Item 1.01 Entry Into a Material Definitive Agreement
On June 10, 2022, Electro-Sensors, Inc. ("ELSE" or "Electro-Sensors") entered
into an Agreement and Plan of Merger (the "Merger Agreement") with Mobile X
Newco, Inc., a Delaware corporation and wholly owned subsidiary of ELSE (the
"Merger Sub"), and Mobile X Global, Inc., a Delaware corporation ("Mobile X")
(together with ELSE and Merger Sub, the "Parties"), pursuant to which Merger Sub
will merge with and into Mobile X, with Mobile X surviving the merger as a
wholly owned subsidiary of ELSE (the "Merger").
Mobile X Global, Inc. is a new entrant in the global mobile industry founded by
Peter Adderton. Mobile X plans to launch a new mobile brand called Mobile X in
the U.S. in 2022, enabled by a network access agreement with a major carrier.
The Merger is structured as a statutory reverse triangular merger under Delaware
and Minnesota law, under which a newly formed subsidiary of ELSE will be merged
with and into Mobile X Global, Inc., with Mobile X Global, Inc. surviving the
Merger and becoming a wholly owned subsidiary of ELSE. In connection with the
Merger, ELSE will reincorporate in Delaware, be re-named Mobile X Global, Inc.,
and operate both the new MobileX wireless business and the Electro-Sensors
business. The Merger Agreement also provides that Electro-Sensors, Inc. will
effect a four-for-one reverse stock split shortly before completion of the
Merger, unless the Parties agree on a different reverse split ratio.
In connection with the execution of the Merger Agreement, a third-party
institutional investor has entered into a commitment letter with Mobile X
Global, Inc. to provide equity financing of up to $20.0 million upon closing of
the Merger in the form of convertible preferred stock. The commitment is subject
to diligence and definitive agreements satisfactory to the third-party
institutional investor, including an agreement for a $50 million equity line of
credit to be provided by the investor. The equity line of credit would provide
significant additional liquidity, at the option of Mobile X. The commitment
letter terminates on October 31, 2022.
It is anticipated that, immediately after the Merger, former Mobile X
stockholders will own approximately 76% of the combined company, legacy ELSE
shareholders will own approximately 11% of the combined company, and that the
third-party institutional investor noted above (or an alternative investor
agreed to by the Parties to the Merger Agreement) and certain other investors
will own approximately 13% of the combined company, all based on current
ownership of ELSE and Mobile X, and assuming the closing of $20 million of
equity financing on the terms contained in the commitment letter from the
third-party institutional investor noted above.
ELSE expects the approximately 332,500 shares subject to currently outstanding
options to be exercised in connection with the Merger prior to the record date
of the cash dividend discussed below. Assuming this exercise, and based on the
relative valuations agreed to by Mobile X and ELSE, and after giving effect to
the reverse split at a ratio of four-for-one, the legacy ELSE shareholders would
continue to own approximately 932,005 shares, the Mobile X stockholders would
own approximately 6,668,294 shares, the third-party institutional investor noted
above (or an alternative investor agreed to by the Parties to the Merger
Agreement) would own approximately 1,066,860 shares (on an as-converted to
common basis) assuming the closing of $20 million of equity financing on the
terms in the commitment letter, and approximately 75,851 shares would be held by
others.
In addition to their continuing interest in the combined company, legacy
Electro-Sensors shareholders as of a record date to be determined before the
closing of the Merger will receive special cash dividends expected to be
approximately $18.0 million in the aggregate, with the amount of the dividends
possibly adjusted based on the amount of ELSE transaction expenses and its
working capital balance at the closing of the Merger, and further adjusted for
indebtedness, if any, and transaction bonuses, if any, approved by the ELSE
board of directors. Aggregate cash dividends of $18.0 million would be
approximately $4.83 per share based on the current, pre-reverse split, fully
diluted shares of Electro-Sensors.
2
Closing of the Merger is subject to specified conditions, including, among other
matters: (i) the approval by Mobile X stockholders and ELSE shareholders of the
Merger; (ii) a registration statement becoming effective under the Securities
Act of 1933, as amended, related to the shares being issued to the Mobile X
stockholders in the Merger and the clearance of the proxy statement related to
the approval by the ELSE shareholders of the Merger; (iii) receipt of $20
million in third party equity financing; (iv) listing of the combined company's
common stock on Nasdaq; and (v) the filing of an amendment to ELSE 's Articles
of Incorporation to increase the number of shares of common stock authorized for
issuance to a number at least large enough to consummate the Merger, as
discussed below. Certain shareholders of each company have entered Voting
Agreements in connection with the Merger, as discussed below.
The Merger Agreement contains customary representations and warranties from
Mobile X and ELSE. It also contains customary covenants, including (i) requiring
each of the Parties to use reasonable best efforts to cause the Merger to be
consummated, (ii) requiring each of the Parties to exert reasonable efforts to
obtain at least $20 million of equity financing, and (iii) for Mobile X and ELSE
to carry on their respective businesses in the ordinary course of business
consistent with past practice during the period between the execution of the
Merger Agreement and the closing of the Merger. ELSE also agreed not to solicit,
seek or initiate or knowingly take any action to facilitate or encourage a
competing transaction, subject to certain exceptions. ELSE is required to seek
shareholder approval of the issuance of the shares of common stock to be issued
in the Merger pursuant to Nasdaq listing rules, the required amendments to its
Articles of Incorporation and other matters specified in the Merger Agreement.
The Merger Agreement contains termination rights for each of Mobile X and ELSE,
including, without limitation, in the event that (i) any governmental entity
issues a non-appealable final order permanently enjoining the Merger, (ii) the
Merger is not consummated by January 31, 2023 or (iii) the other party breaches
its representations, warranties or covenants under the Merger Agreement, which
breach would give rise to the failure of a closing condition and such breach is
not cured within 10 days of receipt of written notice of such breach. In
addition, ELSE has certain rights related to potential Superior Proposals (as
defined in the Merger Agreement), including termination rights, which, if it
exercises in accordance with the Merger Agreement, would entitle it to terminate
the Merger Agreement by paying a fee of $1.1 million and reimbursing certain
expenses of Mobile X up to $575,000. The Merger Agreement also provides for the
. . .
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
Amendment to Bylaws
On June 10, 2022, the Board of Directors Electro-Sensors, Inc. adopted a new
Section 3.12 to its Bylaws, effective immediately. A copy of Section 3.12 is
filed as Exhibit 3.2 to this Form 8-K.
In 2018, the State of Minnesota added Section 302A.191 to the Minnesota Business
Corporation Act. Section 302A.191 explicitly authorizes a Minnesota corporation
to include a provision in its articles of incorporation or bylaws making any or
all of the courts in the State of Minnesota (subject to jurisdictional
requirements) the exclusive forum for internal corporate claims. Section
302A.191 defines "internal corporate claim," as any
3
? claim that is based upon a violation of a duty under the laws of the state of
Minnesota by a current or former director, officer or shareholder in such
capacity;
? derivative action or proceeding brought on behalf of the corporation; or
? action asserting a claim arising under any provision of the MBCA or the
corporation's articles or bylaws.
Pursuant to the statutory authority in MBCA Section 302A.191, Electro-Sensors,
Inc. new bylaw establishes federal courts (where jurisdiction exists) and state
courts located in Hennepin County, Minnesota as the exclusive for
Electro-Sensors, Inc. internal corporate claims.
Item 8.01. Other Events
On June 13, 2022 ELSE issued a press release attached hereto as Exhibit 99.1
relating to its proposed merger transaction with Mobile X.
Item 9.01 Financial Statements and Exhibits.
Exhibit No. Description
2.1 Agreement and Plan of Merger dated June 10, 2022 between
Electro-Sensors, Inc. , Mobile X Newco, Inc., a Delaware
corporation and wholly owned subsidiary of Electro-Sensors, Inc,
and Mobile X Global, Inc.
3.2 Section 3.12 of Electro-Sensors, Inc. Bylaws, effective June 10,
2022
10.1 Form of Voting Agreement dated June 10, 2022 among Mobile X
Global, Inc, Electro-Sensors, Inc, and officers, directors and
shareholders of Electro-Sensors, Inc. named on Schedule I-A
10.2 Form of Mobile X Voting Agreement dated June 10, 2022 among
Mobile X Global, Inc, Electro-Sensors, Inc., and the officers,
directors and Shareholders of Mobile X Global, Inc. named on
Schedule I-B
99.1 Press release issued by Electro-Sensors, Inc. on June 13, 2022
All schedules to the Merger Agreement have been omitted pursuant to Item
601(b)(2) of Regulation S-K. Electro-Sensors, Inc. hereby agrees to furnish
supplementally a copy of any omitted schedule to the SEC upon request.
Important Information and Where to Find It
A full description of the terms of the transaction will be provided in a proxy
statement/prospectus/consent solicitation statement included in a Form S-4
Registration Statement that Electro-Sensors will file with the SEC.
Electro-Sensors urges investors, shareholders and other interested persons to
read, when available, the prospectus/proxy statement/consent solicitation
STATEMENT as well as other documents filed with the SEC because these documents
will contain important information about Electro-Sensors, Mobile X Global, and
the proposed transactions. When final, the definitive proxy statement will be
mailed to Electro-Sensors' shareholders as of a record date to be established
for voting on the proposed transaction, and a definitive consent solicitation
statement will be sent to the Mobile X stockholders. Shareholders will also be
able to obtain a copy of the documents (when available), without charge, by
directing a request to: Electro-Sensors, Inc., 6111 Blue Circle Drive,
Minnetonka, MN 55343. These documents, once available, can also be obtained,
without charge, at the SEC's website (www.sec.gov).
4
Participants in the Solicitation
Electro-Sensors, Inc., Mobile X Global, Inc., and their respective directors and
executive officers may be considered participants in the solicitation of proxies
by Electro-Sensors, Inc. in connection with the proposed transaction.
Information about the directors and executive officers of Electro-Sensors, Inc.
is set forth in its Annual Report on Form 10-K for the fiscal year ended
December 31, 2021, and its 2022 Proxy Statement, which were filed with the SEC
on March 31, 2022. Information regarding the persons who may, under SEC rules,
be deemed participants in the solicitation of proxies from Electro-Sensors'
shareholders in connection with the proposed Merger will be included in the
definitive proxy statement/prospectus that Electro-Sensors intends to file with
the SEC.
Non-Solicitation
This Form 8-K does not constitute an offer to sell or the solicitation of an
offer to buy any securities, nor shall there be any sale of securities in any
jurisdiction in which the offer, solicitation or sale would be unlawful prior to
the registration or qualification under the securities laws of that
jurisdiction. No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act of 1933,
as amended, or an exemption therefrom.
Forward Looking Statements
This Form 8-K includes certain forward-looking statements concerning
Electro-Sensors, Mobile X Global and the proposed transactions within the
meaning of the Private Securities Litigation Reform Act of 1995, including, but
not limited to, statements regarding future financial performance, future
growth, and the development of future products and services; the benefits of the
proposed transactions, including anticipated growth and synergies; the combined
company's plans, objectives and expectations and intentions; the expected timing
of the proposed transactions; and future acquisitions. These statements are
based on current expectations or beliefs and are subject to uncertainty and
changes in circumstances. There can be no guarantee that the proposed
transactions described in this press release will be completed, or that they
will be completed as currently proposed, or at any particular time. Actual
results may vary materially from those expressed or implied by the statements
here due to changes in economic, business, competitive or regulatory factors,
and other risks and uncertainties affecting the operation of Electro-Sensors as
well as the business of Mobile X Global. Many of these risks, uncertainties and
contingencies related to Electro-Sensors are presented in Electro-Sensors'
Annual Report on Form 10-K and, from time to time, in Electro-Sensors' other
filings with the SEC. These and other risks related to the business of Mobile X
Global will be presented in the proxy statement/prospectus/consent solicitation
statement to be filed with the SEC.
The information here should be read considering these risks and the following
considerations: the ability of the merger parties to obtain definitive
investment documents and close on the equity investments necessary to complete
the Merger; the ability of MobileX to successfully launch its business, attract
subscribers, and achieve the levels of customer service, revenues and costs that
it currently expects; the ability of the combined company to successfully
maintain a Nasdaq Capital Market listing; the ability of the combined company to
successfully access the capital markets to finance expansion and acquisitions;
the ability of the combined company to identify and acquire appropriate
acquisition targets and successfully integrate these companies into its
operations; the ability of the combined company to achieve synergies between its
legacy sensor business and its new MobileX business; the conditions to the
5
closing of the Merger may not be satisfied or an event, change or other
circumstance could occur that could give rise to the termination of the Merger
Agreement; the Merger may involve unexpected costs, liabilities or delays,
resulting in the Merger not being consummated within the expected time period;
risks that the announced merger may disrupt current Electro-Sensors plans and
operations or that the business or stock price of Electro-Sensors may suffer as
a result of uncertainty surrounding the Merger; the outcome of any legal
proceedings related to the Merger; and Electro-Sensors or Mobile X Global may be
adversely affected by other economic, business, or competitive factors.
© Edgar Online, source Glimpses
ELECTRO-SENSORS, INC. 
