Exhibit 4.1
CONFORMED COPY
STOCK OPTION AGREEMENT dated as of January 12, 1999
(the "Agreement"), by and between ASCEND COMMUNICATIONS,
INC., a Delaware corporation ("Issuer"), and LUCENT
TECHNOLOGIES INC., a Delaware corporation ("Grantee").
RECITALS
A. Grantee, Dasher Merger Inc., a wholly owned subsidiary of
Grantee ("Sub"), and Issuer have entered into an Agreement and Plan of
Merger dated as of the date hereof (the "Merger Agreement"; defined terms
used but not defined herein have the meanings set forth in the Merger
Agreement), providing for, among other things, the merger of Sub with and
into Issuer, with Issuer as the surviving corporation in the Merger and
becoming a wholly owned subsidiary of Grantee; and
B. As a condition and inducement to Grantee's willingness to
enter into the Merger Agreement, Grantee has requested that Issuer agree,
and Issuer has agreed, to grant Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, Issuer and Grantee agree as follows:
1. Grant of Option. Subject to the terms and conditions set
forth herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase up to 43,832,749 (as adjusted as set forth herein)
shares (the "Option Shares") of Common Stock, par value $.001 per share
("Issuer Common Stock"), of Issuer at a purchase price of $89.00 (as
adjusted as set forth herein) per Option Share (the "Purchase Price").
2. Exercise of Option. (a) Grantee may exercise the Option,
with respect to any or all of the Option Shares at any time or times,
subject to the provisions of Section 2(c), after the occurrence of any
event as a result of which the Grantee is unconditionally entitled to
receive the Termination Fee pursuant to Section 5.10(b) of the Merger
Agreement (a "Purchase Event"); provided, however, that (i) except as
provided in the last sentence of this Section 2(a), the Option will
terminate and be of no further force and effect upon the earliest to occur
of (A) the Effective Time, (B) 15 business days after the first occurrence
of a Purchase Event, and (C) termination of the Merger Agreement in
accordance with its terms prior to the occurrence of a Purchase Event,
unless, in the case of clause (C), Grantee has the right to receive a
Termination Fee following such termination upon the occurrence of certain
events, in which case the Option will not terminate until the later of
(x) 15 business days following the time such Termination Fee becomes
unconditionally payable and (y) the expiration of the period in which the
Grantee has such right to receive a Termination Fee, and (ii) any purchase
of Option Shares upon exercise of the Option will be subject to compliance
with the HSR Act and the obtaining or making of any consents, approvals,
orders, notifications, filings or authorizations, the failure of which to
have obtained or made would have the effect of making the issuance of
Option Shares to Grantee illegal (the "Regulatory Approvals").
Notwithstanding the termination of the Option, Grantee will be entitled to
purchase the Option Shares if it has exercised the Option in accordance
with the terms hereof prior to the termination of the Option and the
termination of the Option will not affect any rights hereunder which by
their terms do not terminate or expire prior to or as of such termination.
(b) In the event that Grantee is entitled to and wishes to
exercise the Option, it will send to Issuer a written notice (an "Exercise
Notice"; the date of which being herein referred to as the "Notice Date")
to that effect which Exercise Notice also specifies the number of Option
Shares, if any, Grantee wishes to purchase pursuant to this Section 2(b),
the number of Option Shares, if any, with respect to which Grantee wishes
to exercise its Cash-Out Right (as defined herein) pursuant to
Section 6(c), the denominations of the certificate or certificates
evidencing the Option Shares which Grantee wishes to purchase pursuant to
this Section 2(b) and a date (an "Option Closing Date"), subject to the
following sentence, not earlier than seven business days nor later than 20
business days from the Notice Date for the closing of such purchase (an
"Option Closing"). Any Option Closing will be at an agreed location and
time in New York, New York on the applicable Option Closing Date or at such
later date as may be necessary so as to comply with the first sentence of
Section 2(a).
(c) Notwithstanding anything to the contrary contained herein,
any exercise of the Option and purchase of Option Shares shall be subject
to compliance with applicable laws and regulations, which may prohibit the
purchase of all the Option Shares specified in the Exercise Notice without
first obtaining or making certain Regulatory Approvals. In such event, if
the Option is otherwise exercisable and Grantee wishes to exercise the
Option, the Option may be exercised in accordance with Section 2(b) and
Grantee shall acquire the maximum number of Option Shares specified in the
Exercise Notice that Grantee is then permitted to acquire under the
applicable laws and regulations, and if Grantee thereafter obtains the
Regulatory Approvals to acquire the remaining balance of the Option Shares
specified in the Exercise Notice, then Grantee shall be entitled to acquire
such remaining balance. Issuer agrees to use its reasonable efforts to
assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a
Regulatory Approval required for the purchase of any Option Shares will not
be issued or granted or (ii) such Regulatory Approval has not been issued
or granted within six months of the date of the Exercise Notice, Grantee
shall have the right to exercise its Cash-Out Right pursuant to
Section 6(c) with respect to the Option Shares for which such Regulatory
Approval will not be issued or granted or has not been issued or granted.
3. Payment and Delivery of Certificates. (a) At any Option
Closing, Grantee will pay to Issuer in immediately available funds by wire
transfer to a bank account designated in writing by Issuer an amount equal
to the Purchase Price multiplied by the number of Option Shares to be
purchased at such Option Closing plus the amount of any transfer, stamp or
other similar taxes or charges imposed in connection therewith.
(b) At any Option Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), Issuer will
deliver to Grantee a certificate or certificates representing the Option
Shares to be purchased at such Option Closing, which Option Shares will be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever. If at the time of issuance of Option Shares pursuant to an
exercise of the Option hereunder, Issuer shall have issued any securities
similar to rights under a stockholder rights plan, then each Option Share
issued pursuant to such exercise will also represent such a corresponding
right with terms substantially the same as and at least as favorable to
Grantee as are provided under any such stockholder rights plan then in
effect.
(c) Certificates for the Option Shares delivered at an Option
Closing will have typed or printed thereon a restrictive legend which will
read substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT DATED AS OF JANUARY 12, 1999, A COPY OF WHICH MAY BE
OBTAINED FROM THE SECRETARY OF ASCEND COMMUNICATIONS, INC. AT ITS
PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend will be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have
been registered pursuant to the Securities Act, such Option Shares have
been sold in reliance on and in accordance with Rule 144 under the
Securities Act or Grantee has delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel in form and substance
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the Securities Act and (ii) the
reference to restrictions pursuant to this Agreement in the above legend
will be removed by delivery of substitute certificate(s) without such
reference if the Option Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance with the provisions
of this Agreement under circumstances that do not require the retention of
such reference.
4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and, subject to the expiration
or termination of any required waiting period under the HSR Act, to
permit it to issue, and, at all times from the date hereof until the
obligation to deliver Option Shares upon the exercise of the Option
terminates, shall have reserved for issuance, upon exercise of the
Option, shares of Issuer Common Stock necessary for Grantee to
exercise the Option, and Issuer will take all necessary corporate
action to authorize and reserve for issuance all additional shares of
Issuer Common Stock or other securities which may be issued pursuant
to Section 6 upon exercise of the Option. The shares of Issuer Common
Stock to be issued upon due exercise of the Option, including all
additional shares of Issuer Common Stock or other securities which may
be issuable upon exercise of the Option or any other securities which
may be issued pursuant to Section 6, upon issuance pursuant hereto,
will be duly and validly issued, fully paid and nonassessable, and
will be delivered free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever, including without
limitation any preemptive rights of any stockholder of Issuer.
5. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
Purchase Not for Distribution. Any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be
transferred or otherwise disposed of except in a transaction
registered, or exempt from registration, under the Securities Act.
6. Adjustment upon Changes in Capitalization, Etc. (a) In the
event of any change in Issuer Common Stock by reason of a stock dividend,
split-up, merger, recapitalization, combination, exchange of shares, or
similar transaction, the type and number of shares or securities subject to
the Option, and the Purchase Price thereof, will be adjusted appropriately,
and proper provision will be made in the agreements governing such
transaction, so that Grantee will receive upon exercise of the Option the
number and class of shares or other securities or property that Grantee
would have received in respect of Issuer Common Stock if the Option had
been exercised immediately prior to such event or the record date therefor,
as applicable. Subject to Section 1, and without limiting the parties'
relative rights and obligations under the Merger Agreement, if any
additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence
of this Section 6(a)), the number of shares of Issuer Common Stock subject
to the Option will be adjusted so that, after such issuance, it equals
19.9% of the number of shares of Issuer Common Stock then issued and
outstanding, without giving effect to any shares subject to or issued
pursuant to the Option.
(b) Without limiting the parties' relative rights and
obligations under the Merger Agreement, in the event that Issuer enters
into an agreement (i) to consolidate with or merge into any person, other
than Grantee or one of its subsidiaries, and Issuer will not be the
continuing or surviving corporation in such consolidation or merger,
(ii) to permit any person, other than Grantee or one of its subsidiaries,
to merge into Issuer and Issuer will be the continuing or surviving
corporation, but in connection with such merger, the shares of Issuer
Common Stock outstanding immediately prior to the consummation of such
merger will be changed into or exchanged for stock or other securities of
Issuer or any other person or cash or any other property, or the shares of
Issuer Common Stock outstanding immediately prior to the consummation of
such merger will, after such merger, represent less than 50% of the
outstanding voting securities of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person,
other than Grantee or one of its subsidiaries, then, and in each such case,
the agreement governing such transaction will make proper provision so that
the Option will, upon the consummation of any such transaction and upon the
terms and conditions set forth herein, be converted into, or exchanged for,
an option with identical terms appropriately adjusted to acquire the number
and class of shares or other securities or property that Grantee would have
received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such consolidation, merger, sale, or transfer, or the
record date therefor, as applicable and make any other necessary
adjustments.
(c) If, at any time during the period commencing on a Purchase
Event and ending on the termination of the Option in accordance with
Section 2, Grantee sends to Issuer an Exercise Notice indicating Grantee's
election to exercise its right (the "Cash-Out Right") pursuant to this
Section 6(c), then Issuer shall pay to Grantee, on the Option Closing Date,
in exchange for the cancellation of the Option with respect to such number
of Option Shares as Grantee specifies in the Exercise Notice, an amount in
cash equal to such number of Option Shares multiplied by the difference
between (i) the average closing price, for the 10 trading days commencing
on the 12th trading day immediately preceding the Option Closing Date, per
share of Issuer Common Stock as reported on The Nasdaq National Market (or,
if not listed on The Nasdaq National Market, as reported on any other
national securities exchange or national securities quotation system on
which the Issuer Common Stock is listed or quoted, as reported in The Wall
Street Journal (Northeast edition), or, if not reported thereby, any other
authoritative source) (the "Closing Price") and (ii) the Purchase Price.
Notwithstanding the termination of the Option, Grantee will be entitled to
exercise its rights under this Section 6(c) if it has exercised such rights
in accordance with the terms hereof prior to the termination of the Option.
(d) (i) Notwithstanding any other provision of this Agreement,
in no event shall Grantee's Total Profit (as hereinafter defined) plus any
Termination Fee paid to Grantee pursuant to Section 5.10(b) of the Merger
Agreement exceed in the aggregate $625 million and, if the total amount
that otherwise would be received by Grantee would exceed such amount,
Grantee, at its election, shall either (a) reduce the number of shares of
Issuer Common Stock subject to the Option, (b) deliver to Issuer for
cancellation shares of Issuer Common Stock previously purchased by Grantee,
(c) pay cash to Issuer or (d) take any action representing any combination
of the preceding clauses (a), (b) and (c), so that Grantee's actually
realized Total Profit, when aggregated with such Termination Fee so paid to
Grantee, shall not exceed $625 million after taking into account the
foregoing actions.
(ii) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of Option Shares as would, as of
the date of exercise, result in a Notional Total Profit (as defined below)
which, together with any Termination Fee theretofore paid to Grantee, would
exceed $625 million; provided, that nothing in this sentence shall restrict
any exercise of the Option permitted hereby on any subsequent date.
(iii) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (A) the amount received
by Grantee pursuant to Issuer's repurchase of the Option (or any portion
thereof) pursuant to the exercise of the Cash-Out Right under Section 6(c)
and (B)(x) the net cash amounts or the fair market value of any property
received by Grantee pursuant to the sale of Option Shares (or other
securities).
(iv) As used herein, the term "Notional Total Profit" with respect to
any number of Option Shares as to which Grantee may propose to exercise the
Option shall be the Total Profit determined as of the date of such proposal
assuming for such purpose that the Option was exercised on such date for
such number of Option Shares and assuming that such Option Shares, together
with all other Option Shares held by Grantee and its affiliates as of such
date, were sold for cash at the closing market price on The Nasdaq National
Market (or, if shares of Issuer Common Stock are not then listed or traded
on The Nasdaq National Market, on any other national securities exchange or
national quotation system on which shares of Issuer Common Stock are so
listed or traded) for shares of Issuer Common Stock as of the close of
business on the preceding trading day (less customary brokerage
commissions).
7. Registration Rights. Issuer will, if requested by Grantee at
any time and from time to time within two years of the exercise of the
Option, as expeditiously as possible prepare and file up to three
registration statements under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all
shares of securities that have been acquired by or are issuable to Grantee
upon exercise of the Option in accordance with the intended method of sale
or other disposition stated by Grantee, including a "shelf" registration
statement under Rule 415 under the Securities Act or any successor
provision, and Issuer will use its best efforts to qualify such shares or
other securities under any applicable state securities laws. Grantee
agrees to cause, and to cause any underwriters of any sale or other
disposition to cause, any sale or other disposition pursuant to such
registration statement to be effected on a widely distributed basis so that
upon consummation thereof no purchaser or transferee will own beneficially
more than 3.0% of the then-outstanding voting power of Issuer. Issuer will
use reasonable efforts to cause each such registration statement to become
effective, to obtain all consents or waivers of other parties which are
required therefor, and to keep such registration statement effective for
such period not in excess of 120 calendar days from the day such
registration statement first becomes effective as may be reasonably
necessary to effect such sale or other disposition. The obligations of
Issuer hereunder to file a registration statement and to maintain its
effectiveness may be suspended for up to 120 calendar days in the aggregate
if the Board of Directors of Issuer shall have determined that the filing
of such registration statement or the maintenance of its effectiveness
would require premature disclosure of material nonpublic information that
would materially and adversely affect Issuer or otherwise interfere with or
adversely affect any pending or proposed offering of securities of Issuer
or any other material transaction involving Issuer. Any registration
statement prepared and filed under this Section 7, and any sale covered
thereby, will be at Issuer's expense except for underwriting discounts or
commissions, brokers' fees and the fees and disbursements of Grantee's
counsel related thereto. Grantee will provide all information reasonably
requested by Issuer for inclusion in any registration statement to be filed
hereunder. If, during the time periods referred to in the first sentence
of this Section 7, Issuer effects a registration under the Securities Act
of Issuer Common Stock for its own account or for any other stockholders of
Issuer (other than on Form S-4 or Form S-8, or any successor form), it will
allow Grantee the right to participate in such registration, and such
participation will not affect the obligation of Issuer to effect demand
registration statements for Grantee under this Section 7; provided that, if
the managing underwriters of such offering advise Issuer in writing that in
their opinion the number of shares of Issuer Common Stock requested to be
included in such registration exceeds the number which can be sold in such
offering, Issuer will include the shares requested to be included therein
by Grantee pro rata with the shares intended to be included therein by
Issuer. In connection with any registration pursuant to this Section 7,
Issuer and Grantee will provide each other and any underwriter of the
offering with customary representations, warranties, covenants,
indemnification, and contribution in connection with such registration.
If a requested registration pursuant to this Section 7 involves
an underwritten offering, the underwriter or underwriters thereof shall be
a nationally recognized firm or firms selected by Issuer. Notwithstanding
anything else contained in this Section 7, each requested registration
shall be for a number of shares of Issuer Common Stock which represent at
least one-fourth of the total of number of shares of Issuer Common Stock
purchased by Grantee hereunder.
8. Transfers. The Option Shares may not be sold, assigned,
transferred, or otherwise disposed of except (i) in an underwritten public
offering as provided in Section 7 or (ii) to any purchaser or transferee
who would not, to the knowledge of Grantee after reasonable inquiry (which
shall include obtaining a representation from the purchaser or transferee),
immediately following such sale, assignment, transfer or disposal,
beneficially own more than 3.0% of the then-outstanding voting power of the
Issuer; provided, however, that Grantee shall be permitted to sell any
Option Shares if such sale is made pursuant to a tender or exchange offer
that has been approved or recommended by a majority of the members of the
Board of Directors of Issuer (which majority shall include a majority of
directors who were directors as of the date hereof).
9. Listing. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then listed on The Nasdaq
National Market (or any other national securities exchange or national
securities quotation system), Issuer, upon the request of Grantee, will
promptly file an application to list the shares of Issuer Common Stock or
other securities to be acquired upon exercise of the Option on The Nasdaq
National Market (and any such other national securities exchange or
national securities quotation system) and will use reasonable efforts to
obtain approval of such listing as promptly as practicable.
10. Loss or Mutilation. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered will constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed, or mutilated shall at any time be enforceable by anyone.
11. Miscellaneous. (a) Expenses. Each of the parties hereto
will bear and pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants,
and counsel.
(b) Amendment. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) Extension; Waiver. Any agreement on the part of a party to
waive any provision of this Agreement, or to extend the time for
performance, will be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise will not
constitute a waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries. This
Agreement, the Merger Agreement (including the documents and instruments
attached thereto as exhibits or schedules or delivered in connection
therewith) and the Confidentiality Agreement (i) constitute the entire
agreement, and supersede all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter of
this Agreement, and (ii) except as provided in Section 8.06 of the Merger
Agreement, are not intended to confer upon any person other than the
parties any rights or remedies.
(e) Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of
conflict of laws thereof.
(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement shall be sent in the manner and to the
addresses set forth in the Merger Agreement.
(g) Assignment. Neither this Agreement, the Option nor any of
the rights, interests, or obligations under this Agreement may be assigned
or delegated, in whole or in part, by operation of law or otherwise, by
Issuer or Grantee without the prior written consent of the other. Any
assignment or delegation in violation of the preceding sentence will be
void. Subject to the first and second sentences of this Section 11(g),
this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
(h) Further Assurances. In the event of any exercise of the
Option by Grantee, Issuer and Grantee will execute and deliver all other
documents and instruments and take all other actions that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(i) Enforcement. The parties agree that irreparable damage
would occur and that the parties would not have any adequate remedy at law
in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties will be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any
Federal court located in the State of Delaware or in Delaware state court,
the foregoing being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto
(i) consents to submit itself to the personal jurisdiction of any Federal
court located in the State of Delaware or any Delaware state court in the
event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (ii) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, and (iii) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated
by this Agreement in any court other than a Federal court sitting in the
State of Delaware or a Delaware state court.
(j) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of
the day and year first written above.
ASCEND COMMUNICATIONS, INC.,
by /s/ Xxxx Xxxxxx
_____________________________
Name: Xxxx Xxxxxx
Title: President and Chief
Executive Officer
LUCENT TECHNOLOGIES INC.,
by /s/ Xxxxxxx X. XxXxxx
_____________________________
Name: Xxxxxxx X. XxXxxx
Title: Chief Executive Officer
