EXHIBIT 99.3
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Option Agreement") is entered into as of May
1, 2000, by and between ACT Networks, Inc., a Delaware corporation (the
"Company"), and Clarent Corporation, a Delaware corporation (the "Grantee").
Recitals
A. The Grantee, Copper Acquisition Sub, Inc., a Delaware corporation
and a wholly owned subsidiary of the Grantee ("Merger Sub"), and the Company are
entering into an Agreement and Plan of Merger and Reorganization of even date
herewith (as amended from time to time, the "Reorganization Agreement") which
provides (subject to the conditions set forth therein) for the merger of Merger
Sub into the Company (the "Merger").
B. The Company is entering into this Option Agreement in order to induce
the Grantee to enter into the Reorganization Agreement.
Agreement
The parties to this Option Agreement, intending to be legally bound, agree
as follows:
1. Certain Definitions. Capitalized terms used but not defined in this
Option Agreement shall have the meanings given to such terms in the
Reorganization Agreement.
2. Grant of Option. The Company hereby grants to the Grantee an
irrevocable option (the "Option") to purchase, out of the authorized but
unissued Company Common Stock, a number of shares of Company Common Stock equal
to up to 19.9% of the number of shares of Company Common Stock outstanding as of
the date hereof (the shares of Company Common Stock purchasable pursuant to the
Option, as adjusted as set forth herein, being referred to as the "Option
Shares"), at a price per Option Share equal to the applicable Exercise Price.
For purposes of this Option Agreement, the applicable "Exercise Price" shall be
equal to $16.00.
3. Term. The Option shall terminate on the earliest of the following
dates (the "Termination Date"): (a) the date on which the Merger becomes
effective; (b) the date on which the Reorganization Agreement is validly
terminated pursuant to Section 8.1 thereof, if an Exercise Event (as defined in
Section 4(b)) shall not have occurred on or prior to such date; or (c) the first
anniversary of the date on which the Grantee receives written notice from the
Company of the occurrence of an Exercise Event; provided, however, that if an
Exercise Event occurs, and if, by reason of any applicable Legal Requirement,
order, judgment, decree or other legal impediment, the Option cannot be
exercised on the first anniversary of the date on which the Grantee receives the
written notice referred to in clause "(c)" of this sentence, then the
Termination Date shall be extended until the date 30 days after the date on
which such impediment is removed. The rights of the Grantee and the obligations
of the Company set forth in Sections 7 and 8 shall not terminate on the
Termination Date, but rather shall survive beyond the Termination Date as
provided in those Sections; and the representation, warranty and
covenant set forth in Section 5(b) shall survive the termination date for an
indefinite period of time.
4. Exercise of Option.
(a) The Grantee may exercise the Option, in whole or in part, at any
time and from time to time on or before the Termination Date following the
occurrence of an Exercise Event. If the Grantee exercises the Option with
respect to any Option Shares on or before the Termination Date, then,
notwithstanding anything to the contrary contained in this Option Agreement, the
Grantee shall be entitled to purchase such Option Shares in accordance with the
terms of this Option Agreement after the Termination Date.
(b) For purposes of this Option Agreement, an "Exercise Event" shall
be deemed to have occurred if:
(i) either the Grantee or the Company shall have the right to
terminate the Reorganization Agreement pursuant to Section 8.1(d) thereof
and an Acquisition Proposal shall have been previously disclosed,
announced, commenced, submitted or made; or
(ii) the Grantee shall have the right to terminate the
Reorganization Agreement pursuant to Section 8.1(e) thereof.
(c) To exercise the Option with respect to any Option Shares, the
Grantee shall deliver to the Company a written notice (an "Exercise Notice")
specifying: (i) the number of Option Shares the Grantee will purchase; (ii) the
place at which such Option Shares are to be purchased; and (iii) the date on
which such Option Shares are to be purchased, which shall not be sooner than two
business days nor later than twenty business days after the date of delivery of
such Exercise Notice to the Company. (The date of delivery of such Exercise
Notice to the Company is referred to as the applicable "Notice Date," and the
Option shall be deemed to have been validly exercised on such Notice Date with
respect to the Option Shares referred to in such Exercise Notice.) The closing
of the purchase of such Option Shares (the applicable "Closing") shall take
place at the place specified in the Exercise Notice and on the date specified in
such Exercise Notice (the applicable "Closing Date"); provided, however, that:
(A) if such purchase cannot be consummated on such Closing Date by reason of any
applicable Legal Requirement, order, judgment, decree or other legal impediment,
then the Grantee may extend the Closing Date to a date not more than 30 days
after the date on which such impediment is removed; and (B) if prior
notification to or approval of any Governmental Body is required, or if any
waiting period must expire or be terminated, in connection with such purchase,
then (1) the Company shall promptly cause to be filed the required notice or
application for approval and shall expeditiously process such notice or
application, (2) the Company shall cooperate with the Grantee in the filing of
any such notice or application required to be filed by the Grantee and in the
obtaining of any such approval required to be obtained by the Grantee, and (3)
the Grantee may extend the Closing Date to a date not more than 30 days after
the latest date on which any required notification has been made, any required
approval has been obtained or any required waiting period has expired or been
terminated.
2.
5. Payment and Delivery of Certificate.
(a) On each Closing Date, the Grantee shall pay to the Company in
immediately available funds an amount equal to the applicable Exercise Price
multiplied by the number of Option Shares to be purchased by the Grantee from
the Company on such Closing Date.
(b) At each Closing, concurrently with the delivery of the
immediately available funds referred to in Section 5(a), the Company shall
deliver to the Grantee a certificate representing the Option Shares being
purchased at such Closing. The Company represents, warrants and covenants that
such Option Shares will be duly authorized, validly issued, fully paid,
nonassessable and free and clear of all Encumbrances, except as may be
specifically provided in this Option Agreement.
(c) The certificate representing the Option Shares delivered at each
Closing shall be endorsed with a restrictive legend that shall read
substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED
UNDER SAID ACT OR UNLESS AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT IS AVAILABLE.
If at any time the Grantee delivers to the Company evidence (in the form of a
copy of a letter from the staff of the SEC or an opinion of counsel reasonably
satisfactory to the Company, or in some other form) that the legend referred to
above is not required for purposes of the Securities Act, then the Company shall
promptly replace such certificate with a certificate that does not include such
legend.
6. Adjustment Upon Changes in Capitalization, Etc.
(a) If the outstanding shares of Company Common Stock are changed
into a different number or class of shares by reason of any stock split,
division or subdivision of shares, stock dividend, reverse stock split,
reclassification, recapitalization or other similar transaction, then the type
and number of shares or other securities subject to the Option, the applicable
Exercise Price, the Designated Price (as defined in Section 7(c)) and the other
numbers and dollar amounts referred to in this Option Agreement shall be
adjusted appropriately, and the Company shall ensure that proper provision is
made in the agreements and other documents governing such transaction so that
the Grantee shall receive upon exercise of the Option the same class and number
of outstanding shares or other securities or property that the Grantee would
have received if the Option had been exercised immediately prior to such
transaction or the record date for determining the stockholders entitled to
participate in such transaction, as applicable.
(b) If any additional shares of Company Common Stock are issued after
the date of this Option Agreement (other than pursuant to a transaction
described in Section 6(a)), then the number of shares of Company Common Stock
then remaining subject to the Option
3.
shall be increased to the number by which (i) 19.9% of the number of shares of
the Company Common Stock outstanding after the issuance of such additional
shares exceeds (ii) the number of shares (adjusted in accordance with Section
6(a)) previously issued to the Grantee upon exercise of the Option.
(c) If the Company shall enter into an agreement (i) to consolidate,
exchange shares or merge with any Person, other than the Grantee or one of the
Grantee's subsidiaries, and, in the case of a merger, shall not be the
continuing or surviving corporation, (ii) to permit any Person, other than the
Grantee or one of the Grantee's subsidiaries, to merge into the Company and the
Company shall be the continuing or surviving corporation, but, in connection
with such merger, the then outstanding shares of Company Common Stock shall be
changed into or exchanged for stock or other securities of the Company or any
other Person or cash or any other property, or the shares of Company Common
Stock outstanding immediately before such merger shall after such merger
represent less than 50% of the common shares and common share equivalents of the
Company outstanding immediately after the merger, or (iii) to sell, lease or
otherwise transfer all or substantially all of its assets to any Person, other
than the Grantee or one of the Grantee's subsidiaries, then, and in each such
case, the Company shall ensure that proper provision is made in the agreements
and other documents governing such transaction so that the Option shall, upon
the consummation of such transaction, become exercisable for the stock,
securities, cash or other property that would have been received by the Grantee
if the Grantee had exercised the Option immediately prior to such transaction or
the record date for determining the stockholders entitled to participate in such
transaction, as appropriate.
(d) The provisions of Sections 7 and 8 shall apply (with appropriate
adjustments) to any securities for which the Option becomes exercisable pursuant
to this Section 6.
7. Repurchase at the Request of the Grantee.
(a) If, at any time during the period commencing upon the occurrence
of the first Exercise Event and ending on the first anniversary of the date on
which the Grantee receives written notice from the Company of the occurrence of
such Exercise Event, the Grantee delivers to the Company a notice stating that
the Grantee is exercising its rights under this Section 7, then the Company
shall repurchase from the Grantee (i) that portion of the Option that then
remains unexercised, (ii) all of the shares of Company Common Stock beneficially
owned by the Grantee that were previously purchased by the Grantee upon exercise
of the Option, and (iii) the Grantee's right to receive all Option Shares with
respect to which the Option was previously exercised but which have not yet been
issued and delivered to the Grantee. (The date on which the Grantee delivers
such notice to the Company is referred to as the "Request Date.") Such
repurchase shall be at an aggregate price (the "Repurchase Consideration") equal
to the sum of:
(i) the aggregate number of Option Shares with respect to which
the Option has been exercised on or prior to the Request Date and which are
beneficially owned by the Grantee, multiplied by the Designated Price;
(ii) the aggregate number of Option Shares with respect to which
the Option has been exercised on or prior to the Request Date but which
have not, as of the Request Date been issued and delivered to the Grantee,
multiplied by the Designated Price; and
4.
(iii) the number of Option Shares with respect to which the
Option has not been exercised on or prior to the Request Date multiplied by
the amount (if any) by which the Designated Price exceeds the applicable
Exercise Price.
(b) If the Grantee exercises its rights under this Section 7, then
the Company shall, within two business days after the Request Date, pay the
Repurchase Consideration to the Grantee in immediately available funds, and the
Grantee shall thereupon surrender to the Company the certificate or certificates
evidencing any shares of Company Common Stock repurchased by the Company
pursuant to this Section 7.
(c) For purposes of this Option Agreement, the "Designated Price"
means the highest of (i) the highest purchase price per share paid after the
date of this Option Agreement and on or prior to the Request Date pursuant to
any tender or exchange offer made for shares of Company Common Stock, (ii) the
highest price per share paid or to be paid by any Person for shares of Company
Common Stock pursuant to any agreement contemplating a merger or other business
combination transaction involving the Company that was entered into after the
date of this Option Agreement and on or prior to the Request Date, (iii) the
highest bid price per share of Company Common Stock as quoted on The Nasdaq
National Market (or if Company Common Stock is not quoted on The Nasdaq National
Market, the highest bid price per share of Company Common Stock as quoted on any
other market comprising a part of The Nasdaq Stock Market or, if the shares of
Company Common Stock are not quoted thereon, on the principal trading market (as
defined in Regulation M under the Exchange Act) on which such shares are traded
as reported by a recognized source) during the 90-day period ending on the
Request Date, or (iv) the highest Exercise Price paid or payable for any Option
Shares. If any portion of the consideration paid or to be paid pursuant to
clause "(i)" or "(ii)" of the preceding sentence is in a form other than cash,
then the value of the non-cash portion of such consideration shall be determined
in good faith by an independent nationally recognized investment banking firm
selected by the Company, and such firm's determination of such value shall be
final and conclusive for all purposes under this Option Agreement.
8. Registration Rights.
(a) The Company shall, if requested by the Grantee at any time and
from time to time within two years after the first exercise of the Option (the
"Registration Period"), as expeditiously as practicable, prepare, file and cause
to be declared effective up to two registration statements under the Securities
Act (including, in the sole discretion of the Grantee, a "shelf" registration
statement under Rule 415 under the Securities Act or any successor provision),
if registration under the Securities Act is (in the Grantee's good faith
judgment) necessary or desirable in order to permit the offering, sale and
delivery, in accordance with the intended method of sale or other disposition
stated by the Grantee, of any or all shares of Company Common Stock or other
securities that have been acquired or are issuable upon exercise of the Option.
No other securities may be included in any such registration statement without
the Grantee's prior written consent. The Company shall use all reasonable
efforts to cause each such registration statement to become effective, to obtain
all consents or waivers of other parties that are required therefor and to keep
such registration statement effective for such period as may be as reasonably
necessary to effect such sale or other disposition. In addition, the Company
shall use all reasonable efforts to register such shares or other securities
under any applicable state securities laws. The obligations of the Company
hereunder to file a registration statement and to maintain its effectiveness may
be suspended for one or more periods of time not
5.
exceeding 30 days in the aggregate if the board of directors of the Company
shall have determined in good faith that the filing of such registration
statement or the maintenance of its effectiveness would require disclosure of
material nonpublic information and that the disclosure thereof would materially
and adversely affect the Company. For purposes of determining whether two
requests have been made under this Section 8, only requests relating to a
registration statement that has become effective under the Securities Act and
pursuant to which the Grantee has disposed of all shares covered thereby in the
manner contemplated therein shall be counted.
(b) The expenses associated with the preparation and filing of any
registration statement pursuant to this Section 8 and any sale covered thereby
(including any fees related to blue sky qualifications and filing fees in
respect of the National Association of Securities Dealers, Inc.) shall be borne
and paid by, and shall be for the sole account of, the Company (except for
underwriting discounts or commissions in respect to shares to be sold by the
Grantee and the fees and disbursements of the Grantee's counsel).
(c) The Grantee shall provide all information reasonably requested by
the Company for inclusion in any registration statement to be filed hereunder.
If, during the Registration Period, the Company shall propose to register under
the Securities Act the offering, sale and delivery of Company Common Stock for
cash pursuant to a firm commitment underwriting, it shall (without limiting the
Company's other obligations under this Section 8) allow the Grantee the right to
participate in such registration (provided that the Grantee participates in the
underwriting); provided, however, that, if the managing underwriter of such
offering advises the Company in writing that in its opinion the number of shares
of Company Common Stock requested to be included in such registration exceeds
the number that can be sold in such offering, the Company shall, after fully
including therein all securities to be sold by the Company, include the shares
requested to be included therein by Grantee pro rata (based on the number of
shares intended to be included therein) with the shares intended to be included
therein by Persons other than the Company. In connection with any offering, sale
and delivery of Company Common Stock pursuant to a registration effected
pursuant to this Section 8, the Company and the Grantee shall provide each other
and each underwriter of the offering with customary representations, warranties
and covenants, including covenants of indemnification and contribution.
9. Profit Limitation. Notwithstanding anything to the contrary contained
in this Option Agreement, the Grantee may not exercise its rights pursuant to
this Option Agreement in a manner that would result in a cash payment to the
Grantee of an aggregate amount under this Option Agreement and under Section
8.3(b) and Section 8.3(c) of the Reorganization Agreement of more than the sum
of (a) the aggregate exercise price paid and/or payable by the Grantee for any
Option Shares as to which the Option has theretofore been exercised, plus (b) an
amount equal to the Termination Fee, plus (c) $1,833,333.
10. Listing. If, at the time of the occurrence of an Exercise Event, the
Company Common Stock (or any other class of securities subject to the Option) is
listed on The Nasdaq National Market or on any other market or exchange, then
the Company, upon the occurrence of such Exercise Event, shall promptly file an
application to list on The Nasdaq National Market and on such other market or
exchange the shares of the Company Common Stock (or other securities) subject to
the Option, and shall use its best efforts to cause such application to be
approved as promptly as practicable.
6.
11. Replacement of Agreement. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Option Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Option Agreement, if mutilated, the Company will execute and deliver a new
Option Agreement of like tenor and date.
12. Miscellaneous.
(a) Waiver. No failure on the part of any party to exercise any
power, right, privilege or remedy under this Option Agreement, and no delay on
the part of any party in exercising any power, right, privilege or remedy under
this Option Agreement, shall operate as a waiver of such power, right, privilege
or remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy. No party shall be deemed to have waived any
claim arising out of this Option Agreement, or any power, right, privilege or
remedy under this Option Agreement, unless the waiver of such claim, power,
right, privilege or remedy is expressly set forth in a written instrument duly
executed and delivered on behalf of such party; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it is
given.
(b) Notices. Any notice or other communication required or permitted
to be delivered to any party under this Option Agreement shall be in writing and
shall be deemed properly delivered, given and received (a) when delivered by
hand, or (b) two business days after sent by internationally recognized courier
or express delivery service (such as Federal Express) or by facsimile (with
confirmation of receipt) to the address or facsimile telephone number set forth
beneath the name of such party below (or to such other address or facsimile
telephone number as such party shall have specified in a written notice given to
the other parties hereto):
if to the Company, to it at:
00000 X. Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
if to the Grantee, to it at:
000 Xxxxxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
(c) Entire Agreement; Counterparts. This Option Agreement and the
agreements referred to herein constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof and thereof. This Option Agreement
may be executed in several counterparts, each of which shall be deemed an
original and all of which shall constitute one and the same instrument.
7.
(d) Binding Effect; Benefit; Assignment. This Option Agreement shall
be binding upon, and shall be enforceable by and inure solely to the benefit of,
the parties hereto and their respective successors and assigns; provided,
however, that neither this Option Agreement nor any of the Company's rights,
interest or obligations hereunder may be assigned by the Company without the
prior written consent of the Grantee, and any attempted assignment of this
Option Agreement or any of such rights, interest or obligations by the Company
without such consent shall be void and of no effect. Nothing in this Option
Agreement, express or implied, is intended to or shall confer upon any Person
(other than the parties hereto and the Grantee's successors and assigns) any
right, benefit or remedy of any nature under or by reason of this Option
Agreement.
(e) Amendment and Modification. This Option Agreement may be amended
with the approval of the respective boards of directors of the Company and the
Grantee at any time. This Option Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
(f) Further Actions. The Company agrees to cooperate fully with the
Grantee and to execute and deliver such further documents, certificates,
agreements and instruments and to take such other actions as may be reasonably
requested by the Grantee to evidence or reflect the transactions contemplated by
this Option Agreement and to carry out the intent and purposes of this Option
Agreement.
(g) Headings. The bold-faced headings contained in this Option
Agreement are for convenience of reference only, shall not be deemed to be a
part of this Option Agreement and shall not be referred to in connection with
the construction or interpretation of this Option Agreement.
(h) Applicable Law; Jurisdiction. This Option 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 conflicts of laws thereof. In any action between any of the
parties arising out of or relating to this Option Agreement or any of the
transactions contemplated by this Option Agreement: (a) each of the parties
irrevocably and unconditionally consents and submits to the jurisdiction and
venue of the state and federal courts located in the State of Delaware; (b) each
of the parties irrevocably waives the right to trial by jury; and (c) each of
the parties irrevocably consents to service of process by first class certified
mail, return receipt requested, postage prepaid, to the address at which such
party is to receive notice in accordance with Section 12(b).
(i) Severability. In the event that any provision of this Option
Agreement, or the application of any such provision to any Person (as such term
is defined in the Reorganization Agreement) or set of circumstances, shall be
determined to be invalid, unlawful, void or unenforceable to any extent, the
remainder of this Option Agreement, and the application of such provision to
Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
(j) Specific Performance. The Company agrees that (i) in the event
of any breach or threatened breach by the Company of any covenant, obligation or
other provision set forth in this Option Agreement, the Grantee shall be
entitled (in addition to any other remedy
8.
that may be available to it), to (A) a decree or order of specific performance
or mandamus to enforce the observance and performance of such covenant,
obligation or other provision, and (B) an injunction restraining such breach or
threatened breach, and (ii) neither the Grantee nor any other Person shall be
required to provide any bond or other security in connection with any such
decree, order or injunction or in connection with any related action or
proceeding.
(k) Attorneys' Fees. In any action at law or suit in equity to
enforce this Option Agreement or the rights of any of the parties hereunder, the
prevailing party in such action or suit shall be entitled to receive a
reasonable sum for its attorneys' fees and all other reasonable costs and
expenses incurred in such action or suit.
(l) Non-Exclusivity. The rights and remedies of the Grantee under
this Option Agreement are not exclusive of or limited by any other rights or
remedies which it may have, whether at law, in equity, by contract or otherwise,
all of which shall be cumulative (and not alternative). Without limiting the
generality of the foregoing, the rights and remedies of the Grantee under this
Option Agreement, and the obligations and liabilities of the Company under this
Option Agreement, are in addition to their respective rights, remedies,
obligations and liabilities under all applicable Legal Requirements and under
the Reorganization Agreement. The covenants and obligations of the Company set
forth in this Option Agreement shall be construed as independent of any other
agreement or arrangement between the Company, on the one hand, and the Grantee,
on the other. The existence of any claim or cause of action by the Company
against the Grantee shall not constitute a defense to the enforcement of any of
such covenants or obligations against the Company.
(m) Construction.
(i) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(ii) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(iii) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(iv) Unless otherwise specified, references in this Agreement to
"Sections" are intended to refer to Sections of this Agreement.
9.
In Witness Whereof, the Company and the Grantee have caused this Option
Agreement to be executed as of the date first written above.
ACT Networks, Inc.
By:___________________________________
Name:_________________________________
Title:________________________________
Clarent Corporation
By:___________________________________
Name: Xxxxxxx X. Xxxxx
Title: Chief Operating Officer and Chief
Financial Officer
10.
