|
|
Item 1.01.
|
Entry into a Material Definitive Agreement.
|
Merger Agreement
On January 18, 2021,
Lumentum Holdings Inc., a Delaware corporation (“Lumentum”), Coherent, Inc., a Delaware corporation (“Coherent”),
Cheetah Acquisition Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Lumentum (“Merger Sub I”),
and Cheetah Acquisition Sub LLC, a Delaware limited liability company and a wholly owned subsidiary of Lumentum (“Merger
Sub II”), entered into an Agreement and Plan of Merger (the “Merger Agreement”).
Pursuant to the terms
of the Merger Agreement, the acquisition of Coherent will be accomplished through a merger of Merger Sub I with and into Coherent
(the “First Merger”), with Coherent surviving the First Merger, followed by a merger of Coherent with and into
Merger Sub II, with Merger Sub II continuing as the surviving entity (the “Second Merger,” and taken together
with the First Merger, the “Mergers”).
Pursuant to the terms of the Merger Agreement,
and subject to the terms and conditions set forth therein, at the effective time of the First Merger (the “Effective Time”),
each share of the common stock of Coherent (the “Coherent Common Stock”) issued and outstanding immediately
prior to the Effective Time (other than (x) shares of Coherent Common Stock owned by Lumentum, Coherent, or any direct or indirect
wholly owned subsidiary of Lumentum or Coherent or (y) shares of Coherent Common Stock owned by stockholders who have properly
exercised and perfected appraisal rights under Delaware law, in each case immediately prior to the Effective Time, will
be cancelled and extinguished and automatically converted into the right to receive the following consideration (collectively,
the “Merger Consideration”):
(A) $100.00 in cash, without interest
(the “Cash Consideration”), plus
(B) 1.1851
validly issued, fully paid and nonassessable shares of the common stock of Lumentum, par value $0.001 per share (“Lumentum
Common Stock”) (such ratio, the “Exchange Ratio”).
Pursuant to the terms
of the Merger Agreement, each Coherent restricted stock unit award (a “Coherent RSU”), other than Director RSUs
(as defined below), outstanding immediately prior to the Effective Time will be automatically converted into time-based restricted
stock units denominated in shares of Lumentum Common Stock entitling the holder to receive, upon settlement, a number of shares
Lumentum Common Stock equal to the number of shares of Coherent Common Stock subject to the Coherent RSU multiplied by the sum
of (A) the Exchange Ratio, and (B) the quotient obtained by dividing the Cash Consideration by the volume weighted average price
of a share of Lumentum Common Stock for a 10 trading day period ending prior to the closing of the Mergers (the “Closing”).
For Coherent RSUs subject to performance-based vesting conditions and metrics, the number of shares of Lumentum Common Stock subject
to the converted Coherent RSUs will be determined after giving effect to the Coherent Board of Director’s determination of
the number of Coherent RSUs earned, based on the greater of the target or actual level of achievement of such goals or metrics
immediately prior to the Effective Time.
The converted Coherent
RSUs generally will be subject to the same terms and conditions that applied to the awards immediately prior to the Effective Time,
provided that any Coherent RSUs subject to performance-based vesting conditions will be subject solely to time- and service-based
vesting. Each Coherent RSU that is outstanding as of the date of the Merger Agreement that is outstanding as of immediately prior
to the Effective Time will be entitled to the following vesting acceleration benefits:
(A) for
any holder of Coherent RSUs who is a participant under Coherent’s Change of Control and Leadership Change Severance Plan
(the “CIC Plan”), the acceleration benefits under the CIC Plan upon such participant’s involuntary termination
of employment in accordance with the terms and conditions set forth therein and
(B) for
any holder who is not a participant in the CIC Plan, the following vesting acceleration benefits upon his or her termination of
employment by Coherent, Lumentum or their respective subsidiaries without “cause” within
the period beginning immediately following the date of the Closing and ending on the date that is 12 months following the date
of the Closing (or, if earlier, December 31, 2022) (the “Qualifying Termination”), (A)
if such holder’s Qualifying Termination occurs during calendar year 2021, the sum of: (x) 100% of the total number of converted
Coherent RSUs that otherwise would have vested during calendar year 2021 under the applicable vesting schedule in effect on the
Closing had such holder remained employed with Coherent, Lumentum or their respective subsidiaries through the last applicable
vesting date for such award in calendar year 2021 (and reduced by the total number of converted Coherent RSUs that vested in calendar
year 2021 prior to such Qualifying Termination) plus (y) 50% of the total number of converted Coherent RSUs that otherwise
would have vested during calendar year 2022 under the applicable vesting schedule in effect on the Closing had such holder remained
employed with Coherent, Lumentum or their respective subsidiaries through the last applicable vesting date for such award in calendar
year 2022, or (B) if such holder’s Qualifying Termination occurs during calendar year 2022, 50% of the total number of converted
Coherent RSUs that otherwise would have vested during calendar year 2022 under the applicable vesting schedule in effect on the
Closing had such holder remained employed with Coherent, Lumentum or their respective subsidiaries through the last applicable
vesting date for such award in calendar year 2022 (and reduced by the total number of converted Coherent RSUs that vested in calendar
year 2022 prior to such Qualifying Termination).
Each Coherent RSU
granted to a non-employee member of Coherent’s Board of Directors (“Director RSUs”) (whether or not vested)
that is outstanding immediately prior to the Effective Time will, automatically vest in full and be cancelled and converted into
the right to receive the Merger Consideration as if such Director RSU had been settled in shares of Coherent Common Stock immediately
prior to the Effective Time.
The Boards of Directors
of Lumentum and Coherent have unanimously approved the Mergers 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, antitrust approvals in other applicable jurisdictions,
including China and South Korea, the effectiveness of a registration statement on Form S-4 registering the shares of Lumentum Common
Stock to be issued in connection with the First Merger, and approval by the holders of a majority of the outstanding shares of
Lumentum Common Stock and Coherent Common Stock. The transaction is not subject to any financing condition.
The Merger Agreement
contains customary representations, warranties and covenants of Lumentum, Coherent, Merger Sub I and Merger Sub II, including,
(i) covenants by Coherent 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 Closing, (ii) covenants by Lumentum 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 Closing, (iii) a covenant by Coherent and Lumentum that, subject to certain exceptions, the Board of Directors
of each of Coherent and Lumentum will recommend to its stockholders the adoption of the Merger Agreement, and (iv) a covenant that
Lumentum and Coherent will not solicit, initiate, or knowingly encourage, facilitate or induce the making of an inquiry, offer
or proposal that would reasonably be expected to lead to any Company or Parent Takeover Proposal, as applicable (each, as defined
in the Merger Agreement).
The Merger Agreement
contains certain termination rights for both Lumentum and Coherent and provides that upon termination of the Merger Agreement under
specified circumstances (including termination by Coherent to accept a superior proposal), Coherent may be required to pay Lumentum
a termination fee of $217.6 million. The Merger Agreement further provides that upon termination of the Merger Agreement under
specified circumstances (including termination by Lumentum to accept a superior proposal), Lumentum may be required to pay Coherent
a termination fee of $337.7 million, and if the Merger Agreement is terminated for failure to obtain antitrust approval from a
Chinese governmental entity, Lumentum may be required to pay Coherent a termination fee of $279 million.
Pursuant to the Merger
Agreement, Lumentum will add two members of Coherent’s Board of Directors, designated by Coherent and reasonably acceptable
to Lumentum, to Lumentum’s Board of Directors at the Closing, each of whom must qualify as an “independent director”
under applicable rules and regulations of the Nasdaq Global Select Market, and Lumentum has agreed to nominate them for reelection
at Lumentum’s first annual stockholders’ meeting that occurs after the Closing.
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 Coherent, Lumentum, Merger Sub I or Merger Sub II.
Financing of the Mergers
Lumentum plans to
finance the Mergers with approximately $1,000 million of cash from the combined company balance sheets, approximately $3,178 million
in Lumentum common stock, and approximately $2,100 million in new debt. In connection with entering into the Merger Agreement,
Lumentum entered into a commitment letter (the “Commitment Letter”), dated as of January 18, 2021, with Deutsche
Bank Securities Inc. and Deutsche Bank AG New York Branch (the “Commitment Party”), pursuant to which, subject
to the terms and conditions set forth therein, the Commitment Party has committed to provide a senior secured term loan facility
in an aggregate principal amount of up to $2,100 million (the “Term Loan Facility”). The funding of the Term
Loan Facility provided for in the Commitment Letter is contingent on the satisfaction of customary conditions, including (i) the
execution and delivery of definitive documentation with respect to credit facilities in accordance with the terms sets forth in
the Commitment Letter, and (ii) the consummation of the Mergers in accordance with the Merger Agreement.
The foregoing description
of the Commitment Letter and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety
by reference to, the Commitment Letter, a copy of which is filed with this Current Report on Form 8-K as Exhibit 10.1 and the terms
of which are incorporated herein by reference.