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AGREEMENT AND PLAN OF MERGER
Dated as of January 12, 1999
By and Among
LUCENT TECHNOLOGIES INC.,
DASHER MERGER INC.
And
ASCEND COMMUNICATIONS, INC.
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TABLE OF CONTENTS
Page
ARTICLE I
The Merger
SECTION 1.01. The Merger........................................ 2
SECTION 1.02. Closing........................................... 2
SECTION 1.03. Effective Time.................................... 2
SECTION 1.04. Effects of the Merger............................. 2
SECTION 1.05. Certificate of Incorporation and By-laws.......... 2
SECTION 1.06. Board of Directors and Officers................... 3
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock........................... 3
(a) Capital Stock of Sub ......................... 3
(b) Cancelation of Treasury Stock and
Lucent-Owned Stock...................... 3
(c) Conversion of Ascend Common Stock............. 3
(d) Anti-Dilution Provisions...................... 4
SECTION 2.02. Exchange of Certificates.......................... 4
(a) Exchange Agent................................ 4
(b) Exchange Procedures........................... 4
(c) Distributions with Respect to
Unexchanged Shares...................... 5
(d) No Further Ownership Rights in Ascend
Common Stock............................ 6
(e) No Fractional Shares.......................... 6
(f) Termination of Exchange Fund.................. 8
(g) No Liability.................................. 8
(h) Investment of Exchange Fund................... 8
(i) Lost Certificates............................. 8
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of Ascend.......... 9
SECTION 3.02. (a) Organization, Standing and Corporate
Power................................... 9
(b) Subsidiaries.................................. 10
(c) Capital Structure............................. 10
(d) Authority; Noncontravention................... 12
(e) SEC Documents; Undisclosed
Liabilities............................. 14
(f) Information Supplied.......................... 15
(g) Absence of Certain Changes or Events.......... 15
(h) Litigation.................................... 16
(i) Compliance with Applicable Laws............... 17
(j) Absence of Changes in Benefit Plans........... 18
(k) ERISA Compliance.............................. 18
(l) Taxes......................................... 20
(m) Voting Requirements........................... 22
(n) State Takeover Statutes....................... 22
(o) Accounting Matters............................ 22
(p) Brokers....................................... 22
(q) Opinion of Financial Advisor.................. 23
(r) Intellectual Property; Year 2000.............. 23
(s) Certain Contracts............................. 24
SECTION 3.02. Representations and Warranties of Lucent
and Sub................................. 24
(a) Organization, Standing and Corporate
Power................................... 25
(b) Capital Structure............................. 25
(c) Authority; Noncontravention................... 26
(d) SEC Documents; Undisclosed
Liabilities ............................ 28
(e) Information Supplied.......................... 29
(f) Absence of Certain Changes or Events.......... 29
(g) Litigation.................................... 30
(h) Compliance with Applicable Laws............... 30
(i) Taxes......................................... 31
(j) Voting Requirements........................... 32
(k) Accounting Matters............................ 32
(l) Brokers....................................... 32
(m) Opinion of Financial Advisor.................. 32
(n) Interim Operations of Sub .................... 32
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business............................... 33
(a) Conduct of Business by Ascend................. 33
(b) Conduct of Business by Lucent................. 36
(c) Other Actions................................. 36
(d) Advice of Changes............................. 37
SECTION 4.02. No Solicitation by Ascend......................... 37
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Form S-4 and the Ascend
Proxy Statement; Ascend Stockholders
Meeting....................................... 40
SECTION 5.02. Letters of Ascend's Accountants.................... 41
SECTION 5.03. Letters of Lucent's Accountants.................... 41
SECTION 5.04. Access to Information; Confidentiality............. 42
SECTION 5.05. Commercially Reasonable Best Efforts............... 42
SECTION 5.06. Stock Options...................................... 43
SECTION 5.07. Ascend Stock Plans................................. 45
SECTION 5.08 Employee Benefit Plans; Existing Agreements........ 45
SECTION 5.09. Indemnification, Exculpation and
Insurance..................................... 46
SECTION 5.10. Fees and Expenses.................................. 48
SECTION 5.11. Public Announcements............................... 49
SECTION 5.12. Affiliates......................................... 50
SECTION 5.13. NYSE Listing....................................... 50
SECTION 5.14. Stockholder Litigation............................. 50
SECTION 5.15. Tax Treatment...................................... 50
SECTION 5.16. Pooling of Interests............................... 51
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To
Effect the Merger............................. 51
(a) Ascend Stockholder Approval.................... 51
(b) HSR Act........................................ 51
(c) No Litigation.................................. 51
(d) Form S-4....................................... 51
(e) NYSE Listing................................... 52
(f) Pooling Letters................................ 52
SECTION 6.02. Conditions to Obligations of Lucent and Sub........ 52
(a) Representations and Warranties................. 52
(b) Performance of Obligations of Ascend........... 52
(c) Tax Opinions................................... 52
SECTION 6.03. Conditions to Obligations of Ascend................ 53
(a) Representations and Warranties................. 53
(b) Performance of Obligations of Lucent
and Sub...................................... 53
(c) Tax Opinions................................... 53
SECTION 6.04. Frustration of Closing Conditions.................. 53
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination........................................ 54
SECTION 7.02. Effect of Termination.............................. 55
SECTION 7.03. Amendment.......................................... 55
SECTION 7.04. Extension; Waiver.................................. 55
SECTION 7.05. Procedure for Termination, Amendment,
Extension or Waiver........................... 56
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and
Warranties.................................... 56
SECTION 8.02. Notices............................................ 56
SECTION 8.03. Definitions........................................ 57
SECTION 8.04. Interpretation..................................... 59
SECTION 8.05. Counterparts....................................... 59
SECTION 8.06. Entire Agreement; No Third-Party
Beneficiaries.................................. 59
SECTION 8.07. Governing Law....................................... 60
SECTION 8.08. Assignment.......................................... 60
SECTION 8.09. Enforcement......................................... 60
SECTION 8.10. Headings............................................ 60
SECTION 8.11. Severability........................................ 61
Annex I Index of Defined Terms
Exhibit A Certificate of Incorporation of Surviving
Corporation
Exhibit B Form of Affiliate Letter
CONFORMED COPY
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AGREEMENT AND PLAN OF MERGER (this
"Agreement") dated as of January 12, 1999,
among LUCENT TECHNOLOGIES INC., a Delaware
corporation ("Lucent"), DASHER MERGER INC., a
Delaware corporation and a wholly owned
subsidiary of Lucent ("Sub"), and ASCEND
COMMUNICATIONS, INC., a Delaware corporation
("Ascend").
WHEREAS the respective Boards of Directors of Lucent, Sub and
Ascend have approved and declared advisable this Agreement and the merger
of Sub with and into Ascend (the "Merger"), upon the terms and subject to
the conditions set forth in this Agreement, whereby each issued and
outstanding share of common stock, par value $.001 per share, of Ascend
("Ascend Common Stock"), other than shares owned by Lucent, Sub or Ascend,
will be converted into the right to receive the Merger Consideration (as
defined in Section 2.01(c));
WHEREAS the respective Boards of Directors of Lucent, Sub and
Ascend have each determined that the Merger and the other transactions
contemplated hereby are consistent with, and in furtherance of, their
respective business strategies and goals;
WHEREAS Lucent, Sub and Ascend desire to make certain
representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger;
WHEREAS, for U.S. federal income tax purposes, it is intended
that the Merger will qualify as a reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code") and that this Agreement constitutes a plan of reorganization;
WHEREAS, for financial accounting purposes, it is intended that
the Merger will be accounted for as a pooling of interests transaction; and
WHEREAS, immediately following the execution and delivery of this
Agreement, Ascend and Lucent will enter into a stock option agreement (the
"Option Agreement"), pursuant to which Ascend will grant Lucent the option
to purchase shares of Ascend Common Stock, upon the terms and subject to
the conditions set forth therein.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the
parties agree as follows:
ARTICLE I
The Merger
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Sub shall be merged with and into
Ascend at the Effective Time (as defined in Section 1.03). Following the
Effective Time, Ascend shall be the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL.
SECTION 1.02. Closing. The closing of the Merger (the "Closing")
will take place at 10:00 a.m. on a date to be specified by the parties (the
"Closing Date"), which shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Article VI (other
than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions),
unless another time or date is agreed to by the parties hereto. The Closing
will be held at such location in the City of New York as is agreed to by
the parties hereto.
SECTION 1.03. Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, the parties
shall file a certificate of merger or other appropriate documents (in any
such case, the "Certificate of Merger") executed in accordance with the
relevant provisions of the DGCL and shall make all other filings or
recordings required under the DGCL. The Merger shall become effective at
such time as the Certificate of Merger is duly filed with the Delaware
Secretary of State, or at such subsequent date or time as Lucent and Ascend
shall agree and specify in the Certificate of Merger (the time the Merger
becomes effective being hereinafter referred to as the "Effective Time").
SECTION 1.04. Effects of the Merger. The Merger shall have the
effects set forth in Section 259 of the DGCL.
SECTION 1.05. Certificate of Incorporation and By-laws. (a) The
certificate of incorporation of Ascend, as in effect immediately prior to
the Effective Time, shall
be amended as set forth in Exhibit A hereto, and, as so amended, shall be
the certificate of incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
(b) The by-laws of Sub, as in effect immediately prior to the
Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.06. Board of Directors and Officers. (a) The directors
of Sub immediately prior to the Effective Time shall be directors of the
Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the
case may be.
(b) The officers of Sub immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, until the earlier of
their resignation or removal or their respective successors are duly
elected and qualified, as the case may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holder of
any shares of Ascend Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into one share of common stock
of the Surviving Corporation.
(b) Cancelation of Treasury Stock and Lucent-Owned Stock. Each
share of Ascend Common Stock that is owned by Ascend, Sub or Lucent
shall automatically be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
(c) Conversion of Ascend Common Stock. Subject to Section
2.02(e), each issued and outstanding share of Ascend Common Stock
(other than shares to be canceled in accordance with Section 2.01(b))
shall be converted into the right to receive 0.825 (the "Exchange
Ratio") fully paid and nonassessable shares
of common stock, par value $.01 per share, of Lucent ("Lucent Common
Stock") (the "Merger Consideration"). As of the Effective Time, all
such shares of Ascend Common Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist,
and each holder of a certificate representing any such shares of
Ascend Common Stock shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration and any
cash in lieu of fractional shares of Lucent Common Stock to be issued
or paid in consideration therefor upon surrender of such certificate
in accordance with Section 2.02, without interest.
(d) Anti-Dilution Provisions. In the event Lucent changes (or
establishes a record date for changing) the number of shares of Lucent
Common Stock issued and outstanding prior to the Effective Date as a
result of a stock split, stock dividend, recapitalization,
subdivision, reclassification, combination, exchange of shares or
similar transaction with respect to the outstanding Lucent Common
Stock and the record date therefor shall be prior to the Effective
Date, the Exchange Ratio shall be proportionately adjusted to reflect
such stock split, stock dividend, recapitalization, subdivision,
reclassification, combination, exchange of shares of similar
transaction.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent. As of
the Effective Time, Lucent shall enter into an agreement with such bank or
trust company as may be designated by Lucent (the "Exchange Agent"), which
shall provide that Lucent shall deposit with the Exchange Agent as of the
Effective Time, for the benefit of the holders of shares of Ascend Common
Stock, for exchange in accordance with this Article II, through the
Exchange Agent, certificates representing the shares of Lucent Common Stock
(such shares of Lucent Common Stock, together with any dividends or
distributions with respect thereto with a record date after the Effective
Time, any Excess Shares (as defined in Section 2.02(e)) and any cash
(including cash proceeds from the sale of the Excess Shares) payable in
lieu of any fractional shares of Lucent Common Stock being hereinafter
referred to as the "Exchange Fund") issuable pursuant to Section 2.01 in
exchange for outstanding shares of Ascend Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record
of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Ascend Common Stock (the "Certificates") whose shares
were converted into the right to receive the Merger Consideration pursuant
to Section 2.01, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent
and shall be in such form and have such other provisions as Lucent and
Ascend may reasonably specify) and (ii) instructions for use in
surrendering the Certificates in exchange for the Merger Consideration.
Upon surrender of a Certificate for cancelation to the Exchange Agent,
together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange Agent, the holder
of such Certificate shall receive in exchange therefor a certificate
representing that number of whole shares of Lucent Common Stock which such
holder has the right to receive pursuant to the provisions of this Article
II, certain dividends or other distributions in accordance with Section
2.02(c) and cash in lieu of any fractional share of Lucent Common Stock in
accordance with Section 2.02(e), and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Ascend
Common Stock which is not registered in the transfer records of Ascend, a
certificate representing the proper number of shares of Lucent Common Stock
may be issued to a person (as defined in Section 8.03) other than the
person in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance shall pay any transfer or
other taxes required by reason of the issuance of shares of Lucent Common
Stock to a person other than the registered holder of such Certificate or
establish to the satisfaction of Lucent that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 2.02(b),
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger
Consideration and any cash in lieu of fractional shares of Lucent Common
Stock to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with this Section 2.02. No interest shall be paid
or will accrue on any cash payable to holders of Certificates pursuant to
the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Lucent Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Lucent Common
Stock represented thereby, and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section 2.02(e), and all such
dividends, other distributions and cash in lieu of fractional shares of
Lucent Common Stock shall be paid by Lucent to the Exchange Agent and shall
be included in the Exchange Fund, in each case until the surrender of such
Certificate in accordance with this Article II. Subject to the effect of
applicable escheat or similar laws, following surrender of any such
Certificate there shall be paid to the holder of the certificate
representing whole shares of Lucent Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective
Time theretofore paid with respect to such whole shares of Lucent Common
Stock, and the amount of any cash payable in lieu of a fractional share of
Lucent Common Stock to which such holder is entitled pursuant to Section
2.02(e) and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but
prior to such surrender and with a payment date subsequent to such
surrender payable with respect to such whole shares of Lucent Common Stock.
(d) No Further Ownership Rights in Ascend Common Stock. All
shares of Lucent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Article II (including any
cash paid pursuant to this Article II) shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the shares of
Ascend Common Stock theretofore represented by such Certificates, subject,
however, to the Surviving Corporation's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective Time
which may have been declared or made by Ascend on such shares of Ascend
Common Stock which remain unpaid at the Effective Time, and there shall be
no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Ascend Common Stock which were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article II, except as otherwise provided by law.
(e) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Lucent Common Stock shall be issued upon
the surrender for exchange of Certificates, no dividend or distribution of
Lucent shall relate to such fractional share interests and such
fractional share interests will not entitle the owner thereof to vote or to
any rights of a stockholder of Lucent.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the excess of (A) the number of whole shares
of Lucent Common Stock delivered to the Exchange Agent by Lucent pursuant
to Section 2.02(a) over (B) the aggregate number of whole shares of Lucent
Common Stock to be distributed to former holders of Ascend Common Stock
pursuant to Section 2.02(b) (such excess being herein called the "Excess
Shares"). Following the Effective Time, the Exchange Agent shall, on behalf
of former stockholders of Ascend, sell the Excess Shares at then-prevailing
prices on the New York Stock Exchange, Inc. (the "NYSE"), all in the manner
provided in Section 2.02(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent shall
be executed on the NYSE through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. The Exchange
Agent shall use reasonable efforts to complete the sale of the Excess
Shares as promptly following the Effective Time as, in the Exchange Agent's
sole judgment, is practicable consistent with obtaining the best execution
of such sales in light of prevailing market conditions. Until the net
proceeds of such sale or sales have been distributed to the holders of
Certificates formerly representing Ascend Common Stock, the Exchange Agent
shall hold such proceeds in trust for such holders (the "Common Shares
Trust"). Ascend shall pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation of
the Exchange Agent, incurred in connection with such sale of the Excess
Shares. The Exchange Agent shall determine the portion of the Common Shares
Trust to which each former holder of Ascend Common Stock is entitled, if
any, by multiplying the amount of the aggregate net proceeds comprising the
Common Shares Trust by a fraction, the numerator of which is the amount of
the fractional share interest to which such former holder of Ascend Common
Stock is entitled (after taking into account all shares of Ascend Common
Stock held at the Effective Time by such holder) and the denominator of
which is the aggregate amount of fractional share interests to which all
former holders of Ascend Common Stock are entitled.
(iv) Notwithstanding the provisions of Section 2.02(e)(ii) and
(iii), Lucent may elect at its option, exercised prior to the Effective
Time, in lieu of the issuance and sale of Excess Shares and the making of
the payments hereinabove contemplated, to pay each former holder
of Ascend Common Stock an amount in cash equal to the product obtained by
multiplying (A) the fractional share interest to which such former holder
(after taking into account all shares of Ascend Common Stock held at the
Effective Time by such holder) would otherwise be entitled by (B) the
closing price for a share of Lucent Common Stock as reported on the NYSE
Composite Transaction Tape (as reported in The Wall Street Journal, or, if
not reported thereby, any other authoritative source) on the Closing Date,
and, in such case, all references herein to the cash proceeds of the sale
of the Excess Shares and similar references shall be deemed to mean and
refer to the payments calculated as set forth in this Section 2.02(e)(iv).
(v) As soon as practicable after the determination of the amount
of cash, if any, to be paid to holders of Certificates formerly
representing Ascend Common Stock with respect to any fractional share
interests, the Exchange Agent shall make available such amounts to such
holders of Certificates formerly representing Ascend Common Stock subject
to and in accordance with the terms of Section 2.02(c).
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of the Certificates for
twelve months after the Effective Time shall be delivered to Lucent, upon
demand, and any holders of the Certificates who have not theretofore
complied with this Article II shall thereafter look only to Lucent for
payment of their claim for Merger Consideration, any dividends or
distributions with respect to Lucent Common Stock and any cash in lieu of
fractional shares of Lucent Common Stock.
(g) No Liability. None of Lucent, Sub, Ascend or the Exchange
Agent shall be liable to any person in respect of any shares of Lucent
Common Stock, any dividends or distributions with respect thereto, any cash
in lieu of fractional shares of Lucent Common Stock or any cash from the
Exchange Fund, in each case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall invest
any cash included in the Exchange Fund, as directed by Lucent, on a daily
basis. Any interest and other income resulting from such investments shall
be paid to Lucent.
(i) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by Lucent, the posting by such person
of a bond in such reasonable amount as Lucent may direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration and, if
applicable, any unpaid dividends and distributions on shares of Lucent
Common Stock deliverable in respect thereof and any cash in lieu of
fractional shares, in each case pursuant to this Agreement.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of Ascend. Except as
disclosed in the Ascend Filed SEC Documents (as defined in Section 3.01(g))
or as set forth on the Disclosure Schedule delivered by Ascend to Lucent
prior to the execution of this Agreement (the "Ascend Disclosure Schedule")
and making reference to the particular subsection of this Agreement to
which exception is being taken, Ascend represents and warrants to Lucent
and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of Ascend
and its subsidiaries (as defined in Section 8.03) is a corporation or
other legal entity duly organized, validly existing and in good
standing (with respect to jurisdictions which recognize such concept)
under the laws of the jurisdiction in which it is organized and has
the requisite corporate or other power, as the case may be, and
authority to carry on its business as now being conducted, except for
those jurisdictions where the failure to be so organized, existing or
in good standing individually or in the aggregate is not reasonably
likely to have a material adverse effect (as defined in Section 8.03)
on Ascend. Each of Ascend and its subsidiaries is duly qualified or
licensed to do business and is in good standing (with respect to
jurisdictions which recognize such concept) in each jurisdiction in
which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing
necessary, except for those jurisdictions where the failure to be so
qualified or licensed or to be in good standing individually or in the
aggregate is not reasonably likely to have a material adverse effect
on Ascend. Ascend has made available to Lucent prior to the execution
of this Agreement complete and correct
copies of its certificate of incorporation and by-laws, as amended to
date.
(b) Subsidiaries. Exhibit 21 to Ascend's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 includes all the
subsidiaries of Ascend which as of the date of this Agreement are
Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X of
the Securities and Exchange Commission (the "SEC")). All the
outstanding shares of capital stock of, or other equity interests in,
each such Significant Subsidiary have been validly issued and are
fully paid and nonassessable and are owned directly or indirectly by
Ascend, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") and free of any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other
ownership interests except restrictions under applicable law.
(c) Capital Structure. The authorized capital stock of Ascend
consists of 400,000,000 shares of Ascend Common Stock and 2,000,000
shares of preferred stock, par value $.001 per share, of Ascend
("Ascend Authorized Preferred Stock"). At the close of business on
January 4, 1999, (i) 220,265,072 shares of Ascend Common Stock were
issued and outstanding; (ii) 800 shares of Ascend Common Stock were
held by Ascend in its treasury; (iii) no shares of Ascend Authorized
Preferred Stock were issued and outstanding; and (iv) 73,872,241
shares of Ascend Common Stock were reserved for issuance pursuant to
the Ascend Communications, Inc. 1998 Stock Incentive Plan, the Ascend
Communications, Inc. 1996 Restricted Stock Plan, the Ascend
Communications, Inc. 1994 Outside Directors Stock Option Plan, the
Ascend Communications, Inc. 1994 Stock Purchase Plan, the Ascend
Communications, Inc. Amended and Restated 1989 Stock Option Plan, the
Cascade Communications Corp. Amended and Restated 1991 Stock Plan, the
Cascade Communications Corp. 1994 Non-Employee Director Stock Option
Plan, the Stratus Computer, Inc. Amended and Restated Employee Stock
Purchase Plan, the Stratus Computer, Inc. Amended and Restated 1983
Stock Option Plan, the Stratus Computer, Inc. Restricted Non-Qualified
Stock Option Plan, the Stratus Computer, Inc. Stock Option Plan
(January 1993), the Stratus Computer, Inc. 1997 Non-Qualified Stock
Option Plan, the Stoneybrook, Inc. 1992 Stock Incentive Plan, the
Whitetree, Inc. 1993 Incentive Plan, the NetStar, Inc. Stock Option
Incentive Plan
(1992), the Morning Star Technologies, Inc. Plan, the Concert
Communications Corporation 1995 Stock Option Plan and the Sahara
Networks, Inc. 1995 Stock Plan (such plans, collectively, the "Ascend
Stock Plans") (of which 39,171,557 are subject to outstanding Ascend
Stock Options (as defined below)). Except as set forth above, at the
close of business on January 4, 1999, no shares of capital stock or
other voting securities of Ascend were issued, reserved for issuance
or outstanding. There are no outstanding stock appreciation rights
("SARs") or rights (other than the Ascend Stock Options) to receive
shares of Ascend Common Stock on a deferred basis granted under the
Ascend Stock Plans or otherwise. Ascend has delivered to Lucent a
complete and correct list, as of January 4, 1999, of the number of
shares of Ascend Common Stock subject to outstanding stock options or
other rights to purchase or receive Ascend Common Stock granted under
the Ascend Stock Plans (collectively, "Ascend Stock Options") and the
exercise prices thereof. As of the date of this Agreement, no bonds,
debentures, notes or other indebtedness of Ascend having the right to
vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of Ascend may vote
are issued or outstanding. All outstanding shares of capital stock of
Ascend are, and all shares which may be issued will be, when issued,
duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Except as set forth in this Section
3.01(c) and except for changes since January 4, 1999 resulting from
the issuance of shares of Ascend Common Stock pursuant to the Ascend
Stock Options outstanding as of January 4, 1999, and pursuant to the
Ascend Stock Options issued after the date hereof as expressly
permitted by the terms of this Agreement, (x) there are not issued,
reserved for issuance or outstanding (A) any shares of capital stock
or other voting securities of Ascend, (B) any securities of Ascend
convertible into or exchangeable or exercisable for shares of capital
stock or voting securities of Ascend, (C) any warrants, calls, options
or other rights to acquire from Ascend or any Ascend subsidiary, and
no obligation of Ascend or any Ascend subsidiary to issue, any capital
stock, voting securities or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of
Ascend and (y) as of the close of business on January 4, 1999, there
are not any outstanding obligations of Ascend or any Ascend subsidiary
to repurchase, redeem or otherwise acquire any such securities or to
issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities. Ascend is
not a party to any voting agreement with respect to the voting of any
such securities. There are no outstanding (A) securities of Ascend or
any Ascend subsidiary convertible into or exchangeable or exercisable
for shares of capital stock or other voting securities or ownership
interests in any Ascend subsidiary, (B) warrants, calls, options or
other rights to acquire from Ascend or any Ascend subsidiary, and no
obligation of Ascend or any Ascend subsidiary to issue, any capital
stock, voting securities or other ownership interests in, or any
securities convertible into or exchangeable or exercisable for any
capital stock, voting securities or ownership interests in, any Ascend
subsidiary or (C) obligations of Ascend or any Ascend subsidiary to
repurchase, redeem or otherwise acquire any such outstanding
securities of Ascend subsidiaries or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities. Other than
the Ascend subsidiaries, Ascend does not directly or indirectly
beneficially own any securities or other beneficial ownership
interests in any other entity.
(d) Authority; Noncontravention. Ascend has all requisite
corporate power and authority to enter into this Agreement and,
subject to the Ascend Stockholder Approval (as defined in Section
3.01(m)), to consummate the transactions contemplated by this
Agreement. Ascend has all requisite corporate power and authority to
enter into the Option Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of this Agreement and
the Option Agreement by Ascend and the consummation by Ascend of the
transactions contemplated by this Agreement and the Option Agreement
have been duly authorized by all necessary corporate action on the
part of Ascend, subject, in the case of the Merger, to the Ascend
Stockholder Approval. This Agreement and the Option Agreement have
been duly executed and delivered by Ascend and, assuming the due
authorization, execution and delivery by each of the other parties
thereto, constitute legal, valid and binding obligations of Ascend,
enforceable against Ascend in accordance with their terms. The
execution and delivery of this Agreement and the Option Agreement do
not, and the consummation of the transactions contemplated by this
Agreement and the Option Agreement and compliance with the provisions
of this Agreement and the Option Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancelation or acceleration of any obligation or loss of a benefit
under, or result in the creation of any Lien upon any of the
properties or assets of Ascend or any of its subsidiaries under, (i)
the certificate of incorporation or by-laws of Ascend or the
comparable organizational documents of any of its subsidiaries, (ii)
any loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise, license
or similar authorization applicable to Ascend or any of its
subsidiaries or their respective properties or assets or (iii) subject
to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Ascend or any of its
subsidiaries or their respective properties or assets, other than, in
the case of clauses (ii) and (iii), any such conflicts, violations,
defaults, rights, losses or Liens that individually or in the
aggregate are not (x) reasonably likely to have a material adverse
effect on Ascend or (y) reasonably likely to impair the ability of
Ascend to perform its obligations under this Agreement or the Option
Agreement. No consent, approval, order or authorization of, action by
or in respect of, or registration, declaration or filing with, any
federal, state, local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or
authority or any non-governmental self-regulatory agency, commission
or authority (each a "Governmental Entity") is required by or with
respect to Ascend or any of its subsidiaries in connection with the
execution and delivery of this Agreement or the Option Agreement by
Ascend or the consummation by Ascend of the transactions contemplated
by this Agreement or the Option Agreement, except for (1) the filing
of a premerger notification and report form by Ascend under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act") and any applicable filings and approvals under similar
foreign antitrust laws and regulations; (2) the filing with the SEC of
(A) a proxy statement relating to the Ascend Stockholders Meeting (as
defined in Section 5.01(b)) (such proxy statement, as amended or
supplemented from time to time, the "Ascend Proxy Statement"), and (B)
such reports under Section 13(a), 13(d), 15(d) or 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement, the Option
Agreement and the transactions contemplated by this
Agreement and the Option Agreement; (3) the filing of the Certificate
of Merger with the Delaware Secretary of State and appropriate
documents with the relevant authorities of other states in which
Ascend is qualified to do business and such filings with Governmental
Entities to satisfy the applicable requirements of state securities or
"blue sky" laws; (4) such filings with and approvals of The Nasdaq
National Market ("Nasdaq") to permit the shares of Ascend Common Stock
that are to be issued pursuant to the Option Agreement to be listed on
Nasdaq; and (5) such consents, approvals, orders or authorizations the
failure of which to be made or obtained individually or in the
aggregate is not reasonably likely to have a material adverse effect
on Ascend.
(e) SEC Documents; Undisclosed Liabilities. Ascend has filed all
required reports, schedules, forms, statements and other documents
(including exhibits and all other information incorporated therein)
with the SEC since January 1, 1997 (the "Ascend SEC Documents"). As of
their respective dates, the Ascend SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933,
as amended (the "Securities Act"), or the Exchange Act, as the case
may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Ascend SEC Documents, and none of the
Ascend SEC Documents when filed contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. Except to the extent that information contained in any
Ascend SEC Document has been revised or superseded by a later filed
Ascend SEC Document, none of the Ascend SEC Documents contains any
untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of Ascend included
in the Ascend SEC Documents comply as to form, as of their respective
dates of filing with the SEC, in all material respects with applicable
accounting requirements and the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on
a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position
of Ascend and its consolidated subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for
the periods then ended (subject, in the case of unaudited statements,
to normal recurring year-end audit adjustments). Except (i) as
reflected in such financial statements or in the notes thereto or (ii)
for liabilities incurred in connection with this Agreement or the
Option Agreement or the transactions contemplated hereby or thereby,
neither Ascend nor any of its subsidiaries has any liabilities or
obligations of any nature which, individually or in the aggregate, are
reasonably likely to have a material adverse effect on Ascend.
(f) Information Supplied. None of the information supplied or to
be supplied by Ascend specifically for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed
with the SEC by Lucent in connection with the issuance of Lucent
Common Stock in the Merger (the "Form S-4") will, at the time the Form
S-4 becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading or (ii) the Ascend Proxy Statement will, at the
date it is first mailed to Ascend's stockholders or at the time of the
Ascend Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. The
Ascend Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation or warranty is
made by Ascend with respect to statements made or incorporated by
reference therein based on information supplied by Lucent specifically
for inclusion or incorporation by reference in the Ascend Proxy
Statement.
(g) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the Option Agreement or
the transactions contemplated hereby or thereby and except as
disclosed in the Ascend SEC Documents filed and publicly available
prior to the date of this Agreement (as
amended to the date of this Agreement, the "Ascend Filed SEC
Documents"), since September 30, 1998, Ascend and its subsidiaries
have conducted their business only in the ordinary course, and there
has not been (1) any material adverse change (as defined in Section
8.03) in Ascend, (2) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property)
with respect to any of Ascend's capital stock, (3) any split,
combination or reclassification of any of Ascend's capital stock or
any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of
Ascend's capital stock, except for issuances of Ascend Common Stock
upon the exercise of Ascend Stock Options under the Ascend Stock
Plans, in each case awarded prior to the date hereof in accordance
with their present terms, (4) (A) any granting by Ascend or any of its
subsidiaries to any current or former director, executive officer or
other key employee of Ascend or its subsidiaries of any increase in
compensation, bonus or other benefits, except for normal increases in
cash compensation in the ordinary course of business consistent with
past practice or as was required under any employment agreements in
effect as of the date of the most recent audited financial statements
included in the Ascend Filed SEC Documents, (B) any granting by Ascend
or any of its subsidiaries to any such current or former director,
executive officer or key employee of any increase in severance or
termination pay, except in the ordinary course of business consistent
with past practice, (C) any entry by Ascend or any of its subsidiaries
into, or any amendments of, any employment, deferred compensation,
consulting, severance, termination or indemnification agreement with
any such current or former director, executive officer or key
employee, or (D) any amendment to, or modification of, any Ascend
Stock Option, (5) except insofar as may have been required by a change
in generally accepted accounting principles, any change in accounting
methods, principles or practices by Ascend materially affecting its
assets, liabilities or business or (6) any tax election that
individually or in the aggregate is reasonably likely to have a
material adverse effect on Ascend or any of its tax attributes or any
settlement or compromise of any material income tax liability.
(h) Litigation. There is no suit, action or proceeding pending
or, to the knowledge of Ascend, threatened against or affecting Ascend
or any of its
subsidiaries that, individually or in the aggregate, is reasonably
likely to have a material adverse effect on Ascend nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against Ascend or any of its subsidiaries
having, or which is reasonably likely to have, individually or in the
aggregate, a material adverse effect on Ascend; provided that for
purposes of this paragraph (h) any such suit, action, proceeding,
judgment, decree, injunction, rule or order arising after the date
hereof shall not be deemed to have a material adverse effect on Ascend
if and to the extent such suit, action, proceeding, judgment, decree,
injunction, rule or order (or any relevant part thereof) is based on
this Agreement, the Option Agreement or the transactions contemplated
hereby or thereby.
(i) Compliance with Applicable Laws. Ascend, its subsidiaries and
employees hold all permits, licenses, variances, exemptions, orders,
registrations and approvals of all Governmental Entities which are
required for the operation of the businesses of Ascend and its
subsidiaries (the "Ascend Permits"), except where the failure to have
any such Ascend Permits individually or in the aggregate is not
reasonably likely to have a material adverse effect on Ascend. Ascend
and its subsidiaries are in compliance with the terms of the Ascend
Permits and all applicable statutes, laws, ordinances, rules and
regulations, except where the failure so to comply individually or in
the aggregate is not reasonably likely to have a material adverse
effect on Ascend. No action, demand, requirement or investigation by
any Governmental Entity and no suit, action or proceeding by any
person, in each case with respect to Ascend or any of its subsidiaries
or any of their respective properties, is pending or, to the knowledge
(as defined in Section 8.03) of Ascend, threatened, other than, in
each case, those the outcome of which individually or in the aggregate
are not (i) reasonably likely to have a material adverse effect on
Ascend or (ii) reasonably likely to impair the ability of Ascend to
perform its obligations under this Agreement or the Option Agreement
or prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement or the Option Agreement;
provided that -------- for purposes of this paragraph (i) any such
action, demand, requirement or investigation or any such suit, action
or proceeding arising after the date hereof shall not be deemed to
have a material adverse effect
on Ascend if and to the extent such action, demand, requirement or
investigation or such suit, action or proceeding (or any relevant part
thereof) is based on this Agreement, the Option Agreement or the
transactions contemplated hereby or thereby.
(j) Absence of Changes in Benefit Plans. Since the date of the
most recent audited financial statements included in the Ascend Filed
SEC Documents, there has not been any adoption or amendment in any
material respect by Ascend or any of its subsidiaries of any
collective bargaining agreement or any material bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization,
medical, welfare benefit or other plan, arrangement or understanding
providing benefits to any current or former employee, officer or
director of Ascend or any of its wholly owned subsidiaries
(collectively, the "Ascend Benefit Plans"), or any material change in
any actuarial or other assumption used to calculate funding
obligations with respect to any Ascend pension plans, or any change in
the manner in which contributions to any Ascend pension plans are made
or the basis on which such contributions are determined.
(k) ERISA Compliance. (i) With respect to the Ascend Benefit
Plans, no event has occurred and, to the knowledge of Ascend, there
exists no condition or set of circumstances, in connection with which
Ascend or any of its subsidiaries could be subject to any liability
that individually or in the aggregate is reasonably likely to have a
material adverse effect on Ascend under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), the Code or any other
applicable law.
(ii) Each Ascend Benefit Plan has been administered in accordance
with its terms, except for any failures so to administer any Ascend
Benefit Plan that individually or in the aggregate are not reasonably
likely to have a material adverse effect on Ascend. Ascend, its
subsidiaries and all the Ascend Benefit Plans are in compliance with
the applicable provisions of ERISA, the Code and all other applicable
laws and the terms of all applicable collective bargaining agreements,
except for any failures to be in such compliance that individually or
in the aggregate are not reasonably likely to have a material adverse
effect
on Ascend. Each Ascend Benefit Plan that is intended to be qualified
under Section 401(a) or 401(k) of the Code has received a favorable
determination letter from the IRS that it is so qualified and each
trust established in connection with any Ascend Benefit Plan that is
intended to be exempt from federal income taxation under Section
501(a) of the Code has received a determination letter from the IRS
that such trust is so exempt. To the knowledge of Ascend, no fact or
event has occurred since that date of any determination letter from
the IRS which is reasonably likely to affect adversely the qualified
status of any such Ascend Benefit Plan or the exempt status of any
such trust. There are no pending or, to the knowledge of Ascend,
threatened lawsuits, claims, grievances, investigations or audits of
any Ascend Benefit Plan that, individually or in the aggregate, are
reasonably likely to have a material adverse effect on Ascend.
(iii) Neither Ascend nor any of its subsidiaries has incurred any
liability under Title IV of ERISA (other than liability for premiums
to the Pension Benefit Guaranty Corporation arising in the ordinary
course). No Ascend Benefit Plan has incurred an "accumulated funding
deficiency" (within the meaning of Section 302 of ERISA or Section 412
of the Code) whether or not waived. To the knowledge of Ascend, there
are not any facts or circumstances that are reasonably likely to
materially change the funded status of any Ascend Benefit Plan that is
a "defined benefit" plan (as defined in Section 3(35) of ERISA) since
the date of the most recent actuarial report for such plan. No Ascend
Benefit Plan is a "multiemployer plan" within the meaning of Section
3(37) of ERISA.
(iv) Ascend and its subsidiaries are in compliance with all
federal, state and local requirements regarding employment, except for
any failures to comply that individually or in the aggregate are not
reasonably likely to have a material adverse effect on Ascend. Neither
Ascend nor any of its subsidiaries is a party to any collective
bargaining or other labor union contract applicable to persons
employed by Ascend or any of its subsidiaries and no collective
bargaining agreement is being negotiated by Ascend or any of its
subsidiaries. As of the date of this Agreement, there is no labor
dispute, strike or work stoppage against Ascend or any of its
subsidiaries pending or, to the knowledge of Ascend, threatened which
may interfere with the respective business activities of Ascend or any
of its subsidiaries, except where such dispute,
strike or work stoppage individually or in the aggregate is not
reasonably likely to have a material adverse effect on Ascend. As of
the date of this Agreement, to the knowledge of Ascend, none of
Ascend, any of its subsidiaries or any of their respective
representatives or employees has committed any unfair labor practice
in connection with the operation of the respective business of Ascend
or any of its subsid iaries, and there is no charge or complaint
against Ascend or any of its subsidiaries by the National Labor
Relations Board or any comparable governmental agency pending or
threatened in writing, in each case except where such actions, charges
or complaints, individually or in the aggregate, are not reasonably
likely to have a material adverse effect on Ascend.
(v) No employee of Ascend will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any
benefits under any Ascend Benefit Plan as a result of the transactions
contemplated by this Agreement or the Option Agreement. No amount
payable, or economic benefit provided, by Ascend or its subsidiaries
(including any acceleration of the time of payment or vesting of any
benefit) could be considered an "excess parachute payment" under
Section 280G of the Code. No person is entitled to receive any
additional payment from Ascend or its subsidiaries or any other person
(a "Parachute Gross-Up Payment") in the event that the excise tax of
Section 4999 of the Code is imposed on such person. The Board of
Directors of Ascend or any of its subsidiaries has not granted to any
person any right to receive any Parachute Gross-Up Payment.
(l) Taxes. (i) Each of Ascend and its subsidiaries has filed all
material tax returns and reports required to be filed by it and all
such returns and reports are complete and correct in all material
respects, or requests for extensions to file such returns or reports
have been timely filed, granted and have not expired, except to the
extent that such failures to file, to be complete or correct or to
have extensions granted that remain in effect individually or in the
aggregate are not reasonably likely to have a material adverse effect
on Ascend. Ascend and each of its subsidiaries has paid (or Ascend has
paid on its behalf) all taxes (as defined in Section 3.01(l)(vi))
shown as due on such returns, and the most recent financial statements
contained in the Ascend Filed SEC Documents reflect an adequate
reserve for all taxes payable by Ascend and its subsidiaries for all
taxable
periods and portions thereof accrued through the date of such
financial statements.
(ii) No deficiencies for any taxes have been proposed, asserted
or assessed against Ascend or any of its subsidiaries that are not
adequately reserved for, except for deficiencies that individually or
in the aggregate are not reasonably likely to have a material adverse
effect on Ascend. The federal income tax returns of Ascend and each of
its subsidiaries consolidated in such returns have closed by virtue of
the applicable statute of limitations.
(iii) Neither Ascend nor any of its subsidiaries has taken any
action or knows of any fact, agreement, plan or other circumstance
that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(iv) The Ascend Benefit Plans and other Ascend employee
compensation arrangements in effect as of the date of this Agreement
have been designed so that the disallowance of a material deduction
under Section 162(m) of the Code for employee remuneration will not
apply to any amounts paid or payable by Ascend or any of its
subsidiaries under any such plan or arrangement and, to the knowledge
of Ascend, no fact or circumstance exists that is reasonably likely to
cause such disallowance to apply to any such amounts.
(v) Neither Ascend nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section
355 of the Code (x) in the two years prior to the date of this
Agreement or (y) in a distribution which could otherwise constitute
part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the Merger.
(vi) As used in this Agreement, "taxes" shall include all (x)
federal, state, local or foreign income, property, sales, excise and
other taxes or similar governmental charges, including any interest,
penalties or additions with respect thereto, (y) liability for the
payment of any amounts of the type described in (x) as a result of
being a member of an affiliated, consolidated, combined or unitary
group, and (z) liability for the payment of any amounts as a result of
being party to any tax sharing agreement or
as a result of any express or implied obligation to indemnify any
other person with respect to the payment of any amounts of the type
described in clause (x) or (y).
(m) Voting Requirements. The affirmative vote of the holders of a
majority of the voting power of all outstanding shares of Ascend
Common Stock at the Ascend Stockholders Meeting to adopt this
Agreement (the "Ascend Stockholder Approval") is the only vote of the
holders of any class or series of Ascend's capital stock necessary to
approve and adopt this Agreement, the Option Agreement and the
transactions contemplated hereby and thereby.
(n) State Takeover Statutes. The Board of Directors of Ascend
(including the disinterested directors thereof) has unanimously
approved the terms of this Agreement and the Option Agreement and the
consummation of the Merger and the other transactions contemplated by
this Agreement and the Option Agreement and such approval constitutes
approval of the Merger and the other transactions contemplated by this
Agreement and the Option Agreement by the Ascend Board of Directors
under the provisions of Section 203 of the DGCL and represents all the
action necessary to ensure that such Section 203 does not apply to
Lucent in connection with the Merger and the other transactions
contemplated by this Agreement and by the Option Agreement. To the
knowledge of Ascend, no other state takeover statute is applicable to
the Merger or the other transactions contemplated hereby and by the
Option Agreement.
(o) Accounting Matters. Neither Ascend nor any of its affiliates
(as defined in Section 8.03) has taken or agreed to take any action
that would prevent the business combination to be effected by the
Merger to be accounted for as a pooling of interests.
(p) Brokers. No broker, investment banker, financial advisor or
other person, other than Credit Suisse First Boston Corporation, the
fees and expenses of which will be paid by Ascend, is entitled to any
broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this
Agreement and the Option Agreement based upon arrangements made by or
on behalf of Ascend. Ascend has furnished to Lucent true and complete
copies of all agreements under which any such fees or expenses are
payable and all
indemnification and other agreements related to the engagement of the
persons to whom such fees are payable.
(q) Opinion of Financial Advisor. Ascend has received the opinion
of Credit Suisse First Boston Corporation, dated the date of this
Agreement, to the effect that, as of such date, the Exchange Ratio is
fair from a financial point of view to holders of shares of Ascend
Common Stock (other than Lucent and its affiliates), a signed copy of
which opinion has been or will promptly be delivered to Lucent.
(r) Intellectual Property; Year 2000. (i) Ascend and its
subsidiaries own, or are validly licensed or otherwise have the right
to use, all patents, patent rights, trademarks, trade secrets, trade
names, service marks, copyrights and other proprietary intellectual
property rights and computer programs (the "Intellectual Property
Rights") which are material to the conduct of the business of Ascend
and its subsidiaries.
(ii) To the knowledge of Ascend, neither Ascend nor any of its
subsidiaries has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property Rights or
other proprietary information of any other person, except for any such
interference, infringement, misappropriation or other conflict which
is not, individually or in the aggregate, reasonably likely to have a
material adverse effect on Ascend. Neither Ascend nor any of its
subsidiaries has received any written charge, complaint, claim, demand
or notice alleging any such interference, infringement,
misappropriation or other conflict (including any claim that Ascend or
any such subsidiary must license or refrain from using any
Intellectual Property Rights or other proprietary information of any
other person) which has not been settled or otherwise fully resolved.
To Ascend's knowledge, no other person has interfered with, infringed
upon, misappropriated or otherwise come into conflict with any
Intellectual Property Rights of Ascend or any of its subsidiaries,
except for any such interference, infringement, misappropriation or
other conflict which is not, individually or in the aggregate,
reasonably likely to have a material adverse effect on Ascend.
(iii) As the business of Ascend and its subsidiaries is presently
conducted and without giving
effect to any changes with respect thereto that may be made by Lucent,
to Ascend's knowledge, Lucent's use of the Intellectual Property
Rights which are material to the conduct of the business of Ascend and
its subsidiaries taken as a whole will not interfere with, infringe
upon, misappropriate or otherwise come into conflict with the
Intellectual Property Rights of any other person.
(iv) Ascend has implemented a program directed at ensuring that
its and its subsidiaries' products (including prior and current
products and technology and products and technology currently under
development) will, when used in accordance with associated
documentation on a specified platform or platforms, be capable upon
installation of (i) operating in the same manner on dates in both the
Twentieth and Twenty-First centuries and (ii) accurately processing,
providing and receiving date data from, into and between the Twentieth
and Twenty-First centuries, including the years 1999 and 2000, and
making leap-year calculations, provided that all non-Ascend products
(e.g., hardware, software and firmware) material to the conduct of the
business of Ascend and used in or in combination with Ascend's
products, exchange data with Ascend's products in the same manner on
dates in both the Twentieth and Twenty- First centuries. Ascend has
taken the steps as set forth in Section 3.01(r) of the Ascend
Disclosure Schedule to assure that the year 2000 date change will not
adversely affect the systems and facilities that support the
operations of Ascend and its subsidiaries, except as is not reasonably
likely to have a material adverse effect on Ascend.
(s) Certain Contracts. Neither Ascend nor any of its subsidiaries
is a party to or bound by any non-competition agreement or any other
similar agreement or obligation which purports to limit in any
material respect the manner in which, or the localities in which, all
or any material portion of the business of Ascend and its
subsidiaries, taken as a whole, is conducted.
SECTION 3.02. Representations and Warranties of Lucent and Sub.
Except as disclosed in the Lucent Filed SEC Documents (as defined in
Section 3.02(f)) or as set forth on the Disclosure Schedule delivered by
Lucent to Ascend prior
to the execution of this Agreement (the "Lucent Disclosure Schedule") and
making reference to the particular subsection of this Agreement to which
exception is being taken, Lucent and Sub represent and warrant to Ascend as
follows:
(a) Organization, Standing and Corporate Power. Each of Lucent,
Sub and their subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing (with respect to
jurisdictions which recognize such concept) under the laws of the
jurisdiction in which it is organized and has the requisite corporate
or other power, as the case may be, and authority to carry on its
business as now being conducted, except for those jurisdictions where
the failure to be so organized, existing or in good standing
individually or in the aggregate is not reasonably likely to have a
material adverse effect on Lucent. Each of Lucent and its subsidiaries
is duly qualified or licensed to do business and is in good standing
(with respect to jurisdictions which recognize such concept) in each
jurisdiction in which the nature of its business or the ownership,
leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions where the failure
to be so qualified or licensed or to be in good standing individually
or in the aggregate is not reasonably likely to have a material
adverse effect on Lucent. Lucent has made available to Ascend prior to
the execution of this Agreement complete and correct copies of its
certificate of incorporation and by-laws and the certificate of
incorporation and by-laws of Sub, in each case as amended to date.
(b) Capital Structure. The authorized capital stock of Lucent
consists of 3,000,000,000 shares of Lucent Common Stock and
250,000,000 shares of preferred stock, par value $1.00 per share, of
Lucent ("Lucent Authorized Preferred Stock"), of which 7,500,000
shares have been designated Series A Junior Participating Preferred
Stock (the "Lucent Junior Preferred Stock"). At the close of business
on November 30, 1998, (i) 1,318,615,011 shares of Lucent Common Stock
were issued and outstanding, (ii) approximately 105,351,000 shares of
Lucent Common Stock were reserved for issuance pursuant to outstanding
stock options or other rights to purchase or receive Lucent Common
Stock granted under the 1996 Long Term Incentive Program, the 1997
Long Term Incentive Plan, the Global Founders Grant, the 1998 Global
Ownership Grant and various plans of companies acquired by Lucent
(such plans, collectively, the "Lucent Stock Plans"), (iii) no
shares of Lucent Junior Preferred Stock were issued and outstanding
and (iv) other than the Lucent Junior Preferred Stock, no other shares
of Lucent Authorized Preferred Stock have been designated or issued.
As of the date of this Agreement, no bonds, debentures, notes or other
indebtedness of Lucent having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any
matters on which stockholders of Lucent may vote are issued or
outstanding. All outstanding shares of capital stock of Lucent are,
and all shares which may be issued will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Lucent has made available to Ascend a
complete and correct copy of the Rights Agreement dated as of April 4,
1996, as amended (the "Lucent Rights Agreement") between Lucent and
The Bank of New York, as Rights Agent, relating to rights ("Lucent
Rights") to purchase Lucent Junior Preferred Stock.
(c) Authority; Noncontravention. Each of Lucent and Sub has all
requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated by this Agreement.
Lucent has all requisite corporate power and authority to enter into
the Option Agreement and to consummate the transactions contemplated
thereby. The execution and delivery of this Agreement by Lucent and
Sub, and the execution and delivery of the Option Agreement by Lucent,
and the consummation by Lucent and Sub of the transactions
contemplated by this Agreement and the consummation by Lucent of the
transactions contemplated by the Option Agreement have been duly
authorized by all necessary corporate action on the part of Lucent and
Sub, as applicable. This Agreement has been duly executed and
delivered by Lucent and Sub and, assuming the due authorization,
execution and delivery by each of the other parties thereto,
constitutes a legal, valid and binding obligation of Lucent and Sub,
enforceable against each of them in accordance with its terms. The
Option Agreement has been duly executed and delivered by Lucent, and,
assuming the due authorization, execution and delivery by each of the
other parties thereto, constitutes a legal, valid and binding
obligation of Lucent, enforceable against Lucent in accordance with
its terms. The execution and delivery of this Agreement and the Option
Agreement do not, and the consummation of the transactions
contemplated by this Agreement and the Option Agreement and compliance
with the provisions of this Agreement and the Option Agreement will
not, conflict with, or
result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancelation or acceleration of any obligation or loss of a benefit
under, or result in the creation of any Lien upon any of the
properties or assets of Lucent or Sub or any of Lucent's other
subsidiaries under, (i) the certificate of incorporation or by-laws of
Lucent or Sub or the comparable organizational documents of any of
Lucent's other subsidiaries, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise, license or similar authorization
applicable to Lucent or Sub or any of Lucent's other subsidiaries or
their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Lucent or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, defaults, rights,
losses or Liens that individually or in the aggregate are not (x)
reasonably likely to have a material adverse effect on Lucent or (y)
reasonably likely to impair the ability of Lucent or Sub to perform
its obligations under this Agreement or, in the case of Lucent, to
perform its obligations under the Option Agreement. No consent,
approval, order or authorization of, action by, or in respect of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Lucent or Sub or any of Lucent's other
subsidiaries in connection with the execution and delivery of this
Agreement by Lucent and Sub or the execution and delivery of the
Option Agreement by Lucent or the consummation by Lucent and Sub of
the transactions contemplated by this Agreement or the consummation by
Lucent of the transactions contemplated by the Option Agreement,
except for (1) the filing of a premerger notification and report form
by Lucent under the HSR Act and any applicable filings and approvals
under similar foreign antitrust laws and regulations; (2) the filing
with the SEC of (A) the Form S-4 and (B) such reports under Section
13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may be required in
connection with this Agreement and the Option Agreement and the
transactions contemplated by this Agreement and the Option Agreement;
(3) the filing of the Certificate of Merger with the Delaware
Secretary of State and appropriate documents with the relevant
authorities of other states in which Lucent is qualified to do
business and such filings with Governmental Entities to satisfy the
applicable requirements of state securities or "blue sky" laws; (4)
such filings with and approvals of the NYSE to permit the shares of
Lucent Common Stock that are to be issued in the Merger to be listed
on the NYSE; and (5) such consents, approvals, orders or
authorizations the failure of which to be made or obtained
individually or in the aggregate is not reasonably likely to have a
material adverse effect on Lucent.
(d) SEC Documents; Undisclosed Liabilities. Lucent has filed all
required reports, schedules, forms, statements and other documents
(including exhibits and all other information incorporated therein)
with the SEC since October 1, 1997 (the "Lucent SEC Documents"). As of
their respective dates, the Lucent SEC Documents complied in all
material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such Lucent SEC Documents,
and none of the Lucent SEC Documents when filed contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. Except to the extent that information
contained in any Lucent SEC Document has been revised or superseded by
a later filed Lucent SEC Document, none of the Lucent SEC Documents
contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of Lucent
included in the Lucent SEC Documents comply as to form, as of their
respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present in all
material respects the consolidated financial position of Lucent and
its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case
of unaudited statements, to normal recurring year-end audit
adjustments). Except (i) as reflected in such financial statements or
in the notes thereto or (ii) for liabilities incurred in connection
with this Agreement or the Option Agreement or the transactions
contemplated hereby or thereby, neither Lucent nor any of its
subsidiaries has any liabilities or obligations of any nature which,
individually or in the aggregate, are reasonably likely to have a
material adverse effect on Lucent.
(e) Information Supplied. None of the information supplied or to
be supplied by Lucent specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or
(ii) the Ascend Proxy Statement will, at the date it is first mailed
to Ascend's stockholders or at the time of the Ascend Stockholders
Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Form S-4 will comply as
to form in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder, except that no
representation or warranty is made by Lucent with respect to
statements made or incorporated by reference therein based on
information supplied by Ascend specifically for inclusion or
incorporation by reference in the Form S-4.
(f) Absence of Certain Changes or Events. Except for liabilities
incurred in connection with this Agreement or the Option Agreement or
the transactions contemplated hereby or thereby and except as
disclosed in the Lucent SEC Documents filed and publicly available
prior to the date of this Agreement (the "Lucent Filed SEC
Documents"), since September 30, 1998, Lucent and its subsidiaries
have conducted their business only in the ordinary course, and there
has not been (1) any material adverse change in Lucent, (2) except
insofar as may have been or required by a change in generally accepted
accounting principles, any change in accounting methods, principles or
practices by Lucent materially affecting its assets, liabilities or
business or (3) any tax election that individually or in the aggregate
is reasonably likely to have a
material adverse effect on Lucent or any of its tax attributes or any
settlement or compromise of any material income tax liability.
(g) Litigation. There is no suit, action or proceeding pending
or, to the knowledge of Lucent, threatened against or affecting Lucent
or any of its subsidiaries that, individually or in the aggregate, is
reasonably likely to have a material adverse effect on Lucent nor is
there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Lucent or any of
its subsidiaries having, or which is reasonably likely to have,
individually or in the aggregate, a material adverse effect on Lucent;
provided that, for purposes of this paragraph (g), any such suit,
action, proceeding, judgment, decree, injunction, rule or order
arising after the date hereof shall not be deemed to have a material
adverse effect on Lucent if and to the extent such suit, action,
proceeding, judgment, decree, injunction, rule or order (or any
relevant part thereof) is based on this Agreement, the Option
Agreement or the transactions contemplated hereby or thereby.
(h) Compliance with Applicable Laws. Lucent, its subsidiaries and
employees hold all permits, licenses, variances, exemptions, orders,
registrations and approvals of all Governmental Entities which are
required for the operation of the businesses of Lucent and its
subsidiaries (the "Lucent Permits") except where the failure to have
any such Lucent Permits individually or in the aggregate is not
reasonably likely to have a material adverse effect on Lucent. Lucent
and its subsidiaries are in compliance with the terms of the Lucent
Permits and all applicable statutes, laws, ordinances, rules and
regulations, except where the failure so to comply individually or in
the aggregate is not reasonably likely to have a material adverse
effect on Lucent. No action, demand, requirement or investigation by
any Governmental Entity and no suit, action or proceeding by any
person, in each case with respect to Lucent or any of its subsidiaries
or any of their respective properties, is pending or, to the knowledge
of Lucent, threatened, other than, in each case, those the outcome of
which individually or in the aggregate are not (i) reasonably likely
to have a material adverse effect on Lucent or (ii) reasonably likely
to impair the ability of Lucent to perform its obligations under this
Agreement or the Option Agreement or prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement
or the Option Agreement; provided that for purposes of this paragraph
(h) any such action, demand, requirement or investigation or any such
suit, action or proceeding arising after the date hereof shall not be
deemed to have a material adverse effect on Lucent if and to the
extent such action, demand, requirement or investigation or such suit,
action or proceeding (or any relevant part thereof) is based on this
Agreement, the Option Agreement or the transactions contemplated
hereby or thereby.
(i) Taxes. (i) Each of Lucent and its subsidiaries has filed all
material tax returns and reports required to be filed by it and all
such returns and reports are complete and correct in all material
respects, or requests for extensions to file such returns or reports
have been timely filed, granted and have not expired, except to the
extent that such failures to file, to be complete or correct or to
have extensions granted that remain in effect individually or in the
aggregate are not reasonably likely to have a material adverse effect
on Lucent. Lucent and each of its subsidiaries has paid (or Lucent has
paid on its behalf) all taxes shown as due on such returns, and the
most recent financial statements contained in the Lucent Filed SEC
Documents reflect an adequate reserve for all taxes payable by Lucent
and its subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed, asserted
or assessed against Lucent or any of its subsidiaries that are not
adequately reserved for, except for deficiencies that individually or
in the aggregate are not reasonably likely to have a material adverse
effect on Lucent. The federal income tax returns of Lucent and each of
its subsidiaries consolidated in such returns have closed by virtue of
the applicable statute of limitations.
(iii) Neither Lucent nor any of its subsidiaries has taken any
action or knows of any fact, agreement, plan or other circumstance
that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(iv) Neither Lucent nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section
355 of
the Code (x) in the two years prior to the date of this Agreement or
(y) in a distribution which could otherwise constitute part of a
"plan" or "series of related transactions" (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.
(j) Voting Requirements. No vote of the holders of shares of
Lucent Common Stock or any other class or series of capital stock of
Lucent is necessary to approve and adopt this Agreement and the Option
Agreement and the transactions contemplated hereby and thereby.
(k) Accounting Matters. Neither Lucent nor any of its affiliates
has taken or agreed to take any action that would prevent the business
combination to be effected by the Merger to be accounted for as a
pooling of interests.
(l) Brokers. No broker, investment banker, financial advisor or
other person, other than Xxxxxxx, Xxxxx & Co., the fees and expenses
of which will be paid by Lucent, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement and
the Option Agreement based upon arrangements made by or on behalf of
Lucent.
(m) Opinion of Financial Advisor. Lucent has received the opinion
of Xxxxxxx, Sachs & Co., dated the date of this Agreement, to the
effect that, as of such date, the Exchange Ratio is fair to Lucent
and, accordingly, to Lucent's stockholders from a financial point of
view, a signed copy of which opinion has been or promptly will be
delivered to Ascend.
(n) Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its
operations only as contemplated hereby.
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business. (a) Conduct of Business by
Ascend. Except as set forth in Section 4.01(a) of the Ascend Disclosure
Schedule, as otherwise expressly contemplated by this Agreement or the
Option Agreement or as consented to by Lucent, such consent not to be
unreasonably withheld or delayed, during the period from the date of this
Agreement to the Effective Time, Ascend shall, and shall cause its
subsidiaries to, carry on their respective businesses in the ordinary
course consistent with past practice and in compliance in all material
respects with all applicable laws and regulations and, to the extent
consistent therewith, use all reasonable efforts to preserve intact their
current business organizations, use reasonable efforts to keep available
the services of their current officers and other key employees and preserve
their relationships with those persons having business dealings with them
to the end that their goodwill and ongoing businesses shall be unimpaired
at the Effective Time. Without limiting the generality of the foregoing
(but subject to the above exceptions and subject to actions taken
consistent with the Stratus Computer, Inc. divestiture plan referred to in
clause (v) below), during the period from the date of this Agreement to the
Effective Time, Ascend shall not, and shall not permit any of its
subsidiaries to:
(i) other than dividends and distributions (including liquidating
distributions) by a direct or indirect wholly owned subsidiary of
Ascend to its parent, (x) declare, set aside or pay any dividends on,
or make any other distributions in respect of, any of its capital
stock, (y) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, except
for issuances of Ascend Common Stock pursuant to the exercise of
Ascend Stock Options outstanding as of the date hereof in accordance
with their present terms or (z) purchase, redeem or otherwise acquire
any shares of capital stock of Ascend or any of its subsidiaries or
any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants
or options to acquire, any such shares, voting securities
or convertible securities (other than (w) the issuance of Ascend Stock
Options granted consistent with past practice to new or promoted
employees (other than executive officers) of Ascend representing in
the aggregate not more than 3.8 million shares of Ascend Common Stock
(provided that the vesting of such Ascend Stock Options shall not be
accelerated as a result of the Merger), (x) the issuance of Ascend
Common Stock upon the exercise of Ascend Stock Options outstanding as
of the date hereof in accordance with their present terms, or upon the
exercise of the Ascend Stock Options referred to in clause (w) in
accordance with their terms, (y) the issuance of Ascend Common Stock
pursuant to the Option Agreement or (z) subject to Section 5.06(e),
the issuance of Ascend Common Stock in accordance with past practice
pursuant to the terms of the 1994 Stock Purchase Plan as in effect on
the date of this Agreement);
(iii) amend Ascend's certificate of incorporation, by-laws or
other comparable organizational documents;
(iv) acquire or agree to acquire by merging or consolidating
with, or by purchasing assets of, or by any other manner, any business
or any person, other than (A) purchases of raw materials or supplies
in the ordinary course of business consistent with past practice or
(B) acquisitions for cash plus assumption of debt with a purchase
price (together with the amount of assumed debt) not in excess of $100
million individually or $250 million in the aggregate, provided that
Ascend shall have reasonably consulted with Lucent prior to entering
into a definitive agreement with respect to any such acquisition and
shall not consummate any acquisition that, to the knowledge of Ascend
in its good faith judgment, will result in a significant overlap with
Lucent's businesses;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets (including securitizations), other than sales or licenses of
finished goods in the ordinary course of business consistent with past
practice (provided that Ascend shall use reasonable efforts to
consummate the previously announced plan to divest portions of Stratus
Computer, Inc. and Stratus Computer Limited, as such plan has
previously been described to Lucent);
(vi) (x) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person,
issue or sell any debt securities or warrants or other rights to
acquire any debt securities of Ascend or any of its subsidiaries,
guarantee any debt securities of another person, enter into any "keep
well" or other agreement to maintain any financial statement condition
of another person or enter into any arrangement having the economic
effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business (or to refund existing or
maturing indebtedness) consistent with past practice and except for
intercompany indebtedness between Ascend and any of its subsidiaries
or between such subsidiaries, or (y) make any loans, advances or
capital contributions to, or investments in, any other person;
(vii) make or agree to make any new capital expenditure or
expenditures, or enter into any agreement or agreements providing for
payments which, individually, are in excess of $5 million or, in the
aggregate, are in excess of $25 million;
(viii) make any tax election that, individually or in the
aggregate, is reasonably likely to have a material adverse effect on
the tax liability of Ascend or settle or compromise any material
income tax liability;
(ix) pay, discharge, settle or satisfy any material claims,
liabilities, obligations or litigation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge, settlement or satisfaction, in the ordinary course of
business consistent with past practice or in accordance with their
terms, of liabilities recognized or disclosed in the most recent
consolidated financial statements (or the notes thereto) of Ascend
included in the Ascend Filed SEC Documents or incurred since the date
of such financial statements, or waive the benefits of, or agree to
modify in any manner, any standstill or similar agreement to which
Ascend or any of its subsidiaries is a party;
(x) except as required by law or contemplated hereby and except
for labor agreements negotiated in the ordinary course, enter into,
adopt or amend in any material respect or terminate any Ascend Benefit
Plan or any other agreement, plan or policy involving Ascend or its
subsidiaries, and one or more of its directors, officers or employees,
or materially change any actuarial or other assumption used to
calculate funding obligations with respect to any pension plan, or
change
the manner in which contributions to any pension plan are made or the
basis on which such contributions are determined;
(xi) except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not
materially increase benefits or compensation expenses of Ascend or its
subsidiaries, or as contemplated hereby or by the terms of any
employment agreement in existence on the date hereof, increase the
cash compensation of any director, executive officer or other key
employee or pay any benefit or amount not required by a plan or
arrangement as in effect on the date of this Agreement to any such
person; provided, however, that nothing contained herein shall
prohibit Ascend from paying 1998 bonuses that have been earned under
its incentive bonus plans in accordance with the terms of such plans
as in effect on the date hereof consistent with past practice;
(xii) transfer or license to any person or entity or otherwise
extend, amend or modify any rights to the Intellectual Property Rights
of Ascend and its subsidiaries other than in the ordinary course of
business consistent with past practices or on a non-exclusive basis
not materially different from past practices;
(xiii) enter into or amend in any material respect any material
OEM agreement or any agreements pursuant to which any person is
granted exclusive marketing, manufacturing or other rights with
respect to any Ascend product, process or technology;
(xiv) take any action that would cause the representations and
warranties set forth in Section 3.01(g) to no longer be true and
correct; or
(xv) authorize, or commit or agree to take, any of the foregoing
actions.
(b) Conduct of Business by Lucent. During the period from the
date of this Agreement to the Effective Time, Lucent shall not make any
acquisition of assets or businesses which, in its good faith judgment,
would cause a material delay of the Merger.
(c) Other Actions. Except as required by law, Ascend and Lucent
shall not, and shall not permit any of their respective subsidiaries to,
voluntarily take any action that would, or that could reasonably be
expected to,
result in (i) any of the representations and warranties of such party set
forth in this Agreement or the Option Agreement that are qualified as to
materiality becoming untrue at the Effective Time, (ii) any of such
representations and warranties that are not so qualified becoming untrue in
any material respect at the Effective Time, or (iii) any of the conditions
to the Merger set forth in Article VI not being satisfied.
(d) Advice of Changes. Ascend and Lucent shall promptly advise
the other party orally and in writing to the extent it has knowledge of (i)
any representation or warranty made by it (and, in the case of Lucent, made
by Sub) contained in this Agreement or the Option Agreement becoming untrue
or inaccurate in any respect where the failure of such representation to be
so true and correct (without giving effect to any limitation as to
"materiality" or "material adverse effect" set forth therein), individually
or in the aggregate, has had or is reasonably likely to have a material
adverse effect on it, (ii) the failure by it (and, in the case of Lucent,
by Sub) to comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement or the Option Agreement and (iii) any
change or event having, or which is reasonably likely to have, a material
adverse effect on such party or on the truth of their respective
representations and warranties or the ability of the conditions set forth
in Article VI to be satisfied; provided, however, that no such notification
shall affect the representations, warranties, covenants or agreements of
the parties (or remedies with respect thereto) or the conditions to the
obligations of the parties under this Agreement or the Option Agreement.
SECTION 4.02. No Solicitation by Ascend. (a) Ascend shall not,
nor shall it permit any of its subsidiaries to, nor shall it authorize or
permit any of its directors, officers or employees or any investment
banker, financial advisor, attorney, accountant or other representative
retained by it or any of its subsidiaries to, directly or indirectly
through another person, (i) solicit, initiate or encourage (including by
way of furnishing information), or take any other action designed to
facilitate, any inquiries or the making of any proposal which constitutes a
Takeover Proposal (as defined below) or (ii) participate in any discussions
or negotiations regarding any Takeover Proposal; provided, however, that
if, at any time prior to the date of the Ascend Stockholders Meeting (the
"Applicable Period"), the Board of Directors of Ascend determines in good
faith, after consultation with outside counsel, that it is legally
advisable to do so in
order to comply with its fiduciary duties to Ascend's stockholders under
applicable law, Ascend may, in response to a Superior Proposal (as defined
in Section 4.02(b)) which was not solicited by it or which did not
otherwise result from a breach of this Section 4.02(a), and subject to
providing prior written notice of its decision to take such action to
Lucent (a "Section 4.02 Notice") and compliance with Section 4.02(c), (x)
furnish information with respect to Ascend and its subsidiaries to any
person making an Superior Proposal pursuant to a customary confidentiality
agreement (as determined by Ascend after consultation with its outside
counsel) and (y) participate in discussions or negotiations regarding such
Superior Proposal. For purposes of this Agreement, "Takeover Proposal"
means any inquiry, proposal or offer from any person relating to any direct
or indirect acquisition or purchase of a business that constitutes 15% or
more of the net revenues, net income or the assets of Ascend and its
subsidiaries, taken as a whole, or 15% or more of any class of equity
securities of Ascend or any of its subsidiaries, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 15% or more of any class of equity securities of Ascend or any of
its subsidiaries, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Ascend or any of its subsidiaries, other than the transactions contemplated
by this Agreement.
(b) Except as expressly permitted by this Section 4.02, neither
the Board of Directors of Ascend nor any committee thereof shall (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Lucent, the approval or recommendation by such Board of
Directors or such committee of the Merger or this Agreement, (ii) approve
or recommend, or propose publicly to approve or recommend, any Takeover
Proposal, or (iii) cause Ascend to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement
(each, an "Acquisition Agreement") related to any Takeover Proposal, other
than any such agreement entered into concurrently with a termination
pursuant to the next sentence in order to facilitate such action.
Notwithstanding the foregoing, during the Applicable Period, in response to
a Superior Proposal which was not solicited by Ascend and which did not
otherwise result from a breach of Section 4.02(a), the Board of Directors
of Ascend may (subject to this and the following sentences) terminate this
Agreement (and concurrently with or after such termination, if it so
chooses, cause Ascend to enter into any Acquisition Agreement with respect
to any Superior Proposal), but only at a time that is during the Applicable
Period and is after
the fifth business day following Lucent's receipt of written notice
advising Lucent that the Board of Directors of Ascend is prepared to accept
a Superior Proposal, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal.
For purposes of this Agreement, a "Superior Proposal" means any proposal
made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction, for consideration consisting of cash and/or securities, more
than 50% of the combined voting power of the shares of Ascend Common Stock
then outstanding or all or substantially all the assets of Ascend and
otherwise on terms which the Board of Directors of Ascend determines in its
good faith judgment (based on the advice of a financial advisor of
nationally recognized reputation) to be more favorable to Ascend's
stockholders than the Merger and for which financing, to the extent
required, is then committed or which, in the good faith judgment of the
Board of Directors of Ascend, is reasonably capable of being obtained by
such third party.
(c) In addition to the obligations of Ascend set forth in
paragraphs (a) and (b) of this Section 4.02, Ascend shall immediately
advise Lucent orally and in writing of any request for information or of
any Takeover Proposal, the material terms and conditions of such request or
Takeover Proposal and the identity of the person making such request or
Takeover Proposal. Ascend will keep Lucent informed of the status and
details (including amendments or proposed amendments) of any such request
or Takeover Proposal.
(d) Nothing contained in this Section 4.02 shall prohibit Ascend
from taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to Ascend's stockholders if, in the good faith judgment of the
Board of Directors of Ascend, after consultation with outside counsel,
failure so to disclose would be inconsistent with its obligations under
applicable law; provided, however, that neither Ascend nor its Board of
Directors nor any committee thereof shall withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to this Agreement
or the Merger or approve or recommend, or propose publicly to approve or
recommend, a Takeover Proposal.
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Form S-4 and the Ascend Proxy
Statement; Ascend Stockholders Meeting. (a) As soon as practicable
following the date of this Agreement, Ascend shall prepare and file with
the SEC the Ascend Proxy Statement and Lucent shall prepare and file with
the SEC the Form S-4, in which the Ascend Proxy Statement will be included
as a prospectus. Each of Ascend and Lucent shall use reasonable efforts to
have the Form S-4 declared effective under the Securities Act as promptly
as practicable after such filing. Ascend will use all reasonable efforts to
cause the Ascend Proxy Statement to be mailed to Ascend's stockholders as
promptly as practicable after the Form S-4 is declared effective under the
Securities Act. Lucent shall also take any action (other than qualifying to
do business in any jurisdiction in which it is not now so qualified or to
file a general consent to service of process) required to be taken under
any applicable state securities laws in connection with the issuance of
Lucent Common Stock in the Merger and Ascend shall furnish all information
concerning Ascend and the holders of Ascend Common Stock as may be
reasonably requested in connection with any such action. No filing of, or
amendment or supplement to, the Form S-4 will be made by Lucent, or the
Ascend Proxy Statement will be made by Ascend, without providing the other
party the opportunity to review and comment thereon. Lucent will advise
Ascend, promptly after it receives notice thereof, of the time when the
Form S-4 has become effective or any supplement or amendment has been
filed, the issuance of any stop order, the suspension of the qualification
of the Lucent Common Stock issuable in connection with the Merger for
offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Form S-4 or comments thereon and responses thereto or
requests by the SEC for additional information. Ascend will inform Lucent,
promptly after it receives notice thereof, of any request by the SEC for
the amendment of the Ascend Proxy Statement or comments thereon and
responses thereto or requests by the SEC for additional information. If at
any time prior to the Effective Time any information relating to Ascend or
Lucent, or any of their respective affiliates, officers or directors,
should be discovered by Ascend or Lucent which should be set forth in an
amendment or supplement to any of the Form S-4 or the Ascend Proxy
Statement, so that any of such documents would not include any misstatement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not
misleading, the party which discovers such information shall promptly
notify the other parties hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to
the extent required by law, disseminated to the stockholders of Ascend.
(b) Ascend shall, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of
its stockholders (the "Ascend Stockholders Meeting") for the purpose of
obtaining the Ascend Stockholder Approval and shall, through its Board of
Directors, recommend to its stockholders the approval and adoption of this
Agreement, the Merger and the other transactions contemplated hereby.
Without limiting the generality of the foregoing but subject to its rights
to terminate this Agreement pursuant to Section 4.02(b), Ascend agrees that
its obligations pursuant to the first sentence of this Section 5.01(b)
shall not be affected by the commencement, public proposal, public
disclosure or communication to Ascend of any Takeover Proposal.
SECTION 5.02. Letters of Ascend's Accountants. (a) Ascend shall
use reasonable efforts to cause to be delivered to Lucent two letters from
Ascend's independent accountants, one dated a date within two business days
before the date on which the Form S-4 shall become effective and one dated
a date within two business days before the Closing Date, each addressed to
Lucent, in form and substance reasonably satisfactory to Lucent and
customary in scope and substance for comfort letters delivered by
independent public accountants in connection with registration statements
similar to the Form S-4.
(b) Ascend shall provide reasonable cooperation to each of
Lucent's independent accountants and Ascend's independent accountants to
enable them to issue the letters referred to in Section 6.01(f) and shall
use reasonable efforts to cause them to do so.
SECTION 5.03. Letters of Lucent's Accountants. (a) Lucent shall
use reasonable efforts to cause to be delivered to Ascend two letters from
Lucent's independent accountants, one dated a date within two business days
before the date on which the Form S-4 shall become effective and one dated
a date within two business days before the Closing Date, each addressed to
Ascend, in form and substance reasonably satisfactory to Ascend and
customary in scope and substance for comfort letters delivered by
independent public accountants in connection with registration statements
similar to the Form S-4.
(b) Lucent shall provide reasonable cooperation to each of
Lucent's independent accountants and Ascend's independent accountants to
enable them to issue the letters referred to in Section 6.01(f) and shall
use reasonable efforts to cause them to do so.
SECTION 5.04. Access to Information; Confidentiality. Subject to
the Nondisclosure Agreement dated September 17, 1998, as amended as of
December 10, 1998, between Lucent and Ascend (the "Confidentiality
Agreement"), each of Lucent and Ascend shall, and shall cause each of its
respective subsidiaries to, afford to the other party and to the officers,
employees, accountants, counsel, financial advisors and other
representatives of such other party, reasonable access during normal
business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records
and, during such period, each of Ascend and Lucent shall, and shall cause
each of its respective subsidiaries to, furnish promptly to the other party
(a) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of
federal or state securities laws and (b) all other information concerning
its business, properties and personnel as such other party may reasonably
request. Neither Lucent nor Ascend shall be required to provide access to
or disclose information where such access or disclosure would contravene
any law, rule, regulation, order or decree. No review pursuant to this
Section 5.04 shall have an effect for the purpose of determining the
accuracy of any representation or warranty given by either party hereto to
the other party hereto. Each of Ascend and Lucent will hold, and will cause
its respective officers, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any nonpublic
information in accordance with the terms of the Confidentiality Agreement.
SECTION 5.05. Commercially Reasonable Best Efforts. (a) Upon the
terms and subject to the conditions set forth in this Agreement, each of
the parties agrees to use commercially reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement and the Option Agreement, including (i) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings and the
taking of all steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental Entity, (ii)
the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
Option Agreement or the consummation of the transactions contemplated by
this Agreement or the Option Agreement, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental
Entity vacated or reversed, and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement and
the Option Agreement.
(b) In connection with and without limiting the foregoing, Ascend
and Lucent shall (i) take all action necessary to ensure that no state
takeover statute or similar statute or regulation is or becomes applicable
to the Merger, this Agreement, the Option Agreement or any of the other
transactions contemplated by this Agreement or the Option Agreement and
(ii) if any state takeover statute or similar statute or regulation becomes
applicable to the Merger, this Agreement, the Option Agreement or any other
transaction contemplated by this Agreement or the Option Agreement, take
all action necessary to ensure that the Merger and the other transactions
contemplated by this Agreement and the Option Agreement may be consummated
as promptly as practicable on the terms contemplated by this Agreement and
the Option Agreement and otherwise to minimize the effect of such statute
or regulation on the Merger and the other transactions contemplated by this
Agreement and the Option Agreement.
SECTION 5.06. Stock Options. (a) As soon as practicable following
the date of this Agreement, the Board of Directors of Ascend (or, if
appropriate, any committee administering the Ascend Stock Plans) shall
adopt such resolutions or take such other actions as may be required to
effect the following:
(i) adjust the terms of all outstanding Ascend Stock Options
granted under Ascend Stock Plans, whether vested or unvested, as
necessary to provide that, at the Effective Time, each Ascend Stock
Option out standing immediately prior to the Effective Time shall be
amended and converted into an option to acquire, on the same terms and
conditions as were applicable under such Ascend Stock Option (as
modified by the terms of an agreement (referred to in Section 3.01(k)
of the
Ascend Disclosure Schedule) in effect on the date hereof between
Ascend and the holder of such Ascend Stock Option as disclosed to
Lucent prior to the date hereof), the same number of shares of Lucent
Common Stock (rounded down to the nearest whole share) as the holder
of such Ascend Stock Option would have been entitled to receive
pursuant to the Merger had such holder exercised such Ascend Stock
Option in full immediately prior to the Effective Time, at a price per
share of Lucent Common Stock (rounded up to the nearest whole cent)
equal to (A) the aggregate exercise price for the shares of Ascend
Common Stock otherwise purchasable pursuant to such Ascend Stock
Option divided by (B) the aggregate number of shares of Lucent Common
Stock deemed purchasable pursuant to such Ascend Stock Option (each,
as so adjusted, an "Adjusted Option"); and
(ii) make such other changes to the Ascend Stock Plans as Ascend
and Lucent may agree are appropriate to give effect to the Merger,
including as provided in Section 5.07.
(b) As soon as practicable after the Effective Time, Lucent shall
deliver to the holders of Ascend Stock Options appropriate notices setting
forth such holders' rights pursuant to the respective Ascend Stock Plans
and the agreements evidencing the grants of such Ascend Stock Options and
that such Ascend Stock Options and agreements shall be assumed by Lucent
and shall continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 5.06 after giving effect to the
Merger).
(c) A holder of an Adjusted Option may exercise such Adjusted
Option in whole or in part in accordance with its terms by delivering a
properly executed notice of exercise to Lucent, together with the
consideration therefor and the federal withholding tax information, if any,
required in accordance with the related Ascend Stock Plan.
(d) Except as otherwise contemplated by this Section 5.06 and
except to the extent required under the respective terms of the Ascend
Stock Options or any agreement (referred to in Section 3.01(k) of the
Ascend Disclosure Schedule) in effect on the date hereof between Ascend and
a holder of Ascend Stock Options (as disclosed to Lucent prior to the date
hereof), all restrictions or limitations on transfer and vesting with
respect to Ascend Stock Options awarded under the Ascend Stock Plans or any
other plan, program or arrangement of Ascend or any of its
subsidiaries, to the extent that such restrictions or limitations shall not
have already lapsed, shall remain in full force and effect with respect to
such options after giving effect to the Merger and the assumption by Lucent
as set forth above.
(e) Effective as of January 31, 1999, Ascend shall amend the 1994
Stock Purchase Plan to terminate all future offering periods.
SECTION 5.07. Ascend Stock Plans. At the Effective Time, by
virtue of the Merger, the Ascend Stock Plans shall be assumed by Lucent,
with the result that all obligations of Ascend under the Ascend Stock
Plans, including with respect to awards outstanding at the Effective Time
under each Ascend Stock Plan, shall be obligations of Lucent following the
Effective Time. Prior to the Effective Time, Lucent shall take all
necessary actions (including, if required to comply with Section 162(m) of
the Code (and the regulations thereunder) or applicable law or rule of the
NYSE, obtaining the approval of its stockholders at the next regularly
scheduled annual meeting of Lucent following the Effective Time) for the
assumption of the Ascend Stock Plans, including the reservation, issuance
and listing of Lucent Common Stock in a number at least equal to the number
of shares of Lucent Common Stock that will be subject to Adjusted Options.
As soon as practicable following the Effective Time, Lucent shall prepare
and file with the SEC a registration statement on Form S-8 (or another
appropriate form) registering a number of shares of Lucent Common Stock
determined in accordance with the preceding sentence. Such registration
statement shall be kept effective (and the current status of the prospectus
or prospectuses required thereby shall be maintained) at least for so long
as Adjusted Options or any unsettled awards granted under the Ascend Stock
Plans after the Effective Time remain outstanding.
SECTION 5.08. Employee Benefit Plans; Existing Agreements. (a) On
a date that shall be no later than the first anniversary of the Effective
Time (the "Benefits Date"), Lucent shall provide, or cause to be provided,
employee benefit plans, programs and arrangements to employees of Ascend
that are no less favorable in the aggregate than those made generally
available to non- represented employees of Lucent who are hired by Lucent
after December 31, 1998. From the Effective Time to the Benefits Date
(which the parties acknowledge may occur on different dates with respect to
different plans, programs or arrangements of Ascend) (the "Continuation
Period"), Lucent shall provide, or cause to be provided, the employee
benefit
plans, programs and arrangements of Ascend provided to employees of Ascend
as of the date hereof; provided that during the Continuation Period,
employees of Ascend shall be eligible for grants of stock options under
Lucent's stock option plans to the same extent as similarly situated
employees of Lucent. Notwithstanding the foregoing, for a period of no less
than one year after the Effective Time, Lucent shall provide severance
benefits to employees of Ascend that are no less favorable than those
provided to such employees as of the date hereof.
(b) With respect to each benefit plan, program practice, policy
or arrangement maintained by Lucent in which employees of Ascend
subsequently participate (the "Lucent Plans"), for purposes of determining
eligibility to participate, vesting, and entitlement to benefits, including
for severance benefits and vacation entitlement (but not for accrual of
pension benefits), service with Ascend (or predecessor employers to the
extent Ascend provides past service credit) shall be treated as service
with Lucent; provided, however, that such service shall not be recognized
to the extent that such recognition would result in a duplication of
benefits. Such service also shall apply for purposes of satisfying any
waiting periods, evidence of insurability requirements, or the application
of any pre-existing condition limitations. Each Lucent Plan shall waive
pre-existing condition limitations to the same extent waived under the
applicable Ascend Benefit Plan. Ascend Employees shall be given credit for
amounts paid under a corresponding benefit plan during the same period for
purposes of applying deductibles, copayments and out-of-pocket maximums as
though such amounts had been paid in accordance with the terms and
conditions of the Lucent Plan.
(c) As of the Effective Time, Lucent shall cause the appropriate
subsidiaries of Lucent to assume and to honor in accordance with their
terms all employment, severance and other compensation agreements and
arrangements existing prior to the execution of this Agreement which are
between Ascend or any of its subsidiaries and any director, officer or
employee thereof. The provisions of this Section 5.08(c) are intended to be
for the benefit of, and shall be enforceable by, each such director,
officer or employee.
(d) Ascend and Lucent hereby agree that Ascend or Lucent (as
appropriate) shall take all such actions as are necessary to carry out the
matters described in Section 5.08(d) of the Ascend Disclosure Schedule.
SECTION 5.09. Indemnification, Exculpation and Insurance. (a)
Lucent agrees that all rights to
indemnification and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time now existing in favor of the
current or former directors or officers of Ascend and its subsidiaries as
provided in their respective certificates of incorporation or by-laws (or
comparable organizational documents) and any indemnification agreements of
Ascend, the existence of which does not constitute a breach of this
Agreement, shall be assumed by the Surviving Corporation in the Merger,
without further action, as of the Effective Time and shall survive the
Merger and shall continue in full force and effect in accordance with their
terms, and Lucent shall cause the Surviving Corporation to honor all such
rights.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person
and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such
case, Lucent shall cause proper provision to be made so that the successors
and assigns of the Surviving Corporation assume the obligations set forth
in this Section 5.09.
(c) For six years after the Effective Time, Lucent shall maintain
in effect Ascend's current directors' and officers' liability insurance
covering acts or omissions occurring prior to the Effective Time with
respect to those persons who are currently covered by Ascend's directors'
and officers' liability insurance policy on terms with respect to such
coverage and amount no less favorable than those of such policy in effect
on the date hereof; provided that Lucent may substitute therefor policies
of Lucent or its subsidiaries containing terms with respect to coverage and
amount no less favorable to such directors or officers; provided further,
that if the existing or substituted directors' and officers' liability
insurance expires, is terminated or canceled during such six-year period,
Lucent will obtain as much directors' and officers' liability insurance as
can be obtained for the remainder of such period for a premium not in
excess of 200% of the aggregate premiums paid by Ascend in 1998 on an
annualized basis for such purpose and that in no event shall Lucent be
required to pay aggregate premiums for insurance under this Section 5.09(c)
in excess of 200% of amount of aggregate premiums paid by Ascend in 1998 on
an annualized basis for such purpose.
(d) The provisions of this Section 5.09 (i) are intended to be
for the benefit of, and will be enforceable
by, each indemnified party, his or her heirs and his or her representatives
and (ii) are in addition to, and not in substitution for, any other rights
to indemnification or contribution that any such person may have by
contract or otherwise.
SECTION 5.10. Fees and Expenses. (a) Except as provided in this
Section 5.10, all fees and expenses incurred in connection with the Merger,
this Agreement, the Option Agreement and the transactions contemplated by
this Agreement and the Option Agreement shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated,
except that each of Lucent and Ascend shall bear and pay one-half of (1)
the costs and expenses incurred in connection with the filing, printing and
mailing of the Form S-4 and the Ascend Proxy Statement (including SEC
filing fees) and (2) the filing fees for the premerger notification and
report forms under the HSR Act. Lucent shall file any return with respect
to, and shall pay, any state or local taxes (including any penalties or
interest with respect thereto), if any, which are attributable to the
transfer of the beneficial ownership of Ascend's real property
(collectively, the "Real Estate Transfer Taxes") as a result of the Merger
(other than any such taxes that are solely the obligations of a stockholder
of Ascend, in which case Ascend shall pay any such taxes). Ascend shall
coop erate with Lucent in the filing of such returns including, in the case
of Ascend, supplying in a timely manner a complete list of all real
property interests held by Ascend and any information with respect to such
property that is reasonably necessary to complete such returns. The fair
market value of any real property of Ascend subject to the Real Estate
Transfer Taxes shall be as agreed to between Lucent and Ascend.
(b) In the event that (1) a bona fide Takeover Proposal shall
have been made directly to the stockholders of Ascend generally or shall
have otherwise become publicly known or any person shall have publicly
announced an intention (whether or not conditional) to make a Takeover
Proposal and thereafter this Agreement is terminated by either Lucent or
Ascend pursuant to Section 7.01(b)(i) or (ii) or (2) this Agreement is
terminated (x) by Ascend pursuant to Section 7.01(f) or (y) by Lucent
pursuant to Section 7.01(d), then Ascend shall promptly, but in no event
later than the date of such termination, pay Lucent a fee equal to $525
million (the "Termination Fee"), payable by wire transfer of same day
funds; provided, however, that no Termination Fee shall be payable to
Lucent pursuant to clause (1) of this paragraph (b) or pursuant to a
termination by Lucent pursuant to Section 7.01(d) unless and
until within 7 months of such termination Ascend or any of its subsidiaries
enters into any definitive agreement with respect to, or consummates, any
Takeover Proposal (for the purposes of the foregoing proviso the term
"Takeover Proposal" shall have the meaning assigned to such term in Section
4.02 except that the references to "15%" in the definition of "Takeover
Proposal" in Section 4.02(a) shall be deemed to be references to "50%" and
"Takeover Proposal" shall only be deemed to refer to a transaction
involving Ascend, or with respect to assets (including the shares of any
subsidiary), Ascend and its subsidiaries, taken as a whole, and not any of
its subsidiaries alone), in which event the Termination Fee shall be
payable upon the first to occur of such events. Notwithstanding the
foregoing, if a Takeover Proposal shall have been made as described in
clause (1) of this paragraph (b) and shall thereafter have been publicly
unconditionally withdrawn by the maker thereof prior to the event giving
rise to the termination of this Agreement referred to in clause (1) of this
paragraph (b), no Termination Fee shall be payable by Ascend to Lucent
unless Ascend or any of its subsidiaries enters into any definitive
agreement with respect to, or consummates, any Takeover Proposal with the
same maker or any of its affiliates within the period of time set forth in
the proviso to the immediately preceding sentence. Ascend acknowledges that
the agreements contained in this Section 5.10(b) are an integral part of
the transactions contemplated by this Agreement, and that, without these
agreements, Lucent would not enter into this Agreement; accordingly, if
Ascend fails promptly to pay the amount due pursuant to this Section
5.10(b), and, in order to obtain such payment, Lucent commences a suit
which results in a judgment against Ascend for the fee set forth in this
Section 5.10(b), Ascend shall pay to Lucent its costs and expenses
(including attorneys' fees and expenses) in connection with such suit,
together with interest on the amount of the fee at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made.
SECTION 5.11. Public Announcements. Lucent and Ascend will
consult with each other before issuing, and provide each other the
opportunity to review, comment upon and concur with, any press release or
other public statements with respect to the transactions contemplated by
this Agreement, including the Merger and the Option Agreement, and shall
not issue any such press release or make any such public statement prior to
such consultation, except as either party may determine is required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange or national trading system.
The parties agree that the
initial press release to be issued with respect to the transactions
contemplated by this Agreement and the Option Agreement shall be in the
form heretofore agreed to by the parties.
SECTION 5.12. Affiliates. As soon as practicable after the date
hereof, Ascend shall deliver to Lucent a letter identifying all persons who
are, at the time this Agreement is submitted for adoption by the
stockholders of Ascend, "affiliates" of Ascend for purposes of Rule 145
under the Securities Act or for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations.
Ascend shall use reasonable efforts to cause each such person to deliver to
Lucent as of the Closing Date, a written agreement substantially in the
form attached as Exhibit B hereto. Lucent shall use reasonable efforts to
cause all persons who are "affiliates" of Lucent for purposes of qualifying
the Merger for pooling of interests accounting treatment under Opinion 16
of the Accounting Principles Board and applicable SEC rules and regulations
to comply with the fourth paragraph of Exhibit B hereto.
SECTION 5.13. NYSE Listing. Lucent shall use reasonable efforts
to cause the Lucent Common Stock issuable in the Merger to be approved for
listing on the NYSE, subject to official notice of issuance, as promptly as
practicable after the date hereof, and in any event prior to the Closing
Date. Ascend shall use reasonable efforts to cause the shares of Ascend
Common Stock to be issued pursuant to the Option Agreement to be approved
for listing on Nasdaq, subject to official notice of issuance, as promptly
as practicable after the date hereof, and in any event prior to the Closing
Date.
SECTION 5.14. Stockholder Litigation. Ascend shall give Lucent
the opportunity to participate in the defense of any stockholder litigation
against Ascend and/or its directors relating to the transactions
contemplated by this Agreement and the Option Agreement.
SECTION 5.15. Tax Treatment. Each of Lucent and Ascend shall use
reasonable efforts to cause the Merger to qualify as a reorganization under
the provisions of Section 368 of the Code and to obtain the opinions of
counsel referred to in Sections 6.02(c) and 6.03(c), including the
execution of the letters of representation referred to therein.
SECTION 5.16. Pooling of Interests. Each of Ascend and Lucent
shall use reasonable efforts to cause the transactions contemplated by this
Agreement, including the Merger, and the Option Agreement to be accounted
for as a pooling of interests under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations, and Lucent's and Ascend's
managements' conclusion that such accounting treatment is appropriate for
the Merger to be concurred with by each of Ascend's and Lucent's auditors
and by the SEC, respectively, and each of Ascend and Lucent agrees that it
shall voluntarily take no action that would cause such accounting treatment
not to be obtained.
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of
the following conditions:
(a) Ascend Stockholder Approval. The Ascend Stockholder Approval
shall have been obtained.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated
or shall have expired.
(c) No Litigation. No judgment, order, decree, statute, law,
ordinance, rule or regulation, entered, enacted, promulgated, enforced
or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect, and there shall not be pending any
suit, action or proceeding by any Governmental Entity (i) preventing
the consummation of the Merger or (ii) which otherwise is reasonably
likely to have a material adverse effect on Ascend or Lucent, as
applicable; provided, however, that each of the parties shall have
used its reasonable efforts to prevent the entry of any such
Restraints and to appeal as promptly as possible any such Restraints
that may be entered.
(d) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop order.
(e) NYSE Listing. The shares of Lucent Common Stock issuable to
Ascend's stockholders as contemplated by this Agreement shall have
been approved for listing on the NYSE, subject to official notice of
issuance.
(f) Pooling Letters. Each of Lucent and Ascend shall have
received letters, dated as of the Closing Date, in each case addressed
to Lucent and Ascend, from Ernst & Young LLP and
PricewaterhouseCoopers LLP stating in substance that pooling of
interests accounting is appropriate for the Merger under Opinion 16 of
the Accounting Principles Board and applicable SEC rules and
regulations.
SECTION 6.02. Conditions to Obligations of Lucent and Sub. The
obligation of Lucent and Sub to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Ascend set forth herein shall be true and correct both
when made and at and as of the Closing Date, as if made at and as of
such time (except to the extent expressly made as of an earlier date,
in which case as of such date), except where the failure of such
representations and warranties to be so true and correct (without
giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) does not have, and is not
reasonably likely to have, individually or in the aggregate, a
material adverse effect on Ascend.
(b) Performance of Obligations of Ascend. Ascend shall have
performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date.
(c) Tax Opinions. Lucent shall have received from Cravath, Swaine
& Xxxxx, counsel to Lucent, on the date on which the Form S-4 is
declared effective by the SEC and on the Closing Date, an opinion, in
each case dated as of such respective date and stating that the Merger
will qualify for U.S. federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code. The issuance of such
opinion shall be conditioned upon the receipt by such tax counsel of
customary representation letters from
each of Lucent, Sub and Ascend, in each case, in form and substance
reasonably satisfactory to such tax counsel.
SECTION 6.03. Conditions to Obligations of Ascend. The obligation
of Ascend to effect the Merger is further subject to satisfaction or waiver
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Lucent and Sub set forth herein shall be true and
correct both when made and at and as of the Closing Date, as if made
at and as of such time (except to the extent expressly made as of an
earlier date, in which case as of such date), except where the failure
of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein) does not have, and is not
reasonably likely to have, individually or in the aggregate, a
material adverse effect on Lucent.
(b) Performance of Obligations of Lucent and Sub. Lucent and Sub
shall have performed in all material respects all obligations required
to be performed by them under this Agreement at or prior to the
Closing Date.
(c) Tax Opinions. Ascend shall have received from Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, counsel to Ascend, on the date on which the
Form S-4 is declared effective by the SEC and on the Closing Date, an
opinion, in each case dated as of such respective date and stating
that the Merger will qualify for U.S. federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. The
issuance of such opinion shall be conditioned upon the receipt by such
tax counsel of customary representation letters from each of Ascend,
Sub and Lucent, in each case, in form and substance reasonably
satisfactory to such tax counsel.
SECTION 6.04. Frustration of Closing Conditions. Neither Lucent,
Sub nor Ascend may rely on the failure of any condition set forth in
Section 6.01, 6.02 or 6.03, as the case may be, to be satisfied if such
failure was caused by such party's failure to use reasonable efforts to
consummate the Merger and the other transactions contemplated by this
Agreement and the Option Agreement, as required by and subject to Section
5.05.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after the Ascend
Stockholder Approval:
(a) by mutual written consent of Lucent, Sub and Ascend;
(b) by either Lucent or Ascend:
(i) if the Merger shall not have been consummated by
September 30, 1999; provided, however, that the right to
terminate this Agreement pursuant to this Section 7.01(b)(i)
shall not be available to any party whose failure to perform any
of its obligations under this Agreement results in the failure of
the Merger to be consummated by such time;
(ii) if the Ascend Stockholder Approval shall not have been
obtained at a Ascend Stockholders Meeting duly convened therefor
or at any adjournment or postponement thereof; or
(iii) if any Restraint having any of the effects set forth
in Section 6.01(c) shall be in effect and shall have become final
and nonappealable; provided that the party seeking to terminate
this Agreement pursuant to this Section 7.01(b)(iii) shall have
used reasonable efforts to prevent the entry of and to remove
such Restraint;
(c) by Lucent, if Ascend shall have breached or failed to perform
in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which
breach or failure to perform (A) would give rise to the failure of a
condition set forth in Section 6.02(a) or (b), and (B) is incapable of
being cured by Ascend within thirty calendar days;
(d) by Lucent, if Ascend or any of its directors or officers
shall participate in discussions or negotiations in breach (other than
an immaterial breach) of Section 4.02;
(e) by Ascend, if Lucent shall have breached or failed to perform
in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which
breach or failure to perform (A) would give rise to the failure of a
condition set forth in Section 6.03(a) or (b), and (B) is incapable of
being cured by Lucent within thirty calendar days; or
(f) by Ascend in accordance with Section 4.02(b); provided that,
in order for the termination of this Agreement pursuant to this
paragraph (f) to be deemed effective, Ascend shall have complied with
all provisions of Section 4.02, including the notice provisions
therein, and with applicable requirements, including the payment of
the Termination Fee, of Section 5.10.
SECTION 7.02. Effect of Termination. In the event of termination
of this Agreement by either Ascend or Lucent as provided in Section 7.01,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Lucent or Ascend, other than the
provisions of Section 3.01(p), Section 3.02(l), the last sentence of
Section 5.04, Section 5.10, this Section 7.02 and Article VIII, which
provisions survive such termination, and except to the extent that such
termination results from the willful and material breach by a party of any
of its representations, warranties, covenants or agreements set forth in
this Agreement.
SECTION 7.03. Amendment. This Agreement may be amended by the
parties at any time before or after the Ascend Stockholder Approval;
provided, however, that after any such approval, there shall not be made
any amendment that by law requires further approval by the stockholders of
Ascend or the approval of the stockholders of Lucent without the further
approval of such stockholders. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties.
SECTION 7.04. Extension; Waiver. At any time prior to the
Effective Time, a party may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 7.03, waive compliance
by the other party with any of the agreements or conditions contained in
this Agreement.
Any agreement on the part of a party to any such extension or waiver shall
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 shall not constitute a waiver of
such rights.
SECTION 7.05. Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 7.01, an
amendment of this Agreement pursuant to Section 7.03 or an extension or
waiver pursuant to Section 7.04 shall, in order to be effective, require,
in the case of Lucent or Ascend, action by its Board of Directors or, with
respect to any amendment to this Agreement, the duly authorized committee
of its Board of Directors to the extent permitted by law.
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective
Time.
SECTION 8.02. Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally, telecopied (which is confirmed) or
sent by overnight courier (providing proof of delivery) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Lucent or Sub, to
Lucent Technologies Inc.
000 Xxxxxxxx Xxxxxx
Room 6A 311
Xxxxxx Xxxx, XX 00000
Telecopy No.: Separately supplied
Attention: Xxxxxx X. Xxxxxx
Vice President-Law
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy No.: Separately supplied
Attention: Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxxx, III; and
(b) if to Ascend, to
Ascend Communications, Inc.
One Ascend Plaza
0000 Xxxxxx Xxx Xxxxxxx
Xxxxxxx, XX 00000
Telecopy No.: Separately supplied
Attention: Xxxxxxx X. Jewels
Vice President and General Counsel
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy No.: Separately supplied
Attention: Xxxxxxxx X. Xxxxx
SECTION 8.03. Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first person,
where "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of a
person, whether through the ownership of voting securities, by
contract, as trustee or executor, or otherwise;
(b) "material adverse change" or "material adverse effect" means,
when used in connection with Ascend or Lucent, any change, effect,
event, occurrence or state of facts that is, or is reasonably likely
to be,
materially adverse to the business, financial condition or results of
operations of such party and its subsidiaries taken as a whole, other
than any change, effect, event, occurrence, state of facts or
development (i) relating to the economy in general, (ii) relating to
the industries in which such party operates in general, (iii) arising
out of or resulting from actions contemplated by the parties in
connection with, or which is attributable to, the announcement of this
Agreement and the transactions contemplated hereby (including loss of
personnel, customers or suppliers or the delay or cancelation of
orders for products) or (iv) in the case of Ascend, litigation brought
or threatened against Ascend or any member of its Board of Directors
in respect of this Agreement; provided that the following in and of
itself shall not be deemed to constitute a material adverse change or
material adverse effect: with respect to Lucent, a failure by Lucent
to meet the revenue or earnings predictions of equity analysis as
reflected in the First Call consensus estimate, or any other revenue
or earnings predictions or expectations, for any period ending on or
after the date of this Agreement, or, in the case of Ascend, a failure
by Ascend to meet the revenue or earnings predictions of equity
analysts as reflected in the First Call consensus estimate, or any
other revenue or earnings predictions or expectations, for any period
ending on or after the date of this Agreement (however, this proviso
shall not exclude any underlying change, effect, event, occurrence,
state of facts or developments which resulted in such failure to meet
such estimates, predictions or expectations);
(c) "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity;
(d) a "subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its
Board of Directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first person;
(e) "knowledge" of any person which is not an individual means,
with respect to any specific matter, the knowledge of such person's
executive officers and other officers having primary responsibility
for such
matter, in each case obtained in the conduct of their duties in the
ordinary course without special inquiry; and
(f) "business day" means any day other than Saturday, Sunday or
any other day on which banks are legally permitted to be closed in New
York.
SECTION 8.04. Interpretation. When a reference is made in this
Agreement to an Article, Section or Exhibit, such reference shall be to an
Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation". The words "hereof",
"herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All terms defined in this Agreement
shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including
(in the case of agreements or instruments) by waiver or consent and (in the
case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.
SECTION 8.05. Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.
SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries.
This Agreement (including the documents and instruments referred to
herein), the Option Agreement and the Confidentiality Agreement (a)
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter of this Agreement and
(b) except for the provisions of Article II, Section 5.06, Section 5.08(c),
paragraph 2 of Section 5.08(d) of the Ascend Disclosure Schedule and
Section 5.09, are not intended to confer upon any person other than the
parties any rights or remedies.
SECTION 8.07. Governing Law. This Agreement shall 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.
SECTION 8.08. Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by either of the parties
hereto without the prior written consent of the other party. Any assignment
in violation of the preceding sentence shall be void. Subject to the
preceding two sentences, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective
successors and assigns.
SECTION 8.09. 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 shall 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,
this being in addition to any other remedy to which they are entitled at
law or in equity. In addition, each of the parties hereto (a) 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, (b) 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 (c) 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.
SECTION 8.10. Headings. The headings contained in this Agreement
are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
SECTION 8.11. 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, Lucent, Sub and Ascend have caused this
Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
LUCENT TECHNOLOGIES INC.,
by
/s/ Xxxxxxx X. XxXxxx
-------------------------------
Name: Xxxxxxx X. XxXxxx
Title: Chief Executive Officer
DASHER MERGER INC.,
by
/s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President and
Secretary
ASCEND COMMUNICATIONS, INC.,
by
/s/ Xxxx Xxxxxx
-------------------------------
Name: Xxxx Xxxxxx
Title: President and Chief
Executive Officer
ANNEX I
TO THE MERGER AGREEMENT
Index of Defined Terms
Term Page Term Page
Acquisition Agreement....... 38 Intellectual Property
Adjusted Option............. 44 Rights.................... 23
affiliate................... 57 knowledge................... 58
Agreement................... 1 Liens....................... 10
Applicable Period........... 37 Lucent...................... 1
Ascend...................... 1 Lucent Authorized Preferred
Ascend Authorized Preferred Stock..................... 25
Stock..................... 10 Lucent Common Stock......... 4
Ascend Benefit Plans........ 18 Lucent Disclosure Schedule.. 25
Ascend Common Stock......... 1 Lucent Filed SEC Documents.. 29
Ascend Disclosure Schedule.. 9 Lucent Junior Preferred
Ascend Filed SEC Documents.. 16 Stock..................... 25
Ascend Permits.............. 17 Lucent Permits.............. 30
Ascend Proxy Statement...... 13 Lucent Plans................ 46
Ascend SEC Documents........ 14 Lucent Rights............... 26
Ascend Stock Options........ 11 Lucent Rights Agreement..... 26
Ascend Stock Plans.......... 11 Lucent Stock Plans.......... 25
Ascend Stockholder Approval. 22 material adverse change..... 57
Ascend Stockholders Meeting. 41 material adverse effect..... 57
Benefits Date............... 45 Merger...................... 1
business day................ 59 Merger Consideration........ 4
Certificate of Merger....... 2 Nasdaq...................... 14
Certificates................ 5 NYSE........................ 7
Closing..................... 2 Option Agreement............ 1
Closing Date................ 2 Parachute Gross-Up Payment.. 20
Code........................ 1 person...................... 58
Common Shares Trust......... 7 Real Estate Transfer Taxes.. 48
Confidentiality Agreement... 42 Restraints.................. 51
Continuation Period......... 45 SARs........................ 11
control..................... 57 SEC......................... 10
DGCL........................ 2 Section 4.02 Notice......... 38
Effective Time.............. 2 Securities Act.............. 14
ERISA....................... 18 Sub......................... 1
Excess Shares............... 7 subsidiary.................. 58
Exchange Act................ 13 Superior Proposal........... 39
Exchange Agent.............. 4 Surviving Corporation....... 2
Exchange Fund............... 4 Takeover Proposal........... 38
Exchange Ratio.............. 3 taxes....................... 21
Form S-4.................... 15 Termination Fee............. 48
Governmental Entity......... 13
HSR Act..................... 13
EXHIBIT A
TO THE MERGER AGREEMENT
Certificate of Incorporation of Surviving Corporation
RESTATED
CERTIFICATE OF INCORPORATION
OF
ASCEND COMMUNICATIONS, INC.
FIRST: The name of the corporation (hereinafter called the
"corporation") is Ascend Communications, Inc.
SECOND: The address, including street, number, city, and county, of
the registered office of the corporation in the State of Delaware is 0000
Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000, County of New Castle; and the
name of the registered agent of the corporation in the State of Delaware at
such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is one thousand, with a par value of $.01 per
share. All such shares are of one class and are shares of Common Stock.
FIFTH: The corporation is to have perpetual existence.
SIXTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application
in a summary way of this corporation or of any creditor or stockholder
thereof or on the application of any receiver or receivers appointed for
this corporation under the provisions of ss.291 of Title 8 of the Delaware
Code or on the application of trustees in dissolution or of any receiver or
receivers appointed for this corporation under the provisions of ss.279 of
Title 8 of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three fourths in value
of the creditors or class of creditors and/or of the stockholders or class
of
stockholders of this corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court
to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
SEVENTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation, and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further
provided:
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the Bylaws. The phrase "whole
Board" and the phrase "total number of directors" shall be deemed to have
the same meaning, to wit, the total number of directors which the
corporation would have if there were no vacancies. No election of
directors need be by written ballot.
2. After the original or other Bylaws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of ss.109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payment for any of
its stock, the power to adopt, amend, or repeal the Bylaws of the
corporation may be exercised by the Board of Directors of the
corporation; provided, however, that any provision for the classification
of directors of the corporation for staggered terms pursuant to the
provisions of subsection (d) of ss.141 of the General Corporation Law of
the State of Delaware shall be set forth in an initial Bylaw or in a
Bylaw adopted by the stockholders entitled to vote of the corporation
unless provisions for such classification shall be set forth in this
certificate of incorporation.
3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof
to notice of, and the right to vote at, any meeting of stockholders.
Whenever the corporation shall be authorized to issue more than one class
of stock, no outstanding share of any class of stock
which is denied voting power under the provisions of the certificate of
incorporation shall entitle the holder thereof to the right to vote at
any meeting of stockholders except as the provisions of paragraph (2) of
subsection (b) of ss.242 of the General Corporation Law of the State of
Delaware shall otherwise require; provided, that no share of any such
class which is otherwise denied voting power shall entitle the holder
thereof to vote upon the increase or decrease in the number of authorized
shares of said class.
EIGHTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the provisions of
paragraph (7) of subsection (b) of ss.102 of the General Corporation Law of
the State of Delaware, as the same may be amended and supplemented.
NINTH: The corporation shall, to the fullest extent permitted by the
provisions of ss.145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and
all persons whom it shall have power to indemnify under said section from
and against any and all of the expenses, liabilities, or other matters
referred to in or covered by said section, and the indemnification provided
for herein shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
an official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
TENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the
corporation by this certificate of incorporation are granted subject to the
provisions of this Article TENTH.
EXHIBIT B
TO THE MERGER AGREEMENT
Form of Affiliate Letter
Dear Sirs:
The undersigned, a holder of shares of common stock, par value $.001
per share ("Ascend Common Stock"), of Ascend Communications, Inc., a
Delaware corporation ("Ascend"), is entitled to receive in connection with
the merger (the "Merger") of a subsidiary of Lucent Technologies Inc., a
Delaware corporation ("Lucent"), with and into Ascend, securities of
Lucent, as the parent of the surviving corporation in the Merger (the
"Parent Securities"). The undersigned acknowledges that the undersigned may
be deemed an "affiliate" of Ascend within the meaning of Rule 145 ("Rule
145") promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), by the Securities and Exchange Commission (the "SEC")
and may be deemed an "affiliate" of Ascend for purposes of qualifying the
Merger for pooling of interests accounting treatment under Opinion 16 of
the Accounting Principles Board and applicable SEC rules and regulations,
although nothing contained herein should be construed as an admission of
either such fact.
If in fact the undersigned were an affiliate under the Securities Act,
the undersigned's ability to sell, assign or transfer the Parent Securities
received by the undersigned in exchange for any shares of Ascend Common
Stock in connection with the Merger may be restricted unless such
transaction is registered under the Securities Act or an exemption from
such registration is available. The undersigned understands that such
exemptions are limited and the undersigned has obtained or will obtain
advice of counsel as to the nature and conditions of such exemptions,
including information with respect to the applicability to the sale of such
securities of Rules 144 and 145(d) promulgated under the Securities Act.
The undersigned understands that Lucent will not be required to maintain
the effectiveness of any registration statement under the Securities Act
for the purposes of resale of Parent Securities by the undersigned.
The undersigned hereby represents to and covenants with Lucent that
the undersigned will not sell, assign or transfer any of the Parent
Securities received by the undersigned in exchange for shares of Ascend
Common Stock in connection with the Merger except (i) pursuant to an
effective registration statement under the Securities Act, (ii) in
conformity with the volume and other limitations of Rule 145 or (iii) in a
transaction which, in the opinion of counsel to Lucent or as described in a
"no-action" or
interpretive letter from the Staff of the SEC specifically issued with
respect to a transaction to be engaged in by the undersigned, is not
required to be registered under the Securities Act; provided, however, that
in any such case, such sale, assignment or transfer shall only be permitted
if, in the opinion of counsel of Lucent, such transaction would not have,
directly or indirectly, any adverse consequences for Lucent with respect to
the treatment of the Merger for tax purposes.
The undersigned hereby further represents to and covenants with Lucent
that the undersigned has not, within the preceding 30 days, sold,
transferred or otherwise disposed of any shares of Ascend Common Stock held
by the undersigned and that the undersigned will not sell, transfer or
otherwise dispose of any Parent Securities received by the undersigned in
connection with the Merger until after such time as results covering at
least 30 days of post- Merger combined operations of Ascend and Lucent have
been published by Lucent, in the form of a quarterly earnings report, an
effective registration statement filed with the SEC, a report to the SEC on
Form 10-K, 10-Q or 8-K, or any other public filing or announcement which
includes such combined results of operations, except as would not otherwise
reasonably be expected to adversely affect the qualification of the Merger
as a pooling-of-interests.
In the event of a sale or other disposition by the undersigned of
Parent Securities pursuant to Rule 145, the undersigned will supply Lucent
with evidence of compliance with such Rule, in the form of a letter in the
form of Annex I hereto and the opinion of counsel or no-action letter
referred to above. The undersigned understands that Lucent may instruct its
transfer agent to withhold the transfer of any Parent Securities disposed
of by the undersigned, but that (provided such transfer is not prohibited
by any other provision of this letter agreement) upon receipt of such
evidence of compliance, Lucent shall cause the transfer agent to effectuate
the transfer of the Parent Securities sold as indicated in such letter.
Lucent covenants that it will take all such actions as may be
reasonably available to it to permit the sale or other disposition of
Parent Securities by the undersigned under Rule 145 in accordance with the
terms thereof.
The undersigned acknowledges and agrees that the legends set forth
below will be placed on certificates representing Parent Securities
received by the undersigned in connection with the Merger or held by a
transferee thereof, which legends will be removed by delivery of
substitute certificates upon receipt of an opinion in form and substance
reasonably satisfactory to Lucent from independent counsel reasonably
satisfactory to Lucent to the effect that such legends are no longer
required for purposes of the Securities Act.
There will be placed on the certificates for Parent Securities issued
to the undersigned, or any substitutions therefor, a legend stating in
substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is being accounted for as a pooling of
interests, in a transaction to which Rule 145 promulgated under the
Securities Act of 1933 applies. The shares have not been acquired by the
holder with a view to, or for resale in connection with, any distribution
thereof within the meaning of the Securities Act of 1933. The shares may
not be sold, pledged or otherwise transferred (i) until such time as
Lucent Technologies Inc. shall have published financial results covering
at least 30 days of combined operations after the Effective Time and (ii)
except in accordance with an exemption from the registration requirements
of the Securities Act of 1933."
The undersigned acknowledges that (i) the undersigned has carefully
read this letter and understands the requirements hereof and the
limitations imposed upon the distribution, sale, transfer or other
disposition of Parent Securities and (ii) the receipt by Lucent of this
letter is an inducement to Lucent's obligations to consummate the Merger.
Very truly yours,
Dated:
ANNEX I
TO EXHIBIT B
[Name] [Date]
On , the undersigned sold the securities
of Lucent Technologies Inc., a Delaware corporation ("Lucent"), described
below in the space provided for that purpose (the "Securities"). The
Securities were received by the undersigned in connection with the merger
of a subsidiary of Lucent with and into Ascend Communications, Inc., a
Delaware corporation.
Based upon the most recent report or statement filed by Lucent with
the Securities and Exchange Commission, the Securities sold by the
undersigned were within the prescribed limitations set forth in paragraph
(e) of Rule 144 promulgated under the Securities Act of 1933, as amended
(the "Securities Act").
The undersigned hereby represents that the Securities were sold in
"brokers' transactions" within the meaning of Section 4(4) of the
Securities Act or in transactions directly with a "market maker" as that
term is defined in Section 3(a)(38) of the Securities Exchange Act of 1934,
as amended. The undersigned further represents that the undersigned has not
solicited or arranged for the solicitation of orders to buy the Securities,
and that the undersigned has not made any payment in connection with the
offer or sale of the Securities to any person other than to the broker who
executed the order in respect of such sale.
Very truly yours,
[Space to be provided for description of the Securities.]
