Item 1.01
Entry into a Material Definitive Agreement.
Merger Agreement
On April 7, 2016, Corning
Incorporated, a New York corporation (Parent), Apricot Merger Company, a
Delaware corporation and a wholly-owned subsidiary of Parent (Merger Sub), and
Alliance Fiber Optic Products, Inc., a Delaware corporation (AFOP), announced
the entry into an Agreement and Plan of Merger (the Merger Agreement). The
Merger Agreement provides that, subject to the terms of the Merger Agreement,
Parent will commence a tender offer (the Offer) to purchase any and all of the
outstanding shares (the Shares) of AFOP common stock, $0.001 par value, at a
price of $18.50 per share in cash, without interest (Offer Price), subject to
any applicable withholding taxes.
The consummation of the Offer,
and the obligation of Merger Sub to accept for payment and pay for Shares
tendered pursuant to the Offer, is subject to various conditions set forth in
the Merger Agreement, including, but not limited to (i) at least a majority of
Shares (determined on a fully diluted basis excluding any options and other
rights to acquire shares of common stock that are either out of the money or not
vested or exercisable) being validly tendered in the Offer and not properly
withdrawn, (ii) the receipt of required approvals, waivers and consents, and
(iii) the satisfaction, or waiver by Merger Sub, of the other conditions and
requirements set forth in Annex I to the Merger Agreement.
The Offer will expire at 12:00
a.m. Eastern Time on the date that is 20 business days (calculated in accordance
with Rule 14d-1(g)(3) of the Securities Exchange Act of 1934) following the
commencement of the Offer, unless extended in accordance with the terms of the
Merger Agreement and the applicable rules and regulations of the Securities and
Exchange Commission (the SEC).
Following consummation of the
Offer and upon the terms and subject to the conditions set forth in the Merger
Agreement, Merger Sub will merge with and into AFOP with AFOP surviving as a
wholly-owned subsidiary of Parent (the Merger). At the effective time of the
Merger (the Effective Time), each Share that is not tendered and accepted
pursuant to the Offer (other than the Shares held in the treasury of AFOP,
Shares held directly or indirectly by Parent or its subsidiaries, and Shares as
to which appraisal rights have been perfected in accordance with applicable law)
will be cancelled and converted into the right to receive cash in an amount
equal to the Offer Price, without interest, on the terms and conditions set
forth in the Merger Agreement.
In addition, at the Effective
Time, (i) each outstanding and unexercised option to purchase Shares, or portion
thereof, to the extent vested or becomes vested as of the Effective Time (each,
a Vested Option), will be cancelled and converted into the right to a payment
in cash of an amount equal to the product of (a) the total number of Shares
subject to such Vested Option immediately prior to such cancellation and (b) the
excess, if any, of the Offer Price over the exercise price per Share of such
Vested Option immediately prior to such cancellation, (ii) each outstanding and
unexercised option to purchase Shares, or portion thereof, that is unvested as
of the Effective Time (each, an Unvested Option) will be assumed by Parent and
converted into an option to purchase, subject to the same vesting schedule, that
number of shares of common stock of Parent as is determined by multiplying the
number of Shares that were subject to such Unvested Option immediately prior to
the Effective Time by a conversion ratio described in the Merger Agreement, at a
per share exercise price as is determined by dividing the per Share exercise
price of such Unvested Option as in effect immediately prior to the Effective
Time by such conversion ratio, (iii) each restricted stock unit representing a
right to receive a Share that is outstanding and vested or becomes vested as of
the Effective Time (each, a Vested RSU) will be cancelled and exchanged for
the right to a payment in cash of an amount equal to the product of (y) the
total number of Shares subject to such Vested RSU immediately prior to such
cancellation and (z) the Offer Price, and (iv) each restricted stock unit
representing a right to receive a Share to the extent unvested as of the
Effective Time (each, an Unvested RSU) will be assumed by Parent and converted
into an award with the same vesting terms and conditions entitling the holder to
a payment in cash of an amount equal to the product of (aa) the total number of
Shares subject to such Unvested RSU immediately prior to such
conversion and (bb) the Offer
Price.
1
The Merger Agreement provides
that the Merger will be governed by Section 251(h) of the Delaware General
Corporation Law (the DGCL) and shall be effected as soon as practicable
following the consummation of the Offer without a meeting of the stockholders of
AFOP pursuant in accordance with Section 251(h) of the DGCL.
The Merger Agreement contains
customary representations and warranties by Parent, Merger Sub and AFOP. The
Merger Agreement also contains customary covenants and agreements, including
with respect to the operations of the business of AFOP and its subsidiaries
between signing and closing, restrictions on responses by AFOP with respect to
alternative transactions, governmental filings and approvals and other matters.
The Merger Agreement generally
prohibits AFOPs solicitation of proposals relating to alternative business
combination transactions and restricts AFOPs ability to furnish non-public
information to, or participate in any discussions or negotiations with, any
third party with respect to any such transaction, subject to certain limited
exceptions.
The Merger Agreement includes
a remedy of specific performance for AFOP, Parent and Merger Sub. The Merger
Agreement also contains termination rights for each of Parent, Merger Sub and
AFOP, and further provides that upon termination of the Merger Agreement under
specified circumstances, including termination by AFOP to accept and enter into
a definitive agreement with respect to an unsolicited superior proposal, AFOP
will be required to pay a termination fee of $10,541,022 million (approximately
3.5% of the aggregate Offer Price) (the Breakup Fee). A superior proposal is a
written proposal pursuant to which a third party would acquire, among other
acquisition structures set forth in the Merger Agreement, 50.1% or more of the
assets of AFOP or the Shares or other equity interests in AFOP on terms that the
board of directors of AFOP will have determined in good faith (after
consultation with its independent financial advisors and its outside legal
counsel) to be more favorable to AFOPs stockholders from a financial point of
view, and that, if accepted, is reasonably capable of being consummated in
accordance with the terms proposed taking into account relevant factors. Any
such termination of the Merger Agreement by AFOP is subject to certain
conditions, including AFOPs compliance with certain procedures set forth in the
Merger Agreement and a determination by the board of directors of AFOP that the
failure to take such action would be inconsistent with its fiduciary duties
under applicable law, the entrance into a definitive agreement by AFOP with a
third party and payment of the Breakup Fee by AFOP.
A copy of the joint press
release issued by AFOP and Parent is attached hereto as Exhibit 99.1 and
incorporated herein by reference.
Scope of Merger Agreement
Summary
The foregoing description of
the Merger Agreement does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1
hereto, and which is incorporated herein by reference. The Merger Agreement has
been provided solely to inform investors of its terms. The representations,
warranties and covenants contained in the Merger Agreement were made only for
purposes of such agreement and as of specific dates, were made solely for the
benefit of the parties to the Merger Agreement, and are intended not as
statements of fact, but rather as a way of allocating risk to one of the parties
if those statements prove to be inaccurate. In addition, such representations,
warranties and covenants may have been qualified by certain disclosures not
reflected in the text of the Merger Agreement and may apply standards of
materiality in a way that is different from what may be viewed as material by
stockholders of, or other investors in, AFOP. Investors are not third-party
beneficiaries under the Merger Agreement and should not rely on the
representations, warranties
and covenants or
any descriptions thereof as characterizations of the actual state of facts or
condition of AFOP, Parent, Merger Sub or any of their respective subsidiaries or
affiliates.
2
Additional Information and
Where to Find It
The Offer described herein has
not yet commenced. This Current Report on Form 8-K and the related exhibits are
for informational purposes only and shall 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 such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws of
any such jurisdiction. Any offer will only be made through a Tender Offer
Statement on Schedule TO, which will contain an offer to purchase, form of
letter of transmittal and other documents relating to the tender offer
(collectively, the Offer Materials), each to be filed with the SEC by Parent.
In addition, AFOP will file with the SEC a solicitation/recommendation statement
on Schedule 14D-9 with respect to the Offer. Parent and AFOP expect to mail the
Offer Materials and the Schedule 14D-9 to AFOPs stockholders. Investors and
stockholders are urged to carefully read these documents and the other documents
relating to the transactions contemplated by the Merger Agreement when they
become available because these documents will contain important information
relating to the Offer and related transactions. The Offer Materials and the
Schedule 14D-9 will also be available at no cost on the SECs web site at
www.sec.gov
.
Forward-Looking
Statements
Certain statements in this
Current Report on Form 8-K may constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements relate to a variety of matters, including but not limited to: the
timing and anticipated completion of the Offer and the proposed Merger; and
other statements that are not purely statements of historical fact. These
forward-looking statements are made on the basis of the current beliefs,
expectations and assumptions of the management of AFOP, and are subject to
significant risks and uncertainties. Investors are cautioned not to place undue
reliance on any such forward-looking statements. All such forward-looking
statements speak only as of the date they are made, and AFOP undertakes no
obligation to update or revise these statements, whether as a result of new
information, future events or otherwise.
Factors that could cause
actual results to differ materially from the forward-looking statements
contained herein include, but are not limited to: potential adverse reactions,
changes to business relationships or any litigation or adverse judgments
relating to the Offer and proposed Merger; risks relating to the consummation of
the Offer and the Merger, including the risk that closing conditions to the
Offer or the proposed Merger will not be satisfied; any delays or issues related
to any inquiry by, or requests or directions from, governmental authorities,
including antitrust authorities, in connection with their reviews of the
transaction; and any changes in general economic or industry-specific
conditions. Additional factors that could cause actual results to differ
materially from those described in the forward-looking statements include those
set forth in AFOPs Annual Report on Form 10-K for the year ended December 31,
2015, which was filed with the SEC on March 11, 2016, under the heading Item
1A-Risk Factors and in AFOPs other reports and filings with the
SEC.