Lucent Technologies Inc. - cl. 104(2)(c)
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED (the "Act")
AND
IN THE MATTER OF
LUCENT TECHNOLOGIES INC.
ORDER
(Clause 104(2)(c))
UPON the application (the "Application") of Lucent Technologies Inc. (the "Company") to the Ontario Securities Commission (the "Commission") for an order pursuant to clause 104(2)(c) of the Act exempting the Company from sections 95, 96, 97, 98 and 100 of the Act and the regulations made thereunder (the "Issuer Bid Requirements") with respect to certain acquisitions by the Company of securities of its own issue pursuant to the Company's 1996 Long Term Incentive Program (the "Plan");
AND UPON considering the Application and the recommendation of the staff of the Commission;
AND UPON the Company having represented to the Commission as follows:
1. The Company is a leading global supplier of communications networking equipment, holding strong leadership positions in Internet infrastructure for service providers, optical networking, wireless networks, communications networking support and services, communications integrated circuits, and optoelectronic components.
2. The Company is incorporated under the laws of the State of Delaware and is registered with the Securities Exchange Commission in the United States of America under the United States Securities Exchange Act of 1934 and is not exempt from the reporting requirements of the Exchange Act pursuant to Rule 12G 3-2 made thereunder.
3. The authorized share capital of the Company consists of 10,000,000,000 common shares ("Shares") and 250,000,000 preferred shares. As at October 1, 2000, there were 3,384,332,104 Shares issued and outstanding.
4. The Company is not a reporting issuer under the Act and has no present intention of becoming a reporting issuer under the Act.
5. Shares subject to the Plan are listed and posted for trading in the United States on the New York Stock Exchange (the "NYSE"). There is no market in Ontario for the Shares and none is expected to develop.
6. As at January 20, 2001, there is one person eligible to participate in the Plan in Ontario.
7. The Plan was established by the Company to encourage selected key employees of the Company and its affiliates to acquire a proprietary and vested interest in the growth and performance of the Company, to generate an increased incentive to contribute to the Company's future success and prosperity, and to attract and retain individuals with exceptional managerial talent.
8. The Plan was, and will be available in Ontario only to employees of subsidiaries in which the Company owns more than 50% of the voting interests and for the purposes of this application, the term "subsidiary" shall be so construed as it applies to employees of the Company and its subsidiaries resident in Ontario.
9. The Plan is open to all employees who are also officers of the Company or its subsidiaries.
10. Grants of awards under the Plan in Ontario were first made in 1997 and continued annually thereafter until August of 2000.
11. Options to purchase Shares were granted to selected employee-officers of the Company resident in Ontario. Since the commencement of the Plan, only 3 individuals in Ontario have received any grants thereunder. As of February 1, 2001, only 1 individual, who is no longer resident in Canada, has exercised any option to purchase Shares under the Plan. Of the 3 employee-officers who received grants, only 1 remains in Ontario and is no longer eligible for grants under the Plan as she no longer holds the title of employee-officer (although she remains an employee).
12. As there are no employee-officers resident in Ontario at the present time, no further grants are contemplated. Grants will no longer be made in Ontario until such time as there are employee-officers of the Company or a subsidiary resident in Ontario.
13. Participation in the Plans by employee-officers ("Plan Participants") is voluntary and Plan Participants will not be induced to participate in the Plan by expectation of or as a condition of employment or continued employment with the Company.
14. The Plan is administered by the Corporate Governance and Compensation Committee (or any successor committee) of the Board of Directors of the Company (the "Committee").
15. The total number of Shares reserved for issuance under the Plan is 128,000,000 Shares.
16. The direct and indirect shareholders of the Company in Ontario, as at January 20, 2001, do not hold more than 10% of the outstanding Shares of the Company. If at any time during the effectiveness of the Plan the direct and indirect shareholders of the Company in Ontario hold, in aggregate, greater than 10% of the total number of issued and outstanding Shares, the Company will apply to the Commission for an order with respect to further trades to and by the Plan Participants in Ontario in respect of Shares acquired under the Plan.
17. Plan Participants resident in Ontario who acquire any awards under the Plan will be provided with all disclosure material relating to the Company which is provided to holders of awards (as described herein) resident in the United States.
18. The Committee, at its discretion, may grant an award to a Plan Participant. An award may consist of (i) employee stock options ("Options" or individually, an "Option") which may or may not be incentive stock options (as defined herein), (ii) currently or on a deferred basis, interest or dividends or interest or dividend equivalents with respect to the number of Shares covered by an award under the Plan, (iii) other awards payable in Shares, other securities of the Company, cash or other property as may be determined by the Committee ("Other Stock Unit Awards"), (iv) awards which are granted or Shares issued through the assumption of, or in substitution or exchange for, employee benefit awards or the right or obligation to make future employee benefit awards, in connection with the acquisition of another corporation or business entity in lieu of Options ("Substitute Awards"), (v) awards of restricted stock ("Restricted Stock"), or (vi) performance based awards ("Performance Awards") (all of the above awards collectively referred to herein as "Awards"). Awards may be granted for no consideration, for such minimum consideration as is required by applicable law or for such other consideration as the Committee may determine.
19. The exercise price per Share under the Options shall be determined by the Committee in its sole discretion; provided that except in the case of Options pursuant to a Substitute Award, such exercise price shall not be less than the fair market value of a Share on the date of the grant of Options. Fair market value is equal to the average of the high and low sales price of a Share as reported on the NYSE on the date of grant (or on the next preceding day when sales were reported if no sales of Shares were reported on the date of grant) ("Fair Market Value").
20. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Incentive Stock Option (defined as an Option that meets the requirements of Section 422 of the United States Internal Revenue Code) shall be exercisable after the expiration of ten years from the date the Option is granted.
21. The Plan provides that the exercise of Options and the payment of the exercise price (the "Exercise Price") in order to acquire Shares of the Company may be effected pursuant to the payment of cash, the surrender of Shares to the Company or other consideration at the Fair Market Value on the exercise date equal to the total Option price, or, by combination of cash, Shares or other consideration.
22. Awards of Restricted Stock ("Restricted Stock Award") may be issued hereunder to Plan Participants either alone or in addition to other Awards granted under the Plan. The provisions of Restricted Stock Awards need not be the same with respect to each recipient. Any Restricted Stock Award issued hereunder may be evidenced in such manner as the Committee in its sole discretion shall deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates. In the event any stock certificate is issued in respect of a Restricted Stock Award, such certificate shall be registered in the name of the Plan Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award. Except as otherwise determined by the Committee, upon termination of employment for any reason during the restriction period, any portion of a Restricted Stock Award still subject to restriction shall be forfeited by the Plan Participant and reacquired by the Company.
23. Performance Awards in the form of performance units or performance shares may be issued to Plan Participants either alone or in addition to other Awards granted under the Plan. The performance criteria to be achieved during any performance period and the length of the performance period shall be determined by the Committee upon the grant of each Performance Award or at any time thereafter. Except as otherwise provided, Performance Awards will be distributed only after the end of the relevant performance period (that period, established by the Committee at the time any Performance Award is granted or at any time thereafter, during which any performance goals specified by the Committee with respect to such Award are to be measured). Performance Awards may be paid in cash, Shares, other property or any combination thereof, in the sole discretion of the Committee at the time of payment. The performance levels to be achieved for each performance period and the amount of the award to be distributed shall be conclusively determined by the Committee. Performance Awards may be paid in a lump sum or in installments following the close of the performance period.
24. The Company is authorized to withhold from any Award granted or payment due under the Plan the amount of withholding taxes due in respect of an Award or payment under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. The Committee shall be authorized to establish procedures for election by Plan Participants to satisfy such withholding taxes by delivery of, or directing the Company to retain, Shares. The number of Shares withheld by the Company will be based upon the Fair Market Value of such Shares on the date of acquisition.
25. During the 60-day period from and after a "change in control" of the Company (as defined in the Plan), a Plan Participant holding an Option may be permitted by the Committee to elect to surrender all or part of the Option to the Company and to receive a cash amount from the Company equal to the amount by which the "change in control price" (as defined in the Plan) exceeds the exercise price of the option multiplied by the number of shares granted under the Option (the "Spread").
26. The Company has engaged the services of PaineWebber Incorporated (the "Agent"), which is a corporation registered to trade in securities under applicable legislation in the United States but is not a registrant under the Act, to maintain the accounts in which the Shares issued under the Plan are to be held by each Plan Participant and to provide day-to-day brokerage services to Plan Participants.
27. Pursuant to the Plan, the acquisition of Shares by the Company in certain circumstances from Plan Participants may constitute an "issuer bid" as defined under the Act. The terms of the Plan permit Plan Participants to tender Shares to the Company (i) to satisfy the Exercise Price for Options granted, and (ii) to satisfy government withholding tax obligations. The Plan also permits the tendering of Options in exchange for the Spread in the event of a change in control of the Company. The issuer bid exemptions contained in the Act may not be available for such acquisitions, since certain acquisitions may occur at a price that exceeds the "market price", as that term is defined in the Regulations to the Act.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS ORDERED pursuant to clause 104(2)(c) of the Act that the acquisition by the Company of Shares and Options from Plan Participants is exempt from the Issuer Bid Requirements, provided that such acquisition is made in accordance with the terms of the Plan.
April 10, 2001.
Paul M. Moore, Robert W. Davis