stock units equal to (x) the total number of shares of Transphorm common stock subject to such unvested Transphorm RSU immediately prior to the effective time of the merger, multiplied by the per share price (converted into Japanese Yen using the U.S. dollar to Japanese Yen exchange rate 30-day trailing average of the closing daily exchange rates published by the Wall Street Journal (U.S. online edition) over the 30 consecutive trading days ending immediately preceding the closing date of the merger), divided by (y) the Guarantor common stock price, rounded up to the nearest 100 Guarantor restricted stock units.

Each Guarantor RSU Grant will be subject to the terms and conditions in Guarantor’s stock compensation plan. Each Guarantor RSU Grant will vest according to the modified vesting schedule that is based on the vesting

 

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schedule that applied to the corresponding unvested Transphorm RSU, except that (a) any Guarantor restricted stock units that otherwise would be scheduled to vest before the first quarterly vesting date of Guarantor that occurs after the closing of the merger (which is referred to as the “initial vest date”) instead will be scheduled to vest on the closing date of the merger, and (b) any Guarantor restricted stock units that otherwise would be scheduled to vest after the initial vest date, will vest as follows: for any restricted stock units that otherwise would be scheduled to vest during the period from (1) November 1 through January 31, those restricted stock units instead will be scheduled to vest on November 1, (2) February 1 through April 30, those restricted stock units instead will be scheduled to vest on February 1, (3) May 1 through July 31, those restricted stock units instead will be scheduled to vest on May 1, and (4) August 1 through October 31, those restricted stock units instead will be scheduled to vest on August 1.

At the effective time of the merger, except as agreed by the affected parties or as otherwise described below, each unvested Transphorm RSU (taking into account the effect of any applicable vesting acceleration in connection with the merger) held by a person who is not a U.S. continuing employee will be cancelled and converted into the right to receive, at Renesas’ discretion, either (1) a Guarantor RSU Grant on the same terms and conditions as the Guarantor RSU Grants for U.S. continuing employees described above, or (2) the unvested Transphorm RSU consideration (that is, a cash payment without interest equal to, for each share of Transphorm common stock subject to such unvested Transphorm RSU, the per share price, less applicable tax withholding), which will vest on the same modified vesting schedule that applies to the Guarantor RSU Grants.

To the extent the vesting schedule that applied to any Transphorm RSUs as of immediately before the effective time of the merger otherwise would have caused any of those Transphorm RSUs to vest before the grant date of the Guarantor RSU Grants, then at the effective time of the merger, those Transphorm RSUs will not be converted into the right to receive Guarantor restricted stock units and instead will be converted into the right to receive the unvested Transphorm RSU consideration, which will be paid, less applicable tax withholding, no later than 30 days after the applicable vesting date.

As of immediately prior to the effective time of the merger, the vesting of any outstanding then-unvested Transphorm RSUs that vest solely on the basis of continued service over specified period(s) of time will be accelerated as follows: (i) for any such Transphorm RSUs that were granted before August 1, 2023, as to all of such Transphorm RSUs, and (ii) for any such Transphorm RSUs that were granted on or after August 1, 2023, but on or prior to December 31, 2023, as to 50 percent of such Transphorm RSUs.

For more information regarding the vesting acceleration that may apply to the Transphorm RSUs held by Transphorm’s directors, see the section of this proxy statement captioned “Interests of Transphorm’s Directors and Executive Officers in the Merger— Change in Control and Severance Benefits Under Existing Relationships.”

Treatment of Transphorm Options

As of February 15, 2024, 4,529,763 shares were subject to outstanding Transphorm options, of which 3,869,042 have a per share exercise price below the per share price. As of February 15, 2024, Transphorm options to purchase an aggregate of 215,000 shares of Transphorm common stock were held by Transphorm’s current non-employee directors (of which 105,000 have a per share exercise price below the per share price) and Transphorm options to purchase an aggregate of 1,780,826 shares of Transphorm common stock were held by any individual who is a current Transphorm executive officer or has been a Transphorm executive officer at any time since the beginning of Transphorm’s fiscal year ended March 31, 2023 (of which 1,576,700 have a per share exercise price below the per share price).

At the effective time of the merger, each outstanding Transphorm option (whether vested or unvested) will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Transphorm common stock subject to the Transphorm option, multiplied by (2) the excess, if

 

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any, of the per share price over the exercise price per share of such Transphorm option, less applicable tax withholding.

Any underwater Transphorm option (whether vested or unvested) will be cancelled at the effective time of the merger for no consideration or payment.

Equity Interests of Transphorm’s Directors and Executive Officers

The following table sets forth for each person who has been a Transphorm executive officer or member of the Transphorm Board at any time since the beginning of Transphorm’s fiscal year ended March 31, 2023 (or 2023 fiscal year), (1) the number of shares of Transphorm common stock directly held, (2) the number of shares of Transphorm common stock subject to his or her in-the-money (that is, the per share exercise price is less than the per share price) Transphorm options, and (3) the number of shares of Transphorm common stock subject to his or her Transphorm RSUs, assuming the following and such additional assumptions set forth in the footnotes to the table:

 

   

the Transphorm shares include those held, and Transphorm options and Transphorm RSUs include those outstanding and held, by the applicable individual as of February 15, 2024, and assuming no sales, transfers or exercises, that are expected to be held and outstanding as of September 15, 2024, which is the date that for purposes of this section of the proxy statement is assumed to be the closing date of the merger;

 

   

that the values of these shares of Transphorm common stock and equity awards are equal to the per share price of $5.10 (minus any applicable exercise price in the case of the in-the-money Transphorm options); and

 

   

that each individual will continue employment or other applicable service with Transphorm through the assumed closing date of the merger except as specified otherwise in footnotes (2) and (7) such that his or her Transphorm equity awards will continue vesting in accordance with their regular vesting schedules through such assumed closing date.

 

    Shares of
Transphorm
Common
Stock(1)
    In-the-Money
Transphorm
Options(2)
    Vested But
Not Yet Settled
Transphorm
RSUs(3)(4)(5)
    Unvested
Transphorm
RSUs(3)(5)(6)
 

Name

  Number of
Shares
(#)
    Value
($)
    Number of
Underlying
Shares
(#)
    Value
($)
    Number of
Underlying
Shares
(#)
    Value
($)
    Number of
Underlying
Shares
(#)
    Value
($)
 

Primit Parikh

    207,976       1,060,678       491,644       675,572       155,334       792,203       132,000       673,200  

Cameron McAulay

    77,914       397,361       200,290       260,636       55,734       284,243       48,400       246,840  

Umesh Mishra

    196,653       1,002,930       526,261       583,609       83,867       427,722       79,200       403,920  

Mario Rivas(7)

    92,134       469,883       358,505       272,464           —        —   

Julian Humphreys

    88,811       452,936       —        —        2,188       11,159       —        —   

Katharina McFarland

    85,717       437,157       —        —        4,375       22,313       —        —   

Cynthia (Cindi) Moreland

    72,704       370,790       50,000       50,000       9,375       47,813       —        —   

Kelly Smales

    70,125       357,638       55,000       33,000       8,750       44,625       —        —   

Eiji Yatagawa

    —        —        —        —        —        —        —        —   

 

(1)

Represents (i) shares of Transphorm common stock held by the individual as of February 15, 2024, plus (ii) any shares of Transphorm common stock subject to Transphorm RSUs held by the individual as of February 15, 2024, that are scheduled to vest on or after February 15, 2024, but prior to the assumed closing date of the merger (which are assumed to be settled in shares of Transphorm common stock as to such full number of shares that vest, and disregarding any reductions in relation to any applicable tax withholding obligations), and (iii) the estimated number of shares of Transphorm common stock underlying the Transphorm RSUs expected to be granted to a non-employee member of the Transphorm Board in lieu of the additional cash retainer payable for service as chair of the

 

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  Transphorm Board, lead independent director of the Transphorm Board, or the chair or a member of a committee of the Transphorm Board for the fourth quarter of Transphorm’s 2024 fiscal year, as discussed further in footnote (5) below. For additional information regarding shares of Transphorm common stock held and other shares beneficially owned by the individuals, see the section of this proxy statement captioned “Security Ownership of Certain Beneficial Owners and Management.”
(2)

Represents vested and unvested outstanding in-the-money Transphorm options held by the individual. The values shown are determined as the excess of (i) the total number of vested shares of Transphorm common stock subject to such Transphorm options multiplied by the per share price, over (ii) the aggregate exercise price for such Transphorm options. The number of shares subject to the vested and unvested portions of the in-the-money Transphorm options (after taking into account any vesting scheduled to occur on or after February 15, 2024, but prior to the closing date of the merger, which date, solely for purposes of this section of the proxy statement, is assumed to be September 15, 2024), and the value (determined as the aggregate number of underlying shares multiplied by the per share price minus the aggregate exercise price with respect to such shares) of those portions of the in-the-money Transphorm options are as follows:

 

Name

   Vested
In-the-Money
Transphorm
Options

(#)
     Vested
In-the-Money
Transphorm
Options

($)
     Unvested
In-the-Money
Transphorm
Options

(#)
     Unvested
In-the-Money
Transphorm
Options

($)
 

Primit Parikh

     347,644        344,372        144,000        331,200  

Cameron McAulay

     147,490        139,196        52,800        121,440  

Umesh Mishra

     439,860        384,886        86,401        198,722  

Mario Rivas

     358,505        272,464        —         —   

Julian Humphreys

     —         —         —         —   

Katharina McFarland

     —         —         —         —   

Cynthia (Cindi) Moreland

     34,375        34,375        15,625        15,625  

Kelly Smales

     41,250        24,750        13,750        8,250  

Eiji Yatagawa

     —         —         —         —   

 

With respect to Mr. Rivas, the numbers of shares and values shown in the table to which this footnote (2) relates and the table set forth in this footnote (2) assume that (i) he will continue to provide services to Transphorm through May 15, 2024 (which is the latest date that he is to provide advisory transition services under his separation and transition letter agreement with Transphorm dated May 11, 2023), and vest in his Transphorm equity awards through such date, and (ii) he will satisfy the conditions for receiving the extension through December 31, 2024, of the post-termination exercise period of his Transphorm options, as specified in his separation and transition and letter agreement, such that his Transphorm options will remain outstanding through the closing date of the merger, which date, solely for purposes of this section of the proxy statement, is assumed to be September 15, 2024. Upon a separation of Mr. Rivas’ service with Transphorm on May 15, 2024, Mr. Rivas’ then unvested equity awards will be forfeited (consisting of unvested Transphorm RSUs covering an aggregate of 9,334 shares of Transphorm common stock and no unvested in-the-money Transphorm options).

(3)

The values shown with respect to Transphorm RSUs are determined as the product of the per share price, multiplied by the total number of shares of Transphorm common stock subject to Transphorm RSUs.

(4)

As described further in the section of this proxy statement captioned “—Interests of Transphorm’s Directors and Executive Officers in the Merger—Change in Control and Severance Benefits Under Existing Relationships—Non-Employee Director Equity Awards,” Transphorm RSUs outstanding as of the date of the closing of the merger (which date, solely for purposes of this section of the proxy statement, is assumed to be September 15, 2024) that are held by Transphorm’s non-employee directors will accelerate vesting in full. In addition, 100 percent of the Transphorm RSUs granted before August 1, 2023, and 50 percent of the Transphorm RSUs granted on or after August 1, 2023, but on or prior to December 31, 2023, outstanding as of the closing date of the merger (which date, solely for purposes of this section of the proxy statement, is assumed to be September 15, 2024) that are held by Transphorm’s executive officers will accelerate vesting.

(5)

Does not include the following shares of Transphorm common stock subject to Transphorm RSUs that are scheduled to vest on or after February 15, 2024, but prior to the closing date of the merger (which date, solely for purposes of this section of the proxy statement, is assumed to be September 15, 2024), subject to continued service through the applicable date: 24,000 shares with respect to Dr. Parikh, 8,800 shares with respect to Mr. McAulay, 14,400 shares with respect to Dr. Mishra, 39,993 shares with respect to Dr. Humphreys, 43,147 shares with respect to Ms. McFarland, 39,013 shares with respect to Ms. Moreland, and 39,943 shares with respect to Ms. Smales. All such shares instead are included in the column entitled “Shares of Transphorm Common Stock” in the table above. With respect to each non-employee member of the Transphorm Board, the foregoing number includes 1,371 shares with respect to Dr. Humphreys, 2,337 shares with respect to Ms. McFarland, 1,016 shares with respect to Ms. Moreland, and 1,321 shares with respect to Ms. Smales, which is the estimated number of shares of Transphorm common stock underlying the Transphorm RSUs expected to be granted on April 20, 2024, to such individual in lieu of the additional cash retainer payable for service as chair of the Transphorm Board, lead independent director of the Transphorm Board, or the chair or a member of a committee of the Transphorm Board for the fourth quarter of Transphorm’s 2024 fiscal year, assuming the closing price for a share of Transphorm common stock on April 20, 2024, is equal to $4.92, which was the closing price for a share of Transphorm common stock on February 15, 2024.

(6)

Represents outstanding Transphorm RSUs that are not scheduled to vest before the closing date of the merger (which date, solely for purposes of this section of the proxy statement, is assumed to be September 15, 2024). For each of the Transphorm executive officers, represents the portion of his Transphorm RSUs granted on August 30, 2023, outstanding and unvested as of the closing date of the

 

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  merger (which date, solely for purposes of this section of the proxy statement, is assumed to be September 15, 2024) that does not accelerate vesting as described in footnote (4) above. Each of the current Transphorm executive officers is eligible for vesting acceleration of any Guarantor RSU Grants received in exchange for such unvested Transphorm RSUs in connection with certain qualifying terminations of employment under the Key Executive Severance Plan. For additional information regarding such vesting acceleration, see the section of this proxy statement captioned “—Interests of Transphorm’s Directors and Executive Officers in the Merger—Change in Control and Severance Benefits Under Existing Relationships.”
(7)

Mr. Rivas resigned from his employment with Transphorm and as a member of the Transphorm Board effective May 15, 2023. His consulting agreement entered into with Transphorm in connection with his resignation provides for Mr. Rivas to provide continued services for a transition period following his employment termination through May 15, 2024. During such transition services period, Mr. Rivas is eligible to continue vesting in his Transphorm equity awards.

Change in Control and Severance Benefits Under Existing Relationships

Non-Employee Director Equity Awards

Transphorm has granted certain stock options and restricted stock units under Transphorm’s 2020 Equity Incentive Plan, as amended (which is referred to as the “2020 plan”), including in accordance with the terms of Transphorm’s Outside Director Compensation Policy (which is referred to as the “director compensation policy”) that are outstanding and held by Transphorm’s non-employee directors. Pursuant to the 2020 plan and the director compensation policy, equity awards granted to Transphorm’s non-employee directors will accelerate vesting in full upon a “change in control.” The closing of the merger will be a “change in control” within the meaning of the 2020 plan or the terms of the award.

Key Executive Change in Control and Severance Plan

Each of Transphorm’s current executive officers participate in the Key Executive Severance Plan. The Key Executive Severance Plan provides for benefits in connection with an involuntary termination of employment, including in connection with a change in control of Transphorm. The closing of the merger will be a “change in control” within the meaning of the Key Executive Severance Plan.

Under the Key Executive Severance Plan, if, other than during the period beginning with Transphorm’s change in control and ending 24 months later, a participant incurs an “involuntary termination” (as defined in the Key Executive Severance Plan), then the participant will receive a lump sum cash amount equal to (a) in the case of Dr. Parikh, 150 percent, or in the case of Dr. Mishra or Mr. McAulay, 100 percent, of the participant’s annual base salary, and (b) a taxable lump sum cash amount equal to the product of the first month’s premiums required for continued health care coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (which is referred to as “COBRA”), under Transphorm’s group medical, dental and vision plans, multiplied by, in the case of Dr. Parikh, 18 months, or in the case of Dr. Mishra or Mr. McAulay, 12 months.

If, during the period beginning with Transphorm’s change in control and ending 24 months later, a participant incurs an involuntary termination (which is referred to as a “CIC involuntary termination”), then the participant will receive (i) a lump sum cash amount equal to the sum of (A) in the case of Dr. Parikh, 200 percent, or in the case of Dr. Mishra or Mr. McAulay, 100 percent, of the participant’s annual base salary and target bonus opportunity in effect for the performance period in which the CIC involuntary termination occurs (or if greater, the target bonus opportunity in effect for the performance period in which the change in control occurs), plus (B) a prorated amount of such target bonus opportunity for the period the participant was employed during Transphorm’s fiscal year in which the involuntary termination occurs, and (ii) a taxable lump sum cash amount equal to the product of the first month’s premiums required for continued health care coverage pursuant to COBRA under Transphorm’s group medical, dental and vision plans, multiplied by, in the case of Dr. Parikh, 24 months, or in the case of Dr. Mishra or Mr. McAulay, 12 months. In addition, upon a CIC involuntary termination, the participant will receive full vesting acceleration of any Transphorm equity awards that are subject to vest based only pursuant to continued service.

 

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The table below sets forth, for each of Transphorm’s current executive officers, the estimated value of the payments and benefits the executive officer would receive under the Key Executive Severance Plan upon a CIC involuntary termination based on his annualized base salary and annualized target bonus as of [●], 2024, and the estimated cost of reimbursements for continued coverage under the applicable Transphorm health plans. The vesting acceleration of Transphorm RSUs that the executive officers would receive under the Key Executive Severance Plan upon a CIC involuntary termination is as described further above. Mr. Rivas is not a participant in the Key Executive Severance Plan and accordingly is not eligible for any benefits under such plan.

 

Name

   Salary
Severance
($)(1)
     Bonus
Severance
($)(2)
     Prorated
Bonus
Severance
($)(3)
     Other
Benefits
($)(4)
 

Primit Parikh

     700,000        630,000        144,986        62,263  

Cameron McAulay

     305,000        183,000        84,230        —   

Umesh Mishra

     190,000        114,000        52,471        —   

 

(1)

Represents the lump sum cash amount equal to 12 months (or in Dr. Parikh’s case, 24 months) of the executive officer’s base salary. Effective January 1, 2024, the base salary for Mr. McAulay was adjusted from $275,000 to $305,000, and the base salary for Dr. Mishra was adjusted from $180,000 to $190,000.

(2)

Represents the lump sum cash amount equal to 100 percent (or in Dr. Parikh’s case, 200 percent) of the executive officer’s target annual bonus (determined as such executive officer’s target annual bonus for Transphorm’s 2024 fiscal year of 90 percent of base salary for Dr. Parikh, 60 percent of base salary for Mr. McAulay, and 60 percent of base salary for Dr. Mishra, multiplied by such executive officer’s base salary as adjusted effective January 1, 2024, as described in footnote (1) above).

(3)

Represents the lump sum cash amount equal to 100 percent of the executive officer’s target annual bonus (determined as described in footnote (2) above), prorated for partial year of service from April 1, 2024, through September 15, 2024, which solely for purposes of this section of the proxy statement is assumed to be the closing date of the merger and, for purposes of this table, is assumed to be the date of such executive officer’s CIC involuntary termination.

(4)

Represents the lump sum cash amount equal to the product of the first month’s premiums required for continued health care coverage pursuant to COBRA under Transphorm’s group medical, dental and vision plans, multiplied by 12 months (or in Dr. Parikh’s case, 24 months).

If any of the severance benefits provided under the Key Executive Severance Plan or otherwise payable to a participant (which is referred to as “280G payments”) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code and could be subject to the excise tax under Section 4999 of the Internal Revenue Code, then the 280G payments will be delivered in full or delivered as to such lesser extent which would result in no portion of such benefits being subject to the excise tax, whichever results in the greatest amount of after-tax benefits to such participant. The Key Executive Severance Plan does not provide for any tax gross-up payment to any participant in the Key Executive Severance Plan.

The severance benefits under the Key Executive Severance Plan are subject to the participant timely entering into and not revoking a separation agreement and release of claims in favor of Transphorm and the participant’s compliance with the terms of the participant’s confidentiality agreement and any other written agreement or agreements between the participant and Transphorm (or any parent or subsidiary of Transphorm) under which the participant has a material duty or obligation to Transphorm (or any parent or subsidiary of Transphorm).

Transphorm has the right to amend or terminate the Key Executive Severance Plan at any time, provided that upon, in connection with or following Transphorm’s change in control, Transphorm without a participant’s written consent may not amend or terminate the Key Executive Severance Plan in any way, or take any other action under the Key Executive Severance Plan that (x) prevents that participant from becoming eligible for severance benefits, or (y) reduces or alters to the detriment of the participant the severance benefits, if any, payable, or potentially payable, to the participant (including, without limitation, imposing additional conditions).

For purposes of the Key Executive Severance Plan, the following definitions are used:

 

   

“Involuntary termination” generally means, with respect to a participant, the participant’s employment is terminated without “cause” and other than due to the participant’s death or “disability,” or the participant resigns in a “good reason termination” (as such terms are defined in the Key Executive Severance Plan).

 

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“Cause” generally means, with respect to a participant:

 

   

the participant’s failure to substantially perform the participant’s lawful duties as assigned by Transphorm or any parent or subsidiary of Transphorm, as applicable (other than any such failure resulting from the participant’s complete or partial incapacity due to physical or mental illness or impairment);

 

   

the participant being convicted of or the participant’s plea of guilty or nolo contendere to any crime involving fraud, embezzlement or any other act of moral turpitude, crime that results in, or is reasonably expected to result in, material harm to the business or reputation of Transphorm or any parent or subsidiary of Transphorm, or felony;

 

   

the participant’s engagement in dishonesty, misrepresentation, illegal conduct, gross negligence or gross misconduct that causes or could reasonably be anticipated to cause material harm to Transphorm or any parent or subsidiary of Transphorm; or

 

   

the participant’s material breach of any material obligation under the Key Executive Severance Plan or any written agreement between the participant and Transphorm or any parent or subsidiary of Transphorm.

The determination of whether grounds for cause exists, including the determination of the cure of any event and/or action, omission or event constituting grounds for cause, will be made in all cases by administrator of the Key Executive Severance Plan.

 

   

“Good reason termination” generally means with respect to a participant, the participant’s resignation due to the occurrence of any of the following conditions which occurs without the participant’s written consent, provided that the requirements set forth below regarding advance notice and an opportunity to cure are satisfied:

 

   

a material reduction in the participant’s base salary as in effect immediately prior to such reduction;

 

   

a material reduction in the participant’s authority, duties or responsibilities pursuant to the participant’s employment with Transphorm or any parent or subsidiary of Transphorm relative to the authority, duties or responsibilities in effect immediately prior to such reduction;

 

   

the participant being required to relocate the participant’s principal site of employment that would increase the participant’s one-way commute by more than 35 miles from the participant’s then principal residence; or

 

   

the failure or refusal of a successor to Transphorm to materially assume Transphorm’s obligations under the Key Executive Severance Plan on or after a change in control.

In order for the participant’s resignation to be a good reason termination, the participant must provide written notice to Transphorm of the existence of the condition that provides grounds for a good reason termination within 90 days of the initial existence of such condition. Upon receipt of such notice, Transphorm will have 30 days during which it may remedy the condition. If the condition is not remedied within such 30-day period, in order to constitute a good reason termination, the participant must resign based on the condition specified in the notice effective no later than 60 days following the expiration of Transphorm’s 30-day cure period. The determination of whether a good reason termination exists, including the determination of the cure of any event and/or breach constituting a good reason termination, will be made in all cases by the administrator of the Key Executive Severance Plan.

Retention Bonuses

As of the date of this proxy statement, it is anticipated that Transphorm will enter into retention letter agreements with each of its current executive officers, pursuant to which it is currently contemplated that such executive officer will be eligible for a cash retention bonus in an amount equal to $535,000 for Dr. Parikh, $225,000 for Mr. McAulay and $265,000 for Dr. Mishra.

 

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Under each such retention letter agreement, if the applicable executive officer remains in continuous service with Transphorm or any of its subsidiaries through the date that is 3 months following the closing date of the merger (which is referred to as the “retention date”), 100 percent of his retention bonus will be paid, less applicable tax withholdings, to him in a single lump sum within 60 days following the retention date. However, in the event an executive officer incurs an involuntary termination (within the meaning of the Key Executive Severance Plan) and such involuntary termination occurs on or after the effective time of the merger but before the retention date, then subject to the executive officer timely entering into and not revoking a separation agreement and release of claims in favor of Transphorm, his retention bonus will be paid, less applicable tax withholdings, in a single lump sum within 60 days following the date of the involuntary termination.

If any of the payments or benefits that an executive officer would receive from Transphorm or any of its subsidiaries (whether under his retention agreement or otherwise) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code and could be subject to the excise tax under Section 4999 of the Internal Revenue Code, then such payments and benefits will be delivered in full or delivered as to such lesser extent which would result in no portion of such benefits being subject to the excise tax, whichever results in the greater amount of after-tax benefits to such executive officer. The retention agreements do not provide for any tax gross-up payment to any executive officer.

Employment Arrangements Following the Merger

As of the date of this proxy statement, none of Transphorm’s executive officers have (1) reached an understanding on potential employment or other retention terms with the surviving corporation or with Renesas or Merger Sub; or (2) entered into any definitive agreements or arrangements regarding employment or other retention with the surviving corporation or with Renesas or Merger Sub to be effective following the consummation of the merger. However, prior to the effective time of the merger, Renesas or Merger Sub may initiate discussions regarding employment or other retention terms and may enter into definitive agreements regarding employment or retention for certain of Transphorm’s employees to be effective as of the effective time of the merger.

Closing and Effective Time of the Merger

The closing of the merger will take place (1) on a date that is agreed upon by Transphorm, Renesas, and Merger Sub, but no later than four business days after the last condition is satisfied or waived (excluding conditions that by their terms are to be satisfied at the closing of the merger, but subject to the satisfaction or waiver of each of such conditions) (further described in the section of this proxy statement captioned “The Merger Agreement—Conditions to the Closing of the Merger”); or (2) at such other time agreed to by Transphorm, Renesas, and Merger Sub. On the closing date of the merger, the parties will file a certificate of merger with the Secretary of State of the State of Delaware as provided under the DGCL. The merger will become effective upon the filing and acceptance of such certificate of merger, or at a later time agreed to in writing by the parties and specified in such certificate of merger in accordance with the DGCL.

Appraisal Rights

If the merger is consummated, Transphorm’s stockholders (including beneficial owners of shares of Transphorm’s capital stock) who (1) do not vote in favor of the adoption of the merger agreement; (2) properly demand an appraisal of their shares; (3) continuously hold of record or beneficially own their shares through the effective time of the merger; (4) otherwise comply with the procedures of Section 262 of the DGCL; and (5) do not withdraw their demands or otherwise lose their rights to appraisal may, subject to the conditions thereof, seek appraisal of their shares in connection with the merger under Section 262 of the DGCL (which is referred to as “Section 262”). Unless the context requires otherwise, all references in Section 262 and in this summary to a “stockholder” are to the record holder of shares as to which appraisal rights are asserted, all references in Section 262 and in this summary “beneficial owner” mean a person who is the beneficial owner of shares of stock held either in voting trust or by a nominee on behalf of such person, and all references in Section 262 and

 

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in this summary to the word “person” mean any individual, corporation, partnership, unincorporated association or other entity.

The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which is available at the following URL, accessible without subscription or cost, which is incorporated herein by reference: https://delcode.delaware.gov/title8/c001/sc09/index.html#262. The following summary does not constitute any legal or other advice and does not constitute a recommendation that Transphorm’s stockholders exercise their appraisal rights under Section 262. STOCKHOLDERS SHOULD CAREFULLY REVIEW THE FULL TEXT OF SECTION 262 AS WELL AS THE INFORMATION DISCUSSED BELOW.

Under Section 262, if the merger is completed, holders of record of shares of Transphorm common stock or beneficial owners who (1) deliver a written demand for appraisal of such stockholder’s shares of Transphorm common stock to Transphorm prior to the vote on the adoption of the merger agreement; (2) do not vote, in person or by proxy, in favor of the adoption of the merger agreement; (3) continuously hold of record or beneficially own such shares on the date of making the demand for appraisal through the effective time of the merger; and (4) otherwise comply with the procedures and satisfy certain ownership thresholds set forth in Section 262 may be entitled to have their shares of Transphorm common stock appraised by the Delaware Court of Chancery and to receive payment in cash, in lieu of the consideration set forth in the merger agreement, for the “fair value” of their shares of Transphorm common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with (unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown) interest on the amount determined by the Delaware Court of Chancery to be the fair value from the effective time of the merger through the date of payment of the judgment (or in certain circumstances described herein, on the difference between the amount determined to be the fair value and the amount paid by the surviving corporation in the merger to each person entitled to appraisal prior to the entry of judgment in the appraisal proceeding) as described further below. However, after an appraisal petition has been filed, the Delaware Court of Chancery, at a hearing to determine persons entitled to appraisal rights, will dismiss appraisal proceedings as to all holders of shares of a class or series of stock that, immediately prior to the closing of the merger, were listed on a national securities exchange who are otherwise entitled to appraisal rights unless (A) the total number of shares of the class or series of stock for which appraisal rights have been pursued or perfected exceeds one percent of the outstanding shares of such class or series as measured in accordance with subsection (g) of Section 262; or (B) the value of the merger consideration in respect of such shares exceeds $1 million. These conditions are referred to as the “ownership thresholds.” Given that the shares of Transphorm common stock are listed on the Nasdaq (and assuming such shares remain so listed up until closing of the merger), then the Delaware Court of Chancery will dismiss any appraisal proceedings as to all holders of Transphorm common stock who are otherwise entitled to appraisal rights unless one of the ownership thresholds is satisfied.

Unless the Delaware Court of Chancery, in its discretion, determines otherwise for good cause shown, interest on the amount determined to be the fair value of the shares subject to appraisal will accrue and compound quarterly from the effective time of the merger through the date the judgment is paid at five percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during such period (except that, if at any time before the entry of judgment in the proceeding, the surviving corporation makes a voluntary cash payment to each person entitled to appraisal, interest will accrue thereafter only upon the sum of (x) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery; and (y) interest theretofore accrued, unless paid at that time). The surviving corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment.

Under Section 262, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders of record as of the record date for notice of such meeting that appraisal rights are available and include in the notice a copy of Section 262 or information directing the stockholders to a publicly available electronic resource at which Section 262 may be accessed without subscription or cost. This proxy statement constitutes Transphorm’s notice

 

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to Transphorm’s stockholders that appraisal rights are available in connection with the merger, and the full text of Section 262 is available at the following URL: https://delcode.delaware.gov/title8/c001/sc09/index.html#262. In connection with the merger, any holder of record or beneficial owner of shares of Transphorm common stock who wishes to exercise appraisal rights, or who wishes to preserve such holder’s right to do so, should review Section 262 carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner may result in the loss of appraisal rights under the DGCL. A person who loses his, her or its appraisal rights will be entitled to receive the per share price described in the merger agreement, without interest, less any applicable withholding taxes. Because of the complexity of the procedures for exercising the right to seek appraisal of shares of Transphorm common stock, Transphorm believes that if a person is considering exercising such rights, such person should seek the advice of legal counsel.

Stockholders or beneficial owners wishing to exercise the right to seek an appraisal of their shares of Transphorm common stock must do ALL of the following:

 

   

such person must not, in person or by proxy, vote in favor of the proposal to adopt the merger agreement;

 

   

such person must deliver to Transphorm a written demand for appraisal before the vote on the merger agreement at the special meeting;

 

   

such person must continuously hold of record or beneficially own the shares of Transphorm common stock from the date of making the demand through the effective time of the merger (a person will lose appraisal rights if the person transfers the shares before the effective time of the merger); and

 

   

such person or the surviving corporation must file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the stock of all dissenting stockholders entitled to appraisal within 120 days after the effective time of the merger (the surviving corporation is under no obligation to file any petition and has no intention of doing so).

In addition, after an appraisal petition has been filed, the Delaware Court of Chancery, at a hearing to determine persons entitled to appraisal rights, will dismiss appraisal proceedings as to all persons who asserted appraisal rights with respect to the shares of Transphorm common stock unless one of the ownership thresholds is met.

Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the merger agreement, each person who votes by proxy and who wishes to exercise appraisal rights must vote against the adoption of the merger agreement or abstain.

Filing Written Demand

A person wishing to exercise appraisal rights must deliver to Transphorm, before the vote on the adoption of the merger agreement at the special meeting, a written demand for the appraisal of such person’s shares. In addition, that person must not vote or submit a proxy in favor of the adoption of the merger agreement. A vote in favor of the adoption of the merger agreement, in person at the special meeting or by proxy (whether by mail or via the internet or telephone), will constitute a waiver of your appraisal rights in respect of the shares so voted and will nullify any previously filed written demands for appraisal. A person exercising appraisal rights must hold or own, as applicable, beneficially or of record, the shares on the date the written demand for appraisal is delivered and must continue to hold or own, as applicable, the shares through the effective time of the merger. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the merger agreement, and it will constitute a waiver of the stockholder’s and beneficial owner’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the adoption of the merger agreement or abstain from voting on the adoption of the merger agreement. Neither voting against the adoption of the merger agreement nor abstaining from voting or failing to vote on the proposal to adopt the merger agreement will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any

 

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proxy or vote on the adoption of the merger agreement. A proxy or vote against the adoption of the merger agreement will not constitute a demand. A person’s failure to make the written demand prior to the taking of the vote on the adoption of the merger agreement at the special meeting will constitute a waiver of appraisal rights.

In the case of a written demand for appraisal made by a stockholder of record, the demand must reasonably inform Transphorm of the identity of the stockholder and that the stockholder intends thereby to demand an appraisal of such stockholder’s shares. In the case of a written demand for appraisal made by a beneficial owner, the demand must reasonably identify the record holder of the shares for which the demand is made, be accompanied by documentary evidence of such beneficial owner’s beneficial ownership of such stock and a statement that such documentary evidence is a true and correct copy of what it purports to be, and provide an address at which such beneficial owner consents to receive notices given by the surviving corporation and to be set forth on the verified list (as defined below).

All written demands for appraisal pursuant to Section 262 should be mailed or delivered to:

Transphorm, Inc.

75 Castilian Drive

Goleta, California 97113

Attention: Corporate Secretary

At any time within 60 days after the effective time of the merger, any person who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw such person’s demand for appraisal and accept the terms offered pursuant to the merger agreement by delivering to Transphorm, as the surviving corporation, a written withdrawal of the demand for appraisal. Any withdrawal of a demand for appraisal made more than 60 days after the effective time of the merger may only be made with the written approval of the surviving corporation. Notwithstanding the foregoing, no appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any person without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just, including, without limitation, a reservation of jurisdiction (which is referred to as a “reservation”) for any application (as defined below) to the Delaware Court of Chancery; provided, however, that this shall not affect the right of any person who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such person’s demand for appraisal and to accept the merger consideration within 60 days after the effective time of the merger. If the Delaware Court of Chancery does not approve the dismissal of an appraisal proceeding with respect to a person, such person will be entitled to receive only the fair value determined in any such appraisal proceeding, which value could be less than, equal to or more than the per share price being offered pursuant to the merger agreement.

Notice by the Surviving Corporation

If the merger is completed, within ten days after the effective time of the merger, the surviving corporation will notify each stockholder (including any beneficial owner) of each constituent corporation who has submitted a demand for appraisal in accordance with Section 262, and who has not voted in favor of the adoption of the merger agreement, that the merger has become effective and the effective time thereof.

Filing a Petition for Appraisal

Within 120 days after the effective time of the merger, but not thereafter, the surviving corporation or any person who has complied with Section 262 and is otherwise entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the surviving corporation in the case of a petition filed by any person other than the surviving corporation, demanding a determination of the fair value of the shares held by all dissenting stockholders entitled to appraisal. The surviving corporation is under no obligation, and has no present intention, to file a petition, and stockholders and beneficial owners should not assume that the surviving corporation will file a petition or initiate any

 

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negotiations with respect to the fair value of the shares of Transphorm common stock. Accordingly, any persons who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of their shares of Transphorm common stock within the time and in the manner prescribed in Section 262. The failure to file such a petition within the period specified in Section 262 could nullify a previous written demand for appraisal.

Within 120 days after the effective time of the merger, any person who has complied with the requirements for an appraisal of such person’s shares pursuant to Section 262 will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of shares not voted in favor of the adoption of the merger agreement and with respect to which Transphorm has received demands for appraisal, and the aggregate number of stockholders or beneficial owners holding or owning such shares (provided that where a beneficial owner makes a demand for appraisal directly, the record holder of such shares shall not be considered a separate stockholder holding such shares for purposes of this aggregate number). Such statement must be given within ten days after receipt by the surviving corporation of the written request for such a statement or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later.

If a petition for an appraisal is duly filed by any person other than the surviving corporation, service of a copy thereof must be made upon the surviving corporation, which will then be obligated within 20 days after such service to file with the Delaware Register in Chancery a duly verified list (which is referred to as the “verified list”) containing the names and addresses of all persons who have demanded appraisal for their shares and with whom agreements as to the value of their shares have not been reached. The Delaware Court of Chancery may order the Register in Chancery to give notice of the time and place fixed for the hearing of such petition be given to the surviving corporation and all of the persons shown on the verified list at the addresses stated therein. The costs of any such notice are borne by the surviving corporation.

After notice is provided to the applicable persons as required by the Delaware Court of Chancery, at the hearing on such petition, the Delaware Court of Chancery will determine the persons who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the persons who demanded appraisal for their shares and who hold stock represented by stock certificates to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings. Accordingly, persons holding stock represented by stock certificates and wishing to seek appraisal of their shares are cautioned to retain their stock certificates pending resolution of the appraisal proceedings. If any person fails to comply with this requirement, the Delaware Court of Chancery may dismiss the proceedings as to such person. Upon application by the surviving corporation or by any person entitled to participate in the appraisal proceeding, the Delaware Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the persons entitled to an appraisal. Any person whose name appears on the verified list may participate fully in all proceedings until it is finally determined that such person is not entitled to appraisal rights under Section 262.

Given that the shares of Transphorm common stock are listed on the Nasdaq (and assuming such shares remain so listed up until closing of the merger), the Delaware Court of Chancery will dismiss any appraisal proceedings as to all holders of shares of Transphorm common stock who are otherwise entitled to appraisal rights unless one of the ownership thresholds is met.

Determination of Fair Value

After the Delaware Court of Chancery determines the persons entitled to appraisal and, with respect to Transphorm common stock, that at least one of the ownership thresholds above has been satisfied in respect of persons seeking appraisal rights, then the appraisal proceeding will be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Delaware Court of Chancery will determine the “fair value” of the shares of Transphorm common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger,

 

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together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective time of the merger through the date of payment of the judgment will be compounded quarterly and will accrue at five percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time of the merger and the date of payment of the judgment. However, the surviving corporation has the right, at any time prior to the Delaware Court of Chancery’s entry of judgment in the proceedings, to make a voluntary cash payment to each person seeking appraisal. If the surviving corporation makes a voluntary cash payment pursuant to subsection (h) of Section 262, interest will accrue thereafter only on the sum of (x) the difference, if any, between the amount paid by the surviving corporation in such voluntary cash payment and the fair value of the shares as determined by the Delaware Court of Chancery; and (y) interest accrued before such voluntary cash payment, unless paid at that time.

In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

Persons considering seeking appraisal should be aware that the fair value of their shares as so determined by the Delaware Court of Chancery could be more than, the same as or less than the consideration they would receive pursuant to the merger if they did not seek appraisal of their shares and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a merger is not an opinion as to, and may not in any manner address, fair value under Section 262. ALTHOUGH TRANSPHORM BELIEVES THAT THE PER SHARE PRICE IS FAIR, NO REPRESENTATION IS MADE AS TO THE OUTCOME OF THE APPRAISAL OF FAIR VALUE AS DETERMINED BY THE DELAWARE COURT OF CHANCERY, AND TRANSPHORM STOCKHOLDERS SHOULD RECOGNIZE THAT SUCH AN APPRAISAL COULD RESULT IN A DETERMINATION OF A VALUE HIGHER OR LOWER THAN, OR THE SAME AS, THE PER SHARE PRICE. Neither Transphorm nor Renesas anticipates offering more than the per share price to any persons exercising appraisal rights, and each of Transphorm and Renesas reserves the rights to make a voluntary cash payment pursuant to subsection (h) of Section 262 and to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of Transphorm common stock is less than the per share price. If a petition for appraisal is not timely filed or, with respect to Transphorm common stock, if neither of the ownership thresholds above has been satisfied in respect of persons seeking appraisal rights, then the right to an appraisal will cease.

The Delaware Court of Chancery will direct the payment of the fair value of the shares, together with interest, if any, by the surviving corporation to the persons entitled thereto. Payment will be so made to each such person upon such terms and conditions as the Delaware Court of Chancery may order. The Delaware Court of Chancery’s decree may be enforced as other decrees in such Delaware Court of Chancery may be enforced.

The costs of the appraisal proceedings (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and taxed upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a person whose name appears on the

 

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verified list who participated in the proceeding and incurred expenses in connection therewith (which is referred to as an “application”), the Delaware Court of Chancery may also order that all or a portion of such expenses, including, without limitation, reasonable attorney’s fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to an appraisal that were not dismissed pursuant to the terms of Section 262 or subject to an award pursuant to a reservation. In the absence of such determination or assessment, each party bears its own expenses.

If any person who demands appraisal of his, her or its shares of Transphorm common stock under Section 262 fails to perfect, or loses or validly withdraws, such person’s right to appraisal, such person’s shares of Transphorm common stock will be deemed to have been converted at the effective time of the merger into the right to receive the per share price as provided in the merger agreement. A person will fail to perfect, or effectively lose, such person’s right to appraisal if no petition for appraisal is filed within 120 days after the effective time of the merger, if neither of the ownership thresholds above has been satisfied in respect of those seeking appraisal rights with respect to the shares of Transphorm common stock, or if the person delivers to the surviving corporation a written withdrawal of such person’s demand for appraisal and an acceptance of the per share price as provided in the merger agreement in accordance with Section 262.

From and after the effective time of the merger, no person who has demanded appraisal rights in compliance with Section 262 will be entitled to vote such shares of Transphorm common stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective time of the merger).

Failure to comply strictly with all of the procedures set forth in Section 262 may result in the loss of appraisal rights. In that event, you will be entitled to receive the per share price for your dissenting shares in accordance with the merger agreement, less any applicable withholding taxes. Consequently, any person wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.

Accounting Treatment

The merger will be accounted for as a “business combination” for financial accounting purposes.

Material U.S. Federal Income Tax Consequences of the Merger

The following discussion is a summary of material U.S. federal income tax consequences of the merger that may be relevant to U.S. holders and Non-U.S. holders of shares of Transphorm common stock whose shares are converted into the right to receive cash pursuant to the merger. This discussion is based upon the U.S. Internal Revenue Code of 1986, as amended (which is referred to as the “Code”), U.S. Treasury Regulations promulgated under the Code, court decisions, published positions of the U.S. Internal Revenue Service (which is referred to as the “IRS”), and other applicable authorities, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations, possibly with retroactive effect. This discussion is limited to holders who hold their shares of Transphorm common stock as “capital assets” within the meaning of Section 1221 of the Code (generally, as property held for investment purposes). With respect to holders whose shares of Transphorm common stock were subject to vesting restrictions at the time such shares were acquired, if any, this discussion assumes that a valid and timely election pursuant to Section 83(b) of the Code was made with respect to such shares.

This discussion is for general information purposes only and does not address all of the tax consequences that may be relevant to holders in light of their particular circumstances. For example, this discussion does not address:

 

   

tax consequences to holders who received their shares of Transphorm common stock in a compensatory transaction or pursuant to the exercise of Transphorm options, or Transphorm RSUs, or otherwise in connection with the performance of services;

 

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tax consequences that may be relevant to holders who may be subject to special treatment under U.S. federal income tax laws, such as financial institutions; tax-exempt organizations; S corporations, partnerships and any other entity or arrangement treated as a partnership or pass-through entity for U.S. federal income tax purposes; insurance companies; mutual funds; dealers in stocks and securities; traders in securities that elect to use the mark-to-market method of accounting for their securities; regulated investment companies; real estate investment trusts; entities subject to the U.S. anti-inversion rules; holders who hold their common stock as “qualified small business stock” for purposes of Sections 1045 and 1202 of the Code, as “Section 1244 stock” within the meaning of Section 1244 of the Code, or through individual retirement or other tax-deferred accounts; Non-U.S. holders that own (directly or by attribution) more than five percent of Transphorm common stock; or U.S. expatriates and certain former citizens or long-term residents of the United States;

 

   

tax consequences to holders holding shares of Transphorm common stock as part of a hedging, constructive sale or conversion, straddle, or other risk reduction transaction;

 

   

tax consequences to U.S. holders whose “functional currency” is not the U.S. dollar;

 

   

tax consequences to holders who hold their Transphorm common stock through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States;

 

   

tax consequences to holders who are “controlled foreign corporations,” “passive foreign investment companies” or “personal holding companies” for U.S. federal income tax purposes;

 

   

tax consequences arising from the Medicare tax on net investment income;

 

   

tax consequences to holders subject to special tax accounting rules as a result of any item of gross income with respect to the shares of Transphorm common stock being taken into account in an “applicable financial statement” (as defined in the Code);

 

   

any U.S. federal estate, gift, or alternative minimum tax consequences;

 

   

any state, local, or non-U.S. tax consequences; or

 

   

tax consequences to persons that do not vote in favor of the merger and who properly demand appraisal of their shares under Section 262 of the DGCL.

If a partnership (including an entity or arrangement, domestic or foreign, treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of Transphorm common stock, then the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partner and the partnership. Partnerships holding shares of Transphorm common stock and partners therein should consult their tax advisors regarding the consequences of the merger.

No ruling has been or will be obtained from the IRS regarding the U.S. federal income tax consequences of the merger described below. If the IRS contests a conclusion set forth herein, no assurance can be given that a holder would ultimately prevail in a final determination by a court. Further, no opinion of counsel has been or will be rendered with respect to the tax consequences of the merger or related transactions.

THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE TO ANY HOLDER. A HOLDER SHOULD CONSULT ITS TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER U.S. FEDERAL NON-INCOME TAX LAWS OR THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION.

 

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U.S. Holders

General

For purposes of this discussion, a “U.S. holder” is a beneficial owner of shares of Transphorm common stock that is not a partnership and is for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

 

   

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

   

a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more United States persons as defined in Section 7701(a)(30) of the Code; or (2) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person.

Taxable Sale of Company Capital Stock

The receipt of cash by a U.S. holder in exchange for shares of Transphorm common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, such U.S. holder’s gain or loss will be equal to the difference, if any, between (i) the amount of cash received and (ii) the U.S. holder’s adjusted tax basis in the shares surrendered pursuant to the merger. A U.S. holder’s adjusted tax basis generally will equal the amount that such U.S. holder paid for the shares. Such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if such U.S. holder’s holding period in such shares is more than one year at the time of the completion of the merger. A reduced tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. holder (including individuals). The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of shares of Transphorm common stock at different times and/or different prices, such holder must determine its adjusted tax basis and holding period separately with respect to each block of Transphorm common stock.

Non-U.S. Holders

General

For purposes of this discussion, a “Non-U.S. holder” is a beneficial owner of shares of Transphorm common stock that is neither a U.S. holder nor a partnership for U.S. federal income tax purposes.

Taxable Sale of Company Capital Stock

Subject to the discussion below on backup withholding and FATCA (as defined below) withholding, any gain realized by a Non-U.S. holder pursuant to the merger generally will not be subject to U.S. federal income tax unless:

 

   

the gain is effectively connected with a trade or business of such Non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by such Non-U.S. holder in the United States), in which case such gain generally will be subject to U.S. federal income tax at rates generally applicable to U.S. persons, and, if the Non-U.S. holder is a corporation, such gain may also be subject to the branch profits tax at a rate of 30 percent (or a lower rate under an applicable income tax treaty);

 

   

such Non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the completion of the merger, and certain other specified conditions are met, in which case such gain will be subject to U.S. federal income tax at a rate of 30 percent (or a lower rate under an applicable income tax treaty); or

 

   

Transphorm is or has been a “United States real property holding corporation” as such term is defined in Section 897(c) of the Code (which is referred to as “USRPHC”), at any time within the shorter of the

 

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five-year period preceding the merger or such Non-U.S. holder’s holding period with respect to the applicable shares of Transphorm common stock (which is refer to as the “relevant period”) and, if shares of Transphorm common stock are regularly traded on an established securities market (within the meaning of Section 897(c)(3) of the Code), such Non-U.S. holder owns (directly, indirectly or constructively) more than five percent of Transphorm common stock at any time during the relevant period, in which case such gain will be subject to U.S. federal income tax at rates generally applicable to U.S. persons (as described in the first bullet point above), except that the branch profits tax will not apply. Generally, a corporation is a USRPHC if the fair market value of its U.S. real property interests (as defined in the Code) equals or exceeds 50 percent of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. For this purpose, U.S. real property interests generally include land, improvements and associated personal property. Although there can be no assurances in this regard, Transphorm believes that it is not, and has not been, a USRPHC at any time during the five-year period preceding the merger. Non-U.S. holders are encouraged to consult their tax advisors regarding the possible consequences to them if Transphorm is a USRPHC.

Information Reporting and Backup Withholding

Information reporting and backup withholding (at a current rate of 24 percent) may apply to the proceeds received by a holder pursuant to the merger. Backup withholding generally will not apply to (1) a U.S. holder that furnishes a correct taxpayer identification number and certifies that such U.S. holder is not subject to backup withholding on IRS Form W-9 (or a substitute or successor form); or (2) a Non-U.S. holder that (a) provides a certification of such Non-U.S. holder’s non-U.S. status on the appropriate series of IRS Form W-8 (or a substitute or successor form); or (b) otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against the holder’s U.S. federal income tax liability, if the required information is timely furnished to the IRS.

A U.S. holder may be required to retain records related to such holder’s Transphorm common stock and file with its U.S. federal income tax return, for the taxable year that includes the merger, a statement setting forth certain facts relating to the merger.

Additional Withholding Requirements under the Foreign Account Tax Compliance Act (FATCA)

Sections 1471 through 1474 of the Code, and the U.S. Treasury Regulations and administrative guidance issued thereunder (which is referred to as, collectively, “FATCA”), impose a U.S. federal withholding tax of 30 percent on certain payments made to a “foreign financial institution” (as specially defined under these rules) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding certain U.S. account holders of such institution (which include certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or an exemption applies. FATCA also generally imposes a U.S. federal withholding tax of 30 percent on certain payments made to a non-financial foreign entity unless such entity provides the withholding agent a certification identifying certain direct and indirect U.S. owners of the entity or an exemption applies. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Under certain circumstances, a Non-U.S. holder might be eligible for refunds or credits of such taxes.

The U.S. Treasury Department recently released proposed regulations which, if finalized in their present form, would eliminate the FATCA withholding applicable to the gross proceeds of a sale or other disposition of Transphorm common stock. In its preamble to such proposed regulations, the U.S. Treasury Department stated that taxpayers may generally rely on the proposed regulations until final regulations are issued.

Holders of Transphorm common stock are encouraged to consult with their tax advisors regarding the possible implications of FATCA on the disposition of Transphorm common stock pursuant to the merger.

 

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THE U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE INCLUDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH U.S. HOLDER AND NON-U.S. HOLDER SHOULD CONSULT SUCH HOLDER’S TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED ABOVE TO SUCH HOLDER AND THE PARTICULAR TAX EFFECTS OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF U.S. FEDERAL NON-INCOME, STATE, LOCAL, NON-U.S. AND OTHER TAX LAWS.

Regulatory Approvals Required for the Merger

General Efforts

Upon the terms and subject to the conditions set forth in the merger agreement, Renesas and Merger Sub, on the one hand, and Transphorm, on the other hand, agreed to use reasonable best efforts to take, or cause to be taken, all actions, do, or cause to be done, all things and assist and cooperate with the other parties in doing, or causing to be done, all things, in each case as are necessary, proper or advisable pursuant to applicable law or otherwise to consummate and make effective the merger, in the most expeditious manner practicable including: (1) seeking to obtain all consents, waivers, approvals, expirations of all applicable waiting periods, orders and authorizations from governmental authorities, and taking all actions to avoid or eliminate each and every impediment under applicable law; and (2) making all registrations, declarations, and filings with governmental authorities, in each case that are necessary or advisable to consummate the merger.

HSR Act; CFIUS

Under the merger agreement, the merger cannot be completed until the waiting period (and extensions thereof, if any) applicable to the merger under the HSR Act have expired or otherwise been terminated, and all consents of the relevant governmental authorities have been obtained.

Transphorm and Renesas each filed or caused to be filed the requisite notification forms under the HSR Act with the FTC and the DOJ on January 25, 2024. The applicable waiting period under the HSR Act is scheduled to expire at 11:59 p.m., Eastern time, on February 26, 2024.

Transphorm and Renesas have each agreed to use its reasonable best efforts, as soon as reasonably practicable, to cause the expiration or termination of the applicable waiting period pursuant to the HSR Act and any other antitrust law applicable to the merger.

Additionally, Renesas and Merger Sub have each agreed not to acquire or agree to acquire by merging or by acquiring in any other manner, any business of any person or other business organization or division if such business competes in any material line of business with Transphorm or its subsidiaries and the entering into a definitive agreement relating to the consummation of such transaction would reasonably be expected to (1) impose any delay in the obtaining of, or materially increase the risk of not obtaining, any authorization, consent, order, declaration, or approval of any governmental authority necessary to consummate the merger or the expiration or termination of any applicable waiting period; (2) increase the risk of any governmental authority entering an order prohibiting the consummation of the merger; (3) increase the risk of not being able to remove any such order on appeal or otherwise; or (4) delay or prevent the consummation of the merger, subject to certain exceptions.

At any time before or after consummation of the merger, notwithstanding the termination of the waiting period under the HSR Act, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary or desirable, including seeking to enjoin the completion of the merger, seeking divestiture of substantial assets of the parties or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. At any time before or after the completion of the merger, and notwithstanding the termination of the waiting period under the HSR Act, any state could take such action under its antitrust laws as it deems

 

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necessary or desirable. Such action could include seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of Transphorm or Renesas. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

Subject to the terms of the merger agreement, each of Renesas and Merger Sub (and their respective controlled affiliates, if applicable) agreed to, if and to the extent necessary to obtain clearance of the merger pursuant to the HSR Act and any other antitrust laws applicable to the merger, use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to cause the expiration or termination of the applicable waiting periods pursuant to the HSR Act, including if there is any legal proceeding by a governmental authority challenging the merger as violative of any antitrust law; provided, however, that Renesas shall not be required to (i) offer, negotiate, commit to or effect, by consent decree, hold separate order or otherwise, (A) the sale, divestiture, license or other disposition of any and all of the capital stock or other equity or voting interests, assets (whether tangible or intangible), rights, products or businesses of Renesas, Merger Sub (or their respective affiliates, if applicable), or Transphorm and its subsidiaries; (B) the termination, modification, or assignment of existing relationships, joint ventures, contracts or obligations of Renesas, Merger Sub (or their respective affiliates, if applicable), or Transphorm and its subsidiaries; (C) the modification of any course of conduct regarding future operations of, or any other restrictions on, the activities of Renesas, Merger Sub (or their respective affiliates, if applicable), or the Transphorm and its subsidiaries; or (ii) otherwise accept any limitations, requirements or conditions imposed, recommended or requested by the FTC or the DOJ that would have a material adverse effect on Renesas and its subsidiaries, taken as a whole.

Under the merger agreement, the merger cannot be completed until receipt of the CFIUS approval. Each party’s obligations to complete the merger are contingent upon CFIUS approval.

CFIUS may impose conditions as a prerequisite for its clearance of the merger. Renesas may determine not to proceed with the merger should such conditions (i) result in a material adverse effect on Guarantor and its subsidiaries taken as a whole; (ii) violate any law of a competent jurisdiction applicable to Renesas or its affiliates; (iii) require Guarantor or its subsidiaries to sell, divest, or dispose of any material assets or material businesses of Guarantor or its subsidiaries; (iv) result in a material impediment to the reasonable integration of Transphorm with Renesas, including any mitigation that would materially limit the ability of Guarantor or its subsidiaries to own, control or operate Transphorm; or (v) reasonably be expected to materially impair the commercial value to Renesas of Transphorm and its subsidiaries, taken as a whole.

One or more governmental bodies may impose a condition, restriction, qualification, requirement, or limitation when it grants the necessary approvals and consents to the merger. Third parties may also seek to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, which actions could significantly impede or even preclude obtaining required regulatory approvals. There is currently no way to predict how long it will take to obtain all of the required regulatory approvals or whether such approvals will ultimately be obtained, and there may be a substantial period of time between the approval by Transphorm’s stockholders and the completion of the merger.

Although Transphorm expects that all required regulatory clearances and approvals will be obtained, Transphorm cannot assure you that these regulatory clearances and approvals will be obtained in a timely manner, obtained at all, or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the merger or require changes to the terms of the merger agreement. These conditions or changes could result in the conditions to the merger not being satisfied.

Financing of the Merger

The obligation of Renesas and Merger Sub to consummate the merger is not subject to any financing condition. Renesas and Merger Sub have represented to Transphorm that, as of January 10, 2024, they had and will have

 

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available to them sufficient funds to make the payments required to be paid at the closing of the merger by Renesas and Merger Sub under the merger agreement. This includes funds needed to: (1) pay Transphorm stockholders the amounts due under the merger agreement for their Transphorm common stock and (2) make payments in respect of outstanding Transphorm RSUs, Transphorm options and Transphorm warrants payable at the closing of the merger pursuant to the merger agreement.

Voting Agreement

In connection with Transphorm’s entry into the merger agreement, on January 10, 2024, Phorm Investor, in its capacity as a stockholder of Transphorm, entered into the voting agreement with Renesas. A copy of the voting agreement is attached as Annex C to this proxy statement. The voting agreement covers approximately 38.6 percent of the number of shares of Transphorm’s common stock issued and outstanding as of the record date.

Under the voting agreement, Phorm Investor has agreed to vote all of its shares of Transphorm common stock (1) in favor of the adoption of the merger agreement and the approval of the merger for any proposal to adjourn or postpone the special meeting to a later date if there are not sufficient votes present for there to be a quorum or for the adoption of the merger agreement on the date on which such meeting is held; and (2) against any acquisition proposal, reorganization, recapitalization, liquidation or winding-up of Transphorm or any other extraordinary transaction involving Transphorm, or any corporate action the consummation of which would reasonably be expected to interfere with, prevent or delay the consummation of the transactions contemplated by the merger agreement. The voting agreement does not restrict any designee of Phorm Investor who is a director of Transphorm from acting in such capacity or fulfilling the obligations of such office.

Pursuant to the voting agreement, Phorm Investor has agreed not to, until the termination of the voting agreement and subject to certain exceptions in the voting agreement, directly or indirectly (1) grant any proxies, powers of attorney or any other authorizations, or enter into any voting trust or other agreement or arrangement with respect to the voting of any Transphorm common stock held by Phorm Investor; (2) sell, assign, transfer or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the direct or indirect sale, assignment, transfer or other disposition of (including by gift, and whether by merger, by tendering into any tender or exchange offer, by operation of law or otherwise, including pursuant to any derivative transaction), any Transphorm common stock held by Phorm Investor (or any beneficial ownership therein or portion thereof) or consent to any of the foregoing; or (3) otherwise permit any lien or encumbrance to be created on any of the Transphorm common stock held by Phorm Investor, except for such liens or encumbrances as would not reasonably be expected to, individually or in the aggregate, materially prevent, delay or impair or otherwise adversely impact Phorm Investor’s ability to perform its obligations under the voting agreement.

The voting agreement terminates automatically upon the earliest to occur of (1) the effective time of the merger; (2) the date on which either Renesas or Transphorm provides notice to the other of termination of the merger agreement in accordance with its terms (or, if earlier, the date on which the merger agreement is otherwise terminated); (3) the mutual termination of the voting agreement by written agreement of each party to the voting agreement; (4) the effectiveness of amendment to the merger agreement that imposes any additional restrictions or conditions on the payment of the per share price, imposes any additional conditions on the consummation of the merger, reduces the per share price or changes the form of consideration payable to the Transphorm stockholders pursuant to the merger agreement; and (5) the occurrence of a Transphorm Board recommendation change.

Delisting and Deregistration of Transphorm Common Stock

If the merger is completed, Transphorm common stock will no longer be traded on the Nasdaq and will be deregistered under the Exchange Act. Transphorm will no longer be required to file periodic reports, current reports and proxy and information statements with the SEC with respect to Transphorm common stock.

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

Transphorm is asking you to approve the adoption of the merger agreement. For a summary of and detailed information regarding this proposal, see the information about the merger agreement throughout this proxy statement, including the information set forth in the sections of this proxy statement captioned “The Merger” and “The Merger Agreement.” A copy of the merger agreement is attached as Annex A to this proxy statement. You are urged to read the merger agreement carefully and in its entirety.

The Transphorm Board unanimously recommends that you vote “FOR” this proposal.

 

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PROPOSAL 2: ADJOURNMENT OF THE SPECIAL MEETING

Transphorm is asking you to approve any proposal to adjourn the special meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the merger agreement at the time of the special meeting. If stockholders approve this proposal, Transphorm can adjourn the special meeting and any adjourned session of the special meeting and use the additional time to solicit additional proxies, including soliciting proxies from stockholders that have previously returned properly signed proxies voting against adoption of the merger agreement. Among other things, approval of the adjournment proposal could mean that, even if Transphorm received proxies representing a sufficient number of votes against adoption of the merger agreement such that the proposal to adopt the merger agreement would be defeated, Transphorm could adjourn the special meeting without a vote on the adoption of the merger agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the merger agreement. Additionally, Transphorm may seek stockholder approval to adjourn the special meeting if a quorum is not present. Finally, the chairperson of the special meeting is permitted by Transphorm’s bylaws to adjourn the special meeting even if Transphorm’s stockholders have not approved the proposal to adjourn the special meeting.

The Transphorm Board unanimously recommends that you vote “FOR” this proposal.

 

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THE MERGER AGREEMENT

The following summary describes the material provisions of the merger agreement. The descriptions of the merger agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the merger agreement, a copy of which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You are encouraged to carefully read and consider the merger agreement, which is the legal document that governs the merger, in its entirety because this summary may not contain all the information about the merger agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the merger agreement, and not by this summary or any other information contained in this proxy statement.

The representations, warranties, covenants, and agreements described below and included in the merger agreement (1) were made only for purposes of the merger agreement and as of specific dates; (2) were made solely for the benefit of the parties to the merger agreement; (3) may be subject to important qualifications, limitations, and supplemental information agreed to by Transphorm, Renesas, Merger Sub, and Guarantor in connection with negotiating the terms of the merger agreement; and (4) may also be subject to a contractual standard of materiality different from those generally applicable to reports and documents filed with the SEC and in some cases were qualified by confidential matters disclosed by Transphorm to Renesas and Merger Sub by Transphorm in connection with the merger agreement. In addition, the representations and warranties may have been included in the merger agreement for the purpose of allocating contractual risk between Transphorm and Renesas and Merger Sub rather than to establish matters as facts. Further, the representations and warranties were negotiated with the principal purpose of establishing the circumstances in which a party to the merger agreement may have the right not to consummate the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise. Transphorm’s stockholders are not generally third-party beneficiaries under the merger agreement and should not rely on the representations, warranties, covenants, and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of Transphorm, Renesas, Merger Sub, Guarantor or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the merger agreement. None of the representations and warranties will survive the closing of the merger, and, therefore, they will have no legal effect under the merger agreement after the effective time of the merger. In addition, you should not rely on the covenants in the merger agreement as actual limitations on the respective businesses of Transphorm, Renesas, and Merger Sub because the parties may take certain actions that are either expressly permitted in the confidential disclosure letter to the merger agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The merger agreement is described below, and included as Annex A to this proxy statement, only to provide you with information regarding its terms and conditions, and not to provide you with any other factual information regarding Transphorm, Renesas, Merger Sub, or their respective businesses. Accordingly, the representations, warranties, covenants, and other agreements in the merger agreement should not be read alone, and you should read the information provided elsewhere in this document and in Transphorm’s filings with the SEC regarding Transphorm and Transphorm’s business.

Closing and Effective Time of the Merger

The closing of the merger will take place (1) on a date to be agreed by Renesas, Merger Sub, and Transphorm that is no later than the fourth business day after the satisfaction or waiver of the last condition to the closing of the merger (other than those conditions that by their terms are to be satisfied at the closing of the merger, but subject to the satisfaction or waiver (to the extent permitted under the merger agreement) of such conditions); or (2) at such other time mutually agreed to by Transphorm, Renesas, and Merger Sub. On the closing date of the merger, the parties will file a certificate of merger with the Secretary of State of the State of Delaware as provided under the DGCL. The merger will become effective upon the filing and acceptance of such certificate of merger, or at a later time agreed to in writing by the parties and specified in such certificate of merger.

 

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Effects of the Merger; Certificate of Incorporation; Bylaws; Directors and Officers

The merger agreement provides that, subject to the terms and conditions of the merger agreement, and in accordance with the DGCL, at the effective time of the merger: (1) Merger Sub will be merged with and into Transphorm; (2) the separate corporate existence of Merger Sub will cease; and (3) Transphorm will continue as the surviving corporation in the merger and a wholly owned subsidiary of Renesas. From and after the effective time of the merger, all of the property, rights, privileges, powers, and franchises of Transphorm and Merger Sub will vest in the surviving corporation and all of the debts, liabilities, and duties of Transphorm and Merger Sub will become the debts, liabilities, and duties of the surviving corporation.

At the effective time of the merger, the certificate of incorporation of Transphorm as the surviving corporation will be amended and restated in its entirety to read as set forth in the applicable exhibit attached to the merger agreement, and the bylaws of Merger Sub as in effect immediately prior to the effective time will become the bylaws of Transphorm as the surviving corporation, in each case, until thereafter amended in accordance with the DGCL and the certificate of incorporation and bylaws of the surviving corporation.

At the effective time of the merger, the board of directors of the surviving corporation will be the directors of Merger Sub as of immediately prior to the effective time of the merger, each to hold office in accordance with the certificate of incorporation and bylaws of the surviving corporation until their successors are duly elected or appointed and qualified, or until their earlier death, resignation or removal. At the effective time of the merger, the officers of the surviving corporation will be the officers of Transphorm as of immediately prior to the effective time of the merger, each to hold office in accordance with the certificate of incorporation and bylaws of the surviving corporation until their successors are duly appointed, or until their earlier death, resignation, or removal.

Conversion of Shares

Common Stock

Upon the terms and subject to the conditions set forth in the merger agreement, at the effective time of the merger, each share of Transphorm common stock that is issued and outstanding as of immediately prior to the effective time of the merger (other than as specified in the merger agreement) will be automatically converted into the right to receive an amount in cash equal to the per share price without interest and less any applicable withholding taxes (or, in the case of a lost, stolen or destroyed certificate, upon delivery of an affidavit (and bond, if required) in accordance with the terms of the merger agreement).

At the effective time of the merger, each outstanding share of common stock that is (1) held by Transphorm as treasury stock; (2) owned by Renesas or Merger Sub; or (3) owned by any direct or indirect wholly owned subsidiary of Renesas or Merger Sub will automatically be cancelled and will cease to exist without any conversion thereof or consideration paid in exchange therefor. At the effective time of the merger, the shares of Transphorm common stock held by Transphorm stockholders who have (1) neither voted in favor of the adoption of the merger nor consented thereto in writing, and (2) properly demanded appraisal of such shares of Transphorm common stock pursuant to, and in accordance with Section 262 of the DGCL, if any, will be entitled to only such rights as are granted by Section 262 of the DGCL. At the effective time of the merger, each share of common stock of Merger Sub that is outstanding immediately prior to the effective time of the merger will be converted into one validly issued, fully paid, and nonassessable share of Transphorm common stock of the surviving corporation and such shares of common stock of Merger Sub will thereafter represent ownership of shares of common stock of the surviving corporation.

 

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Treatment of Equity Awards

The merger agreement provides that Transphorm’s equity awards that are outstanding immediately prior to the effective time of the merger will be treated in the following manner in connection with the merger:

Treatment of Transphorm Restricted Stock Units

At the effective time of the merger, each vested Transphorm RSU will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Transphorm common stock subject to such vested Transphorm RSU immediately prior to the effective time of the merger, multiplied by (2) the per share price, less applicable tax withholding.

At the effective time of the merger, except as agreed by the affected parties or as otherwise described below, each unvested Transphorm RSU (taking into account the effect of any applicable vesting acceleration in connection with the merger) held by a U.S. continuing employee will be cancelled and converted into the right to receive an unvested Guarantor RSU Grant covering a number of Guarantor restricted stock units equal to (x) the total number of shares of Transphorm common stock subject to such unvested Transphorm RSU immediately prior to the effective time of the merger, multiplied by the per share price (converted into Japanese Yen using the U.S. dollar to Japanese Yen exchange rate 30-day trailing average of the closing daily exchange rates published by the Wall Street Journal (U.S. online edition) over the 30 consecutive trading days ending immediately preceding the closing date of the merger), divided by (y) the Guarantor common stock price, rounded up to the nearest 100 Guarantor restricted stock units.

Each Guarantor RSU Grant will be subject to the terms and conditions in Guarantor’s stock compensation plan. Each Guarantor RSU Grant will vest according to the modified vesting schedule that is based on the vesting schedule that applied to the corresponding unvested Transphorm RSU, except that (a) any Guarantor restricted stock units that otherwise would be scheduled to vest before the initial vest date (that is, first quarterly vesting date of Guarantor that occurs after the closing of the merger) instead will be scheduled to vest on the closing date of the merger, and (b) for any Guarantor restricted stock units that otherwise would be scheduled to vest after the initial vest date, will vest as follows: for any for any restricted stock units that otherwise would be scheduled to vest during the period from (1) November 1 through January 31, those restricted stock units instead will be scheduled to vest on November 1, (2) February 1 through April 30, those restricted stock units instead will be scheduled to vest on February 1, (3) May 1 through July 31, those restricted stock units instead will be scheduled to vest on May 1, and (4) August 1 through October 31, those restricted stock units instead will be scheduled to vest on August 1.

At the effective time of the merger, except as agreed by the affected parties or as otherwise described below, each unvested Transphorm RSU (taking into account the effect of any applicable vesting acceleration in connection with the merger) held by a person who is not a U.S. continuing employee will be cancelled and converted into the right to receive, at Renesas’ discretion, either (1) a Guarantor RSU Grant on the same terms and conditions as the Guarantor RSU Grants for U.S. continuing employees described above, or (2) the unvested Transphorm RSU consideration (that is, a cash payment without interest equal to, for each share of Transphorm common stock subject to such unvested Transphorm RSU, the per share price, less applicable tax withholding), which will vest on the same modified vesting schedule that applies to the Guarantor RSU Grants.

To the extent the vesting schedule that applied to any Transphorm RSUs as of immediately before the effective time of the merger otherwise would have caused any of those Transphorm RSUs to vest before the grant date of the Guarantor RSU Grants, then at the effective time of the merger, those Transphorm RSUs will not be converted into the right to receive Guarantor restricted stock units and instead will be converted into the right to receive the unvested Transphorm RSU consideration, which will be paid, less applicable tax withholding, no later than 30 days after the applicable vesting date.

The merger agreement provides that before the effective time of the merger, the Transphorm Board must have adopted appropriate resolutions and taken all other actions necessary and appropriate to provide that, as of

 

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immediately prior to the effective time of the merger, the vesting of any outstanding then-unvested Transphorm RSUs that vest solely on the basis of continued service over specified period(s) of time will be accelerated as follows: (i) for any such Transphorm RSUs that were granted before August 1, 2023, as to all of such Transphorm RSUs, and (ii) for any such Transphorm RSUs that were granted on or after August 1, 2023, but on or prior to December 31, 2023, as to 50 percent of such Transphorm RSUs.

Treatment of Transphorm Options

At the effective time of the merger, each outstanding Transphorm option (whether vested or unvested) will be cancelled and converted into the right to receive an amount in cash (without interest) equal to (1) the total number of shares of Transphorm common stock subject to the Transphorm option multiplied by (2) the excess, if any, of the per share price over the exercise price per share of such Transphorm option, less applicable tax withholding.

Any underwater Transphorm option (whether vested or unvested) will be cancelled at the effective time of the merger for no consideration or payment.

Warrants

At the effective time of the merger, each Transphorm warrant that is outstanding immediately prior to the effective time of the merger will be cancelled and converted into the right to receive (without interest) an amount in cash, equal to (1) the number of shares of Transphorm common stock subject to such Transphorm warrant multiplied by (2) the excess, if any, of the per share price over the exercise price per share of such Transphorm warrant, less any applicable taxes. Any Transphorm warrant with an exercise price per share of Transphorm common stock that is greater than or equal to the per share price will be cancelled at the effective time of the merger for no consideration or payment.

Payment Agent, Exchange Fund and Exchange and Payment Procedures

Prior to the closing of the merger, Renesas will appoint an agent reasonably acceptable to Transphorm (which is referred to as the “payment agent”), to make payments of the merger consideration to Transphorm’s stockholders and warrantholders. At or prior to the closing of the merger, Renesas will deposit (or cause to be deposited) with the payment agent an amount of cash that is sufficient in the aggregate to pay the aggregate per share price payable to Transphorm’s stockholders and warrantholders in accordance with the merger agreement.

Promptly (and in any event within one business day) following the effective time of the merger, Renesas and the surviving corporation will cause the payment agent to mail to each holder of record (as of immediately prior to the effective time of the merger) of a certificate that immediately prior to the effective time of the merger represented outstanding shares of Transphorm common stock (other than as specified in the merger agreement), a letter of transmittal and instructions advising stockholders how to surrender stock certificates in exchange for merger consideration. Upon receipt of (1) surrendered certificates for cancellation (or an appropriate affidavit for lost, stolen or destroyed certificates, together with any required bond); and (2) a duly completed and signed letter of transmittal and such other documents as may be reasonably requested by the payment agent, the holder of such certificate will be entitled to receive an amount in cash equal to the product of (x) the aggregate number of shares of Transphorm common stock represented by such certificate and (y) the per share price. The amount of any per share price paid to Transphorm’s stockholders will not include interest and may be reduced by any applicable withholding taxes.

Notwithstanding the foregoing, any holder of shares of Transphorm common stock held in book-entry form (which is referred to as “uncertificated shares”) will not be required to deliver a certificate or an executed letter of transmittal (as both are described above) to the payment agent to receive the consideration payable in respect thereof. Each holder of record (as of immediately prior to the effective time of the merger) of uncertificated

 

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shares that immediately prior to the effective time of the merger represented an outstanding share of Transphorm common stock (other than as specified in the merger agreement) will, upon receipt of an “agent’s message” in customary form at the effective time of the merger, and after providing any documents as may reasonably be requested by the payment agent, be entitled to receive, and the payment agent will pay and deliver as promptly as practicable, an amount in cash equal to the product of (1) the aggregate number of shares of Transphorm common stock represented by such holder’s transferred uncertificated shares; and (2) the per share price. The amount of consideration paid to such Transphorm stockholders will not include interest and may be reduced by any applicable withholding taxes.

If any cash deposited with the payment agent is not claimed within one year following the effective time of the merger, such cash will be returned to Renesas upon demand, and any of Transphorm’s stockholders and warrantholders as of immediately prior to the merger who have not complied with the exchange procedures in the merger agreement will thereafter look only to Renesas for satisfaction of payment of the merger consideration (subject to abandoned property law, escheat law or similar laws). None of the payment agent, Renesas, the surviving corporation, or any other party will be liable to any of Transphorm’s stockholders with respect to any cash amounts properly paid to a public official pursuant to any applicable abandoned property law, escheat law or similar laws.

The letter of transmittal will include instructions if a stockholder has lost a share certificate or if such certificate has been stolen or destroyed. In the event that any share certificates have been lost, stolen, or destroyed, then the payment agent will issue the per share price to such holder upon the making by such holder of an affidavit for such lost, stolen or destroyed certificate. Renesas or the payment agent may, in its discretion and as a condition precedent to the payment of the per share price, require such stockholder to deliver a bond in such amount as Renesas or the payment agent may direct as indemnity against any claim that may be made against Renesas, the surviving corporation or the payment agent with respect to such certificate.

Representations and Warranties

The merger agreement contains representations and warranties of Transphorm, Renesas, Merger Sub and Guarantor.

Some of the representations and warranties in the merger agreement made by Transphorm are qualified as to “materiality” or “company material adverse effect.” For purposes of the merger agreement, “company material adverse effect” means any change, event, condition, development, fact, occurrence, effect, or circumstance that, individually or taken together with all other effects that exist or have occurred prior to the date of determination of the company material adverse effect, has had or would reasonably be expected to have a material adverse effect on the business, financial condition, or results of operations of Transphorm and its subsidiaries, taken as a whole, but excluding, in each case, any such effect to the extent arising out of, relating to or resulting from:

 

   

general economic conditions anywhere in the world, or conditions in the global economy generally (except, to the extent that such effect has had a materially disproportionate adverse effect on Transphorm and its subsidiaries relative to similarly situated companies operating in the industry in which Transphorm and its subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether a company material adverse effect has occurred);

 

   

conditions in the financial markets, credit markets, equity markets, debt markets, currency markets, or capital markets in anywhere in the world, including (a) changes in interest rates or credit ratings in the United States or any other country; (b) changes in exchange rates for the currencies of any country; or (c) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market operating anywhere in the world (except, in each case, to the extent that such effect has had a materially disproportionate adverse effect on Transphorm relative to similarly situated companies operating in the industry in which Transphorm and its subsidiaries

 

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conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether a company material adverse effect has occurred);

 

   

conditions in the industries in which Transphorm and its subsidiaries conduct business, or changes in such conditions (except to the extent that such effect has had a materially disproportionate adverse effect on Transphorm and its subsidiaries, taken as a whole, relative to the similarly situated companies operating in the industry in which Transphorm and its subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether a company material adverse effect has occurred).

 

   

conditions in any specific jurisdiction or geographical area in which Transphorm and its subsidiaries conduct business, or changes in such conditions (except, in each case, to the extent that such effect has had a materially disproportionate adverse effect on Transphorm and its subsidiaries relative to similarly situated companies operating in the industry in which Transphorm and its subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether a company material adverse effect has occurred);

 

   

regulatory, legislative, or political conditions (including anti-dumping actions, international tariffs, sanctions, trade policies or disputes or any “trade war” or similar actions) in the United States or any other country or region in the world (except, in each case, to the extent that such effect has had a materially disproportionate adverse effect on Transphorm relative to the similarly situated companies operating in the industry in which Transphorm and its subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether a company material adverse effect has occurred be expected to occur);

 

   

any geopolitical conditions, outbreak of hostilities, armed conflicts, civil unrest, civil disobedience, acts of war, sabotage, terrorism, or military actions (including, in each case, any escalation or worsening of any of the foregoing) in the United States or any other country or region in the world, including an outbreak or escalation of hostilities involving the United States or any other governmental authority or the declaration by the United States or any other governmental authority of a national emergency or war (except, in each case, to the extent that such effect has had a materially disproportionate adverse effect on Transphorm relative to similarly situated companies operating in the industry in which Transphorm and its subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether a company material adverse effect has occurred);

 

   

earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, volcanic eruptions, wildfires, nuclear incidents, foreign or domestic social protest or social unrest (whether or not violent), or other natural or man-made disasters, weather conditions, power outages, or other force majeure events in the United States or any other country or region in the world (or escalation or worsening of any such events or occurrences, including, in each case, the response of governmental authorities) (except, in each case, to the extent that such effect has had a materially disproportionate adverse effect on Transphorm and its subsidiaries, taken as a whole, relative to similarly situated companies operating in the industry in which Transphorm and its subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether a company material adverse effect has occurred);

 

   

pandemics (including the COVID-19 pandemic), epidemics, plagues, contagious disease outbreaks, or other comparable events (including quarantine restrictions mandated or recommended by any governmental authority), or escalation or worsening of any such events or occurrences, including, in each case, the response of governmental authorities (including “shelter in place,” “stay at home,” social distancing, shut down, closure, sequester, safety or similar law, directive, guideline, response, or recommendation of or promulgated by any governmental authority, including the Centers for Disease Control and Prevention and the World Health Organization, or other reasonable actions taken, in each case, in connection with or in response to COVID-19 and including, in each case, any changes in any

 

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such law, directive, guidance, response or recommendation (which is referred to as “COVID-19 measures”)) in the United States or any other country or region in the world;

 

   

inflation or any changes in the rate of increase or decrease of inflation;

 

   

the development, continuation, or worsening of supply chain disruptions affecting the industry in which Transphorm and its subsidiaries conduct business (except, in each case, to the extent that such effect has had a materially disproportionate adverse effect on Transphorm and its subsidiaries, take as a whole, relative to similarly situated companies operating in the industry in which Transphorm and its subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether a company material adverse effect has occurred);

 

   

the negotiation, execution, delivery, announcement, or performance of the merger agreement or the pendency or consummation of the merger including the impact thereof on the relationships, contractual or otherwise, of Transphorm and its subsidiaries with employees (including any employee attrition), suppliers, customers, partners, lenders, lessors vendors, governmental authorities, or any other third person (except that this exception shall not apply to representations and warranties that specifically address the consequences of the entry into the merger agreement or the consummation of the merger);

 

   

the compliance by any party with the terms of the merger agreement, including any action taken or refrained from being taken pursuant to or in accordance with the express terms of the merger agreement;

 

   

any action taken or refrained from being taken by Transphorm or any of its subsidiaries, in each case to which Renesas has expressly approved, consented to, or requested in writing (including by email) following the date of the merger agreement;

 

   

changes or proposed changes in GAAP or other accounting standards or law (or the enforcement or interpretation of any of the foregoing), including the adoption, implementation, repeal, modification, reinterpretation, or proposal thereof, changes in the regulatory accounting requirements applicable to any industry in which Transphorm and its subsidiaries operate (including the adoption, implementation, repeal, modification reinterpretation or proposal thereof), or any action taken for the purpose of complying with such changes to GAAP or law (except to the extent that such effect has had a materially disproportionate adverse effect on Transphorm and its subsidiaries, taken as a whole, relative to the similarly situated companies operating in the industry in which Transphorm and its subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determining whether a company material adverse effect has occurred), or any COVID-19 measures;

 

   

changes in the price or trading volume of Transphorm common stock, in and of itself (it being understood that the cause of such change may be deemed to constitute, in and of itself, a company material adverse effect and may be taken into consideration when determining whether a company material adverse effect has occurred to the extent not otherwise excluded under this definition);

 

   

any failure, in and of itself, by Transphorm and its subsidiaries to meet (1) any public estimates or expectations of Transphorm’s revenue, earnings, or other financial performance or results of operations for any period; or (2) any budgets, plans, projections, or forecasts of its revenues, earnings or other financial performance or results of operations (it being understood that the cause of any such failure in clause (1) or (2) may be deemed to constitute, in and of itself, a company material adverse effect and may be taken into consideration when determining whether a company material adverse effect has occurred to the extent not otherwise excluded under this definition);

 

   

the availability or cost of equity, debt, or other financing to Renesas or Merger Sub, or any of their respective affiliates;

 

   

any transaction litigation or other legal proceeding threatened, made or brought by any of Transphorm’s current or former stockholders (on their own behalf or on behalf of Transphorm) against Transphorm, any of its stockholders, executive officers, or other employees or any member of the

 

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Transphorm Board (or any affiliates of any of the foregoing) in connection with, arising from or otherwise relating to the merger, including any demand or legal proceeding for appraisal rights of the fair value of any shares of Transphorm common stock;

 

   

the identity of, or any facts or circumstances relating to Renesas, or Merger Sub or their respective their respective plans or intentions of the foregoing with respect to Transphorm or its business; or

 

   

any breach of the merger agreement by Renesas or Merger Sub.

In the merger agreement, Transphorm has made customary representations and warranties to Renesas and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the merger agreement and the confidential disclosure letter to the merger agreement. These representations and warranties relate to, among other things:

 

   

organization and good standing;

 

   

corporate power and enforceability;

 

   

approval of the Transphorm Board, fairness opinion, and anti-takeover laws;

 

   

the nature of the required approval of Transphorm’s stockholders;

 

   

non-contravention of certain agreements and laws;

 

   

requisite governmental approvals;

 

   

Transphorm’s capitalization;

 

   

Transphorm’s subsidiaries and their capitalization;

 

   

Transphorm’s SEC reports;

 

   

Transphorm’s financial statements, internal controls, and indebtedness;

 

   

no undisclosed liabilities;

 

   

absence of certain changes;

 

   

material contracts;

 

   

real property matters;

 

   

environmental matters;

 

   

intellectual property matters;

 

   

privacy and security matters;

 

   

tax matters;

 

   

employee benefit plans;

 

   

labor matters;

 

   

permits;

 

   

compliance with laws;

 

   

legal proceedings and orders;

 

   

insurance;

 

   

related party transactions; and

 

   

brokers.

 

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Under the merger agreement, Renesas and Merger Sub acknowledge that Transphorm has not made any representations or warranties other than those expressly set forth in the merger agreement or any certificate delivered by Transphorm pursuant to the merger agreement, and expressly disclaim reliance on any representation, warranty, or other information regarding Transphorm, other than those expressly set forth in the merger agreement or any certificate delivered by Transphorm pursuant to the merger agreement.

In the merger agreement, Renesas and Merger Sub have made customary representations and warranties to Transphorm that are subject, in some cases, to specified exceptions and qualifications contained in the merger agreement. These representations and warranties relate to, among other things:

 

   

organization and good standing;

 

   

corporate power and enforceability;

 

   

non-contravention of certain agreements and laws;

 

   

requisite governmental approvals;

 

   

legal proceedings and orders;

 

   

ownership of Renesas and Merger Sub capital stock;

 

   

brokers;

 

   

no Renesas vote or approval required;

 

   

sufficient funds to consummate the merger; and

 

   

absence of stockholder and management arrangements;

Under the merger agreement, Transphorm acknowledges that Renesas and Merger Sub have not made any representations or warranties other than those expressly set forth in the merger agreement or any certificate delivered by Renesas and Merger Sub pursuant to the merger agreement and expressly disclaims reliance on any representation, warranty, or other information regarding Renesas and Merger Sub, other than those expressly set forth in the merger agreement or any certificate delivered by Renesas and Merger Sub pursuant to the merger agreement.

The representations and warranties contained in the merger agreement will not survive the consummation of the merger.

Conduct of Business Pending the Merger

Other than as contemplated by the merger agreement, as required by applicable law, as set forth in the confidential disclosure letter to the merger agreement or approved by Renesas, from the date of the merger agreement to the effective time of the merger (or termination of the merger agreement), Transphorm agreed to, and agreed to cause its subsidiaries to, subject to certain exceptions, use its reasonable best efforts to:

 

   

conduct its business and operations in the ordinary course of business;

 

   

preserve intact its material assets, properties, material contracts, and business organizations;

 

   

keep available the services of its current officers and key employees; and

 

   

preserve its current relationships with material customers, suppliers, distributors, lessors, licensors, licensees, creditors, contractors, and other persons with whom Transphorm or any of its subsidiaries has business relations.

Transphorm has also agreed that, subject to certain exceptions, it will not, and agreed that it would not permit its subsidiaries to:

 

   

amend or otherwise change Transphorm’s charter, bylaws, or any other similar organizational document;

 

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propose or adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization, or other reorganization;

 

   

issue, sell, or deliver or agree or commit to issue, sell or deliver any Transphorm securities (including any Transphorm equity-based awards) (whether through the issuance or granting of options, restricted stock units, warrants, commitments, subscriptions, rights to purchase, or otherwise), except, in each case, (1) for the issuance, delivery or sale of (or agreement or commitment to issue, sell or deliver) Transphorm common stock pursuant to Transphorm equity-based awards or warrants outstanding as of the date of the merger agreement in each case, in accordance with their terms and the terms of the merger agreement; (2) as set forth on the confidential disclosure letter to the merger agreement; and (3) for the issuance delivery or sale of (or agreement or commitment to issue, sell or deliver) equity securities by Transphorm or its subsidiaries;

 

   

acquire, repurchase, or redeem any of its equity securities, except, in each case, (1) pursuant to the terms and conditions of Transphorm equity-based awards outstanding as of the date of the merger agreement in accordance with their terms as in effect as of the date of the merger agreement; or to otherwise satisfy tax obligations with respect to awards granted pursuant to Transphorm equity plans or to pay the exercise price of Transphorm options, in each case, in accordance with the existing terms of the applicable Transphorm equity plan as in effect of the date of this merger agreement; or (2) for transactions between Transphorm and any of its subsidiaries;

 

   

(1) adjust, split, subdivide, combine, or reclassify any shares of capital stock, or other equity or voting interests; (2) declare, set aside, establish a record date for, authorize or pay any dividend or other distribution (whether in cash, shares or property or any combination thereof) in respect of any shares of its capital stock or other equity or voting interests or make any other actual, constructive, or deemed distribution in respect of its capital stock or other equity or voting interests, except for dividends or other distributions made by any wholly-owned subsidiary of Transphorm to Transphorm or one of its other wholly-owned subsidiaries; (3) pledge or encumber any of its capital stock or other equity or voting interests (other than certain permitted liens); or (4) modify the terms of any of its capital stock or other equity or voting interests;

 

   

acquire or agree to acquire (by merger, consolidation, or acquisition of stock or assets) any third person or any equity interest in such person, or enter into any contractual joint venture or similar arrangement or legal partnership with any third person;

 

   

acquire, or agree to acquire, fee ownership (or its jurisdictional equivalent) of any real property;

 

   

(1) incur or assume any indebtedness or issue any debt securities, except, in each case (a) for loans or advances between Transphorm subsidiaries or between Transphorm and its subsidiaries; (b) obligations incurred pursuant to business credit cards in the ordinary course of business; or (c) pursuant to Transphorm’s credit facilities as in effect on the date of the merger agreement; (2) assume, guarantee, endorse, or otherwise become liable or responsible for the obligations of any third person except with respect to obligations of Transphorm’s subsidiaries; (3) make any loans advances or capital contributions to, or investments in, any third person, except, in each case, for (a) extensions of credit to customers in the ordinary course of business; (b) advances of reimbursable expenses to directors, officers and other employees, in each case, in the ordinary course of business; and (c) for loans or advances between wholly-owned Transphorm subsidiaries or between Transphorm and its wholly-owned subsidiaries and capital contributions in or to subsidiaries of Transphorm; or (4) mortgage, pledge or otherwise encumber any assets, tangible or intangible, or create any lien thereon (other than certain permitted liens);

 

   

except (1) in order to comply with applicable law; (2) as required pursuant to the existing terms of any Transphorm benefit plan in effect on the date of the merger agreement, listed on the confidential disclosure letter to the merger agreement and made available to Renesas; or (3) as provided in the merger agreement, (a) establish, adopt, enter into, terminate, or amend any material Transphorm

 

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benefit plan (or any plan, policy, agreement, contract, or arrangement that would be a material Transphorm benefit plan if in effect on the date of the merger agreement), or take any action to accelerate the vesting, payment, or funding of any compensation or benefits under, any Transphorm benefit plan (or any plan, policy, agreement, contract or arrangement that would be a Transphorm benefit plan if in effect on the date of the merger agreement); (b) grant to any service provider whose annual base cash compensation exceeds $175,000 any increase in cash on compensation, bonus or material fringe or other material benefits or, in the case of any such service provider whose annual base cash compensation does not exceed $175,000, grant any such increase that would result in such service provider’s annual base compensation exceeding $175,000; (c) grant to any service provider any increase in change in control, retention or termination pay; (d) enter into any employment, consulting, change in control, retention, severance or termination agreement with any service provider (other than with newly-hired non-officer employees or consultants in the ordinary course of business, or to replace personnel terminated for cause, death or disability or who resign voluntarily); or (e) terminate any employee of Transphorm or any of its subsidiaries with an annual base cash compensation in excess of $175,000, other than terminations for cause or in the ordinary course of business;

 

   

implement any reduction in force, mass layoff, collective redundancy, early retirement program, or other voluntary or involuntary termination program (other than individual employee terminations in the ordinary course of business consistent with past practice);

 

   

settle, release, waive, or compromise any pending or threatened material legal proceeding, except for the settlement of any legal proceedings (1) solely for monetary damages in an amount (a) not in excess of $250,000 individually or $500,000 in the aggregate; or (b) that does not exceed the amount reflected or reserved against in the audited Transphorm balance sheet; or (2) settled in compliance with the merger agreement;

 

   

except as required by applicable law or GAAP, (1) other than in the ordinary course of business, revalue in any material respect any of its properties or assets, including writing-off notes or accounts receivable; or (2) make any change in any of its accounting principles or practices;

 

   

(1) make or change any material tax election (other than elections that are consistent with past practice); (2) settle or compromise any material tax claim or assessment; (3) consent to any extension or waiver of any limitation period with respect to any material tax claim or assessment; (4) change any annual tax accounting period; (5) adopt or change any income or other material method of tax accounting, (6) file any amended material tax return; (7) file any tax return inconsistent with past practice; or (8) surrender any right to claim a tax refund (other than by reason of passage of time);

 

   

(1) incur, authorize or commit to incur any material capital expenditures other than (a) consistent in all material respects with the capital expenditure budget set forth in the confidential disclosure letter to the merger agreement; (b) pursuant to obligations imposed by material contracts or leases; or (c) pursuant to agreements in effect prior to the date of the merger agreement; (2) except in the ordinary course of business, (a) enter into any contract which if entered into prior to the date of the merger agreement would be a material contract; or (b) modify, amend or terminate any material contract in a manner that is adverse in any material respect to Transphorm and its subsidiaries, taken as whole, or terminate any material contract (other than any material contract that has expired in accordance with its terms); (3) maintain insurance at less than current levels or otherwise in a manner inconsistent with past practice; (4) engage in any transaction with, or enter into any agreement, arrangement or understanding with, any affiliate of Transphorm or other person covered by Item 404 of Regulation S-K promulgated by the SEC that would be required to be disclosed pursuant to Item 404 of Regulation S-K;

 

   

enter into a new line of business or cease, abandon, discontinue, dispose of, or materially modify operations with respect to, any material existing line of business; or

 

   

enter into or agree or commit to enter into a contract to take any such prohibited actions.

 

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No Solicitation of Other Acquisition Offers

From the date of the merger agreement to the effective time of the merger (or termination of the merger agreement), Transphorm agreed to, and agreed to (1) cause its subsidiaries and its executive officers and directors; (2) instruct its legal and financial advisors; and (3) use reasonable best efforts to cause each of its other representatives to, in each case, cease and cause to be terminated any discussions or negotiations with, and terminate any data room access (or other access to diligence) of any person and its representatives relating to, an acquisition transaction.

In particular, under and subject to the terms of the merger agreement, from the date of the merger agreement to the effective time of the merger (or termination of the merger agreement) Transphorm, its subsidiaries, and their respective directors and executive officers, will not, and Transphorm will not authorize or direct any of its subsidiaries’ other employees, consultants or other representatives to, directly or indirectly:

 

   

solicit, initiate, propose the making, submission, or announcement of, or knowingly induce, encourage, facilitate, or assist, any proposal that constitutes, or is reasonably expected to lead to, an acquisition proposal;

 

   

furnish to any person or group (other than Renesas, Merger Sub, or any of their respective representatives) any non-public information relating to Transphorm or any of its subsidiaries or afford to any person or group (other than Renesas, Merger Sub, or any of their respective representatives) access to the business, properties, assets, books, records, or other non-public information, or to any personnel, of Transphorm or any of its subsidiaries, in any such case in connection with any acquisition proposal or with the intent to induce the making, submission or announcement of, or to knowingly induce, encourage, facilitate, or assist, an acquisition proposal or the making of any proposal that would reasonably be expected to lead to an acquisition proposal;

 

   

participate, knowingly facilitate or engage in discussions or negotiations with any person or group (other than Renesas, Merger Sub, or any of their respective representatives) with respect to an acquisition proposal or with respect to any inquiries from third persons relating to the making of an acquisition proposal, other than informing such persons of the solicitation provisions contained in the merger agreement, or discussing any acquisition proposal made by any person or group making the acquisition proposal with such person or group solely to the extent necessary to clarify the terms of the acquisition proposal;

 

   

approve, endorse, or recommend any proposal that constitutes, or is reasonably expected to lead to, an acquisition proposal;

 

   

enter into any alternative acquisition agreement; or

 

   

authorize or commit to do any of the foregoing.

Until the earlier of the effective time of the merger and the termination of the merger agreement, Transphorm has agreed that it will promptly (and, in any event, by the later of 24 hours from receipt or 5:00 p.m. Eastern time on the next business day) notify Renesas in writing if any acquisition proposal is, to the knowledge of Transphorm, received by Transphorm or its representatives, or if any non-public information is requested from, or any discussions or negotiations are sought to be initiated or continued with, Transphorm or any of its representatives, which requests, discussions or negotiations related to an acquisition proposal. Such notice must include (1) the identity of the person or group making such proposal, or request; and (2) a summary of the material terms and conditions of such proposal or request and, if in writing, a copy thereof, unless such disclosure is prohibited pursuant to the terms of any confidentiality agreement with such person or group that is in effect on the date of the merger agreement. Thereafter, Transphorm must keep Renesas reasonably informed, on a prompt basis, of the status and terms of any such proposal, including any amendments to such proposal, and of any such discussions or negotiations.

 

   

participate or engage in discussions or negotiations with such person or their representatives;

 

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subject to an acceptable confidentiality agreement, (a) furnish any non-public information relating to Transphorm or any of its subsidiaries to; or (b) afford access to the business, properties, assets, books, records, or other non-public information or to any personnel, of Transphorm or any of its subsidiaries to such person of their representatives; or

 

   

otherwise facilitate the making of a superior proposal by such person or their representatives

Until the earlier of the effective time of the merger and the termination of the merger agreement, Transphorm has agreed that it will promptly (and, in any event, within 24 hours) notify Renesas in writing if any acquisition proposal is, to the knowledge of Transphorm, received by Transphorm or its representatives, or if any non-public information is requested from, or any discussions or negotiations are sought to be initiated or continued with, Transphorm or any of its representatives, which requests, discussions or negotiations related to an acquisition proposal. Such notice must include (1) the identity of the person or group making such proposal, or request (unless such disclosure is prohibited pursuant to the terms of any confidentiality agreement with such person or group that is in effect on the date of the merger agreement); and (2) a summary of the material terms and conditions of such proposal or request and, if in writing, a copy thereof. Thereafter, Transphorm must keep Renesas reasonably informed, on a prompt basis, of the status and terms of any such proposal, including any amendments to such proposal, and of any such discussions or negotiations.

For purposes of this proxy statement and the merger agreement, “acquisition proposal” means any offer or proposal (other than an offer or proposal by Renesas or Merger Sub or any group that includes Renesas or Merger Sub or any of their affiliates) to Transphorm or the Transphorm Board (or any committee thereof) to engage in any acquisition transaction.

For purposes of this proxy statement and the merger agreement, “acquisition transaction” means any transaction or series of related transactions (other than the merger) involving:

 

   

any direct or indirect purchase or other acquisition by any person or group (other than Renesas or Merger Sub or any of their affiliates, or any group that includes Renesas or Merger Sub or any of their affiliates), whether from Transphorm or any other person, of securities representing more than 20 percent of the total outstanding voting power of Transphorm after giving effect to the consummation of such purchase or other acquisition, including pursuant to a tender offer or exchange offer by any person or group that, if consummated in accordance with its terms, would result in such person or group beneficially owning more than 20 percent of the total outstanding voting power of the Transphorm after giving effect to the consummation of such tender offer or exchange offer;

 

   

any direct or indirect purchase or other acquisition by any person or group (other than Renesas or Merger Sub or any of their affiliates, or any group that includes Renesas or Merger Sub or any of their affiliates) of assets (x) generating 20 percent or more of the consolidated revenues (measured based on the 12 full calendar months prior to the date of determination) of Transphorm and its subsidiaries or (y) constituting 20 percent or more of the fair market value of the consolidated assets (measured based on fair market value as of the last day of the most recently completed calendar month) of Transphorm and its subsidiaries, in each case except for sales or non-exclusive licenses or sublicenses of Transphorm products in the ordinary course of business; or

 

   

any merger, consolidation, business combination, recapitalization, reorganization, liquidation, dissolution or other transaction involving Transphorm pursuant to which any person or group (other than Renesas or Merger Sub or any of their affiliates, or any group that includes Renesas or Merger Sub or any of their affiliates) would hold securities representing more than 20 percent of the total voting power of Transphorm (or the surviving company) outstanding after giving effect to the consummation of such transaction.

For purposes of this proxy statement and the merger agreement, “superior proposal” means any written acquisition proposal on terms that the Transphorm Board (or a committee thereof) has determined in good faith

 

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(after consultation with its financial advisor and outside legal counsel) would be more favorable from a financial point of view to Transphorm stockholders (in their capacity as such) than the merger (taking into account (i) any revisions to the merger agreement made or proposed in writing by Renesas prior to the time of such determination; and (ii) those factors and matters deemed relevant in good faith by the Transphorm Board (or any committee thereof), which factors may include, among other things, the (A) identity of the person making the proposal; (B) likelihood of consummation in accordance with the terms of such acquisition proposal; and (C) legal, financial (including the financing terms), regulatory, timing and other aspects of such acquisition proposal). For purposes of the reference to an “acquisition proposal” in this definition, all references to “20 percent” in the definition of “acquisition transaction” will be deemed to be references to “50.1 percent.”

The Transphorm Board’s Recommendation; Board Recommendation Change

The Transphorm Board has recommended that the holders of shares of Transphorm common stock vote “FOR” the proposal to adopt the merger agreement. Under the merger agreement, except as set forth below, at no time after the date of the merger agreement may the Transphorm Board (or a committee thereof):

 

   

withhold, withdraw, amend, qualify, or modify, or publicly propose to withhold, withdraw, amend, qualify, or modify, the Transphorm Board recommendation in a manner adverse to Renesas;

 

   

adopt, approve, or recommend an acquisition proposal;

 

   

fail to publicly reaffirm the Transphorm Board recommendation within ten business days of the occurrence of a material event or development and after Renesas so requests in writing (or, if the Transphorm stockholder meeting is scheduled to be held within ten business days, then within one business day after Renesas so requests in writing) (it being understood that Transphorm will not be obligated to affirm the Transphorm Board recommendation on more than two occasions);

 

   

make any recommendation in connection with a tender or exchange offer, other than a recommendation against such offer or the issuance of a “stop, look, and listen” communication by the Transphorm Board (or a committee thereof) to Transphorm’s stockholders pursuant to Rule 14d-9(f) promulgated under the Exchange Act (or any substantially similar communication);

 

   

fail to include the Transphorm Board recommendation in the proxy statement (the actions described in these five bullets are referred to as a “Transphorm Board recommendation change”); or

 

   

cause or permit Transphorm or any of its subsidiaries to enter into an alternative acquisition agreement.

At any time prior to obtaining the requisite stockholder approval, other than in connection with a written acquisition proposal that constitutes a superior proposal, the Transphorm Board (or a committee thereof) may effect a Transphorm Board recommendation change in response to an intervening event if and only if:

 

   

the Transphorm Board (or a committee thereof) determines in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to take such action would reasonably be expected to be inconsistent with the Transphorm Board’s fiduciary duties pursuant to applicable law;

 

   

Transphorm has provided prior written notice to Renesas at least four business days in advance (which is referred to as the “event notice period”) to the effect that the Transphorm Board (or a committee thereof) has (1) so determined; and (2) intends to effect a Transphorm Board recommendation change, which notice will describe the intervening event in reasonable detail; and

 

   

prior to effecting such Transphorm Board recommendation change, Transphorm and its representatives, until 11:59 p.m., Eastern time, at the end of such four business day period, has negotiated with Renesas and its representatives in good faith (to the extent that Renesas desires to negotiate) to make such adjustments to the terms and conditions of the merger agreement and the transaction documents to enable Renesas to propose in writing an offer binding on Renesas and Merger Sub to effect revisions to the terms of the merger agreement, and, at the end of such event notice period, the Transphorm Board (or a

 

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committee thereof) shall have considered in good faith any such binding offer, and shall have determined in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to make a Transphorm Board recommendation change in connection with such an intervening event would reasonably be expected to be inconsistent with its fiduciary duties pursuant to applicable law.

At any time prior to obtaining the requisite stockholder approval, if Transphorm has received a written acquisition proposal that the Transphorm Board (or a committee thereof) has concluded in good faith (after consultation with its financial advisor and outside legal counsel) is a superior proposal, then the Transphorm Board may (1) effect a Transphorm Board recommendation change with respect to such superior proposal; or (2) authorize Transphorm to terminate the merger agreement to enter into an alternative acquisition agreement with respect to such superior proposal, in each case if and only if:

 

   

the Transphorm Board (or a committee thereof) determines in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to take such action would reasonably be expected to be inconsistent with the Transphorm Board’s fiduciary duties pursuant to applicable law;

 

   

such superior proposal did not result from a material breach of the applicable restrictions in the merger agreement;

 

   

Transphorm has provided prior written notice to Renesas at least four business days in advance (the “notice period”) to the effect that the Transphorm Board (or a committee thereof) has (1) received a written acquisition proposal that has not been withdrawn; and (2) concluded in good faith (after consultation with its financial advisor and outside legal counsel) that such acquisition proposal constitutes a superior proposal, which notice describes the basis for such Transphorm Board recommendation change or termination, including the identity of the person or group making such acquisition proposal and the material terms of such acquisition proposal and, if in writing, a copy of such proposal (unless any such disclosure is prohibited pursuant to the terms of any confidentiality agreement with such person or group that is in effect on the date of the merger agreement); and

 

   

prior to effecting such Transphorm Board recommendation change or termination, Transphorm and its representatives, until 5:00 p.m., Eastern time, on the last day of the notice period, have negotiated with Renesas and its representatives in good faith (to the extent that Renesas desires to negotiate) to make such adjustments to the terms and conditions of the merger agreement and the transaction documents so that such acquisition proposal would cease to constitute a superior proposal, it being understood that (1) in the event of any material revision, amendment, update or supplement to such acquisition proposal, Transphorm agreed to be required to deliver a new written notice to Renesas and to comply with the requirements of the merger agreement with respect to such new written notice (with the “notice period” in respect of such new written notice being two business days from the later of (A) the delivery of such written notice to Renesas; or (B) the end of the original notice period); and (2) at the end of the notice period, the Transphorm Board (or a committee thereof) must have in good faith (after consultation with its financial advisor and outside legal counsel and taking into account Renesas proposed revisions to the terms and conditions of the merger agreement) reaffirmed its determination that such acquisition proposal is a superior proposal and the failure to make a Transphorm Board recommendation change would reasonably be expected to be inconsistent with its fiduciary duties pursuant to applicable law.

For purposes of this proxy statement and the merger agreement, “intervening event” means any effect, or any material consequence of such effect, that (1) as of the date of the merger agreement was not known to, or reasonably foreseeable by, the Transphorm Board, in each case based on facts known to the Transphorm Board as of the date of the merger agreement (or, if known by the Transphorm Board, the consequences of which were not known to, or reasonably foreseeable by, the Transphorm Board, in each case based on facts known to the Transphorm Board as of the date of the merger agreement); and (2) does not relate to (A) an acquisition proposal or (B) the mere fact, in and of itself, that Transphorm meets or exceeds any internal or published projections, forecasts, estimates or predictions of revenue, earnings or other financial or operating metrics for any period

 

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ending on or after the date of the merger agreement, or changes after the date of the merger agreement in the market price or trading volume of the Transphorm common stock or the credit rating of the Transphorm (it being understood that the underlying cause of any of the foregoing in this clause (B) may be considered and taken into account in determining whether an intervening event has occurred).

Special Meeting

Transphorm has agreed to take all action necessary to establish a record date for, duly call, give notice of, convene, and hold the special meeting as promptly as reasonably practicable following the mailing of this proxy statement. Transphorm is permitted to postpone or adjourn the special meeting in certain circumstances related to soliciting additional proxies or requirements of applicable law.

Employee Matters

From and after the effective time of the merger, the surviving corporation will (and Renesas will cause the surviving corporation to) honor all of the Transphorm benefit plans and compensation and severance arrangements in accordance with their terms as in effect immediately prior to the effective time of the merger, except that other than as described in the following two paragraphs, nothing will prohibit Renesas or the surviving corporation or their affiliates from amending, modifying, or terminating any Transphorm benefit plans or compensation or severance arrangements in accordance with their terms or as otherwise required pursuant to applicable law.

During the benefits period, the surviving corporation and its subsidiaries will, generally speaking:

 

   

maintain for the benefit of each continuing employee the Transphorm plans (which excludes any equity or equity-based compensation, defined benefit, deferred compensation, retiree health or welfare, long-term incentive, change in control, retention or other similar compensation or benefits, which is referred to as the “excluded compensation and benefits”) on terms and conditions that are no less favorable in the aggregate than those in effect at Transphorm or its subsidiaries on the date of the merger agreement;

 

   

provide compensation and benefits (which excludes any excluded compensation and benefits but includes severance to the extent pursuant to a Transphorm benefit plan or arrangement that is in effect as of the date of the merger agreement and disclosed to Renesas) to each continuing employee that, taken as a whole, are no less favorable in the aggregate than the compensation and benefits (excluding any excluded compensation and benefits) provided to such continuing employee immediately prior to the effective time of the merger; or

 

   

provide some combination of Transphorm plans and comparable plans such that each continuing employee receives compensation and benefits (excluding any excluded compensation and benefits) that, taken as a whole, are no less favorable in the aggregate than the compensation and benefits (excluding any excluded compensation and benefits) provided to such continuing employee immediately prior to the effective time of the merger.

In each case, base compensation and target cash incentive compensation opportunity will not be decreased during the benefits period for any continuing employee employed during that period. During the benefits period, the surviving corporation will provide to continuing employees severance benefits that are no less favorable than those provided by Transphorm and its subsidiaries as of the date of the merger agreement and as disclosed to Renesas.

At or after the effective time of the merger, Renesas will use commercially reasonable efforts to provide continuing employees credit for service with Transphorm and its subsidiaries before the effective time of the merger and with Renesas, the surviving corporation, and any of their subsidiaries on or after the effective time of the merger, for purposes of eligibility to participate, vesting and entitlement to benefits where length of service is relevant (including for purposes of vacation accrual and severance pay entitlement), except to the extent that it would result in duplication of coverage or benefits.

 

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In addition, the merger agreement provides that:

 

   

each continuing employee will be immediately eligible to participate, without any waiting period, in any employee benefit plans sponsored by Renesas and its subsidiaries (other than the Transphorm plans) (which is referred to as “new plans”) to the extent that coverage pursuant to any new plan replaces coverage pursuant to an old plan in which such continuing employee participates immediately before the effective time of the merger (which is referred to as “old plans”);

 

   

for purposes of each new plan providing medical, dental, pharmaceutical, vision, disability or other welfare benefits to any continuing employee, Renesas will undertake commercially reasonable efforts to cause all waiting periods, pre-existing conditions or limitations, physical examination requirements, evidence of insurability requirements and actively-at-work or similar requirements of such new plan to be waived for such continuing employee and his or her covered dependents, and to cause any eligible expenses incurred by such continuing employee and his or her covered dependents during the portion of the plan year of the old plan ending on the date that such continuing employee’s participation in the corresponding new plan begins to be given full credit pursuant to such new plan for purposes of satisfying all deductible, co-payments, coinsurance, offset and maximum out-of-pocket requirements applicable to such continuing employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such new plan;

 

   

Renesas will undertake commercially reasonable efforts to credit the accounts of such continuing employees pursuant to any new plan that is a flexible spending plan with any unused balance in the account of such continuing employee; and

 

   

any vacation or paid time off accrued but unused by a continuing employee as of immediately prior to the effective time of the merger will be credited to such continuing employee following the effective time of the merger, will not be subject to accrual limits or other forfeiture and will not limit future accruals.

Efforts to Close the Merger

HSR Act; CFIUS

Transphorm and Renesas have each agreed to use its reasonable best efforts, as soon as reasonably practicable, to cause the expiration or termination of the applicable waiting period pursuant to the HSR Act or any other antitrust law applicable to the merger.

Transphorm and Renesas each filed or caused to be filed the requisite notification forms under the HSR Act with the FTC and the DOJ on January 25, 2024. The applicable waiting period under the HSR Act is scheduled to expire at 11:59 p.m., Eastern time, on February 26, 2024.

Transphorm and Renesas have each agreed to use its reasonable best efforts, as soon as reasonably practicable, to cause the expiration or termination of the applicable waiting period pursuant to the HSR Act and any other antitrust law applicable to the merger.

Additionally, Renesas and Merger Sub have each agreed not to acquire or agree to acquire by merging or by acquiring in any other manner, any business of any person or other business organization or division if such business competes in any material line of business with Transphorm or its subsidiaries and the entering into a definitive agreement relating to the consummation of such transaction would reasonably be expected to (1) impose any delay in the obtaining of, or materially increase the risk of not obtaining, any authorization, consent, order, declaration, or approval of any governmental authority necessary to consummate the merger or the expiration or termination of any applicable waiting period; (2) increase the risk of any governmental authority entering an order prohibiting the consummation of the merger; (3) increase the risk of not being able to remove any such order on appeal or otherwise; or (4) delay or prevent the consummation of the merger, subject to certain exceptions.

At any time before or after consummation of the merger, notwithstanding the termination of the waiting period under the HSR Act, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary or

 

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desirable, including seeking to enjoin the completion of the merger, seeking divestiture of substantial assets of the parties or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. At any time before or after the completion of the merger, and notwithstanding the termination of the waiting period under the HSR Act, any state could take such action under its antitrust laws as it deems necessary or desirable. Such action could include seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of Transphorm or Renesas. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

Subject to the terms of the merger agreement, each of Renesas and Merger Sub (and their respective controlled affiliates, if applicable) agreed to, if and to the extent necessary to obtain clearance of the merger pursuant to the HSR Act and any other antitrust laws applicable to the merger, use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to cause the expiration or termination of the applicable waiting periods pursuant to the HSR Act, including if there is any legal proceeding by a governmental authority challenging the merger as violative of any antitrust law; provided, however, that Renesas shall not be required to (i) offer, negotiate, commit to or effect, by consent decree, hold separate order or otherwise, (A) the sale, divestiture, license or other disposition of any and all of the capital stock or other equity or voting interests, assets (whether tangible or intangible), rights, products or businesses of Renesas, Merger Sub (or their respective affiliates, if applicable), or Transphorm and its subsidiaries; (B) the termination, modification, or assignment of existing relationships, joint ventures, contracts or obligations of Renesas, Merger Sub (or their respective affiliates, if applicable), or Transphorm and its subsidiaries; (C) the modification of any course of conduct regarding future operations of, or any other restrictions on, the activities of Renesas, Merger Sub (or their respective affiliates, if applicable), or Transphorm and its subsidiaries; or (ii) otherwise accept any limitations, requirements or conditions imposed, recommended or requested by the FTC or the DOJ that would have a material adverse effect on Renesas and its subsidiaries, taken as a whole.

Under the merger agreement, the merger cannot be completed until the CFIUS approval has been obtained. Each party’s obligations to complete the merger are contingent upon CFIUS approval.

CFIUS may impose conditions as a prerequisite for its clearance of the merger. Renesas may determine not to proceed with the merger should such conditions (i) result in a material adverse effect on Guarantor and its subsidiaries taken as a whole; (ii) violate any law of a competent jurisdiction applicable to Renesas or its affiliates; (iii) require Guarantor or its subsidiaries to sell, divest, or dispose of any material assets or material businesses of Guarantor or its subsidiaries; (iv) result in a material impediment to the reasonable integration of Transphorm with Renesas, including any mitigation that would materially limit the ability of Guarantor or its subsidiaries to own, control or operate Transphorm; or (v) reasonably be expected to materially impair the commercial value to Renesas of Transphorm and its subsidiaries, taken as a whole.

One or more governmental bodies may impose a condition, restriction, qualification, requirement, or limitation when it grants the necessary approvals and consents to the merger. Third parties may also seek to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, which actions could significantly impede or even preclude obtaining required regulatory approvals. There is currently no way to predict how long it will take to obtain all of the required regulatory approvals or whether such approvals will ultimately be obtained, and there may be a substantial period of time between the approval by Transphorm stockholders and the completion of the merger.

Although Transphorm expects that all required regulatory clearances and approvals will be obtained, Transphorm cannot assure you that these regulatory clearances and approvals will be obtained in a timely manner, obtained at all, or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the merger or require changes to the terms of the merger agreement. These conditions or changes could result in the conditions to the merger not being satisfied.

Guaranty

In connection with the transactions contemplated by the merger agreement, the Guarantor has guaranteed the due and punctual payment and performance of each of the covenants, obligations and agreements of Renesas and

 

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Merger Sub set forth in the merger agreement. The obligation of Renesas and Merger Sub to consummate the merger is not subject to any financing condition. Renesas and Merger Sub have represented to Transphorm that, as of January 10, 2024, Renesas had and will have available to it funds necessary to make all the payments required to be paid at the closing of the merger by Renesas and Merger Sub under the merger agreement. This includes funds needed to: (1) pay Transphorm stockholders the amounts due under the merger agreement for their Transphorm common stock and (2) make payments in respect of outstanding Transphorm RSUs, Transphorm options and Transphorm warrants payable at the closing of the merger pursuant to the merger agreement.

Indemnification and Insurance

The merger agreement provides that the surviving corporation and its subsidiaries will (and Renesas will cause the surviving corporation and its subsidiaries to), for a period of six years after the effective time of the merger, honor and fulfill, in all respects, the obligations of Transphorm and its subsidiaries pursuant to any indemnification agreements entered into prior to the effective time of the merger between Transphorm and any of its subsidiaries, on the one hand, and any of their respective current or former directors or officers (and any person who becomes a director, officer of Transphorm or any of its subsidiaries prior to the effective time of the merger), on the other hand (such persons collectively are referred to as the “indemnified persons”). In addition, under the merger agreement, during the period commencing at the effective time of the merger and ending on the sixth anniversary of the effective time of the merger, the surviving corporation and its subsidiaries will (and Renesas will cause the surviving corporation and its subsidiaries to) cause the certificates of incorporation, bylaws, and other similar organizational documents of the surviving corporation and its subsidiaries to contain provisions with respect to indemnification, exculpation, and the advancement of expenses that are at least as favorable as the indemnification, exculpation, and advancement of expenses provisions set forth in the charter, the bylaws and the other similar organizational documents of Transphorm and the subsidiaries of Transphorm, as applicable, as of the date of the merger agreement. During such six-year period or such period in which an indemnified person is asserting a claim for indemnification pursuant to the merger agreement, whichever is longer, such provisions may not be repealed, amended, or otherwise modified in any manner that would adversely affect the rights thereunder of any indemnified persons except as required by applicable law.

Furthermore, during the period commencing at the effective time of the merger and ending on the sixth anniversary of the effective time of the merger, the surviving corporation has agreed to (and Renesas has agreed to cause the surviving corporation to) indemnify and hold harmless, to the fullest extent permitted by Transphorm’s governing and organizational documents in effect on the date of the merger agreement or pursuant to any indemnification agreement with Transphorm or any of its subsidiaries in effect as of the effective time of the merger, each indemnified person from and against any costs, fees and expenses (including attorneys’ fees and investigation expenses), judgments, fines, losses, claims, damages, liabilities, and amounts paid in settlement or compromise in connection with any legal proceeding, whether civil, criminal, administrative, or investigative, to the extent that such legal proceeding arises, directly or indirectly, out of or pertains, directly or indirectly, to (1) the fact that an indemnified person or was a director, officer or employee of Transphorm or any of its subsidiaries or is or was serving at the request of Transphorm or any of its subsidiaries as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by Transphorm or its subsidiaries; (2) any action or omission, or alleged action or omission, in such indemnified person’s capacity as a director, officer, or agent of Transphorm or any of its subsidiaries or other affiliates (regardless of whether such action or omission, or alleged action or omission, occurred prior to, at or after the effective time of the merger); and (3) the merger, as well as any actions taken by Transphorm, Renesas or Merger Sub with respect to the merger (including any disposition of assets of the surviving corporation or any of its subsidiaries that is alleged to have rendered the surviving corporation or any of its subsidiaries insolvent). If prior to the sixth anniversary of the effective time of the merger, any indemnified person delivers to Renesas a written notice asserting a claim for indemnification pursuant to the merger agreement, then the claim asserted in such notice will survive the sixth anniversary of the effective time of the merger until such claim is fully and finally resolved.

 

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Under the merger agreement, for a period of six years after the effective time of the merger, the surviving corporation will (and Renesas will cause the surviving corporation to) maintain in effect Transphorm’s director and officer indemnification and insurance coverage in respect of acts or omissions occurring at or prior to the effective time of the merger on terms (including with respect to coverage, conditions, retentions, limits and amounts) that are equivalent to those of Transphorm’s current director and officer indemnification and insurance coverage, subject to certain exceptions.

Prior to the effective time of the merger, Transphorm has agreed to purchase a prepaid six-year “tail” policy with respect to the directors’ and officers’ liability insurance. The surviving corporation will (and Renesas will cause the surviving corporation to) maintain the tail policy in full force and effect and continue to honor its obligations thereunder for so long as the tail policy is in full force and effect.

For more information, refer to the section of this proxy statement captioned “The Merger—Interests of Transphorm’s Directors and Executive Officers in the Merger.”

Conditions to the Closing of the Merger

The respective obligations of Renesas, Merger Sub and Transphorm, to consummate the merger are subject to the satisfaction or waiver (where permissible pursuant to applicable law) at or prior to the effective time of the merger of certain conditions, including the following:

 

   

the adoption of the merger agreement by the affirmative vote of the holders of a majority of the issued and outstanding shares of Transphorm common stock as of the record date;

 

   

the expiration or termination of the waiting periods, if any, applicable to the merger pursuant to the HSR Act; and all requisite consents pursuant to the HSR Act will have been obtained;

 

   

the absence of (1) any order issued by any governmental authority of competent jurisdiction; or (2) any action taken by any governmental authority of competent jurisdiction; or (3) law applicable to the merger, enacted by a governmental authority of competent jurisdiction, that in the case of each of the foregoing clauses (1) or (2), prohibits or makes illegal consummation of the merger; and

 

   

the CFIUS approval will have been obtained.

The obligations of Renesas and Merger Sub to consummate the merger are subject to the satisfaction or waiver (where permissible pursuant to applicable law) at or prior to the effective time of the merger of each of the following additional conditions, any of which may be waived exclusively by Renesas:

 

   

the accuracy of the representations and warranties of Transphorm set forth in the merger agreement, subject to applicable materiality or other qualifiers, as of the closing or the date in respect of which such representation or warranty was specifically made;

 

   

Transphorm having performed and complied in all material respects with all covenants in the merger agreement required to be performed and complied with by it at or prior to the closing;

 

   

receipt by Renesas and Merger Sub of a customary closing certificate of Transphorm; and

 

   

the absence of any company material adverse effect having occurred after the date of the merger agreement that is continuing.

The obligations of Transphorm to consummate the merger are subject to the satisfaction or waiver (where permitted by applicable law) at or prior to the effective time of the merger of each of the following additional conditions, any of which may be waived exclusively by Transphorm:

 

   

the accuracy of the representations and warranties of Renesas and Merger Sub set forth in the merger agreement, subject to applicable materiality or other qualifiers, as of the effective time of the merger or the date in respect of which such representation or warranty was specifically made;

 

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Renesas and Merger Sub having performed and complied in all material respects with all covenants in the merger agreement required to be performed and complied with by Renesas and Merger Sub at or prior to the closing; and

 

   

the receipt by Transphorm of a customary closing certificate of Renesas and Merger Sub.

Termination of the Merger Agreement

The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after the adoption of the merger agreement by Transphorm’s stockholders (except as otherwise provided in the merger agreement), in the following circumstances:

 

   

by mutual written agreement of Transphorm and Renesas;

 

   

by either Transphorm or Renesas if:

 

   

any restraint becomes final and non-appealable that prohibits or makes illegal the consummation of the merger, except that the right to terminate pursuant to this bullet will not be available to any party that has failed to comply with certain covenants set forth in the merger agreement;

 

   

the merger has not been consummated by 11:59 p.m., Eastern time, on January 10, 2025 (which is referred to as the “termination date”), except that if as of the termination date, (1) the relevant waiting periods applicable to the merger pursuant to the HSR Act have not expired or otherwise been terminated or requisite consents pursuant to the HSR Act have not been obtained, (2) a restraint related to CFIUS, the HSR Act or antitrust laws has been issued by a governmental authority of competent jurisdiction, that in any such case prohibits or makes illegal the consummation of the merger, or (3) the CFIUS approval has not been obtained, the termination date will automatically be extended to 11:59 p.m., Eastern time, on July 10, 2025; or

 

   

Transphorm’s stockholders do not adopt the merger agreement at the special meeting, except that a party may not terminate the merger agreement pursuant to this provision if such party’s action or failure to act constitutes a breach of the merger agreement and is the primary cause of, or primarily resulted in, the failure to approve the adoption of the merger agreement by Transphorm’s stockholders at the special meeting;

 

   

by Transphorm if:

 

   

subject to a 40-day cure period, Renesas or Merger Sub has breached or failed to perform in any material respect any of its respective representations, warranties, or covenants in the merger agreement such that the related closing condition would not be satisfied, except that Transphorm is not entitled to terminate the merger agreement, if, at the time that such termination would otherwise take effect, Transphorm is in material breach of the merger agreement;

 

   

prior to the adoption of the merger agreement by Transphorm’s stockholders: (1) Transphorm has received a superior proposal; (2) the Transphorm Board (or a committee thereof) has authorized Transphorm to enter into an alternative acquisition agreement to consummate the acquisition transaction contemplated by that superior proposal; (3) Transphorm has complied in all material respects with its covenants under the merger agreement with respect to such superior proposal; and (4) Transphorm pays Renesas or its designee the applicable termination fee; or

 

   

by Renesas if:

 

   

subject to a 40-day cure period, Transphorm has breached or failed to perform in any material respect any of its representations, warranties, or covenants in the merger agreement such that the related closing condition would not be satisfied, except that Renesas is not entitled to terminate the merger agreement, if, at the time that such termination would otherwise take effect, Renesas is in material breach of the merger agreement; or

 

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prior to the adoption of the merger agreement by Transphorm stockholders, the Transphorm Board (or a committee thereof) has effected a Transphorm Board recommendation change (as defined in the section of this proxy statement captioned “The Merger Agreement—The Transphorm Board’s Recommendation; Board Recommendation Change”) (except that Renesas’ right to terminate in such instance will expire at 5:00 p.m., Eastern time, on the 10th business day following the date on which such right to terminate first arose).

In the event that the merger agreement is terminated pursuant to the termination rights above, the merger agreement will be of no further force or effect without liability of any party (or any direct or indirect equity holder, controlling person, partner, member, manager, stockholder, director, officer, employee, affiliate, agent, or other representative of such party) to the other parties, as applicable, except certain sections of the merger agreement will survive the termination of the merger agreement, in each case in accordance with their respective terms. Notwithstanding the previous sentence, nothing in the merger agreement will relieve any party from any liability for any fraud or any willful breach of the merger agreement prior to the termination of the merger agreement. Furthermore, no termination of the merger agreement will affect the rights or obligations of any party pursuant to any confidentiality agreement, which rights, obligations, and agreements will survive the termination of the merger agreement in accordance with their respective terms.

Termination Fees and Remedies

The merger agreement contains certain termination rights for Transphorm and Renesas. Upon valid termination of the merger agreement under specified circumstances, Transphorm agreed to pay Renesas (or its designee) a termination fee of $12,938,000. Specifically, this termination fee will be payable by Transphorm to Renesas if the merger agreement is terminated:

 

   

by Transphorm prior to the adoption of the merger agreement by Transphorm stockholders, in order to enter into a definitive agreement providing for a superior proposal; or

 

   

by Renesas if the Transphorm Board changes its recommendation with respect to the merger.

Transphorm also agreed to pay Renesas (or its designee) the termination fee in cert