Exhibit 2.1
CONFORMED COPY
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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
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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
(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 . . . . . . . . 14
(g) Absence of Certain Changes or Events 15
(h) Litigation . . . . . . . . . . . . . 15
(i) Compliance with Applicable Laws . . . 16
(j) Absence of Changes in Benefit Plans . 17
(k) ERISA Compliance . . . . . . . . . . 18
(l) Taxes . . . . . . . . . . . . . . . . 18
(m) Voting Requirements . . . . . . . . . 20
(n) State Takeover Statutes . . . . . . . 22
(o) Accounting Matters . . . . . . . . . 22
(p) Brokers . . . . . . . . . . . . . . . 22
(q) Opinion of Financial Advisor . . . . 22
(r) Intellectual Property; Year 2000 . . 23
(s) Certain Contracts . . . . . . . . . . 23
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
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 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ 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
subsidiaries, 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 ▇▇▇▇▇▇▇, ▇▇▇▇▇ & 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 ▇▇▇▇▇▇▇, 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 outstanding 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 cooperate 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 & ▇▇▇▇▇, 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, ▇▇▇▇▇▇▇ & ▇▇▇▇ 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.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Room 6A 311
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: Separately supplied
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President-Law
with a copy to:
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: Separately supplied
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III; and
(b) if to Ascend, to
Ascend Communications, Inc.
One Ascend Plaza
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: Separately supplied
Attention: ▇▇▇▇▇▇▇ ▇. Jewels
Vice President and General Counsel
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: Separately supplied
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
DASHER MERGER INC.,
by
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and
Secretary
ASCEND COMMUNICATIONS, INC.,
by
/s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
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 SEC Documents . . . . 28
Ascend Stockholder Approval . 22 Lucent Stock Plans . . . . . 25
Ascend Stockholders Meeting . 41 material adverse change . . . 57
Benefits Date . . . . . . . . 45 material adverse effect . . . 57
business day . . . . . . . . 59 Merger . . . . . . . . . . . . 1
Certificate of Merger . . . . 2 Merger Consideration . . . . . 4
Certificates . . . . . . . . 5 Nasdaq . . . . . . . . . . . 14
Closing . . . . . . . . . . . 2 NYSE . . . . . . . . . . . . . 7
Closing Date . . . . . . . . 2 Option Agreement . . . . . . . 1
Code . . . . . . . . . . . . 1 Parachute Gross-Up Payment . 20
Common Shares Trust . . . . . 7 person . . . . . . . . . . . 58
Confidentiality Agreement . . 42 Real Estate Transfer Taxes . 48
Continuation Period . . . . . 45 Restraints . . . . . . . . . 51
control . . . . . . . . . . . 57 SARs . . . . . . . . . . . . 11
DGCL . . . . . . . . . . . . 2 SEC . . . . . . . . . . . . . 10
Effective Time . . . . . . . 2 Section 4.02 Notice . . . . . 38
ERISA . . . . . . . . . . . . 18 Securities Act . . . . . . . 14
Excess Shares . . . . . . . . 7 Sub . . . . . . . . . . . . . . 1
Exchange Act . . . . . . . . 13 subsidiary . . . . . . . . . 58
Exchange Agent . . . . . . . 4 Superior Proposal . . . . . . 39
Exchange Fund . . . . . . . . 4 Surviving Corporation . . . . . 2
Exchange Ratio . . . . . . . 3 Takeover Proposal . . . . . . 38
Form S-4 . . . . . . . . . . 15 taxes . . . . . . . . . . . . 21
Governmental Entity . . . . . 13 Termination Fee . . . . . . . 48
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 ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, 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 section291 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 section279 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 section109 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 section141 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 section242 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 section102 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 section145 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.]