<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LUCENT TECHNOLOGIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3661 22-3408857
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
600 MOUNTAIN AVENUE
MURRAY HILL, NEW JERSEY 07974
(908) 582-8500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PAMELA F. CRAVEN, ESQ.
VICE PRESIDENT -- LAW AND SECRETARY
LUCENT TECHNOLOGIES INC.
600 MOUNTAIN AVENUE
MURRAY HILL, NEW JERSEY 07974
(908) 582-8500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT I. TOWNSEND, III, ESQ. MARGARET A. BROWN, ESQ.
CRAVATH, SWAINE & MOORE SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
WORLDWIDE PLAZA, 825 EIGHTH AVENUE ONE BEACON STREET, 31ST FLOOR
NEW YORK, NEW YORK 10019 BOSTON, MASSACHUSETTS 02108
(212) 474-1000 (617) 573-4800
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: Upon consummation of the merger referred to herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER UNIT OFFERING PRICE(2) REGISTRATION FEE(3)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per
share, and related preferred stock
purchase rights(4)................... 435,062,130 N/A $24,735,918,814 $6,876,585.43
- -------------------------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Based on the maximum number of shares to be issued in connection with the
merger, calculated as the product of (a) 263,674,018, the aggregate number
of shares of Ascend Communications, Inc. common stock, par value $0.001 per
share, outstanding on May 17, 1999 (other than shares owned by Ascend,
Dasher Merger Inc., a wholly owned subsidiary of the registrant, or the
registrant) or issuable pursuant to outstanding options prior to the date
the merger is expected to be consummated and (b) an exchange ratio of 1.65
shares of the registrant's common stock for each share of Ascend common
stock.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act, and calculated pursuant to
Rule 457(f) under the Securities Act. Pursuant to Rule 457(f)(1) under the
Securities Act, the proposed maximum aggregate offering price of the
registrant's common stock was calculated in accordance with Rule 457(c)
under the Securities Act as: (a) $93 13/16, the average of the high and low
prices per share of Ascend common stock on May 17, 1999 as reported on The
Nasdaq National Market, multiplied by (b) 263,674,018, the aggregate number
of shares of Ascend common stock outstanding on May 17, 1999 or issuable
pursuant to outstanding options prior to the date the merger is expected to
be completed.
(3) Pursuant to Rule 457(b) under the Securities Act, $3,737,310 of the
registration fee was paid on February 3, 1999 in connection with the filing
of preliminary proxy materials of Ascend on February 4, 1999 and
$3,139,275.43 of the registration fee was paid on May 20, 1999 in connection
with the filing of the registration statement by the registrant on May 21,
1999.
(4) No separate consideration will be received for the rights, which initially
will trade together with the common stock.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ASCEND COMMUNICATIONS, INC.
ONE ASCEND PLAZA
1701 HARBOR BAY PARKWAY
ALAMEDA, CA 94502-3002
MAY 21, 1999
Dear Stockholder:
You are cordially invited to attend our special meeting of stockholders on
Thursday, June 24, 1999, at 9:00 a.m., local time, at The Ritz-Carlton, 600
Stockton Street, San Francisco, CA 94108.
At the special meeting, we will ask you to vote on the merger of Ascend and
Lucent Technologies Inc. In the merger, you will receive 1.65 shares of Lucent
common stock for each share of Ascend common stock that you own. Lucent common
stock is listed on the New York Stock Exchange under the trading symbol "LU" and
on May 20, 1999, Lucent common stock closed at $59 per share. You will receive
cash for any fractional shares of Lucent common stock which you would otherwise
receive in the merger.
We cannot complete the merger unless the holders of a majority of the
outstanding shares of Ascend common stock vote to adopt the merger agreement.
Only stockholders who hold shares of Ascend common stock at the close of
business on April 27, 1999 will be entitled to vote at the special meeting.
YOU SHOULD CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS RELATING TO
THE MERGER" COMMENCING ON PAGE 12 OF THE ENCLOSED PROXY STATEMENT/PROSPECTUS
BEFORE VOTING. PLEASE REVIEW CAREFULLY THE ENTIRE PROXY STATEMENT/PROSPECTUS.
AFTER CAREFUL CONSIDERATION, ASCEND'S BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND DETERMINED THAT THE MERGER IS FAIR TO YOU AND
IN YOUR BEST INTERESTS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ADOPTION
OF THE MERGER AGREEMENT.
Thank you for your cooperation.
Sincerely,
/s/ Mory Ejabat
Mory Ejabat
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved the merger described in the proxy
statement/prospectus or the Lucent common stock to be issued in connection with
the merger, or determined if the proxy statement/prospectus is accurate or
adequate. Any representation to the contrary is a criminal offense.
THE PROXY STATEMENT/PROSPECTUS IS DATED MAY 21, 1999,
AND IS FIRST BEING MAILED TO STOCKHOLDERS ON OR ABOUT MAY 24, 1999.
<PAGE> 3
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Lucent and Ascend from documents that are not
included in or delivered with this proxy statement/prospectus. This information
is available to you without charge upon your written or oral request. You can
obtain documents incorporated by reference in this proxy statement/prospectus by
requesting them in writing or by telephone from the appropriate company at the
following addresses and telephone numbers:
<TABLE>
<S> <C>
Lucent Technologies Inc. Ascend Communications, Inc.
c/o The Bank of New York One Ascend Plaza
Church Street Station 1701 Harbor Bay Parkway
P.O. Box 11009 Alameda, California 94502-3002
New York, New York 10286-1009 Attention: Kristina Graziano-Manager,
Telephone: 1-888-LUCENT6 Investor Relations
Telephone: (510) 769-6001
</TABLE>
If you would like to request documents, please do so by June 17, 1999 in
order to receive them before the Ascend special meeting.
See "Where You Can Find More Information" (page 63).
<PAGE> 4
ASCEND COMMUNICATIONS, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 24, 1999
To the Stockholders of Ascend Communications, Inc.:
We will hold a special meeting of the stockholders of Ascend
Communications, Inc. on Thursday, June 24, 1999, at 9:00 a.m., local time, at
The Ritz-Carlton, 600 Stockton Street, San Francisco, CA 94108, for the
following purpose:
To consider and vote upon a proposal to adopt the merger agreement among
Lucent Technologies Inc., a wholly owned subsidiary of Lucent and Ascend.
Under the merger agreement, each outstanding share of Ascend common stock
will be converted into the right to receive 1.65 shares of Lucent common
stock.
We will transact no other business at the special meeting, except such
business as may properly be brought before the special meeting or any
adjournment of it by the Ascend board of directors.
Only holders of record of shares of Ascend common stock at the close of
business on April 27, 1999, the record date for the special meeting, are
entitled to notice of, and to vote at, the special meeting and any adjournments
or postponements of it.
We cannot complete the merger unless the holders of a majority of the
outstanding shares of Ascend common stock vote to adopt the merger agreement.
Holders of Ascend common stock have no appraisal rights under Delaware law in
connection with the merger.
FOR MORE INFORMATION ABOUT THE MERGER, PLEASE REVIEW THE ACCOMPANYING PROXY
STATEMENT/ PROSPECTUS AND THE MERGER AGREEMENT ATTACHED AS ANNEX 1.
Whether or not you plan to attend the special meeting, please complete,
sign and date the enclosed proxy and return it promptly in the enclosed
postage-paid envelope. If you do not vote by proxy or in person at the special
meeting, it will count as a vote against the merger agreement.
Please do not send any stock certificates at this time.
By Order of the Board of Directors,
/s/ Michael F.G. Ashby
Michael F. G. Ashby
Secretary
Alameda, California
May 21, 1999
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... i
SUMMARY..................................................... 1
General................................................... 1
The Special Meeting....................................... 2
The Merger................................................ 2
The Companies............................................. 4
Selected Consolidated Historical and Unaudited Pro Forma
Combined Condensed Financial Data...................... 8
Lucent................................................. 8
Ascend................................................. 10
Lucent and Ascend Unaudited Pro Forma Combined......... 11
RISK FACTORS RELATING TO THE MERGER......................... 12
The exchange ratio for Lucent common stock to be received
in the merger is fixed and will not be adjusted in the
event of any change in stock price..................... 12
The integration of Lucent and Ascend following the merger
will present significant challenges.................... 12
The merger may cause customers to delay purchasing
decisions.............................................. 12
The price of Lucent common stock may be affected by
factors different from those affecting the price of
Ascend common stock.................................... 12
THE SPECIAL MEETING......................................... 13
Date, Time and Place...................................... 13
Purpose of Special Meeting................................ 13
Record Date; Stock Entitled to Vote; Quorum............... 13
Votes Required............................................ 13
Voting by Ascend Directors and Executive Officers......... 13
Voting of Proxies......................................... 13
Revocability of Proxies................................... 14
Solicitation of Proxies................................... 14
THE COMPANIES............................................... 15
Ascend.................................................... 15
Lucent.................................................... 16
Material Contracts between Lucent and Ascend.............. 16
THE MERGER.................................................. 17
Background to the Merger.................................. 17
Reasons for the Merger and Board of Directors
Recommendation......................................... 20
Opinion of Credit Suisse First Boston Corporation......... 21
Interests of Ascend Directors and Management in the
Merger................................................. 29
Accounting Treatment...................................... 30
Form of the Merger........................................ 30
Merger Consideration...................................... 31
Conversion of Shares; Procedures for Exchange of
Certificates; Fractional Shares........................ 31
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Effective Time of the Merger.............................. 32
Stock Exchange Listing of Lucent Common Stock............. 32
Delisting and Deregistration of Ascend Common Stock....... 32
Material United States Federal Income Tax Consequences of
the Merger............................................. 32
Regulatory Matters........................................ 33
Litigation................................................ 34
Appraisal Rights.......................................... 35
Continuation of Ascend Employee Benefits.................. 35
Effect on Awards Outstanding Under Ascend Stock Plans;
Warrants............................................... 35
Resale of Lucent Common Stock............................. 36
THE MERGER AGREEMENT AND STOCK OPTION AGREEMENT............. 37
The Merger Agreement...................................... 37
The Stock Option Agreement................................ 44
COMPARATIVE STOCK PRICES AND DIVIDENDS...................... 47
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS................................................ 48
PRO FORMA CAPITALIZATION OF LUCENT AND ASCEND............... 55
DESCRIPTION OF LUCENT CAPITAL STOCK......................... 56
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF LUCENT AND
ASCEND.................................................... 56
Capitalization............................................ 56
Voting Rights............................................. 57
Number, Election, Vacancy and Removal of Directors........ 57
Amendments to Certificates of Incorporation............... 58
Amendments to By-Laws..................................... 58
Stockholder Action........................................ 59
Notice of Certain Stockholder Actions..................... 59
Special Stockholder Meetings.............................. 59
Limitation of Personal Liability of Directors............. 60
Dividends................................................. 60
Conversion................................................ 60
Rights Plan............................................... 60
LEGAL MATTERS............................................... 62
EXPERTS..................................................... 62
STOCKHOLDER PROPOSALS....................................... 62
OTHER MATTERS............................................... 63
WHERE YOU CAN FIND MORE INFORMATION......................... 63
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 66
Annexes
Annex 1 Agreement and Plan of Merger
Annex 2 Stock Option Agreement
Annex 3 Opinion of Credit Suisse First Boston
Corporation
</TABLE>
<PAGE> 7
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY ARE LUCENT AND ASCEND PROPOSING TO MERGE?
A: This is a unique opportunity for Ascend to join one of the world's leading
designers, developers and manufacturers of communications systems, software
and products, and for Ascend stockholders to become stockholders of that
company. We anticipate that the merger will make the combined company a more
efficient competitor through broader product offerings, operating
efficiencies and other economies of scale.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
proxy statement/prospectus, please complete and sign your proxy and return
it in the enclosed return envelope as soon as possible, so that your shares
may be represented at the special meeting. If you sign and send in your
proxy and do not indicate how you want to vote, we will count your proxy as
a vote in favor of adoption of the merger agreement. If you abstain from
voting or do not vote, it will have the effect of a vote against adoption of
the merger agreement.
The special meeting will take place on June 24, 1999. You may attend the
special meeting and vote your shares in person, rather than signing and
mailing your proxy.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you
can complete and submit a new proxy. If you choose either of these two
methods, you must submit your notice of revocation or your new proxy to the
Secretary of Ascend at the address set forth below. Third, you can attend
the special meeting and vote in person.
Q: IF MY ASCEND SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Your broker will vote your Ascend shares only if you provide instructions on
how to vote. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares. Without
instructions, your shares will not be voted, which will have the effect of a
vote against adoption of the merger agreement.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, you will receive written instructions for
exchanging your stock certificates. Please do not send in your stock
certificates with your proxy.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger as quickly as possible. We expect to
complete the merger during the second calendar quarter of 1999.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger or if you need additional copies
of this proxy statement/prospectus or the enclosed proxy, you should
contact:
Kristina Graziano
Manager, Investor Relations
Ascend Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502-3002
Telephone: (510) 769-6001
i
<PAGE> 8
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and does not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should carefully read this
entire proxy statement/prospectus and the other documents to which we have
referred you. See "Where You Can Find More Information" on page 63. We have
included page references parenthetically to direct you to a more complete
description of the topics presented in this summary.
GENERAL
WHAT ASCEND STOCKHOLDERS WILL RECEIVE IN THE MERGER (page 31)
In the merger, holders of Ascend common stock will receive 1.65 shares of
Lucent common stock for each share of Ascend common stock that they own.
Stockholders will receive cash for any fractional shares which they would
otherwise receive in the merger.
The exchange ratio has been adjusted to 1.65 from the 0.825 exchange ratio
reflected in the merger agreement to account for Lucent's two-for-one stock
split effective on April 1, 1999.
OWNERSHIP OF LUCENT FOLLOWING THE MERGER
Based on the number of outstanding shares of Ascend common stock on the
record date, we anticipate that Ascend stockholders will receive approximately
368,101,000 shares of Lucent common stock in the merger. Based on that number
and on the number of outstanding shares of Lucent common stock on the record
date, following the merger former Ascend stockholders will own approximately 12%
of the outstanding shares of Lucent common stock.
APPRAISAL RIGHTS (page 35)
Ascend stockholders have no appraisal rights in connection with the merger.
MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER (page 32)
The merger is intended to qualify as a reorganization within the meaning of
the Internal Revenue Code of 1986. It is a condition to the completion of the
merger that Ascend receive an opinion from Skadden, Arps, Slate, Meagher & Flom
LLP and Lucent receive an opinion from Cravath, Swaine & Moore, in each case
stating that the merger will qualify for United States federal income tax
purposes as a reorganization within the meaning of the Internal Revenue Code.
Assuming the merger qualifies as a reorganization within the meaning of the
Internal Revenue Code, holders of Ascend common stock will not recognize gain or
loss for United States federal income tax purposes as a result of the exchange
of their Ascend common stock for Lucent common stock in the merger, except for
cash received instead of fractional shares of Lucent common stock.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO
YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR OWN
TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER TO
YOU.
BOARD OF DIRECTORS RECOMMENDATION TO
STOCKHOLDERS (page 21)
The Ascend board of directors believes that the terms of the merger and the
merger agreement are fair to and in the best interests of Ascend and its
stockholders and unanimously recommends that the stockholders vote "for" the
adoption of the merger agreement.
To review the background and reasons for the merger in greater detail, as
well as certain risks related to the merger, see pages 12 and 17-21.
FAIRNESS OPINION OF FINANCIAL ADVISOR (page 21)
In deciding to approve the merger, the Ascend board of directors considered
the
1
<PAGE> 9
opinion, as of the date of the merger agreement, of its financial advisor,
Credit Suisse First Boston Corporation, as to the fairness of the exchange ratio
in the merger to Ascend stockholders from a financial point of view. This
opinion is attached as Annex 3 to this proxy statement/prospectus. WE ENCOURAGE
STOCKHOLDERS TO READ THIS OPINION CAREFULLY.
INTERESTS OF ASCEND DIRECTORS AND
MANAGEMENT IN THE MERGER (page 29)
Ascend stockholders should note that a number of directors and officers of
Ascend have interests in the merger as directors or officers that are different
from, or in addition to, those of a stockholder. If we complete the merger,
until January 31, 2000, all non-employee directors of Ascend will continue as
members of the board of directors of Ascend and certain current executive
officers of Ascend will continue as employees of Ascend. Certain indemnification
arrangements for current directors and officers of Ascend will also be
continued. Stock options held by corporate vice presidents of Ascend who are
parties to change in control agreements with Ascend will have vesting
accelerated by one year upon completion of the merger. In addition, all stock
options issued under Ascend's 1994 Outside Directors Stock Option Plan will
become fully vested and exercisable prior to the merger.
THE SPECIAL MEETING (page 13)
The special meeting of Ascend stockholders will be held at The
Ritz-Carlton, 600 Stockton Street, San Francisco, CA 94108, at 9:00 a.m., local
time, on June 24, 1999. At the special meeting, stockholders will be asked to
adopt the merger agreement.
RECORD DATE; VOTING POWER
Ascend stockholders are entitled to vote at the special meeting if they
owned shares as of the close of business on April 27, 1999, the record date.
On the record date, there were 223,091,687 shares of Ascend common stock
entitled to vote at the special meeting. Stockholders will have one vote at the
special meeting for each share of Ascend common stock that they owned on the
record date.
VOTE REQUIRED
The affirmative vote of a majority of the shares of Ascend common stock
outstanding on the record date is required to adopt the merger agreement.
VOTING BY ASCEND DIRECTORS AND EXECUTIVE OFFICERS
On the record date, directors and executive officers of Ascend and their
affiliates owned and were entitled to vote 1,136,948 shares of Ascend common
stock, or approximately 0.5% of the shares of Ascend common stock outstanding on
the record date. The directors and executive officers of Ascend have indicated
that they intend to vote the Ascend common stock owned by them "for" adoption of
the merger agreement.
THE MERGER (page 37)
The merger agreement is attached as Annex 1 to this proxy
statement/prospectus. We encourage you to read the merger agreement. It is the
principal document governing the merger.
CONDITIONS TO THE MERGER (page 37)
Lucent and Ascend will complete the merger only if they satisfy or, in some
cases, waive several conditions, including the following:
- holders of a majority of the outstanding shares of Ascend common stock
must adopt the merger agreement
- the waiting period required under the Hart-Scott-Rodino Act must expire
or be terminated
- no legal restraints or prohibitions may exist which prevent the
completion of the merger or are reasonably likely to
2
<PAGE> 10
have a material adverse effect on
Lucent or Ascend
- Lucent and Ascend must receive letters from PricewaterhouseCoopers LLP
and Ernst & Young LLP regarding those firms' concurrence with Lucent
management's and Ascend management's conclusions, respectively, that
pooling of interests accounting is appropriate for the merger under
Accounting Principles Board Opinion No. 16 if completed in accordance
with the merger agreement
- Lucent common stock issuable to Ascend stockholders must have been
approved for listing on the New York Stock Exchange
- Skadden, Arps, Slate, Meagher & Flom LLP must deliver an opinion to
Ascend and Cravath, Swaine & Moore must deliver an opinion to Lucent, in
each case stating that the merger will qualify for United States federal
income tax purposes as a reorganization within the meaning of the
Internal Revenue Code
- Lucent and Ascend must satisfy the representations, warranties and
covenants contained in the merger agreement in all material respects.
TERMINATION OF THE MERGER AGREEMENT (page 40)
1. Lucent and Ascend can jointly agree to terminate the merger agreement at
any time without completing the merger.
2. Lucent or Ascend can terminate the merger agreement if:
- Lucent and Ascend do not complete the merger by September 30, 1999
- the holders of a majority of the outstanding shares of Ascend common
stock do not adopt the merger agreement
- a governmental authority or other legal action permanently prohibits the
completion of the merger or is reasonably likely to have a material
adverse effect on either Lucent or Ascend
- the other party breached in any material respect any of its
representations, warranties or obligations under the merger agreement and
has not cured the breach within 30 days.
3. Before the special meeting, Ascend can terminate the merger agreement if
the Ascend board of directors receives an unsolicited proposal by a third party
to acquire Ascend on terms determined by the Ascend board of directors to be
more favorable to Ascend stockholders than the terms of the merger with Lucent.
4. Lucent can also terminate the merger agreement if Ascend or any of its
directors or officers participates in discussions with third parties regarding
certain takeover proposals or other business transactions in material breach of
the merger agreement.
TERMINATION FEES (page 40)
Ascend must pay Lucent a termination fee of $525 million if:
- Ascend stockholders receive a takeover proposal or a takeover proposal
otherwise becomes publicly known and Lucent or Ascend then terminates the
merger agreement for the first or second reason described in paragraph 2
above under "-- Termination of the Merger Agreement"
- Ascend terminates the merger agreement for the reason described in
paragraph 3 above under "-- Termination of the Merger Agreement"
- Lucent terminates the merger agreement for the reason described in
paragraph 4 above under "-- Termination of the Merger Agreement."
Ascend is not required to pay Lucent the termination fee for the first and
third reasons described above unless Ascend enters into an agreement for or
completes any takeover
3
<PAGE> 11
proposal within seven months of the termination of the merger agreement.
STOCK OPTION AGREEMENT (page 44)
Ascend has granted an option to Lucent to purchase shares of Ascend common
stock equal to approximately 19.9% of the number of outstanding shares of Ascend
common stock if certain events occur that entitle Lucent to receive the
termination fee under the merger agreement. The option agreement limits to $625
million the total amount Lucent may receive from (1) the stock option and (2)
any termination fee payable by Ascend if the merger agreement is terminated.
REGULATORY MATTERS (page 33)
United States antitrust laws prohibit Lucent and Ascend from completing
the merger until after they have furnished certain information and materials to
the Antitrust Division of the Department of Justice and the Federal Trade
Commission and a required waiting period has ended. Lucent and Ascend each
filed the required notification and report forms with the Antitrust Division
and the Federal Trade Commission on February 4, 1999. On March 5, 1999, the
Antitrust Division issued requests for additional information and other
documents to Lucent and Ascend relating to the merger. Lucent and Ascend
provided additional information and documents to the Antitrust Division, and on
April 12, 1999 the Antitrust Division granted early termination of the waiting
period.
Lucent and Ascend must also receive approval under the applicable European
Union merger regulations from the European Commission for the completion of the
merger. Lucent and Ascend made the required notifications to the European
Commission on March 1, 1999 and received notice that the merger was approved on
April 6, 1999. Additional filings may be required in countries outside the
European Union.
ACCOUNTING TREATMENT (page 30)
Lucent and Ascend expect the merger to qualify as a pooling of interests,
which means that Lucent and Ascend will be treated as if they had always been
combined for accounting and financial reporting purposes.
EXPENSES (page 43)
Each of Lucent and Ascend will bear all expenses it incurs in connection
with the merger, except that Lucent and Ascend will share equally the costs of
filing with the Securities and Exchange Commission the registration statement of
which this proxy statement/prospectus is a part, printing and mailing this proxy
statement/prospectus and the filing fees incurred in connection with obtaining
regulatory approval for the merger in the United States.
THE COMPANIES (page 15)
ASCEND COMMUNICATIONS, INC.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502-3002
(510) 769-6001
Ascend develops, manufactures and sells wide area networking solutions for
telecommunications carriers, Internet service providers and corporate customers
worldwide that enable them to build:
- Internet access systems
- switches for application by telecommunications carriers and Internet
service providers
- extensions and enhancements to certain corporate networks that facilitate
access to these networks by remote offices, telecommuters and mobile
computer users
- video conferencing and multimedia access facilities.
Ascend's products support existing digital and analog networks.
4
<PAGE> 12
LUCENT TECHNOLOGIES INC.
600 Mountain Avenue
Murray Hill, NJ 07974
(908) 582-8500
Lucent designs, builds and delivers a wide range of public and private
networks, communications systems and software, data networking systems, business
telephone systems and microelectronic components. Lucent is a global leader in
the sale of public communications systems, and is a supplier of systems or
software to most of the world's largest network operators. Lucent is also a
global leader in the sale of business communications systems and in the sale of
microelectronic components for communications applications to manufacturers of
communications systems and computers. Lucent conducts its research and
development activities through Bell Laboratories, one of the world's foremost
industrial research and development organizations.
MARKET PRICE AND DIVIDEND INFORMATION (page 47)
Shares of Lucent common stock are listed on the New York Stock Exchange.
Shares of Ascend common stock are listed on The Nasdaq National Market. The
following table presents:
- the last reported sale price of one share of Lucent common stock, as
reported on the New York Stock Exchange Composite Transaction Tape
- the last reported sale price of one share of Ascend common stock, as
reported on The Nasdaq National Market
- the market value of one share of Ascend common stock on an equivalent per
share basis
in each case as if the merger had been completed on January 12, 1999, the last
full trading day prior to the public announcement of the proposed merger, and on
May 20, 1999, the last day for which such information could be calculated prior
to the date of this proxy statement/prospectus. The equivalent price per share
data for Ascend common stock has been determined by multiplying the last
reported sale price of one share of Lucent common stock on each of these dates
by the exchange ratio of 1.65. We adjusted the prices for Lucent common stock
prior to April 2, 1999 to account for Lucent's two-for-one stock split effective
on April 1, 1999.
<TABLE>
<CAPTION>
EQUIVALENT
PRICE PER
SHARE OF
LUCENT ASCEND ASCEND
COMMON COMMON COMMON
DATE STOCK STOCK STOCK
---- ------ ------ ----------
<S> <C> <C> <C>
January 12, 1999..... $53 15/16 $74 15/16 $89
May 20, 1999......... $59 $94 1/4 $97 11/32
</TABLE>
Lucent has historically paid a regular quarterly dividend, currently $0.02
per share, to its stockholders. The payment of dividends by Lucent in the future
will depend on business conditions, its financial position, earnings and other
factors. Ascend has never paid dividends to its stockholders.
5
<PAGE> 13
COMPARATIVE PER SHARE INFORMATION
We have summarized below the per common share information for Lucent on a
restated consolidated basis, for Lucent and Ascend on a pro forma combined basis
and for Ascend on an historical and pro forma equivalent basis. Lucent's
restated consolidated results include the results of Kenan Systems Corporation
which merged with Lucent on February 26, 1999. The Kenan merger was accounted
for as a pooling of interests. All per share data has been restated to account
for Lucent's two-for-one stock splits effective on April 1, 1999 and on April 1,
1998. Lucent's fiscal year ends on September 30 and Ascend's fiscal year ends on
December 31.
The unaudited "pro forma combined" and the unaudited "pro forma
equivalent -- Ascend" information assumes that the merger of Ascend and Lucent
was accounted for as a pooling of interests and had occurred at the beginning of
the earliest period presented. The unaudited "pro forma combined" information
combines the financial information of Lucent for the six months ended March 31,
1999 and 1998, for each of the two years in the period ended September 30, 1998
and for the nine-month period ended September 30, 1996, with the financial
information of Ascend for the six months ended March 31, 1999 and June 30, 1998,
for each of the two years in the period ended December 31, 1998 and for the
nine-month period ended December 31, 1996, respectively. Beginning September 30,
1996, Lucent changed its fiscal year end from December 31 to September 30 and
reported results for the nine-month transition period ended September 30, 1996.
Results for the six-month period ended March 31, 1999 may not be indicative of
the results for the full year.
The unaudited "pro forma equivalent -- Ascend" information was calculated
by multiplying the corresponding pro forma combined data by the exchange ratio
of 1.65. This information shows how each share of Ascend common stock would have
participated in net earnings, cash dividends and book value of Lucent if the
merger had been completed at the beginning of the earliest period presented.
However, these amounts do not necessarily reflect future per share levels of net
earnings, cash dividends or book value of Lucent. The following unaudited
comparative and unaudited pro forma per share data is derived from the restated
consolidated financial statements of Lucent, the consolidated historical
financial statements of Ascend and the unaudited pro forma financial statements
of Lucent and Ascend.
6
<PAGE> 14
STOCKHOLDERS SHOULD READ THE INFORMATION IN THIS SECTION ALONG WITH
LUCENT'S RESTATED HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND ASCEND'S
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES INCLUDED IN
THE DOCUMENTS DESCRIBED UNDER "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 63.
STOCKHOLDERS SHOULD ALSO READ THE UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS AND ACCOMPANYING DISCUSSION AND NOTES INCLUDED IN THIS
PROXY STATEMENT/PROSPECTUS STARTING ON PAGE 48.
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE AT OR FOR THE
SIX MONTHS ENDED TWELVE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
---------------------------- -------------------- -----------------
1999 1998 1998 1997 1996
------------ ------------ -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
LUCENT -- RESTATED
HISTORICAL
Basic earnings per
share................. $1.19 $0.33 $0.40 $0.22 $0.10
Diluted earnings per
share................. 1.16 0.32 0.39 0.22 0.10
Cash dividends declared
per share............. 0.04 0.0375 0.0775 0.0563 0.0375
Book value per share..... 3.39 1.92 2.11 1.31 1.05
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
SIX MONTHS SIX MONTHS AT OR FOR THE AT OR FOR THE
ENDED ENDED TWELVE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, JUNE 30, DECEMBER 31, DECEMBER 31,
------------- ------------- -------------------- -----------------
1999 1998 1998 1997 1996
------------- ------------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
ASCEND -- HISTORICAL
Basic earnings (loss) per
share................. $(0.40) $0.58 $(0.10) $(0.66) $0.86
Diluted earnings (loss)
per share............. (0.40) 0.55 (0.10) (0.66) 0.78
Cash dividends declared
per share............. N/A N/A N/A N/A N/A
Book value per share..... 10.32 6.00 9.50 5.07 4.20
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE AT OR FOR THE
SIX MONTHS ENDED TWELVE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
---------------------------- -------------------- -----------------
1999 1998 1998 1997 1996
------------ ------------ -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
PRO FORMA COMBINED
Basic earnings per
share................. $1.02 $0.33 $0.35 $0.16 $0.14
Diluted earnings per
share................. 0.99 0.32 0.34 0.15 0.14
Cash dividends declared
per share............. 0.04 0.0375 0.0775 0.0563 0.0375
Book value per share..... 3.73 2.11 2.55 1.51 1.20
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE AT OR FOR THE
SIX MONTHS ENDED TWELVE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
---------------------------- -------------------- -----------------
1999 1998 1998 1997 1996
------------ ------------ -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
PRO FORMA
EQUIVALENT - ASCEND
Basic earnings per
share................. $1.68 $0.54 $0.58 $0.26 $0.23
Diluted earnings per
share................. 1.63 0.53 0.56 0.25 0.23
Cash dividends declared
per share............. 0.066 0.0619 0.1279 0.0928 0.0619
Book value per share..... 6.15 3.48 4.21 2.49 1.98
</TABLE>
- ---------------
N/A -- Not applicable
7
<PAGE> 15
SELECTED CONSOLIDATED HISTORICAL AND UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL DATA
LUCENT
Lucent was spun off from AT&T Corp. in 1996. On February 1, 1996, AT&T
began transferring to Lucent the assets and liabilities relating to Lucent's
operations. Lucent's historical financial data for periods prior to that date
reflect the results of operations and the financial position of the business
that was transferred to Lucent from AT&T in the separation as if Lucent had been
a stand-alone entity and have been prepared using the historical basis in the
assets and liabilities and historical results of operations related to the
Lucent business. Lucent's historical financial data for periods prior to that
date also include an allocation of certain AT&T corporate headquarters assets,
liabilities and expenses related to the Lucent business. The calculation of
earnings (loss) per common share on a historical basis includes the retroactive
recognition to January 1, 1995 of the 524,624,894 shares on a pre-split basis,
or 2,098,499,576 shares on a post-split basis, owned by AT&T on April 10, 1996.
Beginning September 30, 1996, Lucent changed its fiscal year end from
December 31 to September 30 and reported results for the nine-month transition
period ended September 30, 1996. All per share data has been restated to account
for Lucent's two-for-one stock splits effective on April 1, 1999 and on April 1,
1998.
Effective October 1, 1998, Lucent changed its method of accounting for
pension and post-retirement benefits to allow it to better represent the related
expenses in its financial statements. As a result, Lucent recorded a one-time,
after-tax gain from the cumulative effect of the accounting change of $1,308
million net of tax of $842 million, or $0.48 per share, for the first fiscal
quarter of 1999. Included in net income as a result of the accounting change is
$130 million, or $0.05 per share for the six months ended March 31, 1999.
Lucent's restated consolidated results include the results of Kenan Systems
Corporation which merged with Lucent on February 26, 1999. The Kenan merger was
accounted for as a pooling of interests. These restated consolidated results
have become the historical consolidated results of Lucent.
The following selected consolidated financial data of Lucent at September
30, 1998 and 1997, for each of the two years in the period ended September 30,
1998 and for the nine-month period ended September 30, 1996 is derived from
audited restated consolidated financial statements incorporated by reference in
this proxy statement/prospectus. The selected consolidated financial data of
Lucent at September 30, 1996, December 31, 1995 and 1994, and for each of the
two years in the period ended December 31, 1995 is derived from unaudited
restated consolidated financial statements not incorporated by reference in this
proxy statement/prospectus and, in the opinion of Lucent's management, includes
all necessary adjustments for a fair presentation of such data in conformity
with generally accepted accounting principles.
The selected consolidated financial data of Lucent at and for the six
months ended March 31, 1999 and 1998 and for the twelve months ended September
30, 1996 is derived from unaudited condensed consolidated financial statements
incorporated by reference in this proxy statement/prospectus and, in the opinion
of Lucent's management, includes all necessary adjustments for a fair
presentation of such data in conformity with generally accepted accounting
principles. Results for the six-month period ended March 31, 1999 may not be
indicative of the results for the full year.
8
<PAGE> 16
THE INFORMATION IN THIS SECTION SHOULD BE READ ALONG WITH LUCENT'S RESTATED
CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/ PROSPECTUS. SEE "WHERE YOU CAN FIND MORE
INFORMATION" ON PAGE 63.
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE AT OR FOR THE AT OR FOR THE AT OR FOR THE
SIX MONTHS TWELVE MONTHS TWELVE MONTHS NINE MONTHS TWELVE MONTHS
ENDED ENDED ENDED ENDED ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
------------------ ------------------ ------------- ------------- ------------------
1999 1998 1998 1997 1996 1996 1995 1994
------- ------- ------- ------- ------------- ------------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:
Revenues........... $17,484 $14,959 $30,328 $26,444 $23,324 $15,897 $21,431 $19,777
Operating income
(loss)........... 2,962 1,585 2,550 1,666 (939) 495 (998) 970
Net income
(loss)........... 3,178 854 1,055 574 (788) 229 (866) 481
Earnings (loss) per
common share -
basic............ 1.19 0.33 0.40 0.22 (0.34) 0.10 (0.41) N/A
Earnings (loss) per
common share -
diluted.......... 1.16 0.32 0.39 0.22 (0.34) 0.10 (0.41) N/A
Dividends declared
per common
share............ 0.04 0.0375 0.0775 0.0563 0.0375 0.0375 -- N/A
BALANCE SHEET DATA:
Total assets....... $32,840 $24,733 $26,831 $23,868 $22,650 $22,650 $19,735 $17,348
Total debt......... 6,901 3,852 4,640 4,203 3,997 3,997 4,014 3,164
Shareowners'
equity........... 9,051 5,088 5,615 3,410 2,695 2,695 1,438 2,480
</TABLE>
- ---------------
N/A -- Not applicable
9
<PAGE> 17
SELECTED CONSOLIDATED HISTORICAL AND UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL DATA
ASCEND
The following selected historical financial data of Ascend at December 31,
1998 and 1997, and for each of the three years in the period ended December 31,
1998 is derived from audited consolidated financial statements incorporated by
reference in this proxy statement/prospectus.
The selected historical financial data of Ascend at December 31, 1996, 1995
and 1994, and for each of the two years in the period ended December 31, 1995 is
derived from audited consolidated financial statements not incorporated by
reference in this proxy statement/prospectus.
The selected historical financial data of Ascend at and for the six months
ended June 30, 1998 and for the nine-month period ended December 31, 1996 is
derived from unaudited condensed consolidated financial statements not
incorporated by reference in this proxy statement/prospectus and, in the opinion
of Ascend's management, includes all necessary adjustments for a fair
presentation of such data in conformity with generally accepted accounting
principles.
The selected consolidated financial data of Ascend at and for the six
months ended March 31, 1999 is derived from unaudited condensed consolidated
financial statements incorporated by reference in this proxy
statement/prospectus and, in the opinion of Ascend's management, includes all
necessary adjustments for a fair presentation of such data in conformity with
generally accepted accounting principles. Results for the six-month period ended
March 31, 1999 may not be indicative of the results for the full year.
All financial information set forth below up to December 31, 1997 has been
restated to reflect the pooling of interests with Cascade Communications Corp.
and Netstar, Inc. Information for the six-month period ended March 31, 1999 was
calculated by adding the three-month period ended December 31, 1998 to the
three-month period ended March 31, 1999. Information for the nine-month period
ended December 31, 1996 was calculated by subtracting the March 31, 1996
three-month period from the financial statements for the year ended December 31,
1996. In May, October and December, 1995, the Ascend board of directors approved
two-for-one stock splits, payable in the form of a stock dividend to all
stockholders of record. All per share data has been restated to reflect these
stock splits.
THE INFORMATION IN THIS SECTION SHOULD BE READ ALONG WITH ASCEND'S
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES INCORPORATED
BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS. SEE "WHERE YOU CAN FIND MORE
INFORMATION" ON PAGE 63.
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
---------------------------------------------------------------- -----------------
AT OR FOR THE AT OR FOR THE AT OR FOR THE AT OR FOR THE AT OR FOR THE
SIX MONTHS SIX MONTHS TWELVE MONTHS NINE MONTHS TWELVE MONTHS
ENDED ENDED ENDED ENDED ENDED
MARCH 31, JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------- ------------- -------------------------------- ------------- -----------------
1999 1998 1998 1997 1996 1996 1995 1994
------------- ------------- ------ ------------- ------- ------------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................. $ 985 $ 632 $1,479 $1,167 $890 $742 $287 $ 90
Operating income
(loss)................. (30) 163 89 (68) 285 240 77 15
Net income (loss)........ (89) 111 (20) (124) 184 154 53 16
Earnings (loss) per
common share - basic... (0.40) 0.58 (0.10) (0.66) 1.03 0.86 0.33 0.11
Earnings (loss) per
common share -
diluted................ (0.40) 0.55 (0.10) (0.66) 0.94 0.78 0.30 0.11
Dividends declared per
common share........... N/A N/A N/A N/A N/A N/A N/A N/A
BALANCE SHEET DATA:
Total assets............. $2,765 $1,390 $2,531 $1,138 $922 $922 $482 $127
Total debt............... -- -- -- -- -- -- -- --
Shareowners' equity...... 2,298 1,188 2,094 969 767 767 411 103
</TABLE>
- ---------------
N/A -- Not applicable
10
<PAGE> 18
SELECTED CONSOLIDATED HISTORICAL AND UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL DATA
LUCENT AND ASCEND UNAUDITED PRO FORMA COMBINED
The following selected unaudited pro forma combined condensed financial
data of Lucent and Ascend has been prepared giving effect to the merger under
the pooling of interests method of accounting. The selected unaudited pro forma
combined condensed information combines the restated consolidated financial
information of Lucent at or for the six months ended March 31, 1999 and 1998,
for each of the two years in the period ended September 30, 1998, and the
nine-month period ended September 30, 1996 with the financial information of
Ascend at or for the six months ended March 31, 1999 and June 30, 1998, for each
of the two years in the period ended December 31, 1998 and the nine-month period
ended December 31, 1996, respectively. The selected unaudited pro forma combined
condensed financial data is derived from the unaudited pro forma combined
condensed financial statements contained elsewhere in this proxy statement/
prospectus.
Lucent's restated consolidated results include the results of Kenan Systems
Corporation which merged with Lucent on February 26, 1999. The Kenan merger was
accounted for as a pooling of interests. These restated consolidated results
have become the historical consolidated results of Lucent.
The unaudited pro forma combined condensed financial information does not
purport to represent what the combined company's financial position or results
of operations would have been had the merger occurred at the beginning of the
earliest period presented or to project the combined company's financial
position or results of operations for any future date or period. In addition, it
does not incorporate any benefits from cost savings or synergies of operations
of the combined company.
THE FINANCIAL INFORMATION IN THIS SECTION SHOULD BE READ ALONG WITH
LUCENT'S AND ASCEND'S CONSOLIDATED HISTORICAL AND UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES, EITHER INCORPORATED BY
REFERENCE OR INCLUDED IN THIS PROXY STATEMENT/ PROSPECTUS. SEE "UNAUDITED PRO
FORMA COMBINED CONDENSED FINANCIAL STATEMENTS" ON PAGE 48 AND "WHERE YOU CAN
FIND MORE INFORMATION" ON PAGE 63.
<TABLE>
<CAPTION>
AT OR FOR THE
AT OR FOR THE SIX AT OR FOR THE TWELVE NINE MONTHS
MONTHS ENDED MONTHS ENDED ENDED
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------- -------------
1999 1998 1998 1997 1996
------- ------- -------- -------- -------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................ $18,469 $15,591 $31,807 $27,611 $16,639
Operating income.................... 2,932 1,748 2,639 1,598 735
Net income.......................... 3,089 965 1,035 450 383
Earnings per common share - basic... 1.02 0.33 0.35 0.16 0.14
Earnings per common
share - diluted.................. 0.99 0.32 0.34 0.15 0.14
Dividends declared per
common share..................... 0.04 0.0375 0.0775 0.0563 0.0375
BALANCE SHEET DATA:
Total assets........................ $35,605
Total debt.......................... 6,901
Shareowners' equity................. 11,349
</TABLE>
11
<PAGE> 19
RISK FACTORS RELATING TO THE MERGER
In addition to the other information included and incorporated by reference
in this proxy statement/prospectus, Ascend stockholders should consider
carefully the matters described below in determining whether to adopt the merger
agreement.
- THE EXCHANGE RATIO FOR LUCENT COMMON STOCK TO BE RECEIVED IN THE MERGER
IS FIXED AND WILL NOT BE ADJUSTED IN THE EVENT OF ANY CHANGE IN STOCK
PRICE. Under the merger agreement, each share of Ascend common stock
will be converted into the right to receive 1.65 shares of Lucent common
stock. This exchange ratio is a fixed number and will not be adjusted in
the event of any increase or decrease in the price of Lucent common stock
or Ascend common stock. The prices of Lucent common stock and Ascend
common stock at the closing of the merger may vary from their respective
prices on the date of this proxy statement/prospectus and on the date of
the special meeting. These prices may vary because of changes in the
business, operations or prospects of Lucent or Ascend, market assessments
of the likelihood that the merger will be completed, the timing of the
completion of the merger, the prospects of post-merger operations,
regulatory considerations, general market and economic conditions and
other factors. Because the date that the merger is completed may be later
than the date of the special meeting, the prices of Lucent common stock
and Ascend common stock on the date of the special meeting may not be
indicative of their respective prices on the date the merger is
completed. We urge Ascend stockholders to obtain current market
quotations for Lucent common stock and Ascend common stock.
- THE INTEGRATION OF LUCENT AND ASCEND FOLLOWING THE MERGER WILL PRESENT
SIGNIFICANT CHALLENGES. Lucent and Ascend will face significant
challenges in integrating their organizations, operations and product
lines in a timely and efficient manner and in retaining key Lucent and
Ascend personnel. The integration of Lucent and Ascend will be complex
and time-consuming. For example, Lucent and Ascend must rapidly integrate
their respective sales forces, despite different business cultures and
geographically dispersed operations, or the combined company may not be
able to maintain its competitive position. In addition, Lucent and Ascend
must successfully combine their respective product development teams,
despite similar issues, or the combined company may not fully achieve the
anticipated potential benefits of the merger. The failure to successfully
integrate Lucent and Ascend and to successfully manage the challenges
presented by the integration process may result in Lucent and Ascend not
achieving the anticipated potential benefits of the merger.
- THE MERGER MAY CAUSE CUSTOMERS TO DELAY PURCHASING DECISIONS. There can
be no assurance that the customers of each of Ascend and Lucent will
continue their current buying patterns without regard to the proposed
merger. Uncertainties regarding new product development by the combined
company, for example, may cause customers to delay purchasing decisions.
- THE PRICE OF LUCENT COMMON STOCK MAY BE AFFECTED BY FACTORS DIFFERENT
FROM THOSE AFFECTING THE PRICE OF ASCEND COMMON STOCK. Upon completion
of the merger, holders of Ascend common stock will become holders of
Lucent common stock. Lucent's business differs from that of Ascend, and
Lucent's results of operations, as well as the price of Lucent common
stock, may be affected by factors different from those affecting Ascend's
results of operations and the price of Ascend common stock. For a
discussion of Lucent's and Ascend's businesses and certain factors to
consider in connection with such businesses, see Lucent's Annual Report
on Form 10-K for the fiscal year ended September 30, 1998, as amended,
and Ascend's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, as amended, which are incorporated by reference in
this proxy statement/prospectus.
12
<PAGE> 20
THE SPECIAL MEETING
We are furnishing this proxy statement/prospectus to stockholders of Ascend
as part of the solicitation of proxies by the Ascend board of directors for use
at the special meeting.
DATE, TIME AND PLACE
We will hold the special meeting at The Ritz-Carlton, 600 Stockton Street,
San Francisco, CA 94108, at 9:00 a.m., local time, on Thursday, June 24, 1999.
PURPOSE OF SPECIAL MEETING
At the special meeting, we are asking holders of Ascend common stock to
adopt the merger agreement. The Ascend board of directors has determined that
the merger is fair to, and in the best interests of, Ascend stockholders, has
unanimously approved the merger agreement and the merger and unanimously
recommends that Ascend stockholders vote "for" adoption of the merger agreement.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only holders of record of Ascend common stock at the close of business on
April 27, 1999, the record date, are entitled to notice of and to vote at the
special meeting. On the record date, 223,091,687 shares of Ascend common stock
were issued and outstanding and held by approximately 3,166 holders of record. A
quorum is present at the special meeting if a majority of the shares of Ascend
common stock issued and outstanding and entitled to vote on the record date are
represented in person or by proxy. In the event that a quorum is not present at
the special meeting, it is expected that the meeting will be adjourned or
postponed to solicit additional proxies. Holders of record of Ascend common
stock on the record date are entitled to one vote per share at the special
meeting on the proposal to adopt the merger agreement.
VOTES REQUIRED
The adoption of the merger agreement requires the affirmative vote of a
majority of the shares of Ascend common stock outstanding on the record date. IF
AN ASCEND STOCKHOLDER ABSTAINS FROM VOTING OR DOES NOT VOTE, EITHER IN PERSON OR
BY PROXY, IT WILL HAVE THE EFFECT OF A VOTE AGAINST ADOPTION OF THE MERGER
AGREEMENT.
VOTING BY ASCEND DIRECTORS AND EXECUTIVE OFFICERS
At the close of business on the record date, directors and executive
officers of Ascend and their affiliates owned and were entitled to vote
1,136,948 shares of Ascend common stock, which represented approximately 0.5% of
the shares of Ascend common stock outstanding on that date. Each Ascend director
and executive officer has indicated his or her present intention to vote, or
cause to be voted, the Ascend common stock owned by him or her "for" adoption of
the merger agreement.
VOTING OF PROXIES
All shares represented by properly executed proxies received in time for
the special meeting will be voted at the special meeting in the manner specified
by the holders. Properly executed proxies that do not contain voting
instructions will be voted "for" adoption of the merger agreement.
13
<PAGE> 21
Shares of Ascend common stock represented at the special meeting but not
voting, including shares of Ascend common stock for which proxies have been
received but for which holders of shares have abstained, will be treated as
present at the special meeting for purposes of determining the presence or
absence of a quorum for the transaction of all business.
Only shares affirmatively voted for adoption of the merger agreement,
including properly executed proxies that do not contain voting instructions,
will be counted as favorable votes for that proposal. If an Ascend stockholder
abstains from voting or does not vote, either in person or by proxy, it will
count as if that Ascend stockholder had voted against adoption of the merger
agreement. Brokers who hold shares of Ascend common stock in street name for
customers who are the beneficial owners of such shares may not give a proxy to
vote those customers' shares in the absence of specific instructions from those
customers. These non-voted shares are referred to as broker non-votes and have
the effect of votes against adoption of the merger agreement.
The persons named as proxies by a stockholder may propose and vote for one
or more adjournments of the special meeting, including adjournments to permit
further solicitations of proxies. No proxy voted against the proposal to adopt
the merger agreement will be voted in favor of any such adjournment or
postponement.
Ascend does not expect that any matter other than the proposal to adopt the
merger agreement will be brought before the special meeting. If, however, the
Ascend board of directors properly presents other matters, the persons named as
proxies will vote in accordance with their judgment.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed form of proxy does not preclude a
stockholder from voting in person at the special meeting. A stockholder may
revoke a proxy at any time prior to its exercise by filing with the Secretary of
Ascend a duly executed revocation of proxy, by submitting a duly executed proxy
to the Secretary of Ascend bearing a later date or by appearing at the special
meeting and voting in person. Attendance at the special meeting will not itself
constitute revocation of a proxy.
SOLICITATION OF PROXIES
Ascend will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of Ascend and its subsidiaries may solicit proxies from stockholders
by telephone or other electronic means or in person. Ascend will cause brokerage
houses and other custodians, nominees and fiduciaries to forward solicitation
materials to the beneficial owners of stock held of record by such persons.
Ascend will reimburse such custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses in doing so.
Corporate Investor Communications, Inc. will assist in the solicitation of
proxies by Ascend. Ascend will pay Corporate Investor Communications, Inc. a fee
of $12,000, plus reimbursement of certain out-of-pocket expenses, and will
indemnify Corporate Investor Communications, Inc. against any losses arising out
of Corporate Investor Communications, Inc.'s proxy soliciting services on behalf
of Ascend.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXIES. A
transmittal form with instructions for the surrender of Ascend common stock
certificates will be mailed to Ascend stockholders as soon as practicable after
completion of the merger.
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<PAGE> 22
THE COMPANIES
ASCEND
Ascend develops, manufactures and sells wide area networking solutions for
telecommunications carriers, Internet service providers and corporate customers
worldwide that enable them to build:
- Internet access systems consisting of point-of-presence termination
equipment for Internet service providers and remote site Internet access
equipment for Internet subscribers
- high speed frame relay, asynchronous transfer mode and Internet protocol
switches for application in telecommunications carriers and Internet
service provider backbone networks
- extensions and enhancements to corporate backbone networks that
facilitate access to these networks by remote offices, telecommuters and
mobile computer users
- video conferencing and multimedia access facilities.
Ascend's products support existing digital and analog networks.
The following definitions explain certain terms referred to in this
description of Ascend:
- "Point-of-presence" is the location in the network of a
telecommunications carrier, such as a regional Bell operating company or
Internet service provider, where a customer, whether a consumer or
business, first gains access to the telecommunications carrier network.
Access can be through a number of forms, such as analog modem, integrated
services digital network, digital subscriber loop, frame relay or
asynchronous transfer mode.
- "Frame relay" is a data transmission technology where information is
organized into variable size packets for transmission over a data
communications network, usually that of a telecommunications carrier,
such as a regional Bell operating company, Internet service provider or
long distance interexchange carrier. Frame relay is primarily used for
transmitting data between local area networks, originating from
terminals, personal computers, workstations, servers and mainframe
computers, over the wide area. Transmission of data using the frame relay
protocol has been standardized by the Frame Relay Forum.
- "Asynchronous transfer mode" is a data transmission technology where
information is organized into fixed size packets, also known as cells,
for transmission over a data communications network, either in a local
area network environment or over a private or public wide area network.
Asynchronous transfer mode is primarily used in telecommunications
carrier networks such as a regional Bell operating company, Internet
service provider or long distance interexchange carrier, in one of two
applications: (1) as a backbone network technology, or (2) for
transmitting integrated voice, video and data over one transmission line.
Transmission of data using the asynchronous transfer mode protocol has
been standardized by the Asynchronous Transfer Mode Forum.
- "Internet protocol" was first developed as part of the U.S. Department of
Defense advanced research project, know as the Arpanet, which evolved
into the Internet. The Internet protocol became the only "high level"
protocol acceptable for use over the Internet. Due to its broad
acceptance in the research community, both within government and
corporate settings, Internet protocol has gained broad acceptance in
private local area network and both private and public wide area network
applications. Internet protocol is primarily used for data applications,
including local area network to local area network, computer to local
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<PAGE> 23
area network, and computer to computer. Transmission of data using the
Internet protocol has been standardized by the Internet Engineering Task
Force.
- A "backbone network" can be either a standalone network that is used
solely to connect other networks together or it can refer to that portion
of a single network which provides the tandem transport function between
network access points. Frame relay and asynchronous transfer mode
switches are often used in backbone network applications.
Ascend was incorporated in Delaware in March 1994. Additional information
regarding Ascend is contained in Ascend's filings with the Securities and
Exchange Commission. See "Where You Can Find More Information" on page 63.
LUCENT
Lucent designs, builds and delivers a wide range of public and private
networks, communications systems and software, data networking systems, business
telephone systems and microelectronic components. Lucent is a global leader in
the sale of public communications systems, and is a supplier of systems or
software to most of the world's largest network operators. Lucent is also a
global leader in the sale of business communications systems and in the sale of
microelectronic components for communications applications to manufacturers of
communications systems and computers. Lucent conducts its research and
development activities through Bell Laboratories, one of the world's foremost
industrial research and development organizations.
Lucent was incorporated in Delaware in November 1995. Lucent was a wholly
owned subsidiary of AT&T prior to its initial public offering of common stock on
April 10, 1996, and became completely separate from AT&T when the remaining
shares of Lucent common stock held by AT&T were distributed to AT&T's
stockholders on September 30, 1996. Additional information regarding Lucent is
contained in Lucent's filings with the Securities and Exchange Commission. See
"Where You Can Find More Information" on page 63.
MATERIAL CONTRACTS BETWEEN LUCENT AND ASCEND
Lucent and Ascend are parties to a patent license agreement dated as of
September 30, 1998, covering licenses of patents for the manufacture and sale of
data networking products. Lucent and Ascend are also parties to an original
equipment manufacturer agreement dated as of February 15, 1996, as amended on
March 11, 1998 and January 20, 1999, under which Ascend granted Lucent the
non-exclusive right to resell certain of Ascend's products to end-user
customers. Lucent and Ascend are also parties to a teaming agreement dated as of
October 20, 1998, under which the parties agreed to work together to sell
complementary products.
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<PAGE> 24
THE MERGER
The following discussion summarizes the material terms of the merger, the
merger agreement and the stock option agreement. Stockholders should read
carefully the merger agreement and the stock option agreement, which are
attached as Annexes 1 and 2 to this proxy statement/prospectus.
BACKGROUND TO THE MERGER
In June 1998, Richard A. McGinn, Chairman and Chief Executive Officer of
Lucent, and William T. O'Shea, Group President of Lucent's Business
Communications Systems and Data Networking Systems business units, met with Mory
Ejabat, President and Chief Executive Officer of Ascend, during which meeting
they agreed to investigate increasing the amount of business done under the
original equipment manufacturer agreement between Lucent and Ascend.
On August 20, 1998, Messrs. O'Shea and Ejabat discussed broadening the
existing business relationship between Lucent and Ascend.
On September 17, 1998, Lucent and Ascend entered into a confidentiality
agreement, which was amended on December 10, 1998 and January 12, 1999,
containing customary terms and conditions.
On September 22, 1998, the Ascend board of directors held a regularly
scheduled meeting attended by members of Ascend's senior management. Mr. Ejabat
updated the Ascend board of directors on consolidation trends in the data
networking industry as well as industry trends leading towards the integration
of voice and data networks. The Ascend board of directors discussed a variety of
strategic transactions with companies that have products and technologies
complementary to those of Ascend. The Ascend board of directors authorized
management to continue to explore these potential strategic transactions.
On September 25, 1998, representatives of Lucent and Ascend met to discuss
Ascend's business and continue discussions regarding broadening the existing
business relationship between Lucent and Ascend.
On October 3 and 4, 1998, at regularly scheduled meetings of the Lucent
board of directors, Lucent management reviewed with the Lucent board of
directors Lucent's data networking strategy, gaps in its data networking product
line and ways of addressing those gaps. These discussions included, among other
things, a possible business combination with Ascend. As a result of this review,
the Lucent board of directors authorized Lucent management to initiate
discussions with Ascend relating to a strategic business combination.
On October 12, 1998, the Ascend board of directors held a special meeting
by telephone conference, which was also attended by members of Ascend's senior
management. Mr. Ejabat reported on the status of business discussions with
Lucent. Mr. Ejabat discussed the relative merits of different strategic partners
and addressed questions and comments from the Ascend board of directors.
Ascend's general corporate outside legal counsel advised the Ascend board of
directors of fiduciary duties applicable to directors in considering a strategic
business combination. After discussion, the Ascend board of directors authorized
and instructed management to continue the discussions with Lucent regarding
broadening the existing relationship.
On October 19, 1998, Mr. O'Shea and Donald Peterson, Executive Vice
President and Chief Financial Officer of Lucent, met with Mr. Ejabat and Michael
F.G. Ashby, Executive Vice President and Chief Financial Officer of Ascend, to
discuss a strategic business combination
17
<PAGE> 25
between Lucent and Ascend which would permit Lucent and Ascend to combine their
respective strengths.
On November 2, 1998, the Ascend board of directors held a special meeting
attended by members of Ascend's senior management, representatives of Credit
Suisse First Boston Corporation, commonly referred to as CSFB, and The Yankee
Group. The Yankee Group presented a data networking industry overview and
discussed trends in the consolidation of the voice and data networking industry.
Representatives of CSFB discussed with the Ascend board of directors
opportunities available to Ascend including a strategic business relationship
with Lucent as well as other potential strategic alternatives available to
Ascend.
On November 12, 1998, representatives of Lucent, including Patricia Russo,
Executive Vice President -- Strategy, Business Development and Corporate
Operations, John Braskamp, Corporate Strategy and Business Development Director,
Carl Pavarini, Vice President -- Business Development and Operations, Data
Networking Systems, and Kevin Oye, DNS Strategy and Business Development Vice
President, met to discuss Lucent's business with representatives of Ascend,
including Mr. Ashby and Ken Fehrnstrom, Vice President, Business Development,
Bruce Sachs, Executive Vice President of Carrier Signaling Group, Curtis N.
Sanford, Executive Vice President and General Manager, Access Switching
Division, and Dave Misunas, Vice President and General Manager, Voice and
Carrier Signaling.
On November 20, 1998, Messrs. Pavarini, Braskamp, Oye and Michael Levy,
Vice President -- Worldwide Sales, Data Networking Systems of Lucent, met with
Messrs. Ashby, Sanford and Sachs to further discuss a possible business
combination. They discussed certain issues relating to a potential strategic
business combination, including business and employee matters.
During the period from late November through December 1998, representatives
of Lucent, including Messrs. Peterson, O'Shea, Braskamp and Oye, and
representatives of Ascend, including Messrs. Ejabat, Ashby and Bernard V.
Schneider, Vice President and Treasurer of Ascend, continued preliminary
discussions with respect to a strategic business combination between Lucent and
Ascend. They discussed, among other things, each company's operations, their
complementary strengths and the possible advantages of a strategic business
combination. They also discussed certain terms of a potential strategic business
combination, including, among others, a range of appropriate exchange ratios,
certain senior management roles and other integration issues. Throughout this
period of time, representatives of Lucent and Ascend exchanged and discussed
certain business, personnel, legal and financial information relating to Lucent
and Ascend.
On December 15, 1998, the Ascend board of directors held a regularly
scheduled meeting attended by members of Ascend's senior management and
representatives of Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Ejabat
discussed with the Ascend board of directors the status of discussions with
Lucent and further discussed the relative merits of other potential strategic
alternatives. Jeanette Symons, Chief Technology Officer of Ascend, presented an
industry technology overview with an assessment of Ascend's relative strengths
and weaknesses. Based on these presentations, the Ascend board of directors
authorized and instructed management to continue discussions with Lucent.
On December 15, 1998, Ascend formally engaged CSFB as its financial
advisor. CSFB had been assisting Ascend in its consideration of strategic
alternatives since October 1998.
On December 16, 1998, at a regularly scheduled Lucent board of directors
meeting, Lucent management reviewed with the Lucent board of directors the
status of the ongoing discussions with Ascend. On the same day, Messrs. Ejabat
and Ashby contacted Mr. McGinn to further discuss a
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<PAGE> 26
proposed timetable and possible exchange ratios. Messrs. McGinn and Ejabat
agreed to meet the following week to continue discussions.
On December 21, 1998, Messrs. McGinn and Ejabat met again. They both
concluded that they were interested in further pursuing a possible business
combination and determined to resume discussions in early January 1999.
On January 4, 1999, Messrs. McGinn, Peterson and O'Shea met with Messrs.
Ejabat and Ashby to discuss certain material terms of the proposed transaction.
They determined that an exchange ratio of 0.825 for a proposed strategic
business combination was within a range that would justify continuing
discussions, conducting mutual due diligence and negotiating definitive
documentation, all subject to the approval of their respective boards of
directors. They also agreed to instruct their senior management teams and their
advisors to continue their work analyzing the proposed strategic business
combination and to exchange drafts of a merger agreement, a stock option
agreement and related documents.
On January 5, 1999, the Ascend board of directors held a special meeting by
telephone conference during which members of Ascend's senior management reported
on the status of discussions with Lucent, including the discussed exchange ratio
of 0.825 shares of Lucent common stock per share of Ascend common stock and the
feasibility of a strategic business combination. The Ascend board of directors
discussed, among other things, the possible timing, structure and terms of such
a transaction. The Ascend board of directors authorized and instructed
management to continue to explore a possible strategic business combination, to
pursue further discussions and to begin due diligence with respect to Lucent.
From January 6 through January 10, 1999, representatives of Lucent and
Ascend, including their financial and legal advisors, conducted mutual due
diligence concerning their respective businesses and operations.
From January 4 through January 12, 1999, representatives of Lucent and
Ascend, together with their financial and legal advisors, held numerous meetings
to discuss and negotiate the terms and conditions of the merger agreement and
the stock option agreement and various other legal, financial and regulatory
issues, including, among other things, the treatment of employee benefit plans
and the tax treatment of the proposed transaction.
On January 7, 1999, during a telephonic meeting of the Lucent board of
directors on other matters, Lucent management reported on the status of the
negotiations with Ascend.
On January 12, 1999, during a telephonic meeting, the Lucent board of
directors considered the terms of the merger and the definitive agreements and,
after deliberation, approved the merger agreement and the stock option agreement
with Ascend.
On January 12, 1999, the Ascend board of directors held a meeting attended
by members of Ascend's senior management and representatives of CSFB and
Skadden, Arps, Slate, Meagher & Flom LLP. Prior to the meeting, Ascend's special
counsel provided each member of the Ascend board of directors with the current
draft of the merger agreement, stock option agreement and related documents.
Ascend's legal counsel described to the Ascend board of directors the fiduciary
duties applicable to directors in considering a strategic business combination.
The Ascend board of directors considered the proposed merger agreement, the
proposed stock option agreement, certain related documents and the transactions
contemplated by the merger agreement. Mr. Ejabat summarized the status of
negotiations. Representatives of CSFB described its financial analysis with
respect to the possible combination with Lucent, and then delivered the oral
opinion of CSFB, later confirmed in writing, to the effect that, as of January
12, 1999, the exchange ratio was fair to
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<PAGE> 27
Ascend stockholders, other than Lucent and its affiliates, from a financial
point of view. In light of the prior discussions relating to other possible
strategic transactions at the meetings of the Ascend board of directors referred
to above and the provisions of the proposed merger agreement permitting the
Ascend board of directors to terminate the merger agreement in response to a
third party proposal which the Ascend board of directors determines in its good
faith judgment to be more favorable to Ascend stockholders than the merger
provided Ascend complies with the notice and other requirements of the merger
agreement and pays a termination fee of $525 million to Lucent, the Ascend board
of directors did not consider it necessary to further consider alternatives to
the merger. Following discussions, the Ascend board of directors concluded that
the merger was fair to and in the best interests of Ascend and unanimously
approved the merger agreement, the stock option agreement and related documents.
The merger agreement and the stock option agreement were signed by the
parties on the night of January 12, 1999. On the morning of January 13, 1999,
prior to the commencement of trading, Lucent and Ascend issued a joint press
release announcing the execution of the merger agreement.
On May 16, 1999, Lucent and Ascend amended the merger agreement to increase
the number of options to acquire shares of Ascend common stock issuable by
Ascend and to modify the provisions for continuation of existing Ascend employee
benefit plans, programs and arrangements by Lucent.
REASONS FOR THE MERGER AND BOARD OF DIRECTORS RECOMMENDATION
REASONS FOR THE MERGER. In reaching its decision to approve the merger
agreement and the merger and to recommend adoption of the merger agreement by
Ascend stockholders, the Ascend board of directors consulted with its management
team and advisors and independently considered the proposed merger agreement and
the transactions contemplated by the merger agreement. The following discussion
of the factors considered by the Ascend board of directors in making its
decision is not intended to be exhaustive but includes all material factors
considered by the Ascend board of directors.
The Ascend board of directors considered the following factors as reasons
that the merger will be beneficial to Ascend and its stockholders:
- the potential of the combined companies to offer customers total
communications networking capability, including voice, data and optical
networking as well as software and service solutions
- Lucent's established relationships with major carriers, sales and
marketing resources and distribution channels and access to Bell
Laboratories and Lucent voice, optical networking and digital loop
carrier products and technology
- the complementary nature of the companies' product offerings across a
range of products and possible synergies from combining Ascend and Lucent
- the terms and conditions of the merger agreement, including termination
fees and closing conditions
- the expected qualification of the merger as a reorganization under
Section 368(a) of the Internal Revenue Code
- the transaction being accounted for as a pooling of interests, so that
Ascend would not be incurring charges to earnings associated with the
application of purchase accounting
- the opinion of CSFB that, as of the date of the merger agreement and
subject to the considerations set forth in the opinion, the 0.825
exchange ratio, as subsequently adjusted to
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1.65 to account for Lucent's two-for-one stock split effective on April
1, 1999, is fair to the stockholders of Ascend, other than Lucent and its
affiliates, from a financial point of view.
In the course of deliberations, the Ascend board of directors also
considered a number of additional factors relevant to the merger, including:
- information relating to the business, assets, management, competitive
position, operating performance, trading performance and prospects of
each of Ascend and Lucent, including the prospects of Ascend if it were
to continue as an independent company
- current industry, market and economic conditions
- the possibility of strategic alternatives to the merger for enhancing
long-term stockholder value, including the possibility of other potential
strategic transactions
- the impact of the merger on Ascend's and Lucent's customers, suppliers
and employees
- the likelihood that the merger would be completed.
The Ascend board of directors also identified and considered a number of
potentially negative factors in its deliberations concerning the merger,
including:
- the risk that the operations of Lucent and Ascend might not be
successfully integrated
- a recognition that Lucent common stock has traded at high valuation
multiples, and the risk that such multiples might not be sustained in the
future
- the risk that, despite the efforts of Ascend and Lucent after the merger,
key personnel might leave Ascend
- the difficulty of managing operations in the different geographic
locations in which Ascend and Lucent operate
- the risk that the potential benefits of the merger might not be fully
realized.
The Ascend board of directors believed that certain of these risks were
unlikely to occur, that Ascend could avoid or mitigate others, and that,
overall, these risks were outweighed by the potential benefits of the merger.
In view of the variety of factors considered in connection with its
evaluation of the merger agreement and the merger, the Ascend board of directors
did not find it practicable to and did not quantify or otherwise assign relative
weight to the specific factors considered in reaching its determination. In
addition, individual members of the Ascend board of directors may have given
different weight to different factors.
RECOMMENDATION OF THE ASCEND BOARD OF DIRECTORS. After careful
consideration, the Ascend board of directors has unanimously determined that the
terms of the merger agreement and the merger are fair to, and in the best
interests of, Ascend and its stockholders and has approved the merger agreement
and the merger. The Ascend board of directors unanimously recommends that the
stockholders of Ascend vote "for" the adoption of the merger agreement.
OPINION OF CREDIT SUISSE FIRST BOSTON CORPORATION
Ascend retained CSFB to act as its exclusive financial advisor in
connection with the merger. CSFB was selected by the Ascend board of directors
to act as Ascend's financial advisor based on CSFB's qualifications, expertise
and reputation, as well as CSFB's investment banking relationship and
familiarity with Ascend.
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On January 12, 1999, the Ascend board of directors met to review the
proposed transaction with Lucent and the final terms of the merger agreement.
During this meeting, CSFB rendered its oral opinion, subsequently confirmed in
writing on January 12, 1999, that, as of that date, based upon and subject to
the various considerations set forth in the CSFB opinion, the 0.825 exchange
ratio under the merger agreement was fair to Ascend stockholders, other than
Lucent and its affiliates, from a financial point of view.
The exchange ratio has been adjusted to 1.65 from the 0.825 exchange ratio
reflected in the merger agreement to account for Lucent's two-for-one stock
split effective on April 1, 1999. However, the CSFB opinion, the summary of the
CSFB opinion and the procedures and analyses described below refer to the 0.825
exchange ratio contemplated as of the date of the CSFB opinion.
The CSFB opinion sets forth, among other things, assumptions made,
procedures followed, matters considered and limitations on the scope of the
review undertaken by CSFB in rendering the CSFB opinion. The full text of the
opinion is attached as Annex 3 to this proxy statement/ prospectus and is
incorporated by reference in its entirety. Ascend stockholders are urged to, and
should, read the CSFB opinion carefully and in its entirety. The CSFB opinion
addresses only the fairness of the 0.825 exchange ratio to the Ascend
stockholders, other than Lucent and its affiliates, from a financial point of
view as of the date of the CSFB opinion, and does not constitute a
recommendation to any stockholder as to how such stockholder should vote at the
Ascend special meeting. The summary of the CSFB opinion in this proxy
statement/prospectus is qualified in its entirety by reference to the full text
of the CSFB opinion.
In arriving at its opinion, CSFB reviewed certain publicly available
business and financial information relating to Ascend and Lucent, as well as the
merger agreement. CSFB also reviewed certain other information provided to it by
Ascend as well as estimates of Ascend's and Lucent's future performance made by
market analysts. CSFB had discussions with the management of Ascend to discuss
the business prospects of Ascend, its projected performance, the strategic
importance of the merger to Lucent and the strategic and operational benefits
expected to be achieved through the combination of the operations of Ascend and
Lucent. CSFB also had discussions with the management of Lucent regarding its
business and operations.
CSFB considered certain financial and stock market data of Ascend and
Lucent, and CSFB compared that data with similar data for other publicly held
companies in businesses similar to those of Ascend and Lucent. CSFB also
considered the financial terms of certain other recent business combinations and
other transactions. CSFB also considered such other information, financial
studies, analyses and investigations and financial, economic and market criteria
which it deemed relevant.
In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the foregoing information and relied on its
being complete and accurate in all material respects. CSFB assumed that any
estimates or forecasts used in its analysis had been reasonably prepared on
bases reflecting the best currently available estimates and judgments of
Ascend's management as to the future financial performance of Ascend. In
addition, CSFB did not make an independent evaluation or appraisal of the assets
or liabilities of Ascend or Lucent, nor was CSFB furnished with any such
evaluations or appraisals. The CSFB opinion is necessarily based upon financial,
economic, market and other conditions as they existed and could be evaluated on
the date of the CSFB opinion.
CSFB did not express any opinion as to what the value of Lucent common
stock actually would be when issued to Ascend stockholders pursuant to the
merger or the prices at which such Lucent
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common stock would trade subsequent to the merger. CSFB was not requested to,
and did not, solicit third party indications of interest in acquiring all or any
part of Ascend.
In preparing the CSFB opinion, CSFB performed a variety of financial and
comparative analyses. The preparation of a fairness opinion is a complex process
and is not necessarily susceptible to partial analysis or summary description.
CSFB believes that its analyses must be considered as a whole, and that
selecting portions of its analyses and of the factors considered by it, without
considering all analyses and factors, could create a misleading view of the
processes underlying the CSFB opinion. In addition, CSFB may have given various
analyses more or less weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions, so that the range of
valuation resulting from any particular analysis described below should not be
taken to be CSFB's view of the actual value of Ascend or Lucent. In performing
its analyses, CSFB made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of Ascend or Lucent. The analyses performed by CSFB
are not necessarily indicative of actual values or actual future results, which
may be significantly more or less favorable than suggested by such analyses. In
addition, analyses relating to the value of businesses or assets do not purport
to be appraisals or to necessarily reflect the prices at which businesses or
assets may actually be sold. The analyses performed were prepared solely as part
of CSFB's analysis of the fairness of the 0.825 exchange ratio to Ascend
stockholders, other than Lucent and its affiliates, from a financial point of
view and were provided to the Ascend board of directors in connection with the
delivery of the CSFB opinion. The following is a summary of the material
financial analyses performed by CSFB in connection with the preparation of the
CSFB opinion, and reviewed with the Ascend board of directors in a meeting held
on January 12, 1999. Certain of the summaries of those financial analyses
include information presented in tabular format. In order to understand fully
the material financial analyses used by CSFB, the tables should be read together
with the text of each summary. The tables alone do not constitute a complete
description of the material financial analyses.
HISTORICAL STOCK PRICE ANALYSIS. CSFB analyzed the prices at which Ascend
common stock traded since Ascend's initial public offering on May 13, 1994
through January 8, 1999. CSFB noted that the all-time high price for Ascend
common stock was $78.75 on January 20, 1997, and the all-time split-adjusted low
price for Ascend common stock was $1.45 on June 24, 1994. CSFB noted that 81.0%
of shares of Ascend common stock traded from January 2, 1998 through January 8,
1999 were traded for a price below $50.00 per share and 96.8% were traded for a
price below $65.00 per share.
COMPARATIVE STOCK PRICE PERFORMANCE. As part of its analyses, CSFB
reviewed the recent stock price performance of Ascend and compared such
performance with that of other companies involved in the communications
equipment industry including 3Com Corporation, Cisco Systems, Inc., Lucent and
an equal-weighted telecommunications equipment index comprised of Alcatel,
Ericsson LM, Nokia OYJ and Northern Telecom Ltd. CSFB noted that from January 2,
1998 through January 8, 1999, the market price of Ascend common stock increased
176.1%, compared with an increase of 188.8% for Lucent common stock, 175.6% for
the common stock of Cisco Systems, Inc., 92.4% for the index of
telecommunications equipment companies, 48.2% for the Nasdaq composite index and
28.8% for the common stock of 3Com Corporation. CSFB noted that over the same
period, Ascend common stock underperformed relative to Lucent common stock and
outperformed the common stock of Cisco Systems, Inc., the index of
telecommunications equipment companies, the Nasdaq composite index and the
common stock of 3Com Corporation.
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PEER GROUP COMPARISON. CSFB compared certain information relating to
Ascend and Lucent with several groups of companies in the communications
equipment industry including the following companies:
- The "broad local area network companies" which include Cisco Systems,
Inc., 3Com Corporation, Fore Systems, Inc., Cabletron Systems, Inc. and
Xylan Corporation
- The "major telecom switch vendors" which include Nokia OYJ, Ericsson LM,
Siemens AG, Northern Telecom Ltd. and Alcatel
- The "mid-tier telecom equipment vendors" which include Tellabs, Inc., ADC
Telecommunications, Inc., RELTEC Corporation, Ciena Corporation and
Advanced Fibre Communications, Inc.
Such information included, among other things, equity market capitalization,
stock price as a multiple of earnings per share and aggregate market
capitalization as a multiple of revenues. CSFB compared the multiples for Ascend
and Lucent with the median multiples for each group of companies listed above.
The multiples are based on a compilation of publicly available information and
consensus forecasts by securities research analysts. In particular, such
comparison showed:
<TABLE>
<CAPTION>
MULTIPLE OF SELECTED VALUATION METRICS AS OF JANUARY 8, 1999
-------------------------------------------------------------
BROAD MAJOR
LOCAL AREA TELECOM MID-TIER TELECOM
NETWORK SWITCH EQUIPMENT
VALUATION METRIC ASCEND LUCENT COMPANIES VENDORS VENDORS
- ---------------- ------ ------ ---------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Aggregate value/
projected calendar 1998 revenue....... 10.0x 5.0x 2.7x 1.9x 2.6x
Aggregate value/
projected calendar 1999 revenue....... 6.5x 4.3x 2.2x 1.7x 2.3x
Share price/
projected calendar 1998 earnings per
share............................... 60.5x 62.3x 42.7x 30.2x 35.5x
Share price/
projected calendar 1999 earnings per
share............................... 43.3x 50.5x 29.0x 25.6x 29.0x
Share price/projected calendar
1999 earnings per share/first call
consensus
estimated long-term growth rate....... 1.44x 2.53x 1.02x 1.64x 1.01x
</TABLE>
HISTORICAL TRADING MULTIPLE ANALYSIS. CSFB noted that, during the period
from May 1, 1996 through January 8, 1999, Ascend traded at an average multiple
of 37.1 times share price to next twelve months earnings per share, while Lucent
traded at an average multiple of 31.3 times share price to next twelve months
earnings per share and Cisco Systems, Inc. traded at an average multiple of 33.3
times share price to next twelve months earnings per share. CSFB further noted
that, during the period from May 1, 1996 through January 8, 1999, Ascend traded
at an average multiple of 0.99 times share price to next twelve months earnings
per share divided by the First Call consensus estimated long-term earnings per
share growth rate, while Lucent traded at an average multiple of 1.63 times
share price to next twelve months earnings per share divided by the First Call
consensus estimated long-term earnings per share growth rate and Cisco Systems,
Inc. traded at an average multiple of 1.03 times share price to next twelve
months earnings per share divided by the First Call consensus estimated
long-term earnings per share growth rate.
DISCOUNTED CASH FLOW ANALYSIS. CSFB analyzed the present value of future
cash flows potentially realizable from the continued operation of Ascend based
on estimated Ascend operating results through the end of fiscal year 2004. CSFB
computed the present value of the free cash flows
24
<PAGE> 32
of Ascend for the five fiscal years from 1999 through 2003 by applying a range
of discount rates of 15.0% to 17.0% per year. CSFB also computed the present
value of the terminal value of Ascend at the end of fiscal year 2003 by applying
a range of net income multiples of 25.0 to 30.0 times Ascend's estimated fiscal
year 2004 net income and applying to these terminal values a range of discount
rates of 15.0% to 17.0% per year. The range of terminal net income multiples was
determined by analyzing the current and historic next twelve months net income
multiples of Ascend and other companies in the communications equipment industry
and factoring in the expected growth prospects of Ascend at the end of fiscal
2003. The discounted cash flow analysis implied a range of values per share of
Ascend common stock on a fully diluted basis of $65.14 to $81.23.
CONTRIBUTION ANALYSIS. CSFB analyzed the Ascend stockholder pro forma
ownership level implied by the pro forma contribution by each of Ascend and
Lucent to the revenue, gross profit, operating income and net income of the
combined company, adjusted to reflect the companies' respective net debt
balances, if the merger were to be completed. The analysis was based on publicly
available securities analyst forecasts for each of Ascend and Lucent for their
respective fiscal years 1998 and 1999. Ascend's fiscal year ends on December 31
and Lucent's fiscal year ends on September 30.
<TABLE>
<CAPTION>
IMPLIED ASCEND STOCKHOLDER PRO
FORMA OWNERSHIP LEVEL
------------------------------------
OPERATING METRIC FISCAL YEAR 1998 FISCAL YEAR 1999
- ---------------- ---------------- ----------------
<S> <C> <C>
Revenues.................................................... 5.3% 6.8%
Gross profit................................................ 6.9 8.7
Operating income............................................ 9.3 11.5
Net income.................................................. 9.9 12.0
</TABLE>
CSFB noted that the median of these pro forma implied ownership levels by Ascend
stockholders was 9.0% which represented an exchange ratio of 0.570. These
figures compared to the pro forma fully diluted ownership of the Ascend
stockholders in the combined company of 12.8% based on the 0.825 exchange ratio,
assuming the merger were to be completed.
SELECTED PRECEDENT TRANSACTIONS. CSFB reviewed the publicly available
financial terms of eight precedent announced transactions in the communications
equipment industry:
- Northern Telecom Ltd./Bay Networks, Inc.
- Alcatel/DSC Communications Corporation
- Tellabs, Inc./Ciena Corporation -- announced but subsequently terminated
- Lucent/Yurie Systems, Inc.
- Lucent/Livingston Enterprises, Inc.
- Ascend/Cascade Communications Corp.
- 3Com Corporation/U.S. Robotics Corporation
- Cisco Systems, Inc./StrataCom, Inc.
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<PAGE> 33
The following table sets forth information concerning the median multiples
of the selected financial metrics paid in these precedent transactions and the
multiple of the same financial metrics for Ascend implied by the 0.825 exchange
ratio:
<TABLE>
<CAPTION>
MEDIAN MULTIPLE
PAID IN MULTIPLE IMPLIED BY 0.825
METRIC PRECEDENT TRANSACTIONS EXCHANGE RATIO
- ------ ---------------------- -------------------------
<S> <C> <C>
Aggregate transaction value/
latest twelve months revenue........................ 10.0x 15.2x
Aggregate transaction value/
projected next twelve months revenue................ 6.3x 9.9x
Share price/latest twelve months earnings per
share............................................. 56.2x 80.6x
Share price/next twelve months earnings per share... 50.3x 57.3x
</TABLE>
CSFB also noted that for these precedent transactions, the median premium paid
to the one-day prior and thirty-day prior market price of the target company was
28.3% and 36.2%, respectively. CSFB compared these premiums to the premiums
implied by the 0.825 exchange ratio of 33.1% and 62.5% to the one-day prior and
thirty-day prior market price of Ascend, respectively, as of January 8, 1999.
PREMIUM ANALYSIS. CSFB reviewed the following three groups of precedent
combination transactions, none of which was deemed directly comparable to the
merger:
- The "communications equipment transactions" which include 15
stock-for-stock transactions involving companies in the communications
equipment sector announced since July 5, 1994
- The "over $500 million transactions" which include 39 stock-for-stock
transactions over $500 million in size in the technology sector announced
since July 5, 1994
- The "technology transactions" which include 112 stock-for-stock
transactions in the technology sector announced since July 24, 1987.
Such analyses compared the premium of the transaction exchange ratios over the
average of the ratios of the closing stock prices of the companies involved in
each of these transactions over various periods ending the day preceding the
public announcement of these transactions. CSFB also calculated the
Ascend/Lucent exchange ratio implied by applying the median of the premiums
observed in each of these groups of transactions to the average of the ratios of
the daily closing stock prices of Ascend common stock to Lucent common stock for
the respective comparable periods ending on January 8, 1999. CSFB also observed
the premiums that the 0.825 exchange ratio represented over the average of the
ratios of the daily closing stock prices of Ascend common stock to Lucent common
stock for the respective comparable periods ending on January 8, 1999. In
particular such analysis showed:
<TABLE>
<CAPTION>
MEDIAN PERCENTAGE PREMIUM
OVER AVERAGE HISTORICAL IMPLIED ASCEND/LUCENT
PERIOD PRECEDING EXCHANGE RATIOS IN EXCHANGE RATIO BASED
ANNOUNCEMENT* SELECTED TRANSACTIONS ON MEDIAN PREMIUMS
- ---------------- ------------------------- -----------------------
<S> <C> <C>
Communications Equipment Transactions:
One year........................................ (3.6)% 0.588x
90 trading days................................. 17.9 0.716
60 trading days................................. 30.6 0.795
30 trading days................................. 39.9 0.869
10 trading days................................. 34.9 0.809
1 trading day................................... 28.1 0.794
</TABLE>
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<PAGE> 34
<TABLE>
<CAPTION>
MEDIAN PERCENTAGE PREMIUM
OVER AVERAGE HISTORICAL IMPLIED ASCEND/LUCENT
PERIOD PRECEDING EXCHANGE RATIOS IN EXCHANGE RATIO BASED
ANNOUNCEMENT* SELECTED TRANSACTIONS ON MEDIAN PREMIUMS
- ---------------- ------------------------- -----------------------
<S> <C> <C>
Over $500 Million Transactions:
One year........................................ 19.3% 0.728x
90 trading days................................. 28.7 0.782
60 trading days................................. 37.2 0.835
30 trading days................................. 38.7 0.861
10 trading days................................. 33.6 0.801
1 trading day................................... 28.3 0.795
Technology Transactions:
One year........................................ 15.5% 0.705x
90 trading days................................. 27.7 0.776
60 trading days................................. 31.8 0.802
30 trading days................................. 33.2 0.827
10 trading days................................. 31.0 0.786
1 trading day................................... 26.5 0.784
</TABLE>
- ---------------
* For the Ascend/Lucent merger, represents periods prior to January 8, 1999.
CSFB observed that the 0.825 exchange ratio represented premiums of
approximately 35.2%, 35.8%, 35.6%, 32.8%, 37.5% and 33.1% over the average of
the ratios of the daily closing stock prices of Ascend common stock to Lucent
common stock for the respective comparable periods ending on January 8, 1999.
HISTORICAL EXCHANGE RATIO ANALYSIS. CSFB reviewed the historical trading
prices for Ascend common stock and Lucent common stock separately, and in
comparison to each other. CSFB also reviewed the ratios of the daily closing
stock prices of Ascend common stock to Lucent common stock for each day over
various periods, starting as far back as January 1, 1998 and ending on January
8, 1999, and computed the premiums represented by the 0.825 exchange ratio over
the average of these ratios. The following table sets forth information
concerning the average of the ratios of the daily closing stock prices of Ascend
common stock to Lucent common stock for the indicated periods, which are
referred to as the historical exchange ratios, as well as the premium that the
exchange ratio of 0.825 represents over such historical exchange ratios.
<TABLE>
<CAPTION>
PERCENTAGE PREMIUM
AVERAGE REPRESENTED BY 0.825
EXCHANGE EXCHANGE RATIO OVER
PERIOD PRECEDING JANUARY 8, 1999 RATIO OVER PERIOD HISTORICAL EXCHANGE RATIOS
- -------------------------------- ----------------- --------------------------
<S> <C> <C>
January 6, 1998 - January 8, 1999...................... 0.610x 35.2%
180 trading days....................................... 0.596 38.5
90 trading days........................................ 0.607 35.8
60 trading days........................................ 0.608 35.6
30 trading days........................................ 0.621 32.8
10 trading days........................................ 0.600 37.5
January 8, 1999........................................ 0.620 33.1
</TABLE>
PRO FORMA ANALYSIS OF THE MERGER. CSFB analyzed certain pro forma effects
of the merger on the earnings and capitalization of Lucent. Such analysis was
based on First Call consensus earnings estimates for Ascend and Lucent. Such
analysis was also based on the 0.825 exchange ratio and assumed that the merger
would be treated as a pooling of interests business combination for accounting
purposes before taking into account any one-time restructuring charges. The
analysis was
27
<PAGE> 35
performed both excluding and including estimates of potential synergies which
could result from the merger as prepared jointly by CSFB and Ascend management.
The following table sets forth the earnings per share accretion/(dilution) to
Lucent stockholders under these assumptions for Lucent's fiscal years ended
September 30, 1999, September 30, 2000 and for the quarters ended June 30, 1999,
September 30, 1999 and December 31, 1999.
<TABLE>
<CAPTION>
EARNINGS PER SHARE ACCRETION/(DILUTION) TO LUCENT STOCKHOLDERS
FOR VARIOUS PERIODS
----------------------------------------------------------------
LUCENT FISCAL
YEAR ENDED
1999 QUARTER ENDED SEPTEMBER 30,
-------------------------------------------- ----------------
JUNE 30 SEPTEMBER 30 DECEMBER 31 1999 2000
--------- -------------- ------------- ------ ------
<S> <C> <C> <C> <C> <C>
Excluding potential synergies.............. 2.2% 0.3% (6.0)% (1.7)% (0.5)%
Including potential synergies.............. 4.8% 8.3% (2.6)% 0.8% 6.0%
</TABLE>
POTENTIAL FUTURE TRADING VALUE. CSFB computed the equivalent per share
values for Ascend both on a stand-alone basis and assuming the merger were to be
completed. Such analysis was based upon projected Ascend and Lucent calendar
year 2001 earnings per share utilizing the First Call consensus earnings per
share projection for the latest year available increased based upon the First
Call consensus estimated long-term earnings per share growth rate. The analysis
was also based on a range of multiples of 25.0 times to 50.5 times one-year
forward earnings. Equivalent future share prices were then computed for Ascend
two years from the date of the analysis based on calendar year 2001 earnings per
share estimates. Based on the stand-alone estimates for Ascend's calendar year
2001 earnings per share, this analysis resulted in a stand-alone value per share
to holders of Ascend common stock two years from the date of the analysis
ranging from $68.90 to $139.31. Based on the pro forma calendar year 2001
earnings per share for the combined company assuming the merger were to be
completed without taking into account any potential synergies from the merger,
this analysis resulted in a value per share to holders of Ascend common stock
two years from the date of the analysis ranging from $68.32 to $138.14. Based on
the pro forma calendar year 2001 earnings per share for the combined company
assuming the merger were to be completed and taking into account potential
synergies from the merger, this analysis resulted in a value per share to
holders of Ascend common stock two years from the date of the analysis ranging
from $71.60 to $144.76.
As described above, CSFB's opinion and presentation to the Ascend board of
directors was one of many factors taken into consideration by the Ascend board
of directors in making its determination to approve the merger agreement and the
merger. Consequently, the analyses described above should not be viewed as
determinative of the opinion of the Ascend board of directors or the management
of Ascend with respect to the value of Ascend or Lucent or whether the Ascend
board of directors would have been willing to agree to a different exchange
ratio.
CSFB is an internationally recognized investment banking and advisory firm.
CSFB, as part of its investment banking business, is continuously engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In the ordinary course of its
business, CSFB and its affiliates may actively trade the securities and loans of
Ascend and Lucent for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities
and loans.
Ascend has agreed to pay CSFB a fee for its financial advisory services in
connection with the merger, including, among other things, rendering the CSFB
opinion and making the presentation referred to above. Pursuant to a letter
agreement between Ascend and CSFB dated December 15,
28
<PAGE> 36
1998, Ascend has agreed to pay CSFB certain fees, which will not exceed $40
million, consisting of the following:
(1) an advisory fee of $100,000 to $200,000 intended to compensate CSFB for
its time and effort expended in the event that a transaction including
the merger is not completed
(2) an opinion fee of $5,000,000 upon delivery of a fairness opinion to the
Ascend board of directors
(3) in the event the merger is completed, a transaction fee of 0.24% of the
aggregate value of the merger, less any fee paid under clause (2).
The aggregate value of the merger is calculated based upon the closing share
price of Lucent common stock over the ten trading days up to and including the
day preceding the announcement of the merger. Based upon the closing share price
of Lucent over the ten trading days up to and including January 12, 1999, the
fee payable to CSFB would be $40 million. In addition, Ascend has agreed to
reimburse CSFB for its out-of-pocket expenses incurred in connection with its
engagement, including fees and expenses of its legal counsel, and to indemnify
CSFB and certain related persons against certain liabilities and expenses
arising out of or in conjunction with its rendering of services under its
engagement, including liabilities arising under the federal securities laws.
INTERESTS OF ASCEND DIRECTORS AND MANAGEMENT IN THE MERGER
In considering the recommendation of the Ascend board of directors in favor
of the merger, stockholders of Ascend should be aware that certain members of
the Ascend board of directors and executive officers of Ascend have interests in
the merger that are different from, or in addition to, the interests of
stockholders of Ascend. Such interests relate to or arise from, among other
things, the terms of the merger agreement providing for:
- all non-employee directors and certain current executive officers of
Ascend immediately prior to the effective time of the merger to remain as
directors and employees of Ascend following completion of the merger
until January 31, 2000
- the continued indemnification of current directors and officers of
Ascend.
All such additional interests are described below, to the extent material, and
except as described below such persons have, to the knowledge of Lucent and
Ascend, no material interest in the merger apart from those of stockholders
generally. The Ascend board of directors was aware of, and considered the
interests of, their directors and executive officers in approving the merger
agreement and the merger.
ASCEND BOARD OF DIRECTORS. From the effective time of the merger until
January 31, 2000, the Ascend board of directors will consist of those
individuals who were non-employee directors of Ascend immediately prior to the
effective time of the merger, together with such other representatives as Lucent
may from time to time appoint.
ASCEND EXECUTIVE OFFICERS. From the effective time of the merger until
January 31, 2000, Ascend will retain as employees certain current executive
officers of Ascend.
INDEMNIFICATION AND INSURANCE. The merger agreement provides that all
rights of indemnification and exculpation from liabilities existing in favor of
the current and former directors or officers of Ascend and its subsidiaries as
provided in their respective certificates of incorporation and by-laws and
existing indemnification agreements of Ascend shall be assumed by the surviving
29
<PAGE> 37
corporation in the merger, and will continue in full force and effect in
accordance with their terms. The merger agreement provides that for six years
after the effective time of the merger, Lucent will maintain directors' and
officers' liability insurance for acts or omissions occurring prior to the
effective time of the merger covering those persons who were, as of the date of
the merger agreement, covered by Ascend's directors' and officers' liability
insurance policy, on terms no less favorable than those in effect on the date of
the merger agreement.
CHANGE IN CONTROL TERMINATION AGREEMENTS. Ascend has entered into change
in control agreements with a number of its corporate vice presidents. The change
in control agreements generally provide that if, during the period commencing
thirty days prior to the date on which the merger agreement was announced and
ending twelve months after a "change in control" of Ascend occurs, the
employment of a covered executive is involuntarily terminated without cause or
constructively terminated, the covered executive will receive a severance
payment generally equal to 12 or 18 months' base salary plus his or her annual
bonus for the year in which the termination occurs, the continuation of medical
insurance benefits for 12 or 18 months and certain outplacement benefits. All
options to acquire shares of Ascend common stock held by the covered executive
will receive an additional 12 months of vesting credit upon the occurrence of
the change in control. Each covered executive will receive an additional payment
equal to certain excise taxes imposed on such covered executive.
Stock options issued to members of the Ascend board of directors under
Ascend's 1994 Outside Directors Stock Option Plan will become fully vested and
exercisable prior to the merger.
ACCOUNTING TREATMENT
Completion of the merger is conditioned upon its being accounted for on a
pooling of interests accounting basis and the receipt by Lucent and Ascend of
letters from PricewaterhouseCoopers LLP and Ernst & Young LLP regarding those
firms' concurrence with Lucent management's and Ascend management's conclusions,
respectively, that pooling of interests accounting is appropriate for the merger
under Accounting Principles Board Opinion No. 16 if completed in accordance with
the merger agreement. See "The Merger Agreement and Stock Option
Agreement -- The Merger Agreement -- Conditions to the Completion of the Merger"
and "-- Termination." Under this accounting treatment, as of the effective time
of the merger, the assets and liabilities of Ascend would be added to those of
Lucent at their recorded book values and the stockholders' equity accounts of
Lucent and Ascend would be combined on Lucent's consolidated balance sheet. On a
pooling of interests accounting basis, Lucent will retroactively restate its
financial statements issued after completion of the merger to reflect the
consolidated combined financial position and results of operations of Lucent and
Ascend as if the merger had taken place as of the earliest period covered by
such financial statements.
FORM OF THE MERGER
Subject to the terms and conditions of the merger agreement and in
accordance with Delaware law, at the effective time of the merger, Dasher Merger
Inc., a wholly owned subsidiary of Lucent and a party to the merger agreement,
will merge with and into Ascend. Ascend will survive the merger as a wholly
owned Delaware subsidiary of Lucent, and will continue under the name "Ascend
Communications, Inc."
30
<PAGE> 38
MERGER CONSIDERATION
At the effective time of the merger, each outstanding share of Ascend
common stock will be converted into the right to receive 1.65 shares of Lucent
common stock, except that treasury stock and stock held by Lucent and Dasher
Merger Inc. will be canceled. Stockholders will receive cash for any fractional
shares which they would otherwise receive in the merger. As of the effective
time of the merger, all shares of Ascend common stock will no longer be
outstanding and will automatically be canceled and will cease to exist and each
holder of a certificate representing any shares of Ascend common stock will
cease to have any rights as a stockholder except the right to receive Lucent
common stock in the merger. The exchange ratio of 0.825 was determined through
arm's-length negotiations between Lucent and Ascend. The exchange ratio has been
adjusted to 1.65 from the 0.825 exchange ratio reflected in the merger agreement
to account for Lucent's two-for-one stock split effective on April 1, 1999.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
The conversion of Ascend common stock into the right to receive Lucent
common stock will occur automatically at the effective time of the merger. As
soon as practicable after the effective time of the merger, The Bank of New
York, the exchange agent, will send a transmittal letter to each former Ascend
stockholder. The transmittal letter will contain instructions for obtaining
shares of Lucent common stock in exchange for shares of Ascend common stock.
ASCEND STOCKHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.
After the effective time of the merger, each certificate that previously
represented shares of Ascend common stock will represent only the right to
receive the Lucent common stock into which such shares were converted in the
merger and the right to receive cash for any fractional shares of Lucent common
stock as described below.
Until holders of certificates previously representing Ascend common stock
have surrendered those certificates to the exchange agent for exchange, holders
will not receive dividends or distributions on the Lucent common stock into
which such shares have been converted with a record date after the effective
time of the merger, and will not receive cash for any fractional shares of
Lucent common stock. When holders surrender such certificates, they will receive
any unpaid dividends and any cash for fractional shares of Lucent common stock
without interest.
In the event of a transfer of ownership of Ascend common stock which is not
registered in the records of Ascend's transfer agent, a certificate representing
the proper number of shares of Lucent common stock may be issued to a person
other than the person in whose name the certificate so surrendered is registered
if:
- such certificate is properly endorsed or otherwise is in proper form for
transfer
- the person requesting such issuance will (1) pay any transfer or other
taxes resulting from the issuance of shares of Lucent common stock to a
person other than the registered holder of such certificate or (2)
establish to Lucent that such tax has been paid or is not applicable.
All shares of Lucent common stock issued upon conversion of shares of
Ascend common stock, including any cash paid instead of any fractional shares of
Lucent common stock, will be issued in full satisfaction of all rights relating
to such shares of Ascend common stock. Lucent will remain obligated, however, to
pay any dividends or make any other distributions declared or made by Ascend
with a record date prior to the effective time of the merger and which remain
unpaid at the effective time of the merger.
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<PAGE> 39
No fractional shares of Lucent common stock will be issued to any Ascend
stockholder upon surrender of certificates previously representing Ascend common
stock. Promptly after the effective time of the merger, the exchange agent will
determine the excess of (1) the number of whole shares of Lucent common stock
delivered to the exchange agent by Lucent over (2) the aggregate number of whole
shares of Lucent common stock to be distributed to former holders of Ascend
common stock. The exchange agent will sell such excess shares on the New York
Stock Exchange and will hold the proceeds in trust for the former holders of
Ascend common stock. The exchange agent shall determine the portion of such
proceeds to which each former holder of Ascend common stock is entitled, if any,
by multiplying (1) the amount of net aggregate proceeds held in trust by (2) a
fraction, the numerator of which is the amount of the fractional share interest
to which such holder would otherwise be entitled and the denominator of which is
the aggregate amount of fractional share interests to which all former holders
of Ascend common stock are entitled.
As an alternative to the issuance and sale of excess shares described
above, Lucent may elect to pay each such stockholder an amount in cash equal to
the product obtained by multiplying (1) the fractional share interest to which
such holder would otherwise be entitled by (2) the closing price for a share of
Lucent common stock on the New York Stock Exchange Composite Transaction Tape on
the date on which the merger is completed.
EFFECTIVE TIME OF THE MERGER
The merger will become effective upon the filing of the certificate of
merger with the Delaware Secretary of State or such later time as is agreed upon
by Lucent and Ascend and specified in the certificate of merger. The filing of
the certificate of merger will occur as soon as practicable, but no later than
the second business day, after satisfaction or waiver of the conditions to the
completion of the merger described in the merger agreement unless another date
is agreed to in writing by Lucent and Ascend.
STOCK EXCHANGE LISTING OF LUCENT COMMON STOCK
It is a condition to the completion of the merger that Lucent common stock
issuable to Ascend stockholders in the merger be approved for listing on the New
York Stock Exchange, subject to official notice of issuance.
DELISTING AND DEREGISTRATION OF ASCEND COMMON STOCK
If the merger is completed, Ascend common stock will be delisted from The
Nasdaq National Market and will be deregistered under the Securities Exchange
Act of 1934.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following general discussion summarizes the opinion of Skadden, Arps,
Slate, Meagher & Flom LLP, special counsel to Ascend, as to the anticipated
material United States federal income tax consequences of the merger to holders
of Ascend common stock who exchange such stock for Lucent common stock in the
merger, which opinion is filed as an exhibit to the registration statement of
which this proxy statement/prospectus is a part. This discussion addresses only
such stockholders who hold their Ascend common stock as a capital asset, and
does not address all of the United States federal income tax consequences that
may be relevant to particular stockholders in light of their individual
circumstances or to stockholders who are subject to special rules, such as
financial institutions, tax-exempt organizations, insurance companies, dealers
in securities or foreign currencies, foreign holders, persons who hold such
shares as a hedge against currency risk,
32
<PAGE> 40
or as part of a constructive sale or conversion transaction, or holders who
acquired their shares upon the exercise of employee stock options or otherwise
as compensation. The following discussion is not binding on the Internal Revenue
Service. It is based upon the Internal Revenue Code, laws, regulations, rulings
and decisions in effect as of the date of this proxy statement/prospectus, all
of which are subject to change, possibly with retroactive effect. Tax
consequences under state, local and foreign laws are not addressed.
HOLDERS OF ASCEND COMMON STOCK ARE STRONGLY URGED TO CONSULT THEIR TAX
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING
THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX LAWS IN THEIR PARTICULAR CIRCUMSTANCES.
No ruling has been, or will be, sought from the Internal Revenue Service as
to the United States federal income tax consequences of the merger. It is a
condition to the completion of the merger that Ascend receive an opinion from
Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to Ascend, and Lucent
receive an opinion from Cravath, Swaine & Moore, counsel to Lucent, in each case
stating that the merger will qualify for United States federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. Such opinions will be based on customary assumptions and
representations made by Ascend, Dasher Merger Inc. and Lucent. An opinion of
counsel represents counsel's best legal judgment and is not binding on the
Internal Revenue Service or any court.
The merger will qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code. Holders of Ascend common stock who exchange
their Ascend common stock for Lucent common stock in the merger will not
recognize gain or loss for United States federal income tax purposes, except
with respect to cash, if any, they receive instead of a fractional share of
Lucent common stock. Each holder's aggregate tax basis in the Lucent common
stock received in the merger will be the same as his or her aggregate tax basis
in the Ascend common stock surrendered in the merger, decreased by the amount of
any tax basis allocable to any fractional share interest for which cash is
received. The holding period of the Lucent common stock received in the merger
by a holder of Ascend common stock will include the holding period of Ascend
common stock that he or she surrendered in the merger.
A holder of Ascend common stock who receives cash instead of a fractional
share of Lucent common stock will recognize gain or loss equal to the difference
between the amount of cash received and his or her tax basis in the Lucent
common stock that is allocable to the fractional share. That gain or loss
generally will constitute capital gain or loss. In the case of an individual
stockholder, any such capital gain will be subject to a maximum United States
federal income tax rate of 20% if the individual has held his or her Ascend
common stock for more than 12 months at the effective time of the merger. The
deductibility of capital losses is subject to limitations for both individuals
and corporations.
REGULATORY MATTERS
UNITED STATES ANTITRUST. Under the Hart-Scott-Rodino Act and related
rules, certain transactions, including the merger, may not be completed unless
certain waiting period requirements have been satisfied. On February 4, 1999,
Lucent and Ascend each filed a Notification and Report Form with the Antitrust
Division of the Department of Justice and the Federal Trade Commission. On March
5, 1999, the Antitrust Division issued requests for additional information and
other documentary material to Lucent and Ascend relating to the merger. Lucent
and Ascend provided additional information and documents to the Antitrust
Division, and on April 12, 1999 the Antitrust Division granted early termination
of the waiting period. At any time before or after the effective time of the
merger, the Antitrust Division, the Federal Trade Commission or others could
take
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action under the antitrust laws, including seeking to prevent the merger, to
rescind the merger or to conditionally approve the merger upon the divestiture
of substantial assets of Lucent or Ascend. There can be no assurance that a
challenge to the merger on antitrust grounds will not be made or, if such a
challenge is made, that it would not be successful.
EUROPEAN UNION. Lucent and Ascend each conducts business in member states
of the European Union. European Union Council Regulation 4064/89 requires
notification to and approval by the European Commission of certain mergers or
acquisitions involving parties with aggregate worldwide sales and individual
European Union sales exceeding certain thresholds before such mergers or
acquisitions are implemented. Ascend and Lucent have sales that exceed these
thresholds. A single notification to the European Commission eliminates any need
to submit notifications of the merger to national competition authorities in
member states within the European Economic Area. Lucent and Ascend notified the
European Commission of the merger on March 1, 1999. Additional filings may be
necessary in countries outside the European Economic Area.
The European Commission must review the merger to determine whether or not
it is compatible with the common market and, accordingly, whether or not to
permit it to proceed. A merger or acquisition which does not create or
strengthen a dominant position as a result of which effective competition would
be significantly impeded in the common market or in a substantial part of the
common market is considered to be compatible with the common market, and must be
allowed to proceed. The European Commission has one month following submission
of a complete notification to examine whether the merger raises serious doubts
with regard to its compatibility with the common market. If within this
one-month period the European Commission decides that there are no serious
doubts, or if it fails to reach a decision, the merger is deemed approved. On
April 6, 1999, the European Commission notified Lucent and Ascend that the
merger was compatible with the common market.
GENERAL. It is possible that any of the governmental entities with which
filings are made may seek, as conditions for granting approval of the merger,
various regulatory concessions. There can be no assurance that:
- Lucent or Ascend will be able to satisfy or comply with such conditions
- compliance or non-compliance will not have adverse consequences for
Lucent after completion of the merger
- the required regulatory approvals will be obtained within the time frame
contemplated by Lucent and Ascend and referred to in this proxy
statement/prospectus or on terms that will be satisfactory to Lucent and
Ascend.
See "The Merger Agreement and Stock Option Agreement -- The Merger
Agreement -- Conditions to the Completion of the Merger."
LITIGATION
On January 13, 1999, four purported stockholder class action suits were
filed against Ascend and the members of the Ascend board of directors and, in
one suit, Lucent in the Delaware Court of Chancery. These complaints allege,
among other things, that the defendants have breached their fiduciary duties to
Ascend stockholders by failing to maximize stockholder value. The complaints
seek, among other things, an order enjoining completion of the merger. Ascend
and, to the extent it is a defendant, Lucent believe that the complaints are
without merit and plan to vigorously defend against such complaints.
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APPRAISAL RIGHTS
Under Delaware corporate law, holders of Ascend common stock are not
entitled to appraisal rights in connection with the merger because, on the
record date, Ascend common stock was designated and quoted for trading on The
Nasdaq National Market and will be converted into shares of Lucent common stock,
which at the effective time of the merger will be listed on the New York Stock
Exchange.
CONTINUATION OF ASCEND EMPLOYEE BENEFITS
Lucent has agreed that, from the effective time of the merger until the
second anniversary of the effective time of the merger, it will provide, or
cause to be provided, benefit plans, programs and arrangements to employees of
Ascend that are substantially equivalent in the aggregate to those provided to
employees of Ascend as of January 12, 1999, except that Ascend employees will be
eligible for option grants on the same basis as similarly situated employees of
Lucent. For the first year after the effective time of the merger, Lucent has
agreed to provide severance benefits to employees of Ascend that are no less
favorable to such employees than those provided by Ascend as of January 12,
1999.
Lucent has agreed that:
- continuing employees of Ascend will be credited with their service with
Ascend and its affiliates for purposes of participation, vesting and
entitlement to benefits in any employee benefits plans, programs or
arrangements in which they subsequently participate after the effective
time of the merger, but not for accrual of pension benefits and not to
the extent such recognition would result in a duplication of benefits
- subsidiaries of Lucent will assume and honor in accordance with their
terms all employment, severance and other compensation agreements and
arrangements with employees, directors and officers of Ascend and its
affiliates.
EFFECT ON AWARDS OUTSTANDING UNDER ASCEND STOCK PLANS; WARRANTS
Under the merger agreement, at the effective time of the merger, Lucent
will assume each stock option plan of Ascend and all outstanding equity-based
awards. Each option to acquire shares of Ascend common stock under such plans
will be converted into an option to acquire Lucent common stock on the same
terms and conditions. The number of shares of Lucent common stock to be subject
to any such option will be equal to the number of shares of Ascend common stock
subject to such Ascend option multiplied by the 1.65 exchange ratio and rounded
down to the nearest whole share. The exercise price per share of Lucent common
stock under any such option will be equal to the aggregate exercise price for
the shares of Ascend common stock subject to such Ascend option divided by the
total number of shares of Lucent common stock to be subject to such option. As
of January 4, 1999, the number of shares of Ascend common stock reserved for
issuance under such plans was approximately 74 million.
Completion of the merger will result in a "transfer of control" under such
plans. As a result, (1) options to acquire Ascend common stock granted to
corporate vice presidents who are parties to change in control agreements with
Ascend will have vesting accelerated by one year upon completion of the merger
and (2) options to acquire Ascend common stock granted to members of the Ascend
board of directors under Ascend's 1994 Outside Directors Stock Option Plan will
become fully vested prior to the effective time of the merger. Except as
described in the preceding sentences, the terms of the options to acquire shares
of Lucent common stock will be the same as
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the terms of the options to acquire shares of Ascend common stock. Ascend's 1994
Employee Stock Purchase Plan will continue in effect until approximately two
weeks before the effective date of the merger. No further offering periods will
be started after that time.
Each warrant to purchase Ascend common stock will, at the effective time of
the merger, be converted, subject to adjustment in certain circumstances, into
the right to receive the number of shares of Lucent common stock, rounded down
to the nearest whole share, equal to the number of shares of Ascend common stock
subject to such warrant immediately prior to the effective time of the merger
multiplied by the 1.65 exchange ratio.
RESALE OF LUCENT COMMON STOCK
Lucent common stock issued in the merger will not be subject to any
restrictions on transfer arising under the Securities Act of 1933, except for
shares issued to any Ascend stockholder who may be deemed to be an "affiliate"
of Ascend or Lucent for purposes of Rule 145 under the Securities Act or for
purposes of qualifying the merger for pooling of interests accounting treatment.
It is expected that each such affiliate will agree not to transfer any Lucent
common stock received in the merger except in compliance with the resale
provisions of Rule 144 or 145 under the Securities Act or as otherwise permitted
under the Securities Act and will make no disposition of any Lucent common stock
received in connection with the merger unless, in the opinion of counsel to
Lucent, the transaction will not have any adverse consequences for Lucent with
respect to the treatment of the merger for tax purposes. In addition, it is
expected that each such affiliate will agree not to make any such disposition
within 30 days prior to the effective time of the merger, and, until after such
time as financial results covering at least 30 days of combined operations of
Lucent and Ascend after the merger have been published. The merger agreement
requires Ascend to use reasonable efforts to cause its affiliates to enter into
such agreements, and Lucent has agreed to use reasonable efforts to cause its
affiliates to comply with the transfer restrictions referred to in the preceding
sentence. This proxy statement/prospectus does not cover resales of Lucent
common stock received by any person upon completion of the merger, and no person
is authorized to make any use of this proxy statement/prospectus in connection
with any such resale.
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THE MERGER AGREEMENT AND STOCK OPTION AGREEMENT
The following description summarizes the material provisions of the merger
agreement and the stock option agreement. Stockholders should read carefully the
merger agreement and the stock option agreement, which are attached as Annexes 1
and 2 to this proxy statement/prospectus.
THE MERGER AGREEMENT
CONDITIONS TO THE COMPLETION OF THE MERGER. Each party's obligation to
effect the merger is subject to the satisfaction or waiver of various conditions
which include, in addition to other customary closing conditions, the following:
- holders of a majority of the voting power of all outstanding shares of
Ascend common stock having adopted the merger agreement
- the waiting period applicable to the merger under the Hart-Scott-Rodino
Act having expired or been terminated
- no judgment, order, statute, law or regulation entered, enacted, enforced
or issued by any court or other governmental entity of competent
jurisdiction or other legal restraint or prohibition being in effect, and
no suit, action or proceeding by any governmental entity being pending
that (1) would prevent the completion of the merger or (2) otherwise
would be reasonably likely to have a material adverse effect, as
described below, on Lucent or Ascend; provided, however, that each of the
parties shall have used its reasonable efforts to prevent the entry of
any such legal restraint or prohibition and to appeal as promptly as
possible any such legal restraint or prohibition that may be entered
- the registration statement on Form S-4, of which this proxy
statement/prospectus forms a part, having become effective under the
Securities Act and not being the subject of any stop order or proceedings
seeking a stop order
- the shares of Lucent common stock issuable to Ascend stockholders in the
merger having been approved for listing on the New York Stock Exchange,
subject to official notice of issuance
- Lucent and Ascend each having received letters dated as of the date on
which the merger is to be completed from PricewaterhouseCoopers LLP and
Ernst & Young LLP regarding those firms' concurrence with Lucent
management's and Ascend management's conclusions, respectively, that
pooling of interests accounting is appropriate for the merger under
Accounting Principles Board Opinion No. 16 if completed in accordance
with the merger agreement.
In addition, each party's obligation to effect the merger is further
subject to the satisfaction or waiver of the following additional conditions:
- the representations and warranties of the other party set forth in the
merger agreement being true and correct as of the date of the merger
agreement and as of the date on which the merger is to be completed as
though made on and as of the date on which the merger is to be completed,
or, if such representations and warranties expressly relate to an earlier
date, then as of such date, except where the failure of such
representations and warranties to be so true and correct, without giving
effect to any included limitation as to "materially" or "material adverse
effect," does not have, and is not reasonably likely to have,
individually or in the aggregate, a material adverse effect on such other
party
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- the other party to the merger agreement having performed in all material
respects all obligations required to be performed by it under the merger
agreement on or prior to the date on which the merger is to be completed
- Ascend having received from Skadden, Arps, Slate, Meagher & Flom LLP,
special counsel to Ascend, and Lucent having received from Cravath,
Swaine & Moore, counsel to Lucent, on the date on which the registration
statement is declared effective by the Securities and Exchange Commission
and on the date on which the merger is to be completed, an opinion in
each case dated as of such respective date and stating that the merger
will qualify for United States federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code. The issuance of such opinions will be conditioned upon the
receipt by such tax counsel of customary representation letters from each
of Ascend, Dasher Merger Inc. and Lucent, in each case, in form and
substance reasonably satisfactory to such tax counsel.
The merger agreement provides that a "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:
- relating to the economy in general
- relating to the industries in which such party operates in general
- arising out of or resulting from actions contemplated by the parties in
connection with, or which is attributable to, the announcement of the
merger agreement and the transactions contemplated by the merger
agreement, including loss of personnel, customers or suppliers or the
delay or cancelation of orders for products
- in the case of Ascend, litigation brought or threatened against Ascend or
any member of the Ascend board of directors concerning the merger
agreement,
provided that a failure by either Lucent or 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 the merger agreement will not in and of
itself constitute a material adverse change or material adverse effect; however,
this proviso will 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.
Ascend can provide no assurance that all of the conditions precedent to the
merger will be satisfied or waived by the party permitted to do so. Ascend
cannot at this point determine whether it would resolicit proxies in the event
that it decides to waive any of the items listed above, including among other
things, the requirement that it receive letters that the merger will qualify for
pooling of interests accounting treatment. This decision would depend upon the
facts and circumstances leading to Ascend's decision to complete the merger and
whether Ascend believes there has been a material change in the terms of the
merger and its effect on Ascend stockholders. In making its determination,
Ascend would consider, among other factors, the reasons for the waiver, the
effect of the waiver on the terms of the merger, whether the requirement being
waived, including the requirement that the merger be treated as pooling of
interests for accounting purposes, was necessary in order to make the deal fair
to the stockholders from a financial point of view, the availability of
alternative transactions and the prospects of Ascend as an independent entity.
If Ascend determines that a waiver of a condition would materially change the
terms of the merger,
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including the expected qualification of the merger as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code, it will resolicit
proxies.
NO SOLICITATION. The merger agreement provides that Ascend will not, nor
will it permit any of its subsidiaries to, nor will it authorize or permit any
of its directors, officers or employees or any financial advisor, attorney,
accountant or other representative retained by it or any of its subsidiaries to,
directly or indirectly through another person:
- 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 takeover proposal, as described below
- participate in any discussions or negotiations regarding any takeover
proposal;
provided, however, that if, at any time prior to the date of the special
meeting, the Ascend board of directors 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 stockholders under
applicable law, Ascend may, in response to a superior proposal, as described
below, which was not solicited by it, subject to providing prior oral and
written notice of its decision to do so to Lucent:
- furnish under a customary confidentiality agreement information about
Ascend and its subsidiaries to any person making a superior proposal
- participate in negotiations regarding such superior proposal.
The merger agreement provides that:
- the term "takeover proposal" means any inquiry, proposal or offer from
any person relating to any acquisition or purchase of a business that
constitutes 15% or more of the net revenues, net income or 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 completed 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
- the term "superior proposal" means any proposal made by a third party to
acquire, for consideration consisting of cash and/or securities, more
than 50% of the combined voting power of the shares of Ascend common
stock or all or substantially all the assets of Ascend, on terms that the
Ascend board of directors 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 Ascend board of directors, is reasonably
capable of being obtained.
Except as expressly permitted by the merger agreement, neither the Ascend
board of directors nor any committee of the board will:
- withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to Lucent, the approval or recommendation by the Ascend
board of directors or such committee of the merger or the merger
agreement
- approve or recommend, or propose publicly to approve or recommend, any
takeover proposal
- cause Ascend to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any takeover
proposal, other than any such agreement entered into concurrently with a
termination as described in the next sentence in order to facilitate such
action.
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Notwithstanding the foregoing, in response to a superior proposal which was not
solicited by Ascend and which did not otherwise result from a breach of the
provisions of the merger agreement described above, the Ascend board of
directors may terminate the merger agreement, but only at a time that is after
the fifth business day following Lucent's receipt of written notice advising
Lucent that the Ascend board of directors is prepared to accept a superior
proposal. Ascend must pay a fee in the amount of $525 million to Lucent upon
such termination. See "-- Termination" and "--Termination Fees."
TERMINATION. The merger agreement may be terminated at any time prior to
the effective time of the merger, whether before or after adoption of the merger
agreement by the stockholders of Ascend:
1. by mutual written consent of Lucent, Dasher Merger Inc. and Ascend
2. by Lucent or Ascend, if the merger has not been completed by
September 30, 1999; provided, however, that this right to terminate
the merger agreement will not be available to a party whose failure
to perform any of its obligations under the merger agreement has
resulted in the failure of the merger to be completed by that date
3. by Lucent or Ascend, if the Ascend stockholders have not adopted the
merger agreement at an Ascend stockholders' meeting
4. by Lucent or Ascend, if any legal restraint or prohibition is in
effect and has become final and nonappealable (1) preventing the
completion of the merger or (2) which otherwise is reasonably likely
to have a material adverse effect on Ascend or Lucent, provided that
the party seeking to exercise this right to terminate the merger
agreement has used reasonable efforts to prevent the entry of and to
remove such legal restraint or prohibition
5. by Lucent or Ascend, if the other party has breached or failed to
perform in any material respect any of its representations,
warranties, covenants or other agreements contained in the merger
agreement, which breach or failure to perform would give rise to the
failure of a condition to the merger and cannot be cured within 30
calendar days
6. by Ascend, at any time prior to the date of the special meeting, in
response to a superior proposal which was not solicited by Ascend and
which did not otherwise result from a breach of the provisions of the
merger agreement described above under "-- No Solicitation," if
Ascend has complied with certain notice requirements
7. by Lucent, if Ascend or any of its directors or officers has taken
any of the actions, unless immaterial, that would be prohibited by
the covenant described in "-- No Solicitation" above.
TERMINATION FEES. If the merger agreement is terminated:
1. by Lucent or Ascend as described above in the second or third
paragraph under "-- Termination" at a time when a takeover proposal
has been made directly to Ascend stockholders generally or has
otherwise become publicly known or any person has publicly announced
an intention to make a takeover proposal
2. by Ascend as described above in the sixth paragraph under
"-- Termination"
3. by Lucent as described above in the seventh paragraph under
"-- Termination,"
then Ascend must pay Lucent a $525 million termination fee; provided, however,
that, no termination fee will be payable under the first and third clauses of
this section unless Ascend enters into a definitive agreement concerning, or
completes, a takeover proposal involving at least 50% of the stock or assets of
Ascend within seven months of termination of the merger agreement.
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If a takeover proposal has been made as described in clause (1) of this
section and has thereafter been publicly unconditionally withdrawn by its maker
prior to the termination event referred to in clause (1) of this section, no
termination fee will be payable by Ascend to Lucent unless Ascend enters into a
definitive agreement concerning, or completes, a takeover proposal with the same
maker or any of its affiliates within the seven-month period referred to above.
The merger agreement further provides that if Ascend fails to pay any
termination fee due, Ascend must pay the costs and expenses in connection with
any action taken to collect payment, together with interest on the amount of the
termination fee.
CONDUCT OF BUSINESS PENDING THE MERGER. Under the merger agreement, Ascend
has agreed that, prior to the effective time of the merger, it will carry on its
business in the ordinary course consistent with past practice and in compliance
in all material respects with applicable laws and regulations and will use
reasonable efforts to preserve intact its current business organization, to keep
available the services of its current officers and other key employees and
preserve its relationships with those persons having business dealings with it.
Lucent has agreed that, prior to the effective time of the merger, it will not
make any acquisition of assets or businesses which, in Lucent's good faith
judgment, would cause a material delay of the merger. In addition, Ascend has
agreed that, among other things and subject to certain exceptions, neither it
nor any of its subsidiaries may:
- declare, set aside or pay any dividends or other distributions on any of
its capital stock, other than certain dividends and distributions by a
wholly owned subsidiary, or split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities
in substitution for shares of its capital stock, except for issuances of
Ascend common stock by the exercise of options and warrants outstanding
on the date of the merger agreement, or purchase, redeem or otherwise
acquire any shares of capital stock of Ascend or its subsidiaries or any
other of its securities or any rights, warrants or options to acquire any
such securities
- issue, deliver, sell, pledge or otherwise encumber or subject to any lien
any shares of capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such securities, other than under existing options and
warrants, under Ascend's 1994 Employee Stock Purchase Plan in accordance
with past practices, certain issuances of options under Ascend's stock
option plans and issuances under the stock option agreement
- amend the certificate of incorporation of Ascend, the by-laws of Ascend
or other comparable organizational documents
- acquire or agree to acquire by merging or consolidating with, or by
purchasing assets of, any business or any person, other than (1)
purchases of raw materials or supplies in the ordinary course of business
consistent with past practice or (2) acquisitions for cash plus
assumptions of debt with a purchase price together with the assumed debt
not in excess of $100 million individually or $250 million in the
aggregate, provided that Ascend will have reasonably consulted with
Lucent prior to entering into a definitive agreement for any such
acquisition and will not complete any acquisition that, to the knowledge
of Ascend, in Ascend's good faith judgment, will result in a significant
overlap with Lucent's businesses
- sell, lease, license, mortgage or otherwise encumber or subject to any
lien or otherwise dispose of any of its properties or assets, other than
sales or licenses of finished goods in the ordinary course of business
consistent with past practice, provided that Ascend will use
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reasonable efforts to complete the previously announced plan to divest
portions of Stratus Computer, Inc. and Stratus Computer Limited
- 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 consistent with
past practice and except for intercompany indebtedness between Ascend and
any of its subsidiaries or between such subsidiaries
- make any loans, advances or capital contributions to, or investments in,
any other person
- make or agree to make any new capital expenditures, or enter into any
agreement providing for payments which, individually, are in excess of $5
million or, in the aggregate, are in excess of $25 million
- make any tax election that is reasonably likely to have a material
adverse effect on the tax liability of Ascend or settle or compromise any
material income tax liability
- pay, discharge, settle or satisfy any material claims, liabilities,
obligations or litigation, 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 of Ascend
included in the documents filed by Ascend with the Securities and
Exchange Commission 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
- except as required by law or contemplated in the merger agreement and
except for labor agreements negotiated in the ordinary course, enter
into, adopt or amend in any material respect or terminate any 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 for 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
- 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 in the merger agreement or by the terms of any employment
agreement in existence on the date of the merger agreement, 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 the merger agreement to any such
person; provided, however, that Ascend may pay 1998 bonuses earned under
its incentive bonus plans in accordance with the terms of such plans
consistent with past practice
- 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
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- enter into or amend in any material respect any material original
equipment manufacturer agreement or any agreements under which any person
is granted exclusive marketing, manufacturing or other rights concerning
any Ascend product, process or technology
- take any action that would result in a material adverse change in Ascend
occurring.
AMENDMENT; EXTENSION AND WAIVER. Subject to applicable law:
- the merger agreement may be amended by the parties in writing at any
time, except that after the merger agreement has been adopted by the
stockholders of Ascend, no amendment may be entered into which requires
further approval by Ascend stockholders unless such further approval is
obtained
- at any time prior to the effective time of the merger, a party may, by
written instrument signed on behalf of such party, extend the time for
performance of the obligations of any other party to the merger
agreement, waive inaccuracies in representations and warranties of any
other party contained in the merger agreement or in any related document
and except as provided in the merger agreement, waive compliance by any
other party with any agreements or conditions in the merger agreement.
Under Section 251(d) of the Delaware General Corporation Law, no amendment
to the merger agreement made after the adoption of the merger agreement by the
stockholders of Ascend may, without further stockholder approval, alter or
change the amount or kind of shares, securities, cash, property and/or rights to
be received by Ascend stockholders in the merger, or alter or change any terms
and conditions of the merger agreement if such alteration or change would
adversely affect the holders of any class or series of stock of Ascend.
EXPENSES. Whether or not the merger is completed, all fees and expenses
incurred in connection with the merger, the merger agreement and the stock
option agreement will be paid by the party incurring such fees or expenses,
except as otherwise provided in the merger agreement and the stock option
agreement and except that Lucent and Ascend will share equally the expenses
incurred in connection with filing, printing and mailing this proxy
statement/prospectus and the registration statement of which it is a part and
the filing fees for the premerger notification and report forms under the
Hart-Scott-Rodino Act. Lucent will file any return and will pay any state or
local taxes, if any, resulting from the transfer of the beneficial ownership of
Ascend's real property as a result of the merger, other than any such taxes that
are solely the obligation of a stockholder of Ascend, in which case Ascend shall
pay any such taxes.
REPRESENTATIONS AND WARRANTIES. The merger agreement contains customary
representations and warranties relating to, among other things:
- corporate organization and similar corporate matters of Lucent and Ascend
- subsidiaries of Ascend
- the capital structure of each of Lucent and Ascend
- authorization, execution, delivery, performance and enforceability of,
and required consents, approvals, orders and authorizations of
governmental authorities relating to, the merger agreement and related
matters of Lucent and Ascend
- documents filed by each of Lucent and Ascend with the Securities and
Exchange Commission, the accuracy of information contained in such
documents and the absence of undisclosed liabilities of each of Lucent
and Ascend
43
<PAGE> 51
- the accuracy of information supplied by each of Lucent and Ascend in
connection with this proxy statement/prospectus and the registration
statement of which it is a part
- absence of material changes or events concerning Lucent and Ascend
- compliance with applicable laws by each of Lucent and Ascend
- absence of changes in benefit plans of Ascend
- matters relating to the Employee Retirement Income Security Act for
Ascend
- filing of tax returns and payment of taxes by each of Lucent and Ascend
- required stockholder vote of Ascend
- satisfaction of certain state takeover statutes' requirements for Ascend
- the absence of actions by Lucent or Ascend that would prevent using the
"pooling of interests" method to account for the merger
- engagement and payment of fees of brokers, investment bankers, finders
and financial advisors by each of Lucent and Ascend
- receipt of fairness opinions by each of Lucent and Ascend from their
respective financial advisors
- intellectual property and year 2000 matters of Ascend
- outstanding and pending material litigation of each of Lucent and Ascend
- certain contracts of Ascend
- interim operations of Dasher Merger Inc.
AMENDMENTS TO THE ASCEND CERTIFICATE OF INCORPORATION. As of the effective
time of the merger, the Ascend certificate of incorporation will be
substantially identical to the certificate of incorporation of Dasher Merger
Inc. immediately prior to the merger. For a summary of certain provisions of the
Ascend certificate of incorporation and the associated rights of Ascend
stockholders, see "Comparison of Rights of Common Stockholders of Lucent and
Ascend."
AMENDMENTS TO THE ASCEND BY-LAWS. The merger agreement provides that the
by-laws of Dasher Merger Inc., as in effect immediately prior to the effective
time of the merger, will be the by-laws of the surviving corporation following
the merger until changed or amended. For a summary of certain provisions of the
Ascend by-laws and the associated rights of Ascend stockholders, see "Comparison
of Rights of Common Stockholders of Lucent and Ascend."
THE STOCK OPTION AGREEMENT
GENERAL. Immediately following the execution and delivery of the merger
agreement, Lucent and Ascend entered into a stock option agreement under which
Ascend granted Lucent an option to purchase up to 43,832,749 shares of Ascend
common stock, or such number of shares of Ascend common stock as represents
19.9% of the then-outstanding shares of Ascend common stock, at a price per
share of $89.00.
EXERCISE OF THE OPTION. Except as described below, the option is
exercisable at any time after the occurrence of any event unconditionally
entitling Lucent to receive the termination fee under the merger agreement. The
right to purchase shares under the stock option agreement will expire upon the
earliest to occur of:
- the effective time of the merger
44
<PAGE> 52
- 15 business days after the first occurrence of any event unconditionally
entitling Lucent to receive the termination fee
- termination of the merger agreement prior to the occurrence of any event
unconditionally entitling Lucent to receive the termination fee, unless
Lucent has the right to receive a termination fee following such
termination upon the occurrence of certain events, in which case the
option will not terminate until the later of (1) 15 business days
following the time such termination fee becomes unconditionally payable
and (2) the expiration of the period during which Lucent has such right
to receive a termination fee.
Any purchase of shares upon the exercise of the option is subject to compliance
with the Hart-Scott-Rodino Act and the obtaining or making of any governmental
or regulatory consents, approvals, orders, notifications, filings or
authorizations, the failure of which to have obtained or made would make the
issuance of shares subject to the option illegal. In the event that any such
governmental or regulatory action has not yet been obtained or made at the time
the option is exercisable, which prohibits the exercise of the entire option,
the option may be exercised for a lesser amount of shares than may be then
acquired without such governmental or regulatory action. If Lucent receives
official notice that such governmental or regulatory action will not be issued
or granted or it is not granted within six months after a partial exercise in
accordance with the preceding sentence, then Lucent may exercise its right to
receive cash for any remaining shares subject to the option.
ADJUSTMENTS TO NUMBER AND TYPE OF SHARES. The number and type of
securities subject to the option and the purchase price will be adjusted for any
change in Ascend common stock by reason of a stock dividend, split-up, merger,
recapitalization, combination, exchange of shares or similar transaction, such
that Lucent will receive, upon exercise of the option, the number and type of
securities that Lucent would have received if the option had been exercised
immediately prior to the occurrence of such event, or the record date of such
event. The number of shares of Ascend common stock subject to the option will
also be adjusted in the event Ascend issues additional shares of common stock,
such that the number of shares of Ascend common stock subject to the option
represents 19.9% of the shares of Ascend common stock then outstanding, without
giving effect to shares subject to or issued under the option.
If Ascend agrees to consolidate with or merge into any person other than
Lucent or one of its subsidiaries, to permit any person other than Lucent or one
of its subsidiaries to merge into Ascend, or to sell or otherwise transfer all
or substantially all of its assets to any person other than Lucent or one of its
subsidiaries, then such agreement will provide that the option will, upon the
completion of such transaction, be converted into or exchanged for an option to
acquire the number and class of shares or other securities or property Lucent
would have received for Ascend common stock if the option had been exercised
immediately prior to such consolidation, merger, sale or transfer, or the record
date of such event.
CASH PAYMENT FOR THE OPTION. Instead of purchasing shares of Ascend common
stock under the option, Lucent may exercise its right to have Ascend pay to
Lucent an amount per share of Ascend common stock equal to the number of shares
of Ascend common stock subject to the option multiplied by the difference
between:
- the average closing price on The Nasdaq National Market of shares of
Ascend common stock for the 10 trading days commencing on the 12th
trading day immediately preceding the option closing date and
- the exercise price of the option.
45
<PAGE> 53
In addition, the stock option agreement provides that in no event will
Lucent's total profit from the option plus any termination fee paid to Lucent
exceed $625 million in the aggregate and, if Lucent's total profit from the
option would otherwise exceed such amount, Lucent is required to:
- reduce the number of shares of Ascend common stock subject to the option
- deliver to Ascend for cancelation shares of Ascend common stock
previously purchased by Lucent
- pay cash to Ascend
- any combination of the foregoing, so that Lucent's total profit from the
option plus the termination fee so paid to Lucent does not exceed $625
million after taking into account the foregoing actions.
REGISTRATION RIGHTS AND LISTING. Lucent has certain rights to require
registration by Ascend of any shares purchased under the option under the
securities laws if necessary for Lucent to be able to sell such shares and to
require the listing of such shares on The Nasdaq National Market or other
national securities exchange.
ASSIGNABILITY. The stock option agreement may not be assigned or delegated
by Lucent or Ascend without the prior written consent of the other. The shares
subject to the option may not be sold, assigned, transferred or otherwise
disposed of except in an underwritten public offering or to a purchaser or
transferee who would not, immediately after such sale, assignment, transfer or
disposal, beneficially own more than 3.0% of the outstanding voting power of
Ascend; provided, however, that Lucent shall be permitted to sell any such
shares if the sale is made in connection with a tender or exchange offer that
has been approved or recommended by a majority of the Ascend board of directors.
EFFECT OF STOCK OPTION AGREEMENT. The stock option agreement is intended
to increase the likelihood that the merger will be completed on the terms set
forth in the merger agreement. Consequently, certain aspects of the stock option
agreement may discourage persons who might now or prior to the effective time of
the merger be interested in acquiring all of or a significant interest in Ascend
from considering or proposing such an acquisition, even if such persons were
prepared to offer higher consideration per share for Ascend common stock than
that implicit in the 1.65 exchange ratio or a higher price per share for Ascend
common stock than the market price.
46
<PAGE> 54
COMPARATIVE STOCK PRICES AND DIVIDENDS
Lucent common stock is listed for trading on the New York Stock Exchange
under the trading symbol "LU" and Ascend common stock is quoted on The Nasdaq
National Market under the trading symbol "ASND." The following table sets forth,
for the periods indicated, dividends and the high and low sales prices per share
of Lucent common stock on the New York Stock Exchange Composite Transaction Tape
and of Ascend common stock on The Nasdaq National Market. Lucent's per share
data has been restated to account for Lucent's two-for-one stock splits
effective on April 1, 1999 and on April 1, 1998. For current price information,
stockholders are urged to consult publicly available sources.
<TABLE>
<CAPTION>
LUCENT ASCEND
COMMON STOCK COMMON STOCK
----------------------------------- -----------------------------------
DIVIDENDS DIVIDENDS
CALENDAR PERIOD HIGH LOW DECLARED HIGH LOW DECLARED
- --------------- ---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1996
First Quarter................... $ N/A $N/A $ -- $58 3/8 $28 3/4 $N/A
Second Quarter.................. 9 13/16 7 7/16 0.01875 71 1/4 47 3/4 N/A
Third Quarter................... 11 15/32 7 21/32 0.01875 68 3/4 38 1/4 N/A
Fourth Quarter.................. 13 9/32 10 17/32 0.01875 75 1/4 57 1/2 N/A
1997
First Quarter................... 15 5/32 11 3/16 0.00000 80 1/4 40 7/64 N/A
Second Quarter.................. 18 35/64 12 15/32 0.01875 60 36 1/8 N/A
Third Quarter................... 22 11/16 18 3/64 0.01875 56 13/16 30 N/A
Fourth Quarter.................. 22 35/64 18 3/32 0.03750 35 11/16 22 N/A
1998
First Quarter................... 32 1/16 18 23/64 0.00000 38 3/4 24 3/8 N/A
Second Quarter.................. 41 27/32 32 0.02000 51 13/16 36 1/8 N/A
Third Quarter................... 54 1/4 34 3/16 0.02000 55 1/16 32 5/8 N/A
Fourth Quarter.................. 56 15/16 26 23/32 0.04000 69 5/8 33 15/16 N/A
1999
First Quarter................... 60 47 0.00000 93 3/8 65 1/4 N/A
Second Quarter (through May 20,
1999)......................... 67 51 7/8 0.02000 102 9/16 80 7/8 N/A
</TABLE>
N/A -- Not applicable
The following table sets forth the high and low sales prices per share of
Lucent common stock on the New York Stock Exchange Composite Transaction Tape
and of Ascend common stock on The Nasdaq National Market on January 12, 1999,
the last trading day before the public announcement of the merger agreement, and
on May 20, 1999, the last trading day before the date of this proxy
statement/prospectus:
<TABLE>
<CAPTION>
LUCENT ASCEND
COMMON STOCK COMMON STOCK
--------------- -----------------
HIGH LOW HIGH LOW
------ ----- ------ -----
<S> <C> <C> <C> <C>
January 12, 1999......................................... $56 21/32 $53 7/16 $79 1/2 $73
May 20, 1999............................................. $60 1/2 $58 3/4 $97 11/16 $94
</TABLE>
47
<PAGE> 55
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the merger of Lucent and Ascend under the pooling of interests
method of accounting. These pro forma statements are presented for illustrative
purposes only, and therefore are not necessarily indicative of the operating
results and financial position that might have been achieved had the merger
occurred as of an earlier date, nor are they necessarily indicative of operating
results and financial position which may occur in the future. Lucent's per share
data has been restated to account for its two-for-one stock splits effective on
April 1, 1999 and on April 1, 1998.
The unaudited pro forma combined condensed balance sheet as of March 31,
1999 was prepared by combining the unaudited condensed consolidated balance
sheet at March 31, 1999, for Lucent with the unaudited condensed balance sheet
at March 31, 1999, for Ascend, giving effect to the merger as though it had been
consummated on March 31, 1999.
The unaudited pro forma combined condensed statements of income for the
periods presented were prepared by combining Lucent's consolidated statements of
income for the six months ended March 31, 1999, for each of the two years in the
period ended September 30, 1998 and for the nine-month period ended September
30, 1996 with Ascend's statements of income for the six months ended March 31,
1999, for each of the two years in the period ended December 31, 1998 and for
the nine-month period ended December 31, 1996, and giving effect to the merger
as though it had occurred at the beginning of the earliest period presented.
The restated consolidated condensed financial statements of Lucent at
September 30, 1998, for each of the two years in the period ended September 30,
1998 and for the nine-month period ended September 30, 1996 are derived from
audited restated consolidated financial statements incorporated by reference in
this proxy statement/prospectus. The unaudited consolidated condensed financial
statements for Lucent at March 31, 1999 and for the six months ended March 31,
1999, are derived from unaudited consolidated condensed financial statements
incorporated by reference in this proxy statement/prospectus, and, in the
opinion of Lucent's management, include all necessary adjustments for a fair
presentation of such unaudited consolidated condensed financial statements in
conformity with generally accepted accounting principles.
The condensed historical financial statements of Ascend at December 31,
1998 and for each of the two years in the period ended December 31, 1998 are
derived from audited consolidated financial statements incorporated by reference
in this proxy statement/prospectus. The unaudited condensed historical financial
statements for Ascend at and for the six months ended March 31, 1999 are
calculated from unaudited consolidated condensed financial statements
incorporated by reference in this proxy statement/prospectus and the financial
statements for the nine-month period ended December 31, 1996 are calculated from
unaudited consolidated condensed financial statements not incorporated by
reference in this proxy statement/ prospectus, and, in the opinion of Ascend's
management, include all necessary adjustments for a fair presentation of such
unaudited condensed historical financial statements in conformity with generally
accepted accounting principles. Information for the six-month period ended March
31, 1999 was calculated by adding the three-month period ended December 31, 1998
to the three-month period ended March 31, 1999.
Certain reclassifications have been made to the unaudited pro forma
combined condensed financial statements to conform to the presentation expected
to be used by the merged companies. No adjustments have been made in these
unaudited pro forma combined condensed financial statements to conform the
accounting policies of the combining companies. The nature and extent of such
adjustments, if any, are not expected to be significant.
As a result of the merger, Lucent and Ascend will incur certain merger
related expenses currently estimated to be approximately $78 million. These
merger related expenses have not been reflected in the unaudited pro forma
combined condensed financial statements.
THE FINANCIAL INFORMATION IN THIS SECTION SHOULD BE READ ALONG WITH
LUCENT'S AND ASCEND'S HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND
ACCOMPANYING NOTES INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS.
SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 63.
48
<PAGE> 56
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
LUCENT AT ASCEND AT COMBINED AT
MARCH 31, MARCH 31, PRO FORMA MARCH 31,
1999 1999(A) ADJUSTMENTS 1999
------------- ------------ ----------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Cash, cash equivalents and short-term
investments........................... $ 792 $ 708 $ -- $ 1,500
Accounts receivable - net............... 8,752 454 -- 9,206
Inventories............................. 4,332 242 -- 4,574
Contracts in process - net.............. 1,106 -- -- 1,106
Deferred income taxes - net............. 1,632 179 -- 1,811
Other current assets.................... 1,160 53 -- 1,213
------- ------ ----- -------
Total current assets............... 17,774 1,636 -- 19,410
Property, plant and equipment - net..... 5,751 283 -- 6,034
Prepaid pension costs................... 6,210 -- -- 6,210
Deferred income taxes - net............. -- -- -- --
Capitalized software development
costs................................. 346 -- -- 346
Other assets............................ 2,759 846 -- 3,605
------- ------ ----- -------
Total assets....................... $32,840 $2,765 $ -- $35,605
======= ====== ===== =======
LIABILITIES
Accounts payable........................ $ 2,410 $ 129 $ -- $ 2,539
Payroll and benefit-related
liabilities........................... 1,724 46 -- 1,770
Postretirement and postemployment
benefit liabilities................... 184 -- -- 184
Debt maturing within one year........... 3,185 -- -- 3,185
Other current liabilities............... 4,059 282 -- 4,341
------- ------ ----- -------
Total current liabilities.......... 11,562 457 -- 12,019
Postretirement and postemployment
benefit liabilities................... 6,471 -- -- 6,471
Long-term debt.......................... 3,716 -- -- 3,716
Other liabilities....................... 2,040 10 -- 2,050
------- ------ ----- -------
Total liabilities.................. $23,789 $ 467 $ -- $24,256
Commitments and contingencies
SHAREOWNERS' EQUITY
Preferred stock......................... $ -- $ -- $ -- $ --
Common stock............................ 27 --(b) 3(c) 30
Additional paid-in capital.............. 4,996 2,118 (3)(c) 7,111
Guaranteed ESOP obligation.............. (34) -- -- (34)
Retained earnings....................... 4,384 180 -- 4,564
Accumulated other comprehensive income (loss) (322) -- -- (322)
------- ------ ----- -------
Total shareowners' equity.......... $ 9,051 $2,298 $ -- $11,349
------- ------ ----- -------
Total liabilities and shareowners' equity... $32,840 $2,765 $ -- $35,605
======= ====== ===== =======
</TABLE>
49
<PAGE> 57
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
PRO FORMA
LUCENT ASCEND COMBINED
FOR THE SIX FOR THE SIX FOR THE SIX
MONTHS ENDED MONTHS ENDED MONTHS ENDED
MARCH 31, MARCH 31, PRO FORMA MARCH 31,
1999 1999 ADJUSTMENTS 1999
------------- ------------- ----------- -------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................................... $ 17,484 $ 985 $ -- $ 18,469
Costs...................................... 8,725 375 -- 9,100
------------- ----------- ----- -------------
Gross margin............................... 8,759 610 -- 9,369
Operating expenses:
Selling, general and administrative... 3,688 238 -- 3,926
Research and development.............. 2,070 159 -- 2,229
Purchased in-process research and
development......................... 39 243 -- 282
------------- ----------- ----- -------------
Total operating expenses................... $ 5,797 $ 640 $ -- $ 6,437
------------- ----------- ----- -------------
Operating income (loss).................... 2,962 (30) -- 2,932
Other income - net......................... 37 21 -- 58
Interest expense........................... 173 -- -- 173
------------- ----------- ----- -------------
Income (loss) before income tax............ 2,826 (9) -- 2,817
Provision for income taxes................. 956 80 -- 1,036
------------- ----------- ----- -------------
Income (loss) before cumulative effect of
accounting change........................ 1,870 (89) -- 1,781
Cumulative effect of accounting change..... 1,308 -- -- 1,308
Net income (loss).......................... $ 3,178 $ (89) $ -- $ 3,089
============= =========== ===== =============
Net income (loss) per common share - basic:
Income (loss) before cumulative effect
of accounting change................ 0.70 (0.40) -- 0.59
Cumulative effect of accounting
change.............................. 0.49 -- -- 0.43
------------- ----------- ----- -------------
Net income (loss)..................... 1.19 (0.40) -- 1.02
Net income (loss) per common
share - diluted:
Income (loss) before cumulative effect
of accounting change................ 0.68 (0.40) -- 0.57
Cumulative effect of accounting
change.............................. 0.48 -- -- 0.42
------------- ----------- ----- -------------
Net income (loss)..................... 1.16 (0.40) -- 0.99
Weighted average number of common shares
(in millions):
Basic................................. 2,663.5 221.8 144.2(d) 3,029.5
Diluted............................... 2,738.7 238.6 155.1(d) 3,132.4
</TABLE>
50
<PAGE> 58
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
PRO FORMA
LUCENT ASCEND COMBINED
FOR THE TWELVE FOR THE TWELVE FOR THE TWELVE
MONTHS ENDED MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, DECEMBER 31, PRO FORMA SEPTEMBER 30,
1998 1998 ADJUSTMENTS 1998
-------------- -------------- ----------- --------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues.................................... $ 30,328 $1,479 $ -- $ 31,807
Costs....................................... 16,171 544 -- 16,715
------------- ------ ----- -------------
Gross margin................................ 14,157 935 -- 15,092
Operating expenses:
Selling, general and administrative.... 6,502 363 -- 6,865
Research and development............... 3,689 216 -- 3,905
Purchased in-process research and
development.......................... 1,416 267 -- 1,683
------------- ------ ----- -------------
Total operating expenses.................... $ 11,607 $ 846 -- $ 12,453
------------- ------ ----- -------------
Operating income............................ 2,550 89 -- 2,639
Other income - net.......................... 100 28 -- 128
Interest expense............................ 254 -- -- 254
------------- ------ ----- -------------
Income before income tax.................... 2,396 117 -- 2,513
Provision for income taxes.................. 1,341 137 -- 1,478
------------- ------ ----- -------------
Net income (loss)........................... $ 1,055 $ (20) -- $ 1,035
============= ====== ===== =============
Net income (loss) per common share:
Basic.................................. 0.40 (0.10) N/A 0.35
Diluted................................ 0.39 (0.10) N/A 0.34
Weighted average number of common shares (in
millions):
Basic.................................. 2,635.0 199.3 129.5(d) 2,963.8
Diluted................................ 2,692.5 210.4 136.8(d) 3,039.7
</TABLE>
51
<PAGE> 59
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
PRO FORMA
LUCENT ASCEND COMBINED
FOR THE TWELVE FOR THE TWELVE FOR THE TWELVE
MONTHS ENDED MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, DECEMBER 31, PRO FORMA SEPTEMBER 30,
1997 1997 ADJUSTMENTS 1997
-------------- -------------- ----------- --------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues.................................... $26,444 $1,167 $ -- $27,611
Costs....................................... 14,905 413 -- 15,318
------- ------ --------- -------
Gross margin................................ 11,539 754 -- 12,293
Operating expenses:
Selling, general and administrative....... 5,820 435 -- 6,255
Research and development.................. 3,029 156 -- 3,185
Purchased in-process research and
development............................ 1,024 231 -- 1,255
------- ------ --------- -------
Total operating expenses.................... $ 9,873 $ 822 $ -- $10,695
------- ------ --------- -------
Operating income (loss)..................... 1,666 (68) -- 1,598
Other income - net.......................... 75 23 -- 98
Interest expense............................ 238 -- -- 238
------- ------ --------- -------
Income (loss) before income tax............. 1,503 (45) -- 1,458
Provision for income taxes.................. 929 79 -- 1,008
------- ------ --------- -------
Net income (loss)........................... $ 574 $ (124) $ -- $ 450
======= ====== ========= =======
Net income (loss) per common share:
Basic..................................... 0.22 (0.66) N/A 0.16
Diluted................................... 0.22 (0.66) N/A 0.15
Weighted average number of common shares (in
millions):
Basic..................................... 2,582.6 189.1 122.9(d) 2,894.6
Diluted................................... 2,602.7 199.8 129.8(d) 2,932.3
</TABLE>
52
<PAGE> 60
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
PRO FORMA
LUCENT ASCEND COMBINED
FOR THE NINE FOR THE NINE FOR THE NINE
MONTHS ENDED MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, DECEMBER 31, PRO FORMA SEPTEMBER 30,
1996 1996(E) ADJUSTMENTS 1996
------------- ------------ ----------- -------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues.................................... $15,897 $ 742 $ -- $16,639
Costs....................................... 9,295 259 -- 9,554
------- ------ --------- -------
Gross margin................................ 6,602 483 -- 7,085
Operating expenses:
Selling, general and administrative....... 4,264 165 -- 4,429
Research and development.................. 1,843 78 -- 1,921
Purchased in-process research and
development............................ -- -- -- --
------- ------ --------- -------
Total operating expenses.................... $ 6,107 $ 243 $ -- $ 6,350
------- ------ --------- -------
Operating income............................ 495 240 -- 735
Other income - net.......................... 55 13 -- 68
Interest expense............................ 175 -- -- 175
------- ------ --------- -------
Income before income tax.................... 375 253 628
Provision for income taxes.................. 146 99 -- 245
------- ------ --------- -------
Net income.................................. $ 229 $ 154 $ -- $ 383
======= ====== ========= =======
Net income per common share:
Basic.................................. 0.10 0.86 N/A 0.14
Diluted................................ 0.10 0.78 N/A 0.14
Weighted average number of common shares (in
millions):
Basic.................................. 2,408.8 179.7 116.9(d) 2,705.4
Diluted................................ 2,409.2 197.3 128.2(d) 2,734.7
</TABLE>
53
<PAGE> 61
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(a) The combined financial information for Lucent and Ascend for the fiscal
year ending September 30, 1999 will reflect a one-time adjustment to
beginning retained earnings to adjust for the net loss of $197 reported
by Ascend for the quarter ended December 31, 1998.
(b) As of March 31, 1999, there were outstanding 222,656,000 shares of Ascend
common stock, par value $0.001 per share, and the aggregate par value of
the outstanding Ascend common stock was $0.2.
(c) This adjustment reflects the difference in par value between Lucent
common stock and Ascend common stock.
(d) Under the merger agreement, each outstanding share of Ascend common stock
will be converted into the right to receive 1.65 shares of Lucent common
stock. The 1.65 exchange ratio was used in computing share and per share
amounts in the unaudited pro forma combined condensed financial
statements. The number of shares of Lucent common stock to be issued in
the merger will be based upon the actual number of shares of Ascend
common stock outstanding at the effective time of the merger.
(e) Information for the nine-month period ended December 31, 1996 was
calculated by subtracting the March 31, 1996 three-month period from the
financial statements for the year ended December 31, 1996.
N/A - Not applicable
54
<PAGE> 62
PRO FORMA CAPITALIZATION OF LUCENT AND ASCEND
The following table presents the pro forma capitalization of Lucent and
Ascend at March 31, 1999, and on a combined basis as of March 31, 1999 after
giving pro forma effect to the merger and related transactions as if they had
occurred on March 31, 1999.
THE FINANCIAL INFORMATION IN THIS SECTION SHOULD BE READ ALONG WITH
LUCENT'S RESTATED CONSOLIDATED AND ASCEND'S HISTORICAL AND LUCENT AND ASCEND'S
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS AND ACCOMPANYING
NOTES, EITHER INCORPORATED BY REFERENCE OR INCLUDED IN THIS PROXY
STATEMENT/PROSPECTUS. SEE "UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS" ON PAGE 48 AND "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 63.
<TABLE>
<CAPTION>
LUCENT ASCEND PRO FORMA COMBINED
AS OF AS OF PRO FORMA AS OF
MARCH 31, 1999 MARCH 31, 1999 ADJUSTMENTS MARCH 31, 1999
-------------- -------------- ----------- ------------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Debt maturing within one year........... $ 3,185 $ -- $ -- $ 3,185
------- ------ ------ -------
Long-term debt.......................... $ 3,716 $ -- $ -- $ 3,716
------- ------ ------ -------
Shareowners' equity:
Lucent preferred stock................ -- -- --
Ascend preferred stock................ -- -- --
Lucent common stock
Authorized shares: 6,000,000,000
Issued and outstanding shares:
2,672,362,415.................... 27 3(a) 30
Ascend common stock
Authorized shares: 400,000,000
Issued and outstanding shares:
222,656,000...................... --(b) -- --(b)
Additional paid-in capital............ 4,996 2,118 (3)(a) 7,111
Guaranteed ESOP obligation............ (34) -- -- (34)
Retained earnings..................... 4,384 180 -- 4,564
Accumulated other comprehensive income
(loss)............................. (322) -- -- (322)
Total shareowners' equity............... 9,051 2,298 -- 11,349
------- ------ ------ -------
Total capitalization.................... $15,952 $2,298 $ -- $18,250
======= ====== ====== =======
</TABLE>
- ---------------
(a) This adjustment reflects the difference in par value between Lucent
common stock and Ascend common stock.
(b) As of March 31, 1999, there were outstanding 222,656,000 shares of Ascend
common stock, par value $0.001 per share, and the aggregate par value of
the outstanding Ascend common stock was $0.2.
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<PAGE> 63
DESCRIPTION OF LUCENT CAPITAL STOCK
The following summary of the capital stock of Lucent is subject in all
respects to applicable Delaware law, Lucent's certificate of incorporation and
by-laws and Lucent's rights agreement. See "Comparison of Rights of Common
Stockholders of Lucent and Ascend" and "Where You Can Find More Information."
The total authorized shares of capital stock of Lucent consist of (1) 6
billion shares of common stock, $.01 par value per share, and (2) 250 million
shares of preferred stock, $1.00 par value per share. At the close of business
on April 27, 1999, approximately 2.7 billion shares of Lucent common stock were
issued and outstanding and no shares of Lucent preferred stock were issued and
outstanding.
The Lucent board of directors is authorized to provide for the issuance
from time to time of Lucent preferred stock in series and, as to each series, to
fix the designation, the dividend rate and the preferences, if any, which
dividends on such series will have compared to any other class or series of
capital stock of Lucent, the voting rights, if any, the voluntary and
involuntary liquidation prices, the conversion or exchange privileges, if any,
applicable to such series and the redemption price or prices and the other terms
of redemption, if any, applicable to such series. Cumulative dividends, dividend
preferences and conversion, exchange and redemption provisions, to the extent
that some or all of these features may be present when shares of Lucent
preferred stock are issued, could have an adverse effect on the availability of
earnings for distribution to the holders of Lucent common stock or for other
corporate purposes.
For a description of the rights to acquire Lucent junior preferred stock
that are attached to shares of Lucent common stock, see "Comparison of Rights of
Common Stockholders of Lucent and Ascend -- Rights Plan."
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS
OF LUCENT AND ASCEND
The rights of Lucent stockholders are currently governed by the Delaware
General Corporation Law, Lucent's certificate of incorporation and Lucent's
by-laws. The rights of Ascend stockholders are currently governed by the
Delaware General Corporation Law, Ascend's certificate of incorporation and
Ascend's by-laws. Upon completion of the merger, the rights of Ascend
stockholders who become stockholders of Lucent in the merger will be governed by
the Delaware General Corporation Law, Lucent's certificate of incorporation and
Lucent's by-laws.
The following description summarizes the material differences which may
affect the rights of stockholders of Lucent and Ascend but does not purport to
be a complete statement of all such differences, or a complete description of
the specific provisions referred to in this summary. The identification of
specific differences is not intended to indicate that other equally or more
significant differences do not exist. Stockholders should read carefully the
relevant provisions of the Delaware General Corporation Law, Lucent's
certificate of incorporation, Lucent's by-laws, Ascend's certificate of
incorporation and Ascend's by-laws.
CAPITALIZATION
LUCENT. Lucent's authorized capital stock is described above under
"Description of Lucent Capital Stock."
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<PAGE> 64
ASCEND. The total authorized shares of capital stock of Ascend consist of
(1) 400 million shares of common stock, $.001 par value per share, and (2) 2
million shares of preferred stock, $.001 par value per share. At the close of
business on April 27, 1999, there were approximately 223 million shares of
Ascend common stock outstanding and no shares of Ascend preferred stock
outstanding.
The Ascend board of directors is authorized to issue preferred stock from
time to time in series, and to determine, alter or eliminate any or all of the
rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of preferred shares, and to fix, increase or decrease the
number of shares comprising any such series and the designation of any such
series, or any of them, and to provide for the rights and terms of redemption or
conversion of the shares of any such series. The Ascend board of directors,
without stockholder approval, can issue Ascend preferred stock with voting,
conversion or other rights that could adversely affect the voting power and
other rights of the holders of Ascend common stock. Ascend preferred stock could
thus be issued quickly with terms calculated to delay or prevent a change in
control of Ascend or make removal of management more difficult. Additionally,
issuing Ascend preferred stock may cause the market price of Ascend common stock
to decrease.
VOTING RIGHTS
LUCENT. Each holder of Lucent common stock is entitled to one vote for
each share held of record and may not cumulate votes for the election of
directors.
ASCEND. Each holder of Ascend common stock is entitled to one vote for
each share held of record and may not cumulate votes for the election of
directors.
NUMBER, ELECTION, VACANCY AND REMOVAL OF DIRECTORS
LUCENT. Lucent's board of directors has nine members. Lucent's certificate
of incorporation provides that the Lucent board of directors will consist of at
least three directors and that the number of directors may be changed from time
to time by a resolution adopted by a majority of the total number of directors
which Lucent would have if there were no vacancies. Lucent's certificate of
incorporation also provides that the Lucent board of directors consists of three
classes of directors. The directors in each class serve on the Lucent board of
directors for approximately three years each.
Lucent's certificate of incorporation provides that if there is a vacancy
on the Lucent board of directors or if the number of directors is increased,
such vacancies will be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum, and not by
the stockholders. A director elected to fill a vacancy or newly created
directorship will serve for the remainder of the full term of the class of
directors in which the vacancy occurred or the new directorship was created and
until such director's successor will have been duly elected and qualified. No
decrease in the number of directors will shorten the term of any incumbent
director.
Under Lucent's certificate of incorporation, any director may be removed
from office only for cause by the affirmative vote of the holders of at least a
majority of the voting power of all shares of Lucent common stock entitled to
vote generally in the election of directors then outstanding, voting together as
a single class.
ASCEND. Ascend's board of directors has eight members. Ascend's
certificate of incorporation provides that the number of directors may be
changed from time to time by a resolution adopted by a majority of the total
number of directors Ascend would have if there were no vacancies. Neither
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Ascend's certificate of incorporation nor Ascend's by-laws provides for a
staggered board of directors.
Under Ascend's certificate of incorporation, vacancies on the Ascend board
of directors and newly created directorships resulting from any increase in the
authorized number of directors may be filled by the remaining directors.
Ascend's certificate of incorporation and by-laws provide that vacancies on the
Ascend board of directors and newly created directorships resulting from any
increase in the authorized number of directors may be filled only by a majority
vote of the directors then in office, even though less than a quorum, except
that vacancies on the Ascend board of directors resulting from the removal of a
director by the stockholders of Ascend may be filled at a special meeting of the
Ascend stockholders held for that purpose.
Ascend's certificate of incorporation provides that any director or the
entire Ascend board of directors may be removed at any time, with or without
cause, by the affirmative vote of the holders of at least a majority of the
voting power of all of the then outstanding shares of capital stock entitled to
vote generally in the election of directors, voting together as a single class.
AMENDMENTS TO CERTIFICATES OF INCORPORATION
LUCENT. Lucent's certificate of incorporation provides that the
affirmative vote of the holders of at least 80% of the voting stock then
outstanding, voting together as a single class, will be required to alter,
amend, adopt any provision inconsistent with or repeal Articles V, VII and VIII
of Lucent's certificate of incorporation, which relate to stockholder action,
the Lucent board of directors and Lucent's by-laws, respectively.
ASCEND. Ascend's certificate of incorporation requires two-thirds of the
voting power of all of the outstanding shares of capital stock entitled to vote
generally in the election of directors to amend or repeal Articles V, VI, VII,
VIII and IX of Ascend's certificate of incorporation, which relate to the Ascend
board of directors, stockholder actions, Ascend's by-laws, director liability
and amending Ascend's certificate of incorporation, respectively.
AMENDMENTS TO BY-LAWS
LUCENT. Lucent's certificate of incorporation and by-laws provide that
Lucent's by-laws may be altered or repealed and new by-laws may be adopted:
- at any annual or special meeting of stockholders, by the affirmative vote
of the holders of a majority of the voting power of the stock issued and
outstanding and entitled to vote at such meeting, provided that any
proposed alteration or repeal of, or the adoption of, any by-law
inconsistent with Section 2.2, 2.7 or 2.10 of Article II of Lucent's
by-laws, which relate to special meetings of stockholders, notice of
stockholder business and nominations and actions by written consent of
stockholders, respectively, or with Section 3.2, 3.9 or 3.11 of Article
III of Lucent's by-laws, which relate to the number and tenure of the
directors, vacancies on the Lucent board of directors and removal of
directors, respectively, by the stockholders requires the affirmative
vote of the holders of at least 80% of the voting stock then outstanding,
voting together as a single class
- by a majority of the total number of directors Lucent would have if there
were no vacancies.
ASCEND. Ascend's certificate of incorporation gives the Ascend board of
directors the power to adopt, amend or repeal Ascend's by-laws by a vote of a
majority of the total number of directors Ascend would have if there were no
vacancies. Ascend's certificate of incorporation also provides that Ascend's
by-laws may be adopted, amended or repealed by the affirmative vote of at least
two-
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thirds of the voting power of all of the then outstanding shares of the capital
stock of Ascend entitled to vote generally in the election of directors, voting
together as a single class.
STOCKHOLDER ACTION
LUCENT. Lucent's certificate of incorporation provides that any action
required or permitted to be taken by the Lucent stockholders must be effected at
a duly called annual or special meeting and may not be effected by written
consent.
ASCEND. Ascend's certificate of incorporation provides that any action
required or permitted to be taken by the Ascend stockholders must be effected at
a duly called annual or special meeting and may not be effected by written
consent.
NOTICE OF CERTAIN STOCKHOLDER ACTIONS
LUCENT. Lucent's certificate of incorporation provides that a stockholder
must give advance written notice of nominations for election of directors and to
properly bring business before an annual meeting of stockholders. Under Lucent's
by-laws, a stockholder's written notice must generally be delivered to the
Secretary of Lucent not later than 45 days nor earlier than the 75 days prior to
the first anniversary of the record date for determining stockholders entitled
to vote at the preceding year's annual meeting.
In the event that Lucent calls a special meeting of stockholders for the
purpose of electing one or more directors to the Lucent board of directors, any
stockholder may nominate a director or directors, provided that written notice
must be delivered not earlier than 120 days prior to such special meeting and
not later than (1) 90 days prior to such special meeting or (2) 10 days
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Lucent board of directors to
be elected at such meeting.
ASCEND. Ascend's by-laws provide that for business to be properly brought
before any meeting of stockholders, a stockholder must deliver notice, and such
notice must be received by the Secretary of Ascend not less than 120 days in
advance of the date that Ascend's proxy statement was released to stockholders
in connection with the previous year's annual meeting, provided that if the date
of the annual meeting has been changed by more than 30 days from the date
contemplated at the time of the previous year's proxy statement, or in the event
of a special meeting, notice must be received not later than the close of
business on the tenth day following the day notice of the meeting is provided.
SPECIAL STOCKHOLDER MEETINGS
LUCENT. Lucent's certificate of incorporation and by-laws provide that a
special meeting of Lucent's stockholders may be called only by the Lucent board
of directors by a resolution stating the purposes of the special meeting and
approved by a majority of the total number of directors Lucent would have if
there were no vacancies or by the chairman of the Lucent board of directors. Any
power of the stockholders to call a special meeting is specifically denied in
Lucent's certificate of incorporation.
ASCEND. Ascend's certificate of incorporation and by-laws provide that
special meetings of the stockholders may be called by either a resolution
adopted by a majority of the authorized directors of the Ascend board of
directors or by the holders of not less than 10% of all shares entitled to cast
votes at the special meeting.
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LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
The Delaware General Corporation Law provides that a corporation's
certificate of incorporation may include a provision limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. However, no such provision
can eliminate or limit the liability of a director for:
- any breach of the director's duty of loyalty to the corporation or its
stockholders
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law
- violation of Section 174 of the Delaware General Corporation Law
regarding unlawful payment of dividends or unlawful stock purchases or
redemptions
- any transaction from which the director derived an improper personal
benefit
- any act or omission prior to the adoption of such a provision in the
certificate of incorporation.
LUCENT. Lucent's certificate of incorporation provides that no director
will be personally liable to Lucent or to its stockholders for monetary damages
for breach of fiduciary duty as a director, except, if required by law, for
liability:
- for any breach of the director's duty of loyalty to Lucent or its
stockholders
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law
- under Section 174 of the Delaware General Corporation Law
- for any transaction from which the director derived an improper personal
benefit.
ASCEND. Ascend's certificate of incorporation authorizes Ascend to
eliminate or limit the liability of directors to the maximum extent legally
permissible.
DIVIDENDS
LUCENT. Lucent's by-laws provide that the Lucent board of directors may
from time to time declare, and Lucent may pay, dividends on its outstanding
shares in the manner and upon the terms and conditions provided by law and in
Lucent's certificate of incorporation.
ASCEND. Ascend's by-laws provide that the Ascend board of directors may
from time to time declare dividends on its outstanding shares in accordance with
law.
CONVERSION
LUCENT. Holders of Lucent common stock have no rights to convert their
shares into any other securities.
ASCEND. Holders of Ascend common stock have no rights to convert their
shares into any other securities.
RIGHTS PLAN
Ascend does not have a stockholders' rights plan. Lucent has a rights
agreement with The Bank of New York as rights agent. The following description
of the rights agreement is qualified in its
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entirety by reference to the terms and conditions of the rights agreement.
Stockholders should read carefully the rights agreement. See "Where You Can Find
More Information" on page 63.
Under the rights agreement, rights attach to each share of Lucent common
stock outstanding and, when exercisable, entitle the registered holder to
purchase from Lucent one four-hundredth of a share of junior preferred stock,
par value $1.00 per share, at a purchase price of $22.50 per one four-hundredth
of a share, subject to customary anti-dilution adjustments.
The rights will not be exercisable until the earlier of:
- 10 days following a public announcement that a person or group has
acquired beneficial ownership of 10% or more of the outstanding shares of
Lucent common stock
- 10 business days, or such later date as may be determined by the Lucent
board of directors, following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer the consummation of
which would result in a person or group acquiring beneficial ownership of
10% or more of the outstanding shares of Lucent common stock.
The rights will expire on March 31, 2006, unless such date is extended or unless
the rights are earlier redeemed or exchanged by Lucent, in each case as
summarized below.
In the event that a person or group acquires beneficial ownership of 10% or
more of the outstanding shares of Lucent common stock, each holder of a right,
other than rights beneficially owned by such person or group, which become void,
will have the right to receive upon exercise that number of shares of Lucent
common stock having a market value of two times the purchase price provided for
in the right. In the event that Lucent is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group acquires beneficial ownership of 10% or
more of the outstanding shares of Lucent common stock, each holder of a right
will have the right to receive upon exercise that number of shares of common
stock of the acquiring company which at the time of such transaction will have a
market value of two times the purchase price provided for in the right.
At any time after a person or group acquires beneficial ownership of 10% or
more of the outstanding shares of Lucent common stock and prior to the
acquisition by such person or group of 50% or more of the then outstanding
shares of Lucent common stock, the Lucent board of directors may exchange the
rights, other than rights owned by such person or group which have become void,
in whole or in part, for Lucent common stock or junior preferred stock.
At any time prior to a person or group acquiring beneficial ownership of
10% or more of the outstanding shares of Lucent common stock, the Lucent board
of directors may redeem the rights in whole, but not in part, at a redemption
price of $0.0025 per right, subject to customary anti-dilution provisions, or
amend the terms of the rights, in each case without the consent of the holders
of the rights, at such time, on such basis and with such conditions as the
Lucent board of directors may establish.
Junior preferred shares purchasable upon exercise of the rights will not be
redeemable. The junior preferred shares have dividend, voting and liquidation
rights that are intended to result in the value of the one four-hundredth
interest in a junior preferred share purchasable upon exercise of each right
approximating the value of one share of Lucent common stock.
The rights may have antitakeover effects. The rights will cause substantial
dilution to a person or group of persons that attempts to acquire Lucent on
terms not approved by the Lucent board of directors. The rights should not
interfere with any merger or other business combination approved by the Lucent
board of directors prior to the time that a person or group has acquired such
10% beneficial ownership since the rights may be redeemed or amended by Lucent
until such time.
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LEGAL MATTERS
The legality of Lucent common stock offered by this proxy
statement/prospectus will be passed upon for Lucent by Pamela F. Craven, Vice
President -- Law and Secretary, of Lucent. As of May 21, 1999, Pamela F. Craven
owned 1,096 shares of Lucent common stock and options and stock units for
316,668 shares of Lucent common stock. Cravath, Swaine & Moore, New York, New
York from time to time acts as counsel for Lucent and its subsidiaries.
Certain United States federal income tax consequences of the merger will be
passed upon for Ascend by its special counsel Skadden, Arps, Slate, Meagher &
Flom LLP.
EXPERTS
The consolidated balance sheets of Lucent as of September 30, 1998 and 1997
and the related consolidated statements of income, changes in shareowners'
equity and cash flows for each of the two years in the period ended September
30, 1998 and for the nine-month period ended September 30, 1996, included in
Lucent's Current Report on Form 8-K/A #1 have been incorporated by reference in
this proxy statement/prospectus in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The consolidated financial statements of Ascend at December 31, 1998, and
December 31, 1997, and for each of the three years in the period ended December
31, 1998, incorporated in this proxy statement/prospectus from Ascend's Annual
Report on Form 10-K for the year ended December 31, 1998, as amended by
Amendment No. 1 thereto filed on Form 10-K/A on May 19, 1999 and Amendment No. 2
thereto filed on Form 10-K/A on May 21, 1999, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report which is incorporated by
reference which, as to the year ended December 31, 1996, is based in part on the
report of PricewaterhouseCoopers LLP, independent accountants, and have been so
incorporated in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
Representatives of Ernst & Young LLP are not expected to be present at the
special meeting.
STOCKHOLDER PROPOSALS
Ascend will hold a 1999 Annual Meeting of Ascend stockholders only if the
merger is not completed before the time of such meeting. The deadline for
submission of stockholder proposals for inclusion in Ascend's proxy materials
for the 1999 Ascend annual meeting has passed.
If the merger is not completed, Ascend stockholders may present proper
proposals for consideration at the next annual meeting of Ascend stockholders by
submitting their proposal in writing to the Secretary of Ascend in a timely
manner.
Ascend's by-laws establish an advance notice procedure with regard to
certain matters, including stockholder proposals not included in Ascend's proxy
statement, to be brought before an annual meeting of stockholders. In general,
nominations for the election of directors may be made by:
- the Ascend board of directors
- a proxy committee appointed by the Ascend board of directors
- any stockholder entitled to vote in the election of directors generally
who has delivered written notice to the Secretary of Ascend not less than
120 days in advance of the date that Ascend's proxy statement was
released to stockholders in connection with the previous year's annual
meeting, which notice must contain specified information concerning the
nominees and concerning the stockholder proposing the nominations.
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For an election of directors to be held at a special meeting of Ascend
stockholders, nominations may be made by any Ascend stockholder entitled to vote
who has delivered written notice to the Secretary of Ascend by the close of
business on the 10th day following the date on which notice of the special
meeting was mailed or such public disclosure was made.
The only business that will be conducted at an annual meeting of Ascend
stockholders is business that is brought before the meeting:
- by or at the direction of the chairman of the meeting
- by any stockholder entitled to vote who has delivered written notice to
the Secretary of Ascend 120 days in advance of the annual meeting, which
notice must contain specific information concerning the matters to be
brought before the meeting and concerning the stockholder proposing those
matters.
If no annual meeting was held in the previous year or if the date of the
annual meeting has been changed by more than 30 days, notice by the stockholder
must be received not later than the close of business on the 10th day following
the day on which notice of the date of the annual meeting was mailed or public
disclosure was made. A copy of the full text of the by-law provisions discussed
above may be obtained by writing to the Secretary of Ascend.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the Ascend board of
directors knows of no matters that will be presented for consideration at the
special meeting other than as described in this proxy statement/prospectus.
WHERE YOU CAN FIND MORE INFORMATION
Lucent and Ascend file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information that Lucent
and Ascend file with the Securities and Exchange Commission at the Securities
and Exchange Commission's public reference rooms at the following locations:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</TABLE>
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. These Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the Internet world wide web site maintained by the
Securities and Exchange Commission at "http://www.sec.gov." Reports, proxy
statements and other information concerning Lucent may also be inspected at the
offices of the New York Stock Exchange at 20 Broad Street, New York, New York
10005. Reports, proxy statements and other information pertaining to Ascend are
also available for inspection at the offices of The Nasdaq Stock Market, which
is located at 1735 K Street, N.W., Washington, D.C. 20006.
Lucent filed a registration statement on Form S-4 on May 21, 1999 to
register with the Securities and Exchange Commission the Lucent common stock to
be issued to Ascend stockholders in the merger. This proxy statement/prospectus
is a part of that registration statement and constitutes a prospectus of Lucent
in addition to being a proxy statement of Ascend. As allowed by Securities and
Exchange Commission rules, this proxy statement/prospectus does not contain all
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the information you can find in Lucent's registration statement or the exhibits
to the registration statement.
The Securities and Exchange Commission allows Lucent and Ascend to
"incorporate by reference" information into this proxy statement/prospectus,
which means that the companies can disclose important information to you by
referring you to other documents filed separately with the Securities and
Exchange Commission. The information incorporated by reference is considered
part of this proxy statement/prospectus, except for any information superseded
by information contained directly in this proxy statement/prospectus or in later
filed documents incorporated by reference in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that Lucent and Ascend have previously filed with the Securities and
Exchange Commission. These documents contain important business and financial
information about Lucent and Ascend that is not included in or delivered with
this proxy statement/prospectus.
<TABLE>
<CAPTION>
LUCENT FILINGS
(FILE NO. 001-11639) PERIOD
-------------------- ------
<S> <C>
Annual Report on Form 10-K Fiscal Year ended September 30, 1998, as
amended by Amendment No. 1 thereto filed
on Form 10-K/A on May 17, 1999
Quarterly Reports on Form 10-Q Quarters ended December 31, 1998 and
March 31, 1999
Current Reports on Form 8-K Filed November 19, 1998, January 8, 1999,
January 15, 1999 and March 5, 1999, as
amended by Amendment No. 1 thereto filed
on Form 8-K/A on May 18, 1999
Proxy Statement Filed December 22, 1998
The description of Lucent common stock Filed under Section 12 of the Exchange
and Lucent rights to acquire junior Act on February 26, 1996, as amended by
preferred stock set forth in the Lucent Amendment No. 1 thereto filed on Form
Registration Statement on Form 10 10/A on March 12, 1996, Amendment No. 2
thereto filed on Form 10/A on March 22,
1996 and Amendment No. 3 thereto filed on
Form 10/A on April 1, 1996
</TABLE>
<TABLE>
<CAPTION>
ASCEND FILINGS
(FILE NO. 000-23774) PERIOD
-------------------- ------
<S> <C>
Annual Report on Form 10-K Fiscal Year ended December 31, 1998, as
amended by Amendment No. 1 thereto filed
on Form 10-K/A on May 19, 1999 and
Amendment No. 2 thereto filed on Form 10-
K/A on May 21, 1999
Quarterly Reports on Form 10-Q Quarters ended June 30, 1998 and March
31, 1999, as amended by Amendment No. 1
thereto filed on Form 10-Q/A on May 19,
1999 and May 21, 1999, respectively
Current Reports on Form 8-K Filed July 2, 1998, August 14, 1998,
October 15, 1998, October 23, 1998,
November 3, 1998 and January 15, 1999
Proxy Statement Filed April 8, 1998
The description of Ascend common stock Filed under Section 12 of the Exchange
set forth in the Ascend Registration Act on March 31, 1993
Statement on Form 8-A
</TABLE>
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Lucent and Ascend also incorporate by reference additional documents that
may be filed with the Securities and Exchange Commission under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act between the date of this proxy
statement/prospectus and the date of the special meeting. These include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as proxy statements.
Lucent has supplied all information contained or incorporated by reference
in this proxy statement/prospectus relating to Lucent and Ascend has supplied
all such information relating to Ascend.
Ascend stockholders should not send in their Ascend certificates until they
receive the transmittal materials from the exchange agent. Ascend stockholders
of record who have further questions about their share certificates or the
exchange of their Ascend common stock for Lucent common stock should call the
exchange agent.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through the companies,
the Securities and Exchange Commission or the Securities and Exchange
Commission's Internet web site as described above. Documents incorporated by
reference are available from the companies without charge, excluding all
exhibits, except that if the companies have specifically incorporated by
reference an exhibit in this proxy statement/prospectus, the exhibit will also
be provided without charge. Stockholders may obtain documents incorporated by
reference in this proxy statement/prospectus by requesting them in writing or by
telephone from the appropriate company at the following addresses:
<TABLE>
<S> <C>
Lucent Technologies Inc. Ascend Communications, Inc.
c/o The Bank of New York One Ascend Plaza
Church Street Station 1701 Harbor Bay Parkway
P.O. Box 11009 Alameda, California 94502-3002
New York, New York 10286-1009 Attention: Kristina Graziano-Manager,
Telephone: 1-888-LUCENT6 Investor Relations
Telephone: (510) 769-6001
</TABLE>
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. We have not authorized anyone to
provide you with information that is different from what is contained in this
proxy statement/prospectus. This proxy statement/ prospectus is dated May 21,
1999. You should not assume that the information contained in this proxy
statement/prospectus is accurate as of any date other than that date. Neither
the mailing of this proxy statement/prospectus to stockholders nor the issuance
of Lucent common stock in the merger creates any implication to the contrary.
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<PAGE> 73
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to the financial condition, results of operations, business strategies,
operating efficiencies or synergies, competitive positions, growth opportunities
for existing products, plans and objectives of management, markets for stock of
Lucent and Ascend and other matters. Statements in this proxy
statement/prospectus that are not historical facts are hereby identified as
"forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Exchange Act and Section 27A of the Securities Act. Such
forward-looking statements, including, without limitation, those relating to the
future business prospects, revenues and income, in each case relating to Lucent
and Ascend, wherever they occur in this proxy statement/prospectus, are
necessarily estimates reflecting the best judgment of the senior management of
Lucent and Ascend and involve a number of risks and uncertainties that could
cause actual results to differ materially from those suggested by the
forward-looking statements. Such forward-looking statements should, therefore,
be considered in light of various important factors, including those set forth
in this proxy statement/prospectus. Important factors that could cause actual
results to differ materially from estimates or projections contained in the
forward-looking statements include without limitation:
- the ability to integrate the operations of Lucent and Ascend, including
their respective product lines
- the effects of vigorous competition in the markets in which Lucent and
Ascend operate.
Words such as "estimate," "project," "plan," "intend," "expect," "believe"
and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are found at various places throughout this
proxy statement/prospectus and the other documents incorporated by reference,
including, but not limited to, the Annual Report on Form 10-K for the year ended
September 30, 1998 of Lucent, including any amendments, and the Annual Report on
Form 10-K for the year ended December 31, 1998 of Ascend, including any
amendments. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this proxy
statement/prospectus. Neither Lucent nor Ascend undertakes any obligation to
publicly update or release any revisions to these forward-looking statements to
reflect events or circumstances after the date of this proxy
statement/prospectus or to reflect the occurrence of unanticipated events.
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ANNEX 1
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AGREEMENT AND PLAN OF MERGER
Dated as of January 12, 1999,
As amended by the
FIRST AMENDMENT TO AGREEMENT
AND PLAN OF MERGER
Dated as of May 16, 1999,
By and Among
LUCENT TECHNOLOGIES INC.,
DASHER MERGER INC.
And
ASCEND COMMUNICATIONS, INC.
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TABLE OF CONTENTS
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ARTICLE I
The Merger
SECTION 1.01. The Merger.................................................. 1-1
SECTION 1.02. Closing..................................................... 1-1
SECTION 1.03. Effective Time.............................................. 1-2
SECTION 1.04. Effects of the Merger....................................... 1-2
SECTION 1.05. Certificate of Incorporation and By-laws.................... 1-2
SECTION 1.06. Board of Directors and Officers............................. 1-2
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock..................................... 1-2
(a) Capital Stock of Sub.................................... 1-2
(b) Cancelation of Treasury Stock and Lucent-Owned Stock.... 1-2
(c) Conversion of Ascend Common Stock....................... 1-2
(d) Anti-Dilution Provisions................................ 1-3
SECTION 2.02. Exchange of Certificates.................................... 1-3
(a) Exchange Agent.......................................... 1-3
(b) Exchange Procedures..................................... 1-3
(c) Distributions with Respect to Unexchanged Shares........ 1-4
(d) No Further Ownership Rights in Ascend Common Stock...... 1-4
(e) No Fractional Shares.................................... 1-4
(f) Termination of Exchange Fund............................ 1-5
(g) No Liability............................................ 1-5
(h) Investment of Exchange Fund............................. 1-6
(i) Lost Certificates...................................... 1-6
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of Ascend.................... 1-6
(a) Organization, Standing and Corporate Power.............. 1-6
(b) Subsidiaries............................................ 1-6
(c) Capital Structure....................................... 1-7
(d) Authority; Noncontravention............................. 1-8
(e) SEC Documents; Undisclosed Liabilities.................. 1-9
(f) Information Supplied.................................... 1-10
(g) Absence of Certain Changes or Events.................... 1-10
(h) Litigation.............................................. 1-10
(i) Compliance with Applicable Laws........................ 1-11
(j) Absence of Changes in Benefit Plans..................... 1-11
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(k) ERISA Compliance........................................ 1-11
(l) Taxes.................................................. 1-13
(m) Voting Requirements..................................... 1-14
(n) State Takeover Statutes................................. 1-14
(o) Accounting Matters...................................... 1-14
(p) Brokers................................................. 1-14
(q) Opinion of Financial Advisor............................ 1-14
(r) Intellectual Property; Year 2000........................ 1-14
(s) Certain Contracts....................................... 1-15
SECTION 3.02. Representations and Warranties of Lucent and Sub............ 1-15
(a) Organization, Standing and Corporate Power.............. 1-15
(b) Capital Structure....................................... 1-16
(c) Authority; Noncontravention............................. 1-16
(d) SEC Documents; Undisclosed Liabilities.................. 1-17
(e) Information Supplied.................................... 1-18
(f) Absence of Certain Changes or Events.................... 1-18
(g) Litigation.............................................. 1-18
(h) Compliance with Applicable Laws......................... 1-19
(i) Taxes.................................................. 1-19
(j) Voting Requirements..................................... 1-20
(k) Accounting Matters...................................... 1-20
(l) Brokers................................................ 1-20
(m) Opinion of Financial Advisor............................ 1-20
(n) Interim Operations of Sub............................... 1-20
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business......................................... 1-20
(a) Conduct of Business by Ascend........................... 1-20
(b) Conduct of Business by Lucent........................... 1-23
(c) Other Actions........................................... 1-23
(d) Advice of Changes....................................... 1-23
SECTION 4.02. No Solicitation by Ascend................................... 1-23
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Form S-4 and the Ascend Proxy Statement;
Ascend Stockholders Meeting............................... 1-25
SECTION 5.02. Letters of Ascend's Accountants............................. 1-26
SECTION 5.03. Letters of Lucent's Accountants............................. 1-26
SECTION 5.04. Access to Information; Confidentiality...................... 1-26
SECTION 5.05. Commercially Reasonable Best Efforts........................ 1-26
SECTION 5.06. Stock Options............................................... 1-27
SECTION 5.07. Ascend Stock Plans.......................................... 1-28
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SECTION 5.08. Employee Benefit Plans; Existing Agreements................. 1-28
SECTION 5.09. Indemnification, Exculpation and Insurance.................. 1-29
SECTION 5.10. Fees and Expenses........................................... 1-30
SECTION 5.11. Public Announcements........................................ 1-31
SECTION 5.12. Affiliates.................................................. 1-31
SECTION 5.13. NYSE Listing................................................ 1-31
SECTION 5.14. Stockholder Litigation...................................... 1-31
SECTION 5.15. Tax Treatment............................................... 1-31
SECTION 5.16. Pooling of Interests........................................ 1-32
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To Effect the
Merger.................................................... 1-32
(a) Ascend Stockholder Approval............................. 1-32
(b) HSR Act................................................. 1-32
(c) No Litigation........................................... 1-32
(d) Form S-4................................................ 1-32
(e) NYSE Listing............................................ 1-32
(f) Pooling Letters......................................... 1-32
SECTION 6.02. Conditions to Obligations of Lucent and Sub................. 1-33
(a) Representations and Warranties.......................... 1-33
(b) Performance of Obligations of Ascend.................... 1-33
(c) Tax Opinions............................................ 1-33
SECTION 6.03. Conditions to Obligations of Ascend......................... 1-33
(a) Representations and Warranties.......................... 1-33
(b) Performance of Obligations of Lucent and Sub............ 1-33
(c) Tax Opinions............................................ 1-33
SECTION 6.04. Frustration of Closing Conditions........................... 1-33
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination................................................. 1-34
SECTION 7.02. Effect of Termination....................................... 1-34
SECTION 7.03. Amendment................................................... 1-35
SECTION 7.04. Extension; Waiver........................................... 1-35
SECTION 7.05. Procedure for Termination, Amendment, Extension or Waiver... 1-35
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and Warranties............... 1-35
SECTION 8.02. Notices..................................................... 1-35
SECTION 8.03. Definitions................................................. 1-36
SECTION 8.04. Interpretation.............................................. 1-37
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SECTION 8.05. Counterparts................................................ 1-37
SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries.............. 1-37
SECTION 8.07. Governing Law............................................... 1-38
SECTION 8.08. Assignment.................................................. 1-38
SECTION 8.09. Enforcement................................................. 1-38
SECTION 8.10. Headings.................................................... 1-38
SECTION 8.11. Severability................................................ 1-38
Annex I Index of Defined Terms
Exhibit A Certificate of Incorporation of Surviving Corporation
Exhibit B Form of Affiliate Letter
</TABLE>
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AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
January 12, 1999, as amended by the FIRST AMENDMENT TO AGREEMENT AND
PLAN OF MERGER dated as of May 16, 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
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<PAGE> 80
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
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"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
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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
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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
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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
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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
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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
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<PAGE> 87
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 Hart-Scott-Rodino
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.
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(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
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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
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<PAGE> 90
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.
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(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
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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
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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
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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
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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
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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
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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.
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(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 Goldman, Sachs & 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 Goldman, 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
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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 5.3 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) and
provided further, that any such options issued after May 3, 1999 shall be
issued to new employees only, (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
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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;
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(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"
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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
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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.
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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
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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
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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) From
the Effective Time to the second anniversary of the Effective Time (the
"Continuation Period"), Lucent shall provide, or cause to be provided, employee
benefit plans, programs and arrangements (other than stock options) to employees
of Ascend that are substantially equivalent in the aggregate to those employee
benefit plans, programs and arrangements of Ascend provided to employees of
Ascend as of the date hereof; provided, however, 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; and, provided further that the substitution of Lucent stock for
Ascend stock under any employee benefit plan, program or arrangement shall be
disregarded for purposes of this sentence. 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.
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(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
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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
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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
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<PAGE> 110
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.
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<PAGE> 111
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 &
Moore, 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, Meagher & Flom 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.
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<PAGE> 112
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
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<PAGE> 113
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.
600 Mountain Avenue
Room 6A 311
Murray Hill, NJ 07974
Telecopy No.: Separately supplied
Attention: Pamela F. Craven
Vice President-Law
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<PAGE> 114
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Telecopy No.: Separately supplied
Attention: Robert A. Kindler
Robert I. Townsend, III; and
(b) if to Ascend, to
Ascend Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Telecopy No.: Separately supplied
Attention: Frances M. Jewels
Vice President and General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, MA 02108
Telecopy No.: Separately supplied
Attention: Margaret A. Brown
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
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<PAGE> 115
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
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<PAGE> 116
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.
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<PAGE> 117
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/ RICHARD A. MCGINN
-----------------------------------
Name: Richard A. McGinn
Title: Chief Executive Officer
DASHER MERGER INC.,
by /s/ PAMELA F. CRAVEN
-----------------------------------
Name: Pamela F. Craven
Title: Vice President and Secretary
ASCEND COMMUNICATIONS, INC.,
by /s/ MORY EJABAT
-----------------------------------
Name: Mory Ejabat
Title: President and Chief Executive
Officer
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<PAGE> 118
ANNEX I
TO THE MERGER AGREEMENT
Index of Defined Terms
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Acquisition Agreement............... 1-24
Adjusted Option..................... 1-27
affiliate........................... 1-36
Agreement........................... 1-1
Applicable Period................... 1-23
Ascend.............................. 1-1
Ascend Authorized Preferred Stock... 1-7
Ascend Benefit Plans................ 1-11
Ascend Common Stock................. 1-1
Ascend Disclosure Schedule.......... 1-6
Ascend Filed SEC Documents.......... 1-10
Ascend Permits...................... 1-11
Ascend Proxy Statement.............. 1-9
Ascend SEC Documents................ 1-9
Ascend Stock Options................ 1-7
Ascend Stock Plans.................. 1-7
Ascend Stockholder Approval......... 1-14
Ascend Stockholders Meeting......... 1-25
Benefits Date....................... 1-28
business day........................ 1-37
Certificate of Merger............... 1-2
Certificates........................ 1-3
Closing............................. 1-1
Closing Date........................ 1-1
Code................................ 1-1
Common Shares Trust................. 1-5
Confidentiality Agreement........... 1-26
Continuation Period................. 1-28
control............................. 1-36
DGCL................................ 1-1
Effective Time...................... 1-2
ERISA............................... 1-12
Excess Shares....................... 1-5
Exchange Act........................ 1-9
Exchange Agent...................... 1-3
Exchange Fund....................... 1-3
Exchange Ratio...................... 1-3
Form S-4............................ 1-10
Governmental Entity................. 1-8
HSR Act............................. 1-9
Intellectual Property Rights........ 1-14
knowledge........................... 1-37
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Liens............................... 1-6
Lucent.............................. 1-1
Lucent Authorized Preferred Stock... 1-16
Lucent Common Stock................. 1-3
Lucent Disclosure Schedule.......... 1-15
Lucent Filed SEC Documents.......... 1-18
Lucent Junior Preferred Stock....... 1-16
Lucent Permits...................... 1-19
Lucent Plans........................ 1-29
Lucent Rights....................... 1-16
Lucent Rights Agreement............. 1-16
Lucent SEC Documents................ 1-17
Lucent Stock Plans.................. 1-16
material adverse change............. 1-36
material adverse effect............. 1-36
Merger.............................. 1-1
Merger Consideration................ 1-3
Nasdaq.............................. 1-9
NYSE................................ 1-5
Option Agreement.................... 1-1
Parachute Gross-Up Payment.......... 1-13
person.............................. 1-37
Real Estate Transfer Taxes.......... 1-30
Restraints.......................... 1-32
SARs................................ 1-7
SEC................................. 1-6
Section 4.02 Notice................. 1-23
Securities Act...................... 1-9
Sub................................. 1-1
subsidiary.......................... 1-37
Superior Proposal................... 1-24
Surviving Corporation............... 1-1
Takeover Proposal................... 1-23
taxes............................... 1-13
Termination Fee..................... 1-30
</TABLE>
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<PAGE> 119
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 1209 Orange
Street, Wilmington, Delaware 19801, 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 sec.291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for this
corporation under the provisions of sec.279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three fourths in value of the creditors or class of creditors
and/or of the stockholders or class of stockholders of this corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
SEVENTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation, and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the
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<PAGE> 120
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 sec.109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payment for any of
its stock, the power to adopt, amend, or repeal the Bylaws of the
corporation may be exercised by the Board of Directors of the corporation;
provided, however, that any provision for the classification of directors
of the corporation for staggered terms pursuant to the provisions of
subsection (d) of sec.141 of the General Corporation Law of the State of
Delaware shall be set forth in an initial Bylaw or in a Bylaw adopted by
the stockholders entitled to vote of the corporation unless provisions for
such classification shall be set forth in this certificate of
incorporation.
3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever
the corporation shall be authorized to issue more than one class of stock,
no outstanding share of any class of stock which is denied voting power
under the provisions of the certificate of incorporation shall entitle the
holder thereof to the right to vote at any meeting of stockholders except
as the provisions of paragraph (2) of subsection (b) of sec.242 of the
General Corporation Law of the State of Delaware shall otherwise require;
provided, that no share of any such class which is otherwise denied voting
power shall entitle the holder thereof to vote upon the increase or
decrease in the number of authorized shares of said class.
EIGHTH: The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of sec.102 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented.
NINTH: The corporation shall, to the fullest extent permitted by the
provisions of sec.145 of the General Corporation Law of the State of Delaware,
as the same may be amended and supplemented, indemnify any and all persons whom
it shall have power to indemnify under said section from and against any and all
of the expenses, liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee, or agent and shall inure to the
benefit of the heirs, executors, and administrators of such a person.
TENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article TENTH.
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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
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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:
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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.]
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ANNEX 2
STOCK OPTION AGREEMENT dated as of January 12, 1999 (the
"Agreement"), by and between ASCEND COMMUNICATIONS, INC., a Delaware
corporation ("Issuer"), and LUCENT TECHNOLOGIES INC., a Delaware
corporation ("Grantee").
RECITALS
A. Grantee, Dasher Merger Inc., a wholly owned subsidiary of Grantee
("Sub"), and Issuer have entered into an Agreement and Plan of Merger dated as
of the date hereof (the "Merger Agreement"; defined terms used but not defined
herein have the meanings set forth in the Merger Agreement), providing for,
among other things, the merger of Sub with and into Issuer, with Issuer as the
surviving corporation in the Merger and becoming a wholly owned subsidiary of
Grantee; and
B. As a condition and inducement to Grantee's willingness to enter into
the Merger Agreement, Grantee has requested that Issuer agree, and Issuer has
agreed, to grant Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Issuer
and Grantee agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase up to 43,832,749 (as adjusted as set forth herein)
shares (the "Option Shares") of Common Stock, par value $.001 per share
("Issuer Common Stock"), of Issuer at a purchase price of $89.00 (as
adjusted as set forth herein) per Option Share (the "Purchase Price").
2. Exercise of Option. (a) Grantee may exercise the Option, with
respect to any or all of the Option Shares at any time or times, subject to
the provisions of Section 2(c), after the occurrence of any event as a
result of which the Grantee is unconditionally entitled to receive the
Termination Fee pursuant to Section 5.10(b) of the Merger Agreement (a
"Purchase Event"); provided, however, that (i) except as provided in the
last sentence of this Section 2(a), the Option will terminate and be of no
further force and effect upon the earliest to occur of (A) the Effective
Time, (B) 15 business days after the first occurrence of a Purchase Event,
and (C) termination of the Merger Agreement in accordance with its terms
prior to the occurrence of a Purchase Event, unless, in the case of clause
(C), Grantee has the right to receive a Termination Fee following such
termination upon the occurrence of certain events, in which case the Option
will not terminate until the later of (x) 15 business days following the
time such Termination Fee becomes unconditionally payable and (y) the
expiration of the period in which the Grantee has such right to receive a
Termination Fee, and (ii) any purchase of Option Shares upon exercise of
the Option will be subject to compliance with the HSR Act and the obtaining
or making of any consents, approvals, orders, notifications, filings or
authorizations, the failure of which to have obtained or made would have
the effect of making the issuance of Option Shares to Grantee illegal (the
"Regulatory Approvals"). Notwithstanding the termination of the Option,
Grantee will be entitled to purchase the Option Shares if it has exercised
the Option in accordance with the terms hereof prior to the termination of
the Option and the termination of the Option will not affect any
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rights hereunder which by their terms do not terminate or expire prior to
or as of such termination.
(b) In the event that Grantee is entitled to and wishes to exercise
the Option, it will send to Issuer a written notice (an "Exercise Notice";
the date of which being herein referred to as the "Notice Date") to that
effect which Exercise Notice also specifies the number of Option Shares, if
any, Grantee wishes to purchase pursuant to this Section 2(b), the number
of Option Shares, if any, with respect to which Grantee wishes to exercise
its Cash-Out Right (as defined herein) pursuant to Section 6(c), the
denominations of the certificate or certificates evidencing the Option
Shares which Grantee wishes to purchase pursuant to this Section 2(b) and a
date (an "Option Closing Date"), subject to the following sentence, not
earlier than seven business days nor later than 20 business days from the
Notice Date for the closing of such purchase (an "Option Closing"). Any
Option Closing will be at an agreed location and time in New York, New York
on the applicable Option Closing Date or at such later date as may be
necessary so as to comply with the first sentence of Section 2(a).
(c) Notwithstanding anything to the contrary contained herein, any
exercise of the Option and purchase of Option Shares shall be subject to
compliance with applicable laws and regulations, which may prohibit the
purchase of all the Option Shares specified in the Exercise Notice without
first obtaining or making certain Regulatory Approvals. In such event, if
the Option is otherwise exercisable and Grantee wishes to exercise the
Option, the Option may be exercised in accordance with Section 2(b) and
Grantee shall acquire the maximum number of Option Shares specified in the
Exercise Notice that Grantee is then permitted to acquire under the
applicable laws and regulations, and if Grantee thereafter obtains the
Regulatory Approvals to acquire the remaining balance of the Option Shares
specified in the Exercise Notice, then Grantee shall be entitled to acquire
such remaining balance. Issuer agrees to use its reasonable efforts to
assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a Regulatory
Approval required for the purchase of any Option Shares will not be issued
or granted or (ii) such Regulatory Approval has not been issued or granted
within six months of the date of the Exercise Notice, Grantee shall have
the right to exercise its Cash-Out Right pursuant to Section 6(c) with
respect to the Option Shares for which such Regulatory Approval will not be
issued or granted or has not been issued or granted.
3. Payment and Delivery of Certificates. (a) At any Option
Closing, Grantee will pay to Issuer in immediately available funds by wire
transfer to a bank account designated in writing by Issuer an amount equal
to the Purchase Price multiplied by the number of Option Shares to be
purchased at such Option Closing plus the amount of any transfer, stamp or
other similar taxes or charges imposed in connection therewith.
(b) At any Option Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), Issuer will
deliver to Grantee a certificate or certificates representing the Option
Shares to be purchased at such Option Closing, which Option Shares will be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever. If at the time of issuance of Option Shares pursuant to an
exercise of the Option hereunder, Issuer shall have issued any securities
similar to rights under a stockholder rights plan, then each Option Share
issued pursuant to such exercise will also represent such a corresponding
right with terms substantially the same as and at least as favorable to
Grantee as are provided under any such stockholder rights plan then in
effect.
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(c) Certificates for the Option Shares delivered at an Option
Closing will have typed or printed thereon a restrictive legend which will
read substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR
SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS
ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF
JANUARY 12, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF
ASCEND COMMUNICATIONS, INC. AT ITS PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend will be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have
been registered pursuant to the Securities Act, such Option Shares have
been sold in reliance on and in accordance with Rule 144 under the
Securities Act or Grantee has delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel in form and substance
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the Securities Act and (ii) the
reference to restrictions pursuant to this Agreement in the above legend
will be removed by delivery of substitute certificate(s) without such
reference if the Option Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance with the provisions
of this Agreement under circumstances that do not require the retention of
such reference.
4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and, subject to the expiration or
termination of any required waiting period under the HSR Act, to permit
it to issue, and, at all times from the date hereof until the obligation
to deliver Option Shares upon the exercise of the Option terminates,
shall have reserved for issuance, upon exercise of the Option, shares of
Issuer Common Stock necessary for Grantee to exercise the Option, and
Issuer will take all necessary corporate action to authorize and reserve
for issuance all additional shares of Issuer Common Stock or other
securities which may be issued pursuant to Section 6 upon exercise of
the Option. The shares of Issuer Common Stock to be issued upon due
exercise of the Option, including all additional shares of Issuer Common
Stock or other securities which may be issuable upon exercise of the
Option or any other securities which may be issued pursuant to Section
6, upon issuance pursuant hereto, will be duly and validly issued, fully
paid and nonassessable, and will be delivered free and clear of all
liens, claims, charges and encumbrances of any kind or nature
whatsoever, including without limitation any preemptive rights of any
stockholder of Issuer.
5. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
Purchase Not for Distribution. Any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be
transferred or otherwise disposed of except in a transaction registered,
or exempt from registration, under the Securities Act.
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6. Adjustment upon Changes in Capitalization, Etc. (a) In the
event of any change in Issuer Common Stock by reason of a stock dividend,
split-up, merger, recapitalization, combination, exchange of shares, or
similar transaction, the type and number of shares or securities subject to
the Option, and the Purchase Price thereof, will be adjusted appropriately,
and proper provision will be made in the agreements governing such
transaction, so that Grantee will receive upon exercise of the Option the
number and class of shares or other securities or property that Grantee
would have received in respect of Issuer Common Stock if the Option had
been exercised immediately prior to such event or the record date therefor,
as applicable. Subject to Section 1, and without limiting the parties'
relative rights and obligations under the Merger Agreement, if any
additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence
of this Section 6(a)), the number of shares of Issuer Common Stock subject
to the Option will be adjusted so that, after such issuance, it equals
19.9% of the number of shares of Issuer Common Stock then issued and
outstanding, without giving effect to any shares subject to or issued
pursuant to the Option.
(b) Without limiting the parties' relative rights and obligations
under the Merger Agreement, in the event that Issuer enters into an
agreement (i) to consolidate with or merge into any person, other than
Grantee or one of its subsidiaries, and Issuer will not be the continuing
or surviving corporation in such consolidation or merger, (ii) to permit
any person, other than Grantee or one of its subsidiaries, to merge into
Issuer and Issuer will be the continuing or surviving corporation, but in
connection with such merger, the shares of Issuer Common Stock outstanding
immediately prior to the consummation of such merger will be changed into
or exchanged for stock or other securities of Issuer or any other person or
cash or any other property, or the shares of Issuer Common Stock
outstanding immediately prior to the consummation of such merger will,
after such merger, represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or
one of its subsidiaries, then, and in each such case, the agreement
governing such transaction will make proper provision so that the Option
will, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire the number and class
of shares or other securities or property that Grantee would have received
in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such consolidation, merger, sale, or transfer, or the
record date therefor, as applicable and make any other necessary
adjustments.
(c) If, at any time during the period commencing on a Purchase Event
and ending on the termination of the Option in accordance with Section 2,
Grantee sends to Issuer an Exercise Notice indicating Grantee's election to
exercise its right (the "Cash-Out Right") pursuant to this Section 6(c),
then Issuer shall pay to Grantee, on the Option Closing Date, in exchange
for the cancellation of the Option with respect to such number of Option
Shares as Grantee specifies in the Exercise Notice, an amount in cash equal
to such number of Option Shares multiplied by the difference between (i)
the average closing price, for the 10 trading days commencing on the 12th
trading day immediately preceding the Option Closing Date, per share of
Issuer Common Stock as reported on The Nasdaq National Market (or, if not
listed on The Nasdaq National Market, as reported on any other national
securities exchange or national securities quotation system on which the
Issuer Common Stock is listed or quoted, as reported in The Wall Street
Journal (Northeast edition), or, if not reported thereby, any other
authoritative source) (the "Closing Price") and (ii) the Purchase Price.
Notwithstanding the
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termination of the Option, Grantee will be entitled to exercise its rights
under this Section 6(c) if it has exercised such rights in accordance with
the terms hereof prior to the termination of the Option.
(d) (i) Notwithstanding any other provision of this Agreement, in no
event shall Grantee's Total Profit (as hereinafter defined) plus any
Termination Fee paid to Grantee pursuant to Section 5.10(b) of the Merger
Agreement exceed in the aggregate $625 million and, if the total amount
that otherwise would be received by Grantee would exceed such amount,
Grantee, at its election, shall either (a) reduce the number of shares of
Issuer Common Stock subject to the Option, (b) deliver to Issuer for
cancellation shares of Issuer Common Stock previously purchased by Grantee,
(c) pay cash to Issuer or (d) take any action representing any combination
of the preceding clauses (a), (b) and (c), so that Grantee's actually
realized Total Profit, when aggregated with such Termination Fee so paid to
Grantee, shall not exceed $625 million after taking into account the
foregoing actions.
(ii) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of Option Shares as would, as of
the date of exercise, result in a Notional Total Profit (as defined below)
which, together with any Termination Fee theretofore paid to Grantee, would
exceed $625 million; provided, that nothing in this sentence shall restrict
any exercise of the Option permitted hereby on any subsequent date.
(iii) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (A) the amount received
by Grantee pursuant to Issuer's repurchase of the Option (or any portion
thereof) pursuant to the exercise of the Cash-Out Right under Section 6(c)
and (B)(x) the net cash amounts or the fair market value of any property
received by Grantee pursuant to the sale of Option Shares (or other
securities).
(iv) As used herein, the term "Notional Total Profit" with respect
to any number of Option Shares as to which Grantee may propose to exercise
the Option shall be the Total Profit determined as of the date of such
proposal assuming for such purpose that the Option was exercised on such
date for such number of Option Shares and assuming that such Option Shares,
together with all other Option Shares held by Grantee and its affiliates as
of such date, were sold for cash at the closing market price on The Nasdaq
National Market (or, if shares of Issuer Common Stock are not then listed
or traded on The Nasdaq National Market, on any other national securities
exchange or national quotation system on which shares of Issuer Common
Stock are so listed or traded) for shares of Issuer Common Stock as of the
close of business on the preceding trading day (less customary brokerage
commissions).
7. Registration Rights. Issuer will, if requested by Grantee at
any time and from time to time within two years of the exercise of the
Option, as expeditiously as possible prepare and file up to three
registration statements under the Securities Act if such registration is
necessary in order to permit the sale or other disposition of any or all
shares of securities that have been acquired by or are issuable to Grantee
upon exercise of the Option in accordance with the intended method of sale
or other disposition stated by Grantee, including a "shelf" registration
statement under Rule 415 under the Securities Act or any successor
provision, and Issuer will use its best efforts to qualify such shares or
other securities under any applicable state securities laws. Grantee agrees
to cause, and to cause any underwriters of any sale or other disposition to
cause, any sale or other disposition pursuant to such registration
statement to be effected on a widely distributed basis so that upon
consummation thereof no purchaser or transferee will own beneficially more
than 3.0% of the then-outstanding voting power of Issuer. Issuer will use
reasonable efforts to cause each such registration statement to become
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effective, to obtain all consents or waivers of other parties which are
required therefor, and to keep such registration statement effective for
such period not in excess of 120 calendar days from the day such
registration statement first becomes effective as may be reasonably
necessary to effect such sale or other disposition. The obligations of
Issuer hereunder to file a registration statement and to maintain its
effectiveness may be suspended for up to 120 calendar days in the aggregate
if the Board of Directors of Issuer shall have determined that the filing
of such registration statement or the maintenance of its effectiveness
would require premature disclosure of material nonpublic information that
would materially and adversely affect Issuer or otherwise interfere with or
adversely affect any pending or proposed offering of securities of Issuer
or any other material transaction involving Issuer. Any registration
statement prepared and filed under this Section 7, and any sale covered
thereby, will be at Issuer's expense except for underwriting discounts or
commissions, brokers' fees and the fees and disbursements of Grantee's
counsel related thereto. Grantee will provide all information reasonably
requested by Issuer for inclusion in any registration statement to be filed
hereunder. If, during the time periods referred to in the first sentence of
this Section 7, Issuer effects a registration under the Securities Act of
Issuer Common Stock for its own account or for any other stockholders of
Issuer (other than on Form S-4 or Form S-8, or any successor form), it will
allow Grantee the right to participate in such registration, and such
participation will not affect the obligation of Issuer to effect demand
registration statements for Grantee under this Section 7; provided that, if
the managing underwriters of such offering advise Issuer in writing that in
their opinion the number of shares of Issuer Common Stock requested to be
included in such registration exceeds the number which can be sold in such
offering, Issuer will include the shares requested to be included therein
by Grantee pro rata with the shares intended to be included therein by
Issuer. In connection with any registration pursuant to this Section 7,
Issuer and Grantee will provide each other and any underwriter of the
offering with customary representations, warranties, covenants,
indemnification, and contribution in connection with such registration.
If a requested registration pursuant to this Section 7 involves an
underwritten offering, the underwriter or underwriters thereof shall be a
nationally recognized firm or firms selected by Issuer. Notwithstanding
anything else contained in this Section 7, each requested registration
shall be for a number of shares of Issuer Common Stock which represent at
least one-fourth of the total of number of shares of Issuer Common Stock
purchased by Grantee hereunder.
8. Transfers. The Option Shares may not be sold, assigned,
transferred, or otherwise disposed of except (i) in an underwritten public
offering as provided in Section 7 or (ii) to any purchaser or transferee
who would not, to the knowledge of Grantee after reasonable inquiry (which
shall include obtaining a representation from the purchaser or transferee),
immediately following such sale, assignment, transfer or disposal,
beneficially own more than 3.0% of the then-outstanding voting power of the
Issuer; provided, however, that Grantee shall be permitted to sell any
Option Shares if such sale is made pursuant to a tender or exchange offer
that has been approved or recommended by a majority of the members of the
Board of Directors of Issuer (which majority shall include a majority of
directors who were directors as of the date hereof).
9. Listing. If Issuer Common Stock or any other securities to be
acquired upon exercise of the Option are then listed on The Nasdaq National
Market (or any other national securities exchange or national securities
quotation system), Issuer, upon the request of Grantee, will promptly file
an application to list the shares of Issuer Common Stock or other
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securities to be acquired upon exercise of the Option on The Nasdaq
National Market (and any such other national securities exchange or
national securities quotation system) and will use reasonable efforts to
obtain approval of such listing as promptly as practicable.
10. Loss or Mutilation. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered will constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed, or mutilated shall at any time be enforceable by anyone.
11. Miscellaneous. (a) Expenses. Each of the parties hereto will
bear and pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants,
and counsel.
(b) Amendment. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) Extension; Waiver. Any agreement on the part of a party to
waive any provision of this Agreement, or to extend the time for
performance, will be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise will not
constitute a waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries. This Agreement,
the Merger Agreement (including the documents and instruments attached
thereto as exhibits or schedules or delivered in connection therewith) and
the Confidentiality Agreement (i) constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter of this Agreement,
and (ii) except as provided in Section 8.06 of the Merger Agreement, are
not intended to confer upon any person other than the parties any rights or
remedies.
(e) Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of
conflict of laws thereof.
(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement shall be sent in the manner and to the
addresses set forth in the Merger Agreement.
(g) Assignment. Neither this Agreement, the Option nor any of the
rights, interests, or obligations under this Agreement may be assigned or
delegated, in whole or in part, by operation of law or otherwise, by Issuer
or Grantee without the prior written consent of the other. Any assignment
or delegation in violation of the preceding sentence will be void. Subject
to the first and second sentences of this Section 11(g), this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
(h) Further Assurances. In the event of any exercise of the Option
by Grantee, Issuer and Grantee will execute and deliver all other documents
and instruments and take all
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<PAGE> 131
other actions that may be reasonably necessary in order to consummate the
transactions provided for by such exercise.
(i) Enforcement. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any Federal
court located in the State of Delaware or in Delaware state court, the
foregoing being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (i) consents
to submit itself to the personal jurisdiction of any Federal court located
in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (ii) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, and (iii) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated
by this Agreement in any court other than a Federal court sitting in the
State of Delaware or a Delaware state court.
(j) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled
to the extent possible.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first written above.
ASCEND COMMUNICATIONS, INC.,
by /s/ MORY EJABAT
-----------------------------------
Name: Mory Ejabat
Title: President and Chief Executive
Officer
LUCENT TECHNOLOGIES INC.,
by /s/ RICHARD A. MCGINN
-----------------------------------
Name: Richard A. McGinn
Title: Chief Executive Officer
2-8
<PAGE> 132
ANNEX 3
LOGO
January 12, 1999
Board of Directors
Ascend Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, California 94502
Dear Sirs:
You have asked us to advise you with respect to the fairness to the
stockholders of Ascend Communications, Inc. (the "Company"), other than Lucent
Technologies Inc. (the "Parent") and its affiliates, from a financial point of
view of the Exchange Ratio, as defined below and as established pursuant to the
terms of the Agreement and Plan of Merger, dated as of January 13, 1999 (the
"Merger Agreement"), among the Company, the Parent and Dasher Merger Inc. (the
"Sub"). The Merger Agreement provides for the merger (the "Merger") of the Sub
with and into the Company pursuant to which the Company will become a
wholly-owned subsidiary of the Parent and each outstanding share of common
stock, par value $.001 per share, of the Company will be converted into the
right to receive 0.825 of a share of common stock, par value $.01 per share (the
"Parent Common Stock") of the Parent (the "Exchange Ratio").
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company and the Parent, as
well as the Merger Agreement. We have also reviewed certain other information
provided to us by the Company as well as estimates of the Company's and Parent's
future performance made by market analysts.
We have had discussions with the management of the Company to discuss
the business prospects of the Company, its projected performance, the strategic
importance of the Merger to the Parent, and the strategic and operational
benefits expected to be achieved through the combination of the operations of
the Company and the Parent. We have also had discussions with the management of
the Parent to discuss the business and operations of the Parent.
We have also considered certain financial and stock market data of the
Company and the Parent, and we have compared that data with similar data for
other publicly held companies in businesses similar to those of the Company and
the Parent and we have considered the financial terms of certain other business
combinations and other transactions which have recently been effected. We also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility
for independent verification of any of the foregoing information and have relied
on its being complete and accurate in all material respects. We have assumed
that any estimates or forecasts used in our analysis have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the Company's management as to the future financial performance of
the Company. In addition, we have not made an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of the Company
or the Parent, nor have we been furnished with any such evaluations or
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<PAGE> 133
Board of Directors
Ascend Communications, Inc.
January 12, 1999
Page 2
appraisals. Our opinion is necessarily based upon financial, economic, market
and other conditions as they exist and can be evaluated on the date hereof.
We are not expressing any opinion as to what the value of the Parent
Common Stock actually will be when issued to the Company's stockholders pursuant
to the Merger or the prices at which such Parent Common Stock will trade
subsequent to the Merger. We were not requested to, and did not, solicit third
party indications of interest in acquiring all or any part of the Company.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger. We will also receive a fee
for rendering this opinion. In the past, we have performed certain investment
banking services for the Company and the Parent and have received customary fees
for such services.
In the ordinary course of our business, we and our affiliates may
actively trade the debt and equity securities of both the Company and the Parent
for our own accounts and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors in connection with its consideration of the Merger, does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on the proposed Merger and is not to be quoted or referred to, in whole or
in part, in any registration statement, prospectus or proxy statement, or in any
other document used in connection with the offering or sale of securities, nor
shall this letter be used for any other purposes, without our prior written
consent.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Exchange Ratio is fair to the stockholders of the Company,
other than the Parent and its affiliates, from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ GEORGE F. BOUTROS
---------------------------------------------------------
George F. Boutros
Managing Director
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<PAGE> 134
4050-PS-99
<PAGE> 135
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The registrant's Certificate of Incorporation provides that a director of
the registrant shall not be personally liable to the registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except, if required by the Delaware General Corporation Law, for liability (1)
for any breach of the director's duty of loyalty to the registrant or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) under Section 174 of
the Delaware General Corporation Law, which concerns unlawful payments of
dividends, stock purchases or redemptions or (4) for any transaction from which
the director derived an improper personal benefit. Neither the amendment nor
repeal of such provision shall eliminate or reduce the effect of such provision
in respect of any matter occurring, or any cause of action, suit or claim that,
but for such provision, would accrue or arise prior to such amendment or repeal.
While the registrant's Certificate of Incorporation provides directors with
protection from awards for monetary damages for breach of their duty of care, it
does not eliminate such duty. Accordingly, the registrant's Certificate of
Incorporation will have no effect on the availability of equitable remedies such
as an injunction or rescission based on a director's breach of his or her duty
of care.
The registrant's Certificate of Incorporation provides that each person who
was or is made a party to or is threatened to be made a party to or is involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that such
person, or a person of whom such person is the legal representative, is or was a
director or officer of the registrant or is or was serving at the request of the
registrant as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the registrant to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the registrant to provide broader
indemnification rights than said law permitted the registrant to provide prior
to such amendment), against all expense, liability and loss reasonably incurred
or suffered by such person in connection therewith. Such right to
indemnification includes the right to have the registrant pay the expenses
incurred in defending any such proceeding in advance of its final disposition,
subject to the provisions of the Delaware General Corporation Law. Such rights
are not exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the registrant's Certificate of
Incorporation or By-Laws, agreement, vote of stockholders or disinterested
directors or otherwise. No repeal or modification of such provision will in any
way diminish or adversely affect the rights of any director, officer, employee
or agent of the registrant thereunder in respect of any occurrence or matter
arising prior to any such repeal or modification.
The registrant's Certificate of Incorporation also specifically authorizes
the registrant to maintain insurance and to grant similar indemnification rights
to employees or agents of the registrant. The directors and officers of the
registrant are covered by insurance policies indemnifying them against certain
liabilities, including certain liabilities arising under the Securities Act of
1933, which might be incurred by them in such capacities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See Exhibit Index.
(b) Not applicable.
(c) Opinion of Credit Suisse First Boston Corporation, attached as Annex 3
to the proxy statement/ prospectus which is a part of this registration
statement on Form S-4.
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<PAGE> 136
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c)(1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c)(1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is
used in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
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<PAGE> 137
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE> 138
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MURRAY HILL, STATE OF NEW
JERSEY, ON MAY 21, 1999.
LUCENT TECHNOLOGIES INC.
(Registrant)
By: /s/ JAMES S. LUSK
------------------------------------
Name: James S. Lusk
Title: Vice President and
Controller
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C> <C>
Principal Executive Officer:
Richard A. McGinn Chairman of the Board
and Chief Executive
Officer
Principal Financial Officer:
Donald K. Peterson Executive Vice President
and Chief Financial
Officer
Principal Accounting Officer:
James S. Lusk Vice President and
Controller
Directors:
Paul A. Allaire
Carla A. Hills
Drew Lewis
Richard A. McGinn
Paul H. O'Neill
Donald S. Perkins
Henry B. Schacht
Franklin A. Thomas
John A. Young
</TABLE>
By: /s/ JAMES S. LUSK
---------------------------------
(James S. Lusk
attorney-in-fact)*
*by power of attorney
Date: May 21, 1999
II-4
<PAGE> 139
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C>
2.1** Agreement and Plan of Merger dated as of January 12, 1999,
by and among the registrant, Dasher Merger Inc. and Ascend
(included as Annex 1 to the proxy statement/prospectus which
is a part of this Registration Statement on Form S-4).
2.2 Stock Option Agreement dated as of January 12, 1999, by and
between Ascend, as issuer, and the registrant, as grantee
(included as Annex 2 to the proxy statement/prospectus which
is a part of this Registration Statement on Form S-4).
3.1* Certificate of Incorporation of the registrant, as amended
effective February 17, 1999 (incorporated by reference to
Exhibit (3)(i) to the registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999).
3.2* By-Laws of the registrant, as amended effective February 17,
1999 (incorporated by reference to Exhibit (3)(ii) to the
registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999).
4.1* Rights Agreement between the registrant and The Bank of New
York (successor to First Chicago Trust Company of New York),
as rights agent, dated as of April 4, 1996 (incorporated by
reference to Exhibit 4.2 to Registration Statement (No.
333-00703) on Form S-1).
4.2* Amendment to Rights Agreement between the registrant and The
Bank of New York (successor to First Chicago Trust Company
of New York), dated as of February 18, 1998 (incorporated by
reference to Exhibit (10)(i)5 to the registrant's Annual
Report on Form 10-K for the period ended September 30,
1998).
4.3* Indenture dated as of April 1, 1996 between the registrant
and The Bank of New York, as trustee (incorporated by
reference to Exhibit 4A to Registration Statement (No.
333-01223) on Form S-3).
4.4 Other instruments in addition to Exhibit 4.3 which define
the rights of holders of long term debt of the registrant
and all of its consolidated subsidiaries are not filed
herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A).
Pursuant to this regulation, the registrant hereby agrees to
furnish a copy of any such instrument to the Commission upon
request.
5.1 Opinion of Pamela F. Craven, Vice President -- Law and
Secretary of the registrant, as to the legality of the
securities to be issued.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to
certain United States federal income tax consequences of the
merger.
10.1* Separation and Distribution Agreement by and among the
registrant, AT&T Corp. and NCR Corporation, dated as of
February 1, 1996 and amended and restated as of March 29,
1996 (incorporated by reference to Exhibit 10.1 to
Registration Statement (No. 333-00703) on Form S-1).
10.2* Tax Sharing Agreement by and among the registrant, AT&T
Corp. and NCR Corporation, dated as of February 1, 1996 and
amended and restated as of March 29, 1996 (incorporated by
reference to Exhibit 10.6 to Registration Statement (No.
333-00703) on Form S-1).
10.3* Employee Benefits Agreement by and between AT&T and the
registrant, dated as of February 1, 1996 and amended and
restated as of March 29, 1996 (incorporated by reference to
Exhibit 10.2 to Registration Statement (No. 333-00703) on
Form S-1).
</TABLE>
<PAGE> 140
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C>
10.4* General Purchase Agreement by and between AT&T Corp. and the
registrant, dated February 1, 1996 and amended and restated
as of March 29, 1996 (incorporated by reference to Exhibit
10.3 to Registration Statement (No. 333-00703) on Form S-1).
10.5* Interim Services and Systems Replication Agreement by and
among AT&T, the registrant and NCR, dated as of February 1,
1996 and amended and restated as of March 29, 1996
(incorporated by reference to Exhibit 10.4 to Registration
Statement (No. 333-00703) on Form S-1).
10.6* Brand License Agreement by and between the registrant and
AT&T, dated as of February 1, 1996 (incorporated by
reference to Exhibit 10.5 to Registration Statement (No.
333-00703) on Form S-1).
10.7* Patent License Agreement among AT&T, NCR and the registrant,
effective as of March 29, 1996 (incorporated by reference to
Exhibit 10.7 to Registration Statement (No. 333-00703) on
Form S-1).
10.8* Amended and Restated Technology License Agreement among
AT&T, NCR and the registrant, effective as of March 29, 1996
(incorporated by reference to Exhibit 10.8 to Registration
Statement (No. 333-00703) on Form S-1).
10.9* Lucent Technologies Inc. Short Term Incentive Program
(incorporated by reference to Exhibit (10)(iii)(A)2 to the
registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998).
10.10* Lucent Technologies Inc. 1996 Long Term Incentive Program
(incorporated by reference to Exhibit (10)(iii)(A)1 to the
registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998).
10.11* Lucent Technologies Inc. Deferred Compensation Plan
(incorporated by reference to Exhibit (10)(iii)(A)3 to the
registrant's Annual Report on Form 10-K for the period ended
September 30, 1998).
10.12* Pension Plan for Non-Employee Directors of the registrant
(incorporated by reference to Exhibit 10.11 to Registration
Statement (No. 333-00703) on Form S-1) (this plan has been
terminated).
10.13* Lucent Technologies Inc. Stock Retainer Plan for
Non-Employee Directors (incorporated by reference to Exhibit
10(iii)(A)5 to the registrant's Annual Report on Form 10-K
for the period ended September 30, 1998).
10.14* Lucent Technologies Inc. Excess Benefit and Compensation
Plan (incorporated by reference to Exhibit (10)(iii)(A)5 to
the registrant's Annual Report on Form 10-K for Transition
Period ended September 30, 1996).
10.15* Lucent Technologies Inc. Mid-Career Pension Plan
(incorporated by reference to Exhibit (10)(iii)(A)6 to the
registrant's Annual Report on Form 10-K for Transition
Period ended September 30, 1996).
10.16* Lucent Technologies Inc. Non-Qualified Pension Plan
(incorporated by reference to Exhibit (10)(iii)(A)7 to the
registrant's Annual Report on Form 10-K for Transition
Period ended September 30, 1996).
10.17* Lucent Technologies Inc. Officer Long-Term Disability and
Survivor Protection Plan (incorporated by reference to
Exhibit (10)(iii)(A)8 to the registrant's Annual Report on
Form 10-K for Transition Period ended September 30, 1996).
10.18* Employment Agreement of Mr. Verwaayen dated June 12, 1997
(incorporated by reference to Exhibit (10)(iii)(A)9 to the
registrant's Annual Report on Form 10-K for the period ended
September 30, 1997).
</TABLE>
<PAGE> 141
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C>
10.19* Employment Agreement of Mr. Peterson dated August 8, 1995
(incorporated by reference to Exhibit (10)(iii)(A)10 to the
registrant's Annual Report on Form 10-K for the period ended
September 30, 1997).
10.20* Consulting Agreement of Mr. Schacht effective March 1, 1998
(incorporated by reference to Exhibit (10)(iii)(A)5 to the
registrant's Quarterly Report on Form 10-Q for the period
ended March 31, 1998).
10.21* Description of the Lucent Technologies Inc. Supplemental
Pension Plan (incorporated by reference to Exhibit
(10)(iii)(A)13 to the registrant's Annual Report on Form
10-K for the period ended September 30, 1998).
10.22* Lucent Technologies Inc. 1999 Stock Compensation Plan for
Non-Employee Directors (incorporated by reference to Exhibit
(10)(iii)(A)14 to the registrant's Annual Report on Form
10-K for the period ended September 30, 1998).
10.23* Lucent Technologies Inc. Voluntary Life Insurance Plan
(incorporated by reference to Exhibit (10)(iii)(A)15 to the
registrant's Annual Report on Form 10-K for the period ended
September 30, 1998).
21.1* List of Subsidiaries of the registrant (incorporated by
reference to Exhibit 21 to the registrant's Annual Report on
Form 10-K for the period ended September 30, 1998).
23.1 Consent of Pamela F. Craven, Vice President -- Law and
Secretary of the registrant (included as part of Exhibit 5.1
to this registration statement).
23.2 Consent of Independent Accountants.
23.3 Consent of Ernst & Young LLP, Independent Auditors.
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included as part of Exhibit 8.1 to this registration
statement).
23.5 Consent of Credit Suisse First Boston Corporation.
23.6 Consent of Independent Accountants.
24.1 Powers of Attorney.
99.1 Form of Proxy to be mailed to holders of Ascend common
stock.
</TABLE>
- ---------------
* Incorporated herein by reference.
** The registrant hereby agrees to furnish supplementally a copy of any omitted
schedules to this agreement to the Securities and Exchange Commission upon
its request.
<PAGE> 1
Exhibit 5.1
May 21, 1999
Lucent Technologies Inc.
600 Mountain Avenue
Murray Hill, New Jersey 07974
Ladies and Gentlemen:
I have acted as counsel for Lucent Technologies Inc., a Delaware
corporation ("Lucent"), in connection with the preparation of a Registration
Statement on Form S-4 (the "Registration Statement") to be filed on the date
hereof by Lucent with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities Act of 1933 (the "Act"). The Registration Statement
relates to the proposed issuance by Lucent of up to 435,062,130 shares (the
"Shares") of its common stock, par value $0.01 per share (together with the
attached rights to purchase junior preferred stock, the "Common Stock"),
pursuant to the Agreement and Plan of Merger (the "Merger Agreement") dated as
of January 12, 1999, as amended, among Lucent, Dasher Merger Inc., a Delaware
corporation and a wholly owned subsidiary of Lucent ("MergerSub"), and Ascend
Communications, Inc., a Delaware corporation ("Ascend"). The Merger Agreement
provides for the merger (the "Merger") of MergerSub with and into Ascend, with
Ascend surviving as a wholly owned subsidiary of Lucent.
I have examined such corporate records, certificates and other
documents as I have considered necessary or appropriate for the purposes of this
opinion. In such examination, I have assumed the genuineness of all signatures
and the authenticity of all documents submitted to me as copies. In examining
agreements executed by parties other than Lucent and MergerSub, I have assumed
that such parties had the power, corporate or other, to enter into and perform
all obligations thereunder and also have assumed the due authorization by all
requisite action, corporate or other, and execution and delivery by such
parties of such documents, and the validity and binding effect thereof. As to
any facts material to the opinion expressed herein which I have not
independently verified or established, I have relied upon statements and
representations of officers and representatives of Lucent and others.
<PAGE> 2
Lucent Technologies Inc.
May 21, 1999
Page 2
Based on such examination, I am of the opinion that the Shares have
been duly authorized for issuance and, when issued in accordance with the terms
and conditions of the Merger Agreement, will be validly issued, fully paid and
non-assessable.
I hereby consent to the inclusion of this opinion as an exhibit to
the Registration Statement and to the reference to me and this opinion in the
proxy statement/prospectus that forms a part of the Registration Statement. In
giving such consent, I do not hereby admit that I am in the category of persons
whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Pamela F. Craven
<PAGE> 1
Exhibit 8.1
May 21, 1999
Ascend Communications, Inc.
1701 Harbor Bay Parkway
Alameda, California 94502
Ladies and Gentlemen:
We have acted as tax counsel to Ascend Communications, Inc. ("Ascend"), a
Delaware corporation, in connection with (i) the Merger, as defined and
described in the Agreement and Plan of Merger, dated as of January 12, 1999, as
amended (the "Merger Agreement"), among Ascend, Lucent Technologies Inc., a
Delaware corporation ("Lucent"), and Dasher Merger Inc., a Delaware corporation
and newly-formed, wholly-owned subsidiary of Lucent ("MergerSub"), and (ii) the
preparation and filing of the Registration Statement with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), on May 21, 1999 (the "Registration Statement"),
which includes the Proxy Statement of Ascend and the Prospectus of Lucent (the
"Proxy Statement/Prospectus"). The delivery of this opinion, dated as of May 21,
1999, is a condition of the Merger pursuant to Section 6.03(c) of the Merger
Agreement. Unless otherwise indicated, each capitalized term used herein has the
meaning ascribed to it in the Merger Agreement.
In connection with this opinion, we have examined the Merger Agreement, the
Proxy Statement/Prospectus and such other documents and corporate records as we
have deemed necessary or appropriate in order to enable us to render the opinion
below. For purposes of this opinion, we have assumed (i) the validity and
accuracy of the documents and corporate records that we have examined and the
facts and representations concerning the Merger that
<PAGE> 2
Ascend Communications, Inc.
May 21, 1999
Page 2
have come to our attention during our engagement, (ii) that the Merger will
be consummated in the manner described in the Merger Agreement and the Proxy
Statement/Prospectus, and (iii) that the representations made to us by Ascend,
Lucent, and MergerSub in their respective letters dated as of the date hereof,
and delivered to us for purposes of this opinion, are accurate and complete.
Subject to the assumptions set forth above, and the assumptions and
qualifications set forth in the discussion in the Proxy Statement/Prospectus
under the heading "Material United States Federal Income Tax Consequences of
the Merger" (the "Discussion"), in our opinion: (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code; (ii) holders of
Ascend Common Stock who exchange their Ascend Common Stock for Lucent Common
Stock in the Merger will not recognize gain or loss for United States federal
income tax purposes, except with respect to cash, if any, that they receive in
lieu of fractional shares of Lucent Common Stock; (iii) each such holder's
aggregate tax basis in the Lucent Common Stock received in the Merger will equal
his or her aggregate tax basis in the Ascend Common Stock exchanged therefor,
decreased by the amount of any tax basis allocable to any fractional share
interest for which cash is received; and (iv) the holding period of Lucent
Common Stock received by such holder in the exchange will include the holding
period of the Ascend Common Stock surrendered in exchange therefor. There can be
no assurances that the opinion expressed herein will be accepted by the Internal
Revenue Service (the "IRS") or, if challenged, by a court. This opinion is
delivered in accordance with the requirements of Item 601(b)(8) of Regulation
S-K under the Securities Act.
In rendering our opinion, we have considered the applicable provisions of
the Code, Treasury Department regulations promulgated thereunder, pertinent
judicial authorities, interpretive rulings of the IRS and such other authorities
as we have considered relevant. It should be noted that statutes, regulations,
judicial decisions and administrative interpretations are subject to change at
any time (possibly with retroactive effect). A change in the authorities or the
accuracy or completeness of any of the facts, information, documents, corporate
records, covenants, statements, representations or assumptions on which our
opinion is based could affect our conclusions. This opinion is expressed as of
the date hereof, and we are under no obligation to supplement or revise our
opinion to reflect any changes (including
<PAGE> 3
Ascend Communications, Inc.
May 21, 1999
Page 3
changes that have retroactive effect) (i) in applicable law or (ii) in any
fact, information, document, corporate record, covenant, statement,
representation or assumption stated herein that becomes untrue or incorrect.
This letter is furnished to you for use in connection with the Merger, as
described in the Merger Agreement and the Proxy Statement/Prospectus, and is not
to be used, circulated, quoted, or otherwise referred to for any other purpose
without our express written permission. In accordance with the requirements of
Item 601(b)(23) of Regulation S-K under the Securities Act, we hereby consent to
the filing of this opinion as an exhibit to the Registration Statement and to
the reference to our firm name under the headings "SUMMARY - General - Material
United States Federal Income Tax Consequences of the Merger," "SUMMARY - The
Merger - Conditions to the Merger," "THE MERGER - Material United States Federal
Income Tax Consequences of the Merger," "THE MERGER AGREEMENT AND STOCK OPTION
AGREEMENT - The Merger Agreement - Conditions to the Completion of the Merger,"
and "LEGAL MATTERS" in the Proxy Statement/Prospectus. In giving such consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the Commission thereunder.
Very truly yours,
By: /s/ Skadden, Arps, Slate, Meagher & Flom LLP
--------------------------------------------
Skadden, Arps, Slate, Meagher & Flom LLP
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Lucent Technologies Inc. on Form S-4 of our report, dated February 26, 1999,
except for the fifth paragraph of Note 1, as to which the date is April 1, 1999,
on our audit of the consolidated financial statements of Lucent Technologies
Inc. and subsidiaries at September 30, 1998 and 1997 and for each of the two
years in the period ended September 30, 1998 and for the nine-month period ended
September 30, 1996, which report is included in the Current Report on Form 8-K/A
#1 dated May 18, 1999. We also consent to the reference to our firm under the
caption "Experts".
/s/ PricewaterhouseCoopers LLP
New York, New York
May 19, 1999
<PAGE> 1
Exhibit 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-4 and related Proxy Statement/Prospectus and to
the incorporation by reference therein of our report dated January 22, 1999,
with respect to the consolidated financial statements and schedule of Ascend
Communications, Inc. included in its Annual Report (Form 10-K/A) for the year
ended December 31, 1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Walnut Creek, California
May 18, 1999
<PAGE> 1
EXHIBIT 23.5
CONSENT OF
CREDIT SUISSE FIRST BOSTON CORPORATION
Board of Directors
Ascend Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, California 94502
Members of the Board:
We hereby consent to the inclusion of (i) our opinion letter, dated January
12, 1999, to the board of directors of Ascend Communications, Inc. (the
"Company") as Annex 3 to the proxy statement/prospectus (the "Registration
Statement") relating to the proposed merger of Dasher Merger Inc. with and into
the Company, with the Company surviving the merger as a wholly owned subsidiary
of Lucent Technologies Inc., and (ii) references made to our firm and such
opinion in the Registration Statement under the captions entitled "SUMMARY --
General -- Fairness Opinion of Financial Advisor," "THE MERGER -- Background to
the Merger," "-- Reasons for the Merger and Board of Directors Recommendation --
Reasons for the Merger" and "-- Opinion of Credit Suisse First Boston
Corporation." In giving such consent, we do not admit that we come within the
category of persons whose consent is required under, nor do we admit that we are
"experts" for purposes of, the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
CREDIT SUISSE FIRST BOSTON CORPORATION
By /s/ George Boutros
------------------------------------
Name: George Boutros
Title: Managing Director
March 11, 1999
<PAGE> 1
Exhibit 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Lucent Technologies Inc. on Form S-4 of our report dated January 22, 1997,
except for note M as to which the date is March 30, 1997, on our audit of the
consolidated financial statements and our report dated January 22, 1997 on our
audit of the consolidated financial statement schedule of Cascade Communications
Corp. for the year ended December 31, 1996, which reports are included in the
Ascend Communications, Inc. Annual Report on Form 10-K/A #2 for the year ended
December 31, 1998. We also consent to the reference to our firm under the
caption "Experts."
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 19, 1999
<PAGE> 1
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, Lucent Technologies Inc., a Delaware corporation
(hereinafter referred to as the "Company"), proposes to file with the Securities
and Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Kenan Systems Corporation; and
WHEREAS, the Company proposes to file with the Securities and
Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Ascend Communications, Inc.; and
WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Donald K. Peterson and James S. Lusk and each of them, as attorneys for and in
the name, place and stead of the undersigned, and in the capacity of the
undersigned as a director and/or officer of the Company, to execute and file any
such registration statement with respect to the above-described common shares
and thereafter to execute and file any amended registration statement or
statements with respect thereto or amendments or supplements to any of the
foregoing, hereby giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing whatsoever
requisite and necessary to be done in and about the premises, as fully, to all
intents and purposes, as the undersigned might or could do if personally present
at the doing thereof, hereby ratifying and confirming all that said attorneys
may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 16th day of March, 1999.
By
/s/ RICHARD A. MCGINN
-------------------------------
Richard A. McGinn
Chairman of the Board and
Chief Executive Officer
<PAGE> 2
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, Lucent Technologies Inc., a Delaware corporation
(hereinafter referred to as the "Company"), proposes to file with the Securities
and Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Kenan Systems Corporation; and
WHEREAS, the Company proposes to file with the Securities and
Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Ascend Communications, Inc.; and
WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Donald K. Peterson and James S. Lusk and each of them, as attorneys for and in
the name, place and stead of the undersigned, and in the capacity of the
undersigned as a director and/or officer of the Company, to execute and file any
such registration statement with respect to the above-described common shares
and thereafter to execute and file any amended registration statement or
statements with respect thereto or amendments or supplements to any of the
foregoing, hereby giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing whatsoever
requisite and necessary to be done in and about the premises, as fully, to all
intents and purposes, as the undersigned might or could do if personally present
at the doing thereof, hereby ratifying and confirming all that said attorneys
may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 17th day of February, 1999.
By
/s/ DONALD K. PETERSON
----------------------------
Donald K. Peterson
Executive Vice President
and Chief Financial Officer
<PAGE> 3
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, Lucent Technologies Inc., a Delaware corporation
(hereinafter referred to as the "Company"), proposes to file with the Securities
and Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Kenan Systems Corporation; and
WHEREAS, the Company proposes to file with the Securities and
Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Ascend Communications, Inc.; and
WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Donald K. Peterson and James S. Lusk and each of them, as attorneys for and in
the name, place and stead of the undersigned, and in the capacity of the
undersigned as a director and/or officer of the Company, to execute and file any
such registration statement with respect to the above-described common shares
and thereafter to execute and file any amended registration statement or
statements with respect thereto or amendments or supplements to any of the
foregoing, hereby giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing whatsoever
requisite and necessary to be done in and about the premises, as fully, to all
intents and purposes, as the undersigned might or could do if personally present
at the doing thereof, hereby ratifying and confirming all that said attorneys
may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 17th day of February, 1999.
By
/s/ JAMES S. LUSK
-------------------------
James S. Lusk
Vice President and
Controller
<PAGE> 4
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, Lucent Technologies Inc., a Delaware corporation
(hereinafter referred to as the "Company"), proposes to file with the Securities
and Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Kenan Systems Corporation; and
WHEREAS, the Company proposes to file with the Securities and
Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Ascend Communications, Inc.; and
WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Donald K. Peterson and James S. Lusk and each of them, as attorneys for and in
the name, place and stead of the undersigned, and in the capacity of the
undersigned as a director and/or officer of the Company, to execute and file any
such registration statement with respect to the above-described common shares
and thereafter to execute and file any amended registration statement or
statements with respect thereto or amendments or supplements to any of the
foregoing, hereby giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing whatsoever
requisite and necessary to be done in and about the premises, as fully, to all
intents and purposes, as the undersigned might or could do if personally present
at the doing thereof, hereby ratifying and confirming all that said attorneys
may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 17th day of February, 1999.
By
/s/ PAUL A. ALLAIRE
-----------------------------
Paul A. Allaire
Director
<PAGE> 5
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, Lucent Technologies Inc., a Delaware corporation
(hereinafter referred to as the "Company"), proposes to file with the Securities
and Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Kenan Systems Corporation; and
WHEREAS, the Company proposes to file with the Securities and
Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Ascend Communications, Inc.; and
WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Donald K. Peterson and James S. Lusk and each of them, as attorneys for and in
the name, place and stead of the undersigned, and in the capacity of the
undersigned as a director and/or officer of the Company, to execute and file any
such registration statement with respect to the above-described common shares
and thereafter to execute and file any amended registration statement or
statements with respect thereto or amendments or supplements to any of the
foregoing, hereby giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing whatsoever
requisite and necessary to be done in and about the premises, as fully, to all
intents and purposes, as the undersigned might or could do if personally present
at the doing thereof, hereby ratifying and confirming all that said attorneys
may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 17th day of February, 1999.
By
/s/ CARLA A. HILLS
--------------------------------
Carla A. Hills
Director
<PAGE> 6
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, Lucent Technologies Inc., a Delaware corporation
(hereinafter referred to as the "Company"), proposes to file with the Securities
and Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Kenan Systems Corporation; and
WHEREAS, the Company proposes to file with the Securities and
Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Ascend Communications, Inc.; and
WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Donald K. Peterson and James S. Lusk and each of them, as attorneys for and in
the name, place and stead of the undersigned, and in the capacity of the
undersigned as a director and/or officer of the Company, to execute and file any
such registration statement with respect to the above-described common shares
and thereafter to execute and file any amended registration statement or
statements with respect thereto or amendments or supplements to any of the
foregoing, hereby giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing whatsoever
requisite and necessary to be done in and about the premises, as fully, to all
intents and purposes, as the undersigned might or could do if personally present
at the doing thereof, hereby ratifying and confirming all that said attorneys
may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 16th day of February, 1999.
By
/s/ DREW LEWIS
--------------------------------
Drew Lewis
Director
<PAGE> 7
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, Lucent Technologies Inc., a Delaware corporation
(hereinafter referred to as the "Company"), proposes to file with the Securities
and Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Kenan Systems Corporation; and
WHEREAS, the Company proposes to file with the Securities and
Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Ascend Communications, Inc.; and
WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Donald K. Peterson and James S. Lusk and each of them, as attorneys for and in
the name, place and stead of the undersigned, and in the capacity of the
undersigned as a director and/or officer of the Company, to execute and file any
such registration statement with respect to the above-described common shares
and thereafter to execute and file any amended registration statement or
statements with respect thereto or amendments or supplements to any of the
foregoing, hereby giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing whatsoever
requisite and necessary to be done in and about the premises, as fully, to all
intents and purposes, as the undersigned might or could do if personally present
at the doing thereof, hereby ratifying and confirming all that said attorneys
may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 17th day of February, 1999.
By
/s/ PAUL H. O'NEILL
--------------------------------
Paul H. O'Neill
Director
<PAGE> 8
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, Lucent Technologies Inc., a Delaware corporation
(hereinafter referred to as the "Company"), proposes to file with the Securities
and Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Kenan Systems Corporation; and
WHEREAS, the Company proposes to file with the Securities and
Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Ascend Communications, Inc.; and
WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Donald K. Peterson and James S. Lusk and each of them, as attorneys for and in
the name, place and stead of the undersigned, and in the capacity of the
undersigned as a director and/or officer of the Company, to execute and file any
such registration statement with respect to the above-described common shares
and thereafter to execute and file any amended registration statement or
statements with respect thereto or amendments or supplements to any of the
foregoing, hereby giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing whatsoever
requisite and necessary to be done in and about the premises, as fully, to all
intents and purposes, as the undersigned might or could do if personally present
at the doing thereof, hereby ratifying and confirming all that said attorneys
may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 14th day of February, 1999.
By
/s/ DONALD S. PERKINS
--------------------------------
Donald S. Perkins
Director
<PAGE> 9
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, Lucent Technologies Inc., a Delaware corporation
(hereinafter referred to as the "Company"), proposes to file with the Securities
and Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Kenan Systems Corporation; and
WHEREAS, the Company proposes to file with the Securities and
Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Ascend Communications, Inc.; and
WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Donald K. Peterson and James S. Lusk and each of them, as attorneys for and in
the name, place and stead of the undersigned, and in the capacity of the
undersigned as a director and/or officer of the Company, to execute and file any
such registration statement with respect to the above-described common shares
and thereafter to execute and file any amended registration statement or
statements with respect thereto or amendments or supplements to any of the
foregoing, hereby giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing whatsoever
requisite and necessary to be done in and about the premises, as fully, to all
intents and purposes, as the undersigned might or could do if personally present
at the doing thereof, hereby ratifying and confirming all that said attorneys
may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 16th day of February, 1999.
By
/s/ HENRY B. SCHACHT
----------------------------------
Henry B. Schacht
Director
<PAGE> 10
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, Lucent Technologies Inc., a Delaware corporation
(hereinafter referred to as the "Company"), proposes to file with the Securities
and Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Kenan Systems Corporation; and
WHEREAS, the Company proposes to file with the Securities and
Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Ascend Communications, Inc.; and
WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Donald K. Peterson and James S. Lusk and each of them, as attorneys for and in
the name, place and stead of the undersigned, and in the capacity of the
undersigned as a director and/or officer of the Company, to execute and file any
such registration statement with respect to the above-described common shares
and thereafter to execute and file any amended registration statement or
statements with respect thereto or amendments or supplements to any of the
foregoing, hereby giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing whatsoever
requisite and necessary to be done in and about the premises, as fully, to all
intents and purposes, as the undersigned might or could do if personally present
at the doing thereof, hereby ratifying and confirming all that said attorneys
may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 17th day of February, 1999.
By
/s/ FRANKLIN A. THOMAS
----------------------------------
Franklin A. Thomas
Director
<PAGE> 11
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, Lucent Technologies Inc., a Delaware corporation
(hereinafter referred to as the "Company"), proposes to file with the Securities
and Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Kenan Systems Corporation; and
WHEREAS, the Company proposes to file with the Securities and
Exchange Commission, under the provisions of the Securities Act of 1933, as
amended, a registration statement or registration statements (on Form S-3, Form
S-4, Form S-8 or any other appropriate Form) with respect to the issuance of
common shares, par value $.01 per share, of the Company (including the related
Preferred Share Purchase Rights), in connection with the acquisition by the
Company of Ascend Communications, Inc.; and
WHEREAS, the undersigned is a director and/or officer of the
Company, as indicated below his or her signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Donald K. Peterson and James S. Lusk and each of them, as attorneys for and in
the name, place and stead of the undersigned, and in the capacity of the
undersigned as a director and/or officer of the Company, to execute and file any
such registration statement with respect to the above-described common shares
and thereafter to execute and file any amended registration statement or
statements with respect thereto or amendments or supplements to any of the
foregoing, hereby giving and granting to said attorneys, and each of them, full
power and authority to do and perform each and every act and thing whatsoever
requisite and necessary to be done in and about the premises, as fully, to all
intents and purposes, as the undersigned might or could do if personally present
at the doing thereof, hereby ratifying and confirming all that said attorneys
may or shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of
Attorney this 17th day of February, 1999.
By
/s/ JOHN A. YOUNG
--------------------------------
John A. Young
Director
<PAGE> 1
PROXY Exhibit 99.1
ASCEND COMMUNICATIONS, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, JUNE 24, 1999
The undersigned stockholder of Ascend Communications, Inc., revoking all
prior proxies, hereby appoints Mory Ejabat and Michael Ashby, or any of them
acting singly, proxies, with full power of substitution, to vote all shares of
capital stock of Ascend which the undersigned is entitled to vote at the
special meeting of stockholders to be held at The Ritz-Carlton, 600 Stockton
Street, San Francisco, CA 94108, on Thursday, June 24, 1999, beginning at 9:00
a.m., local time, and at any adjournments of the meeting, upon matters set
forth in the Notice of Special Meeting dated May 20, 1999, and the related
proxy statement/prospectus, copies of which have been received by the
undersigned, and in their discretion upon any adjournment of the meeting or
upon any other business that may properly be brought before the meeting by the
Ascend board of directors. Attendance of the undersigned at the meeting or any
adjournment session of the meeting will not be deemed to revoke this proxy
unless the undersigned shall affirmatively indicate the intention of the
undersigned to vote the shares represented hereby in person prior to the
exercise of this proxy.
This proxy is solicited on behalf of the Ascend board of directors. A
stockholder wishing to vote in accordance with the recommendations of the board
of directors need only sign and date this proxy and return it in the enclosed
envelope.
- ------------------ CONTINUED AND TO BE SIGNED ON REVERSE SIDE ------------------
SEE REVERSE SEE REVERSE
SIDE SIDE
- ------------------ ------------------
- --------------------------------------------------------------------------------
[ARROW] FOLD AND DETACH HERE [ARROW]
<PAGE> 2
Please mark
votes as in X
this Example
The shares represented by this proxy will be voted as directed or, if no
direction is given with respect to the proposal set forth below, will be voted
"FOR" such proposal.
1. To adopt the Agreement and Plan of Merger dated as of January 12, 1999, as
amended, among Lucent Technologies Inc., Ascend Communications, Inc. and a
wholly owned subsidiary of Lucent Technologies Inc.
FOR AGAINST ABSTAIN
/ / / / / /
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please promptly complete, date and sign this proxy and mail it in the enclosed
envelope to assure representation of your shares. No postage need be affixed if
mailed in the United States. Please sign exactly as name(s) appear on the stock
certificate.
If stockholder is a corporation, please sign full corporate name by president
or other authorized officer and, if a partnership, please sign full partnership
name by an authorized partner or other persons.
Signature:___________________Date:___________Signature:_____________Date:_______
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
