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Exhibit (c)(5)
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated March 1, 1999 (this "Agreement"), by
and among Alcatel, a French corporation ("Parent"), Zeus Acquisition Corp., a
California corporation and wholly-owned indirect subsidiary of Parent
("Purchaser"), and Xylan Corporation, a California corporation (the "Company").
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this
Agreement, the parties hereto are entering into an Agreement and Plan of Merger
(as such agreement may hereafter be amended from time to time, the "Merger
Agreement"; capitalized terms used but not defined in this Agreement shall have
the meanings ascribed to them in the Merger Agreement), which provides, upon the
terms and subject to the conditions thereto, for (i) the commencement by
Purchaser of a cash tender offer (the "Offer") to acquire all of the outstanding
Company Common Stock at the applicable Offer Price, and (ii) the subsequent
merger of Purchaser with and into the Company (the "Merger"), following the
consummation of the Offer; and
WHEREAS, as a condition to the willingness of Parent and Purchaser
to enter into the Merger Agreement, Parent and Purchaser have required that the
Company agree, and in order to induce Parent and Purchaser to enter into the
Merger Agreement, the Company has agreed, to grant to Purchaser certain options
to purchase shares of Company Common Stock, upon the terms and subject to the
conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and in the Merger Agreement, the parties hereto agree as follows:
ARTICLE I
THE TOP-UP OPTION
SECTION 1.1 Grant of Top-Up Stock Option. Subject to the terms and
conditions set forth herein, the Company hereby grants to Purchaser, an
irrevocable option (the "Top-Up Stock Option") to purchase that number of shares
of Company Common Stock (the "Top-Up Option Shares") equal to the number of
shares of Company Common Stock that, when added to the number of shares of
Company Common Stock owned by Purchaser, Parent and their subsidiaries
immediately following consummation of the Offer, shall constitute 90% of the
shares of Company Common Stock then outstanding (assuming the issuance of the
Top-Up Option Shares) at a purchase price per Top-Up Option Share equal to the
Offer Price; provided,
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however, that the Top-Up Stock Option shall not be exercisable if the number of
shares of Company Common Stock subject thereto exceeds the number of authorized
shares of Company Common Stock available for issuance. The Company agrees to
provide Parent and Purchaser with information regarding the number of shares of
Company Common Stock available for issuance on an ongoing basis.
SECTION 1.2. Exercise of Top-Up Stock Option. (a) Subject to the
conditions set forth in Section 2.1 and any additional requirements of
applicable law, the Top-Up Stock Option may be exercised by Purchaser, in whole,
but not in part, at any one time after the occurrence of a Top-Up Exercise Event
(as defined below) and prior to the Top-Up Termination Date (as defined below).
(b) A "Top-Up Exercise Event" shall occur for purposes of this
Agreement at such time as such number of shares of Company Common Stock that
have been validly tendered and not withdrawn when added to such number of Shares
issuable pursuant to this Agreement would constitute at least 90% of the shares
of Company Common Stock then outstanding.
(c) Except as provided in the last sentence of this Section 1.2(c),
the "Top-Up Termination Date" shall occur for purposes of this Agreement upon
the earliest to occur of: (i) the Effective Time; (ii) the date which is ten
(10) business days after the occurrence of a Top-Up Exercise Event; (iii) the
termination of the Merger Agreement; and (iv) the date on which Purchaser waives
the Minimum Condition and accepts for payment the Revised Minimum Number of
Shares.
Notwithstanding the occurrence of the Top-Up Termination Date, Purchaser shall
be entitled to purchase the Top-Up Option Shares if it has exercised the Top-Up
Stock Option in accordance with the terms hereof prior to such occurrence, and
the occurrence of the Top-Up Termination Date shall not affect any rights
hereunder which by their terms do not terminate or expire prior to or as of such
date.
(d) In the event Purchaser wishes to exercise the Top-Up Stock
Option, Purchaser shall send to the Company a written notice (a "Top-Up Exercise
Notice," the date of which notice is referred to herein as the "Top-Up Notice
Date") specifying the denominations of the certificate or certificates
evidencing the Top-Up Option Shares which Purchaser wishes to receive, the place
for the closing of the purchase and sale pursuant to the Top-Up Stock Option
(the "Top-Up Closing") and a date not earlier than one (1) day nor later than
ten (10) business days from the Top-Up Notice Date for the Top-Up Closing (the
"Top-Up Closing Date"); provided, however, that (i) the Top-Up Closing shall
occur concurrently with the consummation of the Offer, (ii) if the Top-Up
Closing cannot be consummated by reason of any applicable laws or orders, the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which such restriction on consummation has expired or
been terminated, and (iii) without limiting the foregoing, if prior notification
to or approval of any Governmental Entity is required in connection with such
purchase, Purchaser and the Company shall promptly file the required notice or
application for approval and shall cooperate in the expeditious filing of such
notice or
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application, and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which, as the case may be, (A) any
required notification period has expired or been terminated or (B) any required
approval has been obtained, and in either event, any requisite waiting period
has expired or been terminated.
ARTICLE II
CLOSING
SECTION 2.1. Conditions to Closing. The obligation of the Company to
deliver Top-Up Option Shares upon the exercise of the Top-Up Stock Option is
subject to the following conditions:
(a) All waiting periods, if any, under the HSR Act, the EC Merger
Regulations or other applicable non-United States laws regulating competition,
antitrust, investment or exchange controls applicable to the issuance of the
Top-Up Option Shares hereunder shall have expired, have been terminated or
waived; and
(b) There shall be no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or Governmental Entity or similar binding legal restraint
preventing or prohibiting the exercise of the Top-Up Stock Option or the
delivery of the Top-Up Option Shares in respect of any such exercise.
SECTION 2.2 Closing. (a) At the Top-Up Closing (i) the Company shall
deliver to Purchaser or Parent, as applicable, a certificate or certificates
evidencing the applicable number of Top-Up Option Shares (in the denominations
designated by Purchaser or Parent in the Top-Up Exercise Notice) and (ii)
Purchaser or Parent shall purchase each Top-Up Option Share from the Company at
the Offer Price. Payment by Purchaser of the Offer Price for the Top-Up Option
Shares shall be made by wire transfer of immediately available funds to an
account designated by the Company.
(b) The Company shall pay all expenses that may be payable in
connection with the preparation, issuance and delivery of stock certificates
under this Section 2.2.
(c) Certificates evidencing Top-Up Option Shares delivered hereunder
may include legends legally required including the legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
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It is understood and agreed that the foregoing legend shall be removed by
delivery of substitute certificate(s) without such legend upon the sale of the
Top-Up Option Shares pursuant to a registered public offering or Rule 144 under
the Securities Act, or any other sale as a result of which such legend is no
longer required.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Purchaser
(except as otherwise disclosed in writing on the date hereof) as follows:
SECTION 3.1. Organization; Authority Relative to this Agreement. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California. The Company has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
the Company and, assuming the due authorization, execution and delivery of this
Agreement by Parent and Purchaser, constitutes the legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally, and by general equitable principles.
SECTION 3.2. Authority to Issue Shares. The Company has taken all
necessary corporate action to authorize and reserve and permit it to issue, and
at all times from the date hereof through the Top-Up Termination Date shall have
reserved, all the Top-Up Option Shares issuable pursuant to this Agreement. All
of the Top-Up Option Shares issuable upon exercise of the Top-Up Stock Option,
upon their issuance and delivery in accordance with the terms of this Agreement,
will be duly authorized, validly issued, fully paid and nonassessable, will be
delivered free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on Purchaser's or
Parent's voting rights, charges, adverse rights and other encumbrances of any
nature whatsoever (other than this Agreement) and will not be subject to any
preemptive rights.
SECTION 3.3. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company does not, and the
performance by the Company of its obligations hereunder and the consummation of
the transactions contemplated hereby will not, (i) conflict with or violate the
articles of incorporation or bylaws of the Company, (ii) assuming that all
consents and filings described in Section 3.3(b) have been obtained or made,
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conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to the Company or by which any property or asset of the Company is
bound or affected, or (iii) result in any material breach of or constitute a
material default (or an event that with notice or lapse of time or both would
become a material default) under, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company is a party or by which the Company or any of its
properties may be bound or affected.
(b) No consent of, or filing with, any Government Entity is required
by the Company in connection with the execution and delivery of this Agreement,
the performance by the Company of its obligations hereunder or the consummation
by the Company of the transactions contemplated hereby, except for (i)
compliance with the Securities Act, the Exchange Act, Blue Sky Laws, the HSR
Act, the EC Merger Regulations or any non-United States laws regulating
competition, antitrust, investment or exchange controls and (ii) consents or
filings the failure of which to be obtained or made would not, individually or
in the aggregate, prevent or materially delay the consummation of the
transactions contemplated hereby or the performance by the Company of any of its
obligations hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Each of Parent and Purchaser hereby represents and warrants to the
Company as follows:
SECTION 4.1 Organization; Authority Relative to this Agreement. Each
of Parent and Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation. Each of
Parent and Purchaser has all necessary corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Purchaser and the consummation by Parent and
Purchaser of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Purchaser
and no other corporate proceedings on the part of Parent or Purchaser are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Parent and Purchaser and, assuming the due authorization, execution and delivery
of this Agreement by the Company, constitutes the legal, valid and binding
obligation of Parent and Purchaser, enforceable against Parent and Purchaser in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, and by general equitable principles.
SECTION 4.2. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent and Purchaser does not, and
the performance by each of Parent and Purchaser of its obligations hereunder and
the consummation of the transactions
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contemplated hereby will not, (i) conflict with or violate the articles of
incorporation or bylaws or equivalent organizational documents of Parent or
Purchaser, (ii) assuming that all consents and filings described in Section
4.2(b) have been obtained or made, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Parent or Purchaser or by
which any property or asset of Parent or Purchaser is bound or affected or (iii)
result in any material breach of or constitute a material default (or an event
that with notice or lapse of time or both would become a material default)
under, any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
Purchaser is a party or by which Parent or Purchaser of any of their respective
properties are bound or affected.
(b) No consent of, or filing with, any Governmental Entity is
required by Parent or Purchaser in connection with the execution and delivery of
this Agreement, the performance by Parent and Purchaser of any of their
obligations hereunder or the consummation by Parent and Purchaser of the
transactions contemplated hereby, except for (i) compliance with the Securities
Act, the Exchange Act, Blue Sky Laws, the HSR Act, EC Merger Regulations, or any
non-United States laws regulating competition, antitrust, investment or exchange
controls, and (ii) consents or filings the failure of which to be obtained or
made would not, individually or in the aggregate, prevent or materially delay
the consummation of the transactions contemplated hereby or the performance by
Parent or Purchaser of any of their obligations hereunder.
SECTION 4.3. Investment Intent. The purchase of shares of Company
Common Stock pursuant to this Agreement is for the account of the Purchaser or
Parent, as applicable, for the purpose of investment and not with a view to or
for sale in connection with any distribution thereof within the meaning of the
Securities Act, and the rules and regulations populated thereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, Parent, Purchaser and the Company shall each use
its reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Each party shall promptly consult
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement or the transactions contemplated hereby.
SECTION 5.2. Further Assurances. The Company shall perform such
further acts and execute such further documents and instruments as may
reasonably be required to vest in Purchaser and Parent the power to carry out
the provisions of this Agreement. If Purchaser or
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Parent shall exercise the Top-Up Stock Option granted hereunder in accordance
with the terms of this Agreement, the Company shall, without additional
consideration, execute and deliver all such further documents and instruments
and take all such further action as Purchaser or Parent may reasonably request
to carry out the transactions contemplated by this Agreement.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Amendment. This Agreement may not be amended except by
an instrument in writing signed by the parties thereto.
SECTION 6.2. Waiver. Any party hereto may (a) extend the time for or
waive compliance with the performance of any obligation or other act of any
other party hereto or (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby. 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 those rights.
SECTION 6.3. Fees and Expenses. Except as otherwise provided herein
or in Section 9.03 of the Merger Agreement, all costs, fees and expenses
incurred in connection with this Agreement shall be paid by the party incurring
such expenses; provided, that if any legal action is instituted to enforce or
interpret the terms of this Agreement, the prevailing party in such action shall
be entitled, in addition to any other relief to which the party is entitled, to
reimbursement of its actual attorneys fees.
SECTION 6.4. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by telecopy or by overnight courier (providing
proof of delivery) to the respective parties at their addresses as specified in
Section 10.02 of the Merger Agreement.
SECTION 6.5. Severability. If any term or other provision of this
Agreement shall be held to be invalid, illegal or unenforceable by any rule of
law or public policy, such clause or provision shall be construed and enforced
as if it had been more narrowly drawn so as not to be invalid or unenforceable,
and such invalidity or unenforceability shall not affect or render invalid or
unenforceable any other provision of this Agreement.
SECTION 6.6. Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, in whole or in part, by operation of law or otherwise, by any of the
parties hereto without the prior written consent of the other parties, except
that Parent or Purchaser may assign, in its discretion, any or all of their
rights, interests and obligations hereunder to any direct or indirect subsidiary
of Parent (or, in the case of Purchaser, to Parent), but no such assignment
shall relieve Parent or Purchaser of any of its respective obligations
hereunder. Subject to the preceding sentence, this Agreement shall be
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binding upon, inure to the benefit of, and be enforceable by, the parties hereto
and their respective successors and permitted assigns. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement, express
or implied, is intended to confer on any person other than the parties hereto or
their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
SECTION 6.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to the principles of conflicts of laws thereof.
SECTION 6.8. Headings. The descriptive headings contained in this
Agreement are included for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 6.9. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in two 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,
it being understood that all parties need not sign the same counterpart.
SECTION 6.10. Entire Agreement. This Agreement constitutes the
entire agreement, and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of this
Agreement.
SECTION 6.11. Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement, each
non-breaching party would be irreparably and immediately harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties hereto
(i) will waive, in any action for specific performance, the defense of adequacy
of a remedy a law, and (ii) shall be entitled, in addition to any other remedy
to which they may be entitled at law or in equity, to compel specific
performance of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, all as of
the date first written above.
ALCATEL
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: Chairman & Chief Executive Officer
XYLAN CORPORATION
By: /s/ Xxxxx X. Xxx
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Name: Xxxxx X. Xxx
Title: President & Chief Executive Officer
ZEUS ACQUISITION CORP.
By: /s/ Olivier Houssin
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Name: Olivier Houssin
Title: Chairman
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