Option will be subject to substantially the same terms and conditions as applied to the related NeoPhotonics option immediately prior to the Effective Time, including the same vesting schedule applicable thereto, except that (A) the number of shares of common stock of Lumentum subject to each Assumed NeoPhotonics Option will be equal the product of (x) the number of shares of NeoPhotonics Common Stock underlying such unvested NeoPhotonics option as of immediately prior to the Effective Time multiplied by (y) the Equity Award Exchange Ratio, rounded down to the nearest whole share, and (B) the per share exercise price of such Assumed NeoPhotonics Option will equal (x) the per share exercise price of such unvested NeoPhotonics Option immediately prior to the Effective Time, divided by (y) the Equity Award Exchange Ratio, rounded up to the nearest cent.
Pursuant to the terms of the Merger Agreement, each NeoPhotonics stock appreciation unit (or portion thereof), that is outstanding and vested immediately prior to the Effective Time (each, a “Cancelled NeoPhotonics SAU”) will be automatically cancelled and converted into the right to receive, with respect to each share of NeoPhotonics Common Stock underlying such Cancelled NeoPhotonics SAU, a cash payment equal to the excess of: (A) the Merger Consideration, less (B) the exercise or base price per share of such Cancelled NeoPhotonics SAU, less applicable tax withholding.
The Boards of Directors of NeoPhotonics and Lumentum have unanimously approved the Merger and the Merger Agreement. The transaction is subject to customary closing conditions, including the absence of certain legal impediments, the expiration or termination of the required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and approval by the holders of a majority of the outstanding shares of Lumentum Common Stock and NeoPhotonics Common Stock. The transaction is not subject to any financing condition.
The Merger Agreement contains customary representations, warranties and covenants of NeoPhotonics, including, (i) covenants concerning the conduct of its business in the ordinary course consistent with past practice during the interim period between the execution of the Merger Agreement and the Effective Time, (ii) a covenant that, subject to certain exceptions, the Board of Directors of NeoPhotonics will recommend to its stockholders the adoption of the Merger Agreement, and (iii) a covenant that NeoPhotonics will not solicit, initiate, or knowingly encourage, knowingly facilitate or knowingly induce the making of an inquiry, offer or proposal that would reasonably be expected to lead to any Acquisition Proposal (as defined in the Merger Agreement).
The Merger Agreement contains certain mutual termination rights for both NeoPhotonics and Lumentum, including (i) if the Merger is not completed by August 3, 2022 (subject to an automatic extension first to November 3, 2022 and then to February 3, 2023, in each case, in order to obtain required regulatory approvals), (ii) if the approval of the NeoPhotonics stockholders is not obtained, and (iii) if the other party breaches its representations, warranties, covenants or agreements under the Merger Agreement in a way that would result in a failure of the other party’s condition to closing being satisfied (subject to certain procedures and cure periods). In addition, the Merger Agreement provides that upon termination of the Merger Agreement under specified circumstances (including termination by NeoPhotonics to accept a superior proposal), NeoPhotonics may be required to pay Lumentum a termination fee of $27,500,000. The Merger Agreement further provides that upon termination of the Merger Agreement under specified circumstances related to antitrust approvals, Lumentum may be required to pay NeoPhotonics a termination fee of $55,100,000, and if Lumentum takes certain specified actions (including entering into any definitive agreement for an acquisition (by stock purchase, merger, consolidation, amalgamation, purchase of assets, license or otherwise) of any ownership interest or assets of any Person)) that cause a material delay in, or results in the failure of, the consummation of the Merger, Lumentum may be required to pay NeoPhotonics an additional termination fee of $36,700,000.
Lumentum has agreed to arrange for up to $50,000,000 in interim debt financing that is unsecured, subordinated to NeoPhotonics’s existing secured credit facility with Wells Fargo, has a two-year term and bears interest at the Prime Rate.
The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is attached hereto as Exhibit 2.1. We encourage you to read the Merger Agreement for a more complete understanding of the transaction. The Merger Agreement has been attached as an exhibit to this report to provide investors and security holders with information regarding its terms. The Merger Agreement is not intended to provide any factual information about Lumentum, NeoPhotonics or Merger Sub.
Forward-Looking Statements
This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events, including the timing of the proposed transaction and other information related to the proposed transaction. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern the proposed transaction and our expectations, strategy, plans or intentions regarding it. Forward-looking statements in this communication
